-----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, T8mm9Y3GIW2+pCY43NxOkiInqtEFRLnngOPGb7wPCIoe0byAOwQnBCwwPjg2MGxl gYUx6PpqYA3M+nAQzKjedA== /in/edgar/work/0000898432-00-000743/0000898432-00-000743.txt : 20001030 0000898432-00-000743.hdr.sgml : 20001030 ACCESSION NUMBER: 0000898432-00-000743 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000831 FILED AS OF DATE: 20001027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEUBERGER BERMAN EQUITY ASSETS CENTRAL INDEX KEY: 0000914228 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 133783592 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08106 FILM NUMBER: 747108 BUSINESS ADDRESS: STREET 1: 605 THIRD AVENUE STREET 2: 2ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10158-0006 BUSINESS PHONE: 2124768800 FORMER COMPANY: FORMER CONFORMED NAME: NEUBERGER & BERMAN EQUITY ASSETS DATE OF NAME CHANGE: 19931028 N-30D 1 0001.txt NEUBERGER BERMAN Neuberger Berman Equity Assets-Registered Trademark- ----------------------------------------------- ANNUAL REPORT AUGUST 31, 2000 Focus Assets Genesis Assets Guardian Assets Manhattan Assets Millennium Assets Partners Assets Socially Responsive Assets TABLE OF CONTENTS THE FUNDS CHAIRMAN'S LETTER A-4 PORTFOLIO COMMENTARY Focus Assets A-5 Genesis Assets A-8 Guardian Assets A-11 Manhattan Assets A-14 Millennium Assets A-17 Partners Assets A-20 Socially Responsive Assets A-23 GROWTH OF A DOLLAR CHARTS COMPARISON OF A $10,000 INVESTMENT Focus Assets A-27 Genesis Assets A-29 Guardian Assets A-30 Manhattan Assets A-31 Millennium Assets A-32 Partners Assets A-34 Socially Responsive Assets A-35 FINANCIAL STATEMENTS B-2 FINANCIAL HIGHLIGHTS PER SHARE DATA Focus Assets B-14 Genesis Assets B-15 Guardian Assets B-16 Manhattan Assets B-17 Millennium Assets B-18 Partners Assets B-19 Socially Responsive Assets B-20 REPORT OF INDEPENDENT ACCOUNTANTS/AUDITORS B-23 THE PORTFOLIOS SCHEDULE OF INVESTMENTS TOP TEN EQUITY HOLDINGS Focus Portfolio C-1 Genesis Portfolio C-3 Guardian Portfolio C-7 Manhattan Portfolio C-10 Millennium Portfolio C-13 Partners Portfolio C-16 Socially Responsive Portfolio C-19 FINANCIAL STATEMENTS C-24 FINANCIAL HIGHLIGHTS Focus Portfolio C-39 Genesis Portfolio C-40 Guardian Portfolio C-41 Manhattan Portfolio C-42 Millennium Portfolio C-43 Partners Portfolio C-44 Socially Responsive Portfolio C-45 REPORT OF INDEPENDENT ACCOUNTANTS/AUDITORS C-47 OTHER INFORMATION Directory/Officers and Trustees D-1
The "Neuberger Berman" name and logo are service marks of Neuberger Berman, LLC. "Neuberger Berman Management Inc." and the individual fund names in this report are either service marks or registered trademarks of Neuberger Berman Management Inc.-C- 2000 Neuberger Berman Management Inc. A-3 CHAIRMAN'S LETTER October 20, 2000 Dear Fellow Shareholder, In recent years many growth stocks have excelled while value stocks have languished. Some market observers declared value investing dead. We disagreed, praising the long-term benefits of style diversification. As measured by the growth and value stock benchmarks, growth stock investing continued to be the most productive style in our fiscal year 2000. But, value stocks came back to life, and Neuberger Berman value-oriented funds, most notably Focus, Genesis, Guardian and Partners, delivered attractive returns. Going forward, we can't predict which investment style will provide the most generous short- to intermediate-term returns. Over the longer term, however, we believe style diversification will work to shareholders' advantage. We have witnessed a similar pattern in the relative performance of stocks in different capitalization sectors. In recent years, large-cap stocks materially outperformed small and mid-cap stocks.(1) In fiscal 2000, small- and mid-cap stocks generally excelled. Our small- and mid-cap funds, most notably Genesis, Millennium and Manhattan, were excellent performers. We don't know which market capitalization sectors will be the best relative performers in the year ahead, but again, we believe diversification is advantageous over the long haul. Diversification and patience -- the twin foundations of a prudent long-term investment strategy -- paid off handsomely in fiscal 2000. We believe they will continue to benefit shareholders in the years ahead. In closing, it is with great sadness that we report the recent passing of John T. Patterson, Jr. John served as a Trustee of our equity funds since 1992. He was widely respected for his intelligence and caring nature, a gracious man whose pleasant vitality was a continuous inspiration. We will miss him deeply. Sincerely, /s/ Peter Sundman Peter Sundman Chairman of the Board Neuberger Berman Equity Assets (1) Mid-cap stocks, as represented by the Russell Midcap Index, returned 28.83% for the fiscal year ending August 31, 2000. Small-cap stocks, as represented by the Russell 2000 Index, returned 27.15%. Large-cap stocks, as represented by the Russell 1000 Index, returned 20.14%. In the previous three fiscal years ending August 31, the Russell 1000 had outperformed both the Russell Midcap Index and the Russell 2000 Index. A-4 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Focus Assets For the six and twelve month periods concluding August 31, 2000, the Focus Assets gained 31.02% and 58.68% respectively, versus an 11.72% and a 16.31% increase in the S&P 500 and a 14.31% and a 4.15% rise in the Russell 1000 Value index. These results placed the fund in the top 2% of all Lipper Multi-Cap Value funds for the year.* It was a good year. Whether or not such relative performance can be sustained is anyone's guess, but we can state unequivocally that the investment approach used to manage the portfolio will not be altered. The Focus Portfolio is a value fund. We are valuation driven, and the first question we ask regarding any potential investments is "what is the price-earnings ratio?" We are not content, however, to buy only those stocks which are just statistically cheap. We are trying to build a portfolio of stocks that sell at a discount to the market but whose earnings per share growth will prove to be superior to that of the overall market. The aim is to have a fund that is valued like a value fund but has earnings dynamics of a growth fund. One of the common sense assumptions we make is that value is unlikely to be evenly distributed throughout the market at any given time. In our opinion, when value managers attempt to construct a portfolio that does not differ materially from the S&P 500, they necessarily face some unappealing investment choices. If an industry sector is currently favored by the market, the best stocks in that sector will likely be highly priced, and buying them will cause the manager to violate his or her value discipline. Yet, if the manager maintains his or her discipline by looking for "cheap" stocks in that sector, it may mean buying a third or fourth rate company. We find each of these choices unacceptable. That's why we do not seek to have investments in all areas of the market at all times. We never invest in a company just to diversify the portfolio. There is but one reason, and one reason only, that the Portfolio buys a stock: we think it will prove to be a good investment. A-5 - ---------------------------------------------------------------------- Focus Assets (Cont'd) Looking for stocks with attractive valuations usually takes us to areas which are out of popular favor. It has been our experience that when an industry or sector goes out of favor, the disfavor affects all companies in that area to more or less the same degree. Thus, it is possible to buy even the best companies in such industries while maintaining a value discipline. While it is a subjective judgement, we believe that using this approach results in the Focus Portfolio having a higher percentage of its assets in industry leaders than most other value funds do. For example, when the Federal Reserve started to raise interest rates last year, many investors' knee-jerk reaction was to sell financial stocks due to the perception that rising rates would hurt earnings. While this perception has little in the way of empirical evidence to support it, it is widely held, and the downward movement in financial stocks was both widespread and indiscriminate. We emerged from this period with substantial positions in Citigroup, which we consider the leading financial services company; Morgan Stanley Dean Witter, the leading brokerage firm; Chase Manhattan, the leading money center bank; as well as Capital One and Providian, which have been the two fastest growing credit card companies. All of these stocks were purchased at substantial P/E discounts to the S&P 500. While our belief that the Portfolio's investments are of higher quality than those of the average value fund is a subjective one, the numbers show that the Portfolio's earnings are expected to grow much faster than the typical value fund. On August 31, 2000 the P/E ratio of the Focus Portfolio was 16.0 times next year's earnings as opposed to 15.6 times for the Russell 1000 Value Index, yet the long term expected growth rate in earnings of the Fund was 20.0% as opposed to 13.2% for the Russell 1000 Value. In other words, with a forward P/E ratio only 3% higher than the Russell 1000 Value, the Portfolio has an expected growth rate in earnings that is over 50% higher. Similarly, the forward P/E ratio of the S&P 500 on August 31st was 23.1, 44% higher than that of the Focus Fund. At the same time, the S&P 500's expected earnings growth rate (18.9%) was some 6% lower A-6 - ---------------------------------------------------------------------- Focus Assets (Cont'd) than that of Focus. We find these metrics compelling, and a portfolio like this doesn't result from mindless diversification. In our opinion, there is only one way to do it: Focus. Sincerely, /s/ Kent Simons Kent Simons PORTFOLIO MANAGER *For index definitions, refer to page A-26, titled "Glossary of Indices." The Portfolio invests in many securities not included in the indices listed. Percentage rankings for Multi-Cap Value funds provided by Lipper Inc. These funds are defined by Lipper as those value funds that, by portfolio practice, invest in a variety of market capitalization ranges, without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Lipper Multi-Cap Value funds percentage ratings are calculated from the funds' one-, and three-year average annual returns, net of expenses, for the year ending August 31, 2000 and were compared to 476 and 334 funds respectively. Neuberger Berman Focus Assets began operations on September 4, 1996. Certain expenses were reimbursed to the fund during the period shown, and had a material effect on returns. Absent such arrangement, the average annual returns of the fund would have been less. The composition, industries and holdings of the Portfolio are subject to change. No single holdings of Focus Portfolio make up more than a small fraction of the Portfolio's total assets. While the value-oriented approach is intended to limit risks, the Portfolio -- with its concentration in sectors -- may be more greatly affected by any single economic, political or regulatory development than a more diversified mutual fund. Past performance is no guarantee of future results. Share prices will vary and your shares, when redeemed, may be worth more or less than the price you paid for them. A-7 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Genesis Assets For the six and twelve month periods concluding August 31, 2000, Genesis Assets gained 17.59% and 25.42% respectively, compared to the Russell 2000's drop of 6.38% and gain of 27.15% over the same time periods (see page A-29 for comparison of a $10,000 investment and average annual total returns as of August 31, 2000).* Small-cap value stocks delivered solid returns in fiscal 2000. The Spring 2000 collapse of red-hot small-cap growth stocks with "more sizzle than substance" (particularly in the Internet sector) appeared to give investors a renewed appreciation of the fundamental merits of small-cap value stocks. Even after this year's good performance, we believe small-cap value stocks remain attractively valued. We think earnings prospects look good and valuations are still modest compared to other equity asset classes. Value has continued to be brought to fruition by corporate acquirers targeting bargains in the small-cap value sector. Importantly, the outflow of capital from small-cap value mutual funds appears to be abating, or perhaps even turning positive. This may provide additional momentum for small-cap value stocks going forward. Our technology stock investments made the greatest performance contribution in fiscal 2000. As a result of our value discipline, we were materially under-weighted, relative to our benchmark, in technology stocks throughout the year. However, our holdings produced returns exceeding 70%, which is why the technology sector was such a positive contributor. Some of our biggest winners were somewhat mundane technology companies with small divisions in more glamorous tech niches. For example, Methode Electronics, which is primarily an auto electronics systems company, soared when it began talking about spinning off its much smaller, but more exciting bandwidth enhancing optical electronic components division. We exited our Methode position with a big gain. Over the course of fiscal 2000, we booked profits in tech holdings that moved out of our value range. We redirected some of our profits to technology stock opportunities that seemed to us more A-8 - ---------------------------------------------------------------------- Genesis Assets (Cont'd) reasonably priced and took some money off the tech table to deploy in other sectors. We will continue to invest in technology stocks on our own value terms. Our energy investments also produced excellent gains. We were materially over-weighted in this sector, with a bias toward oil services companies and drillers, the leading performers in the energy group. We have taken some profits, but are still committed to the energy sector. Inventories remain tight and capacity is constrained. We believe the fundamental prospects for our energy investments remain attractive, even if oil prices decline modestly from their current highs. The portfolio also benefited from the takeover of two portfolio holdings, Cordant Technology and Central Newspapers. The former soared after the deal announcement and the latter doubled after putting itself up for sale. We expect more of the bargains in the portfolio to attract corporate suitors in the years ahead. Although our capital goods holdings posted a modest gain for the year -- every sector represented in the portfolio finished in positive performance territory -- we had some major disappointments in this sector. Five of the stocks on our Worst 10 Performance List, AAR Corp, Wallace Computer Services, Kaydon Corp., Aviall Inc., and Dionex Corp., are in the capital goods category. Each declined as a result of company specific earnings problems. Our inclination is to be patient with these investments that we believe can get back on the earnings track. Returns from our financial services investments were not as lofty as the gains in our technology and energy holdings, but we believe we have identified some excellent bargains. Let us give you an example. Mutual Risk provides administrative and claims handling services to companies that insure themselves. Mutual Risk's revenue and earnings growth has been tempered by declining prices for property and casualty and workman's compensation insurance. Cutthroat competition in the insurance industry has abated, however, and insurance rates are now on the rise. This should materially increase the number of companies A-9 - ---------------------------------------------------------------------- Genesis Assets (Cont'd) choosing the self-insurance option, and therefore, the demand for Mutual Risk's services. We see Mutual Risk's earnings beginning to accelerate in the next two or three quarters and believe the company can grow earnings at 20% or better annually over the next several years. At the close of this reporting period, Mutual Risk stock was trading at 14 times our 2001 earnings estimate. Of course, Mutual Risk may not live up to our earnings and stock appreciation expectations and should not be considered a recommendation. However, we think the stock is an excellent addition to the Genesis Portfolio. In closing, we are delighted by the rebound in the small-cap value sector and pleased that the Fund performed as it did. Looking ahead, we believe we will continue to enjoy a fertile environment for our value-oriented discipline. Sincerely, /s/ Judith Vale /s/ Robert D-Alelio Judith Vale and Robert D'Alelio PORTFOLIO CO-MANAGERS *For index definitions, refer to page A-26, titled "Glossary of Indices." The Portfolio invests in many securities not included in the indices listed. The composition, industries and holdings of the Portfolio are subject to change. Genesis Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. The risks involved in seeking capital appreciation from investments primarily in companies with small market capitalization are set forth in the prospectus. Past performance is no guarantee of future results. Share prices will vary and your shares when redeemed, may be worth more or less than the price you paid for them. A-10 GUARDIAN ASSETS Neuberger Berman - ---------------------------------------------------------------------- Guardian Assets For the six and twelve month periods concluding August 31, 2000, the Guardian Assets returned 19.63% and 16.04% respectively, versus the Russell 1000 Value Index's 14.31% and 4.15% gains over the same time periods. The S&P 500 advanced 11.72% and 16.31% over the corresponding six and twelve month periods (see page A-30 for comparison of $10,000 investment and average annual total returns as of August 31, 2000).* We are pleased with the Fund's excellent returns in fiscal 2000, and gratified by its continued solid progress toward achieving our objective of superior long-term performance. In the first half of fiscal 2000, technology stocks were the only game in town. Over the last six months, we enjoyed a much broader market, with the stocks of companies in many other industry groups performing well. Our technology stock investments (on average about 16% of portfolio assets during the year) performed exceptionally well, with collective returns exceeding 65%. We will continue to invest in technology stocks with a very sharp eye on valuations and a focus on companies that we believe are improving their competitive position. Seven of the other ten sectors represented in the portfolio also posted positive results. Strong returns from our capital goods, consumer staples, energy, financial services, and health care holdings demonstrated investors' renewed appreciation of high quality, reasonably valued companies in less glamorous industries -- the kind of stocks that are staples of the Guardian Portfolio. Aided by declining market interest rates, good earnings and continued consolidation in the industry, our financial services holdings finished the year with solid gains. Our health care holdings also got much healthier during the year as investors re-appraised quality companies in this previously out-of-favor sector. Rising oil prices propelled our energy holdings. Finally, five portfolio companies (Champion, Union Pacific, Nabisco, Warner Lambert, and Associated First Capital) were hit by takeover lightning -- receiving A-11 - ---------------------------------------------------------------------- Guardian Assets (Cont'd) bids well above our average purchase prices. We believe ongoing merger and acquisition activity may continue to bring values to fruition in out-of-favor industries, providing a tailwind for the portfolio. Our communications services investments were a drag on performance. We were well aware the tidal wave of capital being used to build advanced communications networks would create temporary over-capacity and cutthroat competition. However, we wanted to maintain some exposure in a sector that benefits from the continued proliferation of digital communications services. We adopted a defensive posture -- owning established companies like Verizon Communications (formerly Bell Atlantic), Worldcom, and AT&T, which we viewed as the most reasonably-valued participants. This strategy struggled as prices for telecom services fell faster and farther than we anticipated. Our consumer cyclicals investments also restrained portfolio performance. As the Federal Reserve increased short-term interest rates to slow the economy, investors began anticipating earnings problems for consumer cyclicals, such as retailers and auto manufacturers. To date, earnings have held up relatively well, and if interest rates stabilize at current levels, future earnings may come in better than expected. Our current inclination is to be patient with our consumer cyclicals holdings, one of which we will highlight in this report. Be advised this should not be viewed as a recommendation, but rather an example of our investment discipline. Costco is a leading discount retailer, which until the last several quarters had an unblemished growth record. The company's rapid expansion finally resulted in growing pains and an earnings shortfall, which took the stock from a high of $60 per share to the mid-$20s. We began buying in the low- to mid-$30s. We believe Costco has a valid business model, plenty of room for growth, and the ability to manage this growth more successfully in the years ahead. We expect long-term annual earnings growth approximating 15%. Costco stock has rebounded from its low, but we think it still represents good value. A-12 - ---------------------------------------------------------------------- Guardian Assets (Cont'd) It's been a rewarding year for Guardian Assets shareholders. Although we can never be sure of what the market has in store for us, we believe our value strategy (buying "best in class" companies at below market average valuations) has better long-term potential than momentum investing -- buying stocks simply because they are going up in price. We like to buy "momentum casualties" -- great companies such as Costco, Bristol Myers, GM Hughes, The Gap, and Lexmark -- that we believe are now back to being great values as well. We believe quality merchandise bought at bargain prices will continue to be an effective method for generating superior long-term investment returns. Sincerely, /s/ Kevin Risen /s/ Rick White Kevin Risen and Rick White PORTFOLIO CO-MANAGERS *For index definitions, refer to page A-26, titled "Glossary of Indices." The Portfolio invests in many securities not included in the indices listed. The composition, industries and holdings of the Portfolio are subject to change. Guardian Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. Past performance is no guarantee of future results. Share prices will vary, and your shares, when redeemed may be worth more or less than the price you paid for them. The investments for the Portfolio are managed by the same portfolio manager(s) who manage one or more other mutual funds that have similar names, investment objectives and investment styles as the Portfolio. You should be aware that the Portfolio is likely to differ from the other mutual funds in size, cash flow pattern and tax matters. Accordingly, the holdings and performance of the Portfolio can be expected to vary from those of the other mutual funds. A-13 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Manhattan Assets For the six and twelve month periods concluding August 31, 2000, the Manhattan Assets declined 1.42% and gained 86.04% respectively, versus the Russell Midcap Growth Index's 0.09% decline and 67.18% gain over the same time period, (see page A-31 for comparison of $10,000 investment and average annual total returns as of August 31, 2000).