485BPOS 1 wrapper.txt As filed with the Securities and Exchange Commission on December 20, 2006 1933 Act Registration No. 2-11357 1940 Act Registration No. 811-00582 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. [ ] [ ] Post-Effective Amendment No. [125] [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. [80] [X] (Check appropriate box or boxes) NEUBERGER BERMAN EQUITY FUNDS ----------------------------- (Exact Name of the Registrant as Specified in Charter) 605 Third Avenue, 2[nd] Floor New York, New York 10158-0180 (Address of Principal Executive Offices) Registrant's Telephone Number, including area code: (212) 476-8800 Peter E. Sundman, Chairman of the Board and Chief Executive Officer Neuberger Berman Equity Funds 605 Third Avenue, 2[nd] Floor New York, New York 10158-0180 Arthur C. Delibert, Esq. Kirkpatrick & Lockhart Nicholson Graham LLP 1601 K Street, N.W. Washington, D.C. 20006-1600 (Names and Addresses of agents for service) Approximate Date of Proposed Public Offering: Continuous It is proposed that this filing will become effective: X immediately upon filing pursuant to paragraph (b) --- ___ on _________________ pursuant to paragraph (b) ___ 60 days after filing pursuant to paragraph (a)(1) ___ on _________________ pursuant to paragraph (a)(1) ___ 75 days after filing pursuant to paragraph (a)(2) ___ on _________________ pursuant to paragraph (a)(2) Title of Securities being registered: Shares of Neuberger Berman International Institutional Fund and the Advisor Class of Neuberger Berman Fasciano Fund, Neuberger Berman Focus Fund, Neuberger Berman Genesis Fund, Neuberger Berman Guardian Fund, Neuberger Berman Manhattan Fund, Neuberger Berman Millennium Fund and Neuberger Berman Partners Fund; Institutional Class of Neuberger Berman All Cap Growth Fund, Neuberger Berman Fasciano Fund, Neuberger Berman Focus Fund, Neuberger Berman Genesis Fund, Neuberger Berman Guardian Fund, Neuberger Berman International Large Cap Fund, Neuberger Berman Manhattan Fund, Neuberger Berman Millennium Fund, Neuberger Berman Partners Fund, Neuberger Berman Real Estate Fund, Neuberger Berman Regency Fund and Neuberger Berman Socially Responsive Fund; Investor Class of Neuberger Berman Century Fund, Neuberger Berman Fasciano Fund, Neuberger Berman Focus Fund, Neuberger Berman Genesis Fund, Neuberger Berman Guardian Fund, Neuberger Berman International Fund, Neuberger Berman Manhattan Fund, Neuberger Berman Millennium Fund, Neuberger Berman Partners Fund, Neuberger Berman Regency Fund and Neuberger Berman Socially Responsive Fund; Trust Class of Neuberger Berman All Cap Growth Fund, Neuberger Berman Focus Fund, Neuberger Berman Genesis Fund, Neuberger Berman Guardian Fund, Neuberger Berman International Fund, Neuberger Berman International Large Cap Fund, Neuberger Berman Manhattan Fund, Neuberger Berman Millennium Fund, Neuberger Berman Partners Fund, Neuberger Berman Real Estate Fund Neuberger Berman Regency Fund and Neuberger Berman Socially Responsive Fund. NEUBERGER BERMAN EQUITY FUNDS CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 125 ON FORM N-1A This Post-Effective Amendment consists of the following papers and documents. Cover Sheet Contents of Post-Effective Amendment No. 125 on Form N-1A Part A - Prospectuses Part B -Statement of Additional Information Part C -Other Information Signature Pages Exhibits This filing is intended to affect only the Registration Statement of Neuberger Berman International Institutional Fund and the Advisor Class of Neuberger Berman Fasciano Fund, Neuberger Berman Focus Fund, Neuberger Berman Genesis Fund, Neuberger Berman Guardian Fund, Neuberger Berman Manhattan Fund, Neuberger Berman Millennium Fund and Neuberger Berman Partners Fund; Institutional Class of Neuberger Berman All Cap Growth Fund, Neuberger Berman Fasciano Fund, Neuberger Berman Focus Fund, Neuberger Berman Genesis Fund, Neuberger Berman Guardian Fund, Neuberger Berman International Large Cap Fund, Neuberger Berman Manhattan Fund, Neuberger Berman Millennium Fund, Neuberger Berman Partners Fund, Neuberger Berman Real Estate Fund, Neuberger Berman Regency Fund and Neuberger Berman Socially Responsive Fund; Investor Class of Neuberger Berman Century Fund, Neuberger Berman Fasciano Fund, Neuberger Berman Focus Fund, Neuberger Berman Genesis Fund, Neuberger Berman Guardian Fund, Neuberger Berman International Fund, Neuberger Berman Manhattan Fund, Neuberger Berman Millennium Fund, Neuberger Berman Partners Fund, Neuberger Berman Regency Fund and Neuberger Berman Socially Responsive Fund; Trust Class of Neuberger Berman All Cap Growth Fund, Neuberger Berman Focus Fund, Neuberger Berman Genesis Fund, Neuberger Berman Guardian Fund, Neuberger Berman International Fund, Neuberger Berman International Large Cap Fund, Neuberger Berman Manhattan Fund, Neuberger Berman Millennium Fund, Neuberger Berman Partners Fund, Neuberger Berman Real Estate Fund Neuberger Berman Regency Fund and Neuberger Berman Socially Responsive Fund. [GRAPHIC OMITTED] PROSPECTUS - DECEMBER 20, 2006 These securities, like the securities of all mutual funds, have not been approved or disapproved by the Securities and Exchange Commission, and the Securities and Exchange Commission has not determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. NEUBERGER BERMAN EQUITY FUNDS ADVISOR CLASS SHARES Fasciano Fund Focus Fund Genesis Fund Guardian Fund Manhattan Fund Millennium Fund Partners Fund Contents -------------------------------------------------------------------------------- EQUITY FUNDS Fasciano Fund................................................................2 Focus Fund...................................................................7 Genesis Fund................................................................12 Guardian Fund...............................................................18 Manhattan Fund..............................................................24 Millennium Fund.............................................................30 Partners Fund...............................................................36 YOUR INVESTMENT Maintaining Your Account....................................................41 Share Prices................................................................43 Distributions and Taxes.....................................................44 Market Timing Policy........................................................45 Portfolio Holdings Policy...................................................46 Fund Structure..............................................................46 THESE FUNDS: -- are designed for investors with long-term goals in mind -- offer you the opportunity to participate in financial markets through professionally managed portfolios -- also offer the opportunity to diversify your portfolio with Funds that invest using a value or a growth approach, or a combination of the two -- carry certain risks, including the risk that you could lose money if Fund shares, when you sell them, are worth less than what you originally paid. This prospectus discusses principal risks of investing in Fund shares. These and other risks are discussed in more detail in the Statement of Additional Information (see back cover) -- are mutual funds, not bank deposits, and are not guaranteed or insured by the FDIC or any other government agency -- normally invest at least 80% of net assets in equity securities The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman, LLC. "Neuberger Berman Management Inc." and the individual Fund names in this prospectus are either service marks or registered service marks of Neuberger Berman Management Inc.(c) 2006 Neuberger Berman Management Inc. All rights reserved. Neuberger Berman Ticker Symbol: NBFVX FASCIANO FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM CAPITAL GROWTH. THE PORTFOLIO MANAGER ALSO MAY CONSIDER A COMPANY'S POTENTIAL FOR CURRENT INCOME PRIOR TO SELECTING IT FOR THE FUND. To pursue this goal, the Fund invests mainly in common stocks of small-capitalization companies, which it defines as those with a total market value of no more than $1.5 billion at the time the Fund first invests in them. The Fund may continue to hold or add to a position in a stock after the issuer has grown beyond $1.5 billion. These stocks include securities having common stock characteristics, such as securities convertible into common stocks, and rights and warrants to purchase common stocks. The Portfolio Manager currently looks for companies with: -- strong business franchises that are likely to sustain long-term rates of earnings growth for a three to five year time horizon, and -- stock prices that the market has undervalued relative to the value of similar companies and that offer excellent potential to appreciate over a three to five year time horizon. In choosing companies that the Portfolio Manager believes are likely to achieve the Fund's objective, the Portfolio Manager also will consider the company's overall business qualities. These qualities include the company's profitability and cash flow, financial condition, insider ownership, and stock valuation. In selecting companies that the Portfolio Manager believes may have greater potential to appreciate in price, the Portfolio Manager will invest the Fund in smaller companies that are not closely followed by major Wall Street brokerage houses and large asset management firms. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] SMALL-CAP STOCKS HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE LAST 40 YEARS, SMALL-CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] GROWTH VS. VALUE INVESTING VALUE INVESTORS SEEK STOCKS TRADING AT BELOW MARKET AVERAGE PRICES BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES BEFORE OTHER INVESTORS DISCOVER THEIR WORTH. GROWTH INVESTORS SEEK COMPANIES THAT ARE ALREADY SUCCESSFUL BUT MAY NOT HAVE REACHED THEIR FULL POTENTIAL. THE FUND'S BLENDED INVESTMENT APPROACH SEEKS TO LOWER RISK BY DIVERSIFYING ACROSS COMPANIES AND INDUSTRIES WITH GROWTH AND VALUE CHARACTERISTICS, AND CAN PROVIDE A CORE SMALL-CAP FOUNDATION WITHIN A DIVERSIFIED PORTFOLIO. 2 Fasciano Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. The stocks of smaller companies in which the Fund invests are often more volatile and less liquid than the stocks of larger companies, and these companies: -- may have a shorter history of operations than larger companies; -- may not have as great an ability to raise additional capital; -- may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also: -- underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor; -- be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. The Fund will combine value and growth styles of investing. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund may at times invest a portion of its assets in mid-cap stocks. For a discussion of the risks associated with mid-cap stocks, see the Appendix. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 3 Fasciano Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. [GRAPHIC OMITTED] YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 26.54 21.51 7.19 6.16 1.70 4.46 -9.00 29.07 12.14 2.29 BEST QUARTER: Q2 '03, 19.20% WORST QUARTER: Q3 '98, -13.41% Year-to-date performance as of 9/30/2006: -1.16% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- FASCIANO FUND Return Before Taxes 2.29 7.07 9.62 Return After Taxes on Distributions 1.73 6.67 9.02 Return After Taxes on Distributions and Sale of Fund Shares 2.24 6.03 8.28 Russell Index 2000 4.55 8.22 9.26 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The Russell 2000 Index is an unmanaged index of U.S. small- cap stocks. -------------------------------------------------------------------------------- * The year-by-year and average annual total return data for the periods prior to 3/24/2001 are those of Neuberger Berman Fasciano Fund's predecessor, Fasciano Fund, Inc. Performance from the beginning of the measurement period above to 5/2002 is that of Fasciano Fund Investor Class. Because Investor Class has moderately lower expenses, its performance typically would have been slightly better than that of the Advisor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. 4 Fasciano Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 1.25 Distribution (12b-1) fees 0.25 Other expenses 0.15 -------------------------------------------------------------------------------- Total annual operating expenses 1.65 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $168 $520 $897 $1,955 -------------------------------------------------------------------------------- * Neuberger Berman Management Inc. (NBMI) has voluntarily agreed to reimburse certain expenses of the Advisor Class of the Fund, so that the total annual operating expenses of that class are limited to 1.50% Of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. NBMI may, at its sole discretion, terminate this voluntary commitment with notice to the Fund. The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 1.24% of average net assets before reimbursements. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER MICHAEL FASCIANO is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC and has managed the Fund's assets since its inception. Prior to joining Neuberger Berman, he managed Fasciano Fund, Inc. from its inception in 1988 to 2001. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 5 Fasciano Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002(1) 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 10.00 8.38 9.45 10.60 11.63 PLUS: Income from investment operations Net investment loss (0.03) (0.09) (0.09) (0.05) (0.07) Net gains (losses) - realized and unrealized (1.59) 1.16 1.29 1.44 (0.06) Subtotal: income from investment operations (1.62) 1.07 1.20 1.39 (0.13) MINUS: Distributions to shareholders Capital gain distributions - - 0.05 0.36 0.43 EQUALS: Share price (NAV) at end of year 8.38 9.45 10.60 11.63 11.07 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense reimbursement/repayment and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.90(2) 1.83 1.56 1.49 1.49 Gross expenses(3) 4.58(2) 1.75 1.73 1.67 1.65 Expenses(4) 1.90(2) 1.83 1.56 1.50 1.50 Net investment loss - actual (1.04)(2) (1.03) (0.85) (0.41) (0.57) ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(5) (16.20)(6) 12.77 12.73 13.20 (1.25) Net assets at end of year (in millions of dollars) 0.9 13.9 18.5 30.7 33.4 Portfolio turnover rate (%) 24(6) 24 17 22 39 ------------------------------------------------------------------------------------------------------------------------------------ The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Period from 5/24/2002 (beginning of operations) to 8/31/2002. (2) Annualized. (3) Shows what this ratio would have been if there had been no expense reimbursement/repayment and/or waiver of a portion of investment management fees. (4) Shows what this ratio would have been if there had been no expense offset arrangements. (5) Would have been lower/higher if Neuberger Berman Management had not reimbursed/recouped certain expenses and/or waived a portion of investment management fees. (6) Not annualized. 6 Fasciano Fund
Neuberger Berman Ticker Symbol: NBFAX FOCUS FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of companies of any size that fall within the following sectors: -- autos and housing -- consumer goods and services -- defense and aerospace -- energy -- financial services -- health care -- heavy industry -- machinery and equipment -- media and entertainment -- retailing -- technology -- transportation -- utilities At any given time, the Fund intends to place most of its assets in those sectors that the Portfolio Manager believes are undervalued. The Fund generally invests at least 90% of its net assets in no more than six sectors and may invest 50% or more of its assets in any one sector. The Portfolio Manager looks for undervalued companies. Factors in identifying these firms may include above-average returns, an established market niche, and sound future business prospects. This approach is designed to let the Fund benefit from potential increases in stock prices, while limiting the risks typically associated with investing in a small number of sectors. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] INDUSTRY SECTORS THE ECONOMY IS DIVIDED INTO SECTORS, EACH MADE UP OF RELATED INDUSTRIES. BY FOCUSING ON SEVERAL SECTORS AT A TIME, THE FUND CAN ADD A MEASURE OF DIVERSIFICATION AND STILL PURSUE THE PERFORMANCE POTENTIAL OF INDIVIDUAL SECTORS. TO THE EXTENT THE FUND INVESTS MORE HEAVILY IN ONE SECTOR, IT THEREBY PRESENTS A MORE CONCENTRATED RISK. A SECTOR MAY HAVE ABOVE AVERAGE PERFORMANCE DURING PARTICULAR PERIODS, BUT INDIVIDUAL SECTORS ALSO TEND TO MOVE UP AND DOWN MORE THAN THE BROADER MARKET. ALTHOUGH THE FUND DOES NOT INVEST MORE THAN 25% OF TOTAL ASSETS IN ANY ONE INDUSTRY, THE SEVERAL INDUSTRIES THAT COMPRISE A SECTOR MAY ALL REACT IN THE SAME WAY TO ECONOMIC, POLITICAL AND REGULATORY EVENTS. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 7 Focus Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Because the Fund typically focuses on a few sectors at a time, its performance is likely to be disproportionately affected by the factors influencing those sectors. To the extent the Fund invests more heavily in one sector, the risks of that sector are magnified. (See the Appendix for a discussion of sector-specific risks.) To the extent that the Fund emphasizes a particular market capitalization, it takes on the associated risks. Mid- and small-cap stocks tend to be more volatile than large-cap stocks. At any given time, any one of these market capitalizations may be out of favor with investors. If the Fund emphasizes that market capitalization, it could perform worse than certain other funds. The Fund is non-diversified. This means that the percentage of the Fund's assets invested in any single issuer is not limited by the Investment Company Act of 1940. Investing a higher percentage of its assets in any one issuer would increase the Fund's risk of loss, because the value of its shares would be more susceptible to adverse events affecting that issuer. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 8 Focus Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. [GRAPHIC OMITTED] YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 16.10 23.42 17.56 24.86 12.38 -7.18 -36.67 64.23 4.62 -0.39 BEST QUARTER: Q4 '98, 40.19% WORST QUARTER: Q3 '02, -31.95% Year-to-date performance as of 9/30/2006: 7.51% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- FOCUS FUND Return Before Taxes -0.39 0.12 9.05 Return After Taxes on Distributions -2.37 -0.56 8.32 Return After Taxes on Distributions and Sale of Fund Shares 2.44 0.02 7.80 Russell 1000 Value Index 7.05 5.28 10.94 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 1000 Value Index is an unmanaged index of U.S. mid- and large-cap value stocks. The S&P 500 Index is an unmanaged index of U.S. stocks. -------------------------------------------------------------------------------- * Through 12/15/2000, Focus Fund Advisor Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the period from 9/1996 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Focus Fund Advisor Class. Performance from the beginning of the measurement period above to 9/1996 is that of Focus Fund Investor Class. Because Investor Class has moderately lower expenses, its performance typically would have been slightly better than that of the Advisor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING MAINLY IN LARGE-CAP STOCKS PRIOR TO SEPTEMBER 1998, ITS PERFORMANCE DURING THAT TIME MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 9 Focus Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.90 Distribution (12b-1)fees 0.25 Other expenses 0.12 -------------------------------------------------------------------------------- Total annual operating expenses 1.27 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $129 $403 $697 $1,534 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.90% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER ROBERT B. CORMAN is a Vice President of Neuberger Berman Management Inc. and Managing Director of Neuberger Berman, LLC. He has been the Portfolio Manager of the Fund since October 2005. Previously, he co-managed the Fund's assets from November 2003 to September 2005. He held senior positions in portfolio management at four other firms since 1981. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 10 Focus Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002(1) 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 18.64 11.86 16.54 16.35 19.00 PLUS: Income from investment operations Net investment income (loss) (0.06) (0.02) (0.02) 0.04 0.00 Net gains (losses) - realized and unrealized (5.48) 4.70 (0.17) 2.61 1.15 Subtotal: income from investment operations (5.54) 4.68 (0.19) 2.65 1.15 MINUS: Distributions to shareholders Capital gain distributions 1.24 - - - 2.58 Subtotal: distributions to shareholders 1.24 - - - 2.58 EQUALS: Share price (NAV) at end of year 11.86 16.54 16.35 19.00 17.57 ---------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.28 1.31 1.21 1.23 1.26 Gross expenses(1) - - 1.22 1.23 1.26 Expenses(2) 1.28 1.31 1.22 1.24 1.27 Net investment loss - actual (0.37) (0.19) (0.13) 0.20 (0.03) ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (31.83) 39.46 (1.15)(3) 16.21(3) 6.62(3) Net assets at end of year (in millions of dollars) 15.8 26.9 41.7 35.3 28.1 Portfolio turnover rate (%) 25 24 27 19 41 ------------------------------------------------------------------------------------------------------------------------------------ The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 11 Focus Fund
Neuberger Berman Ticker Symbol: NBGAX GENESIS FUND -------------------------------------------------------------------------------- This Fund is closed to new investors. [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of small-capitalization companies, which it defines as those with a total market value of no more than $1.5 billion at the time the Fund first invests in them. The Fund may continue to hold or add to a position in a stock after the issuer has grown beyond $1.5 billion. The Fund seeks to reduce risk by diversifying among many companies and industries. The Portfolio Managers look for undervalued companies whose current product lines and balance sheets are strong. Factors in identifying these firms may include: -- above-average returns -- an established market niche -- circumstances that would make it difficult for new competitors to enter the market -- the ability to finance their own growth -- sound future business prospects. This approach is designed to let the Fund benefit from potential increases in stock prices, while limiting the risks typically associated with small-cap stocks. At times, the Portfolio Managers may emphasize certain sectors that they believe will benefit from market or economic trends. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] SMALL-CAP STOCKS HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE LAST 40 YEARS, SMALL-CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 12 Genesis Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Stock prices of many smaller companies are based on future expectations. The Portfolio Managers tend to focus on companies whose financial strength is largely based on existing business lines rather than projected growth. While this can help reduce risk, the Fund is still subject to many of the risks of small-cap investing. The stocks of smaller companies in which the Fund invests are often more volatile and less liquid than the stocks of larger companies, and these companies: -- may have a shorter history of operations than larger companies; -- may not have as great an ability to raise additional capital; -- may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also: -- underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor; -- be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund may at times invest a portion of its assets in mid-cap stocks. For a discussion of the risks associated with mid-cap stocks, see the Appendix. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 13 Genesis Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. [GRAPHIC OMITTED] YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 29.86 34.74 -7.21 3.78 32.21 11.75 -3.21 31.34 18.39 16.00 BEST QUARTER: Q3 '97, 20.28% WORST QUARTER: Q3 '98, -16.42% Year-to-date performance as of 9/30/2006: 0.67% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- GENESIS FUND Return Before Taxes 16.00 14.30 15.83 Return After Taxes on Distributions 15.62 13.94 15.25 Return After Taxes on Distributions and Sale of Fund Shares 10.92 12.45 14.04 Russell 2000 Index 4.55 8.22 9.26 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The Russell 2000 Index is an unmanaged index of U.S. small- cap stocks. -------------------------------------------------------------------------------- * Through 12/15/2000, Genesis Fund Advisor Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 4/1997 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Genesis Fund Advisor Class. Performance from the beginning of the measurement period above to 4/1997 is that of Genesis Fund Investor Class. Because Investor Class has moderately lower expenses, its performance typically would have been slightly better than that of the Advisor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. 14 Genesis Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 1.06 Distribution (12b-1) fees 0.25 Other expenses 0.04 -------------------------------------------------------------------------------- Total annual operating expenses 1.35 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $137 $428 $739 $1,624 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 1.06% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGERS JUDITH M. VALe AND ROBERT W. D'ALELIO are Vice Presidents of Neuberger Berman Management Inc. and Managing Directors of Neuberger Berman, LLC. Vale and D'Alelio have been senior members of the Small Cap Group since 1992 and 1996, respectively. Ms. Vale has co-managed the Fund's assets since 1994. Mr. D'Alelio joined the firm in 1996 and has co-managed the Fund's assets since 1997. MICHAEL L. BOWYER AND BRETT S. REINER are Vice Presidents of Neuberger Berman Management Inc. and Managing Directors of Neuberger Berman, LLC. Bowyer and Reiner have been members of the Small Cap Group since 2001 and 2003, respectively. Mr. Bowyer joined the firm in 1996 and Mr. Reiner in 2000. They are the Associate Portfolio Managers of the Fund. 15 Genesis Fund Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 16 Genesis Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------------ YEAR ENDED AUGUST 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 16.72 16.60 19.71 22.66 28.46 PLUS: Income from investment operations Net investment loss (0.06) (0.10) (0.15) (0.14) (0.14) Net gains (losses) - realized and unrealized 0.43 3.27 3.11 6.67 1.42 Subtotal: income from investment operations 0.37 3.17 2.96 6.53 1.28 MINUS: Distributions to shareholders Capital gain distributions 0.49 0.06 0.01 0.73 0.64 EQUALS: Share price (NAV) at end of year 16.60 19.71 22.66 28.46 29.10 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 1.39 1.37 1.35 1.35 1.34 Gross expenses(1) - - 1.36 1.35 1.35 Expenses(2) 1.39 1.37 1.36 1.35 1.35 Net investment loss - actual (0.33) (0.61) (0.68) (0.56) (0.47) ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities. Total return (%) 2.22 19.15 15.02(3) 29.31(3) 4.52(3) Net assets at end of year (in millions of dollars) 298.2 320.2 438.5 661.0 617.4 Portfolio turnover rate (%) 19 17 23 11 19 ------------------------------------------------------------------------------------------------------------------------------------ The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 17 Genesis Fund
Neuberger Berman Ticker Symbol: NBGUX GUARDIAN FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL; CURRENT INCOME IS A SECONDARY GOAL. To pursue these goals, the Fund invests mainly in common stocks of mid- to large-capitalization companies. The Fund seeks to reduce risk by investing across many different industries. The Portfolio Managers employ a research driven and valuation sensitive approach to stock selection. They seek to identify stocks in well-positioned businesses that they believe are undervalued in the market. They look for solid balance sheets, strong management teams with a track record of success, good cash flow, the prospect for above average earnings growth, and other valuation-related factors. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, when the company's business fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID- AND LARGE-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY PERFORMED MORE LIKE SMALL-CAPS THAN LIKE LARGE-CAPS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER ATTRACTIVE LONG-TERM RETURNS. LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. COMPARED TO MID-CAP COMPANIES, THEY MAY BE LESS RESPONSIVE TO CHANGE, BUT THEIR RETURNS HAVE SOMETIMES LED THOSE OF MID-CAP COMPANIES, OFTEN WITH LOWER VOLATILITY. [GRAPHIC OMITTED] VALUATION SENSITIVE INVESTING In addition to traditional value investing - i.e., looking for value among companies whose stock prices are below their historic average, based on earnings, cash flow, or other financial measures - we may also buy a company's shares if they look more fully priced based on Wall Street consensus estimates of earnings, but still inexpensive relative to our estimates. We look for these companies to rise in price as they outperform Wall Street's expectations, because some aspects of the business has not been fully appreciated or appropriately priced by other investors. 18 Guardian Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. To the extent that the Fund emphasizes mid- or large-cap stocks, it takes on the associated risks. Mid-cap stocks tend to be more volatile than large-cap stocks and are usually more sensitive to economic, political, regulatory and market factors. At any given time, one or both groups of stocks may be out of favor with investors. With a valuation sensitive approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 19 Guardian Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. [GRAPHIC OMITTED] YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 17.59 17.10 1.67 7.64 -2.43 -2.24 -26.06 34.67 15.46 7.75 BEST QUARTER: Q4 '98, 22.98% WORST QUARTER: Q3 '98, -26.34% Year-to-date performance as of 9/30/2006: 5.43% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- GUARDIAN FUND Return Before Taxes 7.75 3.90 5.94 Return After Taxes on Distributions 7.75 3.81 5.72 Return After Taxes on Distributions and Sale of Fund Shares 5.04 3.29 5.11 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The S&P 500 Index is an unmanaged index of U.S. stocks. -------------------------------------------------------------------------------- * Through 12/15/2000, Guardian Fund Advisor Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 9/1996 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Guardian Fund Advisor Class. Performance from the beginning of the measurement period above to 9/1996 is that of Guardian Fund Investor Class. Because Investor Class has moderately lower expenses, its performance typically would have been slightly better than that of the Advisor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING MAINLY IN LARGE-CAP STOCKS PRIOR TO DECEMBER 2002, ITS PERFORMANCE DURING THOSE TIMES MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 20 Guardian Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.89 Distribution (12b-1) fees 0.25 Other expenses 2.00 -------------------------------------------------------------------------------- Total annual operating expenses 3.14 -------------------------------------------------------------------------------- Minus: Expense reimbursement 1.64 -------------------------------------------------------------------------------- Net Expenses 1.50 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $153 $474 $818 $1,791 -------------------------------------------------------------------------------- * Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Advisor Class of the Fund through 8/31/2017, so that the total annual operating expenses of that class are limited to 1.50% Of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Advisor Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 1.50% Of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.89% of average net assets before reimbursements. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 21 Guardian Fund PORTFOLIO MANAGERS ARTHUR MORETTI is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. Mr. Moretti joined each firm in 2001 and has managed the Fund since December 2002. He was a portfolio manager and fund analyst at two other firms since 1991. INGRID S. DYOTT is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. She has been an Associate Manager of the Fund since December 2003 and has been a Portfolio Manager at Neuberger Berman since 1997. SAJJAD S. LADIWALA is a Vice President of Neuberger Berman Management Inc. and Neuberger Berman, LLC. He has been an Associate Manager of the Fund since December 2003. He held various positions as a financial analyst at two other firms since 1994. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 22 Guardian Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------------ YEAR ENDED AUGUST 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 12.75 10.29 11.48 12.83 15.49 PLUS: Income from investment operations Net investment income (loss) 0.06 - (0.01) (0.04) (0.02) Net gains (losses) - realized and unrealized (2.47) 1.25 1.36 2.70 1.01 Subtotal: income from investment operations (2.41) 1.25 1.35 2.66 0.99 MINUS: Distributions to shareholders Income dividends 0.05 0.05 - - - Tax return of capital - 0.01 - - - Subtotal: distributions to shareholders 0.05 0.06 - - - EQUALS: Share price (NAV) at end of year 10.29 11.48 12.83 15.49 16.48 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 1.24 1.31 1.30 1.50 1.49 Gross expenses(1) - - 1.31 1.68 3.13 Expenses(2) 1.24 1.31 1.31 1.50 1.50 Net investment income (loss) - actual 0.48 0.05 (0.09) (0.28) (0.12) ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (18.95) 12.21 11.76(3) 20.73(3) 6.39(3) Net assets at end of year (in millions of dollars) 17.0 16.6 6.7 0.6 1.3 Portfolio turnover rate (%) 85 113 25 20 34 ------------------------------------------------------------------------------------------------------------------------------------ The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. 23 Guardian Fund
Neuberger Berman Ticker Symbol: NBMBX MANHATTAN FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of mid-capitalization companies, which it defines as those with a total market capitalization within the market capitalization range of the Russell Midcap Index. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Manager employs a disciplined investment strategy when selecting growth stocks. Using fundamental research and quantitative analysis, he looks for fast-growing companies with above average sales and competitive returns on equity relative to their peers. In doing so, the Portfolio Manager analyzes such factors as: -- financial condition (such as debt to equity ratio) -- market share and competitive leadership of the company's products -- earnings growth relative to competitors -- market valuation in comparison to a stock's own historical norms and the stocks of other mid-cap companies. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY SHOWN RISK/RETURN CHARACTERISTICS THAT ARE IN BETWEEN THOSE OF SMALL- AND LARGE-CAP STOCKS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER COMPARATIVELY ATTRACTIVE LONG-TERM RETURNS. MID-CAPS ARE LESS WIDELY FOLLOWED IN THE MARKET THAN LARGE-CAPS, WHICH CAN MAKE IT COMPARATIVELY EASIER TO FIND ATTRACTIVE STOCKS THAT ARE NOT OVERPRICED. [GRAPHIC OMITTED] GROWTH INVESTING FOR GROWTH INVESTORS, THE AIM IS TO INVEST IN COMPANIES THAT ARE ALREADY SUCCESSFUL BUT COULD BE EVEN MORE SO. OFTEN, THESE STOCKS ARE IN EMERGING OR RAPIDLY GROWING INDUSTRIES. ACCORDINGLY, THE FUND AT TIMES MAY INVEST A GREATER PORTION OF ITS ASSETS IN PARTICULAR INDUSTRIES OR SECTORS THAN OTHER FUNDS DO. WHILE MOST GROWTH STOCKS ARE KNOWN TO INVESTORS, THEY MAY NOT YET HAVE REACHED THEIR FULL POTENTIAL. THE GROWTH INVESTOR LOOKS FOR INDICATIONS OF CONTINUED SUCCESS. 24 Manhattan Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. By focusing on mid-cap stocks, the Fund is subject to their risks, including the risk its holdings may: -- fluctuate more widely in price than the market as a whole -- underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when mid-cap stocks are out of favor. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 25 Manhattan Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. [GRAPHIC OMITTED] YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 9.60 28.58 15.75 49.27 -12.00 -30.16 -31.39 29.96 15.37 12.87 BEST QUARTER: Q4 '99, 48.35% WORST QUARTER: Q3 '01, -30.13% Year-to-date performance as of 9/30/2006: 5.42% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- MANHATTAN FUND Return Before Taxes 12.87 -4.10 5.68 Return After Taxes on Distributions 12.87 -4.13 4.89 Return After Taxes on Distributions and Sale of Fund Shares 8.37 -3.45 4.73 Russell Midcap Growth 12.10 1.38 9.27 Index Russell Midcap Index 12.65 8.45 12.49 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell Midcap Growth Index is an unmanaged index of U.S. mid-cap growth stocks. The Russell Midcap Index is an unmanaged index of U.S. mid- cap stocks. -------------------------------------------------------------------------------- * Through 12/15/2000, Manhattan Fund Advisor Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 9/1996 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Manhattan Fund Advisor Class. Performance from the beginning of the measurement period above to 9/1996 is that of Manhattan Fund Investor Class. Because Investor Class has moderately lower expenses, its performance typically would have been slightly better than that of the Advisor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING IN STOCKS OF ALL CAPITALIZATIONS AND USED A COMPARATIVELY MORE VALUE-ORIENTED INVESTMENT APPROACH PRIOR TO JULY 1997, ITS PERFORMANCE MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 26 Manhattan Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE SHAREHOLDER FEES None ------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.94 Distribution (12b-1) fees 0.25 Other expenses 1.67 ------------------------------------------------------------------------------- Total annual operating expenses 2.86 ------------------------------------------------------------------------------- Minus: Expense reimbursement 1.36 ------------------------------------------------------------------------------- Net expenses 1.50 ------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. 1 Year 3 Years 5 Years 10 Years --------------------------------------------------------- Expenses $153 $474 $818 $1,791 * Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Advisor Class of the Fund through 8/31/2017, so that the total annual operating expenses of that class are limited to 1.50% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Advisor Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 1.50% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.94% of average net assets before reimbursements. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 27 Manhattan Fund PORTFOLIO MANAGER KENNETH J. TUREK, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed or co-managed two equity mutual funds and other equity portfolios for several other investment managers since 1985. Mr. Turek has managed the Fund since January 2003. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 28 Manhattan Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
----------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 10.77 7.61 9.00 9.40 11.88 PLUS: Income from investment operations Net investment loss (0.11) (0.09) (0.10) (0.11) (0.10) Net gains (losses) - realized and unrealized (2.97) 1.48 0.50 2.59 1.18 Subtotal: income from investment operations (3.08) 1.39 0.40 2.48 1.08 MINUS: Distributions to shareholders Capital gain distributions 0.08 - - - - Subtotal: distributions to shareholders 0.08 - - - - EQUALS: Share price (NAV) at end of year 7.61 9.00 9.40 11.88 12.96 ----------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.50 1.50 1.48 1.49 1.49 Gross expenses(1) 2.25 2.26 2.14 2.87 2.85 Expenses(2) 1.50 1.50 1.50 1.50 1.50 Net investment loss - actual (1.14) (1.16) (1.05) (1.08) (0.80) ----------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(3) (28.81) 18.27 4.44 26.38 9.09 Net assets at end of year (in millions of dollars) 1.8 2.2 2.1 1.1 0.8 Portfolio turnover rate (%) 98 145 102 65 45
All figures for fiscal years 2002 and 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm for those years. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. 29 Manhattan Fund Neuberger Berman Ticker Symbol: NBMVX MILLENNIUM FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of small- capitalization companies, which it defines as those with a total market value of no more than $2 billion at the time the Fund first invests in them. The Fund may continue to hold or add to a position in a stock after the issuer has grown beyond $2 billion. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Manager employs a disciplined investment strategy when selecting growth stocks. Using fundamental research and quantitive analysis, he looks for fast-growing companies with above average sales and competitive returns on equity relative to their peers. In doing so, the Portfolio Manager analyzes such factors as: -- financial condition (such as debt to equity ratio) -- market share and competitive leadership of the company's products -- earnings growth relative to competitors -- market valuation in comparison to a stock's own historical norms and the stocks of other small-cap companies. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] SMALL-CAP STOCKS HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE LAST 40 YEARS, SMALL-CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] GROWTH INVESTING FOR GROWTH INVESTORS, THE AIM IS TO INVEST IN COMPANIES THAT ARE ALREADY SUCCESSFUL BUT COULD BE EVEN MORE SO. OFTEN, THESE STOCKS ARE IN EMERGING OR RAPIDLY GROWING INDUSTRIES. ACCORDINGLY, THE FUND AT TIMES MAY INVEST A GREATER PORTION OF ITS ASSETS IN PARTICULAR INDUSTRIES OR SECTORS THAN OTHER FUNDS DO. WHILE MOST GROWTH STOCKS ARE KNOWN TO INVESTORS, THEY MAY NOT YET HAVE REACHED THEIR FULL POTENTIAL. THE GROWTH INVESTOR LOOKS FOR INDICATIONS OF CONTINUED SUCCESS. 30 Millennium Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. The stocks of smaller companies in which the Fund invests are often more volatile and less liquid than the stocks of larger companies, and these companies: -- may have a shorter history of operations than larger companies; -- may not have as great an ability to raise additional capital; -- may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also: -- underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor; -- be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. The Fund may at times invest a portion of its assets in mid-cap stocks. For a discussion of the risks associated with mid-cap stocks, see the Appendix. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 31 Millennium Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* ------------------------------------------------- [GRAPHIC OMITTED] 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 ---------------------------------------------------------------------- 130.49 -28.68 -14.47 -44.45 33.44 16.08 15.07 BEST QUARTER: Q4 '99, 72.95% WORST QUARTER: Q3 '01, -27.89% Year-to-date performance as of 9/30/2006: -0.62% AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* ----------------------------------------------------- Since Inception 1 Year 5 Years (10/20/1998) ------------------------------------------------------ MILLENNIUM FUND Return Before Taxes 15.07 -3.27 10.94 Return After Taxes on Distriutions 15.07 -3.27 9.28 Return After Taxes on Distributions and Sale of Fund Shares 9.80 -2.75 8.74 Russell 2000 Growth Index 4.15 2.28 6.62 Russell 2000 Index 4.55 8.22 10.81 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 2000 Growth Index is an unmanaged index of U.S. small-cap growth stocks. The Russell 2000 Index is an unmanaged index of U.S. small- cap stocks. * Performance from the beginning of the measurement period above to 5/2002 is that of Millennium Fund Investor Class. Because Investor Class has moderately lower expenses, its performance typically would have been slightly better than that of the Advisor Class. PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN THE FUND AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. SMALL-CAP EQUITY MARKET AND OF THE PORTION OF THAT MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. 32 Millennium Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 1.25 Distribution (12b-1) fees 0.25 Other expenses 1.77 -------------------------------------------------------------------------------- Total annual operating expenses 3.27 -------------------------------------------------------------------------------- Minus: Expense reimbursement 1.67 -------------------------------------------------------------------------------- Net expenses 1.60 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $163 $505 $871 $1,900 -------------------------------------------------------------------------------- * Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Advisor Class of the Fund through 8/31/2017, so that the total annual operating expenses of that class are limited to 1.60% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Advisor Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 1.60% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. The figures in the table are based on last year's expenses except for the expense reimbursement, which has been restated to reflect the current contractual fee cap since it was reduced during the last year. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 1.25% of average net assets before reimbursements. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 33 Millennium Fund PORTFOLIO MANAGER DAVID H. BURSHTAN, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed two equity mutual funds and other equity portfolios for another investment manager from 1999-2002. Prior to 1999, he managed small-cap portfolios for another manager. Mr. Burshtan has managed the Fund since January 2003. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 34 Millennium Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED)
------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002(1) 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 10.00 6.92 8.04 7.92 10.49 PLUS: Income from investment operations Net investment loss (0.04) (0.09) (0.11) (0.15) (0.16) Net gains (losses) - realized and unrealized (3.04) 1.21 (0.01) 2.72 0.74 Subtotal: income from investment operations (3.08) 1.12 (0.12) 2.57 0.58 EQUALS: Share price (NAV) at end of year 6.92 8.04 7.92 10.49 11.07 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.90(2) 1.90 1.86 1.86 1.74 Gross expenses(3) 7.42(2) 4.27 6.28 4.58 3.24 Expenses(4) 1.90(2) 1.90 1.90 1.90 1.77 Net investment loss - actual (1.28)(2) (1.25) (1.36) (1.62) (1.36) ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(5) (30.80)(6) 16.18 (1.49) 32.45 5.53 Net assets at end of year (in millions of dollars) 0.2 0.8 0.5 1.0 2.2 Portfolio turnover rate (%) 1.26(7) 241 146 204 142 ------------------------------------------------------------------------------------------------------------------------------------
The figures above for fiscal years 2002 and 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm for those years. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Period from 5/3/2002 (beginning of operations) to 8/31/2002. (2) Annualized. (3) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (4) Shows what this ratio would have been if there had been no expense offset arrangements. (5) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. (6) Not annualized. (7) Portfolio turnover is calculated at the Fund Level. Percentage indicated was calculated for the year ended August 31, 2002. 35 Millennium Fund Neuberger Berman Ticker Symbol: NBPBX PARTNERS FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of mid- to large-capitalization companies. The Fund seeks to reduce risk by diversifying among many companies and industries. The Portfolio Manager looks for well-managed companies with strong balance sheets whose stock prices are undervalued. Factors in identifying these firms may include: -- historical low valuation -- strong fundamentals, such as a company's financial, operational, and competitive positions -- relatively high operating profit margins and returns. The Portfolio Manager may also look for other characteristics in a company, such as a strong market position relative to competitors, a high level of stock ownership among management, and a recent sharp decline in stock price that appears to be the result of a short-term market overreaction to negative news. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID- AND LARGE-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY PERFORMED MORE LIKE SMALL-CAPS THAN LIKE LARGE-CAPS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER ATTRACTIVE LONG-TERM RETURNS. LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. COMPARED TO MID-CAP COMPANIES, THEY MAY BE LESS RESPONSIVE TO CHANGE, BUT THEIR RETURNS HAVE SOMETIMES LED THOSE OF MID-CAP COMPANIES, OFTEN WITH LOWER VOLATILITY. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 36 Partners Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. To the extent that the Fund emphasizes mid- or large-cap stocks, it takes on the associated risks. Mid-cap stocks tend to be more volatile than large-cap stocks and are usually more sensitive to economic, political, regulatory and market factors. At any given time, one or both groups of stocks may be out of favor with investors. The Fund's value investing approach may dictate an emphasis on certain sectors of the market at any given time. To the extent the Fund invests more heavily in one sector, it thereby presents a more concentrated risk. A sector may have above average performance during particular periods, but individual sectors also tend to move up and down more than the broader market. The several industries that comprise a sector may all react in the same way to economic, political and regulatory events. The Fund's performance may also suffer if a sector does not perform as expected. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 37 Partners Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- [GRAPHIC OMITTED] 26.27 28.44 5.59 7.28 0.04 -3.48 -25.07 35.38 18.67 17.60 BEST QUARTER: Q2 '03, 20.33% WORST QUARTER: Q3 '02, -21.46% Year-to-date performance as of 9/30/2006: -1.38% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- PARTNERS FUND Return Before Taxes 17.60 6.44 9.65 Return After Taxes on Distributions 16.82 6.21 9.15 Return After Taxes on Distributions and Sale of Fund Shares 12.49 5.54 8.37 Russell 1000 Value Index 7.05 5.28 10.94 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 1000 Value Index is an unmanaged index of U.S. mid- and large-cap value stocks. The S&P 500 Index is an unmanaged index of U.S. stocks. -------------------------------------------------------------------------------- * Through 12/15/2000, Partners Fund Advisor Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 8/1996 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Partners Fund Advisor Class. Performance from the beginning of the measurement period above to 8/1996 is that of Partners Fund Investor Class. Because Investor Class has moderately lower expenses, its performance typically would have been slightly better than that of the Advisor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. 38 Partners Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.85 Distribution (12b-1) fees 0.25 Other expenses 0.05 -------------------------------------------------------------------------------- Total annual operating expenses 1.15 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $117 $365 $633 $1,398 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.85% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER S. BASU MULLICK is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. He has been a fund manager at Neuberger Berman Management Inc. and has managed the Fund since 1998. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 39 Partners Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
----------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 13.72 11.14 12.82 14.23 19.01 PLUS: Income from investment operations Net investment income (loss) (0.02) (0.03) 0.03 0.07 0.10 Net gains (losses) - realized and unrealized (2.31) 1.71 1.38 4.77 0.94 Subtotal: income from investment operations (2.33) 1.68 1.41 4.84 1.04 MINUS: Distributions to shareholders Income dividends - - - 0.06 0.01 Capital gain distributions 0.25 - - - 0.86 Subtotal: distributions to shareholders 0.25 - - 0.06 0.87 EQUALS: Share price (NAV) at end of year 11.14 12.82 14.23 19.01 19.18 ----------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 1.22 1.26 1.24 1.23 1.14 Gross expenses(1) - - 1.24 1.23 1.15 Expenses(2) 1.22 1.26 1.26 1.25 1.15 Net investment loss - actual (0.19) (0.28) 0.25 0.40 0.52 ----------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (17.29) 15.08 11.00(3) 34.04(3) 5.56(3) Net assets at end of year (in millions of dollars) 29.9 30.0 13.7 85.6 605.0 Portfolio turnover rate (%) 53 65 67 61 33 -----------------------------------------------------------------------------------------------------------------------------------
The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 40 Partners Fund NEUBERGER BERMAN YOUR INVESTMENT -------------------------------------------------------------------------------- -- MAINTAINING YOUR ACCOUNT To buy or sell Advisor Class shares described in this prospectus, contact your investment provider. All investments must be made in U.S. dollars, and investment checks must be drawn on a U.S. bank. The Funds do not issue certificates for shares. Most investment providers allow you to take advantage of the Neuberger Berman fund exchange program, which is designed for moving an investment from the Advisor Class of one Neuberger Berman fund to the Advisor Class of another through an exchange of shares. However, this privilege can be withdrawn from any investor that we believe is trying to "time the market" or is otherwise making exchanges that we judge to be excessive. Frequent exchanges can interfere with Fund management and affect costs and performance for other shareholders. Every buy or sell order will be processed at the next share price to be calculated after the order has been accepted. Purchase orders are deemed "accepted" when the Funds' transfer agent has received payment for the shares. Redemption orders are deemed "accepted" when the Funds' transfer agent has received the order to sell Fund shares. In the case of certain institutional investors, Neuberger Berman Management Inc. will process purchase orders when received, on the basis of a pre-existing arrangement to make payment by the following morning. In addition, if you have established a systematic investment program (SIP) with a Fund, your order is deemed "accepted" on the date you pre-selected on your SIP application for the systematic investments to occur. These policies apply to the investment providers who invest in the Fund. If you are buying shares through an investment provider, contact the investment provider for its policies. Under certain circumstances, the Funds reserve the right to: -- suspend the offering of shares -- reject any exchange or purchase order -- suspend or reject future purchase orders from any investor who does not provide payment to settle a purchase order -- change, suspend, or revoke the exchange privilege -- satisfy an order to sell Fund shares with securities rather than cash, for certain very large orders -- suspend or postpone your right to sell Fund shares on days when trading on the New York Stock Exchange (the "Exchange") is restricted, or as otherwise permitted by the Securities and Exchange Commission ("SEC") -- take orders to purchase or sell Fund shares when the Exchange is closed. In such a case, the Fund would post a notice on the Neuberger Berman website, www.nb.com PROCEEDS FROM THE SALE OF SHARES -- The proceeds from the shares you sell are generally sent out the next business day after your order is executed, and nearly always within seven business days. There are two cases in which proceeds may be delayed beyond this time: -- in unusual circumstances where the law allows additional time if needed -- if a check you wrote to buy shares has not cleared by the time you sell those shares; clearance may take up to 15 calendar days from the date of purchase. If you think you may need to sell shares soon after buying them, you can avoid the check clearing time by investing by wire. UNCASHED CHECKS -- When you receive a check, you may want to deposit or cash it right away, as you will not receive interest on uncashed checks. 41 Your Investment [GRAPHIC OMITTED] DISTRIBUTION AND SHAREHOLDER SERVICING FEES EACH FUND HAS ADOPTED A PLAN PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940. UNDER THE PLAN, EACH FUND'S ADVISOR CLASS PAYS THE FUND'S DISTRIBUTOR, NEUBERGER BERMAN MANAGEMENT INC., 0.25% OF ITS AVERAGE NET ASSETS EVERY YEAR TO COMPENSATE FINANCIAL INTERMEDIARIES FOR PROVIDING DISTRIBUTION RELATED SERVICES TO THE FUND AND/OR ADMINISTRATIVE OR SHAREHOLDER SERVICES TO FUND SHAREHOLDERS. NEUBERGER BERMAN MANAGEMENT INC. MAY ALSO RETAIN PART OF THIS FEE AS COMPENSATION FOR PROVIDING THESE SERVICES. THESE FEES INCREASE THE COST OF INVESTMENT. OVER THE LONG TERM, THEY COULD RESULT IN HIGHER OVERALL COSTS THAN OTHER TYPES OF SALES CHARGES. [GRAPHIC OMITTED] YOUR INVESTMENT PROVIDER THE ADVISOR CLASS SHARES DESCRIBED IN THIS PROSPECTUS ARE AVAILABLE ONLY THROUGH INVESTMENT PROVIDERS SUCH AS BANKS, BROKERAGE FIRMS, WORKPLACE RETIREMENT PROGRAMS, AND FINANCIAL ADVISERS. THE FEES AND POLICIES OUTLINED IN THIS PROSPECTUS ARE SET BY THE FUND AND BY NEUBERGER BERMAN MANAGEMENT INC. HOWEVER, MOST OF THE INFORMATION YOU WILL NEED FOR MANAGING YOUR INVESTMENT WILL COME FROM YOUR INVESTMENT PROVIDER. THIS INCLUDES INFORMATION ON HOW TO BUY AND SELL ADVISOR CLASS SHARES, INVESTOR SERVICES, AND ADDITIONAL POLICIES. IN EXCHANGE FOR THE SERVICES IT OFFERS, YOUR INVESTMENT PROVIDER MAY CHARGE FEES, WHICH ARE IN ADDITION TO THOSE DESCRIBED IN THIS PROSPECTUS. [GRAPHIC OMITTED] ADDITIONAL PAYMENTS TO INVESTMENT PROVIDERS NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES MAY PAY ADDITIONAL COMPENSATION, OUT OF THEIR OWN RESOURCES AND NOT AS AN EXPENSE OF THE FUNDS, TO YOUR INVESTMENT PROVIDER OR OTHER FINANCIAL INTERMEDIARIES, INCLUDING AFFILIATES, IN CONNECTION WITH THE SALE, DISTRIBUTION, RETENTION AND/OR SERVICING OF FUND SHARES. IN SOME CASES, THESE PAYMENTS MAY CREATE AN INCENTIVE FOR YOUR INVESTMENT PROVIDER OR ITS EMPLOYEES TO RECOMMEND OR SELL SHARES OF THE FUNDS TO YOU. IF YOU HAVE PURCHASED SHARES OF A FUND THROUGH AN INVESTMENT PROVIDER, PLEASE SPEAK WITH YOUR INVESTMENT PROVIDER TO LEARN MORE ABOUT ANY PAYMENTS IT RECEIVES FROM NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES, AS WELL AS FEES AND/ OR COMMISSIONS THE INVESTMENT PROVIDER CHARGES. YOU SHOULD ALSO CONSULT DISCLOSURES MADE BY YOUR INVESTMENT PROVIDER AT THE TIME OF PURCHASE. ANY SUCH PAYMENTS WILL NOT CHANGE THE NET ASSET VALUE OR THE PRICE OF EACH FUND'S SHARES. FOR MORE INFORMATION, PLEASE SEE THE FUNDS' STATEMENT OF ADDITIONAL INFORMATION. [GRAPHIC OMITTED] INFORMATION REQUIRED FROM NEW ACCOUNTS TO HELP THE U.S. GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHEN YOU OPEN AN ACCOUNT, WE (WHICH MAY INCLUDE YOUR INVESTMENT PROVIDER ACTING ON OUR BEHALF) WILL REQUIRE YOUR NAME, ADDRESS, DATE OF BIRTH, AND SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER. WE MAY ALSO REQUIRE OTHER IDENTIFYING DOCUMENTS. IF WE CANNOT VERIFY THE INFORMATION YOU SUPPLY TO US OR IF IT IS INCOMPLETE, WE MAY BE REQUIRED TO RETURN YOUR FUNDS OR REDEEM YOUR ACCOUNT. 42 Your Investment -- SHARE PRICES Because Advisor Class shares of the Funds do not have a sales charge, the price you pay for each share is the Fund's net asset value per share. Similarly, because the Funds do not charge fees for selling shares, your Fund pays you the full share price (net asset value) when you sell shares. Remember that your investment provider may charge fees for its services. The Funds are open for business every day the Exchange is open. The Exchange is closed on all national holidays and Good Friday; Fund shares will not be priced on those days or other days on which the Exchange is closed. Each Fund calculates its share price as of the end of regular trading on the Exchange on business days, usually 4:00 p.m. Eastern time. In general, every buy or sell order you place will go through at the next share price calculated after your order has been accepted (see "Maintaining Your Account" for information on placing orders). Check with your investment provider to find out by what time your order must be received so that it can be processed the same day. Depending on when your investment provider accepts orders, it is possible that a Fund's share price could change on days when you are unable to buy or sell shares. Because foreign markets may be open on days when U.S. markets are closed, the value of foreign securities owned by a Fund could change on days when you cannot buy or sell Fund shares. Remember, though, any purchase or sale takes place at the next share price calculated after your order is accepted. [GRAPHIC OMITTED] SHARE PRICE CALCULATIONS THE PRICE OF AN ADVISOR CLASS SHARE OF A FUND IS THE TOTAL VALUE OF THE FUND'S ASSETS ATTRIBUTABLE TO ADVISOR CLASS SHARES MINUS LIABILITIES ATTRIBUTABLE TO THAT CLASS, DIVIDED BY THE TOTAL NUMBER OF ADVISOR CLASS SHARES OUTSTANDING. BECAUSE THE VALUE OF A FUND'S SECURITIES CHANGES EVERY BUSINESS DAY, THE SHARE PRICE USUALLY CHANGES AS WELL. WHEN VALUING PORTFOLIO SECURITIES, THE FUNDS USE MARKET PRICES. HOWEVER, IN CERTAIN CASES, EVENTS THAT OCCUR AFTER CERTAIN MARKETS HAVE CLOSED MAY RENDER THESE PRICES UNRELIABLE. WHEN A FUND BELIEVES A REPORTED MARKET PRICE FOR A SECURITY DOES NOT REFLECT THE AMOUNT THE FUND WOULD RECEIVE ON A CURRENT SALE OF THAT SECURITY, THE FUND MAY SUBSTITUTE FOR THE MARKET PRICE A FAIR-VALUE ESTIMATE MADE ACCORDING TO METHODS APPROVED BY THE BOARD OF TRUSTEES. A FUND MAY ALSO USE THESE METHODS TO VALUE CERTAIN TYPES OF ILLIQUID SECURITIES. FAIR VALUE PRICING GENERALLY WILL BE USED IF THE EXCHANGE ON WHICH A PORTFOLIO SECURITY IS TRADED CLOSES EARLY OR IF TRADING IN A PARTICULAR SECURITY WAS HALTED DURING THE DAY AND DID NOT RESUME PRIOR TO A FUND'S NET ASSET VALUE CALCULATION. A FUND MAY ALSO USE THESE METHODS TO VALUE SECURITIES THAT TRADE IN A FOREIGN MARKET, IF SIGNIFICANT EVENTS THAT APPEAR LIKELY TO AFFECT THE VALUE OF THOSE SECURITIES OCCUR BETWEEN THE TIME THAT FOREIGN MARKET CLOSES AND THE TIME THE EXCHANGE CLOSES. SIGNIFICANT EVENTS MAY INCLUDE (1) THOSE IMPACTING A SINGLE ISSUER, (2) GOVERNMENTAL ACTIONS THAT AFFECT SECURITIES IN ONE SECTOR OR COUNTRY, (3) NATURAL DISASTERS OR ARMED CONFLICTS AFFECTING A COUNTRY OR REGION, OR (4) SIGNIFICANT DOMESTIC OR FOREIGN MARKET FLUCTUATIONS. THE EFFECT OF USING FAIR VALUE PRICING IS THAT A FUND'S NET ASSET VALUE WILL BE SUBJECT TO THE JUDGMENT OF NEUBERGER BERMAN MANAGEMENT INC., OPERATING UNDER PROCEDURES APPROVED BY THE BOARD OF TRUSTEES, INSTEAD OF BEING DETERMINED BY MARKET PRICES. 43 Your Investment -- DISTRIBUTIONS AND TAXES DISTRIBUTIONS -- Each Fund pays out to shareholders any net investment income and net realized capital gains. Ordinarily, the Funds make any distributions once a year (in December). Consult your investment provider about whether your income and capital gain distributions from a Fund will be reinvested in additional Advisor Class shares of that Fund or paid to you in cash. HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement plans and accounts and other tax-exempt investors, all Fund distributions you receive are generally taxable to you, regardless of whether you take them in cash or reinvest them in additional Fund shares. Fund distributions to Roth IRAs, other individual retirement accounts ("IRAs") and qualified retirement plans generally are tax-free. Eventual withdrawals from a Roth IRA also may be tax-free, while withdrawals from other retirement accounts and plans generally are subject to tax. Distributions generally are taxable to you in the year you receive them. In some cases, however, distributions you receive in January are taxable as if they had been paid the previous December 31. Your tax statement (see "Taxes and You") will help clarify this for you. Distributions of income and the excess of net short-term capital gain over net long-term capital loss are generally taxed as ordinary income. However, a Fund's dividends attributable to "qualified dividend income" (generally, dividends it receives on stock of most U.S. and certain foreign corporations with respect to which it satisfies certain holding period, financing, and other restrictions) are subject to a 15% maximum federal income tax rate for individual shareholders who satisfy those restrictions with respect to their Fund shares on which the dividends were paid. Distributions of net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss) are generally taxed as long-term capital gain and are subject to that 15% maximum rate for individual shareholders. The tax treatment of capital gain distributions from a Fund depends on how long the Fund held the securities it sold, not when you bought your shares of the Fund or whether you reinvested your distributions. HOW SHARE TRANSACTIONS ARE TAXED -- When you sell (redeem) or exchange Fund shares, you generally realize a taxable gain or loss. An exception, once again, applies to tax-advantaged retirement plans and accounts and other tax-exempt investors. Any capital gain an individual shareholder recognizes on a redemption or exchange of his or her Fund shares that have been held for more than one year will qualify for the 15% maximum federal income tax rate mentioned above. [GRAPHIC OMITTED] TAXES AND YOU THE TAXES YOU ACTUALLY OWE ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS CAN VARY WITH MANY FACTORS, SUCH AS YOUR MARGINAL TAX BRACKET, HOW LONG YOU HELD YOUR SHARES, AND WHETHER YOU OWE ALTERNATIVE MINIMUM TAX. HOW CAN YOU FIGURE OUT YOUR TAX LIABILITY ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS? ONE HELPFUL TOOL IS THE TAX STATEMENT THAT YOUR INVESTMENT PROVIDER SENDS YOU EVERY JANUARY. IT DETAILS THE DISTRIBUTIONS YOU RECEIVED DURING THE PAST YEAR AND SHOWS THEIR TAX STATUS. A SEPARATE STATEMENT COVERS YOUR SHARE TRANSACTIONS. 44 Your Investment MOST IMPORTANTLY, CONSULT YOUR TAX PROFESSIONAL. EVERYONE'S TAX SITUATION IS DIFFERENT, AND YOUR PROFESSIONAL SHOULD BE ABLE TO HELP YOU ANSWER ANY QUESTIONS YOU MAY HAVE. [GRAPHIC OMITTED] BACKUP WITHHOLDING A FUND IS REQUIRED TO WITHHOLD 28% OF THE MONEY YOU ARE OTHERWISE ENTITLED TO RECEIVE FROM ITS DISTRIBUTIONS AND REDEMPTION PROCEEDS IF YOU ARE AN INDIVIDUAL OR CERTAIN OTHER NON-CORPORATE SHAREHOLDER WHO FAILS TO PROVIDE A CORRECT TAXPAYER IDENTIFICATION NUMBER TO THE FUND. WITHHOLDING AT THAT RATE ALSO IS REQUIRED FROM EACH FUND'S DISTRIBUTIONS TO WHICH YOU ARE OTHERWISE ENTITLED IF YOU ARE SUCH A SHAREHOLDER AND THE INTERNAL REVENUE SERVICE ("IRS") TELLS US THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING OR YOU ARE SUBJECT TO BACKUP WITHHOLDING FOR ANY OTHER REASON. IN THE CASE OF A CUSTODIAL ACCOUNT FOR A NEWBORN, IF A SOCIAL SECURITY NUMBER HAS BEEN APPLIED FOR BUT IS NOT AVAILABLE WHEN YOU COMPLETE THE ACCOUNT APPLICATION, YOU MAY OPEN THE ACCOUNT WITHOUT THAT NUMBER, IF WE RECEIVE (FROM YOU OR FROM YOUR INVESTMENT PROVIDER) THE CUSTODIAN'S DATE OF BIRTH AND SOCIAL SECURITY NUMBER TOGETHER WITH A COPY OF THE REQUEST MADE TO THE IRS FOR THE NEWBORN'S SOCIAL SECURITY NUMBER. HOWEVER, WE MUST RECEIVE THE NEW NUMBER WITHIN 60 DAYS OR THE ACCOUNT WILL BE CLOSED. FOR INFORMATION ON CUSTODIAL ACCOUNTS, CALL 800-877-9700. YOU MUST SUPPLY YOUR SIGNED TAXPAYER IDENTIFICATION NUMBER FORM TO YOUR INVESTMENT PROVIDER, IF ANY, AND IT MUST SUPPLY ITS TAXPAYER IDENTIFICATION NUMBER TO US, IN ORDER TO AVOID BACKUP WITHHOLDING. [GRAPHIC OMITTED] BUYING SHARES BEFORE A DISTRIBUTION THE MONEY A FUND EARNS, EITHER AS INCOME OR AS CAPITAL GAINS, IS REFLECTED IN ITS SHARE PRICE UNTIL IT DISTRIBUTES THE MONEY. AT THAT TIME, THE AMOUNT OF THE DISTRIBUTION IS DEDUCTED FROM THE SHARE PRICE. THE AMOUNT OF THE DISTRIBUTION IS EITHER REINVESTED IN ADDITIONAL SHARES OF THE DISTRIBUTING CLASS OF THE FUND OR PAID TO SHAREHOLDERS IN CASH. BECAUSE OF THIS, IF YOU BUY SHARES JUST BEFORE THE FUND MAKES A DISTRIBUTION, YOU WILL END UP GETTING SOME OF YOUR INVESTMENT BACK AS A TAXABLE DISTRIBUTION. YOU CAN AVOID THIS SITUATION BY WAITING TO INVEST UNTIL AFTER THE RECORD DATE FOR THE DISTRIBUTION. GENERALLY, IF YOU ARE INVESTING IN A FUND THROUGH A TAX-ADVANTAGED RETIREMENT PLAN OR ACCOUNT, THERE ARE NO TAX CONSEQUENCES TO YOU FROM DISTRIBUTIONS. -- MARKET TIMING POLICY Frequent purchases, exchanges and redemptions of Fund shares ("market-timing activities") can interfere with Fund management and affect costs and performance for other shareholders. To discourage market-timing activities by Fund shareholders, the Board of Trustees has adopted market-timing policies and has approved the procedures of the principal underwriter for implementing those policies. As described earlier in this prospectus, pursuant to such policies, the exchange privilege can be withdrawn from any investor that is believed to be "timing the market" or is otherwise making exchanges judged to be excessive. In furtherance of these policies, under certain circumstances, the Funds reserve the right to reject any exchange or investment order; change, suspend or revoke the exchange privilege or suspend the telephone order privilege. Neuberger Berman Management Inc. applies the Funds' policies and procedures with respect to market-timing activities by monitoring trading activity in the Funds, identifying excessive trading 45 Your Investment patterns, and warning or prohibiting shareholders who trade excessively from making further purchases or exchanges of Fund shares. These policies and procedures are applied consistently to all shareholders. Although the Funds make efforts to monitor for market-timing activities, the ability of the Funds to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and other approved intermediaries may be limited in those instances in which the investment intermediary maintains the underlying shareholder accounts. Accordingly, there can be no assurance that the Funds will be able to eliminate all market-timing activities. -- PORTFOLIO HOLDINGS POLICY A description of the Funds' policies and procedures with respect to the disclosure of the Funds' portfolio holdings is available in the Funds' Statement of Additional Information. Complete portfolio holdings for each Fund (except Fasciano, Genesis, and Millennium Funds) are available at http://www.nb.com/ind/mutual_funds/ prospectuses/ 15-30 days after each month-end; the complete portfolio holdings of Fasciano, Genesis and Millennium Funds are available 15-30 days after the end of each calendar quarter. Each Fund's complete portfolio holdings will remain available at www.nb.com until the subsequent month-end holdings have been posted (holdings for Fasciano, Genesis and Millennium Funds will be available for only 15-30 days.) Complete holdings for all Funds will also be available in reports on Form N-Q or Form N-CSR filed with the SEC. Historical portfolio holdings are available upon request. -- FUND STRUCTURE Each Fund uses a "multiple class" structure. Each Neuberger Berman fund offers one or more classes of shares that have identical investment programs, but different arrangements for distribution and shareholder servicing and, consequently, different expenses. This prospectus relates solely to the Advisor Class shares of the Funds. 46 Your Investment APPENDIX NEUBERGER BERMAN FOCUS FUND -- DESCRIPTION OF ECONOMIC SECTORS. Neuberger Berman Focus Fund seeks to achieve its investment objective by investing principally in common stocks in the following thirteen multi-industry economic sectors, normally making at least 90% of its investments in not more than six such sectors: (1) AUTOS AND HOUSING SECTOR: Companies engaged in design, production, or sale of automobiles, automobile parts, mobile homes, or related products ("automobile industries") or design, construction, renovation, or refurbishing of residential dwellings. The value of securities of companies in the automobile industries is affected by, among other things, foreign competition, the level of consumer confidence and consumer debt, and installment loan rates. The housing construction industry may be affected by the level of consumer confidence and consumer debt, mortgage rates, tax laws, and the inflation outlook. (2) CONSUMER GOODS AND SERVICES SECTOR: Companies engaged in providing consumer goods or services, including design, processing, production, sale, or storage of packaged, canned, bottled, or frozen foods and beverages and design, production, or sale of home furnishings, appliances, clothing, accessories, cosmetics, or perfumes. Certain of these companies are subject to government regulation affecting the use of various food additives and production methods, which could affect profitability. Also, the success of food- and fashion-related products may be strongly affected by fads, marketing campaigns, health concerns, and other factors affecting supply and demand. (3) DEFENSE AND AEROSPACE SECTOR: Companies involved in research, manufacture, or sale of products or services related to the defense or aerospace industries, including air transport; data processing or computer-related services; communications systems; military weapons or transportation; general aviation equipment, missiles, space launch vehicles, or spacecraft; machinery for guidance, propulsion, or control of flight vehicles; and airborne or ground-based equipment essential to the test, operation, or maintenance of flight vehicles. Because these companies rely largely on U.S. (and foreign) governmental demand for their products and services, their financial conditions are heavily influenced by defense spending, foreign assistance and export control policies. (4) ENERGY SECTOR: Companies involved in the production, transmission, or marketing of energy from oil, gas, or coal, as well as nuclear, geothermal, oil shale, or solar sources of energy (but excluding public utility companies). Also included are companies that provide component products or services for those activities. The value of these companies' securities varies based on the price and supply of energy fuels and may be affected by international politics, energy conservation, the success of exploration projects, environmental considerations, and the tax and other regulatory policies of various governments. (5) FINANCIAL SERVICES SECTOR: Companies providing financial services to consumers or industry, including commercial banks and savings and loan associations, consumer and industrial finance companies, securities brokerage companies, leasing companies, and insurance companies. Their profitability may fluctuate significantly as a result of volatile interest rates, concerns about particular banks and savings institutions, and general economic conditions. The economic prospects of this sector are strongly affected by the cost of short-term funds and the rate of default on consumer and business loans. The sector is also subject to extensive governmental 47 APPENDIX regulation, which can limit or assist its business prospects. Recent regulatory changes have allowed much greater competition among banks, securities firms and insurance companies. This is resulting in a wave of consolidations within this sector; however, the ultimate impact of these changes in any one company or portion of the financial services sector is difficult to predict. (6) HEALTH CARE SECTOR: Companies engaged in design, manufacture, or sale of products or services used in connection with the provision of health care, including pharmaceutical companies; firms that design, manufacture, sell, or supply medical, dental, or optical products, hardware, or services; companies involved in biotechnology, medical diagnostic, or biochemical research and development; and companies that operate health care facilities. Many of these companies are subject to government regulation and potential health care reforms, which could affect the price and availability and their products and services. Also, products and services of these companies could quickly become obsolete. (7) HEAVY INDUSTRY SECTOR: Companies engaged in research, development, manufacture, or marketing of products, processes, or services related to the agriculture, chemicals containers, forest products, non-ferrous metals, steel, or pollution control industries, including synthetic and natural materials (for example, chemicals, plastics, fertilizers, gases, fibers, flavorings, or fragrances), paper, wood products, steel and cement. Certain of these companies are subject to state and federal regulation, which could require alteration or cessation of production of a product, payment of fines, or cleaning of a disposal site. Furthermore, because some of the materials and processes used by these companies involve hazardous components, there are additional risks associated with their production, handling and disposal. The risk of product obsolescence also is present. (8) MACHINERY AND EQUIPMENT SECTOR: Companies engaged in the research, development, or manufacture of products, processes, or services relating to electrical equipment, machinery, pollution control, or construction services, including transformers, motors, turbines, hand tools, earth-moving equipment, and waste disposal services. The profitability of most of these companies may fluctuate significantly in response to capital spending and general economic conditions. As is the case for the heavy industry sector, there are risks associated with the production, handling and disposal of materials and processes that involve hazardous components and the risk of product obsolescence. (9) MEDIA AND ENTERTAINMENT SECTOR: Companies engaged in design, production, or distribution of goods or services for the media industries (including television or radio broadcasting or manufacturing, publishing, recordings and musical instruments, motion pictures, and photography) and the entertainment industries (including sports arenas, amusement and theme parks, gaming casinos, sporting goods, camping and recreational equipment, toys and games, travel-related services, hotels and motels, and fast food and other restaurants). Many products produced by companies in this sector -- for example, video and electronic games -- may become obsolete quickly. Additionally, companies engaged in television and radio broadcasts are subject to government regulation. (10) RETAILING SECTOR: Companies engaged in retail distribution of home furnishings, food products, clothing, pharmaceuticals, leisure products, or other consumer goods, including department stores, supermarkets, and retail chains specializing in particular items such as shoes, toys, or pharmaceuticals. The value of these companies' securities fluctuates based on consumer spending patterns, which depend on inflation and interest rates, the levels of consumer debt and 48 APPENDIX consumer confidence, and seasonal shopping habits. The success or failure of a company in this highly competitive sector depends on its ability to predict rapidly changing consumer tastes. (11) TECHNOLOGY SECTOR: Companies that are expected to have or develop products, processes, or services that will provide, or will benefit significantly from, technological advances and improvements or future automation trends, including semiconductors, computers and peripheral equipment, scientific instruments, computer software, telecommunications equipment, and electronic components, instruments, and systems. These companies are sensitive to foreign competition and import tariffs. Also, many of their products may become obsolete quickly. (12) TRANSPORTATION SECTOR: Companies involved in providing transportation of people and products, including airlines, railroads, and trucking firms. Revenues of these companies are affected by fluctuations in fuel prices and government regulation of fares as well as the general level of economic activity and the public's willingness to travel. (13) UTILITIES SECTOR: Companies in the public utilities industry and companies that derive a substantial majority of their revenues through supplying public utilities (including companies engaged in the manufacture, production, generation, transmission, or sale of gas and electric energy) and that provide telephone, telegraph, satellite, microwave, and other communication facilities to the public. The gas and electric public utilities industries are subject to various uncertainties, including the outcome of political issues concerning the environment, prices of fuel for electric generation, availability of natural gas, and risks associated with the construction and operation of nuclear power facilities. MARKET RISK The following is a discussion of the risks of investing in the various capitalization components of the stock market and the risks of using either a value or growth approach to selecting these securities. (1) SMALL-CAP STOCKS: The stocks of smaller companies are often more volatile and less liquid than the stocks of larger companies, and these companies may have a shorter history of operations than larger companies. They may not have as great an ability to raise additional capital; and may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor. Finally, small-cap stocks may be more affected than other types of stock by the underperformance of a sector in which they may be more concentrated. (2) MID-CAP STOCKS: Mid-cap stocks may fluctuate more widely in price than the market as a whole and may underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when mid-cap stocks are out of favor. (3) LARGE-CAP STOCKS: At times, large-cap stocks may lag other types of stocks in performance, which could cause a fund holding these stocks to perform worse than certain other funds over a given time period. (4) VALUE STOCKS: With a value approach, there is the risk that stocks may remain undervalued during a given period. This may happen because value stocks as a category lose favor with investors compared to growth stocks or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. 49 APPENDIX (5) GROWTH STOCKS: Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. 50 APPENDIX [GRAPHIC OMITTED] NEUBERGER BERMAN EQUITY FUNDS ADVISOR CLASS SHARES If you would like further details on these Funds you can request a free copy of the following documents: SHAREHOLDER REPORTS -- The shareholder reports offer information about each Fund's recent performance, including: -- a discussion by the Portfolio Managers about strategies and market conditions that significantly affect the Fund's performance -- Fund performance data and financial statements -- portfolio holdings STATEMENT OF ADDITIONAL INFORMATIOn (SAI) -- The SAI contains more comprehensive information on these Funds, including: -- various types of securities and practices, and their risks -- investment limitations and additional policies -- information about each Fund's management and business structure The SAI is hereby incorporated by reference into this prospectus, making it legally part of the prospectus. Investment manager: NEUBERGER BERMAN MANAGEMENT INC. Sub-adviser: NEUBERGER BERMAN, LLC [GRAPHIC OMITTED] OBTAINING INFORMATION You can obtain a shareholder report, SAI, and other information from your investment provider, or from: NEUBERGER BERMAN MANAGEMENT INC. 605 Third Avenue 2nd Floor New York, NY 10158-0180 800-877-9700 212-476-8800 Broker/Dealer and Institutional Services: 800-366-6264 Web site: www.nb.com Email: fundinquiries@nb.com You can also request copies of this information from the SEC for the cost of a duplicating fee by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, 100 F Street, N.E., Washington, DC 20549-9303. They are also available from the EDGAR Database on the SEC's website at www.sec.gov. You may also view and copy the documents at the SEC's Public Reference Room in Washington. Call 202-551-8090 for information about the operation of the Public Reference Room. [GRAPHIC OMITTED] A0092 12/06 SEC file number: 811-582 [GRAPHIC OMITTED] 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.nb.com [GRAPHIC OMITTED] PROSPECTUS - DECEMBER 20, 2006 These securities, like the securities of all mutual funds, have not been approved or disapproved by the Securities and Exchange Commission, and the Securities and Exchange Commission has not determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. NEUBERGER BERMAN EQUITY FUNDS INSTITUTIONAL CLASS SHARES All Cap Growth Fund International Large Cap Fund Partners Fund Real Estate Fund Regency Fund Contents -------------------------------------------------------------------------------- EQUITY FUNDS All Cap Growth Fund..........................................................2 International Large Cap Fund.................................................9 Partners Fund...............................................................17 Real Estate Fund............................................................23 Regency Fund................................................................31 YOUR INVESTMENT Share Prices................................................................37 Privileges and Services.....................................................38 Distributions and Taxes.....................................................38 Maintaining Your Account....................................................40 Redemption Fee..............................................................46 Market Timing Policy........................................................46 Portfolio Holdings Policy...................................................47 Fund Structure..............................................................47 THESE FUNDS: -- are designed for investors with long-term goals in mind, and for the Real Estate Fund, also for current income -- offer you the opportunity to participate in financial markets through a professionally managed stock portfolio -- carry certain risks, including the risk that you could lose money if Fund shares, when you sell them, are worth less than what you originally paid. This prospectus discusses principal risks of investing in Fund shares. These and other risks are discussed in more detail in the Statement of Additional Information (see back cover) -- are mutual funds, not bank deposits, and are not guaranteed or insured by the FDIC or any other government agency -- normally invests at least 80% of its net assets in equity securities. The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman, LLC. "Neuberger Berman Management Inc." and the individual Fund name in this prospectus are either service marks or registered service marks of Neuberger Berman Management Inc.(c) 2006 Neuberger Berman Management Inc. All rights reserved. Neuberger Berman Ticker Symbol: NBAIX ALL CAP GROWTH FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stock of small-, mid-, and large-capitalization companies, which it defines as those with a total market capitalization within the market capitalization range of the Russell 3000 Index. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Managers employ a disciplined investment strategy when selecting growth stocks. Using fundamental research and quantitative analysis, they look for fast-growing companies with above average sales and competitive returns on equity relative to their peers. In doing so, the Portfolio Managers analyze such factors as: -- financial condition (such as debt to equity ratio); -- market share and competitive leadership of the company's products; -- earnings growth relative to competitors; -- market valuation in comparison to stock's own historical norms and the stocks of other companies. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] ALL CAP: LARGE, MID AND SMALL CAP STOCKS LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. THEY MAY HAVE A VARIETY OF PRODUCTS AND BUSINESS LINES AND A SOUND FINANCIAL BASE THAT CAN HELP THEM WEATHER BAD TIMES. COMPARED TO SMALLER COMPANIES, LARGE-CAP COMPANIES MAY BE LESS RESPONSIVE TO CHANGES AND OPPORTUNITIES, BUT, THEIR RETURNS HAVE SOMETIMES LED THOSE OF SMALLER COMPANIES, OFTEN WITH LOWER VOLATILITY. MID-CAP STOCKS HAVE HISTORICALLY SHOWN RISK/RETURN CHARACTERISTICS THAT ARE IN BETWEEN THOSE OF SMALL- AND LARGE-CAP STOCKS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER COMPARATIVELY ATTRACTIVE LONG-TERM RETURNS. MID-CAPS ARE LESS WIDELY FOLLOWED IN THE MARKET THAN LARGE-CAPS, WHICH CAN MAKE IT COMPARATIVELY EASIER TO FIND ATTRACTIVE STOCKS THAT ARE NOT OVERPRICED. HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE PAST 40 YEARS, SMALL CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] GROWTH INVESTING FOR GROWTH INVESTORS, THE AIM IS TO INVEST IN COMPANIES THAT ARE ALREADY SUCCESSFUL BUT COULD BE EVEN MORE SO. OFTEN, THESE STOCKS ARE IN EMERGING OR RAPIDLY GROWING INDUSTRIES. ACCORDINGLY, THE FUND AT TIMES MAY INVEST A GREATER PORTION OF ITS ASSETS IN PARTICULAR INDUSTRIES OR SECTORS THAN OTHER FUNDS DO. WHILE MOST GROWTH STOCKS ARE KNOWN TO INVESTORS, THEY MAY NOT YET HAVE REACHED THEIR FULL POTENTIAL. THE GROWTH INVESTOR LOOKS FOR INDICATIONS OF CONTINUED SUCCESS. 2 All Cap Growth Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock markets. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. To the extent that the Fund emphasizes small-, mid-, or large-cap stocks, it takes on the associated risks. At any given time, any one of these market capitalizations may be out of favor with investors. If the Fund emphasizes a certain market capitalization, it could perform worse than certain other funds over a given time period. At times, large-cap stocks may lag other types of stocks in performance, which could cause a fund holding those stocks to perform worse than certain other funds. Also, by investing in small- or mid-cap stocks, the Fund is subject to their risks, including the risk its holdings may: -- fluctuate more widely in price than the market as a whole; -- underperform other types of stocks or be difficult to sell when the economy is not robust or during market downturns; -- be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. In addition smaller companies in which the Fund may invest are often more volatile and less liquid than the stocks of larger companies, and these companies: -- may have a shorter history of operations than larger companies; -- may not have as great an ability to raise additional capital; -- may have a less diversified product line, making them more susceptible to market pressure. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. 3 All Cap Growth Fund WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES BUT MAY MEAN LOST OPPORTUNITIES. 4 All Cap Growth Fund PERFORMANCE [GRAPHIC OMITTED] When this prospectus was prepared, the Fund had completed less than one calendar year of operations and had no performance record to report. Accordingly, performance charts are not included. 5 All Cap Growth Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (% of average net assets) These are deducted from Fund assets, so you pay them indirectly. Management Fees 0.70 Distribution (12b-1) fees None Other expenses* 0.95 -------------------------------------------------------------------------------- Total annual operating expenses 1.65 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.75 -------------------------------------------------------------------------------- Net expenses** 0.90 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years -------------------------------------------------------------------------------- Expenses $92 $287 -------------------------------------------------------------------------------- * "Other expenses" are based on estimated amounts for the current fiscal year and estimated net assets of $25,000,000. ** Neuberger Berman Management inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of the Fund through 8/31/2010, so that the total annual operating expenses of that class of the fund are limited to 0.90% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Institutional Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 0.90% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. The Fund will pay the Manager fees at the annual rate of 0.55% of the first $250 million, 0.525% of the next $250 million, 0.500% of the next $250 million, 0.475% of the next $250 million, 0.450% of the next $500 million, 0.425% of the next $2.5 billion, and 0.400% of amounts in excess of $4 billion of the Fund's average daily net assets for investment management services and 0.15% of its average daily net assets for administrative services provided to the Institutional Class of the Fund. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees will be available in the Fund's semi-annual report dated February 2007. 6 All Cap Growth Fund PORTFOLIO MANAGERS The Fund is managed by a team consisting of the following Portfolio Managers: DAVID H. BURSHTAN, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed two equity mutual funds and other equity portfolios for another investment manager from 1999-2002. Mr. Burshtan has been Portfolio Manager of the Fund since its inception. KRISTINA KALEBICH, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, and a Managing Director and Portfolio Specialist for the Chicago Growth Equity Group with the Investment Management Division of Lehman Brothers, has been a product specialist for another investment manager from 1998-2002. Ms. Kalebich has been Portfolio Manager of the Fund since its inception. KENNETH J. TUREK, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed or co-managed other equity mutual funds and equity portfolios for several other investment managers since 1985. Mr. Turek has been Portfolio Manager of the Fund since its inception. JOHN J. ZIELINSKI, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has co-managed an equity mutual fund and managed other equity portfolios for another investment manager since 1983. Mr. Zielinski has been Portfolio Manager of the Fund since its inception. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 7 All Cap Growth Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED] When this prospectus was prepared, the Fund had no financial highlights to report. 8 All Cap Growth Fund Neuberger Berman Ticker Symbol: NILIX INTERNATIONAL LARGE CAP FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN COMMON STOCKS OF FOREIGN COMPANIES. To pursue this goal, the Fund invests mainly in large-capitalization foreign companies, including companies in developed and emerging industrialized markets. The Fund currently defines large-capitalization companies as those with a market capitalization greater than $2.5 billion. The Fund defines a foreign company as one that is organized outside of the United States and conducts the majority of its business abroad. The Fund seeks to reduce risk by diversifying among many industries. Although it has the flexibility to invest a significant portion of its assets in one country or region, it generally intends to remain well-diversified across countries and geographical regions. In picking stocks, the Portfolio Managers look for well-managed and profitable companies that show growth potential and whose stock prices are undervalued. Factors in identifying these firms may include strong fundamentals, such as attractive cash flows and balance sheets, as well as prices that are reasonable in light of projected returns. The Portfolio Managers also consider the outlooks for various countries and sectors around the world, examining economic, market, social, and political conditions. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] FOREIGN STOCKS THERE ARE MANY PROMISING OPPORTUNITIES FOR INVESTMENT OUTSIDE THE UNITED STATES. FOREIGN MARKETS OFTEN RESPOND TO DIFFERENT FACTORS AND THEREFORE TEND TO FOLLOW CYCLES THAT ARE DIFFERENT FROM EACH OTHER. FOR THIS REASON, MANY INVESTORS PUT A PORTION OF THEIR PORTFOLIOS IN FOREIGN INVESTMENTS AS A WAY OF GAINING FURTHER DIVERSIFICATION. WHILE FOREIGN STOCK MARKETS CAN BE RISKY, INVESTORS GAIN AN OPPORTUNITY TO ADD POTENTIAL LONG-TERM GROWTH. [GRAPHIC OMITTED] GROWTH AND VALUE INVESTING THE FUND USES A BLEND OF GROWTH AND VALUE STRATEGIES. VALUE INVESTORS SEEK STOCKS TRADING AT BELOW MARKET AVERAGE PRICES BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES BEFORE OTHER INVESTORS DISCOVER THEIR WORTH. GROWTH INVESTORS SEEK COMPANIES THAT ARE ALREADY SUCCESSFUL BUT MAY NOT HAVE REACHED THEIR FULL POTENTIAL. 9 International Large Cap Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in international stock markets. The behavior of these markets is unpredictable, particularly in the short term. Although foreign stocks offer added diversification potential, world markets may all react in similar fashion to important economic or political developments. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Foreign stocks are subject to more risks than comparable U.S. stocks. This is in part because some foreign markets are less developed and foreign governments, economies, laws (including tax laws), and securities firms may be less stable. There is also a higher chance that key information will be unavailable, incomplete, or inaccurate. As a result, foreign stocks can fluctuate more widely in price than comparable U.S. stocks and they may also be less liquid. These risks are generally greater in emerging markets. Over a given period of time, foreign stocks may underperform U.S. stocks -- sometimes for years. The Fund could also underperform if the Portfolio Managers invest in countries or sectors whose economic performance falls short. In addition, investing in foreign stocks may also involve a greater risk for excessive trading due to "time-zone arbitrage". If an event occurring after the close of a foreign market, but before the time the Fund computes its current net asset value, causes a change in the price of the foreign stock and such price is not reflected in the Fund's current net asset value, investors may attempt to take advantage of anticipated price movements in securities held by the Fund based on such pricing discrepancies. Changes in currency exchange rates bring an added dimension of risk. Currency fluctuations could erase investment gains or add to investment losses. At times, larger capitalization stocks may lag other types of stocks in performance, which could cause a fund holding these stocks to perform worse than certain other funds over a given time period. Any type of stock may underperform any other during a given period. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. THE FUND MAY USE DERIVATIVES FOR HEDGING AND FOR SPECULATION. HEDGING COULD REDUCE THE FUND'S LOSSES FROM CURRENCY FLUCTUATIONS, BUT COULD ALSO REDUCE ITS GAINS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND 10 International Large Cap Fund INCREASES ITS RISK OF LOSS. A DERIVATIVE INSTRUMENT, WHETHER USED FOR HEDGING OR SPECULATION, COULD FAIL TO PERFORM AS EXPECTED, CAUSING A LOSS FOR THE FUND. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL, OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES BUT MAY MEAN LOST OPPORTUNITIES. 11 International Large Cap Fund PERFORMANCE [GRAPHIC OMITTED] When this prospectus was prepared, the Fund had completed less than one calendar year of operations and had no performance record to report. Accordingly, performance charts are not included. 12 International Large Cap Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares held for more than 60 days, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES (% of amount redeemed or exchanged) None -------------------------------------------------------------------------------- These are deducted directly from your investment. Redemption Fee* 2.00 Exchange Fee* 2.00 -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (% of average net assets) These are deducted from Fund assets, so you pay them indirectly. Management fees 0.70 Distribution (12b-1) fees None Other expenses** 1.32 -------------------------------------------------------------------------------- Total annual operating expenses 2.02 -------------------------------------------------------------------------------- Minus: Expense reimbursement 1.12 -------------------------------------------------------------------------------- Net expenses*** 0.90 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years -------------------------------------------------------------------------------- Expenses $92 $287 -------------------------------------------------------------------------------- * These fees are charged on investments held 60 days or less, whether Fund shares are redeemed or exchanged for shares of another Fund. See "Redemption Fee" for more information. ** "Other expenses" are based on estimated amounts for the current fiscal year and estimated net assets of $25,000,000. *** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of the Fund through 8/31/2010, so that the total annual operating expenses of that class of the Fund are limited to 0.90% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Institutional class will repay NBMI for fees and expenses forgone or reimbursed for that Class provided that repayment does not cause its annual operating expenses to exceed 0.90% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. The Fund will pay the Manager fees at the annual rate of 0.55% of the first $250 million, 0.525% of the next $250 million, 0.500% of the next $250 million, 0.475% of the next $250 million, 0.450% of the next $500 million, 0.425% of the next $2.5 billion, and 0.400% of amounts in excess of $4 billion of the Fund's average daily net assets for investment management services and 0.15% of its average daily net assets for administrative services provided to the Institutional Class of the Fund. 13 International Large Cap Fund A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's annual report dated August 2006. 14 International Large Cap Fund PORTFOLIO MANAGERS BENJAMIN SEGAL is a Vice President of Neuberger Berman Management Inc. and Managing Director of Neuberger Berman, LLC. Mr. Segal joined the firms in 1999 and has been the Portfolio Manager of the Fund since its inception in 2006. He has been a Portfolio Manager at Neuberger Berman Management Inc. since 2000, with responsibility for other mutual funds advised by the Manager. MILU E. KOMER is a Vice President of Neuberger Berman Management Inc. and of Neuberger Berman, LLC. Ms. Komer joined the firms in 2001 and has been the Associate Portfolio Manager of the Fund since its inception in 2006. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 15 International Large Cap Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED] -------------------------------------------------------------------------------- Year Ended August 31, 2006(1) -------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 10.00 PLUS: Income from investment operations Net investment income 0.01 Net gains/losses - realized and unrealized 0.18 Subtotal: income from investment operations 0.19 Redemption fees - EQUALS: Share price (NAV) at end of year 10.19 -------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.25(5) Gross expenses(2) 37.46(5) Expenses(3) 1.25(5) Net investment income - actual 1.32(5) -------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(4) 1.90(6) Net assets at end of year (in millions of dollars) 6.2 Portfolio turnover rate (%) 6(6) -------------------------------------------------------------------------------- The figures above are from the International Large Cap Trust Class. All figures have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Period from 8/1/2006 (beginning of operations) to 8/31/2006. (2) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (3) Shows what this ratio would have been if there had been no expense offset arrangements. (4) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. (5) Annualized. (6) Not annualized. 16 International Large Cap Fund Neuberger Berman Ticker Symbol: NBPIX PARTNERS FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of mid- to large-capitalization companies. The Fund seeks to reduce risk by diversifying among many companies and industries. The Portfolio Manager looks for well-managed companies with strong balance sheets whose stock prices are undervalued. Factors in identifying these firms may include: -- historical low valuation -- strong fundamentals, such as a company's financial, operational, and competitive positions -- relatively high operating profit margins and returns. The Portfolio Manager may also look for other characteristics in a company, such as a strong market position relative to competitors, a high level of stock ownership among management, and a recent sharp decline in stock price that appears to be the result of a short-term market overreaction to negative news. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID- AND LARGE-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY PERFORMED MORE LIKE SMALL-CAPS THAN LIKE LARGE-CAPS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER ATTRACTIVE LONG-TERM RETURNS. LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. COMPARED TO MID-CAP COMPANIES, THEY MAY BE LESS RESPONSIVE TO CHANGE, BUT THEIR RETURNS HAVE SOMETIMES LED THOSE OF MID-CAP COMPANIES, OFTEN WITH LOWER VOLATILITY. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 17 Partners Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. To the extent that the Fund emphasizes mid- or large-cap stocks, it takes on the associated risks. Mid-cap stocks tend to be more volatile than large-cap stocks and are usually more sensitive to economic, political, regulatory and market factors. At any given time, one or both groups of stocks may be out of favor with investors. The Fund's value investing approach may dictate an emphasis on certain sectors of the market at any given time. To the extent the Fund invests more heavily in one sector, it thereby presents a more concentrated risk. A sector may have above average performance during particular periods, but individual sectors also tend to move up and down more than the broader market. The several industries that comprise a sector may all react in the same way to economic, political and regulatory events. The Fund's performance may also suffer if a sector does not perform as expected. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 18 Partners Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 26.49 29.23 6.28 7.80 0.57 -3.02 -24.82 35.87 19.21 17.99 BEST QUARTER: Q2 '03, 20.37% WORST QUARTER: Q3 '02, -21.32% Year-to-date performance as of 9/30/2006: 1.68% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- PARTNERS FUND Return Before Taxes 17.99 6.86 10.13 Return After Taxes on Distributions 17.02 6.53 8.21 Return After Taxes on Distributions and Sale of Fund Shares 12.93 5.86 7.92 Russell 1000 Value Index 7.05 5.28 10.94 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 1000 Value Index is an unmanaged index of U.S. mid- and large-cap value stocks. The S&P 500 Index is an unmanaged index of U.S. stocks. * Performance from the beginning of the measurement period above to 6/6/2006 is that of the Partners Fund Investor Class. Because Institutional Class has lower expenses, its performance typically would have been slightly better than that of the Investor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. 19 Partners Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.60 Distribution (12b-1) fees None Other expenses 0.38 -------------------------------------------------------------------------------- Total annual operating expenses 0.98 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.28 -------------------------------------------------------------------------------- Net expenses** 0.70 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $72 $224 $455 $1,120 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. ** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of the Fund through 8/31/2010 so that the total annual operating expenses of that class of the Fund are limited to 0.70% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Institutional Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 0.70% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.60% of average net assets before reimbursements. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 20 Partners Fund PORTFOLIO MANAGER S. BASU MULLICK is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. He has been a fund manager at Neuberger Berman Management Inc. and has managed the Fund since 1998. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 21 Partners Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED] -------------------------------------------------------------------------------- Year Ended August 31, 2006(1) -------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 28.12 PLUS: Income from investment operations Net investment income 0.19 Net gains (losses) - realized and unrealized 0.41 Subtotal: income from investment operations 0.60 EQUALS: Share price (NAV) at end of year 28.72 -------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 0.69(2) Gross expenses(3) 0.96(2) Expenses(4) 0.70(2) Net investment income - actual 2.85(2) -------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(5) 2.13(6) Net assets at end of year (in millions of dollars) 130.5 Portfolio turnover rate (%) 33(6) -------------------------------------------------------------------------------- The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Period from 6/7/2006 (beginning of operations) to 8/31/2006. (2) Annualized. (3) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (4) Shows what this ratio would have been if there had been no expense offset arrangements. (5) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. (6) Not annualized. 22 Partners Fund Neuberger Berman Ticker Symbol: NBRIX REAL ESTATE FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS TOTAL RETURN THROUGH INVESTMENT IN REAL ESTATE SECURITIES, EMPHASIZING BOTH CAPITAL APPRECIATION AND CURRENT INCOME. To pursue this goal, the Fund normally invests at least 80% of its assets in equity securities issued by real estate investment trusts ("REITs") and common stocks and other securities issued by other real estate companies. The Fund defines a real estate company as one that derives at least 50% of its revenue from, or has at least 50% of its assets in, real estate. A REIT is a company dedicated to owning, and usually operating, income-producing real estate, or to financing real estate. The Fund may invest up to 20% of its net assets in debt securities. These debt securities can be either investment grade or below investment grade, provided that, at the time of purchase, they are rated at least B by Moody's or Standard & Poor's or, if unrated by either of these, deemed by the Portfolio Managers to be of comparable quality. The Portfolio Managers make investment decisions through a fundamental analysis of each company. The Portfolio Managers review each company's current financial condition and industry position, as well as economic and market conditions. In doing so, they evaluate the company's growth potential, earnings estimates and quality of management, as well as other factors. The Fund normally seeks to invest for the long-term, but it may sell securities regardless of how long they have been held if the Portfolio Managers find an opportunity they believe is more compelling, or if the Portfolio Managers' outlook on the company or the market changes. Active trading may cause the Fund to have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. The Fund has the ability to change its goal without shareholder approval, although it does not currently intend to do so. The Fund will not change its strategy of normally investing at least 80% of its assets in equity securities issued by REITs and common stocks and other securities issued by other real estate companies, without providing shareholders at least 60 days' notice. This test and the test of whether a company is a real estate company are applied at the time the Fund invests; later percentage changes caused by a change in market values or company circumstances will not require the Fund to dispose of a holding. [GRAPHIC OMITTED] SMALL- AND MID-CAP COMPANIES REITS TEND TO BE SMALL- TO MID-CAP COMPANIES IN RELATION TO THE EQUITY MARKETS AS A WHOLE. REIT SHARES, THEREFORE, CAN BE MORE VOLATILE THAN, AND PERFORM DIFFERENTLY FROM, LARGE-CAP COMPANY STOCKS. SMALLER REAL ESTATE COMPANIES OFTEN HAVE NARROWER MARKETS AND MORE LIMITED MANAGERIAL AND FINANCIAL RESOURCES THAN LARGER COMPANIES. THERE MAY ALSO BE LESS TRADING IN A SMALL- OR MID-CAP COMPANY'S STOCK, WHICH MEANS THAT BUY AND SELL TRANSACTIONS IN THAT STOCK COULD HAVE A LARGER IMPACT ON THE STOCK'S PRICE THAN IS THE CASE WITH LARGE-CAP COMPANY STOCKS. [GRAPHIC OMITTED] REAL ESTATE INVESTMENT TRUSTS A REIT IS A POOLED INVESTMENT VEHICLE THAT INVESTS PRIMARILY IN INCOME-PRODUCING REAL ESTATE OR REAL ESTATE RELATED LOANS OR INTERESTS. REITS ARE NOT TAXED ON INCOME AND GAINS THAT ARE DISTRIBUTED TO SHAREHOLDERS, PROVIDED THEY COMPLY WITH THE REQUIREMENTS OF THE INTERNAL REVENUE CODE. 23 Real Estate Fund REITS ARE GENERALLY CLASSIFIED AS EQUITY REITS, MORTGAGE REITS AND HYBRID REITS. EQUITY REITS INVEST THE MAJORITY OF THEIR ASSETS DIRECTLY IN REAL PROPERTY, DERIVE THEIR INCOME PRIMARILY FROM RENTS AND CAN ALSO REALIZE CAPITAL GAINS BY SELLING PROPERTIES THAT HAVE APPRECIATED IN VALUE. MORTGAGE REITS INVEST THE MAJORITY OF THEIR ASSETS IN REAL ESTATE MORTGAGES AND DERIVE THEIR INCOME PRIMARILY FROM INTEREST PAYMENTS. HYBRID REITS COMBINE THE CHARACTERISTICS OF BOTH EQUITY AND MORTGAGE REITS. 24 Real Estate Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock and real estate markets. The markets' behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Although the Fund will not invest in real estate directly, it concentrates its assets in the real estate industry, so your investment in the Fund will be closely linked to the performance of the real estate markets. Property values may decrease due to increasing vacancies or declining rents resulting from unanticipated economic, legal, cultural or technological developments or because of overbuilding or lack of mortgage funds. The value of an individual property may also decline because of environmental liabilities or losses due to casualty or condemnation. Because of this concentration in the real estate industry, the value of the Fund's shares may change at different rates compared to the value of shares of a mutual fund with investments in a mix of different industries. The Fund may at times be more concentrated in particular sub-sectors of the real estate business -- e.g., apartments, retail, hotels, offices, industrial, health care, etc. As such, its performance would be especially sensitive to developments that significantly affected those businesses. In addition, Equity REITs may be affected by changes in the value of the underlying property they own, while Mortgage REITs may be affected by the quality of any credit they extend. Equity and Mortgage REITs are dependent upon management skills and are subject to heavy cash flow dependency, defaults by borrowers, self-liquidation and the possibility of failing to qualify for tax- free pass through of income and gains under the federal tax law. The value of debt securities tends to rise when market interest rates fall and fall when market interest rates rise. This effect is generally more pronounced the longer the maturity of a debt security. If the Fund invests in lower-rated bonds, it will be subject to their risks, including the risk its holdings may fluctuate more widely in price and yield than investment-grade bonds, fall in price when the economy is weak or expected to become weak, be difficult to sell at the time and price the Fund desires, or carry higher transaction costs. Performance may also suffer if an issuer of bonds held by the Fund defaults on payment of its debt obligations. The Fund is subject to interest rate risk, which is the risk that REIT and other real estate company share prices overall will decline over short or even long periods because of rising interest rates. During periods of high interest rates, REITs and other real estate companies may lose appeal for investors who may be able to obtain higher yields from other income-producing investments. High interest rates may also mean that financing for property purchases and improvements is more costly and difficult to obtain. Some of the REIT and other real estate company securities in which the Fund invests may be preferred stock that receives preference in the payment of dividends. Convertible preferred stock is exchangeable for common stock and may therefore be more volatile. The Fund can invest up to 15% of its net assets in illiquid securities. These securities may be more difficult to dispose of at the price at which the Fund is carrying them. Judgment also plays a greater role in pricing these securities than it does for securities having more active markets. 25 Real Estate Fund The Fund is non-diversified. This means that the percentage of the Fund's assets invested in any single issuer is not limited by the Investment Company Act of 1940. Investing a higher percentage of its assets in any one issuer would increase the Fund's risk of loss, because the value of its shares would be more susceptible to adverse events affecting that issuer. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 26 Real Estate Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 39.96 31.68 13.08 BEST QUARTER: Q4 '04, 16.53% WORST QUARTER: Q1 '05, -6.88% Year-to-date performance as of 9/30/2006: 25.44% AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- Since Inception 1 Year 5/1/2002 -------------------------------------------------------------------------------- REAL ESTATE FUND Return Before Taxes 13.08 21.97 Return After Taxes on Distributions 8.63 18.16 Return After Taxes on Distributions and Sale of Fund Shares 10.82 17.42 FTSE NAREIT Equity REITs Index 12.16 19.51 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The FTSE NAREIT Equity REITs Index is an unmanaged index of all equity REITs currently listed on the New York Stock Exchange, NASDAQ National Market System and the American Stock Exchange. -------------------------------------------------------------------------------- * The above performance is that of Real Estate Fund Trust Class. Because Institutional Class has lower expenses, its performance typically would have been slightly better than that of the Trust Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED INDEX OF THE EQUITY REIT MARKET. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. 27 Real Estate Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares held for more than 60 days, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES (% of amount redeemed or exchanged) None -------------------------------------------------------------------------------- These are deducted directly from your investment. Redemption Fee* 1.00 Exchange Fee* 1.00 -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets) These are deducted from Fund assets, so you pay them indirectly Management fees 1.00 Distribution (12b-1) fees None Other expenses** 0.32 -------------------------------------------------------------------------------- Total annual operating expenses 1.32 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.37 -------------------------------------------------------------------------------- Net expenses*** 0.95 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $97 $303 $525 $1,166 -------------------------------------------------------------------------------- * These fees are charged on investments held 60 days or less, whether Fund shares are redeemed or exchanged for shares of another Fund. see "redemption fee" for more information. ** Other expenses are estimated based on $50 million average net assets in the Fund. *** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of the Fund through 8/31/2017 so that the total annual operating expenses of that class of the Fund are limited to 0.95% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Institutional Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 0.95% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, theNeuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management fees paid to the Manager were 0.85% of average net assets before reimbursements. The Fund will pay the Manager fees at the anual rate of 0.15% of average daily net assets for administrative services provided to the Institutional Class of the Fund. 28 Real Estate Fund A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGERS STEVEN R. BROWN is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. He has managed the Fund's assets since 2002. From 1997 to 2002 he was a co-portfolio manager of a comparable fund at an investment firm specializing in securities of REITs. STEVE S. SHIGEKAWA is a Vice President of Neuberger Berman Management Inc. and of Neuberger Berman, LLC. He has been an Associate Portfolio Manager of the Fund since December 2005, and prior to that, was an analyst since 2002. He held associate analyst positions at two other investment firms from 2000 to 2002. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 29 Real Estate Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002(1) 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 10.00 9.81 11.49 14.13 14.73 PLUS: Income from investment operations Net investment income 0.12 0.31 0.26 0.19 0.20 Net gains (losses) - realized and unrealized (0.24) 1.75 3.17 3.28 3.39 Subtotal: income from investment operations (0.12) 2.06 3.43 3.47 3.59 Redemption fees 0.00 0.00 0.01 0.00 0.00 MINUS: Distributions to shareholders Income dividends 0.07 0.38 0.28 0.23 0.27 Capital gain distributions - - 0.52 2.64 2.36 Subtotal: distributions to shareholders 0.07 0.38 0.80 2.87 2.63 EQUALS: Share price (NAV) at end of year 9.81 11.49 14.13 14.73 15.69 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.50(2) 1.50 1.47 1.48 1.09 Gross expenses(3) 4.81(2) 2.19 1.93 1.86 1.90 Expenses(4) 1.50(2) 1.50 1.50 1.50 1.11 Net investment income - actual 3.53(2) 3.10 2.05 1.40 1.39 ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(5) (1.23)(6) 21.70 31.03 27.06 28.50 Net assets at end of year (in millions of dollars) 12.2 31.2 40.1 46.8 86.7 Portfolio turnover rate (%) 44(6) 85 148 129 97 ------------------------------------------------------------------------------------------------------------------------------------ The figures above are from the Real Estate Trust Class. The above figures have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Period from 5/1/2002 (beginning of operations) to 8/31/2002. (2) Annualized. (3) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (4) Shows what this ratio would have been if there had been no expense offset arrangements. (5) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. (6) Not annualized. 30 Real Estate Fund
Neuberger Berman Ticker Symbol: NBRTX REGENCY FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of mid-capitalization companies, which it defines as those with a total market capitalization with market capitalization in the range of the Russell Midcap Index. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Manager looks for undervalued companies with high-quality businesses. Factors in identifying these firms may include: -- historical low valuation -- above-average returns on invested capital -- solid balance sheets. This approach is designed to let the Fund benefit from potential increases in stock prices while limiting the risks typically associated with stocks. At times, the Portfolio Manager may emphasize certain sectors that he believes will benefit from market or economic trends. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY SHOWN RISK/RETURN CHARACTERISTICS THAT ARE IN BETWEEN THOSE OF SMALL- AND LARGE-CAP STOCKS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER COMPARATIVELY ATTRACTIVE LONG-TERM RETURNS. MID-CAPS ARE LESS WIDELY FOLLOWED IN THE MARKET THAN LARGE-CAPS, WHICH CAN MAKE IT COMPARATIVELY EASIER TO FIND ATTRACTIVE STOCKS THAT ARE NOT OVERPRICED. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 31 Regency Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. By focusing on mid-cap stocks, the Fund is subject to their risks, including the risk its holdings may: -- fluctuate more widely in price than the market as a whole -- underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when mid-cap stocks are out of favor. The Fund's value investing approach may dictate an emphasis on certain sectors of the market at any given time. To the extent the Fund invests more heavily in one sector, it thereby presents a more concentrated risk. A sector may have above average performance during particular periods, but individual sectors also tend to move up and down more than the broader market. The several industries that comprise a sector may all react in the same way to economic, political and regulatory events. The Fund's performance may also suffer if a sector does not perform as expected. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 32 Regency Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 31.24 -2.34 -11.69 35.88 22.34 12.42 BEST QUARTER: Q4 '03, 14.83% WORST QUARTER: Q3 '02, -15.37% Year-to-date performance as of 9/30/2006: -0.24% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- Since Inception 1 Year 5 Year (6/1/1999) -------------------------------------------------------------------------------- REGENCY FUND Return Before Taxes 12.42 10.02 13.59 Return After Taxes on Distributions 10.94 8.74 12.14 Return After Taxes on Distributions and Sale of Fund Shares 9.62 8.16 11.26 Russell Midcap Value Index 12.65 12.21 10.99 Russell Midcap Index 12.65 8.45 9.34 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell Midcap Value Index is an unmanaged index of U.S. midcap value stocks. The Russell Midcap Index is an unmanaged index of U.S. mid-cap stocks. -------------------------------------------------------------------------------- * The above performance is that of the Regency Fund Investor Class. Because Institutional Class has lower expenses, its performance typically would have been slightly better than that of the Investor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE U.S. MID-CAP EQUITY MARKET AND OF THE PORTION OF THAT MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. 33 Regency Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets) These are deducted from Fund assets, so you pay them indirectly. Management fees* 0.70 Distribution (12b-1)fees None Other expenses 0.27 -------------------------------------------------------------------------------- Total annual operating expenses 0.97 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.22 -------------------------------------------------------------------------------- Net expenses** 0.75 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $77 $240 $468 $1,126 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses adjusted to reflect anticipated net assets. * "Management fees" includes investment management and administration fees. ** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of the Fund through 8/31/2010 so that the total annual operating expenses of that class of the Fund are limited to 0.75% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Institutional Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 0.75% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management fees paid to the Manager were 0.55% of average net assets before reimbursements. The Fund will pay the Manager fees at the annual rate of 0.15% of average daily net assets for administrative services provided to the Fund. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 34 Regency Fund PORTFOLIO MANAGER S. BASU MULLICK is a Vice President of Neuberger Berman Management Inc., and a Managing Director of Neuberger Berman, LLC. He has managed the Fund since 2005 and has been a fund manager at Neuberger Berman Management Inc. since 1998. He previously co-managed the Fund from its inception in 1999 to 2000. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 35 Regency Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 12.92 10.58 12.14 14.44 17.37 PLUS: Income from investment operations Net investment income (loss) (0.01) (0.03) (0.03) 0.01 0.13 Net gains (losses) - realized and unrealized (0.88) 1.59 2.33 4.08 0.39 Subtotal: income from investment operations (0.89) 1.56 2.30 4.09 0.52 MINUS: Distributions to shareholders Income dividends 0.01 - - - 0.06 Capital gain distributions 1.44 - - 1.16 1.31 Subtotal: distributions to shareholders 1.45 - - 1.16 1.37 EQUALS: Share price (NAV) at end of year 10.58 12.14 14.44 17.37 16.52 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense reimbursement/repayment and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.50 1.50 1.49 1.20 1.11 Gross expenses(1) 1.46 1.57 1.42 1.18 1.12 Expenses(2) 1.50 1.50 1.50 1.21 1.12 Net investment income (loss) - actual (0.07) (0.30) (0.22) 0.09 0.75 ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(3) (7.42) 14.74 18.95 29.26 2.94 Net assets at end of year (in millions of dollars) 16.7 20.1 33.5 107.9 111.1 Portfolio turnover rate (%) 119 73 62 91 52 ------------------------------------------------------------------------------------------------------------------------------------ The figures above are from the Regency Fund Investor Class. All figures for fiscal years 2002 through and including 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement/repayment and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower/higher if Neuberger Berman Management Inc. had not reimbursed/recouped certain expenses and/or waived a portion of investment management fees. 36 Regency Fund
