NEUBERGER BERMAN INCOME FUNDS, 485APOS, 1998-12-29

NEUBERGER BERMAN INCOME FUNDS
485APOS, 1998-12-29

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As filed with the Securities and Exchange Commission on December 29, 1998
1933 Act Registration No. 2-85229
1940 Act Registration No. 811-3802

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. 26 [ X ]
---- ---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
---
Amendment No. 27 [ X ]
---- ---

(Check appropriate box or boxes)

NEUBERGER BERMAN INCOME FUNDS
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue
New York, New York 10158-0180
(Address of Principal Executive Offices)

Registrant's Telephone Number, including area code: (212) 476-8800

Theodore P. Giuliano, President
Neuberger Berman Income Funds
605 Third Avenue, 2nd Floor
New York, New York 10158-0180

Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
(Names and Addresses of agents for service)

Approximate Date of Proposed Public Offering: Continuous

It is proposed that this filing will become effective:

__ immediately upon filing pursuant to paragraph (b)
__ ___________________ pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)
X on March 1, 1999 pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2)
__ on ________________ pursuant to paragraph (a)(2)

The public offering of Registrant's series is on-going. The title of
securities being registered is shares of beneficial interest.

Neuberger Berman Income Funds is a "master/feeder fund." This
Post-Effective Amendment No. 26 includes a signature page for the master fund,
Income Managers Trust, and appropriate officers and trustees thereof.

<PAGE>

NEUBERGER BERMAN INCOME FUNDS

CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 26 ON FORM N-1A

This Post-Effective Amendment consists of the following papers and
documents.

Cover Sheet

Contents of Post-Effective Amendment No. 26 on Form N-1A

Cross Reference Sheet

Part A - Prospectus

Neuberger Berman Government Money Fund
Neuberger Berman Cash Reserves
Neuberger Berman Limited Maturity Bond Fund
Neuberger Berman High Yield Bond Fund
Neuberger Berman Municipal Money Fund
Neuberger Berman Municipal Securities Trust
- -------------------------------------------

Part B - Statement of Additional Information

Neuberger Berman Government Money Fund
Neuberger Berman Cash Reserves
Neuberger Berman Limited Maturity Bond Fund
Neuberger Berman High Yield Bond Fund
- -------------------------------------

Part B - Statement of Additional Information

Neuberger Berman Municipal Money Fund
Neuberger Berman Municipal Securities Trust
- -------------------------------------------

Part B - Statement of Additional Information

Part C - Other Information

Signature Pages

Exhibits

<PAGE>

NEUBERGER BERMAN INCOME FUNDS
POST-EFFECTIVE AMENDMENT NO. 26 ON FORM N-1A

Cross Reference Sheets

This cross reference sheet relates to the Prospectus for:

NEUBERGER BERMAN GOVERNMENT MONEY FUND
NEUBERGER BERMAN CASH RESERVES
NEUBERGER BERMAN LIMITED MATURITY BOND FUND
NEUBERGER BERMAN HIGH YIELD BOND FUND
NEUBERGER BERMAN MUNICIPAL MONEY FUND
NEUBERGER BERMAN MUNICIPAL SECURITIES TRUST

Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------

Item 1. Front and Back Cover Front and Back Cover Pages
Pages

Item 2. Risk/Return Summary; Investor Expenses; Performance; Main
Investments, Risks, and Risks
Performance

Item 3. Risk/Return Summary; Fee Performance; Investor Expenses
Table

Item 4. Investment Objectives, Goal & Strategy; Main Risks
Principal Investment
Strategies, and Related
Risks

Item 5. Management's Discussion Not Applicable
of Fund Performance

Item 6. Management, Front Cover Page; Management Sidebar
Organization, and
Capital Structure

Item 7. Shareholder Information Your Investment; Buying Shares;
Maintaining Your Account; Privileges
and Services; Share Prices

Item 8. Distribution Arrangements Fund Structure Sidebar (under
Maintaining Your Account)

Item 9. Financial Highlights Financial Highlights
Information

<PAGE>

This cross reference sheet relates to the
Statements of Additional Information for:

Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------

Item 10. Cover Page and Table of Cover Page and Table of Contents
Contents

Item 11. Fund History Information Regarding Organization,
Capitalization and Other Matters

Item 12. Description of the Fund Investment Information; Certain Risk
and Its Investments Considerations
and Risks

Item 13. Management of the Fund Trustees and Officers

Item 14. Control Persons and Not Applicable
Principal Holders of
Securities

Item 15. Investment Advisory and Investment Management and
Other Services Administration Services; Trustees and
Officers; Distribution Arrangements;
Reports to Shareholders; Custodian and
Transfer Agent; Independent
Auditors/Accountants

Item 16. Brokerage Allocation Portfolio Transactions
and Other Practices

Item 17. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions

Item 18. Purchase, Redemption Additional Purchase Information;
and Pricing of Shares Additional Exchange Information;
Additional Redemption Information;
Distribution Arrangements

Item 19. Taxation of the Fund Dividends and Other Distributions;
Additional Tax Information

Item 20. Underwriters Investment Management and
Administration Services; Distribution
Arrangements

Item 21. Calculation of Performance Information
Performance Data

Item 22. Financial Statements Financial Statements

<PAGE>

Part C

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Post-Effective Amendment No.
26.

<PAGE>

[LOGO]

- --------------------------------------------------------------------------------

Neuberger Berman
INCOME FUNDS-Registered Trademark-
- -------------------------------------------------------
Government Money Fund PROSPECTUS MONTH XX, 1999

Cash Reserves

Limited Maturity The Securities and Exchange Commission does not
Bond Fund say whether any mutual fund is a good or bad
investment or whether the information in any
High Yield Bond Fund prospectus is accurate or complete. It is unlawful
for anyone to indicate otherwise.
Municipal Money Fund

Municipal Securities Trust

<PAGE>

Contents

NEUBERGER BERMAN INCOME FUNDS
-----------------------------------

PAGE 2 . . . . Government Money Fund
8 . . . . Cash Reserves
14 . . . . Limited Maturity Bond Fund
20 . . . . High Yield Bond Fund
26 . . . . Municipal Money Fund
32 . . . . Municipal Securities Trust

-----------------------------------

YOUR INVESTMENT
-----------------------------------
38 . . . . Share Prices
39 . . . . Privileges and Services
40 . . . . Distributions and Taxes
42 . . . . Maintaining Your Account
46 . . . . Buying and Selling Shares

-----------------------------------

The "Neuberger Berman" name and logo are service marks of
Neuberger Berman LLC. "Neuberger Berman Management Inc."
and the individual fund names in this prospectus are
either service marks or registered trademarks of
Neuberger Berman Management Inc. -C-1998. Neuberger
Berman Management Inc.

<PAGE>

THESE FUNDS:

- - ARE DESIGNED FOR INVESTORS WITH A RANGE OF DIFFERENT GOALS IN MIND:

- THE MONEY MARKET FUNDS ARE DESIGNED FOR INVESTORS SEEKING CAPITAL
PRESERVATION, LIQUIDITY AND INCOME

- THE BOND FUNDS ARE DESIGNED FOR INVESTORS SEEKING HIGHER INCOME THAN
MONEY MARKET FUNDS IN EXCHANGE FOR SOME RISK TO PRINCIPAL

- THE MUNICIPAL FUNDS ARE DESIGNED FOR INVESTORS SEEKING INCOME EXEMPT
FROM FEDERAL INCOME TAXES

- - OFFER YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH
PROFESSIONALLY MANAGED BOND AND MONEY MARKET PORTFOLIOS.

- - USE A MASTER/FEEDER STRUCTURE IN THEIR PORTFOLIOS; SEE PAGE __ FOR
INFORMATION ON HOW IT WORKS

- - ALSO OFFER THE OPPORTUNITY TO DIVERSIFY YOUR PORTFOLIO WITH FUNDS THAT SEEK
TO PROVIDE DIFFERENT LEVELS OF TAXABLE OR TAX-EXEMPT INCOME

- - CARRY CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF FUND
SHARES ARE WORTH LESS THAN WHAT YOU PAID

- - ARE MUTUAL FUNDS, NOT BANK DEPOSITS, AND ARE NOT GUARANTEED OR INSURED BY
THE FDIC OR ANY OTHER ORGANIZATION

FUND MANAGEMENT

All of the Neuberger Berman Income Funds are managed by Neuberger Berman
Management Inc., in conjunction with Neuberger Berman, LLC, as sub-adviser.
Together, the firms manage more than $00 billion in total assets (as of
December 31, 1998) and continue an asset management history that began in 1939.

RISK INFORMATION

This prospectus discusses principal risks of investment in fund shares. These
and other risks are discussed in detail in the Statement of Additional
Information (see back cover).

1
<PAGE>

- --------------------------------------------------------------------------------

Neuberger Berman

GOVERNMENT MONEY FUND
- ---------------------------------------------------------------------------

Ticker Symbol: NBGXX ABOVE: PORTFOLIO MANAGERS THEODORE P. GIULIANO AND
JOSEPHINE MAHANEY

"CURRENTLY, WE'RE INVESTING EXCLUSIVELY IN U.S. TREASURY SECURITIES IN THIS
FUND. THAT'S AN UNUSUALLY HIGH QUALITY STANDARD EVEN IN THE WORLD OF GOVERNMENT
MONEY MARKET FUNDS, AND IT'S DESIGNED TO OFFER ADDITIONAL COMFORT TO INVESTORS
WHO ARE LOOKING FOR CAPITAL PRESERVATION."

2
<PAGE>

GOAL & STRATEGY
- --------------------------------------------------------------------------------

[GRAPHIC] THE FUND SEEKS MAXIMUM SAFETY AND LIQUIDITY WITH THE HIGHEST AVAILABLE
CURRENT INCOME.

To pursue this goal, the fund invests in U.S. Treasury obligations. It may
also invest in other securities backed by the full faith and credit of the
United States, although it currently does not intend to invest more than a
small portion of the fund's assets in these securities. The fund does not
invest in repurchase agreements or other types of investments commonly used
by government money market funds. The fund seeks to maintain a stable $1.00
share price. The fund's dividends are generally exempt from state income
taxes, although not from federal income tax.

The managers monitor a range of economic and financial factors, in order to
weigh the yields of Treasury securities of various maturities against their
levels of interest rate risk. Based on their analysis, the managers invest the
fund's assets in a mix of Treasury securities that is intended to provide as
high a yield as possible without violating the fund's credit quality policies or
jeopardizing the stability of its share price.

The fund is authorized to change its goal without shareholder approval, although
it does not currently intend to do so.

- ------------------
MONEY MARKET FUNDS
- ------------------

Money market funds are subject to federal regulations designed to help maintain
liquidity and a stable share price. The regulations set strict standards for
credit quality and for maturity (397 days or less for individual securities, 90
days or less on average for the portfolio overall).

By investing only in securities backed by the full faith and credit of the U.S.
government, this fund maintains even more stringent quality standards than money
market fund regulations require.

- --------------------
STATE TAX EXEMPTIONS
- --------------------

Because the income from U.S. Treasuries is exempt from state and local income
taxes, the fund's dividends generally are too. Investors in higher tax brackets
who live in areas with substantial income tax rates may realize higher after-tax
yields from this fund than from certain fully taxable money funds.

Government Money Fund 3
<PAGE>

MAIN RISKS
- --------------------------------------------------------------------------------

[GRAPHIC] Most of the fund's performance depends on interest rates. When
interest rates fall, the fund's yields will typically fall as well.

The fund's emphasis on the high credit quality of its investments may mean
that its yields are lower than those available from certain other money
market funds, either on a before- or after-tax basis. Over time, the fund may
produce lower returns than bond or stock investments. Although historically
the fund's yield has outpaced inflation, it may not always do so.

OTHER RISKS
- -----------

Although the fund has maintained a stable share price since its inception, the
share price could fluctuate, meaning that there is a chance that you could lose
money by investing in the fund.

While securities in the fund's portfolio carry U.S. government guarantees, these
guarantees do not extend to shares of the fund itself.

These and other risks are discussed in more detail in the Statement of
Additional Information (see back cover).

4 Neuberger Berman
<PAGE>

PERFORMANCE
- --------------------------------------------------------------------------------

[GRAPHIC] The bar chart below shows how the fund's performance has varied from
one year to another. The table below the chart shows what the return would equal
if you averaged out actual performance over various lengths of time. This
information is based on past performance; it's not a guarantee of future
results.