* After five long years of under-performing large-cap stocks, mid-cap stocks excelled in fiscal 2000.(1) Even after this exceptional year, we believe mid-cap stocks remain fundamentally attractive relative to large-caps. Earnings growth rates are materially higher and valuations are still significantly lower. Merger and acquisition activity affirms there is still great value to be found in the mid-cap arena. Of course, fundamental merit is no guarantee that mid-cap stocks will continue to outperform. However, mid-caps are attracting more investor attention. Over the last year, we have seen the average capitalizations of large-cap mutual funds declining and the average capitalization of small-cap funds rising. Large-cap fund managers appear to be dipping into the mid-cap well for companies with better earnings growth and more reasonable valuations. Small-cap fund managers may be straying into mid-cap territory for greater liquidity. Regardless of the reasons for increased institutional interest in mid-cap stocks, the positive flow of funds into mid-caps may provide a demand-driven performance tailwind. We are delighted to have out-performed the Russell Midcap Growth Index benchmark by a sizable margin for the fiscal one-year period. We believe this further validates our investment thesis that stocks which are growing earnings faster than their competitors and are consistently beating consensus earnings estimates will be superior performers. In calendar second quarter 2000, portfolio earnings grew by 65% compared to consensus earnings growth rate estimates of 48%. Seventy-five percent of our holdings exceeded consensus earnings estimates. We believe if the portfolio sustains its earnings momentum and its high percentage of pleasant earnings surprises, the Fund will continue to deliver superior performance. A-14 - ---------------------------------------------------------------------- Manhattan Assets (Cont'd) Our technology investments continued to lead the performance parade, with holdings such as Veritas Software, JDS Uniphase, and Network Appliance Inc. more than tripling in fiscal 2000. Our strategy of investing in profitable Internet infrastructure companies, rather than profitless "dot.coms," helped generate impressive absolute returns and resulted in our tech holdings materially exceeding the tech sector's contribution to our Russell Midcap Growth benchmark. We employed a similarly fruitful strategy in the healthcare arena, favoring companies supplying productivity enhancing products to end-users. Our best performer was PE Biosystems (PEB), which manufactures gene sequencing equipment for genomic research. PEB sells its equipment to nearly all of the participants in the genomic drug field. In the course of the year, we added genomic drug companies Millennium Pharmaceuticals and Human Genome to the portfolio. We believe these two companies have some potentially profitable genomic drugs (drugs customized to treat individuals with varying genetic makeups) in their pipelines. If other factors line up right, this could translate into positive earnings growth. Not all our big winners were in glamorous growth industries such as technology and biotechnology. Calpine, which finished near the top of our performance list, is a utility using state-of-the-art gas turbine technology to generate electricity. It is the low cost producer in the generating business and earnings are accelerating. In second quarter 2000, Calpine's earnings came in 50% above consensus estimates, which over the previous six months had been raised by more than 30%. As usual, our primary portfolio disappointments came in the form of companies in a variety of sectors that failed to meet earnings expectations. As is our discipline, these stocks were sold. Communications services holdings such as McCloud and Winstar performed poorly despite meeting fundamental forecasts. The same is true for media investments including Westwood One and Univision. We put these stocks in our "performance in the warehouse" category -- stocks we believe will ultimately be rewarded for superior earnings growth records. A-15 - ---------------------------------------------------------------------- Manhattan Assets (Cont'd) Manhattan Assets booked relatively large realized capital gains in fiscal 2000. This is primarily the result of selling holdings that performed so well that they moved up into the large-cap category. This includes some of our biggest winners in the technology sector. Our prospectus doesn't mandate the sale of stocks that grow out of their mid-cap clothing. However, an integral part of our investment thesis is that over the long term, mid-cap stocks will outperform large-cap equities. This dictates we preserve the mid-cap character of the Fund. We believe that recycling cash from the sales of our larger cap holdings into smaller companies just graduating into the mid-cap category will enhance long-term returns. In closing, we are gratified by the strong showing of mid-cap growth stocks and the Fund's exceptional fiscal 2000 returns. We will be striving to build on Manhattan Assets successful performance record in the year ahead. Sincerely, /s/ Jennifer Silver /s/ Brooke Cobb Jennifer Silver and Brooke Cobb PORTFOLIO CO-MANAGERS *For index definitions, refer to page A-26, titled "Glossary of Indices." The Portfolio invests in many securities not included in the indices listed. (1)Mid-cap stocks, as represented by the Russell Midcap Index, returned 28.83% for the fiscal year ending August 31, 2000. Large-cap stocks, as represented by the Russell 1000 Index, returned 20.14%. In the previous five fiscal years ending August 31, the Russell 1000 had outperformed the Russell Midcap Index. The composition, industries and holdings of the Portfolio are subject to change. Manhattan Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. Past performance is no guarantee of future results. The investments for the Portfolio are managed by the same portfolio manager(s) who manage one or more other mutual funds that have similar names, investment objectives and investment styles as the Portfolio. You should be aware that the Portfolio is likely to differ from the other mutual funds in size, cash flow pattern and tax matters. Accordingly, the holdings and performance of the Portfolio can be expected to vary from those of the other mutual funds. A-16 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Millennium Assets For the six and twelve month periods concluding August 31, 2000, Millennium Assets declined 13.21% and gained 96.36%, respectively, compared to the Russell 2000 Growth Index's 16.24% decline and 39.08% gain over the same time periods. (See page A-32 for comparison of a $10,000 investment and average annual total returns as of August 31, 2000)* We are pleased to have achieved excellent results in fiscal 2000. Technology stocks comprised approximately 50% of portfolio equity market value, and collectively generated returns in excess of 130%. These gains were accompanied by the volatility which is characteristic of the technology sector. More than any other sector group in today's market, technology stocks are subject to dramatic shifts in investor sentiment. This year, we saw panic buying in January and February, which gave way to panic selling in March and April, before a more orderly summer advance that helped our tech investments close the year with strong gains. Over the short-term, technology stock performance will almost surely continue to be erratic, characterized by breathtaking rallies and dizzying declines. However, over the longer term, we believe investing in small technology companies that are capable of translating promise into profits will be rewarding. Our communications technology investments performed extremely well this year, with Integrated Device Technologies, Efficient Networks Inc. and Natural Microsystems finishing near the top of our performance list. We believe companies providing semiconductors and optical components for next generation communications systems continue to have exceptional growth and investment potential. The Internet category in our technology universe produced some of our major portfolio disappointments. Many "dot.com" stocks went from market darlings to market dogs almost overnight. At issue is whether rapidly growing revenues will ever translate into profits. We believe dot.com companies with good business plans can succeed, and that discerning investors will acknowledge this going forward. In fact, some had a positive impact on the Portfolio's performance. Lifeminders and My Points, for example, are direct marketers specializing in targeted A-17 - ---------------------------------------------------------------------- Millennium Assets (Cont'd) e-mail programs. Both companies are experiencing rapid revenue growth, and in our opinion, are on the road to future profitability. We believe the same is true for About.com, a portal that seems well positioned in the Internet information niche. Despite the poor performance of these stocks this year, we continue to have faith in their ability to reward shareholders. Our energy investments contributed positively to returns this year, with oil services stocks such as Caldive International posting excellent gains. There is some concern that natural gas and oil prices will decline from their highs, restraining energy companies earnings. We believe strong global demand, tight inventories and constrained capacity will sustain energy prices around current levels and that oil services company earnings will advance in the year ahead. Our communications services investments, primarily the publicly traded Sprint PCS affiliates, also performed well. In return for building their wireless systems, these companies have the right to market their services under the Sprint PCS name and receive back office support from Sprint PCS as well. We think this is a good deal for all involved. Collectively, our health care investments had a negative impact on our Portfolio, well below the contribution of this sector to our Russell 2000 Growth benchmark. Experimental drugs from several of the biotechnology companies in the portfolio stumbled badly in clinical trials, dimming their prospects. Having failed our growth tests as well, they were eliminated from the portfolio. What does the small-cap stock market hold in store for the year ahead? The performance of technology stocks will probably continue to have the greatest influence on small-cap stock returns. We believe there are still pockets of extreme overvaluation in the tech sector. For example, several fuel cell companies with little revenues and no earnings have multi-billion dollar market caps. We also see pockets of extreme under-valuation. As mentioned above, virtually every stock with a dot.com label has been severely punished. We believe there are some outstanding growth bargains in this category, however. We are not top-down investors, so we won't venture the blanket statement that A-18 - ---------------------------------------------------------------------- Millennium Assets (Cont'd) technology stocks are now reasonably valued. However, we are still finding plenty of small-cap growth stocks that in our analysis, look like great long-term investment opportunities. In closing, we are pleased to have delivered strong gains and materially outperformed our Russell 2000 Growth Index benchmark. We believe this is a testament to our investment strategy of looking for fast growing companies capable of consistently exceeding consensus growth expectations. Volatility, particularly in the technology sector, will continue to present a challenge to small-cap growth stock investors. It will not undermine our resolve or cause us to lose confidence in the long-term potential of small-cap growth stock investing. Sincerely, /s/ Michael Malouf /s/ Jennifer Silver Michael Malouf and Jennifer Silver PORTFOLIO CO-MANAGERS *The start up of Millennium Assets roughly coincided with a period of accelerated growth in the small-cap growth sector of the stock market, and its investment in IPOs had a significant impact on performance. There can be no assurance that these factors will continue to have a positive effect on the fund. And since the fund for much of this period was relatively small in asset size, it may be easier to achieve higher returns than in a larger fund. NBMI currently absorbs certain expenses of the fund. This arrangement is subject to change, and without this arrangement, the fund's returns would have been less. Results are shown on a "total return" basis and include reinvestment of all dividends and capital gains distributions. Performance data quoted represents past performance, which is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that the shares, when redeemed, may be worth more or less than their original cost. For index definitions, refer to page A-26, titled "Glossary of Indices." The Portfolio invests in many securities not included in the indices listed. The composition, industries and holdings of the Portfolio are subject to change. Millennium Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY IN COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE PROSPECTUS. A-19 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Partners Assets For the six and twelve month periods concluding August 31, 2000, the Partners Assets returned 11.94% and 7.99% respectively, versus the Russell 1000 Value Index's 14.31% and 4.15% gains over the same time period. The S&P 500 advanced 11.72% and 16.31% over the corresponding six and twelve month periods (see page A-34 for comparison of $10,000 investment and average annual total returns as of August 31, 2000).* We are pleased to have nearly doubled the performance of our Russell 1000 Value benchmark in fiscal 2000. We were in some of the right places at the right time: technology, financial services, energy, and healthcare: and stock selection helped us post good gains in poorer performing sectors such as consumer cyclicals, and consumer staples. Although our technology stock holdings provided the greatest contribution to performance this year, we are particularly proud of the generous returns achieved by our financial services investments. We significantly under-weighted financial services stocks, relative to our benchmark, when they began retreating in the face of Federal Reserve rate hikes in the first half of fiscal 2000. We gradually increased our exposure to financials as declining market interest rates spawned a big rebound in the second half. Our stock selection was also good, with Bank of New York, Morgan Stanley Dean Witter, and XL Capital Ltd. making our Top Ten Performance List. Although the Portfolio, on average, was materially under-weighted in financial services throughout fiscal 2000, our returns in this sector matched that of our benchmark index. Stock selection was the key to our success in energy, where Portfolio gains were more than triple this sector's contribution to the Russell 1000 Value Index. Anadarko Petroleum, which became a much more balanced exploration/production company through its acquisition of Union Pacific Resources, was a big winner, as was offshore driller Transocean Sedco. We think energy prices may have peaked and therefore we currently favor the integrated oils over more richly valued exploration/production companies and drillers. A-20 - ---------------------------------------------------------------------- Partners Assets (Cont'd) Our basic materials, capital goods, and communications services investments disappointed. We expected basic materials and capital goods company earnings to benefit from global economic expansion. A strong dollar, however, has continued to keep international demand, pricing and margins down, and we have lost confidence in earnings prospects for the foreseeable future. In communications services, we took a defensive approach, favoring established companies such as Verizon Communications (formerly Bell Atlantic), AT&T and Worldcom. Low valuations failed to support these stocks when revenues and earnings suffered from superheated competition and cutthroat pricing in the land line telecom arena. Even though we think these companies still have stores of value -- principally in their wireless communications businesses -- we are re-evaluating our strategy in this area. Value investors buy technology stocks when valuations are in line with realistic earnings potential. Such opportunities generally evolve when the tech sector is out-of-favor or when a good technology company stumbles on the earnings front. Lexmark, the low cost producer of laser jet and ink jet computer printers, ran into earnings problems when companies deferred buying new computer systems during the Y2K hysteria. Lexmark stock retreated from a high of 136 to the mid-40's. We began buying it shortly afterward. It has continued to retreat, but become even a better bargain, in our opinion. We believe the revenues and earnings Lexmark lost in fourth quarter 1999 will begin coming on stream in fourth quarter 2000. In the interim Lexmark continues to gain market share. In addition, growth in the Internet should translate into growth in the use of printers and ink cartridges, particularly the higher margin colored ink cartridges. This should help improve Lexmark's margins. We think the company can grow earnings by 30% annually over the next several years, but Lexmark stock is trading at just about 13 times our 2001 earnings estimates. Although there are no guarantees Lexmark will live up to our earnings and capital appreciation expectations, it looks like a great bargain. A-21 - ---------------------------------------------------------------------- Partners Assets (Cont'd) What can we expect from the stock market in the year ahead? We note that declining market interest rates (bond yields), infer the economy is beginning to slow. No one (including us) can predict the precise impact of a slower economy on earnings. If corporate earnings do disappoint in the year ahead, however, we believe that richly valued growth stocks will suffer more than the fundamental value bargains in our portfolio. Sincerely, /s/ Basu Mullick /s/ Robert Gendelman S. Basu Mullick and Robert Gendelman PORTFOLIO CO-MANAGERS *For index definitions, refer to page A-26, titled "Glossary of Indices." The Portfolio invests in many securities not included in the indices listed. The composition, industries and holdings of the Portfolio are subject to change. Partners Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. Past performance is no guarantee of future results. Share prices will vary and your shares, when redeemed may be worth more or less than the price you paid for them. The investments for the Portfolio are managed by the same portfolio manager(s) who manage one or more other mutual funds that have similar names, investment objectives and investment styles as the Portfolio. You should be aware that the Portfolio is likely to differ from the other mutual funds in size, cash flow pattern and tax matters. Accordingly, the holdings and performance of the Portfolio can be expected to vary from those of the other mutual funds. A-22 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Socially Responsive Assets For the six and twelve month periods concluding August 31, 2000, the Socially Responsive Assets returned 14.77% and 3.35%, respectively, compared to the Russell 1000 Value Index's 14.31% and 4.15% gains over the same time periods. The S&P 500 Index returned 11.72% and 16.31% over the corresponding six and twelve month periods (see page A-35 for comparison of a $10,000 investment and average annual total returns as of August 31, 2000).* After a slow start, the Socially Responsive Assets regained momentum in the second half of fiscal 2000. We finished the fiscal year with competitive gains versus our Russell 1000 Value benchmark, although we trailed the growth stock-dominated S&P 500 by a significant margin. Our energy investments made the greatest contribution to returns. The Portfolio's energy sector weighting matched that of its Russell 1000 Value Index benchmark, but the Portfolio's returns were exponentially higher. Our bias towards oil services and exploration/production companies, which significantly outperformed the integrated oil companies, was responsible for this big relative return advantage. Anadarko Petroleum, a natural gas exploration and production company with a great environmental management record, was high on our Top Ten Performance List. We still like the energy sector. Inventories are low and capacity is still constrained, which means, in our opinion, that our energy investments can earn good money even if energy prices retreat from their current highs. Our financial services holdings also performed well, highlighted by good gains in insurance company holdings such as Hartford Financial and AIG. Property and casualty insurers and re-insurance companies just now seem to be emerging from an extended down cycle characterized by intense, margin-eroding price competition. Competition has been abating and some pricing flexibility has returned to the business. We accumulated these beaten down stocks at very low prices relative to severely depressed earnings. We expect these stocks to continue to march higher, assuming policy pricing continues to firm, earnings recover, and price/earnings multiples expand. A-23 - ---------------------------------------------------------------------- Socially Responsive Assets (Cont'd) Our utility holdings, most notably Enron and Keyspan Energy, posted exceptional revenue and earnings gains in part due to supplementing their regulated utilities businesses with unregulated operations such as telecommunications and commodities trading. Coupled with pricing improvements in the basic utilities business, a growth dimension has been added to these stocks, which have performed quite well over the last year. Our returns from the health care sector got a big boost when Pfizer acquired Warner Lambert. Looking ahead, we are a bit wary about the pharmaceuticals. Political pressure for some form of price restraints on prescription drugs is mounting. Whether it comes from government or the insurance companies, price restraints would likely crimp pharmaceutical companies' earnings growth. Collectively, our technology investments finished the year at a modest gain compared to substantial gains for the tech sector in our benchmark index. What went wrong? Smaller cap tech holdings such as Quantum Corp. were severely punished for reporting disappointing earnings. Larger cap holdings such as Xerox and Unisys suffered the same fate. Substantial losses in these stocks offset good gains in portfolio holdings such as Intel, Hewlett Packard, and Compaq Computer. We have reoriented our technology stock commitments, focusing on what we think are reasonably valued blue chips less prone to unpleasant earnings surprises. Our communications services holdings also penalized returns. We had taken what we thought was a defensive posture, focusing on large established companies including AT&T, Worldcom, and Verizon Communications (formerly Bell Atlantic). We believed these companies' size and dominant positions would help them succeed in the increasingly competitive telecommunications market. Instead, newcomers with more modern networks continued to capture share from these "legacy" companies, sending their stock prices materially lower. We are rethinking our communications services sector strategy and may change our focus in the year ahead. As the name of our Assets indicates, portfolio companies must be socially responsive in addition to having good investment potential. A-24 - ---------------------------------------------------------------------- Socially Responsive Assets (Cont'd) KeySpan Corporation (formerly Brooklyn Union Gas) certainly qualifies. In addition to its New York Metropolitan Area electric and gas utilities business, KeySpan has some telecommunications properties and investments in fuel cell technology. Fuel