Neuberger Berman YOUR INVESTMENT -------------------------------------------------------------------------------- Institutional Class shares of the Funds are available through an investment provider or from Neuberger Berman Management Inc. (see "Maintaining Your Account"). -- SHARE PRICES Because Institutional Class shares of the Funds do not have a sales charge, the price you pay for each share of the Fund is the Fund's net asset value per share. Similarly, because the Funds (other than International Large Cap Fund and Real Estate Fund) do not charge fees for selling shares, your Fund pays you the full share price when you sell shares. International Large Cap Fund and Real Estate Fund imposes a redemption fee on sales or exchanges of Fund shares held 60 days or less ("see Redemption Fee"). If you use an investment provider, that provider may charge fees that are in addition to those described in this prospectus. The Funds are open for business every day the New York Stock Exchange ("Exchange") is open. The Exchange is closed on all national holidays and Good Friday; Fund shares will not be priced on those days or other days on which the Exchange is closed. Each Fund calculates its share price as of the end of regular trading on the Exchange on business days, usually 4:00 p.m. Eastern time. In general, every buy or sell order you place will go through at the next share price calculated after your order has been accepted (see "Maintaining Your Account" for information on placing orders). If you use an investment provider, you should check with it to find out by what time your order must be received so that it can be processed the same day. Depending on when it accepts orders, it is possible that the Funds' share price could change on days when you are unable to buy or sell shares. Because foreign markets may be open on days when U.S. markets are closed, the value of foreign securities owned by the Funds could change on days when you cannot buy or sell Fund shares. Remember, though, any purchase or sale takes place at the next share price calculated after your order is accepted. [GRAPHIC OMITTED] SHARE PRICE CALCULATIONS THE PRICE OF AN INSTITUTIONAL CLASS SHARE OF A FUND IS THE TOTAL VALUE OF FUND ASSETS ATTRIBUTABLE TO INSTITUTIONAL CLASS SHARES MINUS ITS LIABILITIES ATTRIBUTABLE TO THAT CLASS, DIVIDED BY THE TOTAL NUMBER OF INSTITUTIONAL CLASS SHARES OUTSTANDING. BECAUSE THE VALUE OF THE FUND'S SECURITIES CHANGES EVERY BUSINESS DAY, THE SHARE PRICE USUALLY CHANGES AS WELL. WHEN VALUING PORTFOLIO SECURITIES, THE FUNDS USE MARKET PRICES. HOWEVER, IN CERTAIN CASES, EVENTS THAT OCCUR AFTER CERTAIN MARKETS HAVE CLOSED MAY RENDER THESE PRICES UNRELIABLE. WHEN A FUND BELIEVES A REPORTED MARKET PRICE FOR A SECURITY DOES NOT REFLECT THE AMOUNT IT WOULD RECEIVE ON A CURRENT SALE OF THAT SECURITY, THE FUND MAY SUBSTITUTE FOR THE MARKET PRICE A FAIR VALUE ESTIMATE MADE ACCORDING TO METHODS APPROVED BY THE BOARD OF TRUSTEES. A FUND MAY ALSO USE THESE METHODS TO VALUE CERTAIN TYPES OF ILLIQUID SECURITIES. FAIR VALUE PRICING GENERALLY WILL BE USED IF THE EXCHANGE ON WHICH A PORTFOLIO SECURITY IS TRADED CLOSES EARLY OR IF TRADING IN A PARTICULAR SECURITY WAS HALTED DURING THE DAY AND DID NOT RESUME PRIOR TO A FUND'S NET ASSET VALUE CALCULATION. A FUND MAY ALSO USE THESE METHODS TO VALUE SECURITIES THAT TRADE IN A FOREIGN MARKET, IF SIGNIFICANT EVENTS THAT APPEAR LIKELY TO AFFECT THE VALUE OF THOSE SECURITIES OCCUR BETWEEN THE TIME THAT FOREIGN MARKET CLOSES AND THE TIME THE EXCHANGE CLOSES. SIGNIFICANT EVENTS MAY INCLUDE (1) THOSE IMPACTING A SINGLE ISSUER, (2) GOVERNMENTAL ACTIONS THAT AFFECT SECURITIES IN 37 Your Investment ONE SECTOR OR COUNTRY, (3) NATURAL DISASTERS OR ARMED CONFLICTS AFFECTING A COUNTRY OR REGION, OR (4) SIGNIFICANT DOMESTIC OR FOREIGN MARKET FLUCTUATIONS. THE EFFECT OF USING FAIR VALUE PRICING IS THAT A FUND'S NET ASSET VALUE WILL BE SUBJECT TO THE JUDGMENT OF NEUBERGER BERMAN MANAGEMENT INC., OPERATING UNDER PROCEDURES APPROVED BY THE BOARD OF TRUSTEES, INSTEAD OF BEING DETERMINED BY MARKET PRICES. -- PRIVILEGES AND SERVICES If you purchase Institutional Class shares directly from Neuberger Berman Management Inc., you have access to the services listed below. If you purchase shares through an investment provider, consult that provider for information about investment services. SYSTEMATIC INVESTMENTS -- This plan lets you take advantage of dollar-cost averaging by establishing periodic investments of $100 a month or more once you make an initial minimum investment of at least $5 million. You choose the schedule and amount. Your investment money may come from a Neuberger Berman money market fund or your bank account. SYSTEMATIC WITHDRAWALS -- This plan lets you arrange withdrawals of at least $100 from a Neuberger Berman fund on a periodic schedule. You can also set up payments to distribute the full value of an account over a given time. While this service can be helpful to many investors, be aware that it could generate capital gains or losses. ELECTRONIC BANK TRANSFERS -- When you sell Fund shares, you can have the money sent to your bank account electronically rather than mailed to you as a check. Please note that your bank must be a member of the Automated Clearing House, or ACH, system. [GRAPHIC OMITTED] DOLLAR-COST AVERAGING SYSTEMATIC INVESTING ALLOWS YOU TO TAKE ADVANTAGE OF THE PRINCIPLE OF DOLLAR-COST AVERAGING. WHEN YOU MAKE REGULAR INVESTMENTS OF A GIVEN AMOUNT -- SAY, $100 A MONTH -- YOU WILL END UP INVESTING AT DIFFERENT SHARE PRICES OVER TIME. WHEN THE SHARE PRICE IS HIGH, YOUR $100 BUYS FEWER SHARES; WHEN THE SHARE PRICE IS LOW, YOUR $100 BUYS MORE SHARES. OVER TIME, THIS CAN HELP LOWER THE AVERAGE PRICE YOU PAY PER SHARE. DOLLAR-COST AVERAGING CANNOT GUARANTEE YOU A PROFIT OR PROTECT YOU FROM LOSSES IN A DECLINING MARKET. BUT IT CAN BE BENEFICIAL OVER THE LONG TERM. -- DISTRIBUTIONS AND TAXES DISTRIBUTIONS -- Each Fund pays out to shareholders any net investment income and net realized capital gains. Ordinarily, the Funds make any distributions once a year (in December), except for Real Estate Fund, which typically distributes any net investment income quarterly. Unless you designate otherwise, your income and capital gain distributions from a Fund will be reinvested in additional Institutional Class shares of the Fund. However, if you prefer, you may receive all distributions in cash or reinvest capital gain distributions but receive income distributions in cash. Distributions taken in cash can be sent to you by check or by electronic transfer to a designated bank account or invested in Institutional Class shares of another Neuberger Berman fund with the same account registration. To take advantage of one of these options, please indicate your choice on your 38 Your Investment application. If you use an investment provider, you must consult it about whether your income and capital gain distributions will be reinvested in additional Fund shares or paid in cash. HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement plans and accounts and other tax-exempt investors, all Fund distributions you receive are generally taxable to you, regardless of whether you take them in cash or reinvest them in additional Fund shares. Fund distributions to Roth IRAs, other individual retirement accounts ("IRAs") and qualified retirement plans generally are tax-free. Eventual withdrawals from a Roth IRA also may be tax-free, while withdrawals from other retirement accounts and plans generally are subject to tax. Distributions generally are taxable to you in the year you receive them. In some cases, however, distributions you receive in January are taxable as if they had been paid the previous December 31. Your tax statement (see "Taxes and You") will help clarify this for you. Distributions of income and the excess of net short-term capital gain over net long-term capital loss are generally taxed as ordinary income. However, a Fund's dividends attributable to "qualified dividend income" (generally, dividends it receives on stock of most U.S. and certain foreign corporations with respect to which it satisfies certain holding period, financing, and other restrictions) are subject to a 15% maximum federal income tax rate for individual shareholders who satisfy those restrictions with respect to their Fund shares on which the dividends were paid. Distributions of net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss) are generally taxed as long-term capital gain and are subject to that 15% maximum rate for individual shareholders. The tax treatment of capital gain distributions from a Fund depends on how long the Fund held the securities it sold, not when you bought your shares of the Fund or whether you reinvested your distributions. HOW SHARE TRANSACTIONS ARE TAXED -- When you sell (redeem) or exchange Fund shares, you generally realize a taxable gain or loss. An exception, once again, applies to tax-advantaged retirement plan and accounts and other tax exempt investors. Any capital gain an individual shareholder recognizes on a redemption or exchange of his or her Fund shares that have been held for more than one year will qualify for the 15% maximum federal income tax rate mentioned above. [GRAPHIC OMITTED] TAXES AND YOU THE TAXES YOU ACTUALLY OWE ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS CAN VARY WITH MANY FACTORS, SUCH AS YOUR MARGINAL TAX BRACKET, HOW LONG YOU HELD YOUR SHARES, AND WHETHER YOU OWE ALTERNATIVE MINIMUM TAX. HOW CAN YOU FIGURE OUT YOUR TAX LIABILITY ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS? ONE HELPFUL TOOL IS THE TAX STATEMENT THAT WE OR YOUR INVESTMENT PROVIDER SENDS YOU EVERY JANUARY. IT DETAILS THE DISTRIBUTIONS YOU RECEIVED DURING THE PAST YEAR AND SHOWS THEIR TAX STATUS. A SEPARATE STATEMENT COVERS YOUR SHARE TRANSACTIONS. MOST IMPORTANTLY, CONSULT YOUR TAX PROFESSIONAL. EVERYONE'S TAX SITUATION IS DIFFERENT, AND YOUR PROFESSIONAL SHOULD BE ABLE TO HELP YOU ANSWER ANY QUESTIONS YOU MAY HAVE. 39 Your Investment [GRAPHIC OMITTED] BACKUP WITHHOLDING A FUND IS REQUIRED TO WITHHOLD 28% OF THE MONEY YOU ARE OTHERWISE ENTITLED TO RECEIVE FROM ITS DISTRIBUTIONS AND REDEMPTION PROCEEDS IF YOU ARE AN INDIVIDUAL OR CERTAIN OTHER NON-CORPORATE SHAREHOLDER WHO FAILS TO PROVIDE A CORRECT TAXPAYER IDENTIFICATION NUMBER TO THE FUND. WITHHOLDING AT THAT RATE ALSO IS REQUIRED FROM EACH FUND'S DISTRIBUTIONS TO WHICH YOU ARE OTHERWISE ENTITLED IF YOU ARE SUCH A SHAREHOLDER AND THE INTERNAL REVENUE SERVICE ("IRS") TELLS US THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING, OR YOU ARE SUBJECT TO BACKUP WITHHOLDING FOR ANY OTHER REASON . IN THE CASE OF A CUSTODIAL ACCOUNT FOR A NEWBORN, IF A SOCIAL SECURITY NUMBER HAS BEEN APPLIED FOR BUT IS NOT AVAILABLE WHEN YOU COMPLETE THE ACCOUNT APPLICATION, YOU MAY OPEN THE ACCOUNT WITHOUT THAT NUMBER, IF WE RECEIVE (FROM YOU OR YOUR INVESTMENT PROVIDER) THE CUSTODIAN'S DATE OF BIRTH AND SOCIAL SECURITY NUMBER TOGETHER WITH A COPY OF THE REQUEST MADE TO THE IRS FOR THE NEWBORN'S SOCIAL SECURITY NUMBER. HOWEVER, WE MUST RECEIVE THE NEW NUMBER WITHIN 60 DAYS OR THE ACCOUNT WILL BE CLOSED. FOR INFORMATION ON CUSTODIAL ACCOUNTS, CALL 800-366-6264. IF YOU USE AN INVESTMENT PROVIDER, YOU MUST SUPPLY YOUR SIGNED TAXPAYER IDENTIFICATION NUMBER FORM TO IT AND IT MUST SUPPLY ITS TAXPAYER IDENTIFICATION NUMBER TO US, IN ORDER TO AVOID BACKUP WITHHOLDING. [GRAPHIC OMITTED] BUYING SHARES BEFORE A DISTRIBUTION THE MONEY A FUND EARNS, EITHER AS INCOME OR AS CAPITAL GAINS, IS REFLECTED IN ITS SHARE PRICE UNTIL IT DISTRIBUTES THE MONEY. AT THAT TIME, THE AMOUNT OF THE DISTRIBUTION IS DEDUCTED FROM THE SHARE PRICE. THE AMOUNT OF THE DISTRIBUTION IS EITHER REINVESTED IN ADDITIONAL SHARES OF THE DISTRIBUTING CLASS OF THE FUND OR PAID TO SHAREHOLDERS IN CASH. BECAUSE OF THIS, IF YOU BUY SHARES JUST BEFORE THE FUND MAKES A DISTRIBUTION, YOU WILL END UP GETTING SOME OF YOUR INVESTMENT BACK AS A TAXABLE DISTRIBUTION. YOU CAN AVOID THIS SITUATION BY WAITING TO INVEST UNTIL AFTER THE RECORD DATE FOR THE DISTRIBUTION. GENERALLY, IF YOU ARE INVESTING IN THE FUND THROUGH A TAX-ADVANTAGED RETIREMENT PLAN OR ACCOUNT, THERE ARE NO TAX CONSEQUENCES TO YOU FROM DISTRIBUTIONS. -- MAINTAINING YOUR ACCOUNT WHEN YOU BUY SHARES -- Instructions for buying shares from Neuberger Berman Management Inc. are under "Buying Shares." See "Investment Providers" if you are buying shares through an investment provider. Whenever you make an initial investment in one of the Funds or add to your existing account (except with an automatic investment), you will be sent a statement confirming your transaction if you bought shares directly. Investors who bought shares through an investment provider should contact their provider for information regarding transaction statements. All investments must be made in U.S. dollars, and investment checks must be drawn on a U.S. bank. The minimum initial investment is $5 million. When you purchase shares, you will receive the next share price to be calculated after your order has been accepted. Purchase orders are deemed "accepted" when the Funds' transfer agent has received your check or other payment for the shares. In the case of certain institutional investors, Neuberger Berman Management Inc. will accept purchase orders when received directly or through one of its administrative agents, on the basis of a pre-existing arrangement to make payment to Neuberger 40 Your Investment Berman Management Inc. or its administrative agent by the following morning. In addition, if you have established a systematic investment program (SIP) with one or more of the Funds, your order is deemed "accepted" on the date you preselected on your SIP application for the systematic investments to occur. WHEN YOU SELL SHARES -- If you bought your shares from Neuberger Berman Management Inc., instructions for selling shares are under "Selling Shares." See "Investment Providers" if you want to sell shares you purchased through an investment provider. You can place an order to sell some or all of your shares at any time. When you sell shares, you will receive the next share price to be calculated after your order has been accepted. Redemption orders are deemed "accepted" when the Funds' transfer agent has received your order to sell. If you sell or exchange shares of International Large Cap Fund or Real Estate Fund within 60 days or less of purchase, you may be charged a redemption fee (see"Redemption Fee"). In some cases, you will have to place your order to sell shares in writing, and you will need a Medallion signature guarantee (see "Medallion Signature Guarantees"). When selling shares in an account that you do not intend to close, remember to leave at least $5 million worth of shares in the account. Otherwise, the Fund has the right to request that you bring the balance back up to the minimum level. If you have not done so within 60 days, we may close your account and wire you the proceeds. The Funds reserve the right to pay in kind for redemptions. The Funds do not redeem in kind under normal circumstances, but would do so when Neuberger Berman Management Inc. has determined that it is in the best interests of the Fund's shareholders as a whole. UNCASHED CHECKS -- We do not pay interest on uncashed checks from Fund distributions or the sale of Fund shares. We are not responsible for checks after they are sent to you. After allowing a reasonable time for delivery, please call us if you have not received an expected check. While we cannot track a check, we may make arrangements for a replacement. STATEMENTS AND CONFIRMATIONS -- Please review your account statements and confirmations carefully as soon as you receive them. You must contact us within 30 days if you have any questions or notice any discrepancies. Otherwise, you may adversely affect your right to make a claim about the transaction(s). WHEN YOU EXCHANGE SHARES -- You can move an investment from one fund to a comparable class of another fund in the fund family through an exchange of shares, or by electing to use your cash distributions from one fund to purchase shares of the other fund. There are three things to remember when making an exchange: -- both accounts must have the same registration -- you will need to observe the minimum investment and minimum account balance requirements for the Fund accounts involved -- because an exchange is a sale for tax purposes, consider any tax consequences before placing your order The exchange privilege can be withdrawn from any investor that we believe is trying to "time the market" or is otherwise making exchanges that we judge to be excessive. Frequent exchanges can interfere with fund management and affect costs and performance for other shareholders. If you sell or exchange shares of International Large Cap Fund or Real Estate Fund within 60 days or less of purchase, you may be charged a redemption fee (see "Redemption Fee"). 41 Your Investment PLACING ORDERS BY TELEPHONE -- Fund investors have the option of placing telephone orders, subject to certain restrictions. This option is available to you unless you indicate on your account application (or in a subsequent letter to us or to State Street Bank and Trust Company) that you do not want it. Whenever we receive a telephone order, we take steps to make sure the order is legitimate. These may include asking for identifying information and recording the call. As long as a Fund and its representatives take reasonable measures to verify the authenticity of calls, investors may be responsible for any losses caused by unauthorized telephone orders. In unusual circumstances, it may be difficult to place an order by phone. In these cases, consider sending your order by express delivery. PROCEEDS FROM THE SALE OF SHARES -- The proceeds from the shares you sell are generally sent out the next business day after your order is executed, and nearly always within seven business days. There are two cases in which proceeds may be delayed beyond this time: -- in unusual circumstances where the law allows additional time if needed -- if a check you wrote to buy shares has not cleared by the time you sell those shares; clearance may take up to15 calendar days from the date of purchase If you think you may need to sell shares soon after buying them, you can avoid the check clearing time by investing by wire. The Funds do not issue certificates for shares. OTHER POLICIES -- Under certain circumstances, the Funds reserve the right to: -- suspend the offering of shares -- reject any exchange or purchase order -- suspend or reject future purchase orders from any investor who does not provide payment to settle a purchase order -- change, suspend, or revoke the exchange privilege -- suspend the telephone order privilege -- satisfy an order to sell Fund shares with securities rather than cash, for certain very large orders -- suspend or postpone your right to sell Fund shares on days when trading on the Exchange is restricted, or as otherwise permitted by the Securities and Exchange Commission ("SEC") -- change its investment minimums or other requirements for buying and selling, or waive any minimums or requirements for certain investors -- take orders to purchase or sell Fund shares when the Exchange is closed. In such a case, the Fund would post a notice on the Neuberger Berman website, www.nb.com [GRAPHIC OMITTED] MEDALLION SIGNATURE GUARANTEES YOU MAY NEED A MEDALLION SIGNATURE GUARANTEE WHEN YOU SELL SHARES DIRECTLY OR THROUGH AN INVESTMENT PROVIDER. A MEDALLION SIGNATURE GUARANTEE IS A GUARANTEE THAT YOUR SIGNATURE IS AUTHENTIC. MOST BANKS, BROKERS, AND OTHER FINANCIAL INSTITUTIONS CAN PROVIDE YOU WITH ONE. SOME MAY CHARGE A FEE; OTHERS MAY NOT, PARTICULARLY IF YOU ARE A CUSTOMER OF THEIRS. 42 Your Investment MEDALLION SIGNATURE GUARANTEES ARE REQUIRED FOR A VARIETY OF TRANSACTIONS INCLUDING REQUESTS FOR CHANGES TO YOUR ACCOUNT OR TO THE INSTRUCTIONS FOR DISTRIBUTION OF PROCEEDS. WE RESERVE THE RIGHT TO REQUIRE A MEDALLION SIGNATURE GUARANTEE ON ANY TRANSACTION AT OUR DISCRETION. A NOTARIZED SIGNATURE FROM A NOTARY PUBLIC IS NOT A MEDALLION SIGNATURE GUARANTEE. [GRAPHIC OMITTED] INVESTMENT PROVIDERS THE INSTITUTIONAL CLASS SHARES AVAILABLE IN THIS PROSPECTUS MAY ALSO BE PURCHASED THROUGH CERTAIN INVESTMENT PROVIDERS SUCH AS BANKS, BROKERAGE FIRMS, WORKPLACE RETIREMENT PROGRAMS, AND FINANCIAL ADVISERS. THE FEES AND POLICIES OUTLINED IN THIS PROSPECTUS ARE SET BY THE FUNDS AND BY NEUBERGER BERMAN MANAGEMENT INC. HOWEVER, IF YOU USE AN INVESTMENT PROVIDER, MOST OF THE INFORMATION YOU WILL NEED FOR MANAGING YOUR INVESTMENT WILL COME FROM THAT PROVIDER. THIS INCLUDES INFORMATION ON HOW TO BUY AND SELL SHARES, INVESTOR SERVICES, AND ADDITIONAL POLICIES. IF YOU USE AN INVESTMENT PROVIDER, YOU MUST CONTACT THAT PROVIDER TO BUY OR SELL SHARES OF ANY OF THE FUNDS DESCRIBED IN THIS PROSPECTUS. MOST INVESTMENT PROVIDERS ALLOW YOU TO TAKE ADVANTAGE OF THE NEUBERGER BERMAN FUND EXCHANGE PROGRAM, WHICH IS DESIGNED FOR MOVING AN INVESTMENT FROM ONE FUND TO A COMPARABLE CLASS OF ANOTHER FUND IN THE FUND FAMILY THROUGH AN EXCHANGE OF SHARES (SEE"WHEN YOU EXCHANGE SHARES"). IN EXCHANGE FOR THE SERVICES IT OFFERS, YOUR INVESTMENT PROVIDER MAY CHARGE FEES, WHICH ARE IN ADDITION TO THOSE DESCRIBED IN THIS PROSPECTUS. [GRAPHIC OMITTED] ADDITIONAL PAYMENT TO INVESTMENT PROVIDERS NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES MAY PAY ADDITIONAL COMPENSATION, OUT OF THEIR OWN RESOURCES AND NOT AS AN EXPENSE OF THE FUNDS, TO YOUR INVESTMENT PROVIDER OR OTHER FINANCIAL INTERMEDIARIES, INCLUDING AFFILIATES, IN CONNECTION WITH THE SALE, DISTRIBUTION, RETENTION AND/OR SERVICING OF FUND SHARES. IN SOME CASES, THESE PAYMENTS MAY CREATE AN INCENTIVE FOR YOUR INVESTMENT PROVIDER OR ITS EMPLOYEES TO RECOMMEND OR SELL SHARES OF THE FUNDS TO YOU. IF YOU HAVE PURCHASED SHARES OF A FUND THROUGH AN INVESTMENT PROVIDER, PLEASE SPEAK WITH YOUR INVESTMENT PROVIDER TO LEARN MORE ABOUT ANY PAYMENTS IT RECEIVES FROM NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES, AS WELL AS FEES AND/ OR COMMISSIONS THE INVESTMENT PROVIDER CHARGES. YOU SHOULD ALSO CONSULT DISCLOSURES MADE BY YOUR INVESTMENT PROVIDER AT THE TIME OF PURCHASE. ANY SUCH PAYMENTS WILL NOT CHANGE THE NET ASSET VALUE OR THE PRICE OF EACH FUND'S SHARES. FOR MORE INFORMATION, PLEASE SEE THE FUNDS' STATEMENT OF ADDITIONAL INFORMATION. [GRAPHIC OMITTED] INFORMATION REQUIRED FROM NEW ACCOUNTS TO HELP THE U.S. GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHEN YOU OPEN AN ACCOUNT, WE (WHICH MAY INCLUDE YOUR INVESTMENT PROVIDER ACTING ON OUR BEHALF) WILL REQUIRE YOUR NAME, ADDRESS, DATE OF BIRTH, AND SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER. WE MAY ALSO REQUIRE OTHER IDENTIFYING DOCUMENTS. IF WE CANNOT VERIFY THE INFORMATION YOU SUPPLY TO US OR IF IT IS INCOMPLETE, WE MAY BE REQUIRED TO RETURN YOUR FUNDS OR REDEEM YOUR ACCOUNT. 43 Your Investment If you are buying or selling shares directly, instructions are provided in the following charts. Investors buying or selling shares through an investment provider should contact it for instructions. BUYING SHARES -------------------------------------------------------------------------------------------------------------------------------- Method Things to know Instructions -------------------------------------------------------------------------------------------------------------------------------- SENDING US A CHECK Your first investment must be at least $5 million Fill out the application and enclose your check We cannot accept cash, money orders, starter checks, cashier's checks, travelers checks, or If regular first-class mail, send to: other cash equivalents Neuberger Berman Funds Boston Service Center You will be responsible for any losses or fees P.O. Box 8403 resulting from a bad check; if necessary, we may Boston, MA 02266-8403 sell other shares belonging to you in order to cover these losses If express delivery, registered mail, or certified mail, send to: All checks must be made out to "Neuberger Neuberger Berman Funds Berman Funds"; we cannot accept checks made c/o State Street Bank and Trust Company out to you or other parties and signed over to us 30 Dan Road Canton, MA 02021 -------------------------------------------------------------------------------------------------------------------------------- WIRING MONEY Your first investment must be at least $5 million Before wiring any money, call 800-366-6264 for an order confirmation Have your financial institution send your wire to State Street Bank and Trust Company Include your name, the Fund name, your account number and other information as requested -------------------------------------------------------------------------------------------------------------------------------- EXCHANGING FROM ANOTHER All exchanges must be for at least $1,000 Call 800-366-6264 to place your order FUND Both accounts involved must be registered in the same name, address and tax ID number An exchange order cannot be cancelled or changed once it has been placed -------------------------------------------------------------------------------------------------------------------------------- BY TELEPHONE We do not accept phone orders for a first Call 800-366-6264 to notify us of your investment purchase Additional shares will be purchased when your Immediately follow up with a wire or order is accepted electronic transfer Not available on retirement accounts -------------------------------------------------------------------------------------------------------------------------------- SETTING UP SYSTEMATIC All investments must be at least $100 (in Call 800-366-6264 for instructions INVESTMENTS addition to an initial minimum investment of at least $5 million) -------------------------------------------------------------------------------------------------------------------------------- 44 Your Investment
SELLING SHARES
-------------------------------------------------------------------------------------------------------------------------------- Method Things to know Instructions -------------------------------------------------------------------------------------------------------------------------------- SENDING US A LETTER Unless you instruct us otherwise, we will mail Send us a letter requesting us to sell shares your proceeds by check to the address of record, signed by all registered owners; include your payable to the registered owner(s) name, account number, the Fund name, the dollar amount or number of shares you want If you have designated a bank account on your to sell, and any other instructions application, you can request that we wire the proceeds to this account If regular first-class mail, send to: Neuberger Berman Funds You can also request that we send the proceeds Boston Service Center to your designated bank account by electronic P.O. Box 8403 transfer (ACH) Boston, MA 02266-8403 You may need a Medallion signature guarantee If express delivery, registered mail, or certified mail, send to: Please also supply us with your e-mail address Neuberger Berman Funds and daytime telephone number when you write to c/o State Street Bank and Trust Company us in the event we need to reach you 30 Dan Road Canton, MA 02021 -------------------------------------------------------------------------------------------------------------------------------- SENDING US A FAX Not available if you have changed the address on Write a request to sell shares as described the account in the past 15 days above Call 800-366-6264 to obtain the appropriate fax number -------------------------------------------------------------------------------------------------------------------------------- CALLING IN YOUR ORDER Not available if you have declined the phone Call 800-366-6264 to place your order option or are selling shares in certain retirement accounts (The only exception is for those Give your name, account number, the Fund retirement shareholders who are at least 59 1/2 or name, the dollar amount or number of shares older and have their birthdates on file) you want to sell, and any other instructions Not available if you have changed the address on the account in the past 15 days -------------------------------------------------------------------------------------------------------------------------------- EXCHANGING INTO ANOTHER All exchanges must be for at least $1,000 Call 800-366-6264 to place your order FUND Both accounts must be registered in the same name, address and tax ID number An exchange order cannot be cancelled or changed once it has been placed -------------------------------------------------------------------------------------------------------------------------------- SETTING UP SYSTEMATIC Withdrawals must be at least $100 Call 800-366-6264 for instructions WITHDRAWALS -------------------------------------------------------------------------------------------------------------------------------- REDEMPTION FEE International Large Cap Fund and Real Estate See "Redemption Fee" or call 800-366-6264 Fund charge a 2.00% and 1.00% redemption fee, for more information respectively, on shares redeemed or exchanged within 60 days or less of purchase -------------------------------------------------------------------------------------------------------------------------------- 45 Your Investment
[GRAPHIC OMITTED] RETIREMENT PLANS WE OFFER INVESTORS A NUMBER OF TAX-ADVANTAGED PLANS FOR RETIREMENT SAVING: TRADITIONAL IRAS ALLOW MONEY TO GROW TAX-DEFERRED UNTIL YOU TAKE IT OUT, USUALLY AT OR AFTER RETIREMENT. CONTRIBUTIONS ARE DEDUCTIBLE FOR SOME INVESTORS, BUT EVEN WHEN THEY ARE NOT, AN IRA CAN BE BENEFICIAL. ROTH IRAS OFFER TAX-FREE GROWTH LIKE A TRADITIONAL IRA, BUT INSTEAD OF TAX-DEDUCTIBLE CONTRIBUTIONS, THE WITHDRAWALS ARE TAX-FREE FOR INVESTORS WHO MEET CERTAIN REQUIREMENTS. ALSO AVAILABLE: SEP-IRA, SIMPLE, KEOGH, AND OTHER TYPES OF PLANS. COVERDELL EDUCATION SAVINGS ACCOUNTS (FORMERLY EDUCATION IRAS), THOUGH NOT FOR RETIREMENT SAVINGS, ALSO ARE AVAILABLE. CONSULT YOUR TAX PROFESSIONAL TO FIND OUT WHICH TYPES OF PLANS OR ACCOUNTS MAY BE BENEFICIAL FOR YOU, THEN CALL 800-366-6264 FOR INFORMATION ON ANY NEUBERGER BERMAN RETIREMENT PLAN OR ACCOUNT. -- REDEMPTION FEE If you sell your shares of International Large Cap Fund or Real Estate Fund or exchange them for shares of another fund within 60 days of your purchase, you will be charged a fee of 2.00% in the case of International Large Cap Fund, and a fee of 1.00% in the case of Real Estate Fund, on the current net asset value of the shares sold or exchanged. The fee is paid to the respective Fund to offset costs associated with short-term trading, such as portfolio transaction and administrative costs. The Funds use a "first-in, first-out" method to determine how long you have held your Fund shares. This means that if you bought shares on different days, the shares purchased first will be considered redeemed first for purposes of determining whether the redemption fee will be charged. We may not impose the redemption fee on a redemption or an exchange of: -- shares acquired by reinvestment of dividends or other distributions of the Funds; -- shares held in an account of certain retirement plans; -- shares purchased through other investment providers, if the provider imposes a similar type of fee or otherwise has a policy in place to deter short-term trading; or -- shares held in certain rebalancing and asset allocation programs. You should contact your investment provider to determine whether it imposes a redemption fee or otherwise has a policy in place to deter short-term trading. From time to time, as circumstances change, we may modify or eliminate certain exemption categories. -- MARKET TIMING POLICY Frequent purchases, exchanges and redemptions of Fund shares ("market-timing activities") can interfere with Fund management and affect costs and performance for other shareholders. To discourage market-timing activities by Fund shareholders, the Board of Trustees has adopted market-timing policies and has approved the procedures of the principal underwriter for implementing those policies. As described earlier in this prospectus, pursuant to such policies, the exchange privilege can be withdrawn from any investor that is believed to be "timing the market" or is otherwise making exchanges judged to be excessive. In furtherance of these policies, under 46 Your Investment certain circumstances, the Funds reserve the right to reject any exchange or purchase order; change, suspend or revoke the exchange privilege; or suspend the telephone order privilege. To further discourage excessive trading, if a shareholder sells shares of International Large Cap Fund or Real Estate Fund or exchanges them for shares of another fund within 60 days of purchase, the shareholder will be charged a fee of 2.00% (in the case of International Large Cap Fund) or 1.00% (in the case of Real Estate Fund) on the current net asset value of the shares sold or exchanged. The fee is paid to the respective Funds to offset costs associated with short-term trading, such as portfolio transaction and administrative costs, and is imposed uniformly on all applicable shareholders, with only a few exceptions. The Funds may not impose the fee on a redemption or exchange of: shares acquired by reinvestment of dividends or other distributions of the Funds; shares held in an account of certain retirement plans; shares purchased through other investment providers, if the provider imposes a similar type of fee or otherwise has a policy in place to deter short-term trading; or shares held in certain rebalancing and asset allocation programs. Neuberger Berman Management Inc. applies the Funds' policies and procedures with respect to market-timing activities by monitoring trading activity in the Funds, identifying excessive trading patterns, and warning or prohibiting shareholders who trade excessively from making further purchases or exchanges of Fund shares. These policies and procedures are applied consistently to all shareholders. Although the Funds make an effort to monitor for market-timing activities, the ability of the Funds to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and other approved intermediaries may be limited in those instances in which the investment intermediary maintains the underlying shareholder accounts. Accordingly, there can be no assurance that the Funds will be able to eliminate all market-timing activities. -- PORTFOLIO HOLDINGS POLICY A description of the Funds' policies and procedures with respect to the disclosure of the Funds' portfolio holdings is available in the Funds' Statement of Additional Information. The complete portfolio holdings for the Funds is available at http://www.nb.com/ind/mutual_funds/prospectuses/ 15-30 days after each month- end. The Funds' complete portfolio holdings will remain available at www.nb.com until the subsequent month-end holdings have been posted. Complete holdings for the Funds will also be available in reports on Form N-Q or Form N-CSR filed with the SEC. Historical portfolio holdings are available upon request. -- FUND STRUCTURE Each Fund uses a "multiple class" structure. Each Neuberger Berman funds offer one or more classes of shares that have identical investment programs, but different arrangements for distribution and shareholder servicing and, consequently, different expenses. This prospectus relates solely to the Institutional Class shares of the Funds. 47 Your Investment [GRAPHIC OMITTED] NEUBERGER BERMAN EQUITY FUNDS INSTITUTIONAL CLASS SHARES No load, sales charges or 12b-1 fees If you would like further details on these Funds you can request a free copy of the following documents: SHAREHOLDER REPORTS -- The shareholder reports offer information about each Fund's recent performance, including: -- a discussion by the Portfolio Managers about strategies and market conditions that significantly affect the Fund's performance -- Fund performance data and financial statements -- portfolio holdings STATEMENT OF ADDITIONAL INFORMATION (SAI) -- The SAI contains more comprehensive information on these Funds, including: -- various types of securities and practices, and their risks -- investment limitations and additional policies -- information about each Fund's management and business structure The SAI is hereby incorporated by reference into this prospectus, making it legally part of the prospectus. Investment manager: NEUBERGER BERMAN MANAGEMENT INC. Sub-adviser: NEUBERGER BERMAN, LLC [GRAPHIC OMITTED] OBTAINING INFORMATION You can obtain a shareholder report, SAI, and other information from your investment provider, or from: NEUBERGER BERMAN MANAGEMENT INC. 605 Third Avenue 2nd Floor New York, NY 10158-0180 800-877-9700 212-476-8800 Broker/Dealer and Institutional Services: 800-366-6264 Web site: www.nb.com Email: fundinquiries@nb.com You can also request copies of this information from the SEC for the cost of a duplicating fee by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, 100 F Street, N.E., Washington, DC 20549-9303. They are also available from the EDGAR Database on the SEC's website at www.sec.gov. You may also view and copy the documents at the SEC's Public Reference Room in Washington. Call 202-551-8090 for information about the operation of the Public Reference Room. [GRAPHIC OMITTED] G0491 12/06 SEC file number: 811-582 [GRAPHIC OMITTED] 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.nb.com [GRAPHIC OMITTED] PROSPECTUS - DECEMBER 20, 2006 These securities, like the securities of all mutual funds, have not been approved or disapproved by the Securities and Exchange Commission, and the Securities and Exchange Commission has not determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. Neuberger Berman Equity Funds INSTITUTIONAL CLASS SHARES Fasciano Fund Focus Fund Guardian Fund Manhattan Fund Millennium Fund Socially Responsive Fund Contents -------------------------------------------------------------------------------- EQUITY FUNDS Fasciano Fund................................................................2 Focus Fund...................................................................8 Guardian Fund...............................................................14 Manhattan Fund..............................................................20 Millennium Fund.............................................................26 Socially Responsive Fund....................................................32 YOUR INVESTMENT Share Prices................................................................39 Privileges and Services.....................................................40 Distributions and Taxes.....................................................40 Maintaining Your Account....................................................42 Market Timing Policy........................................................48 Portfolio Holdings Policy...................................................48 Fund Structure..............................................................49 THESE FUNDS: o are designed for investors with long-term goals in mind -- offer you the opportunity to participate in financial markets through professionally managed portfolios o also offer the opportunity to diversify your portfolio with Funds that invest using a value or a growth approach, or a combination of the two o carry certain risks, including the risk that you could lose money if Fund shares, when you sell them, are worth less than what you originally paid. This prospectus discusses principal risks of investing in Fund shares. These and other risks are discussed in more detail in the Statement of Additional Information (see back cover) o are mutual funds, not bank deposits, and are not guaranteed or insured by the FDIC or any other government agency o normally invest at least 80% of net assets in equity securities The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman, LLC. "Neuberger Berman Management Inc." and the individual Fund names in this prospectus are either service marks or registered service marks of Neuberger Berman Management Inc.(c) 2006 Neuberger Berman Management Inc. All rights reserved. Neuberger Berman FASCIANO FUND Ticker Symbol: -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM CAPITAL GROWTH. THE PORTFOLIO MANAGER ALSO MAY CONSIDER A COMPANY'S POTENTIAL FOR CURRENT INCOME PRIOR TO SELECTING IT FOR THE FUND. To pursue this goal, the Fund invests mainly in common stocks of small-capitalization companies, which it defines as those with a total market value of no more than $1.5 billion at the time the Fund first invests in them. The Fund may continue to hold or add to a position in a stock after the issuer has grown beyond $1.5 billion. These stocks include securities having common stock characteristics, such as securities convertible into common stocks, and rights and warrants to purchase common stocks. The Portfolio Manager currently looks for companies with: o strong business franchises that are likely to sustain long-term rates of earnings growth for a three to five year time horizon, and o stock prices that the market has undervalued relative to the value of similar companies and that offer excellent potential to appreciate over a three to five year time horizon. In choosing companies that the Portfolio Manager believes are likely to achieve the Fund's objective, the Portfolio Manager also will consider the company's overall business qualities. These qualities include the company's profitability and cash flow, financial condition, insider ownership, and stock valuation. In selecting companies that the Portfolio Manager believes may have greater potential to appreciate in price, the Portfolio Manager will invest the Fund in smaller companies that are not closely followed by major Wall Street brokerage houses and large asset management firms. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] SMALL-CAP STOCKS HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE LAST 40 YEARS, SMALL-CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] GROWTH VS. VALUE INVESTING VALUE INVESTORS SEEK STOCKS TRADING AT BELOW MARKET AVERAGE PRICES BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES BEFORE OTHER INVESTORS DISCOVER THEIR WORTH. GROWTH INVESTORS SEEK COMPANIES THAT ARE ALREADY SUCCESSFUL BUT MAY NOT HAVE REACHED THEIR FULL POTENTIAL. THE FUND'S BLENDED INVESTMENT APPROACH SEEKS TO LOWER RISK BY DIVERSIFYING ACROSS COMPANIES AND INDUSTRIES WITH GROWTH AND VALUE CHARACTERISTICS, AND CAN PROVIDE A CORE SMALL-CAP FOUNDATION WITHIN A DIVERSIFIED PORTFOLIO. 2 Fasciano Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. The stocks of smaller companies in which the Fund invests are often more volatile and less liquid than the stocks of larger companies, and these companies: o may have a shorter history of operations than larger companies; o may not have as great an ability to raise additional capital; o may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also: o underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor; o be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. The Fund will combine value and growth styles of investing. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund may at times invest a portion of its assets in mid-cap stocks. For a discussion of the risks associated with mid-cap stocks, see the Appendix. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 3 Fasciano Fund [GRAPHIC OMITTED] PERFORMANCE The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 26.54 21.51 7.19 6.16 1.70 4.46 -8.67 29.72 12.55 2.60 BEST QUARTER: Q2 '03, 19.46% WORST QUARTER: Q3 '98, -13.41% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- FASCIANO FUND Return Before Taxes 2.60 7.40 9.78 Return After Taxes on Distributions 2.04 7.00 9.19 Return After Taxes on Distributions and Sale of Fund Shares 2.44 6.32 8.44 Russell 2000 Index 4.55 8.22 9.26 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The Russell 2000 Index is an unmanaged index of U.S. small- cap stocks. -------------------------------------------------------------------------------- * The above performance is that of the Fasciano Fund Investor Class. Because the Institutional Class has lower expenses, its performance typically would have been slightly better than that of the Investor Class. The year-by-year and average annual total return data for the periods prior to 3/24/2001 are those of Neuberger Berman Fasciano Fund's predecessor, Fasciano Fund, Inc. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. 4 Fasciano Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets) These are deducted from Fund assets, so you pay them indirectly. Management fees* 1.00 Distribution (12b-1) fees None Other expenses 0.16 -------------------------------------------------------------------------------- Total annual operating expenses 1.16 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.21 -------------------------------------------------------------------------------- Net expenses** 0.95 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses 97 303 574 1,350 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses adjusted to reflect anticipated net assets. * "Management fees" includes investment management and administration fees. ** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of the Fund through 8/31/2010 so that the total annual operating expenses of the Institutional Class of the Fund are limited to 0.95% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Institutional Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 0.95% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management fees paid to the Manager were 0.84% of average net assets. The Fund will pay the Manager fees at the annual rate of 0.15% of average daily net assets for administrative services provided to the Fund. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 5 Fasciano Fund PORTFOLIO MANAGER MICHAEL FASCIANO is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC and has managed the Fund's assets since its inception. Prior to joining Neuberger Berman, he managed Fasciano Fund, Inc. from its inception in 1988 to 2001. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 6 Fasciano Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
-------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 -------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 33.93 31.19 35.39 39.81 43.83 PLUS: Income from investment operations Net investment income (loss) (0.16) (0.11) (0.20) (0.05) (0.12) Net gains (losses) - realized and unrealized (1.50) 4.31 4.81 5.41 (0.25) Subtotal: income from investment operations (1.66) 4.20 4.61 5.36 (0.37) MINUS: Distributions to shareholders Capital gain distributions 1.08 - 0.19 1.34 1.61 EQUALS: Share price (NAV) at end of year 31.19 35.39 39.81 43.83 41.85 -------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 1.36 1.24 1.22 1.20 1.20 Gross expenses(1) - - 1.23 1.21 1.21 Expenses(2) 1.36 1.24 1.23 1.20 1.21 Net investment income (loss) - actual (0.48) (0.36) (0.52) (0.13) (0.28) -------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (4.99) 13.47 13.06(3) 13.60(3) (0.95)(3) Net assets at end of year (in millions of dollars) 214.1 277.6 364.9 520.6 484.5 Portfolio turnover rate (%) 24 24 17 22 39
The figures above are from the Fasciano Fund Investor Class. The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 7 Fasciano Fund Neuberger Berman FOCUS FUND Ticker Symbol: -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of companies of any size that fall within the following sectors: o autos and housing o machinery and equipment o consumer goods and services o media and entertainment o defense and aerospace o retailing o energy o technology o financial services o transportation o health care o utilities o heavy industry At any given time, the Fund intends to place most of its assets in those sectors that the Portfolio Manager believes are undervalued. The Fund generally invests at least 90% of its net assets in no more than six sectors and may invest 50% or more of its assets in any one sector. The Portfolio Manager looks for undervalued companies. Factors in identifying these firms may include above-average returns, an established market niche, and sound future business prospects. This approach is designed to let the Fund benefit from potential increases in stock prices, while limiting the risks typically associated with investing in a small number of sectors. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] INDUSTRY SECTORS THE ECONOMY IS DIVIDED INTO SECTORS, EACH MADE UP OF RELATED INDUSTRIES. BY FOCUSING ON SEVERAL SECTORS AT A TIME, THE FUND CAN ADD A MEASURE OF DIVERSIFICATION AND STILL PURSUE THE PERFORMANCE POTENTIAL OF INDIVIDUAL SECTORS. TO THE EXTENT THE FUND INVESTS MORE HEAVILY IN ONE SECTOR, IT THEREBY PRESENTS A MORE CONCENTRATED RISK. A SECTOR MAY HAVE ABOVE AVERAGE PERFORMANCE DURING PARTICULAR PERIODS, BUT INDIVIDUAL SECTORS ALSO TEND TO MOVE UP AND DOWN MORE THAN THE BROADER MARKET. ALTHOUGH THE FUND DOES NOT INVEST MORE THAN 25% OF TOTAL ASSETS IN ANY ONE INDUSTRY, THE SEVERAL INDUSTRIES THAT COMPRISE A SECTOR MAY ALL REACT IN THE SAME WAY TO ECONOMIC, POLITICAL AND REGULATORY EVENTS. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 8 Focus Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Because the Fund typically focuses on a few sectors at a time, its performance is likely to be disproportionately affected by the factors influencing those sectors. To the extent the Fund invests more heavily in one sector, the risks of that sector are magnified. (See the Appendix for a discussion of sector-specific risks.) To the extent that the Fund emphasizes a particular market capitalization, it takes on the associated risks. Mid- and small-cap stocks tend to be more volatile than large-cap stocks. At any given time, any one of these market capitalizations may be out of favor with investors. If the Fund emphasizes that market capitalization, it could perform worse than certain other funds. The Fund is non-diversified. This means that the percentage of the Fund's assets invested in any single issuer is not limited by the Investment Company Act of 1940. Investing a higher percentage of its assets in any one issuer would increase the Fund's risk of loss, because the value of its shares would be more susceptible to adverse events affecting that issuer. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 9 Focus Fund [GRAPHIC OMITTED] PERFORMANCE The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- [GRAPHIC OMITTED] 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 16.2 24.15 13.24 26.02 12.42 -6.69 -36.41 64.89 5.00 0.00 BEST QUARTER: Q4 '98, 34.51% WORST QUARTER: Q3 '02, -31.87% AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* 1 Year 5 Years 10 Years FOCUS FUND Return Before Taxes 0.00 0.54 9.05 Return After Taxes on Distributions -2.08 -0.17 7.40 Return After Taxes on Distributions and Sale of Fund Shares 2.82 0.38 7.31 Russell 1000 Value Index 7.05 5.28 10.94 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 1000 Value Index is an unmanaged index of U.S. mid- and large-cap value stocks. The S&P 500 Index is an unmanaged index of U.S. stocks. * The above performance is that of the Focus Fund Investor Class. Because the Institutional Class has lower expenses, its performance typically would have been slightly better than that of the Investor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING MAINLY IN LARGE-CAP STOCKS PRIOR TO SEPTEMBER 1998, ITS PERFORMANCE DURING THAT TIME MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 10 Focus Fund [GRAPHIC OMITTED] INVESTOR EXPENSES The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets) These are deducted from Fund assets, so you pay them indirectly. Management fees* 0.65 Distribution (12b-1) fees None Other expenses 0.13 -------------------------------------------------------------------------------- Total annual operating expenses 0.78 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.13 -------------------------------------------------------------------------------- Net expenses** 0.65 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses 66 208 393 928 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses adjusted to reflect anticipated net assets. * "Management fees" includes investment management and administration fees. ** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of the Fund through 8/31/2010 so that the total annual operating expenses of the Institutional Class of the Fund are limited to 0.65% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Institutional Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 0.65% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management fees paid to the Manager were 0.49% of average net assets. The Fund will pay the Manager fees at the annual rate of 0.15% of average daily net assets for administrative services provided to the Fund. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER ROBERT B. CORMAN is a Vice President of Neuberger Berman Management Inc. and Managing Director of Neuberger Berman, LLC. He has been the Portfolio Manager of the Fund since 11 Focus Fund October 2005. Previously, he co-managed the Fund's assets from November 2003 to September 2005. He held senior positions in portfolio management at four other firms since 1981. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 12 Focus Fund [GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 --------------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 36.11 23.05 32.28 31.96 37.21 PLUS: Income from investment operations Net investment income (loss) 0.01 0.05 0.08 0.21 0.13 Net gains (losses) - realized and unrealized (10.65) 9.18 (0.35) 5.12 2.24 Subtotal: income from investment operations (10.64) 9.23 (0.27) 5.33 2.37 MINUS: Distributions to shareholders Income dividends - - 0.05 0.08 0.24 Capital gain distributions 2.42 - - - 5.04 Subtotal: distributions to shareholders 2.42 - 0.05 0.08 5.28 EQUALS: Share price (NAV) at end of year 23.05 32.28 31.96 37.21 34.30 --------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 0.87 0.90 0.85 0.87 0.87 Gross expenses(1) - - 0.86 0.87 0.87 Expenses(2) 0.87 0.90 0.86 0.87 0.88 Net investment income (loss) - actual 0.02 0.21 0.21 0.57 0.37 --------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (31.58) 40.04 (0.84)(3) 16.69(3) 7.00(3) Net assets at end of year (in millions of dollars) 1,024.6 1,300.0 1,198.9 1,185.4 1,093.1 Portfolio turnover rate turnover rate 25 24 27 19 41 ---------------------------------------------------------------------------------------------------------------------------------
The figures above are from the Focus Fund Investor Class. The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 13 Focus Fund Neuberger Berman GUARDIAN FUND Ticker Symbol: -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL; CURRENT INCOME IS A SECONDARY GOAL. To pursue these goals, the Fund invests mainly in common stocks of mid- to large-capitalization companies. The Fund seeks to reduce risk by investing across many different industries. The Portfolio Managers employ a research driven and valuation sensitive approach to stock selection. They seek to identify stocks in well-positioned businesses that they believe are undervalued in the market. They look for solid balance sheets, strong management teams with a track record of success, good cash flow, the prospect for above average earnings growth, and other valuation-related factors. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, when the company's business fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID- AND LARGE-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY PERFORMED MORE LIKE SMALL-CAPS THAN LIKE LARGE-CAPS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER ATTRACTIVE LONG-TERM RETURNS. LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. COMPARED TO MID-CAP COMPANIES, THEY MAY BE LESS RESPONSIVE TO CHANGE, BUT THEIR RETURNS HAVE SOMETIMES LED THOSE OF MID-CAP COMPANIES, OFTEN WITH LOWER VOLATILITY. [GRAPHIC OMITTED] VALUATION SENSITIVE INVESTING IN ADDITION TO TRADITIONAL VALUE INVESTING - I.E., LOOKING FOR VALUE AMONG COMPANIES WHOSE STOCK PRICES ARE BELOW THEIR HISTORIC AVERAGE, BASED ON EARNINGS, CASH FLOW, OR OTHER FINANCIAL MEASURES - WE MAY ALSO BUY A COMPANY'S SHARES IF THEY LOOK MORE FULLY PRICED BASED ON WALL STREET CONSENSUS ESTIMATES OF EARNINGS, BUT STILL INEXPENSIVE RELATIVE TO OUR ESTIMATES. WE LOOK FOR THESE COMPANIES TO RISE IN PRICE AS THEY OUTPERFORM WALL STREET'S EXPECTATIONS, BECAUSE SOME ASPECTS OF THE BUSINESS HAS NOT BEEN FULLY APPRECIATED OR APPROPRIATELY PRICED BY OTHER INVESTORS. 14 Guardian Fund [GRAPHIC OMITTED] MAIN RISKS Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. To the extent that the Fund emphasizes mid- or large-cap stocks, it takes on the associated risks. Mid-cap stocks tend to be more volatile than large-cap stocks and are usually more sensitive to economic, political, regulatory and market factors. At any given time, one or both groups of stocks may be out of favor with investors. With a valuation sensitive approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 15 Guardian Fund [GRAPHIC OMITTED] PERFORMANCE The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 17.88 17.94 2.35 8.46 -1.86 -1.84 -25.75 35.14 16.06 8.44 BEST QUARTER: Q4 '98, 23.12% WORST QUARTER: Q3 '98, -26.19% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- GUARDIAN FUND Return Before Taxes 8.44 4.39 6.50 Return After Taxeson Distributions 8.33 4.20 4.53 Return After Taxes on Distributions and Sale of Fund Shares 5.63 3.67 4.79 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The S&P 500 Index is an unmanaged index of U.S. stocks. -------------------------------------------------------------------------------- * The above performance is that of the Guardian Fund Investor Class. Because the Institutional Class has lower expenses, its performance typically would have been slightly better than that of the Investor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING MAINLY IN LARGE-CAP STOCKS PRIOR TO DECEMBER 2002, ITS PERFORMANCE DURING THOSE TIMES MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 16 Guardian Fund [GRAPHIC OMITTED] INVESTOR EXPENSES The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets) These are deducted from Fund assets, so you pay them indirectly. Management fees* 0.64 Distribution (12b-1) fees None Other expenses 0.13 -------------------------------------------------------------------------------- Total annual operating expenses 0.77 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.12 -------------------------------------------------------------------------------- Net expenses** 0.65 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses 66 208 390 919 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses adjusted to reflect anticipated net assets. * "Management fees" includes investment management and administration fees. ** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of the Fund through 8/31/2010 so that the total annual operating expenses of the Institutional Class of the Fund are limited to 0.65% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Institutional Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 0.65% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management fees paid to the Manager were 0.49% of average net assets. The Fund will pay the Manager fees at the annual rate of 0.15% of average daily net assets for administrative services provided to the Fund. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 17 Guardian Fund PORTFOLIO MANAGERS ARTHUR MORETTI is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. Mr. Moretti joined each firm in 2001 and has managed the Fund since December 2002. He was a portfolio manager and fund analyst at two other firms since 1991. INGRID S. DYOTT is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. She has been an Associate Manager of the Fund since December 2003 and has been a Portfolio Manager at Neuberger Berman since 1997. SAJJAD S. LADIWALA is a Vice President of Neuberger Berman Management Inc. and Neuberger Berman, LLC. He has been an Associate Manager of the Fund since December 2003. He held various positions as a financial analyst at two other firms since 1994. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 18 Guardian Fund [GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 14.30 11.53 12.92 14.46 17.52 PLUS: Income from investment operations Net investment income 0.12 0.05 0.05 0.13 0.08 Net gains (losses) - realized and unrealized (2.77) 1.40 1.53 2.98 1.16 Subtotal: income from investment operations (2.65) 1.45 1.58 3.11 1.24 MINUS: Distributions to shareholders Income dividends 0.12 0.05 0.04 0.05 0.12 Tax return of capital - 0.01 - - - Subtotal: distributions to shareholders 0.12 0.06 0.04 0.05 0.12 EQUALS: Share price (NAV) at end of year 11.53 12.92 14.46 17.52 18.64 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 0.88 0.92 0.90 0.90 0.88 Gross expenses(1) - - 0.90 0.90 0.88 Expenses(2) 0.88 0.92 0.91 0.90 0.89 Net investment income - actual 0.84 0.44 0.35 0.83 0.47 ------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (18.64) 12.70 12.24(3) 21.52(3) 7.09(3) Net assets at end of year (in millions of dollars) 1,337.1 1,297.6 1,300.6 1,415.2 1,417.0 Portfolio turnover rate (%) 85 113 25 20 34 ------------------------------------------------------------------------------------------------------------------------------
The figures above are from the Guardian Fund Investor Class. The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 19 Guardian Fund Neuberger Berman MANHATTAN FUND Ticker Symbol: -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of mid-capitalization companies, which it defines as those with a total market capitalization within the market capitalization range of the Russell Midcap Index. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Manager employs a disciplined investment strategy when selecting growth stocks. Using fundamental research and quantitative analysis, he looks for fast-growing companies with above average sales and competitive returns on equity relative to their peers. In doing so, the Portfolio Manager analyzes such factors as: o financial condition (such as debt to equity ratio) o market share and competitive leadership of the company's products o earnings growth relative to competitors o market valuation in comparison to a stock's own historical norms and the stocks of other mid-cap companies. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY SHOWN RISK/RETURN CHARACTERISTICS THAT ARE IN BETWEEN THOSE OF SMALL- AND LARGE-CAP STOCKS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER COMPARATIVELY ATTRACTIVE LONG-TERM RETURNS. MID-CAPS ARE LESS WIDELY FOLLOWED IN THE MARKET THAN LARGE-CAPS, WHICH CAN MAKE IT COMPARATIVELY EASIER TO FIND ATTRACTIVE STOCKS THAT ARE NOT OVERPRICED. [GRAPHIC OMITTED] GROWTH INVESTING FOR GROWTH INVESTORS, THE AIM IS TO INVEST IN COMPANIES THAT ARE ALREADY SUCCESSFUL BUT COULD BE EVEN MORE SO. OFTEN, THESE STOCKS ARE IN EMERGING OR RAPIDLY GROWING INDUSTRIES. ACCORDINGLY, THE FUND AT TIMES MAY INVEST A GREATER PORTION OF ITS ASSETS IN PARTICULAR INDUSTRIES OR SECTORS THAN OTHER FUNDS DO. WHILE MOST GROWTH STOCKS ARE KNOWN TO INVESTORS, THEY MAY NOT YET HAVE REACHED THEIR FULL POTENTIAL. THE GROWTH INVESTOR LOOKS FOR INDICATIONS OF CONTINUED SUCCESS. 20 Manhattan Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. By focusing on mid-cap stocks, the Fund is subject to their risks, including the risk its holdings may: o fluctuate more widely in price than the market as a whole o underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when mid-cap stocks are out of favor. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 21 Manhattan Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 9.85 29.20 16.39 50.76 -11.42 -29.66 -31.23 30.57 16.22 13.38 BEST QUARTER: Q4 '99, 49.01% WORST QUARTER: Q3 '01, -30.09% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- MANHATTAN FUND Return Before Taxes 13.38 -3.60 6.27 Return After Taxes on Distributions 13.38 -3.63 3.99 Return After Taxes on Distributions and Sale of Fund Shares 8.70 -3.04 4.63 Russell Midcap Growth Index 12.10 1.38 9.27 Russell Midcap Index 12.65 8.45 12.49 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell Midcap Growth Index is an unmanaged index of U.S. mid-cap growth stocks. The Russell Midcap Index is an unmanaged index of U.S. mid- cap stocks. -------------------------------------------------------------------------------- * The above performance is that of the Manhattan Fund Investor Class. Because Institutional Class has lower expenses, its performance typically would have been slightly better than that of the Investor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING IN STOCKS OF ALL CAPITALIZATIONS AND USED A COMPARATIVELY MORE VALUE-ORIENTED INVESTMENT APPROACH PRIOR TO JULY 1997, ITS PERFORMANCE MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 22 Manhattan Fund [GRAPHIC OMITTED] INVESTOR EXPENSES The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES NONE -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets) These are deducted from Fund assets, so you pay them indirectly. Management fees* 0.69 Distribution (12b-1) fees None Other expenses 0.18 -------------------------------------------------------------------------------- Total annual operating expenses 0.87 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.12 -------------------------------------------------------------------------------- Net expenses** 0.75 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses 77 240 445 1,037 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses adjusted to reflect anticipated net assets. * "Management fees" includes investment management and administration fees. ** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of the Fund through 8/31/2010 so that the total annual operating expenses of that class of the Fund are limited to 0.75% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Institutional Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 0.75% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management fees paid to the Manager were 0.54% of average net assets. The Fund will pay the Manager fees at the annual rate of 0.15% of average daily net assets for administrative services provided to the Fund. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER KENNETH J. TUREK, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed or co-managed two equity mutual funds and 23 Manhattan Fund other equity portfolios for several other investment managers since 1985. Mr. Turek has managed the Fund since January 2003. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 24 Manhattan Fund [GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 ---------------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 6.63 4.70 5.58 5.86 7.45 PLUS: Income from investment operations Net investment loss (0.04) (0.04) (0.04) (0.04) (0.03) Net gains (losses) - realized and unrealized (1.84) 0.92 0.32 1.63 0.75 Subtotal: income from investment operations (1.88) 0.88 0.28 1.59 0.72 MINUS: Distributions to shareholders Capital gain distributions 0.05 - - - - Subtotal: distributions to shareholders 0.05 - - - - EQUALS: Share price (NAV) at end of year 4.70 5.58 5.86 7.45 8.17 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.05 1.12 1.06 1.06 1.04 Gross Expenses(1) - - 1.06 1.06 1.04 Expenses(2) 1.05 1.12 1.09 1.07 1.05 Net investment loss - actual (0.69) (0.78) (0.63) (0.65) (0.36) ---------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (28.57) 18.72 5.02(3) 27.13(3) 9.66(3) Net assets at end of year (in millions of dollars) 300.5 324.6 306.2 342.2 356.7 Portfolio turnover rate (%) 98 145 102 65 45 ----------------------------------------------------------------------------------------------------------------------------------
The figures above are for the Manhattan Fund Investor Class. All figures for fiscal years 2002 through and including 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm for those years. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of the investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. 25 Manhattan Fund Neuberger Berman MILLENNIUM FUND Ticker Symbol: -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of small-capitalization companies, which it defines as those with a total market value of no more than $2 billion at the time the Fund first invests in them. The Fund may continue to hold or add to a position in a stock after the issuer has grown beyond $2 billion. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Manager employs a disciplined investment strategy when selecting growth stocks. Using fundamental research and quantitive analysis, he looks for fast-growing companies with above average sales and competitive returns on equity relative to their peers. In doing so, the Portfolio Manager analyzes such factors as: o financial condition (such as debt to equity ratio) o market share and competitive leadership of the company's products o earnings growth relative to competitors o market valuation in comparison to a stock's own historical norms and the stocks of other small-cap companies. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] SMALL-CAP STOCKS HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE LAST 40 YEARS, SMALL-CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] GROWTH INVESTING FOR GROWTH INVESTORS, THE AIM IS TO INVEST IN COMPANIES THAT ARE ALREADY SUCCESSFUL BUT COULD BE EVEN MORE SO. OFTEN, THESE STOCKS ARE IN EMERGING OR RAPIDLY GROWING INDUSTRIES. ACCORDINGLY, THE FUND AT TIMES MAY INVEST A GREATER PORTION OF ITS ASSETS IN PARTICULAR INDUSTRIES OR SECTORS THAN OTHER FUNDS DO. WHILE MOST GROWTH STOCKS ARE KNOWN TO INVESTORS, THEY MAY NOT YET HAVE REACHED THEIR FULL POTENTIAL. THE GROWTH INVESTOR LOOKS FOR INDICATIONS OF CONTINUED SUCCESS. 26 Millennium Fund [GRAPHIC OMITTED] MAIN RISKS Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. The stocks of smaller companies in which the Fund invests are often more volatile and less liquid than the stocks of larger companies, and these companies: o may have a shorter history of operations than larger companies; o may not have as great an ability to raise additional capital; o may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also: o underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor; o be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. The Fund may at times invest a portion of its assets in mid-cap stocks. For a discussion of the risks associated with mid-cap stocks, see the Appendix. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 27 Millennium Fund [GRAPHIC OMITTED] PERFORMANCE The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- [GRAPHIC OMITTED] 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 130.49 -28.68 -14.47 -44.46 33.26 16.20 15.22 BEST QUARTER: Q4 '99, 72.95% WORST QUARTER: Q3 '01, -27.89% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- Since Inception 1 Year 5 Years (10/20/1998) -------------------------------------------------------------------------------- MILLENNIUM FUND Return Before Taxes 15.22 -3.25 10.95 Return After Taxes on Distributions 15.22 -3.25 9.29 Return After Taxes on Distributions and Sale of Fund Shares 9.89 -2.74 8.75 Russell 2000 Growth Index 4.15 2.28 6.62 Russell 2000 Index 4.55 8.22 10.81 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 2000 Growth Index is an unmanaged index of U.S. small-cap growth stocks. The Russell 2000 Index is an unmanaged index of U.S. small- cap stocks. -------------------------------------------------------------------------------- * The above performance is that of Millennium Fund Investor Class. Because Institutional Class has lower expenses, its performance typically would have been slightly better than that of the Investor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN THE FUND AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. SMALL-CAP EQUITY MARKET AND OF THE PORTION OF THAT MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. 28 Millennium Fund [GRAPHIC OMITTED] INVESTOR EXPENSES The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- Shareholder Fees None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets) These are deducted from Fund assets, so you pay them indirectly. Management fees* 1.00 Distribution (12b-1) fees None Other expenses 0.48 -------------------------------------------------------------------------------- Total annual operating expenses 1.48 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.63 -------------------------------------------------------------------------------- Net expenses** 0.85 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses 87 271 618 1,596 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses adjusted to reflect anticipated net assets. * "Management fees" includes investment management and administration fees. ** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of the Fund through 8/31/2010 so that the total annual operating expenses of the Institutional Class of the Fund are limited to 0.85% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Institutional Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 0.85% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management fees paid to the Manager were 0.85% of average net assets. The Fund will pay the Manager fees at the annual rate of 0.15% of average daily net assets for administrative services provided to the Fund. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 29 Millennium Fund PORTFOLIO MANAGER DAVID H. BURSHTAN, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed two equity mutual funds and other equity portfolios for another investment manager from 1999-2002. Prior to 1999, he managed small-cap portfolios for another manager. Mr. Burshtan has managed the Fund since January 2003. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 30 Millennium Fund [GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 14.35 9.36 10.88 10.71 14.19 PLUS: Income from investment operations Net investment loss (0.14) (0.10) (0.14) (0.19) (0.19) Net gains (losses) - realized and unrealized (4.85) 1.62 (0.03) 3.67 1.01 Subtotal: income from investment operations (4.99) 1.52 (0.17) 3.48 0.82 EQUALS: Share price (NAV) at end of year 9.36 10.88 10.71 14.19 15.01 -------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense reimbursement/repayment and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.62 1.75 1.71 1.71 1.57 Gross expenses(1) - 1.83 1.77 1.90 1.86 Expenses(2) 1.62 1.75 1.75 1.75 1.60 Net investment loss - actual (1.05) (1.09) (1.20) (1.47) (1.21) ------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (34.77) 16.24(3) (1.56)(3) 32.49(3) 5.78(3) Net assets at end of year (in millions of dollars) 63.1 59.1 43.3 45.0 46.9 Portfolio turnover rate (%) 126 241 146 204 142 -------------------------------------------------------------------------------------------------------------------------------
The figures above are for the Millennium Fund Investor Class. All figures for fiscal years 2002 through and including 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm for those years. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement/repayment and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower/higher if Neuberger Berman Management Inc. had not reimbursed/recouped certain expenses and/or waived a portion of investment management fees. 31 Millennium Fund Neuberger Berman SOCIALLY RESPONSIVE FUND Ticker Symbol: -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN SECURITIES OF COMPANIES THAT MEET THE FUND'S FINANCIAL CRITERIA AND SOCIAL POLICY. To pursue this goal, the Fund invests mainly in common stocks of mid- to large-capitalization companies. The Fund seeks to reduce risk by investing across many different industries. The Portfolio Managers employ a research driven and valuation sensitive approach to stock selection. They seek to identify stocks in well-positioned businesses that they believe are undervalued in the market. They look for solid balance sheets, strong management teams with a track record of success, good cash flow, the prospect for above average earnings growth, and other valuation-related factors. Among companies that meet these criteria, the Portfolio Managers look for those that show leadership in three areas: o environmental concerns o diversity in the work force o progressive employment and workplace practices, and community relations. The Portfolio Managers typically also look at a company's record in public health and the nature of its products. The Portfolio Managers judge firms on their corporate citizenship overall, considering their accomplishments as well as their goals. While these judgments are inevitably subjective, the Fund endeavors to avoid companies that derive revenue from gambling or the production of alcohol, tobacco, weapons, or nuclear power. The Fund also does not invest in any company that derives its total revenue primarily from non-consumer sales to the military. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, when the company's business fails to perform as expected, or when other opportunities appear more attractive. The Fund has the ability to change its goal without shareholder approval, although it does not currently intend to do so. The Fund will not change its strategy of normally investing at least 80% of its total assets in equity securities selected in accordance with its social policy without providing shareholders at least 60 days' notice. [GRAPHIC OMITTED] MID- AND LARGE-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY PERFORMED MORE LIKE SMALL-CAPS THAN LIKE LARGE-CAPS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER ATTRACTIVE LONG-TERM RETURNS. LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. COMPARED TO MID-CAP COMPANIES, THEY MAY BE LESS RESPONSIVE TO CHANGE, BUT THEIR RETURNS HAVE SOMETIMES LED THOSE OF MID-CAP COMPANIES, OFTEN WITH LOWER VOLATILITY. [GRAPHIC OMITTED] SOCIAL INVESTING FUNDS THAT FOLLOW SOCIAL POLICIES SEEK SOMETHING IN ADDITION TO ECONOMIC SUCCESS. THEY ARE DESIGNED TO ALLOW INVESTORS TO PUT THEIR MONEY TO WORK AND ALSO SUPPORT COMPANIES THAT FOLLOW PRINCIPLES OF GOOD CORPORATE CITIZENSHIP. 32 Socially Responsive Fund [GRAPHIC OMITTED] VALUATION SENSITIVE INVESTING IN ADDITION TO TRADITIONAL VALUE INVESTING - I.E., LOOKING FOR VALUE AMONG COMPANIES WHOSE STOCK PRICES ARE BELOW THEIR HISTORIC AVERAGE, BASED ON EARNINGS, CASH FLOW, OR OTHER FINANCIAL MEASURES - WE MAY ALSO BUY A COMPANY'S SHARES IF THEY LOOK MORE FULLY PRICED BASED ON WALL STREET CONSENSUS ESTIMATES OF EARNINGS, BUT STILL INEXPENSIVE RELATIVE TO OUR ESTIMATES. WE LOOK FOR THESE COMPANIES TO RISE IN PRICE AS THEY OUTPERFORM WALL STREET'S EXPECTATIONS, BECAUSE SOME ASPECTS OF THE BUSINESS HAS NOT BEEN FULLY APPRECIATED OR APPROPRIATELY PRICED BY OTHER INVESTORS. 33 Socially Responsive Fund [GRAPHIC OMITTED] MAIN RISKS Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. The Fund's social policy could cause it to underperform similar funds that do not have a social policy. Among the reasons for this are: o undervalued stocks that do not meet the social criteria could outperform those that do o economic or political changes could make certain companies less attractive for investment o the social policy could cause the Fund to sell or avoid stocks that subsequently perform well. To the extent that the Fund emphasizes mid- or large-cap stocks, it takes on the associated risks. Mid-cap stocks tend to be more volatile than large-cap stocks and are usually more sensitive to economic, political, regulatory and market factors. At any given time, one or both groups of stocks may be out of favor with investors. With a valuation sensitive approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 34 Socially Responsive Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 18.50 24.41 15.01 7.04 -0.44 -2.57 -14.45 34.48 13.57 7.58 BEST QUARTER: Q4 '98, 20.98% WORST QUARTER: Q3 '02, -17.08% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years SOCIALLY RESPONSIVE FUND Return Before Taxes 7.58 6.49 9.48 Return After Taxes on Distributions 7.00 5.61 8.65 Return After Taxes on Distributions and Sale of Fund Shares 5.70 5.26 8.05 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The S&P 500 Index is an unmanaged index of U.S. stocks. -------------------------------------------------------------------------------- * The above performance is that of the Socially Responsive Fund Investor Class. Because Institutional Class has lower expenses, its performance typically would have been slightly better than that of the Investor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. 35 Socially Responsive Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets) These are deducted from Fund assets, so you pay them indirectly. Management fees* 0.69 Distribution (12b-1) fees None Other expenses 0.15 -------------------------------------------------------------------------------- Total annual operating expenses 0.84 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.19 -------------------------------------------------------------------------------- Net expenses** 0.65 --------------------------------------------------------------------------------
EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower.
-------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses 66 208 407 981 --------------------------------------------------------------------------------
* The figures in the table are based on last year's expenses adjusted to reflect anticipated net assets. * "Management fees" includes investment management and administration fees. ** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of the Fund through 8/31/2010 so that the total annual operating expenses of the Institutional Class of the Fund are limited to 0.65% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Institutional Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 0.65% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management fees paid to the Manager were 0.54% of average net assets. The Fund will pay the Manager fees at the annual rate of 0.15% of average daily net assets for administrative services provided to the Fund. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 36 Socially Responsive Fund PORTFOLIO MANAGERS ARTHUR MORETTI is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. He joined each firm and has co-managed the Fund since 2001. He was a portfolio manager and fund analyst at two other firms since 1991. INGRID S. DYOTT is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. She has been co-manager of the Fund since December 2003 and before that was an Associate Manager of the Fund since 1997. SAJJAD S. LADIWALA is a Vice President of Neuberger Berman Management Inc. and Neuberger Berman, LLC. He has been an Associate Manager of the Fund since December 2003. He held various positions as a financial analyst at two other firms since 1994. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers and the Portfolio Managers' ownership of Fund shares. 37 Socially Responsive Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
Year Ended August 31, 2002 2003 2004 2005 2006 PER-SHARE DATA ($) ----------------------------------------------------------------------------------------------------------------------------------- Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 18.96 15.39 18.55 19.48 22.91 PLUS: Income from investment operations Net investment income 0.04 0.02 0.04 0.18 0.09 Net gains (losses) - realized and unrealized (1.83) 3.17 1.81 3.79 1.73 Subtotal: income from investment operations (1.79) 3.19 1.85 3.97 1.82 MINUS: Distributions to shareholders Income dividends 0.06 0.03 0.05 0.03 0.14 Capital gain distributions 1.67 - 0.87 0.51 0.71 Tax return of capital 0.05 - - - - Subtotal: distributions to shareholders 1.78 0.03 0.92 0.54 0.85 EQUALS: Share price (NAV) at end of year 15.39 18.55 19.48 22.91 23.88 ----------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income - as they actually are as well as how they would have been if certain expense offset arrangements had not been in effect. Net expenses - actual 1.17 1.07 1.06 1.01 0.95 Expenses(1) 1.17 1.08 1.07 1.02 0.95 Net investment income - actual 0.21 0.14 0.19 0.83 0.39 ----------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (10.62) 20.79 10.06 20.57 8.08 Net assets at end of year (in millions of dollars) 71.2 132.8 215.6 330.0 487.5 Portfolio turnover rate (%) 60 62 35 21 23 -----------------------------------------------------------------------------------------------------------------------------------
The figures above are from the Socially Responsive Fund Investor Class. All figures for fiscal years 2002 and 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm for those years. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense offset arrangements. 38 Socially Responsive Fund Neuberger Berman YOUR INVESTMENT -------------------------------------------------------------------------------- Institutional Class Shares of the Funds are available through an investment provider or from Neuberger Berman Management Inc. (see "Maintaining Your Account") -- SHARE PRICES Because Institutional Class shares of the Funds do not have a sales charge, the price you pay for each share of a Fund is the Fund's net asset value per share. The Funds pay you the full share price when you sell shares. If you use an investment provider, that provider may charge fees that are in addition to those described in this prospectus. The Funds are open for business every day the New York Stock Exchange ("Exchange") is open. The Exchange is closed on all national holidays and Good Friday; Fund shares will not be priced on those days or other days on which the Exchange is closed. Each Fund calculates its share price as of the end of regular trading on the Exchange on business days, usually 4:00 p.m. Eastern time. In general, every buy or sell order you place will go through at the next share price calculated after your order has been accepted (see "Maintaining Your Account" for information on placing orders). If you use an investment provider, you should check with it to find out by what time your order must be received so that it can be processed the same day. Depending on when it accepts orders, it is possible that a Fund's share price could change on days when you are unable to buy or sell shares. Because foreign markets may be open on days when U.S. markets are closed, the value of foreign securities owned by a Fund could change on days when you cannot buy or sell Fund shares. Remember, though, any purchase or sale takes place at the next share price calculated after your order is accepted. [GRAPHIC OMITTED] SHARE PRICE CALCULATIONS THE PRICE OF AN INSTITUTIONAL CLASS SHARE OF A FUND IS THE TOTAL VALUE OF THE FUND'S ASSETS ATTRIBUTABLE TO INSTITUTIONAL CLASS SHARES MINUS ITS LIABILITIES ATTRIBUTABLE TO THAT CLASS, DIVIDED BY THE TOTAL NUMBER OF INSTITUTIONAL CLASS SHARES OUTSTANDING. BECAUSE THE VALUE OF A FUND'S SECURITIES CHANGES EVERY BUSINESS DAY, THE SHARE PRICE USUALLY CHANGES AS WELL. WHEN VALUING PORTFOLIO SECURITIES, THE FUNDS USE MARKET PRICES. HOWEVER, IN CERTAIN CASES, EVENTS THAT OCCUR AFTER CERTAIN MARKETS HAVE CLOSED MAY RENDER THESE PRICES UNRELIABLE. WHEN A FUND BELIEVES A REPORTED MARKET PRICE FOR A SECURITY DOES NOT REFLECT THE AMOUNT THE FUND WOULD RECEIVE ON A CURRENT SALE OF THAT SECURITY, THE FUND MAY SUBSTITUTE FOR THE MARKET PRICE A FAIR-VALUE ESTIMATE MADE ACCORDING TO METHODS APPROVED BY THE BOARD OF TRUSTEES. A FUND MAY ALSO USE THESE METHODS TO VALUE CERTAIN TYPES OF ILLIQUID SECURITIES. FAIR VALUE PRICING GENERALLY WILL BE USED IF THE EXCHANGE ON WHICH A PORTFOLIO SECURITY IS TRADED CLOSES EARLY OR IF TRADING IN A PARTICULAR SECURITY WAS HALTED DURING THE DAY AND DID NOT RESUME PRIOR TO A FUND'S NET ASSET VALUE CALCULATION. A FUND MAY ALSO USE THESE METHODS TO VALUE SECURITIES THAT TRADE IN A FOREIGN MARKET, IF SIGNIFICANT EVENTS THAT APPEAR LIKELY TO AFFECT THE VALUE OF THOSE SECURITIES OCCUR BETWEEN THE TIME THAT FOREIGN MARKET CLOSES AND THE TIME THE EXCHANGE CLOSES. SIGNIFICANT EVENTS MAY INCLUDE (1) THOSE IMPACTING A SINGLE ISSUER, (2) GOVERNMENTAL ACTIONS THAT AFFECT SECURITIES IN ONE SECTOR OR COUNTRY, (3) NATURAL DISASTERS OR ARMED CONFLICTS AFFECTING A COUNTRY OR REGION, OR (4) SIGNIFICANT DOMESTIC OR FOREIGN MARKET FLUCTUATIONS. THE EFFECT OF USING FAIR VALUE PRICING IS THAT A FUND'S NET ASSET VALUE WILL BE SUBJECT TO THE JUDGMENT OF NEUBERGER BERMAN MANAGEMENT INC., OPERATING UNDER PROCEDURES APPROVED BY THE BOARD OF TRUSTEES, INSTEAD OF BEING DETERMINED BY MARKET PRICES. 39 Your Investment -- PRIVILEGES AND SERVICES If you purchase Institutional Class shares directly from Neuberger Berman Management Inc., you have access to the services listed below. If you are purchasing shares through an investment provider, consult that provider for information about investment services. SYSTEMATIC INVESTMENTS -- This plan lets you take advantage of dollar-cost averaging by establishing periodic investments of $100 a month or more once you make an initial minimum investment of at least $5 million. You choose the schedule and amount. Your investment money may come from a Neuberger Berman money market fund or your bank account. SYSTEMATIC WITHDRAWALS -- This plan lets you arrange withdrawals of at least $100 from a Neuberger Berman fund on a periodic schedule. You can also set up payments to distribute the full value of an account over a given time. While this service can be helpful to many investors, be aware that it could generate capital gains or losses. ELECTRONIC BANK TRANSFERS -- When you sell Fund shares, you can have the money sent to your bank account electronically rather than mailed to you as a check. Please note that your bank must be a member of the Automated Clearing House, or ACH, system. [GRAPHIC OMITTED] DOLLAR-COST AVERAGING SYSTEMATIC INVESTING ALLOWS YOU TO TAKE ADVANTAGE OF THE PRINCIPLE OF DOLLAR-COST AVERAGING. WHEN YOU MAKE REGULAR INVESTMENTS OF A GIVEN AMOUNT - SAY, $100 A MONTH - YOU WILL END UP INVESTING AT DIFFERENT SHARE PRICES OVER TIME. WHEN THE SHARE PRICE IS HIGH, YOUR $100 BUYS FEWER SHARES; WHEN THE SHARE PRICE IS LOW, YOUR $100 BUYS MORE SHARES. OVER TIME, THIS CAN HELP LOWER THE AVERAGE PRICE YOU PAY PER SHARE. DOLLAR-COST AVERAGING CANNOT GUARANTEE YOU A PROFIT OR PROTECT YOU FROM LOSSES IN A DECLINING MARKET. BUT IT CAN BE BENEFICIAL OVER THE LONG TERM. -- DISTRIBUTIONS AND TAXES DISTRIBUTIONS -- Each Fund pays out to shareholders any net investment income and net realized capital gains. Ordinarily, the Funds make any distributions once a year (in December). Unless you designate otherwise, your income and capital gain distributions from a Fund will be reinvested in additional Institutional class shares of the Fund. However, if you prefer you may receive all distributions in cash or reinvest capital gain distributions but receive income distributions in cash. Distributions taken in cash can be sent to you by check, by electronic transfer to a designated bank account, or invested in Institutional class shares of another Neuberger Berman fund with the same account registration. To take advantage of one of these options, please indicate your choice on your application. If you use an investment provider, you must consult it about whether your income and capital gain distributions will be reinvested in additional Fund shares or paid in cash. HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement plans and accounts and other tax-exempt investors, all Fund distributions you receive are generally taxable to you, regardless of whether you take them in cash or reinvest them in additional Fund shares. 40 Your Investment Fund distributions to Roth IRAs, other individual retirement accounts ("IRAs") and qualified retirement plans generally are tax-free. Eventual withdrawals from a Roth IRA also may be tax-free, while withdrawals from other retirement accounts and plans generally are subject to tax. Distributions generally are taxable to you in the year you receive them. In some cases, however, distributions you receive in January are taxable as if they had been paid the previous December 31. Your tax statement (See "Taxes and You") will help clarify this for you. Distributions of income and the excess of net short-term capital gain over net long-term capital loss are generally taxed as ordinary income. However, a Fund's dividends attributable to "qualified dividend income" (generally, dividends it receives on stock of most U.S. and certain foreign corporations with respect to which it satisfies certain holding period, financing and other restrictions) are subject to a 15% maximum federal income tax rate for individual shareholders who satisfy those restrictions with respect to their Fund shares, on which the dividends were paid. Distributions of net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss) are generally taxed as long-term capital gain and are subject to that 15% maximum rate for individual shareholders. The tax treatment of capital gain distributions from a Fund depends on how long the Fund held the securities it sold, not when you bought your shares of the Fund, or whether you reinvested your distributions. HOW SHARE TRANSACTIONS ARE TAXED -- When you sell (redeem) or exchange Fund shares, you generally realize a taxable gain or loss. An exception, once again, applies to tax-advantaged retirement plans and accounts and other tax-exempt investors. Any capital gain an individual shareholder recognizes on a redemption or exchange of his or her Fund shares that have been held for more than one year will qualify for the 15% maximum federal income tax rate mentioned above. [GRAPHIC OMITTED] TAXES AND YOU THE TAXES YOU ACTUALLY OWE ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS CAN VARY WITH MANY FACTORS, SUCH AS YOUR MARGINAL TAX BRACKET, HOW LONG YOU HELD YOUR SHARES AND WHETHER YOU OWE ALTERNATIVE MINIMUM TAX. HOW CAN YOU FIGURE OUT YOUR TAX LIABILITY ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS? ONE HELPFUL TOOL IS THE TAX STATEMENT THAT WE OR YOUR INVESTMENT PROVIDER SENDS YOU EVERY JANUARY. IT DETAILS THE DISTRIBUTIONS YOU RECEIVED DURING THE PAST YEAR AND SHOWS THEIR TAX STATUS. A SEPARATE STATEMENT COVERS YOUR SHARE TRANSACTIONS. MOST IMPORTANTLY, CONSULT YOUR TAX PROFESSIONAL. EVERYONE'S TAX SITUATION IS DIFFERENT, AND YOUR PROFESSIONAL SHOULD BE ABLE TO HELP YOU ANSWER ANY QUESTIONS YOU MAY HAVE. [GRAPHIC OMITTED] BACKUP WITHHOLDING A FUND IS REQUIRED TO WITHHOLD 28% OF THE MONEY YOU ARE OTHERWISE ENTITLED TO RECEIVE FROM ITS DISTRIBUTIONS AND REDEMPTION PROCEEDS IF YOU ARE AN INDIVIDUAL OR CERTAIN OTHER NON-CORPORATE SHAREHOLDER WHO FAILS TO PROVIDE A CORRECT TAXPAYER IDENTIFICATION NUMBER TO THE FUND. WITHHOLDING AT THAT RATE ALSO IS REQUIRED FROM EACH FUND'S DISTRIBUTIONS TO WHICH YOU ARE OTHERWISE ENTITLED IF YOU ARE SUCH A SHAREHOLDER AND THE INTERNAL REVENUE SERVICE ("IRS") TELLS US THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING OR YOU ARE SUBJECT TO BACKUP WITHHOLDING FOR ANY OTHER REASON. 41 Your Investment IN THE CASE OF A CUSTODIAL ACCOUNT FOR A NEWBORN, IF A SOCIAL SECURITY NUMBER HAS BEEN APPLIED FOR BUT IS NOT AVAILABLE WHEN YOU COMPLETE THE ACCOUNT APPLICATION, YOU MAY OPEN THE ACCOUNT WITHOUT THAT NUMBER, IF WE RECEIVE (FROM YOU OR YOUR INVESTMENT PROVIDER) THE CUSTODIAN'S DATE OF BIRTH AND SOCIAL SECURITY NUMBER TOGETHER WITH A COPY OF THE REQUEST MADE TO THE IRS FOR THE NEWBORN'S SOCIAL SECURITY NUMBER. HOWEVER, WE MUST RECEIVE THE NEW NUMBER WITHIN 60 DAYS OR THE ACCOUNT WILL BE CLOSED. FOR INFORMATION ON CUSTODIAL ACCOUNTS, CALL 800-366-6264. IF YOU USE AN INVESTMENT PROVIDER, YOU MUST SUPPLY YOUR SIGNED TAXPAYER IDENTIFICATION NUMBER FORM TO IT, AND IT MUST SUPPLY ITS TAXPAYER IDENTIFICATION NUMBER TO US, IN ORDER TO AVOID BACKUP WITHHOLDING. [GRAPHIC OMITTED] BUYING SHARES BEFORE A DISTRIBUTION THE MONEY A FUND EARNS, EITHER AS INCOME OR AS CAPITAL GAINS, IS REFLECTED IN ITS SHARE PRICE UNTIL IT DISTRIBUTES THE MONEY. AT THAT TIME, THE AMOUNT OF THE DISTRIBUTION IS DEDUCTED FROM THE SHARE PRICE. THE AMOUNT OF THE DISTRIBUTION IS EITHER REINVESTED IN ADDITIONAL SHARES OF THE DISTRIBUTING CLASS OF THE FUND OR PAID TO SHAREHOLDERS IN CASH. BECAUSE OF THIS, IF YOU BUY SHARES JUST BEFORE THE FUND MAKES A DISTRIBUTION, YOU WILL END UP GETTING SOME OF YOUR INVESTMENT BACK AS A TAXABLE DISTRIBUTION. YOU CAN AVOID THIS SITUATION BY WAITING TO INVEST UNTIL AFTER THE RECORD DATE FOR THE DISTRIBUTION. GENERALLY, IF YOU ARE INVESTING IN THE FUND THROUGH A TAX-ADVANTAGED RETIREMENT PLAN OR ACCOUNT, THERE ARE NO TAX CONSEQUENCES TO YOU FROM DISTRIBUTIONS. -- MAINTAINING YOUR ACCOUNT WHEN YOU BUY SHARES -- Instructions for buying shares from Neuberger Berman Management Inc. are under "Buying Shares." See "Investment Providers" if you are buying shares through an investment provider. Whenever you make an initial investment in one of the Funds or add to your existing account (except with an automatic investment), you will be sent a statement confirming your transaction if you bought shares directly. Investors who bought shares through an investment provider should contact their provider for information regarding transaction statements. All investments must be made in U.S. dollars, and investment checks must be drawn on a U.S. bank. The minimum initial investment is $5 million. When you purchase shares, you will receive the next share price to be calculated after your order has been accepted. Purchase orders are deemed "accepted" when the Funds' transfer agent has received your check or other payment for the shares. In the case of certain institutional investors, Neuberger Berman Management Inc. will accept purchase orders when received directly or through one of its administrative agents, on the basis of a pre-existing arrangement to make payment to Neuberger Berman Management Inc. or its administrative agent by the following morning. In addition, if you have established a systematic investment program (SIP) with one or more of the Funds, your order is deemed "accepted" on the date you preselected on your SIP application for the systematic investments to occur. WHEN YOU SELL SHARES -- If you bought your shares from Neuberger Berman Management Inc., instructions for selling shares are under "Selling Shares." See "Investment Providers" if you want to sell shares you purchased through an investment provider. You can place an order to sell some 42 Your Investment or all of your shares at any time. When you sell shares, you will receive the next share price to be calculated after your order has been accepted. Redemption orders are deemed "accepted" when the Funds' transfer agent has received your order to sell. In some cases, you will have to place your order to sell shares in writing, and you will need a Medallion signature guarantee (See "Medallion Signature Guarantees"). When selling shares in an account that you do not intend to close, remember to leave at least $5 million worth of shares in the account. Otherwise, the Funds have the right to request that you bring the balance back up to the minimum level. If you have not done so within 60 days, we may close your account and wire you the proceeds. The Funds reserve the right to pay in kind for redemptions. The Funds do not redeem in kind under normal circumstances, but would do so when Neuberger Berman Management Inc. has determined that it is in the best interests of a Fund's shareholders as a whole. UNCASHED CHECKS -- We do not pay interest on uncashed checks from Fund distributions or the sale of Fund shares. We are not responsible for checks after they are sent to you. After allowing a reasonable time for delivery, please call us if you have not received an expected check. While we cannot track a check, we may make arrangements for a replacement. STATEMENTS AND CONFIRMATIONS -- Please review your account statements and confirmations carefully as soon as you receive them. You must contact us within 30 days if you have any questions or notice any discrepancies. Otherwise, you may adversely affect your right to make a claim about the transaction(s). WHEN YOU EXCHANGE SHARES -- You can move an investment from one fund to a comparable class of another fund in the fund family through an exchange of shares, or by electing to use your cash distributions from one fund to purchase shares of the other fund. There are three things to remember when making an exchange: o both accounts must have the same registration o you will need to observe the minimum investment and minimum account balance requirements for the Fund accounts involved o because an exchange is a sale for tax purposes, consider any tax consequences before placing your order The exchange privilege can be withdrawn from any investor that we believe is trying to "time the market" or is otherwise making exchanges that we judge to be excessive. Frequent exchanges can interfere with fund management and affect costs and performance for other shareholders. PLACING ORDERS BY TELEPHONE -- Fund investors have the option of placing telephone orders, subject to certain restrictions. This option is available to you unless you indicate on your account application (or in a subsequent letter to us or to State Street Bank and Trust Company) that you do not want it. Whenever we receive a telephone order, we take steps to make sure the order is legitimate. These may include asking for identifying information and recording the call. As long as a Fund and its representatives take reasonable measures to verify the authenticity of calls, investors may be responsible for any losses caused by unauthorized telephone orders. In unusual circumstances, it may be difficult to place an order by phone. In these cases, consider sending your order by express delivery. 43 Your Investment PROCEEDS FROM THE SALE OF SHARES -- The proceeds from the shares you sell are generally sent out the next business day after your order is executed, and nearly always within seven business days. There are two cases in which proceeds may be delayed beyond this time: o in unusual circumstances where the law allows additional time if needed o if a check you wrote to buy shares has not cleared by the time you sell those shares; clearance may take up to 15 calendar days from the date of purchase If you think you may need to sell shares soon after buying them, you can avoid the check clearing time by investing by wire. The Funds do not issue certificates for shares. OTHER POLICIES -- Under certain circumstances, the Funds reserve the right to: o suspend the offering of shares o reject any exchange or purchase order o suspend or reject future purchase orders from any investor who does not provide payment to settle a purchase order o change, suspend, or revoke the exchange privilege o suspend the telephone order privilege o satisfy an order to sell Fund shares with securities rather than cash, for certain very large orders o suspend or postpone your right to sell Fund shares on days when trading on the Exchange is restricted, or as otherwise permitted by the Securities and Exchange Commission ("SEC") o change its investment minimums or other requirements for buying and selling, or waive any minimums or requirements for certain investors o take orders to purchase or sell Fund shares when the Exchange is closed. In such a case, the Fund would post a notice on the Neuberger Berman website, www.nb.com [GRAPHIC OMITTED] MEDALLION SIGNATURE GUARANTEES YOU MAY NEED A MEDALLION SIGNATURE GUARANTEE WHEN YOU SELL SHARES DIRECTLY OR THROUGH AN INVESTMENT PROVIDER. A MEDALLION SIGNATURE GUARANTEE IS A GUARANTEE THAT YOUR SIGNATURE IS AUTHENTIC. MOST BANKS, BROKERS, AND OTHER FINANCIAL INSTITUTIONS CAN PROVIDE YOU WITH ONE. SOME MAY CHARGE A FEE; OTHERS MAY NOT, PARTICULARLY IF YOU ARE A CUSTOMER OF THEIRS. MEDALLION SIGNATURE GUARANTEES ARE REQUIRED FOR A VARIETY OF TRANSACTIONS INCLUDING REQUESTS FOR CHANGES TO YOUR ACCOUNT OR TO THE INSTRUCTIONS FOR DISTRIBUTION OF PROCEEDS. WE RESERVE THE RIGHT TO REQUIRE A MEDALLION SIGNATURE GUARANTEE ON ANY TRANSACTION AT OUR DISCRETION. A NOTARIZED SIGNATURE FROM A NOTARY PUBLIC IS NOT A MEDALLION SIGNATURE GUARANTEE. [GRAPHIC OMITTED] INVESTMENT PROVIDERS THE INSTITUTIONAL CLASS SHARES AVAILABLE IN THIS PROSPECTUS MAY ALSO BE PURCHASED THROUGH CERTAIN INVESTMENT PROVIDERS SUCH AS BANKS, BROKERAGE FIRMS, WORKPLACE RETIREMENT PROGRAMS, AND FINANCIAL ADVISERS. THE FEES AND POLICIES OUTLINED IN THIS PROSPECTUS ARE SET BY THE FUNDS AND BY NEUBERGER BERMAN MANAGEMENT INC. HOWEVER, IF YOU USE AN INVESTMENT PROVIDER, MOST OF THE INFORMATION YOU WILL NEED FOR MANAGING YOUR INVESTMENT WILL COME 44 Your Investment FROM THAT PROVIDER. THIS INCLUDES INFORMATION ON HOW TO BUY AND SELL SHARES, INVESTOR SERVICES, AND ADDITIONAL POLICIES. IF YOU USE AN INVESTMENT PROVIDER, YOU MUST CONTACT THAT PROVIDER TO BUY OR SELL SHARES OF THE FUNDS DESCRIBED IN THIS PROSPECTUS. MOST INVESTMENT PROVIDERS ALLOW YOU TO TAKE ADVANTAGE OF THE NEUBERGER BERMAN FUND EXCHANGE PROGRAM, WHICH IS DESIGNED FOR MOVING AN INVESTMENT FROM ONE FUND TO A COMPARABLE CLASS OF ANOTHER FUND IN THE FUND FAMILY THROUGH AN EXCHANGE OF SHARES. SEE "WHEN YOU EXCHANGE SHARES" FOR MORE INFORMATION. IN EXCHANGE FOR SERVICES IT OFFERS, YOUR INVESTMENT PROVIDER MAY CHARGE FEES, WHICH ARE IN ADDITION TO THOSE DESCRIBED IN THIS PROSPECTUS. [GRAPHIC OMITTED] ADDITIONAL PAYMENTS TO INVESTMENT PROVIDERS NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES MAY PAY ADDITIONAL COMPENSATION, OUT OF THEIR OWN RESOURCES AND NOT AS AN EXPENSE OF THE FUNDS, TO YOUR INVESTMENT PROVIDER OR OTHER FINANCIAL INTERMEDIARIES, INCLUDING AFFILIATES, IN CONNECTION WITH THE SALE, DISTRIBUTION, RETENTION AND/OR SERVICING OF FUND SHARES. IN SOME CASES, THESE PAYMENTS MAY CREATE AN INCENTIVE FOR YOUR INVESTMENT PROVIDER OR ITS EMPLOYEES TO RECOMMEND OR SELL SHARES OF THE FUNDS TO YOU. IF YOU HAVE PURCHASED SHARES OF A FUND THROUGH AN INVESTMENT PROVIDER, PLEASE SPEAK WITH YOUR INVESTMENT PROVIDER TO LEARN MORE ABOUT ANY PAYMENTS IT RECEIVES FROM NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES, AS WELL AS FEES AND/ OR COMMISSIONS THE INVESTMENT PROVIDER CHARGES. YOU SHOULD ALSO CONSULT DISCLOSURES MADE BY YOUR INVESTMENT PROVIDER AT THE TIME OF PURCHASE. ANY SUCH PAYMENTS WILL NOT CHANGE THE NET ASSET VALUE OR THE PRICE OF EACH FUND'S SHARES. FOR MORE information, please see the Funds' Statement of ADDITIONAL INFORMATION. [GRAPHIC OMITTED] INFORMATION REQUIRED FROM NEW ACCOUNTS TO HELP THE U.S. GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHEN YOU OPEN AN ACCOUNT, WE (WHICH MAY INCLUDE YOUR INVESTMENT PROVIDER ACTING ON OUR BEHALF) WILL REQUIRE YOUR NAME, ADDRESS, DATE OF BIRTH, AND SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER. WE MAY ALSO REQUIRE OTHER IDENTIFYING DOCUMENTS. IF WE CANNOT VERIFY THE INFORMATION YOU SUPPLY TO US OR IF IT IS INCOMPLETE, WE MAY BE REQUIRED TO RETURN YOUR FUNDS OR REDEEM YOUR ACCOUNT. 45 Your Investment If you are buying shares directly, instructions are provided in the following charts. Investors buying or selling shares through an investment provider should contact it for instructions. BUYING SHARES ----------------------------------------------------------------------------------------------------------------------------- Method Things to know Instructions ----------------------------------------------------------------------------------------------------------------------------- SENDING US A CHECK Your first investment must be at least $5 million Fill out the application and enclose your check We cannot accept cash, money orders, starter checks, cashier's checks, travelers checks, or If regular first-class mail, send to: other cash equivalents Neuberger Berman Funds Boston Service Center You will be responsible for any losses or fees P.O. P.O. Box 8403 Box 8403 resulting from a bad check; if necessary, we Boston, MA 02266-8403 may Boston, MA 02266-8403 sell other shares belonging to you in order to cover these losses If express delivery, registered mail, or certified mail, send to: All checks must be made out to "Neuberger Neuberger Neuberger Berman Funds Berman Funds Berman Funds"; we cannot accept checks c/o State Street Bank and Trust Company made c/o State Street Bank and Trust Company out to 30 Dan Road you or other parties and signed over to us Canton, MA 02021 ----------------------------------------------------------------------------------------------------------------------------- WIRING MONEY Your first investment must be at least $5 million Before wiring any money, call 800-366-6264 for an order confirmation Have your financial institution send your wire to State Street Bank and Trust Company Include your name, the Fund name, your account number and other information as requested ----------------------------------------------------------------------------------------------------------------------------- EXCHANGING FROM ANOTHER All exchanges must be for at least $1,000 Call 800-366-6264 to place your order FUND Both accounts involved must be registered in the same name, address and tax ID number An exchange order cannot be cancelled or changed once it has been placed ----------------------------------------------------------------------------------------------------------------------------- BY TELEPHONE We do not accept phone orders for a first Call 800-366-6264 to notify us of your investment purchase Additional shares will be purchased when your Immediately follow up with a wire or order is accepted electronic transfer Not available on retirement accounts ----------------------------------------------------------------------------------------------------------------------------- SETTING UP SYSTEMATIC All investments must be at least $100 (in Call 800-366-6264 for instructions INVESTMENTS addition to an initial minimum investment of at least $5 million) -----------------------------------------------------------------------------------------------------------------------------
46 Your Investment SELLING SHARES ----------------------------------------------------------------------------------------------------------------------------- Method Things to know Instructions ----------------------------------------------------------------------------------------------------------------------------- SENDING US A LETTER Unless you instruct us otherwise, we will Send us a letter requesting us to sell shares mail your proceeds by check to the address of record, signed by all registered owners; include your payable to the registered owner(s) name, account number, the Fund name, the dollar amount or number of shares you want If you have designated a bank account on your to sell, any other instructions application, you can request that we wire the proceeds to this account If regular first-class mail, send to: Neuberger Berman Funds You can also request that we send the proceeds Boston Boston Service Center Service Center to your designated bank account by P.O. Box 8403 electronic P.O. Box 8403 transfer (ACH) Boston, MA Boston, MA 02266-8403 02266-8403 You may need a Medallion signature guarantee If express delivery, registered mail, or certified mail, send to: Please also supply us with your e-mail address Neuberger Berman Funds and daytime telephone number when you write to c/o State Street Bank and Trust Company us in the event we need to reach you 30 Dan Road Canton, MA 02021 ----------------------------------------------------------------------------------------------------------------------------- SENDING US A FAX Not available if you have changed the address on Write a request to sell shares as described the account in the past 15 days above Call 800-366-6264 to obtain the appropriate fax number ----------------------------------------------------------------------------------------------------------------------------- CALLING IN YOUR ORDER Not available if you have declined the phone are selling shares in certain retirement Call 800-366-6264 to place your order option or accounts (The only exception is for those retirement shareholders who are at least 59 1/2 or Give your name, account number, the Fund older and have their birthdates on file) name, the dollar amount or number of shares you want to sell, and any other instructions Not available if you have changed the address on the account in the past 15 days ----------------------------------------------------------------------------------------------------------------------------- EXCHANGING INTO ANOTHER All exchanges must be for at least $1,000 Call 800-366-6264 to place your order FUND Both accounts must be registered in the same name, address and tax ID number An exchange order cannot be cancelled or changed once it has been placed ----------------------------------------------------------------------------------------------------------------------------- SETTING UP SYSTEMATIC Withdrawals must be at least $100 Call 800-366-6264 for instructions WITHDRAWALS -----------------------------------------------------------------------------------------------------------------------------
47 Your Investment [GRAPHIC OMITTED] RETIREMENT PLANS WE OFFER INVESTORS A NUMBER OF TAX-ADVANTAGED PLANS FOR RETIREMENT SAVING: TRADITIONAL IRAS ALLOW MONEY TO GROW TAX-DEFERRED UNTIL YOU TAKE IT OUT, USUALLY AT OR AFTER RETIREMENT. CONTRIBUTIONS ARE DEDUCTIBLE FOR SOME INVESTORS, BUT EVEN WHEN THEY ARE NOT, AN IRA CAN BE BENEFICIAL. ROTH IRAS OFFER TAX-FREE GROWTH LIKE A TRADITIONAL IRA, BUT INSTEAD OF TAX-DEDUCTIBLE CONTRIBUTIONS, THE WITHDRAWALS ARE TAX-FREE FOR INVESTORS WHO MEET CERTAIN REQUIREMENTS. ALSO AVAILABLE: SEP-IRA, SIMPLE, KEOGH, AND OTHER TYPES OF PLANS. COVERDELL EDUCATION SAVINGS ACCOUNTS (FORMERLY EDUCATION IRAS), THOUGH NOT FOR RETIREMENT SAVINGS, ALSO ARE AVAILABLE. CONSULT YOUR TAX PROFESSIONAL TO FIND OUT WHICH TYPES OF PLANS OR ACCOUNTS MAY BE BENEFICIAL FOR YOU, THEN CALL 800-366-6264 FOR INFORMATION ON ANY NEUBERGER BERMAN RETIREMENT PLAN OR ACCOUNT. -- MARKET TIMING POLICY Frequent purchases, exchanges and redemptions of Fund shares ("market-timing activities") can interfere with Fund management and affect costs and performance for other shareholders. To discourage market-timing activities by Fund shareholders, the Board of Trustees has adopted market-timing policies and has approved the procedures of the principal underwriter for implementing those policies. As described earlier in this prospectus, pursuant to such policies, the exchange privilege can be withdrawn from any investor that is believed to be "timing the market" or is otherwise making exchanges judged to be excessive. In furtherance of these policies, under certain circumstances, the Funds reserve the right to reject any exchange or purchase order; change, suspend or revoke the exchange privilege; or suspend the telephone order privilege. Neuberger Berman Management Inc. applies the Funds' policies and procedures with respect to market-timing activities by monitoring trading activity in each Fund, identifying excessive trading patterns, and warning or prohibiting shareholders who trade excessively from making further purchases or exchanges of Fund shares. These policies and procedures are applied consistently to all shareholders. Although the Funds make an effort to monitor for market-timing activities, the ability of the Funds to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and other approved intermediaries may be limited in those instances in which the investment intermediary maintains the underlying shareholder accounts. Accordingly, there can be no assurance that the Funds will be able to eliminate all market-timing activities. -- PORTFOLIO HOLDINGS POLICY A description of the Funds' policies and procedures with respect to the disclosure of the Funds' portfolio holdings is available in the Funds' Statement of Additional Information. The complete portfolio holdings for each Fund (except Fasciano and Millennium) are available at http://www.nb.com/ind/mutual_funds/prospectuses/ 15-30 days after each month-end; the complete portfolio holdings of Fasciano and Millennium Funds are available 15-30 days after the end of each calendar quarter. Each Fund's complete portfolio holdings will remain available at www.nb.com until the subsequent month-end holdings have been posted (holdings for Fasciano and Millennium Funds 48 Your Investment will be available for only 15-30 days). Complete holdings for the Funds will also be available in reports on Form N-Q or Form N-CSR filed with the SEC. Historical portfolio holdings are available upon request. -- FUND STRUCTURE Each Fund uses a "multiple class" structure. Each Neuberger Berman fund offers one or more classes of shares that have identical investment programs, but different arrangements for distribution and shareholder servicing and, consequently, different expenses. This prospectus relates solely to the Institutional Class shares of the Funds. 49 Your Investment APPENDIX NEUBERGER BERMAN FOCUS FUND -- DESCRIPTION OF ECONOMIC SECTORS. Neuberger Berman Focus Fund seeks to achieve its investment objective by investing principally in common stocks in the following thirteen multi-industry economic sectors, normally making at least 90% of its investments in not more than six such sectors: (1) AUTOS AND HOUSING SECTOR: Companies engaged in design, production, or sale of automobiles, automobile parts, mobile homes, or related products ("automobile industries") or design, construction, renovation, or refurbishing of residential dwellings. The value of securities of companies in the automobile industries is affected by, among other things, foreign competition, the level of consumer confidence and consumer debt, and installment loan rates. The housing construction industry may be affected by the level of consumer confidence and consumer debt, mortgage rates, tax laws, and the inflation outlook. (2) CONSUMER GOODS AND SERVICES SECTOR: Companies engaged in providing consumer goods or services, including design, processing, production, sale, or storage of packaged, canned, bottled, or frozen foods and beverages and design, production, or sale of home furnishings, appliances, clothing, accessories, cosmetics, or perfumes. Certain of these companies are subject to government regulation affecting the use of various food additives and production methods, which could affect profitability. Also, the success of food- and fashion-related products may be strongly affected by fads, marketing campaigns, health concerns, and other factors affecting supply and demand. (3) DEFENSE AND AEROSPACE SECTOR: Companies involved in research, manufacture, or sale of products or services related to the defense or aerospace industries, including air transport; data processing or computer-related services; communications systems; military weapons or transportation; general aviation equipment, missiles, space launch vehicles, or spacecraft; machinery for guidance, propulsion, or control of flight vehicles; and airborne or ground-based equipment essential to the test, operation, or maintenance of flight vehicles. Because these companies rely largely on U.S. (and foreign) governmental demand for their products and services, their financial conditions are heavily influenced by defense spending, foreign assistance and export control policies. (4) ENERGY SECTOR: Companies involved in the production, transmission, or marketing of energy from oil, gas, or coal, as well as nuclear, geothermal, oil shale, or solar sources of energy (but excluding public utility companies). Also included are companies that provide component products or services for those activities. The value of these companies' securities varies based on the price and supply of energy fuels and may be affected by international politics, energy conservation, the success of exploration projects, environmental considerations, and the tax and other regulatory policies of various governments. (5) FINANCIAL SERVICES SECTOR: Companies providing financial services to consumers or industry, including commercial banks and savings and loan associations, consumer and industrial finance companies, securities brokerage companies, leasing companies, and insurance companies. Their profitability may fluctuate significantly as a result of volatile interest rates, concerns about particular banks and savings institutions, and general economic conditions. The economic prospects of this sector are strongly affected by the cost of short-term funds and the rate of default on consumer and business loans. The sector is also subject to extensive governmental 50 APPENDIX regulation, which can limit or assist its business prospects. Recent regulatory changes have allowed much greater competition among banks, securities firms and insurance companies. This is resulting in a wave of consolidations within this sector; however, the ultimate impact of these changes in any one company or portion of the financial services sector is difficult to predict. (6) HEALTH CARE SECTOR: Companies engaged in design, manufacture, or sale of products or services used in connection with the provision of health care, including pharmaceutical companies; firms that design, manufacture, sell, or supply medical, dental, or optical products, hardware, or services; companies involved in biotechnology, medical diagnostic, or biochemical research and development; and companies that operate health care facilities. Many of these companies are subject to government regulation and potential health care reforms, which could affect the price and availability and their products and services. Also, products and services of these companies could quickly become obsolete. (7) HEAVY INDUSTRY SECTOR: Companies engaged in research, development, manufacture, or marketing of products, processes, or services related to the agriculture, chemicals containers, forest products, non-ferrous metals, steel, or pollution control industries, including synthetic and natural materials (for example, chemicals, plastics, fertilizers, gases, fibers, flavorings, or fragrances), paper, wood products, steel and cement. Certain of these companies are subject to state and federal regulation, which could require alteration or cessation of production of a product, payment of fines, or cleaning of a disposal site. Furthermore, because some of the materials and processes used by these companies involve hazardous components, there are additional risks associated with their production, handling and disposal. The risk of product obsolescence also is present. (8) MACHINERY AND EQUIPMENT SECTOR: Companies engaged in the research, development, or manufacture of products, processes, or services relating to electrical equipment, machinery, pollution control, or construction services, including transformers, motors, turbines, hand tools, earth-moving equipment, and waste disposal services. The profitability of most of these companies may fluctuate significantly in response to capital spending and general economic conditions. As is the case for the heavy industry sector, there are risks associated with the production, handling and disposal of materials and processes that involve hazardous components and the risk of product obsolescence. (9) MEDIA AND ENTERTAINMENT SECTOR: Companies engaged in design, production, or distribution of goods or services for the media industries (including television or radio broadcasting or manufacturing, publishing, recordings and musical instruments, motion pictures, and photography) and the entertainment industries (including sports arenas, amusement and theme parks, gaming casinos, sporting goods, camping and recreational equipment, toys and games, travel-related services, hotels and motels, and fast food and other restaurants). Many products produced by companies in this sector -- for example, video and electronic games -- may become obsolete quickly. Additionally, companies engaged in television and radio broadcasts are subject to government regulation. (10) RETAILING SECTOR: Companies engaged in retail distribution of home furnishings, food products, clothing, pharmaceuticals, leisure products, or other consumer goods, including department stores, supermarkets, and retail chains specializing in particular items such as shoes, toys, or pharmaceuticals. The value of these companies' securities fluctuates based on consumer spending patterns, which depend on inflation and interest rates, the levels of consumer debt and 51 APPENDIX consumer confidence, and seasonal shopping habits. The success or failure of a company in this highly competitive sector depends on its ability to predict rapidly changing consumer tastes. (11) TECHNOLOGY SECTOR: Companies that are expected to have or develop products, processes, or services that will provide, or will benefit significantly from, technological advances and improvements or future automation trends, including semiconductors, computers and peripheral equipment, scientific instruments, computer software, telecommunications equipment, and electronic components, instruments, and systems. These companies are sensitive to foreign competition and import tariffs. Also, many of their products may become obsolete quickly. (12) TRANSPORTATION SECTOR: Companies involved in providing transportation of people and products, including airlines, railroads, and trucking firms. Revenues of these companies are affected by fluctuations in fuel prices and government regulation of fares as well as the general level of economic activity and the public's willingness to travel. (13) UTILITIES SECTOR: Companies in the public utilities industry and companies that derive a substantial majority of their revenues through supplying public utilities (including companies engaged in the manufacture, production, generation, transmission, or sale of gas and electric energy) and that provide telephone, telegraph, satellite, microwave, and other communication facilities to the public. The gas and electric public utilities industries are subject to various uncertainties, including the outcome of political issues concerning the environment, prices of fuel for electric generation, availability of natural gas, and risks associated with the construction and operation of nuclear power facilities. MARKET RISK The following is a discussion of the risks of investing in the various capitalization components of the stock market and the risks of using either a value or growth approach to selecting these securities. (1) SMALL-CAP STOCKS: The stocks of smaller companies are often more volatile and less liquid than the stocks of larger companies, and these companies may have a shorter history of operations than larger companies. They may not have as great an ability to raise additional capital; and may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor. Finally, small-cap stocks may be more affected than other types of stock by the underperformance of a sector in which they may be more concentrated. (2) MID-CAP STOCKS: Mid-cap stocks may fluctuate more widely in price than the market as a whole and may underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when mid-cap stocks are out of favor. (3) LARGE-CAP STOCKS: At times, large-cap stocks may lag other types of stocks in performance, which could cause a fund holding these stocks to perform worse than certain other funds over a given time period. (4) VALUE STOCKS: With a value approach, there is the risk that stocks may remain undervalued during a given period. This may happen because value stocks as a category lose favor with investors compared to growth stocks or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. 52 APPENDIX (5) GROWTH STOCKS: Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. 53 APPENDIX [GRAPHIC OMITTED] NEUBERGER BERMAN EQUITY FUNDS INSTITUTIONAL CLASS SHARES No load, sales charges or 12b-1 fees If you would like further details on these Funds you can request a free copy of the following documents: SHAREHOLDER REPORTS -- The shareholder reports offer information about each Fund's recent performance, including: o a discussion by the Portfolio Managers about strategies and market conditions that significantly affect the Fund's performance o Fund performance data and financial statements o portfolio holdings STATEMENT OF ADDITIONAL INFORMATION (SAI) -- The SAI contains more comprehensive information on these Funds, including: o various types of securities and practices, and their risks o investment limitations and additional policies o information about each Fund's management and business structure The SAI is hereby incorporated by reference into this prospectus, making it legally part of the prospectus. Investment manager: NEUBERGER BERMAN MANAGEMENT INC. Sub-adviser: NEUBERGER BERMAN, LLC [GRAPHIC OMITTED] OBTAINING INFORMATION You can obtain a shareholder report, SAI, and other information from your investment provider, or from: NEUBERGER BERMAN MANAGEMENT INC. 605 Third Avenue 2nd Floor New York, NY 10158-0180 800-877-9700 212-476-8800 Broker/Dealer and Institutional Services: 800-366-6264 Web site: www.nb.com Email: fundinquiries@nb.com You can also request copies of this information from the SEC for the cost of a duplicating fee by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, 100 F Street, N.E., Washington, DC 20549-9303. They are also available from the EDGAR Database on the SEC's website at www.sec.gov. You may also view and copy the documents at the SEC's Public Reference Room in Washington. Call 202-551-8090 for information about the operation of the Public Reference Room. [GRAPHIC OMITTED] G0014 12/06 SEC file number: 811-582 [GRAPHIC OMITTED] 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.nb.com [GRAPHIC OMITTED] PROSPECTUS - DECEMBER 20, 2006 These securities, like the securities of all mutual funds, have not been approved or disapproved by the Securities and Exchange Commission, and the Securities and Exchange Commission has not determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. NEUBERGER BERMAN Equity Funds INSTITUTIONAL CLASS SHARES Genesis Fund Contents -------------------------------------------------------------------------------- EQUITY FUNDS Genesis Fund.................................................................2 YOUR INVESTMENT Maintaining Your Account.....................................................8 Share Prices.................................................................9 Distributions and Taxes.....................................................10 Market Timing Policy........................................................11 Portfolio Holdings Policy...................................................11 Fund Structure..............................................................11 THIS FUND: -- is designed for investors with long-term goals in mind -- offers you the opportunity to participate in financial markets through a professionally managed stock portfolio -- also offers the opportunity to diversify your portfolio with a Fund that invests using a value approach -- carries certain risks, including the risk that you could lose money if Fund shares, when you sell them, are worth less than what you originally paid. This prospectus discusses principal risks of investing in Fund shares. These and other risks are discussed in more detail in the Statement of Additional Information (see back cover) -- is a mutual fund, not a bank deposit, and is not guaranteed or insured by the FDIC or any other government agency -- normally invests at least 80% of its net assets in equity securities. The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman, LLC. "Neuberger Berman Management Inc." and the individual Fund name in this prospectus are either service marks or registered service marks of Neuberger Berman Management Inc.(c) 2006 Neuberger Berman Management Inc. All rights reserved. Neuberger Berman Ticker Symbol: NBGIX GENESIS FUND -------------------------------------------------------------------------------- This Fund is closed to new investors. [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of small-capitalization companies, which it defines as those with a total market value of no more than $1.5 billion at the time the Fund first invests in them. The Fund may continue to hold or add to a position in a stock after the issuer has grown beyond $1.5 billion. The Fund seeks to reduce risk by diversifying among many companies and industries. The Portfolio Managers look for undervalued companies whose current product lines and balance sheets are strong. Factors in identifying these firms may include: -- above-average returns -- an established market niche -- circumstances that would make it difficult for new competitors to enter the market -- the ability to finance their own growth -- sound future business prospects. This approach is designed to let the Fund benefit from potential increases in stock prices, while limiting the risks typically associated with small-cap stocks. At times, the Portfolio Managers may emphasize certain sectors that they believe will benefit from market or economic trends. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] SMALL-CAP STOCKS HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE LAST 40 YEARS, SMALL-CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 2 Genesis Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Stock prices of many smaller companies are based on future expectations. The Portfolio Managers tend to focus on companies whose financial strength is largely based on existing business lines rather than projected growth. While this can help reduce risk, the Fund is still subject to many of the risks of small-cap investing. The stocks of smaller companies in which the Fund invests are often more volatile and less liquid than the stocks of larger companies, and these companies: -- may have a shorter history of operations than larger companies; -- may not have as great an ability to raise additional capital; -- may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also: -- underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor; -- be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. To the extent the Portfolio Managers commit a portion of the Fund's assets to mid-cap stocks, the Fund is subject to their risks, including the risk its holdings may: -- fluctuate more widely in price than the market as a whole -- underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when mid-cap stocks are out of favor. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 3 Genesis Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------- -------------------------------------- [GRAPHIC OMITTED] 1996 '99 '98 '99 '00 '01 '02 '03 '04 '05 29.86 34.89 -6.95 4.24 33.00 12.39 -2.74 32.00 18.98 16.61 BEST QUARTER: Q3 '97, 20.07% WORST QUARTER: Q3 '98, -16.43% Year-to-date performance as of 9/30/2006: 1.03% AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005*
1 Year 5 Years 10 Years Genesis Fund Return Before Taxes 16.61 14.89 16.29 Return After Taxes on Distributions 16.23 14.53 15.55 Return After Taxes on Distributions and Sale of Fund Shares 11.32 12.98 14.35 Russell 2000 Index 4.55 8.22 9.26 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The Russell 2000 Index is an unmanaged index of U.S. small-cap stocks.