YEAR-BY-YEAR % RETURNS as of 12/31 each year
- --------------------------------------------------------------------------------
PRINTER WILL UPDATE WITH NEW CHART STYLE

[GRAPH]

+BEST QUARTER: QX 'XX, up 00.00% -WORST QUARTER: QX 'XX, up 00.00%
Year-to-date performance as of XX/XX/XX: up 00.00%
- --------------------------------------------------------------------------------

AVERAGE ANNUAL TOTAL % RETURNS as of XX/XX/XX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
GOVERNMENT MONEY FUND 00.0 00.0 00.0
</TABLE>
- --------------------------------------------------------------------------------

- --------------------
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, if any should occur. The figures assume that all distributions were
reinvested in the fund, and include all fund expenses.

Because the fund's share price remained stable throughout the periods described
on this page, the fund's yield over a given period is the same as its total
return.

To obtain the fund's current yield, call 1-800-877-9700. The current yield is
the fund's net income over a recent seven-day period expressed as an annual rate
of return.

Government Money Fund 5
<PAGE>

INVESTOR EXPENSES
- --------------------------------------------------------------------------------
MANAGEMENT
- ----------

THEODORE P. GIULIANO, a Vice President and Director of Neuberger Berman
Management and a principal of Neuberger Berman, LLC, is the manager of the Fixed
Income Group of Neuberger Berman, which he helped establish in 1984. He has
co-managed the fund's assets since 19__.

JOSEPHINE MAHANEY is a Vice President of Neuberger Berman Management. She joined
the firm in 1976 and has co-managed the fund's assets since 1992.

NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 10/31/98, the
management fees paid to Neuberger Berman Management were 0.52% of average net
assets.

[GRAPHIC] The fund does not charge you any fees for buying, selling, or
exchanging shares, or for maintaining your account. Your only fund cost is your
share of annual operating expenses. The expense example can help you compare
costs among funds.

FEE TABLE
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
SHAREHOLDER FEES None
- --------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)*
These are deducted from fund assets, so you pay them indirectly.

Management fees 0.52
PLUS: Distribution (12b-1) fees none
Other expenses 0.12
----
EQUALS: Total annual operating expenses 0.64
</TABLE>

* The figures in this table are based on last year's expenses. Actual
expenses this year may be higher or lower. The table includes costs paid by
the fund and its share of master portfolio costs. For more information on
master/feeder funds, see "Fund Structure" on page 44.

- --------------------------------------------------------------------------------

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 above. Your costs would be the same whether you sold
your shares or continued to hold on to them at the end of each period.
Actual performance and expenses may be higher or lower.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses $65 $205 $357 $798
</TABLE>
- --------------------------------------------------------------------------------

6 Neuberger Berman
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Year Ended October 31, 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 1.0000 1.0000 1.0000 1.0000 1.0000
PLUS: Income from investment operations
Net investment income 0.0302 0.0499 0.0464 0.0468 0.0459
Net gains/losses -- -- -- -- 0.0001
SUBTOTAL: INCOME FROM INVESTMENT OPERATIONS 0.0302 0.0499 0.0464 0.0468 0.0460
MINUS: Distributions to shareholders
Income dividends 0.0302 0.0499 0.0464 0.0468 0.0459
SUBTOTAL: DISTRIBUTIONS TO SHAREHOLDERS 0.0302 0.0499 0.0464 0.0468 0.0459
-------------------------------------------------
EQUALS: Share price (NAV) at end of year 1.0000 1.0000 1.0000 1.0000 1.0001

- ----------------------------------------------------------------------------------------------------------
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 0.72 0.65 0.67 0.63 0.63
Expenses(1) -- 0.65 0.67 0.64 0.64
Net investment income -- actual 3.00 5.00 4.65 4.65 4.61

- ----------------------------------------------------------------------------------------------------------
OTHER DATA

Total return shows how an investment in the fund would have performed over each
year, assuming all distributions were reinvested.

Total return (%) 3.07 5.10 4.74 4.78 4.69
Net assets at end of year (in millions of dollars) 251.5 308.3 363.4 308.2 367.6

- ----------------------------------------------------------------------------------------------------------
</TABLE>

The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).

(1) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER 9/1/95.

Government Money Fund 7

<PAGE>

- --------------------------------------------------------------------------------

Neuberger Berman
CASH RESERVES
---------------------------------------------------------------------------
Ticker Symbol: NBCXX ABOVE: PORTFOLIO MANAGERS THEODORE P.
GIULIANO AND JOSEPHINE MAHANEY

"IN MANAGING THIS FUND WE FOCUS ON THE THREE MAIN GOALS INVESTORS LOOK FOR
IN A MONEY MARKET INVESTMENT: LIQUIDITY, STABILITY AND HIGH CURRENT INCOME.
AT THE SAME TIME, WE SEEK TO MAINTAIN HIGH STANDARDS FOR CREDIT QUALITY, IN
SOME CASES HIGHER THAN REQUIRED BY LAW."

8
<PAGE>

GOAL & STRATEGY
- --------------------------------------------------------------------------------
[GRAPHIC]

THE FUND SEEKS THE HIGHEST AVAILABLE CURRENT
INCOME CONSISTENT WITH SAFETY AND LIQUIDITY.

To pursue this goal, the fund invests in high quality money market
securities. These securities may be from U.S. or foreign issuers, including
governments and their agencies, banks, and corporations, but in all cases must
be denominated in U.S. dollars. The fund may invest more than 25% of total
assets in CDs and similar time deposits and banker's acceptances issued by
U.S. banks. The fund may also invest in repurchase agreements. The fund seeks to
maintain a stable $1.00 share price, and seeks to reduce credit risk by
diversifying among many issuers of money market securities.

The managers monitor a range of economic and financial factors, in order to
weigh the yields of money market securities of various maturities against their
levels of interest rate and credit risk. Based on their analysis, the managers
invest the fund's assets in a mix of money market securities that is intended to
provide as high a yield as possible without violating the fund's credit quality
policies or jeopardizing the stability of its share price.

The fund is authorized to change its goal without shareholder approval, although
it does not currently intend to do so.

MONEY MARKET FUNDS

Money market funds are subject to federal regulations designed to help
maintain liquidity and a stable share price. The regulations set strict
standards for maturity (397 days or less for individual securities, 90 days
or less on average for the portfolio overall).

The regulations also require money market funds to limit investments to the top
two rating categories of credit quality. This fund typically exceeds this
requirement by investing only in top-tier securities.

Cash Reserves 9
<PAGE>

MAIN RISKS
- --------------------------------------------------------------------------------
OTHER RISKS

Although the fund has maintained a stable share price since its inception, the
share price could fluctuate, meaning that there is a chance that you could lose
money by investing in the fund.

While the fund may hold securities that carry U.S. government guarantees, these
guarantees do not extend to shares of the fund itself.

[GRAPHIC]

Most of the fund's performance depends on interest rates. When interest
rates fall, the fund's yields will typically fall as well.

The fund's emphasis on top-tier credit quality securities may mean that its
yields are somewhat lower than those available from certain other money market
funds. Over time, the fund may produce a lower return than bond or stock
investments. Although historically the fund's yield has outpaced inflation,
it may not always do so.

Because the fund may invest more than 25% of total assets in securities
issued by banks, its performance could be affected by factors influencing the
health of the banking industry. These may include economic trends, industry
competition and governmental actions, as well as factors affecting the
financial stability of borrowers. The bank securities in which the fund may
invest typically are not insured by the federal government. Securities that
do not represent deposits have lower priority in the bank's capital structure
than those that do.

10 Neuberger Berman
<PAGE>

PERFORMANCE
- -------------------------------------------------------------------------------

[GRAPHIC]

The bar chart below shows how the fund's performance has varied from one
year to another. The table below the chart shows what the return would equal if
you averaged out actual performance over various lengths of time. This
information is based on past performance; it's not a prediction of future
results.

YEAR-BY-YEAR % RETURNS as of 12/31 each year
- -----------------------------------------------------------------------------
PRINTER WILL UPDATE WITH NEW CHART STYLE

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.00 7.81 5.72 3.37 2.64 3.72 5.45 4.92 5.12 XX.XX
89 90 91 92 93 94 95 96 97 98

</TABLE>

- -- BEST QUARTER: QX 'XX, up 00.00% -- WORST QUARTER: QX 'XX, up 00.00%
Year-to-date performance as of XX/XX/XX: up 00.00%

- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>

AVERAGE ANNUAL TOTAL % RETURNS as of XX/XX/XX
- ------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH RESERVES 00.0 00.0 00.0

</TABLE>

PERFORMANCE MEASURES

Because the fund's share price remained stable throughout the periods described
on this page, the fund's yield over a given period is the same as its total
return.

To obtain the fund's current yield, call 1-800-877-9700. The current yield is
the fund's net income over a recent seven-day period expressed as an annual rate
of return.

Cash Reserves 11
<PAGE>

INVESTOR EXPENSES
- --------------------------------------------------------------------------------
MANAGEMENT

JOSEPHINE MAHANEY is a Vice President of Neuberger Berman Management. She joined
the firm in 1976 and has co-managed the fund's assets since 1992.

NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 10/31/98,
the management fees paid to Neuberger Berman Management were 0.51% of average
net assets.

[GRAPHIC]

The fund does not charge you any fees for buying, selling, or exchanging
shares, or for maintaining your account. Your only fund cost is your share of
annual operating expenses. The expense example can help you compare costs
among funds.

FEE TABLE
- --------------------------------------------------------------------------
<S> <C>
SHAREHOLDER FEES None

- --------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)*
These are deducted from fund assets, so you pay them indirectly.

Management fees 0.51
PLUS: Distribution (12b-1) fees None
Other expenses 0.13
----
EQUALS: Total annual operating expenses 0.64
- --------------------------------------------------------------------------
</TABLE>

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 above. Your costs would be the same whether
you sold your shares or continued to hold on to them at the end of each
period. Actual performance and expenses may be higher or lower.

1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses $65 $205 $357 $798

- -------------------------------------------------------------------------------
</TABLE>

12 Neuberger Berman
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

Year Ended October 31, 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 1.0001 1.0000 1.0000 1.0000 1.0000
PLUS: Income from investment operations
Net investment income (loss) 0.0327 0.0529 0.0486 0.0499 0.0499
Net gains/losses -- -- -- -- --
SUBTOTAL: INCOME FROM INVESTMENT OPERATIONS 0.0327 0.0529 0.0486 0.0499 0.0499
MINUS: Distributions to shareholders
Income dividends 0.0327 0.0529 0.0486 0.0499 0.0499
Capital gain distributions 0.0001 -- -- -- --
SUBTOTAL: DISTRIBUTIONS TO SHAREHOLDERS 0.0328 0.0529 0.0486 0.0499 0.0499
----------------------------------------------
EQUALS: Share price (NAV) at end of year 1.0000 1.0000 1.0000 1.0000 1.0000

- ------------------------------------------------------------------------------------------------------
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 0.65 0.65 0.65 0.63 0.63
Gross expenses(1) 0.71 0.68 0.67 -- --
Expenses(2) -- 0.65 0.66 0.63 0.64
Net investment income (loss) -- actual 3.31 5.30 4.86 4.98 5.00

- ------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each
year, assuming all distributions were reinvested.

Total return (%) 3.33(3) 5.42(3) 4.97(3) 5.11 5.10
Net assets at end of year (in millions of dollars) 311.9 408.9 482.0 664.1 1,024.6
- ------------------------------------------------------------------------------------------------------
</TABLE>

(1) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT.

(2) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.

(3) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.

Cash Reserves 13

<PAGE>

- --------------------------------------------------------------------------------
Neuberger Berman
LIMITED MATURITY BOND FUND
---------------------------------------------------------------------------
Ticker Symbol: NLMBX ABOVE: PORTFOLIO MANAGERS THEODORE P.
GIULIANO AND CATHERINE WATERWORTH

"HISTORICALLY, LIMITED MATURITY PORTFOLIOS HAVE BEEN ABLE TO DELIVER MUCH
OF THE YIELD AVAILABLE IN THE INVESTMENT-GRADE BOND MARKET WHILE OFFERING
REDUCED SHARE PRICE FLUCTUATION. WITH THIS IN MIND, WE STRIVE TO MANAGE THE
FUND WITH AN EMPHASIS ON YIELD AND RISK MANAGEMENT."