cells produce electric power by converting energy from natural gas into electricity without combustion. This is the cleanest, most environmentally friendly method of producing electricity. KeySpan has operated a large fuel cell at a Staten Island hospital, which it believes has eliminated almost 30,000 pounds of air pollution and three million pounds of carbon dioxide from the air. We think KeySpan has reasonably good earnings prospects and a yield approximating 5%. Our comments on KeySpan should not be viewed as a recommendation, but rather an example of the type of stock we want to own: in short, a good corporate citizen with seemingly excellent investment prospects. Although the Fund's full fiscal year 2000 results are uninspiring, we are pleased and encouraged by its strong performance in the second half. We are striving to maintain this momentum in the year ahead, while maintaining the socially responsive character of the portfolio. Sincerely, /s/ Janet Prindle Janet Prindle PORTFOLIO MANAGER *For index definitions, refer to page A-26, titled "Glossary of Indices." The Portfolio invests in many securities not included in the indices listed. The composition, industries and holdings of the Portfolio are subject to change. Socially Responsive Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. Past performance is no guarantee of future results. Share prices will vary and your shares, when redeemed, may be worth more or less than their original cost. The investments for the Portfolio are managed by the same portfolio manager(s) who manage one or more other mutual funds that have similar names, investment objectives and investment styles as the Portfolio. You should be aware that the Portfolio is likely to differ from the other mutual funds in size, cash flow pattern and tax matters. Accordingly, the holdings and performance of the Portfolio can be expected to vary from those of the other mutual funds. A-25 GLOSSARY OF INDICES S&P 500 INDEX: The S&P 500 Index is widely regarded as the standard for measuring large-cap U.S. stock markets performance and includes a representative sample of leading companies in leading industries. RUSSELL 1000-REGISTERED TRADEMARK- Measures the performance of the 1,000 INDEX: largest companies in the Russell 3000-Registered Trademark- Index (which measures the performance of the 3,000 largest U.S. companies based on total market capitalization). The Russell 1000 Index represents approximately 92% of the total market capitalization of the Russell 3000 Index. RUSSELL 1000-REGISTERED TRADEMARK- Measures the performance of those VALUE INDEX: Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. RUSSELL 1000-REGISTERED TRADEMARK- Measures the performance of the Russell GROWTH INDEX: 1000-Registered Trademark- companies with higher price-to-book ratios and higher forecasted growth values. RUSSELL 2000-REGISTERED TRADEMARK- An unmanaged index consisting of INDEX: securities of the 2,000 issuers having the smallest capitalization in the Russell 3000-Registered Trademark- Index, representing approximately 8% of the Russell 3000 total market capitalization. The smallest company's market capitalization is roughly $178 million. RUSSELL 2000-REGISTERED TRADEMARK- Measures the performance of those GROWTH INDEX: Russell 2000-Registered Trademark- Index companies with higher price-to-book ratios and higher forecasted growth values. RUSSELL 2000-REGISTERED TRADEMARK- Measures the performance of those VALUE INDEX: Russell 2000-Registered Trademark- Index companies with lower price-to-book ratios and lower forecasted growth values. EAFE-REGISTERED TRADEMARK- INDEX: Also known as the Morgan Stanley Capital International Europe, Australasia, Far East Index. An unmanaged index of over 1,000 foreign stock prices. The index is translated into U.S. dollars and includes reinvestment of all dividends and capital gain distributions. RUSSELL MIDCAP-REGISTERED TRADEMARK- An unmanaged index that measures the GROWTH INDEX: performance of those Russell Midcap- Trademark- Index (the 800 smallest companies in the Russell 1000 Index) companies with higher price-to-book ratios and higher forecasted growth values. RUSSELL MIDCAP-REGISTERED TRADEMARK- An unmanaged index that measures the VALUE INDEX: performance of those Russell Midcap- Trademark- Index (the 800 smallest companies in the Russell 1000 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 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 may invest in many securities not included in the above-described indices. A-26 COMPARISON OF A $10,000 INVESTMENT Neuberger Berman August 31, 2000 - ---------------------------------------------------------------------- Focus Assets EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURN(1) RUSSELL 1000-REGISTERED TRADEMARK- FOCUS S&P 500(2) VALUE(2) 1 YEAR +58.68% +16.31% +4.15% 5 YEAR +22.65% +24.03% +18.21% 10 YEAR +20.57% +19.47% +17.18%
RUSSELL 1000 FOCUS ASSETS S&P 500 VALUE 1990 $10,000 $10,000 $10,000 1991 $11,596 $12,685 $12,356 1992 $12,965 $13,689 $13,596 1993 $16,627 $15,766 $17,248 1994 $18,348 $16,627 $17,742 1995 $23,389 $20,189 $21,145 1996 $24,254 $23,968 $24,854 1997 $34,731 $33,705 $34,680 1998 $28,574 $36,435 $36,029 1999 $40,904 $50,939 $46,867 2000 $64,906 $59,248 $48,814
The performance information for Neuberger Berman Focus Assets is as of August 31, 2000. Neuberger Berman Focus Assets started operating on September 4, 1996. It has identical investment objectives and policies, and invests in the same Portfolio as Neuberger Berman Focus Fund ("Sister Fund"), which is also managed by Neuberger Berman Management Inc. ("Management"). The performance information shown in the above chart for the period before September 4, 1996, is for the Sister Fund. Management has agreed to bear certain operating expenses of Focus Assets which, in the aggregate, exceed 1.50% per annum of Focus Assets' average daily net assets, until December 31, 2010. Absent such arrangement, the average annual total returns of Focus Assets would have been less. The total returns for the periods prior to Focus Assets' commencement of operations would have been lower had they reflected the higher expense ratios of Focus Assets as compared to those of its Sister Fund. Prior to November 1, 1991, the investment policies of the Sister Fund required that a substantial percentage of its assets be invested in the energy field; accordingly, performance results prior to that time do not necessarily reflect the level of performance that may be expected under the Assets' current investment policies. While the A-27 Assets' 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. 1. "Total Return" includes reinvestment of all income dividends and capital gain distributions. Results represent past performance and do not indicate future results. The value of an investment in Focus Assets and the return on the investment both will fluctuate, and redemption proceeds may be higher or lower than an investor's original cost. 2. The Russell 1000-Registered Trademark- Index measures the performance of the 1,000 largest companies in the Russell 3000-Registered Trademark- Index (which measures the performance of the 3,000 largest U.S. companies based on total market capitalization). The Russell 1000 Index represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The S&P 500 Index is widely regarded as the standard for measuring large-cap U.S. stock market performance and includes a representative sample of leading companies in leading industries. 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 Management and include reinvestment of all dividends and capital gain distributions. The Portfolio may invest in many securities not included in the above-described indices. A-28 COMPARISON OF A $10,000 INVESTMENT Neuberger Berman August 31, 2000 - ---------------------------------------------------------------------- Genesis Assets EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURN(1) GENESIS RUSSELL 2000-REGISTERED TRADEMARK-(2) 1 YEAR +25.42% +27.15% 5 YEAR +16.15% +13.46% 10 YEAR +16.70% +16.20%
GENESIS ASSETS RUSSELL 2000 1990 $10,000 $10,000 1991 $13,536 $13,125 1992 $14,226 $14,083 1993 $17,670 $18,664 1994 $18,512 $19,759 1995 $22,157 $23,875 1996 $26,881 $26,459 1997 $38,822 $34,120 1998 $31,450 $27,502 1999 $37,347 $35,301 2000 $46,838 $44,887
The performance information for Neuberger Berman Genesis Assets is as of August 31, 2000. Neuberger Berman Genesis Assets started operating on April 2, 1997. It has identical investment objectives and policies, and invests in the same Portfolio as Neuberger Berman Genesis Fund ("Sister Fund"), which is also managed by Neuberger Berman Management Inc. ("Management"). The performance information shown in the above chart for the period before April 2, 1997, is for the Sister Fund. Management has agreed to bear certain operating expenses of Genesis Assets which, in the aggregate, exceed 1.50% per annum of Genesis Assets' average daily net assets, until December 31, 2010. Management previously agreed to waive a portion of the management fee borne directly by Neuberger Berman Genesis Portfolio and indirectly by Genesis Assets. Absent such arrangements, the average annual total returns of Genesis Assets would have been less. The total returns for the periods prior to Genesis Assets' commencement of operations would have been lower had they reflected the higher expense ratios of Genesis Assets as compared to those of its Sister Fund. 1. "Total Return" includes reinvestment of all income dividends and capital gain distributions. Results represent past performance and do not indicate future results. The value of an investment in Genesis Assets and the return on the investment both will fluctuate, and redemption proceeds may be higher or lower than an investor's original cost. 2. 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-Registered Trademark- Index, representing approximately 8% of the Russell 3000 total market capitalization. The smallest company's market capitalization is roughly $178 million. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track, and that individuals cannot invest directly in any index. Data about the performance of this index are prepared or obtained by Management 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 RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY IN COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE PROSPECTUS. A-29 COMPARISON OF A $10,000 INVESTMENT Neuberger Berman August 31, 2000 - ---------------------------------------------------------------------- Guardian Assets EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURN(1) RUSSELL 1000 -REGISTERED TRADEMARK- GUARDIAN S&P 500(2) VALUE(2) 1 YEAR +16.04% +16.31% +4.15% 5 YEAR +10.79% +24.03% +18.21% 10 YEAR +15.37% +19.47% +17.18%
RUSSELL 1000 GUARDIAN ASSETS S&P 500 VALUE 1990 $10,000 $10,000 $10,000 1991 $13,048 $12,685 $12,356 1992 $14,860 $13,689 $13,596 1993 $18,491 $15,766 $17,248 1994 $20,177 $16,627 $17,742 1995 $25,032 $20,189 $21,145 1996 $26,350 $23,968 $24,854 1997 $36,545 $33,705 $34,680 1998 $28,744 $36,435 $36,029 1999 $36,003 $50,939 $46,867 2000 $41,778 $59,248 $48,814
The performance information for Neuberger Berman Guardian Assets is as of August 31, 2000. Neuberger Berman Guardian Assets started operating on September 4, 1996. It has identical investment objectives and policies, and invests in the same Portfolio as Neuberger Berman Guardian Fund ("Sister Fund"), which is also managed by Neuberger Berman Management Inc. ("Management"). The performance information shown in the above chart for the period before September 4, 1996, is for the Sister Fund. Management has agreed to bear certain operating expenses of Guardian Assets which, in the aggregate, exceed 1.50% per annum of Guardian Assets' average daily net assets, until December 31, 2010. Absent such arrangement, the average annual total returns of Guardian Assets would have been less. The total returns for the periods prior to Guardian Assets' commencement of operations would have been lower had they reflected the higher expense ratios of Guardian Assets as compared to those of its Sister Fund. 1. "Total Return" includes reinvestment of all income dividends and capital gain distributions. Results represent past performance and do not indicate future results. The value of an investment in Guardian Assets and the return on the investment both will fluctuate, and redemption proceeds may be higher or lower than an investor's original cost. 2. The Russell 1000-Registered Trademark- Index measures the performance of the 1,000 largest companies in the Russell 3000-Registered Trademark- Index (which measures the performance of the 3,000 largest U.S. companies based on total market capitalization). The Russell 1000 Index represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The S&P 500 Index is widely regarded as the standard for measuring large-cap U.S. stock market performance and includes a representative sample of leading companies in leading industries. 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 Management and include reinvestment of all dividends and capital gain distributions. The Portfolio may invest in many securities not included in the above-described indices. A-30 COMPARISON OF A $10,000 INVESTMENT Neuberger Berman August 31, 2000 - ---------------------------------------------------------------------- Manhattan Assets EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURN(1) RUSSELL MIDCAP -REGISTERED TRADEMARK- MANHATTAN S&P 500(2) GROWTH(2) 1 YEAR +86.04% +16.31% +67.18% 5 YEAR +24.66% +24.03% +26.44% 10 YEAR +20.82% +19.47% +22.57%
RUSSELL MIDCAP MANHATTAN ASSETS S&P 500 GROWTH 1990 $10,000 $10,000 $10,000 1991 $12,617 $12,685 $13,896 1992 $13,215 $13,689 $14,836 1993 $16,883 $15,766 $18,012 1994 $17,472 $16,627 $18,983 1995 $22,014 $20,189 $23,681 1996 $21,374 $23,968 $26,480 1997 $29,506 $33,705 $34,751 1998 $26,175 $36,435 $30,763 1999 $35,622 $50,939 $45,786 2000 $66,270 $59,248 $76,545
The performance information for Neuberger Berman Manhattan Assets is as of August 31, 2000. Neuberger Berman Manhattan Assets started operating on September 4, 1996. It has identical investment objectives and policies, and invests in the same Portfolio as Neuberger Berman Manhattan Fund ("Sister Fund"), which is also managed by Neuberger Berman Management Inc. ("Management"). The performance information shown in the above chart for the period before September 4, 1996, is for the Sister Fund. Management has agreed to bear certain operating expenses of Manhattan Assets which, in the aggregate, exceed 1.50% per annum of Manhattan Assets' average daily net assets, until December 31, 2010. Absent such arrangement, the average annual total returns of Manhattan Assets would have been less. The total returns for the periods prior to Manhattan Assets' commencement of operations would have been lower had they reflected the higher expense ratios of Manhattan Assets as compared to those of its Sister Fund. 1. "Total Return" includes reinvestment of all income dividends and capital gain distributions. Results represent past performance and do not indicate future results. The value of an investment in Manhattan Assets and the return on the investment both will fluctuate, and redemption proceeds may be higher or lower than an investor's original cost. 2. The Russell Midcap Growth Index measures the performance of those Russell Midcap-Registered Trademark- Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000-Registered Trademark- Index, which represents approximately 24% 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 S&P 500 Index is widely regarded as the standard for measuring large-cap U.S. stock market performance and includes a representative sample of leading companies in leading industries. 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 Management and include reinvestment of all dividends and capital gain distributions. The Portfolio may invest in many securities not included in the above-described indices. A-31 COMPARISON OF A $10,000 INVESTMENT Neuberger Berman August 31, 2000 - ---------------------------------------------------------------------- Millennium Assets EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURN(1) RUSSELL 2000-REGISTERED TRADEMARK- MILLENNIUM GROWTH(2) RUSSELL 2000-REGISTERED TRADEMARK-(2) 1 YEAR +96.36% +39.08% +27.15% LIFE OF FUND +105.03% +39.78% +26.94%
RUSSELL 2000 MILLENNIUM ASSETS GROWTH RUSSELL 2000 10/20/98 $10,000 $10,000 $10,000 11/30/98 $12,330 $11,714 $11,299 2/28/99 $14,880 $12,127 $11,173 5/31/99 $17,110 $13,690 $12,545 8/31/99 $19,480 $13,443 $12,281 11/30/99 $25,880 $15,540 $13,070 2/29/00 $44,073 $22,321 $16,679 5/31/00 $29,746 $16,386 $13,789 08/31/00 $38,251 $18,696 $15,615
The performance information for Millennium Assets is as of August 31, 2000. Neuberger Berman Millennium Assets started operations on January 26, 2000. It has identical investment objectives and policies, and invests in the same portfolio as Neuberger Berman Millennium Fund ("Sister Fund"), which is also managed by Neuberger Berman Management ("Management"). The performance information shown in the above chart prior to January 26, 2000 is for the Sister Fund. The cumulative return for Millennium Assets from January 26, 2000, which is the commencement of operations of Millennium Assets, through August 31, 2000 was 8.40%. The start up of Millennium Fund roughly coincided with a period of accelerated growth in the small-cap growth sector of the stock market, and its investment in IPOs had a significant impact on performance. There can be no assurance that these factors will continue to have a positive effect on the fund. Since the fund is relatively small in asset size, it may be easier to achieve higher returns in a small fund than in a larger fund. Management has contractually agreed to bear certain operating expenses of Millennium Assets which, in the aggregate, exceed 1.75% per annum of Millennium Assets' average daily net assets, until December 31, 2002. Absent such arrangement, A-32 the average annual total returns of Millennium Assets 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. 1. "Total Return" includes reinvestment of all income dividends and capital gain distributions. Results represent past performance and do not indicate future results. The value of an investment in the Trust and the return on the investment both will fluctuate, and redemption proceeds may be higher or lower than an investor's original cost. 2. 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 Index is an unmanaged index that measures the performance of the 2,000 issuers having the smallest capitalization in the Russell 3000-Registered Trademark- Index, representing approximately 8% of the Russell 3000 total market capitalization. The smallest company's market capitalization is roughly $178 million. 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 Management and include reinvestment of all dividends and capital gain distributions. The Portfolio may invest in many securities not included in the above-described indices. A-33 COMPARISON OF A $10,000 INVESTMENT Neuberger Berman August 31, 2000 - ---------------------------------------------------------------------- Partners Assets EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURN(1) RUSSELL 1000-REGISTERED TRADEMARK- PARTNERS S&P 500(2) VALUE(2) 1 YEAR +7.99% +16.31% +4.15% 5 YEAR +15.06% +24.03% +18.21% 10 YEAR +15.55% +19.47% +17.18%
RUSSELL 1000 PARTNERS ASSETS S&P 500 VALUE 1990 $10,000 $10,000 $10,000 1991 $11,803 $12,685 $12,356 1992 $12,806 $13,689 $13,596 1993 $16,410 $15,766 $17,248 1994 $17,322 $16,627 $17,742 1995 $21,051 $20,189 $21,145 1996 $23,972 $23,968 $24,854 1997 $35,062 $33,705 $34,680 1998 $31,315 $36,435 $36,029 1999 $39,305 $50,939 $46,867 2000 $42,444 $59,248 $48,814
The performance information for Neuberger Berman Partners Assets is as of August 31, 2000. Neuberger Berman Partners Assets started operating on August 19, 1996. It has identical investment objectives and policies, and invests in the same Portfolio as Neuberger Berman Partners Fund ("Sister Fund"), which is also managed by Neuberger Berman Management Inc. ("Management"). The performance information shown in the above chart for the period before August 19, 1996, is for the Sister Fund. Management has agreed to bear certain operating expenses of Partners Assets which, in the aggregate, exceed 1.50% per annum of Partners Assets' average daily net assets, until December 31, 2010. Absent such arrangement, the average annual total returns of Partners Assets would have been less. The total returns for the periods prior to Partners Assets' commencement of operations would have been lower had they reflected the higher expense ratios of Partners Assets as compared to those of its Sister Fund. 1. "Total Return" includes reinvestment of all income dividends and capital gain distributions. Results represent past performance and do not indicate future results. The value of an investment in Partners Assets and the return on the investment both will fluctuate, and redemption proceeds may be higher or lower than an investor's original cost. 2. The Russell 1000-Registered Trademark- Index measures the performance of the 1,000 largest companies in the Russell 3000-Registered Trademark- Index (which measures the performance of the 3,000 largest U.S. companies based on total market capitalization). The Russell 1000 Index represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The S&P 500 Index is widely regarded as the standard for measuring large-cap U.S. stock markets performance and includes a representative sample of leading companies in leading industries. 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 Management and include reinvestment of all dividends and capital gain distributions. The Portfolio may invest in many securities not included in the above-described indices. A-34 COMPARISON OF A $10,000 INVESTMENT Neuberger Berman August 31, 2000 - ---------------------------------------------------------------------- Socially Responsive Assets EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURN(1) RUSSELL 1000-REGISTERED TRADEMARK- SOCIALLY RESPONSIVE S&P 500(2) VALUE(2) 1 YEAR +3.35% +16.31% +4.15% 5 YEAR +16.08% +24.03% +18.21% LIFE OF FUND +15.22% +22.23% +17.18%
RUSSELL 1000 SOCIALLY RESPONSIVE ASSETS S&P 500 VALUE 3/16/94 $10,000 $10,000 $10,000 8/31/94 $10,070 $10,276 $10,128 1995 $11,865 $12,476 $12,071 1996 $14,261 $14,812 $14,188 1997 $18,818 $20,829 $19,797 1998 $17,686 $22,517 $20,568 1999 $24,194 $31,480 $26,754 2000 $25,005 $36,615 $27,866
The performance information for Neuberger Berman Socially Responsive Assets is as of August 31, 2000. Neuberger Berman Socially Responsive Assets started operating on June 9, 1999. It has identical investment objectives and policies, and invests in the same Portfolio as Neuberger Berman Socially Responsive Fund ("Sister Fund"), which is also managed by Neuberger Berman Management Inc. ("Management"). The performance information shown in the above chart for the period before June 9, 1999, is for the Sister Fund. Management has agreed to bear certain operating expenses of Socially Responsive Assets which, in the aggregate, exceed 1.50% per annum of Socially Responsive Assets' average daily net assets, until December 31, 2002. Absent such arrangement, the average annual total returns of Socially Responsive Assets would have been less. The total returns for the periods prior to Socially Responsive Assets' commencement of operations would have been lower had they reflected the higher expense ratios of Socially Responsive Assets as compared to those of its Sister Fund. 1. "Total Return" includes reinvestment of all income dividends and capital gain distributions. Results represent past performance and do not indicate future results. The value of an investment in Socially Responsive Assets and the return on the investment both will fluctuate, and redemption proceeds may be higher or lower than an investor's original cost. 2. The Russell 1000-Registered Trademark- Index measures the performance of the 1,000 largest companies in the Russell 3000-Registered Trademark- Index (which measures the performance of the 3,000 largest U.S. companies based on total market capitalization). The Russell 1000 Index represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Value Index measures the performance of those Russell 1000 A-35 companies with lower price-to-book ratios and lower forecasted growth values. The S&P 500 Index is widely regarded as the standard for measuring large-cap U.S. stock market performance and includes a representative sample of leading companies in leading industries. 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 Management and include reinvestment of all dividends and capital gain distributions. The Portfolio may invest in many securities not included in the above-described indices. A-36 (This page has been left blank intentionally.) B-1 STATEMENTS OF ASSETS AND LIABILITIES Neuberger Berman - ---------------------------------------------------------------------- Equity Assets