* Through 12/15/2000, Genesis Fund Institutional Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 7/1999 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Genesis Fund Institutional Class. Performance from the beginning of the measurement period above to 7/1999 is that of Genesis Fund Investor Class. Because Institutional Class has lower expenses, its performance typically would have been slightly better than that of the Investor Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. 4 Genesis Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying or selling shares or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE SHAREHOLDER FEES None ---------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.81 Distribution (12b-1) fees None Other expenses 0.04 ---------------- Total annual operating expenses 0.85
EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower.
1 Year 3 Years 5 Years 10 Years Expenses $87 $271 $471 $1,049
* The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.81% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 5 Genesis Fund PORTFOLIO MANAGERS JUDITH M. VALE AND ROBERT W. D'ALELIO are Vice Presidents of Neuberger Berman Management Inc. and Managing Directors of Neuberger Berman, LLC. Vale and D'Alelio have been senior members of the Small Cap Group since 1992 and 1996, respectively. Ms. Vale has co-managed the Fund's assets since 1994. Mr. D'Alelio joined the firm in 1996 and has co-managed the Fund's assets since 1997. MICHAEL L. BOWYER AND BRETT S. REINER are Vice Presidents of Neuberger Berman Management Inc. and Managing Directors of Neuberger Berman, LLC. Bowyer and Reiner have been members of the Small Cap Group since 2001 and 2003, respectively. Mr. Bowyer joined the firm in 1996 and Mr. Reiner in 2000. They are the Associate Portfolio Managers of the Fund. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 6 Genesis Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
Year Ended August 31, 2002 2003 2004 2005 2006 PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 26.88 26.83 32.00 36.98 46.66 PLUS: Income from investment operations Net investment income (loss) 0.05 (0.02) (0.06) (0.02) 0.01 Net gains (losses) - realized and unrealized 0.69 5.28 5.06 10.91 2.34 Subtotal: income from investment operations 0.74 5.26 5.00 10.89 2.35 MINUS: Distributions to shareholders Capital gain distributions 0.79 0.09 0.02 1.21 1.06 EQUALS: Share price (NAV) at end of year 26.83 32.00 36.98 46.66 47.95 ----------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense reimbursement/repayment and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 0.85 0.85 0.85 0.85 0.85 Gross expenses(1) 0.88 0.87 0.86 0.85 0.85 Expenses(2) 0.85 0.85 0.85 0.85 0.85 Net investment income (loss) - actual 0.20 (0.08) (0.17) (0.06) 0.03 ----------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return(%)(3) 2.77 19.68 15.62 29.95 5.05 Net assets at end of year (in millions of dollars) 456.3 638.2 912.4 1,788.7 2,625.7 Portfolio turnover rate (%) 19 17 23 11 19
The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement/repayment and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower/higher if Neuberger Berman Management Inc. had not reimbursed/recouped certain expenses and/or waived a portion of investment management fees. 7 Genesis Fund Neuberger Berman YOUR INVESTMENT -------------------------------------------------------------------------------- -- MAINTAINING YOUR ACCOUNT Institutional Class shares of the Fund are available to you for investment through retirement savings programs such as pension and profit sharing plans and employee benefit trusts. The minimum initial investment is $5 million. Neuberger Berman Management Inc. reserves the right to waive this minimum investment for certain retirement plans. To buy or sell Institutional Class shares of the Fund, contact your retirement plan. All investments must be made in U.S. dollars, and investment checks must be drawn on a U.S. bank. The Fund does not issue certificates for shares. Under certain circumstances, the Fund reserves the right to: -- suspend the offering of shares -- reject any purchase order -- suspend or reject future purchase orders from any investor who does not provide payment to settle a purchase order -- satisfy an order to sell Fund shares with securities rather than cash, for certain very large orders -- suspend or postpone your right to sell Fund shares on days when trading on the New York Stock Exchange (the "Exchange") is restricted, or as otherwise permitted by the Securities and Exchange Commission ("SEC") -- change its investment minimums or other requirements for buying and selling, or waive any minimums or requirements for certain investors -- take orders to purchase or sell Fund shares when the Exchange is closed. In such a case, the Fund would post a notice on the Neuberger Berman website, www.nb.com PROCEEDS FROM THE SALE OF SHARES -- The proceeds from the shares you sell are generally sent out the next business day after your order is executed, and nearly always within seven business days. There are two cases in which proceeds may be delayed beyond this time: -- in unusual circumstances where the law allows additional time if needed -- if a check you wrote to buy shares has not cleared by the time you sell those shares; clearance may take up to 15 calendar days from the date of purchase. If you think you may need to sell shares soon after buying them, you can avoid the check clearing time by investing by wire. UNCASHED CHECKS -- When you receive a check, you may want to deposit or cash it right away, as you will not receive interest on uncashed checks. [GRAPHIC OMITTED] YOUR RETIREMENT PLAN THE FEES AND POLICIES OUTLINED IN THIS PROSPECTUS ARE SET BY THE FUND AND BY NEUBERGER BERMAN MANAGEMENT INC. HOWEVER, MOST OF THE INFORMATION YOU'LL NEED FOR MANAGING YOUR INVESTMENT WILL COME FROM YOUR RETIREMENT PLAN. THIS INCLUDES INFORMATION ON HOW TO BUY AND SELL SHARES, INVESTOR SERVICES, AND ADDITIONAL POLICIES. IN EXCHANGE FOR THE SERVICES IT OFFERS, YOUR RETIREMENT PLAN MAY CHARGE FEES, WHICH ARE IN ADDITION TO THOSE DESCRIBED IN THIS PROSPECTUS. 8 YOUR INVESTMENT [GRAPHIC OMITTED] ADDITIONAL PAYMENTS TO INVESTMENT PROVIDERS NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES MAY PAY ADDITIONAL COMPENSATION, OUT OF THEIR OWN RESOURCES AND NOT AS AN EXPENSE OF THE FUND, TO YOUR INVESTMENT PROVIDER OR OTHER FINANCIAL INTERMEDIARIES, INCLUDING AFFILIATES, IN CONNECTION WITH THE SALE, DISTRIBUTION, RETENTION AND/OR SERVICING OF FUND SHARES. IN SOME CASES, THESE PAYMENTS MAY CREATE AN INCENTIVE FOR YOUR INVESTMENT PROVIDER OR ITS EMPLOYEES TO RECOMMEND OR SELL SHARES OF THE FUND TO YOU. IF YOU HAVE PURCHASED SHARES OF THE FUND THROUGH AN INVESTMENT PROVIDER, PLEASE SPEAK WITH YOUR INVESTMENT PROVIDER TO LEARN MORE ABOUT ANY PAYMENTS IT RECEIVES FROM NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES, AS WELL AS FEES AND/OR COMMISSIONS THE INVESTMENT PROVIDER CHARGES. YOU SHOULD ALSO CONSULT DISCLOSURES MADE BY YOUR INVESTMENT PROVIDER AT THE TIME OF PURCHASE. ANY SUCH PAYMENTS WILL NOT CHANGE THE NET ASSET VALUE OR THE PRICE OF THE FUND'S SHARES. FOR MORE INFORMATION, PLEASE SEE THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. [GRAPHIC OMITTED] INFORMATION REQUIRED FROM NEW ACCOUNTS TO HELP THE U.S. GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHEN YOU OPEN AN ACCOUNT, WE (WHICH MAY INCLUDE YOUR RETIREMENT PLAN ACTING ON OUR BEHALF) WILL REQUIRE YOUR NAME, ADDRESS, DATE OF BIRTH, AND SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER. WE MAY ALSO REQUIRE OTHER IDENTIFYING DOCUMENTS. IF WE CANNOT VERIFY THE INFORMATION YOU SUPPLY TO US OR IF IT IS INCOMPLETE, WE MAY BE REQUIRED TO RETURN YOUR FUNDS OR REDEEM YOUR ACCOUNT. -- SHARE PRICES Because Institutional Class shares of the Fund do not have a sales charge, the price you pay for each share is the Fund's net asset value per share. Similarly, because the Fund does not charge fees for selling shares, the Fund pays you the full share price (net asset value) when you sell shares. Remember that your retirement plan may charge fees for its services. The Fund is open for business every day the Exchange is open. The Exchange is closed on all national holidays and Good Friday; Fund shares will not be priced on those days or other days on which the Exchange is closed. The Fund calculates its share price as of the end of regular trading on the Exchange on business days, usually 4:00 p.m. Eastern time. In general, every buy or sell order you place will go through at the next share price calculated after your order has been accepted (see "Maintaining Your Account" for information on placing orders). Check with your retirement plan to find out by what time your order must be received so that it can be processed the same day. Depending on when your retirement plan accepts orders, it is possible that the Fund's share price could change on days when you are unable to buy or sell shares. Because foreign markets may be open on days when U.S. markets are closed, the value of foreign securities owned by the Fund could change on days when you cannot buy or sell Fund shares. Remember, though, any purchase or sale takes place at the next share price calculated after your order is accepted. 9 Your Investment [GRAPHIC OMITTED] SHARE PRICE CALCULATIONS THE PRICE OF AN INSTITUTIONAL CLASS SHARE OF THE FUND IS THE TOTAL VALUE OF THE FUND'S ASSETS ATTRIBUTABLE TO INSTITUTIONAL CLASS SHARES MINUS LIABILITIES ATTRIBUTABLE TO THAT CLASS, DIVIDED BY THE TOTAL NUMBER OF INSTITUTIONAL CLASS SHARES OUTSTANDING. BECAUSE THE VALUE OF THE FUND'S SECURITIES CHANGES EVERY BUSINESS DAY, THE SHARE PRICE USUALLY CHANGES AS WELL. WHEN VALUING PORTFOLIO SECURITIES, THE FUND USES MARKET PRICES. HOWEVER, IN CERTAIN CASES, EVENTS THAT OCCUR AFTER CERTAIN MARKETS HAVE CLOSED MAY RENDER THESE PRICES UNRELIABLE. WHEN THE FUND BELIEVES A REPORTED MARKET PRICE FOR A SECURITY DOES NOT REFLECT THE AMOUNT THE FUND WOULD RECEIVE ON A CURRENT SALE OF THAT SECURITY, THE FUND MAY SUBSTITUTE FOR THE MARKET PRICE A FAIR-VALUE ESTIMATE MADE ACCORDING TO METHODS APPROVED BY THE BOARD OF TRUSTEES. THE FUND MAY ALSO USE THESE METHODS TO VALUE CERTAIN TYPES OF ILLIQUID SECURITIES. FAIR VALUE PRICING GENERALLY WILL BE USED IF THE EXCHANGE ON WHICH A PORTFOLIO SECURITY IS TRADED CLOSES EARLY OR IF TRADING IN A PARTICULAR SECURITY WAS HALTED DURING THE DAY AND DID NOT RESUME PRIOR TO THE FUND'S NET ASSET VALUE CALCULATION. THE FUND MAY ALSO USE THESE METHODS TO VALUE SECURITIES THAT TRADE IN A FOREIGN MARKET, IF SIGNIFICANT EVENTS THAT APPEAR LIKELY TO AFFECT THE VALUE OF THOSE SECURITIES OCCUR BETWEEN THE TIME THAT FOREIGN MARKET CLOSES AND THE TIME THE EXCHANGE CLOSES. SIGNIFICANT EVENTS MAY INCLUDE (1) THOSE IMPACTING A SINGLE ISSUER, (2) GOVERNMENTAL ACTIONS THAT AFFECT SECURITIES IN ONE SECTOR OR COUNTRY, (3) NATURAL DISASTERS OR ARMED CONFLICTS AFFECTING A COUNTRY OR REGION, OR (4) SIGNIFICANT DOMESTIC OR FOREIGN MARKET FLUCTUATIONS. THE EFFECT OF USING FAIR VALUE PRICING IS THAT A FUND'S NET ASSET VALUE WILL BE SUBJECT TO THE JUDGMENT OF NEUBERGER BERMAN MANAGEMENT INC., OPERATING UNDER PROCEDURES APPROVED BY THE BOARD OF TRUSTEES, INSTEAD OF BEING DETERMINED BY MARKET PRICES. -- DISTRIBUTIONS AND TAXES DISTRIBUTIONS -- The Fund pays out to shareholders any net investment income and net realized capital gains. Ordinarily, the Fund makes any distributions once a year in December. Consult your retirement plan about whether your income and capital gain distributions from the Fund will be reinvested in additional Institutional Class shares of the Fund or paid to you in cash. HOW DISTRIBUTIONS ARE TAXED -- Fund distributions to your retirement plan generally are not taxable to you, although withdrawals from your retirement plan generally are subject to tax. HOW SHARE TRANSACTIONS ARE TAXED -- Your retirement plan's sale (redemption) of Fund shares also generally will not result in a realized taxable gain or loss. 10 Your Investment -- MARKET TIMING POLICY Frequent purchases and redemptions of Fund shares ("market-timing activities") can interfere with Fund management and affect costs and performance for other shareholders. To discourage market-timing activities by Fund shareholders, the Board of Trustees has adopted market-timing policies and has approved the procedures of the principal underwriter for implementing those policies. In furtherance of these policies, under certain circumstances, the Fund reserves the right to reject any purchase order or suspend the telephone order privilege. Neuberger Berman Management Inc. applies the Fund policies and procedures with respect to market-timing activities by monitoring trading activity in the Fund, identifying excessive trading patterns, and warning or prohibiting shareholders who trade excessively from making further purchases of Fund shares. These policies and procedures are applied consistently to all shareholders. Although the Fund makes an effort to monitor for market-timing activities, the ability of the Fund to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts, and other approved intermediaries may be limited in those instances in which the investment intermediary maintains the underlying shareholder accounts. Accordingly, there can be no assurance that the Fund will be able to eliminate all market-timing activities. -- PORTFOLIO HOLDINGS POLICY A description of the Fund's policies and procedures with respect to the disclosure of the Fund portfolio securities is available in the Fund's Statement of Additional Information. The complete portfolio holdings for the Fund are available at http://www.nb.com/ind/ mutual_funds/prospectuses/ 15-30 days after the end of each calendar quarter. The Fund's complete portfolio holdings will remain available at www.nb.com for 15-30 days. Complete holdings for the Fund will also be available in reports on Form N-Q or Form N-CSR filed with the SEC. Historical portfolio holdings are available upon request. -- FUND STRUCTURE The Fund uses a "multiple class" structure. Each Neuberger Berman fund offers one or more classes of shares that have identical investment programs, but different arrangements for distribution and shareholder servicing and, consequently, different expenses. This prospectus relates solely to the Institutional Class shares of the Fund. 11 Your Investment [GRAPHIC OMITTED] NEUBERGER BERMAN EQUITY FUNDS INSTITUTIONAL CLASS SHARES No load, sales charges or 12b-1 fees If you would like further details on this Fund you can request a free copy of the following documents: SHAREHOLDER REPORTS -- The shareholder reports offer information about the Fund's recent performance, including: -- a discussion by the Portfolio Managers about strategies and market conditions that significantly affect the Fund's performance -- Fund performance data and financial statements -- portfolio holdings STATEMENT OF ADDITIONAL INFORMATION (SAI) -- The SAI contains more comprehensive information on this Fund, including: -- various types of securities and practices, and their risks -- investment limitations and additional policies -- information about the Fund's management and business structure The SAI is hereby incorporated by reference into this prospectus, making it legally part of the prospectus. Investment manager: NEUBERGER BERMAN MANAGEMENT INC. Sub-adviser: NEUBERGER BERMAN, LLC [GRAPHIC OMITTED] OBTAINING INFORMATION You can obtain a shareholder report, SAI, and other information from your investment provider, or from: NEUBERGER BERMAN MANAGEMENT INC. 605 Third Avenue 2nd Floor New York, NY 10158-0180 800-877-9700 212-476-8800 Broker/Dealer and Institutional Services: 800-366-6264 Web site: www.nb.com Email: fundinquiries@nb.com You can also request copies of this information from the SEC for the cost of a duplicating fee by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, 100 F Street, N.E., Washington, DC 20549-9303. They are also available from the EDGAR Database on the SEC's website at www.sec.gov. You may also view and copy the documents at the SEC's Public Reference Room in Washington. Call 202-551-8090 for information about the operation of the Public Reference Room. [GRAPHIC OMITTED] A0089 12/06 SEC file number: 811-582 [GRAPHIC OMITTED] 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.nb.com [GRAPHIC OMITTED] PROSPECTUS - DECEMBER 20, 2006 These securities, like the securities of all mutual funds, have not been approved or disapproved by the Securities and Exchange Commission, and the Securities and Exchange Commission has not determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. NEUBERGER BERMAN EQUITY FUNDS International Institutional Fund Contents -------------------------------------------------------------------------------- EQUITY FUNDS International Institutional Fund.............................................2 YOUR INVESTMENT Share Prices.................................................................8 Privileges and Services......................................................9 Distributions and Taxes......................................................9 Maintaining Your Account....................................................11 Redemption Fee..............................................................17 Market Timing Policy........................................................17 Portfolio Holdings Policy...................................................18 Related Performance.........................................................19 THIS FUND: -- is designed for investors with long-term goals in mind -- offers you the opportunity to participate in financial markets through a professionally managed stock portfolio -- also offers the opportunity to diversify your portfolio with a Fund that invests using a value approach -- carries certain risks, including the risk that you could lose money if Fund shares, when you sell them, are worth less than what you originally paid. This prospectus discusses principal risks of investing in Fund shares. These and other risks are discussed in more detail in the Statement of Additional Information (see back cover) -- is a mutual fund, not a bank deposit, and is not guaranteed or insured by the FDIC or any other government agency -- normally invests at least 80% of its net assets in equity securities. The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman, LLC. "Neuberger Berman Management Inc." and the individual Fund name in this prospectus are either service marks or registered service marks of Neuberger Berman Management Inc.(c) 2006 Neuberger Berman Management Inc. All rights reserved. Neuberger Berman Ticker Symbol: NBIIX INTERNATIONAL INSTITUTIONAL FUND -------------------------------------------------------------------------------- This Fund is closed to new investors. [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN COMMON STOCKS OF FOREIGN COMPANIES. To pursue this goal, the Fund invests mainly in foreign companies of any size, including companies in developed and emerging industrialized markets. The Fund defines a foreign company as one that is organized outside of the United States and conducts the majority of its business abroad. The Fund seeks to reduce risk by diversifying among many industries. Although it has the flexibility to invest a significant portion of its assets in one country or region, it generally intends to remain well-diversified across countries and geographical regions. In picking stocks, the Portfolio Managers look for well-managed and profitable companies that show growth potential and whose stock prices are undervalued. Factors in identifying these firms may include strong fundamentals, such as attractive cash flows and balance sheets, as well as prices that are reasonable in light of projected returns. The Portfolio Managers also consider the outlooks for various countries and regions around the world, examining economic, market, social, and political conditions. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] FOREIGN STOCKS THERE ARE MANY PROMISING OPPORTUNITIES FOR INVESTMENT OUTSIDE THE UNITED STATES. FOREIGN MARKETS OFTEN RESPOND TO DIFFERENT FACTORS AND THEREFORE TEND TO FOLLOW CYCLES THAT ARE DIFFERENT FROM EACH OTHER. FOR THIS REASON, MANY INVESTORS PUT A PORTION OF THEIR PORTFOLIOS IN FOREIGN INVESTMENTS AS A WAY OF GAINING FURTHER DIVERSIFICATION. WHILE FOREIGN STOCK MARKETS CAN BE RISKY, INVESTORS GAIN AN OPPORTUNITY TO ADD POTENTIAL LONG-TERM GROWTH. [GRAPHIC OMITTED] GROWTH AND VALUE INVESTING THE FUND USES A BLEND OF GROWTH AND VALUE STRATEGIES. VALUE INVESTORS SEEK STOCKS TRADING AT BELOW MARKET AVERAGE PRICES BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES BEFORE OTHER INVESTORS DISCOVER THEIR WORTH. GROWTH INVESTORS SEEK COMPANIES THAT ARE ALREADY SUCCESSFUL BUT MAY NOT HAVE REACHED THEIR FULL POTENTIAL. 2 International Institutional Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in international stock markets. The behavior of these markets is unpredictable, particularly in the short term. Although foreign stocks offer added diversification potential, world markets may all react in similar fashion to important economic or political developments. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Foreign stocks are subject to more risks than comparable U.S. stocks. This is in part because some foreign markets are less developed and foreign governments, economies, laws (including tax laws), and securities firms may be less stable. There is also a higher chance that key information will be unavailable, incomplete, or inaccurate. As a result, foreign stocks can fluctuate more widely in price than comparable U.S. stocks, and they may also be less liquid. These risks are generally greater in emerging markets. Over a given period of time, foreign stocks may underperform U.S. stocks -- sometimes for years. The Fund could also underperform if the Portfolio Managers invest in countries or regions whose economic performance falls short. Changes in currency exchange rates bring an added dimension of risk. Currency fluctuations could erase investment gains or add to investment losses. Mid- and small-cap stocks tend to be less liquid and more volatile than large-cap stocks. Any type of stock may underperform any other during a given period. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. THE FUND MAY USE DERIVATIVES FOR HEDGING AND FOR SPECULATION. HEDGING COULD REDUCE THE FUND'S LOSSES FROM CURRENCY FLUCTUATIONS, BUT COULD ALSO REDUCE ITS GAINS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. A DERIVATIVE INSTRUMENT, WHETHER USED FOR HEDGING OR SPECULATION, COULD FAIL TO PERFORM AS EXPECTED, CAUSING A LOSS FOR THE FUND. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL, OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES BUT MAY MEAN LOST OPPORTUNITIES. 3 International Institutional Fund PERFORMANCE [GRAPHIC OMITTED] When this prospectus was prepared, the Fund had not completed a full calendar year of operations and had no performance information to report. The Fund is modeled after an existing mutual fund that is managed by Neuberger Berman Management Inc., and has a goal and strategy that are identical to that Fund. Please see "Related Performance" for information on the performance of that Fund and of similar accounts managed by Neuberger Berman Management Inc. 4 International Institutional Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying or selling shares held for more than 60 days or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE SHAREHOLDER FEES (% of amount redeemed) None ----------------------------------------------------------------- These are deducted directly from your investment. Redemption Fee* 2.00 ----------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)** These are deducted from Fund assets, so you pay them indirectly Management fees 0.99 Distribution (12b-1) fees None Other expenses 0.20 ----------------------------------------------------------------- Total annual operating expenses 1.19 ------------------------------------------------------------------ Minus: Expense reimbursement 0.34 ------------------------------------------------------------------ Net expenses 0.85
EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower.
1 Year 3 Years 5 Years 10 Years Expenses $87 $271 $471 $1,049
* This fee is charged on investments held 60 days or less, whether Fund shares are redeemed for shares of another fund. See "Redemption Fee" for more information. ** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Fund through 8/31/2017, so that the total annual operating expenses of the Fund are limited to 0.85% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed to repay NBMI for fees and expenses forgone or reimbursed to the Fund provided that repayment does not cause its annual operating expenses to exceed 0.85% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.99% of average net assets before reimbursements. A discussion regarding the basis for the approval of the investment advisory and sub-advisory contracts by the Board of Trustees is available in the Fund's annual report dated August 2005. 5 International Institutional Fund PORTFOLIO MANAGERS BENJAMIN SEGAL is a Vice President of Neuberger Berman Management Inc. and Managing Director of Neuberger Berman, LLC. Mr. Segal joined the firm in 1999 and has been the Portfolio Manager since November 2003. Prior to that, he was a co-Portfolio Manager since 2000. He was an assistant portfolio manager at another firm from 1997 to 1998. Prior to 1997, he held positions in international finance and consulting. MILU E. KOMER is a Vice President of Neuberger Berman Management Inc. and of Neuberger Berman, LLC. Ms. Komer joined the firm in 2001 and is the Associate Portfolio Manager of the Fund. Prior to that, she held associate positions at other investment firms from 1998 to 2001. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 6 International Institutional Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
Year Ended August 31, 2005(1) 2006 PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 10.00 10.95 PLUS: Income from investment operations Net investment income 0.00 0.22 Net gains/losses - realized and 0.95 1.60 unrealized Subtotal: income from investment 0.95 1.82 operations MINUS: Distributions to shareholders Income dividends - 0.03 Capital gain distributions - 0.05 Subtotal: distributions to shareholders - 0.08 EQUALS: Share price (NAV) at end of year 10.95 12.69 ----------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income - as they actually are as well as how they would have been if certain expense reimbursement and offset arrangements had not been in effect. Net expenses - actual 0.85(2) 0.85 Gross expenses(3) 2.90(2) 1.20 Expenses(4) 0.85(2) 0.85 Net investment income - actual 0.14(2) 1.78 ----------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(5) 9.50(6) 16.68 Net assets at end of year (in millions of dollars) 42.2 627.6 Portfolio turnover rate (%) 14(6) 45
The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Period from 6/17/2005 (beginning of operations) to 8/31/2005. (2) Annualized. (3) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (4) Shows what this ratio would have been if there had been no expense offset arrangements. (5) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. (6) Not annualized. 7 International Institutional Fund Neuberger Berman YOUR INVESTMENT -------------------------------------------------------------------------------- Shares of the Fund are available through an investment provider or from Neuberger Berman Management Inc. (See "Maintaining Your Account") -- SHARE PRICES Because shares of the Fund do not have a sales charge, the price you pay for each share of the Fund is the Fund's net asset value per share. Unless a redemption fee is applied, the Fund pays you the full share price when you sell shares. The Fund imposes a redemption fee on sales of Fund shares held 60 days or less. See the "Redemption Fee" section for more information. If you use an investment provider, that provider may charge fees that are in addition to those described in this prospectus. The Fund is open for business every day the Exchange is open. The Exchange is closed on all national holidays and Good Friday; Fund shares will not be priced on those days or other days on which the Exchange is closed. The Fund calculates its share price as of the end of regular trading on the Exchange on business days, usually 4:00 p.m. Eastern time. In general, every buy or sell order you place will go through at the next share price calculated after your order has been accepted (see "Maintaining Your Account" for information on placing orders). If you use an investment provider, you should check with it to find out by what time your order must be received so that it can be processed the same day. Depending on when it accepts orders, it is possible that the Fund's share price could change on days when you are unable to buy or sell shares. Because foreign markets may be open on days when U.S. markets are closed, the value of foreign securities owned by the Fund could change on days when you cannot buy or sell Fund shares. Remember, though, any purchase or sale takes place at the next share price calculated after your order is accepted. [GRAPHIC OMITTED] SHARE PRICE CALCULATIONS THE PRICE OF A SHARE OF THE FUND IS THE TOTAL VALUE OF THE FUND'S ASSETS ATTRIBUTABLE TO ITS SHARES MINUS LIABILITIES ATTRIBUTABLE TO THE FUND, DIVIDED BY THE TOTAL NUMBER OF SHARES OUTSTANDING. BECAUSE THE VALUE OF THE FUND'S SECURITIES CHANGES EVERY BUSINESS DAY, THE SHARE PRICE USUALLY CHANGES AS WELL. WHEN VALUING PORTFOLIO SECURITIES, THE FUND USES MARKET PRICES. HOWEVER, IN CERTAIN CASES, EVENTS THAT OCCUR AFTER CERTAIN MARKETS HAVE CLOSED MAY RENDER THESE PRICES UNRELIABLE. WHEN THE FUND BELIEVES A REPORTED MARKET PRICE FOR A SECURITY DOES NOT REFLECT THE AMOUNT THE FUND WOULD RECEIVE ON A CURRENT SALE OF THAT SECURITY, THE FUND MAY SUBSTITUTE FOR THE MARKET PRICE A FAIR-VALUE ESTIMATE MADE ACCORDING TO METHODS APPROVED BY THE BOARD OF TRUSTEES. THE FUND MAY ALSO USE THESE METHODS TO VALUE CERTAIN TYPES OF ILLIQUID SECURITIES. FAIR VALUE PRICING GENERALLY WILL BE USED IF THE EXCHANGE ON WHICH A PORTFOLIO SECURITY IS TRADED CLOSES EARLY OR IF TRADING IN A PARTICULAR SECURITY WAS HALTED DURING THE DAY AND DID NOT RESUME PRIOR TO THE FUND'S NET ASSET VALUE CALCULATION. THE FUND MAY ALSO USE THESE METHODS TO VALUE SECURITIES THAT TRADE IN A FOREIGN MARKET, IF SIGNIFICANT EVENTS THAT APPEAR LIKELY TO AFFECT THE VALUE OF THOSE SECURITIES OCCUR BETWEEN THE TIME THAT FOREIGN MARKET CLOSES AND THE TIME THE EXCHANGE CLOSES. SIGNIFICANT EVENTS MAY INCLUDE (1) THOSE IMPACTING A SINGLE ISSUER, (2) GOVERNMENTAL ACTIONS THAT AFFECT SECURITIES IN ONE SECTOR OR COUNTRY, (3) NATURAL DISASTERS OR ARMED CONFLICTS AFFECTING A COUNTRY OR REGION, OR (4) SIGNIFICANT DOMESTIC OR FOREIGN MARKET FLUCTUATIONS. THE EFFECT OF USING FAIR VALUE PRICING IS THAT A FUND'S NET ASSET 8 Your Investment VALUE WILL BE SUBJECT TO THE JUDGMENT OF NEUBERGER BERMAN MANAGEMENT INC., OPERATING UNDER PROCEDURES APPROVED BY THE BOARD OF TRUSTEES, INSTEAD OF BEING DETERMINED BY MARKET PRICES. -- PRIVILEGES AND SERVICES If you purchase shares directly from Neuberger Berman Management Inc., you have access to the services listed below. If you purchase shares through an investment provider, consult that provider for information about investment services. SYSTEMATIC INVESTMENTS -- This plan lets you take advantage of dollar-cost averaging by establishing periodic investments of $100 a month or more once you make an initial minimum investment of at least $5 million. You choose the schedule and amount. Your investment money may come from a Neuberger Berman money market fund or your bank account. SYSTEMATIC WITHDRAWALS -- This plan lets you arrange withdrawals of at least $100 from a Neuberger Berman fund on a periodic schedule. You can also set up payments to distribute the full value of an account over a given time. While this service can be helpful to many investors, be aware that it could generate capital gains or losses. ELECTRONIC BANK TRANSFERS -- When you sell Fund shares, you can have the money sent to your bank account electronically rather than mailed to you as a check. Please note that your bank must be a member of the Automated Clearing House, or ACH, system. [GRAPHIC OMITTED] DOLLAR-COST AVERAGING SYSTEMATIC INVESTING ALLOWS YOU TO TAKE ADVANTAGE OF THE PRINCIPLE OF DOLLAR-COST AVERAGING. WHEN YOU MAKE REGULAR INVESTMENTS OF A GIVEN AMOUNT - SAY, $100 A MONTH - YOU WILL END UP INVESTING AT DIFFERENT SHARE PRICES OVER TIME. WHEN THE SHARE PRICE IS HIGH, YOUR $100 BUYS FEWER SHARES; WHEN THE SHARE PRICE IS LOW, YOUR $100 BUYS MORE SHARES. OVER TIME, THIS CAN HELP LOWER THE AVERAGE PRICE YOU PAY PER SHARE. DOLLAR-COST AVERAGING CANNOT GUARANTEE YOU A PROFIT OR PROTECT YOU FROM LOSSES IN A DECLINING MARKET. BUT IT CAN BE BENEFICIAL OVER THE LONG TERM. -- DISTRIBUTIONS AND TAXES DISTRIBUTIONS -- The Fund pays out to shareholders any net investment income and net realized capital gains. Ordinarily, the Fund makes any distributions once a year, in December. Unless you designate otherwise, your income and capital gain distributions from the Fund will be reinvested in additional shares of the Fund. However, if you prefer, you may receive all distributions in cash or reinvest capital gain distributions but receive income distributions in cash. Distributions taken in cash can be sent to you by check or by electronic transfer to a designated bank account. To take advantage of one of these options, please indicate your choice on your application. If you use an investment provider, you must consult it about whether your income and capital gain distributions will be reinvested in additional Fund shares or paid in cash. HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement plans and accounts and other tax-exempt investors, all Fund distributions you receive are generally taxable to you, regardless of whether you take them in cash or reinvest them in additional Fund shares. 9 Your Investment Fund distributions to Roth IRAs, other individual retirement accounts ("IRAs"), and qualified retirement plans generally are tax-free. Eventual withdrawals from a Roth IRA also may be tax-free, while withdrawals from other retirement accounts and plans generally are subject to tax. Distributions generally are taxable to you in the year you receive them. In some cases, however, distributions you receive in January are taxable as if they had been paid the previous December 31. Your tax statement (see "Taxes and You") will help clarify this for you. Distributions of income and the excess of net short-term capital gain over net long-term capital loss are generally taxed as ordinary income. However, a Fund's dividends attributable to "qualified dividend income" (generally, dividends it receives on stock of most U.S. and certain foreign corporations with respect to which it satisfies certain holding period, financing, and other restrictions) are subject to a 15% maximum federal income tax rate for individual shareholders who satisfy those restrictions with respect to their Fund shares on which the dividends were paid. Distributions of net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss) are generally taxed as long-term capital gain and are subject to that 15% maximum rate for individual shareholders. The tax treatment of capital gain distributions from the Fund depends on how long the Fund held the securities it sold, not on when you bought your shares of the Fund or whether you reinvested your distributions. HOW SHARE TRANSACTIONS ARE TAXED -- When you sell (redeem) Fund shares, you generally realize a taxable gain or loss. An exception, once again, applies to tax-advantaged retirement plan and accounts and other tax-exempt investors. Any capital gain an individual shareholder recognizes on a redemption of his or her Fund shares that have been held for more than one year will qualify for the 15% maximum federal income tax rate mentioned above. [GRAPHIC OMITTED] TAXES AND YOU THE TAXES YOU ACTUALLY OWE ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS CAN VARY WITH MANY FACTORS, SUCH AS YOUR MARGINAL TAX BRACKET, HOW LONG YOU HELD YOUR SHARES AND WHETHER YOU OWE ALTERNATIVE MINIMUM TAX. HOW CAN YOU FIGURE OUT YOUR TAX LIABILITY ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS? ONE HELPFUL TOOL IS THE TAX STATEMENT THAT WE OR YOUR INVESTMENT PROVIDER SENDS YOU EVERY JANUARY. IT DETAILS THE DISTRIBUTIONS YOU RECEIVED DURING THE PAST YEAR AND SHOWS THEIR TAX STATUS. A SEPARATE STATEMENT COVERS YOUR SHARE TRANSACTIONS. MOST IMPORTANTLY, CONSULT YOUR TAX PROFESSIONAL. EVERYONE'S TAX SITUATION IS DIFFERENT, AND YOUR PROFESSIONAL SHOULD BE ABLE TO HELP YOU ANSWER ANY QUESTIONS YOU MAY HAVE. [GRAPHIC OMITTED] BACKUP WITHHOLDING THE FUND IS REQUIRED TO WITHHOLD 28% OF THE MONEY YOU ARE OTHERWISE ENTITLED TO RECEIVE FROM ITS DISTRIBUTIONS AND REDEMPTION PROCEEDS IF YOU ARE AN INDIVIDUAL OR CERTAIN OTHER NON-CORPORATE SHAREHOLDER WHO FAILS TO PROVIDE A CORRECT TAXPAYER IDENTIFICATION NUMBER TO THE FUND. WITHHOLDING AT THAT RATE ALSO IS REQUIRED FROM THE FUND'S DISTRIBUTIONS TO WHICH YOU ARE OTHERWISE ENTITLED IF YOU ARE SUCH A SHAREHOLDER AND THE IRS TELLS US THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING OR YOU ARE SUBJECT TO BACKUP WITHHOLDING FOR ANY OTHER REASON. IN THE CASE OF A CUSTODIAL ACCOUNT FOR A NEWBORN, IF A SOCIAL SECURITY NUMBER HAS BEEN APPLIED FOR BUT IS NOT AVAILABLE WHEN YOU COMPLETE THE ACCOUNT APPLICATION, YOU MAY OPEN THE ACCOUNT WITHOUT THAT 10 Your Investment NUMBER, IF WE RECEIVE (FROM YOU OR YOUR INVESTMENT PROVIDER) THE CUSTODIAN'S DATE OF BIRTH AND SOCIAL SECURITY NUMBER TOGETHER WITH A COPY OF THE REQUEST MADE TO THE IRS FOR THE NEWBORN'S SOCIAL SECURITY NUMBER. HOWEVER, WE MUST RECEIVE THE NEW NUMBER WITHIN 60 DAYS OR THE ACCOUNT WILL BE CLOSED. FOR INFORMATION ON CUSTODIAL ACCOUNTS, CALL 800-366-6264. IF YOU USE AN INVESTMENT PROVIDER, YOU MUST SUPPLY YOUR SIGNED TAXPAYER IDENTIFICATION NUMBER FORM TO IT AND IT MUST SUPPLY ITS TAXPAYER IDENTIFICATION NUMBER TO US, IN ORDER TO AVOID BACKUP WITHHOLDING. [GRAPHIC OMITTED] BUYING SHARES BEFORE A DISTRIBUTION THE MONEY THE FUND EARNS, EITHER AS INCOME OR AS CAPITAL GAINS, IS REFLECTED IN ITS SHARE PRICE UNTIL IT DISTRIBUTES THE MONEY. AT THAT TIME, THE AMOUNT OF THE DISTRIBUTION IS DEDUCTED FROM THE SHARE PRICE. THE AMOUNT OF THE DISTRIBUTION IS EITHER REINVESTED IN ADDITIONAL SHARES OF THE FUND OR PAID TO SHAREHOLDERS IN CASH. BECAUSE OF THIS, IF YOU BUY SHARES JUST BEFORE THE FUND MAKES A DISTRIBUTION, YOU WILL END UP GETTING SOME OF YOUR INVESTMENT BACK AS A TAXABLE DISTRIBUTION. YOU CAN AVOID THIS SITUATION BY WAITING TO INVEST UNTIL AFTER THE RECORD DATE FOR THE DISTRIBUTION. GENERALLY, IF YOU ARE INVESTING IN THE FUND THROUGH A TAX-ADVANTAGED RETIREMENT PLAN OR ACCOUNT, THERE ARE NO TAX CONSEQUENCES TO YOU FROM DISTRIBUTIONS. -- MAINTAINING YOUR ACCOUNT WHEN YOU BUY SHARES -- Instructions for buying shares from Neuberger Berman Management Inc. are under "Buying Shares." See "Investment Providers" if you are buying shares through an investment provider. Whenever you make an initial investment in the Fund or add to your existing account (except with an automatic investment), you will be sent a statement confirming your transaction if you bought shares directly. Investors who bought shares through an investment provider should contact their investment provider for information regarding transaction statements. All investments must be made in U.S. dollars, and investment checks must be drawn on a U.S. bank. The minimum initial investment is $5 million. When you purchase shares, you will receive the next share price to be calculated after your order has been accepted. Purchase orders are deemed "accepted" when the Fund's transfer agent has received your check or other payment for the shares. In the case of certain institutional investors, Neuberger Berman Management Inc. will accept purchase orders when received directly or through one of its administrative agents, on the basis of a pre-existing arrangement to make payment to Neuberger Berman Management Inc. or its administrative agent by the following morning. In addition, if you have established a systematic investment program ("SIP") with the Fund, your order is deemed "accepted" on the date you preselected on your SIP application for the systematic investments to occur. WHEN YOU SELL SHARES -- If you bought your shares from Neuberger Berman Management Inc., instructions for selling shares are under "Selling Shares." See "Investment Providers" if you want to sell shares you purchased through an investment provider. You can place an order to sell some or all of your shares at any time. When you sell shares, you will receive the next share price to be 11 Your Investment calculated after your order has been accepted. Redemption orders are deemed "accepted" when the Fund's transfer agent has received your order to sell. In some cases, you will have to place your order to sell shares in writing, and you will need a Medallion signature guarantee (See "Medallion Signature Guarantees"). If you sell shares of the Fund within 60 days or less of purchase, you may be charged a redemption fee. See the "Redemption Fee" section for more information. When selling shares in an account that you do not intend to close, be sure to leave at least $5 million worth of shares in the account. Otherwise, the Fund has the right to request that you bring the balance back up to the minimum level. If you have not done so within 60 days, we may close your account and wire you the proceeds. The Fund reserves the right to pay in kind for redemptions. The Fund does not redeem in kind under normal circumstances, but would do so when Neuberger Berman Management Inc. has determined that it is in the best interests of the Fund's shareholders as a whole. UNCASHED CHECKS -- We do not pay interest on uncashed checks from Fund distributions or the sale of Fund shares. We are not responsible for checks after they are sent to you. After allowing a reasonable time for delivery, please call us if you have not received an expected check. While we cannot track a check, we may make arrangements for a replacement. STATEMENTS AND CONFIRMATIONS -- Please review your account statements and confirmations carefully as soon as you receive them. You must contact us within 30 days if you have any questions or notice any discrepancies. Otherwise, you may adversely affect your right to make a claim about the transaction(s). PLACING ORDERS BY TELEPHONE -- Fund investors have the option of placing telephone orders, subject to certain restrictions. This option is available to you unless you indicate on your account application (or in a subsequent letter to us or to State Street Bank and Trust Company) that you do not want it. Whenever we receive a telephone order, we take steps to make sure the order is legitimate. These may include asking for identifying information and recording the call. As long as the Fund and its representatives take reasonable measures to verify the authenticity of calls, investors may be responsible for any losses caused by unauthorized telephone orders. In unusual circumstances, it may be difficult to place an order by phone. In these cases, consider sending your order by express delivery. PROCEEDS FROM THE SALE OF SHARES -- The proceeds from the shares you sell are generally sent out the next business day after your order is executed, and nearly always within seven business days. There are two cases in which proceeds may be delayed beyond this time: -- in unusual circumstances where the law allows additional time if needed -- if a check you wrote to buy shares has not cleared by the time you sell those shares; clearance may take up to 15 calendar days from the date of purchase If you think you may need to sell shares soon after buying them, you can avoid the check clearing time by investing by wire. The Fund does not issue certificates for shares. 12 Your Investment OTHER POLICIES -- Under certain circumstances, the Fund reserves the right to: -- suspend the offering of shares -- reject any purchase order -- suspend or reject future purchase orders from any investor who does not provide payment to settle a purchase order -- suspend the telephone order privilege -- satisfy an order to sell Fund shares with securities rather than cash, for certain very large orders -- suspend or postpone your right to sell Fund shares on days when trading on the Exchange is restricted, or as otherwise permitted by the Securities and Exchange Commission ("SEC") -- change its investment minimums or other requirements for buying and selling or waive any minimums or requirements for certain investors -- take orders to purchase or sell Fund shares when the Exchange is closed. In such a case, the Fund would post a notice on the Neuberger Berman website, www.nb.com [GRAPHIC OMITTED] MEDALLION SIGNATURE GUARANTEES YOU MAY NEED A MEDALLION SIGNATURE GUARANTEE WHEN YOU SELL SHARES DIRECTLY OR THROUGH AN INVESTMENT PROVIDER. A MEDALLION SIGNATURE GUARANTEE IS A GUARANTEE THAT YOUR SIGNATURE IS AUTHENTIC. MOST BANKS, BROKERS, AND OTHER FINANCIAL INSTITUTIONS CAN PROVIDE YOU WITH ONE. SOME MAY CHARGE A FEE; OTHERS MAY NOT, PARTICULARLY IF YOU ARE A CUSTOMER OF THEIRS. MEDALLION SIGNATURE GUARANTEES ARE REQUIRED FOR A VARIETY OF TRANSACTIONS INCLUDING REQUESTS FOR CHANGES TO YOUR ACCOUNT OR TO THE INSTRUCTIONS FOR DISTRIBUTION OF PROCEEDS. WE RESERVE THE RIGHT TO REQUIRE A MEDALLION SIGNATURE GUARANTEE ON ANY TRANSACTION AT OUR DISCRETION. A NOTARIZED SIGNATURE FROM A NOTARY PUBLIC IS NOT A MEDALLION SIGNATURE GUARANTEE. [GRAPHIC OMITTED] INVESTMENT PROVIDERS THE SHARES AVAILABLE IN THIS PROSPECTUS MAY ALSO BE PURCHASED THROUGH CERTAIN INVESTMENT PROVIDERS SUCH AS BANKS, BROKERAGE FIRMS, WORKPLACE RETIREMENT PROGRAMS, AND FINANCIAL ADVISERS. THE FEES AND POLICIES OUTLINED IN THIS PROSPECTUS ARE SET BY THE FUND AND BY NEUBERGER BERMAN MANAGEMENT INC. HOWEVER, IF YOU USE AN INVESTMENT PROVIDER, MOST OF THE INFORMATION YOU WILL NEED FOR MANAGING YOUR INVESTMENT WILL COME FROM THAT PROVIDER. THIS INCLUDES INFORMATION ON HOW TO BUY AND SELL SHARES, INVESTOR SERVICES, AND ADDITIONAL POLICIES. IF YOU USE AN INVESTMENT PROVIDER, YOU MUST CONTACT THAT PROVIDER TO BUY OR SELL SHARES OF THE FUND DESCRIBED IN THIS PROSPECTUS. [GRAPHIC OMITTED] ADDITIONAL PAYMENTS TO INVESTMENT PROVIDERS NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES MAY PAY ADDITIONAL COMPENSATION, OUT OF THEIR OWN RESOURCES AND NOT AS AN EXPENSE OF THE FUND, TO YOUR INVESTMENT PROVIDER OR OTHER FINANCIAL INTERMEDIARIES, INCLUDING AFFILIATES, IN CONNECTION WITH THE SALE, DISTRIBUTION, RETENTION AND/OR SERVICING OF FUND SHARES. IN SOME CASES, THESE PAYMENTS MAY CREATE AN INCENTIVE FOR YOUR INVESTMENT PROVIDER OR ITS EMPLOYEES TO RECOMMEND OR SELL SHARES OF THE FUND TO YOU. IF YOU HAVE PURCHASED SHARES OF THE FUND THROUGH AN INVESTMENT PROVIDER, PLEASE SPEAK WITH YOUR INVESTMENT PROVIDER TO LEARN MORE ABOUT ANY 13 Your Investment PAYMENTS IT RECEIVES FROM NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES, AS WELL AS FEES AND/ OR COMMISSIONS THE INVESTMENT PROVIDER CHARGES. YOU SHOULD ALSO CONSULT DISCLOSURES MADE BY YOUR INVESTMENT PROVIDER AT THE TIME OF PURCHASE. ANY SUCH PAYMENTS WILL NOT CHANGE THE NET ASSET VALUE OR THE PRICE OF THE FUND'S SHARES. FOR MORE INFORMATION, PLEASE SEE THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. [GRAPHIC OMITTED] INFORMATION REQUIRED FROM NEW ACCOUNTS TO HELP THE U.S. GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHEN YOU OPEN AN ACCOUNT, WE (WHICH MAY INCLUDE YOUR INVESTMENT PROVIDER ACTING ON OUR BEHALF) WILL REQUIRE YOUR NAME, ADDRESS, DATE OF BIRTH, AND SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER. WE MAY ALSO REQUIRE OTHER IDENTIFYING DOCUMENTS. IF WE CANNOT VERIFY THE INFORMATION YOU SUPPLY TO US OR IF IT IS INCOMPLETE, WE MAY BE REQUIRED TO RETURN YOUR FUNDS OR REDEEM YOUR ACCOUNT. 14 Your Investment If you are buying or selling shares directly, instructions are provided in the following charts. Investors buying or selling shares through an investment provider should contact it for instructions. BUYING SHARES Method Things to know Instructions --------------------------------------------------------------------------------------------------------------------- SENDING US A Your first investment must be at least $5 million Fill out the application and enclose your CHECK check We cannot accept cash, money orders, starter checks, cashier's checks, travelers checks, or If regular first-class mail, send to: other cash equivalents Neuberger Berman Funds Boston Service Center You will be responsible for any losses or fees P.O. Box 8403 resulting from a bad check; if necessary, we may Boston, MA 02266-8403 sell other shares belonging to you in order to cover these losses If express delivery, registered mail, or certified mail, send to: All checks must be made out to "Neuberger Neuberger Berman Funds Berman Funds"; we cannot accept checks made c/o State Street Bank and Trust Company out to you or other parties and signed over to us 30 Dan Road Canton, MA 02021 --------------------------------------------------------------------------------------------------------------------- WIRING MONEY Your first investment must be at least $5 million Before wiring any money, call 800-366-6264 for an order confirmation Have your financial institution send your wire to State Street Bank and Trust Company Include your name, the Fund name, your account number and other information as requested --------------------------------------------------------------------------------------------------------------------- BY TELEPHONE We do not accept phone orders for a first Call 800-366-6264 to notify us of your investment purchase Additional shares will be purchased when your Immediately follow up with a wire or order is accepted electronic transfer Not available on retirement accounts --------------------------------------------------------------------------------------------------------------------- SETTING UP All investments must be at least $100 (in Call 800-366-6264 for instructions SYSTEMATIC addition to an initial minimum investment of at INVESTMENTS least $5 million)
15 Your Investment SELLING SHARES Method Things to know Instructions --------------------------------------------------------------------------------------------------------------------- SENDING US A Unless you instruct us otherwise, we will mail Send us a letter requesting us to sell shares LETTER your proceeds by check to the address of record, signed by all registered owners; include your payable to the registered owner(s) name, account number, the Fund name, the dollar amount or number of shares you want If you have designated a bank account on your to sell, and any other instructions application, you can request that we wire the proceeds to this account If regular first-class mail, send to: Neuberger Berman Funds You can also request that we send the proceeds Boston Service Center to your designated bank account by electronic P.O. Box 8403 transfer (ACH) Boston, MA 02266-8403 You may need a Medallion signature guarantee If express delivery, registered mail, or certified mail, send to: Please also supply us with your e-mail address Neuberger Berman Funds and daytime telephone number when you write to c/o State Street Bank and Trust Company us in the event we need to reach you 30 Dan Road Canton, MA 02021 --------------------------------------------------------------------------------------------------------------------- SENDING US A Not available if you have changed the address on Write a request to sell shares as described FAX the account in the past 15 days above Call 800-366-6264 to obtain the appropriate fax number --------------------------------------------------------------------------------------------------------------------- CALLING IN Not available if you have declined the phone Call 800-366-6264 to place your order YOUR ORDER option or are selling shares in certain retirement accounts (The only exception is for those Give your name, account number, the Fund retirement shareholders who are at least 59 1/2 or name, the dollar amount or number of shares older and have their birthdates on file) you want to sell, and any other instructions Not available if you have changed the address on the account in the past 15 days --------------------------------------------------------------------------------------------------------------------- SETTING UP Withdrawals must be at least $100 Call 800-366-6264 for instructions SYSTEMATIC WITHDRAWALS --------------------------------------------------------------------------------------------------------------------- REDEMPTION FEE The Fund charges a 2.00% redemption fee on See section entitled "Redemption Fee" or call shares redeemed within 60 days or less of 800-366-6264 for more information purchase ---------------------------------------------------------------------------------------------------------------------
16 Your Investment [GRAPHIC OMITTED] RETIREMENT PLANS WE OFFER INVESTORS A NUMBER OF TAX-ADVANTAGED PLANS FOR RETIREMENT SAVING: TRADITIONAL IRAS ALLOW MONEY TO GROW TAX-DEFERRED UNTIL YOU TAKE IT OUT, USUALLY AT OR AFTER RETIREMENT. CONTRIBUTIONS ARE DEDUCTIBLE FOR SOME INVESTORS, BUT EVEN WHEN THEY ARE NOT, AN IRA CAN BE BENEFICIAL. ROTH IRAS OFFER TAX-FREE GROWTH LIKE A TRADITIONAL IRA, BUT INSTEAD OF TAX-DEDUCTIBLE CONTRIBUTIONS, THE WITHDRAWALS ARE TAX-FREE FOR INVESTORS WHO MEET CERTAIN REQUIREMENTS. ALSO AVAILABLE: SEP-IRA, SIMPLE, KEOGH, AND OTHER TYPES OF PLANS. COVERDELL EDUCATION SAVINGS ACCOUNTS (FORMERLY EDUCATION IRAS), THOUGH NOT FOR RETIREMENT SAVINGS, ALSO ARE AVAILABLE. CONSULT YOUR TAX PROFESSIONAL TO FIND OUT WHICH TYPES OF PLANS OR ACCOUNTS MAY BE BENEFICIAL FOR YOU, THEN CALL 800-366-6264 FOR INFORMATION ON ANY NEUBERGER BERMAN RETIREMENT PLAN OR ACCOUNT. -- REDEMPTION FEE If you sell your shares of the Fund within 60 days of your purchase, you will be charged a fee of 2.00% on the current net asset value of the shares sold. The fee is paid to the Fund to offset costs associated with short-term trading, such as portfolio transaction and administrative costs. The Fund uses a "first-in, first-out" method to determine how long you have held your Fund shares. This means that if you bought shares on different days, the shares purchased first will be considered redeemed first for purposes of determining whether the redemption fee will be charged. We may not impose the redemption fee on a redemption of: -- shares acquired by reinvestment of dividends or other distributions of the Fund; -- shares held in an account of certain retirement plans; -- shares purchased through other investment providers, if the provider imposes a similar type of fee or otherwise has a policy in place to deter short-term trading; or -- shares held in certain rebalancing and asset allocation programs. You should contact your investment provider to determine whether it imposes a redemption fee or otherwise has a policy in place to deter short-term trading. From time to time, as circumstances change, we may modify or eliminate certain exemption categories. -- MARKET TIMING POLICY Frequent purchases and redemptions of Fund shares ("market-timing activities") can interfere with Fund management and affect costs and performance for other shareholders. To discourage market-timing activities by Fund shareholders, the Board of Trustees has adopted market-timing policies and has approved the procedures of the principal underwriter for implementing those policies. In furtherance of these policies, under certain circumstances, the Fund reserves the right to reject any purchase order or suspend the telephone order privilege. To further discourage excessive trading, if a shareholder sells shares of the Fund within 60 days of purchase, the shareholder will be charged a 2.00% fee on the current net asset value of the shares sold. The fee is paid to the Fund to offset costs associated with short-term trading, such as portfolio transaction and administrative costs, and is imposed uniformly on all applicable 17 Your Investment shareholders, with only a few exceptions. The Fund may not impose a fee on a redemption of: shares acquired by reinvestment of dividends or other distributions of the Fund; shares held in an account of certain retirement plans; shares purchased through other investment providers, if the provider imposes a similar type of fee or otherwise has a policy in place to deter short-term trading; or shares held in certain rebalancing and asset allocation programs. Neuberger Berman Management Inc. applies the Fund's policies and procedures with respect to market-timing activities by monitoring trading activity in the Fund, identifying excessive trading patterns, and warning or prohibiting shareholders who trade excessively from making further purchases of Fund shares. These policies and procedures are applied consistently to all shareholders. Although the Fund makes an effort to monitor for market-timing activities, the ability of the Fund to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts, and other approved intermediaries may be limited in those instances in which the investment intermediary maintains the underlying shareholder accounts. Accordingly, there can be no assurance that the Fund will be able to eliminate all market-timing activities. -- PORTFOLIO HOLDINGS POLICY A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is available in the Fund's Statement of Additional Information. The complete portfolio holdings for the Fund is available at http://www.nb.com/ind/mutual_funds/prospectuses/ 15-30 days after each month-end. The Fund's complete portfolio holdings will remain available at www.nb.com until the subsequent month-end holdings have been posted. Complete holdings for the Fund will also be available in reports on Form N-Q or Form N-CSR filed with the SEC. Historical portfolio holdings are available upon request. 18 Your Investment Neuberger Berman INTERNATIONAL FUND -------------------------------------------------------------------------------- RELATED PERFORMANCE As of the date of this prospectus, the Fund has not completed a full calendar year of operations and has no performance information to report. The Fund is modeled after Neuberger Berman International Fund, an existing Fund that is managed by Neuberger Berman Management Inc. and has an investment objective, policies and strategies that are identical in all material respects to the Fund. Neuberger Berman International Fund had a policy of investing primarily in mid- and large-cap stocks prior to September 1998 and its performance during that time might have been different if its current policies had been in effect. Neuberger Berman Management Inc. has managed Neuberger Berman International Fund since its inception and its asset size as of December 31, 2005 was approximately $1.1 billion. Below you will find information about the prior performance of the Investor Class of Neuberger Berman International Fund. The performance of Neuberger Berman International Fund does not represent the past performance of the Fund and is not an indication of the future performance of the Fund. You should not assume that the Fund will have the same performance as Neuberger Berman International Fund. The performance of the Fund may be better or worse than the performance of Neuberger Berman International Fund due to, among other things, differences in portfolio holdings, expenses, asset sizes, and cash flows between the Fund and Neuberger Berman International Fund. Neuberger Berman International Institutional Fund has lower total expenses than the Investor class of Neuberger Berman International Fund, which would have resulted in higher performance if Neuberger Berman International Institutional Fund's expenses had been applied to the performance of the Investor Class of Neuberger Berman International Fund. The bar chart below shows how performance of the Investor Class of Neuberger Berman International Fund has varied from year to year. The table beside the chart shows what the return of the Investor Class of Neuberger Berman International Fund would equal if you averaged out actual performance over various lengths of time. This information is based on past performance; it is not a prediction of future results. 19 Your Investment NEUBERGER BERMAN INTERNATIONAL FUND - INVESTOR CLASS YEAR-BY-YEAR % RETURNS as of 12/31 each year -------------------------------------- -------------------------------------- [GRAPHIC OMITTED] 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 23.69 11.21 2.35 65.86 -24.36 -18.01 -13.10 43.30 30.33 23.96 BEST QUARTER: Q4 '99, 43.21% WORST QUARTER: Q3 '98, -26.09% Year-to-date performance as of 9/30/2006: 11.35% AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005
1 Year 5 Years 10 Years NEUBERGER BERMAN INTERNATIONAL FUND - INVESTOR CLASS Return Before Taxes 23.96 10.53 11.29 Return After Taxes on Distributions 23.07 10.36 10.62 Return After Taxes on Distributions and Sale of Fund Shares 16.38 9.20 9.84 MSCI EAFE Index 14.02 4.94 6.18 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The MSCI EAFE Index is an unmanaged index of stocks from Europe, Australasia, and the Far East.
20 Your Investment NBMI International Composite -------------------------------------------------------------------------------- The Neuberger Berman Management Inc. also manages other funds and separate accounts with investment objectives, policies, and strategies that are substantially similar to the Fund. Below you will find information about the prior performance of the NBMI International Composite. The NBMI International Composite consists of funds and separate accounts that invest mainly in foreign companies of any size, including companies in developed and emerging industrialized markets. A foreign company is one that is organized outside of the United States and conducts the majority of its business abroad. The NBMI International Composite includes the performance of the Neuberger Berman International Fund. The separate accounts are not subject to certain investment limitations, diversification requirements, and other restrictions imposed by the Investment Company Act of 1940, as amended, and the Internal Revenue Code of 1986, as amended, which, if applicable, may have adversely affected the performance of the NBMI International Composite. The performance of NBMI International Composite does not represent the past performance of the Fund and is not an indication of the future performance of the Fund. You should not assume that the Fund will have the same performance as NBMI International Composite. The performance of the Fund may be better or worse than the performance of NBMI International Composite due to, among other things, differences in portfolio holdings, expenses, asset sizes, and cash flows between the Fund and the Funds and separate accounts in the NBMI International Composite. The separate accounts in the NBMI International Composite generally have lower expenses and are sold through different distribution channels than the Fund. The bar chart below shows how performance of NBMI International Composite has varied from year to year. The table beside the chart shows what the return of the NBMI International Composite would equal if you averaged out actual performance over various lengths of time. The performance information shown below does not reflect the expenses of the Funds and separate accounts that comprise the NBMI International Composite. If these expenses were reflected, the returns shown would be lower. This information is based on past performance; it is not a prediction of future results. 21 Your Investment NBMI INTERNATIONAL COMPOSITE YEAR-BY-YEAR % RETURNS as of 12/31 each year -------------------------------------- [GRAPHIC OMITTED] 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 25.77 13.08 4.08 68.35 -23.24 -16.67 -11.60 45.74 32.45 25.08 BEST QUARTER: Q4 '99, 43.69% WORST QUARTER: Q3 '98, -25.74% Year-to-date performance as of 9/30/2006: 12.12% AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005
1 Year 5 Years 10 Years NBMI INTERNATIONAL COMPOSITE Return Before Taxes 25.08 12.21 13.03 Return After Taxes on Distributions N/A N/A N/A Return After Taxes on Distributions and Sale of Fund Shares N/A N/A N/A MSCI EAFE Index 14.02 4.94 6.18 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The MSCI EAFE Index is an unmanaged index of stocks from Europe, Australasia, and the Far East.
22 Your Investment [GRAPHIC OMITTED] NEUBERGER BERMAN EQUITY FUNDS INTERNATIONAL INSTITUTIONAL FUND No load, sales charges or 12b-1 fees If you would like further details on this Fund you can request a free copy of the following documents: SHAREHOLDER REPORTS -- The shareholder reports offer information about the Fund's recent performance, including: -- a discussion by the Portfolio Managers about strategies and market conditions that significantly affect the Fund's performance -- Fund performance data and financial statements -- portfolio holdings STATEMENT OF ADDITIONAL INFORMATION (SAI) -- The SAI contains more comprehensive information on this Fund, including: -- various types of securities and practices, and their risks -- investment limitations and additional policies -- information about the Fund's management and business structure The SAI is hereby incorporated by reference into this prospectus, making it legally part of the prospectus. Investment manager: NEUBERGER BERMAN MANAGEMENT INC. Sub-adviser: NEUBERGER BERMAN, LLC [GRAPHIC OMITTED] OBTAINING INFORMATION You can obtain a shareholder report, SAI, and other information from your investment provider, or from: NEUBERGER BERMAN MANAGEMENT INC. 605 Third Avenue 2nd Floor New York, NY 10158-0180 800-877-9700 212-476-8800 Broker/Dealer and Institutional Services: 800-366-6264 Web site: www.nb.com Email: fundinquiries@nb.com You can also request copies of this information from the SEC for the cost of a duplicating fee by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, 100 F Street, N.E., Washington, DC 20549-9303. They are also available from the EDGAR Database on the SEC's website at www.sec.gov. You may also view and copy the documents at the SEC's Public Reference Room in Washington. Call 202-551-8090 for information about the operation of the Public Reference Room. [GRAPHIC OMITTED] F0255 12/06 SEC file number: 811-582 [GRAPHIC OMITTED] 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.nb.com [GRAPHIC OMITTED] PROSPECTUS - DECEMBER 20, 2006 These securities, like the securities of all mutual funds, have not been approved or disapproved by the Securities and Exchange Commission, and the Securities and Exchange Commission has not determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. NEUBERGER BERMAN EQUITY FUNDS INVESTOR CLASS SHARES Century Fund Fasciano Fund Focus Fund Genesis Fund Guardian Fund International Fund Manhattan Fund Millennium Fund Partners Fund Regency Fund Socially Responsive Fund Contents -------------------------------------------------------------------------------- EQUITY FUNDS Century Fund.................................................................2 Fasciano Fund................................................................8 Focus Fund..................................................................13 Genesis Fund................................................................18 Guardian Fund...............................................................24 International Fund..........................................................30 Manhattan Fund..............................................................36 Millennium Fund.............................................................41 Partners Fund...............................................................47 Regency Fund................................................................52 Socially Responsive Fund....................................................57 YOUR INVESTMENT Share Prices................................................................64 Privileges and Services.....................................................65 Distributions and Taxes.....................................................65 Maintaining Your Account....................................................67 Redemption Fee..............................................................74 Market Timing Policy........................................................75 Portfolio Holdings Policy...................................................76 Fund Structure..............................................................76 THESE FUNDS: -- are designed for investors with long-term goals in mind -- offer you the opportunity to participate in financial markets through professionally managed portfolios -- also offer the opportunity to diversify your portfolio with Funds that invest using a value or a growth approach, or a combination of the two -- carry certain risks, including the risk that you could lose money if Fund shares, when you sell them, are worth less than what you originally paid. This prospectus discusses principal risks of investing in Fund shares. These and other risks are discussed in more detail in the Statement of Additional Information (see back cover) -- are mutual funds, not bank deposits, and are not guaranteed or insured by the FDIC or any other government agency -- normally invest at least 80% of net assets in equity securities The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman, LLC. "Neuberger Berman Management Inc." and the individual Fund names in this prospectus are either service marks or registered service marks of Neuberger Berman Management Inc.(c) 2006 Neuberger Berman Management Inc. All rights reserved. Neuberger Berman Ticker Symbol: NBCIX CENTURY FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL; DIVIDEND INCOME IS A SECONDARY GOAL. To pursue these goals, the Fund invests mainly in common stocks of large-capitalization companies. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Managers employ a disciplined investment strategy when selecting growth stocks. They seek to buy companies with strong historical and prospective earnings growth. In determining whether a company has favorable growth characteristics, the Portfolio Managers analyze such factors as: -- revenue and earnings growth -- return on equity -- debt to equity ratio -- market share and competitive leadership of the company's products. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] LARGE-CAP STOCKS LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. THEY MAY HAVE A VARIETY OF PRODUCTS AND BUSINESS LINES AND A SOUND FINANCIAL BASE THAT CAN HELP THEM WEATHER BAD TIMES. COMPARED TO SMALLER COMPANIES, LARGE-CAP COMPANIES CAN BE SLOWER TO RESPOND TO CHANGES AND OPPORTUNITIES. AT THE SAME TIME, THEIR RETURNS HAVE SOMETIMES LED THOSE OF SMALLER COMPANIES, OFTEN WITH LOWER VOLATILITY. [GRAPHIC OMITTED] GROWTH INVESTING FOR GROWTH INVESTORS, THE AIM IS TO INVEST IN COMPANIES THAT ARE ALREADY SUCCESSFUL BUT COULD BE EVEN MORE SO. OFTEN, THESE STOCKS ARE IN EMERGING OR RAPIDLY GROWING INDUSTRIES. ACCORDINGLY, THE FUND AT TIMES MAY INVEST A GREATER PORTION OF ITS ASSETS IN PARTICULAR INDUSTRIES OR SECTORS THAN OTHER FUNDS DO. WHILE MOST GROWTH STOCKS ARE KNOWN TO INVESTORS, THEY MAY NOT YET HAVE REACHED THEIR FULL POTENTIAL. THE GROWTH INVESTOR LOOKS FOR INDICATIONS OF CONTINUED SUCCESS. 2 Century Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. At times, large-cap stocks may lag other types of stocks in performance, which could cause the Fund to perform worse than certain other funds over a given time period. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 3 Century Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- -15.48 -29.01 -32.03 25.80 1.53 6.95 BEST QUARTER: Q4 '01, 20.00% WORST QUARTER: Q1 '01, -28.50% Year-to-date performance as of 9/30/2006: 3.59% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005 -------------------------------------------------------------------------------- Since Inception 1 Year 5 Years (12/6/1999) -------------------------------------------------------------------------------- CENTURY FUND Return Before Taxes 6.95 -8.00 -7.07 Return After Taxes on Distributions 6.93 -8.00 -7.07 Return After Taxes on Distributions and Sale of Fund Shares 4.54 -6.61 -5.82 Russell 1000 Growth Index 5.26 -3.58 -6.05 Russell 1000 Index 6.27 1.07 -0.03 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 1000 Growth Index is an unmanaged index of U. S. mid- and large-cap growth stocks. The Russell 1000 Index is an unmanaged index of U.S. large- cap stocks. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. 4 Century Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.81 Distribution (12b-1) fees None Other expenses 1.72 -------------------------------------------------------------------------------- Total annual operating expenses 2.53 -------------------------------------------------------------------------------- Minus: Expense reimbursement 1.02 -------------------------------------------------------------------------------- Net expenses 1.51 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $154 $477 $824 $1,802 -------------------------------------------------------------------------------- * Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Investor Class of the Fund through 8/31/2017, so that the total annual operating expenses of that class are limited to 1.50% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Investor Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 1.50% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. The figures in the table are based on last year's expenses and due to certain tax expenses, which are not covered under the contractual fee cap, the net expenses of the Fund exceeded 1.50% of its average net assets last year. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.81% of average net assets before reimbursements. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 5 Century Fund PORTFOLIO MANAGERS The Fund is managed by a team consisting of the following lead Portfolio Managers, each of whom has managed the Fund since January 2003: JOHN J. ZIELINSKI, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has co-managed an equity mutual fund and managed other equity portfolios for another investment manager since 1983. KENNETH J. TUREK, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed or co-managed two equity mutual funds and other equity portfolios for several other investment managers since 1985. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 6 Century Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 6.50 4.89 5.42 5.54 6.22 PLUS: Income from investment operations Net investment income (loss) (0.05) (0.03) (0.03) 0.01 (0.02) Net gains (losses) - realized and unrealized (1.56) 0.56 0.15 0.67 0.33 Subtotal: income from investment operations (1.61) 0.53 0.12 0.68 0.31 MINUS: Distributions to shareholders Income dividends - - - - 0.01 Subtotal: distributions to shareholders - - - - 0.01 EQUALS: Share price (NAV) at end of year 4.89 5.42 5.54 6.22 6.52 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.50 1.51 1.49 1.47 1.49 Gross expenses(1) 2.09 2.21 2.05 2.35 2.51 Expenses(2) 1.50 1.51 1.50 1.50 1.51 Net investment income (loss) - actual (0.89) (0.62) (0.55) 0.09 (0.27) ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(3) (24.77) 10.84 2.21 12.27 4.92 Net assets at end of year (in millions of dollars) 15.5 17.0 14.3 11.2 10.4 Portfolio turnover rate (%) 142(4) 115 66 107 64 ------------------------------------------------------------------------------------------------------------------------------------
All figures for fiscal years 2002 through and including 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm for those years. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. (4) Portfolio turnover excludes purchases and sales of securities by Technology Fund prior to the merger date. 7 Century Fund Neuberger Berman Ticker Symbol: NBFSX FASCIANO FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM CAPITAL GROWTH. THE PORTFOLIO MANAGER ALSO MAY CONSIDER A COMPANY'S POTENTIAL FOR CURRENT INCOME PRIOR TO SELECTING IT FOR THE FUND. To pursue this goal, the Fund invests mainly in common stocks of small-capitalization companies, which it defines as those with a total market value of no more than $1.5 billion at the time the Fund first invests in them. The Fund may continue to hold or add to a position in a stock after the issuer has grown beyond $1.5 billion. These stocks include securities having common stock characteristics, such as securities convertible into common stocks, and rights and warrants to purchase common stocks. The Portfolio Manager currently looks for companies with: -- strong business franchises that are likely to sustain long-term rates of earnings growth for a three to five year time horizon, and -- stock prices that the market has undervalued relative to the value of similar companies and that offer excellent potential to appreciate over a three to five year time horizon. In choosing companies that the Portfolio Manager believes are likely to achieve the Fund's objective, the Portfolio Manager also will consider the company's overall business qualities. These qualities include the company's profitability and cash flow, financial condition, insider ownership, and stock valuation. In selecting companies that the Portfolio Manager believes may have greater potential to appreciate in price, the Portfolio Manager will invest the Fund in smaller companies that are not closely followed by major Wall Street brokerage houses and large asset management firms. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] SMALL-CAP STOCKS HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE LAST 40 YEARS, SMALL-CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] GROWTH VS. VALUE INVESTING VALUE INVESTORS SEEK STOCKS TRADING AT BELOW MARKET AVERAGE PRICES BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES BEFORE OTHER INVESTORS DISCOVER THEIR WORTH. GROWTH INVESTORS SEEK COMPANIES THAT ARE ALREADY SUCCESSFUL BUT MAY NOT HAVE REACHED THEIR FULL POTENTIAL. THE FUND'S BLENDED INVESTMENT APPROACH SEEKS TO LOWER RISK BY DIVERSIFYING ACROSS COMPANIES AND INDUSTRIES WITH GROWTH AND VALUE CHARACTERISTICS, AND CAN PROVIDE A CORE SMALL-CAP FOUNDATION WITHIN A DIVERSIFIED PORTFOLIO. 8 Fasciano Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. The stocks of smaller companies in which the Fund invests are often more volatile and less liquid than the stocks of larger companies, and these companies: -- may have a shorter history of operations than larger companies; -- may not have as great an ability to raise additional capital; -- may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also: -- underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor; -- be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. The Fund will combine value and growth styles of investing. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund may at times invest a portion of its assets in mid-cap stocks. For a discussion of the risks associated with mid-cap stocks, see the Appendix. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 9 Fasciano Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 26.54 21.51 7.19 6.16 1.70 4.46 -8.67 29.72 12.55 2.60 BEST QUARTER: Q2 '03, 19.46% WORST QUARTER: Q3 '98, -13.41% Year-to-date performance as of 9/30/2006: -1.04% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- FASCIANO FUND Return Before Taxes 2.60 7.40 9.78 Return After Taxes on Distributions 2.04 7.00 9.19 Return After Taxes on Distributions and Sale of Fund Shares 2.44 6.32 8.44 Russell 2000 Index 4.55 8.22 9.26 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The Russell 2000 Index is an unmanaged index of U.S. small-cap stocks. -------------------------------------------------------------------------------- * The year-by-year and average annual total return data for the periods prior to 3/24/2001 are those of Neuberger Berman Fasciano Fund's predecessor, Fasciano Fund, Inc. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. 10 Fasciano Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 1.00 Distribution (12b-1) fees None Other expenses 0.21 -------------------------------------------------------------------------------- Total annual operating expenses 1.21 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $123 $384 $665 $1,466 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.99% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER MICHAEL FASCIANO is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC and has managed the Fund's assets since its inception. Prior to joining Neuberger Berman, he managed Fasciano Fund, Inc. from its inception in 1988 to 2001. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 11 Fasciano Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 33.93 31.19 35.39 39.81 43.83 PLUS: Income from investment operations Net investment income (loss) (0.16) (0.11) (0.20) (0.05) (0.12) Net gains (losses) - realized and unrealized (1.50) 4.31 4.81 5.41 (0.25) Subtotal: income from investment operations (1.66) 4.20 4.61 5.36 (0.37) MINUS: Distributions to shareholders Capital gain distributions 1.08 - 0.19 1.34 1.61 EQUALS: Share price (NAV) at end of year 31.19 35.39 39.81 43.83 41.85 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 1.36 1.24 1.22 1.20 1.20 Gross expenses(1) - - 1.23 1.21 1.21 Expenses(2) 1.36 1.24 1.23 1.20 1.21 Net investment income (loss) - actual (0.48) (0.36) (0.52) (0.13) (0.28) ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (4.99) 13.47 13.06(3) 13.60(3) (0.95)(3) Net assets at end of year (in millions of dollars) 214.1 277.6 364.9 520.6 484.5 Portfolio turnover rate (%) 24 24 17 22 39 ------------------------------------------------------------------------------------------------------------------------------------
The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 12 Fasciano Fund Neuberger Berman Ticker Symbol: NBSSX FOCUS FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of companies of any size that fall within the following sectors: -- autos and housing -- consumer goods and services -- defense and aerospace -- energy -- financial services -- health care -- heavy industry -- machinery and equipment -- media and entertainment -- retailing -- technology -- transportation -- utilities At any given time, the Fund intends to place most of its assets in those sectors that the Portfolio Manager believes are undervalued. The Fund generally invests at least 90% of its net assets in no more than six sectors and may invest 50% or more of its assets in any one sector. The Portfolio Manager looks for undervalued companies. Factors in identifying these firms may include above-average returns, an established market niche, and sound future business prospects. This approach is designed to let the Fund benefit from potential increases in stock prices, while limiting the risks typically associated with investing in a small number of sectors. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] INDUSTRY SECTORS THE ECONOMY IS DIVIDED INTO SECTORS, EACH MADE UP OF RELATED INDUSTRIES. BY FOCUSING ON SEVERAL SECTORS AT A TIME, THE FUND CAN ADD A MEASURE OF DIVERSIFICATION AND STILL PURSUE THE PERFORMANCE POTENTIAL OF INDIVIDUAL SECTORS. TO THE EXTENT THE FUND INVESTS MORE HEAVILY IN ONE SECTOR, IT THEREBY PRESENTS A MORE CONCENTRATED RISK. A SECTOR MAY HAVE ABOVE AVERAGE PERFORMANCE DURING PARTICULAR PERIODS, BUT INDIVIDUAL SECTORS ALSO TEND TO MOVE UP AND DOWN MORE THAN THE BROADER MARKET. ALTHOUGH THE FUND DOES NOT INVEST MORE THAN 25% OF TOTAL ASSETS IN ANY ONE INDUSTRY, THE SEVERAL INDUSTRIES THAT COMPRISE A SECTOR MAY ALL REACT IN THE SAME WAY TO ECONOMIC, POLITICAL AND REGULATORY EVENTS. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 13 Focus Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Because the Fund typically focuses on a few sectors at a time, its performance is likely to be disproportionately affected by the factors influencing those sectors. To the extent the Fund invests more heavily in one sector, the risks of that sector are magnified. (See the Appendix for a discussion of sector-specific risks.) To the extent that the Fund emphasizes a particular market capitalization, it takes on the associated risks. Mid- and small-cap stocks tend to be more volatile than large-cap stocks. At any given time, any one of these market capitalizations may be out of favor with investors. If the Fund emphasizes that market capitalization, it could perform worse than certain other funds. The Fund is non-diversified. This means that the percentage of the Fund's assets invested in any single issuer is not limited by the Investment Company Act of 1940. Investing a higher percentage of its assets in any one issuer would increase the Fund's risk of loss, because the value of its shares would be more susceptible to adverse events affecting that issuer. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 14 Focus Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 16.22 24.15 13.24 26.02 12.42 -6.69 -36.41 64.89 5.00 0.00 BEST QUARTER: Q4 '98, 34.51% WORST QUARTER: Q3 '02, -31.87% Year-to-date performance as of 9/30/2006: 7.78% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005 -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- FOCUS FUND Return Before Taxes 0.00 0.54 9.05 Return After Taxes on Distributions -2.08 -0.17 7.40 Return After Taxes on Distributions and Sale of Fund Shares 2.82 0.38 7.31 Russell 1000 Value Index 7.05 5.28 10.94 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 1000 Value Index is an unmanaged index of U.S. mid- and large-cap value stocks. The S&P 500 Index is an unmanaged index of U.S. stocks. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING MAINLY IN LARGE-CAP STOCKS PRIOR TO SEPTEMBER 1998, ITS PERFORMANCE DURING THAT TIME MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 15 Focus Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.76 Distribution (12b-1) fees None Other expenses 0.12 -------------------------------------------------------------------------------- Total annual operating expenses 0.88 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $90 $281 $488 $1,084 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.76% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER ROBERT B. CORMAN is a Vice President of Neuberger Berman Management Inc. and Managing Director of Neuberger Berman, LLC. He has been the Portfolio Manager of the Fund since October 2005. Previously, he co-managed the Fund's assets from November 2003 to September 2005. He held senior positions in portfolio management at four other firms since 1981. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 16 Focus Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
----------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 ----------------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 36.11 23.05 32.28 31.96 37.21 PLUS: Income from investment operations Net investment income (loss) 0.01 0.05 0.08 0.21 0.13 Net gains (losses) - realized and unrealized (10.65) 9.18 (0.35) 5.12 2.24 Subtotal: income from investment operations (10.64) 9.23 (0.27) 5.33 2.37 MINUS: Distributions to shareholders Income dividends - - 0.05 0.08 0.24 Capital gain distributions 2.42 - - - 5.04 Subtotal: distributions to shareholders 2.42 - 0.05 0.08 5.28 EQUALS: Share price (NAV) at end of year 23.05 32.28 31.96 37.21 34.30 ----------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 0.87 0.90 0.85 0.87 0.87 Gross expenses(1) - - 0.86 0.87 0.87 Expenses(2) 0.87 0.90 0.86 0.87 0.88 Net investment income (loss) - actual 0.02 0.21 0.21 0.57 0.37 ----------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (31.58) 40.04 (0.84)(3) 16.69(3) 7.00(3) Net assets at end of year (in millions of dollars) 1,024.6 1,300.0 1,198.9 1,185.4 1,093.1 Portfolio turnover rate (%) 25 24 27 19 41 -----------------------------------------------------------------------------------------------------------------------------------
The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 17 Focus Fund Neuberger Berman Ticker Symbol: NBGNX GENESIS FUND -------------------------------------------------------------------------------- THIS FUND IS CLOSED TO NEW INVESTORS. [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of small-capitalization companies, which it defines as those with a total market value of no more than $1.5 billion at the time the Fund first invests in them. The Fund may continue to hold or add to a position in a stock after the issuer has grown beyond $1.5 billion. The Fund seeks to reduce risk by diversifying among many companies and industries. The Portfolio Managers look for undervalued companies whose current product lines and balance sheets are strong. Factors in identifying these firms may include: -- above-average returns -- an established market niche -- circumstances that would make it difficult for new competitors to enter the market -- the ability to finance their own growth -- sound future business prospects. This approach is designed to let the Fund benefit from potential increases in stock prices, while limiting the risks typically associated with small-cap stocks. At times, the Portfolio Managers may emphasize certain sectors that they believe will benefit from market or economic trends. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] SMALL-CAP STOCKS HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE LAST 40 YEARS, SMALL-CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 18 Genesis Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Stock prices of many smaller companies are based on future expectations. The Portfolio Managers tend to focus on companies whose financial strength is largely based on existing business lines rather than projected growth. While this can help reduce risk, the Fund is still subject to many of the risks of small-cap investing. The stocks of smaller companies in which the Fund invests are often more volatile and less liquid than the stocks of larger companies, and these companies: -- may have a shorter history of operations than larger companies; -- may not have as great an ability to raise additional capital; -- may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also: -- underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor; -- be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund may at times invest a portion of its assets in mid-cap stocks. For a discussion of the risks associated with mid-cap stocks, see the Appendix. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 19 Genesis Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 29.86 34.89 -6.95 4.04 32.51 12.11 -2.96 31.70 18.76 16.37 BEST QUARTER: Q3 '97, 20.07% WORST QUARTER: Q3 '98, -16.43% Year-to-date performance as of 9/30/2006: 0.91% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005 -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- GENESIS FUND Return Before Taxes 16.37 14.64 16.10 Return After Taxes on Distributions 15.99 14.28 15.48 Return After Taxes on Distributions and Sale of Fund Shares 11.16 12.76 14.26 Russell 2000 Index 4.55 8.22 9.26 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The Russell 2000 Index is an unmanaged index of U.S. small-cap stocks. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. 20 Genesis Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.92 Distribution (12b-1) fees None Other expenses 0.11 -------------------------------------------------------------------------------- Total annual operating expenses 1.03 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $105 $328 $569 $1,259 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.92% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGERS JUDITH M. VALE and ROBERT W. D'ALELIO are Vice Presidents of Neuberger Berman Management Inc. and Managing Directors of Neuberger Berman, LLC. Vale and D'Alelio have been senior members of the Small Cap Group since 1992 and 1996, respectively. Ms. Vale has co-managed the Fund's assets since 1994. Mr. D'Alelio joined the firm in 1996 and has co-managed the Fund's assets since 1997. MICHAEL L. BOWYER and BRETT S. REINER are Vice Presidents of Neuberger Berman Management Inc. and Managing Directors of Neuberger Berman, LLC. Bowyer and Reiner have been members of the Small Cap Group since 2001 and 2003, respectively. Mr. Bowyer joined the firm in 1996 and Mr. Reiner in 2000. They are the Associate Portfolio Managers of the Fund. 21 Genesis Fund Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 22 Genesis Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
---------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 ---------------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 19.78 19.70 23.44 27.03 34.03 PLUS: Income from investment operations Net investment loss (0.01) (0.06) (0.10) (0.08) (0.05) Net gains (losses) - realized and unrealized 0.51 3.87 3.70 7.97 1.71 Subtotal: income from investment operations 0.50 3.81 3.60 7.89 1.66 MINUS: Distributions to shareholders Capital gain distributions 0.58 0.07 0.01 0.89 0.77 EQUALS: Share price (NAV) at end of year 19.70 23.44 27.03 34.03 34.92 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 1.10 1.08 1.05 1.04 1.02 Gross expenses(1) - - 1.05 1.04 1.02 Expenses(2) 1.10 1.08 1.05 1.04 1.02 Net investment loss - actual (0.05) (0.31) (0.38) (0.25) (0.15) ---------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) 2.54 19.40 15.37(3) 29.68(3) 4.89(3) Net assets at end of year (in millions of dollars) 1,063.2 1,273.2 1,324.0 1,823.2 1,901.1 Portfolio turnover rate (%) 19 17 23 11 19 ----------------------------------------------------------------------------------------------------------------------------------
The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 23 Genesis Fund Neuberger Berman Ticker Symbol: NGUAX GUARDIAN FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL; CURRENT INCOME IS A SECONDARY GOAL. To pursue these goals, the Fund invests mainly in common stocks of mid- to large-capitalization companies. The Fund seeks to reduce risk by investing across many different industries. The Portfolio Managers employ a research driven and valuation sensitive approach to stock selection. They seek to identify stocks in well-positioned businesses that they believe are undervalued in the market. They look for solid balance sheets, strong management teams with a track record of success, good cash flow, the prospect for above average earnings growth, and other valuation-related factors. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, when the company's business fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID- AND LARGE-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY PERFORMED MORE LIKE SMALL-CAPS THAN LIKE LARGE-CAPS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER ATTRACTIVE LONG-TERM RETURNS. LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. COMPARED TO MID-CAP COMPANIES, THEY MAY BE LESS RESPONSIVE TO CHANGE, BUT THEIR RETURNS HAVE SOMETIMES LED THOSE OF MID-CAP COMPANIES, OFTEN WITH LOWER VOLATILITY. [GRAPHIC OMITTED] VALUATION SENSITIVE INVESTING IN ADDITION TO TRADITIONAL VALUE INVESTING - I.E., LOOKING FOR VALUE AMONG COMPANIES WHOSE STOCK PRICES ARE BELOW THEIR HISTORIC AVERAGE, BASED ON EARNINGS, CASH FLOW, OR OTHER FINANCIAL MEASURES - WE MAY ALSO BUY A COMPANY'S SHARES IF THEY LOOK MORE FULLY PRICED BASED ON WALL STREET CONSENSUS ESTIMATES OF EARNINGS, BUT STILL INEXPENSIVE RELATIVE TO OUR ESTIMATES. WE LOOK FOR THESE COMPANIES TO RISE IN PRICE AS THEY OUTPERFORM WALL STREET'S EXPECTATIONS, BECAUSE SOME ASPECTS OF THE BUSINESS HAS NOT BEEN FULLY APPRECIATED OR APPROPRIATELY PRICED BY OTHER INVESTORS. 24 Guardian Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. To the extent that the Fund emphasizes mid- or large-cap stocks, it takes on the associated risks. Mid-cap stocks tend to be more volatile than large-cap stocks and are usually more sensitive to economic, political, regulatory and market factors. At any given time, one or both groups of stocks may be out of favor with investors. With a valuation sensitive approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 25 Guardian Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 17.88 17.94 2.35 8.46 -1.86 -1.84 -25.75 -35.14 16.06 8.44 BEST QUARTER: Q4 '98, 23.12% WORST QUARTER: Q3 '98, -26.19% Year-to-date performance as of 9/30/2006: 5.94% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005 -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- GUARDIAN FUND Return Before Taxes 8.44 4.39 6.50 Return After Taxes on Distributions 8.33 4.20 4.53 Return After Taxes on Distributions and Sale of Fund Shares 5.63 3.67 4.79 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The S&P 500 Index is an unmanaged index of U.S. stocks. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING MAINLY IN LARGE-CAP STOCKS PRIOR TO DECEMBER 2002, ITS PERFORMANCE DURING THOSE TIMES MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 26 Guardian Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.75 Distribution (12b-1) fees None Other expenses 0.14 -------------------------------------------------------------------------------- Total annual operating expenses 0.89 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $91 $284 $493 $1,096 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.75% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 27 Guardian Fund PORTFOLIO MANAGERS ARTHUR MORETTI is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. Mr. Moretti joined each firm in 2001 and has managed the Fund since December 2002. He was a portfolio manager and fund analyst at two other firms since 1991. INGRID S. DYOTT is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. She has been an Associate Manager of the Fund since December 2003 and has been a Portfolio Manager at Neuberger Berman since 1997. SAJJAD S. LADIWALA is a Vice President of Neuberger Berman Management Inc. and Neuberger Berman, LLC. He has been an Associate Manager of the Fund since December 2003. He held various positions as a financial analyst at two other firms since 1994. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 28 Guardian Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
PER-SHARE DATA ($) ------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002(1) 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 14.30 11.53 12.92 14.46 17.52 PLUS: Income from investment operations Net investment income 0.12 0.05 0.05 0.13 0.08 Net gains (losses) - realized and unrealized (2.77) 1.40 1.53 2.98 1.16 Subtotal: income from investment operations (2.65) 1.45 1.58 3.11 1.24 MINUS: Distributions to shareholders Income dividends 0.12 0.05 0.04 0.05 0.12 Tax return of capital - 0.01 - - - Subtotal: distributions to shareholders 0.12 0.06 0.04 0.05 0.12 EQUALS: Share price (NAV) at end of year 11.53 12.92 14.46 17.52 18.64 ------------------------------------------------------------------------------------------------------------------------------------ Ratios (% of average net assets) The ratios show the Fund's expenses and net investment income - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 0.88 0.92 0.90 0.90 0.88 Gross expenses(1) - - 0.90 0.90 0.88 Expenses(2) 0.88 0.92 0.91 0.90 0.89 Net investment income - actual 0.84 0.44 0.35 0.83 0.47 ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (18.64) 12.70 12.24(3) 21.52(3) 7.09(3) Net assets at end of year (in millions of dollars) 1,337.1 1,297.6 1,300.6 1,415.2 1,417.0 Portfolio turnover rate (%) 85 113 25 20 34 ------------------------------------------------------------------------------------------------------------------------------------
The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 29 Guardian Fund Neuberger Berman Ticker Symbol: NBISX INTERNATIONAL FUND -------------------------------------------------------------------------------- This Fund is closed to new investors. [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN COMMON STOCKS OF FOREIGN COMPANIES. To pursue this goal, the Fund invests mainly in foreign companies of any size, including companies in developed and emerging industrialized markets. The Fund defines a foreign company as one that is organized outside of the United States and conducts the majority of its business abroad. The Fund seeks to reduce risk by diversifying among many industries. Although it has the flexibility to invest a significant portion of its assets in one country or region, it generally intends to remain well-diversified across countries and geographical regions. In picking stocks, the Portfolio Managers look for well-managed and profitable companies that show growth potential and whose stock prices are undervalued. Factors in identifying these firms may include strong fundamentals, such as attractive cash flows and balance sheets, as well as prices that are reasonable in light of projected returns. The Portfolio Managers also consider the outlooks for various countries and regions around the world, examining economic, market, social, and political conditions. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] FOREIGN STOCKS THERE ARE MANY PROMISING OPPORTUNITIES FOR INVESTMENT OUTSIDE THE UNITED STATES. FOREIGN MARKETS OFTEN RESPOND TO DIFFERENT FACTORS AND THEREFORE TEND TO FOLLOW CYCLES THAT ARE DIFFERENT FROM EACH OTHER. FOR THIS REASON, MANY INVESTORS PUT A PORTION OF THEIR PORTFOLIOS IN FOREIGN INVESTMENTS AS A WAY OF GAINING FURTHER DIVERSIFICATION. WHILE FOREIGN STOCK MARKETS CAN BE RISKY, INVESTORS GAIN AN OPPORTUNITY TO ADD POTENTIAL LONG-TERM GROWTH. [GRAPHIC OMITTED] GROWTH AND VALUE INVESTING THE FUND USES A BLEND OF GROWTH AND VALUE STRATEGIES. VALUE INVESTORS SEEK STOCKS TRADING AT BELOW MARKET AVERAGE PRICES BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES BEFORE OTHER INVESTORS DISCOVER THEIR WORTH. GROWTH INVESTORS SEEK COMPANIES THAT ARE ALREADY SUCCESSFUL BUT MAY NOT HAVE REACHED THEIR FULL POTENTIAL. 30 International Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in international stock markets. The behavior of these markets is unpredictable, particularly in the short term. Although foreign stocks offer added diversification potential, world markets may all react in similar fashion to important economic or political developments. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Foreign stocks are subject to more risks than comparable U.S. stocks. This is in part because some foreign markets are less developed and foreign governments, economies, laws (including tax laws), and securities firms may be less stable. There is also a higher chance that key information will be unavailable, incomplete, or inaccurate. As a result, foreign stocks can fluctuate more widely in price than comparable U.S. stocks, and they may also be less liquid. These risks are generally greater in emerging markets. Over a given period of time, foreign stocks may underperform U.S. stocks -- sometimes for years. The Fund could also underperform if the Portfolio Managers invest in countries or regions whose economic performance falls short. Changes in currency exchange rates bring an added dimension of risk. Currency fluctuations could erase investment gains or add to investment losses. Mid- and small-cap stocks tend to be less liquid and more volatile than large-cap stocks. Any type of stock may underperform any other during a given period. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. THE FUND MAY USE DERIVATIVES FOR HEDGING AND FOR SPECULATION. HEDGING COULD REDUCE THE FUND'S LOSSES FROM CURRENCY FLUCTUATIONS, BUT COULD ALSO REDUCE ITS GAINS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. A DERIVATIVE INSTRUMENT, WHETHER USED FOR HEDGING OR SPECULATION, COULD FAIL TO PERFORM AS EXPECTED, CAUSING A LOSS FOR THE FUND. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL, OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES BUT MAY MEAN LOST OPPORTUNITIES. 31 International Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 23.69 11.21 2.35 65.86 -24.36 -18.01 -13.10 43.30 30.33 23.96 BEST QUARTER: Q4 '99, 43.21% WORST QUARTER: Q3 '98, -26.09% Year-to-date performance as of 9/30/2006: 11.35% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005 -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- INTERNATIONAL FUND Return Before Taxes 23.96 10.53 11.29 Return After Taxes on Distributions 23.07 10.36 10.62 Return After Taxes on Distributions and Sale of Fund Shares 16.38 9.20 9.84 MSCI EAFE Index 4.02 4.94 6.18 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The MSCI EAFE Index is an unmanaged index of stocks from Europe, Australasia, and the Far East. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN THE FUND AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COST OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING PRIMARILY IN MID- AND LARGE-CAP STOCKS PRIOR TO SEPTEMBER 1998, ITS PERFORMANCE DURING THAT TIME MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 32 International Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares held for more than 60 days, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES (% of amount redeemed or exchanged) None -------------------------------------------------------------------------------- These are deducted directly from your investment. Redemption Fee* 2.00 Exchange Fee* 2.00 -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)** These are deducted from Fund assets, so you pay them indirectly Management fees 1.06 Distribution (12b-1) fees None Other expenses 0.20 -------------------------------------------------------------------------------- Total annual operating expenses 1.26 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $128 $400 $692 $1,523 -------------------------------------------------------------------------------- * These fees are charged on investments held 60 days or less, whether Fund shares are redeemed or exchanged for shares of another Fund. See "Redemption Fee" for more information. **The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 1.05% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 33 International Fund PORTFOLIO MANAGERS BENJAMIN SEGAL is a Vice President of Neuberger Berman Management Inc. and Managing Director of Neuberger Berman, LLC. Mr. Segal joined the firm in 1999 and has been the Portfolio Manager since November 2003. Prior to that, he was a co-Portfolio Manager since 2000. He was an assistant portfolio manager at another firm from 1997 to 1998. Prior to 1997, he held positions in international finance and consulting. MILU E. KOMER is a Vice President of Neuberger Berman Management Inc. and of Neuberger Berman, LLC. Ms. Komer joined the firm in 2001 and is the Associate Portfolio Manager of the Fund. Prior to that, she held associate positions at other investment firms from 1998 to 2001. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 34 International Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
---------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 ---------------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 11.81 10.60 11.58 15.42 21.01 PLUS: Income from investment operations Net investment income 0.03 0.10 0.10 0.15 0.28 Net gains (losses) - realized and unrealized (1.21) 0.88 3.89 5.54 3.81 Subtotal: income from investment operations (1.18) 0.98 3.99 5.69 4.09 Redemption fees 0.03 0.03 0.01 0.01 0.01 MINUS: Distributions to shareholders Income dividends 0.02 0.03 0.16 0.11 0.13 Capital gain distributions 0.04 - - - 0.75 Subtotal: distributions to shareholders 0.06 0.03 0.16 0.11 0.88 EQUALS: Share price (NAV) at end of year 10.60 11.58 15.42 21.01 24.23 ---------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense reimbursement/repayment and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.69 1.70 1.57 1.39 1.25 Gross expenses(1) - 1.74 1.57 1.42 1.24 Expenses(2) 1.69 1.70 1.57 1.40 1.26 Net investment income (loss) - actual 0.31 1.00 0.68 0.82 1.19 ---------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (9.76) 9.58(3) 34.73(3) 37.08(3) 20.07(3) Net assets at end of year (in millions of dollars) 77.1 82.0 162.1 455.5 921.4 Portfolio turnover rate (%) 63 90 72 38 48 ----------------------------------------------------------------------------------------------------------------------------------
The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement/repayment and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower/higher if Neuberger Berman Management Inc. had not reimbursed/recouped certain expenses and/or waived a portion of investment management fees. 35 International Fund Neuberger Berman TICKER SYMBOL: NMANX MANHATTAN FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of mid-capitalization companies, which it defines as those with a total market capitalization within the market capitalization range of the Russell Midcap Index. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Manager employs a disciplined investment strategy when selecting growth stocks. Using fundamental research and quantitative analysis, he looks for fast-growing companies with above average sales and competitive returns on equity relative to their peers. In doing so, the Portfolio Manager analyzes such factors as: -- financial condition (such as debt to equity ratio) -- market share and competitive leadership of the company's products -- earnings growth relative to competitors -- market valuation in comparison to a stock's own historical norms and the stocks of other mid-cap companies. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY SHOWN RISK/RETURN CHARACTERISTICS THAT ARE IN BETWEEN THOSE OF SMALL- AND LARGE-CAP STOCKS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER COMPARATIVELY ATTRACTIVE LONG-TERM RETURNS. MID-CAPS ARE LESS WIDELY FOLLOWED IN THE MARKET THAN LARGE-CAPS, WHICH CAN MAKE IT COMPARATIVELY EASIER TO FIND ATTRACTIVE STOCKS THAT ARE NOT OVERPRICED. [GRAPHIC OMITTED] GROWTH INVESTING FOR GROWTH INVESTORS, THE AIM IS TO INVEST IN COMPANIES THAT ARE ALREADY SUCCESSFUL BUT COULD BE EVEN MORE SO. OFTEN, THESE STOCKS ARE IN EMERGING OR RAPIDLY GROWING INDUSTRIES. ACCORDINGLY, THE FUND AT TIMES MAY INVEST A GREATER PORTION OF ITS ASSETS IN PARTICULAR INDUSTRIES OR SECTORS THAN OTHER FUNDS DO. WHILE MOST GROWTH STOCKS ARE KNOWN TO INVESTORS, THEY MAY NOT YET HAVE REACHED THEIR FULL POTENTIAL. THE GROWTH INVESTOR LOOKS FOR INDICATIONS OF CONTINUED SUCCESS. 36 Manhattan Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. By focusing on mid-cap stocks, the Fund is subject to their risks, including the risk its holdings may: -- fluctuate more widely in price than the market as a whole -- underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when mid-cap stocks are out of favor. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 37 Manhattan Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 9.85 29.20 16.39 50.76 -11.42 -29.66 -31.23 30.57 16.22 13.38 BEST QUARTER: Q4 '99, 49.01% WORST QUARTER: Q3 '01, -30.09% Year-to-date performance as of 9/30/2006: 5.84% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005 -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- MANHATTAN FUND Return Before Taxes 13.38 -3.60 6.27 Return After Taxes on Distributions 13.38 -3.63 3.99 Return After Taxes on Distributions and Sale of Fund Shares 8.70 -3.04 4.63 Russell Midcap Growth Index 12.10 1.38 9.27 Russell Midcap Index 12.65 8.45 12.49 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell Midcap Growth Index is an unmanaged index of U.S. mid-cap growth stocks. The Russell Midcap Index is an unmanaged index of U.S. mid- cap stocks. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING IN STOCKS OF ALL CAPITALIZATIONS AND USED A COMPARATIVELY MORE VALUE-ORIENTED INVESTMENT APPROACH PRIOR TO JULY 1997, ITS PERFORMANCE MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 38 Manhattan Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.80 Distribution (12b-1) fees None Other expenses 0.25 Total annual operating expenses 1.05 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $107 $334 $579 $1,283 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.80% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER KENNETH J. TUREK, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed or co-managed two equity mutual funds and other equity portfolios for several other investment managers since 1985. Mr. Turek has managed the Fund since January 2003. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 39 Manhattan Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
---------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 ---------------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 6.63 4.70 5.58 5.86 7.45 PLUS: Income from investment operations Net investment loss (0.04) (0.04) (0.04) (0.04) (0.03 Net gains (losses) - realized and unrealized (1.84) 0.92 0.32 1.63 0.75 Subtotal: income from investment operations (1.88) 0.88 0.28 1.59 0.72 MINUS: Distributions to shareholders Capital gain distributions 0.05 - - - - Subtotal: distributions to shareholders 0.05 - - - - EQUALS: Share price (NAV) at end of year 4.70 5.58 5.86 7.45 8.17 ----------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.05 1.12 1.06 1.06 1.04 Gross Expenses(1) - - 1.06 1.06 1.04 Expenses(2) 1.05 1.12 1.09 1.07 1.05 Net investment loss - actual (0.69) (0.78) (0.63) (0.65) (0.36) ----------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (28.57) 18.72 5.02(3) 27.13(3) 9.66(3) Net assets at end of year (in millions of dollars) 300.5 324.6 306.2 342.2 356.7 Portfolio turnover rate(%) 98 145 102 65 45 -----------------------------------------------------------------------------------------------------------------------------------
All figures for fiscal years 2002 through and including 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm for those years. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of the investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. 40 Manhattan Fund Neuberger Berman Ticker Symbol: NBMIX MILLENNIUM FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of small-capitalization companies, which it defines as those with a total market value of no more than $2 billion at the time the Fund first invests in them. The Fund may continue to hold or add to a position in a stock after the issuer has grown beyond $2 billion. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Manager employs a disciplined investment strategy when selecting growth stocks. Using fundamental research and quantitive analysis, he looks for fast-growing companies with above average sales and competitive returns on equity relative to their peers. In doing so, the Portfolio Manager analyzes such factors as: -- financial condition (such as debt to equity ratio) -- market share and competitive leadership of the company's products -- earnings growth relative to competitors -- market valuation in comparison to a stock's own historical norms and the stocks of other small-cap companies. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] SMALL-CAP STOCKS HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE LAST 40 YEARS, SMALL-CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] GROWTH INVESTING FOR GROWTH INVESTORS, THE AIM IS TO INVEST IN COMPANIES THAT ARE ALREADY SUCCESSFUL BUT COULD BE EVEN MORE SO. OFTEN, THESE STOCKS ARE IN EMERGING OR RAPIDLY GROWING INDUSTRIES. ACCORDINGLY, THE FUND AT TIMES MAY INVEST A GREATER PORTION OF ITS ASSETS IN PARTICULAR INDUSTRIES OR SECTORS THAN OTHER FUNDS DO. WHILE MOST GROWTH STOCKS ARE KNOWN TO INVESTORS, THEY MAY NOT YET HAVE REACHED THEIR FULL POTENTIAL. THE GROWTH INVESTOR LOOKS FOR INDICATIONS OF CONTINUED SUCCESS. 41 Millennium Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. The stocks of smaller companies in which the Fund invests are often more volatile and less liquid than the stocks of larger companies, and these companies: -- may have a shorter history of operations than larger companies; -- may not have as great an ability to raise additional capital; -- may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also: -- underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor; -- be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. The Fund may at times invest a portion of its assets in mid-cap stocks. For a discussion of the risks associated with mid-cap stocks, see the Appendix. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 42 Millennium Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 130.49 -28.68 -14.47 -44.46 33.26 16.20 15.22 BEST QUARTER: Q4, '99, 72.95% WORST QUARTER: Q3 '01, -27.89% Year-to-date performance as of 9/30/2006: -0.39% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005 -------------------------------------------------------------------------------- Since Inception 1 Year 5 Years (10/20/1998) -------------------------------------------------------------------------------- MILLENNIUM FUND Return Before Taxes 15.22 -3.25 10.95 Return After Taxes on Distributions 15.22 -3.25 9.29 Return After Taxes on Distributions and Sale of Fund Shares 9.89 -2.74 8.75 Russell 2000 Growth Index 4.15 2.28 6.62 Russell 2000 Index 4.55 8.22 10.81 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 2000 Growth Index is an unmanaged index of U.S. small-cap growth stocks. The Russell 2000 Index is an unmanaged index of U.S. small- cap stocks. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN THE FUND AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. SMALL-CAP EQUITY MARKET AND OF THE PORTION OF THAT MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. 43 Millennium Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE ------------------------------------------------------------------ SHAREHOLDER FEES None ------------------------------------------------------------------ ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 1.11 Distribution (12b-1) fees None Other expenses 0.78 ------------------------------------------------------------------ Total annual operating expenses 1.89 ------------------------------------------------------------------ Minus: Expense reimbursement 0.59 ------------------------------------------------------------------ Net expenses 1.30 ------------------------------------------------------------------ EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $132 $412 $713 $1,568 -------------------------------------------------------------------------------- * Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Investor Class of the Fund through 8/31/2017, so that the total annual operating expenses of that class are limited to 1.30% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Investor Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 1.30% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. The figures in the table are based on last year's expenses except for the expense reimbursement, which has been restated to reflect the current contractual fee cap since it was reduced during the last year. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 1.11% of average net assets before reimbursements. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 44 Millennium Fund PORTFOLIO MANAGER DAVID H. BURSHTAN, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed two equity mutual funds and other equity portfolios for another investment manager from 1999-2002. Prior to 1999, he managed small-cap portfolios for another manager. Mr. Burshtan has managed the Fund since January 2003. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 45 Millennium Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
----------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 ----------------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 14.35 9.36 10.88 10.71 14.19 PLUS: Income from investment operations Net investment loss (0.14) (0.10) (0.14) (0.19) (0.19) Net gains (losses) - realized and unrealized (4.85) 1.62 (0.03) 3.67 1.01 Subtotal: income from investment operations (4.99) 1.52 (0.17) 3.48 0.82 EQUALS: Share price (NAV) at end of year 9.36 10.88 10.71 14.19 15.01 ----------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense reimbursement/repayment and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.62 1.75 1.71 1.71 1.57 Gross expenses(1) - 1.83 1.77 1.90 1.86 Expenses(2) 1.62 1.75 1.75 1.75 1.60 Net investment loss - actual (1.05) (1.09) (1.20) (1.47) (1.21) ----------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (34.77) 16.24(3) (1.56)(3) 32.49(3) 5.78(3) Net assets at end of year (in millions of dollars) 63.1 59.1 43.3 45.0 46.9 Portfolio turnover rate (%) 126 241 146 204 142 -----------------------------------------------------------------------------------------------------------------------------------
All figures for fiscal years 2002 through and including 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm for those years. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement/repayment and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower/higher if Neuberger Berman Management Inc. had not reimbursed/recouped certain expenses and/or waived a portion of investment management fees. 46 Millennium Fund Neuberger Berman Ticker Symbol: NPRTX PARTNERS FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of mid- to large-capitalization companies. The Fund seeks to reduce risk by diversifying among many companies and industries. The Portfolio Manager looks for well-managed companies with strong balance sheets whose stock prices are undervalued. Factors in identifying these firms may include: -- historical low valuation -- strong fundamentals, such as a company's financial, operational, and competitive positions -- relatively high operating profit margins and returns. The Portfolio Manager may also look for other characteristics in a company, such as a strong market position relative to competitors, a high level of stock ownership among management, and a recent sharp decline in stock price that appears to be the result of a short-term market overreaction to negative news. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID- AND LARGE-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY PERFORMED MORE LIKE SMALL-CAPS THAN LIKE LARGE-CAPS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER ATTRACTIVE LONG-TERM RETURNS. LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. COMPARED TO MID-CAP COMPANIES, THEY MAY BE LESS RESPONSIVE TO CHANGE, BUT THEIR RETURNS HAVE SOMETIMES LED THOSE OF MID-CAP COMPANIES, OFTEN WITH LOWER VOLATILITY. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 47 Partners Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. To the extent that the Fund emphasizes mid- or large-cap stocks, it takes on the associated risks. Mid-cap stocks tend to be more volatile than large-cap stocks and are usually more sensitive to economic, political, regulatory and market factors. At any given time, one or both groups of stocks may be out of favor with investors. The Fund's value investing approach may dictate an emphasis on certain sectors of the market at any given time. To the extent the Fund invests more heavily in one sector, it thereby presents a more concentrated risk. A sector may have above average performance during particular periods, but individual sectors also tend to move up and down more than the broader market. The several industries that comprise a sector may all react in the same way to economic, political and regulatory events. The Fund's performance may also suffer if a sector does not perform as expected. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 48 Partners Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 26.49 29.23 6.28 7.80 0.57 -3.02 -24.82 35.87 19.21 17.99 BEST QUARTER: Q2 '03, 20.37% WORST QUARTER: Q3 '02, -21.32% Year-to-date performance as of 9/30/2006: 1.64% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005 -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- PARTNERS FUND Return Before Taxes 17.99 6.86 10.13 Return After Taxes on Distributions 17.02 6.53 8.21 Return After Taxes on Distributions and Sale of Fund Shares 12.93 5.86 7.92 Russell 1000 Value Index 7.05 5.28 10.94 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 1000 Value Index is an unmanaged index of U.S. mid- and large-cap value stocks. The S&P 500 Index is an unmanaged index of U.S. stocks. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. 49 Partners Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.71 Distribution (12b-1)fees None Other expenses 0.11 -------------------------------------------------------------------------------- Total annual operating expenses 0.82 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $84 $262 $455 $1,014 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.71% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER S. BASU MULLICK is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. He has been a fund manager at Neuberger Berman Management Inc. and has managed the Fund since 1998. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 50 Partners Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 20.54 16.67 19.22 21.41 28.62 PLUS: Income from investment operations Net investment income 0.03 0.01 0.16 0.21 0.24 Net gains (losses) - realized and unrealized (3.44) 2.57 2.04 7.17 1.43 Subtotal: income from investment operations (3.41) 2.58 2.20 7.38 1.67 MINUS: Distributions to shareholders Income dividends 0.08 0.03 0.01 0.17 0.27 Capital gain distributions 0.38 - - - 1.31 Subtotal: distributions to shareholders 0.46 0.03 0.01 0.17 1.58 EQUALS: Share price (NAV) at end of year 16.67 19.22 21.41 28.62 28.71 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 0.87 0.90 0.87 0.85 0.82 Gross expenses(1) - - 0.87 0.85 0.82 Expenses(2) 0.87 0.90 0.88 0.86 0.82 Net investment income - actual 0.16 0.08 0.76 0.83 0.84 ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (16.98) 15.51 11.43(3) 34.59(3) 5.87(3) Net assets at end of year (in millions of dollars) 1,209.6 1,247.2 1,280.8 1,826.9 2,106.7 Portfolio turnover rate (%) 53 65 67 61 33 ------------------------------------------------------------------------------------------------------------------------------------