<PAGE>

GOAL & STRATEGY
- --------------------------------------------------------------------------------

[GRAPHIC]

THE FUND SEEKS THE HIGHEST AVAILABLE CURRENT INCOME CONSISTENT WITH LIQUIDITY
AND LOW RISK TO PRINCIPAL; TOTAL RETURN IS A SECONDARY GOAL.

To pursue these goals, the fund invests mainly in investment-grade bonds and
other debt securities from U.S. government and corporate issuers. These may
include mortgage- and asset backed securities. To enhance yield and add
diversification, the fund may invest up to 10% of net assets in securities that,
at the time of purchase, are rated as low as B by Moody's or Standard and Poor's
or, if unrated by either of these, are believed by the manager to be of
comparable quality.

The fund seeks to reduce credit risk by diversifying among many issuers and
different types of securities. Although it may invest in securities of any
maturity, under normal circumstances it maintains an average portfolio duration
of four years or less.

The managers monitor national trends in the corporate and government securities
markets, including a range of economic and financial factors. The managers look
for securities that appear underpriced compared to securities of similar
structure and credit quality, and securities that appear likely to have their
credit ratings raised. In choosing lower-rated securities, the managers look for
bonds from issuers whose financial health appears comparatively strong but that
are smaller or less well known to investors.

The fund is authorized to change its goal without shareholder approval, although
it does not currently intend to do so.

DURATION

Duration is a measurement of a bond investment's sensitivity to changes in
interest rates.

Typically, with a 1% rise in interest rates, an investment's value may be
expected to fall approximately 1% for each year of its duration.

BOND RATINGS

Most large issuers obtain ratings for their bonds from one or more independent
rating agencies, although many bonds of all quality levels remain unrated.

Bonds in the top four categories of credit quality are considered investment
grade. Bonds in the fifth or sixth category (BB/Ba or B) are called lower-rated,
or non-investment-grade. Many of these "junk bonds" are actually issued by
reputable companies, and offer attractive yields.

Limited Maturity Bond Fund 15
<PAGE>

MAIN RISKS
- --------------------------------------------------------------------------------
OTHER RISKS
- -----------------------

The fund may use certain practices and securities involving additional risks.

The use of certain derivatives to hedge interest rate risk or produce income
could affect fund performance if the derivatives do not perform
as expected.

Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.

When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
securities. This could help the fund avoid losses but may mean lost
opportunities.

[GRAPHIC] Most of the fund's performance depends on what happens in the
investment-grade bond market. The value of your investment will rise and fall,
and you could lose money.

The fund's yield and total return will change with interest rate movements. When
interest rates rise, the fund's share price will typically fall. The fund's
sensitivity to this risk will increase with any increase in the fund's duration.
A downgrade or default affecting any of the fund's securities would affect the
fund's performance. Performance could also be affected if unexpected interest
rate trends cause the fund's mortgage- or asset-backed securities to be paid off
substantially earlier or later than expected.

Over time, the fund may produce a lower return than stock investments and less
conservative bond investments. Although historically the fund's performance has
outpaced inflation, it may not always do so.

Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and increased transaction costs.

16 Neuberger Berman
<PAGE>

PERFORMANCE
- -------------------------------------------------------------------------------

[GRAPHIC]The bar chart below shows how the fund's performance has varied from
one year to another. The table below the chart shows what the return would equal
if you averaged out actual performance over various lengths of time. This
information is based on past performance; it's not a prediction of future
results.

YEAR-BY-YEAR % RETURNS as of 12/31 each year
- --------------------------------------------------------------------------------

PRINTER WILL UPDATE WITH NEW CHART STYLE

[GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11.20 8.72 11.85 5.18 6.79 -0.34 10.59 4.50 6.85 XX.XX
- --------------------------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
- --------------------------------------------------------------------------------------------------
</TABLE>

+BEST QUARTER: QX 'XX, up 00.00% -WORST QUARTER: QX 'XX, down 00.00%
Year-to-date performance as of XX/XX/XX: up 00.00%
- -------------------------------------------------------------------------------

AVERAGE ANNUAL TOTAL % RETURNS as of XX/XX/XX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LIMITED MATURITY BOND FUND 00.00 00.00 00.00
Merrill Lynch 1-3 Year Treasury Index 00.00 00.00 00.00
</TABLE>

The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index of U.S.
Treasuries with maturities between 1 and 3 years.
- --------------------------------------------------------------------------------

- ---------------------
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.

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.

To obtain the fund's current yield, call 1-800-877-9700. The current yield is
the fund's net income over a recent 30-day period expressed as an annual rate of
return.

Limited Maturity Bond Fund 17
<PAGE>

INVESTOR EXPENSES
- -------------------------------------------------------------------------------
MANAGEMENT
- ---------------------

CATHERINE WATERWORTH has co-managed the fund's assets since December 1998.
Previously she was a managing director of a major investment firm from
1995-98 and a senior officer at another firm prior to 1995.

[GRAPHIC]The fund does not charge you any fees for buying, selling, or
exchanging shares, or for maintaining your account. Your only fund cost is your
share of annual operating expenses. 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.

<TABLE>
<S> <C> <C>
Management fees 0.52
PLUS: Distribution (12b-1) fees None
Other expenses 0.20
EQUALS: Total annual operating expenses 0.72
- --------------------------------------------------------------------------------
</TABLE>

* NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
THE TOTAL ANNUAL OPERATING EXPENSES OF THE FUND ARE LIMITED TO 0.70% OF
AVERAGE NET ASSETS. THIS ARRANGEMENT CAN BE TERMINATED UPON 60 DAYS' NOTICE
TO THE FUND. IN ADDITION, THE ARRANGEMENT DOES NOT COVER INTEREST, TAXES,
BROKERAGE COMMISSIONS, AND EXTRAORDINARY EXPENSES. THE TABLE INCLUDES COSTS
PAID BY THE FUND AND ITS SHARE OF MASTER PORTFOLIO COSTS. FOR MORE
INFORMATION ON MASTER/FEEDER FUNDS, SEE "FUND STRUCTURE" ON PAGE 44.

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 above. Your costs would be the same whether
you sold your shares or continued to hold on to them at the end of each
period. Actual performance and expenses may be higher or lower.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses** $74 $230 $401 $894

- --------------------------------------------------------------------------------
</TABLE>

UNDER THE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE ABOVE, YOUR
COSTS FOR THE ONE-, THREE-, FIVE- AND TEN-YEAR PERIODS WOULD BE $____, $____,
$____ AND $____, RESPECTIVELY.

18 Neuberger Berman
<PAGE>

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 10.49 9.88 10.06 9.99 10.03
PLUS: Income from investment operations
Net investment income 0.56 0.62 0.60 0.63 0.60
Net gains/losses -- realized and unrealized (0.55) 0.18 (0.07) 0.04 (0.12)
SUBTOTAL: INCOME FROM INVESTMENT OPERATIONS 0.01 0.80 0.53 0.67 0.48
MINUS: Distributions to shareholders
Income dividends 0.56 0.62 0.60 0.63 0.60
Capital gain distributions 0.05 -- -- -- --
Distributions in excess of net capital gains 0.01 -- -- -- --
SUBTOTAL: DISTRIBUTIONS TO SHAREHOLDERS 0.62 0.62 0.60 0.63 0.60
-------------------------------------------------------
EQUALS: Share price (NAV) at end of year 9.88 10.06 9.99 10.03 9.91

- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
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.
<S> <C> <C> <C> <C> <C>
Net expenses -- actual 0.69 0.70 0.70 0.70 0.70
Gross expenses(1) 0.71 0.71 0.71 0.71 0.75
Expenses(2) -- 0.70 0.71 0.70 0.71
Net investment income -- actual 5.53 6.21 6.10 6.34 6.03

- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
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.
<S> <C> <C> <C> <C> <C>
Total return (%)(3) 0.13 8.32 5.44 6.97 4.92
Net assets at end of year (in millions of dollars) 308.6 307.4 245.7 255.4 295.2
Portfolio turnover rate (%) 102 88 169 89 44

- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT.
(2) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(3) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.

Limited Maturity Bond Fund 19
<PAGE>

Neuberger Berman
HIGH YIELD BOND FUND
- -------------------------------------------------------------------------------

Ticker Symbol: XXXXX ABOVE: PORTFOLIO MANAGER THEODORE P. GIULIANO

"IN SEEKING HIGH YIELDS, WE LOOK FOR ATTRACTIVE LOWER-RATED BONDS USING A VALUE
APPROACH THAT IS SIMILAR TO THAT USED BY SOME STOCK FUNDS. WE ALSO LOOK FOR
'CROSSOVER' CANDIDATES: BONDS THAT WE BELIEVE ARE ON THE VERGE OF BECOMING
INVESTMENT-GRADE, A MOVE THAT TYPICALLY RESULTS IN A RISE IN THE BOND'S PRICE."

20
<PAGE>

GOAL & STRATEGY
- --------------------------------------------------------------------------------

[GRAPHIC]THE FUND SEEKS HIGH CURRENT INCOME; CAPITAL
GROWTH IS A SECONDARY GOAL.

To pursue these goals, the fund invests mainly in high-yield, lower-rated debt
securities (sometimes known as junk bonds). The fund may also invest in
investment-grade debt securities and in stocks. The fund seeks to reduce risk by
diversifying among many securities and industries.

The managers look for securities issued by companies that have an established
market niche and steady cash flows that are well in excess of debt service
requirements. The fund also seeks companies that appear likely to have their
credit ratings raised to an investment-grade level.

Where possible, the managers favor companies in less glamorous industries where
the threat of strong competition is less likely. The managers analyze potential
issuers' income statements and balance sheets, and may meet with corporate
management to assess business strategies and evaluate company prospects. The
managers may also consider an issue's liquidity and the strength and quality of
its underwriters.

The fund is authorized to change its goal without shareholder approval, although
it does not currently intend to do so.

- ------------------
LOWER-RATED BONDS
- ------------------

Any bond rated below the top four categories is considered a lower-rated bond.
These bonds pay higher rates to compensate for higher risk.

Junk bond prices tend to be affected primarily by news relating to the financial
health of issuers, including general economic news and news about a particular
industry or company.

- ------------------
CREDIT CHANGES
- ------------------

A bond's credit rating may change with the financial health of its issuer.
Improved credit quality generally prompts a price increase, deteriorating credit
a price decrease.

In most cases, the credit and price changes both occur in small increments.
However, even an incremental credit change can produce a comparatively large
change in price when the change means that a lower-rated bond becomes an
investment-grade bond, or vice-versa.

High Yield Bond Fund 21
<PAGE>

MAIN RISKS
- ------------------------------------------------------------------------------
OTHER RISKS
- -----------------------

The fund may use certain practices and securities involving additional risks.

The use of certain derivatives to hedge interest rate risk could affect fund
performance if the derivatives do not perform as expected.

Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.

When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high quality short-term
securities. This could help the fund avoid losses but may mean lost
opportunities.

[GRAPHIC]Most of the fund's performance depends on what happens in the high
yield bond market. The market's behavior is unpredictable, particularly in the
short term. Because of this, the value of your investment will rise and fall,
and you could lose money.

By focusing on lower-rated bonds, the fund is subject to their risks, including
the risk its holdings may:

- - fluctuate more widely in price and yield than investment-grade bonds
- - fall in price during times when the economy is weak or is expected to
become weak
- - be difficult to sell during market downturns at the time and price the fund
desires

The fund's performance may also suffer if it owns bonds of a given issuer or
industry that is affected by bad news.

Although the link between interest rates and bond prices tends to be weaker with
lower-rated bonds than with investment-grade bonds, a rise in interest rates is
still likely to cause lower rated bonds to fall in price. Over time, the fund
may produce a lower return than stock investments. The fund may not be a
suitable investment for retirement accounts.

Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and increased transaction costs.

22 Neuberger Berman
<PAGE>

PERFORMANCE
- --------------------------------------------------------------------------------

[GRAPHIC]

Because the fund had less than one calendar year of performance as of the date
of this prospectus, no performance information is provided here.

High Yield Bond Fund 23

<PAGE>

INVESTOR EXPENSES
- --------------------------------------------------------------------------------
MANAGEMENT
- -----------

The fund is team-managed:

THEODORE P. GIULIANO, Vice President and Director of Neuberger Berman
Management, principal of Neuberger Berman, LLC; joined firm in 1984, team
in 1998.