FOCUS GENESIS (000'S OMITTED EXCEPT PER SHARE AMOUNTS) ASSETS ASSETS ---------------------------- ASSETS Investment in corresponding Portfolio, at value (Note A) $ 15,155 $ 99,147 Deferred organization costs (Note A) 12 19 Receivable for Trust shares sold 61 173 Receivable from administrator -- net (Note B) -- -- ---------------------------- 15,228 99,339 ---------------------------- LIABILITIES Payable for Fund expenses (Note B) -- -- Payable for Trust shares redeemed -- 294 Payable to administrator -- net (Note B) 6 50 Accrued expenses 20 45 ---------------------------- 26 389 ---------------------------- NET ASSETS at value $ 15,202 $ 98,950 ---------------------------- NET ASSETS consist of: Par value $ 1 $ 6 Paid-in capital in excess of par value 11,660 77,941 Accumulated undistributed net investment income -- -- Accumulated net realized gains (losses) on investment (71) 8,246 Net unrealized appreciation in value of investment 3,612 12,757 ---------------------------- NET ASSETS at value $ 15,202 $ 98,950 ---------------------------- SHARES OUTSTANDING ($.001 par value; unlimited shares authorized) 645 6,248 ---------------------------- NET ASSET VALUE, offering and redemption price per share $23.57 $15.84 ----------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-2 August 31, 2000 - ---------------------------------------------------------------------- Equity Assets
SOCIALLY GUARDIAN MANHATTAN MILLENNIUM PARTNERS RESPONSIVE ASSETS ASSETS ASSETS ASSETS ASSETS ------------------------------------------------------------------------- ASSETS Investment in corresponding Portfolio, at value (Note A) $ 27,749 $ 5,405 $ 233 $ 53,838 $ 288 Deferred organization costs (Note A) 12 12 -- 11 -- Receivable for Trust shares sold -- 42 -- -- 2 Receivable from administrator -- net (Note B) -- 1 12 -- 114 ------------------------------------------------------------------------- 27,761 5,460 245 53,849 404 ------------------------------------------------------------------------- LIABILITIES Payable for Fund expenses (Note B) -- -- -- -- 108 Payable for Trust shares redeemed 175 4 -- 265 -- Payable to administrator -- net (Note B) 15 -- -- 29 -- Accrued expenses 22 19 18 26 20 ------------------------------------------------------------------------- 212 23 18 320 128 ------------------------------------------------------------------------- NET ASSETS at value $ 27,549 $ 5,437 $ 227 $ 53,529 $ 276 ------------------------------------------------------------------------- NET ASSETS consist of: Par value $ 2 $ -- $ -- $ 3 $ -- Paid-in capital in excess of par value 22,869 3,319 216 45,460 263 Accumulated undistributed net investment income 2 -- -- 9 -- Accumulated net realized gains (losses) on investment 301 778 (10) 2,079 (19) Net unrealized appreciation in value of investment 4,375 1,340 21 5,978 32 ------------------------------------------------------------------------- NET ASSETS at value $ 27,549 $ 5,437 $ 227 $ 53,529 $ 276 ------------------------------------------------------------------------- SHARES OUTSTANDING ($.001 par value; unlimited shares authorized) 1,766 201 21 3,340 27 ------------------------------------------------------------------------- NET ASSET VALUE, offering and redemption price per share $15.60 $27.05 $10.84 $16.03 $10.18 -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-3 STATEMENTS OF OPERATIONS Neuberger Berman - ---------------------------------------------------------------------- Equity Assets
FOCUS GENESIS ASSETS ASSETS For the For the Year Year Ended Ended August 31, August 31, (000'S OMITTED) 2000 2000 ------------------------ INVESTMENT INCOME Investment income from corresponding Portfolio (Note A) $ 46 $ 1,028 ------------------------ Expenses: Administration fee (Note B) 22 346 Amortization of deferred organization and initial offering expenses (Note A) 12 12 Auditing fees 5 5 Custodian fees 10 10 Distribution fees (Note B) 13 216 Legal fees 6 5 Registration and filing fees 27 42 Shareholder reports 17 48 Shareholder servicing agent fees 16 19 Trustees' fees and expenses -- 1 Miscellaneous 2 13 Expenses from corresponding Portfolio (Notes A & B) 27 652 ------------------------ Total expenses 157 1,369 Expenses reimbursed by administrator and/or reduced by custodian fee expense offset arrangement (Note B) (75) (73) ------------------------ Total net expenses 82 1,296 ------------------------ Net investment income (loss) (36) (268) ------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM CORRESPONDING PORTFOLIO (NOTE A) Net realized gain (loss) on investment securities (67) 10,032 Net realized gain (loss) on option contracts 1 -- Net realized loss on financial futures contracts -- -- Change in net unrealized appreciation (depreciation) of investment securities, financial futures contracts, and option contracts 3,270 10,310 ------------------------ Net gain on investments from corresponding Portfolio (Note A) 3,204 20,342 ------------------------ Net increase in net assets resulting from operations $ 3,168 $ 20,074 ------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-4 - ---------------------------------------------------------------------- Equity Assets
SOCIALLY GUARDIAN MANHATTAN MILLENNIUM PARTNERS RESPONSIVE ASSETS ASSETS ASSETS ASSETS ASSETS For the Period from For the For the January 26, 2000 For the For the Year Year (Commencement Year Year Ended Ended of Operations) to Ended Ended August 31, August 31, August 31, August 31, August 31, 2000 2000 2000 2000 2000 ----------------------------------------------------------------------------- INVESTMENT INCOME Investment income from corresponding Portfolio (Note A) $ 379 $ 16 $ -- $ 815 $ 2 ----------------------------------------------------------------------------- Expenses: Administration fee (Note B) 103 15 -- 228 1 Amortization of deferred organization and initial offering expenses (Note A) 11 11 -- 12 -- Auditing fees 5 6 4 5 4 Custodian fees 10 10 6 10 10 Distribution fees (Note B) 64 9 -- 143 -- Legal fees 6 8 19 5 19 Registration and filing fees 27 25 35 35 52 Shareholder reports 10 11 10 15 18 Shareholder servicing agent fees 17 17 -- 17 9 Trustees' fees and expenses -- -- -- 1 -- Miscellaneous 5 2 -- 9 2 Expenses from corresponding Portfolio (Notes A & B) 121 21 1 273 1 ----------------------------------------------------------------------------- Total expenses 379 135 75 753 116 Expenses reimbursed by administrator and/or reduced by custodian fee expense offset arrangement (Note B) -- (78) (74) (1) (114) ----------------------------------------------------------------------------- Total net expenses 379 57 1 752 2 ----------------------------------------------------------------------------- Net investment income (loss) -- (41) (1) 63 -- ----------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM CORRESPONDING PORTFOLIO (NOTE A) Net realized gain (loss) on investment securities 757 738 (14) 1,953 (20) Net realized gain (loss) on option contracts (566) -- -- -- -- Net realized loss on financial futures contracts (27) -- -- -- -- Change in net unrealized appreciation (depreciation) of investment securities, financial futures contracts, and option contracts 3,679 1,269 21 2,077 33 ----------------------------------------------------------------------------- Net gain on investments from corresponding Portfolio (Note A) 3,843 2,007 7 4,030 13 ----------------------------------------------------------------------------- Net increase in net assets resulting from operations $ 3,843 $ 1,966 $ 6 $ 4,093 $ 13 -----------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-5 STATEMENTS OF CHANGES IN NET ASSETS Neuberger Berman - ---------------------------------------------------------------------- Equity Assets
FOCUS GENESIS ASSETS ASSETS Year Year Ended Ended August 31, August 31, (000'S OMITTED) 2000 1999 2000 1999 ------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (36) $ (9) $ (268) $ 93 Net realized gain (loss) on investments from corresponding Portfolio (Note A) (66) 216 10,032 (1,746) Change in net unrealized appreciation (depreciation) of investments from corresponding Portfolio (Note A) 3,270 435 10,310 8,646 ------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 3,168 642 20,074 6,993 ------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income -- -- (66) (113) Net realized gain on investments (194) (1) -- -- ------------------------------------------------------ Total distributions to shareholders (194) (1) (66) (113) ------------------------------------------------------ FROM TRUST SHARE TRANSACTIONS: Proceeds from shares sold in initial capitalization of the Fund (Note A) -- -- -- -- Proceeds from shares sold to the public 11,810 2,252 39,001 69,021 Proceeds from reinvestment of dividends and distributions 192 1 33 58 Payments for shares redeemed (1,673) (1,471) (41,897) (18,620) ------------------------------------------------------ Net increase (decrease) from Trust share transactions 10,329 782 (2,863) 50,459 ------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS 13,303 1,423 17,145 57,339 NET ASSETS: Beginning of year 1,899 476 81,805 24,466 ------------------------------------------------------ End of year $ 15,202 $ 1,899 $ 98,950 $ 81,805 ------------------------------------------------------ Accumulated undistributed net investment income at end of year $ -- $ -- $ -- $ 19 ------------------------------------------------------ NUMBER OF TRUST SHARES: Sold in initial capitalization of the Fund (Note A) -- -- -- -- Sold to the public 605 176 2,859 5,696 Issued on reinvestment of dividends and distributions 11 -- 3 5 Redeemed (88) (101) (3,087) (1,521) ------------------------------------------------------ Net increase (decrease) in shares outstanding 528 75 (225) 4,180 ------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-6 - ---------------------------------------------------------------------- Equity Assets
GUARDIAN MANHATTAN MILLENNIUM ASSETS ASSETS ASSETS Period from January 26, 2000 Year Year (Commencement Ended Ended of Operations) to August 31, August 31, August 31, 2000 1999 2000 1999 2000 ------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ -- $ 6 $ (41) $ (5) $ (1) Net realized gain (loss) on investments from corresponding Portfolio (Note A) 164 (164) 738 (16) (14) Change in net unrealized appreciation (depreciation) of investments from corresponding Portfolio (Note A) 3,679 4,816 1,269 99 21 ------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 3,843 4,658 1,966 78 6 ------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (19) -- -- -- -- Net realized gain on investments (168) -- -- (1) -- ------------------------------------------------------------------------- Total distributions to shareholders (187) -- -- (1) -- ------------------------------------------------------------------------- FROM TRUST SHARE TRANSACTIONS: Proceeds from shares sold in initial capitalization of the Fund (Note A) -- -- -- -- -- Proceeds from shares sold to the public 2,686 5,961 2,753 1,649 272 Proceeds from reinvestment of dividends and distributions 182 -- -- 1 -- Payments for shares redeemed (3,804) (3,339) (999) (218) (51) ------------------------------------------------------------------------- Net increase (decrease) from Trust share transactions (936) 2,622 1,754 1,432 221 ------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 2,720 7,280 3,720 1,509 227 NET ASSETS: Beginning of year 24,829 17,549 1,717 208 -- ------------------------------------------------------------------------- End of year $ 27,549 $ 24,829 $ 5,437 $ 1,717 $ 227 ------------------------------------------------------------------------- Accumulated undistributed net investment income at end of year $ 2 $ 6 $ -- $ -- $ -- ------------------------------------------------------------------------- NUMBER OF TRUST SHARES: Sold in initial capitalization of the Fund (Note A) -- -- -- -- -- Sold to the public 191 452 127 114 26 Issued on reinvestment of dividends and distributions 13 -- -- -- -- Redeemed (272) (241) (44) (15) (5) ------------------------------------------------------------------------- Net increase (decrease) in shares outstanding (68) 211 83 99 21 -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-7 STATEMENTS OF CHANGES IN NET ASSETS(Cont'd) Neuberger Berman - ---------------------------------------------------------------------- Equity Assets
SOCIALLY PARTNERS RESPONSIVE ASSETS ASSETS Period from June 9, 1999 Year Year (Commencement Ended Ended of Operations) to August 31, August 31, August 31, (000'S OMITTED) 2000 1999 2000 1999 ----------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 63 $ 249 $ -- $ -- Net realized gain (loss) on investments from corresponding Portfolio (Note A) 1,953 3,694 (20) (1) Change in net unrealized appreciation (depreciation) of investments from corresponding Portfolio (Note A) 2,077 8,416 33 (1) ----------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 4,093 12,359 13 (2) ----------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (39) (257) -- -- Net realized gain on investments (3,463) -- -- -- ----------------------------------------------------------- Total distributions to shareholders (3,502) (257) -- -- ----------------------------------------------------------- FROM TRUST SHARE TRANSACTIONS: Proceeds from shares sold in initial capitalization of the Fund (Note A) -- -- -- 100 Proceeds from shares sold to the public 10,864 41,194 190 11 Proceeds from reinvestment of dividends and distributions 3,328 238 -- -- Payments for shares redeemed (23,686) (20,381) (36) -- ----------------------------------------------------------- Net increase (decrease) from Trust share transactions (9,494) 21,051 154 111 ----------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (8,903) 33,153 167 109 NET ASSETS: Beginning of year 62,432 29,279 109 -- ----------------------------------------------------------- End of year $ 53,529 $ 62,432 $ 276 $ 109 ----------------------------------------------------------- Accumulated undistributed net investment income at end of year $ 9 $ 9 $ -- $ -- ----------------------------------------------------------- NUMBER OF TRUST SHARES: Sold in initial capitalization of the Fund (Note A) -- -- -- 10 Sold to the public 710 2,928 20 1 Issued on reinvestment of dividends and distributions 223 15 -- -- Redeemed (1,560) (1,301) (4) -- ----------------------------------------------------------- Net increase (decrease) in shares outstanding (627) 1,642 16 11 -----------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-8 (This page has been left blank intentionally.) B-9 NOTES TO FINANCIAL STATEMENTS Neuberger Berman August 31, 2000 - ---------------------------------------------------------------------- Equity Assets NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 1) GENERAL: Neuberger Berman Focus Assets ("Focus"), Neuberger Berman Genesis Assets ("Genesis"), Neuberger Berman Guardian Assets ("Guardian"), Neuberger Berman Manhattan Assets ("Manhattan"), Neuberger Berman Millennium Assets ("Millennium"), Neuberger Berman Partners Assets ("Partners"), and Neuberger Berman Socially Responsive Assets ("Socially Responsive") (collectively, the "Funds") are separate operating series of Neuberger Berman Equity Assets (the "Trust"), a Delaware business trust organized pursuant to a Trust Instrument dated October 18, 1993. The Trust is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and its shares are registered under the Securities Act of 1933, as amended (the "1933 Act"). Millennium and Socially Responsive had no operations until January 26, 2000 and June 9, 1999, respectively, other than matters relating to their organization and registration as diversified, open-end management investment companies under the 1940 Act, and registration of their shares under the 1933 Act, and for Socially Responsive the sale and issuance of 10,000 shares to Neuberger Berman Management Inc. ("Management") on December 24, 1998. The trustees of the Trust may establish additional series or classes of shares without the approval of shareholders. The assets of each Fund belong only to that Fund, and the liabilities of each Fund are borne solely by that Fund and no other. Each Fund seeks to achieve its investment objective by investing all of its net investable assets in its corresponding portfolio of Equity Managers Trust (each a "Portfolio") having the same investment objective and policies as the Fund. The value of each Fund's investment in its corresponding Portfolio reflects that Fund's proportionate interest in the net assets of that Portfolio (0.64%, 5.35%, 0.72%, 0.41%, 0.07%, 1.87%, and 0.21%, for Focus, Genesis, Guardian, Manhattan, Millennium, Partners, and Socially Responsive, respectively, at August 31, 2000). On November 16, 1999, 63.72% of Neuberger Berman Socially Responsive Portfolio was held by another regulated investment company, which redeemed its interest in the Portfolio through a redemption in kind on that date. Management carried out this transaction in a way that minimized the effect on the Portfolio. The performance of each Fund is directly affected by the performance of its corresponding Portfolio. The financial statements of each Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the corresponding Fund's financial statements. B-10 2) PORTFOLIO VALUATION: Each Fund records its investment in its corresponding Portfolio at value. Investment securities held by each Portfolio are valued as indicated in the notes following the Portfolios' Schedule of Investments. 3) TAXES: The Funds are treated as separate entities for U.S. Federal income tax purposes. It is the policy of Focus, Genesis, Guardian, Manhattan, Partners, and Socially Responsive to continue to and the intention of Millennium to qualify as regulated investment companies by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of investment company taxable income and net capital gains (after reduction for any amounts available for U.S. Federal income tax purposes as capital loss carryforwards) sufficient to relieve them 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 ($240 and $4,349 expiring in 2007 and 2008, respectively, for Socially Responsive, determined as of August 31, 2000), it is the policy of each Fund not to distribute such gains. Each Fund distinguishes between dividends on a tax basis and a financial reporting basis and only distributions in excess of tax basis earnings and profits are reported in the financial statements as a return of capital. Differences in the recognition or classification of income between the financial statements and tax earnings and profits which result in temporary over-distributions for financial statement purposes are classified as distributions in excess of net investment income or accumulated net realized gains. 5) ORGANIZATION EXPENSES: Organization expenses incurred by Focus, Genesis, Guardian, Manhattan, and Partners are being amortized on a straight-line basis over a five-year period. At August 31, 2000, the unamortized balance of such expenses amounted to $11,783, $19,261, $11,782, $11,756, and $11,107, for Focus, Genesis, Guardian, Manhattan, and Partners, respectively. 6) EXPENSE ALLOCATION: Each Fund bears all costs of its operations. Expenses incurred by the Trust with respect to any two or more Funds are allocated in 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. B-11 7) OTHER: All net investment income and realized and unrealized capital gains and losses of each Portfolio are allocated pro rata among its respective Funds and any other investors in the Portfolio. NOTE B -- ADMINISTRATION FEES, DISTRIBUTION ARRANGEMENTS, AND OTHER TRANSACTIONS WITH AFFILIATES: Each Fund retains Management as its administrator under an Administration Agreement ("Agreement"). Pursuant to this Agreement each Fund pays Management an administration fee at the annual rate of 0.40% of that Fund's average daily net assets. Each Fund indirectly pays for investment management services through its investment in its corresponding Portfolio (see Note B of Notes to Financial Statements of the Portfolios). Management acts as agent in arranging for the sale of Fund shares without commission and bears advertising and promotion expenses. The trustees of the Trust have adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan"). The Plan provides that, as compensation for administrative and other services provided to the Funds, Management's activities and expenses related to the sale and distribution of Fund shares, and ongoing services provided to investors in the Funds, Management receives from each Fund a fee at the annual rate of 0.25% of that Fund's average daily net assets. Management pays this amount to institutions that distribute Fund shares and provide services to the Funds and their shareholders. Those institutions may use the payments for, among other purposes, compensating employees engaged in sales and/or shareholder servicing. The amount of fees paid by each Fund during any year may be more or less than the cost of distribution and other services provided to that Fund. NASD rules limit the amount of annual distribution fees that may be paid by a mutual fund and impose a ceiling on the cumulative distribution fees paid. The Trust's Plan complies with those rules. Management has undertaken to reimburse Focus, Genesis, Guardian, Manhattan, and Partners through December 31, 2010, and Millennium and Socially Responsive through December 31, 2002, for their operating expenses plus their pro rata portion of their corresponding Portfolio's operating expenses (including the fees payable to Management, but excluding interest, taxes, brokerage commissions, and extraordinary expenses) ("Operating Expenses") which exceed, in the aggregate, 1.50% (1.75% for Millennium) per annum of their average daily net assets (each an "Expense Limitation"). For the year ended August 31, 2000, such excess expenses amounted to $75,274, $73,105, $78,337, $74,383, and $114,442, for Focus, Genesis, Manhattan, Millennium, and Socially Responsive, respectively. For the year ended August 31, 2000, there was no reimbursement of expenses by Management to Guardian and Partners. Socially Responsive has agreed to repay Management through December 31, 2005, for its excess Operating Expenses previously reimbursed by Management, so long as its annual Operating Expenses during that period do not exceed its Expense B-12 Limitation, and the repayments are made within three years after the year in which Management issued the reimbursement. For the year ended August 31, 2000, Socially Responsive has not reimbursed Management. Since inception of Socially Responsive, Management has voluntarily undertaken to pay certain expenses of the Fund as an advance. These expenses will be repaid by the Fund to Management in the future, and are included under the caption Payable for Fund expenses in the Statements of Assets and Liabilities. Management and Neuberger Berman, LLC ("Neuberger"), a member firm of The New York Stock Exchange and sub-adviser to each Portfolio, are wholly owned subsidiaries of Neuberger Berman Inc., a publicly held company. Several individuals who are officers and/or trustees of the Trust are also employees of Neuberger and/or Management. Each Fund also has a distribution agreement with Management. Management receives no commissions for sales or redemptions of shares of beneficial interest of each Fund, but receives fees under the Plan, as described above. Each Portfolio has an expense offset arrangement in connection with its custodian contract. The impact of this arrangement, reflected in the Statements of Operations under the caption Expenses from corresponding Portfolio, was a reduction of $15, $142, $167, $6, $3, $560, and $1, for Focus, Genesis, Guardian, Manhattan, Millennium, Partners, and Socially Responsive, respectively. NOTE C -- INVESTMENT TRANSACTIONS: During the year ended August 31, 2000, additions and reductions in each Fund's investment in its corresponding Portfolio were as follows:
ADDITIONS REDUCTIONS - --------------------------------------------------------------------------- FOCUS $11,413,000 $ 1,368,000 GENESIS 16,523,000 19,874,000 GUARDIAN 2,414,000 3,621,000 MANHATTAN 2,463,000 776,000 MILLENNIUM 277,000 50,000 PARTNERS 7,393,000 20,526,000 SOCIALLY RESPONSIVE 205,000 48,000
NOTE D -- SUBSEQUENT EVENT: On September 7, 2000, the Board of Trustees of Neuberger Berman Equity Assets approved the cessation of the operations of Socially Responsive effective on or about December 1, 2000 (the "Closing Date"). Accordingly, the Board has voted to liquidate and terminate Socially Responsive on the Closing Date. Shareholders will receive the net asset value per share for all shares they own on that date. This may be a taxable event for those shareholders not participating in a qualified retirement vehicle. B-13 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Focus Assets(1) The following table includes selected data for a share outstanding throughout each year 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 September 4, 1996(2) Year Ended August 31, to August 31, 2000 1999 1998 1997 --------------------------------------------------- Net Asset Value, Beginning of Year $16.18 $11.31 $14.34 $ 10.00 --------------------------------------------------- Income From Investment Operations Net Investment Loss (.06) (.08) (.03) (.05) Net Gains or Losses on Securities (both realized and unrealized) 8.99 4.96 (2.42) 4.39 --------------------------------------------------- Total From Investment Operations 8.93 4.88 (2.45) 4.34 --------------------------------------------------- Less Distributions Distributions (from net capital gains) (1.54) (.01) (.58) -- --------------------------------------------------- Net Asset Value, End of Year $23.57 $16.18 $11.31 $ 14.34 --------------------------------------------------- Total Return(3) +58.68% +43.15% -17.73% +43.40%(4) --------------------------------------------------- Ratios/Supplemental Data Net Assets, End of Year (in millions) $ 15.2 $ 1.9 $ 0.5 $ 0.1 --------------------------------------------------- Ratio of Gross Expenses to Average Net Assets(5) 1.50% 1.50% 1.50% 1.50%(6) --------------------------------------------------- Ratio of Net Expenses to Average Net Assets(7) 1.50% 1.50% 1.50% 1.50%(6) --------------------------------------------------- Ratio of Net Investment Loss to Average Net Assets (.66%) (.58%) (.36%) (.43%)(6) ---------------------------------------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-14 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Genesis Assets(1) The following table includes selected data for a share outstanding throughout each year 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 April 2, 1997(2) Year Ended August 31, to August 31, 2000 1999 1998 1997 ---------------------------------------------- Net Asset Value, Beginning of Year $12.64 $10.67 $13.21 $ 10.00 ---------------------------------------------- Income From Investment Operations Net Investment Income (Loss) (.04) .01 .02 (.01) Net Gains or Losses on Securities (both realized and unrealized) 3.25 1.99 (2.52) 3.22 ---------------------------------------------- Total From Investment Operations 3.21 2.00 (2.50) 3.21 ---------------------------------------------- Less Distributions Dividends (from net investment income) (.01) (.03) -- -- Distributions (from net capital gains) -- -- (.04) -- ---------------------------------------------- Total Distributions (.01) (.03) (.04) -- ---------------------------------------------- Net Asset Value, End of Year $15.84 $12.64 $10.67 $ 13.21 ---------------------------------------------- Total Return(3) +25.42% +18.75% -18.99% +32.10%(4) ---------------------------------------------- Ratios/Supplemental Data Net Assets, End of Year (in millions) $ 99.0 $ 81.8 $ 24.5 $ 0.7 ---------------------------------------------- Ratio of Gross Expenses to Average Net Assets(5) 1.50% 1.50% 1.50% 1.50%(6) ---------------------------------------------- Ratio of Net Expenses to Average Net Assets(7) 1.50% 1.50% 1.50% 1.50%(6) ---------------------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets (.31%) .16% .60% (.36%)(6) ----------------------------------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-15 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Guardian Assets(1) The following table includes selected data for a share outstanding throughout each year 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 September 4, 1996(2) Year Ended August 31, to August 31, 2000 1999 1998 1997 ----------------------------------------------------- Net Asset Value, Beginning of Year $13.54 $10.81 $13.88 $10.00 ----------------------------------------------------- Income From Investment Operations Net Investment Income (Loss) -- -- (.02) .01 Net Gains or Losses on Securities (both realized and unrealized) 2.16 2.73 (2.92) 3.88 ----------------------------------------------------- Total From Investment Operations 2.16 2.73 (2.94) 3.89 ----------------------------------------------------- Less Distributions Dividends (from net investment income) (.01) -- -- (.01) Distributions (from net capital gains) (.09) -- (.13) -- ----------------------------------------------------- Total Distributions (.10) -- (.13) (.01) ----------------------------------------------------- Net Asset Value, End of Year $15.60 $13.54 $10.81 $13.88 ----------------------------------------------------- Total Return(3) +16.04% +25.25% -21.34% +38.92%(4) ----------------------------------------------------- Ratios/Supplemental Data Net Assets, End of Year (in millions) $ 27.5 $ 24.8 $ 17.5 $ 9.3 ----------------------------------------------------- Ratio of Gross Expenses to Average Net Assets(5) 1.48% 1.50% 1.50% 1.50%(6) ----------------------------------------------------- Ratio of Net Expenses to Average Net Assets 1.47% 1.50%(7) 1.50%(7) 1.50%(6)(7) ----------------------------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets -- .03% (.16%) (.12%)(6) -----------------------------------------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-16 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Manhattan Assets(1) The following table includes selected data for a share outstanding throughout each year 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 September 4, 1996(2) Year Ended August 31, to August 31, 2000 1999 1998 1997 -------------------------------------------------- Net Asset Value, Beginning of Year $14.54 $10.76 $13.75 $10.00 -------------------------------------------------- Income From Investment Operations Net Investment Loss (.21) (.04) (.11) (.08) Net Gains or Losses on Securities (both realized and unrealized) 12.72 3.92 (1.22) 3.94 -------------------------------------------------- Total From Investment Operations 12.51 3.88 (1.33) 3.86 -------------------------------------------------- Less Distributions Distributions (from net capital gains) -- (.10) (1.66) (.11) -------------------------------------------------- Net Asset Value, End of Year $27.05 $14.54 $10.76 $13.75 -------------------------------------------------- Total Return(3) +86.04% +36.09% -11.29% +38.86%(4) -------------------------------------------------- Ratios/Supplemental Data Net Assets, End of Year (in millions) $ 5.4 $ 1.7 $ 0.2 $ 0.1 -------------------------------------------------- Ratio of Gross Expenses to Average Net Assets(5) 1.50% 1.50% 1.50% 1.50%(6) -------------------------------------------------- Ratio of Net Expenses to Average Net Assets(7) 1.50% 1.50% 1.50% 1.50%(6) -------------------------------------------------- Ratio of Net Investment Loss to Average Net Assets (1.09%) (1.00%) (.98%) (.70%)(6) --------------------------------------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-17 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Millennium Assets(1) The following table includes selected data for a share outstanding throughout the period and other performance information derived from the Financial Statements. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
Period from January 26, 2000(2) to August 31, 2000 ------------------- Net Asset Value, Beginning of Period $ 10.00 ------------------- Income From Investment Operations Net Investment Loss (.05) Net Gains or Losses on Securities (both realized and unrealized) .89 ------------------- Total From Investment Operations .84 ------------------- Net Asset Value, End of Period $ 10.84 ------------------- Total Return(3)(4) +8.40% ------------------- Ratios/Supplemental Data Net Assets, End of Period (in millions) $ 0.2 ------------------- Ratio of Gross Expenses to Average Net Assets(5)(6) 1.75% ------------------- Ratio of Net Expenses to Average Net Assets(6)(7) 1.75% ------------------- Ratio of Net Investment Loss to Average Net Assets(6) (1.34%) -------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-18 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Partners Assets(1) The following table includes selected data for a share outstanding throughout each year 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 August 19, 1996(2) Year Ended August 31, to August 31, 2000 1999 1998 1997 1996 ---------------------------------------------------------------- Net Asset Value, Beginning of Year $ 15.74 $ 12.59 $ 14.42 $ 9.91 $ 10.00 ---------------------------------------------------------------- Income From Investment Operations Net Investment Income .02 .06 .01 .01 -- Net Gains or Losses on Securities (both realized and unrealized) 1.17 3.15 (1.51) 4.56 (.09) ---------------------------------------------------------------- Total From Investment Operations 1.19 3.21 (1.50) 4.57 (.09) ---------------------------------------------------------------- Less Distributions Dividends (from net investment income) (.01) (.06) (.01) (.01) -- Distributions (from net capital gains) (.89) -- (.32) (.05) -- ---------------------------------------------------------------- Total Distributions (.90) (.06) (.33) (.06) -- ---------------------------------------------------------------- Net Asset Value, End of Year $ 16.03 $ 15.74 $ 12.59 $ 14.42 $ 9.91 ---------------------------------------------------------------- Total Return(3) +7.99% +25.51% -10.69% +46.26% -0.90%(4) ---------------------------------------------------------------- Ratios/Supplemental Data Net Assets, End of Year (in millions) $ 53.5 $ 62.4 $ 29.3 $ 5.8 $ 0.1 ---------------------------------------------------------------- Ratio of Gross Expenses to Average Net Assets(5) 1.32% 1.31% 1.50% 1.50% 1.50%(6) ---------------------------------------------------------------- Ratio of Net Expenses to Average Net Assets 1.32% 1.31% 1.50%(7) 1.50%(7) 1.50%(6)(7) ---------------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets .11% .41% .12% .08% 2.38%(6) ----------------------------------------------------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-19 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Socially Responsive Assets(1) The following table includes selected data for a share outstanding throughout each year 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 Year Ended June 9, 1999(2) August 31, to August 31, 2000 1999 ----------------------------- Net Asset Value, Beginning of Year $ 9.85 $10.00 ----------------------------- Income From Investment Operations Net Investment Loss (.02) (.01) Net Gains or Losses on Securities (both realized and unrealized) .35 (.14) ----------------------------- Total From Investment Operations .33 (.15) ----------------------------- Net Asset Value, End of Year $10.18 $ 9.85 ----------------------------- Total Return(3) +3.35% -1.50%(4) ----------------------------- Ratios/Supplemental Data Net Assets, End of Year (in millions) $ 0.3 $ 0.1 ----------------------------- Ratio of Gross Expenses to Average Net Assets(5) 1.50% 1.50%(6) ----------------------------- Ratio of Net Expenses to Average Net Assets(7) 1.50% 1.50%(6) ----------------------------- Ratio of Net Investment Loss to Average Net Assets (.27%) (.56%)(6) -----------------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-20 NOTES TO FINANCIAL HIGHLIGHTS Neuberger Berman August 31, 2000 - ---------------------------------------------------------------------- Equity Assets 1) The per share amounts and ratios which are shown reflect income and expenses, including each Fund's proportionate share of its corresponding Portfolio's income and expenses. 2) The date investment operations commenced. 3) Total return based on per share net asset value reflects the effects of changes in net asset value on the performance of each Fund during each fiscal period and assumes dividends and other distributions, if any, were reinvested. Results represent past performance and do not guarantee future results. Investment returns and principal may fluctuate and shares when redeemed may be worth more or less than original cost. Total return would have been lower if Management had not reimbursed certain expenses. In addition, for Genesis, total return would have been lower if the investment manager had not waived a portion of the management fee. 4) Not annualized. 5) The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. 6) Annualized. 7) After reimbursement of expenses by Management as described in Note B of Notes to Financial Statements. Had Management not undertaken such action the annualized ratios of net expenses to average daily net assets would have been:
Period from September 4, 1996 to Year Ended August 31, August 31, FOCUS 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------- Net Expenses 2.89% 7.08% 28.01% 76.74% ----------------------------------------------------------
Period from September 4, 1996 to Year Ended August 31, August 31, GUARDIAN 1999 1998 1997 - ------------------------------------------------------------------------------------------------- Net Expenses 1.56% 1.63% 5.65% ------------------------------------------------
Period from September 4, 1996 to Year Ended August 31, August 31, MANHATTAN 2000 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------- Net Expenses 3.57% 19.99% 42.53% 77.83% ------------------------------------------------------------
B-21
Period from January 26, 2000 to August 31, MILLENNIUM 2000 - ----------------------------------------------------------------------- Net Expenses 103.09% --------------------
Period from August 19, 1996 to Year Ended August 31, August 31, PARTNERS 1998 1997 1996 - ------------------------------------------------------------------------------------------------- Net Expenses 1.56% 8.74% 11,685.89% ------------------------------------------------
Year Period from Ended June 9, 1999 to August 31, August 31, SOCIALLY RESPONSIVE 2000 1999 - ------------------------------------------------------------------------------------- Net Expenses 62.49% 507.01% ------------------------------------
After reimbursement of expenses by Management as described in Note B of Notes to Financial Statements and/or the waiver of a portion of the management fee by the investment manager of Neuberger Berman Genesis Portfolio. Had Management not undertaken such action the annualized ratios of net expenses to average daily net assets would have been:
Period from April 2, 1997 to Year Ended August 31, August 31, GENESIS 2000 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------- Net Expenses 1.59% 1.63% 2.40% 25.91% ------------------------------------------------------------
B-22 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Trustees of Neuberger Berman Equity Assets and Shareholders of Neuberger Berman Manhattan Assets, Neuberger Berman Millennium Assets, and Neuberger Berman Socially Responsive Assets In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Neuberger Berman Manhattan Assets, Neuberger Berman Millennium Assets, and Neuberger Berman Socially Responsive Assets (collectively, the "Funds") at August 31, 2000, and the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLC Boston, Massachusetts October 9, 2000 B-23 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS To the Board of Trustees Neuberger Berman Equity Assets and Shareholders of: Neuberger Berman Focus Assets Neuberger Berman Genesis Assets Neuberger Berman Guardian Assets and Neuberger Berman Partners Assets We have audited the accompanying statements of assets and liabilities of the Neuberger Berman Focus Assets, Neuberger Berman Genesis Assets, Neuberger Berman Guardian Assets, and Neuberger Berman Partners Assets, four of the series constituting the Neuberger Berman Equity Assets (the "Trust"), as of August 31, 2000, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the above mentioned series of the Neuberger Berman Equity Assets at August 31, 2000, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Boston, Massachusetts October 2, 2000 B-24 SCHEDULE OF INVESTMENTS Neuberger Berman August 31, 2000 - -------------------------------------------------------------------------------- Focus Portfolio
TOP TEN EQUITY HOLDINGS ---------------------------------------------------- HOLDING PERCENTAGE 1. Citigroup Inc. 10.5% 2. Rational Software 7.9% 3. Morgan Stanley Dean Witter 7.4% 4. Capital One Financial 7.0% 5. Providian Financial 6.6% 6. Countrywide Credit Industries 5.9% 7. Chase Manhattan 5.0% 8. FleetBoston Financial 4.3% 9. Wellpoint Health Networks 4.0% 10. Compaq Computer 3.2%
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- COMMON STOCKS (97.8%) FINANCIAL SERVICES (50.9%) 2,767,500 Capital One Financial $ 166,915 2,122,500 Chase Manhattan 118,595 4,244,500 Citigroup Inc. 247,773 3,687,400 Countrywide Credit Industries 139,660 2,380,000 FleetBoston Financial 101,596 440,000 Hartford Financial Services Group 29,315 1,626,000 Morgan Stanley Dean Witter 174,896 1,745,000 Nationwide Financial Services 69,582(5) 1,366,000 Providian Financial 157,005 ---------- 1,205,337 ---------- HEALTH CARE (5.0%) 1,360,000 Foundation Health Systems 23,885(2) 1,098,000 Wellpoint Health Networks 94,771(2) ---------- 118,656 ----------
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- RETAIL (8.9%) 1,025,000 American Eagle Outfitters $ 30,558(2) 3,500,000 Furniture Brands International 56,437(2)(5) 2,510,000 Jones Apparel Group 61,495(2) 369,500 Neiman Marcus Group Class B 11,639(2) 970,000 Pacific Sunwear of California 12,913(2) 2,040,000 TJX Cos. 38,378 ---------- 211,420 ---------- TECHNOLOGY (33.0%) 1,285,000 Amkor Technology 43,851(2) 1,560,000 Atmel Corp. 31,200(2) 2,235,000 Compaq Computer 76,130 885,000 Cypress Semiconductor 43,752(2) 2,340,000 Gartner Group Class A 31,005(2) 845,000 International Rectifier 53,182(2) 700,000 Lattice Semiconductor 54,513(2) 807,000 Microchip Technology 54,926(2) 713,000 Oracle Corp. 64,838(2) 165,000 Photronics, Inc. 4,837(2)(5) 1,458,000 Rational Software 187,626(2) 1,313,500 Tech Data 67,809(2) 1,875,000 WorldCom, Inc. 68,438(2) ---------- 782,107 ---------- TOTAL COMMON STOCKS (COST $1,126,849) 2,317,520 ----------
C-1 SCHEDULE OF INVESTMENTS Neuberger Berman August 31, 2000 - -------------------------------------------------------------------------------- Focus Portfolio (Cont'd)
Market Principal Value(1) Amount (000's omitted) - --------------------- --------------- REPURCHASE AGREEMENTS (1.2%) $28,494,000 State Street Bank and Trust Co. Repurchase Agreement, 6.58%, due 9/1/00, dated 8/31/00, Maturity Value $28,499,208, Collateralized by $28,655,000 Fannie Mae, Notes, 6.40%, due 9/27/01 (Collateral Value $29,350,715) (COST $28,494) $ 28,494(3) ----------
Market Principal Value(1) Amount (000's omitted) - --------------------- --------------- SHORT-TERM INVESTMENTS (0.4%) $10,008,312 N&B Securities Lending Quality Fund, LLC (COST $10,008) $ 10,008(3) ---------- TOTAL INVESTMENTS (99.4%) (COST $1,165,351) 2,356,022(4) Cash, receivables and other assets, less liabilities (0.6%) 14,236 ---------- TOTAL NET ASSETS (100.0%) $2,370,258 ----------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-2 SCHEDULE OF INVESTMENTS Neuberger Berman August 31, 2000 - -------------------------------------------------------------------------------- Genesis Portfolio
TOP TEN EQUITY HOLDINGS ---------------------------------------------------- HOLDING PERCENTAGE 1. National-Oilwell 2.7% 2. Zebra Technologies 2.5% 3. Dallas Semiconductor 2.4% 4. Newport News Shipbuilding 2.4% 5. Alliant Techsystems 2.2% 6. AptarGroup Inc. 2.2% 7. Mutual Risk Management 2.1% 8. Fair, Isaac & Co. 2.1% 9. Trigon Healthcare 2.0% 10. United Stationers 1.7%
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- COMMON STOCKS (94.7%) AEROSPACE (1.9%) 1,427,050 AAR Corp. $ 16,054(5) 754,100 Aviall Inc. 4,525(2)(5) 248,750 Ducommun Inc. 3,607(2) 329,700 Moog, Inc. Class A 10,715(2) ---------- 34,901 ---------- AUTOMOTIVE (0.8%) 674,100 Donaldson Co. 14,240 ---------- BANKING & FINANCIAL (8.2%) 1,347,400 Banknorth Group 22,064 745,600 Cullen/Frost Bankers 23,114 100,000 Haven Bancorp 2,662 331,400 Highland Bancorp 8,368(5) 178,199 Hudson United Bancorp 4,488 28,200 M&T Bank 13,668 195,800 MBIA, Inc. 12,874 532,100 OceanFirst Financial 10,975 125,000 Queens County Bancorp 3,297 130,000 Richmond County Financial 2,616
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- 1,031,975 Sterling Bancshares $ 14,625 317,350 Texas Regional Bancshares 8,092 1,014,100 Webster Financial 25,004 ---------- 151,847 ---------- BUILDING, CONSTRUCTION & FURNISHING (0.9%) 238,300 Lincoln Electric Holdings 3,485 298,500 Simpson Manufacturing 14,030(2) ---------- 17,515 ---------- BUSINESS SERVICES (0.1%) 789,400 SOS Staffing Services 2,171(2)(5) ---------- CONSUMER CYCLICALS (0.4%) 226,300 Valassis Communications 6,534(2) ---------- CONSUMER PRODUCTS & SERVICES (5.3%) 854,700 Alberto-Culver Class A 20,513 560,238 Block Drug 22,690 1,353,200 Church & Dwight 24,273 396,000 Matthews International 11,484 1,105,200 Ruddick Corp. 13,539 475,500 The First Years 5,230 ---------- 97,729 ---------- DEFENSE (5.6%) 532,800 Alliant Techsystems 41,059(2)(5) 1,062,700 Newport News Shipbuilding 45,165 729,300 Primex Technologies 17,685(5) ---------- 103,909 ---------- ELECTRONICS (4.2%) 334,100 Benchmark Electronics 17,394(2) 1,092,000 Dallas Semiconductor 45,181
C-3 SCHEDULE OF INVESTMENTS Neuberger Berman - -------------------------------------------------------------------------------- Genesis Portfolio (Cont'd)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- 151,800 SCI Systems $ 9,374(2) 49,600 Technitrol, Inc. 6,324 ---------- 78,273 ---------- ENERGY (3.7%) 677,300 Cabot Oil & Gas 13,546 655,200 Cross Timbers Oil 17,322 808,290 Swift Energy 23,390(2) 894,500 Unit Corp. 13,976(2) ---------- 68,234 ---------- FINANCIAL TECHNOLOGY (2.4%) 839,500 Fair, Isaac & Co. 38,565(5) 123,900 Investment Technology Group 5,947(2) ---------- 44,512 ---------- HEALTH CARE (9.9%) 148,000 Acuson Corp. 2,128(2) 303,700 Charles River Laboratories International 8,333(2) 286,500 Datascope Corp. 10,099 669,300 DENTSPLY International 22,338 1,105,800 Haemonetics Corp. 27,852(2) 1,191,100 Mentor Corp. 25,236(5) 1,138,800 Patterson Dental 27,047(2) 198,700 STAAR Surgical 3,316(2) 714,000 Trigon Healthcare 36,860(2) 280,600 Universal Health Services Class B 19,852(2) ---------- 183,061 ---------- INDUSTRIAL & COMMERCIAL PRODUCTS (7.4%) 615,500 Brady Corp. 17,811 733,700 Dionex Corp. 21,644(2) 689,600 IDEX Corp. 20,947 1,247,600 Kaydon Corp. 27,525 645,800 Roper Industries 20,908 2,135,300 Wallace Computer Services 24,823(5) 207,650 Woodhead Industries 4,101 ---------- 137,759 ----------