The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 51 Partners Fund Neuberger Berman Ticker Symbol: NBRVX REGENCY FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of mid-capitalization companies, which it defines as those with a total market capitalization with market capitalization in the range of the Russell Midcap Index. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Manager looks for undervalued companies with high-quality businesses. Factors in identifying these firms may include: -- historical low valuation -- above-average returns on invested capital -- solid balance sheets. This approach is designed to let the Fund benefit from potential increases in stock prices while limiting the risks typically associated with stocks. At times, the Portfolio Manager may emphasize certain sectors that he believes will benefit from market or economic trends. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY SHOWN RISK/RETURN CHARACTERISTICS THAT ARE IN BETWEEN THOSE OF SMALL- AND LARGE-CAP STOCKS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER COMPARATIVELY ATTRACTIVE LONG-TERM RETURNS. MID-CAPS ARE LESS WIDELY FOLLOWED IN THE MARKET THAN LARGE-CAPS, WHICH CAN MAKE IT COMPARATIVELY EASIER TO FIND ATTRACTIVE STOCKS THAT ARE NOT OVERPRICED. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 52 Regency Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. By focusing on mid-cap stocks, the Fund is subject to their risks, including the risk its holdings may: -- fluctuate more widely in price than the market as a whole -- underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when mid-cap stocks are out of favor. The Fund's value investing approach may dictate an emphasis on certain sectors of the market at any given time. To the extent the Fund invests more heavily in one sector, it thereby presents a more concentrated risk. A sector may have above average performance during particular periods, but individual sectors also tend to move up and down more than the broader market. The several industries that comprise a sector may all react in the same way to economic, political and regulatory events. The Fund's performance may also suffer if a sector does not perform as expected. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 53 Regency Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 31.24 -2.34 -11.69 35.88 22.34 12.42 BEST QUARTER: Q4 '03, 14.83% WORST QUARTER: Q3 '02, -15.37% Year-to-date performance as of 9/30/2006: -0.24% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNs as of 12/31/2005 -------------------------------------------------------------------------------- Since Inception 1 Year 5 Years (6/1/1999) -------------------------------------------------------------------------------- REGENCY FUND Return Before Taxes 12.42 10.02 13.59 Return After Taxes on Distributions 10.94 8.74 12.14 Return After Taxes on Distributions and Sale of Fund Shares 9.62 8.16 11.26 Russell Midcap Value Index 12.65 12.21 10.99 Russell Midcap Index 12.65 8.45 9.34 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell Midcap Value Index is an unmanaged index of U.S. midcap value stocks. The Russell Midcap Index is an unmanaged index of U.S. mid-cap stocks. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE U.S. MID-CAP EQUITY MARKET AND OF THE PORTION OF THAT MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. 54 Regency Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- Annual operating expenses (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.81 Distribution (12b-1) fees None Other expenses 0.32 -------------------------------------------------------------------------------- Total annual operating expenses 1.13 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $115 $359 $622 $1,375 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.81% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER S. BASU MULLICK is a Vice President of Neuberger Berman Management Inc., and a Managing Director of Neuberger Berman, LLC. He has managed the Fund since 2005 and has been a fund manager at Neuberger Berman Management Inc. since 1998. He previously co-managed the Fund from its inception in 1999 to 2000. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 55 Regency Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 12.92 10.58 12.14 14.44 17.37 PLUS: Income from investment operations Net investment income (loss) (0.01) (0.03) (0.03) 0.01 0.13 Net gains (losses) - realized and unrealized (0.88) 1.59 2.33 4.08 0.39 Subtotal: income from investment operations (0.89) 1.56 2.30 4.09 0.52 MINUS: Distributions to shareholders Income dividends 0.01 - - - 0.06 Capital gain distributions 1.44 - - 1.16 1.31 Subtotal: distributions to shareholders 1.45 - - 1.16 1.37 EQUALS: Share price (NAV) at end of year 10.58 12.14 14.44 17.37 16.52 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense reimbursement/repayment and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.50 1.50 1.49 1.20 1.11 Gross expenses(1) 1.46 1.57 1.42 1.18 1.12 Expenses(2) 1.50 1.50 1.50 1.21 1.12 Net investment income (loss) - actual (0.07) (0.30) (0.22) 0.09 0.75 ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(3) (7.42) 14.74 18.95 29.26 2.94 Net assets at end of year (in millions of dollars) 16.7 20.1 33.5 107.9 111.1 Portfolio turnover rate (%) 119 73 62 91 52 ------------------------------------------------------------------------------------------------------------------------------------
All figures for fiscal years 2002 through and including 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement/repayment and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower/higher if Neuberger Berman Management Inc. had not reimbursed/recouped certain expenses and/or waived a portion of investment management fees. 56 Regency Fund Neuberger Berman Ticker Symbol: NBSRX SOCIALLY RESPONSIVE FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN SECURITIES OF COMPANIES THAT MEET THE FUND'S FINANCIAL CRITERIA AND SOCIAL POLICY. To pursue this goal, the Fund invests mainly in common stocks of mid- to large-capitalization companies. The Fund seeks to reduce risk by investing across many different industries. The Portfolio Managers employ a research driven and valuation sensitive approach to stock selection. They seek to identify stocks in well-positioned businesses that they believe are undervalued in the market. They look for solid balance sheets, strong management teams with a track record of success, good cash flow, the prospect for above average earnings growth, and other valuation-related factors. Among companies that meet these criteria, the Portfolio Managers look for those that show leadership in three areas: -- environmental concerns -- diversity in the work force -- progressive employment and workplace practices, and community relations. The Portfolio Managers typically also look at a company's record in public health and the nature of its products. The Portfolio Managers judge firms on their corporate citizenship overall, considering their accomplishments as well as their goals. While these judgments are inevitably subjective, the Fund endeavors to avoid companies that derive revenue from gambling or the production of alcohol, tobacco, weapons, or nuclear power. The Fund also does not invest in any company that derives its total revenue primarily from non-consumer sales to the military. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, when the company's business fails to perform as expected, or when other opportunities appear more attractive. The Fund has the ability to change its goal without shareholder approval, although it does not currently intend to do so. The Fund will not change its strategy of normally investing at least 80% of its total assets in equity securities selected in accordance with its social policy without providing shareholders at least 60 days' notice. [GRAPHIC OMITTED] MID- AND LARGE-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY PERFORMED MORE LIKE SMALL-CAPS THAN LIKE LARGE-CAPS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER ATTRACTIVE LONG-TERM RETURNS. LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. COMPARED TO MID-CAP COMPANIES, THEY MAY BE LESS RESPONSIVE TO CHANGE, BUT THEIR RETURNS HAVE SOMETIMES LED THOSE OF MID-CAP COMPANIES, OFTEN WITH LOWER VOLATILITY. [GRAPHIC OMITTED] SOCIAL INVESTING FUNDS THAT FOLLOW SOCIAL POLICIES SEEK SOMETHING IN ADDITION TO ECONOMIC SUCCESS. THEY ARE DESIGNED TO ALLOW INVESTORS TO PUT THEIR MONEY TO WORK AND ALSO SUPPORT COMPANIES THAT FOLLOW PRINCIPLES OF GOOD CORPORATE CITIZENSHIP. 57 Socially Responsive Fund [GRAPHIC OMITTED] VALUATION SENSITIVE INVESTING IN ADDITION TO TRADITIONAL VALUE INVESTING - I.E., LOOKING FOR VALUE AMONG COMPANIES WHOSE STOCK PRICES ARE BELOW THEIR HISTORIC AVERAGE, BASED ON EARNINGS, CASH FLOW, OR OTHER FINANCIAL MEASURES - WE MAY ALSO BUY A COMPANY'S SHARES IF THEY LOOK MORE FULLY PRICED BASED ON WALL STREET CONSENSUS ESTIMATES OF EARNINGS, BUT STILL INEXPENSIVE RELATIVE TO OUR ESTIMATES. WE LOOK FOR THESE COMPANIES TO RISE IN PRICE AS THEY OUTPERFORM WALL STREET'S EXPECTATIONS, BECAUSE SOME ASPECTS OF THE BUSINESS HAS NOT BEEN FULLY APPRECIATED OR APPROPRIATELY PRICED BY OTHER INVESTORS. 58 Socially Responsive Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. The Fund's social policy could cause it to underperform similar funds that do not have a social policy. Among the reasons for this are: -- undervalued stocks that do not meet the social criteria could outperform those that do -- economic or political changes could make certain companies less attractive for investment -- the social policy could cause the Fund to sell or avoid stocks that subsequently perform well. To the extent that the Fund emphasizes mid- or large-cap stocks, it takes on the associated risks. Mid-cap stocks tend to be more volatile than large-cap stocks and are usually more sensitive to economic, political, regulatory and market factors. At any given time, one or both groups of stocks may be out of favor with investors. With a valuation sensitive approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 59 Socially Responsive Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 18.50 24.41 15.01 7.04 -0.44 -2.57 -14.45 34.48 13.57 7.58 BEST QUARTER: Q4 '98, 20.98% WORST QUARTER: Q3 '02, -17.08% Year-to-date performance as of 9/30/2006: 6.65% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005 -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- Socially Responsive Fund Return Before Taxes 7.58 6.49 9.48 Return After Taxes on Distributions 7.00 5.61 8.65 Return After Taxes on Distributions and Sale of Fund Shares 5.70 5.26 8.05 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The S&P 500 Index is an unmanaged index of U.S. stocks. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. 60 Socially Responsive Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE SHAREHOLDER FEES None -------------------------------------------------------------------------------- Annual operating expenses (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.79 Distribution (12b-1) fees None Other expenses 0.16 -------------------------------------------------------------------------------- Total annual operating expenses 0.95 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $97 $303 $525 $1,166 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.79% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 61 Socially Responsive Fund PORTFOLIO MANAGERS ARTHUR MORETTI is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. He joined each firm and has co-managed the Fund since 2001. He was a portfolio manager and fund analyst at two other firms since 1991. INGRID S. DYOTT is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. She has been co-manager of the Fund since December 2003 and before that was an Associate Manager of the Fund since 1997. SAJJAD S. LADIWALA is a Vice President of Neuberger Berman Management Inc. and Neuberger Berman, LLC. He has been an Associate Manager of the Fund since December 2003. He held various positions as a financial analyst at two other firms since 1994. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers and the Portfolio Managers' ownership of Fund shares. 62 Socially Responsive Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 18.96 15.39 18.55 19.48 22.91 PLUS: Income from investment operations Net investment income 0.04 0.02 0.04 0.18 0.09 Net gains (losses) - realized and unrealized (1.83) 3.17 1.81 3.79 1.73 Subtotal: income from investment operations (1.79) 3.19 1.85 3.97 1.82 MINUS: Distributions to shareholders Income dividends 0.06 0.03 0.05 0.03 0.14 Capital gain distributions 1.67 - 0.87 0.51 0.71 Tax return of capital 0.05 - - - - Subtotal: distributions to shareholders 1.78 0.03 0.92 0.54 0.85 EQUALS: Share price (NAV) at end of year 15.39 18.55 19.48 22.91 23.88 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income - as they actually are as well as how they would have been if certain expense offset arrangements had not been in effect. Net expenses - actual 1.17 1.07 1.06 1.01 0.95 Expenses(1) 1.17 1.08 1.07 1.02 0.95 Net investment income - actual 0.21 0.14 0.19 0.83 0.39 ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (10.62) 20.79 10.06 20.57 8.08 Net assets at end of year (in millions of dollars) 71.2 132.8 215.6 330.0 487.5 Portfolio turnover rate (%) 60 62 35 21 23 ------------------------------------------------------------------------------------------------------------------------------------
All figures for fiscal years 2002 and 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm for those years. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense offset arrangements. 63 Socially Responsive Fund Neuberger Berman YOUR INVESTMENT -------------------------------------------------------------------------------- -- SHARE PRICES Because Investor Class shares of these Funds do not have sales charges, the price you pay for each share of a Fund is the Fund's net asset value per share. Unless a redemption fee is applied, the Funds pay you the full share price when you sell shares. Of the Funds in this prospectus, only International Fund imposes a redemption fee on sales or exchanges of Fund shares held 60 days or less. If you own shares of this Fund, see "Redemption Fee" for more information on when a redemption fee would be charged to your account. If you use an investment provider, that provider may charge fees that are in addition to those described in this prospectus. The Funds are open for business every day the New York Stock Exchange ("Exchange") is open. The Exchange is closed on all national holidays and Good Friday; Fund shares will not be priced on those days or other days on which the Exchange is closed. Each Fund calculates its share price as of the end of regular trading on the Exchange on business days, usually 4:00 p.m. Eastern time. In general, every buy or sell order you place will go through at the next share price calculated after your order has been accepted (see "Maintaining Your Account" for information on placing orders). If you use an investment provider, you should check with it to find out by what time your order must be received so that it can be processed the same day. Depending on when it accepts orders, it is possible that a Fund's share price could change on days when you are unable to buy or sell shares. Because foreign markets may be open on days when U.S. markets are closed, the value of foreign securities owned by a Fund could change on days when you cannot buy or sell Fund shares. Remember, though, any purchase or sale takes place at the next share price calculated after your order is accepted. [GRAPHIC OMITTED] SHARE PRICE CALCULATIONS THE PRICE OF AN INVESTOR CLASS SHARE OF A FUND IS THE TOTAL VALUE OF THE FUND'S ASSETS ATTRIBUTABLE TO INVESTOR CLASS SHARES MINUS LIABILITIES ATTRIBUTABLE TO THAT CLASS, DIVIDED BY THE TOTAL NUMBER OF INVESTOR CLASS SHARES OUTSTANDING. BECAUSE THE VALUE OF A FUND'S SECURITIES CHANGES EVERY BUSINESS DAY, THE SHARE PRICE USUALLY CHANGES AS WELL. WHEN VALUING PORTFOLIO SECURITIES, THE FUNDS USE MARKET PRICES. HOWEVER, IN CERTAIN CASES, EVENTS THAT OCCUR AFTER CERTAIN MARKETS HAVE CLOSED MAY RENDER THESE PRICES UNRELIABLE. WHEN A FUND BELIEVES A REPORTED MARKET PRICE FOR A SECURITY DOES NOT REFLECT THE AMOUNT THE FUND WOULD RECEIVE ON A CURRENT SALE OF THAT SECURITY, THE FUND MAY SUBSTITUTE FOR THE MARKET PRICE A FAIR-VALUE ESTIMATE MADE ACCORDING TO METHODS APPROVED BY THE BOARD OF TRUSTEES. A FUND MAY ALSO USE THESE METHODS TO VALUE CERTAIN TYPES OF ILLIQUID SECURITIES. FAIR VALUE PRICING GENERALLY WILL BE USED IF THE EXCHANGE ON WHICH A PORTFOLIO SECURITY IS TRADED CLOSES EARLY OR IF TRADING IN A PARTICULAR SECURITY WAS HALTED DURING THE DAY AND DID NOT RESUME PRIOR TO A FUND'S NET ASSET VALUE CALCULATION. A FUND MAY ALSO USE THESE METHODS TO VALUE SECURITIES THAT TRADE IN A FOREIGN MARKET, IF SIGNIFICANT EVENTS THAT APPEAR LIKELY TO AFFECT THE VALUE OF THOSE SECURITIES OCCUR BETWEEN THE TIME THAT FOREIGN MARKET CLOSES AND THE TIME THE EXCHANGE CLOSES. SIGNIFICANT EVENTS MAY INCLUDE (1) THOSE IMPACTING A SINGLE ISSUER, (2) GOVERNMENTAL ACTIONS THAT AFFECT SECURITIES IN ONE SECTOR OR COUNTRY, (3) NATURAL DISASTERS OR ARMED CONFLICTS AFFECTING A COUNTRY OR REGION, OR (4) SIGNIFICANT DOMESTIC OR FOREIGN MARKET FLUCTUATIONS. THE EFFECT OF USING FAIR VALUE PRICING IS THAT A FUND'S NET ASSET VALUE WILL BE 64 Your Investment SUBJECT TO THE JUDGMENT OF NEUBERGER BERMAN MANAGEMENT INC., OPERATING UNDER PROCEDURES APPROVED BY THE BOARD OF TRUSTEES, INSTEAD OF BEING DETERMINED BY MARKET PRICES. -- PRIVILEGES AND SERVICES If you purchase Investor Class shares directly from Neuberger Berman Management Inc., you have access to the services listed below. If you are purchasing shares through an investment provider, consult that provider for information about investment services. SYSTEMATIC INVESTMENTS -- This plan lets you take advantage of dollar-cost averaging by establishing periodic investments of $100 a month or more. You choose the schedule and amount. Your investment money may come from a Neuberger Berman money market fund or your bank account. SYSTEMATIC WITHDRAWALS -- This plan lets you arrange withdrawals of at least $100 from a Neuberger Berman fund on a periodic schedule. You can also set up payments to distribute the full value of an account over a given time. While this service can be helpful to many investors, be aware that it could generate capital gains or losses. ELECTRONIC BANK TRANSFERS -- When you sell Fund shares, you can have the money sent to your bank account electronically rather than mailed to you as a check. Please note that your bank must be a member of the Automated Clearing House, or ACH, system. INTERNET ACCESS -- At www.nb.com, you can make transactions, check your account, and access a wealth of information. FUNDfone(R) -- Get up-to-date performance and account information through our 24-hour automated service by calling 800-335-9366. If you already have an account with us, you can place orders to buy, sell, or exchange fund shares. [GRAPHIC OMITTED] DOLLAR-COST AVERAGING SYSTEMATIC INVESTING ALLOWS YOU TO TAKE ADVANTAGE OF THE PRINCIPLE OF DOLLAR-COST AVERAGING. WHEN YOU MAKE REGULAR INVESTMENTS OF A GIVEN AMOUNT -- SAY, $100 A MONTH -- YOU WILL END UP INVESTING AT DIFFERENT SHARE PRICES OVER TIME. WHEN THE SHARE PRICE IS HIGH, YOUR $100 BUYS FEWER SHARES; WHEN THE SHARE PRICE IS LOW, YOUR $100 BUYS MORE SHARES. OVER TIME, THIS CAN HELP LOWER THE AVERAGE PRICE YOU PAY PER SHARE. DOLLAR-COST AVERAGING CANNOT GUARANTEE YOU A PROFIT OR PROTECT YOU FROM LOSSES IN A DECLINING MARKET. BUT IT CAN BE BENEFICIAL OVER THE LONG TERM. -- DISTRIBUTIONS AND TAXES DISTRIBUTIONS -- Each Fund pays out to shareholders any net investment income and net realized capital gains. Ordinarily, the Funds make any distributions once a year (in December). Unless you designate otherwise, your income and capital gain distributions from a Fund will be reinvested in additional Investor Class shares of the Fund. However, if you prefer, you may receive all distributions in cash or reinvest capital gain distributions but receive income distributions in cash. Distributions taken in cash can be sent to you by check or by electronic 65 Your Investment transfer to a designated bank account or invested in Investor Class shares of another Neuberger Berman fund with the same account registration. To take advantage of one of these options, please indicate your choice on your application. If you use an investment provider, you must consult it about whether your income and capital gain distributions will be reinvested or paid in cash. HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement plans and accounts and other tax-exempt investors, all Fund distributions you receive are generally taxable to you, regardless of whether you take them in cash or reinvest them in additional Fund shares. Fund distributions to Roth IRAs, other individual retirement accounts ("IRAs") and qualified retirement plans generally are tax-free. Eventual withdrawals from a Roth IRA also may be tax-free, while withdrawals from other retirement accounts and plans generally are subject to tax. Distributions generally are taxable to you in the year you receive them. In some cases, however, distributions you receive in January are taxable as if they had been paid the previous December 31. Your tax statement (see "Taxes and You") will help clarify this for you. Distributions of income and the excess of net short-term capital gain over net long-term capital loss are generally taxed as ordinary income. However, a Fund's dividends attributable to "qualified dividend income" (generally, dividends it receives on stock of most U.S. and certain foreign corporations with respect to which it satisfies certain holding period, financing, and other restrictions) are subject to a 15% maximum federal income tax rate for individual shareholders who satisfy those restrictions with respect to their Fund shares on which the dividends were paid. Distributions of net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss) are generally taxed as long-term capital gain and are subject to that 15% maximum rate for individual shareholders. The tax treatment of capital gain distributions from a Fund depends on how long the Fund held the securities it sold, not when you bought your shares of the Fund or whether you reinvested your distributions. HOW SHARE TRANSACTIONS ARE TAXED -- When you sell (redeem) or exchange Fund shares, you generally realize a taxable gain or loss. An exception, once again, applies to tax-advantaged retirement plans and accounts and other tax-exempt investors. Any capital gain an individual shareholder recognizes on a redemption or exchange of his or her Fund shares that have been held for more than one year will qualify for the 15% maximum federal income tax rate mentioned above. [GRAPHIC OMITTED] TAXES AND YOU THE TAXES YOU ACTUALLY OWE ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS CAN VARY WITH MANY FACTORS, SUCH AS YOUR MARGINAL TAX BRACKET, HOW LONG YOU HELD YOUR SHARES, AND WHETHER YOU OWE ALTERNATIVE MINIMUM TAX. HOW CAN YOU FIGURE OUT YOUR TAX LIABILITY ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS? ONE HELPFUL TOOL IS THE TAX STATEMENT THAT WE OR YOUR INVESTMENT PROVIDER SENDS YOU EVERY JANUARY. IT DETAILS THE DISTRIBUTIONS YOU RECEIVED DURING THE PAST YEAR AND SHOWS THEIR TAX STATUS. A SEPARATE STATEMENT COVERS YOUR SHARE TRANSACTIONS. MOST IMPORTANTLY, CONSULT YOUR TAX PROFESSIONAL. EVERYONE'S TAX SITUATION IS DIFFERENT, AND YOUR PROFESSIONAL SHOULD BE ABLE TO HELP YOU ANSWER ANY QUESTIONS YOU MAY HAVE. 66 Your Investment [GRAPHIC OMITTED] BACKUP WITHHOLDING A FUND IS REQUIRED TO WITHHOLD 28% OF THE MONEY YOU ARE OTHERWISE ENTITLED TO RECEIVE FROM ITS DISTRIBUTIONS AND REDEMPTION PROCEEDS IF YOU ARE AN INDIVIDUAL OR CERTAIN OTHER NON-CORPORATE SHAREHOLDER WHO FAILS TO PROVIDE A CORRECT TAXPAYER IDENTIFICATION NUMBER TO THE FUND. WITHHOLDING AT THAT RATE ALSO IS REQUIRED FROM EACH FUND'S DISTRIBUTIONS TO WHICH YOU ARE OTHERWISE ENTITLED IF YOU ARE SUCH A SHAREHOLDER AND THE INTERNAL REVENUE SERVICE ("IRS") TELLS US THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING OR YOU ARE SUBJECT TO BACKUP WITHHOLDING FOR ANY OTHER REASON. IN THE CASE OF A CUSTODIAL ACCOUNT FOR A NEWBORN, IF A SOCIAL SECURITY NUMBER HAS BEEN APPLIED FOR BUT IS NOT AVAILABLE WHEN YOU COMPLETE THE ACCOUNT APPLICATION, YOU MAY OPEN THE ACCOUNT WITHOUT THAT NUMBER, IF WE RECEIVE (FROM YOU OR FROM YOUR INVESTMENT PROVIDER) THE CUSTODIAN'S DATE OF BIRTH AND SOCIAL SECURITY NUMBER TOGETHER WITH A COPY OF THE REQUEST MADE TO THE IRS FOR THE NEWBORN'S SOCIAL SECURITY NUMBER. HOWEVER, WE MUST RECEIVE THE NEW NUMBER WITHIN 60 DAYS OR THE ACCOUNT WILL BE CLOSED. FOR INFORMATION ON CUSTODIAL ACCOUNTS, CALL 800-877-9700. YOU MUST SUPPLY YOUR SIGNED TAXPAYER IDENTIFICATION NUMBER FORM TO YOUR INVESTMENT PROVIDER, IF ANY, AND IT MUST SUPPLY ITS TAXPAYER IDENTIFICATION NUMBER TO US, IN ORDER TO AVOID BACKUP WITHHOLDING. [GRAPHIC OMITTED] BUYING SHARES BEFORE A DISTRIBUTION THE MONEY A FUND EARNS, EITHER AS INCOME OR AS CAPITAL GAINS, IS REFLECTED IN ITS SHARE PRICE UNTIL IT DISTRIBUTES THE MONEY. AT THAT TIME, THE AMOUNT OF THE DISTRIBUTION IS DEDUCTED FROM THE SHARE PRICE. THE AMOUNT OF THE DISTRIBUTION IS EITHER REINVESTED IN ADDITIONAL SHARES OF THE DISTRIBUTING CLASS OF THE FUND OR PAID TO SHAREHOLDERS IN CASH. BECAUSE OF THIS, IF YOU BUY SHARES JUST BEFORE THE FUND MAKES A DISTRIBUTION, YOU WILL END UP GETTING SOME OF YOUR INVESTMENT BACK AS A TAXABLE DISTRIBUTION. YOU CAN AVOID THIS SITUATION BY WAITING TO INVEST UNTIL AFTER THE RECORD DATE FOR THE DISTRIBUTION. GENERALLY, IF YOU ARE INVESTING IN A FUND THROUGH A TAX-ADVANTAGED RETIREMENT PLAN OR ACCOUNT, THERE ARE NO TAX CONSEQUENCES TO YOU FROM DISTRIBUTIONS. -- MAINTAINING YOUR ACCOUNT WHEN YOU BUY SHARES -- Instructions for buying shares from Neuberger Berman Management Inc. are under "Buying Shares." See "Investment Providers" if you are buying shares through an investment provider. Whenever you make an initial investment in one of the Funds or add to an existing account (except with an automatic investment), you will be sent a statement confirming your transaction if you bought shares directly. Investors who bought shares through an investment provider should contact their investment provider for information regarding transaction statements. All investments must be made in U.S. dollars, and investment checks must be drawn on a U.S. bank. When you purchase shares, you will receive the next share price to be calculated after your order has been accepted. Purchase orders are deemed "accepted" when the Funds' transfer agent has received your check or other payment for the shares. In the case of certain institutional investors, Neuberger Berman Management Inc. will accept purchase orders when received directly or through one of its administrative agents, on the basis of a pre-existing arrangement to make payment to Neuberger Berman Management Inc. or 67 Your Investment its administrative agent by the following morning. In addition, if you have established a systematic investment program (SIP) with one or more of the Funds, your order is deemed "accepted" on the date you preselected on your SIP application for the systematic investments to occur. WHEN YOU SELL SHARES -- If you bought your shares from Neuberger Berman Management Inc., instructions for selling shares are under "Selling Shares." See "Investment Providers" if you want to sell shares you purchased through an investment provider. You can place an order to sell some or all of your shares at any time. When you sell shares, you will receive the next share price to be calculated after your order has been accepted. Redemption orders are deemed "accepted" when the Fund's transfer agent has received your order to sell. If you sell or exchange shares of International Fund within 60 days or less of purchase, you may be charged a redemption fee. See the "Redemption Fee" section for more information. In some cases, you will have to place your order to sell shares in writing, and you will need a Medallion signature guarantee (see "Medallion Signature Guarantees"). When selling shares in an account that you do not intend to close, remember to leave at least $1,000 worth of shares in the account. Otherwise, the Fund has the right to request that you bring the balance back up to the minimum level. If you have not done so within 60 days, we may close your account and redeem the proceeds. The Funds reserve the right to pay in kind for redemptions. The Funds do not redeem in kind under normal circumstances, but would do so when Neuberger Berman Management Inc. has determined that it is in the best interests of a Fund's shareholders as a whole. UNCASHED CHECKS -- We do not pay interest on uncashed checks from Fund distributions or the sale of Fund shares. We are not responsible for checks after they are sent to you. After allowing a reasonable time for delivery, please call us if you have not received an expected check. While we cannot track a check, we may make arrangements for a replacement. STATEMENTS AND CONFIRMATIONS -- Please review your account statements and confirmations carefully as soon as you receive them. You must contact us within 30 days if you have any questions or notice any discrepancies. Otherwise, you may adversely affect your right to make a claim about the transaction(s). WHEN YOU EXCHANGE SHARES -- You can move an investment from one fund to a comparable class of another fund in the fund family through an exchange of shares, or by electing to use your cash distributions from one fund to purchase shares of the other fund. There are three things to remember when making an exchange: -- both accounts must have the same registration -- you will need to observe the minimum investment and minimum account balance requirements for the Fund accounts involved -- because an exchange is a sale for tax purposes, consider any tax consequences before placing your order The exchange privilege can be withdrawn from any investor that we believe is trying to "time the market" or is otherwise making exchanges that we judge to be excessive. Frequent exchanges can interfere with fund management and affect costs and performance for other shareholders. If you sell or exchange shares of International Fund within 60 days or less of purchase, you may be charged a redemption fee. See the "Redemption Fee" section for more information. 68 Your Investment PLACING ORDERS BY TELEPHONE -- Fund investors have the option of placing telephone orders, subject to certain restrictions. This option is available to you unless you indicate on your account application (or in a subsequent letter to us or to State Street Bank and Trust Company) that you do not want it. Whenever we receive a telephone order, we take steps to make sure the order is legitimate. These may include asking for identifying information and recording the call. As long as a Fund and its representatives take reasonable measures to verify the authenticity of calls, investors may be responsible for any losses caused by unauthorized telephone orders. In unusual circumstances, it may be difficult to place an order by phone. In these cases, consider sending your order by express delivery. PROCEEDS FROM THE SALE OF SHARES -- The proceeds from the shares you sell are generally sent out the next business day after your order is executed, and nearly always within seven business days. There are two cases in which proceeds may be delayed beyond this time: -- in unusual circumstances where the law allows additional time if needed -- if a check you wrote to buy shares has not cleared by the time you sell those shares; clearance may take up to 15 calendar days from the date of purchase. If you think you may need to sell shares soon after buying them, you can avoid the check clearing time by investing by wire. The Funds do not issue certificates for shares. If you have share certificates from prior purchases, the only way to redeem them is by sending in the certificates. If you lose a certificate, you will incur a fee before any transaction can be processed. OTHER POLICIES -- Under certain circumstances, the Funds reserve the right to: -- suspend the offering of shares -- reject any exchange or purchase order -- suspend or reject future purchase orders from any investor who does not provide payment to settle a purchase order -- change, suspend, or revoke the exchange privilege -- suspend the telephone order privilege -- satisfy an order to sell Fund shares with securities rather than cash, for very large orders -- suspend or postpone your right to sell Fund shares on days when trading on the Exchange is restricted, or as otherwise permitted by the Securities and Exchange Commission ("SEC") -- change its investment minimums or other requirements for buying and selling, or waive any minimums or requirements for certain investors -- take orders to purchase or sell Fund shares when the Exchange is closed. In such a case, the Fund would post a notice on the Neuberger Berman website, www.nb.com 69 Your Investment [GRAPHIC OMITTED] MEDALLION SIGNATURE GUARANTEES A MEDALLION SIGNATURE GUARANTEE IS A GUARANTEE THAT YOUR SIGNATURE IS AUTHENTIC. YOU MAY NEED A MEDALLION SIGNATURE GUARANTEE WHEN YOU SELL SHARES OF A FUND. MOST BANKS, BROKERS, AND OTHER FINANCIAL INSTITUTIONS CAN PROVIDE YOU WITH ONE. SOME MAY CHARGE A FEE; OTHERS MAY NOT, PARTICULARLY IF YOU ARE A CUSTOMER OF THEIRS. MEDALLION SIGNATURE GUARANTEES ARE REQUIRED FOR A VARIETY OF TRANSATIONS INCLUDING REQUESTS FOR CHANGES TO YOUR ACCOUNT OR TO THE INSTRUCTIONS FOR DISTRIBUTION OF PROCEEDS. WE RESERVE THE RIGHT TO REQUIRE A MEDALLION SIGNATURE GUARANTEE ON ANY TRANSACTION AT OUR DISCRETION. A NOTARIZED SIGNATURE FROM A NOTARY PUBLIC IS NOT A MEDALLION SIGNATURE GUARANTEE. [GRAPHIC OMITTED] INVESTMENT PROVIDERS THE INVESTOR CLASS SHARES AVAILABLE IN THIS PROSPECTUS MAY ALSO BE PURCHASED THROUGH CERTAIN INVESTMENT PROVIDERS SUCH AS BANKS, BROKERAGE FIRMS, WORKPLACE RETIREMENT PROGRAMS, AND FINANCIAL ADVISERS. THE FEES AND POLICIES OUTLINED IN THIS PROSPECTUS ARE SET BY THE FUNDS AND BY NEUBERGER BERMAN MANAGEMENT INC. HOWEVER, IF YOU USE AN INVESTMENT PROVIDER, MOST OF THE INFORMATION YOU WILL NEED FOR MANAGING YOUR INVESTMENT WILL COME FROM THAT PROVIDER. THIS INCLUDES INFORMATION ON HOW TO BUY AND SELL SHARES, INVESTOR SERVICES, AND ADDITIONAL POLICIES. IF YOU USE AN INVESTMENT PROVIDER, YOU MUST CONTACT THAT PROVIDER TO BUY OR SELL SHARES OF ANY OF THE FUNDS DESCRIBED IN THIS PROSPECTUS. MOST INVESTMENT PROVIDERS ALLOW YOU TO TAKE ADVANTAGE OF THE NEUBERGER BERMAN FUND EXCHANGE PROGRAM, WHICH IS DESIGNED FOR MOVING AN INVESTMENT FROM ONE FUND TO A COMPARABLE CLASS OF ANOTHER FUND IN THE FUND FAMILY THROUGH AN EXCHANGE OF SHARES. SEE "WHEN YOU EXCHANGE SHARES" FOR MORE INFORMATION. IN EXCHANGE FOR THE SERVICES IT OFFERS, YOUR INVESTMENT PROVIDER MAY CHARGE FEES, WHICH ARE IN ADDITION TO THOSE DESCRIBED IN THIS PROSPECTUS. [GRAPHIC OMITTED] ADDITIONAL PAYMENTS TO INVESTMENT PROVIDERS NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES MAY PAY ADDITIONAL COMPENSATION, OUT OF THEIR OWN RESOURCES AND NOT AS AN EXPENSE OF THE FUNDS, TO YOUR INVESTMENT PROVIDER OR OTHER FINANCIAL INTERMEDIARIES, INCLUDING AFFILIATES, IN CONNECTION WITH THE SALE, DISTRIBUTION, RETENTION AND/OR SERVICING OF FUND SHARES. IN SOME CASES, THESE PAYMENTS MAY CREATE AN INCENTIVE FOR YOUR INVESTMENT PROVIDER OR ITS EMPLOYEES TO RECOMMEND OR SELL SHARES OF THE FUNDS TO YOU. IF YOU HAVE PURCHASED SHARES OF A FUND THROUGH AN INVESTMENT PROVIDER, PLEASE SPEAK WITH YOUR INVESTMENT PROVIDER TO LEARN MORE ABOUT ANY PAYMENTS IT RECEIVES FROM NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES, AS WELL AS FEES AND/ OR COMMISSIONS THE INVESTMENT PROVIDER CHARGES. YOU SHOULD ALSO CONSULT DISCLOSURES MADE BY YOUR INVESTMENT PROVIDER AT THE TIME OF PURCHASE. ANY SUCH PAYMENTS WILL NOT CHANGE THE NET ASSET VALUE OR THE PRICE OF EACH FUND'S SHARES. FOR MORE INFORMATION, PLEASE SEE THE FUNDS' STATEMENT OF ADDITIONAL INFORMATION. 70 Your Investment [GRAPHIC OMITTED] INFORMATION REQUIRED FROM NEW ACCOUNTS TO HELP THE U.S. GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHEN YOU OPEN AN ACCOUNT, WE (WHICH MAY INCLUDE YOUR INVESTMENT PROVIDER ACTING ON OUR BEHALF) WILL REQUIRE YOUR NAME, ADDRESS, DATE OF BIRTH, AND SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER. WE MAY ALSO REQUIRE OTHER IDENTIFYING DOCUMENTS. IF WE CANNOT VERIFY THE INFORMATION YOU SUPPLY TO US OR IF IT IS INCOMPLETE, WE MAY BE REQUIRED TO RETURN YOUR FUNDS OR REDEEM YOUR ACCOUNT. 71 Your Investment BUYING SHARES ------------------------------------------------------------------------------------------------------------------------------------ Method Things to know Instructions ------------------------------------------------------------------------------------------------------------------------------------ SENDING US A CHECK Your first investment must be at least $1000 Fill out the application and enclose your check Additional investments can be as little as $100 If regular first-class mail, send to: We cannot accept cash, money orders, starter Neuberger Berman Funds checks, cashier's checks, travelers checks, or Boston Service Center other cash equivalents P.O. Box 8403 Boston, MA 02266-8403 You will be responsible for any losses or fees resulting from a bad check; if necessary, we may If express delivery, registered mail, or sell other shares belonging to you in order to certified mail, send to: cover these losses Neuberger Berman Funds c/o State Street Bank and Trust Company All checks must be made out to "Neuberger 30 Dan Road Berman Funds"; we cannot accept checks made Canton, MA 02021 out to you or other parties and signed over to us ------------------------------------------------------------------------------------------------------------------------------------ WIRING MONEY All wires must be for at least $1,000 Before wiring any money, call 800-877-9700 for an order confirmation Have your financial institution send your wire to State Street Bank and Trust Company Include your name, the Fund name, your account number and other information as requested ------------------------------------------------------------------------------------------------------------------------------------ EXCHANGING FROM ANOTHER All exchanges must be for at least $1,000 Call 800-877-9700 to place your order FUND Both accounts involved must be registered in the To place an order using FUNDfone(R), call 800- same name, address and tax ID number 335-9366 or through www.nb.com An exchange order cannot be cancelled or changed once it has been placed ------------------------------------------------------------------------------------------------------------------------------------ BY TELEPHONE We do not accept phone orders for a first Call 800-877-9700 to notify us of your investment purchase Additional investments must be for at least Immediately follow up with a wire or $1,000 electronic transfer Additional shares will be purchased when your To add shares to an existing account using order is accepted FUNDfone(R), call 800-335-9366 or you can use www.nb.com Not available on retirement accounts ------------------------------------------------------------------------------------------------------------------------------------ SETTING UP SYSTEMATIC All investments must be at least $100 Call 800-877-9700 for instructions INVESTMENTS ------------------------------------------------------------------------------------------------------------------------------------
72 Your Investment SELLING SHARES ------------------------------------------------------------------------------------------------------------------------------------ Method Things to know Instructions ------------------------------------------------------------------------------------------------------------------------------------ SENDING US A LETTER Unless you instruct us otherwise, we will mail Send us a letter requesting us to sell shares your proceeds by check to the address of record, signed by all registered owners; include your payable to the registered owner(s) name, account number, the Fund name, the dollar amount or number of shares you want If you have designated a bank account on your to sell, and any other instructions application, you can request that we wire the proceeds to this account; if the total balance of If regular first-class mail, send to: all of your Neuberger Berman fund accounts is Neuberger Berman Funds less than $200,000, you will be charged an $8.00 Boston Service Center wire fee P.O. Box 8403 Boston, MA 02266-8403 You can also request that we send the proceeds to your designated bank account by electronic If express delivery, registered mail, or transfer (ACH) without a fee certified mail, send to: Neuberger Berman Funds You may need a Medallion signature guarantee c/o State Street Bank and Trust Company 30 Dan Road Please also supply us with your e-mail address Canton, MA 02021 and daytime telephone number when you write to us in the event we need to reach you ------------------------------------------------------------------------------------------------------------------------------------ SENDING US A FAX For amounts of up to $50,000 Write a request to sell shares as described above Not available if you have changed the address on the account in the past 15 days Call 800-877-9700 to obtain the appropriate fax number ------------------------------------------------------------------------------------------------------------------------------------ CALLING IN YOUR ORDER All phone orders to sell shares must be for at Call 800-877-9700 to place your order least $1,000 unless you are closing out an account Give your name, account number, the Fund name, the dollar amount or number of shares Not available if you have declined the phone you want to sell, and any other instructions option or are selling shares in certain retirement accounts (The only exception is for those To place an order using FUNDfone(R), call 800- retirement shareholders who are at least 59 1/2 or 335-9366 or visit www.nb.com older and have their birthdates on file) Not available if you have changed the address on the account in the past 15 days ------------------------------------------------------------------------------------------------------------------------------------ EXCHANGING INTO ANOTHER All exchanges must be for at least $1,000 Call 800-877-9700 to place your order FUND Both accounts must be registered in the same To place an order using FUNDfone(R), call 800- name, address and tax ID number 335-9366 or visit www.nb.com An exchange order cannot be cancelled or changed once it has been placed ------------------------------------------------------------------------------------------------------------------------------------ SETTING UP SYSTEMATIC For accounts with at least $5,000 worth of shares Call 800-877-9700 for instructions WITHDRAWALS in them Withdrawals must be at least $100 ------------------------------------------------------------------------------------------------------------------------------------ REDEMPTION FEE International Fund charges a 2.00% redemption See section entitled "Redemption Fee" or call fee on shares redeemed or exchanged for shares 800-366-6264 for more information of another fund within 60 days or less of purchase ------------------------------------------------------------------------------------------------------------------------------------
73 Your Investment [GRAPHIC OMITTED] RETIREMENT PLANS WE OFFER INVESTORS A NUMBER OF TAX-ADVANTAGED PLANS FOR RETIREMENT SAVING: TRADITIONAL IRAS ALLOW MONEY TO GROW TAX-DEFERRED UNTIL YOU TAKE IT OUT, USUALLY AT OR AFTER RETIREMENT. CONTRIBUTIONS ARE DEDUCTIBLE FOR SOME INVESTORS, BUT EVEN WHEN THEY ARE NOT, AN IRA CAN BE BENEFICIAL. ROTH IRAS OFFER TAX-FREE GROWTH LIKE A TRADITIONAL IRA, BUT INSTEAD OF TAX-DEDUCTIBLE CONTRIBUTIONS, THE WITHDRAWALS ARE TAX-FREE FOR INVESTORS WHO MEET CERTAIN REQUIREMENTS. ALSO AVAILABLE: SEP-IRA, SIMPLE, KEOGH, AND OTHER TYPES OF PLANS. COVERDELL EDUCATION SAVINGS ACCOUNTS (FORMERLY EDUCATION IRAS), THOUGH NOT FOR RETIREMENT SAVINGS, ALSO ARE AVAILABLE. CONSULT YOUR TAX PROFESSIONAL TO FIND OUT WHICH TYPES OF PLANS OR ACCOUNTS MAY BE BENEFICIAL FOR YOU, THEN CALL 800-877-9700 FOR INFORMATION ON ANY NEUBERGER BERMAN RETIREMENT PLAN OR ACCOUNT. [GRAPHIC OMITTED] INTERNET CONNECTION INVESTORS WITH INTERNET ACCESS CAN ENJOY MANY VALUABLE AND TIME-SAVING FEATURES BY VISITING US AT WWW.NB.COM. THE SITE OFFERS MORE COMPLETE INFORMATION ON OUR FUNDS, INCLUDING CURRENT PERFORMANCE DATA, PORTFOLIO MANAGER INTERVIEWS, TAX INFORMATION PLUS EDUCATIONAL ARTICLES, NEWS AND ANALYSIS. YOU CAN TAILOR THE SITE SO IT SERVES UP INFORMATION THAT IS MOST RELEVANT TO YOU. AS A NEUBERGER BERMAN FUNDS SHAREHOLDER, YOU CAN USE THE WEB SITE TO ACCESS ACCOUNT INFORMATION AND EVEN MAKE SECURE TRANSACTIONS -- 24 HOURS A DAY. YOU CAN ALSO RECEIVE FUND DOCUMENTS SUCH AS PROSPECTUSES AND FINANCIAL REPORTS AS WELL AS YOUR STATEMENTS ELECTRONICALLY VIA NB DELIVERE(R). IF YOU WANT FURTHER INFORMATION, PLEASE CALL 800-877-9700. -- REDEMPTION FEE If you sell your shares of International Fund or exchange them for shares of another fund within 60 days of your purchase, you will be charged a fee of 2.00% on the current net asset value of the shares sold or exchanged. The fee is paid to the Fund to offset costs associated with short-term trading, such as portfolio transaction and administrative costs. The Fund uses a "first-in, first-out" method to determine how long you have held your Fund shares. This means that if you bought shares on different days, the shares purchased first will be considered redeemed first for purposes of determining whether the redemption fee will be charged. We may not impose the redemption fee on a redemption or an exchange of: -- shares acquired by reinvestment of dividends or other distributions of the Fund; -- shares held in an account of certain retirement plans; -- shares purchased through other investment providers, if the provider imposes a similar type of fee or otherwise has a policy in place to deter short-term trading; or -- shares held in certain rebalancing and asset allocation programs. You should contact your investment provider to determine whether it imposes a redemption fee or otherwise has a policy in place to deter short-term trading. From time to time, as circumstances change, we may modify or eliminate certain exemption categories. 74 Your Investment -- MARKET TIMING POLICY Frequent purchases, exchanges and redemptions of Fund shares ("market-timing activities") can interfere with Fund management and affect costs and performance for other shareholders. To discourage market-timing activities by Fund shareholders, the Board of Trustees has adopted market-timing policies and has approved the procedures of the principal underwriter for implementing those policies. As described earlier in this prospectus, pursuant to such policies, the exchange privilege can be withdrawn from any investor that is believed to be "timing the market" or is otherwise making exchanges judged to be excessive. In furtherance of these policies, under certain circumstances, the Funds reserve the right to reject any exchange or purchase order; change, suspend or revoke the exchange privilege or suspend the telephone order privilege. To further discourage excessive trading, if a shareholder sells shares of International Fund or exchanges them for shares of another fund within 60 days of purchase, the shareholder will be charged a fee of 2.00% on the current net asset value of the shares sold or exchanged. The fee is paid to the Fund to offset costs associated with short-term trading, such as portfolio transaction and administrative costs, and is imposed uniformly on all applicable shareholders, with only a few exceptions. The Fund may not impose the fee on a redemption or exchange of: shares acquired by reinvestment of dividends or other distributions of the Fund; shares held in an account of certain retirement plans; shares purchased through other investment providers, if that provider imposes a similar type of fee or otherwise has a policy in place to deter short-term trading; or shares held in certain rebalancing and asset allocation programs. Neuberger Berman Management Inc. applies the Funds' policies and procedures with respect to market-timing activities by monitoring trading activity in the Funds, identifying excessive trading patterns, and warning or prohibiting shareholders who trade excessively from making further purchases or exchanges of Fund shares. These policies and procedures are applied consistently to all shareholders. Although the Funds make efforts to monitor for market-timing activities, the ability of the Funds to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and other approved intermediaries may be limited in those instances in which the investment intermediary maintains the underlying shareholder accounts. Accordingly, there can be no assurance that the Funds will be able to eliminate all market-timing activities. 75 Your Investment -- PORTFOLIO HOLDINGS POLICY A description of the Funds' policies and procedures with respect to the disclosure of the Funds' portfolio holdings is available in the Funds' Statement of Additional Information. The complete portfolio holdings for each Fund (except Fasciano, Genesis, and Millennium Funds) are available at http://www.nb.com/ind/mutual_funds/ prospectuses/ 15-30 days after each month-end; the complete portfolio holdings of Fasciano, Genesis and Millennium Funds are available 15-30 days after the end of each calendar quarter. Each Fund's complete portfolio holdings will remain available at www.nb.com until the subsequent month-end holdings have been posted (holdings for Fasciano, Genesis and Millennium Funds will be available for only 15-30 days.) Complete holdings for all Funds will also be available in reports on Form N-Q or Form N-CSR filed with the SEC. Historical portfolio holdings are available upon request. -- FUND STRUCTURE Each Fund uses a "multiple class" structure. Each Fund offers one or more classes of shares that have identical investment programs, but different arrangements for distribution and shareholder servicing and, consequently, different expenses. This prospectus relates solely to the Investor Class shares of the Funds. 76 Your Investment APPENDIX NEUBERGER BERMAN FOCUS FUND -- DESCRIPTION OF ECONOMIC SECTORS. Neuberger Berman Focus Fund seeks to achieve its investment objective by investing principally in common stocks in the following thirteen multi-industry economic sectors, normally making at least 90% of its investments in not more than six such sectors: (1) AUTOS AND HOUSING SECTOR: Companies engaged in design, production, or sale of automobiles, automobile parts, mobile homes, or related products ("automobile industries") or design, construction, renovation, or refurbishing of residential dwellings. The value of securities of companies in the automobile industries is affected by, among other things, foreign competition, the level of consumer confidence and consumer debt, and installment loan rates. The housing construction industry may be affected by the level of consumer confidence and consumer debt, mortgage rates, tax laws, and the inflation outlook. (2) CONSUMER GOODS AND SERVICES SECTOR: Companies engaged in providing consumer goods or services, including design, processing, production, sale, or storage of packaged, canned, bottled, or frozen foods and beverages and design, production, or sale of home furnishings, appliances, clothing, accessories, cosmetics, or perfumes. Certain of these companies are subject to government regulation affecting the use of various food additives and production methods, which could affect profitability. Also, the success of food- and fashion-related products may be strongly affected by fads, marketing campaigns, health concerns, and other factors affecting supply and demand. (3) DEFENSE AND AEROSPACE SECTOR: Companies involved in research, manufacture, or sale of products or services related to the defense or aerospace industries, including air transport; data processing or computer-related services; communications systems; military weapons or transportation; general aviation equipment, missiles, space launch vehicles, or spacecraft; machinery for guidance, propulsion, or control of flight vehicles; and airborne or ground-based equipment essential to the test, operation, or maintenance of flight vehicles. Because these companies rely largely on U.S. (and foreign) governmental demand for their products and services, their financial conditions are heavily influenced by defense spending, foreign assistance and export control policies. (4) ENERGY SECTOR: Companies involved in the production, transmission, or marketing of energy from oil, gas, or coal, as well as nuclear, geothermal, oil shale, or solar sources of energy (but excluding public utility companies). Also included are companies that provide component products or services for those activities. The value of these companies' securities varies based on the price and supply of energy fuels and may be affected by international politics, energy conservation, the success of exploration projects, environmental considerations, and the tax and other regulatory policies of various governments. (5) FINANCIAL SERVICES SECTOR: Companies providing financial services to consumers or industry, including commercial banks and savings and loan associations, consumer and industrial finance companies, securities brokerage companies, leasing companies, and insurance companies. Their profitability may fluctuate significantly as a result of volatile interest rates, concerns about particular banks and savings institutions, and general economic conditions. The economic prospects of this sector are strongly affected by the cost of short-term funds and the rate of default on consumer and business loans. The 77 APPENDIX sector is also subject to extensive governmental regulation, which can limit or assist its business prospects. Recent regulatory changes have allowed much greater competition among banks, securities firms and insurance companies. This is resulting in a wave of consolidations within this sector; however, the ultimate impact of these changes in any one company or portion of the financial services sector is difficult to predict. (6) HEALTH CARE SECTOR: Companies engaged in design, manufacture, or sale of products or services used in connection with the provision of health care, including pharmaceutical companies; firms that design, manufacture, sell, or supply medical, dental, or optical products, hardware, or services; companies involved in biotechnology, medical diagnostic, or biochemical research and development; and companies that operate health care facilities. Many of these companies are subject to government regulation and potential health care reforms, which could affect the price and availability and their products and services. Also, products and services of these companies could quickly become obsolete. (7) HEAVY INDUSTRY SECTOR: Companies engaged in research, development, manufacture, or marketing of products, processes, or services related to the agriculture, chemicals containers, forest products, non-ferrous metals, steel, or pollution control industries, including synthetic and natural materials (for example, chemicals, plastics, fertilizers, gases, fibers, flavorings, or fragrances), paper, wood products, steel and cement. Certain of these companies are subject to state and federal regulation, which could require alteration or cessation of production of a product, payment of fines, or cleaning of a disposal site. Furthermore, because some of the materials and processes used by these companies involve hazardous components, there are additional risks associated with their production, handling and disposal. The risk of product obsolescence also is present. (8) MACHINERY AND EQUIPMENT SECTOR: Companies engaged in the research, development, or manufacture of products, processes, or services relating to electrical equipment, machinery, pollution control, or construction services, including transformers, motors, turbines, hand tools, earth-moving equipment, and waste disposal services. The profitability of most of these companies may fluctuate significantly in response to capital spending and general economic conditions. As is the case for the heavy industry sector, there are risks associated with the production, handling and disposal of materials and processes that involve hazardous components and the risk of product obsolescence. (9) MEDIA AND ENTERTAINMENT SECTOR: Companies engaged in design, production, or distribution of goods or services for the media industries (including television or radio broadcasting or manufacturing, publishing, recordings and musical instruments, motion pictures, and photography) and the entertainment industries (including sports arenas, amusement and theme parks, gaming casinos, sporting goods, camping and recreational equipment, toys and games, travel-related services, hotels and motels, and fast food and other restaurants). Many products produced by companies in this sector -- for example, video and electronic games -- may become obsolete quickly. Additionally, companies engaged in television and radio broadcasts are subject to government regulation. (10) RETAILING SECTOR: Companies engaged in retail distribution of home furnishings, food products, clothing, pharmaceuticals, leisure products, or other consumer goods, including department stores, supermarkets, and retail chains specializing in particular items such as shoes, toys, or pharmaceuticals. The value of these companies' securities fluctuates based on consumer spending patterns, which depend on inflation and interest rates, the 78 APPENDIX levels of consumer debt and consumer confidence, and seasonal shopping habits. The success or failure of a company in this highly competitive sector depends on its ability to predict rapidly changing consumer tastes. (11) TECHNOLOGY SECTOR: Companies that are expected to have or develop products, processes, or services that will provide, or will benefit significantly from, technological advances and improvements or future automation trends, including semiconductors, computers and peripheral equipment, scientific instruments, computer software, telecommunications equipment, and electronic components, instruments, and systems. These companies are sensitive to foreign competition and import tariffs. Also, many of their products may become obsolete quickly. (12) TRANSPORTATION SECTOR: Companies involved in providing transportation of people and products, including airlines, railroads, and trucking firms. Revenues of these companies are affected by fluctuations in fuel prices and government regulation of fares as well as the general level of economic activity and the public's willingness to travel. (13) UTILITIES SECTOR: Companies in the public utilities industry and companies that derive a substantial majority of their revenues through supplying public utilities (including companies engaged in the manufacture, production, generation, transmission, or sale of gas and electric energy) and that provide telephone, telegraph, satellite, microwave, and other communication facilities to the public. The gas and electric public utilities industries are subject to various uncertainties, including the outcome of political issues concerning the environment, prices of fuel for electric generation, availability of natural gas, and risks associated with the construction and operation of nuclear power facilities. MARKET RISK The following is a discussion of the risks of investing in the various capitalization components of the stock market and the risks of using either a value or growth approach to selecting these securities. (1) SMALL-CAP STOCKS: The stocks of smaller companies are often more volatile and less liquid than the stocks of larger companies, and these companies may have a shorter history of operations than larger companies. They may not have as great an ability to raise additional capital; and may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor. Finally, small-cap stocks may be more affected than other types of stock by the underperformance of a sector in which they may be more concentrated. (2) MID-CAP STOCKS: Mid-cap stocks may fluctuate more widely in price than the market as a whole and may underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when mid-cap stocks are out of favor. (3) LARGE-CAP STOCKS: At times, large-cap stocks may lag other types of stocks in performance, which could cause a fund holding these stocks to perform worse than certain other funds over a given time period. (4) VALUE STOCKS: With a value approach, there is the risk that stocks may remain undervalued during a given period. This may happen because value stocks as a category lose favor with investors compared to growth stocks or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. 79 APPENDIX (5) GROWTH STOCKS: Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. 80 APPENDIX [GRAPHIC OMITTED] NEUBERGER BERMAN EQUITY FUNDS INVESTOR CLASS SHARES No load or sales charges If you would like further details on these Funds you can request a free copy of the following documents: SHAREHOLDER REPORTS -- The shareholder reports offer information about each Fund's recent performance, including: -- a discussion by the Portfolio Managers about strategies and market conditions that significantly affect the Fund's performance -- Fund performance data and financial statements -- portfolio holdings STATEMENT OF ADDITIONAL INFORMATION (SAI) -- The SAI contains more comprehensive information on these Funds, including: -- various types of securities and practices, and their risks -- investment limitations and additional policies -- information about each Fund's management and business structure The SAI is hereby incorporated by reference into this prospectus, making it legally part of the prospectus. Investment manager: NEUBERGER BERMAN MANAGEMENT INC. Sub-adviser: NEUBERGER BERMAN, LLC [GRAPHIC OMITTED] OBTAINING INFORMATION You can obtain a shareholder report, SAI, and other information from your investment provider, or from: NEUBERGER BERMAN MANAGEMENT INC. 605 Third Avenue 2nd Floor New York, NY 10158-0180 800-877-9700 212-476-8800 Web site: www.nb.com Email: fundinquiries@nb.com You can also request copies of this information from the SEC for the cost of a duplicating fee by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, 100 F Street, N.E., Washington, DC 20549-9303. They are also available from the EDGAR Database on the SEC's website at www.sec.gov. You may also view and copy the documents at the SEC's Public Reference Room in Washington. Call 202-551-8090 for information about the operation of the Public Reference Room. [GRAPHIC OMITTED] A0088 12/06 DSTO 47623 SEC file number: 811-582 [GRAPHIC OMITTED] 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.nb.com [GRAPHIC OMITTED] PROSPECTUS - DECEMBER 20, 2006 These securities, like the securities of all mutual funds, have not been approved or disapproved by the Securities and Exchange Commission, and the Securities and Exchange Commission has not determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. NEUBERGER BERMAN EQUITY FUNDS TRUST CLASS SHARES All Cap Growth Fund International Large Cap Fund Real Estate Fund Contents -------------------------------------------------------------------------------- EQUITY FUNDS All Cap Growth Fund..........................................................2 International Large Cap Fund.................................................9 Real Estate Fund............................................................16 YOUR INVESTMENT Share Prices................................................................24 Privileges and Services.....................................................25 Distributions and Taxes.....................................................25 Maintaining Your Account....................................................27 Redemption Fee..............................................................34 Market Timing Policy........................................................35 Portfolio Holdings Policy...................................................35 Fund Structure..............................................................36 THESE FUNDS: -- are designed for investors with long-term goals in mind, and for the Real Estate Fund, also for current income -- offer you the opportunity to participate in financial markets through a professionally managed stock portfolio -- carry certain risks, including the risk that you could lose money if Fund shares, when you sell them, are worth less than what you originally paid. This prospectus discusses principal risks of investing in Fund shares. These and other risks are discussed in more detail in the Statement of Additional Information (see back cover) -- are mutual funds, not bank deposits, and are not guaranteed or insured by the FDIC or any other government agency -- normally invests at least 80% of its net assets in equity securities. The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman, LLC. "Neuberger Berman Management Inc." and the individual Fund name in this prospectus are either service marks or registered service marks of Neuberger Berman Management Inc.(c) 2006 Neuberger Berman Management Inc. All rights reserved. Neuberger Berman Ticker Symbol: NBATX ALL CAP GROWTH FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stock of small-, mid-, and large-capitalization companies, which it defines as those with a total market capitalization within the market capitalization range of the Russell 3000 Index. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Managers employ a disciplined investment strategy when selecting growth stocks. Using fundamental research and quantitative analysis, they look for fast-growing companies with above average sales and competitive returns on equity relative to their peers. In doing so, the Portfolio Managers analyze such factors as: -- financial condition (such as debt to equity ratio); -- market share and competitive leadership of the company's products; -- earnings growth relative to competitors; -- market valuation in comparison to stock's own historical norms and the stocks of other companies. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] ALL CAP: LARGE, MID AND SMALL CAP STOCKS LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. THEY MAY HAVE A VARIETY OF PRODUCTS AND BUSINESS LINES AND A SOUND FINANCIAL BASE THAT CAN HELP THEM WEATHER BAD TIMES. COMPARED TO SMALLER COMPANIES, LARGE-CAP COMPANIES MAY BE LESS RESPONSIVE TO CHANGES AND OPPORTUNITIES, BUT, THEIR RETURNS HAVE SOMETIMES LED THOSE OF SMALLER COMPANIES, OFTEN WITH LOWER VOLATILITY. MID-CAP STOCKS HAVE HISTORICALLY SHOWN RISK/RETURN CHARACTERISTICS THAT ARE IN BETWEEN THOSE OF SMALL- AND LARGE-CAP STOCKS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER COMPARATIVELY ATTRACTIVE LONG-TERM RETURNS. MID-CAPS ARE LESS WIDELY FOLLOWED IN THE MARKET THAN LARGE-CAPS, WHICH CAN MAKE IT COMPARATIVELY EASIER TO FIND ATTRACTIVE STOCKS THAT ARE NOT OVERPRICED. HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE PAST 40 YEARS, SMALL CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] GROWTH INVESTING FOR GROWTH INVESTORS, THE AIM IS TO INVEST IN COMPANIES THAT ARE ALREADY SUCCESSFUL BUT COULD BE EVEN MORE SO. OFTEN, THESE STOCKS ARE IN EMERGING OR RAPIDLY GROWING INDUSTRIES. ACCORDINGLY, THE FUND AT TIMES MAY INVEST A GREATER PORTION OF ITS ASSETS IN PARTICULAR INDUSTRIES OR SECTORS THAN OTHER FUNDS DO. WHILE MOST GROWTH STOCKS ARE KNOWN TO INVESTORS, THEY MAY NOT YET HAVE REACHED THEIR FULL POTENTIAL. THE GROWTH INVESTOR LOOKS FOR INDICATIONS OF CONTINUED SUCCESS. 2 All Cap Growth Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock markets. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. To the extent that the Fund emphasizes small-, mid-, or large-cap stocks, it takes on the associated risks. At any given time, any one of these market capitalizations may be out of favor with investors. If the Fund emphasizes a certain market capitalization, it could perform worse than certain other funds over a given time period. At times, large-cap stocks may lag other types of stocks in performance, which could cause a fund holding those stocks to perform worse than certain other funds. Also, by investing in small- or mid-cap stocks, the Fund is subject to their risks, including the risk its holdings may: -- fluctuate more widely in price than the market as a whole; -- underperform other types of stocks or be difficult to sell when the economy is not robust or during market downturns; -- be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. In addition smaller companies in which the Fund may invest are often more volatile and less liquid than the stocks of larger companies, and these companies: -- may have a shorter history of operations than larger companies; -- may not have as great an ability to raise additional capital; -- may have a less diversified product line, making them more susceptible to market pressure. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. 3 All Cap Growth Fund WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES BUT MAY MEAN LOST OPPORTUNITIES. 4 All Cap Growth Fund PERFORMANCE [GRAPHIC OMITTED] When this prospectus was prepared, the Fund had completed less than one calendar year of operations and had no performance record to report. Accordingly, performance charts are not included. 5 All Cap Growth Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (% of average net assets) These are deducted from Fund assets, so you pay them indirectly. Management Fees 0.95 Distribution (12b-1) fees 0.10 Other expenses* 0.95 -------------------------------------------------------------------------------- Total annual operating expenses 2.00 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.90 -------------------------------------------------------------------------------- Net expenses** 1.10 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. ------------------------------------- 1 Year 3 Years ------------------------------------- Expenses $112 $350 ------------------------------------- * "Other expenses" are based on estimated amounts for the current fiscal year and estimated net assets of $25,000,000. ** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of the Fund through 8/31/2010, so that the total annual operating expenses of that class of the Fund are limited to 1.10% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Trust Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 1.10% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. The Fund will pay the Manager fees at the annual rate of 0.55% of the first $250 million, 0.525% of the next $250 million, 0.500% of the next $250 million, 0.475% of the next $250 million, 0.450% of the next $500 million, 0.425% of the next $2.5 billion, and 0.400% of amounts in excess of $4 billion of the Fund's average daily net assets for investment management services and 0.40% of its average daily net assets for administrative services provided to the Trust Class of the Fund. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees will be available in the Fund's semi-annual report dated February 2007. 6 All Cap Growth Fund PORTFOLIO MANAGERS The Fund is managed by a team consisting of the following Portfolio Managers: DAVID H. BURSHTAN, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed two equity mutual funds and other equity portfolios for another investment manager from 1999-2002. Mr. Burshtan has been Portfolio Manager of the Fund since its inception. KRISTINA KALEBICH, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, and a Managing Director and Portfolio Specialist for the Chicago Growth Equity Group with the Investment Management Division of Lehman Brothers, has been a product specialist for another investment manager from 1998-2002. Ms. Kalebich has been Portfolio Manager of the Fund since its inception. KENNETH J. TUREK, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed or co-managed other equity mutual funds and equity portfolios for several other investment managers since 1985. Mr. Turek has been Portfolio Manager of the Fund since its inception. JOHN J. ZIELINSKI, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has co-managed an equity mutual fund and managed other equity portfolios for another investment manager since 1983. Mr. Zielinski has been Portfolio Manager of the Fund since its inception. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 7 All Cap Growth Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED] When this prospectus was prepared, the Fund had no financial highlights to report. 8 All Cap Growth Fund Neuberger Berman Ticker Symbol: NILTX INTERNATIONAL LARGE CAP FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN COMMON STOCKS OF FOREIGN COMPANIES. To pursue this goal, the Fund invests mainly in large-capitalization foreign companies, including companies in developed and emerging industrialized markets. The Fund currently defines large-capitalization companies as those with a market capitalization greater than $2.5 billion. The Fund defines a foreign company as one that is organized outside of the United States and conducts the majority of its business abroad. The Fund seeks to reduce risk by diversifying among many industries. Although it has the flexibility to invest a significant portion of its assets in one country or region, it generally intends to remain well-diversified across countries and geographical regions. In picking stocks, the Portfolio Managers look for well-managed and profitable companies that show growth potential and whose stock prices are undervalued. Factors in identifying these firms may include strong fundamentals, such as attractive cash flows and balance sheets, as well as prices that are reasonable in light of projected returns. The Portfolio Managers also consider the outlooks for various countries and sectors around the world, examining economic, market, social, and political conditions. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] FOREIGN STOCKS THERE ARE MANY PROMISING OPPORTUNITIES FOR INVESTMENT OUTSIDE THE UNITED STATES. FOREIGN MARKETS OFTEN RESPOND TO DIFFERENT FACTORS AND THEREFORE TEND TO FOLLOW CYCLES THAT ARE DIFFERENT FROM EACH OTHER. FOR THIS REASON, MANY INVESTORS PUT A PORTION OF THEIR PORTFOLIOS IN FOREIGN INVESTMENTS AS A WAY OF GAINING FURTHER DIVERSIFICATION. WHILE FOREIGN STOCK MARKETS CAN BE RISKY, INVESTORS GAIN AN OPPORTUNITY TO ADD POTENTIAL LONG-TERM GROWTH. [GRAPHIC OMITTED] GROWTH AND VALUE INVESTING THE FUND USES A BLEND OF GROWTH AND VALUE STRATEGIES. VALUE INVESTORS SEEK STOCKS TRADING AT BELOW MARKET AVERAGE PRICES BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES BEFORE OTHER INVESTORS DISCOVER THEIR WORTH. GROWTH INVESTORS SEEK COMPANIES THAT ARE ALREADY SUCCESSFUL BUT MAY NOT HAVE REACHED THEIR FULL POTENTIAL. 9 International Large Cap Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in international stock markets. The behavior of these markets is unpredictable, particularly in the short term. Although foreign stocks offer added diversification potential, world markets may all react in similar fashion to important economic or political developments. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Foreign stocks are subject to more risks than comparable U.S. stocks. This is in part because some foreign markets are less developed and foreign governments, economies, laws (including tax laws), and securities firms may be less stable. There is also a higher chance that key information will be unavailable, incomplete, or inaccurate. As a result, foreign stocks can fluctuate more widely in price than comparable U.S. stocks and they may also be less liquid. These risks are generally greater in emerging markets. Over a given period of time, foreign stocks may underperform U.S. stocks -- sometimes for years. The Fund could also underperform if the Portfolio Managers invest in countries or sectors whose economic performance falls short. In addition, investing in foreign stocks may also involve a greater risk for excessive trading due to "time-zone arbitrage". If an event occurring after the close of a foreign market, but before the time the Fund computes its current net asset value, causes a change in the price of the foreign stock and such price is not reflected in the Fund's current net asset value, investors may attempt to take advantage of anticipated price movements in securities held by the Fund based on such pricing discrepancies. Changes in currency exchange rates bring an added dimension of risk. Currency fluctuations could erase investment gains or add to investment losses. At times, larger capitalization stocks may lag other types of stocks in performance, which could cause a fund holding these stocks to perform worse than certain other funds over a given time period. Any type of stock may underperform any other during a given period. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. THE FUND MAY USE DERIVATIVES FOR HEDGING AND FOR SPECULATION. HEDGING COULD REDUCE THE FUND'S LOSSES FROM CURRENCY FLUCTUATIONS, BUT COULD ALSO REDUCE ITS GAINS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND 10 International Large Cap Fund INCREASES ITS RISK OF LOSS. A DERIVATIVE INSTRUMENT, WHETHER USED FOR HEDGING OR SPECULATION, COULD FAIL TO PERFORM AS EXPECTED, CAUSING A LOSS FOR THE FUND. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL, OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES BUT MAY MEAN LOST OPPORTUNITIES. 11 International Large Cap Fund PERFORMANCE [GRAPHIC OMITTED] When this prospectus was prepared, the Fund had completed less than one calendar year of operations and had no performance record to report. Accordingly, performance charts are not included. 12 International Large Cap Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares held for more than 60 days, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES (% of amount redeemed or exchanged) None -------------------------------------------------------------------------------- These are deducted directly from your investment. Redemption Fee* 2.00 Exchange Fee* 2.00 -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (% of average net assets) These are deducted from Fund assets, so you pay them indirectly. Management Fees 0.95 Distribution (12b-1) fees 0.10 Other expenses** 1.32 -------------------------------------------------------------------------------- Total annual operating expenses 2.37 -------------------------------------------------------------------------------- Minus: Expense reimbursement 1.12 -------------------------------------------------------------------------------- Net expenses*** 1.25 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. --------------------------------------- 1 Year 3 Years --------------------------------------- Expenses $127 $397 --------------------------------------- * These fees are charged on investments held 60 days or less, whether Fund shares are redeemed or exchanged for shares of another Fund. See "Redemption Fee" for more information. ** "Other expenses" are based on estimated amounts for the current fiscal year and estimated net assets of $25,000,000. *** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of the Fund through 8/31/2010, so that the total annual operating expenses of that class of the Fund are limited to 1.25% Of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Trust Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 1.25% Of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. The Fund will pay the Manager fees at the annual rate of 0.55% of the first $250 million, 0.525% of the next $250 million, 0.500% of the next $250 million, 0.475% of the next $250 million, 0.450% of the next $500 million, 0.425% of the next $2.5 billion, and 0.400% of amounts in excess of $4 billion of the Fund's average daily net assets for investment management services and 0.40% of its average daily net assets for administrative services provided to the Trust Class of the Fund. 13 International Large Cap Fund A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's annual report dated August 2006. PORTFOLIO MANAGERS BENJAMIN SEGAL is a Vice President of Neuberger Berman Management Inc. and Managing Director of Neuberger Berman, LLC. Mr. Segal joined the firms in 1999 and has been the Portfolio Manager of the Fund since its inception in 2006. He has been a Portfolio Manager at Neuberger Berman Management Inc. since 2000, with responsibility for other mutual funds advised by the Manager. MILU E. KOMER is a Vice President of Neuberger Berman Management Inc. and of Neuberger Berman, LLC. Ms. Komer joined the firms in 2001 and has been the Associate Portfolio Manager of the Fund since its inception in 2006. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 14 International Large Cap Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2006(1) ------------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its Share price changed. Share price (NAV) at beginning of year 10.00 PLUS: Income from investment operations Net investment income 0.01 Net gains/losses - realized and 0.18 unrealized Subtotal: income from investment 0.19 operations Redemption fees - EQUALS: Share price (NAV) at end of year 10.19 ------------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.25(5) Gross expenses(2) 37.46(5) Expenses(3) 1.25(5) Net investment income - actual 1.32(5) ------------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(4) 1.90(6) Net assets at end of year (in millions of dollars) 6.2 Portfolio turnover rate (%) 6(6)
All figures have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Period from 8/1/2006 (beginning of operations) to 8/31/2006. (2) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (3) Shows what this ratio would have been if there had been no expense offset arrangements. (4) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. (5) Annualized. (6) Not annualized. 15 International Large Cap Fund Neuberger Berman Ticker Symbol: NBRFX REAL ESTATE FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS TOTAL RETURN THROUGH INVESTMENT IN REAL ESTATE SECURITIES, EMPHASIZING BOTH CAPITAL APPRECIATION AND CURRENT INCOME. To pursue this goal, the Fund normally invests at least 80% of its assets in equity securities issued by real estate investment trusts ("REITs") and common stocks and other securities issued by other real estate companies. The Fund defines a real estate company as one that derives at least 50% of its revenue from, or has at least 50% of its assets in, real estate. A REIT is a company dedicated to owning, and usually operating, income-producing real estate, or to financing real estate. The Fund may invest up to 20% of its net assets in debt securities. These debt securities can be either investment grade or below investment grade, provided that, at the time of purchase, they are rated at least B by Moody's or Standard & Poor's or, if unrated by either of these, deemed by the Portfolio Managers to be of comparable quality. The Portfolio Managers make investment decisions through a fundamental analysis of each company. The Portfolio Managers review each company's current financial condition and industry position, as well as economic and market conditions. In doing so, they evaluate the company's growth potential, earnings estimates and quality of management, as well as other factors. The Fund normally seeks to invest for the long-term, but it may sell securities regardless of how long they have been held if the Portfolio Managers find an opportunity they believe is more compelling, or if the Portfolio Managers' outlook on the company or the market changes. Active trading may cause the Fund to have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. The Fund has the ability to change its goal without shareholder approval, although it does not currently intend to do so. The Fund will not change its strategy of normally investing at least 80% of its assets in equity securities issued by REITs and common stocks and other securities issued by other real estate companies, without providing shareholders at least 60 days' notice. This test and the test of whether a company is a real estate company are applied at the time the Fund invests; later percentage changes caused by a change in market values or company circumstances will not require the Fund to dispose of a holding. [GRAPHIC OMITTED] SMALL- AND MID-CAP COMPANIES REITS TEND TO BE SMALL- TO MID-CAP COMPANIES IN RELATION TO THE EQUITY MARKETS AS A WHOLE. REIT SHARES, THEREFORE, CAN BE MORE VOLATILE THAN, AND PERFORM DIFFERENTLY FROM, LARGE-CAP COMPANY STOCKS. SMALLER REAL ESTATE COMPANIES OFTEN HAVE NARROWER MARKETS AND MORE LIMITED MANAGERIAL AND FINANCIAL RESOURCES THAN LARGER COMPANIES. THERE MAY ALSO BE LESS TRADING IN A SMALL- OR MID-CAP COMPANY'S STOCK, WHICH MEANS THAT BUY AND SELL TRANSACTIONS IN THAT STOCK COULD HAVE A LARGER IMPACT ON THE STOCK'S PRICE THAN IS THE CASE WITH LARGE-CAP COMPANY STOCKS. [GRAPHIC OMITTED] REAL ESTATE INVESTMENT TRUSTS A REIT IS A POOLED INVESTMENT VEHICLE THAT INVESTS PRIMARILY IN INCOME-PRODUCING REAL ESTATE OR REAL ESTATE RELATED LOANS OR INTERESTS. REITS ARE NOT TAXED ON INCOME AND GAINS THAT ARE DISTRIBUTED TO SHAREHOLDERS, PROVIDED THEY COMPLY WITH THE REQUIREMENTS OF THE INTERNAL REVENUE CODE. 16 Real Estate Fund REITS ARE GENERALLY CLASSIFIED AS EQUITY REITS, MORTGAGE REITS AND HYBRID REITS. EQUITY REITS INVEST THE MAJORITY OF THEIR ASSETS DIRECTLY IN REAL PROPERTY, DERIVE THEIR INCOME PRIMARILY FROM RENTS AND CAN ALSO REALIZE CAPITAL GAINS BY SELLING PROPERTIES THAT HAVE APPRECIATED IN VALUE. MORTGAGE REITS INVEST THE MAJORITY OF THEIR ASSETS IN REAL ESTATE MORTGAGES AND DERIVE THEIR INCOME PRIMARILY FROM INTEREST PAYMENTS. HYBRID REITS COMBINE THE CHARACTERISTICS OF BOTH EQUITY AND MORTGAGE REITS. 17 Real Estate Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock and real estate markets. The markets' behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Although the Fund will not invest in real estate directly, it concentrates its assets in the real estate industry, so your investment in the Fund will be closely linked to the performance of the real estate markets. Property values may decrease due to increasing vacancies or declining rents resulting from unanticipated economic, legal, cultural or technological developments or because of overbuilding or lack of mortgage funds. The value of an individual property may also decline because of environmental liabilities or losses due to casualty or condemnation. Because of this concentration in the real estate industry, the value of the Fund's shares may change at different rates compared to the value of shares of a mutual fund with investments in a mix of different industries. The Fund may at times be more concentrated in particular sub-sectors of the real estate business -- e.g., apartments, retail, hotels, offices, industrial, health care, etc. As such, its performance would be especially sensitive to developments that significantly affected those businesses. In addition, Equity REITs may be affected by changes in the value of the underlying property they own, while Mortgage REITs may be affected by the quality of any credit they extend. Equity and Mortgage REITs are dependent upon management skills and are subject to heavy cash flow dependency, defaults by borrowers, self-liquidation and the possibility of failing to qualify for tax- free pass through of income and gains under the federal tax law. The value of debt securities tends to rise when market interest rates fall and fall when market interest rates rise. This effect is generally more pronounced the longer the maturity of a debt security. If the Fund invests in lower-rated bonds, it will be subject to their risks, including the risk its holdings may fluctuate more widely in price and yield than investment-grade bonds, fall in price when the economy is weak or expected to become weak, be difficult to sell at the time and price the Fund desires, or carry higher transaction costs. Performance may also suffer if an issuer of bonds held by the Fund defaults on payment of its debt obligations. The Fund is subject to interest rate risk, which is the risk that REIT and other real estate company share prices overall will decline over short or even long periods because of rising interest rates. During periods of high interest rates, REITs and other real estate companies may lose appeal for investors who may be able to obtain higher yields from other income-producing investments. High interest rates may also mean that financing for property purchases and improvements is more costly and difficult to obtain. Some of the REIT and other real estate company securities in which the Fund invests may be preferred stock that receives preference in the payment of dividends. Convertible preferred stock is exchangeable for common stock and may therefore be more volatile. The Fund can invest up to 15% of its net assets in illiquid securities. These securities may be more difficult to dispose of at the price at which the Fund is carrying them. Judgment also plays a greater role in pricing these securities than it does for securities having more active markets. 18 Real Estate Fund The Fund is non-diversified. This means that the percentage of the Fund's assets invested in any single issuer is not limited by the Investment Company Act of 1940. Investing a higher percentage of its assets in any one issuer would increase the Fund's risk of loss, because the value of its shares would be more susceptible to adverse events affecting that issuer. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 19 Real Estate Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year -------------------------------------------------------------------------------- [BAR CHART GRAPHIC OMITTED] 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 39.96 31.68 13.08 BEST QUARTER: Q4 '04, 16.53% WORST QUARTER: Q1 '05, -6.88% Year-to-date performance as of 9/30/2006: 25.44% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005 -------------------------------------------------------------------------------- Since Inception 1 Year 5/1/2002 -------------------------------------------------------------------------------- REAL ESTATE FUND Return Before Taxes 13.08 21.97 Return After Taxes on Distributions 8.63 18.16 Return After Taxes on Distributions and Sale of Fund Shares 10.82 17.42 FTSE NAREIT Equity REITs Index 12.16 19.51 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The FTSE NAREIT Equity REITs Index is an unmanaged index of all equity REITs currently listed on the New York Stock Exchange, NASDAQ National Market System and the American Stock Exchange. -------------------------------------------------------------------------------- [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED INDEX OF THE EQUITY REIT MARKET. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. 20 Real Estate Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares held for more than 60 days, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES (% of amount redeemed or exchanged) None -------------------------------------------------------------------------------- These are deducted directly from your investment. Redemption Fee* 1.00 Exchange Fee* 1.00 -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)** These are deducted from Fund assets, so you pay them indirectly Management fees 1.25 Distribution (12b-1) fees 0.10 Other expenses 0.57 -------------------------------------------------------------------------------- Total annual operating expenses 1.92 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.42 -------------------------------------------------------------------------------- Net expenses 1.50 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------- Expenses $153 $474 $818 $1,791 -------------------------------------------------------------- * These fees are charged on investments held 60 days or less, whether Fund shares are redeemed or exchanged for shares of another Fund. See "Redemption Fee" for more information. ** Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of the Fund through 8/31/2017 so that the total annual operating expenses of that class are limited to 1.50% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Trust Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 1.50% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. The figures in the table are based on last year's expenses. In addition, NBMI has voluntarily undertaken to waive or reimburse certain expenses of the Trust Class of the Fund so that its total annual operating expenses are limited to 0.99% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions and extraordinary expenses and is in addition to the contractual undertaking described in the paragraph above. NBMI may, at its sole discretion, terminate this voluntary commitment with notice to the Fund. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, theNeuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 1.25% of average net assets before reimbursements. 21 Real Estate Fund A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGERS STEVEN R. BROWN is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. He has managed the Fund's assets since 2002. From 1997 to 2002 he was a co-portfolio manager of a comparable fund at an investment firm specializing in securities of REITs. STEVE S. SHIGEKAWA is a Vice President of Neuberger Berman Management Inc. and of Neuberger Berman, LLC. He has been an Associate Portfolio Manager of the Fund since December 2005, and prior to that, was an analyst since 2002. He held associate analyst positions at two other investment firms from 2000 to 2002. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 22 Real Estate Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
Year Ended August 31, 2002(1) 2003 2004 2005 2006 PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 10.00 9.81 11.49 14.13 14.73 PLUS: Income from investment operations Net investment income 0.12 0.31 0.26 0.19 0.20 Net gains (losses) - realized and unrealized (0.24) 1.75 3.17 3.28 3.39 Subtotal: income from investment operations (0.12) 2.06 3.43 3.47 3.59 Redemption fees 0.00 0.00 0.01 0.00 0.00 MINUS: Distributions to shareholders Income dividends 0.07 0.38 0.28 0.23 0.27 Capital gain distributions - - 0.52 2.64 2.36 Subtotal: distributions to shareholders 0.07 0.38 0.80 2.87 2.63 EQUALS: Share price (NAV) at end of year 9.81 11.49 14.13 14.73 15.69 ----------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.50(2) 1.50 1.47 1.48 1.09 Gross expenses(3) 4.81(2) 2.19 1.93 1.86 1.90 Expenses(4) 1.50(2) 1.50 1.50 1.50 1.11 Net investment income - actual 3.53(2) 3.10 2.05 1.40 1.39 ----------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(5) (1.23)(6) 21.70 31.03 27.06 28.50 Net assets at end of year (in millions of dollars) 12.2 31.2 40.1 46.8 86.7 Portfolio turnover rate (%) 44(6) 85 148 129 97
The above figures have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Period from 5/1/2002 (beginning of operations) to 8/31/2002. (2) Annualized. (3) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (4) Shows what this ratio would have been if there had been no expense offset arrangements. (5) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. (6) Not annualized. 23 Real Estate Fund Neuberger Berman YOUR INVESTMENT -------------------------------------------------------------------------------- Trust Class shares of the Funds are available through an investment provider or from Neuberger Berman Management Inc. (see "Maintaining Your Account"). -- SHARE PRICES Because Trust Class shares of the Funds do not have a sales charge, the price you pay for each share of the Fund is the Fund's net asset value per share. Similarly, because the Funds (other than International Large Cap Fund and Real Estate Fund) do not charge fees for selling shares, your Fund pays you the full share price when you sell shares. International Large Cap and Real Estate Fund impose a redemption fee on sales or exchanges of Fund shares held 60 days or less (see "Redemption Fee"). If you use an investment provider, that provider may charge fees that are in addition to those described in this prospectus. The Funds are open for business every day the New York Stock Exchange ("Exchange") is open. The Exchange is closed on all national holidays and Good Friday; Fund shares will not be priced on those days or other days on which the Exchange is closed. Each Fund calculates its share price as of the end of regular trading on the Exchange on business days, usually 4:00 p.m. Eastern time. In general, every buy or sell order you place will go through at the next share price calculated after your order has been accepted (see "Maintaining Your Account" for information on placing orders). If you use an investment provider, you should check with it to find out by what time your order must be received so that it can be processed the same day. Depending on when it accepts orders, it is possible that the Funds' share price could change on days when you are unable to buy or sell shares. Because foreign markets may be open on days when U.S. markets are closed, the value of foreign securities owned by the Funds could change on days when you cannot buy or sell Fund shares. Remember, though, any purchase or sale takes place at the next share price calculated after your order is accepted. [GRAPHIC OMITTED] SHARE PRICE CALCULATIONS THE PRICE OF A TRUST CLASS SHARE OF A FUND IS THE TOTAL VALUE OF FUND ASSETS ATTRIBUTABLE TO TRUST CLASS SHARES MINUS LIABILITIES ATTRIBUTABLE TO THAT CLASS, DIVIDED BY THE TOTAL NUMBER OF TRUST CLASS SHARES OUTSTANDING. BECAUSE THE VALUE OF THE FUND'S SECURITIES CHANGES EVERY BUSINESS DAY, THE SHARE PRICE USUALLY CHANGES AS WELL. WHEN VALUING PORTFOLIO SECURITIES, THE FUNDS USE MARKET PRICES. HOWEVER, IN CERTAIN CASES, EVENTS THAT OCCUR AFTER CERTAIN MARKETS HAVE CLOSED MAY RENDER THESE PRICES UNRELIABLE. WHEN A FUND BELIEVES A REPORTED MARKET PRICE FOR A SECURITY DOES NOT REFLECT THE AMOUNT IT WOULD RECEIVE ON A CURRENT SALE OF THAT SECURITY, THE FUND MAY SUBSTITUTE FOR THE MARKET PRICE A FAIR VALUE ESTIMATE MADE ACCORDING TO METHODS APPROVED BY THE BOARD OF TRUSTEES. A FUND MAY ALSO USE THESE METHODS TO VALUE CERTAIN TYPES OF ILLIQUID SECURITIES. FAIR VALUE PRICING GENERALLY WILL BE USED IF THE EXCHANGE ON WHICH A PORTFOLIO SECURITY IS TRADED CLOSES EARLY OR IF TRADING IN A PARTICULAR SECURITY WAS HALTED DURING THE DAY AND DID NOT RESUME PRIOR TO A FUND'S NET ASSET VALUE CALCULATION. A FUND MAY ALSO USE THESE METHODS TO VALUE SECURITIES THAT TRADE IN A FOREIGN MARKET, IF SIGNIFICANT EVENTS THAT APPEAR LIKELY TO AFFECT THE VALUE OF THOSE SECURITIES OCCUR BETWEEN THE TIME THAT FOREIGN MARKET CLOSES AND THE TIME THE EXCHANGE CLOSES. SIGNIFICANT EVENTS MAY INCLUDE (1) THOSE IMPACTING A SINGLE ISSUER, (2) GOVERNMENTAL ACTIONS THAT AFFECT SECURITIES IN ONE SECTOR 24 Your Investment OR COUNTRY, (3) NATURAL DISASTERS OR ARMED CONFLICTS AFFECTING A COUNTRY OR REGION, OR (4) SIGNIFICANT DOMESTIC OR FOREIGN MARKET FLUCTUATIONS. THE EFFECT OF USING FAIR VALUE PRICING IS THAT A FUND'S NET ASSET VALUE WILL BE SUBJECT TO THE JUDGMENT OF NEUBERGER BERMAN MANAGEMENT INC., OPERATING UNDER PROCEDURES APPROVED BY THE BOARD OF TRUSTEES, INSTEAD OF BEING DETERMINED BY MARKET PRICES. -- PRIVILEGES AND SERVICES If you purchase Trust Class shares directly from Neuberger Berman Management Inc., you have access to the services listed below. If you purchase shares through an investment provider, consult that provider for information about investment services. SYSTEMATIC INVESTMENTS -- This plan lets you take advantage of dollar-cost averaging by establishing periodic investments of $100 a month or more. You choose the schedule and amount. Your investment money may come from a Neuberger Berman money market fund or your bank account. SYSTEMATIC WITHDRAWALS -- This plan lets you arrange withdrawals of at least $100 from a Neuberger Berman fund on a periodic schedule. You can also set up payments to distribute the full value of an account over a given time. While this service can be helpful to many investors, be aware that it could generate capital gains or losses. ELECTRONIC BANK TRANSFERS -- When you sell Fund shares, you can have the money sent to your bank account electronically rather than mailed to you as a check. Please note that your bank must be a member of the Automated Clearing House, or ACH, system. INTERNET ACCESS -- At www.nb.com, you can make transactions, check your account, and access a wealth of information. FUNDfone(R) -- Get up-to-date performance and account information through our 24-hour automated service by calling 800-335-9366. If you already have an account with us, you can place orders to buy, sell, or exchange fund shares. [GRAPHIC OMITTED] DOLLAR-COST AVERAGING SYSTEMATIC INVESTING ALLOWS YOU TO TAKE ADVANTAGE OF THE PRINCIPLE OF DOLLAR-COST AVERAGING. WHEN YOU MAKE REGULAR INVESTMENTS OF A GIVEN AMOUNT -- SAY, $100 A MONTH -- YOU WILL END UP INVESTING AT DIFFERENT SHARE PRICES OVER TIME. WHEN THE SHARE PRICE IS HIGH, YOUR $100 BUYS FEWER SHARES; WHEN THE SHARE PRICE IS LOW, YOUR $100 BUYS MORE SHARES. OVER TIME, THIS CAN HELP LOWER THE AVERAGE PRICE YOU PAY PER SHARE. DOLLAR-COST AVERAGING CANNOT GUARANTEE YOU A PROFIT OR PROTECT YOU FROM LOSSES IN A DECLINING MARKET. BUT IT CAN BE BENEFICIAL OVER THE LONG TERM. -- DISTRIBUTIONS AND TAXES DISTRIBUTIONS -- Each Fund pays out to shareholders any net investment income and net realized capital gains. Ordinarily, the Funds make any distributions once a year (in December), except for Real Estate Fund, which typically distributes any net investment income quarterly. 25 Your Investment Unless you designate otherwise, your income and capital gain distributions from a Fund will be reinvested in additional Trust Class shares of the Fund. However, if you prefer, you may receive all distributions in cash or reinvest capital gain distributions but receive income distributions in cash. Distributions taken in cash can be sent to you by check or by electronic transfer to a designated bank account or invested in Trust Class shares of another Neuberger Berman fund with the same account registration. To take advantage of one of these options, please indicate your choice on your application. If you use an investment provider, you must consult it about whether your income and capital gain distributions will be reinvested in additional Fund shares or paid in cash. HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement plans and accounts and other tax-exempt investors, all Fund distributions you receive are generally taxable to you, regardless of whether you take them in cash or reinvest them in additional Fund shares. Fund distributions to Roth IRAs, other individual retirement accounts ("IRAs") and qualified retirement plans generally are tax-free. Eventual withdrawals from a Roth IRA also may be tax-free, while withdrawals from other retirement accounts and plans generally are subject to tax. Distributions generally are taxable to you in the year you receive them. In some cases, however, distributions you receive in January are taxable as if they had been paid the previous December 31. Your tax statement (see "Taxes and You") will help clarify this for you. Distributions of income and the excess of net short-term capital gain over net long-term capital loss are generally taxed as ordinary income. However, a Fund's dividends attributable to "qualified dividend income" (generally, dividends it receives on stock of most U.S. and certain foreign corporations with respect to which it satisfies certain holding period, financing, and other restrictions) are subject to a 15% maximum federal income tax rate for individual shareholders who satisfy those restrictions with respect to their Fund shares on which the dividends were paid. Distributions of net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss) are generally taxed as long-term capital gain and are subject to that 15% maximum rate for individual shareholders. The tax treatment of capital gain distributions from a Fund depends on how long the Fund held the securities it sold, not when you bought your shares of the Fund or whether you reinvested your distributions. HOW SHARE TRANSACTIONS ARE TAXED -- When you sell (redeem) or exchange Fund shares, you generally realize a taxable gain or loss. An exception, once again, applies to tax-advantaged retirement plans and accounts and other tax-exempt investors. Any capital gain an individual shareholder recognizes on a redemption or exchange of his or her Fund shares that have been held for more than one year will qualify for the 15% maximum federal income tax rate mentioned above. [GRAPHIC OMITTED] TAXES AND YOU THE TAXES YOU ACTUALLY OWE ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS CAN VARY WITH MANY FACTORS, SUCH AS YOUR MARGINAL TAX BRACKET, HOW LONG YOU HELD YOUR SHARES, AND WHETHER YOU OWE ALTERNATIVE MINIMUM TAX. HOW CAN YOU FIGURE OUT YOUR TAX LIABILITY ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS? ONE HELPFUL TOOL IS THE TAX STATEMENT THAT WE OR YOUR INVESTMENT PROVIDER SENDS YOU EVERY JANUARY. IT DETAILS THE 26 Your Investment DISTRIBUTIONS YOU RECEIVED DURING THE PAST YEAR AND SHOWS THEIR TAX STATUS. A SEPARATE STATEMENT COVERS YOUR SHARE TRANSACTIONS. MOST IMPORTANTLY, CONSULT YOUR TAX PROFESSIONAL. EVERYONE'S TAX SITUATION IS DIFFERENT, AND YOUR PROFESSIONAL SHOULD BE ABLE TO HELP YOU ANSWER ANY QUESTIONS YOU MAY HAVE. [GRAPHIC OMITTED] BACKUP WITHHOLDING A FUND IS REQUIRED TO WITHHOLD 28% OF THE MONEY YOU ARE OTHERWISE ENTITLED TO RECEIVE FROM ITS DISTRIBUTIONS AND REDEMPTION PROCEEDS IF YOU ARE AN INDIVIDUAL OR CERTAIN OTHER NON-CORPORATE SHAREHOLDER WHO FAILS TO PROVIDE A CORRECT TAXPAYER IDENTIFICATION NUMBER TO THE FUND. WITHHOLDING AT THAT RATE ALSO IS REQUIRED FROM THE FUND'S DISTRIBUTIONS TO WHICH YOU ARE OTHERWISE ENTITLED IF YOU ARE SUCH A SHAREHOLDER AND THE INTERNAL REVENUE SERVICE ("IRS") TELLS US THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING OR YOU ARE SUBJECT TO BACKUP WITHHOLDING FOR ANY OTHER REASON. IN THE CASE OF A CUSTODIAL ACCOUNT FOR A NEWBORN, IF A SOCIAL SECURITY NUMBER HAS BEEN APPLIED FOR BUT IS NOT AVAILABLE WHEN YOU COMPLETE THE ACCOUNT APPLICATION, YOU MAY OPEN THE ACCOUNT WITHOUT THAT NUMBER, IF WE RECEIVE (FROM YOU OR YOUR INVESTMENT PROVIDER) THE CUSTODIAN'S DATE OF BIRTH AND SOCIAL SECURITY NUMBER TOGETHER WITH A COPY OF THE REQUEST MADE TO THE IRS FOR THE NEWBORN'S SOCIAL SECURITY NUMBER. HOWEVER, WE MUST RECEIVE THE NEW NUMBER WITHIN 60 DAYS OR THE ACCOUNT WILL BE CLOSED. FOR INFORMATION ON CUSTODIAL ACCOUNTS, CALL 800-877-9700. IF YOU USE AN INVESTMENT PROVIDER, YOU MUST SUPPLY YOUR SIGNED TAXPAYER IDENTIFICATION NUMBER FORM TO IT AND IT MUST SUPPLY ITS TAXPAYER IDENTIFICATION NUMBER TO US, IN ORDER TO AVOID BACKUP WITHHOLDING. [GRAPHIC OMITTED] BUYING SHARES BEFORE A DISTRIBUTION THE MONEY A FUND EARNS, EITHER AS INCOME OR AS CAPITAL GAINS, IS REFLECTED IN ITS SHARE PRICE UNTIL IT DISTRIBUTES THE MONEY. AT THAT TIME, THE AMOUNT OF THE DISTRIBUTION IS DEDUCTED FROM THE SHARE PRICE. THE AMOUNT OF THE DISTRIBUTION IS EITHER REINVESTED IN ADDITIONAL SHARES OF THE DISTRIBUTING CLASS OF THE FUND OR PAID TO SHAREHOLDERS IN CASH. BECAUSE OF THIS, IF YOU BUY SHARES JUST BEFORE THE FUND MAKES A DISTRIBUTION, YOU WILL END UP GETTING SOME OF YOUR INVESTMENT BACK AS A TAXABLE DISTRIBUTION. YOU CAN AVOID THIS SITUATION BY WAITING TO INVEST UNTIL AFTER THE RECORD DATE FOR THE DISTRIBUTIONS. GENERALLY, IF YOU ARE INVESTING IN THE FUND THROUGH A TAX-ADVANTAGED RETIREMENT PLAN OR ACCOUNT, THERE ARE NO TAX CONSEQUENCES TO YOU FROM DISTRIBUTIONS. -- MAINTAINING YOUR ACCOUNT WHEN YOU BUY SHARES -- Instructions for buying shares from Neuberger Berman Management Inc. are under "Buying Shares." See "Investment Providers" if you are buying shares through an investment provider. Whenever you make an initial investment in one of the Funds or add to your existing account (except with an automatic investment), you will be sent a statement confirming your transaction if you bought shares directly. Investors who bought shares through an investment provider should contact their investment provider for information regarding transaction statements. All investments must be made in U.S. dollars, and investment checks must be drawn on a U.S. bank. 27 Your Investment When you purchase shares, you will receive the next share price to be calculated after your order has been accepted. Purchase orders are deemed "accepted" when the Funds' transfer agent has received your check or other payment for the shares. In the case of certain institutional investors, Neuberger Berman Management Inc. will accept purchase orders when received directly or through one of its administrative agents, on the basis of a pre-existing arrangement to make payment to Neuberger Berman Management Inc. or its administrative agent by the following morning. In addition, if you have established a systematic investment program (SIP) with one or more of the Funds, your order is deemed "accepted" on the date you preselected on your SIP application for the systematic investments to occur. WHEN YOU SELL SHARES -- If you bought your shares from Neuberger Berman Management Inc., instructions for selling shares are under "Selling Shares." See "Investment Providers" if you want to sell shares you purchased through an investment provider. You can place an order to sell some or all of your shares at any time. When you sell shares, you will receive the next share price to be calculated after your order has been accepted. Redemption orders are deemed "accepted" when the Funds' transfer agent has received your order to sell. If you sell or exchange shares of International Large Cap Fund or Real Estate Fund within 60 days or less of purchase, you may be charged a redemption fee ("see Redemption Fee"). In some cases, you will have to place your order to sell shares in writing, and you will need a Medallion signature guarantee (see "Medallion Signature Guarantees"). When selling shares in an account that you do not intend to close, remember to leave at least $1,000 worth of shares in the account. Otherwise, the Fund has the right to request that you bring the balance back up to the minimum level. If you have not done so within 60 days, we may close your account and redeem the proceeds. The Funds reserve the right to pay in kind for redemptions. The Funds do not redeem in kind under normal circumstances, but would do so when Neuberger Berman Management Inc. has determined that it is in the best interests of the Fund's shareholders as a whole. UNCASHED CHECKS -- We do not pay interest on uncashed checks from Fund distributions or the sale of Fund shares. We are not responsible for checks after they are sent to you. After allowing a reasonable time for delivery, please call us if you have not received an expected check. While we cannot track a check, we may make arrangements for a replacement. STATEMENTS AND CONFIRMATIONS -- Please review your account statements and confirmations carefully as soon as you receive them. You must contact us within 30 days if you have any questions or notice any discrepancies. Otherwise, you may adversely affect your right to make a claim about the transaction(s). WHEN YOU EXCHANGE SHARES -- You can move an investment from one fund to a comparable class of another fund in the fund family through an exchange of shares, or by electing to use your cash distributions from one fund to purchase shares of the other fund. There are three things to remember when making an exchange: -- both accounts must have the same registration -- you will need to observe the minimum investment and minimum account balance requirements for the Fund accounts involved 28 Your Investment -- because an exchange is a sale for tax purposes, consider any tax consequences before placing your order The exchange privilege can be withdrawn from any investor that we believe is trying to "time the market" or is otherwise making exchanges that we judge to be excessive. Frequent exchanges can interfere with fund management and affect costs and performance for other shareholders. If you sell or exchange shares of International Large Cap Fund or Real Estate Fund within 60 days or less of purchase, you may be charged a redemption fee ("see Redemption Fee"). PLACING ORDERS BY TELEPHONE -- Fund investors have the option of placing telephone orders, subject to certain restrictions. This option is available to you unless you indicate on your account application (or in a subsequent letter to us or to State Street Bank and Trust Company) that you do not want it. Whenever we receive a telephone order, we take steps to make sure the order is legitimate. These may include asking for identifying information and recording the call. As long as a Fund and its representatives take reasonable measures to verify the authenticity of calls, investors may be responsible for any losses caused by unauthorized telephone orders. In unusual circumstances, it may be difficult to place an order by phone. In these cases, consider sending your order by express delivery. PROCEEDS FROM THE SALE OF SHARES -- The proceeds from the shares you sell are generally sent out the next business day after your order is executed, and nearly always within seven business days. There are two cases in which proceeds may be delayed beyond this time: -- in unusual circumstances where the law allows additional time if needed -- if a check you wrote to buy shares has not cleared by the time you sell those shares; clearance may take up to15 calendar days from the date of purchase If you think you may need to sell shares soon after buying them, you can avoid the check clearing time by investing by wire. The Funds do not issue certificates for shares. OTHER POLICIES -- Under certain circumstances, the Funds reserve the right to: -- suspend the offering of shares -- reject any exchange or purchase order -- suspend or reject future purchase orders from any investor who does not provide payment to settle a purchase order -- change, suspend, or revoke the exchange privilege -- suspend the telephone order privilege -- satisfy an order to sell Fund shares with securities rather than cash, for certain very large orders -- suspend or postpone your right to sell Fund shares on days when trading on the Exchange is restricted, or as otherwise permitted by the Securities and Exchange Commission ("SEC") -- change its investment minimums or other requirements for buying and selling, or waive any minimums or requirements for certain investors -- take orders to purchase or sell Fund shares when the Exchange is closed. In such a case, the Fund would post a notice on the Neuberger Berman website, www.nb.com 29 Your Investment [GRAPHIC OMITTED] MEDALLION SIGNATURE GUARANTEES YOU MAY NEED A MEDALLION SIGNATURE GUARANTEE WHEN YOU SELL SHARES DIRECTLY OR THROUGH AN INVESTMENT PROVIDER. A MEDALLION SIGNATURE GUARANTEE IS A GUARANTEE THAT YOUR SIGNATURE IS AUTHENTIC. MOST BANKS, BROKERS, AND OTHER FINANCIAL INSTITUTIONS CAN PROVIDE YOU WITH ONE. SOME MAY CHARGE A FEE; OTHERS MAY NOT, PARTICULARLY IF YOU ARE A CUSTOMER OF THEIRS. MEDALLION SIGNATURE GUARANTEES ARE REQUIRED FOR A VARIETY OF TRANSACTIONS INCLUDING REQUESTS FOR CHANGES TO YOUR ACCOUNT OR TO THE INSTRUCTIONS FOR DISTRIBUTION OF PROCEEDS. WE RESERVE THE RIGHT TO REQUIRE A MEDALLION SIGNATURE GUARANTEE ON ANY TRANSACTION AT OUR DISCRETION. A NOTARIZED SIGNATURE FROM A NOTARY PUBLIC IS NOT A MEDALLION SIGNATURE GUARANTEE. [GRAPHIC OMITTED] INVESTMENT PROVIDERS THE TRUST CLASS SHARES AVAILABLE IN THIS PROSPECTUS MAY ALSO BE PURCHASED THROUGH CERTAIN INVESTMENT PROVIDERS SUCH AS BANKS, BROKERAGE FIRMS, WORKPLACE RETIREMENT PROGRAMS, AND FINANCIAL ADVISERS. THE FEES AND POLICIES OUTLINED IN THIS PROSPECTUS ARE SET BY THE FUNDS AND BY NEUBERGER BERMAN MANAGEMENT INC. HOWEVER, IF YOU USE AN INVESTMENT PROVIDER, MOST OF THE INFORMATION YOU WILL NEED FOR MANAGING YOUR INVESTMENT WILL COME FROM THAT PROVIDER. THIS INCLUDES INFORMATION ON HOW TO BUY AND SELL SHARES, INVESTOR SERVICES, AND ADDITIONAL POLICIES. IF YOU USE AN INVESTMENT PROVIDER, YOU MUST CONTACT THAT PROVIDER TO BUY OR SELL SHARES OF ANY OF THE FUNDS DESCRIBED IN THIS PROSPECTUS. MOST INVESTMENT PROVIDERS ALLOW YOU TO TAKE ADVANTAGE OF THE NEUBERGER BERMAN FUND EXCHANGE PROGRAM, WHICH IS DESIGNED FOR MOVING AN INVESTMENT FROM ONE FUND TO A COMPARABLE CLASS OF ANOTHER FUND IN THE FUND FAMILY THROUGH AN EXCHANGE OF SHARES (SEE"WHEN YOU EXCHANGE SHARES"). IN EXCHANGE FOR THE SERVICES IT OFFERS, YOUR INVESTMENT PROVIDER MAY CHARGE FEES, WHICH ARE IN ADDITION TO THOSE DESCRIBED IN THIS PROSPECTUS. [GRAPHIC OMITTED] ADDITIONAL PAYMENTS TO INVESTMENT PROVIDERS NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES MAY PAY ADDITIONAL COMPENSATION, OUT OF THEIR OWN RESOURCES AND NOT AS AN EXPENSE OF THE FUNDS, TO YOUR INVESTMENT PROVIDER OR OTHER FINANCIAL INTERMEDIARIES, INCLUDING AFFILIATES, IN CONNECTION WITH THE SALE, DISTRIBUTION, RETENTION AND/OR SERVICING OF FUND SHARES. IN SOME CASES, THESE PAYMENTS MAY CREATE AN INCENTIVE FOR YOUR INVESTMENT PROVIDER OR ITS EMPLOYEES TO RECOMMEND OR SELL SHARES OF THE FUNDS TO YOU. IF YOU HAVE PURCHASED SHARES OF A FUND THROUGH AN INVESTMENT PROVIDER, PLEASE SPEAK WITH YOUR INVESTMENT PROVIDER TO LEARN MORE ABOUT ANY PAYMENTS IT RECEIVES FROM NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES, AS WELL AS FEES AND/ OR COMMISSIONS THE INVESTMENT PROVIDER CHARGES. YOU SHOULD ALSO CONSULT DISCLOSURES MADE BY YOUR INVESTMENT PROVIDER AT THE TIME OF PURCHASE. ANY SUCH PAYMENTS WILL NOT CHANGE THE NET ASSET VALUE OR THE PRICE OF EACH FUND'S SHARES. FOR MORE INFORMATION, PLEASE SEE THE FUNDS' STATEMENT OF ADDITIONAL INFORMATION. [GRAPHIC OMITTED] DISTRIBUTION AND SHAREHOLDER SERVICING FEES EACH FUND HAS ADOPTED A PLAN PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940. UNDER THE PLAN, THE TRUST CLASS PAYS THE FUND'S DISTRIBUTOR, NEUBERGER BERMAN MANAGEMENT INC., 0.10% 30 Your Investment OF ITS AVERAGE NET ASSETS EVERY YEAR TO COMPENSATE FINANCIAL INTERMEDIARIES FOR PROVIDING DISTRIBUTION RELATED SERVICES TO THE FUND AND/OR ADMINISTRATIVE OR SHAREHOLDER SERVICES TO FUND SHAREHOLDERS. NEUBERGER BERMAN MANAGEMENT INC. MAY ALSO RETAIN PART OF THIS FEE AS COMPENSATION FOR PROVIDING THESE SERVICES. THESE FEES INCREASE THE COST OF INVESTMENT. OVER THE LONG TERM, THEY COULD RESULT IN HIGHER OVERALL COSTS THAN OTHER TYPES OF SALES CHARGES. [GRAPHIC OMITTED] INFORMATION REQUIRED FROM NEW ACCOUNTS TO HELP THE U.S. GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHEN YOU OPEN AN ACCOUNT, WE (WHICH MAY INCLUDE YOUR INVESTMENT PROVIDER ACTING ON OUR BEHALF) WILL REQUIRE YOUR NAME, ADDRESS, DATE OF BIRTH, AND SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER. WE MAY ALSO REQUIRE OTHER IDENTIFYING DOCUMENTS. IF WE CANNOT VERIFY THE INFORMATION YOU SUPPLY TO US OR IF IT IS INCOMPLETE, WE MAY BE REQUIRED TO RETURN YOUR FUNDS OR REDEEM YOUR ACCOUNT. 31 Your Investment If you are buying or selling shares directly, instructions are provided in the following charts. Investors buying or selling shares through an investment provider should contact it for instructions. BUYING SHARES Method Things to know Instructions ---------------- SENDING US A Your first investment must be at least $1,000 Fill out the application and enclose your CHECK check Additional investments can be as little as $100 If regular first-class mail, send to: We cannot accept cash, money orders, starter Neuberger Berman Funds checks, cashier's checks, travelers checks, or Boston Service Center other cash equivalents P.O. Box 8403 Boston, MA 02266-8403 You will be responsible for any losses or fees resulting from a bad check; if necessary, we may If express delivery, registered mail, or sell other shares belonging to you in order to certified mail, send to: cover these losses Neuberger Berman Funds c/o State Street Bank and Trust Company All checks must be made out to "Neuberger 30 Dan Road Berman Funds"; we cannot accept checks made out to you or other parties and signed over to us ---------------- WIRING MONEY All wires must be for at least $1,000 Before wiring any money, call 800-366-6264 for an order confirmation Have your financial institution send your wire to State Street Bank and Trust Company Include your name, the Fund name, your account number and other information as requested ---------------- EXCHANGING All exchanges must be for at least $1,000 Call 800-366-6264 to place your order FROM ANOTHER FUND Both accounts involved must be registered in the To place an order using FUNDfone(R), call 800- same name, address and tax ID number 335-9366 An exchange order cannot be cancelled or changed once it has been placed ---------------- BY TELEPHONE We do not accept phone orders for a first Call 800-366-6264 to notify us of your investment purchase Additional shares will be purchased when your Immediately follow up with a wire or order is accepted electronic transfer Not available on retirement accounts ---------------- SETTING UP All investments must be at least $100 Call 800-877-9700 for instructions SYSTEMATIC INVESTMENTS
32 Your Investment SELLING SHARES Method Things to know Instructions ---------------- SENDING US A Unless you instruct us otherwise, we will mail Send us a letter requesting us to sell shares LETTER your proceeds by check to the address of record, signed by all registered owners; include your payable to the registered owner(s) name, account number, the Fund name, the dollar amount or number of shares you want If you have designated a bank account on your to sell, and any other instructions application, you can request that we wire the proceeds to this account; if the total balance of If regular first-class mail, send to: all of your Neuberger Berman fund accounts is Neuberger Berman Funds less than $200,000, you will be charged an $8.00 Boston Service Center wire fee P.O. Box 8403 Boston, MA 02266-8403 You can also request that we send the proceeds to your designated bank account by electronic If express delivery, registered mail, or transfer (ACH) without a fee certified mail, send to: Neuberger Berman Funds You may need a Medallion signature guarantee c/o State Street Bank and Trust Company 30 Dan Road Please also supply us with your e-mail address Canton, MA 02021 and daytime telephone number when you write to us in the event we need to reach you ---------------- SENDING US A For amounts of up to $50,000 Write a request to sell shares as described FAX above Not available if you have changed the address on the account in the past 15 days Call 800-366-6264 to obtain the appropriate fax number ---------------- CALLING IN All phone orders to sell shares must be for at Call 800-366-6264 to place your order YOUR ORDER least $1,000 unless you are closing out an account Give your name, account number, the Fund name, the dollar amount or number of shares Not available if you have declined the phone you want to sell, and any other instructions option or are selling shares in certain retirement accounts (The only exception is for those To place an order using FUNDfone(R), call 800- retirement shareholders who are at least 59 1/2 or 335-9366 older and have their birthdates on file) Not available if you have changed the address on the account in the past 15 days ---------------- EXCHANGING All exchanges must be for at least $1,000 Call 800-366-6264 to place your order INTO ANOTHER FUND Both accounts must be registered in the same To place an order using FUNDfone(R), call 800- name, address and tax ID number 335-9366 An exchange order cannot be cancelled or changed once it has been placed ---------------- SETTING UP For accounts with at least $5,000 worth of shares Call 800-877-9700 for instructions SYSTEMATIC in them WITHDRAWALS Withdrawals must be at least $100 ---------------- REDEMPTION FEE International Large Cap Fund and Real Estate See "Redemption Fee" or call 800-366-6264 Fund charge a 2.00% and 1.00% redemption fee, for more information respectively, on shares redeemed or exchanged within 60 days or less of purchase