MIRIAM ZUSSMAN, credit analyst; began financial career in 1988, joined the firm
in 1996, team in 1998.

SUSAN STANG, credit analyst; began financial career in 1992, joined the firm in
1996, team in 1998.

[GRAPHIC]

The fund does not charge you any fees for buying, selling, or exchanging shares,
or for maintaining your account. Your only fund cost is your share of annual
operating expenses. The expense example can help you compare costs among funds.
Actual performance and expenses may be higher or lower.

FEE TABLE
- --------------------------------------------------------------------------------
<S> <C>
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
PLUS: Distribution (12b-1) fees None
Other expenses 1.00
----
EQUALS: Total annual operating expenses 1.65
- --------------------------------------------------------------------------------
</TABLE>

* NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
THE TOTAL ANNUAL OPERATING EXPENSES OF THE FUND ARE LIMITED TO 1.00% OF
AVERAGE NET ASSETS. THIS ARRANGEMENT MAY BE TERMINATED UPON 60 DAYS' NOTICE
TO THE FUND. IN ADDITION, THE ARRANGEMENT DOES NOT COVER INTEREST, TAXES,
BROKERAGE COMMISSIONS, AND EXTRAORDINARY EXPENSES. THE TABLE INCLUDES COSTS
PAID BY THE FUND AND ITS SHARE OF MASTER PORTFOLIO COSTS. FOR MORE
INFORMATION ON MASTER/FEEDER FUNDS, SEE "FUND STRUCTURE" ON PAGE 44.

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 above. 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
- ------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses** $168 $520 $897 $1955
- ------------------------------------------------------
</TABLE>

**UNDER THE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE ABOVE, YOUR
COSTS FOR THE ONE-, THREE-, FIVE- AND TEN-YEAR PERIODS WOULD BE $____, $____,
$____ AND $____, RESPECTIVELY.

24 Neuberger Berman

<PAGE>

FINANCIAL HIGHLIGHTS

Year Ended October 31, 1998(1)
<S> <C>
- --------------------------------------------------------------------------------
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 period 10.00
PLUS: Income from investment operations
Net investment income 0.51
Net gains/losses -- realized and unrealized (0.66)
SUBTOTAL: INCOME FROM INVESTMENT OPERATIONS (0.15)
MINUS: Distributions to shareholders
Income dividends 0.51
SUBTOTAL: DISTRIBUTIONS TO SHAREHOLDERS 0.51
------------
EQUALS: Share price (NAV) at end of period 9.34

- --------------------------------------------------------------------------------
RATIOS (% of average net assets)

<S> <C>
Net expenses -- actual 1.00(2)
Gross expenses(3) 1.65(2)
Expenses(4) 1.00(2)
Net investment income -- actual 8.03(2)

- --------------------------------------------------------------------------------
OTHER DATA

<S> <C>
Total return (%) (1.69)(5,6)
Net assets at end of period (in millions of dollars) 22.6
Portfolio turnover rate (%) 16

</TABLE>
- --------------------------------------------------------------------------------

(1) PERIOD FROM 3/3/98 (BEGINNING OF OPERATIONS) TO 10/31/98.

(2) ANNUALIZED.

(3) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT.

(4) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.

(5) NOT ANNUALIZED.

(6) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.

High Yield Bond Fund 25

<PAGE>

Neuberger Berman
MUNICIPAL MONEY FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NBTXX ABOVE: PORTFOLIO MANAGERS THEODORE P.
GIULIANO AND CLARA DEL VILLAR

"MONEY MARKET YIELDS THAT ARE GENERALLY FREE FROM FEDERAL INCOME TAX MAY APPEAL
TO MANY INVESTORS, PARTICULARLY THOSE IN HIGHER TAX BRACKETS. WE ALSO KEEP
SAFETY IN MIND, AND PREFER NOT TO REACH FOR YIELDS AT THE EXPENSE OF CREDIT
QUALITY."

<PAGE>

GOAL & STRATEGY
- --------------------------------------------------------------------------------

[GRAPHIC]

THE FUND SEEKS THE HIGHEST AVAILABLE CURRENT INCOME EXEMPT FROM FEDERAL INCOME
TAX THAT IS CONSISTENT WITH SAFETY AND LIQUIDITY.

To pursue this goal, the fund invests in high quality, short-term securities
from municipal issuers around the country. The fund seeks to maintain a stable
$1.00 share price. The fund's dividends are generally exempt from federal income
taxes. A portion of the dividends you receive may also be exempt from state and
local taxes, depending on where you live. The fund seeks to reduce credit risk
by diversifying among many municipal issuers around the country.

The managers monitor a range of economic, financial and political factors, in
order to weigh the yields of municipal securities of various types and
maturities against their levels of interest rate and credit risk. Based on their
analysis, the managers invest the fund's assets in a mix of municipal securities
that is intended to provide as high a tax-exempt yield as possible without
violating the fund's credit quality policies or jeopardizing the stability of
its share price.

The fund is authorized to change its goal without shareholder approval, although
it does not currently intend to do so.

- ------------------
MONEY MARKET FUNDS
- ------------------

The regulations also require money market funds to limit investments to the top
two rating categories of credit quality.

- ---------------------
TAX-EQUIVALENT YIELDS
- ---------------------

To make accurate comparisons between tax-exempt and taxable yields, you should
know your tax situation. Although the yields on taxable investments may be
higher, tax-exempt investments may be the better choice on an after-tax basis.

Municipal Money Fund 27

<PAGE>

MAIN RISKS
- --------------------------------------------------------------------------------
OTHER RISKS
- ------------

Although the fund has maintained a stable share price since its inception, the
share price could fluctuate, meaning that there is a chance that you could lose
money by investing in the fund.

When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term taxable
securities. This strategy could produce income that is not tax-exempt, and may
mean lost opportunities.

[GRAPHIC]

Most of the fund's performance depends on credit quality and interest rates. In
emphasizing credit analysis, the fund could decide not to invest in certain
securities with higher yields, which could mean that its yields are lower than
those available from certain other municipal money market funds.

When interest rates fall, the fund's yields typically will fall as well. Over
time, the fund may produce a lower return than bond or stock investments, and
may not always keep pace with inflation.

Even among high quality short-term municipal securities, there is the risk
that an issuer could go into default, which would affect the fund's
performance. Performance could also be affected by political or regulatory
changes, whether regional or national, and by developments concerning tax
laws and tax-exempt securities.

To the extent that the fund invests in so-called private activity bonds, its
dividends may be subject to alternative minimum tax. Historically, these bonds
have made up a significant portion of the fund's holdings. Consult your tax
advisor for more information.

The fund is not an appropriate investment for tax-advantaged accounts, and may
not be beneficial for investors in low tax brackets.

28 Neuberger Berman

<PAGE>

PERFORMANCE
- --------------------------------------------------------------------------------

[GRAPHIC]

The bar chart below shows how the fund's performance has varied from one year to
another. The table below the chart shows what the return would equal if you
averaged out actual performance over various lengths of time. This information
is based on past performance; it's not a prediction of future results.

YEAR-BY-YEAR % RETURNS as of 12/31 each year
- --------------------------------------------------------------------------------

PRINTER WILL UPDATE WITH NEW CHART STYLE

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.06 5.51 4.08 3.30 2.80 3.03 2.40 2.29 1.79 XX.XX
89 90 91 92 93 94 95 96 97 98

</TABLE>

+ BEST QUARTER: QX 'XX, up 00.00% - WORST QUARTER: QX 'XX, up 00.00%
Year-to-date performance as of XX/XX/XX: up 00.00%
- --------------------------------------------------------------------------------

AVERAGE ANNUAL TOTAL % RETURNS as of XX/XX/XX
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL MONEY FUND 00.0 00.0 00.0
- --------------------------------------------------------------------------------
</TABLE>

- ---------------------
PERFORMANCE MEASURES
- ---------------------

Because the fund's share price remained stable throughout the periods
described on this page, the fund's yield over a given period is the same as
its total return.

To obtain the fund's current yield, call 1-800-877-9700. The current yield is
the fund's net income over a recent seven-day period expressed as an annual rate
of return. You can also ask for information on how the fund's yields compare to
taxable yields after taxes are taken into consideration.

Municipal Money Fund 29

<PAGE>

INVESTOR EXPENSES
- --------------------------------------------------------------------------------
MANAGEMENT
- -----------

CLARA DEL VILLAR is a Vice President of Neuberger Berman Management. She joined
the firm in 1991 and has co-managed the fund's assets since 1993.

NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 10/31/98,
the management fees paid to Neuberger Berman Management were 0.52% of average
net assets.

[GRAPHIC]

The fund does not charge you any fees for buying, selling, or exchanging shares,
or for maintaining your account. Your only fund cost is your share of annual
operating expenses. The expense example can help you compare costs among funds.

FEE TABLE
- --------------------------------------------------------------------------------
<S> <C>
SHAREHOLDER FEES None
- --------------------------------------------------------------------------------

ANNUAL OPERATING EXPENSES (% of average net assets)*

These are deducted from fund assets, so you pay them indirectly.

Management fees 0.52
PLUS: Distribution (12b-1) fees None
Other expenses 0.19
----
EQUALS: Total annual operating expenses 0.71
- --------------------------------------------------------------------------------

</TABLE>

* The figures in the table are based on last year's expenses. Actual expenses
this year may be higher or lower. The table includes costs paid by the fund
and its share of master portfolio costs. For more information on
master/feeder funds, see "Fund Structure" on page 44.

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 above. 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
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses $73 $227 $395 $883
- --------------------------------------------------------------------------------

</TABLE>

30 Neuberger Berman
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Year Ended October 31, 1994 1995 1996 1997 1998
- ------------------------------------------------------------------------------------------------------------------------
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.
<S> <C> <C> <C> <C> <C>
Share price (NAV) at beginning of year 0.9996 0.9995 0.9994 0.9993 0.9994
PLUS: Income from investment operations
Net investment income 0.0204 0.0324 0.0285 0.0296 0.0288
Net gains/losses (0.0001) (0.0001) (0.0001) 0.0001 0.0003
SUBTOTAL: INCOME FROM INVESTMENT OPERATIONS 0.0203 0.0323 0.0284 0.0297 0.0291
MINUS: Distributions to shareholders
Income dividends 0.0204 0.0324 0.0285 0.0296 0.0288
SUBTOTAL: DISTRIBUTIONS TO SHAREHOLDERS 0.0204 0.0324 0.0285 0.0296 0.0288
-----------------------------------------------------------
EQUALS: Share price (NAV) at end of year 0.9995 0.9994 0.9993 0.9994 0.9997

- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
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.
<S> <C> <C> <C> <C> <C>
Net expenses -- actual 0.73 0.71 0.72 0.72 0.71
Expenses(1) -- 0.71 0.73 0.73 0.72
Net investment income -- actual 2.02 3.24 2.86 2.95 2.88

- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested.
<S> <C> <C> <C> <C> <C>
Total return (%) 2.06 3.29 2.89 3.00 2.92
Net assets at end of year (in millions of dollars) 150.3 160.9 132.6 156.3 221.5

- ------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.

Municipal Money Fund 31
<PAGE>

Neuberger Berman
MUNICIPAL SECURITIES TRUST
- --------------------------------------------------------------------------------

Ticker Symbol: NBMUX ABOVE: PORTFOLIO MANAGERS THEODORE P.
GIULIANO AND CLARA DEL VILLAR

"IN SEARCH OF INCOME AND TOTAL RETURN, WE APPROACH THE MUNICIPAL MARKET WITH A
VALUE-ORIENTED APPROACH, LOOKING FOR SECURITIES THAT ARE ATTRACTIVELY PRICED
COMPARED TO THEIR PEERS. WE ALSO FOCUS ON CREDIT QUALITY AND DIVERSIFICATION IN
SEEKING TO REDUCE RISK."

32
<PAGE>

GOAL & STRATEGY
- --------------------------------------------------------------------------------

[GRAPHIC] THE FUND SEEKS HIGH CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX THAT
IS CONSISTENT WITH LOW RISK TO PRINCIPAL AND LIQUIDITY; TOTAL RETURN IS A
SECONDARY GOAL.

To pursue these goals, the fund invests mainly in investment-grade securities
from municipal issuers around the country. The fund's dividends are generally
exempt from federal income taxes. A portion of the dividends you receive may
also be exempt from state and local taxes, depending on where you live.