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- INSURANCE (8.5%) 949,200 Annuity and Life Re $ 24,916 514,200 Brown & Brown 13,723 652,800 FBL Financial Group 9,629 698,600 HCC Insurance Holdings 14,758 1,822,500 Mutual Risk Management 38,728 579,500 PartnerRe Ltd. 24,303 891,500 Scottish Annuity & Life Holdings 8,135(5) 878,600 W. R. Berkley 23,283 ---------- 157,475 ---------- INTERMEDIATES (0.8%) 612,900 Delta & Pine Land 14,978 ---------- LODGING (0.2%) 441,700 Prime Hospitality 4,583(2) ---------- MACHINERY & EQUIPMENT (0.5%) 612,120 Gardner Denver Machinery 8,914(2) ---------- OFFICE EQUIPMENT (1.7%) 977,800 United Stationers 31,717(2) ---------- OIL SERVICES (9.4%) 302,700 Cal Dive International 17,405(2) 651,600 Friede Goldman Halter 3,665(2) 978,800 Global Industries 12,174(2) 320,400 Nabors Industries 15,239(2) 1,467,278 National-Oilwell 50,896(2) 798,400 Oceaneering International 13,922(2) 781,600 Offshore Logistics 13,580(2) 767,300 Pride International 18,895(2) 33,500 Smith International 2,663(2) 345,600 UTI Energy 12,874(2) 631,000 Varco International 12,739(2) ---------- 174,052 ---------- PACKING & CONTAINERS (2.2%) 1,723,900 AptarGroup Inc. 40,188 ----------
C-4 August 31, 2000 - -------------------------------------------------------------------------------- Genesis Portfolio (Cont'd)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- PUBLISHING & BROADCASTING (1.0%) 258,300 Houghton Mifflin $ 12,705 232,900 Meredith Corp. 6,361 ---------- 19,066 ---------- RESTAURANTS (1.1%) 650,050 Brinker International 20,639(2) ---------- RETAILING (4.7%) 28,224 99 Cents Only Stores 1,268(2) 212,800 Ann Taylor Stores 7,661(2) 1,299,900 Claire's Stores 25,592 693,900 Linens 'n Things 18,735(2) 181,500 Payless ShoeSource 9,688(2) 575,000 ShopKo Stores 6,577(2) 360,300 Whole Foods Market 18,195(2) ---------- 87,716 ---------- TECHNOLOGY (11.4%) 847,500 Analysts International 7,045 442,200 Black Box 26,311(2) 496,200 CACI International 11,164(2) 1,453,200 CIBER, Inc. 14,986(2) 807,900 Davox Corp. 10,200(2)(5) 1,085,500 Electronics for Imaging 28,223(2) 565,000 InterVoice-Brite 7,027(2) 126,400 Jack Henry & Associates 5,609 238,500 Keane, Inc. 4,129(2) 389,000 Kronos Inc. 14,539(2) 625,000 META Group 9,062(5) 625,400 MICROS Systems 10,984(2) 10,800 Power Intergrations 184(2)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- 289,200 SBS Technologies $ 14,912(2) 859,400 Zebra Technologies 46,408(2) ---------- 210,783 ---------- TRANSPORTATION (1.8%) 869,900 Circle International Group 31,153 213,600 Maritrans Inc. 1,228 ---------- 32,381 ---------- UTILITIES, ELECTRIC & GAS (0.6%) 144,900 Montana Power 5,225 183,500 NUI Corp. 5,517 ---------- 10,742 ---------- TOTAL COMMON STOCKS (COST $1,439,732) 1,753,919 ----------
Principal Amount - --------------------- - --------------------- --------------- REPURCHASE AGREEMENTS (2.3%) $42,140,000 State Street Bank and Trust Co. Repurchase Agreement, 6.58%, due 9/1/00, dated 8/31/00, Maturity Value $42,147,702, Collateralized by $42,380,000 Fannie Mae, Notes, 6.40%, due 9/27/01 (Collateral Value $43,408,944) (COST $42,140) 42,140(3) ----------
C-5 SCHEDULE OF INVESTMENTS Neuberger Berman August 31, 2000 - -------------------------------------------------------------------------------- Genesis Portfolio (Cont'd)
Market Principal Value(1) Amount (000's omitted) - --------------------- --------------- SHORT-TERM INVESTMENTS (5.2%) $30,000,000 Prudential Funding Corp., 6.48%, due 9/5/00 $ 29,978 30,000,000 American Express Credit Corp., 6.46%, due 9/7/00 29,968 36,226,183 N&B Securities Lending Quality Fund, LLC 36,226 ---------- TOTAL SHORT-TERM INVESTMENTS (COST $96,172) 96,172(3) ---------- TOTAL INVESTMENTS (102.2%) (COST $1,578,044) 1,892,231(4) Liabilities, less cash, receivables and other assets [(2.2%)] (41,103) ---------- TOTAL NET ASSETS (100.0%) $1,851,128 ----------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-6 SCHEDULE OF INVESTMENTS Neuberger Berman August 31, 2000 - -------------------------------------------------------------------------------- Guardian Portfolio
TOP TEN EQUITY HOLDINGS ---------------------------------------------------- HOLDING PERCENTAGE 1. Wellpoint Health Networks 3.8% 2. Citigroup Inc. 3.3% 3. Exxon Mobil 2.9% 4. Gateway Inc. 2.8% 5. Capital One Financial 2.7% 6. News Corp. ADR 2.7% 7. SCI Systems 2.6% 8. Chase Manhattan 2.5% 9. Wells Fargo 2.4% 10. Lexmark International Group 2.4%
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- COMMON STOCKS (83.7%) BANKING & FINANCIAL (5.5%) 402,400 Bank of America $ 21,554 1,745,600 Chase Manhattan 97,535 2,132,000 Wells Fargo 92,076 ---------- 211,165 ---------- BASIC MATERIALS (3.3%) 2,090,000 Cabot Corp. 77,330 1,424,000 Dow Chemical 37,291 250,700 duPont 11,250 ---------- 125,871 ---------- CAPITAL GOODS (5.3%) 193,600 Emerson Electric 12,814 490,200 General Dynamics 30,852 375,900 Illinois Tool Works 21,074 1,292,900 Republic Services 18,909(2) 1,606,000 SCI Systems 99,170(2) 349,100 United Technologies 21,797 ---------- 204,616 ----------
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- COMMUNICATIONS (2.7%) 1,815,600 AT&T Corp. $ 57,191 1,040,000 NTL Inc. 45,565(2) ---------- 102,756 ---------- CONSUMER CYCLICALS (2.7%) 1,159,400 Carnival Corp. 23,116 1,051,300 Costco Wholesale 36,204(2) 429,800 Lear Corp. 9,268(2) 745,615 Safeway Inc. 36,768(2) ---------- 105,356 ---------- CONSUMER GOODS & SERVICES (0.5%) 445,400 PepsiCo, Inc. 18,985 ---------- CONSUMER STAPLES (4.6%) 820,996 Clear Channel Communications 59,419(2) 1,292,219 Kimberly-Clark 75,595 889,700 McDonald's Corp. 26,580 293,300 Nabisco Holdings 15,673 ---------- 177,267 ---------- DRUGS (2.2%) 836,550 Pfizer Inc. 36,181(6) 1,196,095 Schering-Plough 47,993 ---------- 84,174 ---------- ENERGY (10.8%) 907,200 Amerada Hess 62,087 523,715 Anadarko Petroleum 34,445 608,700 Chevron Corp. 51,435 887,200 Diamond Offshore Drilling 39,758 1,344,446 Exxon Mobil 109,740 692,474 Halliburton Co. 36,701 513,900 Royal Dutch Petroleum - NY Shares 31,444 439,000 The Williams Cos. 20,221 511,200 Transocean Sedco Forex 30,544 ---------- 416,375 ----------
C-7 SCHEDULE OF INVESTMENTS Neuberger Berman - -------------------------------------------------------------------------------- Guardian Portfolio (Cont'd)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- FINANCIAL SERVICES (12.8%) 1,275,200 Associates First Capital $ 35,865 1,716,600 Capital One Financial 103,532 2,182,533 Citigroup Inc. 127,405(6) 1,510,200 Household International 72,490 634,900 MetLife, Inc. 15,436(2) 609,300 Morgan Stanley Dean Witter 65,538 462,300 Providian Financial 53,136 481,600 USA Education 18,873 ---------- 492,275 ---------- FOOD PRODUCTS (0.6%) 922,300 Kroger Co. 20,925(2) ---------- HEALTH CARE (7.4%) 1,531,700 American Home Products 82,999 924,400 Bristol-Myers Squibb 48,993 100,000 Pharmacia Corp. 5,856 1,689,900 Wellpoint Health Networks 145,859(2)(6) ---------- 283,707 ---------- TECHNOLOGY (18.2%) 1,463,800 Apple Computer 89,200(2) 1,790,000 Compaq Computer 60,972 644,600 Computer Sciences 50,964(2) 1,581,100 Gateway Inc. 107,673(2) 2,246,300 General Motors Class H 74,409(2) 125,890 Hewlett-Packard 15,201(6) 487,200 IBM 64,310 1,345,000 Lexmark International Group 91,208(2)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- 581,400 Micron Technology $ 47,529(2) 1,046,400 Motorola, Inc. 37,736 290,800 Rational Software 37,422(2)(6) 374,800 Seagate Technology 22,254(2) ---------- 698,878 ---------- TELECOMMUNICATIONS (4.8%) 1,586,400 AT&T Wireless Group 41,544(2) 428,200 Lucent Technologies 17,904 637,800 Nextel Communications 35,358(2) 1,033,600 Verizon Communications 45,091 1,160,050 WorldCom, Inc. 42,342(2) ---------- 182,239 ---------- TRANSPORTATION (1.4%) 574,500 AMR Corp. 18,851(2) 711,000 Continental Airlines Class B 34,217(2) ---------- 53,068 ---------- MISCELLANEOUS (0.9%) 387,700 Minnesota Mining & Manufacturing 36,056 ---------- TOTAL COMMON STOCKS (COST $2,452,175) 3,213,713 ---------- PREFERRED STOCKS (2.6%) 2,313,500 News Corp. ADR (COST $67,929) 102,372 ----------
C-8 August 31, 2000 - -------------------------------------------------------------------------------- Guardian Portfolio (Cont'd)
Market Principal Value(1) Amount (000's omitted) - --------------------- --------------- U.S. GOVERNMENT AGENCY SECURITIES (0.7%) $ 10,000,000 Federal Farm Credit Bank, Discount Notes, 6.36%, due 9/18/00 $ 9,970 8,000,000 Fannie Mae, Discount Notes, 6.38%, due 9/21/00 7,971 8,000,000 Freddie Mac, Discount Notes, 6.41%, due 9/28/00 7,962 ---------- TOTAL U.S. GOVERNMENT AGENCY SECURITIES (COST $25,903) 25,903(3) ---------- REPURCHASE AGREEMENTS (1.8%) 67,823,000 State Street Bank and Trust Co. Repurchase Agreement, 6.58%, due 9/1/00, dated 8/31/00, Maturity Value $67,835,397, Collateralized by $68,205,000 Fannie Mae, Notes, 6.40%, due 9/27/01 (Collateral Value $69,860,949) (COST $67,823) 67,823(3) ----------
Market Principal Value(1) Amount (000's omitted) - --------------------- --------------- SHORT-TERM INVESTMENTS (12.4%) $ 69,206,000 Panasonic Finance Co., 6.63%, due 9/1/00 $ 69,206 100,000,000 Ford Motor Credit Corp., 6.45% & 6.48%, due 9/6/00 & 9/8/00 99,892 50,000,000 General Electric Capital Corp., 6.50%, due 9/14/00 49,883 50,000,000 Prudential Funding Corp., 6.50%, due 9/15/00 49,874 30,000,000 GOVCO Inc., 6.52%, due 9/18/00 29,908 40,000,000 American Express Credit Corp., 6.47%, due 9/20/00 39,863 50,000,000 Coca-Cola Co., 6.48%, due 9/25/00 49,784 89,019,109 N&B Securities Lending Quality Fund, LLC 89,019 ---------- TOTAL SHORT-TERM INVESTMENTS (COST $477,429) 477,429(3) ---------- TOTAL INVESTMENTS (101.2%) (COST $3,091,259) 3,887,240(4) Liabilities, less cash, receivables and other assets [(1.2%)] (47,361) ---------- TOTAL NET ASSETS (100.0%) $3,839,879 ----------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-9 SCHEDULE OF INVESTMENTS Neuberger Berman - -------------------------------------------------------------------------------- Manhattan Portfolio
TOP TEN EQUITY HOLDINGS ---------------------------------------------------- HOLDING PERCENTAGE 1. Applied Micro Circuits 2.9% 2. Calpine Corp. 2.8% 3. Rational Software 2.3% 4. Sanmina Corp. 2.2% 5. Integrated Device Technology 2.2% 6. Bea Systems 2.1% 7. Gemstar-TV Guide International 2.0% 8. Portal Software 1.9% 9. Anadarko Petroleum 1.9% 10. MedImmune, Inc. 1.9%
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- COMMON STOCKS (96.0%) BUSINESS SERVICES - IT BUSINESS SERVICES (4.3%) 248,800 Amdocs Ltd. $ 17,774(2) 534,200 Concord EFS 17,161(2) 197,200 CSG Systems International 8,911(2) 233,900 Fiserv, Inc. 12,674(2) ---------- 56,520 ---------- COMMUNICATIONS EQUIPMENT (5.0%) 166,600 Comverse Technology 15,317(2) 228,300 Phone.com 21,103(2) 128,000 Redback Networks 19,120(2) 28,300 SDL, Inc. 11,244(2) ---------- 66,784 ---------- COMMUNICATION SERVICES (3.9%) 155,000 Digex, Inc. 13,127(2) 554,300 McLeodUSA Inc. 8,765(2) 259,800 Metromedia Fiber Network 10,376(2)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- 76,100 VoiceStream Wireless 8,566(2) 385,800 WinStar Communications 10,368(2) ---------- 51,202 ---------- COMPUTER RELATED (2.1%) 100,600 Brocade Communications Systems 22,717(2) 48,600 QLogic Corp. 5,516(2) ---------- 28,233 ---------- CONSUMER CYCLICAL - LEISURE & CONSUMER SERVICE (1.2%) 57,000 Four Seasons Hotels 4,318 237,800 Harley-Davidson 11,845 ---------- 16,163 ---------- CONSUMER STAPLES (0.8%) 256,900 Estee Lauder 10,517 ---------- ELECTRICAL EQUIPMENT (0.4%) 109,200 RF Micro Devices 4,873 ---------- ENERGY (9.2%) 390,857 Anadarko Petroleum 25,707 374,900 Calpine Corp. 37,115(2) 200,300 Cooper Cameron 15,586(2) 392,000 Dynegy Inc. 17,640 544,000 Rowan Cos. 16,864(2) 194,800 Weatherford International 9,143(2) ---------- 122,055 ---------- FINANCE (3.3%) 181,800 Capital One Financial 10,965 81,500 Lehman Brothers Holdings 11,817 180,600 Providian Financial 20,758 ---------- 43,540 ----------
C-10 August 31, 2000 - -------------------------------------------------------------------------------- Manhattan Portfolio (Cont'd)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- HEALTH CARE (13.8%) 126,100 ALZA Corp. 9,536(2) 165,000 Forest Laboratories 16,149(2) 527,900 Health Management Associates 8,611(2) 58,600 Human Genome Sciences 9,783(2) 121,900 IDEC Pharmaceuticals 17,020(2) 148,900 Immunex Corp. 7,482(2) 189,100 King Pharmaceuticals 6,075(2) 305,200 MedImmune, Inc. 25,675(2) 114,100 Millennium Pharmaceuticals 16,331(2) 242,000 MiniMed Inc. 17,375(2) 216,800 PE Corp.-PE Biosystems Group 21,328 160,200 QLT PhotoTherapeutics 11,865(2) 142,600 Sepracor Inc. 15,686(2) ---------- 182,916 ---------- INSTRUMENTS (3.8%) 244,500 Millipore Corp. 14,884 183,700 Tektronix, Inc. 13,996 261,400 Waters Corp. 20,797(2) ---------- 49,677 ---------- INTERNET (6.7%) 109,125 CacheFlow Inc. 11,936(2) 298,900 Gemstar-TV Guide International 26,976(2) 372,100 Intuit Inc. 22,279(2) 218,750 PurchasePro.com 12,640(2) 265,600 Safeguard Scientifics 7,586(2) 38,000 VeriSign, Inc. 7,557(2) ---------- 88,974 ----------
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- MEDIA (5.4%) 149,100 Charter Communications 2,283 379,200 Emmis Communications 12,442(2) 207,900 Entercom Communications 8,589(2) 283,581 NTL Inc. 12,424(2) 351,200 Univision Communications 15,497 750,800 Westwood One 20,882(2) ---------- 72,117 ---------- RETAIL (3.3%) 234,400 Best Buy 14,474(2) 131,500 Dollar Tree Stores 5,334(2) 241,600 Starbucks Corp. 8,849(2) 352,600 Tiffany & Co. 14,677 ---------- 43,334 ---------- SEMICONDUCTORS (13.2%) 77,700 Analog Devices 7,809(2) 191,200 Applied Micro Circuits 38,802(2) 1,123,000 Atmel Corp. 22,460(2) 193,600 GlobeSpan, Inc. 23,317(2) 327,400 Integrated Device Technology 28,729(2) 325,800 Intersil Holding 17,593(2) 341,700 KLA-Tencor 22,424(2) 35,100 Rambus Inc. 2,867(2) 116,300 Vitesse Semiconductor 10,329(2) ---------- 174,330 ---------- SOFTWARE (14.5%) 87,700 Adobe Systems 11,401 139,900 Art Technology Group 14,261(2) 401,900 Bea Systems 27,354(2) 190,700 Mercury Interactive 23,301(2) 77,900 Micromuse Inc. 11,831(2) 484,100 Peregrine Systems 15,461(2) 465,900 Portal Software 25,741(2) 234,900 Rational Software 30,229(2)
C-11 SCHEDULE OF INVESTMENTS Neuberger Berman August 31, 2000 - -------------------------------------------------------------------------------- Manhattan Portfolio (Cont'd)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- 236,100 RealNetworks 11,495(2) 525,900 Vignette Corp. 20,050(2) ---------- 191,124 ---------- SYSTEMS (5.1%) 204,000 Flextronics International 16,996(2) 183,200 Jabil Circuit 11,691(2) 251,300 Sanmina Corp. 29,653(2) 217,800 Vishay Intertechnology 8,780(2) ---------- 67,120 ---------- TOTAL COMMON STOCKS (COST $920,749) 1,269,479 ----------
Principal Amount - --------------------- REPURCHASE AGREEMENTS (2.9%) $ 37,934,000 State Street Bank and Trust Co. Repurchase Agreement, 6.58%, due 9/1/00, dated 8/31/00, Maturity Value $37,940,933, Collateralized by $38,150,000 Fannie Mae, Notes, 6.40%, due 9/27/01 (Collateral Value $39,076,244) (COST $37,934) 37,934(3) ----------
Market Principal Value(1) Amount (000's omitted) - --------------------- --------------- SHORT-TERM INVESTMENTS (11.2%) 20,000,000 Prudential Funding Corp., 6.45%, due 9/5/00 19,986 127,345,387 N&B Securities Lending Quality Fund, LLC 127,345 ---------- TOTAL SHORT-TERM INVESTMENTS (COST $147,331) 147,331(3) ---------- TOTAL INVESTMENTS (110.1%) (COST $1,106,014) 1,454,744(4) Liabilities, less cash, receivables and other assets [(10.1%)] (132,981) ---------- TOTAL NET ASSETS (100.0%) $1,321,763 ----------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-12 SCHEDULE OF INVESTMENTS Neuberger Berman August 31, 2000 - -------------------------------------------------------------------------------- Millennium Portfolio
TOP TEN EQUITY HOLDINGS ---------------------------------------------------- HOLDING PERCENTAGE 1. AirGate PCS 3.7% 2. Insight Enterprises 3.6% 3. MCK Communications 3.5% 4. LifeMinders, Inc. 2.9% 5. IONA Technologies ADR 2.5% 6. Integrated Device Technology 2.5% 7. AudioCodes Ltd. 2.3% 8. Corinthian Colleges 2.2% 9. Osicom Technologies 2.2% 10. About.com 2.1%
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- COMMON STOCKS (96.6%) BUSINESS SERVICES (13.0%) 50,200 Cal Dive International $ 2,887(2) 138,400 Corinthian Colleges 7,473(2) 239,000 Crown Media Holdings 3,839(2) 114,450 Iron Mountain 3,906(2) 89,600 Manufacturers' Services Limited 2,285(2) 97,200 Marine Drilling 2,643(2) 102,600 National-Oilwell 3,559(2) 90,400 Photon Dynamics 4,243(2) 78,200 Precision Drilling 2,659(2) 82,600 UTI Energy 3,077(2) 78,900 Veeco Instruments 7,071(2) -------- 43,642 -------- BUSINESS SERVICES - IT BUSINESS SERVICES (0.6%) 60,300 Hall, Kinion & Associates 1,990(2) --------
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- CONSUMER CYCLICAL - CONSUMER MEDIA (1.6%) 201,800 Entravision Communications 3,998(2) 80,000 Oakley, Inc. 1,355(2) -------- 5,353 -------- CONSUMER GOODS & SERVICES (0.8%) 50,400 Advanced Lighting Technologies 806(2) 32,000 Proxim, Inc. 1,922(2) -------- 2,728 -------- ENERGY (4.0%) 105,100 Hanover Compressor 3,337(2) 189,400 Maverick Tube 5,315(2) 149,000 Patterson Energy 4,675(2) -------- 13,327 -------- FINANCIAL SERVICES (2.5%) 86,000 Affiliated Managers Group 4,794(2) 111,500 eSPEED, Inc. 3,429(2) -------- 8,223 -------- HEALTH CARE (9.0%) 13,600 Arena Pharmaceuticals 629(2) 53,800 Cephalon, Inc. 2,707(2) 35,500 Charles River Laboratories International 974(2) 189,200 ChromaVision Medical Systems 2,365(2) 25,900 Cubist Pharmaceuticals 1,583(2) 15,100 CV Therapeutics 1,133(2) 62,200 Enzon, Inc. 3,786(2) 196,400 InKine Pharmaceutical 1,866(2) 42,500 Noven Pharmaceuticals 1,785(2) 50,200 OSI Pharmaceuticals 2,509(2) 51,900 Pharmacyclics, Inc. 2,601(2) 61,320 Physiometrix, Inc. 1,418(2)
C-13 SCHEDULE OF INVESTMENTS Neuberger Berman - -------------------------------------------------------------------------------- Millennium Portfolio (Cont'd)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- 112,200 PolyMedia Corp. 3,983(2) 25,600 Tanox, Inc. 1,191(2) 36,800 Titan Pharmaceuticals 1,727(2) -------- 30,257 -------- HEALTH PRODUCTS & SERVICES (0.4%) 45,200 Orthodontic Centers of America 1,480(2) -------- INTERNET (11.1%) 164,300 About.com 7,167(2) 128,800 IntraNet Solutions 5,836(2) 208,700 iVillage Inc. 1,396(2) 329,600 LifeMinders, Inc. 9,888(2) 484,548 MyPoints.com 6,602(2) 112,300 PurchasePro.com 6,489(2) -------- 37,378 -------- RETAIL (5.1%) 8,600 Christopher & Banks 305(2) 130,500 Factory 2-U Stores 4,511(2) 241,700 Insight Enterprises 12,145(2) -------- 16,961 -------- SEMICONDUCTORS (2.3%) 104,300 Helix Technology 3,950 85,500 SIPEX Corp. 3,682(2) -------- 7,632 -------- SOFTWARE (4.2%) 124,300 Accrue Software 2,649(2) 203,200 Actuate Software 5,270(2) 94,700 Eprise Corp. 1,474(2) 63,700 Jack Henry & Associates 2,827 85,900 Primus Knowledge Solutions 2,024(2) -------- 14,244 -------- TECHNOLOGY (6.2%) 62,300 Keithley Instruments 4,731 45,100 LightPath Technologies 2,379(2)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- 127,300 Rainbow Technologies 5,044(2) 195,150 REMEC, Inc. 5,562(2) 38,400 Zygo Corp. 3,048(2) -------- 20,764 -------- TECHNOLOGY - HARDWARE (9.6%) 67,600 AudioCodes Ltd. 7,596(2) 73,700 Natural MicroSystems 5,495(2) 175,800 Netopia, Inc. 6,439(2) 123,000 Osicom Technologies 7,257(2) 78,800 Virata Corp. 5,418(2) -------- 32,205 -------- TECHNOLOGY - SEMICONDUCTOR (7.7%) 434,500 Artisan Components 4,997(2) 95,100 Integrated Device Technology 8,345(2) 138,100 Kopin Corp. 4,618(2) 140,900 Oak Technology 4,104(2) 96,900 Parlex Corp. 3,694(2) -------- 25,758 -------- TECHNOLOGY - SOFTWARE (5.4%) 114,000 Allaire Corp. 3,869(2) 101,500 IONA Technologies ADR 8,456(2) 14,000 Netegrity, Inc. 1,232(2) 102,400 SERENA Software 4,506(2) -------- 18,063 -------- TELECOMMUNICATIONS (13.1%) 180,800 AirGate PCS 12,306(2) 86,300 Alamosa PCS Holdings 2,147(2) 403,600 MCK Communications 11,603(2) 146,800 Pinnacle Holdings 5,909(2) 35,600 SBA Communications 1,588(2) 203,200 SMTC Corp. 4,877(2)
C-14 August 31, 2000 - -------------------------------------------------------------------------------- Millennium Portfolio (Cont'd)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- 200,400 UbiquiTel Inc. 2,279(2) 210,800 US Unwired 3,149(2) -------- 43,858 -------- TOTAL COMMON STOCKS (COST $269,160) 323,863 --------
Principal Amount - --------------------- REPURCHASE AGREEMENTS (1.1%) $ 3,760,000 State Street Bank and Trust Co. Repurchase Agreement, 6.58%, due 9/1/00, dated 8/31/00, Maturity Value $3,760,687, Collateralized by $3,785,000 Fannie Mae, Notes, 6.40%, due 9/27/01 (Collateral Value $3,876,896) (COST $3,760) 3,760(3) --------
Market Principal Value(1) Amount (000's omitted) - --------------------- --------------- SHORT-TERM INVESTMENTS (15.9%) $53,425,725 N&B Securities Lending Quality Fund, LLC (COST $53,426) $ 53,426(3) -------- TOTAL INVESTMENTS (113.6%) (COST $326,346) 381,049(4) Liabilities, less cash, receivables and other assets [(13.6%)] (45,481) -------- TOTAL NET ASSETS (100.0%) $335,568 --------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-15 SCHEDULE OF INVESTMENTS Neuberger Berman - -------------------------------------------------------------------------------- Partners Portfolio
TOP TEN EQUITY HOLDINGS ---------------------------------------------------- HOLDING PERCENTAGE 1. Lexmark International Group 3.5% 2. Kroger Co. 3.5% 3. Chase Manhattan 3.1% 4. Computer Sciences 2.9% 5. CIGNA Corp. 2.6% 6. News Corp. ADR 2.5% 7. IBM 2.4% 8. Exxon Mobil 2.4% 9. The Williams Cos. 2.4% 10. XL Capital 2.3%
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- COMMON STOCKS (95.4%) AUTOMOBILE MANUFACTURING (0.7%) 265,500 General Motors $ 19,166 ---------- AUTO/TRUCK REPLACEMENT PARTS (0.8%) 1,007,800 Lear Corp. 21,731(2) ---------- BANKING & FINANCIAL (8.6%) 987,700 Bank of New York 51,793 1,611,750 Chase Manhattan 90,056 847,600 Citigroup Inc. 49,479 73,200 Countrywide Credit Industries 2,772 1,252,100 Wells Fargo 54,075 ---------- 248,175 ---------- CHEMICALS (2.7%) 1,374,000 Alcoa Inc. 45,685 704,000 duPont 31,592 ---------- 77,277 ---------- COMMUNICATIONS (3.5%) 885,300 AT&T Corp. 27,887 588,500 NTL Inc. 25,783(2) 1,310,000 WorldCom, Inc. 47,815(2) ---------- 101,485 ----------
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- CONSUMER PRODUCTS & SERVICES (2.1%) 458,532 Clear Channel Communications $ 33,186(2) 734,900 Pitney Bowes 26,870 ---------- 60,056 ---------- DIVERSIFIED (3.2%) 19,000 Berkshire Hathaway Class B 36,347(2) 766,900 Procter & Gamble 47,404 375,400 Thermo Electron 8,728(2) ---------- 92,479 ---------- ENTERTAINMENT (1.1%) 1,628,800 Carnival Corp. 32,474 ---------- FINANCIAL SERVICES (5.1%) 1,535,900 Ceridian Corp. 37,150(2) 284,200 Morgan Stanley Dean Witter 30,569 494,900 Providian Financial 56,883 549,200 USA Education 21,522 ---------- 146,124 ---------- FOOD & TOBACCO (2.0%) 727,900 Anheuser-Busch 57,368 ---------- FOOD PRODUCTS (3.5%) 4,386,600 Kroger Co. 99,521(2) ---------- GAS (1.9%) 1,216,900 Praxair, Inc. 53,848 ---------- HEALTH CARE (10.8%) 774,200 American Home Products 41,952 735,700 Bristol-Myers Squibb 38,992 757,000 CIGNA Corp. 73,618 407,200 Johnson & Johnson 37,437 920,200 Merck & Co. 64,299 479,800 Pharmacia Corp. 28,098 681,600 Schering-Plough 27,349 ---------- 311,745 ---------- INDUSTRIAL GOODS & SERVICES (2.2%) 1,022,300 General Dynamics 64,341 ----------