33 Your Investment [GRAPHIC OMITTED] RETIREMENT PLANS WE OFFER INVESTORS A NUMBER OF TAX-ADVANTAGED PLANS FOR RETIREMENT SAVING: TRADITIONAL IRAS ALLOW MONEY TO GROW TAX-DEFERRED UNTIL YOU TAKE IT OUT, USUALLY AT OR AFTER RETIREMENT. CONTRIBUTIONS ARE DEDUCTIBLE FOR SOME INVESTORS, BUT EVEN WHEN THEY ARE NOT, AN IRA CAN BE BENEFICIAL. ROTH IRAS OFFER TAX-FREE GROWTH LIKE A TRADITIONAL IRA, BUT INSTEAD OF TAX-DEDUCTIBLE CONTRIBUTIONS, THE WITHDRAWALS ARE TAX-FREE FOR INVESTORS WHO MEET CERTAIN REQUIREMENTS. ALSO AVAILABLE: SEP-IRA, SIMPLE, KEOGH, AND OTHER TYPES OF PLANS. COVERDELL EDUCATION SAVINGS ACCOUNTS (FORMERLY EDUCATION IRAS), THOUGH NOT FOR RETIREMENT SAVINGS, ALSO ARE AVAILABLE. CONSULT YOUR TAX PROFESSIONAL TO FIND OUT WHICH TYPES OF PLANS OR ACCOUNTS MAY BE BENEFICIAL FOR YOU, THEN CALL 800-366-6264 FOR INFORMATION ON ANY NEUBERGER BERMAN RETIREMENT PLAN OR ACCOUNT. [GRAPHIC OMITTED] INTERNET CONNECTION INVESTORS WITH INTERNET ACCESS CAN ENJOY MANY VALUABLE AND TIME-SAVING FEATURES BY VISITING US AT WWW.NB.COM. THE SITE OFFERS MORE COMPLETE INFORMATION ON OUR FUNDS, INCLUDING CURRENT PERFORMANCE DATA, PORTFOLIO MANAGER INTERVIEWS, TAX INFORMATION PLUS EDUCATIONAL ARTICLES, NEWS AND ANALYSIS. YOU CAN TAILOR THE SITE SO IT SERVES UP INFORMATION THAT IS MOST RELEVANT TO YOU. AS A NEUBERGER BERMAN FUNDS SHAREHOLDER WHO BOUGHT SHARES DIRECTLY FROM NEUBERGER BERMAN MANAGEMENT, INC., YOU CAN USE THE WEB SITE TO ACCESS ACCOUNT INFORMATION AND EVEN MAKE SECURE TRANSACTIONS -- 24 HOURS A DAY. YOU CAN ALSO RECEIVE FUND DOCUMENTS SUCH AS PROSPECTUSES AND FINANCIAL REPORTS AS WELL AS YOUR STATEMENTS ELECTRONICALLY VIA NB DELIVERE(R). IF YOU WANT FURTHER INFORMATION, PLEASE CALL 800-877-9700. -- REDEMPTION FEE If you sell your shares of International Large Cap Fund or Real Estate Fund or exchange them for shares of another fund within 60 days of your purchase, you will be charged a fee of 2.00% in the case of International Large Cap Fund, and a fee of 1.00% in the case of Real Estate Fund, on the current net asset value of the shares sold or exchanged. The fee is paid to the respective Fund to offset costs associated with short-term trading, such as portfolio transaction and administrative costs. The Funds use a "first-in, first-out" method to determine how long you have held your Fund shares. This means that if you bought shares on different days, the shares purchased first will be considered redeemed first for purposes of determining whether the redemption fee will be charged. We may not impose the redemption fee on a redemption or an exchange of: -- shares acquired by reinvestment of dividends or other distributions of the Funds; -- shares held in an account of certain retirement plans; -- shares purchased through other investment providers, if the provider imposes a similar type of fee or otherwise has a policy in place to deter short-term trading; or -- shares held in certain rebalancing and asset allocation programs. 34 Your Investment You should contact your investment provider to determine whether it imposes a redemption fee or otherwise has a policy in place to deter short-term trading. From time to time, as circumstances change, we may modify or eliminate certain exemption categories. -- MARKET TIMING POLICY Frequent purchases, exchanges and redemptions of Fund shares ("market-timing activities") can interfere with Fund management and affect costs and performance for other shareholders. To discourage market-timing activities by Fund shareholders, the Board of Trustees has adopted market-timing policies and has approved the procedures of the principal underwriter for implementing those policies. As described earlier in this prospectus, pursuant to such policies, the exchange privilege can be withdrawn from any investor that is believed to be "timing the market" or is otherwise making exchanges judged to be excessive. In furtherance of these policies, under certain circumstances, the Funds reserve the right to reject any exchange or purchase order; change, suspend or revoke the exchange privilege; or suspend the telephone order privilege. To further discourage excessive trading, if a shareholder sells shares of International Large Cap Fund or Real Estate Fund or exchanges them for shares of another fund within 60 days of purchase, the shareholder will be charged a fee of 2.00% (in the case of International Large Cap Fund) or 1.00% (in the case of Real Estate Fund) on the current net asset value of the shares sold or exchanged. The fee is paid to the respective Funds to offset costs associated with short-term trading, such as portfolio transaction and administrative costs, and is imposed uniformly on all applicable shareholders, with only a few exceptions. The Funds may not impose the fee on a redemption or exchange of: shares acquired by reinvestment of dividends or other distributions of the Funds; shares held in an account of certain retirement plans; shares purchased through other investment providers, if the provider imposes a similar type of fee or otherwise has a policy in place to deter short-term trading; or shares held in certain rebalancing and asset allocation programs. Neuberger Berman Management Inc. applies the Funds' policies and procedures with respect to market-timing activities by monitoring trading activity in the Funds, identifying excessive trading patterns, and warning or prohibiting shareholders who trade excessively from making further purchases or exchanges of Fund shares. These policies and procedures are applied consistently to all shareholders. Although the Funds make an effort to monitor for market-timing activities, the ability of the Funds to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and other approved intermediaries may be limited in those instances in which the investment intermediary maintains the underlying shareholder accounts. Accordingly, there can be no assurance that the Funds will be able to eliminate all market-timing activities. -- PORTFOLIO HOLDINGS POLICY A description of the Funds' policies and procedures with respect to the disclosure of the Funds' portfolio holdings is available in the Funds' Statement of Additional Information. The complete portfolio holdings for the Funds is available at http://www.nb.com/ind/mutual_funds/prospectuses/ 15-30 days after each month-end. 35 Your Investment The Funds' complete portfolio holdings will remain available at www.nb.com until the subsequent month-end holdings have been posted. Complete holdings for the Funds will also be available in reports on Form N-Q or Form N-CSR filed with the SEC. Historical portfolio holdings are available upon request. -- FUND STRUCTURE The Funds use a "multiple class" structure. Each Neuberger Berman fund offers one or more classes of shares that have identical investment programs, but different arrangements for distribution and shareholder servicing and, consequently, different expenses. This prospectus relates solely to the Trust Class shares of the Funds. 36 Your Investment [GRAPHIC OMITTED] NEUBERGER BERMAN EQUITY FUNDS TRUST CLASS SHARES No load or sales charges If you would like further details on these Funds you can request a free copy of the following documents: SHAREHOLDER REPORTS -- The shareholder reports offer information about each Fund's recent performance, including: -- a discussion by the Portfolio Managers about strategies and market conditions that significantly affect the Fund's performance -- Fund performance data and financial statements -- portfolio holdings STATEMENT OF ADDITIONAL INFORMATION (SAI) -- The SAI contains more comprehensive information on these Funds, including: -- various types of securities and practices, and their risks -- investment limitations and additional policies -- information about each Fund's management and business structure The SAI is hereby incorporated by reference into this prospectus, making it legally part of the prospectus. Investment manager: NEUBERGER BERMAN MANAGEMENT INC. Sub-adviser: NEUBERGER BERMAN, LLC [GRAPHIC OMITTED] OBTAINING INFORMATION You can obtain a shareholder report, SAI, and other information from your investment provider, or from: NEUBERGER BERMAN MANAGEMENT INC. 605 Third Avenue 2nd Floor New York, NY 10158-0180 800-877-9700 212-476-8800 Broker/Dealer and Institutional Services: 800-366-6264 Web site: www.nb.com Email: fundinquiries@nb.com You can also request copies of this information from the SEC for the cost of a duplicating fee by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, 100 F Street, N.E., Washington, DC 20549-9303. They are also available from the EDGAR Database on the SEC's website at www.sec.gov. You may also view and copy the documents at the SEC's Public Reference Room in Washington. Call 202-551-8090 for information about the operation of the Public Reference Room. [GRAPHIC OMITTED] G0492 12/06 DSTO 47624 SEC file number: 811-582 [GRAPHIC OMITTED] 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.nb.com [GRAPHIC OMITTED] PROSPECTUS - DECEMBER 20, 2006 These securities, like the securities of all mutual funds, have not been approved or disapproved by the Securities and Exchange Commission, and the Securities and Exchange Commission has not determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. NEUBERGER BERMAN EQUITY FUNDS TRUST CLASS SHARES Focus Fund Genesis Fund Guardian Fund International Fund Manhattan Fund Millennium Fund Partners Fund Regency Fund Socially Responsive Fund Contents -------------------------------------------------------------------------------- EQUITY FUNDS Focus Fund...................................................................2 Genesis Fund.................................................................7 Guardian Fund...............................................................13 International Fund..........................................................19 Manhattan Fund..............................................................25 Millennium Fund.............................................................30 Partners Fund...............................................................36 Regency Fund................................................................41 Socially Responsive Fund....................................................47 YOUR INVESTMENT Maintaining Your Account....................................................54 Share Prices................................................................56 Distributions and Taxes.....................................................57 Redemption Fee..............................................................58 Market Timing Policy........................................................59 Portfolio Holdings Policy...................................................60 Fund Structure..............................................................60 THESE FUNDS: -- are designed for investors with long-term goals in mind -- offer you the opportunity to participate in financial markets through professionally managed portfolios -- also offer the opportunity to diversify your portfolio with Funds that invest using a value or a growth approach, or a combination of the two -- carry certain risks, including the risk that you could lose money if Fund shares, when you sell them, are worth less than what you originally paid. This prospectus discusses principal risks of investing in Fund shares. These and other risks are discussed in more detail in the Statement of Additional Information (see back cover) -- are mutual funds, not bank deposits, and are not guaranteed or insured by the FDIC or any other government agency -- normally invest at least 80% of net assets in equity securities The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman, LLC. "Neuberger Berman Management Inc." and the individual Fund names in this prospectus are either service marks or registered service marks of Neuberger Berman Management Inc.(c) 2006 Neuberger Berman Management Inc. All rights reserved. Neuberger Berman Ticker Symbol: NBFCX FOCUS FUND -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of companies of any size that fall within the following sectors: -- autos and housing -- consumer goods and services -- defense and aerospace -- energy -- financial services -- health care -- heavy industry -- machinery and equipment -- media and entertainment -- retailing -- technology -- transportation -- utilities At any given time, the Fund intends to place most of its assets in those sectors that the Portfolio Manager believes are undervalued. The Fund generally invests at least 90% of its net assets in no more than six sectors and may invest 50% or more of its assets in any one sector. The Portfolio Manager looks for undervalued companies. Factors in identifying these firms may include above-average returns, an established market niche, and sound future business prospects. This approach is designed to let the Fund benefit from potential increases in stock prices, while limiting the risks typically associated with investing in a small number of sectors. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] INDUSTRY SECTORS THE ECONOMY IS DIVIDED INTO SECTORS, EACH MADE UP OF RELATED INDUSTRIES. BY FOCUSING ON SEVERAL SECTORS AT A TIME, THE FUND CAN ADD A MEASURE OF DIVERSIFICATION AND STILL PURSUE THE PERFORMANCE POTENTIAL OF INDIVIDUAL SECTORS. TO THE EXTENT THE FUND INVESTS MORE HEAVILY IN ONE SECTOR, IT THEREBY PRESENTS A MORE CONCENTRATED RISK. A SECTOR MAY HAVE ABOVE AVERAGE PERFORMANCE DURING PARTICULAR PERIODS, BUT INDIVIDUAL SECTORS ALSO TEND TO MOVE UP AND DOWN MORE THAN THE BROADER MARKET. ALTHOUGH THE FUND DOES NOT INVEST MORE THAN 25% OF TOTAL ASSETS IN ANY ONE INDUSTRY, THE SEVERAL INDUSTRIES THAT COMPRISE A SECTOR MAY ALL REACT IN THE SAME WAY TO ECONOMIC, POLITICAL AND REGULATORY EVENTS. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 2 Focus Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Because the Fund typically focuses on a few sectors at a time, its performance is likely to be disproportionately affected by the factors influencing those sectors. To the extent the Fund invests more heavily in one sector, the risks of that sector are magnified. (See the Appendix for a discussion of sector-specific risks.) To the extent that the Fund emphasizes a particular market capitalization, it takes on the associated risks. Mid- and small-cap stocks tend to be more volatile than large-cap stocks. At any given time, any one of these market capitalizations may be out of favor with investors. If the Fund emphasizes that market capitalization, it could perform worse than certain other funds. The Fund is non-diversified. This means that the percentage of the Fund's assets invested in any single issuer is not limited by the Investment Company Act of 1940. Investing a higher percentage of its assets in any one issuer would increase the Fund's risk of loss, because the value of its shares would be more susceptible to adverse events affecting that issuer. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 3 Focus Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* ------------------------------------------------------- [GRAPHIC OMITTED] ------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 ------------------------------------------------------------------------------- 16.29 24.15 13.17 25.89 12.18 -6.92 -36.48 64.58 4.82 -0.20 BEST QUARTER: Q4 '98, 34.52% WORST QUARTER: Q3 '02, -31.93% Year-to-date performance as of 9/30/2006: 7.64% ------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* ------------------------------------------------------------------------------- 1 Year 5 Years 10 Years ------------------------------------------------------------------------------- FOCUS FUND Return Before Taxes -0.20 0.35 8.91 Return After Taxes on Distributions -2.26 -0.34 8.18 Return After Taxes on Distributions and Sale of Fund Shares 2.68 0.22 7.72 Russell 1000 Value Index 7.05 5.28 10.94 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 1000 Value Index is an unmanaged index of U.S. mid- and large-cap value stocks. The S&P 500 Index is an unmanaged index of U.S. stocks. ------------------------------------------------------------------------------- * Through 12/15/2000, Focus Fund Trust Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the period from 8/1993 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Focus Fund Trust Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING MAINLY IN LARGE-CAP STOCKS PRIOR TO SEPTEMBER 1998, ITS PERFORMANCE DURING THAT TIME MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 4 Focus Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE ---------------------------------------------------------------- SHAREHOLDER None FEES ---------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.90 Distribution (12b-1) fees 0.10 Other expenses 0.07 ----------------------------------------------------------------- Total annual operating expenses 1.07 ----------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. ----------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ----------------------------------------------------------------- Expenses $109 $340 $590 $1,306 ----------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.89% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER ROBERT B. CORMAN is a Vice President of Neuberger Berman Management Inc. and Managing Director of Neuberger Berman, LLC. He has been the Portfolio Manager of the Fund since October 2005. Previously, he co-managed the Fund's assets from November 2003 to September 2005. He held senior positions in portfolio management at four other firms since 1981. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 5 Focus Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
--------------------------------------------------------------------------------------------------------------------- Year Ended August 31, --------------------------------------------------------------------------------------------------------------------- 2002 2003 2004 2005 2006 --------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 26.66 16.98 23.75 23.51 27.36 PLUS: Income from investment operations Net investment income (loss) (0.04) 0.01 0.01 0.10 0.04 Net gains (losses) - realized and unrealized (7.86) 6.76 (0.24) 3.76 1.65 Subtotal: income from investment operations (7.90) 6.77 (0.23) 3.86 1.69 MINUS: Distributions to shareholders Income dividends - - 0.01 0.01 0.16 Capital gain distributions 1.78 - - - 3.70 Subtotal: distributions to shareholders 1.78 - 0.01 0.01 3.86 EQUALS: Share price (NAV) at end of year 16.98 23.75 23.51 27.36 25.19 --------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.04 1.06 1.02 1.04 1.06 Gross expenses(1) - - 1.02 1.04 1.06 Expenses(2) 1.04 1.06 1.03 1.05 1.06 Net investment income (loss) - actual (0.15) 0.04 0.04 0.38 0.14 --------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (31.74) 39.87 (0.98)(3) 16.44(3) 6.81(3) Net assets at end of year (in millions of dollars) 249.3 333.0 267.3 189.4 112.8 Portfolio turnover rate(%) 25 24 27 19 41 ---------------------------------------------------------------------------------------------------------------------
The figures above have been audited by Ernst & YOUNG LLP, the Fund's independent Registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 6 Focus Fund Neuberger Berman GENESIS FUND Ticker Symbol: NBGEX -------------------------------------------------------------------------------- This Fund is closed to new investors. [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of small-capitalization companies, which it defines as those with a total market value of no more than $1.5 billion at the time the Fund first invests in them. The Fund may continue to hold or add to a position in a stock after the issuer has grown beyond $1.5 billion. The Fund seeks to reduce risk by diversifying among many companies and industries. The Portfolio Managers look for undervalued companies whose current product lines and balance sheets are strong. Factors in identifying these firms may include: -- above-average returns -- an established market niche -- circumstances that would make it difficult for new competitors to enter the market -- the ability to finance their own growth -- sound future business prospects. This approach is designed to let the Fund benefit from potential increases in stock prices, while limiting the risks typically associated with small-cap stocks. At times, the Portfolio Managers may emphasize certain sectors that they believe will benefit from market or economic trends. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] SMALL-CAP STOCKS HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE LAST 40 YEARS, SMALL-CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 7 Genesis Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Stock prices of many smaller companies are based on future expectations. The Portfolio Managers tend to focus on companies whose financial strength is largely based on existing business lines rather than projected growth. While this can help reduce risk, the Fund is still subject to many of the risks of small-cap investing. The stocks of smaller companies in which the Fund invests are often more volatile and less liquid than the stocks of larger companies, and these companies: o may have a shorter history of operations than larger companies; o may not have as great an ability to raise additional capital; o may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also: o underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor; o be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund may at times invest a portion of its assets in mid-cap stocks. For a discussion of the risks associated with mid-cap stocks, see the Appendix. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 8 Genesis Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* ------------------------------------------------------------------------------- [GRAPHIC OMITTED] 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 ------------------------------------------------------------------------------- 29.90 34.86 -6.98 4.01 32.49 12.08 -2.99 31.65 18.68 16.30 BEST QUARTER: Q3 '97, 20.18% WORST QUARTER: Q3 '98, -16.44% Year-to-date performance as of 9/30/2006: 0.87% ------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* ------------------------------------------------------------------------------- 1 Year 5 Years 10 Years ------------------------------------------------------------------------------- GENESIS FUND Return Before Taxes 16.30 14.59 16.07 Return After Taxes on Distributions 15.92 14.23 15.59 Return After Taxes on Distributions and Sale of Fund Shares 11.11 12.71 14.34 Russell 2000 Index 4.55 8.22 9.26 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The Russell 2000 Index is an unmanaged index of U.S. small- cap stocks. ------------------------------------------------------------------------------- * Through 12/15/2000, Genesis Fund Trust Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 8/1993 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Genesis Fund Trust Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. 9 Genesis Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE SHAREHOLDER FEES None ------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 1.06 Distribution (12b-1) fees None Other expenses 0.04 ------------------------------------------------------------------- Total annual operating expenses 1.10 ------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. ------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------- Expenses $112 $350 $606 $1,340 ------------------------------------------------------------------- * THE FIGURES IN THE TABLE ARE BASED ON LAST YEAR'S EXPENSES. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 1.06% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGERS JUDITH M. VALE AND ROBERT W. D'ALELIO are Vice Presidents of Neuberger Berman Management Inc. and Managing Directors of Neuberger Berman, LLC. Vale and D'Alelio have been senior members of the Small Cap Group since 1992 and 1996, respectively. Ms. Vale has co-managed the Fund's assets since 1994. Mr. D'Alelio joined the firm in 1996 and has co-managed the Fund's assets since 1997. MICHAEL L. BOWYER AND BRETT S. REINER are Vice Presidents of Neuberger Berman Management Inc. and Managing Directors of Neuberger Berman, LLC. Bowyer and Reiner have been members of the Small Cap Group since 2001 and 2003, respectively. Mr. Bowyer joined the firm in 1996 and Mr. Reiner in 2000. They are the Associate Portfolio Managers of the Fund. 10 Genesis Fund Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 11 Genesis Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
-------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 -------------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 28.33 28.19 33.54 38.66 48.66 PLUS: Income from investment operations Net investment loss (0.02) (0.10) (0.16) (0.13) (0.11) Net gains (losses) - realized and unrealized 0.72 5.55 5.30 11.39 2.44 Subtotal: income from investment operations 0.70 5.45 5.14 11.26 2.33 MINUS: Distributions to shareholders Capital gain distributions 0.84 0.10 0.02 1.26 1.10 EQUALS: Share price (NAV) at end of year 28.19 33.54 38.66 48.66 49.89 -------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 1.13 1.12 1.10 1.09 1.09 Gross expenses(1) - - 1.10 1.10 1.09 Expenses(2) 1.13 1.12 1.10 1.10 1.09 Net investment loss - actual (0.07) (0.35) (0.42) (0.31) (0.22) -------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) 2.49 19.40 15.32(3) 29.63(3) 4.82(3) Net assets at end of year (in millions of dollars) 2,237.3 2,931.7 4,086.3 6,348.2 5,970.9 Portfolio turnover rate (%) 19 17 23 11 19 --------------------------------------------------------------------------------------------------------------------------------
The figures above have been audited BY Ernst & YOUNG LLP, THE Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 12 Genesis Fund Neuberger Berman GUARDIAN FUND Ticker Symbol: NBGTX -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL; CURRENT INCOME IS A SECONDARY GOAL. To pursue these goals, the Fund invests mainly in common stocks of mid- to large-capitalization companies. The Fund seeks to reduce risk by investing across many different industries. The Portfolio Managers employ a research driven and valuation sensitive approach to stock selection. They seek to identify stocks in well-positioned businesses that they believe are undervalued in the market. They look for solid balance sheets, strong management teams with a track record of success, good cash flow, the prospect for above average earnings growth, and other valuation-related factors. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, when the company's business fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID- AND LARGE-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY PERFORMED MORE LIKE SMALL-CAPS THAN LIKE LARGE-CAPS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER ATTRACTIVE LONG-TERM RETURNS. LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. COMPARED TO MID-CAP COMPANIES, THEY MAY BE LESS RESPONSIVE TO CHANGE, BUT THEIR RETURNS HAVE SOMETIMES LED THOSE OF MID-CAP COMPANIES, OFTEN WITH LOWER VOLATILITY. [GRAPHIC OMITTED] VALUATION SENSITIVE INVESTING IN ADDITION TO TRADITIONAL VALUE INVESTING - I.E., LOOKING FOR VALUE AMONG COMPANIES WHOSE STOCK PRICES ARE BELOW THEIR HISTORIC AVERAGE, BASED ON EARNINGS, CASH FLOW, OR OTHER FINANCIAL MEASURES - WE MAY ALSO BUY A COMPANY'S SHARES IF THEY LOOK MORE FULLY PRICED BASED ON WALL STREET CONSENSUS ESTIMATES OF EARNINGS, BUT STILL INEXPENSIVE RELATIVE TO OUR ESTIMATES. WE LOOK FOR THESE COMPANIES TO RISE IN PRICE AS THEY OUTPERFORM WALL STREET'S EXPECTATIONS, BECAUSE SOME ASPECTS OF THE BUSINESS HAS NOT BEEN FULLY APPRECIATED OR APPROPRIATELY PRICED BY OTHER INVESTORS. 13 Guardian Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. To the extent that the Fund emphasizes mid- or large-cap stocks, it takes on the associated risks. Mid-cap stocks tend to be more volatile than large-cap stocks and are usually more sensitive to economic, political, regulatory and market factors. At any given time, one or both groups of stocks may be out of favor with investors. With a valuation sensitive approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 14 Guardian Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- [GRAPHIC OMITTED] 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 17.74 17.83 2.36 8.36 -1.97 -1.93 -25.91 35.01 15.93 8.26 BEST QUARTER: Q4 '98, 23.16% WORST QUARTER: Q3 '98, -26.19% Year-to-date performance as of 9/30/2006: 5.84% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS AS OF 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- GUARDIAN FUND Return Before Taxes 8.26 4.25 6.39 Return After Taxes on Distributions 8.17 4.09 5.04 Return After Taxes on Distributions and Sale of Fund Shares 5.49 3.56 5.01 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The S&P 500 Index is an unmanaged index of U.S. stocks. -------------------------------------------------------------------------------- * Through 12/15/2000, Guardian Fund Trust Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 8/1993 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses aS Guardian Fund Trust Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING MAINLY IN LARGE-CAP STOCKS PRIOR TO DECEMBER 2002, ITS PERFORMANCE DURING THOSE TIMES MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 15 Guardian Fund [GRAPHIC OMITTED] INVESTOR EXPENSES The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.89 Distribution (12b-1) fees 0.10 Other expenses 0.06 -------------------------------------------------------------------------------- Total annual operating expenses 1.05 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $107 $334 $579 $1,283 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.89% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 16 Guardian Fund PORTFOLIO MANAGERS ARTHUR MORETTI is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. Mr. Moretti joined each firm in 2001 and has managed the Fund since December 2002. He was a portfolio manager and fund analyst at two other firms since 1991. INGRID S. DYOTT is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. She has been an Associate Manager of the Fund since December 2003 and has been a Portfolio Manager at Neuberger Berman since 1997. SAJJAD S. LADIWALA is a Vice President of Neuberger Berman Management Inc. and Neuberger Berman, LLC. He has been an Associate Manager of the Fund since December 2003. He held various positions as a financial analyst at two other firms since 1994. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 17 Guardian Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
-------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 -------------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 11.27 9.10 10.18 11.39 13.79 PLUS: Income from investment operations Net investment income 0.08 0.03 0.02 0.08 0.04 Net gains (losses) - realized and unrealized (2.18) 1.10 1.21 2.35 0.91 Subtotal: income from investment operations (2.10) 1.13 1.23 2.43 0.95 MINUS: Distributions to shareholders Income dividends 0.07 0.04 0.02 0.03 0.08 Tax return of capital - 0.01 - - - Subtotal: distributions to shareholders 0.07 0.05 0.02 0.03 0.08 EQUALS: Share price (NAV) at end of year 9.10 10.18 11.39 13.79 14.66 -------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income - as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 1.02 1.05 1.04 1.04 1.04 Gross expenses(1) - - 1.04 1.05 1.04 Expenses(2) 1.02 1.05 1.04 1.05 1.05 Net investment income - actual 0.71 0.33 0.21 0.64 0.31 -------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (18.72) 12.59 12.09(3) 21.33(3) 6.90(3) Net assets at end of year (in millions of dollars) 335.3 288.5 282.7 180.0 160.5 Portfolio turnover rate (%) 85 113 25 20 34 --------------------------------------------------------------------------------------------------------------------------------
The figures above have been audited By Ernst & Young LLP, THE Fund's Independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. Had not waived a portion of investment management fees. 18 Guardian Fund Neuberger Berman INTERNATIONAL FUND Ticker Symbol: NBITX -------------------------------------------------------------------------------- This Fund is closed to new investors. [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN COMMON STOCKS OF FOREIGN COMPANIES. To pursue this goal, the Fund invests mainly in foreign companies of any size, including companies in developed and emerging industrialized markets. The Fund defines a foreign company as one that is organized outside of the United States and conducts the majority of its business abroad. The Fund seeks to reduce risk by diversifying among many industries. Although it has the flexibility to invest a significant portion of its assets in one country or region, it generally intends to remain well-diversified across countries and geographical regions. In picking stocks, the Portfolio Managers look for well-managed and profitable companies that show growth potential and whose stock prices are undervalued. Factors in identifying these firms may include strong fundamentals, such as attractive cash flows and balance sheets, as well as prices that are reasonable in light of projected returns. The Portfolio Managers also consider the outlooks for various countries and regions around the world, examining economic, market, social, and political conditions. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] FOREIGN STOCKS THERE ARE MANY PROMISING OPPORTUNITIES FOR INVESTMENT OUTSIDE THE UNITED STATES. FOREIGN MARKETS OFTEN RESPOND TO DIFFERENT FACTORS AND THEREFORE TEND TO FOLLOW CYCLES THAT ARE DIFFERENT FROM EACH OTHER. FOR THIS REASON, MANY INVESTORS PUT A PORTION OF THEIR PORTFOLIOS IN FOREIGN INVESTMENTS AS A WAY OF GAINING FURTHER DIVERSIFICATION. WHILE FOREIGN STOCK MARKETS CAN BE RISKY, INVESTORS GAIN AN OPPORTUNITY TO ADD POTENTIAL LONG-TERM GROWTH. [GRAPHIC OMITTED] GROWTH AND VALUE INVESTING THE FUND USES A BLEND OF GROWTH AND VALUE STRATEGIES. VALUE INVESTORS SEEK STOCKS TRADING AT BELOW MARKET AVERAGE PRICES BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES BEFORE OTHER INVESTORS DISCOVER THEIR WORTH. GROWTH INVESTORS SEEK COMPANIES THAT ARE ALREADY SUCCESSFUL BUT MAY NOT HAVE REACHED THEIR FULL POTENTIAL. 19 International Fund [GRAPHIC OMITTED] MAIN RISKS Most of the Fund's performance depends on what happens in international stock markets. The behavior of these markets is unpredictable, particularly in the short term. Although foreign stocks offer added diversification potential, world markets may all react in similar fashion to important economic or political developments. The value of your investment will rise and fall, sometimes sharply, and you could lose money. Foreign stocks are subject to more risks than comparable U.S. stocks. This is in part because some foreign markets are less developed and foreign governments, economies, laws (including tax laws), and securities firms may be less stable. There is also a higher chance that key information will be unavailable, incomplete, or inaccurate. As a result, foreign stocks can fluctuate more widely in price than comparable U.S. stocks, and they may also be less liquid. These risks are generally greater in emerging markets. Over a given period of time, foreign stocks may underperform U.S. stocks -- sometimes for years. The Fund could also underperform if the Portfolio Managers invest in countries or regions whose economic performance falls short. Changes in currency exchange rates bring an added dimension of risk. Currency fluctuations could erase investment gains or add to investment losses. Mid- and small-cap stocks tend to be less liquid and more volatile than large-cap stocks. Any type of stock may underperform any other during a given period. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. THE FUND MAY USE DERIVATIVES FOR HEDGING AND FOR SPECULATION. HEDGING COULD REDUCE THE FUND'S LOSSES FROM CURRENCY FLUCTUATIONS, BUT COULD ALSO REDUCE ITS GAINS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. A DERIVATIVE INSTRUMENT, WHETHER USED FOR HEDGING OR SPECULATION, COULD FAIL TO PERFORM AS EXPECTED, CAUSING A LOSS FOR THE FUND. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL, OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES BUT MAY MEAN LOST OPPORTUNITIES. 20 International Fund [GRAPHIC OMITTED] PERFORMANCE The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. [GRAPHIC OMITTED] YEAR-BY-YEAR % RETURNS as of 12/31 each year* ------------------------------------------------------------------------------ 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 ------------------------------------------------------------------------------ 23.69 11.21 2.70 66.03 -23.23 -17.87 -11.58 43.48 29.97 23.87 BEST QUARTER: Q4 '99, 42.53% WORST QUARTER: Q3 '98, -25.92% Year-to-date performance as of 9/30/2006: 11.25% ------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* ----------------------------------------------------------------------------- 1 Year 5 Years 10 Years ----------------------------------------------------------------------------- INTERNATIONAL FUND Return Before Taxes 23.87 10.90 11.69 Return After Taxes on Distributions 23.07 10.80 11.11 Return After Taxes on Distributions and Sale of Fund Shares 16.28 9.57 10.24 MSCI EAFE Index 14.02 4.94 6.18 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTION: The MSCI EAFE Index is an unmanaged index of stocks from Europe, Australasia, and the Far East. ----------------------------------------------------------------------------- * Through 12/15/2000, International Fund Trust Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 6/1998 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as International Fund Trust Class. Performance from the beginning of the measurement period above to 6/1998 is that of International Fund Investor Class. Because Investor Class has moderately lower expenses, its performance typically would have been slightly better than that of the Trust Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN THE FUND AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COST OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING PRIMARILY IN MID- AND LARGE-CAP STOCKS PRIOR TO SEPTEMBER 1998, ITS PERFORMANCE DURING THAT TIME MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 21 International Fund [GRAPHIC OMITTED] INVESTOR EXPENSES The Fund does not charge you any fees for buying, selling, or exchanging shares held for more than 60 days, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES (% of amount redeemed or exchanged) None -------------------------------------------------------------------------------- These are deducted directly from your investment. Redemption Fee* 2.00 Exchange Fee* 2.00 -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)** These are deducted from Fund assets, so you pay them indirectly. Management fees 1.19 Distribution (12b-1) fees None Other expenses 0.14 -------------------------------------------------------------------------------- Total annual operating expenses 1.33 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. ----------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ----------------------------------------------------------------------------- Expenses $135 $421 $729 $1,601 ----------------------------------------------------------------------------- * These fees are charged on investments held 60 days or less, whether Fund shares are redeemed or exchanged for shares of another fund. See "Redemption Fee" for more information. **The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 1.19% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 22 International Fund PORTFOLIO MANAGERS BENJAMIN SEGAL is a Vice President of Neuberger Berman Management Inc. and Managing Director of Neuberger Berman, LLC. Mr. Segal joined the firm in 1999 and has been the Portfolio Manager since November 2003. Prior to that, he was a co-Portfolio Manager since 2000. He was an assistant portfolio manager at another firm from 1997 to 1998. Prior to 1997, he held positions in international finance and consulting. MILU E. KOMER is a Vice President of Neuberger Berman Management Inc. and of Neuberger Berman, LLC. Ms. Komer joined the firm in 2001 and is the Associate Portfolio Manager of the Fund. Prior to that, she held associate positions at other investment firms from 1998 to 2001. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers' ownership of Fund shares. 23 International Fund FINANCIAL HIGHLIGHTS [GRAPHIC OMITTED]
------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 12.56 11.36 12.60 16.80 22.93 PLUS: Income from investment operations Net investment income (loss) (0.01) 0.09 0.03 0.14 0.31 Net gains (losses) - realized and unrealized (1.26) 1.04 4.27 6.04 4.16 Subtotal: income from investment operations (1.27) 1.13 4.30 6.18 4.47 Redemption fees 0.11 0.11 0.01 0.01 0.01 MINUS: Distributions to shareholders Income dividends - - 0.11 0.06 0.08 Capital gain distributions 0.04 - - - 0.81 Subtotal: distributions to shareholders 0.04 - 0.11 0.06 0.89 EQUALS: Share price (NAV) at end of year 11.36 12.60 16.80 22.93 26.52 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense reimbursement/repayment and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.99 2.00 1.93 1.48 1.32 Gross expenses(1) 3.22 3.07 1.93 1.50 1.32 Expenses(2) 1.99 2.00 1.93 1.50 1.33 Net investment income (loss) - actual (0.09) 0.81 0.17 0.70 1.21 ------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return(%)(3) (9.25) 10.92 34.31 36.89 20.02 Net assets at end of year (in millions of dollars) 0.9 2.2 16.7 233.2 870.9 Portfolio turnover rate (%) 63 90 72 38 48 ------------------------------------------------------------------------------------------------------------------------------
The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement/repayment and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower/higher if Neuberger Berman Management Inc. Had not reimbursed/recouped certain expenses and/or waived a portion of investment management fees. 24 International Fund Neuberger Berman MANHATTAN FUND Ticker Symbol: NBMTX -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of mid-capitalization companies, which it defines as those with a total market capitalization within the market capitalization range of the Russell Midcap Index. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Manager employs a disciplined investment strategy when selecting growth stocks. Using fundamental research and quantitative analysis, he looks for fast-growing companies with above average sales and competitive returns on equity relative to their peers. In doing so, the Portfolio Manager analyzes such factors as: -- financial condition (such as debt to equity ratio) -- market share and competitive leadership of the company's products -- earnings growth relative to competitors -- market valuation in comparison to a stock's own historical norms and the stocks of other mid-cap companies. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY SHOWN RISK/RETURN CHARACTERISTICS THAT ARE IN BETWEEN THOSE OF SMALL- AND LARGE-CAP STOCKS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER COMPARATIVELY ATTRACTIVE LONG-TERM RETURNS. MID-CAPS ARE LESS WIDELY FOLLOWED IN THE MARKET THAN LARGE-CAPS, WHICH CAN MAKE IT COMPARATIVELY EASIER TO FIND ATTRACTIVE STOCKS THAT ARE NOT OVERPRICED. [GRAPHIC OMITTED] GROWTH INVESTING FOR GROWTH INVESTORS, THE AIM IS TO INVEST IN COMPANIES THAT ARE ALREADY SUCCESSFUL BUT COULD BE EVEN MORE SO. OFTEN, THESE STOCKS ARE IN EMERGING OR RAPIDLY GROWING INDUSTRIES. ACCORDINGLY, THE FUND AT TIMES MAY INVEST A GREATER PORTION OF ITS ASSETS IN PARTICULAR INDUSTRIES OR SECTORS THAN OTHER FUNDS DO. WHILE MOST GROWTH STOCKS ARE KNOWN TO INVESTORS, THEY MAY NOT YET HAVE REACHED THEIR FULL POTENTIAL. THE GROWTH INVESTOR LOOKS FOR INDICATIONS OF CONTINUED SUCCESS. 25 Manhattan Fund [GRAPHIC OMITTED] MAIN RISKS Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. By focusing on mid-cap stocks, the Fund is subject to their risks, including the risk its holdings may: o fluctuate more widely in price than the market as a whole o underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when mid-cap stocks are out of favor. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 26 Manhattan Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- [GRAPHIC OMITTED] 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 9.74 29.33 15.91 49.57 -11.40 -29.68 -31.23 30.55 16.03 13.07 BEST QUARTER: Q4 '99, 48.88% WORST QUARTER: Q3 '01, -30.10% Year-to-date performance as of 9/30/2006: 5.53% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* ----------------------------------------------------------------------------- 1 Year 5 Years 10 Years ----------------------------------------------------------------------------- MANHATTAN FUND Return Before Taxes 13.07 -3.70 6.09 Return After Taxes on Distributions 13.07 -3.72 4.70 Return After Taxes on Distributions and Sale of Fund Shares 8.50 -3.11 4.85 Russell Midcap Growth Index 12.10 1.38 9.27 Rusell Midcap Index 12.65 8.45 12.49 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell Midcap Growth Index is an unmanaged index of U.S. mid-cap growth stocks. The Russell Midcap Index is an unmanaged index of U.S. mid- cap stocks. -------------------------------------------------------------------------------- * Through 12/15/2000, Manhattan Fund Trust Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 8/1993 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Manhattan Fund Trust Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. BECAUSE THE FUND HAD A POLICY OF INVESTING IN STOCKS OF ALL CAPITALIZATIONS AND USED A COMPARATIVELY MORE VALUE-ORIENTED INVESTMENT APPROACH PRIOR TO JULY 1997, ITS PERFORMANCE MIGHT HAVE BEEN DIFFERENT IF CURRENT POLICIES HAD BEEN IN EFFECT. 27 Manhattan Fund [GRAPHIC OMITTED] INVESTOR EXPENSES The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE ----------------------------------------------------------------------------- SHAREHOLDER FEES None ----------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.94 Distribution (12b-1) fees None Other expenses 0.39 ----------------------------------------------------------------------------- Total annual operating expenses 1.33 ----------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. ----------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ----------------------------------------------------------------------------- Expenses $135 $421 $729 $1,601 ----------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.94% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER KENNETH J. TUREK, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed or co-managed two equity mutual funds and other equity portfolios for several other investment managers since 1985. Mr. Turek has managed the Fund since January 2003. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 28 Manhattan Fund [GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 10.23 7.26 8.62 9.04 11.46 PLUS: Income from investment operations Net investment loss (0.07) (0.06) (0.07) (0.09) (0.08) Net gains (losses) - realized and unrealized (2.83) 1.42 0.49 2.51 1.15 Subtotal: income from investment operations (2.90) 1.36 0.42 2.42 1.07 MINUS: Distributions to shareholders Capital gain distributions 0.07 - - - - Subtotal: distributions to shareholders 0.07 - - - - EQUALS: Share price (NAV) at end of year 7.26 8.62 9.04 11.46 12.53 ------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.11 1.19 1.19 1.26 1.32 Gross expenses(1) - - 1.19 1.26 1.32 Expenses(2) 1.11 1.19 1.21 1.27 1.33 Net investment loss - actual (0.75) (0.85) (0.77) (0.85) (0.6) ------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (28.54) 18.73 4.87(3) 26.77(3) 9.34(3) Net assets at end of year (in millions of dollars) 18.2 16.7 9.5 7.6 6.6 Portfolio turnover rate (%) 98 145 102 65 45 -------------------------------------------------------------------------------------------------------------------------------
All figures for fiscal years 2002 and 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm for those years. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. Had not reimbursed certain expenses and/or waived a portion of investment management fees. 29 Manhattan Fund Neuberger Berman MILLENNIUM FUND Ticker Symbol: NBMOX -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of small-capitalization companies, which it defines as those with a total market value of no more than $2 billion at the time the Fund first invests in them. The Fund may continue to hold or add to a position in a stock after the issuer has grown beyond $2 billion. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Manager employs a disciplined investment strategy when selecting growth stocks. Using fundamental research and quantitive analysis, he looks for fast-growing companies with above average sales and competitive returns on equity relative to their peers. In doing so, the Portfolio Manager analyzes such factors as: o financial condition (such as debt to equity ratio) o market share and competitive leadership of the company's products o earnings growth relative to competitors o market valuation in comparison to a stock's own historical norms and the stocks of other small-cap companies. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] SMALL-CAP STOCKS HISTORICALLY, STOCKS OF SMALLER COMPANIES HAVE NOT ALWAYS MOVED IN TANDEM WITH THOSE OF LARGER COMPANIES. OVER THE LAST 40 YEARS, SMALL-CAPS HAVE OUTPERFORMED LARGE-CAPS OVER 60% OF THE TIME. HOWEVER, SMALL-CAPS HAVE OFTEN FALLEN MORE SEVERELY DURING MARKET DOWNTURNS. [GRAPHIC OMITTED] GROWTH INVESTING FOR GROWTH INVESTORS, THE AIM IS TO INVEST IN COMPANIES THAT ARE ALREADY SUCCESSFUL BUT COULD BE EVEN MORE SO. OFTEN, THESE STOCKS ARE IN EMERGING OR RAPIDLY GROWING INDUSTRIES. ACCORDINGLY, THE FUND AT TIMES MAY INVEST A GREATER PORTION OF ITS ASSETS IN PARTICULAR INDUSTRIES OR SECTORS THAN OTHER FUNDS DO. WHILE MOST GROWTH STOCKS ARE KNOWN TO INVESTORS, THEY MAY NOT YET HAVE REACHED THEIR FULL POTENTIAL. THE GROWTH INVESTOR LOOKS FOR INDICATIONS OF CONTINUED SUCCESS. 30 Millennium Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. The stocks of smaller companies in which the Fund invests are often more volatile and less liquid than the stocks of larger companies, and these companies: o may have a shorter history of operations than larger companies; o may not have as great an ability to raise additional capital; o may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also: o underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor; o be more affected than other types of stocks by the underperformance of a sector emphasized by the Fund. Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. The Fund may at times invest a portion of its assets in mid-cap stocks. For a discussion of the risks associated with mid-cap stocks, see the Appendix. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 31 Millennium Fund PERFORMANCE [GRAPHIC OMITTED] The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- [GRAPHIC OMITTED] 1999 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 130.82 -28.81 -14.61 -44.50 33.26 16.14 15.26 BEST QUARTER: Q4 '99, 72.78% WORST QUARTER: Q3 '01, -27.95% Year-to-date performance as of 9/30/2006: -0.48% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* Since Inception 1 Year 5 Years (10/20/1998) -------------------------------------------------------------------------------- MILLENNIUM FUND Return Before Taxes 15.26 -3.30 10.89 Return After Taxes on Distributions 15.26 -3.30 10.10 Return After Taxes on Distributions and Sale of Fund Shares 9.92 -2.78 9.20 Russell 2000 Growth Index 4.15 2.28 6.62 Russell 2000 Index 4.55 8.22 10.81 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 2000 Growth Index is an unmanaged index of U.S. small-cap growth stocks. The Russell 2000 Index is an unmanaged index of U.S. small-cap stocks. -------------------------------------------------------------------------------- * Through 12/15/2000, Millennium Fund Trust Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 11/1998 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Millennium Fund Trust Class. Performance from the beginning of the measurement period above to 11/1998 is that of Millennium Fund Investor Class. Because Investor Class has moderately lower expenses, its performance typically would have been slightly better than that of the Trust Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN THE FUND AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. SMALL-CAP EQUITY MARKET AND OF THE PORTION OF THAT MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. 32 Millennium Fund INVESTOR EXPENSES [GRAPHIC OMITTED] The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 1.25 Distribution (12b-1) fees 0.10 Other expenses 1.14 -------------------------------------------------------------------------------- Total annual operating expenses 2.49 -------------------------------------------------------------------------------- Minus: Expense reimbursement 1.09 -------------------------------------------------------------------------------- Net expenses 1.40 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $143 $443 $766 $1,680 -------------------------------------------------------------------------------- * Neuberger Berman Management Inc. (NBMI) Has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of the fund through 8/31/2017, so that the total annual operating expenses of that class are limited to 1.40% Of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Trust Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 1.40% Of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. The figures in the table are based on last year's expenses except for the expense reimbursement, which has been restated to reflect the current contractual fee cap since it was reduced during the last year. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 1.25% of average net assets before reimbursements. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 33 Millennium Fund PORTFOLIO MANAGER DAVID H. BURSHTAN, a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC, has managed two equity mutual funds and other equity portfolios for another investment manager from 1999-2002. Prior to 1999, he managed small-cap portfolios for another manager. Mr. Burshtan has managed the Fund since January 2003. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 34 Millennium Fund [GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------------------ Year Ended August 31, 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------ PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 15.82 10.30 11.98 11.78 15.62 PLUS: Income from investment operations Net investment loss (0.17) (0.11) (0.15) (0.21) (0.22) Net gains (losses) - realized and unrealized (5.35) 1.79 (0.05) 4.05 1.12 Subtotal: income from investment operations (5.52) 1.68 (0.20) 3.84 0.90 EQUALS: Share price (NAV) at end of year 10.30 11.98 11.78 15.62 16.52 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.75 1.75 1.70 1.71 1.63 Gross expenses(1) 1.92 2.26 2.17 2.50 2.47 Expenses(2) 1.75 1.75 1.75 1.75 1.66 Net investment loss - actual (1.18) (1.10) (1.20) (1.48) (1.26) ------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(3) (34.89) 16.31 (1.67) 32.60 5.76 Net assets at end of year (in millions of dollars) 4.3 4.6 2.7 2.7 2.5 Portfolio turnover rate (%) 126 241 146 204 142 ------------------------------------------------------------------------------------------------------------------------------
All figures for fiscal years 2002 through and including 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, The Fund's independent registered public accounting firm for those years. Their report, along with full financial statements, appears in the fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. Had not reimbursed certain expenses and/or waived a portion of investment management fees. 35 Millennium Fund Neuberger Berman PARTNERS FUND Ticker Symbol: NBPTX -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of mid- to large-capitalization companies. The Fund seeks to reduce risk by diversifying among many companies and industries. The Portfolio Manager looks for well-managed companies with strong balance sheets whose stock prices are undervalued. Factors in identifying these firms may include: o historical low valuation o strong fundamentals, such as a company's financial, operational, and competitive positions o relatively high operating profit margins and returns. The Portfolio Manager may also look for other characteristics in a company, such as a strong market position relative to competitors, a high level of stock ownership among management, and a recent sharp decline in stock price that appears to be the result of a short-term market overreaction to negative news. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID- AND LARGE-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY PERFORMED MORE LIKE SMALL-CAPS THAN LIKE LARGE-CAPS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER ATTRACTIVE LONG-TERM RETURNS. LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. COMPARED TO MID-CAP COMPANIES, THEY MAY BE LESS RESPONSIVE TO CHANGE, BUT THEIR RETURNS HAVE SOMETIMES LED THOSE OF MID-CAP COMPANIES, OFTEN WITH LOWER VOLATILITY. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 36 Partners Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. To the extent that the Fund emphasizes mid- or large-cap stocks, it takes on the associated risks. Mid-cap stocks tend to be more volatile than large-cap stocks and are usually more sensitive to economic, political, regulatory and market factors. At any given time, one or both groups of stocks may be out of favor with investors. The Fund's value investing approach may dictate an emphasis on certain sectors of the market at any given time. To the extent the Fund invests more heavily in one sector, it thereby presents a more concentrated risk. A sector may have above average performance during particular periods, but individual sectors also tend to move up and down more than the broader market. The several industries that comprise a sector may all react in the same way to economic, political and regulatory events. The Fund's performance may also suffer if a sector does not perform as expected. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 37 Partners Fund [GRAPHIC OMITTED] PERFORMANCE The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- [GRAPHIC OMITTED] -------------------------------------------------------------------------------- 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 26.45 29.10 6.14 7.69 0.48 -3.25 -24.91 35.66 19.02 17.81 BEST QUARTER: Q2 '03, 20.32% WORST QUARTER: Q3 '02, -21.40% Year-to-date performance as of 9/30/2006: 1.52% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- PARTNERS FUND Return Before Taxes 17.81 6.69 9.99 Return After Taxes on Distributions 16.92 6.41 8.92 Return After Taxes on Distributions and Sale of Fund Shares 12.74 5.73 8.31 Russell 1000 Value 7.05 5.28 10.94 Index S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell 1000 Value Index is an unmanaged index of U.S. mid- and large-cap value stocks. The S&P 500 Index is an unmanaged index of U.S. stocks. -------------------------------------------------------------------------------- * Through 12/15/2000, Partners Fund Trust Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 8/1993 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Partners Fund Trust Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE ENTIRE U.S. EQUITY MARKET AND OF THE PORTION OF THE MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. 38 Partners Fund [GRAPHIC OMITTED] INVESTOR EXPENSES The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.85 Distribution (12b-1) fees 0.10 Other expenses 0.05 -------------------------------------------------------------------------------- Total annual operating expenses 1.00 EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $102 $318 $552 $1,225 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.85% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. PORTFOLIO MANAGER S. BASU MULLICK is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. He has been a fund manager at Neuberger Berman Management Inc. and has managed the Fund since 1998. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 39 Partners Fund [GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 ----------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund eaed (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 15.81 12.84 14.81 16.48 22.02 PLUS: Income from investment operations Net investment income (loss) (0.00) (0.01) 0.10 0.13 0.15 Net gains (losses) - realized and unrealized (2.65) 1.98 1.57 5.51 1.11 Subtotal: income from investment operations (2.65) 1.97 1.67 5.64 1.26 MINUS: Distributions to shareholders Income dividends 0.03 - - 0.10 0.13 Capital gain distributions 0.29 - - - 1.01 Subtotal: distributions to shareholders 0.32 - - 0.10 1.14 EQUALS: Share price (NAV) at end of year 12.84 14.81 16.48 22.02 22.14 ------------------------------------------------------------------------------------------------------------------------------ RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss)- as they actually are as well as how they would have been if certain expense offset arrangements and/or waiver had not been in effect. Net expenses - actual 1.03 1.05 1.02 1.02 0.99 Gross expenses(1) - - 1.03 1.02 0.99 Expenses(2) 1.03 1.05 1.04 1.03 1.00 Net investment income (loss) - actual (0.00) (0.07) 0.60 0.66 0.66 -------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (17.10) 15.34 11.28(3) 34.34(3) 5.70(3) Net assets at end of year (in millions of dollars) 314.7 301.1 283.8 532.8 970.5 Portfolio turnover rate (%) 53 65 67 61 33 --------------------------------------------------------------------------------------------------------------------------------
The figures above have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not waived a portion of investment management fees. 40 Partners Fund Neuberger Berman REGENCY FUND Ticker Symbol: NBREX -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS GROWTH OF CAPITAL. To pursue this goal, the Fund invests mainly in common stocks of mid-capitalization companies, which it defines as those with a total market capitalization with market capitalization in the range of the Russell Midcap Index. The Fund seeks to reduce risk by diversifying among many companies, sectors and industries. The Portfolio Manager looks for undervalued companies with high-quality businesses. Factors in identifying these firms may include: o historical low valuation o above-average returns on invested capital o solid balance sheets. This approach is designed to let the Fund benefit from potential increases in stock prices while limiting the risks typically associated with stocks. At times, the Portfolio Manager may emphasize certain sectors that he believes will benefit from market or economic trends. The Portfolio Manager follows a disciplined selling strategy and may sell a stock when it reaches a target price, fails to perform as expected, or when other opportunities appear more attractive. The Fund may change its goal without shareholder approval, although it does not currently intend to do so. [GRAPHIC OMITTED] MID-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY SHOWN RISK/RETURN CHARACTERISTICS THAT ARE IN BETWEEN THOSE OF SMALL- AND LARGE-CAP STOCKS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER COMPARATIVELY ATTRACTIVE LONG-TERM RETURNS. MID-CAPS ARE LESS WIDELY FOLLOWED IN THE MARKET THAN LARGE-CAPS, WHICH CAN MAKE IT COMPARATIVELY EASIER TO FIND ATTRACTIVE STOCKS THAT ARE NOT OVERPRICED. [GRAPHIC OMITTED] VALUE INVESTING AT ANY GIVEN TIME, THERE ARE COMPANIES WHOSE STOCK PRICES ARE BELOW THE MARKET AVERAGE, BASED ON EARNINGS, BOOK VALUE, OR OTHER FINANCIAL MEASURES. THE VALUE INVESTOR EXAMINES THESE COMPANIES, SEARCHING FOR THOSE THAT MAY RISE IN PRICE WHEN OTHER INVESTORS REALIZE THEIR WORTH. 41 Regency Fund [GRAPHIC OMITTED] MAIN RISKS Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. By focusing on mid-cap stocks, the Fund is subject to their risks, including the risk its holdings may: o fluctuate more widely in price than the market as a whole o underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when mid-cap stocks are out of favor. The Fund's value investing approach may dictate an emphasis on certain sectors of the market at any given time. To the extent the Fund invests more heavily in one sector, it thereby presents a more concentrated risk. A sector may have above average performance during particular periods, but individual sectors also tend to move up and down more than the broader market. The several industries that comprise a sector may all react in the same way to economic, political and regulatory events. The Fund's performance may also suffer if a sector does not perform as expected. With a value approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. The Fund's performance may also suffer if certain stocks or certain economic sectors it emphasizes do not perform as expected. To the extent that the Fund sells stocks before they reach their market peak, it may miss out on opportunities for higher performance. Through active trading, the Fund may have a high portfolio turnover rate, which can mean higher taxable distributions and lower performance due to increased brokerage costs. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 42 Regency Fund [GRAPHIC OMITTED] PERFORMANCE The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- [GRAPHIC OMITTED] 1996 '97 '98 '99 '00 '01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 31.25 -2.31 11.69 35.91 22.20 12.34 BEST QUARTER: Q4 '03, 14.90% WORST QUARTER: Q3 '02, -15.32% Year-to-date performance as of 9/30/2006: -0.35% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- Since Inception 1 Year 5 Years (6/1/1999) -------------------------------------------------------------------------------- REGENCY FUND Return Before Taxes 12.34 9.99 13.56 Return After Taxes on Distributions 10.93 8.71 11.39 Return After Taxes on Distributions and Sale of Fund Shares 9.53 8.13 10.70 Russell Midcap Value Index 12.65 12.21 10.99 Russell Midcap Index 12.65 8.45 9.34 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The Russell Midcap Value Index is an unmanaged index of U.S. midcap value stocks. The Russell Midcap Index is an unmanaged index of U.S. mid-cap stocks. -------------------------------------------------------------------------------- * Through 12/15/2000, Regency Fund Trust Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 6/1999 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Regency Fund Trust Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES BROAD-BASED INDICES OF THE U.S. MID-CAP EQUITY MARKET AND OF THE PORTION OF THAT MARKET THE FUND FOCUSES ON. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDICES DO NOT INCLUDE COSTS OF INVESTMENT. 43 Regency Fund [GRAPHIC OMITTED] INVESTOR EXPENSES The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.95 Distribution (12b-1) fees 0.10 Other expenses 0.28 -------------------------------------------------------------------------------- Total annual operating expenses 1.33 -------------------------------------------------------------------------------- Minus: Expense reimbursement 0.08 -------------------------------------------------------------------------------- Net expenses 1.25 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $127 $397 $686 $1,511 -------------------------------------------------------------------------------- * Neuberger Berman Management Inc. (NBMI) has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of the Fund through 8/31/2017 so that the total annual operating expenses of that class are limited to 1.25% of average net assets. This arrangement does not cover interest, taxes, brokerage commissions, and extraordinary expenses. The Fund has agreed that the Trust Class will repay NBMI for fees and expenses forgone or reimbursed for that class provided that repayment does not cause its annual operating expenses to exceed 1.25% of its average net assets. Any such repayment must be made within three years after the year in which NBMI incurred the expense. The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.95% of average net assets before reimbursements. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 44 Regency Fund PORTFOLIO MANAGER S. BASU MULLICK is a Vice President of Neuberger Berman Management Inc., and a Managing Director of Neuberger Berman, LLC. He has managed the Fund since 2005 and has been a fund manager at Neuberger Berman Management Inc. since 1998. He previously co-managed the Fund from its inception in 1999 to 2000. Please see the Statement of Additional Information for additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of Fund shares. 45 Regency Fund [GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 --------------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 11.30 9.24 10.61 12.61 15.13 PLUS: Income from investment operations Net investment income (loss) (0.00) (0.03) (0.03) (0.01) 0.09 Net gains (losses) - realized and unrealized (0.78) 1.40 2.03 3.56 0.34 Subtotal: income from investment operations (0.78) 1.37 2.00 3.55 0.43 MINUS: Distributions to shareholders Income dividends 0.01 - - - 0.02 Capital gain distributions 1.27 - - 1.03 1.13 Subtotal: distributions to shareholders 1.28 - - 1.03 1.15 EQUALS: Share price (NAV) at end of year 9.24 10.61 12.61 15.13 14.41 --------------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment loss - as they actually are as well as how they would have been if certain expense reimbursement and/or waiver and/or offset arrangements had not been in effect. Net expenses - actual 1.50 1.50 1.49 1.37 1.24 Gross expenses(1) 1.64 1.82 1.66 1.39 1.32 Expenses(2) 1.50 1.50 1.50 1.38 1.25 Net investment income (loss) - actual (0.04) (0.30) (0.22) (0.10) 0.61 --------------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%)(3) (7.45) 14.83 18.85 29.13 2.81 Net assets at end of year (in millions of dollars) 13.4 11.3 19.8 36.1 64.2 Portfolio turnover rate (%) 119 73 62 91 52 ---------------------------------------------------------------------------------------------------------------------------------
All figures for fiscal years 2002 through and including 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense reimbursement and/or waiver of a portion of investment management fees. (2) Shows what this ratio would have been if there had been no expense offset arrangements. (3) Would have been lower if Neuberger Berman Management Inc. had not reimbursed certain expenses and/or waived a portion of investment management fees. 46 Regency Fund Neuberger Berman SOCIALLY RESPONSIVE FUND Ticker Symbol: NBSTX -------------------------------------------------------------------------------- [GRAPHIC OMITTED] GOAL & STRATEGY THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN SECURITIES OF COMPANIES THAT MEET THE FUND'S FINANCIAL CRITERIA AND SOCIAL POLICY. To pursue this goal, the Fund invests mainly in common stocks of mid- to large-capitalization companies. The Fund seeks to reduce risk by investing across many different industries. The Portfolio Managers employ a research driven and valuation sensitive approach to stock selection. They seek to identify stocks in well-positioned businesses that they believe are undervalued in the market. They look for solid balance sheets, strong management teams with a track record of success, good cash flow, the prospect for above average earnings growth, and other valuation-related factors. Among companies that meet these criteria, the Portfolio Managers look for those that show leadership in three areas: o environmental concerns o diversity in the work force o progressive employment and workplace practices, and community relations. The Portfolio Managers typically also look at a company's record in public health and the nature of its products. The Portfolio Managers judge firms on their corporate citizenship overall, considering their accomplishments as well as their goals. While these judgments are inevitably subjective, the Fund endeavors to avoid companies that derive revenue from gambling or the production of alcohol, tobacco, weapons, or nuclear power. The Fund also does not invest in any company that derives its total revenue primarily from non-consumer sales to the military. The Portfolio Managers follow a disciplined selling strategy and may sell a stock when it reaches a target price, when the company's business fails to perform as expected, or when other opportunities appear more attractive. The Fund has the ability to change its goal without shareholder approval, although it does not currently intend to do so. The Fund will not change its strategy of normally investing at least 80% of its total assets in equity securities selected in accordance with its social policy without providing shareholders at least 60 days' notice. [GRAPHIC OMITTED] MID- AND LARGE-CAP STOCKS MID-CAP STOCKS HAVE HISTORICALLY PERFORMED MORE LIKE SMALL-CAPS THAN LIKE LARGE-CAPS. THEIR PRICES CAN RISE AND FALL SUBSTANTIALLY, ALTHOUGH MANY HAVE THE POTENTIAL TO OFFER ATTRACTIVE LONG-TERM RETURNS. LARGE-CAP COMPANIES ARE USUALLY WELL ESTABLISHED. COMPARED TO MID-CAP COMPANIES, THEY MAY BE LESS RESPONSIVE TO CHANGE, BUT THEIR RETURNS HAVE SOMETIMES LED THOSE OF MID-CAP COMPANIES, OFTEN WITH LOWER VOLATILITY. [GRAPHIC OMITTED] SOCIAL INVESTING FUNDS THAT FOLLOW SOCIAL POLICIES SEEK SOMETHING IN ADDITION TO ECONOMIC SUCCESS. THEY ARE DESIGNED TO ALLOW INVESTORS TO PUT THEIR MONEY TO WORK AND ALSO SUPPORT COMPANIES THAT FOLLOW PRINCIPLES OF GOOD CORPORATE CITIZENSHIP. 47 Socially Responsive Fund [GRAPHIC OMITTED] VALUATION SENSITIVE INVESTING IN ADDITION TO TRADITIONAL VALUE INVESTING - I.E., LOOKING FOR VALUE AMONG COMPANIES WHOSE STOCK PRICES ARE BELOW THEIR HISTORIC AVERAGE, BASED ON EARNINGS, CASH FLOW, OR OTHER FINANCIAL MEASURES - WE MAY ALSO BUY A COMPANY'S SHARES IF THEY LOOK MORE FULLY PRICED BASED ON WALL STREET CONSENSUS ESTIMATES OF EARNINGS, BUT STILL INEXPENSIVE RELATIVE TO OUR ESTIMATES. WE LOOK FOR THESE COMPANIES TO RISE IN PRICE AS THEY OUTPERFORM WALL STREET'S EXPECTATIONS, BECAUSE SOME ASPECTS OF THE BUSINESS HAS NOT BEEN FULLY APPRECIATED OR APPROPRIATELY PRICED BY OTHER INVESTORS. 48 Socially Responsive Fund MAIN RISKS [GRAPHIC OMITTED] Most of the Fund's performance depends on what happens in the stock market. The market's behavior is unpredictable, particularly in the short term. The value of your investment will rise and fall, sometimes sharply, and you could lose money. The Fund's social policy could cause it to underperform similar funds that do not have a social policy. Among the reasons for this are: -- undervalued stocks that do not meet the social criteria could outperform those that do -- economic or political changes could make certain companies less attractive for investment -- the social policy could cause the Fund to sell or avoid stocks that subsequently perform well. To the extent that the Fund emphasizes mid- or large-cap stocks, it takes on the associated risks. Mid-cap stocks tend to be more volatile than large-cap stocks and are usually more sensitive to economic, political, regulatory and market factors. At any given time, one or both groups of stocks may be out of favor with investors. With a valuation sensitive approach, there is also the risk that stocks may remain undervalued during a given period. This may happen because value stocks, as a category, lose favor with investors compared to growth stocks, or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. OTHER RISKS THE FUND MAY USE CERTAIN PRACTICES AND INVEST IN CERTAIN SECURITIES INVOLVING ADDITIONAL RISKS. BORROWING, SECURITIES LENDING, AND USING DERIVATIVES COULD CREATE LEVERAGE, MEANING THAT CERTAIN GAINS OR LOSSES COULD BE AMPLIFIED, INCREASING SHARE PRICE MOVEMENTS. IN USING CERTAIN DERIVATIVES TO GAIN STOCK MARKET EXPOSURE FOR EXCESS CASH HOLDINGS, THE FUND INCREASES ITS RISK OF LOSS. ALTHOUGH THEY MAY ADD DIVERSIFICATION, FOREIGN SECURITIES CAN BE RISKIER, BECAUSE FOREIGN MARKETS TEND TO BE MORE VOLATILE AND CURRENCY EXCHANGE RATES FLUCTUATE. THERE MAY BE LESS INFORMATION AVAILABLE ABOUT FOREIGN ISSUERS THAN ABOUT DOMESTIC ISSUERS. WHEN THE FUND ANTICIPATES ADVERSE MARKET, ECONOMIC, POLITICAL OR OTHER CONDITIONS, IT MAY TEMPORARILY DEPART FROM ITS GOAL AND INVEST SUBSTANTIALLY IN HIGH-QUALITY SHORT-TERM INVESTMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST OPPORTUNITIES. 49 Socially Responsive Fund [GRAPHIC OMITTED] PERFORMANCE The table and chart below provide an indication of the risks of investing in the Fund. The bar chart shows how the Fund's performance has varied from year to year. The table next to the chart shows what the return would equal if you averaged out actual performance over various lengths of time and compares the return with one or more measures of market performance. This information is based on past performance (before and after taxes); it is not a prediction of future results. YEAR-BY-YEAR % RETURNS as of 12/31 each year* -------------------------------------------------------------------------------- [GRAPHIC OMITTED] 1996 '97 '98 '99 '00 01 '02 '03 '04 '05 -------------------------------------------------------------------------------- 18.50 24.32 14.81 6.88 -0.63 -2.91 -14.66 34.15 13.35 7.45 BEST QUARTER: Q4 '98, 20.81% WORST QUARTER: Q3 '02, -17.23% Year-to-date performance as of 9/30/2006: 6.54% -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/2005* -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years -------------------------------------------------------------------------------- SOCIALLY RESPONSIVE FUND Return Before Taxes 7.45 6.24 9.29 Return After Taxes on Distributions 6.92 5.45 8.68 Return After Taxes on Distributions and Sale of Fund Shares 5.56 5.09 7.99 S&P 500 Index 4.91 0.54 9.07 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. INDEX DESCRIPTIONS: The S&P 500 Index is an unmanaged index of U.S. stocks. -------------------------------------------------------------------------------- * Through 12/15/2000, Socially Responsive Fund Trust Class was organized as a feeder fund in a master/feeder, rather than a multiple class, structure. Performance shown for the periods from 3/1997 to 12/15/2000 is that of the predecessor feeder fund, which had an identical investment program and the same expenses as Socially Responsive Fund Trust Class. Performance from the beginning of the measurement period above to 3/1997 is that of Socially Responsive Fund Investor Class. Because Investor Class has moderately lower expenses, its performance typically would have been slightly better than that of the Trust Class. [GRAPHIC OMITTED] PERFORMANCE MEASURES THE INFORMATION ON THIS PAGE PROVIDES DIFFERENT MEASURES OF THE FUND'S TOTAL RETURN. TOTAL RETURN INCLUDES THE EFFECT OF DISTRIBUTIONS AS WELL AS CHANGES IN SHARE PRICE. THE FIGURES ASSUME THAT ALL DISTRIBUTIONS WERE REINVESTED IN FUND SHARES AND INCLUDE ALL FUND EXPENSES. AS A FRAME OF REFERENCE, THE TABLE INCLUDES A BROAD-BASED MARKET INDEX. THE FUND'S PERFORMANCE FIGURES INCLUDE ALL OF ITS EXPENSES; THE INDEX DOES NOT INCLUDE COSTS OF INVESTMENT. 50 Socially Responsive Fund [GRAPHIC OMITTED] INVESTOR EXPENSES The Fund does not charge you any fees for buying, selling, or exchanging shares, or for maintaining your account. You pay your share of annual operating expenses, which are deducted from Fund assets. The expense example can help you compare costs among funds. FEE TABLE -------------------------------------------------------------------------------- SHAREHOLDER FEES None -------------------------------------------------------------------------------- ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from Fund assets, so you pay them indirectly. Management fees 0.93 Distribution (12b-1) fees 0.10 Other expenses 0.10 -------------------------------------------------------------------------------- Total annual operating expenses 1.13 -------------------------------------------------------------------------------- EXPENSE EXAMPLE The example assumes that you invested $10,000 for the periods shown, that you earned a hypothetical 5% total return each year, and that the Fund's expenses were those in the table to the left. Your costs would be the same whether you sold your shares or continued to hold them at the end of each period. Actual performance and expenses may be higher or lower. -------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- Expenses $115 $359 $622 $1,375 -------------------------------------------------------------------------------- * The figures in the table are based on last year's expenses. [GRAPHIC OMITTED] INVESTMENT MANAGER Neuberger Berman Management Inc. (the "Manager") is the Fund's investment manager, administrator, and distributor. Pursuant to an investment advisory agreement, the Manager is responsible for choosing the Fund's investments and handling its day-to-day business. The Manager carries out its duties subject to the policies established by the Board of Trustees. The investment advisory agreement establishes the fees the Fund pays to the Manager for its services as the Fund's investment manager and the expenses paid directly by the Fund. The Manager engages Neuberger Berman, LLC as sub-adviser to provide investment research and related services. Together, the Neuberger Berman affiliates manage $173.6 billion in total assets (as of 9/30/2006) and continue an asset management history that began in 1939. For the 12 months ended 8/31/2006, the management/administration fees paid to the Manager were 0.93% of average net assets. A discussion regarding the basis for the approval of the investment advisory and sub-advisory agreements by the Board of Trustees is available in the Fund's semi-annual report dated February 2006. 51 Socially Responsive Fund PORTFOLIO MANAGERS ARTHUR MORETTI is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. He joined each firm and has co-managed the Fund since 2001. He was a portfolio manager and fund analyst at two other firms since 1991. INGRID S. DYOTT is a Vice President of Neuberger Berman Management Inc. and a Managing Director of Neuberger Berman, LLC. She has been co-manager of the Fund since December 2003 and before that was an Associate Manager of the Fund since 1997. SAJJAD S. LADIWALA is a Vice President of Neuberger Berman Management Inc. and Neuberger Berman, LLC. He has been an Associate Manager of the Fund since December 2003. He held various positions as a financial analyst at two other firms since 1994. Please see the Statement of Additional Information for additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers and the Portfolio Managers' ownership of Fund shares. 52 Socially Responsive Fund [GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------------------------------------------- Year Ended August 31, 2002 2003 2004 2005 2006 ----------------------------------------------------------------------------------------------------------------------------- PER-SHARE DATA ($) Data apply to a single share throughout each year indicated. You can see what the Fund earned (or lost), what it distributed to investors, and how its share price changed. Share price (NAV) at beginning of year 13.07 10.62 12.79 13.47 15.84 PLUS: Income from investment operations Net investment income (loss) 0.01 (0.01) 0.00 0.12 0.03 Net gains (losses) - realized and unrealized (1.28) 2.18 1.26 2.60 1.20 Subtotal: income from investment operations (1.27) 2.17 1.26 2.72 1.23 MINUS: Distributions to shareholders Income dividends - 0.00 0.01 0.00 0.06 Capital gain distributions 1.14 - 0.57 0.35 0.48 Tax return of capital 0.04 - - - - Subtotal: distributions to shareholders 1.18 0.00 0.58 0.35 0.54 EQUALS: Share price (NAV) at end of year 10.62 12.79 13.47 15.84 16.53 ----------------------------------------------------------------------------------------------------------------------------- RATIOS (% OF AVERAGE NET ASSETS) The ratios show the Fund's expenses and net investment income (loss) - as they actually are as well as how they would have been if certain expense reimbursement and offset arrangements had not been in effect. Net expenses - actual 1.33 1.32 1.25 1.17 1.12 Expenses(1) 1.33 1.33 1.26 1.17 1.13 Net investment income (loss) - actual 0.07 (0.12) 0.00 0.78 0.21 ----------------------------------------------------------------------------------------------------------------------------- OTHER DATA Total return shows how an investment in the Fund would have performed over each year, assuming all distributions were reinvested. The turnover rate reflects how actively the Fund bought and sold securities. Total return (%) (10.86) 20.45 9.89 20.36 7.93 Net assets at end of year (in millions of dollars) 12.5 28.7 42.3 140.1 239.2 Portfolio turnover rate (%) 60 62 35 21 23 -----------------------------------------------------------------------------------------------------------------------------
All figures for fiscal years 2002 and 2003 have been audited by the Fund's independent auditors during those years. The figures for fiscal years 2004 and thereafter have been audited by Tait, Weller, & Baker LLP, the Fund's independent registered public accounting firm for those years. Their report, along with full financial statements, appears in the Fund's most recent shareholder report (see back cover). (1) Shows what this ratio would have been if there had been no expense offset arrangements. 53 Socially Responsive Fund Neuberger Berman Your Investment -------------------------------------------------------------------------------- o MAINTAINING YOUR ACCOUNT To buy or sell Trust Class shares described in this prospectus, contact your investment provider. If you sell or exchange shares of the International Fund within 60 days or less of purchase, you may be charged a redemption fee (see "Redemption Fee"). All investments must be made in U.S. dollars, and investment checks must be drawn on a U.S. bank. The Funds do not issue certificates for shares. Most investment providers allow you to take advantage of the Neuberger Berman fund exchange program, which is designed for moving an investment from the Trust Class of one Neuberger Berman fund to the Trust Class of another through an exchange of shares. However, this privilege can be withdrawn from any investor that we believe is trying to "time the market" or is otherwise making exchanges that we judge to be excessive. Frequent exchanges can interfere with Fund management and affect costs and performance for other shareholders. Every buy or sell order will be processed at the next share price to be calculated after the order has been accepted. Purchase orders are deemed "accepted" when the Funds' transfer agent has received payment for the shares. Redemption orders are deemed "accepted" when the Funds' transfer agent has received the order to sell Fund shares. In the case of certain institutional investors, Neuberger Berman Management Inc. will process purchase orders when received, on the basis of a pre-existing arrangement to make payment by the following morning. In addition, if you have established a systematic investment program (SIP) with a Fund, your order is deemed "accepted" on the date you pre-selected on your SIP application for the systematic investments to occur. These policies apply to the investment providers who invest in the Fund. If you are buying shares through an investment provider, contact the investment provider for its policies. Under certain circumstances, the Funds reserve the right to: o suspend the offering of shares o reject any exchange or purchase order o suspend or reject future purchase orders from any investor who does not provide payment to settle a purchase order o change, suspend, or revoke the exchange privilege o satisfy an order to sell Fund shares with securities rather than cash, for certain very large orders o suspend or postpone your right to sell Fund shares on days when trading on the New York Stock Exchange (the "Exchange") is restricted, or as otherwise permitted by the Securities and Exchange Commission ("SEC") o take orders to purchase or sell Fund shares when the Exchange is closed. In such a case, the Fund would post a notice on the Neuberger Berman website, www.nb.com PROCEEDS FROM THE SALE OF SHARES -- The proceeds from the shares you sell are generally sent out the next business day after your order is executed, and nearly always within seven business days. There are two cases in which proceeds may be delayed beyond this time: o in unusual circumstances where the law allows additional time if needed o if a check you wrote to buy shares has not cleared by the time you sell those shares; clearance may take up to 15 calendar days from the date of purchase. If you think you may need to sell shares soon after buying them, you can avoid the check clearing time by investing by wire. 54 Your Investment Uncashed checks -- When you receive a check, you may want to deposit or cash it right away, as you will not receive interest on uncashed checks. [GRAPHIC OMITTED] DISTRIBUTION AND SHAREHOLDER SERVICING FEES FOCUS, GUARDIAN, MILLENNIUM, PARTNERS, REGENCY AND SOCIALLY RESPONSIVE FUNDS HAVE ADOPTED A PLAN PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940. UNDER THE PLAN, EACH FUND'S TRUST CLASS PAYS THE FUND'S DISTRIBUTOR, NEUBERGER BERMAN MANAGEMENT INC., 0.10% OF ITS AVERAGE NET ASSETS EVERY YEAR TO COMPENSATE FINANCIAL INTERMEDIARIES FOR PROVIDING DISTRIBUTION RELATED SERVICES TO THE FUND AND/OR ADMINISTRATIVE OR SHAREHOLDER SERVICES TO FUND SHAREHOLDERS. NEUBERGER BERMAN MANAGEMENT INC. MAY ALSO RETAIN PART OF THIS FEE AS COMPENSATION FOR PROVIDING THESE SERVICES. THESE FEES INCREASE THE COST OF INVESTMENT. OVER THE LONG TERM, THEY COULD RESULT IN HIGHER OVERALL COSTS THAN OTHER TYPES OF SALES CHARGES. [GRAPHIC OMITTED] YOUR INVESTMENT PROVIDER THE TRUST CLASS SHARES DESCRIBED IN THIS PROSPECTUS ARE AVAILABLE ONLY THROUGH INVESTMENT PROVIDERS SUCH AS BANKS, BROKERAGE FIRMS, WORKPLACE RETIREMENT PROGRAMS, AND FINANCIAL ADVISERS. THE FEES AND POLICIES OUTLINED IN THIS PROSPECTUS ARE SET BY THE FUND AND BY NEUBERGER BERMAN MANAGEMENT INC. HOWEVER, MOST OF THE INFORMATION YOU WILL NEED FOR MANAGING YOUR INVESTMENT WILL COME FROM YOUR INVESTMENT PROVIDER. THIS INCLUDES INFORMATION ON HOW TO BUY AND SELL TRUST CLASS SHARES, INVESTOR SERVICES, AND ADDITIONAL POLICIES. IN EXCHANGE FOR THE SERVICES IT OFFERS, YOUR INVESTMENT PROVIDER MAY CHARGE FEES, WHICH ARE IN ADDITION TO THOSE DESCRIBED IN THIS PROSPECTUS. [GRAPHIC OMITTED] ADDITIONAL PAYMENTS TO INVESTMENT PROVIDERS NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES MAY PAY ADDITIONAL COMPENSATION, OUT OF THEIR OWN RESOURCES AND NOT AS AN EXPENSE OF THE FUNDS, TO YOUR INVESTMENT PROVIDER OR OTHER FINANCIAL INTERMEDIARIES, INCLUDING AFFILIATES, IN CONNECTION WITH THE SALE, DISTRIBUTION, RETENTION AND/OR SERVICING OF FUND SHARES. IN SOME CASES, THESE PAYMENTS MAY CREATE AN INCENTIVE FOR YOUR INVESTMENT PROVIDER OR ITS EMPLOYEES TO RECOMMEND OR SELL SHARES OF THE FUNDS TO YOU. IF YOU HAVE PURCHASED SHARES OF A FUND THROUGH AN INVESTMENT PROVIDER, PLEASE SPEAK WITH YOUR INVESTMENT PROVIDER TO LEARN MORE ABOUT ANY PAYMENTS IT RECEIVES FROM NEUBERGER BERMAN MANAGEMENT INC. AND/OR ITS AFFILIATES, AS WELL AS FEES AND/ OR COMMISSIONS THE INVESTMENT PROVIDER CHARGES. YOU SHOULD ALSO CONSULT DISCLOSURES MADE BY YOUR INVESTMENT PROVIDER AT THE TIME OF PURCHASE. ANY SUCH PAYMENTS WILL NOT CHANGE THE NET ASSET VALUE OR THE PRICE OF EACH FUND'S SHARES. FOR MORE INFORMATION, PLEASE SEE THE FUNDS' STATEMENT OF ADDITIONAL INFORMATION. [GRAPHIC OMITTED] INFORMATION REQUIRED FROM NEW ACCOUNTS TO HELP THE U.S. GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY, AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO OPENS AN ACCOUNT. WHEN YOU OPEN AN ACCOUNT, WE (WHICH MAY INCLUDE YOUR INVESTMENT PROVIDER ACTING ON OUR BEHALF) WILL REQUIRE YOUR NAME, ADDRESS, DATE OF BIRTH, AND SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER. WE 55 Your Investment MAY ALSO REQUIRE OTHER IDENTIFYING DOCUMENTS. IF WE CANNOT VERIFY THE INFORMATION YOU SUPPLY TO US OR IF IT IS INCOMPLETE, WE MAY BE REQUIRED TO RETURN YOUR FUNDS OR REDEEM YOUR ACCOUNT. o SHARE PRICES Because Trust Class shares of the Funds do not have a sales charge, the price you pay for each share is the Fund's net asset value per share. Similarly, because the Funds (other than International Fund) do not charge fees for selling shares, your Fund pays you the full share price (net asset value) when you sell shares. Remember that your investment provider may charge fees for its services. The Funds are open for business every day the Exchange is open. The Exchange is closed on all national holidays and Good Friday; Fund shares will not be priced on those days or other days on which the Exchange is closed. Each Fund calculates its share price as of the end of regular trading on the Exchange on business days, usually 4:00 p.m. Eastern time. In general, every buy or sell order you place will go through at the next share price calculated after your order has been accepted (see "Maintaining Your Account" for information on placing orders). Check with your investment provider to find out by what time your order must be received so that it can be processed the same day. Depending on when your investment provider accepts orders, it is possible that a Fund's share price could change on days when you are unable to buy or sell shares. Because foreign markets may be open on days when U.S. markets are closed, the value of foreign securities owned by a Fund could change on days when you cannot buy or sell Fund shares. Remember, though, any purchase or sale takes place at the next share price calculated after your order is accepted. [GRAPHIC OMITTED] SHARE PRICE CALCULATIONS THE PRICE OF A TRUST CLASS SHARE OF A FUND IS THE TOTAL VALUE OF THE FUND'S ASSETS ATTRIBUTABLE TO TRUST CLASS SHARES MINUS LIABILITIES ATTRIBUTABLE TO THAT CLASS, DIVIDED BY THE TOTAL NUMBER OF TRUST CLASS SHARES OUTSTANDING. BECAUSE THE VALUE OF A FUND'S SECURITIES CHANGES EVERY BUSINESS DAY, THE SHARE PRICE USUALLY CHANGES AS WELL. WHEN VALUING PORTFOLIO SECURITIES, THE FUNDS USE MARKET PRICES. HOWEVER, IN CERTAIN CASES, EVENTS THAT OCCUR AFTER CERTAIN MARKETS HAVE CLOSED MAY RENDER THESE PRICES UNRELIABLE. WHEN A FUND BELIEVES A REPORTED MARKET PRICE FOR A SECURITY DOES NOT REFLECT THE AMOUNT THE FUND WOULD RECEIVE ON A CURRENT SALE OF THAT SECURITY, THE FUND MAY SUBSTITUTE FOR THE MARKET PRICE A FAIR-VALUE ESTIMATE MADE ACCORDING TO METHODS APPROVED BY THE BOARD OF TRUSTEES. A FUND MAY ALSO USE THESE METHODS TO VALUE CERTAIN TYPES OF ILLIQUID SECURITIES. FAIR VALUE PRICING GENERALLY WILL BE USED IF THE EXCHANGE ON WHICH A PORTFOLIO SECURITY IS TRADED CLOSES EARLY OR IF TRADING IN A PARTICULAR SECURITY WAS HALTED DURING THE DAY AND DID NOT RESUME PRIOR TO A FUND'S NET ASSET VALUE CALCULATION. A FUND MAY ALSO USE THESE METHODS TO VALUE SECURITIES THAT TRADE IN A FOREIGN MARKET, IF SIGNIFICANT EVENTS THAT APPEAR LIKELY TO AFFECT THE VALUE OF THOSE SECURITIES OCCUR BETWEEN THE TIME THAT FOREIGN MARKET CLOSES AND THE TIME THE EXCHANGE CLOSES. SIGNIFICANT EVENTS MAY INCLUDE (1) THOSE IMPACTING A SINGLE ISSUER, (2) GOVERNMENTAL ACTIONS THAT AFFECT SECURITIES IN ONE SECTOR OR COUNTRY, (3) NATURAL DISASTERS OR ARMED CONFLICTS AFFECTING A COUNTRY OR REGION, OR (4) SIGNIFICANT DOMESTIC OR FOREIGN MARKET FLUCTUATIONS. THE EFFECT OF USING FAIR VALUE PRICING IS THAT A FUND'S NET ASSET 56 Your Investment value will be subject to the judgment of Neuberger Berman Management Inc., operating under procedures approved by the Board of Trustees, instead of being determined by market prices. o DISTRIBUTIONS AND TAXES DISTRIBUTIONS -- Each Fund pays out to shareholders any net investment income and net realized capital gains. Ordinarily, the Funds make any distributions once a year (in December). Consult your investment provider about whether your income and capital gain distributions from a Fund will be reinvested in additional Trust Class shares of that Fund or paid to you in cash. HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement plans and accounts and other tax-exempt investors, all Fund distributions you receive are generally taxable to you, regardless of whether you take them in cash or reinvest them in additional Fund shares. Fund distributions to Roth IRAs, other individual retirement accounts ("IRAs") and qualified retirement plans generally are tax-free. Eventual withdrawals from a Roth IRA also may be tax-free, while withdrawals from other retirement accounts and plans generally are subject to tax. Distributions generally are taxable to you in the year you receive them. In some cases, however, distributions you receive in January are taxable as if they had been paid the previous December 31. Your tax statement (see "Taxes and You") will help clarify this for you. Distributions of income and the excess of net short-term capital gain over net long-term capital loss are generally taxed as ordinary income. However, a Fund's dividends attributable to "qualified dividend income" (generally, dividends it receives on stock of most U.S. and certain foreign corporations with respect to which it satisfies certain holding period, financing, and other restrictions) are subject to a 15% maximum federal income tax rate for individual shareholders who satisfy those restrictions with respect to their Fund shares on which the dividends were paid. Distributions of net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss) are generally taxed as long-term capital gain and are subject to that 15% maximum rate for individual shareholders. The tax treatment of capital gain distributions from a Fund depends on how long the Fund held the securities it sold, not when you bought your shares of the Fund or whether you reinvested your distributions. HOW SHARE TRANSACTIONS ARE TAXED -- When you sell (redeem) or exchange Fund shares, you generally realize a taxable gain or loss. An exception, once again, applies to tax-advantaged retirement plans and accounts and other tax-exempt investors. Any capital gain an individual shareholder recognizes on a redemption or exchange of his or her Fund shares that have been held for more than one year will qualify for the 15% maximum federal income tax rate mentioned above. [GRAPHIC OMITTED] TAXES AND YOU THE TAXES YOU ACTUALLY OWE ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS CAN VARY WITH MANY FACTORS, SUCH AS YOUR MARGINAL TAX BRACKET, HOW LONG YOU HELD YOUR SHARES, AND WHETHER YOU OWE ALTERNATIVE MINIMUM TAX. 57 Your Investment HOW CAN YOU FIGURE OUT YOUR TAX LIABILITY ON FUND DISTRIBUTIONS AND SHARE TRANSACTIONS? ONE HELPFUL TOOL IS THE TAX STATEMENT THAT YOUR INVESTMENT PROVIDER SENDS YOU EVERY JANUARY. IT DETAILS THE DISTRIBUTIONS YOU RECEIVED DURING THE PAST YEAR AND SHOWS THEIR TAX STATUS. A SEPARATE STATEMENT COVERS YOUR SHARE TRANSACTIONS. MOST IMPORTANTLY, CONSULT YOUR TAX PROFESSIONAL. EVERYONE'S TAX SITUATION IS DIFFERENT, AND YOUR PROFESSIONAL SHOULD BE ABLE TO HELP YOU ANSWER ANY QUESTIONS YOU MAY HAVE. [GRAPHIC OMITTED] BACKUP WITHHOLDING A FUND IS REQUIRED TO WITHHOLD 28% OF THE MONEY YOU ARE OTHERWISE ENTITLED TO RECEIVE FROM ITS DISTRIBUTIONS AND REDEMPTION PROCEEDS IF YOU ARE AN INDIVIDUAL OR CERTAIN OTHER NON-CORPORATE SHAREHOLDER WHO FAILS TO PROVIDE A CORRECT TAXPAYER IDENTIFICATION NUMBER TO THE FUND. WITHHOLDING AT THAT RATE ALSO IS REQUIRED FROM EACH FUND'S DISTRIBUTIONS TO WHICH YOU ARE OTHERWISE ENTITLED IF YOU ARE SUCH A SHAREHOLDER AND THE INTERNAL REVENUE SERVICE ("IRS") TELLS US THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING OR YOU ARE SUBJECT TO BACKUP WITHHOLDING FOR ANY OTHER REASON. IN THE CASE OF A CUSTODIAL ACCOUNT FOR A NEWBORN, IF A SOCIAL SECURITY NUMBER HAS BEEN APPLIED FOR BUT IS NOT AVAILABLE WHEN YOU COMPLETE THE ACCOUNT APPLICATION, YOU MAY OPEN THE ACCOUNT WITHOUT THAT NUMBER, IF WE RECEIVE (FROM YOU OR FROM YOUR INVESTMENT PROVIDER) THE CUSTODIAN'S DATE OF BIRTH AND SOCIAL SECURITY NUMBER TOGETHER WITH A COPY OF THE REQUEST MADE TO THE IRS FOR THE NEWBORN'S SOCIAL SECURITY NUMBER. HOWEVER, WE MUST RECEIVE THE NEW NUMBER WITHIN 60 DAYS OR THE ACCOUNT WILL BE CLOSED. FOR INFORMATION ON CUSTODIAL ACCOUNTS, CALL 800-877-9700. YOU MUST SUPPLY YOUR SIGNED TAXPAYER IDENTIFICATION NUMBER FORM TO YOUR INVESTMENT PROVIDER, IF ANY, AND IT MUST SUPPLY ITS TAXPAYER IDENTIFICATION NUMBER TO US, IN ORDER TO AVOID BACKUP WITHHOLDING. [GRAPHIC OMITTED] BUYING SHARES BEFORE A DISTRIBUTION THE MONEY A FUND EARNS, EITHER AS INCOME OR AS CAPITAL GAINS, IS REFLECTED IN ITS SHARE PRICE UNTIL IT DISTRIBUTES THE MONEY. AT THAT TIME, THE AMOUNT OF THE DISTRIBUTION IS DEDUCTED FROM THE SHARE PRICE. THE AMOUNT OF THE DISTRIBUTION IS EITHER REINVESTED IN ADDITIONAL SHARES OF THE DISTRIBUTING CLASS OF THE FUND OR PAID TO SHAREHOLDERS IN CASH. BECAUSE OF THIS, IF YOU BUY SHARES JUST BEFORE THE FUND MAKES A DISTRIBUTION, YOU WILL END UP GETTING SOME OF YOUR INVESTMENT BACK AS A TAXABLE DISTRIBUTION. YOU CAN AVOID THIS SITUATION BY WAITING TO INVEST UNTIL AFTER THE RECORD DATE FOR THE DISTRIBUTION. GENERALLY, IF YOU ARE INVESTING IN A FUND THROUGH A TAX-ADVANTAGED RETIREMENT PLAN OR ACCOUNT, THERE ARE NO TAX CONSEQUENCES TO YOU FROM DISTRIBUTIONS. o REDEMPTION FEE If you sell your shares of International Fund or exchange them for shares of another fund within 60 days of your purchase, you will be charged a fee of 2.00% on the current net asset value of the shares sold or exchanged. The fee is paid to the Fund to offset costs associated with short-term trading, such as portfolio transaction and administrative costs. 58 Your Investment The Fund uses a "first-in, first-out" method to determine how long you have held your Fund shares. This means that if you bought shares on different days, the shares purchased first will be considered redeemed first for purposes of determining whether the redemption fee will be charged. We may not impose the redemption fee on a redemption or an exchange of: -- shares acquired by reinvestment of dividends or other distributions of the Fund; -- shares held in an account of certain retirement plans; -- shares purchased through other investment providers, if the provider imposes a similar type of fee or otherwise has a policy in place to deter short-term trading; or -- shares held in certain rebalancing and asset allocation programs. You should contact your investment provider to determine whether it imposes a redemption fee or otherwise has a policy in place to deter short-term trading. From time to time, as circumstances change, we may modify or eliminate certain exemption categories. -- MARKET TIMING POLICY Frequent purchases, exchanges and redemptions of Fund shares ("market-timing activities") can interfere with Fund management and affect costs and performance for other shareholders. To discourage market-timing activities by Fund shareholders, the Board of Trustees has adopted market-timing policies and has approved the procedures of the principal underwriter for implementing those policies. As described earlier in this prospectus, pursuant to such policies, the exchange privilege can be withdrawn from any investor that is believed to be "timing the market" or is otherwise making exchanges judged to be excessive. In furtherance of these policies, under certain circumstances, the Funds reserve the right to reject any exchange or investment order; change, suspend or revoke the exchange privilege or suspend the telephone order privilege. To further discourage excessive trading, if a shareholder sells shares of International Fund or exchanges them for shares of another fund within 60 days of purchase, the shareholder will be charged a fee of 2.00% on the current net asset value of the shares sold or exchanged. The fee is paid to the Fund to offset costs associated with short-term trading, such as portfolio transaction and administrative costs, and is imposed uniformly on all applicable shareholders, with only a few exceptions. The Fund may not impose the fee on a redemption or exchange of: shares acquired by reinvestment of dividends or other distributions of the Funds; shares held in an account of certain retirement plans; shares purchased through an intermediary that imposes a similar type of fee or otherwise has a policy in place to deter short-term trading; or shares held in certain rebalancing and asset allocation programs. Neuberger Berman Management Inc. applies the Funds' policies and procedures with respect to market-timing activities by monitoring trading activity in the Funds, identifying excessive trading patterns, and warning or prohibiting shareholders who trade excessively from making further purchases or exchanges of Fund shares. These policies and procedures are applied consistently to all shareholders. Although the Funds make efforts to monitor for market-timing activities, the ability of the Funds to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and other approved intermediaries may be limited in those instances in which the investment intermediary maintains the underlying 59 Your Investment shareholder accounts. Accordingly, there can be no assurance that the Funds will be able to eliminate all market-timing activities. o-- PORTFOLIO HOLDINGS POLICY A description of the Funds' policies and procedures with respect to the disclosure of the Funds' portfolio holdings is available in the Funds' Statement of Additional Information. The complete portfolio holdings for each Fund (except Genesis, and Millennium Funds) are available at http://www.nb.com/ind/mutual_funds/prospectuses/ 15-30 days after each month-end; the complete portfolio holdings of Genesis and Millennium Funds are available 15-30 days after the end of each calendar quarter. Each Fund's complete portfolio holdings will remain available at www.nb.com until the subsequent month-end holdings have been posted (holdings for Genesis and Millennium Funds will be available for only 15-30 days.) Complete holdings for all Funds will also be available in reports on Form N-Q or Form N-CSR filed with the SEC. Historical portfolio holdings are available upon request. o FUND STRUCTURE Each Fund uses a "multiple class" structure. Each Neuberger Berman fund offers one or more classes of shares that have identical investment programs, but different arrangements for distribution and shareholder servicing and, consequently, different expenses. This prospectus relates solely to the Trust Class shares of the Funds. 60 Your Investment APPENDIX NEUBERGER BERMAN FOCUS FUND -- DESCRIPTION OF ECONOMIC SECTORS. Neuberger Berman Focus Fund seeks to achieve its investment objective by investing principally in common stocks in the following thirteen multi-industry economic sectors, normally making at least 90% of its investments in not more than six such sectors: (1) AUTOS AND HOUSING SECTOR: Companies engaged in design, production, or sale of automobiles, automobile parts, mobile homes, or related products ("automobile industries") or design, construction, renovation, or refurbishing of residential dwellings. The value of securities of companies in the automobile industries is affected by, among other things, foreign competition, the level of consumer confidence and consumer debt, and installment loan rates. The housing construction industry may be affected by the level of consumer confidence and consumer debt, mortgage rates, tax laws, and the inflation outlook. (2) CONSUMER GOODS AND SERVICES SECTOR: Companies engaged in providing consumer goods or services, including design, processing, production, sale, or storage of packaged, canned, bottled, or frozen foods and beverages and design, production, or sale of home furnishings, appliances, clothing, accessories, cosmetics, or perfumes. Certain of these companies are subject to government regulation affecting the use of various food additives and production methods, which could affect profitability. Also, the success of food- and fashion-related products may be strongly affected by fads, marketing campaigns, health concerns, and other factors affecting supply and demand. (3) DEFENSE AND AEROSPACE SECTOR: Companies involved in research, manufacture, or sale of products or services related to the defense or aerospace industries, including air transport; data processing or computer-related services; communications systems; military weapons or transportation; general aviation equipment, missiles, space launch vehicles, or spacecraft; machinery for guidance, propulsion, or control of flight vehicles; and airborne or ground-based equipment essential to the test, operation, or maintenance of flight vehicles. Because these companies rely largely on U.S. (and foreign) governmental demand for their products and services, their financial conditions are heavily influenced by defense spending, foreign assistance and export control policies. (4) ENERGY SECTOR: Companies involved in the production, transmission, or marketing of energy from oil, gas, or coal, as well as nuclear, geothermal, oil shale, or solar sources of energy (but excluding public utility companies). Also included are companies that provide component products or services for those activities. The value of these companies' securities varies based on the price and supply of energy fuels and may be affected by international politics, energy conservation, the success of exploration projects, environmental considerations, and the tax and other regulatory policies of various governments. (5) FINANCIAL SERVICES SECTOR: Companies providing financial services to consumers or industry, including commercial banks and savings and loan associations, consumer and industrial finance companies, securities brokerage companies, leasing companies, and insurance companies. Their profitability may fluctuate significantly as a result of volatile interest rates, concerns about particular banks and savings institutions, and general economic conditions. The economic prospects of this sector are strongly affected by the cost of short-term funds and the rate of default on consumer and business loans. The sector is also subject to extensive governmental 61 APPENDIX regulation, which can limit or assist its business prospects. Recent regulatory changes have allowed much greater competition among banks, securities firms and insurance companies. This is resulting in a wave of consolidations within this sector; however, the ultimate impact of these changes in any one company or portion of the financial services sector is difficult to predict. (6) HEALTH CARE SECTOR: Companies engaged in design, manufacture, or sale of products or services used in connection with the provision of health care, including pharmaceutical companies; firms that design, manufacture, sell, or supply medical, dental, or optical products, hardware, or services; companies involved in biotechnology, medical diagnostic, or biochemical research and development; and companies that operate health care facilities. Many of these companies are subject to government regulation and potential health care reforms, which could affect the price and availability and their products and services. Also, products and services of these companies could quickly become obsolete. (7) HEAVY INDUSTRY SECTOR: Companies engaged in research, development, manufacture, or marketing of products, processes, or services related to the agriculture, chemicals containers, forest products, non-ferrous metals, steel, or pollution control industries, including synthetic and natural materials (for example, chemicals, plastics, fertilizers, gases, fibers, flavorings, or fragrances), paper, wood products, steel and cement. Certain of these companies are subject to state and federal regulation, which could require alteration or cessation of production of a product, payment of fines, or cleaning of a disposal site. Furthermore, because some of the materials and processes used by these companies involve hazardous components, there are additional risks associated with their production, handling and disposal. The risk of product obsolescence also is present. (8) MACHINERY AND EQUIPMENT SECTOR: Companies engaged in the research, development, or manufacture of products, processes, or services relating to electrical equipment, machinery, pollution control, or construction services, including transformers, motors, turbines, hand tools, earth-moving equipment, and waste disposal services. The profitability of most of these companies may fluctuate significantly in response to capital spending and general economic conditions. As is the case for the heavy industry sector, there are risks associated with the production, handling and disposal of materials and processes that involve hazardous components and the risk of product obsolescence. (9) MEDIA AND ENTERTAINMENT SECTOR: Companies engaged in design, production, or distribution of goods or services for the media industries (including television or radio broadcasting or manufacturing, publishing, recordings and musical instruments, motion pictures, and photography) and the entertainment industries (including sports arenas, amusement and theme parks, gaming casinos, sporting goods, camping and recreational equipment, toys and games, travel-related services, hotels and motels, and fast food and other restaurants). Many products produced by companies in this sector -- for example, video and electronic games -- may become obsolete quickly. Additionally, companies engaged in television and radio broadcasts are subject to government regulation. (10) RETAILING SECTOR: Companies engaged in retail distribution of home furnishings, food products, clothing, pharmaceuticals, leisure products, or other consumer goods, including department stores, supermarkets, and retail chains specializing in particular items such as shoes, toys, or pharmaceuticals. The value of these companies' securities fluctuates based on consumer spending patterns, which depend on inflation and interest rates, the levels of consumer debt and 62 APPENDIX consumer confidence, and seasonal shopping habits. The success or failure of a company in this highly competitive sector depends on its ability to predict rapidly changing consumer tastes. (11) TECHNOLOGY SECTOR: Companies that are expected to have or develop products, processes, or services that will provide, or will benefit significantly from, technological advances and improvements or future automation trends, including semiconductors, computers and peripheral equipment, scientific instruments, computer software, telecommunications equipment, and electronic components, instruments, and systems. These companies are sensitive to foreign competition and import tariffs. Also, many of their products may become obsolete quickly. (12) TRANSPORTATION SECTOR: Companies involved in providing transportation of people and products, including airlines, railroads, and trucking firms. Revenues of these companies are affected by fluctuations in fuel prices and government regulation of fares as well as the general level of economic activity and the public's willingness to travel. (13) UTILITIES SECTOR: Companies in the public utilities industry and companies that derive a substantial majority of their revenues through supplying public utilities (including companies engaged in the manufacture, production, generation, transmission, or sale of gas and electric energy) and that provide telephone, telegraph, satellite, microwave, and other communication facilities to the public. The gas and electric public utilities industries are subject to various uncertainties, including the outcome of political issues concerning the environment, prices of fuel for electric generation, availability of natural gas, and risks associated with the construction and operation of nuclear power facilities. MARKET RISK The following is a discussion of the risks of investing in the various capitalization components of the stock market and the risks of using either a value or growth approach to selecting these securities. (1) SMALL-CAP STOCKS: The stocks of smaller companies are often more volatile and less liquid than the stocks of larger companies, and these companies may have a shorter history of operations than larger companies. They may not have as great an ability to raise additional capital; and may have a less diversified product line, making them more susceptible to market pressure. Small-cap stocks may also underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when small-cap stocks are out of favor. Finally, small-cap stocks may be more affected than other types of stock by the underperformance of a sector in which they may be more concentrated. (2) MID-CAP STOCKS: Mid-cap stocks may fluctuate more widely in price than the market as a whole and may underperform other types of stocks or be difficult to sell when the economy is not robust, during market downturns, or when mid-cap stocks are out of favor. (3) LARGE-CAP STOCKS: At times, large-cap stocks may lag other types of stocks in performance, which could cause a fund holding these stocks to perform worse than certain other funds over a given time period. (4) VALUE STOCKS: With a value approach, there is the risk that stocks may remain undervalued during a given period. This may happen because value stocks as a category lose favor with investors compared to growth stocks or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions. 63 APPENDIX (5) GROWTH STOCKS: Because the prices of most growth stocks are based on future expectations, these stocks tend to be more sensitive than value stocks to bad economic news and negative earnings surprises. Bad economic news or changing investor perceptions can negatively affect growth stocks across several industries and sectors simultaneously. While the prices of any type of stock can rise and fall rapidly, growth stocks in particular may underperform during periods when the market favors value stocks. 64 APPENDIX [GRAPHIC OMITTED] NEUBERGER BERMAN EQUITY FUNDS TRUST CLASS SHARES No load or sales charges If you would like further details on these Funds you can request a free copy of the following documents: SHAREHOLDER REPORTS -- The shareholder reports offer information about each Fund's recent performance, including: o a discussion by the Portfolio Managers about strategies and market conditions that significantly affect the Fund's performance o Fund performance data and financial statements o portfolio holdings STATEMENT OF ADDITIONAL INFORMATION (SAI) -- The SAI contains more comprehensive information on these Funds, including: o various types of securities and practices, and their risks o investment limitations and additional policies o information about each Fund's management and business structure The SAI is hereby incorporated by reference into this prospectus, making it legally part of the prospectus. Investment manager: NEUBERGER BERMAN MANAGEMENT INC. Sub-adviser: NEUBERGER BERMAN, LLC [GRAPHIC OMITTED] OBTAINING INFORMATION You can obtain a shareholder report, SAI, and other information from your investment provider, or from: NEUBERGER BERMAN MANAGEMENT INC. 605 Third Avenue 2nd Floor New York, NY 10158-0180 800-877-9700 212-476-8800 Broker/Dealer and Institutional Services: 800-366-6264 Web site: www.nb.com Email: fundinquiries@nb.com You can also request copies of this information from the SEC for the cost of a duplicating fee by sending an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, 100 F Street, N.E., Washington, DC 20549-9303. They are also available from the EDGAR Database on the SEC's website at www.sec.gov. You may also view and copy the documents at the SEC's Public Reference Room in Washington. Call 202-551-8090 for information about the operation of the Public Reference Room. [GRAPHIC OMITTED] A0090 12/06 SEC file number: 811-582 [GRAPHIC OMITTED] 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.nb.com ------------------------------------------------------------------------------------------------------------ NEUBERGER BERMAN EQUITY FUNDS STATEMENT OF ADDITIONAL INFORMATION Investor Class Shares, Trust Class Shares, Advisor Class Shares, and Institutional Class Shares DATED DECEMBER 20, 2006 Neuberger Berman ALL CAP GROWTH Fund Neuberger Berman CENTURY Fund Neuberger Berman FASCIANO Fund Neuberger Berman FOCUS Fund Neuberger Berman GENESIS Fund Neuberger Berman GUARDIAN Fund Neuberger Berman INTERNATIONAL Fund Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund Neuberger Berman INTERNATIONAL LARGE CAP Fund Neuberger Berman MANHATTAN Fund Neuberger Berman MILLENNIUM Fund Neuberger Berman PARTNERS Fund Neuberger Berman REAL ESTATE Fund Neuberger Berman REGENCY Fund Neuberger Berman SOCIALLY RESPONSIVE Fund -------------------------------------------------------------------------------------------------------------