The fund seeks to reduce credit risk by diversifying among many municipal
issuers around the country and among the different types of municipal securities
available. Although it may invest in securities of any maturity, under normal
circumstances it maintains an average portfolio duration of ten years or less.

The managers monitor national trends in the municipal securities market,
including a range of economic, financial and political factors. The managers
analyze individual issues and look for securities that appear underpriced
compared to securities of similar structure and credit quality, and securities
that appear likely to have their credit ratings raised. To help maintain the
portfolio's credit quality, the managers seek to avoid securities from states or
regions with weak economies or other revenue problems.

The fund is authorized to change its goal without shareholder approval, although
it does not currently intend to do so.
- --------
DURATION
- --------

Duration is a measurement of a bond investment's sensitivity to changes in
interest rates.

Typically, with a 1% rise in interest rates, an investment's value may be
expected to fall approximately 1% for each year of its duration.

- ---------------------
TAX-EQUIVALENT YIELDS
- ---------------------

Municipal Securities Trust 33
<PAGE>

MAIN RISKS
- --------------------------------------------------------------------------------
OTHER RISKS
- -----------

The fund may use certain practices and securities involving additional risks.

The use of certain derivatives to hedge interest rate risk could affect fund
performance if the derivatives do not perform as expected.

To the extent that the fund invests in so-called private activity bonds, its
dividends may be subject to alternative minimum tax. Consult your tax advisor
for more information.

When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term taxable
securities. This strategy, as well as any other investments in taxable
securities, could produce income that is not tax-exempt, and may mean lost
opportunities.

[GRAPHIC] Most of the fund's performance depends on what happens in the
municipal bond market. The value of your investment will rise and fall, and you
could lose money.

A downgrade or default affecting any of the fund's securities would affect the
fund's performance. Performance could also be affected by political or
regulatory changes, whether regional or national, and by developments concerning
tax laws and tax-exempt securities.

In emphasizing credit analysis, the fund could decide not to invest in certain
securities with higher yields, which could mean that its yields may be lower
than those available from certain other municipal bond funds. Over time, the
fund may produce a lower return than stock investments.

The fund is not an appropriate investment for tax-advantaged accounts, and may
not be beneficial for investors in low tax brackets.

34 Neuberger Berman
<PAGE>

PERFORMANCE
- --------------------------------------------------------------------------------

YEAR-BY-YEAR % RETURNS as of 12/31 each year
- --------------------------------------------------------------------------------

PRINTER WILL UPDATE WITH NEW CHART STYLE

[GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

8.26 6.87 9.03 6.91 9.54 -3.98 12.71 3.56 7.37 XX.XX
- --------------------------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98

</TABLE>

+BEST QUARTER: QX 'XX, up 00.00% -WORST QUARTER: QX 'XX, down 00.00%
Year-to-date performance as of XX/XX/XX: up 00.00%

- --------------------------------------------------------------------------------

AVERAGE ANNUAL TOTAL % RETURNS as of XX/XX/XX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL SECURITIES TRUST 00.00 00.00 00.00
Lehman Brothers 7-Year GO Index 00.00 00.00 00.00
</TABLE>

The Lehman Brothers 7-year General Obligation Index is an unmanaged index of
investment grade, 7-year, tax-exempt general obligations (state and local).
- --------------------------------------------------------------------------------

- --------------------
PERFORMANCE MEASURES
- --------------------

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.

To obtain the fund's current yield, call 1-800-877-9700. The current yield is
the fund's net income over a recent 30-day period expressed as an annual rate of
return. You can also ask for information on how the fund's yields compare to
taxable yields after taxes are taken into consideration.

Municipal Securities Trust 35
<PAGE>

INVESTOR EXPENSES
- --------------------------------------------------------------------------------
MANAGEMENT
- ----------

CLARA DEL VILLAR is a Vice President of Neuberger Berman Management. She joined
the firm in 1991 and has co-managed the fund's assets since the same year.

FEE TABLE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER FEES None

Management fees 0.52
PLUS: Distribution (12b-1) fees None
Other expenses 0.60
-----
EQUALS: Total annual operating expenses 1.12

- --------------------------------------------------------------------------------
</TABLE>

* NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
THE TOTAL ANNUAL OPERATING EXPENSES OF THE FUND ARE LIMITED TO 0.65% OF
AVERAGE NET ASSETS. THIS ARRANGEMENT MAY BE TERMINATED UPON 60 DAYS' NOTICE
TO THE FUND. IN ADDITION, THIS ARRANGEMENT DOES NOT COVER INTEREST, TAXES,
BROKERAGE COMMISSIONS, AND EXTRAORDINARY EXPENSES. THE TABLE INCLUDES COSTS
PAID BY THE FUND AND ITS SHARE OF MASTER PORTFOLIO COSTS. FOR MORE
INFORMATION ON MASTER/FEEDER FUNDS, SEE "FUND STRUCTURE" ON PAGE 44.

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 above. 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.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses** $114 $356 $617 $1363
- --------------------------------------------------------------------------------
</TABLE>

**UNDER THE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE ABOVE, YOUR
COSTS FOR THE ONE-, THREE-, FIVE- AND TEN-YEAR PERIODS WOULD BE $____, $____,
$____ AND $____, RESPECTIVELY.

36 Neuberger Berman
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended October 31, 1994 1995 1996 1997 1998
- -------------------------------------------------------------------------------------------------------------------------
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.
<S> <C> <C> <C> <C> <C>
Share price (NAV) at beginning of year 11.12 10.26 10.83 10.78 11.02
PLUS: Income from investment operations
Net investment income 0.46 0.47 0.47 0.47 0.46
Net gains/losses -- realized and unrealized (0.73) 0.57 (0.05) 0.24 0.32
SUBTOTAL: INCOME FROM INVESTMENT OPERATIONS (0.27) 1.04 0.42 0.71 0.78
MINUS: Distributions to shareholders
Income dividends 0.46 0.47 0.47 0.47 0.46
Capital gain distributions 0.12 -- -- -- --
Distributions in excess of net capital gains 0.01 -- -- -- --
SUBTOTAL: DISTRIBUTIONS TO SHAREHOLDERS 0.59 0.47 0.47 0.47 0.46
-------------------------------------------------------
EQUALS: Share price (NAV) at end of year 10.26 10.83 10.78 11.02 11.34

- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
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.
<S> <C> <C> <C> <C> <C>
Net expenses -- actual 0.65 0.65 0.65 0.65 0.65
Gross expenses(1) 0.82 0.98 1.04 1.05 1.11
Expenses(2) -- 0.66 0.66 0.66 0.66
Net investment income -- actual 4.24 4.45 4.32 4.30 4.13

- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
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.
<S> <C> <C> <C> <C> <C>
Total return (%)(3) (2.57) 10.35 3.92 6.71 7.22
Net assets at end of year (in millions of dollars) 51.1 44.3 38.9 31.6 40.1
Portfolio turnover rate (%) 127 66 3 22 24

- -------------------------------------------------------------------------------------------------------------------------

</TABLE>

Municipal Securities Trust 37
<PAGE>

YOUR INVESTMENT
- --------------------------------------------------------------------------------

SHARE PRICES
- --------------------------------------------------------------------------------
SHARE PRICE CALCULATIONS
- ------------------------

A fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. The share prices of the bond funds
typically change every business day. The money market funds anticipate that
their share price will not fluctuate.

When valuing portfolio securities, the money market funds use a constant
amortization method and the bond funds use bid quotations. When a bond fund
believes a quotation does not reflect a security's true value, the fund may
substitute for the quotation a fair-value estimate made according to methods
approved by its trustees. A fund may also use these methods to value certain
types of illiquid securities.

Because 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. Similarly, because there are
no fees for selling shares, the fund pays you the full share price when you sell
shares.

The funds are open for business every day the New York Stock Exchange is open.
In general, every buy or sell order you place will go through at the next share
price to be calculated after your order has been accepted. Each money market
fund calculates its share price as of noon on business days. Each bond 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.

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 can't
buy or sell fund shares. The fund's share price, however, will not change until
the next time it is calculated.

38 Neuberger Berman

<PAGE>

PRIVILEGES
AND SERVICES
- --------------------------------------------------------------------------------

As a Neuberger Berman fund shareholder, you have access to a range of services
to make investing easier:

SYSTEMATIC INVESTMENTS -- This plan lets you take advantage of dollar-cost
averaging by establishing periodic investments of $100 a month or more in any
bond fund in this prospectus. 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 from a
Neuberger Berman fund of at least $100 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 (except in money market funds).

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. This service is not available for retirement accounts.

INTERNET ACCESS -- At www.nbfunds.com, you can make transactions, check your
account, and access a wealth of information.

FUNDfone-Registered Trademark- -- 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.

- ---------------------
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.

Your Investment 39

<PAGE>

DISTRIBUTIONS
AND TAXES
- --------------------------------------------------------------------------------

BUYING SHARES BEFORE A DISTRIBUTION

The money a fund earns, either as income or as capital gains, is reflected in
its share price until the fund makes a distribution. At that time, the amount
of the distribution is deducted from the share price. The amount of the
distribution is either reinvested in additional fund shares or paid to
shareholders in cash.

Because of this, if you buy shares just before a fund makes a distribution,
you'll end up getting some of your investment back as a taxable distribution.
You can avoid this situation by waiting to invest until after the
distribution has been made.

If you're investing in a tax-advantaged account, you don't need to worry;
generally, there are no tax consequences to you in this case.

DISTRIBUTIONS -- Each fund pays out to shareholders any net income and net
capital gains. Ordinarily, each of the funds declares income dividends daily and
pays them monthly. The bond funds make capital gain distributions once a year
(in December). The money market funds do not anticipate making any capital gain
distributions. Gains from foreign currency transactions, if any, are normally
distributed in December.

Unless you tell us otherwise, your income and capital gain distributions from a
fund will be reinvested in that fund. However, if you prefer you may:

- - receive all distributions in cash

- - reinvest capital gain distributions, but receive income distributions in
cash

To take advantage of one of these options, please indicate your choice on your
application.

HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement accounts and
dividends from funds whose income is exempt from state or federal income taxes,
all fund distributions you receive are generally taxable to you, regardless of
whether you take them in cash or reinvest them. Fund distributions to Roth
IRAs, other individual retirement accounts and qualified retirement plans
generally are tax-free. Eventual withdrawals from a Roth IRA of those amounts
also may be tax-free, while withdrawals from other retirement accounts and
plans generally are subject to tax.

Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they had been paid the
previous year. Your tax statement (see sidebar on facing page) will help clarify
this for you.

40 Neuberger Berman
<PAGE>

- --------------------------------------------------------------------------------

Distributions of taxable income and short-term capital gains are generally taxed
as ordinary income. Distributions of other capital gains from all funds are
generally taxed as long-term capital gains. The tax treatment of capital gain
distributions 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.

In general, for all investors (including corporations), income distributions
from the Government Money Fund are free from state income taxes and income
distributions from the municipal funds are free from federal taxes. However,
if you are a high-income individual who would owe comparatively little in
federal income taxes, some of your fund income may be subject to the
alternative minimum tax. A tax-exempt fund may invest in securities or use
techniques that produce taxable income; your statement will identify any
income of this type.

HOW TRANSACTIONS ARE TAXED -- When you sell bond fund shares, you generally
realize a gain or loss. These transactions, which include exchanges between
funds, usually have tax consequences. The exception, once again, is
tax-advantaged retirement accounts.

- -------------
TAXES AND YOU
- -------------

The taxes you actually owe on distributions and transactions can vary with many
factors, such as your 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
transactions? One helpful tool is the tax statement that we send you every
January. It details the distributions you received during the past year and
shows their tax status. A separate statement covers your 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.

Your Investment 41
<PAGE>

MAINTAINING YOUR ACCOUNT
- --------------------------------------------------------------------------------
BACKUP WITHHOLDING
- ------------------

When sending in your application, it's important to provide your Social
Security or other taxpayer ID number. If we don't have this number, or if the
IRS tells us you are subject to backup withholding, the IRS requires the fund
to withhold 31% of all money you receive from the fund (except for money
market funds), whether from selling shares or from distributions.

If the appropriate ID number has been applied for but is not available (such as
in the case of a custodial account for a newborn), you may open the account
without a number. However, we must receive the number within 60 days in order to
avoid backup withholding. For information on custodial accounts, call
800-877-9700.