C-16 August 31, 2000 - -------------------------------------------------------------------------------- Partners Portfolio (Cont'd)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- INSURANCE (5.7%) 507,500 American International Group $ 45,231 1,379,800 Aon Corp. 51,484 960,159 XL Capital 66,191 ---------- 162,906 ---------- MEDIA & ENTERTAINMENT (1.8%) 1,306,000 Walt Disney 50,852 ---------- OIL & GAS (7.9%) 549,900 Anadarko Petroleum 36,167 473,900 Chevron Corp. 40,045 848,500 Exxon Mobil 69,259 807,000 Halliburton Co. 42,771 670,400 Transocean Sedco Forex 40,056 ---------- 228,298 ---------- RESTAURANTS (1.1%) 1,073,100 McDonald's Corp. 32,059 ---------- RETAILING (1.4%) 736,600 Costco Wholesale 25,367(2) 610,900 Target Corp. 14,203 ---------- 39,570 ---------- TECHNOLOGY (20.4%) 400,000 Apple Computer 24,375(2) 2,027,400 Cadence Design Systems 43,082(2) 1,062,300 Computer Associates 33,728 1,047,400 Computer Sciences 82,810(2) 599,300 Gateway Inc. 40,812(2) 1,648,500 General Motors Class H 54,606(2) 528,800 IBM 69,802
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- 1,478,800 Lexmark International Group $ 100,281(2) 405,600 Micron Technology 33,158(2) 1,685,800 Motorola, Inc. 60,794 1,911,400 Parametric Technology 25,565(2) 144,300 Samsung Electronics GDR 18,182(7) ---------- 587,195 ---------- TELECOMMUNICATIONS (6.5%) 1,771,800 AT&T Corp.- Liberty Media Group Class A 37,872(2) 765,500 AT&T Wireless Group 20,047(2) 237,400 Crown Castle International 8,235(2) 793,500 Nextel Communications 43,990(2) 1,341,582 Verizon Communications 58,526 709,400 WinStar Communications 19,065(2) ---------- 187,735 ---------- UTILITIES (2.4%) 1,490,900 The Williams Cos. 68,674 ---------- TOTAL COMMON STOCKS (COST $2,396,081) 2,743,079 ---------- PREFERRED STOCKS (2.5%) 1,617,100 News Corp. ADR (COST $42,513) 71,557 ----------
C-17 SCHEDULE OF INVESTMENTS Neuberger Berman August 31, 2000 - -------------------------------------------------------------------------------- Partners Portfolio (Cont'd)
Market Principal Value(1) Amount (000's omitted) - --------------------- --------------- REPURCHASE AGREEMENTS (1.5%) $42,017,000 State Street Bank and Trust Co. Repurchase Agreement, 6.58%, due 9/1/00, dated 8/31/00, Maturity Value $42,024,680, Collateralized by $42,255,000 Fannie Mae, Notes, 6.40%, due 9/27/01 (Collateral Value $43,280,909) (COST $42,017) $ 42,017(3) ----------
Market Principal Value(1) Amount (000's omitted) - --------------------- --------------- SHORT-TERM INVESTMENTS (2.2%) $64,211,597 N&B Securities Lending Quality Fund, LLC (COST $64,212) $ 64,212(3) ---------- TOTAL INVESTMENTS (101.6%) (COST $2,544,823) 2,920,865(4) Liabilities, less cash, receivables and other assets [(1.6%)] (46,733) ---------- TOTAL NET ASSETS (100.0%) $2,874,132 ----------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-18 SCHEDULE OF INVESTMENTS Neuberger Berman August 31, 2000 - -------------------------------------------------------------------------------- Socially Responsive Portfolio
TOP TEN EQUITY HOLDINGS ---------------------------------------------------- HOLDING PERCENTAGE 1. Citigroup Inc. 5.1% 2. Intel Corp. 4.9% 3. Anadarko Petroleum 4.6% 4. Compaq Computer 3.7% 5. Hewlett-Packard 3.4% 6. KeySpan Corp. 3.0% 7. Comcast Corp. Class A Special 3.0% 8. Enron Corp. 2.9% 9. Hartford Financial Services Group 2.9% 10. Tyco International 2.9%
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- COMMON STOCKS (98.6%) BANKING (2.4%) 180,000 Dime Bancorp $ 3,308 -------- BASIC MATERIALS (1.1%) 46,200 Alcoa Inc. 1,536 -------- COMMUNICATIONS (3.0%) 109,000 Comcast Corp. Class A Special 4,060(2) -------- CONSUMER GOODS & SERVICES (5.0%) 53,300 Kimberly-Clark 3,118 94,000 Marriott International 3,713 -------- 6,831 -------- DIVERSIFIED (8.1%) 60,000 Danaher Corp. 3,371 40,000 Minnesota Mining & Manufacturing 3,720 70,000 Tyco International 3,990 -------- 11,081 --------
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- ENERGY (7.3%) 50,000 BP Amoco ADR $ 2,762 120,000 KeySpan Corp. 4,133 37,000 Schlumberger Ltd. 3,157 -------- 10,052 -------- ENTERTAINMENT (2.9%) 137,000 Fox Entertainment Group 3,964(2) -------- FINANCIAL SERVICES (16.6%) 40,500 American International Group 3,610 62,000 AXA Financial 3,208 56,400 Chase Manhattan 3,151 120,000 Citigroup Inc. 7,005 60,000 Hartford Financial Services Group 3,998 16,000 Morgan Stanley Dean Witter 1,721 -------- 22,693 -------- HEALTH CARE (11.3%) 60,000 Bristol-Myers Squibb 3,180 150,000 IMS Health 2,831 22,800 Johnson & Johnson 2,096 86,250 Pfizer Inc. 3,730 42,900 Wellpoint Health Networks 3,703(2) -------- 15,540 -------- OIL & GAS (11.7%) 95,000 Anadarko Petroleum 6,248 44,000 Cooper Cameron 3,424(2) 47,300 Enron Corp. 4,014 50,600 Nabors Industries 2,407(2) -------- 16,093 -------- PUBLISHING & BROADCASTING (1.7%) 78,800 Valassis Communications 2,275(2) --------
C-19 SCHEDULE OF INVESTMENTS Neuberger Berman August 31, 2000 - -------------------------------------------------------------------------------- Socially Responsive Portfolio (Cont'd)
Market Number Value(1) of Shares (000's omitted) - --------------------- --------------- RETAIL (3.3%) 60,000 Safeway Inc. $ 2,959(2) 67,200 Target Corp. 1,562 -------- 4,521 -------- RETAILING (1.4%) 40,000 Wal-Mart Stores 1,898 -------- TECHNOLOGY (16.9%) 55,100 Agilent Technologies 3,323(2) 150,000 Compaq Computer 5,110 39,100 Hewlett-Packard 4,721 25,000 IBM 3,300 88,800 Intel Corp. 6,649 -------- 23,103 -------- TELECOMMUNICATIONS (5.9%) 40,000 NTL Inc. 1,753(2) 70,000 SBC Communications 2,923 8,900 TyCom, Ltd. 370(2) 81,900 WorldCom, Inc. 2,989(2) -------- 8,035 -------- TOTAL COMMON STOCKS (COST $95,854) 134,990 --------
Principal Amount - --------------------- REPURCHASE AGREEMENTS (1.3%) $1,720,000 State Street Bank and Trust Co. Repurchase Agreement, 6.58%, due 9/1/00, dated 8/31/00, Maturity Value $1,720,314, Collateralized by $1,730,000 Fannie Mae, Notes, 6.40%, due 9/27/01 (Collateral Value $1,772,003) (COST $1,720) 1,720(3) --------
Market Principal Value(1) Amount (000's omitted) - --------------------- --------------- SHORT-TERM INVESTMENTS (0.3%) $ 100,000 Community Capital Bank, 5.00%, due 9/30/00 $ 100 100,000 Self Help Credit Union, 5.92%, due 11/21/00 100 244,761 N&B Securities Lending Quality Fund, LLC 245 -------- TOTAL SHORT-TERM INVESTMENTS (COST $445) 445(3) -------- TOTAL INVESTMENTS (100.2%) (COST $98,019) 137,155(4) Liabilities, less cash, receivables and other assets [(0.2%)] (254) -------- TOTAL NET ASSETS (100.0%) $136,901 --------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-20 NOTES TO SCHEDULE OF INVESTMENTS August 31, 2000 - ---------------------------------------------------------------------- Equity Managers Trust 1) Investment securities of each Portfolio are valued at the latest sales price; securities for which no sales were reported, unless otherwise noted, are valued at the mean between the closing bid and asked prices. The Portfolios value all other securities by a method the trustees of Equity Managers Trust believe accurately reflects fair value. Foreign security prices are furnished by independent quotation services expressed in local currency values. Foreign security prices are translated from the local currency into U.S. dollars using current exchange rates. Short-term debt securities with less than 60 days until maturity may be valued at cost which, when combined with interest earned, approximates market value. 2) Non-income producing security. 3) At cost, which approximates market value. 4) At August 31, 2000, selected Portfolio information on a U.S. Federal income tax basis was as follows:
GROSS GROSS UNREALIZED UNREALIZED NET UNREALIZED NEUBERGER BERMAN COST APPRECIATION DEPRECIATION APPRECIATION - ----------------------------------------------------------------------------------------------------------- FOCUS PORTFOLIO $1,168,582,000 $1,196,466,000 $ 9,026,000 $1,187,440,000 GENESIS PORTFOLIO 1,579,972,000 420,625,000 108,366,000 312,259,000 GUARDIAN PORTFOLIO 3,115,046,000 839,660,000 67,466,000 772,194,000 MANHATTAN PORTFOLIO 1,106,100,000 380,421,000 31,777,000 348,644,000 MILLENNIUM PORTFOLIO 329,240,000 72,651,000 20,842,000 51,809,000 PARTNERS PORTFOLIO 2,555,689,000 472,050,000 106,874,000 365,176,000 SOCIALLY RESPONSIVE PORTFOLIO 98,032,000 40,680,000 1,557,000 39,123,000
5) Affiliated issuer (see Note E of Notes to Financial Statements). C-21 6) The following securities were held in escrow at August 31, 2000, to cover outstanding call options written:
PREMIUM SECURITIES AND MARKET VALUE ON MARKET VALUE NEUBERGER BERMAN SHARES OPTIONS OF SECURITIES OPTIONS OF OPTIONS - ------------------------------------------------------------------------------------------------------------- GUARDIAN PORTFOLIO 800,000 Pfizer Inc. $34,600,000 $4,575,847 $ 2,150,000 December 2000 @ 45 97,000 Wellpoint Health 8,372,313 870,061 606,250 Networks January 2001 @ 100 160,000 Citigroup Inc. 9,340,000 415,186 320,000 October 2000 @ 60 280,000 Rational Software 36,032,500 5,976,474 10,080,000 January 2001 @ 105 125,000 Hewlett-Packard 15,093,750 1,511,824 1,945,313 November 2000 @ 115
7) Security exempt from registration under the Securities Act of 1933. These securities may be resold in transactions exempt from registration normally to qualified institutional buyers under Rule 144A. At August 31, 2000, these securities amounted to $18,182,000 or 0.6% of net assets for Neuberger Berman Partners Portfolio. SEE NOTES TO FINANCIAL STATEMENTS C-22 (This page has been left blank intentionally.) C-23 (This page has been left blank intentionally.) STATEMENTS OF ASSETS AND LIABILITIES - ---------------------------------------------------------------------- Equity Managers Trust
FOCUS GENESIS (000'S OMITTED) PORTFOLIO PORTFOLIO ---------------------------- ASSETS Investments in securities, at market value* (Notes A & E) -- see Schedule of Investments: Unaffiliated issuers $ 2,225,166 $ 1,686,348 Non-controlled affiliated issuers 130,856 205,883 ---------------------------- 2,356,022 1,892,231 Cash 1 1 Dividends and interest receivable 936 1,609 Prepaid expenses and other assets 16 28 Receivable for securities sold 33,969 1,994 Receivable for variation margin (Note A) -- -- ---------------------------- 2,390,944 1,895,863 ---------------------------- LIABILITIES Option contracts written, at market value (Note A) -- -- Payable for collateral on securities loaned (Note A) 10,008 36,226 Payable for securities purchased 9,666 7,124 Payable to investment manager (Note B) 869 1,088 Accrued expenses and other payables 143 297 ---------------------------- 20,686 44,735 ---------------------------- NET ASSETS Applicable to Investors' Beneficial Interests $ 2,370,258 $ 1,851,128 ---------------------------- NET ASSETS consist of: Paid-in capital $ 1,179,587 $ 1,536,941 Net unrealized appreciation in value of investment securities, financial futures contracts, and option contracts 1,190,671 314,187 ---------------------------- NET ASSETS $ 2,370,258 $ 1,851,128 ---------------------------- *Cost of investments: Unaffiliated issuers $ 1,063,334 $ 1,343,716 Non-controlled affiliated issuers 102,017 234,328 ---------------------------- Total cost of investments $ 1,165,351 $ 1,578,044 ----------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-24 August 31, 2000 - ---------------------------------------------------------------------- Equity Managers Trust
SOCIALLY GUARDIAN 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 $ 3,887,240 $ 1,454,744 $ 381,049 $ 2,920,865 $ 137,155 Non-controlled affiliated issuers -- -- -- -- -- ------------------------------------------------------------------------- 3,887,240 1,454,744 381,049 2,920,865 137,155 Cash 1 1 -- 1 -- Dividends and interest receivable 4,586 703 265 3,880 110 Prepaid expenses and other assets 65 80 28 68 3 Receivable for securities sold 127,496 3,355 21,254 28,678 -- Receivable for variation margin (Note A) 4,136 -- -- -- -- ------------------------------------------------------------------------- 4,023,524 1,458,883 402,596 2,953,492 137,268 ------------------------------------------------------------------------- LIABILITIES Option contracts written, at market value (Note A) 15,102 -- -- -- -- Payable for collateral on securities loaned (Note A) 89,019 127,345 53,426 64,212 245 Payable for securities purchased 77,540 8,544 13,073 13,557 -- Payable to investment manager (Note B) 1,432 518 220 1,106 61 Accrued expenses and other payables 552 713 309 485 61 ------------------------------------------------------------------------- 183,645 137,120 67,028 79,360 367 ------------------------------------------------------------------------- NET ASSETS Applicable to Investors' Beneficial Interests $ 3,839,879 $ 1,321,763 $ 335,568 $ 2,874,132 $ 136,901 ------------------------------------------------------------------------- NET ASSETS consist of: Paid-in capital $ 3,037,228 $ 973,033 $ 280,865 $ 2,498,090 $ 97,765 Net unrealized appreciation in value of investment securities, financial futures contracts, and option contracts 802,651 348,730 54,703 376,042 39,136 ------------------------------------------------------------------------- NET ASSETS $ 3,839,879 $ 1,321,763 $ 335,568 $ 2,874,132 $ 136,901 ------------------------------------------------------------------------- *Cost of investments: Unaffiliated issuers $ 3,091,259 $ 1,106,014 $ 326,346 $ 2,544,823 $ 98,019 Non-controlled affiliated issuers -- -- -- -- -- ------------------------------------------------------------------------- Total cost of investments $ 3,091,259 $ 1,106,014 $ 326,346 $ 2,544,823 $ 98,019 -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-25 STATEMENTS OF OPERATIONS - ---------------------------------------------------------------------- Equity Managers Trust
FOCUS GENESIS (000'S OMITTED) PORTFOLIO PORTFOLIO ------------------------ INVESTMENT INCOME Income: Dividend income -- unaffiliated issuers $ 12,183 $ 12,039 Dividend income -- non-controlled affiliated issuers 1,013 2,354 Interest income 1,702 5,017 Foreign taxes withheld (Note A) -- -- ------------------------ Total income 14,898 19,410 ------------------------ Expenses: Investment management fee (Note B) 8,689 11,889 Accounting fees 10 10 Auditing fees 45 41 Custodian fees (Note B) 308 320 Insurance expense 21 21 Legal fees 23 20 Trustees' fees and expenses 27 25 Miscellaneous -- 33 ------------------------ Total expenses 9,123 12,359 Expenses reduced by custodian fee expense offset arrangement (Note B) (5) (3) ------------------------ Total net expenses 9,118 12,356 ------------------------ Net investment income (loss) 5,780 7,054 ------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain on investment securities sold in unaffiliated issuers 162,326 201,347 Net realized gain (loss) on investment securities sold in non-controlled affiliated issuers 13,304 (3,841) Net realized gain (loss) on option contracts (Note A) 263 -- Net realized loss on financial futures contracts (Note A) -- -- Change in net unrealized appreciation of investment securities, financial futures contracts and option contracts (Note A) 683,324 173,266 ------------------------ Net gain on investments 859,217 370,772 ------------------------ Net increase in net assets resulting from operations $ 864,997 $ 377,826 ------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-26 For the Year Ended August 31, 2000 - ---------------------------------------------------------------------- Equity Managers Trust
SOCIALLY GUARDIAN MANHATTAN MILLENNIUM PARTNERS RESPONSIVE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ----------------------------------------------------------------------- INVESTMENT INCOME Income: Dividend income -- unaffiliated issuers $ 47,067 $ 624 $ 33 $ 41,798 $ 1,630 Dividend income -- non-controlled affiliated issuers -- -- -- -- -- Interest income 13,511 3,307 1,012 4,009 476 Foreign taxes withheld (Note A) (347) -- -- (220) (3) ----------------------------------------------------------------------- Total income 60,231 3,931 1,045 45,587 2,103 ----------------------------------------------------------------------- Expenses: Investment management fee (Note B) 18,304 4,978 2,006 14,477 1,033 Accounting fees 10 10 10 10 10 Auditing fees 51 40 17 48 30 Custodian fees (Note B) 616 217 117 497 80 Insurance expense 63 8 1 48 5 Legal fees 22 27 25 22 38 Trustees' fees and expenses 51 17 9 42 7 Miscellaneous -- 23 6 -- -- ----------------------------------------------------------------------- Total expenses 19,117 5,320 2,191 15,144 1,203 Expenses reduced by custodian fee expense offset arrangement (Note B) (26) (2) (9) (31) (1) ----------------------------------------------------------------------- Total net expenses 19,091 5,318 2,182 15,113 1,202 ----------------------------------------------------------------------- Net investment income (loss) 41,140 (1,387) (1,137) 30,474 901 ----------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain on investment securities sold in unaffiliated issuers 461,016 313,974 42,114 198,792 61,526 Net realized gain (loss) on investment securities sold in non-controlled affiliated issuers -- -- -- -- -- Net realized gain (loss) on option contracts (Note A) (92,778) -- -- -- -- Net realized loss on financial futures contracts (Note A) (5,940) -- -- -- -- Change in net unrealized appreciation of investment securities, financial futures contracts and option contracts (Note A) 221,730 226,396 48,586 16,151 (58,823) ----------------------------------------------------------------------- Net gain on investments 584,028 540,370 90,700 214,943 2,703 ----------------------------------------------------------------------- Net increase in net assets resulting from operations $ 625,168 $ 538,983 $ 89,563 $ 245,417 $ 3,604 -----------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-27 STATEMENTS OF CHANGES IN NET ASSETS - ---------------------------------------------------------------------- Equity Managers Trust
FOCUS GENESIS PORTFOLIO PORTFOLIO Year Year Ended Ended August 31, August 31, (000'S OMITTED) 2000 1999 2000 1999 ------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 5,780 $ 5,971 $ 7,054 $ 18,739 Net realized gain (loss) on investments 175,893 203,107 197,506 (110,390) Change in net unrealized appreciation (depreciation) of investments 683,324 283,206 173,266 413,682 ------------------------------------------------------ Net increase in net assets resulting from operations 864,997 492,284 377,826 322,031 ------------------------------------------------------ TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Additions 293,813 50,568 242,189 528,302 Reductions (334,950) (313,932) (519,991) (911,584) ------------------------------------------------------ Net increase (decrease) in net assets resulting from transactions in investors' beneficial interests (41,137) (263,364) (277,802) (383,282) ------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS 823,860 228,920 100,024 (61,251) NET ASSETS: Beginning of year 1,546,398 1,317,478 1,751,104 1,812,355 ------------------------------------------------------ End of year $ 2,370,258 $ 1,546,398 $ 1,851,128 $ 1,751,104 ------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-28 - ---------------------------------------------------------------------- Equity Managers Trust
GUARDIAN MANHATTAN MILLENNIUM PORTFOLIO PORTFOLIO PORTFOLIO Period from October 20, 1998 Year Year Year (Commencement Ended Ended Ended of Operations) to August 31, August 31, August 31, August 31, 2000 1999 2000 1999 2000 1999 --------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 41,140 $ 60,087 $ (1,387) $ (502) $ (1,137) $ (186) Net realized gain (loss) on investments 362,298 991,845 313,974 57,698 42,114 8,249 Change in net unrealized appreciation (depreciation) of investments 221,730 406,548 226,396 135,208 48,586 6,117 --------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 625,168 1,458,480 538,983 192,404 89,563 14,180 --------------------------------------------------------------------------------------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Additions 61,327 164,857 350,012 47,432 256,345 57,892 Reductions (1,570,336) (2,687,422) (180,091) (150,336) (78,577) (3,835) --------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from transactions in investors' beneficial interests (1,509,009) (2,522,565) 169,921 (102,904) 177,768 54,057 --------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (883,841) (1,064,085) 708,904 89,500 267,331 68,237 NET ASSETS: Beginning of year 4,723,720 5,787,805 612,859 523,359 68,237 -- --------------------------------------------------------------------------------------- End of year $ 3,839,879 $ 4,723,720 $ 1,321,763 $ 612,859 $ 335,568 $ 68,237 ---------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-29 STATEMENTS OF CHANGES IN NET ASSETS(Cont'd) - ---------------------------------------------------------------------- Equity Managers Trust
SOCIALLY PARTNERS RESPONSIVE PORTFOLIO PORTFOLIO Year Year Ended Ended August 31, August 31, (000'S OMITTED) 2000 1999 2000 1999 ------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 30,474 $ 51,968 $ 901 $ 2,271 Net realized gain (loss) on investments 198,792 353,820 61,526 22,484 Change in net unrealized appreciation (depreciation) of investments 16,151 531,136 (58,823) 81,446 ------------------------------------------------------ Net increase in net assets resulting from operations 245,417 936,924 3,604 106,201 ------------------------------------------------------ TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Additions 114,599 230,354 34,685 53,231 Reductions (1,254,624) (979,875) (298,501) (45,169) ------------------------------------------------------ Net increase (decrease) in net assets resulting from transactions in investors' beneficial interests (1,140,025) (749,521) (263,816) 8,062 ------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS (894,608) 187,403 (260,212) 114,263 NET ASSETS: Beginning of year 3,768,740 3,581,337 397,113 282,850 ------------------------------------------------------ End of year $ 2,874,132 $ 3,768,740 $ 136,901 $ 397,113 ------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-30 (This page has been left blank intentionally.) C-31 NOTES TO FINANCIAL STATEMENTS August 31, 2000 - ---------------------------------------------------------------------- Equity Managers Trust NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 1) GENERAL: Neuberger Berman Focus Portfolio ("Focus"), Neuberger Berman Genesis Portfolio ("Genesis"), Neuberger Berman Guardian Portfolio ("Guardian"), Neuberger Berman Manhattan Portfolio ("Manhattan"), Neuberger Berman Millennium Portfolio ("Millennium"), Neuberger Berman Partners Portfolio ("Partners"), and Neuberger Berman Socially Responsive Portfolio ("Socially Responsive") (collectively, the "Portfolios") are separate operating series of Equity Managers Trust ("Managers Trust"), a New York common law trust organized as of December 1, 1992. Managers Trust is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). Millennium had no operations until October 20, 1998, other than matters relating to its organization and registration as a series of Managers Trust. Other regulated investment companies sponsored by Neuberger Berman Management Inc. ("Management"), whose financial statements are not presented herein, also invest in Managers Trust. The assets of each Portfolio belong only to that Portfolio, and the liabilities of each Portfolio are borne solely by that Portfolio and no other. 2) PORTFOLIO VALUATION: Investment securities are valued as indicated in the notes following the Portfolios' Schedule of Investments. 3) FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolios are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange of such currency against the U.S. dollar to determine the value of investments, other assets and liabilities. Purchase and sale prices of securities, and income and expenses are translated into U.S. dollars at the prevailing rate of exchange on the respective dates of such transactions. 4) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Dividend income is recorded on the ex-dividend date or, for certain foreign dividends, as soon as the Portfolio becomes aware of the dividends. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, including accretion of original issue discount, where applicable, and accretion of discount on short-term investments, is recorded on the accrual basis. Realized gains and losses from securities transactions and foreign currency transactions are recorded on the basis of identified cost. 5) TAXES: Managers Trust intends to comply with the requirements of the Internal Revenue Code. Each Portfolio of Managers Trust also intends to conduct its C-32 operations so that each of its investors will be able to qualify as a regulated investment company. Each Portfolio will be treated as a partnership for U.S. Federal income tax purposes and is therefore not subject to U.S. Federal income tax. 6) FOREIGN TAXES: Foreign taxes withheld represent amounts withheld by foreign tax authorities, net of refunds recoverable. 7) EXPENSE ALLOCATION: Each Portfolio bears all costs of its operations. Expenses incurred by Managers Trust with respect to any two or more portfolios are allocated in proportion to the net assets of such portfolios, except where a more appropriate allocation of expenses to each portfolio can otherwise be made fairly. Expenses directly attributable to a portfolio are charged to that portfolio. 8) CALL OPTIONS: Premiums received by each Portfolio upon writing a covered call option are recorded in the liability section of each Portfolio's Statement of Assets and Liabilities and are subsequently adjusted to the current market value. When an option is exercised, closed, or expired, the Portfolio realizes a gain or loss and the liability is eliminated. A Portfolio bears the risk of a decline in the price of the security during the period, although any potential loss during the period would be reduced by the amount of the option premium received. In general, written covered call options may serve as a partial hedge against decreases in value in the underlying securities to the extent of the premium received. All securities covering outstanding options are held in escrow by the custodian bank. Summary of option transactions for the year ended August 31, 2000:
VALUE WHEN FOCUS NUMBER WRITTEN - ------------------------------------------------------------- CONTRACTS OUTSTANDING 8/31/99 3,000 $ 441,000 CONTRACTS WRITTEN 2,000 1,078,000 CONTRACTS EXPIRED (1,600) (533,000) CONTRACTS EXERCISED 0 0 CONTRACTS CLOSED (3,400) (986,000) ------------------------ CONTRACTS OUTSTANDING 8/31/00 0 $ 0 ------------------------
VALUE WHEN GUARDIAN NUMBER WRITTEN - ----------------------------------------------------------------- CONTRACTS OUTSTANDING 8/31/99 23,750 $ 15,446,000 CONTRACTS WRITTEN 86,796 79,702,000 CONTRACTS EXPIRED (5,000) (2,985,000) CONTRACTS EXERCISED (4,769) (2,647,000) CONTRACTS CLOSED (86,157) (76,167,000) ---------------------------- CONTRACTS OUTSTANDING 8/31/00 14,620 $ 13,349,000 ----------------------------
C-33 9) FINANCIAL FUTURES CONTRACTS: Each Portfolio may buy and sell stock index futures contracts for purposes of managing cash flow. Millennium and Socially Responsive may each buy and sell financial futures contracts to hedge against a possible decline in the value of their portfolio securities. At the time a Portfolio enters into a financial futures contract, it is required to deposit with its custodian a specified amount of cash or liquid securities, known as "initial margin," ranging upward from 1.1% of the value of the financial futures contract being traded. Each day, the futures contract is valued at the official settlement price of the board of trade or U.S. commodity exchange on which such futures contract is traded. Subsequent payments, known as "variation margin," to and from the broker are made on a daily basis as the market price of the financial futures contract fluctuates. Daily variation margin adjustments, arising from this "mark to market," are recorded by the Portfolios as unrealized gains or losses. Although some financial futures contracts by their terms call for actual delivery or acceptance of financial instruments, in most cases the contracts are closed out prior to delivery by offsetting purchases or sales of matching financial futures contracts. When the contracts are closed, a Portfolio recognizes a gain or loss. Risks of entering into futures contracts include the possibility there may be an illiquid market and/or a change in the value of the contract may not correlate with changes in the value of the underlying securities. For U.S. Federal income tax purposes, the futures transactions undertaken by a Portfolio may cause that Portfolio to recognize gains or losses from marking to market even though its positions have not been sold or terminated, may affect the character of the gains or losses recognized as long-term or short-term, and may affect the timing of some capital gains and losses realized by the Portfolios. Also, a Portfolio's losses on transactions involving futures contracts may be deferred rather than being taken into account currently in calculating such Portfolio's taxable income. During the year ended August 31, 2000, Focus, Genesis, Manhattan, Millennium, Partners, and Socially Responsive did not enter into any financial futures contracts. At August 31, 2000, open positions in financial futures contracts for Guardian were as follows:
UNREALIZED EXPIRATION OPEN CONTRACTS POSITION APPRECIATION - ----------------------------------------------------------------------- September 2000 940 S&P 500 Futures Long $8,422,000
C-34 At August 31, 2000, Guardian had the following securities deposited in a segregated account to cover margin requirements on open financial futures contracts:
PRINCIPAL AMOUNT SECURITY - -------------------------------------------------------------------------- $8,000,000 Federal Farm Credit Bank, Discount Notes, 6.36%, due 9/18/2000 8,000,000 Fannie Mae, Discount Notes, 6.38%, due 9/21/2000 8,000,000 Freddie Mac, Discount Notes, 6.41%, due 9/28/2000
10) SECURITY LENDING: Securities loans involve certain risks in the event a borrower should fail financially, including delays or inability to recover the lent securities or foreclose against the collateral. The investment manager, under the general supervision of Managers Trust's Board of Trustees, monitors the creditworthiness of the parties to whom the Portfolios make security loans. The Portfolios will not lend securities on which covered call options have been written, or lend securities on terms which would prevent each of their investors from qualifying as a regulated investment company. The Portfolios entered into a Securities Lending Agreement with Morgan Stanley & Co. Incorporated ("Morgan"). The Portfolios receive cash collateral equal to at least 100% of the current market value of the loaned securities. The Portfolios invest the cash collateral in the N&B Securities Lending Quality Fund, LLC ("investment vehicle"), which is managed by State Street Bank and Trust Company ("State Street") pursuant to guidelines approved by Managers Trust's investment manager. Income earned on the investment vehicle is paid to Morgan monthly. The Portfolios receive a fee, payable monthly, negotiated by the Portfolios and Morgan, based on the number and duration of the lending transactions. At August 31, 2000, the value of the securities loaned and the value of the collateral were as follows:
VALUE OF SECURITIES VALUE OF LOANED COLLATERAL - ------------------------------------------------------------------- FOCUS $ 9,812,000 $ 10,008,000 GENESIS 35,516,000 36,226,000 GUARDIAN 87,274,000 89,019,000 MANHATTAN 124,848,000 127,345,000 MILLENNIUM 52,378,000 53,426,000 PARTNERS 62,953,000 64,212,000 SOCIALLY RESPONSIVE 240,000 245,000
11) REPURCHASE AGREEMENTS: Each Portfolio may enter into repurchase agreements with institutions that the Portfolio's investment manager has determined are creditworthy. Each repurchase agreement is recorded at cost. A Portfolio requires that the securities purchased in a repurchase transaction be transferred to the C-35 custodian in a manner sufficient to enable a Portfolio to obtain those securities in the event of a default under the repurchase agreement. A Portfolio monitors, on a daily basis, the value of the securities transferred to ensure that their value, including accrued interest, is greater than amounts owed to a Portfolio under each such repurchase agreement. NOTE B -- MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES: Each Portfolio retains Management as its investment manager under a Management Agreement. For such investment management services, each Portfolio (except Genesis and Millennium) pays Management a fee at the annual rate of 0.55% of the first $250 million of that Portfolio's average daily net assets, 0.525% of the next $250 million, 0.50% of the next $250 million, 0.475% of the next $250 million, 0.45% of the next $500 million, and 0.425% of average daily net assets in excess of $1.5 billion. Genesis and Millennium pay Management a fee for investment management services at the annual rate of 0.85% of the first $250 million of that Portfolio's average daily net assets, 0.80% of the next $250 million, 0.75% of the next $250 million, 0.70% of the next $250 million, and 0.65% of average daily net assets in excess of $1 billion. Management and Neuberger Berman, LLC ("Neuberger"), a member firm of The New York Stock Exchange and sub-adviser to each Portfolio, are wholly owned subsidiaries of Neuberger Berman Inc., a publicly held company. Neuberger is retained by Management to furnish it with investment recommendations and research information without added cost to each Portfolio. Several individuals who are officers and/or trustees of Managers Trust are also employees of Neuberger and/or Management. Each Portfolio has an expense offset arrangement in connection with its custodian contract. The impact of this arrangement, reflected in the Statements of Operations under the caption Custodian fees, was a reduction of $5,067, $2,694, $26,334, $1,460, $9,400, $31,086, and $888, for Focus, Genesis, Guardian, Manhattan, Millennium, Partners, and Socially Responsive, respectively. C-36 NOTE C -- SECURITIES TRANSACTIONS: During the year ended August 31, 2000, there were purchase and sale transactions (excluding short-term securities, financial futures contracts, and option contracts) as follows:
PURCHASES SALES - ------------------------------------------------------------------- FOCUS $ 985,133,000 $1,020,999,000 GENESIS 592,552,000 899,085,000 GUARDIAN 3,199,167,000 4,688,263,000 MANHATTAN 1,124,602,000 967,149,000 MILLENNIUM 563,624,000 392,803,000 PARTNERS 2,963,180,000 3,916,490,000 SOCIALLY RESPONSIVE 139,353,000 379,760,000
During the year ended August 31, 2000, there were brokerage commissions on securities paid to Neuberger and other brokers as follows:
OTHER NEUBERGER BROKERS TOTAL - ----------------------------------------------------------------------------------- FOCUS $ 895,000 $ 775,000 $ 1,670,000 GENESIS 681,000 965,000 1,646,000 GUARDIAN 5,141,000 3,978,000 9,119,000 MANHATTAN 199,000 600,000 799,000 MILLENNIUM 58,000 80,000 138,000 PARTNERS 3,901,000 3,199,000 7,100,000 SOCIALLY RESPONSIVE 261,000 111,000 372,000
NOTE D -- LINE OF CREDIT: At August 31, 2000, Genesis, Manhattan, and Millennium were three of the holders of a single committed, unsecured $100,000,000 line of credit with State Street, to be used only for temporary or emergency purposes. Interest is charged on borrowings under this agreement at the overnight Federal Funds Rate plus 0.75% per annum. A facility fee of 0.09% (0.07% prior to October 1, 1999) per annum of the available line of credit is charged, of which Genesis, Manhattan, and Millennium each has agreed to pay its pro rata share, based on the ratio of its individual net assets to the net assets of all the participants at the time the fee is due and payable. The fee is paid quarterly in arrears. No compensating balance is required. Other investment companies managed by Management also participate in this line of credit on the same terms. Because several investment companies participate, there is no assurance that an individual Portfolio will have access to the entire $100,000,000 at any particular time. Genesis, Manhattan, and Millennium had no loans outstanding pursuant to this line of credit at August 31, 2000. During the year ended August 31, 2000, Genesis, Manhattan, and Millennium did not utilize this line of credit. C-37 NOTE E -- INVESTMENTS IN NON-CONTROLLED AFFILIATES*:
FOCUS BALANCE OF GROSS GROSS BALANCE OF SHARES HELD PURCHASES SALES SHARES HELD VALUE AUGUST 31, AND AND AUGUST 31, AUGUST 31, NAME OF ISSUER: 1999 ADDITIONS REDUCTIONS 2000 2000 - ---------------------------------------------------------------------------------------------------------------------- Furniture Brands International 1,800,000 1,700,000 0 3,500,000 $56,437,000 Nationwide Financial Services 568,700 1,235,400 59,100 1,745,000 69,582,000 Photronics, Inc.** 1,302,500 0 1,137,500 165,000 4,837,000
GENESIS BALANCE OF GROSS GROSS BALANCE OF SHARES HELD PURCHASES SALES SHARES HELD VALUE AUGUST 31, AND AND AUGUST 31, AUGUST 31, NAME OF ISSUER: 1999 ADDITIONS REDUCTIONS 2000 2000 - --------------------------------------------------------------------------------------------------------------------- AAR Corp. 1,771,350 85,900 430,200 1,427,050 $16,054,000 Alliant Techsystems 663,200 6,000 136,400 532,800 41,059,000 Aviall Inc.** 1,219,500 0 465,400 754,100 4,525,000 Davox Corp.** 1,075,600 386,300 654,000 807,900 10,200,000 DONCASTERS PLC ADR** 478,300 0 478,300 0 0 Fair, Isaac & Co. 343,500 500,200 4,200 839,500 38,565,000 Highland Bancorp 331,400 0 0 331,400 8,368,000 Mentor Corp. 885,300 310,800 5,000 1,191,100 25,236,000 META Group 0 632,000 7,000 625,000 9,062,000 Primex Technologies 800,400 7,000 78,100 729,300 17,685,000 SOS Staffing Services 814,400 0 25,000 789,400 2,171,000 Scottish Annuity & Life Holdings 857,900 33,600 0 891,500 8,135,000 Wallace Computer Services 1,247,400 892,100 4,200 2,135,300 24,823,000
*AFFILIATED ISSUERS, AS DEFINED IN THE 1940 ACT, INCLUDE ISSUERS IN WHICH THE PORTFOLIO HELD 5% OR MORE OF THE OUTSTANDING VOTING SECURITIES. **AT AUGUST 31, 2000, THE ISSUERS OF THESE SECURITIES WERE NO LONGER AFFILIATED WITH THE PORTFOLIO. C-38 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Focus Portfolio
Year Ended August 31, 2000 1999 1998 1997 1996 -------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(1) .50% .51% .51% .53% .54% -------------------------------------------------------- Net Expenses .50% .51% .51% .53% .54% -------------------------------------------------------- Net Investment Income .32% .37% .59% .54% 1.04% -------------------------------------------------------- Portfolio Turnover Rate 55% 57% 64% 63% 39% -------------------------------------------------------- Net Assets, End of Year (in millions) $2,370.3 $1,546.4 $1,317.5 $1,573.4 $1,122.4 --------------------------------------------------------
1) The Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. C-39 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Genesis Portfolio
Year Ended August 31, 2000 1999 1998 1997 1996 -------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(1) .76% .75% .72% .77% .85% -------------------------------------------------------- Net Expenses .75% .75% .72%(2) .77%(2) .85%(2) -------------------------------------------------------- Net Investment Income .43% 1.02% 1.13% .32% .27% -------------------------------------------------------- Portfolio Turnover Rate 38% 33% 18% 18% 21% -------------------------------------------------------- Net Assets, End of Year (in millions) $1,851.1 $1,751.1 $1,812.4 $1,083.7 $259.9 --------------------------------------------------------
1) The Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. 2) 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 - --------------------------------------------------------------------- Net Expenses .74% .87% .95%
C-40 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Guardian Portfolio
Year Ended August 31, 2000 1999 1998 1997 1996 -------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(1) .47% .46% .46% .46% .46% -------------------------------------------------------- Net Expenses .47% .46% .46% .46% .46% -------------------------------------------------------- Net Investment Income 1.01% 1.06% .92% .89% 1.72% -------------------------------------------------------- Portfolio Turnover Rate 83% 73% 60% 50% 37% -------------------------------------------------------- Net Assets, End of Year (in millions) $3,839.9 $4,723.7 $5,787.8 $8,758.2 $6,232.5 --------------------------------------------------------
1) The Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. C-41 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Manhattan Portfolio
Year Ended August 31, 2000 1999 1998 1997 1996 ------------------------------------------------ RATIOS TO AVERAGE NET ASSETS: Gross Expenses(1) .55% .58% .57% .59% .58% ------------------------------------------------ Net Expenses .55% .58% .57% .59% .58% ------------------------------------------------ Net Investment Income (Loss) (.14%) (.08%) (.05%) .20% .13% ------------------------------------------------ Portfolio Turnover Rate 105% 115% 90% 89% 53% ------------------------------------------------ Net Assets, End of Year (in millions) $1,321.8 $612.9 $523.4 $621.7 $567.4 ------------------------------------------------
1) The Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. C-42 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Millennium Portfolio
Period from Year Ended October 20, 1998 (1) August 31, to August 31, 2000 1999 ---------------------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(2) .93% 1.20%(3) ---------------------------------- Net Expenses .92% 1.19%(3) ---------------------------------- Net Investment Loss (.48%) (.67%)(3) ---------------------------------- Portfolio Turnover Rate 176% 208% ---------------------------------- Net Assets, End of Year (in millions) $335.6 $68.2 ----------------------------------
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-43 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Partners Portfolio
Year Ended August 31, 2000 1999 1998 1997 1996 -------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(1) .48% .47% .47% .48% .51% -------------------------------------------------------- Net Expenses .48% .47% .47% .48% .51% -------------------------------------------------------- Net Investment Income .96% 1.29% 1.11% 1.05% 1.26% -------------------------------------------------------- Portfolio Turnover Rate 95% 132% 109% 77% 96% -------------------------------------------------------- Net Assets, End of Year (in millions) $2,874.1 $3,768.7 $3,581.3 $3,575.6 $1,999.6 --------------------------------------------------------
1) The Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. C-44 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Socially Responsive Portfolio
Year Ended August 31, 2000 1999 1998 1997 1996 ---------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(1) .64% .59% .60% .63% .65% ---------------------------------------------- Net Expenses .64% .59% .60% .63% .65% ---------------------------------------------- Net Investment Income .48% .63% .92% 1.08% 1.02% ---------------------------------------------- Portfolio Turnover Rate 76% 53% 47% 51% 53% ---------------------------------------------- Net Assets, End of Year (in millions) $136.9 $397.1 $282.9 $256.3 $158.5 ----------------------------------------------
1) The Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. C-45 (This page has been left blank intentionally.) C-46 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Trustees of Equity Managers Trust and Owners of Beneficial Interest of Neuberger Berman Manhattan Portfolio, Neuberger Berman Millennium Portfolio, and Neuberger Berman Socially Responsive Portfolio In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Neuberger Berman Manhattan Portfolio, Neuberger Berman Millennium Portfolio, and Neuberger Berman Socially Responsive Portfolio (collectively, the "Portfolios") at August 31, 2000, the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Portfolios' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2000 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts October 9, 2000 C-47 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS To the Board of Trustees Equity Managers Trust and Owners of Beneficial Interest of Neuberger Berman Focus Portfolio Neuberger Berman Genesis Portfolio Neuberger Berman Guardian Portfolio and Neuberger Berman Partners Portfolio We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the Neuberger Berman Focus Portfolio, Neuberger Berman Genesis Portfolio, Neuberger Berman Guardian Portfolio, and Neuberger Berman Partners Portfolio, four of the series constituting Equity Managers Trust (the "Trust"), as of August 31, 2000, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2000, by correspondence with the custodian and brokers or other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the above mentioned series of Equity Managers Trust at August 31, 2000, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States. Boston, Massachusetts /s/ ERNST & YOUNG LLP October 2, 2000 C-48 OTHER INFORMATION DIRECTORY INVESTMENT MANAGER, ADMINISTRATOR AND DISTRIBUTOR Neuberger Berman Management Inc. 605 Third Avenue 2nd Floor New York, NY 10158-0180 800.877.9700 or 212.476.8800 Institutional Services 800.366.6264 SUB-ADVISER Neuberger Berman, LLC 605 Third Avenue New York, NY 10158-3698 CUSTODIAN AND SHAREHOLDER SERVICING AGENT State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 ADDRESS CORRESPONDENCE TO: Neuberger Berman Funds Institutional Services 605 Third Avenue 2nd Floor New York, NY 10158-0180 LEGAL COUNSEL Kirkpatrick & Lockhart LLP 1800 Massachusetts Avenue, NW 2nd Floor Washington, DC 20036-1800 INDEPENDENT ACCOUNTANTS/AUDITORS PricewaterhouseCoopers LLP 160 Federal Street Boston, MA 02110 Ernst & Young LLP 200 Clarendon Street Boston, MA 02116 OFFICERS AND TRUSTEES Peter E. Sundman CHAIRMAN OF THE BOARD AND TRUSTEE Michael M. Kassen PRESIDENT AND TRUSTEE Faith Colish TRUSTEE Howard A. Mileaf TRUSTEE Edward I. O'Brien TRUSTEE John P. Rosenthal TRUSTEE Cornelius T. Ryan TRUSTEE Gustave H. Shubert TRUSTEE Daniel J. Sullivan VICE PRESIDENT Richard Russell TREASURER Claudia A. Brandon SECRETARY Barbara DiGiorgio ASSISTANT TREASURER Celeste Wischerth ASSISTANT TREASURER Stacy Cooper-Shugrue ASSISTANT SECRETARY - -C- 2000 Neuberger Berman Management Inc. D-1 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 [GRAPHIC] A0087 10/00 Kirkpatrick & Lockhart 1800 Massachusetts Avenue, N.W. Washington, D.C. 20036 October 27, 2000 VIA EDGAR - --------- Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: NEUBERGER BERMAN EQUITY ASSETS: Neuberger Berman Focus Assets Neuberger Berman Genesis Assets Neuberger Berman Guardian Assets Neuberger Berman Manhattan Assets Neuberger Berman Millennium Assets Neuberger Berman Partners Assets Neuberger Berman Socially Responsive Assets 1933 Act File No. 33-82568 1940 ACT FILE NO. 811-8106 -------------------------- Dear Sir or Madam: Transmitted herewith for filing is the Annual Report to Shareholders of the above-referenced series of Neuberger Berman Equity Assets for the period ended August 31, 2000. This filing is being made pursuant to Section 30(b)(2) of the Investment Company Act of 1940, as amended, and Rule 30b2-1 thereunder. If you should have any questions regarding this filing, please contact the undersigned at (202) 778-9223. Sincerely, /s/ Fatima Sulaiman ------------------- Fatima Sulaiman Enclosures -----END PRIVACY-ENHANCED MESSAGE-----