605 Third Avenue, 2[nd] Floor, New York, NY 10158-0180 Toll-Free 800-877-9700 Neuberger Berman ALL CAP GROWTH Fund, Neuberger Berman CENTURY Fund, Neuberger Berman FASCIANO Fund, Neuberger Berman FOCUS Fund, Neuberger Berman GENESIS Fund, Neuberger Berman GUARDIAN Fund, Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman MANHATTAN Fund, Neuberger Berman MILLENNIUM Fund, Neuberger Berman PARTNERS Fund, Neuberger Berman REAL ESTATE Fund, Neuberger Berman REGENCY Fund, and Neuberger Berman SOCIALLY RESPONSIVE Fund (each a "Fund") are mutual funds that offer shares pursuant to Prospectuses dated December 20, 2006. The Prospectus for your share class provides more information about the Funds that you should know before investing. You can get a free copy of the Prospectus for your share class from Neuberger Berman Management Inc. ("NB Management"), 605 Third Avenue, 2[nd] Floor, New York, NY 10158-0180, or by calling 800-877-9700. You should read the appropriate Prospectus carefully before investing. This Statement of Additional Information ("SAI") is not a prospectus and should be read in conjunction with the Prospectus for your share class. No person has been authorized to give any information or to make any representations not contained in the Prospectuses or in this SAI in connection with the offering made by the Prospectuses, and, if given or made, such information or representations must not be relied upon as having been authorized by a Fund or its distributor. The Prospectuses and this SAI do not constitute an offering by a Fund or its distributor in any jurisdiction in which such offering may not lawfully be made. The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman, LLC. "Neuberger Berman Management Inc." and the Fund names in this SAI are either service marks or registered service marks of Neuberger Berman Management Inc. {copyright}2006 Neuberger Berman Management Inc. All rights reserved. ii TABLE OF CONTENTS Page INVESTMENT INFORMATION.........................................................1 Investment Policies and Limitations......................................1 Cash Management and Temporary Defensive Positions........................6 PERFORMANCE INFORMATION.......................................................33 Average Annual Total Return Computations................................39 Average Annual Total Return After Taxes on Distributions................39 Average Annual Total Return After Taxes on Distributions and Sale of Fund Shares.......................................................40 CERTAIN RISK CONSIDERATIONS...................................................40 TRUSTEES AND OFFICERS.........................................................40 INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES.............................58 Investment Manager and Administrator....................................58 Sub-Adviser.............................................................72 Portfolio Manager Information...........................................72 Investment Companies Managed............................................79 Codes of Ethics.........................................................80 Management and Control of NB Management and Neuberger Berman............80 DISTRIBUTION ARRANGEMENTS.....................................................81 Distribution Plan (Trust Class Only)....................................84 Distribution Plan (Advisor Class Only)..................................85 ADDITIONAL PURCHASE INFORMATION...............................................86 Share Prices and Net Asset Value (All Classes)..........................86 Automatic Investing and Dollar Cost Averaging...........................88 ADDITIONAL EXCHANGE INFORMATION...............................................88 ADDITIONAL REDEMPTION INFORMATION.............................................94 Suspension of Redemptions...............................................94 Redemptions in Kind.....................................................95 DIVIDENDS AND OTHER DISTRIBUTIONS.............................................95 ADDITIONAL TAX INFORMATION....................................................96 Taxation of the Funds...................................................96 Taxation of the Funds' Shareholders....................................101 FUND TRANSACTIONS............................................................101 Commission Recapture Program and Expense Offset Arrangement............112 Portfolio Turnover.....................................................114 ii Proxy Voting...........................................................114 PORTFOLIO HOLDINGS DISCLOSURE................................................115 REPORTS TO SHAREHOLDERS......................................................117 ORGANIZATION, CAPITALIZATION AND OTHER MATTERS...............................117 CUSTODIAN AND TRANSFER AGENT.................................................118 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM................................119 LEGAL COUNSEL................................................................119 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..........................119 REGISTRATION STATEMENT.......................................................134 FINANCIAL STATEMENTS.........................................................134 APPENDIX A - RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER.................A-1 ii INVESTMENT INFORMATION Each Fund is a separate operating series of Neuberger Berman Equity Funds ("Trust"), a Delaware statutory trust that is registered with the Securities and Exchange Commission ("SEC") as a diversified, open-end management investment company. At the close of business on March 23, 2001, Neuberger Berman FASCIANO Fund acquired all of the assets and assumed all of the liabilities of Fasciano Fund, Inc. Through December 15, 2000, the other Funds' Advisor Class, Investor Class, Trust Class, and Institutional Class (each a "Class") units of beneficial interest ("shares") were organized as feeder funds in a master-feeder structure rather than a multiple-class structure (except for Neuberger Berman ALL CAP GROWTH Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, Neuberger Berman INTERNATIONAL LARGE CAP Fund, and Neuberger Berman REAL ESTATE Fund). These feeder funds were series of Neuberger Berman Equity Assets, Neuberger Berman Equity Funds, Neuberger Berman Equity Trust, and Neuberger Berman Equity Series, respectively. Neuberger Berman ALL CAP GROWTH Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, Neuberger Berman INTERNATIONAL LARGE CAP Fund, and Neuberger Berman REAL ESTATE Fund commenced operations as separate series of the Trust on September 5, 2006, June 17, 2005, August 1, 2006, and May 1, 2002, respectively. The following information supplements the discussion in the Prospectuses of the investment objective, policies, and limitations of each Fund. The investment objective and, unless otherwise specified, the investment policies and limitations of each Fund are not fundamental. Any investment objective, policy, or limitation that is not fundamental may be changed by the trustees of the Trust ("Fund Trustees") without shareholder approval. The fundamental investment policies and limitations of a Fund may not be changed without the approval of the lesser of: (1)67% of the shares of the Fund represented at a meeting at which more than 50% of the outstanding Fund shares are represented, or (2)a majority of the outstanding shares of the Fund. These percentages are required by the Investment Company Act of 1940, as amended ("1940 Act"), and are referred to in this SAI as a "1940 Act majority vote." INVESTMENT POLICIES AND LIMITATIONS ----------------------------------- Except as set forth in the limitation on borrowing, any investment policy or limitation that involves a maximum percentage of securities or assets will not be considered exceeded unless the percentage limitation is exceeded immediately after, and because of, a transaction by a Fund. 1 The following investment policies and limitations are fundamental and apply to all Funds unless otherwise indicated: 1. BORROWING (ALL FUNDS EXCEPT NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, AND NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND). No Fund may borrow money, except that a Fund may (i) borrow money from banks for temporary or emergency purposes and not for leveraging or investment and (ii) enter into reverse repurchase agreements for any purpose; provided that (i) and (ii) in combination do not exceed 33-1/3% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). If at any time borrowings exceed 33-1/3% of the value of a Fund's total assets, that Fund will reduce its borrowings within three days (excluding Sundays and holidays) to the extent necessary to comply with the 33- 1/3% limitation. BORROWING (NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, AND NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND). No Fund may borrow money, except that a Fund may (i) borrow money from banks for temporary or emergency purposes and for leveraging or investment and (ii) enter into reverse repurchase agreements for any purpose; provided that (i) and (ii) in combination do not exceed 33-1/3% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). If at any time borrowings exceed 33-1/3% of the value of a Fund's total assets, that Fund will reduce its borrowings within three days (excluding Sundays and holidays) to the extent necessary to comply with the 33-1/3% limitation. 2. COMMODITIES (ALL FUNDS EXCEPT NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, AND NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND). No Fund may purchase physical commodities or contracts thereon, unless acquired as a result of the ownership of securities or instruments, but this restriction shall not prohibit a Fund from purchasing futures contracts or options (including options on futures contracts, but excluding options or futures contracts on physical commodities) or from investing in securities of any kind. COMMODITIES (NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, AND NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND). No Fund may purchase physical commodities or contracts thereon, unless acquired as a result of the ownership of securities or instruments, but this restriction shall not prohibit a Fund from purchasing futures contracts, options (including options on futures contracts, but excluding options or futures contracts on physical commodities), foreign currencies or forward contracts, or from investing in securities of any kind. 3. DIVERSIFICATION (ALL FUNDS EXCEPT NEUBERGER BERMAN FOCUS FUND AND NEUBERGER BERMAN REAL ESTATE FUND). No Fund may, with respect to 75% of the value of its total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities ("U.S. Government and Agency Securities"), or securities issued by other investment companies) if, as a result, (i) more than 5% of the value of the Fund's total assets would be invested in the securities of that issuer or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer. 2 DIVERSIFICATION (NEUBERGER BERMAN FOCUS FUND AND NEUBERGER BERMAN REAL ESTATE FUND). Each Fund is non-diversified under the 1940 Act. 4. INDUSTRY CONCENTRATION (ALL FUNDS EXCEPT NEUBERGER BERMAN REAL ESTATE FUND). No Fund may purchase any security if, as a result, 25% or more of its total assets (taken at current value) would be invested in the securities of issuers having their principal business activities in the same industry. This limitation does not apply to U.S. Government and Agency Securities. INDUSTRY CONCENTRATION (NEUBERGER BERMAN REAL ESTATE FUND). The Fund may not purchase any security if, as a result, 25% or more of its total assets (taken at current value) would be invested in the securities of issuers having their principal business activities in the same industry, except that the Fund will invest greater than 25% of its total assets in the real estate industry. This limitation does not apply to U.S. Government and Agency Securities. 5. LENDING. No Fund may lend any security or make any other loan if, as a result, more than 33-1/3% of its total assets (taken at current value) would be lent to other parties, except, in accordance with its investment objective, policies, and limitations, (i) through the purchase of a portion of an issue of debt securities or (ii) by engaging in repurchase agreements. 6. REAL ESTATE (ALL FUNDS EXCEPT NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND, AND NEUBERGER BERMAN REAL ESTATE FUND). No Fund may purchase real estate unless acquired as a result of the ownership of securities or instruments, but this restriction shall not prohibit a Fund from purchasing securities issued by entities or investment vehicles that own or deal in real estate or interests therein or instruments secured by real estate or interests therein. REAL ESTATE (NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, AND NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND). No Fund may invest any part of its total assets in real estate or interests in real estate unless acquired as a result of the ownership of securities or instruments, but this restriction shall not prohibit a Fund from purchasing readily marketable securities issued by entities or investment vehicles that own or deal in real estate or interests therein or instruments secured by real estate or interests therein. REAL ESTATE (NEUBERGER BERMAN REAL ESTATE FUND). The Fund may not purchase real estate unless acquired as a result of the ownership of securities or instruments, except that the Fund may (i) invest in securities of issuers that mortgage, invest or deal in real estate or interests therein, (ii) invest in securities that are secured by real estate or interests therein, (iii) purchase and sell mortgage-related securities, (iv) hold and sell real estate acquired by the Fund as a result of the ownership of securities, and (v) invest in real estate investment trusts of any kind. 7. SENIOR SECURITIES. No Fund may issue senior securities, except as permitted under the 1940 Act. 8. UNDERWRITING. No Fund may underwrite securities of other issuers, except to the extent that a Fund, in disposing of portfolio securities, may be deemed to be an underwriter within the meaning of the Securities Act of 1933, as amended ("1933 Act"). 3 For purposes of the limitation on commodities, the Funds do not consider foreign currencies or forward contracts to be physical commodities. Each Fund (except Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman MILLENNIUM Fund, and Neuberger Berman SOCIALLY RESPONSIVE Fund) has the following fundamental investment policy: Notwithstanding any other investment policy of the Fund, the Fund may invest all of its investable assets (cash, securities, and receivables relating to securities) in an open-end management investment company having substantially the same investment objective, policies, and limitations as the Fund. Neuberger Berman MILLENNIUM Fund and Neuberger Berman SOCIALLY RESPONSIVE Fund have the following fundamental investment policy: Notwithstanding any other investment policy of the Fund, the Fund may invest all of its net investable assets (cash, securities, and receivables relating to securities) in an open-end management investment company having substantially the same investment objective, policies, and limitations as the Fund. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund have the following fundamental investment policy: Notwithstanding any other investment policy of the Fund, the Fund may invest all of its net investable assets in an open-end management investment company having substantially the same investment objective, policies, and limitations as the Fund. For the purposes of the limitation on industry concentration, please note that Neuberger Berman INTERNATIONAL LARGE CAP Fund relies on the Global Industry Classification Standard, which considers diversified commercial banks and regional commercial banks to be separate industries. The following investment policies and limitations are non-fundamental and apply to all Funds unless otherwise indicated: 1. BORROWING (ALL FUNDS EXCEPT NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, AND NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND). None of these Funds may purchase securities if outstanding borrowings, including any reverse repurchase agreements, exceed 5% of its total assets. 2. LENDING. Except for the purchase of debt securities and engaging in repurchase agreements, no Fund may make any loans other than securities loans. 3. MARGIN TRANSACTIONS. No Fund may purchase securities on margin from brokers or other lenders, except that a Fund may obtain such short-term credits 4 as are necessary for the clearance of securities transactions. Margin payments in connection with transactions in futures contracts and options on futures contracts shall not constitute the purchase of securities on margin and shall not be deemed to violate the foregoing limitation. 4. FOREIGN SECURITIES (ALL FUNDS EXCEPT NEUBERGER BERMAN CENTURY FUND, NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND AND NEUBERGER BERMAN MILLENNIUM FUND). None of these Funds may invest more than 10% of the value of its total assets in securities denominated in foreign currency. FOREIGN SECURITIES (NEUBERGER BERMAN CENTURY FUND AND NEUBERGER BERMAN MILLENNIUM FUND). Neither of these Funds may invest more than 20% of the value of its total assets in securities denominated in foreign currency. These policies do not limit investment in American Depository Receipts ("ADRs") and similar instruments denominated in U.S. dollars, where the underlying security may be denominated in a foreign currency. 5. ILLIQUID SECURITIES. No Fund may purchase any security if, as a result, more than 15% of its net assets would be invested in illiquid securities. Illiquid securities include securities that cannot be sold within seven days in the ordinary course of business for approximately the amount at which the Fund has valued the securities, such as repurchase agreements maturing in more than seven days. 6. PLEDGING (NEUBERGER BERMAN GENESIS FUND AND NEUBERGER BERMAN GUARDIAN FUND). Neither of these Funds may pledge or hypothecate any of its assets, except that (i) Neuberger Berman GENESIS Fund may pledge or hypothecate up to 15% of its total assets to collateralize a borrowing permitted under fundamental policy 1 above or a letter of credit issued for a purpose set forth in that policy and (ii) each Fund may pledge or hypothecate up to 5% of its total assets in connection with its entry into any agreement or arrangement pursuant to which a bank furnishes a letter of credit to collateralize a capital commitment made by the Fund to a mutual insurance company of which the Fund is a member. The other Funds are not subject to any restrictions on their ability to pledge or hypothecate assets and may do so in connection with permitted borrowings. 7. INVESTMENTS IN ANY ONE ISSUER (NEUBERGER BERMAN FOCUS FUND AND NEUBERGER BERMAN REAL ESTATE FUND). At the close of each quarter of each Fund's taxable year, (i) no more than 25% of the value of its total assets may be invested in the securities of a single issuer and (ii) with regard to 50% of its total assets, no more than 5% of the value of its total assets may be invested in the securities of a single issuer. These limitations do not apply to government securities, as defined for purposes of Subchapter M of Chapter 1 of the Internal Revenue Code of 1986, as amended ("Code"), or securities of another regulated investment company (as so defined) ("RIC"). 8. SOCIAL POLICY (NEUBERGER BERMAN SOCIALLY RESPONSIVE FUND). The Fund may not purchase securities of issuers that derive more than 5% of their total 5 revenue from the production of alcohol, tobacco, weapons or nuclear power and may not purchase securities of issuers deriving more than 5% of total revenue from gambling. 9. EQUITY SECURITIES. Each Fund normally invests at least 80% of its net assets in equity securities. Although this is a non-fundamental policy, the Fund Trustees will not change this policy without at least 60 days' notice to shareholders. As used in this policy, "assets" means net assets plus the amount of any borrowing for investment purposes. (Only Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund may borrow for investment purposes.) CASH MANAGEMENT AND TEMPORARY DEFENSIVE POSITIONS. For temporary defensive purposes, or to manage cash pending investment or distribution, each Fund (except Neuberger Berman SOCIALLY RESPONSIVE Fund, Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund) may invest up to 100% of its total assets in cash and cash equivalents, U.S. Government and Agency Securities, commercial paper, and certain other money market instruments, as well as repurchase agreements collateralized by the foregoing. For temporary defensive purposes, or to manage cash pending investment or payout, any part of Neuberger Berman SOCIALLY RESPONSIVE Fund's assets may be retained temporarily in U.S. Government and Agency Securities, investment grade fixed income securities of non-governmental issuers, repurchase agreements, money market instruments, commercial paper, and cash and cash equivalents. Generally, the foregoing temporary investments for Neuberger Berman SOCIALLY RESPONSIVE Fund are selected with a concern for the social impact of each investment. For instance the Neuberger Berman SOCIALLY RESPONSIVE Fund can invest in certificates of deposits issued by community banks and credit unions. For temporary defensive purposes, or to manage cash pending investment or payout, Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may invest up to 100% of its total assets in short-term foreign and U.S. investments, such as cash or cash equivalents, commercial paper, short-term bank obligations, U.S. Government and Agency Securities, and repurchase agreements. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may also invest in such instruments to increase liquidity or to provide collateral to be held in segregated accounts. Pursuant to an exemptive order received from the SEC, each Fund also may invest in shares of a money market fund or an unregistered fund, each managed by NB Management or an affiliate, to manage uninvested cash (which will only be invested in shares of a money market fund) and cash collateral received in connection with securities lending. The unregistered fund seeks a higher return by investing in debt instruments with maturities beyond those permitted to a money market fund. The money market fund and unregistered fund do not invest in accordance with Neuberger Berman SOCIALLY RESPONSIVE Fund's Social Policy. Investments of uninvested cash in shares of registered money market funds managed by NB Management or an affiliate are limited to amounts not exceeding 25% of the investing fund's total assets. 6 ADDITIONAL INVESTMENT INFORMATION --------------------------------- Some or all of the Funds, as indicated below, may make the following investments, among others; some of which are part of the Fund's principal investment strategies and some of which are not. The principal risks of each Fund's principal strategies are discussed in the Prospectuses. They may not buy all of the types of securities or use all of the investment techniques that are described. ILLIQUID SECURITIES (ALL FUNDS). Illiquid securities are securities that cannot be expected to be sold within seven days at approximately the price at which they are valued. These may include unregistered or other restricted securities and repurchase agreements maturing in greater than seven days. Illiquid securities may also include commercial paper under section 4(2) of the 1933 Act, and Rule 144A securities (restricted securities that may be traded freely among qualified institutional buyers pursuant to an exemption from the registration requirements of the securities laws); these securities are considered illiquid unless NB Management, acting pursuant to guidelines established by the Fund Trustees, determines they are liquid. Most such securities held by the Funds are deemed liquid. Generally, foreign securities freely tradable in their principal market are not considered restricted or illiquid even if they are not registered in the United States. Illiquid securities may be difficult for a Fund to value or dispose of due to the absence of an active trading market. The sale of some illiquid securities by the Funds may be subject to legal restrictions that could be costly to the Funds. POLICIES AND LIMITATIONS. Each Fund may invest up to 15% of its net assets in illiquid securities. REPURCHASE AGREEMENTS (ALL FUNDS). In a repurchase agreement, a Fund purchases securities from a bank that is a member of the Federal Reserve System (or, in the case of Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, and Neuberger Berman INTERNATIONAL LARGE CAP Funds also from a foreign bank or from a U.S. branch or agency of a foreign bank) or from a securities dealer that agrees to repurchase the securities from it at a higher price on a designated future date. Repurchase agreements generally are for a short period of time, usually less than a week. Costs, delays, or losses could result if the selling party to a repurchase agreement becomes bankrupt or otherwise defaults. NB Management monitors the creditworthiness of sellers. If Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund or Neuberger Berman INTERNATIONAL LARGE CAP Fund enters into a repurchase agreement subject to foreign law and the counter party defaults, that Fund may not enjoy protections comparable to those provided to certain repurchase agreements under U.S. bankruptcy law and may suffer delays and losses in disposing of the collateral as a result. POLICIES AND LIMITATIONS. Repurchase agreements with a maturity of more than seven days are considered to be illiquid securities. No Fund may enter into a repurchase agreement with a maturity of more than seven days if, as a result, more than 15% of the value of its net assets would then be invested in such repurchase agreements and other illiquid securities. A Fund may enter into a repurchase agreement only if (1) the underlying securities are of a type that the Fund's investment policies and limitations would allow it to purchase directly, (2) the market value of the underlying securities, including accrued interest, at all times equals or exceeds the repurchase price, and (3) payment for the underlying securities is made only upon satisfactory evidence that the securities are being held for the Fund's account by its custodian or a bank acting as the Fund's agent. 7 SECURITIES LOANS (ALL FUNDS). Each Fund may lend portfolio securities to banks, brokerage firms, and other institutional investors judged creditworthy by NB Management, provided that cash or equivalent collateral, equal to at least 102% (105% in the case of foreign securities) of the market value of the loaned securities, is continuously maintained by the borrower with the Fund. The Fund may invest the cash collateral and earn income, or it may receive an agreed upon amount of interest income from a borrower that has delivered equivalent collateral. During the time securities are on loan, the borrower will pay the Fund an amount equivalent to any dividends or interest paid on such securities. These loans are subject to termination at the option of the Fund or the borrower. The Fund may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash or equivalent collateral to the borrower or placing broker. The Fund does not have the right to vote securities on loan, but would terminate the loan and regain the right to vote if that were considered important with respect to the investment. NB Management believes the risk of loss on these transactions is slight because if a borrower were to default for any reason, the collateral should satisfy the obligation. However, as with other extensions of secured credit, loans of portfolio securities involve some risk of loss of rights in the collateral should the borrower fail financially. Subject to compliance with the conditions of an SEC exemptive order, the Funds can loan securities through a separate operating unit of Neuberger Berman, LLC ("Neuberger Berman") or an affiliate of Neuberger Berman, acting as agent. The Funds also can loan securities to Neuberger Berman and its affiliates (other than NB Management), subject to the conditions of the SEC order. The Funds may also loan securities through eSecLending, which provides securities loans to principal borrowers arranged through a bidding process managed by eSecLending. POLICIES AND LIMITATIONS. Each Fund may lend portfolio securities with a value not exceeding 33-1/3% of its total assets to banks, brokerage firms, or other institutional investors judged creditworthy by NB Management. Borrowers are required continuously to secure their obligations to return securities on loan from a Fund by depositing collateral in a form determined to be satisfactory by the Fund Trustees. The collateral, which must be marked to market daily, must be equal to at least 102% (105% in the case of foreign securities) of the market value of the loaned securities, which will also be marked to market daily. See the section entitled "Cash Management and Temporary Defensive Positions" for information on how the cash collateral may be invested. A Fund does not count the collateral for purposes of any investment policy or limitation that requires that Fund to invest specific percentages of its assets in accordance with its principal investment program. RESTRICTED SECURITIES AND RULE 144A SECURITIES (ALL FUNDS). Each Fund may invest in restricted securities, which are securities that may not be sold to the public without an effective registration statement under the 1933 Act. Before they are registered, such securities may be sold only in a privately negotiated transaction or pursuant to an exemption from registration. In recognition of the increased size and liquidity of the institutional market for unregistered securities and the importance of institutional investors in the formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule 144A is designed to facilitate efficient trading among institutional investors by permitting the sale of certain unregistered securities to qualified institutional buyers. To the extent privately placed securities held by a Fund qualify under Rule 144A and an institutional market develops for those securities, that Fund likely will be able to dispose of the securities without registering them under the 1933 Act. To the extent that institutional buyers become, for a time, uninterested in purchasing these securities, investing in Rule 144A securities could increase the level of a Fund's illiquidity. NB 8 Management, acting under guidelines established by the Fund Trustees, may determine that certain securities qualified for trading under Rule 144A are liquid. Regulation S under the 1933 Act permits the sale abroad of securities that are not registered for sale in the United States. Where registration is required, a Fund may be obligated to pay all or part of the registration expenses, and a considerable period may elapse between the decision to sell and the time that Fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, that Fund might obtain a less favorable price than prevailed when it decided to sell. Restricted securities for which no market exists are priced by a method that the Fund Trustees believe accurately reflects fair value. POLICIES AND LIMITATIONS. To the extent restricted securities, including Rule 144A securities, are illiquid, purchases thereof will be subject to each Fund's 15% limit on investments in illiquid securities. REVERSE REPURCHASE AGREEMENTS (ALL FUNDS). In a reverse repurchase agreement, a Fund sells portfolio securities subject to its agreement to repurchase the securities at a later date for a fixed price reflecting a market rate of interest. There is a risk that the counter party to a reverse repurchase agreement will be unable or unwilling to complete the transaction as scheduled, which may result in losses to a Fund. POLICIES AND LIMITATIONS. Reverse repurchase agreements are considered borrowings for purposes of each Fund's investment policies and limitations concerning borrowings. While a reverse repurchase agreement is outstanding, a Fund will deposit in a segregated account with its custodian cash or appropriate liquid securities, marked to market daily, in an amount at least equal to that Fund's obligations under the agreement. LEVERAGE (ALL FUNDS). Leverage creates an opportunity for increased total return but, at the same time, creates special risk considerations. For example, leverage may amplify changes in a Fund's net asset value ("NAV"). Although the principal of such borrowings will be fixed, a Fund's assets may change in value during the time the borrowing is outstanding. Leverage from borrowing creates interest expenses for a Fund. To the extent the income derived from securities purchased with borrowed funds exceeds the interest a Fund will have to pay, that Fund's total return will be greater than it would be if leverage were not used. Conversely, if the income from the assets obtained with borrowed funds is not sufficient to cover the cost of leveraging, the net income of a Fund will be less than it would be if leverage were not used, and therefore the amount available for distribution to that Fund's shareholders as dividends, if any, will be reduced. Reverse repurchase agreements create leverage and are considered borrowings for purposes of each Fund's investment limitations. In addition, securities lending transactions and when-issued transactions may create leverage. POLICIES AND LIMITATIONS. Each of Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund may make investments while borrowings are outstanding. For the other Funds, none of them may purchase securities if outstanding borrowings, including any reverse repurchase agreements, exceed 5% of a Fund's total assets. 9 Generally, each of Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund does not intend to use leverage for investment purposes. Each of Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund may, however, use leverage to purchase securities needed to close out short sales entered into for hedging purposes and to facilitate other hedging transactions. FOREIGN SECURITIES (ALL FUNDS). Each Fund may invest in U.S. dollar- denominated securities of foreign issuers and foreign branches of U.S. banks, including negotiable certificates of deposit ("CDs"), bankers' acceptances, and commercial paper. Foreign issuers are issuers organized and doing business principally outside the United States and include banks, non-U.S. governments, and quasi-governmental organizations. While investments in foreign securities are intended to reduce risk by providing further diversification, such investments involve sovereign and other risks, in addition to the credit and market risks normally associated with domestic securities. These additional risks include the possibility of adverse political and economic developments (including political or social instability, nationalization, expropriation, or confiscatory taxation); the potentially adverse effects of unavailability of public information regarding issuers, less governmental supervision and regulation of financial markets, reduced liquidity of certain financial markets, and the lack of uniform accounting, auditing, and financial reporting standards or the application of standards that are different or less stringent than those applied in the United States; different laws and customs governing securities tracking; and possibly limited access to the courts to enforce the Funds' rights as investors. Each Fund also may invest in equity, debt, or other income-producing securities that are denominated in or indexed to foreign currencies, including (1) common and preferred stocks, (2) CDs, commercial paper, fixed time deposits, and bankers' acceptances issued by foreign banks, (3) obligations of other corporations, and (4) obligations of foreign governments and their subdivisions, agencies, and instrumentalities, international agencies, and supranational entities. Investing in foreign currency denominated securities involves the special risks associated with investing in non-U.S. issuers, as described in the preceding paragraph, and the additional risks of (1) adverse changes in foreign exchange rates and (2) adverse changes in investment or exchange control regulations (which could prevent cash from being brought back to the United States). Additionally, dividends and interest payable on foreign securities (and gains realized on disposition thereof) may be subject to foreign taxes, including taxes withheld from those payments. Commissions on foreign securities exchanges are often at fixed rates and are generally higher than negotiated commissions on U.S. exchanges, although the Funds endeavor to achieve the most favorable net results on portfolio transactions. Foreign securities often trade with less frequency and in less volume than domestic securities and therefore may exhibit greater price volatility. Additional costs associated with an investment in foreign securities may include higher custodial fees than apply to domestic custody arrangements and transaction costs of foreign currency conversions. Foreign markets also have different clearance and settlement procedures. In certain markets, there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Delays in settlement could result in temporary periods when a portion of the assets of a Fund is uninvested and no return is 10 earned thereon. The inability of a Fund to make intended security purchases due to settlement problems could cause the Fund to miss attractive investment opportunities. Inability to dispose of portfolio securities due to settlement problems could result in losses to a Fund due to subsequent declines in value of the securities or, if the Fund has entered into a contract to sell the securities, could result in possible liability to the purchaser. Interest rates prevailing in other countries may affect the prices of foreign securities and exchange rates for foreign currencies. Local factors, including the strength of the local economy, the demand for borrowing, the government's fiscal and monetary policies, and the international balance of payments, often affect interest rates in other countries. Individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency, and balance of payments position. The Funds may invest in ADRs, European Depository Receipts ("EDRs"), Global Depository Receipts ("GDRs"), and International Depository Receipts ("IDRs"). ADRs (sponsored or unsponsored) are receipts typically issued by a U.S. bank or trust company evidencing its ownership of the underlying foreign securities. Most ADRs are denominated in U.S. dollars and are traded on a U.S. stock exchange. However, they are subject to the risk of fluctuation in the currency exchange rate if, as is often the case, the underlying securities are denominated in foreign currency. Issuers of the securities underlying sponsored ADRs, but not unsponsored ADRs, are contractually obligated to disclose material information in the United States. Therefore, the market value of unsponsored ADRs are less likely to reflect the effect of such information. EDRs and IDRs are receipts typically issued by a European bank or trust company evidencing its ownership of the underlying foreign securities. GDRs are receipts issued by either a U.S. or non-U.S. banking institution evidencing its ownership of the underlying foreign securities and are often denominated in U.S. dollars. POLICIES AND LIMITATIONS. To limit the risks inherent in investing in foreign currency denominated securities, a Fund (except Neuberger Berman CENTURY, Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP Fund, and Neuberger Berman MILLENNIUM Funds) may not purchase any such security if, as a result, more than 10% of its total assets (taken at market value) would be invested in foreign currency denominated securities. Each of Neuberger Berman CENTURY and Neuberger Berman MILLENNIUM Funds may not purchase foreign currency denominated securities if, as a result, more than 20% of its total assets (taken at market value) would be invested in such securities. Within those limitations, however, none of these Funds is restricted in the amount it may invest in securities denominated in any one foreign currency. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund invest primarily in foreign securities. Investments in securities of foreign issuers are subject to each Fund's quality standards. Each Fund (except Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund) may invest only in securities of issuers in countries whose governments are considered stable by NB Management. 11 FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES (NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, AND NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND). Each Fund may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. These transactions involve a commitment by a Fund to purchase or sell securities at a future date (ordinarily within two months, although a Fund may agree to a longer settlement period). The price of the underlying securities (usually expressed in terms of yield) and the date when the securities will be delivered and paid for (the settlement date) are fixed at the time the transaction is negotiated. When-issued purchases and forward commitment transactions are negotiated directly with the other party, and such commitments are not traded on exchanges. When-issued purchases and forward commitment transactions enable a Fund to "lock in" what NB Management believes to be an attractive price or yield on a particular security for a period of time, regardless of future changes in interest rates. For instance, in periods of rising interest rates and falling prices, a Fund might sell securities it owns on a forward commitment basis to limit its exposure to falling prices. In periods of falling interest rates and rising prices, a Fund might purchase a security on a when-issued or forward commitment basis and sell a similar security to settle such purchase, thereby obtaining the benefit of currently higher yields. If the other party fails to complete the trade, the Fund may lose the opportunity to obtain a favorable price. The value of securities purchased on a when-issued or forward commitment basis and any subsequent fluctuations in their value are reflected in the computation of a Fund's NAV starting on the date of the agreement to purchase the securities. Because a Fund has not yet paid for the securities, this produces an effect similar to leverage. A Fund does not earn interest on securities it has committed to purchase until the securities are paid for and delivered on the settlement date. When a Fund makes a forward commitment to sell securities it owns, the proceeds to be received upon settlement are included in that Fund's assets. Fluctuations in the market value of the underlying securities are not reflected in a Fund's NAV as long as the commitment to sell remains in effect. POLICIES AND LIMITATIONS. The Funds will purchase securities on a when- issued basis or purchase or sell securities on a forward commitment basis only with the intention of completing the transaction and actually purchasing or selling the securities. If deemed advisable as a matter of investment strategy, however, the Funds may dispose of or renegotiate a commitment after it has been entered into. Each Fund also may sell securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. The Funds may realize capital gains or losses in connection with these transactions. When a Fund purchases securities on a when-issued or forward commitment basis, that Fund will deposit in a segregated account with its custodian, until payment is made, appropriate liquid securities having a value (determined daily) at least equal to the amount of that Fund's purchase commitments. In the case of a forward commitment to sell portfolio securities, the custodian will hold the portfolio securities themselves in a segregated account while the commitment is outstanding. These procedures are designed to ensure that each Fund maintains sufficient assets at all times to cover its obligations under when-issued purchases and forward commitment transactions. 12 TECHNOLOGY SECURITIES (ALL FUNDS). These include the securities of companies substantially engaged in offering, using, or developing products, processes, or services that provide, or that benefit significantly from, technological advances or that are expected to do so. Technology-related businesses include, among others: computer products, software, and electronic components; computer services; telecommunications; networking; Internet; and biotechnology, pharmaceuticals or medical technology. The products or services offered by issuers of technology securities quickly may become obsolete in the face of technological developments. The economic outlook of such companies may fluctuate dramatically due to changes in regulatory or competitive environments. In addition, technology companies often progress at an accelerated rate, and these companies may be subject to short product cycles and aggressive pricing which may increase their volatility. Competitive pressures in the technology- related industries also may have a significant effect on the performance of technology securities. The issuers of technology securities also may be smaller or newer companies, which may lack depth of management, be unable to generate funds necessary for growth or potential development, or be developing or marketing new products or services for which markets are not yet established and may never become established. In addition, such companies may be subject to intense competition from larger or more established companies. MASTER LIMITED PARTNERSHIPS (ALL FUNDS). Master Limited Partnerships ("MLPs") are limited partnerships in which the ownership units (i.e., limited partnership interests) are publicly traded. MLP units are registered with the SEC and are freely traded on a securities exchange or in the over-the-counter ("OTC") market. Many MLPs operate in the oil and gas related businesses, including energy processing and distribution. Many MLPs are pass-through entities that generally are taxed at the unitholder level and are not subject to federal or state income tax at the partnership level. Annual income, gains, losses, deductions and credits of an MLP pass through directly to its unitholders. Distributions from an MLP may consist in part of a return of capital. Generally, an MLP is operated under the supervision of one or more general partners. Limited partners are not involved in the day-to-day management of the partnership. Investing in MLPs involves certain risks related to investing in the underlying assets of the MLPs and risks associated with pooled investment vehicles. MLPs holding credit-related investments are subject to interest rate risk and the risk of default on payment obligations by debt issuers. MLPs that concentrate in a particular industry or a particular geographic region are subject to risks associated with such industry or region. Investments held by MLPs may be relatively illiquid, limiting the MLPs' ability to vary their portfolios promptly in response to changes in economic or other conditions. MLPs may have limited financial resources, their securities may trade infrequently and in limited volume, and they may be subject to more abrupt or erratic price movements than securities of larger or more broadly based companies. The risks of investing in an MLP are generally those inherent in investing in a partnership as opposed to a corporation. For example, state law governing partnerships is often less restrictive than state law governing corporations. Accordingly, there may be fewer protections afforded investors in a master limited partnership than investors in a corporation. Although unitholders of an MLP are generally limited in their liability, similar to a corporation's shareholders, creditors typically have the right to seek the return of 13 distributions made to unitholders if the liability in question arose before the distribution was paid. This liability may stay attached to the unitholder even after the units are sold. FUTURES CONTRACTS, OPTIONS ON FUTURES CONTRACTS, OPTIONS ON SECURITIES AND INDICES, FORWARD CONTRACTS, AND OPTIONS ON FOREIGN CURRENCIES (COLLECTIVELY, "FINANCIAL INSTRUMENTS") FUTURES CONTRACTS AND OPTIONS THEREON (ALL FUNDS). Each of Neuberger Berman CENTURY, Neuberger Berman MILLENNIUM, Neuberger Berman REAL ESTATE and Neuberger Berman SOCIALLY RESPONSIVE Funds may purchase and sell single stocks and interest rate futures contracts, stock and bond index futures contracts (including those on a narrow-based index), and foreign currency futures contracts and may purchase and sell options thereon in an attempt to hedge against changes in the prices of securities or, in the case of foreign currency futures and options thereon, to hedge against changes in prevailing currency exchange rates. Because the futures markets may be more liquid than the cash markets, the use of futures contracts permits each Fund to enhance portfolio liquidity and maintain a defensive position without having to sell portfolio securities. These Funds view investment in (i) single stock interest rate and securities index futures and options thereon as a maturity management device and/or a device to reduce risk or preserve total return in an adverse environment for the hedged securities, and (ii) foreign currency futures and options thereon as a means of establishing more definitely the effective return on, or the purchase price of, securities denominated in foreign currencies that are held or intended to be acquired by the Fund. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may enter into futures contracts and options on currencies, single stocks, debt securities, interest rates, and securities indices (including those on a narrow- based index) that are traded on exchanges regulated by the Commodity Futures Trading Commission ("CFTC") or on foreign exchanges. Trading on foreign exchanges is subject to the legal requirements of the jurisdiction in which the exchange is located and to the rules of such foreign exchange. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may sell futures contracts to offset a possible decline in the value of its portfolio securities. When a futures contract is sold by a Fund, the value of the contract will tend to rise when the value of the portfolio securities declines and will tend to fall when the value of such securities increases. Each Fund may purchase futures contracts to fix what NB Management believes to be a favorable price for securities that Fund intends to purchase. If a futures contract is purchased by a Fund, the value of the contract will tend to change together with changes in the value of such securities. To compensate for anticipated differences in volatility between positions Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund may wish to hedge and the standardized futures contracts available to it, each Fund may purchase or sell futures contracts with a greater or lesser value than the securities it wishes to hedge. With respect to currency futures, Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may sell a futures contract or a call option, or they may purchase a put option on such futures contract, if NB Management anticipates that exchange rates for a particular currency will fall. Such a 14 transaction will be used as a hedge (or, in the case of a sale of a call option, a partial hedge) against a decrease in the value of portfolio securities denominated in that currency. If NB Management anticipates that a particular currency will rise, each Fund may purchase a currency futures contract or a call option to protect against an increase in the price of securities that are denominated in that currency and that the Fund intends to purchase. Each Fund may also purchase a currency futures contract or a call option thereon for non- hedging purposes when NB Management anticipates that a particular currency will appreciate in value, but securities denominated in that currency do not present an attractive investment and are not included in each Fund. For purposes of managing cash flow, each Fund may purchase and sell stock index futures contracts, and may purchase and sell options thereon, to increase its exposure to the performance of a recognized securities index, such as the Standard & Poor's 500 Composite Stock Index ("S&P 500 Index"). A "sale" of a futures contract (or a "short" futures position) entails the assumption of a contractual obligation to deliver the securities or currency underlying the contract at a specified price at a specified future time. A "purchase" of a futures contract (or a "long" futures position) entails the assumption of a contractual obligation to acquire the securities or currency underlying the contract at a specified price at a specified future time. Certain futures, including stock and bond index futures, are settled on a net cash payment basis rather than by the sale and delivery of the securities underlying the futures. U.S. futures contracts (except certain currency futures) are traded on exchanges that have been designated as "contract markets" by the CFTC; futures transactions must be executed through a futures commission merchant that is a member of the relevant contract market. In both U.S. and foreign markets, an exchange's affiliated clearing organization guarantees performance of the contracts between the clearing members of the exchange. Although futures contracts by their terms may require the actual delivery or acquisition of the underlying securities or currency, in most cases the contractual obligation is extinguished by being offset before the expiration of the contract. A futures position is offset by buying (to offset an earlier sale) or selling (to offset an earlier purchase) an identical futures contract calling for delivery in the same month. This may result in a profit or loss. While futures contracts entered into by a Fund will usually be liquidated in this manner, the Fund may instead make or take delivery of underlying securities or currency whenever it appears economically advantageous for it to do so. "Margin" with respect to a futures contract is the amount of assets that must be deposited by a Fund with, or for the benefit of, a futures commission merchant or broker in order to initiate and maintain the Fund's futures positions. The margin deposit made by the Fund when it enters into a futures contract ("initial margin") is intended to assure its performance of the contract. If the price of the futures contract changes -- increases in the case of a short (sale) position or decreases in the case of a long (purchase) position -- so that the unrealized loss on the contract causes the margin deposit not to satisfy margin requirements, the Fund will be required to make an additional margin deposit ("variation margin"). However, if favorable price changes in the futures contract cause the margin deposit to exceed the required margin, the excess variation margin will be paid to the Fund. In computing their NAVs, the Funds mark to market the value of their open futures positions. Each Fund also must make margin deposits with respect to options on futures that it has written (but not with respect to options on futures that it has purchased). 15 If the futures commission merchant or broker holding the margin deposit goes bankrupt, a Fund could suffer a delay in recovering its funds and could ultimately suffer a loss. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in the contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the option exercise period. The writer of the option is required upon exercise to assume a short futures position (if the option is a call) or a long futures position (if the option is a put). Upon exercise of the option, the accumulated cash balance in the writer's futures margin account is delivered to the holder of the option. That balance represents the amount by which the market price of the futures contract at exercise exceeds, in the case of a call, or is less than, in the case of a put, the exercise price of the option. Options on futures have characteristics and risks similar to those of securities options, as discussed herein. Although each Fund believes that the use of futures contracts and options will benefit it, if NB Management's judgment about the general direction of the markets or about interest rate or currency exchange rate trends is incorrect, the Fund's overall return would be lower than if it had not entered into any such contracts. The prices of futures contracts and options are volatile and are influenced by, among other things, actual and anticipated changes in interest or currency exchange rates, which in turn are affected by fiscal and monetary policies and by national and international political and economic events. At best, the correlation between changes in prices of futures contracts or options and of securities being hedged can be only approximate due to differences between the futures and securities markets or differences between the securities or currencies underlying a Fund's futures or options position and the securities held by or to be purchased for the Fund. The currency futures or options market may be dominated by short-term traders seeking to profit from changes in exchange rates. This would reduce the value of such contracts used for hedging purposes over a short-term period. Such distortions are generally minor and would diminish as the contract approaches maturity. Because of the low margin deposits required, futures trading involves an extremely high degree of leverage; as a result, a relatively small price movement in a futures contract may result in immediate and substantial loss, or gain, to the investor. Losses that may arise from certain futures transactions are potentially unlimited. Most U.S. futures exchanges limit the amount of fluctuation in the price of a futures contract or option thereon during a single trading day; once the daily limit has been reached, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movements during a particular trading day, however; it does not limit potential losses. In fact, it may increase the risk of loss, because prices can move to the daily limit for several consecutive trading days with little or no trading, thereby preventing liquidation of unfavorable futures and options positions and subjecting traders to substantial losses. If this were to happen with respect to a position held by a Fund, it could have an adverse impact on the NAV of the Fund. Single stock and narrow-based security index futures, and options thereon, have not been permitted to trade in the United States until very recently. Therefore, it may be very difficult, at least initially, to predict how the markets in these instruments will behave, particularly in unusual circumstances. In addition, as some of the markets on which such instruments will trade are 16 also new (such as derivatives transaction execution facilities or "DTEFs"), they have no operating history. In addition, DTEFs are principal markets; therefore, no clearing house in effect guarantees performance of the counter party to a contract executed on a DTEF. Pursuant to a claim for exemption filed with the National Futures Association on behalf of each Fund, each Fund is not deemed to be a commodity pool operator or a commodity pool under the Commodity Exchange Act and is not subject to registration or regulation as such under the Commodity Exchange Act. POLICIES AND LIMITATIONS. Neuberger Berman CENTURY, Neuberger Berman MILLENNIUM, Neuberger Berman REAL ESTATE and Neuberger Berman SOCIALLY RESPONSIVE Funds each may purchase and sell futures contracts and may purchase and sell options thereon in an attempt to hedge against changes in the prices of securities or, in the case of foreign currency futures and options thereon, to hedge against prevailing currency exchange rates. These Funds do not engage in transactions in futures and options on futures for speculation. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may purchase and sell futures for BONA FIDE hedging purposes, as defined in regulations of the CFTC, and for non-hedging purposes (i.e., in an effort to enhance income). The Funds may also purchase and write put and call options on such futures contracts for BONA FIDE hedging and non-hedging purposes. Each Fund may purchase and sell stock index futures contracts, and may purchase and sell options thereon. For purposes of managing cash flow, the Portfolio Managers may use such futures and options to increase the Funds' exposure to the performance of a recognized securities index, such as the S&P 500 Index. CALL OPTIONS ON SECURITIES (ALL FUNDS). Neuberger Berman CENTURY, Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman MILLENNIUM, Neuberger Berman REAL ESTATE and Neuberger Berman SOCIALLY RESPONSIVE Funds may write covered call options and may purchase call options on securities. Each of the other Funds may write covered call options and may purchase call options in related closing transactions. The purpose of writing call options is to hedge (i.e., to reduce, at least in part, the effect of price fluctuations of securities held by the Fund on its NAV) or to earn premium income. Portfolio securities on which call options may be written and purchased by a Fund are purchased solely on the basis of investment considerations consistent with the Fund's investment objective. When a Fund writes a call option, it is obligated to sell a security to a purchaser at a specified price at any time until a certain date if the purchaser decides to exercise the option. The Fund receives a premium for writing the call option. So long as the obligation of the call option continues, the Fund may be assigned an exercise notice, requiring it to deliver the underlying security against payment of the exercise price. The Fund may be obligated to deliver securities underlying an option at less than the market price. The writing of covered call options is a conservative investment technique that is believed to involve relatively little risk but is capable of enhancing 17 the Funds' total return. When writing a covered call option, a Fund, in return for the premium, gives up the opportunity for profit from a price increase in the underlying security above the exercise price, but conversely retains the risk of loss should the price of the security decline. If a call option that a Fund has written expires unexercised, the Fund will realize a gain in the amount of the premium; however, that gain may be offset by a decline in the market value of the underlying security during the option period. If the call option is exercised, the Fund will realize a gain or loss from the sale of the underlying security. When a Fund purchases a call option, it pays a premium for the right to purchase a security from the writer at a specified price until a specified date. POLICIES AND LIMITATIONS. Neuberger Berman CENTURY, Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman MILLENNIUM, Neuberger Berman REAL ESTATE and Neuberger Berman SOCIALLY RESPONSIVE Funds may write covered call options and may purchase call options on securities. Each of the other Funds may write covered call options and may purchase call options in related closing transactions. Each Fund writes only "covered" call options on securities it owns (in contrast to the writing of "naked" or uncovered call options, which the Funds will not do). A Fund would purchase a call option to offset a previously written call option. Each of Neuberger Berman CENTURY, Neuberger Berman MILLENNIUM, Neuberger Berman REAL ESTATE and Neuberger Berman SOCIALLY RESPONSIVE Funds also may purchase a call option to protect against an increase in the price of the securities it intends to purchase. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund may purchase call options for hedging or non- hedging purposes. PUT OPTIONS ON SECURITIES (NEUBERGER BERMAN CENTURY FUND, NEUBERGER BERMAN GUARDIAN FUND, NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND, NEUBERGER BERMAN MILLENNIUM FUND, NEUBERGER BERMAN REAL ESTATE FUND, AND NEUBERGER BERMAN SOCIALLY RESPONSIVE FUND). Each of these Funds may write and purchase put options on securities. Each of Neuberger Berman CENTURY, Neuberger Berman GUARDIAN, Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman MILLENNIUM, and Neuberger Berman SOCIALLY RESPONSIVE Funds will receive a premium for writing a put option, which obligates the Fund to acquire a security at a certain price at any time until a certain date if the purchaser decides to exercise the option. The Fund may be obligated to purchase the underlying security at more than its current value. When any of Neuberger Berman CENTURY, Neuberger Berman GUARDIAN, Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman MILLENNIUM, Neuberger Berman REAL ESTATE or Neuberger Berman SOCIALLY RESPONSIVE Funds purchases a put option, it pays a premium to the writer for the right to sell a security to the writer for a specified amount at any time until a certain date. The Fund would purchase a put option in order to protect itself against a decline in the market value of a security it owns. 18 Portfolio securities on which Neuberger Berman CENTURY, Neuberger Berman GUARDIAN, Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman MILLENNIUM, Neuberger Berman REAL ESTATE, or Neuberger Berman SOCIALLY RESPONSIVE Fund may write and purchase put options are purchased solely on the basis of investment considerations consistent with the Fund's investment objective. When writing a put option, the Fund, in return for the premium, takes the risk that it must purchase the underlying security at a price that may be higher than the current market price of the security. If a put option that the Fund has written expires unexercised, the Fund will realize a gain in the amount of the premium. POLICIES AND LIMITATIONS. Neuberger Berman CENTURY, Neuberger Berman GUARDIAN, Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman MILLENNIUM, Neuberger Berman REAL ESTATE and Neuberger Berman SOCIALLY RESPONSIVE Funds generally write and purchase put options on securities for hedging purposes (i.e., to reduce, at least in part, the effect of price fluctuations of securities held by the Fund on its NAV). However, Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund also may use put options for non-hedging purposes. GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise price of an option may be below, equal to, or above the market value of the underlying security at the time the option is written. Options normally have expiration dates between three and nine months from the date written. American-style options are exercisable at any time prior to their expiration date. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund also may purchase and sell European-style options, which are exercisable only immediately prior to their expiration date. The obligation under any option written by a Fund terminates upon expiration of the option or, at an earlier time, when the writer offsets the option by entering into a "closing purchase transaction" to purchase an option of the same series. If an option is purchased by a Fund and is never exercised or closed out, that Fund will lose the entire amount of the premium paid. Options are traded both on U.S. national securities exchanges and in the OTC market. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund also may purchase and sell options that are traded on foreign exchanges. Exchange-traded options are issued by a clearing organization affiliated with the exchange on which the option is listed; the clearing organization in effect guarantees completion of every exchange-traded option. In contrast, OTC options are contracts between a Fund and a counter party, with no clearing organization guarantee. Thus, when a Fund sells (or purchases) an OTC option, it generally will be able to "close out" the option prior to its expiration only by entering into a closing transaction with the dealer to whom (or from whom) the Fund originally sold (or purchased) the option. There can be no assurance that the Fund would be able to liquidate an OTC option at any time prior to expiration. Unless a Fund is able to effect a closing purchase transaction in a covered OTC call option it has written, it will not be able to liquidate securities used as cover until the option expires or is exercised or until different cover is substituted. In the event of the counter party's insolvency, a Fund may be unable to liquidate its options position and the associated cover. NB Management monitors the creditworthiness of dealers with which a Fund may engage in OTC options transactions. 19 The premium a Fund receives or pays when it writes (or purchases) an option is the amount at which the option is currently traded on the applicable market. The premium may reflect, among other things, the current market price of the underlying security, the relationship of the exercise price to the market price, the historical price volatility of the underlying security, the length of the option period, the general supply of and demand for credit, and the interest rate environment. The premium received by a Fund for writing an option is recorded as a liability on the Fund's statement of assets and liabilities. This liability is adjusted daily to the option's current market value. Closing transactions are effected in order to realize a profit (or minimize a loss) on an outstanding option, to prevent an underlying security from being called, or to permit the sale or the put of the underlying security. Furthermore, effecting a closing transaction permits Neuberger Berman CENTURY, Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman MILLENNIUM, Neuberger Berman REAL ESTATE and Neuberger Berman SOCIALLY RESPONSIVE Funds to write another call option on the underlying security with a different exercise price or expiration date or both. There is, of course, no assurance that a Fund will be able to effect closing transactions at favorable prices. If a Fund cannot enter into such a transaction, it may be required to hold a security that it might otherwise have sold (or purchase a security that it would not have otherwise bought), in which case it would continue to be at market risk on the security. A Fund will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or more than the premium received from writing the call or put option. Because increases in the market price of a call option generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset, in whole or in part, by appreciation of the underlying security owned by the Fund; however, the Fund could be in a less advantageous position than if it had not written the call option. A Fund pays brokerage commissions or spreads in connection with purchasing or writing options, including those used to close out existing positions. From time to time, Neuberger Berman CENTURY, Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman MILLENNIUM, Neuberger Berman REAL ESTATE or Neuberger Berman SOCIALLY RESPONSIVE Funds may purchase an underlying security for delivery in accordance with an exercise notice of a call option assigned to it, rather than delivering the security from its inventory. In those cases, additional brokerage commissions are incurred. The hours of trading for options may not conform to the hours during which the underlying securities are traded. To the extent that the options markets close before the markets for the underlying securities, significant price and rate movements can take place in the underlying markets that cannot be reflected in the options markets. POLICIES AND LIMITATIONS. Each Fund may use American-style options. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund may also purchase and sell European-style options and may purchase and sell options that are traded on foreign exchanges. 20 The assets used as cover (or held in a segregated account) for OTC options written by a Fund will be considered illiquid and thus subject to each Fund's 15% limitation on illiquid securities, unless the OTC options are sold to qualified dealers who agree that the Fund may repurchase any OTC option it writes at a maximum price to be calculated by a formula set forth in the option agreement. The cover for an OTC call option written subject to this procedure will be considered illiquid only to the extent that the maximum repurchase price under the formula exceeds the intrinsic value of the option. PUT AND CALL OPTIONS ON SECURITIES INDICES (ALL FUNDS). Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may purchase put and call options on securities indices for the purpose of hedging against the risk of price movements that would adversely affect the value of a Fund's securities or securities a Fund intends to buy. A Fund may write securities index options to close out positions in such options that it has purchased. For purposes of managing cash flow, each Fund may purchase put and call options on securities indices to increase the Fund's exposure to the performance of a recognized securities index, such as the S&P 500 Index. Unlike a securities option, which gives the holder the right to purchase or sell a specified security at a specified price, an option on a securities index gives the holder the right to receive a cash "exercise settlement amount" equal to (1) the difference between the exercise price of the option and the value of the underlying securities index on the exercise date (2) multiplied by a fixed "index multiplier." A securities index fluctuates with changes in the market values of the securities included in the index. Options on stock indices are currently traded on the Chicago Board Options Exchange, the New York Stock Exchange ("NYSE"), the American Stock Exchange, and other U.S. and foreign exchanges. The effectiveness of hedging through the purchase of securities index options will depend upon the extent to which price movements in the securities being hedged correlate with price movements in the selected securities index. Perfect correlation is not possible because the securities held or to be acquired by a Fund will not exactly match the composition of the securities indices on which options are available. Securities index options have characteristics and risks similar to those of securities options, as discussed herein. POLICIES AND LIMITATIONS. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may purchase put and call options on securities indices for the purpose of hedging. All securities index options purchased by a Fund will be listed and traded on an exchange. No Fund currently expects to invest a substantial portion of its assets in securities index options. For purposes of managing cash flow, each Fund may purchase put and call options on securities indices to increase the Fund's exposure to the performance of a recognized securities index, such as the S&P 500 Index. All securities index options purchased by the Funds will be listed and traded on an exchange. 21 FOREIGN CURRENCY TRANSACTIONS (ALL FUNDS). Each Fund may enter into contracts for the purchase or sale of a specific currency at a future date (usually less than one year from the date of the contract) at a fixed price ("forward contracts"). The Funds also may engage in foreign currency exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market. The Funds (other than Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund) enter into forward contracts in an attempt to hedge against changes in prevailing currency exchange rates. These Funds do not engage in transactions in forward contracts for speculation; they view investments in forward contracts as a means of establishing more definitely the effective return on, or the purchase price of, securities denominated in foreign currencies. Forward contract transactions include forward sales or purchases of foreign currencies for the purpose of protecting the U.S. dollar value of securities held or to be acquired by a Fund or protecting the U.S. dollar equivalent of dividends, interest, or other payments on those securities. Forward contracts are traded in the interbank market directly between dealers (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades; foreign exchange dealers realize a profit based on the difference (the spread) between the prices at which they are buying and selling various currencies. At the consummation of a forward contract to sell currency, a Fund may either make delivery of the foreign currency or terminate its contractual obligation to deliver by purchasing an offsetting contract. If the Fund chooses to make delivery of the foreign currency, it may be required to obtain such currency through the sale of portfolio securities denominated in such currency or through conversion of other assets of the Fund into such currency. If the Fund engages in an offsetting transaction, it will incur a gain or a loss to the extent that there has been a change in forward contract prices. Closing purchase transactions with respect to forward contracts are usually made with the currency dealer who is a party to the original forward contract. NB Management believes that the use of foreign currency hedging techniques, including "proxy-hedges," can provide significant protection of NAV in the event of a general rise or decrease in the U.S. dollar against foreign currencies. For example, the return available from securities denominated in a particular foreign currency would diminish if the value of the U.S. dollar increased against that currency. Such a decline could be partially or completely offset by an increase in value of a hedge involving a forward contract to sell that foreign currency or a proxy-hedge involving a forward contract to sell a different foreign currency whose behavior is expected to resemble the currency in which the securities being hedged are denominated but which is available on more advantageous terms. However, a hedge or proxy-hedge cannot protect against exchange rate risks perfectly, and, if NB Management is incorrect in its judgment of future exchange rate relationships, a Fund could be in a less advantageous position than if such a hedge had not been established. If a Fund uses proxy-hedging, it may experience losses on both the currency in which it has invested and the currency used for hedging if the two currencies do not vary with the expected degree of correlation. Using forward contracts to protect the value of a Fund's securities 22 against a decline in the value of a currency does not eliminate fluctuations in the prices of the underlying securities. Because forward contracts are not traded on an exchange, the assets used to cover such contracts may be illiquid. A Fund may experience delays in the settlement of its foreign currency transactions. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may purchase securities of an issuer domiciled in a country other than the country in whose currency the instrument is denominated. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund and Neuberger Berman INTERNATIONAL LARGE CAP Fund may also invest in securities denominated in currency baskets which consist of a selected group of currencies. POLICIES AND LIMITATIONS. The Funds (other than Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund) may enter into forward contracts for the purpose of hedging and not for speculation. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may enter into forward contracts for hedging or non-hedging purposes. When a Fund engages in foreign currency transactions for hedging purposes, it will not enter into forward contracts to sell currency or maintain a net exposure to such contracts if their consummation would obligate the Fund to deliver an amount of foreign currency materially in excess of the value of its portfolio securities or other assets denominated in that currency. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may also purchase and sell forward contracts for non-hedging purposes when NB Management anticipates that a foreign currency will appreciate or depreciate in value, but securities in that currency do not present attractive investment opportunities and are not held in a Fund's investment portfolio. OPTIONS ON FOREIGN CURRENCIES (ALL FUNDS). Each Fund may write and purchase covered call and put options on foreign currencies. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may write (sell) put and covered call options on any currency in order to realize greater income than would be realized on portfolio securities alone. Currency options have characteristics and risks similar to those of securities options, as discussed herein. Certain options on foreign currencies are traded on the OTC market and involve liquidity and credit risks that may not be present in the case of exchange-traded currency options. POLICIES AND LIMITATIONS. A Fund would use options on foreign currencies to protect against declines in the U.S. dollar value of portfolio securities or increases in the U.S. dollar cost of securities to be acquired or to protect the U.S. dollar equivalent of dividends, interest, or other payments on those securities. In addition, Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund Neuberger Berman INTERNATIONAL LARGE CAP Fund each may purchase put and call options on foreign currencies for non-hedging purposes when NB Management anticipates that a currency will appreciate or depreciate in value, but securities denominated in that currency do not present attractive investment opportunities and are not included in the Fund. 23 REGULATORY LIMITATIONS ON USING FINANCIAL INSTRUMENTS. If a Fund sells or purchases futures contracts or writes options thereon or options on foreign currencies that are traded on an exchange regulated by the CFTC other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums required to establish those positions (excluding the amount by which options are "in-the-money") may not exceed 5% of the Fund's net assets. COVER FOR FINANCIAL INSTRUMENTS. Transactions using Financial Instruments, other than purchased options, expose a Fund to an obligation to another party. A Fund will not enter into any such transactions unless it owns either (1) an offsetting ("covering") position in securities, currencies or other options, futures contracts or forward contracts, or (2) cash and liquid assets held in a segregated account with a value, marked-to-market daily, sufficient to cover its potential obligations to the extent not covered as provided in (1) above. Each Fund will comply with SEC guidelines regarding cover for these instruments and will, if the guidelines so require, set aside cash or liquid assets in an account with its custodian in the prescribed amount as determined daily. Securities held in a segregated account cannot be sold while the futures, options, or forward strategy covered by those securities is outstanding, unless they are replaced with other suitable assets. As a result, segregation of a large percentage of a Fund's assets could impede Fund management or the Fund's ability to meet current obligations. A Fund may be unable to promptly dispose of assets that cover, or are segregated with respect to, an illiquid futures, options, or forward position; this inability may result in a loss to the Fund. POLICIES AND LIMITATIONS. Each Fund will comply with SEC guidelines regarding "cover" for Financial Instruments and, if the guidelines so require, set aside in a segregated account with its custodian the prescribed amount of cash or appropriate liquid securities. GENERAL RISKS OF FINANCIAL INSTRUMENTS. The primary risks in using Financial Instruments are (1) imperfect correlation or no correlation between changes in market value of the securities or currencies held or to be acquired by a Fund and the prices of Financial Instruments; (2) possible lack of a liquid secondary market for Financial Instruments and the resulting inability to close out Financial Instruments when desired; (3) the fact that the skills needed to use Financial Instruments are different from those needed to select a Fund's securities; (4) the fact that, although use of Financial Instruments for hedging purposes can reduce the risk of loss, they also can reduce the opportunity for gain, or even result in losses, by offsetting favorable price movements in hedged investments; and (5) the possible inability of a Fund to purchase or sell a portfolio security at a time that would otherwise be favorable for it to do so, or the possible need for a Fund to sell a portfolio security at a disadvantageous time, due to its need to maintain cover or to segregate securities in connection with its use of Financial Instruments. There can be no assurance that a Fund's use of Financial Instruments will be successful. Each Fund's use of Financial Instruments may be limited by the provisions of the Code, with which it must comply if it is to qualify or continue to qualify as a RIC. See "Additional Tax Information." Financial Instruments may not be available with respect to some currencies, especially those of so-called emerging market countries. POLICIES AND LIMITATIONS. When hedging, NB Management intends to reduce the risk of imperfect correlation by investing only in Financial Instruments whose behavior is expected to resemble or offset that of a Fund's underlying 24 securities or currency. NB Management intends to reduce the risk that a Fund will be unable to close out Financial Instruments by entering into such transactions only if NB Management believes there will be an active and liquid secondary market. SHORT SALES (NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, AND NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND). Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may attempt to limit exposure to a possible decline in the market value of portfolio securities through short sales of securities that NB Management believes possess volatility characteristics similar to those being hedged. Each Fund also may use short sales in an attempt to realize gain. To effect a short sale, a Fund borrows a security from a brokerage firm to make delivery to the buyer. The Fund then is obliged to replace the borrowed security by purchasing it at the market price at the time of replacement. Until the security is replaced, the Fund is required to pay the lender any dividends and may be required to pay a premium or interest. A Fund will realize a gain if the security declines in price between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will incur a loss if the price of the security increases between those dates. The amount of any gain will be decreased, and the amount of any loss increased, by the amount of any premium or interest the Fund is required to pay in connection with the short sale. A short position may be adversely affected by imperfect correlation between movements in the price of the securities sold short and the securities being hedged. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may also make short sales against-the-box, in which it sells securities short only if it owns or has the right to obtain without payment of additional consideration an equal amount of the same type of securities sold. The effect of short selling on Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund is similar to the effect of leverage. Short selling may amplify changes in the Fund's NAV. Short selling may also produce higher than normal portfolio turnover, which may result in increased transaction costs to the Fund. POLICIES AND LIMITATIONS. Under applicable guidelines of the SEC staff, if a Fund engages in a short sale (other than a short sale against-the-box), it must put in a segregated account (not with the broker) an amount of cash or appropriate liquid securities equal to the difference between (1) the market value of the securities sold short at the time they were sold short and (2) any cash or securities required to be deposited as collateral with the broker in connection with the short sale (not including the proceeds from the short sale). In addition, until the Fund replaces the borrowed security, it must daily maintain the segregated account at such a level that (1) the amount deposited in it plus the amount deposited with the broker as collateral equals the current market value of the securities sold short, and (2) the amount deposited in it plus the amount deposited with the broker as collateral is not less than the market value of the securities at the time they were sold short. FIXED INCOME SECURITIES (ALL FUNDS). While the emphasis of the Funds' investment programs is on common stocks and other equity securities, the Funds may also invest in money market instruments, U.S. Government and Agency 25 Securities, and other fixed income securities. Each Fund may invest in investment grade corporate bonds and debentures. The debt securities in which the Funds may invest include variable rate securities, the interest rates on which reset at specified intervals to reflect current market rates as defined by a certain index of reference rate, and floating rate securities, the interest rates on which reset whenever the specified index or reference rate changes. Neuberger Berman CENTURY, Neuberger Berman FASCIANO, Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman PARTNERS, Neuberger Berman REAL ESTATE and Neuberger Berman REGENCY Funds each may invest in corporate debt securities rated below investment grade. U.S. Government Securities are obligations of the U.S. Treasury backed by the full faith and credit of the United States. U.S. Government Agency Securities are issued or guaranteed by U.S. Government agencies or by instrumentalities of the U.S. Government, such as Ginnie Mae (also known as the Government National Mortgage Association), Fannie Mae (also known as the Federal National Mortgage Association), Freddie Mac (also known as the Federal Home Loan Mortgage Corporation), Student Loan Marketing Association (commonly known as "Sallie Mae"), and the Tennessee Valley Authority. Some U.S. Government Agency Securities are supported by the full faith and credit of the United States, while others may by supported by the issuer's ability to borrow from the U.S. Treasury, subject to the Treasury's discretion in certain cases, or only by the credit of the issuer. U.S. Government Agency Securities include U.S. Government Agency mortgage-backed securities. The market prices of U.S. Government and Agency Securities are not guaranteed by the Government. "Investment grade" debt securities are those receiving one of the four highest ratings from Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's ("S&P"), or another nationally recognized statistical rating organization ("NRSRO") or, if unrated by any NRSRO, deemed by NB Management to be comparable to such rated securities ("Comparable Unrated Securities"). Securities rated by Moody's in its fourth highest rating category (Baa) or Comparable Unrated Securities may be deemed to have speculative characteristics. The ratings of an NRSRO represent its opinion as to the quality of securities it undertakes to rate. Ratings are not absolute standards of quality; consequently, securities with the same maturity, coupon, and rating may have different yields. Although the Funds may rely on the ratings of any NRSRO, the Funds primarily refer to ratings assigned by S&P and Moody's, which are described in Appendix A to this SAI. Fixed income securities are subject to the risk of an issuer's inability to meet principal and interest payments on its obligations ("credit risk") and are subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer, and market liquidity ("market risk"). The value of the fixed income securities in which a Fund may invest is likely to decline in times of rising market interest rates. Conversely, when rates fall, the value of a Fund's fixed income investments is likely to rise. Typically, the longer the time to maturity of a given security, the greater is the change in its value in response to a change in interest rates. Foreign debt securities are subject to risks similar to those of other foreign securities. Lower-rated securities are more likely to react to developments affecting market and credit risk than are more highly rated securities, which react primarily to movements in the general level of interest rates. Debt securities 26 in the lowest rating categories may involve a substantial risk of default or may be in default. Changes in economic conditions or developments regarding the individual issuer are more likely to cause price volatility and weaken the capacity of the issuer of such securities to make principal and interest payments than is the case for higher-grade debt securities. An economic downturn affecting the issuer may result in an increased incidence of default. The market for lower-rated securities may be thinner and less active than for higher-rated securities. Pricing of thinly traded securities requires greater judgment than pricing of securities for which market transactions are regularly reported. NB Management will invest in lower-rated securities only when it concludes that the anticipated return on such an investment to Neuberger Berman CENTURY, Neuberger Berman FASCIANO, Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman PARTNERS, Neuberger Berman REAL ESTATE or Neuberger Berman REGENCY Fund warrants exposure to the additional level of risk. POLICIES AND LIMITATIONS. Each Fund normally may invest up to 20% of its total assets in debt securities. Neuberger Berman CENTURY, Neuberger Berman PARTNERS, and Neuberger Berman REGENCY Funds each may invest up to 15% of its net assets in corporate debt securities rated below investment grade or Comparable Unrated Securities. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may invest in domestic and foreign debt securities of any rating, including those rated below investment grade and Comparable Unrated Securities. Subsequent to its purchase by a Fund, an issue of debt securities may cease to be rated or its rating may be reduced, so that the securities would no longer be eligible for purchase by that Fund. In such a case, Neuberger Berman SOCIALLY RESPONSIVE Fund and Neuberger Berman MILLENNIUM Fund each will engage in an orderly disposition of the downgraded securities. Each other Fund (except Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund) will engage in an orderly disposition of the downgraded securities to the extent necessary to ensure that the Fund's holdings of securities rated below investment grade and Comparable Unrated Securities will not exceed 5% of its net assets (15% in the case of Neuberger Berman CENTURY, Neuberger Berman PARTNERS, and Neuberger Berman REGENCY Funds). NB Management will make a determination as to whether Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund should dispose of the downgraded securities. There are no restrictions as to the ratings of debt securities Neuberger Berman FASCIANO or Neuberger Berman REAL ESTATE Funds may acquire or the portion of its assets each may invest in debt securities in a particular ratings category. Although these Funds do not presently intend to invest in debt securities, they may invest in convertible bonds that the manager believes present a good value because they are convertible into equity securities and have an attractive yield. COMMERCIAL PAPER (ALL FUNDS). Commercial paper is a short-term debt security issued by a corporation or bank, usually for purposes such as financing current operations. Each Fund may invest in commercial paper that cannot be resold to the public without an effective registration statement under the 1933 Act. While some restricted commercial paper normally is deemed illiquid, NB Management may in certain cases determine that such paper is liquid, pursuant to guidelines established by the Fund Trustees. 27 POLICIES AND LIMITATIONS. The Funds may invest in commercial paper only if it has received the highest rating from S&P (A-1) or Moody's (P-1) or is deemed by NB Management to be of comparable quality. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may invest in such commercial paper as a defensive measure, to increase liquidity, or as needed for segregated accounts. ZERO COUPON SECURITIES (NEUBERGER BERMAN CENTURY FUND, NEUBERGER BERMAN MILLENNIUM FUND, NEUBERGER BERMAN PARTNERS FUND, NEUBERGER BERMAN REAL ESTATE FUND, NEUBERGER BERMAN REGENCY FUND, AND NEUBERGER BERMAN SOCIALLY RESPONSIVE FUND). Each of these Funds may invest in zero coupon securities, which are debt obligations that do not entitle the holder to any periodic payment of interest prior to maturity or that specify a future date when the securities begin to pay current interest. Zero coupon securities are issued and traded at a discount from their face amount or par value. This discount varies depending on prevailing interest rates, the time remaining until cash payments begin, the liquidity of the security, and the perceived credit quality of the issuer. The discount on zero coupon securities ("original issue discount" or "OID") must be included in gross income ratably by each Fund prior to the receipt of any actual payments. Because each Fund must distribute substantially all of its net income (including its accrued OID) to its shareholders each year for federal income and excise tax purposes, it may have to dispose of portfolio securities under disadvantageous circumstances to generate cash, or may be required to borrow, to satisfy the distribution requirements. See "Additional Tax Information." The market prices of zero coupon securities generally are more volatile than the prices of securities that pay interest periodically. Zero coupon securities are likely to respond to changes in interest rates to a greater degree than other types of debt securities having a similar maturity and credit quality. CONVERTIBLE SECURITIES (ALL FUNDS). Each Fund may invest in convertible securities. A convertible security is a bond, debenture, note, preferred stock, or other security that may be converted into or exchanged for a prescribed amount of common stock of the same or a different issuer within a particular period of time at a specified price or formula. Convertible securities generally have features of both common stocks and debt securities. A convertible security entitles the holder to receive the interest paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before conversion, such securities ordinarily provide a stream of income with generally higher yields than common stocks of the same or similar issuers, but lower than the yield on non-convertible debt. Convertible securities are usually subordinated to comparable-tier non- convertible securities but rank senior to common stock in a corporation's capital structure. The value of a convertible security is a function of (1) its yield in comparison to the yields of other securities of comparable maturity and quality that do not have a conversion privilege and (2) its worth if converted into the underlying common stock. The price of a convertible security often reflects variations in the price of the underlying common stock in a way that non-convertible debt may not. Convertible securities are typically issued by smaller capitalization companies whose stock prices may be volatile. A convertible security may be subject to redemption at the option of the issuer at a price established in the security's 28 governing instrument. If a convertible security held by a Fund is called for redemption, the Fund will be required to convert it into the underlying common stock, sell it to a third party or permit the issuer to redeem the security. Any of these actions could have an adverse effect on a Fund's ability to achieve its investment objectives. POLICIES AND LIMITATIONS. Neuberger Berman SOCIALLY RESPONSIVE Fund may invest up to 20% of its net assets in convertible securities. The Fund does not intend to purchase any convertible securities that are not investment grade. Convertible debt securities are subject to each Fund's investment policies and limitations concerning fixed income securities. PREFERRED STOCK (ALL FUNDS). Each Fund may invest in preferred stock. Unlike interest payments on debt securities, dividends on preferred stock are generally payable at the discretion of the issuer's board of directors. Preferred shareholders may have certain rights if dividends are not paid but generally have no legal recourse against the issuer. Shareholders may suffer a loss of value if dividends are not paid. The market prices of preferred stocks are generally more sensitive to changes in the issuer's creditworthiness than are the prices of debt securities. SWAP AGREEMENTS (NEUBERGER BERMAN CENTURY FUND, NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND, AND NEUBERGER BERMAN REAL ESTATE FUND). Each of these Funds may enter into swap agreements to manage or gain exposure to particular types of investments (including equity securities or indices of equity securities in which the Fund otherwise could not invest efficiently). In a swap agreement, one party agrees to make regular payments equal to a floating rate on a specified amount in exchange for payments equal to a fixed rate, or a different floating rate, on the same amount for a specified period. Swap agreements may involve leverage and may be highly volatile; depending on how they are used, they may have a considerable impact on the Fund's performance. The risks of swap agreements depend upon the other party's creditworthiness and ability to perform, as well as the Fund's ability to terminate its swap agreements or reduce its exposure through offsetting transactions. Swap agreements may be illiquid. The swap market is relatively new and is largely unregulated. POLICIES AND LIMITATIONS. In accordance with SEC staff requirements, each of Neuberger Berman CENTURY, Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP Fund, and Neuberger Berman REAL ESTATE Funds will segregate cash or appropriate liquid securities in an amount equal to its obligations under swap agreements; when an agreement provides for netting of the payments by the two parties, the Fund will segregate only the amount of its net obligation, if any. REAL ESTATE-RELATED INSTRUMENTS (ALL FUNDS). The Funds may invest in securities issued by real estate companies. Investments in these securities are subject to the risks associated with the direct ownership of real estate. These risks include declines in the value of real estate, risks associated with general and local economic conditions, possible lack of availability of mortgage funds, overbuilding, extended vacancies of properties, increased competition, increase in property taxes and operating expenses, changes in zoning laws, losses due to costs resulting from the clean-up of environmental problems, liability to third parties for damages resulting from environmental problems, 29 casualty or condemnation losses, limitation on rents, changes in neighborhood values and the appeal of properties to tenants, and changes in interest rates. In addition, certain real estate valuations, including residential real estate values, are influenced by market sentiments, which can change rapidly and could result in a sharp downward adjustment from current valuation levels. Real estate-related instruments include securities of real estate investment trusts (also known as "REITs"), commercial and residential mortgage- backed securities and real estate financings. Such instruments are sensitive to factors such as real estate values and property taxes, interest rates, cash flow of underlying real estate assets, overbuilding, and the management skill and creditworthiness of the issuer. Real estate-related instruments may also be affected by tax and regulatory requirements, such as those relating to the environment. REITs are sometimes informally characterized as equity REITs, mortgage REITs and hybrid REITs. An equity REIT invests primarily in the fee ownership or leasehold ownership of land and buildings and derives its income primarily from rental income. An equity REIT may also realize capital gains (or losses) by selling real estate properties in its portfolio that have appreciated (or depreciated) in value. A mortgage REIT invests primarily in mortgages on real estate, which may secure construction, development or long-term loans. A mortgage REIT generally derives its income primarily from interest payments on the credit it has extended. A hybrid REIT combines the characteristics of equity REITs and mortgage REITs, generally by holding both ownership interests and mortgage interests in real estate. The types of REITs described above are dependent upon management skill, are not diversified, and are subject to heavy cash flow dependency, defaults by borrowers, self-liquidation, and the possibility of failing to qualify for conduit income tax treatment under the Code and failing to maintain exemption from the 1940 Act. REITs are subject to management fees and other expenses. Therefore, investments in REITs will cause a Fund to indirectly bear its proportionate share of the costs of the REITs' operations. At the same time, a Fund will continue to pay its own management fees and expenses with respect to all of its assets, including any portion invested in the shares of REITs. Neuberger Berman REAL ESTATE Fund may also invest in mortgage-backed securities. These are fixed income securities that represent an interest in a pool of mortgages and entitle the holder to a payout derived from the payment of principal and interest on the underlying mortgages. Like other fixed income securities, the value of mortgage-backed securities generally rises when market interest rates fall and falls when those interest rates rise. These changes in value are more pronounced the longer the duration of the pool. However, because mortgagors have the option to refinance and pay off their mortgages early, the duration of a mortgage pool is somewhat unpredictable. When interest rates decline sufficiently, many mortgagors refinance. This limits the Fund's ability to benefit from increases in value caused by a decline in rates. When rates increase, the value of mortgage-backed securities declines, and fewer mortgagors refinance, thereby extending the duration of the pool and accentuating the decline in value. Mortgage-backed securities are subject to the risk that mortgagors will default on their payments and the value of the underlying property will be inadequate to cover the loss. Mortgages that underlie securities issued by U.S. Government instrumentalities (such as Ginnie Mae, 30 Fannie Mae, and Freddie Mac) generally must meet certain standards intended to reduce that risk and are usually guaranteed against such losses, but privately issued mortgage securities may not meet those standards or be guaranteed. Interests in mortgage REITs, although they are equity securities, can be subject to many of the same risks as mortgage-backed securities. POLICIES AND LIMITATIONS. Under normal conditions at least 80% of Neuberger Berman REAL ESTATE Fund's net assets will be invested in the securities of companies principally engaged in the real estate industry. A company is "principally engaged" in the real estate industry if it derives at least 50% of its revenues or profits from the ownership, construction, management, financing or sale of residential, commercial or industrial real estate. It is anticipated, although not required, that under normal circumstances a majority of Neuberger Berman REAL ESTATE Fund's investments will consist of shares of equity REITs. JAPANESE INVESTMENTS (NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, AND NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND). All of the Funds may invest in foreign securities, including securities of Japanese issuers. From time to time, Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may invest a significant portion of its assets in securities of Japanese issuers. The performance of the Funds may therefore be significantly affected by events influencing the Japanese economy and the exchange rate between the Japanese yen and the U.S. dollar. Japan has experienced a severe recession, including a decline in real estate values and other events that adversely affected the balance sheets of many financial institutions and indicate that there may be structural weaknesses in the Japanese financial system. The effects of this economic downturn may be felt for a considerable period and are being exacerbated by the currency exchange rate. Japan is heavily dependent on foreign oil. Japan is located in a seismically active area, and severe earthquakes may damage important elements of the country's infrastructure. Japan's economic prospects may be affected by the political and military situations of its near neighbors, notably North and South Korea, China, and Russia. OTHER INVESTMENT COMPANY SECURITIES (ALL FUNDS). All of the Funds may invest in shares of other investment companies. Such an investment may be the most practical or only manner in which a Fund can participate in certain foreign markets because of the expenses involved or because other vehicles for investing in those countries may not be available at the time the Fund is ready to make an investment. Each Fund at times may invest in instruments structured as shares of investment companies to gain exposure to the performance of a recognized securities index, such as the S&P 500 Index. As a shareholder in an investment company, a Fund would indirectly bear its pro rata share of that investment company's expenses. Investment in other investment companies may involve the payment of substantial premiums above the value of such issuer's portfolio securities. The Funds do not intend to invest in such investment companies unless, in the judgment of NB Management, the potential benefits of such investment justify the payment of any applicable premium or sales charge. POLICIES AND LIMITATIONS. Except for investments in a money market fund managed by NB Management or its affiliates for cash management purposes, each Fund's investment in securities of other registered investment companies is limited to (i) 3% of the total voting stock of any one investment company, (ii) 5% of the Fund's total assets with respect to any one investment company, 31 and (iii) 10% of the Fund's total assets in the aggregate. Each Fund may also invest in an unregistered fund managed by NB Management or its affiliates as noted in the section entitled "Cash Management and Temporary Defensive Positions." Additionally, in reliance on an SEC exemptive rule, a Fund may invest an unlimited amount of its uninvested cash in a money market fund if the Fund pays no sales charge, as defined in rule 2830(b)(8) of the Conduct Rules of the National Association of Securities Dealers, Inc. ("NASD") ("sales charge"), or service fee, as defined in rule 2830(b)(9) of the Conduct Rules of the NASD, charged in connection with the purchase, sale, or redemption of securities issued by a money market fund ("service fee"); or if the Fund's investment adviser waives its advisory fee in an amount necessary to offset any sales charge or service fee. None of the Funds has any current intention to make use of this authority. INDEXED SECURITIES (NEUBERGER BERMAN INTERNATIONAL FUND, NEUBERGER BERMAN INTERNATIONAL INSTITUTIONAL FUND, AND NEUBERGER BERMAN INTERNATIONAL LARGE CAP FUND). Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund each may invest in indexed securities whose values are linked to currencies, interest rates, commodities, indices, or other financial indicators, domestic or foreign. Most indexed securities are short- to intermediate-term fixed income securities whose values at maturity or interest rates rise or fall according to the change in one or more specified underlying instruments. The value of indexed securities may increase or decrease if the underlying instrument appreciates, and they may have return characteristics similar to direct investment in the underlying instrument. Indexed securities may be more volatile than the underlying instrument itself. TERRORISM RISKS. Some of the U.S. securities markets were closed for a four-day period as a result of the terrorist attacks on the World Trade Center and Pentagon on September 11, 2001. These terrorist attacks, the war with Iraq and its aftermath, continuing occupation of Iraq by coalition forces and related events have led to increased short-term market volatility and may have long-term effects on U.S. and world economies and markets. Those events could also have an acute effect on individual issuers, related groups of issuers, or issuers concentrated in a single geographic area. A similar disruption of the financial markets or other terrorist attacks could adversely impact interest rates, auctions, secondary trading, ratings, credit risk, inflation and other factors relating to portfolio securities and adversely affect Fund service providers and the Funds' operations. NEUBERGER BERMAN SOCIALLY RESPONSIVE FUND - DESCRIPTION OF SOCIAL POLICY ------------------------------------------------------------------------ SOCIAL INVESTMENT GUIDELINES Neuberger Berman's SOCIALLY RESPONSIVE Fund believes that good corporate citizenship is good business and has the potential to produce positive investment results. The Fund is designed to allow investors to put their money to work and also support companies that follow principles of good corporate citizenship. The Fund seeks long-term growth of capital by investing primarily in securities of companies that meet the fund's value-oriented financial criteria and social policy. The Fund focuses on companies that are agents of favorable change in workplace policies (particularly for women and minorities); are responsive to environmental issues; and are good corporate citizens. In 32 addition, the Fund avoids companies with products with negative public health implications. The Neuberger Berman SOCIALLY RESPONSIVE Fund endeavors to avoid companies that derive revenue from gambling or the production of: o tobacco, o alcohol, o weapons, or o nuclear power. In addition to its exclusionary screens, the Fund looks for companies that show leadership in: o environment concerns, o diversity in the work force, and o progressive employment and workplace practices and community relations. The Fund may also consider public health issues, externalities associated with a company's products, and general corporate citizenship in making its investment decisions. INTERPRETATION OF SOCIAL INVESTMENT GUIDELINES ---------------------------------------------- All social screens require interpretation in their application and is at the discretion of the portfolio management team. The following discussion provides further detail about the interpretation of the Fund's Social Investment Guidelines. TOBACCO ------- MANUFACTURERS. The Fund does not buy or hold that companies derive 5% or more of revenues from the manufacture of tobacco products. This screen primarily excludes producers of cigarettes, cigars, pipe tobacco, and smokeless tobacco products (snuff and chewing tobacco). PROCESSORS AND SUPPLIERS. The Fund does not buy or hold companies that are in the business of processing tobacco and supplying tobacco to these manufacturers. RETAIL SALES. The Fund does not buy or hold companies that derive a majority of revenues from the retail sale of tobacco products. TOBACCO-RELATED PRODUCTS. The Fund does not buy or hold companies that derive a majority of revenues from the sale of goods used in the actual manufacture tobacco products, such as cigarette papers and filters. The Fund MAY buy or hold companies that sell certain key products to the tobacco industry. These items include: cigarette packets, boxes, or cartons; the paperboard used in the manufacture of cigarette boxes or cartons; the cellophane wrap used to enclose cigarette packets or boxes; magazine or newspaper space sold for cigarette advertisements; and billboard space rented for cigarette advertisements. In general, the Fund does not exclude such 33 companies from investment, although it may reconsider companies that derive substantial revenues from these activities on a case-by-case basis. ALCOHOL ------- MANUFACTURERS AND PRODUCERS. The Fund does not buy or hold companies that derive 5% or more of revenues from the manufacture of alcoholic beverages. This screen primarily excludes distillers of hard liquors, brewers, and vintners. RETAIL SALES. The Fund does not buy or hold companies that derive a majority of revenues from the retail sale of alcoholic beverages. This screen relates primarily to restaurant chains and convenience stores. The Fund MAY buy or hold: o agricultural products companies that sell products to the alcohol industry for use in the production of alcoholic beverages (primarily grain alcohol producers); or o companies that sell unprocessed agricultural goods, such as barley or grapes, to producers of alcoholic beverages. GAMBLING -------- OWNERS AND OPERATORS. The Fund does not buy or hold companies that derive 5% or more of revenues from the provision of gaming services. This screen primarily excludes owners and operators of casinos, riverboat gambling facilities, horse tracks, dog tracks, bingo parlors, or other betting establishments. MANUFACTURERS OF GAMING EQUIPMENT. The Fund does not buy or hold companies that derive 5% or more of revenues from the manufacture of gaming equipment or the provision of goods and services to lottery operations. The Fund MAY buy or hold companies that: o provide specialized financial services to casinos; or o sell goods or services that are clearly nongaming-related to casinos or other gaming operations. NUCLEAR POWER ------------- OWNERS AND OPERATORS. The Fund does not buy or hold companies that are owners or operators of nuclear power plants. This screen primarily excludes major electric utility companies. The Fund MAY buy or hold: o engineering or construction companies that are involved in the construction of a nuclear power plant or provide maintenance services to such plants in operation; or 34 o electric utility companies that are purchasers and distributors of electricity that may have come from nuclear power plants (but are not themselves owners of such plants). MILITARY CONTRACTING -------------------- MAJOR PRIME CONTRACTORS. The Fund does not buy or hold companies that derive 5% or more of revenues from weapons-related contracts. Although this screen permits the Fund to invest in companies that derive less than 5% of revenues from weapons contracts, the Fund generally avoids large military contractors that have weapons-related contracts that total less than 5% of revenues but are, nevertheless, large in dollar value and exclusively designed for weapons-related activities. While it is often difficult to obtain precise weapons contracting figures, the Fund will make a good faith effort to do so. NON-WEAPONS-RELATED SALES TO THE DEPARTMENT OF DEFENSE. The Fund does not buy or hold companies that derive their total revenue primarily from non- consumer sales to the Department of Defense ("DoD"). In some cases, it is difficult to clearly distinguish between contracts that are weapons-related and those that are not. For example, is jet fuel for fighter aircraft a weapons-related product? The Fund has decided to treat jet fuel as a civilian product and may buy or hold a company that produces it. The Fund will use its best judgment in making such determinations. The Fund MAY buy or hold companies that: o have some minor military business; o have some contracts with the DoD for goods and services that are clearly not weapons-related; or o manufacture computers, electric wiring, and semiconductors or that provide telecommunications systems (in the absence of information that these products and services are weapons-related). FIREARMS -------- MANUFACTURERS. The Fund does not buy or hold companies that produce firearms such as pistols, revolvers, rifles, shotguns, or sub-machine guns. The Fund will also not buy or hold companies that produce small arms ammunition. RETAILERS. The Fund does not buy or hold companies that derive a majority of revenues from the wholesale or retail distribution of firearms or small arms ammunition. ENVIRONMENT ----------- Best of Class Approach The Fund seeks to invest in companies that have demonstrated a commitment to environmental stewardship. Among other things, it will look for companies: o that have integrated environmental management systems; 35 o that have measurably reduced their Toxic Release Inventory (TRI) emissions to air, land, or water (on-and off-site releases); o whose TRI emissions are substantially lower than their peers; o that participate in voluntary environmental initiatives led by governmental agencies such as the Environmental Protection Agency (EPA), non-industry organizations, or community groups; o that are committed to the public disclosure of corporate environmental information, such as signatories to CERES (Coalition for Environmentally Responsible Economies) or participants in the GRI (Global Reporting Initiative); or o have innovative processes or products that offer an environmental benefit. ENVIRONMENTAL RISK ------------------ The Fund seeks to avoid companies whose products it has determined pose unacceptable levels of environmental risk. To that end, the Fund does not buy or hold companies that: o are major manufacturers of hydrochloroflurocarbons (HCFCs), bromines, or other ozone-depleting chemicals; o are major manufacturers of pesticides or chemical fertilizers; o operate in the gold mining industry; or o design, market, own, or operate nuclear power plants (see Nuclear Power section). THE FUND SERIOUSLY CONSIDERS A COMPANY'S ENVIRONMENTAL LIABILITIES, BOTH ACCRUED AND UNACCRUED, AS A MEASURE OF ENVIRONMENTAL RISK. IT VIEWS PUBLIC DISCLOSURE OF THESE LIABILITIES AS A POSITIVE STEP. REGULATORY PROBLEMS ------------------- The Fund seeks to avoid companies with involvement in major environmental controversies. It will look at a combination of factors in this area and will decide if, on balance, a company qualifies for investment. Negative factors may include: o environmental fines or penalties issued by a state or federal agency or court over the most recent three calendar years; and/or o highly publicized community environmental lawsuits or controversies. Positive factors may include: o good environmental management systems; o progress in implementing environmental programs; and o public disclosure of environmental policies, goals, and progress toward those goals. If a company already held in the Fund becomes involved in an environmental controversy, the Fund will communicate with the company to press for positive action. The Fund will not necessarily divest the company's shares if it perceives a path to remediation and policies and procedures are implemented to mitigate risk of recurrence.. 36 DIVERSITY --------- The Fund strives to invest in companies that are leaders in promoting diversity in the workplace. Among other things, it will look for companies that: o promote women and people of color into senior line positions; o appoint women and people of color to their boards of directors; o offer diversity training and support groups; o purchase goods and services from women- and minority-owned firms; and o have implemented innovative hiring, training, or other programs for women, people of color, and/or the disabled, or otherwise have a superior reputation in the area of diversity. The Fund attempts to avoid companies with recent major discrimination lawsuits related to gender, race, disability, or sexual orientation. In general, the Fund does not buy companies: o that are currently involved in unsettled major class action discrimination lawsuits; o that are currently involved in unsettled major discrimination lawsuits involving the U.S. Department of Justice or the EEOC (Equal Employment Opportunity Commission); or o with exceptional historical patterns of discriminatory practices. Although the Fund views companies involved in non-class action discrimination lawsuits and/or lawsuits that have been settled or ruled upon with some concern, it may buy or hold such companies. These types of lawsuits will be given particular weight if a company does not have a strong record of promoting diversity in the workplace. While the Fund encourages companies to have diverse boards of directors and senior management, the absence of women and minorities in these positions does not warrant a company's exclusion from the Fund. If a company already held in the Fund becomes involved in a discrimination controversy, the Fund will communicate with the company to press for positive action. The Fund will not necessarily divest the company's shares if it perceives a path to remediation and policies and procedures are implemented to mitigate risk of recurrence.. EMPLOYMENT AND WORKPLACE PRACTICES ---------------------------------- The Fund endeavors to invest in companies whose employment and workplace practices are considered progressive. Among other things, it will look for companies that: o offer benefits such as maternity leave that exceeds the 12 unpaid weeks mandated by the federal government; paid maternity leave; paternity leave; subsidized child and elder care (particularly for lower-paid staff); flexible spending accounts with dependent care options; flextime or job- sharing arrangements; phaseback for new mothers; adoption assistance; a full time work/family benefits manager; and/or health and other benefits for same-sex domestic partners of its employees; o have taken extraordinary steps to treat their unionized workforces fairly; and o have exceptional workplace safety records, particularly OSHA Star certification for a substantial number of its facilities and/or a marked decrease in their lost time accidents and workers compensation rates. 37 The Fund will seek to avoid investing in companies that have: o demonstrated a blatant disregard for worker safety; or o historically had poor relations with their unionized workforces, including involvement in unfair labor practices, union busting, and denying employees the right to organize. Although the Fund is deeply concerned about the labor practices of companies with international operations, it may buy or hold companies that are currently or have been involved in related controversies. The Fund recognizes that it is often difficult to obtain accurate and consistent information in this area; however, it will seek to include companies that are complying with or exceeding International Labour Organization (ILO) standards. COMMUNITY RELATIONS ------------------- The Fund believes that it is important for companies to have positive relations with the communities in which they are located - communities of all races and socio-economic status. It will seek to invest in companies that: o have open communications within the communities in which they operate; o make generous cash donations to charitable organizations, particularly multi-year commitments to local community groups; and o offer incentives (such as paid time off) to employees to volunteer their time with charitable organizations. The Fund seeks to avoid companies with involvement in recent environmental controversies that have significantly affected entire communities (See Environment, Regulatory Problems). The Fund will be particularly stringent with companies that do not have positive relations with the communities in which they operate. If a company already held in the Fund becomes involved in a community controversy, the Fund will communicate with the company to press for positive action. The Fund will not necessarily divest the company's shares if it perceives a path to remediation and policies and procedures are implemented to mitigate risk of recurrence. PRODUCT SAFETY -------------- The Fund seeks to avoid companies whose products have negative public health implications. Among other things, the Fund will consider: o the nature of a company's products; or o whether a company has significant (already accrued or settled lawsuits) or potentially significant (pending lawsuits or settlements) product liabilities. GENERAL ------- CORPORATE ACTIONS. If a company held in the Fund subsequently becomes involved in tobacco, alcohol, gambling, weapons, or nuclear power (as described above) through a corporate acquisition or change of business strategy, and no longer satisfies the Social Investment Guidelines, the Fund will eliminate the 38 position at the time deemed appropriate by the Fund given market conditions. The Fund will divest such companies whether or not they have taken strong positive initiatives in the other social issue areas that the Fund considers. OWNERSHIP. The Fund does not buy or hold companies that are majority owned by companies that are excluded by its Social Investment Guidelines. PERFORMANCE INFORMATION Each Fund's performance figures are based on historical results and are not intended to indicate future performance. The share price and total return of each Fund will vary, and an investment in a Fund, when redeemed, may be worth more or less than an investor's original cost. AVERAGE ANNUAL TOTAL RETURN COMPUTATIONS ---------------------------------------- Each Fund may advertise certain total return information. An average annual compounded rate of return ("T") may be computed by using the redeemable value at the end of a specified period ("ERV") of a hypothetical initial investment of $1,000 ("P") over a period of time ("n") according to the formula: n P(1+T) = ERV Average annual total return smoothes out year-to-year variations in performance and, in that respect, differs from actual year-to-year results. NB Management may from time to time forgo a portion of its current fees due from any Fund or reimburse a Fund for a portion of its expenses. Such action has the effect of increasing total return. Such undertakings are described in the Prospectuses and in "Investment Management and Administration Services" below. AVERAGE ANNUAL TOTAL RETURN AFTER TAXES ON DISTRIBUTIONS -------------------------------------------------------- An average annual rate of return after taxes on distribution ("T") may be computed by using the ending value at the end of a specified period after taxes on Fund distributions but not after taxes on redemption ("ATVD") of a hypothetical initial investment of $1,000 ("P") over a period of time ("n") according to the formula: n P(1+T) = ATV D After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. 39 AVERAGE ANNUAL TOTAL RETURN AFTER TAXES ON DISTRIBUTIONS AND SALE OF FUND SHARES -------------------------------------------------------------------------------- An average annual rate of return after taxes on distribution and sale of Fund shares ("T") may be computed by using the ending value at the end of a specified period after taxes on Fund distributions and sale of Fund shares ("ATVDR") of a hypothetical initial investment of $1,000 ("P") over a period of time ("n") according to the formula: n P(1+T) = ATV DR CERTAIN RISK CONSIDERATIONS Although each Fund seeks to reduce risk by investing in a diversified portfolio of securities, diversification does not eliminate all risk. There can, of course, be no assurance that any Fund will achieve its investment objective. TRUSTEES AND OFFICERS The following tables set forth information concerning the Fund Trustees and officers of the Trust. All persons named as Fund Trustees and officers also serve in similar capacities for other funds administered or managed by NB Management and Neuberger Berman. INFORMATION ABOUT THE BOARD OF TRUSTEES ---------------------------------------
--------------------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN OTHER DIRECTORSHIPS POSITION AND FUND COMPLEX HELD OUTSIDE FUND NAME, AGE, AND LENGTH OF OVERSEEN BY COMPLEX BY FUND ADDRESS (1) TIME SERVED (2) PRINCIPAL OCCUPATION(S) (3) FUND TRUSTEE (4) TRUSTEE ----------- -------------- --------------------------- ---------------- ------- --------------------------------------------------------------------------------------------------------------------- INDEPENDENT FUND TRUSTEES --------------------------------------------------------------------------------------------------------------------- John Cannon (76) Trustee since Consultant; formerly, Chairman, 64 Independent Trustee 2000 CDC Investment Advisers or Director of three (registered investment adviser), series of 1993 to January 1999; formerly, Oppenheimer Funds: President and Chief Executive Limited Term New Officer, AMA Investment York Municipal Fund, Advisors, an affiliate of the Rochester Fund American Medical Association. Municipals, and Oppenheimer Convertible Securities Fund since 1992.