WHEN YOU BUY SHARES -- Instructions for buying shares are on pages 46 and 47.
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. All investments must be made in U.S.
dollars, and investment checks must be drawn on a U.S. bank.

When you purchase shares by phone you will receive the share price calculated on
the day your order is received. Dividends will not be earned or accrued until
the day after our transfer agent receives payment.

The funds do not generally issue certificates for shares, although you can
request them. Please note, however, that the only way to redeem share
certificates is by sending in the certificates. Also, if you lose the
certificate, you will be charged a fee to replace it.

WHEN YOU SELL SHARES -- Instructions for selling shares are on pages 48 and 49.
You can place an order to sell some or all of your shares at any time. The
proceeds from the shares you sold are generally sent out the next business day
after your order is executed, and nearly always within three 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 hasn't cleared by the time you sell
those shares

42 Neuberger Berman
<PAGE>

- --------------------------------------------------------------------------------

If you think you may need to sell shares soon after buying them, you can avoid
the check clearing time (which may be up to 15 days) by investing by wire or
certified check.

In some cases, you will have to place your order to sell shares in writing, and
you will need a signature guarantee (see sidebar). These cases include:

- - when selling more than $50,000 worth of shares

- - when you want the check for the proceeds to be made out to someone other
than an owner of record, or sent somewhere other than the address of record

- - when you want the proceeds sent by wire or electronic transfer to a bank
account you have not designated in advance

When selling shares in an account that you do not intend to close, be sure to
leave at least $2,000 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 send you the
proceeds by mail.

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 a transaction.

- --------------------
SIGNATURE GUARANTEES
- --------------------

A 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.

A notarized signature from a notary public is not a signature guarantee.

Your Investment 43
<PAGE>

MAINTAINING YOUR
ACCOUNT CONTINUED
- --------------------------------------------------------------------------------
FUND STRUCTURE
- --------------

Each of the funds in this prospectus uses a "master-feeder" structure.

Rather than investing directly in securities, each fund is a "feeder fund,"
meaning that it invests in a corresponding "master portfolio." The master
portfolio in turn invests in securities, using the strategies described in this
prospectus. One potential benefit of this structure is lower costs, since the
expenses of the master portfolio can be shared with any other feeder funds.
In this prospectus, we have used the word "fund" to mean a feeder fund and
its master portfolio.

In this prospectus, we have used the word "fund" to mean a feeder fund and its
master portfolio. Costs for a feeder fund include its own costs and its share of
master portfolio costs.

For reasons relating to costs or a change in investment goal, among others, a
feeder fund could switch to another master portfolio or decide to manage its
assets itself. No fund in this prospectus is currently contemplating such a
move.

WHEN YOU EXCHANGE SHARES -- You can move money from one Neuberger Berman fund to
another through an exchange of shares. 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 program is available to all shareholders in the funds, but 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 -- Neuberger Berman fund investors have the option
of placing telephone orders to buy, sell, or exchange shares (except in money
market funds). On non-retirement accounts, 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 don't 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 record-

44 Neuberger Berman

<PAGE>

- --------------------------------------------------------------------------------

ing 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 fax or express delivery.

OTHER POLICIES -- Under certain circumstances, the funds reserve the right to:

- - suspend the offering of shares

- - reject any exchange or investment 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 New York Stock Exchange is restricted, or as otherwise permitted by the
SEC

- - change its investment minimums or other requirements for buying and
selling, or waive any minimums or requirements for certain investors

- -------------------------
EURO AND YEAR 2000 ISSUES
- -------------------------

Like other mutual funds, the funds could be affected by problems relating to the
conversion of European currencies into the Euro beginning 1/1/99 and the ability
of computer systems to recognize the Year 2000.

At Neuberger Berman, we are taking steps to ensure that our own computer systems
are compliant with Euro and Year 2000 issues and to determine that the systems
used by our major service providers are also compliant. We are also making
efforts to determine whether companies in the funds' portfolios will be affected
by either issue.

At the same time, it is impossible to know whether these problems, which could
disrupt fund operations and investments if uncorrected, have been adequately
addressed until the dates in question arrive.

Your Investment 45
<PAGE>

BUYING SHARES

Method Things to know
- --------------------------------------------------------------------------------
SENDING US A CHECK Your first investment must be at least $2,000

Additional investments can be as little as $100

We cannot accept cash, money orders, starter checks,
or travelers checks

You will be responsible for any losses or fees
resulting from a bad check; if necessary, we may
sell other shares belonging to you in order to cover
these losses

All checks must be made out to "Neuberger Berman
Funds;" we cannot accept checks made out to you or
other parties and signed over to us

- --------------------------------------------------------------------------------
WIRING MONEY A wire for a first investment must be for at least
$2,000

Wires for additional investments must be for at
least $1,000

- --------------------------------------------------------------------------------
EXCHANGING FROM An exchange for a first investment must be for at
ANOTHER FUND least $2,000

Exchanges for additional investments must be for at
least $1,000

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

- --------------------------------------------------------------------------------
CALLING IN YOUR ORDER A phone order for a first investment must be for at
(with follow-up payment) least $2,000

Phone orders for additional investments must be for
at least $1,000

The money for your shares must be received within
three days after you place your order, or your order
may be cancelled

You will be responsible for any losses or fees
resulting from a cancelled order; if necessary, we
may sell other shares belonging to you in order to
cover these losses

Not available on retirement accounts

- --------------------------------------------------------------------------------
SETTING UP SYSTEMATIC All investments must be at least $100
INVESTMENTS

46 Neuberger Berman
<PAGE>

Instructions
- --------------------------------------------------------------------------------
Fill out the application and enclose your check

If regular first-class mail, address to:
NEUBERGER BERMAN FUNDS
BOSTON SERVICE CENTER
P.O BOX 8403
BOSTON, MA 02266-8403

If express delivery, registered mail, or certified mail, send to:
NEUBERGER BERMAN FUNDS
C/O STATE STREET BANK AND TRUST COMPANY
66 BROOKS DRIVE
BRAINTREE, MA 02184-3839

- --------------------------------------------------------------------------------
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

- --------------------------------------------------------------------------------
Call 800-877-9700 to place your order

To place an order using FUNDfone-Registered Trademark- call 800-335-9366

- --------------------------------------------------------------------------------
Call 800-877-9700 to place your order

Follow up with a wire, electronic transfer, or check
(via express delivery)

To add shares to an existing account using FUNDfone-Registered Trademark-, call
800-335-9366

- --------------------------------------------------------------------------------
Call 800-877-9700 for instructions

- -------------------
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 at
retirement. Contributions are deductible for some investors, but even when
they're 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. Consult your
tax professional to find out which types of plans may be beneficial for you,
then call 800-877-9700 for information on any Neuberger Berman retirement plan.

Generally, retirement plans cannot invest in municipal funds.

Your Investment 47
<PAGE>

SELLING SHARES

Method Things to know
- --------------------------------------------------------------------------------
SENDING US A LETTER Unless you tell us otherwise, we will mail your
proceeds by check to the address of record, payable
to the registered owner(s)

If you have designated a bank account on your
application, you can request that we wire the
proceeds to this account; if the total balance in
all of your Neuberger Berman fund accounts is less
than $200,000, you will be charged an $8.00 fee

You can also request that we send the proceeds to
your designated bank account by electronic transfer
without fee

You may need a signature guarantee (see page 43)

- --------------------------------------------------------------------------------
SENDING US A FAX For amounts of up to $50,000

Not available if you have changed the address on the
account by phone, fax, or postal address change in
the past 15 days

- --------------------------------------------------------------------------------
CALLING IN YOUR ORDER All phone orders to sell shares must be for at least
$1,000, unless you are closing out an account

Not available if you have declined the phone option
or are selling shares in a retirement account

Not available if you have changed the address on the
account by phone, fax, or postal address change in
the past 15 days

- --------------------------------------------------------------------------------
EXCHANGING INTO All exchanges must be for at least $1,000
ANOTHER 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

- --------------------------------------------------------------------------------
SETTING UP SYSTEMATIC For accounts with at least $5,000 worth of shares in
WITHDRAWALS them

Withdrawals must be at least $100

- --------------------------------------------------------------------------------
BY CHECK Available for money market funds only

Withdrawals must be at least $250

48 Neuberger Berman
<PAGE>

Instructions
- --------------------------------------------------------------------------------
Send us a letter requesting us to sell shares signed by all registered owners;
include your name, account number, the fund name, the dollar amount or number of
shares you want to sell, and any other instructions

If regular first-class mail, send to:
NEUBERGER BERMAN FUNDS
BOSTON SERVICE CENTER
P.O BOX 8403
BOSTON, MA 02266-8403

If express delivery, registered mail, or certified mail, send to:
NEUBERGER BERMAN FUNDS
C/O STATE STREET BANK AND TRUST COMPANY
66 BROOKS DRIVE
BRAINTREE, MA 02184-3839

- --------------------------------------------------------------------------------
Write a request to sell shares as described above

Fax it to 212-476-8848

Call 800-877-9700 to make sure your fax arrived and is in order

- --------------------------------------------------------------------------------
Call 800-877-9700 to place your order

Give your name, account number, the fund name, the dollar amount or number of
shares you want to sell, and any other instructions

To place an order using FUNDfone-Registered Trademark- call 800-335-9366

- --------------------------------------------------------------------------------
Call 800-877-9700 to place your order

To place an order using FUNDfone-Registered Trademark- call 800-335-9366

- --------------------------------------------------------------------------------
Call 800-877-9700 for instructions

- ----------------------
INTERNET CONNECTION
- ----------------------

Investors with Internet access can enjoy many valuable and time-saving features
by visiting us on the World Wide Web at www.nbfunds.com.

The site offers complete information on our funds, current performance data, and
an Investment Education Center with interactive worksheets for college and
retirement planning. Also available are relevant news items, tax information,
portfolio manager interviews, and related articles.

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.

Your Investment 49
<PAGE>

- --------------------------------------------------------------------------------
OBTAINING INFORMATION

You can obtain a shareholder report, SAI, and other information from:

NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue, 2nd floor
New York, NY 10158-0180

800-877-9700
212-476-8800

Web site:
www.nbfunds.com
Email:
[email protected]

SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549-6009
1-800-SEC-0330 (Public
Reference Section)

Web site:
www.sec.gov

You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.

NEUBERGER BERMAN INCOME FUNDS

- - No load
- - No sales charges
- - No 12b-1 fees

If you'd like further details on any of these funds, you can request a free copy
of the following documents:

SHAREHOLDER REPORTS -- Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:

- - a discussion by the portfolio manager(s) about strategies and
market conditions
- - fund performance data and financial statements
- - complete portfolio holdings

STATEMENT OF ADDITIONAL INFORMATION -- 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 incorporated by reference into this prospectus, making it legally
part of the prospectus.

INVESTMENT MANAGER:
NEUBERGER BERMAN MANAGEMENT INC.

SUB-ADVISER:
NEUBERGER BERMAN, LLC

605 Third Avenue
New York, NY 10158-0180

[LOGO]

SEC file number: 811-3802
NBIP00031297

<PAGE>

NEUBERGER BERMAN INCOME FUNDS AND PORTFOLIOS

STATEMENT OF ADDITIONAL INFORMATION

DATED MARCH __, 1999

Neuberger Berman Neuberger Berman
Government Money Fund Limited Maturity Bond Fund
(and Neuberger Berman (and Neuberger Berman
Government Money Limited Maturity Bond Portfolio)
Portfolio)

Neuberger Berman Neuberger Berman
Cash Reserves High Yield Bond Fund
(and Neuberger Berman (and Neuberger Berman
Cash Reserves Portfolio) High Yield Bond Portfolio)

No-Load Mutual Funds
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700

Neuberger Berman GOVERNMENT MONEY Fund ("GOVERNMENT MONEY"),
Neuberger Berman CASH RESERVES ("CASH RESERVES"), Neuberger Berman LIMITED
MATURITY Bond Fund ("LIMITED MATURITY") and Neuberger Berman HIGH YIELD Bond
Fund ("HIGH YIELD")(each a "Fund") are no-load mutual funds that offer shares
pursuant to a Prospectus dated March __, 1999. The Funds invest all of their
net investable assets in Neuberger Berman GOVERNMENT MONEY Portfolio, Neuberger
Berman CASH RESERVES Portfolio, Neuberger Berman LIMITED MATURITY Bond
Portfolio, and Neuberger Berman HIGH YIELD Bond Portfolio (each a "Portfolio"),
respectively.

The Funds' Prospectus, which is also the prospectus for certain
municipal funds administered by Neuberger Berman Management Incorporated ("NB
Management"), provides basic information that an investor should know before
investing. A copy of the Prospectus may be obtained, without charge, from NB
Management, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180 or by calling
800-877-9700.

This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus.

<PAGE>

information or representations must not be relied upon as having been authorized
by a Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by a Fund or its distributor in any jurisdiction in which such offering
may not lawfully be made.

<PAGE>

TABLE OF CONTENTS

INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations....................................1
Temporary Defensive Position...........................................6
Overview of Each Fund..................................................6
Money Market Funds.....................................................7
Bond Funds.............................................................7
Additional Investment Information......................................8
Risks of Fixed Income Securities......................................33
Risks of Equity Securities............................................35

CERTAIN RISK CONSIDERATIONS.................................................35

PERFORMANCE INFORMATION.....................................................36
Yield Calculations....................................................37
Tax Equivalent Yield - State and Local Taxes..........................38
Total Return Computations.............................................38
Comparative Information...............................................39
Other Performance Information.........................................40

TRUSTEES AND OFFICERS.......................................................41

INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................46
Investment Manager and Administrator..................................46
Expense Reimbursements................................................48
Sub-Adviser...........................................................49
Investment Companies Managed..........................................50
Management and Control of NB Management...............................51

DISTRIBUTION ARRANGEMENTS...................................................52

ADDITIONAL PURCHASE INFORMATION.............................................53
Share Prices and Net Asset Value......................................53
Automatic Investing and Dollar Cost Averaging.........................54

ADDITIONAL EXCHANGE INFORMATION.............................................54

- i -
<PAGE>

ADDITIONAL REDEMPTION INFORMATION...........................................57
Suspension of Redemptions.............................................57
Redemptions in Kind...................................................57

DIVIDENDS AND OTHER DISTRIBUTIONS...........................................57

ADDITIONAL TAX INFORMATION..................................................58
Taxation of the Funds.................................................58
Taxation of the Portfolios............................................59
Taxation of the Funds' Shareholders...................................62

VALUATION OF PORTFOLIO SECURITIES...........................................63

PORTFOLIO TRANSACTIONS......................................................63
Portfolio Turnover....................................................64

REPORTS TO SHAREHOLDERS.....................................................64

CUSTODIAN AND TRANSFER AGENT................................................67

INDEPENDENT AUDITORS........................................................67

LEGAL COUNSEL...............................................................67

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................67

REGISTRATION STATEMENT......................................................68

FINANCIAL STATEMENTS........................................................69

Appendix A.................................................................A-1
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER

- ii -

<PAGE>

INVESTMENT INFORMATION

Each Fund is a separate series of Neuberger Berman Income Funds
("Trust"), a Delaware business trust that is registered with the Securities and
Exchange Commission ("SEC") as an open-end management investment company. Each
Fund seeks its investment objective by investing all of its net investable
assets in a Portfolio of Income Managers Trust ("Managers Trust") that has an
investment objective identical to, and a name similar to, that of the Fund. Each
Portfolio, in turn, invests in securities in accordance with an investment
objective, policies, and limitations identical to those of its corresponding
Fund. (The Trust and Managers Trust, which is an open-end management investment
company managed by NB Management, are together referred to below as the
"Trusts.")

The following information supplements the discussion in the
Prospectus of the investment objective, policies, and limitations of each Fund
and Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of each Fund and Portfolio are not
fundamental. Any investment objective, policy or limitation that is not
fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of
Managers Trust ("Portfolio Trustees") without shareholder approval. The
fundamental investment policies and limitations of a Fund or a Portfolio may not
be changed without the approval of the lesser of (1) 67% of the total units of
beneficial interest ("shares") of the Fund or Portfolio represented at a meeting
at which more than 50% of the outstanding Fund or Portfolio shares are
represented or (2) a majority of the outstanding shares of the Fund or
Portfolio. These percentages are required by the Investment Company Act of 1940
("1940 Act") and are referred to in this SAI as a "1940 Act majority vote."
Whenever a Fund is called upon to vote on a change in a fundamental investment
policy or limitation of its corresponding Portfolio, the Fund casts its votes
thereon in proportion to the votes of its shareholders at a meeting thereof
called for that purpose.

Investment Policies and Limitations
- -----------------------------------

Each Fund has the following fundamental investment policy, to enable
it to invest in its corresponding Portfolio:

Notwithstanding any other investment policy of the Fund, the Fund
may invest all of its investable assets (cash, securities, and
receivables relating to securities) in an open-end management
investment company having substantially the same investment
objective, policies, and limitations as the Fund.

All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of each Fund are identical
to those of its corresponding Portfolio. Therefore, although the following
discusses the investment policies and limitations of the Portfolios, it applies
equally to their corresponding Funds.

For purposes of the investment limitation on concentration in a
particular industry, Neuberger Berman LIMITED MATURITY Bond Portfolio determines
the "issuer" of a municipal obligation that is not a general obligation note or
bond based on the obligation's characteristics. The most significant of these

<PAGE>

characteristics is the source of funds for the repayment of principal and
payment of interest on the obligation. If an obligation is backed by an
irrevocable letter of credit or other guarantee, without which the obligation
would not qualify for purchase under the Portfolio's quality restrictions, the
issuer of the letter of credit or the guarantee is considered an issuer of the
obligation. If an obligation meets the Portfolio's quality restrictions without
credit support, the Portfolio treats the commercial developer or the industrial
user, rather than the governmental entity or the guarantor, as the only issuer
of the obligation, even if the obligation is backed by a letter of credit or
other guarantee. Neuberger Berman CASH RESERVES Portfolio determines the
"issuer" of a municipal obligation for purposes of its policy on industry
concentration in accordance with the principles of Rule 2a-7 under the 1940 Act.
Also for purposes of the investment limitation on concentration in a particular
industry, both mortgage-backed and asset-backed securities are grouped together
as a single industry and certificate of deposit ("CD") is interpreted to
include similar types of time deposits.

With respect to the limitation on borrowings, Neuberger Berman HIGH
YIELD Bond Portfolio may pledge assets in connection with permitted borrowings.
For purposes of its limitation on commodities, Neuberger Berman LIMITED MATURITY
Bond Portfolio does not consider foreign currencies or forward contracts to be
physical commodities.

Except for the limitation on borrowing and the limitation on
illiquid securities, any maximum percentage of securities or assets contained in
any investment policy or limitation will not be considered to be exceeded unless
the percentage limitation is exceeded immediately after, and because of, a
transaction by a Portfolio. If events subsequent to a transaction result in a
Portfolio exceeding the percentage limitation on borrowing or illiquid
securities, NB Management will take appropriate steps to reduce the percentage
of borrowings or the percentage held in illiquid securities, as may be required
by law, within a reasonable amount of time.

The fundamental investment policies and limitations of Neuberger
Berman GOVERNMENT MONEY Portfolio are as follows:

1. BORROWING. The Portfolio may not borrow money, except from banks
for temporary or emergency purposes and not for leveraging or investment, in an
amount not exceeding 33-1/3% of the value of its total assets (including the
amount borrowed) less liabilities (other than borrowings). If at any time
borrowings exceed 33-1/3% of the value of the Portfolio's total assets, it 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 AND REAL ESTATE. The Portfolio may not purchase or
sell commodities, commodity contracts, foreign exchange, or real estate,
including interests in real estate investment trusts and real estate mortgage
loans, except securities issued by the Government National Mortgage Association
("GNMA").

3. LENDING. The Portfolio may not make loans. The acquisition of a
portion of an issue of publicly distributed bonds, debentures, notes, and other
securities as permitted by Managers Trust's Declaration of Trust shall not be
deemed to be the making of loans.

4. SENIOR SECURITIES. The Portfolio may not issue senior securities,
except as permitted under the 1940 Act.

- 2 -
<PAGE>

5. UNDERWRITING. The Portfolio may not underwrite securities of
other issuers, except to the extent that the Portfolio, in disposing of
portfolio securities, may be deemed to be an underwriter within the meaning of
the Securities Act of 1933 ("1933 Act").

6. SHORT SALES AND PUTS, CALLS, STRADDLES, OR SPREADS. The Portfolio
may not effect short sales of securities or write or purchase any puts, calls,
straddles, spreads, or any combination thereof.

The non-fundamental investment policies and limitations of Neuberger
Berman GOVERNMENT MONEY Portfolio are as follows:

1. BORROWING. The Portfolio may not purchase securities if
outstanding borrowings exceed 5% of its total assets.

2. MARGIN TRANSACTIONS. The Portfolio may not purchase securities on
margin from brokers or other lenders, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions.

3. INDUSTRY CONCENTRATION. The Portfolio may not purchase any
security if, as a result, 25% or more of its total assets (taken at current
value) would be invested in the securities of issuers having their principal
business activities in the same industry. This limitation does not apply to (i)
purchases of securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities ("U.S. Government and Agency Securities") or (ii)
investments in certificates of deposit ("CDs") or banker's acceptances issued by
domestic branches of U.S. banks.

The following investment policies and limitations are fundamental
and apply to each of Neuberger Berman CASH RESERVES Portfolio and Neuberger
Berman LIMITED MATURITY Bond Portfolio unless otherwise indicated:

1. BORROWING. Neither Portfolio may borrow money, except that a
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and not for leveraging or investment, and (ii) enter into reverse repurchase
agreements; provided that (i) and (ii) in combination do not exceed 33-1/3% of
the value of its total assets (including the amount borrowed) less liabilities
(other than borrowings). If at any time borrowings exceed 33-1/3% of the value
of a Portfolio's total assets, that Portfolio will reduce its borrowings within
three days (excluding Sundays and holidays) to the extent necessary to comply
with the 33-1/3% limitation.

2. COMMODITIES. Neuberger Berman LIMITED MATURITY Bond Portfolio may
not purchase physical commodities or contracts thereon, unless acquired as a
result of the ownership of securities or instruments, but this restriction shall
not prohibit a Portfolio from purchasing futures contracts or options (including
options on futures contracts, but excluding options or futures contracts on
physical commodities) or from investing in securities of any kind. Neuberger
Berman CASH RESERVES Portfolio may not purchase commodities or contracts
thereon, but this restriction shall not prohibit the Portfolio from purchasing
the securities of issuers that own interests in any of the foregoing.

- 3 -
<PAGE>

3. DIVERSIFICATION. Neither Portfolio may, with respect to 75% of
the value of its total assets, purchase the securities of any issuer (other than
U.S. Government and Agency Securities) if, as a result, (i) more than 5% of the
value of the Portfolio's total assets would be invested in the securities of
that issuer or (ii) the Portfolio would hold more than 10% of the outstanding
voting securities of that issuer.

4. INDUSTRY CONCENTRATION. Neither Portfolio may purchase any
security if, as a result, 25% or more of its total assets (taken at current
value) would be invested in the securities of issuers having their principal
business activities in the same industry. This limitation does not apply to (i)
purchases of U.S. Government and Agency Securities, or (ii) investments by
Neuberger Berman CASH RESERVES Portfolio in CDs or banker's acceptances issued
by domestic branches of U.S. banks.

5. LENDING. Neither Portfolio may lend any security or make any
other loan if, as a result, more than 33-1/3% of its total assets (taken at
current value) would be lent to other parties, except, in 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. Neither Portfolio may purchase real estate unless
acquired as a result of the ownership of securities or instruments, but this
restriction shall not prohibit a Portfolio from purchasing securities issued by
entities or investment vehicles that own or deal in real estate or interests
therein, or instruments secured by real estate or interests therein.

7. SENIOR SECURITIES. Neither Portfolio may issue senior securities,
except as permitted under the 1940 Act.

8. UNDERWRITING. Neither Portfolio may underwrite securities of
other issuers, except to the extent that a Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the 1933
Act.

The fundamental investment policies and limitations of Neuberger
Berman HIGH YIELD Bond Portfolio are as follows:

1. BORROWING. The Portfolio may not borrow money, except that it may
(i) borrow money from banks for temporary or emergency purposes and not for
leveraging or investment, and (ii) enter into reverse repurchase agreements;
provided that (i) and (ii) in combination do not exceed 33-1/3% of the value of
its total assets (including the amount borrowed) less liabilities (other than
borrowings). If at any time borrowings exceed 33-1/3% of the value of the
Portfolio's total assets, the Portfolio will reduce its borrowings within three
days (excluding Sundays and holidays) to the extent necessary to comply with the
33-1/3% limitation.