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--------------------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN OTHER DIRECTORSHIPS POSITION AND FUND COMPLEX HELD OUTSIDE FUND NAME, AGE, AND LENGTH OF OVERSEEN BY COMPLEX BY FUND ADDRESS (1) TIME SERVED (2) PRINCIPAL OCCUPATION(S) (3) FUND TRUSTEE (4) TRUSTEE ----------- -------------- --------------------------- ---------------- ------- --------------------------------------------------------------------------------------------------------------------- Faith Colish (71) Trustee since Counsel, Carter Ledyard & 64 Advisory Director, 1982 Milburn LLP (law firm) since ABA Retirement Funds October 2002; formerly, (formerly, American Attorney-at-Law and President, Bar Retirement Faith Colish, A Professional Association (ABRA)) Corporation, 1980 to 2002. since 1997 (not-for-profit membership association). ---------------------------------------------------------------------------------------------------------------------- C. Anne Harvey (69) Trustee since President, C.A. Harvey 64 Formerly, President, 2000 Associates since October 2001; Board of Associates formerly, Director, AARP, 1978 to The National to December 2001. Rehabilitation Hospital's Board of Directors, 2001 to 2002; formerly, Member, Individual Investors Advisory Committee to the New York Stock Exchange Board of Directors, 1998 to June 2002. ----------------------------------------------------------------------------------------------------------------------- Robert A. Kavesh (79) Trustee since Marcus Nadler Professor Emeritus 64 Director, The Caring 2000 of Finance and Economics, New Community (not- York University Stern School of for-profit); Business; formerly, Executive formerly, Director, Secretary-Treasurer, American DEL Laboratories, Finance Association, 1961 to Inc. (cosmetics and 1979. pharmaceuticals), 1978 to 2004; formerly, Director, Apple Bank for Savings, 1979 to 1990; formerly, Director, Western Pacific Industries, Inc., 1972 to 1986 (public company). -----------------------------------------------------------------------------------------------------------------------
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--------------------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN OTHER DIRECTORSHIPS POSITION AND FUND COMPLEX HELD OUTSIDE FUND NAME, AGE, AND LENGTH OF OVERSEEN BY COMPLEX BY FUND ADDRESS (1) TIME SERVED (2) PRINCIPAL OCCUPATION(S) (3) FUND TRUSTEE (4) TRUSTEE ----------- -------------- --------------------------- ---------------- ------- --------------------------------------------------------------------------------------------------------------------- Howard A. Mileaf (69) Trustee since Retired; formerly, Vice 64 Director, 1984 President and General Counsel, Webfinancial WHX Corporation (holding Corporation (holding company), 1993 to 2001. company) since December 2002; formerly, Director WHX Corporation (holding company), January 2002 to June 2005; formerly, Director, State Theatre of New Jersey (not-for-profit theater), 2000 to 2005; formerly, Director, Kevlin Corporation (manufacturer of microwave and other products). --------------------------------------------------------------------------------------------------------------------- Edward I. O'Brien (78) Trustee since Formerly, Member, Investment 64 Director, Legg 1993 Policy Committee, Edward Jones, Mason, Inc. 1993 to 2001; President, (financial services Securities Industry Association holding company) ("SIA") (securities industry's since 1993; representative in government formerly, Director, relations and regulatory matters Boston Financial at the federal and state Group (real estate levels), 1974 to 1992; Adviser and tax shelters), to SIA, November 1992 to 1993 to 1999. November 1993. --------------------------------------------------------------------------------------------------------------------- William E. Rulon (74) Trustee since Retired; formerly, Senior Vice 64 Formerly, Director, 1986 President, Foodmaker, Inc. Pro-Kids Golf and (operator and franchiser of Learning Academy restaurants) until January 1997. (teach golf and computer usage to "at risk" children), 1998 to 2006; formerly, Director, Prandium, Inc. (restaurants), March 2001 to July 2002. ---------------------------------------------------------------------------------------------------------------------
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--------------------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN OTHER DIRECTORSHIPS POSITION AND FUND COMPLEX HELD OUTSIDE FUND NAME, AGE, AND LENGTH OF OVERSEEN BY COMPLEX BY FUND ADDRESS (1) TIME SERVED (2) PRINCIPAL OCCUPATION(S) (3) FUND TRUSTEE (4) TRUSTEE ----------- -------------- --------------------------- ---------------- ------- --------------------------------------------------------------------------------------------------------------------- Cornelius T. Ryan (74) Trustee since Founding General Partner, Oxford 64 None. 1982 Partners and Oxford Bioscience Partners (venture capital investing) and President, Oxford Venture Corporation since 1981. --------------------------------------------------------------------------------------------------------------------- Tom D. Seip (56) Trustee since General Partner, Seip 64 Director, H&R Block, 2000; Lead Investments LP (a private Inc. (financial Independent investment partnership); services company) Trustee formerly, President and CEO, since May 2001; beginning 2006 Westaff, Inc. (temporary Director, America staffing), May 2001 to January One Foundation since 2002; formerly, Senior Executive 1998; formerly, at the Charles Schwab Director, Forward Corporation, 1983 to 1999, Management, Inc. including Chief Executive (asset management Officer, Charles Schwab company), 1999 to Investment Management, Inc. and 2006; formerly Trustee, Schwab Family of Funds Director, E-Bay and Schwab Investments, 1997 to Zoological Society, 1998, and Executive Vice 1999 to 2003; President-Retail Brokerage, formerly, Director, Charles Schwab Investment General Magic (voice Management,1994 to 1997. recognition software), 2001 to 2002; formerly, Director, E-Finance Corporation (credit decisioning services), 1999 to 2003; formerly, Director, Save-Daily.com (micro investing services), 1999 to 2003. ---------------------------------------------------------------------------------------------------------------------
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--------------------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN OTHER DIRECTORSHIPS POSITION AND FUND COMPLEX HELD OUTSIDE FUND NAME, AGE, AND LENGTH OF OVERSEEN BY COMPLEX BY FUND ADDRESS (1) TIME SERVED (2) PRINCIPAL OCCUPATION(S) (3) FUND TRUSTEE (4) TRUSTEE ----------- -------------- --------------------------- ---------------- ------- --------------------------------------------------------------------------------------------------------------------- Candace L. Straight Trustee since Private investor and consultant 64 Director, Montpelier (59) 2000 specializing in the insurance Re (reinsurance industry; formerly, Advisory company) since 2006; Director, Securitas Capital LLC Director, National (a global private equity Atlantic Holdings investment firm dedicated to Corporation making investments in the (property and insurance sector), 1998 to casualty insurance December 2003. company) since 2004; Director, The Proformance Insurance Company (personal lines property and casualty insurance company) since March 2004; formerly, Director, Providence Washington Insurance Company (property and casualty insurance company), December 1998 to March 2006; formerly, Director, Summit Global Partners (insurance brokerage firm), 2000 to 2005. -------------------------------------------------------------------------------------------------------------------- Peter P. Trapp (61) Trustee since Regional Manager for 64 None. 2000 Mid-Southern Region, Ford Motor Credit Company since September 1997; formerly, President, Ford Life Insurance Company, April 1995 to August 1997. --------------------------------------------------------------------------------------------------------------------
44
--------------------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN OTHER DIRECTORSHIPS POSITION AND FUND COMPLEX HELD OUTSIDE FUND NAME, AGE, AND LENGTH OF OVERSEEN BY COMPLEX BY FUND ADDRESS (1) TIME SERVED (2) PRINCIPAL OCCUPATION(S) (3) FUND TRUSTEE (4) TRUSTEE ----------- -------------- --------------------------- ---------------- ------- --------------------------------------------------------------------------------------------------------------------- FUND TRUSTEES WHO ARE "INTERESTED PERSONS" --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- Jack L. Rivkin* (66) President and Executive Vice President and 64 Director, Dale Trustee since Chief Investment Officer, Carnegie and 2002 Neuberger Berman Inc. (holding Associates, Inc. company) since 2002 and 2003, (private company) respectively; Managing Director since 1998; and Chief Investment Officer, Director, Solbright, Neuberger Berman since December Inc. (private 2005 and 2003, respectively; company) since 1998. formerly, Executive Vice President, Neuberger Berman, December 2002 to 2005; Director and Chairman, NB Management since December 2002; formerly, Executive Vice President, Citigroup Investments, Inc., September 1995 to February 2002; formerly, Executive Vice President, Citigroup Inc., September 1995 to February 2002. -------------------------------------------------------------------------------------------------------------------------- Peter E. Sundman* (47) Chairman of the Executive Vice President, 64 Director and Vice Board, Chief Neuberger Berman Inc. (holding President, Executive company) since 1999; Head of Neuberger & Berman Officer and Neuberger Berman Inc.'s Mutual Agency, Inc. since Trustee since Funds Business (since 1999) and 2000; formerly, 1999 Institutional Business (1999 to Director, Neuberger October 2005); responsible for Berman Inc. (holding Managed Accounts Business and company), October intermediary distribution since 1999 to March 2003; October 1999; President and Trustee, Frost Director, NB Management since Valley YMCA; 1999; Managing Director, Trustee, College of Neuberger Berman since 2005; Wooster. formerly, Executive Vice President, Neuberger Berman, 1999 to December 2005; formerly, Principal, Neuberger Berman, 1997 to 1999; formerly, Senior Vice President, NB Management, 1996 to 1999. --------------------------------------------------------------------------------------------------------------------------
(1) The business address of each listed person is 605 Third Avenue, New York, New York 10158. 45 (2) Pursuant to the Trust's Trust Instrument, each Fund Trustee shall hold office for life or until his or her successor is elected or the Trust terminates; except that (a) any Fund Trustee may resign by delivering a written resignation; (b) any Fund Trustee may be removed with or without cause at any time by a written instrument signed by at least two-thirds of the other Fund Trustees; (c) any Fund Trustee who requests to be retired, or who has become unable to serve, may be retired by a written instrument signed by a majority of the other Fund Trustees; and (d) any Fund Trustee may be removed at any shareholder meeting by a vote of at least two-thirds of the outstanding shares. (3) Except as otherwise indicated, each individual has held the positions shown for at least the last five years. (4) For funds organized in a master-feeder structure, we count the master fund and its associated feeder funds as a single portfolio. * Indicates a Fund Trustee who is an "interested person" within the meaning of the 1940 Act. Mr. Sundman and Mr. Rivkin are interested persons of the Trust by virtue of the fact that they are officers and/or directors of NB Management and Neuberger Berman. INFORMATION ABOUT THE OFFICERS OF THE TRUST -------------------------------------------
POSITION AND LENGTH OF NAME, AGE, AND ADDRESS (1) TIME SERVED (2) PRINCIPAL OCCUPATION(S)(3) -------------------------- --------------- --------------------------- Andrew B. Allard (45) Anti-Money Laundering Compliance Senior Vice President, Neuberger Berman Officer since 2002 since 2006; Deputy General Counsel, Neuberger Berman since 2004; formerly, Vice President, Neuberger Berman, 2000 to 2006; formerly, Associate General Counsel, Neuberger Berman, 1999 to 2004; Anti-Money Laundering Compliance Officer, fifteen registered investment companies for which NB Management acts as investment manager and administrator (seven since 2002, three since 2003, four since 2004 and one since 2005) and one registered investment company for which Lehman Brothers Asset Management Inc. acts as investment adviser (since 2006). Michael J. Bradler (36) Assistant Treasurer since 2005 Vice President, Neuberger Berman since 2006; Employee, NB Management since 1997; Assistant Treasurer, fifteen registered investment companies for which NB Management acts as investment manager and administrator (fifteen since 2005) and one registered investment company for which Lehman Brothers Asset Management Inc. acts as investment adviser (since 2006).
46
POSITION AND LENGTH OF NAME, AGE, AND ADDRESS (1) TIME SERVED (2) PRINCIPAL OCCUPATION(S)(3) -------------------------- --------------- --------------------------- Claudia A. Brandon (49) Secretary since 1985 Vice President-Mutual Fund Board Relations, NB Management since 2000 and Assistant Secretary since 2004; Vice President, Neuberger Berman since 2002 and Employee since 1999; Secretary, fifteen registered investment companies for which NB Management acts as investment manager and administrator (three since 1985, four since 2002, three since 2003, four since 2004 and one since 2005) and one registered investment company for which Lehman Brothers Asset Management Inc. acts as investment adviser (since 2006). Robert Conti (50) Vice President since 2000 Senior Vice President, Neuberger Berman since 2003; formerly, Vice President, Neuberger Berman, 1999 to 2003; Senior Vice President, NB Management since 2000; Vice President, fifteen registered investment companies for which NB Management acts as investment manager and administrator (three since 2000, four since 2002, three since 2003, four since 2004 and one since 2005) and one registered investment company for which Lehman Brothers Asset Management Inc. acts as investment adviser (since 2006). Brian J. Gaffney (53) Vice President since 2000 Managing Director, Neuberger Berman since 1999; Senior Vice President, NB Management since 2000; Vice President, fifteen registered investment companies for which NB Management acts as investment manager and administrator (three since 2000, four since 2002, three since 2003, four since 2004 and one since 2005) and one registered investment company for which Lehman Brothers Asset Management Inc. acts as investment adviser (since 2006).
47
POSITION AND LENGTH OF NAME, AGE, AND ADDRESS (1) TIME SERVED (2) PRINCIPAL OCCUPATION(S)(3) -------------------------- --------------- --------------------------- Maxine L. Gerson (55) Chief Legal Officer since 2005 Senior Vice President, Neuberger Berman (only for purposes of sections 307 since 2002; Deputy General Counsel and and 406 of the Sarbanes-Oxley Act Assistant Secretary, Neuberger Berman since of 2002) 2001; formerly, Vice President, Neuberger Berman, 2001 to 2002; formerly, Associate General Counsel, Neuberger Berman, 2001; formerly, Counsel, Neuberger Berman, 2000; Secretary and General Counsel, NB Management since 2004; Chief Legal Officer (only for purposes of sections 307 and 406 of the Sarbanes-Oxley Act of 2002), fifteen registered investment companies for which NB Management acts as investment manager and administrator (fifteen since 2005) and one registered investment company for which Lehman Brothers Asset Management Inc. acts as investment adviser (since 2006). Sheila R. James (41) Assistant Secretary since 2002 Employee, Neuberger Berman since 1999; Assistant Secretary, fifteen registered investment companies for which NB Management acts as investment manager and administrator (seven since 2002, three since 2003, four since 2004 and one since 2005) and one registered investment company for which Lehman Brothers Asset Management Inc. acts as investment adviser (since 2006). Kevin Lyons (51) Assistant Secretary since 2003 Employee, Neuberger Berman since 1999; Assistant Secretary, fifteen registered investment companies for which NB Management acts as investment manager and administrator (ten since 2003, four since 2004 and one since 2005) and one registered investment company for which Lehman Brothers Asset Management Inc. acts as investment adviser (since 2006).
48
POSITION AND LENGTH OF NAME, AGE, AND ADDRESS (1) TIME SERVED (2) PRINCIPAL OCCUPATION(S)(3) -------------------------- --------------- --------------------------- John M. McGovern (36) Treasurer and Principal Financial Vice President, Neuberger Berman since 2004; and Accounting Officer since 2005; Employee, NB Management since 1993; prior thereto, Assistant Treasurer Treasurer and Principal Financial and since 2002 Accounting Officer, fifteen registered investment companies for which NB Management acts as investment manager and administrator (fifteen since 2005) and one registered investment company for which Lehman Brothers Asset Management Inc. acts as investment adviser (since 2006); formerly, Assistant Treasurer, fifteen registered investment companies for which NB Management acts as investment manager and administrator, 2002 to 2005. Frank Rosato (35) Assistant Treasurer since 2005 Vice President, Neuberger Berman since 2006; Employee, NB Management since 1995; Assistant Treasurer, fifteen registered investment companies for which NB Management acts as investment manager and administrator (fifteen since 2005) and one registered investment company for which Lehman Brothers Asset Management Inc. acts as investment adviser (since 2006). Frederic B. Soule (60) Vice President since 2000 Senior Vice President, Neuberger Berman since 2003; formerly, Vice President, Neuberger Berman, 1999 to 2003; Vice President, fifteen registered investment companies for which NB Management acts as investment manager and administrator (three since 2000, four since 2002, three since 2003, four since 2004 and one since 2005) and one registered investment company for which Lehman Brothers Asset Management Inc. acts as investment adviser (since 2006).
49
POSITION AND LENGTH OF NAME, AGE, AND ADDRESS (1) TIME SERVED (2) PRINCIPAL OCCUPATION(S)(3) -------------------------- --------------- --------------------------- Chamaine Williams (35) Chief Compliance Officer since 2005 Vice President, Lehman Brothers Inc. since 2003; Chief Compliance Officer, fifteen registered investment companies for which NB Management acts as investment manager and administrator (fifteen since 2005) and one registered investment company for which Lehman Brothers Asset Management Inc. acts as investment adviser (since 2005); Chief Compliance Officer, Lehman Brothers Asset Management Inc. since 2003; Chief Compliance Officer, Lehman Brothers Alternative Investment Management LLC since 2003; formerly, Vice President, UBS Global Asset Management (US) Inc. (formerly, Mitchell Hutchins Asset Management, a wholly-owned subsidiary of PaineWebber Inc.), 1997 to 2003.
(1)The business address of each listed person is 605 Third Avenue, New York, New York 10158. (2)Pursuant to the By-Laws of the Trust, each officer elected by the Fund Trustees shall hold office until his or her successor shall have been elected and qualified or until his or her earlier death, inability to serve, or resignation. Officers serve at the pleasure of the Fund Trustees and may be removed at any time with or without cause. (3)Except as otherwise indicated, each individual has held the positions shown for at least the last five years. THE BOARD OF TRUSTEES --------------------- The Board of Trustees is responsible for managing the business and affairs of the Trust. Among other things, the Board of Trustees generally oversees the portfolio management of each Fund and reviews and approves each Fund's advisory and sub-advisory contracts and other principal contracts. It is the Trust's policy that at least three quarters of the Board of Trustees shall be comprised of Fund Trustees who are not "interested persons" of NB Management (including its affiliates) or the Trust ("Independent Fund Trustees"). The Board of Trustees has established several standing committees to oversee particular aspects of the Funds' management. The standing committees of the Board of Trustees are described below. AUDIT COMMITTEE. The Audit Committee's purposes are (a) to oversee the Funds' accounting and financial reporting processes, their internal control over financial reporting and, as the Committee deems appropriate, to inquire into the internal control over financial reporting of certain third-party service providers; (b) to oversee the quality and integrity of the Funds' financial statements and the independent audit thereof; (c) to oversee, or, as appropriate, assist Board oversight of, the Funds' compliance with legal and regulatory requirements that relate to the Funds' accounting and financial reporting, internal control over financial reporting and independent audits; (d) to approve prior to appointment the engagement of the Funds' independent registered public accounting firms and, in connection therewith, to review and evaluate the qualifications, independence and performance of the Funds' independent registered public accounting firms; and (e) to act as a liaison between the Funds' independent registered public accounting firms and the full 50 Board. Its members are John Cannon, Howard A. Mileaf, Cornelius T. Ryan (Chairman), Tom D. Seip, and Peter P. Trapp. All members are Independent Fund Trustees. During the fiscal year ended August 31, 2006, the Committee met seven times. ETHICS AND COMPLIANCE COMMITTEE. The Ethics and Compliance Committee generally oversees: (a) the Trust's program for compliance with Rule 38a-1 and the Trust's implementation and enforcement of its compliance policies and procedures; (b) the compliance with the Trust's Code of Ethics, which restricts the personal securities transactions, including transactions in Fund shares, of employees, officers, and trustees; and (c) the activities of the Trust's Chief Compliance Officer ("CCO"). The Committee shall not assume oversight duties to the extent that such duties have been assigned by the Board expressly to another Committee of the Board (such as oversight of internal controls over financial reporting, which has been assigned to the Audit Committee.) The Committee's primary function is oversight. Each investment adviser, subadviser, principal underwriter, administrator and transfer agent (collectively, "Service Providers") is responsible for its own compliance with the federal securities laws and for devising, implementing, maintaining and updating appropriate policies, procedures and codes of ethics to ensure compliance with applicable laws and regulations. The CCO is responsible for administering each Fund's Compliance Program, including devising and implementing appropriate methods of testing compliance by the Fund and its Service Providers. Its members are John Cannon (Chairman), Faith Colish, C. Anne Harvey and Edward I. O'Brien. All members are Independent Fund Trustees. During the fiscal year ended August 31, 2006, the Committee met four times. The entire Board will receive at least annually a report on the compliance programs of the Trust and service providers and the required annual reports on the administration of the Code of Ethics and the required annual certifications from the Trust, Neuberger Berman and NB Management. CONTRACT REVIEW COMMITTEE. The Contract Review Committee is responsible for overseeing and guiding the process by which the Independent Fund Trustees annually consider whether to renew the Trust's principal contractual arrangements and Rule 12b-1 plans. Its members are Faith Colish (Chairwoman), Robert A. Kavesh, William E. Rulon and Candace L. Straight. All members are Independent Fund Trustees. During the fiscal year ended August 31, 2006, the Committee met three times. EXECUTIVE COMMITTEE. The Executive Committee is responsible for acting in an emergency when a quorum of the Board of Trustees is not available; the Committee has all the powers of the Board of Trustees when the Board is not in session to the extent permitted by Delaware law. Its members are John Cannon, Howard A. Mileaf, Edward I. O'Brien, Tom D. Seip and Peter E. Sundman (Chairman). All members except for Mr. Sundman are Independent Fund Trustees. During the fiscal year ended August 31, 2006, the Committee did not meet. GOVERNANCE AND NOMINATING COMMITTEE. The Governance and Nominating Committee is responsible for: (a) considering and evaluating the structure, composition and operation of the Board of Trustees and each committee thereof, including the operation of the annual self-evaluation by the Board; (b) evaluating and nominating individuals to serve as Fund Trustees including as Independent Fund Trustees, as members of committees, as Chair of the Board and as officers of the Trust; and (c) considering and making recommendations relating to the compensation of Independent Fund Trustees and of those officers 51 as to whom the Board is charged with approving compensation. Its members are C. Anne Harvey (Chairwoman), Robert A. Kavesh, Howard A. Mileaf, and Tom D. Seip. All members are Independent Fund Trustees. The Committee will consider nominees recommended by shareholders; shareholders may send resumes of recommended persons to the attention of Claudia A. Brandon, Secretary, Neuberger Berman Equity Funds, 605 Third Avenue, 2[nd] Floor, New York, NY, 10158-0180. During the fiscal year ended August 31, 2006, the Committee met two times. PORTFOLIO TRANSACTIONS AND PRICING COMMITTEE. The Portfolio Transactions and Pricing Committee: (a) monitors the operation of policies and procedures reasonably designed to ensure that each portfolio holding is valued in an appropriate and timely manner, reflecting information known to the manager about current market conditions ("Pricing Procedures"); (b) considers and evaluates, and recommends to the Board when the Committee deems it appropriate, amendments to the Pricing Procedures proposed by management, counsel, the auditors and others; (c) from time to time, as required or permitted by the Pricing Procedures, establishes or ratifies a method of determining the fair value of portfolio securities for which market pricing is not readily available; (d) generally oversees the program by which the manager seeks to monitor and improve the quality of execution for portfolio transactions; and (e) oversees the adequacy and fairness of the arrangements for securities lending; in each case with special emphasis on any situations in which a Fund deals with the manager or any affiliate of the manager as principal or agent. Its members are Faith Colish, Jack L. Rivkin (Vice Chairman), William E. Rulon, Cornelius T. Ryan and Candace L. Straight (Chairwoman). All members except for Mr. Rivkin are Independent Fund Trustees. During the fiscal year ended August 31, 2006, the Committee met four times. INVESTMENT PERFORMANCE COMMITTEE. The Investment Performance Committee is responsible for overseeing and guiding the process by which the Board reviews fund performance. Its members are Robert A. Kavesh, Edward I. O'Brien, Jack L. Rivkin (Vice Chairman), Cornelius T. Ryan and Peter P. Trapp (Chairman). All members except for Mr. Rivkin are Independent Fund Trustees. During the fiscal year ended August 31, 2006, the Committee met two times. The Trust's Trust Instrument provides that the Trust will indemnify its Fund Trustees and officers against liabilities and expenses reasonably incurred in connection with litigation in which they may be involved because of their offices with the Trust, unless it is adjudicated that they (a) engaged in bad faith, willful misfeasance, gross negligence, or reckless disregard of the duties involved in the conduct of their offices, or (b) did not act in good faith in the reasonable belief that their action was in the best interest of the Trust. In the case of settlement, such indemnification will not be provided unless it has been determined (by a court or other body approving the settlement or other disposition, by a majority of disinterested trustees based upon a review of readily available facts, or in a written opinion of independent counsel) that such officers or Fund Trustees have not engaged in willful misfeasance, bad faith, gross negligence, or reckless disregard of their duties. Officers and Fund Trustees who are interested persons of the Trust, as defined in the 1940 Act, receive no salary or fees from the Trust. Effective July 1, 2005, the compensation of each Independent Fund Trustee has been restructured. For serving as a trustee of the Neuberger Berman Funds, each Independent Fund Trustee receives an annual retainer of $60,000, paid quarterly, 52 and a fee of $7,500 for each of the six regularly scheduled meetings he or she attends in-person or by telephone. For any additional special in-person meeting of the Board, the Independent Fund Trustees will determine whether a fee is warranted, provided, however, that no fee is normally authorized for any special meeting attended by telephone. To compensate for the additional time commitment, the Chair of the Board's Audit Committee receives $5,000 per year and each member of the Audit Committee, including the Chair, receives $1,000 for each Audit Committee meeting he or she attends in-person or by telephone. No additional compensation is provided for service on any other Board committee. The Lead Independent Trustee receives an additional $20,000 per year. The Neuberger Berman Funds continue to reimburse Independent Fund Trustees for their travel and other out-of-pocket expenses related to attendance at Board meetings. The Independent Fund Trustee compensation is allocated to each Neuberger Berman Fund based on a method the Board of Trustees finds reasonable. The following table sets forth information concerning the compensation of Fund Trustees. Neuberger Berman Equity Funds does not have any retirement plan for its trustees. TABLE OF COMPENSATION FOR FISCAL YEAR ENDED 8/31/06 -----------------------------
TOTAL COMPENSATION FROM AGGREGATE INVESTMENT COMPANIES IN THE COMPENSATION NEUBERGER BERMAN NAME AND POSITION WITH THE TRUST FROM THE TRUST FUND COMPLEX PAID TO FUND TRUSTEES -------------------------------- -------------- ---------------------------------- INDEPENDENT FUND TRUSTEES John Cannon $31,190 $109,242 Trustee Faith Colish $29,489 $102,416 Trustee C. Anne Harvey $29,489 $102,416 Trustee Robert A. Kavesh $29,489 $102,416 Trustee Howard A. Mileaf $31,190 $109,242 Trustee Edward I. O'Brien $29,489 $102,416 Trustee William E. Rulon $29,489 $102,416 Trustee Cornelius T. Ryan $32,613 $114,133 Trustee Tom D. Seip $33,648 $119,032 Trustee
53
TOTAL COMPENSATION FROM AGGREGATE INVESTMENT COMPANIES IN THE COMPENSATION NEUBERGER BERMAN NAME AND POSITION WITH THE TRUST FROM THE TRUST FUND COMPLEX PAID TO FUND TRUSTEES -------------------------------- -------------- ---------------------------------- Candace L. Straight $29,489 $102,416 Trustee Peter P. Trapp $31,557 $109,242 Trustee FUND TRUSTEES WHO ARE "INTERESTED PERSONS" Jack L. Rivkin $0 $0 Trustee Peter E. Sundman $0 $0 Trustee
On December 1, 2006, the trustees and officers of the Trust, as a group, owned beneficially or of record less than 1% of the outstanding shares of each Fund. 54 OWNERSHIP OF SECURITIES ----------------------- Set forth below is the dollar range of equity securities owned by each Fund Trustee as of February 3, 2006.
------------------------------------------------------------------------------------------------------------------------------------ Century Fasciano Focus Genesis Guardian International International Manhattan Millennium Fund Fund Fund Fund Fund Fund Institutional Fund Fund Fund ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT FUND TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ John Cannon A D A A A E A A A Faith Colish B B B D B B A A B C. Anne Harvey A C A A A A A A A Robert A. Kavesh A A C A A A A A C Howard A. Mileaf B C C B A D A A A Edward I. O'Brien A A C D C A A D A William E. Rulon A A A A A A A B A Cornelius T. Ryan A A A A A A A A A Tom D. Seip A C B A A E A A A Candace L. Straight A A E E E D A C A Peter P. Trapp A A C A A D A A A ------------------------------------------------------------------------------------------------------------------------------------ FUND TRUSTEES WHO ARE "INTERESTED PERSONS" ------------------------------------------------------------------------------------------------------------------------------------ Jack L. Rivkin A A A A A A A A A Peter E. Sundman C A D D C C A C D ------------------------------------------------------------------------------------------------------------------------------------ A = NONE; B = $1-$10,000; C = $10,000 - $50,000; D = $50,000-$100,000; E = OVER $100,000
------------------------------------------------------------------------------------------------------------------------------------ Socially Real Partners Regency Responsive Estate Fund Fund Fund Fund ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT FUND TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ John Cannon D C A A Faith Colish B B B B C. Anne Harvey A A C A Robert A. Kavesh A A A A Howard A. Mileaf A B A B Edward I. O'Brien E A A A William E. Rulon A A A A Cornelius T. Ryan A A A A Tom D. Seip C A C A Candace L. Straight A A A A Peter P. Trapp A C A A ------------------------------------------------------------------------------------------------------------------------------------ FUND TRUSTEES WHO ARE "INTERESTED PERSONS" ------------------------------------------------------------------------------------------------------------------------------------ Jack L. Rivkin A A A A Peter E. Sundman D A A E ------------------------------------------------------------------------------------------------------------------------------------ A = NONE; B = $1-$10,000; C = $10,000 - $50,000; D = $50,000-$100,000; E = OVER $100,000
55 The following table shows the aggregate dollar range that each Fund Trustee held in all the funds in the Neuberger Berman Fund Family. ------------------------------------------------------------------------------- AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL REGISTERED INVESTMENT COMPANIES OVERSEEN BY TRUSTEE IN NAME OF TRUSTEE FAMILY OF INVESTMENT COMPANIES* ------------------------------------------------------------------------------- INDEPENDENT FUND TRUSTEES ------------------------------------------------------------------------------- John Cannon Over $100,000 Faith Colish Over $100,000 C. Anne Harvey $50,00O-$100,000 Robert A. Kavesh $10,000-$50,000 Howard A. Mileaf Over $100,000 Edward I. O'Brien Over $100,000 William E.Rulon $1-$10,000 Cornelius T. Ryan Over-$100,000 Tom D. Seip Over $100,000 Candace L. Straight Over $100,000 Peter P. Trapp Over-$100,000 ------------------------------------------------------------------------------- FUND TRUSTEES WHO ARE "INTERESTED PERSONS" ------------------------------------------------------------------------------- Jack L. Rivkin None Peter E. Sundman Over $100,000 ------------------------------------------------------------------------------- * Valuation as of February 3, 2006. INDEPENDENT FUND TRUSTEES OWNERSHIP OF SECURITIES No Independent Fund Trustee (including his/her immediate family members) owns any securities (not including shares of registered investment companies) in any Neuberger Berman entity or Lehman Brothers Holdings Inc., which controls the Neuberger Berman entities. 56 INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES INVESTMENT MANAGER AND ADMINISTRATOR ------------------------------------ NB Management serves as the investment manager to all the Funds pursuant to a management agreement with the Trust, dated November 3, 2003 ("Management Agreement"). The Management Agreement provides, in substance, that NB Management will make and implement investment decisions for the Funds in its discretion and will continuously develop an investment program for the Funds' assets. The Management Agreement permits NB Management to effect securities transactions on behalf of each Fund through associated persons of NB Management. The Management Agreement also specifically permits NB Management to compensate, through higher commissions, brokers and dealers who provide investment research and analysis to the Funds. NB Management provides to each Fund, without separate cost, office space, equipment, and facilities and the personnel necessary to perform executive, administrative, and clerical functions. NB Management pays all salaries, expenses, and fees of the officers, trustees, and employees of the Trust who are officers, directors, or employees of NB Management. Each Fund pays NB Management a management fee based on the Fund's average daily net assets, as described below. NB Management provides facilities, services, and personnel as well as accounting, record keeping and other services to the Funds pursuant to six administration agreements with the Trust, one for each class dated October 31, 2003, one for the Trust Class dated July 25, 2006, and one for the Institutional Class dated June 13, 2005 (each an "Administration Agreement"). For such administrative services, each Class of a Fund pays NB Management a fee based on the Class's average daily net assets, as described below. Under the Administration Agreement for each class of shares, NB Management also provides to each Class and its shareholders certain shareholder, shareholder-related, and other services that are not furnished by the Fund's shareholder servicing agent or third-party investment providers, such as brokers, banks, or pension administrators ("Institutions"). NB Management provides the direct shareholder services specified in the Administration Agreement and assists the shareholder servicing agent or Institutions in the development and implementation of specified programs and systems to enhance overall shareholder servicing capabilities. NB Management or the Institutions solicit and gather shareholder proxies, performs services connected with the qualification of each Fund's shares for sale in various states, and furnishes other services the parties agree from time to time should be provided under the Administration Agreement. NB Management enters into administrative services agreements with third parties, including investment providers, pursuant to which it compensates such third parties for accounting, recordkeeping and other services that they provide in connection with investments in the Funds. 57 From time to time, a Fund may enter into arrangements with registered broker-dealers or other third parties pursuant to which it pays the broker- dealer or third party a per account fee or a fee based on a percentage of the aggregate net asset value of Fund shares purchased by the broker-dealer or third party on behalf of its customers, in payment for administrative and other services rendered to such customers. Institutions may be subject to federal or state laws that limit their ability to provide certain administrative or distribution related services. NB Management and the Funds intend to contract with Institutions for only those services they may legally provide. If, due to a change in laws governing Institutions or in the interpretation of any such law, an Institution is prohibited from performing some or all of the above-described services, NB Management or a Fund may be required to find alternative means of providing those services. Any such change is not expected to impact the Funds or their shareholders adversely. MANAGEMENT AND ADMINISTRATION FEES ---------------------------------- For investment management services, each Fund (except Neuberger Berman FASCIANO, GENESIS, MILLENNIUM, INTERNATIONAL, INTERNATIONAL INSTITUTIONAL and REAL ESTATE Funds) pays NB Management a fee at the annual rate of 0.550% of the first $250 million of that Fund's average daily net assets, 0.525% of the next $250 million, 0.500% of the next $250 million, 0.475% of the next $250 million, 0.450% of the next $500 million, 0.425% of the next $2.5 billion, and 0.400% of average daily net assets in excess of $4 billion. Neuberger Berman GENESIS Fund and Neuberger Berman MILLENNIUM Fund pay NB Management a fee for investment management services at the annual rate of 0.85% of the first $250 million of the Fund'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. Neuberger Berman INTERNATIONAL Fund and Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund each pays NB Management a fee for investment management services at the annual rate of 0.85% of the first $250 million of the Fund's average daily net assets, 0.825% of the next $250 million, 0.80% of the next $250 million, 0.775% of the next $250 million, 0.75% of the next $500 million, 0.725% of the next $1 billion, and 0.70% of average daily net assets in excess of $2.5 billion. Neuberger Berman FASCIANO Fund pays NB Management a management fee at an annual rate of 0.85% of the first $500 million of the Fund's average daily net assets, 0.825% of the next $500 million, 0.80% of the next $500 million, 0.775% of the next $500 million, 0.75% of the next $500 million and 0.725% of average daily net assets in excess of $2.5 billion. Neuberger Berman REAL ESTATE Fund pays NB Management a management fee at the annual rate of 0.85% of the Fund's average daily net assets. For administrative services, the Investor Class of each Fund except Neuberger Berman FASCIANO Fund pays NB Management a fee at the annual rate of 0.26% (0.15% for Neuberger Berman FASCIANO Fund) of that Fund's average daily net assets, plus certain out-of-pocket expenses for technology used for shareholder servicing and shareholder communications, subject to the prior approval of an annual budget by the Fund Trustees, including a majority of the Independent Fund Trustees and periodic reports to the Board of Trustees on actual expenses. With a Fund's consent, NB Management may subcontract to third parties, including investment providers, some of its responsibilities to that Fund under the Administration Agreement. In addition, a Fund may compensate 58 third parties, including investment providers, for recordkeeping, accounting and other services. During the fiscal years ended August 31, 2006, 2005 and 2004, the Investor Class of each Fund accrued management and administration fees as follows: MANAGEMENT AND ADMINISTRATION FEES ACCRUED FOR FISCAL YEARS INVESTOR CLASS ENDED AUGUST 31 2006 2005 2004 ---- ---- ---- CENTURY $87,051 $100,186 $135,224 FASCIANO $5,176,635 $4,563,041 $3,285,013 FOCUS $8,628,475 $9,357,984 $10,501,867 GENESIS $17,680,906 $14,422,878 $12,241,518 GUARDIAN $10,628,489 $10,326,432 $10,021,988 INTERNATIONAL $8,404,302 $3,293,906 $1,292,973 MANHATTAN $2,898,453 $2,651,942 $2,637,553 MILLENNIUM $551,865 $506,703 $603,257 PARTNERS $14,861,648 $11,095,295 $9,796,758 REGENCY $886,037 $518,718 $204,343 SOCIALLY RESPONSIVE $3,193,275 $2,180,585 $1,405,081 For administrative services, the Trust and Advisor Class of each Fund each pays NB Management a fee at the annual rate of 0.40% of that Fund's average daily net assets, plus certain out-of-pocket expenses for technology used for shareholder servicing and shareholder communications, subject to the prior approval of an annual budget by the Trust's Board of Trustees, including a majority of those Fund Trustees who are not interested persons of the Trust or of NB Management, and periodic reports to the Board of Trustees on actual expenses. With a Fund's consent NB Management may subcontract to third parties, including investment providers, some of its responsibilities to that Fund under the Administration Agreement and may compensate each such third party that provides such services. (A portion of this payment may be derived from the Rule 12b-1 fee paid to NB Management by certain of the Funds; see "Distribution Arrangements," below.) During the fiscal years ended August 31, 2006, 2005 and 2004, the Trust Class of each Fund accrued management and administration fees as follows: 59 MANAGEMENT AND ADMINISTRATION FEES ACCRUED FOR FISCAL YEARS TRUST CLASS ENDED AUGUST 31 2006 2005 2004 ---- ---- ---- FOCUS $1,271,484 $2,126,585 $3,204,119 GENESIS $70,941,287 $54,349,662 $39,155,598 GUARDIAN $1,476,830 $1,751,768 $2,644,866 INTERNATIONAL $7,118,563 $1,211,079 $74,561 INTERNATIONAL LARGE CAP $4,346* N/A** N/A** MANHATTAN $67,455 $84,909 $117,235 MILLENNIUM $41,609 $35,396 $49,605 PARTNERS $6,956,601 $3,346,204 $2,698,175 REAL ESTATE $740,837 $537,077 $475,331 REGENCY $507,537 $241,443 $126,510 SOCIALLY RESPONSIVE $1,745,287 $682,505 $352,458 * From August 1, 2006 (commencement of operations) to August 31, 2006. ** There is no data because this Class of the Fund had not commenced operations. During the fiscal years ended August 31, 2006, 2005 and 2004, the Advisor Class of each Fund accrued management and administration fees as follows: MANAGEMENT AND ADMINISTRATION FEES ACCRUED FOR FISCAL YEARS ADVISOR CLASS ENDED AUGUST 31 2006 2005 2004 ---- ---- ---- FASCIANO $412,630 $302,464 $196,353 FOCUS $287,741 $366,279 $375,183 GENESIS $7,395,821 $5,757,011 $4,188,811 GUARDIAN $8,994 $34,017 $127,221 MANHATTAN $12,026 $11,675 $20,925 MILLENNIUM $20,989 $9,109 $5,668 PARTNERS $3,161,269 $255,896 $213,375 For administrative services, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund and the Institutional Class of each Fund pays NB Management a fee at the annual rate of 0.15% of that Fund's average daily net assets, plus out-of-pocket expenses for technology used for shareholder servicing and shareholder 60 communications, subject to the prior approval of an annual budget by the Trust's Board of Trustees, including a majority of those Fund Trustees who are not interested persons of the Trust or of NB Management, and periodic reports to the Board of Trustees on actual expenses. With a Fund's consent NB Management may subcontract to third parties, including investment providers, some of its responsibilities to that Fund under the Administration Agreement and may compensate each such third party that provides such services. In addition, a Fund may compensate third parties, including investment providers, for recordkeeping, accounting or other services. During the fiscal years ended August 31, 2006, 2005 and 2004, each Fund accrued management and administration fees as follows: MANAGEMENT AND ADMINISTRATION FEES ACCRUED FOR FISCAL YEARS INSTITUTIONAL CLASS ENDED AUGUST 31 2006 2005 2004 ---- ---- ---- GENESIS $17,059,686 $10,654,121 $6,794,919 PARTNERS $23,948* N/A** N/A** * From June 7, 2006 (commencement of operations) to August 31, 2006. ** There is no data because this Class of the Fund had not commenced operations. MANAGEMENT AND ADMINISTRATION FEES ACCRUED FOR FISCAL YEARS ENDED AUGUST 31 2006 2005 2004 ---- ---- ---- INTERNATIONAL $3,230,675 $69,592* N/A** INSTITUTIONAL * From June 17, 2005 (commencement of operations) to August 31, 2005. ** There is no data because the Fund had not commenced operations. CONTRACTUAL FEE CAP ------------------- NB Management has undertaken to forgo current payment of certain fees or provide certain reimbursements of Fund expenses, as described below. With respect to any Fund, the appropriateness of any such undertaking is determined on a fund-by-fund and class-by-class basis. INVESTOR CLASS -------------- NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Investor Class of Neuberger Berman INTERNATIONAL Fund so that its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) do not exceed, in the aggregate, 1.40% per annum of INTERNATIONAL Investor Class' average daily net assets. This contractual undertaking lasts until August 31, 2010. INTERNATIONAL Fund Investor Class has contractually undertaken to repay NB Management for the 61 for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.40% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. During the fiscal year ended August 31, 2006, INTERNATIONAL Fund Investor Class repaid NB Management $98,054 of expenses that NB Management reimbursed to the Fund. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Investor Class of Neuberger Berman MILLENNIUM Fund so that its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) do not exceed, in the aggregate, 1.30% per annum of MILLENNIUM Investor Class' average daily net assets. This contractual undertaking lasts until August 31, 2017. MILLENNIUM Fund Investor Class has contractually undertaken to repay NB Management for the for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.30% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Investor Class of each of Neuberger Berman CENTURY Fund and Neuberger Berman REGENCY Fund so that the total operating expenses of each Fund's Trust Class are limited to 1.50% per annum of the Investor Class' average daily net assets (excluding interest, taxes, brokerage commissions, and extraordinary expenses). This undertaking lasts until August 31, 2017. The Investor Class of each of Neuberger Berman CENTURY Fund and Neuberger Berman REGENCY Fund has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.50% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. During the fiscal year ended August 31, 2005, REGENCY Fund Investor Class repaid NB Management $9,951 of expenses that NB Management reimbursed to the Fund. 62 Amount of Total Operating Expenses Reimbursed by NB Management INVESTOR CLASS for Fiscal Years Ended August 31 FUND 2006 2005 2004 ---- ---- ---- ---- CENTURY $109,822 $107,921 $93,790 INTERNATIONAL $0 $80,064 $0 MILLENNIUM $141,506 $86,111 $30,041 TRUST CLASS ----------- NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of each of Neuberger Berman FOCUS Fund, Neuberger Berman GENESIS Fund, Neuberger Berman GUARDIAN Fund, Neuberger Berman MANHATTAN Fund, Neuberger Berman PARTNERS Fund and Neuberger Berman SOCIALLY RESPONSIVE Fund so that the total operating expenses of each Fund's Trust Class are limited to 1.50% per annum of the Trust Class' average daily net assets (excluding interest, taxes, brokerage commissions, and extraordinary expenses). This undertaking lasts until August 31, 2010. The Trust Class of each of Neuberger Berman FOCUS Fund, Neuberger Berman GENESIS Fund, Neuberger Berman GUARDIAN Fund, Neuberger Berman MANHATTAN Fund, Neuberger Berman PARTNERS Fund and Neuberger Berman SOCIALLY RESPONSIVE Fund has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.50% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of Neuberger Berman ALL CAP GROWTH Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 1.10% per annum of the ALL CAP GROWTH Trust Class' average daily net assets. This undertaking lasts until August 31, 2010. ALL CAP GROWTH Fund's Trust Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.10% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of Neuberger Berman INTERNATIONAL LARGE CAP Fund so that the total operating expenses of the Trust Class (excluding interest, taxes, brokerage commissions and extraordinary expenses) are limited to 1.25% per annum of the Trust Class' average daily net 63 assets. This undertaking lasts until August 31, 2010. Neuberger Berman INTERNATIONAL LARGE CAP Fund's Trust Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.25% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of Neuberger Berman INTERNATIONAL Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 1.50% until August 31, 2007 and 2.00% thereafter per annum of INTERNATIONAL Trust Class' average daily net assets. This undertaking lasts until August 31, 2017. INTERNATIONAL Fund Trust Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.50% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. During the fiscal year ended August 31, 2006, INTERNATIONAL Fund Trust Class repaid NB Management $27,679 of expenses that NB Management reimbursed to the Fund. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of Neuberger Berman MILLENNIUM Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 1.40% per annum of MILLENNIUM Trust Class' average daily net assets. This undertaking lasts until August 31, 2017. MILLENNIUM Fund Trust Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.40% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of Neuberger Berman REGENCY Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 1.25% per annum of REGENCY Trust Class' average daily net assets. This undertaking lasts until August 31, 2017. The REGENCY Fund Trust Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.25% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of Neuberger Berman REAL ESTATE Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the 64 aggregate, 1.50% per annum of REAL ESTATE Trust Class' average daily net assets. This undertaking lasts until August 31, 2017. The REAL ESTATE Fund Trust Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.50% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. In addition, effective December 20, 2005, NB Management has voluntarily undertaken to forgo current payment of fees and/or reimburse certain expenses of the Trust Class of Neuberger Berman REAL ESTATE Fund so that the total annual operating expenses of Trust Class are limited to 0.99% per annum of average daily net assets. This undertaking, which is terminable by NB Management upon notice to Neuberger Berman REAL ESTATE Fund, is in addition to the contractual undertaking described in the paragraph above. Amount of Total Operating Expenses Reimbursed by NB Management TRUST CLASS for Fiscal Years Ended August 31 FUND 2006 2005 2004 ---- ---- ---- ---- INTERNATIONAL $0 $13,523 $0 INTERNATIONAL LARGE CAP $165,601* N/A** N/A** MILLENNIUM $27,860 $22,476 $18,588 REAL ESTATE $477,540 $161,095 $175,965 REGENCY $38,694 $4,161 $21,748 * From August 1, 2006 (commencement of operations) to August 31, 2006. ** There is no data because this Class of the Fund had not commenced operations. ADVISOR CLASS ------------- NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Advisor Class of each of Neuberger Berman FOCUS Fund, Neuberger Berman GENESIS Fund, Neuberger Berman GUARDIAN Fund, Neuberger Berman MANHATTAN Fund and Neuberger Berman PARTNERS Fund so that the total operating expenses of each Fund's Adviser Class are limited to 1.50% per annum of the Advisor Class' average daily net assets (excluding interest, taxes, brokerage commissions and extraordinary expenses). This undertaking lasts until August 31, 2017. The Advisor Class of each such Fund has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause its total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.50% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. 65 NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Advisor Class of Neuberger Berman FASCIANO Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 1.90% per annum of FASCIANO Advisor Class' average daily net assets. This undertaking lasts until August 31, 2017. The FASCIANO Fund Advisor Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.90% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. In addition, NB Management has voluntarily undertaken to forgo current payment of fees and/or reimburse certain expenses of the Advisor Class of Neuberger Berman FASCIANO Fund so that the total annual operating expenses of Advisor Class are limited to 1.50% per annum of average daily net assets. This undertaking, which is terminable by NB Management upon notice to Neuberger Berman FASCIANO Fund, is in addition to the contractual undertaking described in the paragraph above. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Advisor Class of Neuberger Berman MILLENNIUM Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 1.60% per annum of MILLENNIUM Advisor Class' average daily net assets. This undertaking lasts until August 31, 2017. The MILLENNIUM Fund Advisor Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 1.60% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. The table below shows the amounts reimbursed by NB Management pursuant to these arrangements: 66 Amount of Total Operating Expenses Reimbursed by NB Management ADVISOR CLASS for Fiscal Years Ended August 31 FUND 2006 2005 2004 ---- ---- ---- ---- FASCIANO $48,682 $39,311 $25,925 GUARDIAN $16,546 $7,001 $0 MANHATTAN $17,364 $17,098 $14,667 MILLENNIUM $25,052 $19,812 $19,780 INSTITUTIONAL CLASS ------------------- NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of each of Neuberger Berman ALL CAP GROWTH Fund and Neuberger Berman INTERNATIONAL LARGE CAP Fund so that the total operating expenses of each Fund's Institutional Class are limited to 0.90% per annum of the Institutional Class' average daily net assets (excluding interest, taxes, brokerage commissions, and extraordinary expenses). This undertaking lasts until August 31, 2010. The Institutional Class of each of Neuberger Berman ALL CAP GROWTH Fund and Neuberger Berman INTERNATIONAL LARGE CAP Fund has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 0.90% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of REAL ESTATE Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 0.95% per annum of REAL ESTATE Fund Institutional Class' average daily net assets. This undertaking lasts until August 31, 2017. REAL ESTATE Fund Institutional Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 0.95% of average net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of GENESIS Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 0.85% per annum of GENESIS Fund Institutional Class' average daily net assets. This undertaking lasts until August 31, 2017. GENESIS Fund Institutional Class has contractually undertaken to repay NB Management for the fees and excess expenses 67 forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 0.85% of average net assets and the repayments are made within three years after the year in which NB Management incurred the expense. During the fiscal years ended August 31, 2005 and August 31, 2006, GENESIS Fund Institutional Class repaid NB Management, respectively, $148 and $124,980 of expenses that NB Management reimbursed to the Fund. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of REGENCY Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 0.75% per annum of REGENCY Fund Institutional Class' average daily net assets. This undertaking lasts until August 31, 2010. REGENCY Fund Institutional Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 0.75% of average net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of PARTNERS Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 0.70% per annum of PARTNERS Fund Institutional Class' average daily net assets. This undertaking lasts until August 31, 2010. PARTNERS Fund Institutional Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 0.70% of average net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of FASCIANO Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 0.95% per annum of FASCIANO Fund Institutional Class' average daily net assets. This undertaking lasts until August 31, 2010. FASCIANO Fund Institutional Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 0.95% of average net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of each of Neuberger Berman FOCUS Fund, Neuberger Berman GUARDIAN Fund and Neuberger Berman SOCIALLY RESPONSIVE Fund so that the total operating expenses of each Fund's Institutional Class are limited to 0.65% per annum of the Institutional Class' average daily net assets (excluding interest, taxes, brokerage commissions, and extraordinary expenses). This undertaking lasts until August 31, 2010. The 68 Institutional Class of each of Neuberger Berman FOCUS Fund, Neuberger Berman GUARDIAN Fund and Neuberger Berman SOCIALLY RESPONSIVE Fund has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 0.65% of average daily net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of MANHATTAN Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 0.75% per annum of MANHATTAN Fund Institutional Class' average daily net assets. This undertaking lasts until August 31, 2010. MANHATTAN Fund Institutional Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 0.95% of average net assets and the repayments are made within three years after the year in which NB Management incurred the expense. NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of the Institutional Class of MILLENNIUM Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 0.85% per annum of MILLENNIUM Fund Institutional Class' average daily net assets. This undertaking lasts until August 31, 2010. MILLENNIUM Fund Institutional Class has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Class' total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 0.85% of average net assets and the repayments are made within three years after the year in which NB Management incurred the expense. The table below shows the amounts reimbursed by NB Management pursuant to these arrangements: Amount of Total Operating Expenses INSTITUTIONAL Reimbursed by NB Management CLASS for Fiscal Years Ended August 31 FUND 2006 2005 2004 ---- ---- ---- ---- GENESIS $0 $0 $37,095 PARTNERS $10,130* N/A** N/A** * From June 7, 2006 (commencement of operations) to August 31, 2006. ** There is no data because this Class of the Fund had not commenced operations. 69 INTERNATIONAL INSTITUTIONAL FUND NB Management has contractually undertaken to forgo current payment of fees and/or reimburse certain expenses of Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund for its total operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) which exceed, in the aggregate, 0.85% per annum of INTERNATIONAL INSTITUTIONAL Fund's average daily net assets. This undertaking lasts until August 31, 2017. INTERNATIONAL INSTITUTIONAL Fund has contractually undertaken to repay NB Management for the fees and excess expenses forgone and/or paid by NB Management, provided the repayments do not cause the Fund's total operating expenses (exclusive of interest, taxes, brokerage commissions and extraordinary expenses) to exceed an annual rate of 0.85% of average net assets and the repayments are made within three years after the year in which NB Management incurred the expense. The table below shows the amounts reimbursed by NB Management pursuant to these arrangements: Amount of Total Operating Expenses Reimbursed by NB Management for Fiscal Years Ended August 31 FUND 2006 2005 2004 ---- ---- ---- ---- INTERNATIONAL $1,114,659 $142,722* N/A** INSTITUTIONAL * From June 17, 2005 (commencement of operations) to August 31, 2005. ** There is no data because the Fund had not commenced operations. ALL CLASSES ----------- The Management Agreement continues until October 31, 2007. The Management Agreement is renewable thereafter from year to year with respect to each Fund, so long as its continuance is approved at least annually (1) by the vote of a majority of Independent Fund Trustees, cast in person at a meeting called for the purpose of voting on such approval and (2) by the vote of a majority of the Fund Trustees or by a 1940 Act majority vote of the outstanding interests in that Fund. The Administration Agreement continues until October 31, 2006. The Administration Agreement is renewable from year to year with respect to a Fund, so long as its continuance is approved at least annually (1) by the vote of a majority of the Independent Fund Trustees, and (2) by the vote of a majority of the Fund Trustees or by a 1940 Act majority vote of the outstanding shares in that Fund. The Management Agreement is terminable, without penalty, with respect to a Fund on 60 days' written notice either by the Trust or by NB Management. The Administration Agreement is terminable, without penalty, with respect to a Fund on 60 days' written notice either by NB Management or by the Trust. Each Agreement terminates automatically if it is assigned. 70 SUB-ADVISER ----------- NB Management retains Neuberger Berman, 605 Third Avenue, New York, NY 10158-3698, as sub-adviser with respect to each Fund pursuant to a sub-advisory agreement dated November 3, 2003 ("Sub-Advisory Agreement"). The Sub-Advisory Agreement provides in substance that Neuberger Berman will furnish to NB Management, upon reasonable request, the same type of investment recommendations and research that Neuberger Berman, from time to time, provides to its principals and employees for use in managing client accounts. In this manner, NB Management expects to have available to it, in addition to research from other professional sources, the capability of the research staff of Neuberger Berman. This staff consists of numerous investment analysts, each of whom specializes in studying one or more industries, under the supervision of the Director of Research, who is also available for consultation with NB Management. The Sub-Advisory Agreement provides that NB Management will pay for the services rendered by Neuberger Berman based on the direct and indirect costs to Neuberger Berman in connection with those services. The Sub-Advisory Agreement continues until October 31, 2007 and is renewable from year to year, subject to approval of their continuance in the same manner as the Management Agreement. The Sub-Advisory Agreement is subject to termination, without penalty, with respect to each Fund by the Fund Trustees or a 1940 Act majority vote of the outstanding interests in that Fund, by NB Management, or by Neuberger Berman on not less than 30 nor more than 60 days' prior written notice. The Sub-Advisory Agreements also terminate automatically with respect to each Fund if they are assigned or if the Management Agreement terminates with respect to that Fund. Most money managers that come to the Neuberger Berman organization have at least fifteen years experience. Neuberger Berman and NB Management employ experienced professionals that work in a competitive environment. Portfolio manager information ----------------------------- Other accounts managed ---------------------- The table below lists the Portfolio Manager(s) of each Fund and the Funds in the Trust for which the Portfolio Manager has day-to-day management responsibility as of August 31, 2006. ----------------------------------------------------------------------------- PORTFOLIO MANAGER FUND(S) MANAGED ----------------------------------------------------------------------------- MICHAEL L. BOWYER Neuberger Berman GENESIS Fund ------------------- --------------------------------------------------- STEVEN R. BROWN Neuberger Berman REAL ESTATE Fund ------------------- --------------------------------------------------- DAVID H. BURSHTAN Neuberger Berman ALL CAP GROWTH Fund Neuberger Berman MILLENNIUM Fund ------------------- --------------------------------------------------- ROBERT B. CORMAN Neuberger Berman FOCUS Fund ------------------- --------------------------------------------------- 71 ROBERT W. D'ALELIO Neuberger Berman GENESIS Fund ------------------- --------------------------------------------------- INGRID S. DYOTT Neuberger Berman GUARDIAN Fund Neuberger Berman SOCIALLY RESPONSIVE Fund ------------------- --------------------------------------------------- MICHAEL FASCIANO Neuberger Berman FASCIANO Fund ------------------- --------------------------------------------------- KRISTINA KALEBICH Neuberger Berman ALL CAP GROWTH Fund ------------------- --------------------------------------------------- MILU E. KOMER Neuberger Berman INTERNATIONAL Fund Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund Neuberger Berman INTERNATIONAL LARGE CAP Fund ------------------- --------------------------------------------------- SAJJAD S. LADIWALA Neuberger Berman GUARDIAN Fund Neuberger Berman SOCIALLY RESPONSIVE FUND ------------------- --------------------------------------------------- ARTHUR MORETTI Neuberger Berman GUARDIAN Fund Neuberger Berman SOCIALLY RESPONSIVE FUND ------------------- --------------------------------------------------- S. BASU MULLICK Neuberger Berman PARTNERS Fund Neuberger Berman REGENCY Fund ------------------- --------------------------------------------------- BRETT S. REINER Neuberger Berman GENESIS Fund ------------------- --------------------------------------------------- BENJAMIN SEGAL Neuberger Berman INTERNATIONAL Fund Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund Neuberger Berman INTERNATIONAL LARGE CAP Fund ------------------- --------------------------------------------------- STEVE SHIGEKAWA Neuberger Berman REAL ESTATE Fund ------------------- --------------------------------------------------- KENNETH J. TUREK Neuberger Berman ALL CAP GROWTH Fund Neuberger Berman CENTURY Fund Neuberger Berman MANHATTAN Fund ------------------- --------------------------------------------------- JUDITH M. VALE Neuberger Berman GENESIS Fund ------------------- --------------------------------------------------- JOHN J. ZIELINSKI Neuberger Berman ALL CAP GROWTH Fund Neuberger Berman CENTURY Fund ------------------- --------------------------------------------------- The table below describes the other accounts for which each Portfolio Manager has day-to-day management responsibility as of August 31, 2006. 72
NUMBER OF ACCOUNTS ASSETS MANAGED FOR NUMBER OF TOTAL ASSETS MANAGED FOR WHICH WHICH ADVISORY FEE IS ACCOUNTS MANAGED ADVISORY FEE IS PERFORMANCE-BASED TYPE OF ACCOUNT MANAGED ($ MILLIONS) PERFORMANCE-BASED ($ MILLIONS) MICHAEL L. BOWYER Registered 1 $11,119 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 377 $2,398 - - Accounts** STEVEN R. BROWN Registered 4 $2,421 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 96 $1,128 - - Accounts** DAVID H. BURSHTAN Registered 1 $52 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 3 $70 - - Accounts** ROBERT B. CORMAN Registered 2 $1,236 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other - - - - Accounts** ROBERT W. D'ALELIO Registered 1 $11,119 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 377 $2,398 - - Accounts** INGRID S. DYOTT Registered 4 $2,709 - - Investment Companies* Other Pooled - - - - Investment Vehicles 73 Other 595 $513 - - Accounts** MICHAEL FASCIANO Registered 2 $541 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 1,580 $1,349 - - Accounts** KRISTINA KALEBICH Registered 5 $1,334 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 28 $648 - - Accounts** MILU E. KOMER Registered 4 $2,614 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 1,640 $2,502 - - Accounts** SAJJAD S. LADIWALA Registered 4 $2,709 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 595 $513 - - Accounts** ARTHUR MORETTI Registered 4 $2,709 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 595 $513 - - Accounts** S. BASU MULLICK Registered 4 $4,851 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 10 $3,226 - - Accounts** 74 BRETT S. REINER Registered 1 $11,119 - - Investment Companieso Other Pooled - - - - Investment Vehicles Other 377 $2,398 - - Accounts** BENJAMIN SEGAL Registered 4 $2,614 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 1,640 $2,502 - - Accounts** STEVE SHIGEKAWA Registered 4 $2,421 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 96 $1,128 - - Accounts** KENNETH J. TUREK Registered 3 $1,271 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 24 $575 - - Accounts** JUDITH M. VALE Registered 1 $11,119 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 377 $2,398 - - Accounts** JOHN J. ZIELINSKI Registered 1 $11 - - Investment Companies* Other Pooled - - - - Investment Vehicles Other 1 $3 - - Accounts**
75 *Registered Investment Companies include: Mutual Funds. **Other Accounts include: Institutional Separate Accounts, Sub-Advised, and Managed Accounts (WRAP). CONFLICTS OF INTEREST --------------------- Actual or apparent conflicts of interest may arise when a Portfolio Manager has day-to-day management responsibilities with respect to more than one Fund or other account. The management of multiple funds and accounts (including proprietary accounts) may give rise to potential conflicts of interest if the funds and accounts have different or similar objectives, benchmarks, time horizons, and fees as the Portfolio Manager must allocate his time and investment ideas across multiple funds and accounts. The Portfolio Manager may execute transactions for another fund or account that may adversely impact the value of securities held by the fund. Moreover, if a Portfolio Manager identifies a limited investment opportunity that may be suitable for more than one fund or other account, a Fund may not be able to take full advantage of that opportunity. Securities selected for funds or accounts other than the fund may outperform the securities selected for the fund. NB Management, Neuberger Berman and each Fund have adopted certain compliance procedures which are designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises. COMPENSATION ------------ A portion of the compensation paid to each Portfolio Manager is determined by comparisons to pre-determined peer groups and benchmarks, as opposed to a system dependent on a percent of management fees. The Portfolio Managers are paid a base salary that is not dependent on performance. Each Portfolio Manager also has a "target bonus," which is set each year and can be increased or decreased prior to payment based in part on performance measured against the relevant peer group and benchmark. Performance is measured on a three-year rolling average in order to emphasize longer-term performance. There is also a subjective component to determining the bonus, which consists of the following factors: (i) the individual's willingness to work with the marketing and sales groups; (ii) his or her effectiveness in building a franchise; and (iii) client servicing. Senior management determines this component in appropriate cases. There are additional components that comprise the Portfolio Managers' compensation packages, including: (i) whether the manager was a partner/principal of Neuberger Berman prior to Neuberger Berman Inc.'s initial public offering; (ii) for more recent hires, incentives that may have been negotiated at the time the Portfolio Manager joined the Neuberger Berman complex; and (iii) the total amount of assets for which the Portfolio Manager is responsible. NB Management's Portfolio Managers have always had a degree of independence that they would not get at other firms that have, for example, investment committees. NB Management believes that its Portfolio Managers are retained not only through compensation and opportunities for advancement, but also by a collegial and stable money management environment. In addition, there are additional stock and option award programs available. NB Management believes the measurement versus the peer groups on a three- year rolling average basis creates a meaningful disincentive to try and beat the peer group and benchmark in any given year by taking undue risks in portfolio 76 management. The incentive is to be a solid performer over the longer-term, not necessarily to be a short-term winner in any given year. OWNERSHIP OF SECURITIES ----------------------- Set forth below is the dollar range of equity securities beneficially owned by each Portfolio Manager in the Fund(s) that the Portfolio Manager manages as of August 31, 2006.
---------------------------------------------------------------------------------------------------------- PORTFOLIO MANAGER FUND(S) MANAGED DOLLAR RANGE OF EQUITY SECURITIES OWNED IN THE FUND ---------------------------------------------------------------------------------------------------------- Michael L. Bowyer Neuberger Berman GENESIS Fund E ---------------------------------------------------------------------------------------------------------- Steven R. Brown Neuberger Berman REAL ESTATE Fund E ---------------------------------------------------------------------------------------------------------- David H. Burshtan Neuberger Berman ALL CAP GROWTH Fund N/A Neuberger Berman MILLENNIUM Fund C ---------------------------------------------------------------------------------------------------------- Robert B. Corman Neuberger Berman FOCUS Fund E ---------------------------------------------------------------------------------------------------------- Robert W. D'Alelio Neuberger Berman GENESIS Fund F ---------------------------------------------------------------------------------------------------------- Ingrid S. Dyott Neuberger Berman GUARDIAN Fund E Neuberger Berman SOCIALLY RESPONSIVE Fund E ---------------------------------------------------------------------------------------------------------- Michael Fasciano Neuberger Berman FASCIANO Fund G ---------------------------------------------------------------------------------------------------------- Kristina Kalebich Neuberger Berman ALL CAP GROWTH Fund N/A ---------------------------------------------------------------------------------------------------------- Milu E. Komer Neuberger Berman INTERNATIONAL Fund C Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund A Neuberger Berman INTERNATIONAL LARGE CAP Fund N/A ---------------------------------------------------------------------------------------------------------- Sajjad S. Ladiwala Neuberger Berman GUARDIAN Fund A Neuberger Berman SOCIALLY RESPONSIVE Fund D ---------------------------------------------------------------------------------------------------------- Arthur Moretti Neuberger Berman GUARDIAN Fund F Neuberger Berman SOCIALLY RESPONSIVE Fund F ---------------------------------------------------------------------------------------------------------- S. Basu Mullick Neuberger Berman PARTNERS Fund E Neuberger Berman REGENCY Fund A ----------------------------------------------------------------------------------------------------------
77
---------------------------------------------------------------------------------------------------------- Brett S. Reiner Neuberger Berman GENESIS Fund E ---------------------------------------------------------------------------------------------------------- Benjamin Segal Neuberger Berman INTERNATIONAL Fund E Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund A Neuberger Berman INTERNATIONAL LARGE CAP Fund N/A ---------------------------------------------------------------------------------------------------------- Steve Shigekawa Neuberger Berman REAL ESTATE Fund A ---------------------------------------------------------------------------------------------------------- Kenneth J. Turek Neuberger Berman ALL CAP GROWTH Fund N/A Neuberger Berman CENTURY Fund C Neuberger Berman MANHATTAN Fund E ---------------------------------------------------------------------------------------------------------- Judith M. Vale Neuberger Berman GENESIS Fund G ---------------------------------------------------------------------------------------------------------- John J. Zielinski Neuberger Berman ALL CAP GROWTH Fund N/A Neuberger Berman CENTURY Fund A ----------------------------------------------------------------------------------------------------------
A = NONE E = $100,001-$500,000 B = $1-$10,000 F = $500,001-$1,000,000 C = $10,001 - $50,000 G = OVER $1,000,001 D =$50,001-$100,000 OTHER INVESTMENT COMPANIES MANAGED ---------------------------------- The investment decisions concerning the Funds and the other registered investment companies managed by NB Management (collectively, "Other NB Funds") have been and will continue to be made independently of one another. In terms of their investment objectives, most of the Other NB Funds differ from the Funds. Even where the investment objectives are similar, however, the methods used by the Other NB Funds and the Funds to achieve their objectives may differ. The investment results achieved by all of the registered investment companies managed by NB Management have varied from one another in the past and are likely to vary in the future. There may be occasions when a Fund and one or more of the Other NB Funds or other accounts managed by Neuberger Berman are contemporaneously engaged in purchasing or selling the same securities from or to third parties. When this occurs, the transactions are averaged as to price and allocated, in terms of amount, in accordance with a formula considered to be equitable to the Funds involved. Although in some cases this arrangement may have a detrimental effect on the price or volume of the securities as to a Fund, in other cases it is 78 believed that a Fund's ability to participate in volume transactions may produce better executions for it. In any case, it is the judgment of the Fund Trustees that the desirability of the Funds' having their advisory arrangements with NB Management outweighs any disadvantages that may result from contemporaneous transactions. The Funds are subject to certain limitations imposed on all advisory clients of Neuberger Berman (including the Funds, the Other NB Funds, and other managed accounts) and personnel of Neuberger Berman and its affiliates. These include, for example, limits that may be imposed in certain industries or by certain companies, and policies of Neuberger Berman that limit the aggregate purchases, by all accounts under management, of the outstanding shares of public companies. CODES OF ETHICS --------------- The Funds, NB Management and Neuberger Berman, LLC have personal securities trading policies that restrict the personal securities transactions of employees, officers, and Fund Trustees. Their primary purpose is to ensure that personal trading by these individuals does not disadvantage any fund managed by NB Management. The Funds' Portfolio Managers and other investment personnel who comply with the policies' preclearance and disclosure procedures may be permitted to purchase, sell or hold certain types of securities which also may be or are held in the Funds they advise, but are restricted from trading in close conjunction with their Funds or taking personal advantage of investment opportunities that may belong to the Funds. Text-only versions of the Codes of Ethics can be viewed online or downloaded from the EDGAR Database on the SEC's internet web site at www.sec.gov. You may also review and copy those documents by visiting the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 202-942-8090. In addition, copies of the Codes of Ethics may be obtained, after mailing the appropriate duplicating fee, by writing to the SEC's Public Reference Section, 450 5th Street, N.W., Washington, DC 20549-0102 or by e-mail request at publicinfo@sec.gov. MANAGEMENT AND CONTROL OF NB MANAGEMENT AND NEUBERGER BERMAN ------------------------------------------------------------ Neuberger Berman and NB Management are wholly-owned subsidiaries of Lehman Brothers Holdings Inc., a publicly-owned holding company. The directors, officers and/or employees of NB Management, Neuberger Berman and Neuberger Berman Inc. who are deemed "control persons," all of whom have offices at the same address as NB Management and Neuberger Berman, are: Kevin Handwerker, Jeffrey B. Lane, Jack L. Rivkin and Peter E. Sundman. Mr. Sundman and Mr. Rivkin are Fund Trustees and officers of the Trust. Lehman Brothers Holding Inc. is one of the leading global investment banks serving the financial needs of corporations, governments and municipalities, institutional clients, and high-net-worth individuals worldwide. Founded in 1850, Lehman Brothers Holdings Inc. maintains leadership positions in equity and fixed income sales, trading and research, investment banking, private equity, and private client services. The firm is headquartered in New York, London, and Tokyo and operates in a network of offices around the world. Lehman Brothers Holdings Inc.'s address is 745 Seventh Avenue, New York, New York 10019. 79 DISTRIBUTION ARRANGEMENTS Each Fund offers the classes of shares shown below: FUND INVESTOR TRUST ADVISOR INSTITUTIONAL ---- CLASS CLASS CLASS CLASS ----- ----- ----- ----- -------------------------------------------------------------------------------- ALL CAP GROWTH X X -------------------------------------------------------------------------------- CENTURY X -------------------------------------------------------------------------------- FASCIANO X X X -------------------------------------------------------------------------------- FOCUS X X X X -------------------------------------------------------------------------------- GENESIS X X X X -------------------------------------------------------------------------------- GUARDIAN X X X X -------------------------------------------------------------------------------- INTERNATIONAL X X -------------------------------------------------------------------------------- INTERNATIONAL INSTITUTIONAL X -------------------------------------------------------------------------------- INTERNATIONAL LARGE CAP X X -------------------------------------------------------------------------------- MANHATTAN X X X X -------------------------------------------------------------------------------- MILLENNIUM X X X X -------------------------------------------------------------------------------- PARTNERS X X X X -------------------------------------------------------------------------------- REAL ESTATE X X -------------------------------------------------------------------------------- REGENCY X X X -------------------------------------------------------------------------------- SOCIALLY RESPONSIVE X X X -------------------------------------------------------------------------------- DISTRIBUTOR ----------- NB Management serves as the distributor ("Distributor") in connection with the offering of each Fund's shares. Investor Class, Advisor Class, Trust Class and Institutional Class shares are offered on a no-load basis. Trust Class (with the exception of Neuberger Berman REAL ESTATE Fund, Neuberger Berman ALL CAP GROWTH Fund and Neuberger Berman INTERNATIONAL LARGE CAP Fund, whose shares are 80 also sold directly to investors), Advisor Class, and Neuberger Berman GENESIS Fund Institutional Class are available only through Institutions that have made arrangements with NB Management for shareholder servicing and administration. In connection with the sale of its shares, each Fund has authorized the Distributor to give only the information, and to make only the statements and representations, contained in the Prospectuses and this SAI or that properly may be included in sales literature and advertisements in accordance with the 1933 Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales may be made only by a Prospectus, which may be delivered personally, through the mails, or by electronic means. The Distributor is the Funds' "principal underwriter" within the meaning of the 1940 Act and, as such, acts as agent in arranging for the sale of each Fund's Investor Class and Institutional Class shares without sales commission or other compensation and bears all advertising and promotion expenses incurred in the sale of those shares. The Distributor also acts as agent in arranging for the sale of each Fund's Advisor Class and Trust Class shares to Institutions and bears all advertising and promotion expenses incurred in the sale of the Funds' shares. For each Fund that is sold directly to investors (currently the Funds in the Investor Class and certain Funds in the Trust and Institutional Classes), the Distributor or one of its affiliates may, from time to time, deem it desirable to offer to shareholders of the Funds, through use of their shareholder lists, the shares of other mutual funds for which the Distributor acts as distributor or other products or services. Any such use of the Funds' shareholder lists, however, will be made subject to terms and conditions, if any, approved by a majority of the Independent Fund Trustees. These lists will not be used to offer the Funds' shareholders any investment products or services other than those managed or distributed by NB Management or Neuberger Berman. [NB Management and/or its affiliates may pay additional compensation and/or provide incentives (out of their own resources and not as an expense of the Funds) to certain brokers, dealers, or other financial intermediaries ("Financial Intermediaries") in connection with the sale, distribution, retention and/or servicing of Fund shares ("revenue sharing payments"). Such payments are intended to provide additional compensation to Financial Intermediaries for various services, including without limitation, participating in joint advertising with a Financial Intermediary, granting NB Management personnel reasonable access to a Financial Intermediary's financial advisers and consultants, and allowing NB Management personnel to attend conferences. NB Management and its affiliates may make other payments or allow other promotional incentives to Financial Intermediaries to the extent permitted by SEC and NASD rules and by other applicable laws and regulations. [In addition, NB Management may pay for: placing the Funds on the Financial Intermediary's sales system, preferred or recommended fund list, providing periodic and ongoing education and training of Financial Intermediary personnel regarding the Funds; disseminating to Financial Intermediary personnel information and product marketing materials regarding the Funds; explaining to clients the features and characteristics of the Funds; conducting due diligence regarding the Funds; providing reasonable access to sales meetings, sales representatives and management representatives of a Financial Intermediary; and furnishing marketing support and other services. Additional compensation also 81 may include non-cash compensation, financial assistance to Financial Intermediaries in connection with conferences, seminars for the public and advertising campaigns, technical and systems support and reimbursement of ticket charges (fees that a Financial Intermediary charges its representatives for effecting transactions in Fund shares) and other similar charges.] [The level of revenue sharing payments made to Financial Intermediaries may be a fixed fee or based upon one or more of the following factors: reputation in the industry, ability to attract and retain assets, target markets, customer relationships, quality of service, gross sales, current assets and/or number of accounts of the Fund attributable to the Financial Intermediary, the particular Fund or fund type or other measures as agreed to by NB Management and/or their affiliates and the Financial Intermediaries or any combination thereof.] The amount of these payments is determined at the discretion of NB Management and/or its affiliates from time to time, may be substantial, and may be different for different Financial Intermediaries based on, for example, the nature of the services provided by the Financial Intermediary. Receipt of, or the prospect of receiving, this additional compensation, may influence a Financial Intermediary's recommendation of the Funds or of any particular share class of the Funds. These payment arrangements, however, will not change the price that an investor pays for Fund shares or the amount that a Fund receives to invest on behalf of an investor and will not increase Fund expenses. You should review your Financial Intermediary's compensation disclosure and/or talk to your Financial Intermediary to obtain more information on how this compensation may have influenced your Financial Intermediary's recommendation of a Fund. In addition to the compensation described above, the Funds and/or NB Management may pay fees to Financial Intermediaries and their affiliated persons for maintaining Fund share balances and/or for subaccounting, administrative or transaction processing services related to the maintenance of accounts for retirement and benefit plans and other omnibus accounts ("subaccounting fees"). Such subaccounting fees paid by the Funds may differ depending on the Fund and are designed to be equal to or less than the fees the Funds would pay to their transfer agent for similar services. [Because some subaccounting fees are directly related to the number of accounts and assets for which a Financial Intermediary provides services, these fees will increase with the success of the Financial Intermediary's sales activities.] NB Management and its affiliates are motivated to make the payments described above since they promote the sale of Fund shares and the retention of those investments by clients of Financial Intermediaries. To the extent Financial Intermediaries sell more shares of the Funds or retain shares of the Funds in their clients' accounts, NB Management and/or its affiliates benefit from the incremental management and other fees paid to NB Management and/or its affiliates by the Funds with respect to those assets.] The Trust, on behalf of each Fund, and the Distributor are parties to a Distribution Agreement with respect to the Investor Class, the Institutional Class, and the Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and a Distribution and Shareholder Services Agreement with respect to the Advisor Class and the Trust Class of each Fund (except the Trust Class of Neuberger Berman GENESIS, Neuberger Berman MANHATTAN and Neuberger Berman INTERNATIONAL Funds, as to which there is a Distribution Agreement) ("Distribution Agreements"). The Distribution Agreements continue until October 31, 2007. The 82 Distribution Agreements may be renewed annually if specifically approved by (1) the vote of a majority of the Fund Trustees or a 1940 Act majority vote of the Fund's outstanding shares and (2) the vote of a majority of the Independent Fund Trustees, cast in person at a meeting called for the purpose of voting on such approval. The Distribution Agreements may be terminated by either party and will terminate automatically on their assignment, in the same manner as the Management Agreements. DISTRIBUTION PLAN (TRUST CLASS ONLY) ------------------------------------ The Trust, on behalf of the Fund, has also adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act ("Plan") with respect to the Trust Class of Neuberger Berman ALL CAP GROWTH Fund, Neuberger Berman FOCUS, Neuberger Berman GUARDIAN, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman MILLENNIUM, Neuberger Berman PARTNERS, Neuberger Berman REAL ESTATE, Neuberger Berman REGENCY, and Neuberger Berman SOCIALLY RESPONSIVE Funds. The Plan provides that the Funds will compensate NB Management for administrative and other services provided to the Funds, its activities and expenses related to the sale and distribution of Fund shares, and ongoing services to investors in the Funds. Under the Plan, NB Management receives from the Trust Class of each Fund a fee at the annual rate of 0.10% of that Class's average daily net assets. NB Management may pay up to the full amount of this fee to Institutions that make available Trust Class shares and/or provide services to the Trust Class and its shareholders. The fee paid to an Institution is based on the level of such services provided. Institutions may use the payments for, among other purposes, compensating employees engaged in sales and/or shareholder servicing. The amount of fees paid by the Trust Class of a Fund during any year may be more or less than the cost of distribution and other services provided to that class of the Fund and its investors. NASD rules limit the amount of annual distribution and service fees that may be paid by a mutual fund and impose a ceiling on the cumulative distribution fees paid. The Trust Class's plan complies with these rules. The table below sets forth the amount of fees accrued for the Funds indicated below: TRUST CLASS Period Ended August 31, FUND 2006 2005 2004 ---- ---- ---- ---- FOCUS $141,878 $239,013 $364,440 GUARDIAN $166,362 $197,414 $298,753 INTERNATIONAL LARGE CAP $457* N/A** N/A** MILLENNIUM $3,330 $2,832 $3,978 PARTNERS $812,900 $381,518 $304,626 REAL ESTATE $59,267 $42,966 $38,026 83 TRUST CLASS Period Ended August 31, FUND 2006 2005 2004 ---- ---- ---- ---- REGENCY $53,392 $25,435 $13,312 SOCIALLY RESPONSIVE $187,286 $72,304 $37,108 * From August 1, 2006 (commencement of operations) to August 31, 2006. ** There is no data because this Class of the Fund had not commenced operations. DISTRIBUTION PLAN (ADVISOR CLASS ONLY) -------------------------------------- The Trust, on behalf of the Fund, has also adopted a Plan with respect to the Advisor Class of each Fund. The Plan provides that the Advisor Class of each Fund will compensate NB Management for administrative and other services provided to the Funds, its activities and expenses related to the sale and distribution of Fund shares, and ongoing services to investors in the Funds. Under the Plan, NB Management receives from the Advisor Class of each Fund a fee at the annual rate of 0.25% of that Class's average daily net assets. NB Management may pay up to the full amount of this fee to Institutions that make available Fund shares and/or provide services to the Advisor Class and its shareholders. The fee paid to an Institution is based on the level of such services provided. Institutions may use the payments for, among other purposes, compensating employees engaged in sales and/or shareholder servicing. The amount of fees paid by the Advisor Class of a Fund during any year may be more or less than the cost of distribution and other services provided to that class of the Fund and its investors. NASD rules limit the amount of annual distribution and service fees that may be paid by a mutual fund and impose a ceiling on the cumulative distribution fees paid. The Advisor Class's plan complies with these rules. The table below sets forth the amount of fees accrued for the Funds indicated below: ADVISOR CLASS Period Ended August 31, FUND 2006 2005 2004 ---- ---- ---- ---- FASCIANO $82,648 $60,473 $39,283 FOCUS $80,153 $102,854 $106,471 GENESIS $1,743,132 $1,351,904 $978,477 GUARDIAN $2,527 $9,606 $35,986 MANHATTAN $3,195 $3,098 $5,546 MILLENNIUM $4,190 $1,818 $1,118 PARTNERS $923,686 $72,763 $60,289 84 Each Plan requires that NB Management provide the Fund Trustees for their review a quarterly written report identifying the amounts expended by each Fund and the purposes for which such expenditures were made. Prior to approving the Plans, the Fund Trustees considered various factors relating to the implementation of each Plan and determined that there is a reasonable likelihood that the Plans will benefit the Funds and their shareholders. To the extent the Plans allow the Funds to penetrate markets to which they would not otherwise have access, the Plans may result in additional sales of Fund shares; this, in turn, may enable the Funds to achieve economies of scale that could reduce expenses. In addition, certain on-going shareholder services may be provided more effectively by Institutions with which shareholders have an existing relationship. The Plans continue until October 31, 2007. The Plans are renewable thereafter from year to year with respect to each Fund, so long as its continuance is approved at least annually (1) by the vote of a majority of the Fund Trustees and (2) by a vote of the majority of those Independent Fund Trustees who have no direct or indirect financial interest in the Distribution Agreement or the Plans pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1 Trustees"), cast in person at a meeting called for the purpose of voting on such approval. The Plans may not be amended to increase materially the amount of fees paid by any class of any Fund thereunder unless such amendment is approved by a 1940 Act majority vote of the outstanding shares of the class and by the Fund Trustees in the manner described above. A Plan is terminable with respect to a class of a Fund at any time by a vote of a majority of the Rule 12b-1 Trustees or by a 1940 Act majority vote of the outstanding shares in the class. From time to time, one or more of the Funds may be closed to new investors. Because the Plans for the Advisor and Trust Class shares of the Funds pay for ongoing shareholder and account services, the Board may determine that it is appropriate for a Fund to continue paying a 12b-1 fee, even though the Fund is closed to new investors. ADDITIONAL PURCHASE INFORMATION SHARE PRICES AND NET ASSET VALUE (All Classes) -------------------------------- Each Fund's shares are bought or sold at a price that is the Fund's NAV per share. The NAV for each Class of the Funds are calculated by subtracting total liabilities of that Class from total assets attributable to that Class (the market value of the securities the Fund holds plus cash and other assets). Each Fund's per share NAV is calculated by dividing its NAV by the number of Fund shares outstanding attributable to that Class and rounding the result to the nearest full cent. Each Fund calculates its NAV as of the close of regular trading on the NYSE, usually 4 p.m. Eastern time, on each day the NYSE is open. Each Fund (except Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund and Neuberger Berman INTERNATIONAL LARGE CAP Funds) values securities (including options) listed on the NYSE, the American Stock Exchange or other national securities exchanges and other securities for which market quotations are readily available, at the last reported sale price on the day the securities are being valued. Securities traded primarily on the NASDAQ Stock Market are normally valued by the Fund at the NASDAQ Official 85 Closing Price ("NOCP") provided by NASDAQ each business day. The NOCP is the most recently reported price as of 4:00:02 p.m., Eastern time, unless that price is outside the range of the "inside" bid and asked prices (i.e., the bid and asked prices that dealers quote to each other when trading for their own accounts); in that case, NASDAQ will adjust the price to equal the inside bid or asked price, whichever is closer. Because of delays in reporting trades, the NOCP may not be based on the price of the last trade to occur before the market closes. If there is no reported sale of a security on a particular day, the security is valued at the mean between its closing bid and asked prices on that day. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund and Neuberger Berman INTERNATIONAL LARGE CAP Fund each values equity securities at the last reported sale price on the principal exchange or in the principal OTC market in which such securities are traded, as of the close of regular trading on the NYSE on the day the securities are being valued or, if there are no sales, at the last available bid price on that day. Debt obligations are valued at the last available bid price for such securities or, if such prices are not available, at prices for securities of comparable maturity, quality, and type. Each Fund values all other types of securities and assets, including restricted securities and securities for which market quotations are not readily available, by a method that the Fund Trustees believe accurately reflects fair value. Each Fund's foreign security prices are furnished by independent quotation services and expressed in local currency values. Foreign security prices are translated from the local currency into U.S. dollars using the exchange rate as of 4:00 p.m., Eastern time. The Board has approved the use of FT Interactive Data Corporation ("FT Interactive") to assist in determining the fair value of the Fund's foreign equity securities when changes in the value of a certain index suggest that the closing prices on the foreign exchanges may no longer represent the amount that the Fund could expect to receive for those securities. In this event, FT Interactive will provide adjusted prices for certain foreign equity securities using a statistical analysis of historical correlations of multiple factors. Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund and Neuberger Berman INTERNATIONAL LARGE CAP Fund's securities are traded primarily in foreign markets that may be open on days when the NYSE is closed. As a result, the NAV of Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund or Neuberger Berman INTERNATIONAL LARGE CAP Fund may be significantly affected on days when shareholders have no access to that Fund. If, after the close of the principal market on which a security is traded, and before the time the Fund's securities are priced that day, an event occurs that NB Management deems likely to cause a material change in the value of such security, the Fund Trustees have authorized NB Management, subject to the Board's review, to ascertain a fair value for such security. Such events may include circumstances in which the value of the U.S. markets changes by a percentage deemed significant. Under the 1940 Act, funds are required to act in good faith in determining the fair value of portfolio securities. The SEC has recognized that a security's valuation may differ depending on the method used for determining value. The fair value ascertained for a security is an estimate 86 and there is no assurance, given the limited information available at the time of fair valuation, that a security's fair value will be the same as or close to the subsequent opening market price for that security. If NB Management believes that the price of a security obtained under a Fund's valuation procedures (as described above) does not represent the amount that the Fund reasonably expects to receive on a current sale of the security, the Fund will value the security based on a method that the Fund Trustees believe accurately reflects fair value. Numerous factors may be considered when determining the fair value of a security, including available analyst, media or other reports, trading in futures or ADRs and whether the issuer of the security being fair valued has other securities outstanding. FINANCIAL INTERMEDIARIES ------------------------ The Funds have authorized one or more financial intermediaries to receive purchase and redemption orders on their behalf. Such financial intermediaries are authorized to designate other administrative intermediaries to receive purchase and redemption orders on the Funds' behalf. A Fund will be deemed to have received a purchase and redemption order when a financial intermediary or its designee receives the order. Purchase and redemption orders will be priced at the next share price to be calculated after the order has been "accepted" as defined in the Funds' prospectuses. AUTOMATIC INVESTING AND DOLLAR COST AVERAGING --------------------------------------------- For each Fund that is sold directly to investors (currently the Funds in the Investor Class and certain Funds in the Trust and Institutional Classes), shareholders in that Fund ("Direct Shareholders") may arrange to have a fixed amount automatically invested in Fund shares each month. To do so, a Direct Shareholder must complete an application, available from the Distributor, electing to have automatic investments funded either through (1) redemptions from his or her account in a money market fund for which NB Management serves as investment manager or (2) withdrawals from the shareholder's checking account. In either case, the minimum monthly investment is $100. Direct Shareholders who elect to participate in automatic investing through his or her checking account must include a voided check with the completed application. A completed application should be sent to Neuberger Berman Funds, Boston Service Center, P.O. Box 8403, Boston, MA 02266-8403. Automatic investing enables a Direct Shareholder to take advantage of "dollar cost averaging." As a result of dollar cost averaging, a Direct Shareholder's average cost of Fund shares generally would be lower than if the shareholder purchased a fixed number of shares at the same pre-set intervals. Additional information on dollar cost averaging may be obtained from the Distributor. ADDITIONAL EXCHANGE INFORMATION As more fully set forth in the section of the Prospectuses entitled "Maintaining Your Account," if shareholders purchased a Fund's Advisor, Institutional, Investor, Neuberger Berman Investor, or Trust Class shares directly, they may redeem at least $1,000 worth of the Fund's shares and invest the proceeds in shares of the corresponding class of one or more of the other Equity, Income, or Municipal Funds that are briefly described below, provided that the minimum investment requirements of the other Fund(s) are met (for 87 purposes of the exchange privilege, Neuberger Berman Investor Class and Investor Class are considered in the same class). Investor Class and Neuberger Berman Investor Class shares may also be exchanged for Trust Class shares of the Real Estate Fund, and Trust Class shares of the Real Estate Fund may be exchanged for Investor Class and Neuberger Berman Investor Class shares, provided that NB Management is the Institution acting as the record owner on behalf of the shareholder making the exchange. Institutional Class shares may also be exchanged for shares of the Neuberger Berman International Institutional Fund. An Institution may exchange the Fund's Advisor, Trust, or Institutional Class shares (if the shareholder did not purchase the Fund's Institutional Class shares directly) for shares of the corresponding class of one or more of the other Neuberger Berman Funds, if made available through that Institution. This privilege is not available for Lehman Brothers Institutional Class shareholders, Strategic Income Fund Institutional Class shareholders, International Institutional Fund shareholders, or Genesis Fund Institutional Class shareholders. Most investment providers allow you to take advantage of the Neuberger Berman fund exchange program. Please contact your investment provider or NB Management for further information on exchanging your shares.
EQUITY FUNDS ------------ Neuberger Berman All Cap Growth Fund Seeks growth of capital. Invests mainly in common stocks of small-, mid-, and large-capitalization companies, which it defines as those with a total market capitalization within the market capitalization range of the Russell 3000 Index. The Portfolio Managers employ a disciplined investment strategy when selecting growth stocks, looking for fast-growing companies with above average sales and competitive returns on equity relative to their peers. Neuberger Berman Seeks long-term growth of capital; dividend income is a secondary Century Fund goal. Invests mainly in common stocks of large-capitalization companies. The Portfolio Manager seeks to buy companies with strong historical and prospective earnings growth.
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EQUITY FUNDS ------------ Neuberger Berman Seeks long-term capital growth. The Portfolio Manager also may Fasciano Fund consider a company's potential for income prior to selecting it for the Fund. The Fund invests mainly in the common stocks of small-cap companies, i.e., those with a total market value of no more than $1.5 billion at the time the Fund first invests in them. In selecting companies that the Portfolio Manager believes may have greater potential to appreciate in price, the Portfolio Manager will invest the Fund in smaller companies that are under-followed by major Wall Street brokerage houses and large asset management firms. Neuberger Berman Seeks long-term growth of capital. Invests mainly in common stocks Focus Fund selected from 13 multi-industry sectors of the economy. To maximize potential return, the Fund normally makes 90% or more of its investments in not more than six sectors of the economy, and may invest 50% or more of its assets in any one sector. Neuberger Berman Seeks growth of capital. Invests mainly in stocks of companies with Genesis Fund small market capitalizations (no more than $1.5 billion at the time of the Fund's investment). The Portfolio Managers seek to buy the (This Fund is closed to new investors.) stocks of undervalued companies whose current product lines and balance sheets are strong. Neuberger Berman Seeks long-term growth of capital and secondarily, current income. Guardian Fund Invests mainly in stocks of mid- to large-capitalization companies that are well positioned and are undervalued in the market. Neuberger Berman Seeks long-term capital appreciation by investing primarily in International Fund foreign stocks of any capitalization, both in developed economies and in emerging markets. The Portfolio Managers seek undervalued (This Fund is closed to new investors.) companies in countries with strong potential for growth. Neuberger Berman International Institutional Seeks long-term capital appreciation by investing primarily in Fund foreign stocks of any capitalization, both in developed economies and in emerging markets. The Portfolio Managers seek undervalued (This Fund is closed to new investors.) companies in countries with strong potential for growth.
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EQUITY FUNDS ------------ Neuberger Berman Seeks long-term capital appreciation by investing primarily in common International Large Cap Fund stocks of foreign companies, both in developed economies and in emerging markets. The Portfolio Managers seek undervalued companies in countries with strong potential for growth. Neuberger Berman Seeks growth of capital. Invests in securities believed to have the Manhattan Fund maximum potential for long-term capital appreciation. Portfolio Managers seek fast-growing companies with above average sales and competitive returns on equity relative to their peers. Factors in identifying these firms may include financial strength, a strong position relative to competitors and strong earnings growth relative to competitors. Neuberger Berman Seeks growth of capital by investing mainly in common stocks of Millennium Fund small-capitalization companies, which it defines as those with a total market value of no more than $2 billion at the time of initial investment. The Portfolio Managers take a growth approach to stock selection, looking for fast growing companies with above average sales and competitive returns on equity relative to their peers. Factors in identifying these firms may include financial strength, a strong position relative to competitors and strong earnings growth relative to competitors. Neuberger Berman Seeks capital growth through an approach that is intended to increase Partners Fund capital with reasonable risk. The Portfolio Manager looks at fundamentals, focusing particularly on cash flow, return on capital, and asset values. Neuberger Berman Seeks total return through investment in real estate securities, Real Estate Fund emphasizing both capital appreciation and current income. Neuberger Berman Seeks growth of capital by investing primarily in common stocks of Regency Fund mid-capitalization companies which the Portfolio Manager believes have solid fundamentals. Neuberger Berman Seeks long-term growth of capital by investing primarily in Socially Responsive Fund securities of companies that meet the Fund's financial criteria and social policy.
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INCOME FUNDS ------------ Neuberger Berman A money market fund seeking the highest available current income Cash Reserves consistent with safety and liquidity. The Fund invests in high-quality money market instruments. The Fund may also engage in reverse repurchase agreements and securities lending. It seeks to maintain a constant purchase and redemption price of $1.00. Neuberger Berman A U.S. Government money market fund seeking maximum safety and Government Money Fund liquidity and the highest available current income. The Fund invests in securities issued or guaranteed as to principal or interest by the U.S. Government, its agencies and instrumentalities and repurchase agreements on such securities. The Fund may also engage in reverse repurchase agreements and securities lending. It seeks to maintain a constant purchase and redemption price of $1.00. Neuberger Berman Seeks high total returns consistent with capital preservation. The High Income Bond Fund Fund normally invests primarily in a diversified portfolio of U.S. intermediate-term, high-yield corporate bonds, including those sometimes known as "junk" bonds. Lehman Brothers Seeks to maximize total return through a combination of income and Core Bond Fund capital appreciation. The Fund normally invests in high quality fixed-income securities. Corporate bonds, commercial paper or bonds secured by assets such as home mortgages, generally, must at least be an A*/; bonds issued by the U.S. Government or its agencies are considered high quality. Neuberger Berman Seeks the highest current income consistent with low risk to Limited Maturity Bond Fund principal and liquidity and, secondarily, total return. The Fund invests in debt securities, primarily investment grade; maximum 10% below investment grade, but no lower than B.*/ Maximum average duration of four years.
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MUNICIPAL FUNDS --------------- Neuberger Berman Seeks high current tax-exempt income with low risk to principal, Municipal Securities Trust limited price fluctuation, and liquidity and, secondarily, total return. The Fund invests in investment grade municipal securities with a maximum average duration of 10 years. National Municipal Money Fund Seeks the highest available current income exempt from federal income tax that is consistent with safety and liquidity. The Fund normally invests at least 80% of its net assets in high-quality, short-term securities from municipal issuers around the country. The Fund seeks to maintain a stable $1.00 share price. Lehman Brothers Municipal Money Fund A money market fund seeking the maximum current income exempt from federal income tax, consistent with safety and liquidity. The Fund invests in high-quality, short-term municipal securities. It seeks to maintain a constant purchase and redemption price of $1.00. Lehman Brothers New York Municipal Money Fund A money market fund seeking the highest available current income exempt from federal income tax and New York State and New York City personal income taxes that is consistent with safety and liquidity. The Fund normally invests at least 80% of its net assets in high-quality, short-term municipal securities that provide income that is exempt from federal income tax and New York State and New York City personal income taxes. The Fund seeks to maintain a stable $1.00 share price. Tax-Free Money Fund Seeks the highest available current income exempt from federal income tax and, to the extent possible, from the federal alternative minimum tax, that is consistent with safety and liquidity. The Fund normally invests at least 80% of its net assets in high-quality, short-term municipal securities. The Fund also normally invests at least 80% of its net assets in securities the interest on which is not a preference item for federal alternative minimum tax purposes. The Fund seeks to maintain a stable $1.00 share price.
[*/] As rated by Moody's or S&P or, if unrated by either of those entities, determined by NB Management to be of comparable quality. 92 Any of the Income Funds, Equity Funds or Municipal Funds may terminate or modify its exchange privilege in the future. Before effecting an exchange, Fund shareholders must obtain and should review a currently effective Prospectus of the Fund into which the exchange is to be made. An exchange is treated as a sale for federal income tax purposes and, depending on the circumstances, a capital gain or loss may be realized. There can be no assurance that NATIONAL Municipal Money Fund, Neuberger Berman GOVERNMENT MONEY Fund, Neuberger Berman CASH RESERVES, Lehman Brothers MUNICIPAL MONEY Fund, Lehman Brothers NEW YORK Municipal Money Fund, or TAX-FREE Money Fund, each of which is a money market fund that seeks to maintain a constant purchase and redemption price of $1.00, will be able to maintain that price. An investment in any of the above-referenced Funds, as in any other mutual fund, is neither insured nor guaranteed by the U.S. Government. Any Fund described herein, and any of the Income or Municipal Funds, may terminate or modify its exchange privilege in the future. Before effecting an exchange, shareholders should review a currently effective Prospectus of the Fund into which the exchange is to be made. Each of the Funds, except Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP and Neuberger Berman REAL ESTATE Funds may terminate or materially alter its exchange privilege without notice to shareholders. Because Neuberger Berman INTERNATIONAL, Neuberger Berman INTERNATIONAL INSTITUTIONAL, Neuberger Berman INTERNATIONAL LARGE CAP and Neuberger Berman REAL ESTATE Funds charge shareholders a redemption fee on exchanges of Fund shares held 60 days or less, the Funds will provide at least 60 days' notice prior to terminating or materially altering its exchange privilege, except in the following cases: o If the effect of the amendment to the exchange privilege is to reduce or eliminate the redemption fee payable at the time of the exchange; or o In certain extraordinary circumstances, such as the suspension of the redemption of the Fund's shares under Section 22(e) of the 1940 Act and the rules and regulations thereunder, or where a Fund temporarily delays or ceases the sales of its shares because it is unable to invest amounts effectively in accordance with applicable investment objectives, policies and restrictions. ADDITIONAL REDEMPTION INFORMATION SUSPENSION OF REDEMPTIONS ------------------------- The right to redeem Fund shares may be suspended or payment of the redemption price postponed (1) when the NYSE is closed, (2) when trading on the NYSE is restricted, (3) when an emergency exists as a result of which it is not reasonably practicable for the Fund to dispose of securities it owns or fairly to determine the value of its net assets, or (4) for such other period as the SEC may by order permit for the protection of the Fund's shareholders. Applicable SEC rules and regulations shall govern whether the conditions prescribed in (2) or (3) exist. If the right of redemption is suspended, shareholders may withdraw their offers of redemption, or they will receive 93 payment at the NAV per share in effect at the close of business on the first day the NYSE is open ("Business Day") after termination of the suspension. REDEMPTIONS IN KIND ------------------- Each Fund reserves the right, under certain conditions, to honor any request for redemption by making payment in whole or in part in securities valued as described in "Share Prices and Net Asset Value (All Classes)" above. Each Fund may pay in kind only those requests for redemption (or a combination of requests from the same shareholder in any 90-day period) exceeding $250,000 or 1% of the net assets of the Fund, whichever is less. If payment is made in securities, a shareholder or Institution generally will incur brokerage expenses or other transaction costs in converting those securities into cash and will be subject to fluctuation in the market prices of those securities until they are sold. The Funds do not redeem in kind under normal circumstances, but would do so when the Fund Trustees determined that it was in the best interests of a Fund's shareholders as a whole. DIVIDENDS AND OTHER DISTRIBUTIONS Each Fund distributes to its shareholders, by Class, substantially all of its net investment income (after deducting expenses attributable to the Class), net capital gains, and net gains from foreign currency transactions it earns or realizes. Capital gain realization is one factor that a Portfolio Manager may consider in deciding when to sell a security. A Fund's net investment income, for financial accounting purposes, consists of all income accrued on its assets less accrued expenses but does not include capital and foreign currency gains and losses. Net investment income and realized gains and losses are reflected in a Fund's NAV until they are distributed. Each Fund calculates its net investment income and NAV per share as of the close of regular trading on the NYSE on each Business Day (usually 4:00 p.m. Eastern time). Each Fund normally pays dividends from net investment income and distributions of net realized capital and foreign currency gains, if any, once annually, in December, except that Neuberger Berman REAL ESTATE Fund distributes substantially all of its net investment income (after deducting expenses), if any, near the end of each calendar quarter. Each Fund's dividends and other distributions are automatically reinvested in additional shares of the distributing Class of the Fund, unless the shareholder elects to receive them in cash ("cash election"). Direct Shareholders may make a cash election on the original account application or at a later date by writing to State Street Bank and Trust Company ("State Street"), c/o Boston Service Center, P.O. Box 8403, Boston, MA 02266-8403. Cash distributions can be paid by check or through an electronic transfer to a bank account or used to purchase shares of another Neuberger Berman Fund, designated in the shareholder's original account application. To the extent dividends and other distributions are subject to federal, state, and/or local income taxation, they are taxable to the shareholders whether received in cash or reinvested in Fund shares. A cash election with respect to any Fund remains in effect until the shareholder (or Institution) notifies State Street in writing to discontinue the election. If it is determined, however, that the U.S. Postal Service cannot 94 properly deliver a Fund's mailings to a shareholder for 180 days, the Fund will terminate the shareholder's cash election. Thereafter, the shareholder's dividends and other distributions will automatically be reinvested in additional Fund shares of the relevant Class until the shareholder requests in writing to State Street or the Fund that the cash election be reinstated. Dividend or other distribution checks that are not cashed or deposited within 180 days from being issued will be reinvested in additional shares of the distributing Class of the Fund at their NAV per share on the day the check is reinvested. No interest will accrue on amounts represented by uncashed dividend or other distribution checks. ADDITIONAL TAX INFORMATION TAXATION OF THE FUNDS --------------------- To qualify or continue to qualify for treatment as a RIC under the Code, each Fund - which is treated as a separate corporation for federal tax purposes - must distribute to its shareholders for each taxable year at least 90% of its investment company taxable income (consisting generally of net investment income, the excess of net short-term capital gain over net long-term capital loss, and net gains from certain foreign currency transactions, all determined without regard to any deduction for dividends paid) ("Distribution Requirement") and must meet several additional requirements. With respect to each Fund, these requirements include the following: (1) the Fund must derive at least 90% of its gross income each taxable year from (i) dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of securities or foreign currencies, or other income (including gains from Financial Instruments) derived with respect to its business of investing in securities or those currencies, and (ii) as a result of the American Jobs Creation Act of 2004 ("2004 Act"), net income from an interest in a "qualified publicly traded partnership" ("QPTP") ("Income Requirement"); and (2) at the close of each quarter of the Fund's taxable year, (i) at least 50% of the value of its total assets must be represented by cash and cash items, U.S. Government securities, securities of other RICs, and other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of the Fund's total assets and that does not represent more than 10% of the issuer's outstanding voting securities (equity securities of QPTPs being considered voting securities for these purposes), and (ii) not more than 25% of the value of its total assets may be invested in (a) securities (other than U.S. Government securities or securities of other RICs) of any one issuer, (b) securities (other than securities of other RICs) of two or more issuers the Fund controls that are determined to be engaged in the same, similar, or related trades or businesses, or (c) securities of one or more QPTPs. If a Fund (as noted above under "Investment Information -- Cash Management and Temporary Defensive Positions") invests cash collateral received in connection with securities lending in an unregistered fund, the Fund generally will be treated as (x) owning a proportionate share of the unregistered fund's assets for purposes of determining the Fund's compliance with the foregoing diversification requirements and certain other provisions (including the provision that permits it to enable its shareholders to get the benefit of foreign taxes it pays, as described below) and (y) being entitled to the income on that share for purposes of determining whether it satisfies the Income Requirement. If a Fund failed to qualify for treatment as a RIC for any taxable year, it would be taxed on the full amount of its taxable income for that year without 95 being able to deduct the distributions it makes to its shareholders and the shareholders would treat all those distributions, including distributions of net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss), as dividends to the extent of the Fund's earnings and profits. Those dividends would be taxable as ordinary income, except that, for individual shareholders, the part thereof that is "qualified dividend income" (as described in each Prospectus) ("QDI") would be taxable for federal tax purposes at the rate for net capital gain (a maximum of 15%). In addition, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions before requalifying for RIC treatment. Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the extent it fails to distribute by the end of any calendar year substantially all of its ordinary income for that year and capital gain net income for the one-year period ended on October 31 of that year, plus certain other amounts. Dividends and interest a Fund receives, and gains it realizes, on foreign securities may be subject to income, withholding, or other taxes imposed by foreign countries and U.S. possessions ("foreign taxes") that would reduce the total return on its securities. Tax treaties between certain countries and the United States may reduce or eliminate foreign taxes, however, and many foreign countries do not impose taxes on capital gains in respect of investments by foreign investors. For Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, and Neuberger Berman INTERNATIONAL LARGE CAP Fund if more than 50% of the value of a Fund's total assets at the close of its taxable year consists of securities of foreign corporations, that Fund will be eligible to, and may, file an election with the Internal Revenue Service ("Service") that will enable its shareholders, in effect, to receive the benefit of the foreign tax credit with respect to any foreign taxes the Fund paid. Pursuant to that election, a Fund would treat those taxes as dividends paid to its shareholders and each shareholder would be required to (1) include in gross income, and treat as paid by the shareholder, his or her share of those taxes, (2) treat his or her share of those taxes and of any dividend the Fund paid that represents its income from foreign or U.S. possessions sources as his or her own income from those sources, and (3) either use the foregoing information in calculating the foreign tax credit against his or her federal income tax or, alternatively, deduct the taxes deemed paid by him or her in computing his or her taxable income. A Fund will report to its shareholders shortly after each taxable year their respective shares of the Fund's foreign taxes and income from sources within foreign countries and U.S. possessions if it makes this election. Individual shareholders of a Fund who have no more than $300 ($600 for married persons filing jointly) of creditable foreign taxes included on Forms 1099 and all of whose foreign source income is "qualified passive income" may elect each year to be exempt from the extremely complicated foreign tax credit limitation and will be able to claim a foreign tax credit without having to file the detailed Form 1116 that otherwise is required. A Fund may invest in the stock of "passive foreign investment companies" ("PFICs"). A PFIC is any foreign corporation (with certain exceptions) that, in general, meets either of the following tests: (1) at least 75% of its gross income for the taxable year is passive or (2) an average of at least 50% of its assets produce, or are held for the production of, passive income. Under certain circumstances, a Fund that holds stock of a PFIC will be subject to federal 96 income tax on a portion of any "excess distribution" it receives on the stock or of any gain on its disposition of the stock (collectively, "PFIC income"), plus interest thereon, even if the Fund distributes the PFIC income as a taxable dividend to its shareholders. The balance of the PFIC income will be included in the Fund's investment company taxable income and, accordingly, will not be taxable to it to the extent it distributes that income to its shareholders. A Fund's distributions attributable to PFIC income will not be eligible for the 15% maximum federal income tax rate on QDI. If a Fund invests in a PFIC and elects to treat the PFIC as a "qualified electing fund" ("QEF"), then in lieu of the Fund's incurring the foregoing tax and interest obligation, the Fund would be required to include in income each year its PRO RATA share of the QEF's annual ordinary earnings and net capital gain -- which the Fund most likely would have to distribute to satisfy the Distribution Requirement and avoid imposition of the Excise Tax -- even if the Fund did not receive those earnings and gain from the QEF. In most instances it will be very difficult, if not impossible, to make this election because of certain requirements thereof. Each Fund may elect to "mark-to-market" any stock in a PFIC it owns at the end of its taxable year. "Marking-to-market," in this context, means including in gross income each taxable year (and treating as ordinary income) the excess, if any, of the fair market value of the stock over a Fund's adjusted basis therein as of the end of that year. Pursuant to the election, a Fund also would be allowed to deduct (as an ordinary, not a capital, loss) the excess, if any, of its adjusted basis in PFIC stock over the fair market value thereof as of the taxable year-end, but only to the extent of any net mark-to-market gains with respect to that stock the Fund included in income for prior taxable years under the election (and under regulations proposed in 1992 that provided a similar election with respect to the stock of certain PFICs). A Fund's adjusted basis in each PFIC's stock subject to the election would be adjusted to reflect the amounts of income included and deductions taken thereunder. Investors should be aware that a Fund may not be able, at the time it acquires a foreign corporation's shares, to ascertain whether the corporation is a PFIC and that a foreign corporation may become a PFIC after a Fund acquires shares therein. While each Fund generally will seek to avoid investing in PFIC shares to avoid the tax consequences detailed above, there are no guarantees that each will be able to do so. The Funds' use of hedging strategies, such as writing (selling) and purchasing options and futures contracts and entering into forward contracts, involves complex rules that will determine for income tax purposes the amount, character, and timing of recognition of the gains and losses the Funds realize in connection therewith. Gains from the disposition of foreign currencies (except certain gains that may be excluded by future regulations), and gains from Financial Instruments a Fund derives with respect to its business of investing in securities or foreign currencies, will be treated as qualifying income under the Income Requirement. Exchange-traded futures contracts (other than "securities futures contracts," as defined in section 1234B(c) of the Code), certain foreign currency contracts, and "nonequity" options (i.e., certain listed options, such as those on a "broad-based" securities index) that are subject to section 1256 of the Code ("Section 1256 contracts") in which a Fund may invest are required to be "marked-to-market" (that is, treated as having been sold at market value) 97 for federal income tax purposes at the end of the Fund's taxable year. Sixty percent of any net gain or loss recognized as a result of these deemed sales, and 60% of any net realized gain or loss from any actual sales, of Section 1256 contracts are treated as long-term capital gain or loss; the remainder is treated as short-term capital gain or loss. Section 1256 contracts also may be marked-to-market for purposes of the Excise Tax. These rules may operate to increase the amount that a Fund must distribute to satisfy the Distribution Requirement (i.e., with respect to the portion treated as short-term capital gain), which will be taxable to its shareholders as ordinary income, and to increase the net capital gain the Fund recognizes, without in either case increasing the cash available to it. A Fund may elect to exclude certain transactions from the operation of section 1256, although doing so may have the effect of increasing the relative proportion of net short-term capital gain (as noted above, taxable to its shareholders as ordinary income when distributed to them) and/or increasing the amount of dividends it must distribute to meet the Distribution Requirement and avoid imposition of the Excise Tax. If a Fund has an "appreciated financial position" -- generally, an interest (including an interest through an option, futures or forward contract, or short sale) with respect to any stock, debt instrument (other than "straight debt"), or partnership interest the fair market value of which exceeds its adjusted basis -- and enters into a "constructive sale" of the position, the Fund will be treated as having made an actual sale thereof, with the result that it will recognize gain at that time. A constructive sale generally consists of a short sale, an offsetting notional principal contract, or a futures or forward contract a Fund or a related person enters into with respect to the same or substantially identical property. In addition, if the appreciated financial position is itself a short sale or such a contract, acquisition of the underlying property or substantially identical property will be deemed a constructive sale. The foregoing will not apply, however, to any Fund's transaction during any taxable year that otherwise would be treated as a constructive sale if the transaction is closed within 30 days after the end of that year and the Fund holds the appreciated financial position unhedged for 60 days after that closing (i.e., at no time during that 60-day period is the Fund's risk of loss regarding that position reduced by reason of certain specified transactions with respect to substantially identical or related property, such as having an option to sell, being contractually obligated to sell, making a short sale, or granting an option to buy substantially identical stock or securities). Each of Neuberger Berman CENTURY, Neuberger Berman MILLENNIUM, Neuberger Berman PARTNERS, Neuberger Berman REAL ESTATE, Neuberger Berman REGENCY, and Neuberger Berman SOCIALLY RESPONSIVE Funds may acquire zero coupon securities or other securities issued with OID. As a holder of those securities, each such Fund must take into income the OID that accrues on the securities during the taxable year, even if it receives no corresponding payment on them during the year. Because each Fund annually must distribute substantially all of its investment company taxable income (including accrued OID) to satisfy the Distribution Requirement and avoid imposition of the Excise Tax, such a Fund may be required in a particular year to distribute as a dividend an amount that is greater than the total amount of cash it actually receives. Those distributions will be made from a Fund's cash assets or, if necessary, from the proceeds of sales of its securities. A Fund may realize capital gains or losses from those sales, which would increase or decrease its investment company taxable income and/or net capital gain. 98 Each Fund may invest in ownership units (i.e., limited partnership interests) in MLPs, which generally are classified as partnerships for federal tax purposes. Most MLPs in which the Funds may invest are expected to be QPTPs, all the net income from which (regardless of source) would be qualifying income to the investing Funds under the Income Requirement. If a Fund invests in an MLP that is not a QPTP, the net income the Fund earns therefrom would be treated the same under the Income Requirement as income described in the preceding paragraph. Income that each Fund derives from a company principally engaged in the real estate industry that is classified for federal tax purposes as a partnership (and not as a corporation or REIT) and is not a QPTP will be treated as qualifying income under the Income Requirement only to the extent it would be qualifying income if realized directly by the Fund in the same manner as realized by that company. Each Fund may invest in REITs that (1) hold residual interests in real estate mortgage investment conduits ("REMICs") or (2) engage in mortgage securitization transactions that cause the REITs to be taxable mortgage pool ("TMPs") or have a qualified REIT subsidiary that is a TMP. A portion of the net income allocable to REMIC residual interest holders may be an "excess inclusion." The Code authorizes the issuance of regulations dealing with the taxation and reporting of excess inclusion income of REITs and RICs that hold residual REMIC interests and of REITs, or qualified REIT subsidiaries, that are TMPs. Although those regulations have not yet been issued, the U.S. Treasury Department and the Service recently issued a notice ("Notice") announcing that, pending the issuance of further guidance, the Service would apply the principles in the following paragraphs to all excess inclusion income, whether from REMIC residual interests or TMPs. The Notice provides that a REIT must (1) determine whether it or its qualified REIT subsidiary (or a part of either) is a TMP and, if so, calculate the TMP's excess inclusion income under a "reasonable method," (2) allocate its excess inclusion income to its shareholders generally in proportion to dividends paid, (3) inform shareholders that are not "disqualified organizations" (i.e., governmental units and tax-exempt entities that are not subject to the unrelated business income tax) of the amount and character of the excess inclusion income allocated thereto, (4) pay tax (at the highest federal income tax rate imposed on corporations) on the excess inclusion income allocated to its disqualified organization shareholders, and (5) apply the withholding tax provisions with respect to the excess inclusion part of dividends paid to foreign persons without regard to any treaty exception or reduction in tax rate. Excess inclusion income allocated to certain tax-exempt entities (including qualified retirement plans, individual retirement accounts, and public charities) constitutes unrelated business taxable income to them. A RIC with excess inclusion income is subject to rules identical to those in clauses (2), (3) (substituting "that are nominees" for "that are not disqualified organizations"), (4), and (5). The Notice further provides that a RIC is not required to report the amount and character of the excess inclusion income allocated to its shareholders that are not nominees, except that for taxable years beginning after December 31, 2006, (1) a RIC with excess inclusion income from all sources that exceeds 1% of its gross income must do so and (2) any other RIC must do so by taking into account only excess inclusion income allocated to the RIC from REITs the excess inclusion income of which exceeded 3% of its dividends. Each Fund will not invest directly in REMIC residual 99 interests and does not intend to invest in REITs that, to its knowledge, invest in those interests or are TMPs or have a qualified REIT subsidiary that is a TMP. TAXATION OF THE FUNDS' SHAREHOLDERS ----------------------------------- If Fund shares are sold at a loss after being held for six months or less, the loss will be treated as long-term, instead of short-term, capital loss to the extent of any capital gain distributions received on those shares. Each Fund is required to withhold 28% of all dividends, capital gain distributions, and redemption proceeds otherwise payable to any individuals and certain other non-corporate shareholders who do not provide the Fund with a correct taxpayer identification number. Withholding at that rate also is required from dividends and other distributions otherwise payable to such shareholders who are subject to backup withholding for any other reason. Dividends a Fund pays to a foreign shareholder, other than (1) dividends paid to a foreign shareholder whose ownership of shares is effectively connected with a U.S. trade or business the shareholder carries on and (2) capital gain distributions paid to a nonresident alien individual who is physically present in the United States for no more than 182 days during the taxable year, generally will be subject to a federal withholding tax of 30% (or lower treaty rate). The 2004 Act, however, created two categories of dividends, "short-term capital gain dividends" and "interest-related dividends," that, if properly designated by a Fund, will be exempt from that tax. "Short-term capital gain dividends" are dividends that are attributable to the excess of net short-term capital gain over net long-term capital loss, computed with certain adjustments. "Interest-related dividends," are dividends that are attributable to "qualified net interest income" ("qualified interest income" less allocable deductions), which generally consists of certain OID, interest on obligations "in registered form," and interest on deposits. The exemption from withholding tax will apply to short-term capital gain dividends and interest-related dividends a Fund pays to foreign investors, with certain exceptions, with respect to its taxable years beginning before January 1, 2008. As described in "Maintaining Your Account" in each Prospectus, a Fund may close a shareholder's account and redeem the remaining shares if the account balance falls below the specified minimum and the shareholder fails to re- establish the minimum balance after being given the opportunity to do so. If an account that is closed pursuant to the foregoing was maintained for an individual retirement account (including a Roth IRA) or a qualified retirement plan (including a simplified employee pension plan, savings incentive match plan for employees, Keogh plan, corporate profit-sharing and money purchase pension plan, Code section 401(k) plan, and Code section 403(b)(7) account), a Fund's payment of the redemption proceeds may result in adverse tax consequences for the accountholder. Shareholders should consult their tax advisers regarding any such consequences. FUND TRANSACTIONS Neuberger Berman and Lehman Brothers act as principal brokers for each Fund (except Neuberger Berman INTERNATIONAL Fund and Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund) in the purchase and sale of its portfolio 100 securities (other than certain securities traded on the OTC market). This means that Fund trades may be executed by Neuberger Berman or Lehman Brothers where Neuberger Berman or Lehman Brothers is capable of providing best execution. Neuberger Berman and Lehman Brothers may act as broker for Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund and Neuberger Berman INTERNATIONAL LARGE CAP Fund. A substantial portion of the Fund transactions of Neuberger Berman GENESIS and Neuberger Berman MILLENNIUM Funds involves securities traded on the OTC market; those Funds purchase and sell OTC securities in principal transactions with dealers who are the principal market makers for such securities. In effecting securities transactions, each Fund seeks to obtain the best price and execution of orders. For Neuberger Berman CENTURY Fund, Neuberger Berman FASCIANO Fund, Neuberger Berman FOCUS Fund, Neuberger Berman GENESIS Fund, Neuberger Berman GUARDIAN Fund, Neuberger Berman INTERNATIONAL Fund, Neuberger Berman MANHATTAN Fund, Neuberger Berman MILLENNIUM Fund, Neuberger Berman PARTNERS Fund, Neuberger Berman REAL ESTATE Fund, Neuberger Berman REGENCY Fund, and Neuberger Berman SOCIALLY RESPONSIVE Fund, during the fiscal years ended 2004 and 2005 there was a reduction in the amount of brokerage transactions Neuberger Berman provided for the Funds and an increase in the amount of brokerage transactions Lehman Brothers provided for the Funds due to the merger between Lehman Brothers and Neuberger Berman. During the fiscal year ended August 31, 2004, Neuberger Berman MANHATTAN Fund paid brokerage commissions of $1,029,848 of which $62,167 was paid to Neuberger Berman and $166,041 was paid to Lehman Brothers. During the fiscal year ended August 31, 2005, Neuberger Berman MANHATTAN Fund paid brokerage commissions of $664,695 of which $350 was paid to Neuberger Berman and $111,455 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, Neuberger Berman MANHATTAN Fund paid brokerage commissions of $439,122 of which $0 was paid to Neuberger Berman and $55,490 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 0% of the aggregate dollar amount of transactions involving the payment of commissions, and 0% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 16.71% of the aggregate dollar amount of transactions involving the payment of commissions, and 12.64% of the aggregate brokerage commissions paid by the Fund. 100% of the $383,632 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $293,320,188) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund did not acquire or hold any securities of its "regular broker or dealers (as defined under the 1940 Act). During the fiscal year ended August 31, 2004, Neuberger Berman GENESIS Fund paid brokerage commissions of $4,725,331, of which $241,355 was paid to Neuberger Berman and $780,899 was paid to Lehman Brothers. 101 During the fiscal year ended August 31, 2005, Neuberger Berman GENESIS Fund paid brokerage commissions of $4,226,620, of which $1,064 was paid to Neuberger Berman and $778,956 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, Neuberger Berman GENESIS Fund paid brokerage commissions of $5,714,010 of which $5,391 was paid to Neuberger Berman and $833,943 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 0.08% of the aggregate dollar amount of transactions involving the payment of commissions, and 0.09% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 19.33% of the aggregate dollar amount of transactions involving the payment of commissions, and 14.59% of the aggregate brokerage commissions paid by the Fund. 100% of the $4,874,676 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $3,504,978,385) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund did not acquire or hold any securities of its "regular broker or dealers (as defined under the 1940 Act). During the fiscal year ended August 31, 2004, Neuberger Berman FOCUS Fund paid brokerage commissions of $2,349,516, of which $112,130 was paid to Neuberger Berman and $426,532 was paid to Lehman Brothers. During the fiscal year ended August 31, 2005, Neuberger Berman FOCUS Fund paid brokerage commissions of $1,173,794, of which $5,928 was paid to Neuberger Berman and $222,812 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, Neuberger Berman FOCUS Fund paid brokerage commissions of $1,063,510 of which $0 was paid to Neuberger Berman and $140,170 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 0% of the aggregate dollar amount of transactions involving the payment of commissions, and 0% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 18.35% of the aggregate dollar amount of transactions involving the payment of commissions, and 13.18% of the aggregate brokerage commissions paid by the Fund. 100% of the $923,340 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $681,302,564) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund acquired securities of the following of its Regular B/Ds: Credit Suisse First Boston Corp., Merrill Lynch, Pierce, Fenner & Smith, Inc. and State Street Bank and Trust Company; at that date, that Fund held the securities of its Regular B/Ds with an aggregate value as follows: Citigroup Global Markets, Inc. $88,830,000; Merrill Lynch, Pierce, Fenner & Smith, Inc. $128,762,000. During the fiscal year ended August 31, 2004, Neuberger Berman GUARDIAN Fund paid brokerage commissions of $1,565,147 of which $194,038 was paid to Neuberger Berman and $211,141 was paid to Lehman Brothers. 102 During the fiscal year ended August 31, 2005, Neuberger Berman GUARDIAN Fund paid brokerage commissions of $1,064,328 of which $0 was paid to Neuberger Berman and $208,076 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, Neuberger Berman GUARDIAN Fund paid brokerage commissions of $1,278,810 of which $0 was paid to Neuberger Berman and $204,203 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 0% of the aggregate dollar amount of transactions involving the payment of commissions, and 0% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 23.76% of the aggregate dollar amount of transactions involving the payment of commissions, and 15.97% of the aggregate brokerage commissions paid by the Fund. 100% of the $1,074,607 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $887,424,026) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund acquired securities of the following of its Regular B/Ds: Citigroup Global Markets, Inc., Goldman Sachs & Co. and State Street Bank and Trust Company, at that date, that Fund held the securities of its Regular B/Ds with an aggregate value as follows: Citigroup Global Markets, Inc. $63,383,363; Goldman, Sachs & Co. $27,098,895; State Street Bank and Trust Company $61,886,520. During the fiscal year ended August 31, 2004, Neuberger Berman PARTNERS Fund paid brokerage commissions of $3,509,499 of which $33 was paid to Neuberger Berman and $628,704 was paid to Lehman Brothers. During the fiscal year ended August 31, 2005, Neuberger Berman PARTNERS Fund paid brokerage commissions of $3,180,514 of which $1,021 was paid to Neuberger Berman and $649,322 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, Neuberger Berman PARTNERS Fund paid brokerage commissions of $3,693,574 of which $2,385 was paid to Neuberger Berman and $485,393 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 0.11% of the aggregate dollar amount of transactions involving the payment of commissions, and 0.06% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 14.10% of the aggregate dollar amount of transactions involving the payment of commissions, and 13.14% of the aggregate brokerage commissions paid by the Fund. 100% of the $3,205,796 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $2,794,679,748) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund acquired securities of the following of its Regular B/Ds: Citigroup Global Markets, Inc., Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith, Inc.; at that date, that Fund held the securities of its Regular B/Ds with an aggregate value as follows: Goldman, Sachs & Co. $65,628,975; Merrill Lynch, Pierce, Fenner & Smith, Inc. $55,037,205. 103 During the fiscal year ended August 31, 2004, Neuberger Berman SOCIALLY RESPONSIVE Fund paid brokerage commissions of $332,967, of which $32,234 was paid to Neuberger Berman and $51,042 was paid to Lehman Brothers. During the fiscal year ended August 31, 2005, Neuberger Berman SOCIALLY RESPONSIVE Fund paid brokerage commissions of $351,039, of which $107 was paid to Neuberger Berman and $74,482 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, Neuberger Berman SOCIALLY RESPONSIVE Fund paid brokerage commissions of $596,079 of which $677 was paid to Neuberger Berman and $97,724 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 0.20% of the aggregate dollar amount of transactions involving the payment of commissions, and 0.11% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 24.46% of the aggregate dollar amount of transactions involving the payment of commissions, and 16.39% of the aggregate brokerage commissions paid by the Fund. 100% of the $497,678 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $359,947,382) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund acquired securities of the following of its Regular B/Ds: Citigroup Global Markets, Inc., Goldman, Sachs & Co. and State Street Bank and Trust Company; at that date, that Fund held the securities of its Regular B/Ds with an aggregate value as follows: Citigroup Global Markets, Inc. $28,853,711; Goldman, Sachs & Co. $12,129,840; State Street Bank and Trust Company $54,152,305. During the fiscal year ended August 31, 2004, Neuberger Berman INTERNATIONAL Fund paid brokerage commissions of $379,705, of which $0 was paid to Neuberger Berman and $15,459 was paid to Lehman Brothers. During the fiscal year ended August 31, 2005, Neuberger Berman INTERNATIONAL Fund paid brokerage commissions of $1,145,798, of which $0 was paid to Neuberger Berman and $48,817 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, Neuberger Berman INTERNATIONAL Fund paid brokerage commissions of $2,859,017 of which $0 was paid to Neuberger Berman and $125,628 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 0% of the aggregate dollar amount of transactions involving the payment of commissions, and 0% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 11.28% of the aggregate dollar amount of transactions involving the payment of commissions, and 4.39% of the aggregate brokerage commissions paid by the Fund. 100% of the $2,733,389 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $1,846,921,234) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund did not acquire or hold any securities of its "regular broker or dealers (as defined under the 1940 Act). 104 Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund commenced operations on June 15, 2005 and therefore has no brokerage data for the fiscal year ending August 31, 2004. During the fiscal year ended August 31, 2005, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund paid brokerage commissions of $66,660, of which $0 was paid to Neuberger Berman and $50,428 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund paid brokerage commissions of $715,453 of which $0 was paid to Neuberger Berman and $58,728 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 0% of the aggregate dollar amount of transactions involving the payment of commissions, and 0% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 17.27% of the aggregate dollar amount of transactions involving the payment of commissions, and 8.21% of the aggregate brokerage commissions paid by the Fund. 100% of the $656,725 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $618,679,117) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund did not acquire or hold any securities of its "regular broker or dealers (as defined under the 1940 Act). Neuberger Berman INTERNATIONAL LARGE CAP Fund commenced operations on August 1, 2006 and therefore has no brokerage data for the fiscal years ending August 31, 2004 and August 31, 2005. During the fiscal year ended August 31, 2006, Neuberger Berman INTERNATIONAL LARGE CAP Fund paid brokerage commissions of $3,074 of which $0 was paid to Neuberger Berman and $187 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 0% of the aggregate dollar amount of transactions involving the payment of commissions, and 0% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 16.72% of the aggregate dollar amount of transactions involving the payment of commissions, and 6.08% of the aggregate brokerage commissions paid by the Fund. 100% of the $2,887 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $5,220,239) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund did not acquire or hold any securities of its "regular broker or dealers (as defined under the 1940 Act). During the fiscal year ended August 31, 2004, Neuberger Berman MILLENNIUM Fund paid brokerage commissions of $330,255, of which $8,189 was paid to Neuberger Berman and $42,462 was paid to Lehman Brothers. During the fiscal year ended August 31, 2005, Neuberger Berman MILLENNIUM Fund paid brokerage commissions of $329,518, of which $812 was paid to Neuberger Berman and $58,531 was paid to Lehman Brothers. 105 During the fiscal year ended August 31, 2006, Neuberger Berman MILLENNIUM Fund paid brokerage commissions of $221,346 of which $143 was paid to Neuberger Berman and $31,171 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 0.07% of the aggregate dollar amount of transactions involving the payment of commissions, and 0.06% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 20.84% of the aggregate dollar amount of transactions involving the payment of commissions, and 14.08% of the aggregate brokerage commissions paid by the Fund. 100% of the $190,032 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $120,064,183) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund did not acquire or hold any securities of its "regular broker or dealers (as defined under the 1940 Act). During the fiscal year ended August 31, 2004, Neuberger Berman REGENCY Fund paid brokerage commissions of $90,190, of which $7,572 was paid to Neuberger Berman and $13,778 was paid to Lehman Brothers. During the fiscal year ended August 31, 2005, Neuberger Berman REGENCY Fund paid brokerage commissions of $153,843, of which $181 was paid to Neuberger Berman and $28,431 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, Neuberger Berman REGENCY Fund paid brokerage commissions of $285,721 of which $0 was paid to Neuberger Berman and $43,501 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 0% of the aggregate dollar amount of transactions involving the payment of commissions, and 0% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 18.05% of the aggregate dollar amount of transactions involving the payment of commissions, and 15.22% of the aggregate brokerage commissions paid by the Fund. 100% of the $242,220 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $164,743,834) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund acquired securities of the following of its Regular B/Ds: Bear Stearns & Co.; at that date, that Fund held the securities of its Regular B/Ds with an aggregate value as follows: Bear Stearns & Co. $2,411,475. During the fiscal year ended August 31, 2004, Neuberger Berman CENTURY Fund paid brokerage commissions of $29,866, of which $3,829 was paid to Neuberger Berman and $4,314 was paid to Lehman Brothers. During the fiscal year ended August 31, 2005, Neuberger Berman CENTURY Fund paid brokerage commissions of $35,939, of which $2,520 was paid to Neuberger Berman and $5,689 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, Neuberger Berman CENTURY Fund paid brokerage commissions of $16,070 of which $1,088 was paid to Neuberger Berman and $1,733 was paid to Lehman Brothers. During the fiscal year ended 106 August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 7.68% of the aggregate dollar amount of transactions involving the payment of commissions, and 6.77% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 17.49% of the aggregate dollar amount of transactions involving the payment of commissions, and 10.79% of the aggregate brokerage commissions paid by the Fund. 100% of the $13,249 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $11,389,670) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund acquired securities of the following of its Regular B/Ds: Citigroup Global Markets, Inc. and Goldman, Sachs & Co.; at that date, that Fund held the securities of its Regular B/Ds with an aggregate value as follows: Citigroup Global Markets, Inc. $123,375; and Goldman, Sachs Group Inc. $148,650. During the fiscal year ended August 31, 2004, Neuberger Berman FASCIANO Fund paid brokerage commissions of $212,836, of which $10,545 was paid to Neuberger Berman and $16,278 was paid to Lehman Brothers. During the fiscal year ended August 31, 2005, Neuberger Berman FASCIANO Fund paid brokerage commissions of $400,602, of which $33 was paid to Neuberger Berman and $67,341 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, Neuberger Berman FASCIANO Fund paid brokerage commissions of $543,071 of which $0 was paid to Neuberger Berman and $79,373 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker comprised 0% of the aggregate dollar amount of transactions involving the payment of commissions, and 0% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 17.42% of the aggregate dollar amount of transactions involving the payment of commissions, and 14.62% of the aggregate brokerage commissions paid by the Fund. 100% of the $463,698 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $331,079,874) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund did not acquire or hold any securities of its "regular broker or dealers (as defined under the 1940 Act). During the fiscal year ended August 31, 2004, Neuberger Berman REAL ESTATE Fund paid brokerage commissions of $169,628, of which $100 was paid to Neuberger Berman and $28,845 was paid to Lehman Brothers. During the fiscal year ended August 31, 2005, Neuberger Berman REAL ESTATE Fund paid brokerage commissions of $146,563, of which $285 was paid to Neuberger Berman and $30,062 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, Neuberger Berman REAL ESTATE Fund paid brokerage commissions of $170,848 of which $428 was paid to Neuberger Berman and $33,413 was paid to Lehman Brothers. During the fiscal year ended August 31, 2006, transactions in which that Fund used Neuberger Berman as broker 107 comprised 0.39% of the aggregate dollar amount of transactions involving the payment of commissions, and 0.25% of the aggregate brokerage commissions paid by the Fund. During that fiscal year, transactions in which that Fund used Lehman Brothers as broker comprised 20.98% of the aggregate dollar amount of transactions involving the payment of commissions, and 19.56% of the aggregate brokerage commissions paid by the Fund. 100% of the $137,007 paid to other brokers by that Fund during that fiscal year (representing commissions on transactions involving approximately $104,605,400) was directed to those brokers at least partially on the basis of research services they provided. During the fiscal year ended August 31, 2006, that Fund did not acquire or hold any securities of its "regular broker or dealers (as defined under the 1940 Act). Neuberger Berman ALL CAP GROWTH Fund commenced operations after the end of the fiscal year and therefore has no brokerage data for the fiscal years ending August 31, 2004, August 31, 2005 and August 31, 2006. Insofar as Fund transactions of Neuberger Berman CENTURY, Neuberger Berman MILLENNIUM, Neuberger Berman PARTNERS, and Neuberger Berman REGENCY Funds result from active management of equity securities, and insofar as Fund transactions of Neuberger Berman MANHATTAN Fund result from seeking capital appreciation by selling securities whenever sales are deemed advisable without regard to the length of time the securities may have been held, it may be expected that the aggregate brokerage commissions paid by those Funds to brokers (including Neuberger Berman where it acts in that capacity) may be greater than if securities were selected solely on a long-term basis. For each of Neuberger Berman CENTURY Fund, Neuberger Berman MANHATTAN Fund and Neuberger Berman INTERNATIONAL Fund, the aggregate dollar amount of brokerage commissions paid in the 2006 fiscal year differed materially from the aggregate dollar amount of brokerage commissions paid in the 2004 fiscal year and 2005 fiscal year (only for CENTURY Fund). This was caused by multiple factors including changes in the net assets of a Fund, changes in either the inflows and outflows of a Fund's net assets and/or changes in the portfolio turnover rate for a Fund. For Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, the aggregate dollar amount of brokerage commissions paid in the 2006 fiscal year differed materially from the aggregate dollar amount of brokerage commissions paid in the 2005 fiscal year since the Fund commenced operations in June 2005. For Neuberger Berman FOCUS Fund, the aggregate dollar amount of brokerage commissions paid in the 2006 fiscal year differed materially from the aggregate dollar amount of brokerage commissions paid in the 2004 fiscal year because there was a change in the Portfolio Manager of the Fund in 2005. The Funds may, from time to time, loan portfolio securities to Neuberger Berman, Lehman Brothers and to other affiliated broker-dealers ("Affiliated Borrowers") in accordance with the terms and conditions of an order issued by the SEC. The order exempts such transactions from the provisions of the 1940 Act that would otherwise prohibit these transactions, subject to certain conditions. In accordance with the order, securities loans made by a Fund to Affiliated 108 Borrowers are fully secured by cash collateral. Each loan to an Affiliated Borrower by a Fund will be made on terms at least as favorable to the Fund as comparable loans to unaffiliated borrowers, and no loans will be made to an Affiliated Borrower unless the Affiliated Borrower represents that the terms are at least as favorable to the Fund as those it provides to unaffiliated lenders in comparable transactions. All affiliated loans will be made with spreads that are not lower than those provided for in a schedule of spreads established by the Independent Fund Trustees. The schedule of spreads will set the lowest spread that can apply with respect to a loan and will permit the spread for each individual loan to be adjusted to cover costs and realize net income for the Funds. All transactions with Affiliated Borrowers will be reviewed periodically by officers of the Trust and reported to the Board of Trustees. In effecting securities transactions, each Fund generally seeks to obtain the best price and execution of orders. Commission rates, being a component of price, are considered along with other relevant factors. Each Fund plans to continue to use Neuberger Berman and/or Lehman Brothers as its broker where, in the judgment of NB Management, that firm is able to obtain a price and execution at least as favorable as other qualified brokers. To the Funds' knowledge, no affiliate of any Fund receives give-ups or reciprocal business in connection with its securities transactions. The use of Neuberger Berman and Lehman Brothers as brokers for each Fund is subject to the requirements of Section 11(a) of the Securities Exchange Act of 1934. Section 11(a) prohibits members of national securities exchanges from retaining compensation for executing exchange transactions for accounts which they or their affiliates manage, except where they have the authorization of the persons authorized to transact business for the account and comply with certain annual reporting requirements. The Trust and NB Management have expressly authorized Neuberger Berman and Lehman Brothers to retain such compensation, and Neuberger Berman and Lehman Brothers have agreed to comply with the reporting requirements of Section 11(a). Under the 1940 Act, commissions paid by a Fund to Neuberger Berman and Lehman Brothers in connection with a purchase or sale of securities on a securities exchange may not exceed the usual and customary broker's commission. Accordingly, it is each Fund's policy that the commissions paid to Neuberger Berman and Lehman Brothers must be (1) at least as favorable as commissions contemporaneously charged by each of Neuberger Berman and Lehman Brothers on comparable transactions for its most favored unaffiliated customers, except for accounts for which Neuberger Berman or Lehman Brothers acts as a clearing broker for another brokerage firm and customers of Neuberger Berman and Lehman Brothers considered by a majority of the Independent Fund Trustees not to be comparable to the Fund and (2) at least as favorable as those charged by other brokers having comparable execution capability in NB Management's judgment. The Funds do not deem it practicable and in their best interests to solicit competitive bids for commissions on each transaction effected by Neuberger Berman and Lehman Brothers. However, consideration regularly is given to information concerning the prevailing level of commissions charged by other brokers on comparable transactions during comparable periods of time. The 1940 Act generally prohibits Neuberger Berman and Lehman Brothers from acting as principal in the purchase of portfolio securities from, or the sale of portfolio securities to, a Fund unless an appropriate exemption is available. 109 A committee of Independent Fund Trustees from time to time reviews, among other things, information relating to the commissions charged by Neuberger Berman and Lehman Brothers to the Funds and to their other customers and information concerning the prevailing level of commissions charged by other brokers having comparable execution capability. In addition, the procedures pursuant to which Neuberger Berman and Lehman Brothers determine that the commissions paid to Neuberger Berman and Lehman Brothers by the Funds are fair and reasonable must be reviewed and approved no less often than annually by a majority of the Independent Fund Trustees. To ensure that accounts of all investment clients, including a Fund, are treated fairly in the event that Neuberger Berman receives transaction instructions regarding the same security for more than one investment account at or about the same time, Neuberger Berman may combine orders placed on behalf of clients, including advisory accounts in which affiliated persons have an investment interest, for the purpose of negotiating brokerage commissions or obtaining a more favorable price. Where appropriate, securities purchased or sold may be allocated, in terms of amount, to a client according to the proportion that the size of the order placed by that account bears to the aggregate size of orders contemporaneously placed by the other accounts, subject to de minimis exceptions. All participating accounts will pay or receive the same price when orders are combined. Under policies adopted by the Board of Trustees, Neuberger Berman and Lehman Brothers may enter into agency cross-trades on behalf of a Fund. An agency cross-trade is a securities transaction in which the same broker acts as agent on both sides of the trade and the broker or an affiliate has discretion over one of the participating accounts. In this situation, Neuberger Berman or Lehman Brothers would receive brokerage commissions from both participants in the trade. The other account participating in an agency cross-trade with a Fund cannot be an account over which Neuberger Berman or Lehman Brothers exercises investment discretion. A member of the Board of Trustees who is not affiliated with Neuberger Berman or Lehman Brothers reviews information about each agency cross-trade that the Funds participate in. Each Fund expects that it will continue to execute a portion of its transactions through brokers other than Neuberger Berman and Lehman Brothers. In selecting those brokers, NB Management considers the quality and reliability of brokerage services, including execution capability, speed of execution, overall performance, and financial responsibility, and may consider, among other factors, research and other investment information provided by, and sale of Fund shares effected through, those brokers as well as any expense offset arrangements offered by the brokers. In certain instances Neuberger Berman specifically allocates brokerage for research services (including research reports on issuers, industries as well as economic and financial data) which may otherwise be purchased for cash. While the receipt of such services has not reduced Neuberger Berman's normal internal research activities, Neuberger Berman's expenses could be materially increased if it were to generate such additional information internally. To the extent such research services are provided by others, Neuberger Berman is relieved of expenses it may otherwise incur. In some cases research services are generated by third parties but provided to Neuberger Berman by or through broker dealers. 110 Research obtained in this manner may be used in servicing any or all clients of Neuberger Berman and may be used in connection with clients other than those client's whose brokerage commissions are used to acquire the research services described herein. With regard to allocation of brokerage to acquire research services described above, Neuberger Berman always considers its best execution obligation when deciding which broker to utilize. A committee comprised of officers of NB Management and employees of Neuberger Berman who are Fund managers of some of the Funds and Other NB Funds (collectively, "NB Funds") and some of Neuberger Berman's managed accounts ("Managed Accounts") evaluates quarterly the nature and quality of the brokerage and research services provided by other brokers. Based on this evaluation, the committee establishes a list and projected rankings of preferred brokers for use in determining the relative amounts of commissions to be allocated to those brokers. Ordinarily, the brokers on the list effect a large portion of the brokerage transactions for the NB Funds and the Managed Accounts that are not effected by Neuberger Berman. However, in any semi-annual period, brokers not on the list may be used, and the relative amounts of brokerage commissions paid to the brokers on the list may vary substantially from the projected rankings. These variations reflect the following factors, among others: (1) brokers not on the list or ranking below other brokers on the list may be selected for particular transactions because they provide better price and/or execution, which is the primary consideration in allocating brokerage; (2) adjustments may be required because of periodic changes in the execution capabilities of or research or other services provided by particular brokers or in the execution or research needs of the NB Funds and/or the Managed Accounts; and (3) the aggregate amount of brokerage commissions generated by transactions for the NB Funds and the Managed Accounts may change substantially from one semi-annual period to the next. The commissions paid to a broker other than Neuberger Berman and Lehman Brothers may be higher than the amount another firm might charge if NB Management determines in good faith that the amount of those commissions is reasonable in relation to the value of the brokerage and research services provided by the broker. NB Management believes that those research services benefit the Funds by supplementing the information otherwise available to NB Management. That research may be used by NB Management in servicing Other NB Funds and, in some cases, by Neuberger Berman in servicing the Managed Accounts. On the other hand, research received by NB Management from brokers effecting portfolio transactions on behalf of the Other NB Funds and by Neuberger Berman from brokers effecting portfolio transactions on behalf of the Managed Accounts may be used for the Funds' benefit. COMMISSION RECAPTURE PROGRAM AND EXPENSE OFFSET ARRANGEMENT ----------------------------------------------------------- The Funds have entered into a commission recapture program with Citigroup Global Markets Inc., which enables each Fund to recoup a portion of the commissions it pays to a broker that is not a related party of the Funds by redirecting these commissions to pay for some of its operational expenses. Expenses paid through this program may include costs of custodial, transfer agency or accounting services. For the year ended August 31, 2006, the impact of this arrangement on the Funds was a reduction of expenses as follows: 111 ------------------------------------------------------------- FUNDS AMOUNT OF REDUCTION OF EXPENSES ------------------------------------------------------- Century $1,513 ------------------------------------------------------- Fasciano $37,759 ------------------------------------------------------- Focus $63,488 ------------------------------------------------------- Genesis $294,650 ------------------------------------------------------- Guardian $87,682 ------------------------------------------------------- International $159,678 ------------------------------------------------------- International Institutional $0 ------------------------------------------------------- International Large Cap $0** ------------------------------------------------------- Manhattan $28,202 ------------------------------------------------------- Millennium $15,938 ------------------------------------------------------- Partners $217,857 ------------------------------------------------------- Real Estate $10,050 ------------------------------------------------------- Regency $16,592 ------------------------------------------------------- Socially Responsive $43,373 ------------------------------------------------------- * Period from August 1, 2006 (Commencement of Operations) to August 31, 2006. Each Fund also has an expense offset arrangement in connection with its custodian contract. For the year ended August 31, 2006, the impact of this arrangement was a reduction of expenses as follows: -------------------------------------------------------- FUNDS AMOUNT OF REDUCTION OF EXPENSES -------------------------------------------------------- Century $4 -------------------------------------------------------- Fasciano $1,904 -------------------------------------------------------- Focus $6,525 -------------------------------------------------------- Genesis $78,619 -------------------------------------------------------- Guardian $4,635 -------------------------------------------------------- International $4,874 -------------------------------------------------------- International Institutional $648 -------------------------------------------------------- International Large Cap $0* -------------------------------------------------------- Manhattan $446 -------------------------------------------------------- Millennium $389 -------------------------------------------------------- 112 Partners $14,435 -------------------------------------------------------- Real Estate $61 -------------------------------------------------------- Regency $818 -------------------------------------------------------- Socially Responsive $4,306 -------------------------------------------------------- * Period from August 1, 2006 (Commencement of Operations) to August 31, 2006. PORTFOLIO TURNOVER ------------------ A Fund's portfolio turnover rate is calculated by dividing (1) the lesser of the cost of the securities purchased or the proceeds from the securities sold by the Fund during the fiscal year (other than securities, including options, whose maturity or expiration date at the time of acquisition was one year or less) by (2) the month-end average of the value of such securities owned by the Fund during the fiscal year. PROXY VOTING ------------ The Board of Trustees has delegated to Neuberger Berman the responsibility to vote proxies related to the securities held in the Funds' portfolios. Under this authority, Neuberger Berman is required by the Board of Trustees to vote proxies related to portfolio securities in the best interests of the Funds and their shareholders. The Board of Trustees permits Neuberger Berman to contract with a third party to obtain proxy voting and related services, including research of current issues. Neuberger Berman has implemented written Proxy Voting Policies and Procedures ("Proxy Voting Policy") that are designed to reasonably ensure that Neuberger Berman votes proxies prudently and in the best interest of its advisory clients for whom Neuberger Berman has voting authority, including the Funds. The Proxy Voting Policy also describes how Neuberger Berman addresses any conflicts that may arise between its interests and those of its clients with respect to proxy voting. Neuberger Berman's Proxy Committee is responsible for developing, authorizing, implementing and updating the Proxy Voting Policy, overseeing the proxy voting process and engaging and overseeing any independent third-party vendors as voting delegate to review, monitor and/or vote proxies. In order to apply the Proxy Voting Policy noted above in a timely and consistent manner, Neuberger Berman utilizes Institutional Shareholder Services Inc. ("ISS") to vote proxies in accordance with Neuberger Berman's voting guidelines. For socially responsive clients, Neuberger Berman has adopted socially responsive voting guidelines. For non-socially responsive clients, Neuberger Berman's guidelines adopt the voting recommendations of ISS. Neuberger Berman retains final authority and fiduciary responsibility for proxy voting. Neuberger Berman believes that this process is reasonably designed to address material conflicts of interest that may arise between Neuberger Berman and a client as to how proxies are voted. In the event that an investment professional at Neuberger Berman believes that it is in the best interests of a client or clients to vote proxies in a manner inconsistent with Neuberger Berman's proxy voting guidelines or in a 113 manner inconsistent with ISS recommendations, the Proxy Committee will review information submitted by the investment professional to determine that there is no material conflict of interest between Neuberger Berman and the client with respect to the voting of the proxy in that manner. If the Proxy Committee determines that the voting of a proxy as recommended by the investment professional present a material conflict of interest between Neuberger Berman and the client or clients with respect to the voting of the proxy, the Proxy Committee shall: (i) take no further action, in which case ISS shall vote such proxy in accordance with the proxy voting guidelines or as ISS recommends; (ii) disclose such conflict to the client or clients and obtain written direction from the client as to how to vote the proxy; (iii) suggest that the client or clients engage another party to determine how to vote the proxy; or (iv) engage another independent third party to determine how to vote the proxy. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available, without charge, by calling 1-800-877-9700 (toll-free) or visiting www.nb.com or the website of the SEC, www.sec.gov. PORTFOLIO HOLDINGS DISCLOSURE PORTFOLIO HOLDINGS DISCLOSURE POLICY ------------------------------------ The Funds prohibit the disclosure of information about their portfolio holdings, before such information is publicly disclosed, to any outside parties, including individual investors, institutional investors, intermediaries, third party service providers to NB Management or the Funds, rating and ranking organizations, and affiliated persons of the Funds or NB Management (the "Potential Recipients") unless such disclosure is consistent with a Fund's legitimate business purposes and is in the best interests of its shareholders (the "Best Interests Standard"). NB Management and the Funds have determined that the only categories of Potential Recipients that meet the Best Interests Standard are certain mutual fund rating and ranking organizations and third party service providers to NB Management or the Funds with a specific business reason to know the portfolio holdings of a Fund (e.g., securities lending agents) (the "Allowable Recipients"). As such, certain procedures must be adhered to before the Allowable Recipients may receive the portfolio holdings prior to their being made public. Allowable Recipients that get approved for receipt of the portfolio holdings are known as "Approved Recipients." The President or a Senior Vice President of NB Management may determine to expand the categories of Allowable Recipients only if he or she first determines that the Best Interests Standard has been met (e.g., for disclosure to a newly hired investment adviser or sub- adviser to the Funds prior to commencing its duties), and only with the written concurrence of NB Management's legal and compliance department. Portfolio Holdings Disclosure Procedures ---------------------------------------- Disclosure of portfolio holdings may be requested only by an officer of NB Management or a Fund by completing a holdings disclosure form. The completed form must be submitted to the President or a Senior Vice President of NB Management (who may not be the officer submitting the request) for review and approval. If the Proposed Recipient is an affiliated person of the Funds or NB 114 Management, the reviewer must ensure that the disclosure is in the best interests of Fund shareholders and that no conflict of interest exists between the shareholders and the Funds or NB Management. Following this approval, the form is submitted to NB Management's legal and compliance department or to the Chief Compliance Officer of NB Management for review, approval and processing. Neither the Funds, NB Management nor any affiliate of either may receive any compensation or consideration for the disclosure of portfolio holdings, although usual and customary compensation may be paid in connection with a service delivered, such as securities lending. Each Allowable Recipient must sign a non-disclosure agreement before they may become an Approved Recipient. Pursuant to a duty of confidentiality set forth in the non-disclosure agreement, Allowable Recipients are (1) required to keep all portfolio holdings information confidential and (2) prohibited from trading based on such information. In consultation with the Funds' Chief Compliance Officer, the Board of Trustees reviews the Funds' portfolio holdings disclosure policy and procedures annually to determine their effectiveness and to adopt changes as necessary. Pursuant to a Code of Ethics adopted by the Funds, NB Management and Neuberger Berman ("NB Code"), Investment Personnel, Access Persons and employees of each are prohibited from revealing information relating to current or anticipated investment intentions, portfolio holdings, portfolio transactions or activities of the Funds except to persons whose responsibilities are determined to require knowledge of the information in accordance with procedures established by the Legal and Compliance Department in the best interests of the Funds' shareholders. The NB Code also prohibits any person associated with the Funds, NB Management or Neuberger Berman, in connection with the purchase or sale, directly or indirectly, by such person of a security held or to be acquired by the Funds from engaging in any transaction in a security while in possession of material nonpublic information regarding the security or the issuer of the security. PORTFOLIO HOLDINGS APPROVED RECIPIENTS -------------------------------------- The Funds currently have ongoing arrangements to disclose portfolio holdings information prior to their being made public with the following Approved Recipients: STATE STREET BANK AND TRUST COMPANY ("STATE STREET"). Each Fund has selected State Street as custodian for its securities and cash. Pursuant to a custodian contract, each Fund employs State Street as the custodian of its assets. As custodian, State Street creates and maintains all records relating to each Fund's activities and supplies each Fund with a daily tabulation of the securities it owns and that are held by State Street. Pursuant to such contract, State Street agrees that all books, records, information and data pertaining to the business of each Fund which are exchanged or received pursuant to the contract shall remain confidential, shall not be voluntarily disclosed to any other person, except as may be required by law, and shall not be used by State Street for any purpose not directly related to the business of any Fund, except with such Fund's written consent. State Street receives reasonable compensation for its services and expenses as custodian. SECURITIES LENDING AGENT. Each Fund has entered or may enter into a securities lending agency agreement with eSecLending under which eSecLending 115 provides securities loans to principal borrowers arranged through a bidding process managed by eSecLending. Those principal borrowers may receive each Fund's portfolio holdings daily. Each such principal borrower that receives such information is or will be subject to an agreement, that all financial, statistical, personal, technical and other data and information related to the Fund's operations that is designated by the Fund as confidential will be protected from unauthorized use and disclosure by the principal borrower. Each Fund pays eSecLending a fee for agency and/or administrative services related to its role as lending agent. Each Fund also pays the principal borrowers a fee with respect to the cash collateral that it receives and retains the income earned on reinvestment of that cash collateral. OTHER THIRD-PARTY SERVICE PROVIDERS TO THE FUNDS. The Funds may also disclose portfolio holdings information prior to their being made public to their independent registered public accounting firms, legal counsel, financial printers, proxy voting firms and other third-party service providers to the Funds who require access to this information to fulfill their duties to the Funds. In all cases the third-party service provider receiving the information has agreed in writing (or is otherwise required by professional and/or written confidentiality requirements or fiduciary duty) to keep the information confidential, to use it only for the agreed-upon purpose(s) and not to trade securities on the basis of such information. RATING, RANKING AND RESEARCH AGENCIES. Each Fund sends its complete portfolio holdings information to the following rating, ranking and research agencies for the purpose of having such agency develop a rating, ranking or specific research product for the Fund. Each Fund provides its complete portfolio holdings to: Vestek each day and Lipper, a Reuters company on the second business day of each month. Each Fund also provides its complete month- end portfolio holdings to Data Communiqu{e'} International ("DCI"), a company that provides automated data publishing, printing, and distribution technologies to financial services companies, on the first business day of each following month so that DCI can create a list of each Fund's top 10 holdings. No compensation is received by any Fund, NB Management, Neuberger Berman or any other person in connection with the disclosure of this information. NB Management either has or expects to enter shortly into a written confidentiality agreement, with each rating, ranking or research agency in which the agency agrees or will agree to keep each Fund's portfolio holdings confidential and to use such information only in connection with developing a rating, ranking or research product for the Fund. REPORTS TO SHAREHOLDERS Shareholders of each Fund receive unaudited semi-annual financial statements, as well as year-end financial statements audited by the respective independent registered public accounting firms for the Funds. Each Fund's statements show the investments owned by it and the market values thereof and provide other information about the Fund and its operations. ORGANIZATION, CAPITALIZATION AND OTHER MATTERS Each Fund is a separate ongoing series of the Trust, a Delaware statutory trust organized pursuant to an Amended and Restated Trust Instrument dated as of December 14, 2005. The Trust is registered under the 1940 Act as a diversified, open-end management investment company, commonly known as a mutual fund. The Trust has twenty separate operating series. The Fund Trustees may establish 116 additional series or classes of shares without the approval of shareholders. The assets of each series belong only to that series, and the liabilities of each series are borne solely by that series and no other. Prior to November 9, 1998, the name of the Trust was "Neuberger & Berman Equity Funds," and the term "Neuberger Berman" in each Fund's name (except Neuberger Berman ALL CAP GROWTH Fund, Neuberger Berman CENTURY Fund, Neuberger Berman FASCIANO Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman REAL ESTATE Fund and Neuberger Berman REGENCY Fund) was "Neuberger & Berman." DESCRIPTION OF SHARES. Each Fund is authorized to issue an unlimited number of shares of beneficial interest (par value $0.001 per share). Shares of each Fund represent equal proportionate interests in the assets of that Fund only and have identical voting, dividend, redemption, liquidation, and other rights except that expenses allocated to a Class may be borne solely by such Class as determined by the Fund Trustees and a Class may have exclusive voting rights with respect to matters affecting only that Class. All shares issued are fully paid and non-assessable, and shareholders have no preemptive or other rights to subscribe to any additional shares. SHAREHOLDER MEETINGS. The Fund Trustees do not intend to hold annual meetings of shareholders of the Funds. The Fund Trustees will call special meetings of shareholders of a Fund or Class only if required under the 1940 Act or in their discretion or upon the written request of holders of 10% or more of the outstanding shares of that Fund entitled to vote at the meeting. CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the shareholders of a Fund will not be personally liable for the obligations of any Fund; a shareholder is entitled to the same limitation of personal liability extended to shareholders of a corporation. To guard against the risk that Delaware law might not be applied in other states, the Trust Instrument requires that every written obligation of the Trust or a Fund contain a statement that such obligation may be enforced only against the assets of the Trust or Fund and provides for indemnification out of Trust or Fund property of any shareholder nevertheless held personally liable for Trust or Fund obligations, respectively, merely on the basis of being a shareholder. OTHER. Because Advisor Class, Trust Class and Institutional Class shares for certain Funds can be bought, owned and sold only through an account with an Institution, a client of an Institution may be unable to purchase additional shares and/or may be required to redeem shares (and possibly incur a tax liability) if the client no longer has a relationship with the Institution or if the Institution no longer has a contract with NB Management to perform services. Depending on the policies of the Institution involved, an investor may be able to transfer an account from one Institution to another. CUSTODIAN AND TRANSFER AGENT Each Fund has selected State Street, 225 Franklin Street, Boston, MA 02110, as custodian for its securities and cash. State Street also serves as each Fund's transfer and shareholder servicing agent, administering purchases, redemptions, and transfers of Fund shares and the payment of dividends and other distributions through its Boston Service Center. All Investor Class correspondence should be mailed to Neuberger Berman Funds, c/o Boston Service 117 Center, P.O. Box 8403, Boston, MA 02266-8403. All correspondence for other classes should be mailed to Neuberger Berman Funds, Institutional Services, 605 Third Avenue, 2[nd] Floor, New York, NY 10158-0180. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS Each Fund (other than Neuberger Berman ALL CAP GROWTH Fund, Neuberger Berman CENTURY Fund, Neuberger Berman MANHATTAN Fund, Neuberger Berman MILLENNIUM Fund, Neuberger Berman REGENCY Fund, and Neuberger Berman SOCIALLY RESPONSIVE Fund) has selected Ernst & Young LLP, 200 Clarendon Street, Boston, MA 02116, as the independent registered public accounting firm that will audit its financial statements. Each of Neuberger Berman ALL CAP GROWTH Fund, Neuberger Berman CENTURY Fund, Neuberger Berman MANHATTAN Fund, Neuberger Berman MILLENNIUM Fund, Neuberger Berman REGENCY Fund, and Neuberger Berman SOCIALLY RESPONSIVE Fund has selected Tait, Weller & Baker LLP, 1818 Market Street, Suite 2400, Philadelphia, PA, 19103, as the independent registered public accounting firm that will audit its financial statements. LEGAL COUNSEL The Trust has selected Kirkpatrick & Lockhart Nicholson Graham LLP, 1601 K Street, N.W., Washington, DC 20006-1600, as its legal counsel. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES As of December 1, 2006, the following are all of the beneficial and record owners of more than five percent of each Fund's shares. Except where indicated with an asterisk, the owners listed are record owners. These entities hold these shares of record for the accounts of certain of their clients and have informed the Funds of their policy to maintain the confidentiality of holdings in their client accounts, unless disclosure is expressly required by law.
FUND AND CLASS NAME AND ADDRESS PERCENT OWNED FASCIANO FUND INVESTOR CLASS CHARLES SCHWAB & CO 25.89% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 NATIONAL FINANCIAL SERVICES CORP 9.74% FOR THE EXCLUSIVE BENEFIT OF THEIR CLIENTS PO BOX 3908 CHURCH STREET STATION NEW YORK NY 10008-3908
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FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- FIDELITY INVESTMENTS INSTITUTIONAL 8.44% OPS CO INC FIIOC AS AGENT FOR CERTAIN EMPLOYEE BENEFIT PLAN 100 MAGELLAN WAY KW1C COVINGTON KY 41015-1999 FOCUS FUND INVESTOR CLASS CHARLES SCHWAB & CO INC 8.76% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 GENESIS FUND INVESTOR CLASS CHARLES SCHWAB & CO INC 18.97% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 NATIONAL FINANCIAL SERVICES 6.20% FOR THE EXCLUSIVE BENEFIT OF THEIR CLIENTS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 UNION CENTRAL LIFE INSURANCE CO 5.87% 401K GROUP SEP ACCT ATTN MUTUAL FUNDS DEPT STATION 3 1876 WAYCROSS RD PO BOX 40888 CINCINNATI OH 45240-0888 GUARDIAN FUND INVESTOR CLASS CHARLES SCHWAB & CO INC 18.11% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 INTERNATIONAL FUND INVESTOR CLASS CHARLES SCHWAB & CO INC 27.06% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151
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FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- NATIONAL FINANCIAL SERV CORP 10.50% FOR EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 MANHATTAN FUND INVESTOR CLASS CHARLES SCHWAB & CO INC 6.90% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 MILLENNIUM FUND INVESTOR CLASS CHARLES SCHWAB & CO INC 13.97% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 PARTNERS FUND INVESTOR CLASS CHARLES SCHWAB & CO INC 15.27% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 NATIONAL FINANCIAL SERV CORP 5.60% FOR EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 REGENCY FUND INVESTOR CLASS CHARLES SCHWAB & CO INC 15.39% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 NATIONAL FINANCIAL SERV CORP 12.65% FOR EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908
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FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- WELLS FARGO BANK NA FBO 11.56% SECURA - MUTUAL FUND 16751000 PO BOX 1533 MINNEAPOLIS MN 55480-1533 JEWISH COMMUNAL FUND CORPORATION 5.07% ( NOT- FOR- PROFIT) 575 MADISON AVE STE 703 NEW YORK NY 10022-8591 SOCIALLY RESPONSIVE CHARLES SCHWAB & CO INC 21.29% FUND INVESTOR CLASS ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 NATIONWIDE LIFE INSURANCE CO 8.63% NACO C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029 NATIONAL FINANCIAL SERV CORP 7.43% FOR EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 NATIONWIDE LIFE INSURANCE CO 6.04% DCVA C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029 ALL CAP GROWTH FUND NEUBERGER BERMAN LLC 97.30% TRUST CLASS 001-30025-14 70 HUDSON STREET 7TH FLOOR JERSEY CITY NJ 07302-4585
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FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- FOCUS FUND DELAWARE CHARTER GUARANTEE & TRUST 16.92% TRUST CLASS CUST FBO PRINCIPAL FINANCIAL GROUP ATTN RIS NPIO TRADE DESK 711 HIGH ST DES MOINES IA 50392-0001 NATIONAL FINANCIAL SERV CORP 15.99% FOT THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 CITIGROUP GLOBAL MARKETS INC. 7.94% 00109801250 388 GREENWICH ST NEW YORK NY 10013-2375 WELLS FARGO BANK NA FBO 7.13% RPS NEUBERGER BERMAN FOCUS TRUST 99020230 PO BOX 1533 MINNEAPOLIS MN 55480-1533 FIDELITY INVESTMENTS INST OPS 6.91% CO AS AGENT FOR CERTAIN EE BENEFIT PL 100 MAGELLAN WAY # KWIC COVINGTON KY 41015-1999 NATIONWIDE TRUST CO 6.76% FSB C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029 GENESIS FUND FIDELITY INVESTMENTS INST OPS CO 33.44% TRUST CLASS AS AGENT FOR CERTAIN EE BENEFIT PL MAILZONE KWIC 100 MAGELLAN WAY # KW1C COVINGTON KY 41015-1999
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FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- NATIONAL FINANCIAL SERV CORP 5.37% FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 AMERIPRISE TRUST COMPANY FOR THE 5.02% BENEFIT OF AMERIPRISE TRUST RETIREMENT SERVICES PLANS ATTN MUTUAL FUND OPERATIONS 996 AXP FINANCIAL CTR MINNEAPOLIS MN 55474-0009 GUARDIAN FUND ING NATIONAL TRUST 21.06% TRUST CLASS U/A DTD 4/22/96 151 FARMINGTON AVE # T531 HARTFORD CT 06156-0001 NATIONWIDE LIFE INSURANCE CO 17.99% QPVA C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029 NATIONAL FINANCIAL SERV CORP 17.36% FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 NATIONWIDE TRUST CO 7.37% FSB C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029 INTERNATIONAL FUND CITIGROUP GLOBAL MARKETS INC. 40.07% TRUST CLASS 00109801250 388 GREENWICH ST NEW YORK NY 10013-2375
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FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- NATIONAL FINANCIAL SERV CORP 12.40% FOR EXCLUSIVE BENEFIT OF OUR CUSTOMERS 200 LIBERTY ST - 1 WORLD FIN CTR ATTN MUTUAL FUNDS DEPT - 5TH FLOOR NEW YORK NY 10281 MFPF&S FOR THE SOLE BENEFIT OF 11.03% ITS CUSTOMERS ATTN FUND ADMINISTRATION 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 INTERNATIONAL LARGE NEUBERGER BERMAN LLC 41.45% CAP FUND 001-30025-14 TRUST CLASS 70 HUDSON STREET 7TH FLOOR JERSEY CITY NJ 07302-4585 NATIONAL FINANCIAL SERV CORP 9.76% FOR EXCLUSIVE BENEFIT OF OUR CUSTOMERS 200 LIBERTY ST - 1 WORLD FIN CTR ATTN MUTUAL FUNDS DEPT - 5TH FLOOR NEW YORK NY 10281 MANHATTAN FUND TRUST CLASS NATIONAL FINANCIAL SERV CORP 1 28.20% FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 DELAWARE CHARTER GUARANTEE & TRUST 17.12% FBO VARIOUS QUALIFED PLANS 711 HIGH STREET DES MOINES IA 50309-2732 FIDELITY INVESTMENTS INST OPS 15.26% CO AS AGENT FOR CERTAIN EE BENEFIT PL 100 MAGELLAN WAY # KW1C COVINGTON KY 41015-1999
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FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- BICE AGF S.A. PARA F.M. BICE BEST 11.22% NORTEAMERICA TEATINOS 280 PISO 13 SANTIAGO CHILE DELAWARE CHARTER GUARANTEE & TRUST 6.10% FBO VARIOUS NONQUALIFED PLANS 711 HIGH STREET DES MOINES IA 50309-2732 MILLENIUM FUND NATIONAL FINANCIAL SERV CORP 85.27% TRUST CLASS FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 NATIONWIDE TRUST CO 5.04% FSB C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029 PARTNERS FUND FIDELITY INVESMENTS INSTIT OPER CO 29.92% TRUST CLASS AS AGENT FOR CERTAIN BENEFIT PLN 100 MAGELLAN WAY # KW1C COVINGTON KY 41015-1999 NATIONAL FINANCIAL SERV CORP 13.96% FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 NATIONWIDE LIFE INSURANCE 6.84% QPVA C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029
125
FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- PRC INC 6.64% C/O T ROWE PRICE FINANCIAL ATTN ASSET RECON PO BOX 17215 BALTIMORE MD 21297-1215 MLPF&S FOR THE SOLE BENEFIT OF 6.20% ITS CUSTOMERS ATTN FUND ADMINSTRATION (97NX1) 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484 REAL ESTATE FUND PRUDENTIAL INVESTMENT MANAGEMENT 36.43% TRUST CLASS SERVICE FBO MUTUAL FUND CLIENTS 100 MULBERRY ST 3 GATEWAY CENTER FL 11 MAIL STOP NJ 05-11-20 NEWARK NJ 07102-4000 CHARLES SCHWAB & CO INC 11.49% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 NATIONAL FINANCIAL SERV CORP 5.72% FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 REGENCY FUND BOST & CO A/C TWBF2229002 38.48% TRUST CLASS FBO DIRECTED ACCOUNT PLAN MUTUAL FUND OPERATIONS PO BOX 3198 PITTSBURGH PA 15230-3198 NATIONWIDE TRUST COMPANY FSB 10.92% C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029
126
FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- UNION CENTRAL LIFE INSURANCE CO 8.28% 401K GROUP SEP ACCT 1876 WAYCROSS RD PO BOX 40888 CINCINNATI OH 45240-0888 NATIONAL FINANCIAL SERV CORP 5.31% FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 SOCIALLY RESPONSIVE FUND FIDELITY INVESTMENTS INST OPS 19.28% TRUST CLASS CO AS AGENT FOR CERTAIN EE BENEFIT PL 100 MAGELLAN WAY # KW1C COVINGTON KY 41015-1999 HARTFORD LIFE INSURANCE CO 18.74% SEPARATE ACCOUNT TK ATTN DAVID TEN BROECK 200 HOPMEADOW ST SIMSBURY CT 06089-9793 NATIONAL FINANCIAL SERV CORP 7.00% FOR THE EXCLUSIVE BENEFIT OF OUR CUSTOMERS PO BOX 3908 CHURCH ST STATION NEW YORK NY 10008-3908 FASCIANO FUND CHARLES SCHWAB & CO INC 15.79% ADVISOR CLASS ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 AMERICAN UNITED LIFE INS CO 13.36% FBO GROUP RETIREMENT ANNUITY PO BOX 1995 INDIANAPOLIS IN 46206-9102
127
FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- CITIGROUP GLOBAL MARKETS INC. 9.13% 00109801250 333 W 34TH ST FL 3 NEW YORK NY 10001-2402 JP MORGAN CHASE BANK 6.94% FBO ADP MID MARKET 3 METROTECH CTR FL 6 BROOKLYN NY 11245-0001 SCUDDER TRST CO 6.58% SCUDDER TRST CO FBO LITHIA MOTORS INC SALARY REDUCTION PROFIT SHARING PLAN ATTN ASSET RECON DEPT #063813 PO BOX 1757 SALEM NH 03079-1143 FOCUS FUND TRANSAMERICA LIFE INSURANCE COMPANY 36.82% ADVISOR CLASS 1150 SOUTH OLIVE ST T-10-05 LOS ANGELES CA 90015-2209 DELAWARE CHARTER GUARANTEE & TRUST 10.88% FBO VARIOUS QUALIFED PLANS 711 HIGH STREET DES MOINES IA 50309-2732 DELAWARE CHARTER GUARANTEE & TRUST 8.79% FBO PRINCIPAL FINANCIAL GROUP ATTN RIS NPIO TRADE DESK 711 HIGH ST DES MOINES IA 50392-0001 AMERICAN UNITED LIFE INS CO [7.86% FBO GROUP RETIREMENT ANNUITY PO BOX 1995 INDIANAPOLIS IN 46206-9102 GENESIS FUND FIRST UNION NATIONAL BANK FBO 17.36% ADVISOR CLASS VARIOUS RETIREMENT PLANS A/C #1080827609 1525 W WT HARRIS BLVD CMGNC1151 CHARLOTTE NC 28262-8522
128
FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- CHARLES SCHWAB & CO INC 11.59% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 TRANSAMERICA LIFE INSURANCE COMPANY 11.36% 1150 SOUTH OLIVE ST T-10-05 LOS ANGELES CA 90015-2209 FIRST UNION NATIONAL BANK CUSTODIAN 5.57% FOR VARIOUS RETIREMENT PLANS ACCT# 1080823676 1525 W WT HARRIS BLVD CMGNC1151 CHARLOTTE NC 28262-8522 HORACE MANN LIFE INSURANCE CO 5.51% SEPERATE ACCOUNT 1 HORACE MANN PLZ SPRINGFIELD IL 62715-0002 DELAWARE CHARTER GUARANTEE & TRUST 5.46% CUST FBO PRINCIPAL MUTUAL LIFE INS CO DTD 1/1/96 PO BOX 8704 1013 CENTRE RD WILMINGTON DE 19899-8704 GUARDIAN FUND CHARLES SCHWAB & CO INC 63.87% ADVISOR CLASS ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 MG TRUST COMPANY CUST. FBO 10.44% .R. PIERCE PLUMBING CO., INC. 700 17TH STREET SUITE 300 DENVER CO 80202-3531 MANHATTAN FUND MFPF&S FOR THE SOLE BENEFIT OF 25.91% ADVISOR CLASS ITS CUSTOMERS ATTN FUND ADMINISTRATION 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484
129
FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- FIDELITY INVESTMENTS INSTITUTIONAL 15.98% OPERATOINS CO INC (FIIOC) AS AGENT FOR BASE TECHNOLOGIES INC 401K PLAN & TRUST-10202 100 MAGELLAN WAY # KW1C COVINGTON KY 41015-1999 NEUBERGER AND BERMAN 11.33% MANAGEMENT INC ATTN: NICK ALTOMARE 605 3RD AVE FL 3 NEW YORK NY 10158-0180 CHARLES SCHWAB & CO INC 7.87% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 MILLENIUM FUND CHARLES SCHWAB & CO INC 23.16% ADVISOR CLASS ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 AMERICAN UNITED LIFE INS CO 19.46% FBO GROUP RETIREMENT ANNUITY PO BOX 1995 INDIANAPOLIS IN 46206-9102 NEUBERGER BERMAN LLC 12.97% 001-30025-14 70 HUDSON STREET 7TH FLOOR JERSEY CITY NJ 07302-4585 HARTFORD LIFE INSURANCE CO 12.47% SEPARATE ACCOUNT TK ATTN DAVID TEN BROECK 200 HOPMEADOW ST SIMSBURY CT 06089-9793
130
FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- HUBB & CO 11.47% FBO RELIUS ACCOUNTS 665 LOCUST STREET PO BOX 897 DES MOINES IA 50306-0897 METLIFE RETIREMENT PLANS GROUP 9.17% RELIANCE TRUST COMPANY AS TRUSTEE FOR 2 MONTGOMERY ST FL 3 JERSEY CITY NJ 07302-3802 METLIFE 7.58% FBO METLIFE RETIREMENT PLANS GROUP GAP 2 MONTGOMERY ST FL 3 JERSEY CITY NJ 07302-3802 PARTNERS FUND STATE STREET BANK AND TRUST 38.84% ADVISOR CLASS FBO ADP DAILY 401(K) PRODUCT 105 ROSEMONT RD WESTWOOD MA 02090-2318 CHARLES SCHWAB & CO INC 9.73% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 TRANSAMERICA LIFE INSURANCE COMPANY 9.38% ATTN DAISY LO RETIREMENT SVCS - SEPARATE ACCTS PO BOX 30368 LOS ANGELES CA 90030-0368 MFPF&S FOR THE SOLE BENEFIT OF 8.43% ITS CUSTOMERS ATTN FUND ADMINISTRATION 4800 DEER LAKE DR E FL 2 JACKSONVILLE FL 32246-6484
131
FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- WELLS FARGO BANK NA FBO 8.36% SAKS INCORPORATED 401K PLAN 10493522 PO BOX 1533 MINNEAPOLIS MN 55480-1533 INTERNATIONAL PRUDENTIAL INVESTMENT MANAGEMENT 25.16% INSTITUTIONAL FUND SERVICE FBO MUTUAL FUND CLIENTS 100 MULBERRY ST 3 GATEWAY CENTER FL 11 MAIL STOP NJ 05-11-20 NEWARK NJ 07102-4000 CHARLES SCHWAB & CO INC 11.90% ATTN MUTUAL FUNDS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 HSBC 10.13% L&F INDEMNITY LIMITED BELVEDERE BUILDING 69 PITTS BAY RD PEMBROKE BERMUDA CHILDRENS HEALTHCARE OF ATLANTA INC 6.65% STATE STREET BANK & TRUST 1584 TULLIE CIR NE ATLANTA GA 30329-2311 MAC & CO A/C PIBF1856682 5.62% ATTN MUTUAL FDS OPERATIONS PO BOX 3198 PITTSBURGH PA 15230-3198 INTERNATIONAL LARGE CAP FUND VMI FOUNDATION INC 71.75% INSTITUTIONAL CLASS MELLON BANK TTEE PO BOX 932 LEXINGTON VA 24450-0932 THE BANK OF NEW YORK CUST 28.24% FBO SUBURBAN PROPANE LP 240 ROUTE 10 WEST WHIPPANY NJ 07981-2105
132
FUND AND CLASS NAME AND ADDRESS PERCENT OWNED -------------- ---------------- ------------- PARTNERS FUND STATE OF MARYLAND SAVINGS & 46.87% INSTITUTIONAL CLASS INVESTMENT PLAN (457) C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029 STATE OF MARYLAND SAVINGS & 34.88% INVESTMENT PLAN (401K) C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029 STATE OF MARYLAND SAVINGS & 6.19% INVESTMENT PLAN 401A C/O IPO PORTFOLIO ACCOUNTING PO BOX 182029 COLUMBUS OH 43218-2029
REGISTRATION STATEMENT This SAI and the Prospectuses do not contain all the information included in the Trust's registration statement filed with the SEC under the 1933 Act with respect to the securities offered by the Prospectuses. The registration statement, including the exhibits filed therewith, may be examined at the SEC's offices in Washington, D.C. The SEC maintains a Website (http://www.sec.gov) that contains this SAI, material incorporated by reference, and other information regarding the Funds. Statements contained in this SAI and in the Prospectuses as to the contents of any contract or other document are not necessarily complete. In each instance where reference is made to the copy of any contract or other document filed as an exhibit to the registration statement, each such statement is qualified in all respects by such reference. FINANCIAL STATEMENTS The following financial statements and related documents are incorporated herein by reference from the Funds' Annual Report to shareholders for the fiscal year ended August 31, 2006: The audited financial statements of Neuberger Berman FASCIANO Fund, Neuberger Berman FOCUS Fund, Neuberger Berman GENESIS Fund, Neuberger Berman GUARDIAN Fund, Neuberger Berman INTERNATIONAL Fund, Neuberger Berman INTERNATIONAL INSTITUTIONAL Fund, Neuberger Berman INTERNATIONAL LARGE CAP Fund, Neuberger Berman PARTNERS Fund, and Neuberger Berman REAL ESTATE Fund, notes thereto, and the reports of Ernst & Young LLP, 133 independent registered public accounting firm, with respect to such audited financial statements. The audited financial statements of Neuberger Berman CENTURY Fund, Neuberger Berman MANHATTAN Fund, Neuberger Berman MILLENNIUM Fund, Neuberger Berman REGENCY Fund, and Neuberger Berman SOCIALLY RESPONSIVE Fund, notes thereto, and the reports of Tait, Weller & Baker LLP, independent registered public accounting firm, with respect to such audited financial statements. 134 APPENDIX A RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER ----------------------------------------------- S&P CORPORATE BOND RATINGS: --------------------------- AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong. AA - Bonds rated AA have a very strong capacity to pay interest and repay principal and differ from the higher rated issues only in small degree. A - Bonds rated A have a strong capacity to pay interest and repay principal, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than bonds in higher rated categories. BBB - Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in higher rated categories. BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and C the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. CI - The rating CI is reserved for income bonds on which no interest is being paid. D - Bonds rated D are in default, and payment of interest and/or repayment of principal is in arrears. PLUS (+) OR MINUS (-) - The ratings above may be modified by the addition of a plus or minus sign to show relative standing within the major categories. MOODY'S CORPORATE BOND RATINGS: ------------------------------- Aaa - Bonds rated Aaa are judged to be of the highest quality, with minimal credit risk. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or an exceptionally stable margin, and principal is secure. Although the various protective elements are likely to change, the changes that can be visualized are most unlikely to impair the fundamentally strong position of the issuer. Aa - Bonds rated Aa are judged to be of high quality and are subject to very low credit risk. Together with the Aaa group, they comprise what are generally known as "high grade bonds." They are rated lower than the best bonds because margins of protection may not be as large as in Aaa-rated securities, fluctuation of protective elements may be of greater amplitude, or there may be A-1 other elements present that make the long-term risks appear somewhat larger than in Aaa-rated securities. A - Bonds rated A are considered upper-medium grade and are subject to low credit risk. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment sometime in the future. Baa - Bonds which are rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics; i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. These bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba - Bonds rated Ba are judged to have speculative elements and are subject to substantial credit risk; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B - Bonds rated B are considered speculative and are subject to high credit risk. They generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa - Bonds rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca - Bonds rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. C - Bonds rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3 in each generic rating classification described above. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issuer ranks in the lower end of its generic rating category. S&P COMMERCIAL PAPER RATINGS: A-1 - This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+). A-2 MOODY'S COMMERCIAL PAPER RATINGS Issuers rated Prime-1 (or related supporting institutions), also known as P-1, have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: - Leading market positions in well-established industries. - High rates of return on funds employed. - Conservative capitalization structures with moderate reliance on debt and ample asset protection. - Broad margins in earnings coverage of fixed financial charges and high internal cash generation. - Well-established access to a range of financial markets and assured sources of alternate liquidity. A-3 NEUBERGER BERMAN EQUITY FUNDS POST-EFFECTIVE AMENDMENT NO. 125 ON FORM N-1A PART C OTHER INFORMATION Item 23. Exhibits. -------- --------- (a) (1) Restated Certificate of Trust. Incorporated by Reference to Post-Effective Amendment No. 82 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 21, 1998). (2) Trust Instrument Amended and Restated. Incorporated by Reference to Post-Effective Amendment No. 113 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 30, 2005). (3) Amended Trust Instrument Schedule A - Listing the current series and classes of Neuberger Berman Equity Funds. Incorporated by Reference to Post-Effective Amendment No. 119 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed July 24, 2006). (b) By-Laws of Neuberger Berman Equity Funds. Incorporated by Reference to Post-Effective Amendment No. 70 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed August 30, 1995). (c) (1) Trust Instrument Amended and Restated of Neuberger Berman Equity Funds, Articles IV, V, and VI. Incorporated by Reference to Post-Effective Amendment No. 113 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 30, 2005). (2) By-Laws of Neuberger Berman Equity Funds, Articles V, VI, and VIII. Incorporated by Reference to Post-Effective Amendment No. 70 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed August 30, 1995). (3) Plan of Share Class Conversion with Respect to Neuberger Berman Real Estate Fund. Incorporated by Reference to Post- Effective Amendment No. 113 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 30, 2005). (d) (1) (i) Management Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. Incorporated by Reference to Post-Effective Amendment No. 106 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2003). (ii) Amended Management Agreement Schedules listing the current series of Neuberger Berman Equity Funds subject to the Management Agreement and the compensation under the Management Agreement. Incorporated by Reference to Post- Effective Amendment No. 119 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed July 24, 2006). (2) (i) Sub-Advisory Agreement Between Neuberger Berman Management Inc. and Neuberger Berman, LLC with respect to Neuberger Berman Equity Funds. Incorporated by Reference to Post-Effective Amendment No. 106 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2003). (ii) Amended Sub-Advisory Agreement Schedule listing the current series of Neuberger Berman Equity Funds subject to the Sub-Advisory Agreement. Incorporated by Reference to Post-Effective Amendment No. 119 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed July 24, 2006). (e) (1) Distribution Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to Investor Class Shares. Incorporated by Reference to Post-Effective Amendment No. 106 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2003). (2) Distribution Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to Trust Class Shares of Genesis Fund, International Fund and Manhattan Fund. Incorporated by Reference to Post-Effective Amendment No. 106 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2003). (3) (i) Distribution and Services Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to Trust Class Shares of Focus Fund, Guardian Fund, Millennium Fund, Partners Fund, Real Estate Fund, Regency Fund and Socially Responsive Fund. Incorporated by Reference to Post-Effective Amendment No. 106 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2003). (ii) Amended Distribution and Services Agreement Schedule with Respect to Trust Class Shares of All Cap Growth Fund, Equity Income Fund, Focus Fund, Guardian Fund, International Large Cap Fund, Millennium Fund, Partners Fund, Premier Analysts Fund, Premier Convergence Fund, Premier Dividend Fund, Premier Energy Fund, Real Estate Fund, Regency Fund and Socially Responsive Fund. Incorporated by Reference to Post-Effective Amendment No. 119 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed July 24, 2006). (4) Distribution and Services Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to Advisor Class Shares. Incorporated by Reference to Post-Effective Amendment No. 106 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2003). (5) Distribution Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to Institutional Class Shares of the Genesis Fund. Incorporated by Reference to Post-Effective Amendment No. 106 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2003). (6) (i) Distribution Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to International Institutional Fund. Incorporated by Reference to Post-Effective Amendment No. 110 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed June 14, 2005). (ii) Amended Distribution Agreement Schedule with Respect to International Institutional Fund and the Institutional Class Shares of All Cap Growth Fund, Fasciano Fund, Focus Fund, Guardian Fund, International Large Cap, Manhattan Fund, Millennium Fund, Partners Fund, Real Estate Fund, Regency Fund and Socially Responsive Fund. Incorporated by Reference to Post-Effective Amendment No. 117 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed June 16, 2006). (f) Bonus or Profit Sharing Contracts. None. (g) (1) Custodian Contract Between Neuberger Berman Equity Funds and State Street Bank and Trust Company. Incorporated by Reference to Post-Effective Amendment No. 74 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 15, 1995). (2) Schedule of Compensation under the Custodian Contract. Incorporated by Reference to Post-Effective Amendment No. 76 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 5, 1996). (h) (1) Transfer Agency and Service Agreement. Incorporated by Reference to Post-Effective Amendment No. 116 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed June 2, 2006). (2) Administration Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to Investor Class Shares. Incorporated by Reference to Post-Effective Amendment No. 106 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2003). (3) Administration Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to Advisor Class Shares. Incorporated by Reference to Post-Effective Amendment No. 106 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2003). (4) Administration Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to Trust Class Shares of Focus Fund, Genesis Fund, Guardian Fund, International Fund, Manhattan Fund, Millennium Fund, Partners Fund, Real Estate Fund, Regency Fund and Socially Responsive Fund. Incorporated by Reference to Post-Effective Amendment No. 106 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2003). (5) (i) Administration Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to Trust Class Shares of All Cap Growth Fund and International Large Cap Fund. Incorporated by Reference to Post- Effective Amendment No. 123 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed September 1, 2006). (ii) Amended Administration Agreement Schedule with Respect to Trust Class Shares of All Cap Growth Fund, Equity Income Fund, International Large Cap, Premier Analysts Fund, Premier Convergence Fund, Premier Dividend Fund, and Premier Energy Fund. Incorporated by Reference to Post-Effective Amendment No. 124 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed October 6, 2006). (6) Administration Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to Institutional Class Shares of Genesis Fund. Incorporated by Reference to Post-Effective Amendment No. 106 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2003). (7) (i) Administration Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to International Institutional Fund and Institutional Class Shares. Incorporated by Reference to Post-Effective Amendment No. 110 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed June 14, 2005). (ii) Amended Administration Agreement Schedule with Respect to International Institutional Fund and the Institutional Class Shares of All Cap Growth Fund, Fasciano Fund, Focus Fund, Guardian Fund, International Large Cap, Manhattan Fund, Millennium Fund, Partners Fund, Real Estate Fund, Regency Fund and Socially Responsive Fund. Incorporated by Reference to Post-Effective Amendment No. 117 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed June 16, 2006). (8) Expense Limitation Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to Trust Class Shares of Equity Income Fund, Premier Analysts Fund, Premier Convergence Fund, Premier Dividend Fund, and Premier Energy Fund. Incorporated by Reference to Post-Effective Amendment No. 124 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed October 6, 2006). (9) Expense Limitation Agreement Between Neuberger Berman Equity Funds and Neuberger Berman Management Inc. with Respect to the Funds and Classes listed on Schedule A of the Agreement (Filed herewith). (i) Opinion and Consent of Kirkpatrick & Lockhart Nicholson Graham LLP with Respect to Securities Matters of the Registrant. (Filed herewith). (j) (1) Consent of Independent Registered Public Accounting Firm. (Filed herewith). (2) Consent of Independent Registered Public Accounting Firm. (Filed herewith). (k) Financial Statements Omitted from Prospectus. None. (l) Letter of Investment Intent. None. (m) (1) (i) Plan Pursuant to Rule 12b-1 with Respect to Trust Class of Neuberger Berman Equity Funds. Incorporated by Reference to Post-Effective Amendment No. 92 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 13, 2000). (ii) Amended Schedule A listing series of Neuberger Berman Equity Funds currently subject to the Trust Class plan pursuant to Rule 12b-1. Incorporated by Reference to Post-Effective Amendment No. 119 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed July 24, 2006). (2) (i) Plan Pursuant to Rule 12b-1 with Respect to Advisor Class of Neuberger Berman Equity Funds. Incorporated by Reference to Post-Effective Amendment No. 92 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 13, 2000). (ii) Amended Schedule A listing series of Neuberger Berman Equity Funds currently subject to the Advisor Class plan pursuant to Rule 12b-1. Incorporated by Reference to Post-Effective Amendment No. 101 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed April 25, 2002). (n) Plan Pursuant to Rule 18f-3. Incorporated by Reference to Post-Effective Amendment No. 112 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2005). (o) Power of Attorney (Filed herewith). (p) Code of Ethics for Registrant, its Investment Advisers and Principal Underwriters. Incorporated by Reference to Post-Effective Amendment No. 106 to Registrant's Registration Statement, File Nos. 2-11357 and 811-582 (Filed December 19, 2003). Item 24. Persons Controlled By or Under Common Control with Registrant. -------- -------------------------------------------------------------- No person is controlled by or under common control with the Registrant. Item 25. Indemnification. -------- ---------------- A Delaware business trust may provide in its governing instrument for indemnification of its officers and trustees from and against any and all claims and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides that the Registrant shall indemnify any present or former trustee, officer, employee or agent of the Registrant ("Covered Person") to the fullest extent permitted by law against liability and all expenses reasonably incurred or paid by him or her in connection with any claim, action, suit or proceeding ("Action") in which he or she becomes involved as a party or otherwise by virtue of his or her being or having been a Covered Person and against amounts paid or incurred by him or her in settlement thereof. Indemnification will not be provided to a person adjudged by a court or other body to be liable to the Registrant or its shareholders by reason of "willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office" ("Disabling Conduct"), or not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Registrant. In the event of a settlement, no indemnification may be provided unless there has been a determination that the officer or trustee did not engage in Disabling Conduct (i) by the court or other body approving the settlement; (ii) by at least a majority of those trustees who are neither interested persons, as that term is defined in the Investment Company Act of 1940 ("1940 Act"), of the Registrant ("Independent Trustees"), nor parties to the matter based upon a review of readily available facts; or (iii) by written opinion of independent legal counsel based upon a review of readily available facts. Pursuant to Article IX, Section 3 of the Trust Instrument, if any present or former shareholder of any series ("Series") of the Registrant shall be held personally liable solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reason, the present or former shareholder (or his or her heirs, executors, administrators or other legal representatives or in the case of any entity, its general successor) shall be entitled out of the assets belonging to the applicable Series to be held harmless from and indemnified against all loss and expense arising from such liability. The Registrant, on behalf of the affected Series, shall, upon request by such shareholder, assume the defense of any claim made against such shareholder for any act or obligation of the Series and satisfy any judgment thereon from the assets of the Series. Section 9 of the Management Agreement between Neuberger Berman Management Inc. ("NB Management") and the Registrant provide that neither NB Management nor any director, officer or employee of NB Management performing services for the series of the Registrant at the direction or request of NB Management in connection with NB Management's discharge of its obligations under the Agreements shall be liable for any error of judgment or mistake of law or for any loss suffered by a series in connection with any matter to which the Agreements relates; provided, that nothing in the Agreements shall be construed (i) to protect NB Management against any liability to the Registrant or any series thereof or their interest holders to which NB Management would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of NB Management's reckless disregard of its obligations and duties under the Agreements, or (ii) to protect any director, officer or employee of NB Management who is or was a trustee or officer of the Registrant against any liability to the Registrant or any series thereof or its interest holders to which such person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person's office with Registrant. Section 1 of the Sub-Advisory Agreement between NB Management and Neuberger Berman, LLC ("Neuberger Berman") with respect to the Registrant provides that, in the absence of willful misfeasance, bad faith or gross negligence in the performance of its duties or of reckless disregard of its duties and obligations under the Agreement, Neuberger Berman will not be subject to any liability for any act or omission or any loss suffered by any series of the Registrant or their interest holders in connection with the matters to which the Agreements relate. Section 9.1 of the Administration Agreements between the Registrant and NB Management on behalf of each of the classes of shares of each of the Registrant's series provides that NB Management will not be liable to the Registrant for any action taken or omitted to be taken by NB Management or its employees, agents or contractors in carrying out the provisions of the Agreement if such action was taken or omitted in good faith and without negligence or misconduct on the part of NB Management, or its employees, agents or contractors. Section 12 of each Administration Agreement provides that the Registrant shall indemnify NB Management and hold it harmless from and against any and all losses, damages and expenses, including reasonable attorneys' fees and expenses, incurred by NB Management that result from: (i) any claim, action, suit or proceeding in connection with NB Management's entry into or performance of the Agreement; or (ii) any action taken or omission to act committed by NB Management in the performance of its obligations under the Agreement; or (iii) any action of NB Management upon instructions believed in good faith by it to have been executed by a duly authorized officer or representative of a Series; provided, that NB Management will not be entitled to such indemnification in respect of actions or omissions constituting negligence or misconduct on the part of NB Management, or its employees, agents or contractors. Amounts payable by the Registrant under this provision shall be payable solely out of assets belonging to that Series, and not from assets belonging to any other Series of the Registrant. Section 13 of each Administration Agreement provides that NB Management will indemnify the Registrant and hold it harmless from and against any and all losses, damages and expenses, including reasonable attorneys' fees and expenses, incurred by the Registrant that result from: (i) NB Management's failure to comply with the terms of the Agreement; or (ii) NB Management's lack of good faith in performing its obligations under the Agreement; or (iii) the negligence or misconduct of NB Management, or its employees, agents or contractors in connection with the Agreement. The Registrant shall not be entitled to such indemnification in respect of actions or omissions constituting negligence or misconduct on the part of the Registrant or its employees, agents or contractors other than NB Management, unless such negligence or misconduct results from or is accompanied by negligence or misconduct on the part of NB Management, any affiliated person of NB Management, or any affiliated person of an affiliated person of NB Management. Section 11 of the Distribution Agreements, and Section 14 of the Distribution Agreement with respect to the Advisor Class Shares, between the Registrant and NB Management (on behalf of each class of the Registrant) provides that NB Management shall look only to the assets of a Series for the Registrant's performance of the Agreement by the Registrant on behalf of such Series, and neither the Trustees nor any of the Registrant's officers, employees or agents, whether past, present or future, shall be personally liable therefore. Insofar as indemnification for liabilities arising under the Securities Act of 1933 ("1933 Act") may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. Item 26. Business and Other Connections of Investment Adviser and -------- -------------------------------------------------------- Sub-Adviser. ------------ There is set forth below information as to any other business, profession, vocation or employment of a substantial nature in which each director or officer of NB Management and each executive officer of Neuberger Berman, LLC is, or at any time during the past two years has been, engaged for his or her own account or in the capacity of director, officer, employee, partner or trustee. NAME BUSINESS AND OTHER CONNECTIONS ---- ------------------------------ Ann H. Benjamin Portfolio Manager, High Income Bond Portfolio, a Vice President, NB series of Neuberger Berman Advisers Management Management Trust; Portfolio Manager, Neuberger Berman High Income Bond Fund and Neuberger Berman Strategic Income Fund, each a series of Neuberger Berman Income Funds; Portfolio Manager, Neuberger Berman Income Opportunity Fund Inc. Michael L. Bowyer Associate Portfolio Manager, Neuberger Berman Vice President, NB Genesis Fund, a series of Neuberger Berman Equity Management Funds. Claudia A. Brandon Vice President, Neuberger Berman, LLC since 2002; Vice President/Mutual Employee, Neuberger Berman, LLC since 1999; Fund Board Relations and Secretary, Neuberger Berman Advisers Management Assistant Secretary, NB Trust; Secretary, Neuberger Berman Equity Funds; Management. Secretary, Neuberger Berman Income Funds; Secretary, Neuberger Berman Real Estate Income Fund Inc.; Secretary, Neuberger Berman Intermediate Municipal Fund Inc.; Secretary, Neuberger Berman New York Intermediate Municipal Fund Inc.; Secretary, Neuberger Berman California Intermediate Municipal Fund Inc.; Secretary, Neuberger Berman Realty Income Fund Inc.; Secretary, Neuberger Berman Income Opportunity Fund Inc.; Secretary, Neuberger Berman Real Estate Securities Income Fund Inc.; Secretary, Neuberger Berman Dividend Advantage Fund Inc.; Secretary, Neuberger Berman Institutional Liquidity Series; Secretary, Lehman Brothers Institutional Liquidity Series; Secretary, Institutional Liquidity Trust; Secretary, Lehman Brothers Reserve Liquidity Series. NAME BUSINESS AND OTHER CONNECTIONS ---- ------------------------------ Thomas J. Brophy Managing Director, Neuberger Berman, LLC; Portfolio Vice President, NB Manager, Neuberger Berman California Intermediate Management. Municipal Fund Inc.; Portfolio Manager, Neuberger Berman Intermediate Municipal Fund Inc.; Portfolio Manager, Neuberger Berman New York Intermediate Municipal Fund Inc.; Portfolio Manager, Neuberger Berman Municipal Securities Trust, a series of Neuberger Berman Income Funds. Steven R. Brown Managing Director, Neuberger Berman, LLC; Portfolio Vice President, NB Manager, Neuberger Berman Real Estate Income Fund Management. Inc.; Portfolio Manager, Neuberger Berman Realty Income Fund Inc.; Portfolio Manager, Neuberger Berman Income Opportunity Fund Inc.; Portfolio Manager, Neuberger Berman Real Estate Securities Income Fund Inc.; Portfolio Manager, Neuberger Berman Dividend Advantage Fund Inc.; Portfolio Manager, Neuberger Berman Real Estate Fund, a series of Neuberger Berman Equity Funds; Portfolio Manager, Real Estate Portfolio, a series of Neuberger Berman Advisers Management Trust; Portfolio Manager, Neuberger Berman Strategic Income Fund, a series of Neuberger Berman Income Funds. David H. Burshtan Portfolio Manager, Neuberger Berman Millennium Vice President, NB Fund, a series of Neuberger Berman Equity Funds. Management. Lori B. Canell Managing Director, Neuberger Berman, LLC; Portfolio Vice President, NB Manager, Neuberger Berman California Intermediate Management. Municipal Fund Inc.; Portfolio Manager, Neuberger Berman Intermediate Municipal Fund Inc.; Portfolio Manager, Neuberger Berman New York Intermediate Municipal Fund Inc.; Portfolio Manager, Neuberger Berman Municipal Securities Trust, a series of Neuberger Berman Income Funds. Robert Conti Senior Vice President of Neuberger Berman, LLC, Senior Vice since 2003; Vice President, Neuberger Berman, LLC, President, NB from 1999 to 2003; Vice President, Neuberger Berman Management. Income Funds; Vice President, Neuberger Berman Equity Funds; Vice President, Neuberger Berman Advisers Management Trust; Vice President, Neuberger Berman Real Estate Income Fund Inc.; Vice President, Neuberger Berman Intermediate Municipal Fund Inc.; Vice President, Neuberger Berman New York Intermediate Municipal Fund Inc.; Vice President, Neuberger Berman California Intermediate Municipal Fund Inc.; Vice President, Neuberger Berman Realty Income Fund Inc.; Vice President, Neuberger Berman Income Opportunity Fund Inc.; Vice President, Neuberger Berman Real Estate Securities Income Fund Inc.; Vice President, Neuberger Berman Dividend Advantage Fund Inc.; Vice President, Neuberger Berman Institutional Liquidity Series; Vice President, Lehman Brothers Institutional Liquidity Series; Vice President, Institutional Liquidity Trust; Vice President, Lehman Brothers Reserve Liquidity Series. Robert B. Corman Managing Director, Neuberger Berman, LLC; Portfolio Vice President, Manager, Neuberger Berman Focus Fund, a series of NB Management. Neuberger Berman Equity Funds; Portfolio Manager, Focus Portfolio, a series of Neuberger Berman Advisers Management Trust. NAME BUSINESS AND OTHER CONNECTIONS ---- ------------------------------ Robert W. D'Alelio Managing Director, Neuberger Berman, LLC; Portfolio Vice President, Manager, Neuberger Berman Genesis Fund, a series of NB Management. Neuberger Berman Equity Funds. John E. Dugenske Portfolio Manager, Balanced Portfolio and Limited Vice President, Maturity Bond Portfolio, each a series of Neuberger NB Management. Berman Advisers Management Trust; Portfolio Manager, Neuberger Berman Cash Reserves, Neuberger Berman Government Money Fund and Neuberger Berman Limited Maturity Bond Fund, each a series of Neuberger Berman Income Funds. Ingrid Dyott Vice President, Neuberger Berman, LLC; Associate Vice President, Portfolio Manager, Guardian Portfolio, a series of NB Management. Neuberger Berman Advisers Management Trust; Portfolio Manager, Socially Responsive Portfolio, a series of Neuberger Berman Advisers Management Trust; Associate Portfolio Manager, Neuberger Berman Guardian Fund, a series of Neuberger Berman Equity Funds; Portfolio Manager, Neuberger Berman Socially Responsive Fund, a series of Neuberger Berman Equity Funds. Michael F. Fasciano Managing Director, Neuberger Berman, LLC since Vice President, March 2001; Portfolio Manager, Neuberger Berman NB Management. Fasciano Fund, a series of Neuberger Berman Equity Funds; Portfolio Manager, Fasciano Portfolio, a series of Neuberger Berman Advisers Management Trust. Janet A. Fiorenza Portfolio Manager, Lehman Brothers Municipal Money Vice President, Fund, National Municipal Money Fund, Lehman NB Management. Brothers New York Municipal Money Fund and Tax-Free Money Fund, each a series of Neuberger Berman Income Funds. William J. Furrer Portfolio Manager, Lehman Brothers Municipal Money Vice President, Fund, National Municipal Money Fund, Lehman NB Management. Brothers New York Municipal Money Fund and Tax-Free Money Fund, each a series of Neuberger Berman Income Funds. Brian J. Gaffney Managing Director, Neuberger Berman, LLC since Senior Vice President, 1999; Vice President, Neuberger Berman Income NB Management. Funds; Vice President, Neuberger Berman Equity Funds; Vice President, Neuberger Berman Advisers Management Trust; Vice President, Neuberger Berman Real Estate Income Fund Inc.; Vice President, Neuberger Berman Intermediate Municipal Fund Inc.; Vice President, Neuberger Berman New York Intermediate Municipal Fund Inc.; Vice President, Neuberger Berman California Intermediate Municipal Fund Inc.; Vice President, Neuberger Berman Realty Income Fund Inc.; Vice President, Neuberger Berman Income Opportunity Fund Inc.; Vice President, Neuberger Berman Real Estate Securities Income Fund Inc.; Vice President, Neuberger Berman Dividend Advantage Fund Inc.; Vice President, Neuberger Berman Institutional Liquidity Series; Vice President, Lehman Brothers Institutional Liquidity Series; Vice President, Institutional Liquidity Trust; Vice President, Lehman Brothers Reserve Liquidity Series. NAME BUSINESS AND OTHER CONNECTIONS ---- ------------------------------ Maxine L. Gerson Senior Vice President, Neuberger Berman, LLC since Secretary and 2002; Deputy General Counsel and Assistant General Counsel, Secretary, Neuberger Berman, LLC since 2001; Chief NB Management. Legal Officer, Neuberger Berman Income Funds; Chief Legal Officer, Neuberger Berman Equity Funds; Chief Legal Officer, Neuberger Berman Advisers Management Trust; Chief Legal Officer, Neuberger Berman Real Estate Income Fund Inc.; Chief Legal Officer, Neuberger Berman Intermediate Municipal Fund Inc.; Chief Legal Officer, Neuberger Berman New York Intermediate Municipal Fund Inc.; Chief Legal Officer, Neuberger Berman California Intermediate Municipal Fund Inc.; Chief Legal Officer, Neuberger Berman Realty Income Fund Inc.; Chief Legal Officer, Neuberger Berman Income Opportunity Fund Inc.; Chief Legal Officer, Neuberger Berman Real Estate Securities Income Fund Inc.; Chief Legal Officer, Neuberger Berman Dividend Advantage Fund Inc.; Chief Legal Officer, Neuberger Berman Institutional Liquidity Series; Chief Legal Officer, Lehman Brothers Institutional Liquidity Series; Chief Legal Officer, Institutional Liquidity Trust; Chief Legal Officer, Lehman Brothers Reserve Liquidity Series. Edward S. Grieb Senior Vice President and Treasurer, Neuberger Treasurer and Chief Berman, LLC; Treasurer, Neuberger Berman Inc. Financial Officer, NB Management. Michael J. Hanratty None. Vice President, NB Management. Milu E. Komer Associate Portfolio Manager, International Vice President, Portfolio, a series of Neuberger Berman Advisers NB Management. Management Trust; Associate Portfolio Manager, Neuberger Berman International Fund, Neuberger Berman International Institutional Fund and Neuberger Berman International Large Cap Fund, each a series of Neuberger Berman Equity Funds. Sajjad S. Ladiwala Associate Portfolio Manager, Guardian Portfolio and Vice President, Socially Responsive Portfolio, each a series of NB Management. Neuberger Berman Advisers Management Trust; Associate Portfolio Manager, Neuberger Berman Guardian Fund and Neuberger Berman Socially Responsive Fund, each a series of Neuberger Berman Equity Funds. Kelly M. Landron Portfolio Manager, Lehman Brothers Municipal Money Vice President, Fund, National Municipal Money Fund, Lehman NB Management Inc. Brothers New York Municipal Money Fund and Tax-Free Money Fund, each a series of Neuberger Berman Income Funds. Jeffrey B. Lane President and Chief Operating Officer, Neuberger Director, NB Management. Berman, LLC; Director and President, Neuberger Berman Inc. Richard S. Levine Portfolio Manager, Neuberger Berman Strategic Vice President, Income Fund, a series of Neuberger Berman Income NB Management. Funds; Portfolio Manager, Neuberger Berman Dividend Advantage Fund Inc. John A. Lovito Portfolio Manager, Neuberger Berman Strategic Vice President, Income Fund, a series of Neuberger Berman Income NB Management. Funds. NAME BUSINESS AND OTHER CONNECTIONS ---- ------------------------------ Arthur Moretti Managing Director, Neuberger Berman, LLC since June Vice President, 2001; Portfolio Manager, Neuberger Berman Guardian NB Management. Fund and Neuberger Berman Socially Responsive Fund, each a series of Neuberger Berman Equity Funds; Portfolio Manager, Guardian Portfolio and Socially Responsive Portfolio, each a series of Neuberger Berman Advisers Management Trust. S. Basu Mullick Managing Director, Neuberger Berman, LLC; Portfolio Vice President, Manager, Neuberger Berman Partners Fund and NB Management. Neuberger Berman Regency Fund, each a series of Neuberger Berman Equity Funds; Portfolio Manager, Partners Portfolio and Regency Portfolio, each a series of Neuberger Berman Advisers Management Trust. Thomas P. Portfolio Manager, Neuberger Berman Income O'Reilly Opportunity Fund Inc.; Portfolio Manager, Neuberger Vice President, Berman Strategic Income Fund and Neuberger Berman NB Management. High Income Bond Fund, each a series of Neuberger Berman Income Funds; Portfolio Manager, High Income Bond Portfolio, a series of Neuberger Berman Advisers Management Trust. Loraine Olavarria None. Assistant Secretary, NB Management. Elizabeth Reagan None. Vice President, NB Management. Brett S. Reiner Associate Portfolio Manager, Neuberger Berman Vice President, Genesis Fund, a series of Neuberger Berman Equity NB Management. Funds. Jack L. Rivkin Chairman and Director, NB Executive Vice President, Neuberger Berman, LLC; Management. Executive Vice President, Neuberger Berman Inc.; President and Director, Neuberger Berman Real Estate Income Fund Inc; President and Director, Neuberger Berman Intermediate Municipal Fund Inc.; President and Director, Neuberger Berman New York Intermediate Municipal Fund Inc.; President and Director, Neuberger Berman California Intermediate Municipal Fund Inc.; President and Trustee, Neuberger Berman Advisers Management Trust; President and Trustee, Neuberger Berman Equity Funds; President and Trustee, Neuberger Berman Income Funds; President and Director, Neuberger Berman Realty Income Fund Inc.; President and Director, Neuberger Berman Income Opportunity Fund Inc.; President and Director, Neuberger Berman Real Estate Securities Income Fund Inc.; President, Director and Portfolio Manager, Neuberger Berman Dividend Advantage Fund Inc.; President and Trustee, Neuberger Berman Institutional Liquidity Series; President and Trustee, Lehman Brothers Institutional Liquidity Series; President and Trustee, Institutional Liquidity Trust; President and Trustee, Lehman Brothers Reserve Liquidity Series; Portfolio Manager, Neuberger Berman Strategic Income Fund, a series of Neuberger Berman Income Funds; Director, Dale Carnegie and Associates, Inc. since 1998; Director, Solbright, Inc. since 1998. NAME BUSINESS AND OTHER CONNECTIONS ---- ------------------------------ Benjamin E. Segal Managing Director, Neuberger Berman, LLC since Vice President, November 2000, prior thereto, Vice President, NB Management. Neuberger Berman, LLC; Portfolio Manager, Neuberger Berman International Fund, Neuberger Berman International Institutional Fund and Neuberger Berman International Large Cap Fund, each a series of Neuberger Berman Equity Funds; Portfolio Manager, International Portfolio, a series of Neuberger Berman Advisers Management Trust. Michelle B. Stein Portfolio Manager, Neuberger Berman Dividend Vice President, Advantage Fund Inc. NB Management. Peter E. Sundman Executive Vice President, Neuberger Berman Inc. President and Director, since 1999; Head of Neuberger Berman Inc.'s Mutual NB Management. Funds Business (since 1999) and Institutional Business (1999 to October 2005); responsible for Managed Accounts Business and intermediary distribution since October 1999; Managing Director, Neuberger Berman since 2005; formerly, Executive Vice President, Neuberger Berman, 1999 to December 2005; Director and Vice President, Neuberger & Berman Agency, Inc. since 2000; Chairman of the Board, Chief Executive Officer and Trustee, Neuberger Berman Income Funds; Chairman of the Board, Chief Executive Officer and Trustee, Neuberger Berman Advisers Management Trust; Chairman of the Board, Chief Executive Officer and Trustee, Neuberger Berman Equity Funds; Chairman of the Board, Chief Executive Officer and Director, Neuberger Berman Real Estate Income Fund Inc.; Chairman of the Board, Chief Executive Officer and Director, Neuberger Berman Intermediate Municipal Fund Inc.; Chairman of the Board, Chief Executive Officer and Director, Neuberger Berman New York Intermediate Municipal Fund Inc.; Chairman of the Board, Chief Executive Officer and Director, Neuberger Berman California Intermediate Municipal Fund Inc.; Chairman of the Board, Chief Executive Officer and Director, Neuberger Berman Realty Income Fund Inc.; Chairman of the Board, Chief Executive Officer and Director, Neuberger Berman Income Opportunity Fund Inc.; Chairman of the Board, Chief Executive Officer and Director, Neuberger Berman Real Estate Securities Income Fund Inc.; Chairman of the Board, Chief Executive Officer and Director, Neuberger Berman Dividend Advantage Fund Inc.; Chairman of the Board, Chief Executive Officer and Trustee, Neuberger Berman Institutional Liquidity Series; Chairman of the Board, Chief Executive Officer and Trustee, Lehman Brothers Institutional Liquidity Series; Chairman of the Board, Chief Executive Officer and Trustee, Institutional Liquidity Trust; Chairman of the Board, Chief Executive Officer and Trustee, Lehman Brothers Reserve Liquidity Series; Trustee, College of Wooster. Kenneth J. Turek Portfolio Manager, Balanced Portfolio, Growth Vice President, Portfolio and Mid-Cap Growth Portfolio, each a NB Management. series of Neuberger Berman Advisers Management Trust; Portfolio Manager, Neuberger Berman Century Fund and Neuberger Berman Manhattan Fund, each a series of Neuberger Berman Equity Funds. Judith M. Vale Managing Director, Neuberger Berman, LLC; Portfolio Vice President, Manager, Neuberger Berman Genesis Fund, a series of NB Management. Neuberger Berman Equity Funds. NAME BUSINESS AND OTHER CONNECTIONS ---- ------------------------------ John T. Zielinsky Portfolio Manager, Neuberger Berman Century Fund, Vice President, a series of Neuberger Berman Equity Funds. NB Management. Item 27. Principal Underwriters. -------- ----------------------- (a) NB Management, the principal underwriter distributing securities of the Registrant, is also the principal underwriter and distributor for each of the following investment companies: Neuberger Berman Advisers Management Trust Neuberger Berman Income Funds Neuberger Berman Institutional Liquidity Series Lehman Brothers Institutional Liquidity Series Lehman Brothers Institutional Liquidity Funds Lehman Brothers Reserve Liquidity Series (b) Set forth below is information concerning the directors and officers of the Registrant's principal underwriter. The principal business address of each of the persons listed is 605 Third Avenue, New York, New York 10158-0180, which is also the address of the Registrant's principal underwriter. POSITIONS AND POSITIONS AND OFFICES OFFICES WITH NAME WITH UNDERWRITER REGISTRANT ---- ---------------- ---------- Ann H. Benjamin Vice President None Michael L. Bowyer Vice President None Claudia A. Brandon Vice President/Mutual Fund Board Secretary Relations & Assistant Secretary Thomas J. Brophy Vice President None Steven R. Brown Vice President None David H. Burshtan Vice President None Lori B. Canell Vice President None Robert Conti Senior Vice President Vice President Robert B. Corman Vice President None Robert W. D'Alelio Vice President None John E. Dugenske Vice President None Ingrid Dyott Vice President None Michael F. Fasciano Vice President None Janet A. Fiorenza Vice President None William J. Furrer Vice President None Brian J. Gaffney Senior Vice President Vice President Maxine L. Gerson Secretary Chief Legal Officer (only for purposes of sections 307 and 406 of the Sarbanes-Oxley Act of 2002) Edward S. Grieb Treasurer and Chief Financial Officer None Michael J. Hanratty Vice President None Milu E. Komer Vice President None Sajjad S. Ladiwala Vice President None POSITIONS AND POSITIONS AND OFFICES OFFICES WITH NAME WITH UNDERWRITER REGISTRANT ---- ---------------- ---------- Richard S. Levine Vice President None John A. Lovito Vice President None Kelly M. Landron Vice President None Jeffrey B. Lane Director None Arthur Moretti Vice President None S. Basu Mullick Vice President None Thomas P. O'Reilly Vice President None Loraine Olavarria Assistant Secretary None Elizabeth Reagan Vice President None Brett S. Reiner Vice President None Jack L. Rivkin Chairman and Director President and Trustee Benjamin E. Segal Vice President None Michelle B. Stein Vice President None Kenneth J. Turek Vice President None Peter E. Sundman President and Director Chairman of the Board, Chief Executive Officer and Trustee Judith M. Vale Vice President None Chamaine Williams Chief Compliance Officer Chief Compliance Officer John T. Zielinsky Vice President None (c) No commissions or other compensation were received directly or indirectly from the Registrant by any principal underwriter who was not an affiliated person of the Registrant. Item 28. Location of Accounts and Records. -------- --------------------------------- All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder with respect to the Registrant are maintained at the offices of State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except for the Registrant's Trust Instrument and By-Laws, minutes of meetings of the Registrant's Trustees and shareholders and the Registrant's policies and contracts, which are maintained at the offices of the Registrant, 605 Third Avenue, New York, New York 10158-0180. Item 29. Management Services. -------- -------------------- Other than as set forth in Parts A and B of this Post-Effective Amendment, the Registrant is not a party to any management-related service contract. Item 30. Undertakings. -------- ------------- None. SIGNATURES ---------- Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness of this registration statement under rule 485(b) under the Securities Act and has duly caused this Post-Effective Amendment 125 to its Registration Statement on Form N-1A to be signed on its behalf by the undersigned, thereunto duly authorized, in the City and State of New York on the 18th day of December 2006. NEUBERGER BERMAN EQUITY FUNDS By: /s/ Jack L. Rivkin ---------------------------------- Name: Jack L. Rivkin* Title: President and Trustee Pursuant to the requirements of the 1933 Act, Post-Effective Amendment No. 125 has been signed below by the following persons in the capacities and on the date indicated. Signature Title Date --------- ----- ---- /s/ Peter E. Sundman Chairman of the Board, Chief December 18, 2006 --------------------------- Executive Officer and Trustee Peter E. Sundman* /s/ Jack L. Rivkin President and Trustee December 18, 2006 --------------------------- Jack L. Rivkin* /s/ John M. McGovern Treasurer and Principal December 19, 2006 --------------------------- Financial and Accounting John M. McGovern Officer /s/ John Cannon Trustee December 18, 2006 --------------------------- John Cannon* /s/ Faith Colish Trustee December 18, 2006 --------------------------- Faith Colish* /s/ C. Anne Harvey Trustee December 18, 2006 --------------------------- C. Anne Harvey* /s/ Robert A. Kavesh Trustee December 18, 2006 --------------------------- Robert A. Kavesh* /s/ Howard A. Mileaf Trustee December 18, 2006 --------------------------- Howard A. Mileaf* /s/ Edward I. O'Brien Trustee December 18, 2006 --------------------------- Edward I. O'Brien* /s/ William E. Rulon Trustee December 18, 2006 --------------------------- William E. Rulon* /s/ Cornelius T. Ryan Trustee December 18, 2006 --------------------------- Cornelius T. Ryan* /s/ Tom Decker Seip Trustee December 18, 2006 --------------------------- Tom Decker Seip* /s/ Candace L. Straight Trustee December 18, 2006 --------------------------- Candace L. Straight* /s/ Peter P. Trapp Trustee December 18, 2006 --------------------------- Peter P. Trapp* * Signatures affixed by Fatima Sulaiman on December 18, 2006 pursuant to power of attorney filed herewith.