2. COMMODITIES. The Portfolio may not purchase physical commodities
or contracts thereon, unless acquired as a result of the ownership of securities
or instruments, but this restriction shall not prohibit the Portfolio from
purchasing futures contracts or options (including options on futures contracts,
but excluding options or futures contracts on physical commodities), foreign

- 4 -
<PAGE>

currency, forward contracts, swaps, caps, collars, floors and other financial
instruments, or from investing in securities of any kind.

3. DIVERSIFICATION. The Portfolio may not with respect to 75% of the
value of its total assets, purchase the securities of any issuer (other than
U.S. Government and Agency Securities) if, as a result, (i) more than 5% of the
value of the Portfolio's total assets would be invested in the securities of
that issuer or (ii) the Portfolio would hold more than 10% of the outstanding
voting securities of that issuer.

4. INDUSTRY CONCENTRATION. The Portfolio may not purchase any
security if, as a result, 25% or more of its total assets (taken at current
value) would be invested in the securities of issuers having their principal
business activities in the same industry. This limitation does not apply to
purchases of U.S. Government and Agency Securities.

5. LENDING. The Portfolio may not lend any security or make any
other loan if, as a result, more than 33-1/3% of its total assets (taken at
current value) would be lent to other parties, except, in accordance with its
investment objective, policies, and limitations, (i) through the purchase of a
portion of an issue of debt securities, loans, loan participations or other
forms of direct debt instruments or (ii) by engaging in repurchase agreements.

6. REAL ESTATE. The Portfolio may not purchase real estate unless
acquired as a result of the ownership of securities or instruments, but this
restriction shall not prohibit the Portfolio from purchasing securities issued
by entities or investment vehicles that own or deal in real estate or interests
therein, or instruments secured by real estate or interests therein.

7. SENIOR SECURITIES. The Portfolio may not issue senior securities,
except as permitted under the 1940 Act.

8. UNDERWRITING. The Portfolio may not underwrite securities of
other issuers, except to the extent that the Portfolio, in disposing of
portfolio securities, may be deemed to be an underwriter within the meaning of
the 1933 Act.

The following investment policies and limitations are
non-fundamental and apply to each of Neuberger Berman CASH RESERVES Portfolio,
Neuberger Berman LIMITED MATURITY Bond Portfolio, and Neuberger Berman HIGH
YIELD Bond Portfolio unless otherwise indicated:

1. INVESTMENTS IN ANY ONE ISSUER. Neuberger Berman CASH RESERVES
Portfolio may not purchase the securities of any one issuer (other than U.S.
Government and Agency Securities or securities subject to a guarantee issued by
a non-controlled person as defined in Rule 2a-7 under the 1940 Act) if, as a
result, more than 5% of the Portfolio's total assets would be invested in the
securities of that issuer.

2. ILLIQUID SECURITIES. No Portfolio may purchase any security if,
as a result, more than 15% of its net assets (10% in the case of Neuberger
Berman CASH RESERVES Portfolio) would be invested in illiquid securities.
Illiquid securities include securities that cannot be sold within seven days in

- 5 -
<PAGE>

the ordinary course of business for approximately the amount at which the
Portfolio has valued the securities, such as repurchase agreements maturing in
more than seven days.

3. BORROWING. No Portfolio may purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.

4. LENDING (NEUBERGER BERMAN CASH RESERVES PORTFOLIO AND NEUBERGER
BERMAN LIMITED MATURITY BOND PORTFOLIO). Except for the purchase of debt
securities and engaging in repurchase agreements, neither Portfolio may make any
loans other than securities loans.

LENDING (NEUBERGER BERMAN HIGH YIELD BOND PORTFOLIO). Except for the
purchase of debt securities, loans, loan participations or other forms of direct
debt instruments and engaging in repurchase agreements, the Portfolio may not
make any loans other than securities loans.

5. MARGIN TRANSACTIONS. No Portfolio may purchase securities on
margin from brokers or other lenders, except that a Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. For Neuberger Berman HIGH YIELD Bond Portfolio and Neuberger
Berman LIMITED MATURITY Bond Portfolio, 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.

Temporary Defensive Position
- ----------------------------

For temporary defensive purposes, each Portfolio may invest up to
100% of its total assets in cash or cash equivalents, U.S. Government and Agency
Securities, commercial paper (except for Neuberger Berman GOVERNMENT MONEY
Portfolio) and certain other money market instruments, as well as (except for
Neuberger Berman GOVERNMENT MONEY Portfolio) repurchase agreements on U.S.
Government and Agency Securities, the interest on which may be subject to
federal and state income taxes, and may adopt shorter than normal weighted
average maturities or durations. Yields on these securities are generally lower
than yields available on the lower-rated debt securities in which Neuberger
Berman LIMITED MATURITY Bond Portfolio and Neuberger Berman HIGH YIELD Bond
Portfolio normally invest.

Overview of Each Fund
- ---------------------

Neuberger Berman's commitment to its asset management approach is
reflected in the more than $125 million the organization's principals, employees
and their families have invested in the Neuberger Berman mutual funds.

NB Management offers a group of mutual funds that earn taxable
income and are designed with varying degrees of risk and return based on the
duration and/or maturity of each Portfolio. Duration measures a bond's exposure
to interest rate risk. Duration incorporates a bond's yield, coupon interest
payments, final maturity and call features into one measure. In general, the

- 6 -
<PAGE>

longer you extend a bond's duration, the greater its potential return and
exposure to interest rate fluctuations.

For example, GOVERNMENT MONEY and CASH RESERVES are money market
funds with average portfolio maturity of up to 90 days. This is followed by
LIMITED MATURITY which seeks a higher income but can experience more price
fluctuation. Its Portfolio of bonds has a maximum average duration of four
years. Rounding out the group is HIGH YIELD which invests primarily in lower
rated debt securities. This Fund has even greater potential for higher yields
but is accompanied by increased risk. Its Portfolio has no duration, maturity or
minimum quality limitations. A more detailed discussion of each Fund follows. In
all cases, these Funds pursue attractive current income with varying levels of
risk to principal and differ according to their investment guidelines. These
guidelines include maturity or duration, type of bonds, and the credit quality
of these bonds.

Money Market Funds
- ------------------

Neuberger Berman Government Money Fund
- --------------------------------------
GOVERNMENT MONEY is oriented to investors who seek maximum liquidity
with virtually no credit risk. It is managed to maintain a constant one dollar
net asset value. Through its corresponding Portfolio, the Fund invests in
securities issued or guaranteed by the United States Government. The income
earned by investors in U.S. Treasury issues is generally free of state and local
taxation. Thus, this Fund will have particular appeal to investors who live in
states that levy a tax on interest income and who are looking for a temporary
investment vehicle.

Neuberger Berman Cash Reserves
- ------------------------------
CASH RESERVES is oriented to investors who seek a high degree of
liquidity while investing in Government and corporate money market instruments.
The Fund is invested to maintain a constant one dollar net asset value. Through
its corresponding Portfolio, the Fund invests only in securities that enjoy one
of the two highest credit ratings or unrated securities deemed equivalent by NB
Management.

Bond Funds
- ----------

Our bond funds are managed on the basis of a strategy of investment
in fixed income sectors we believe are attractively priced, and the selection of
the most attractively priced issues in those sectors based on their perceived
risk and returns. We also manage the duration of the portfolios. Sector
investments include corporate bonds, mortgage-backed securities, asset backed
securities, CMOs (Collateralized Mortgages Obligations), Treasuries and
Government agencies.

Neuberger Berman Limited Maturity Bond Fund
- -------------------------------------------
LIMITED MATURITY is appropriate for investors who seek to
participate in the returns of the bond market, but wish to avoid significant
fluctuations in principal value. In order to achieve its investment goal through
its Portfolio, this Fund has the flexibility to invest across the full range of

- 7 -
<PAGE>

bond sectors (corporate, mortgage-backed securities, etc.) and may invest a
limited portion of its assets in foreign securities denominated in foreign
currencies as well as lower-rated "high yield" issues.

The investment strategy of this Fund is based upon the demonstrated
ability of short and intermediate duration portfolios to deliver virtually all
of the income of riskier long-term maturity portfolios. Thus, this Fund limits
its maximum average duration to four years. However, in order to improve total
return, it invests across a broad range of fixed income sectors and within each
sector seeks out securities that have a higher yield than counterpart issues
that we believe have a similar credit risk. It may opportunistically invest in
foreign issues when they offer higher yield than U.S. issues. In addition, it
may invest up to 10% of its net assets in "high yield" issues when these issues
offer the prospect of higher total return to the Portfolio. It is the manager's
belief that the combination of broad sector diversification, active security
selection and flexible maturity and duration management can offer investors the
prospect of total returns that will approximate the bond market as a whole, with
only moderate fluctuation in principal value.

NEUBERGER BERMAN HIGH YIELD BOND FUND
HIGH YIELD may be appropriate for equity investors seeking to
rebalance their portfolios, or for those investors looking for higher rates of
return and willing to take on more risk. The Fund seeks high current income and,
secondarily, capital growth by investing primarily in lower-rated debt
securities. These securities are expected to generate higher returns than
investment grade fixed-income securities. The Fund may be more volatile, because
the performance of high-yield bonds is linked to the financial health of the
overall market. With this in mind, the portfolio co-managers attempt to select
securities of companies with promising upside potential. The Fund is a
well-diversified portfolio of securities that must first pass the intensive,
time-tested selection process that Neuberger Berman applies to the security
selection in all of its stock funds.

ADDITIONAL INVESTMENT INFORMATION

Some or all of the Portfolios, as indicated below, may make the
following investments, among others, although they may not buy all of the types
of securities or use all of the investment techniques that are described.

U.S. GOVERNMENT AND AGENCY SECURITIES (ALL PORTFOLIOS). 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 the Government National Mortgage Association ("GNMA"),
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 Tennessee Valley
Authority. Some U.S. Government Agency Securities are supported by the full
faith and credit of the United States, while others may be supported by the
issuer's ability to borrow from the U.S. Treasury, subject to the Treasury's
discretion in certain cases, or only by the credit of the issuer. U.S.
Government Agency Securities include U.S. Government Agency mortgage-backed
securities. (See "Mortgage-Backed Securities," below.) The market prices of U.S.

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Government Agency Securities are not guaranteed by the Government and generally
fluctuate inversely with changing interest rates.

POLICIES AND LIMITATIONS. Neuberger Berman CASH RESERVES Portfolio may
invest 25% or more of its total assets in U.S. Government and Agency Securities.

INFLATION-INDEXED SECURITIES (NEUBERGER BERMAN HIGH YIELD BOND AND
NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIOS). The Portfolios may invest in
U.S. Treasury securities whose principal value is adjusted daily in accordance
with changes to the Consumer Price Index. Such securities are backed by the full
faith and credit of the U.S. Government. Interest is calculated on the basis of
the current adjusted principal value. The principal value of inflation-indexed
securities declines in periods of deflation, but holders at maturity receive no
less than par. If inflation is lower than expected during the period a Portfolio
holds the security, the Portfolio may earn less on it than on a conventional
bond.

Because the coupon rate on inflation-indexed securities is lower than
fixed-rate U.S. Treasury securities, the Consumer Price Index would have to rise
at least to the amount of the difference between the coupon rate of the fixed
rate U.S. Treasury issues and the coupon rate of the inflation-indexed
securities, assuming all other factors are equal, in order for such securities
to match the performance of the fixed-rate Treasury securities.
Inflation-indexed securities are expected to react primarily to changes in the
"real" interest rate (I.E., the nominal (or stated) rate less the rate of
inflation), while a typical bond reacts to changes in the nominal interest rate.
Accordingly, inflation-indexed securities have characteristics of fixed-rate
Treasuries having a shorter duration. Changes in market interest rates from
causes other than inflation will likely affect the market prices of
inflation-indexed securities in the same manner as conventional bonds.

Any increase in principal value is taxable in the year the increase
occurs, even though holders do not receive cash representing the increase until
the security matures. Because each Fund must distribute substantially all of its
income to its shareholders to avoid payment of federal income and excise taxes,
a Portfolio may have to dispose of other investments to obtain the cash
necessary to distribute the accrued taxable income on inflation-indexed
securities.

ILLIQUID SECURITIES (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN GOVERNMENT
MONEY PORTFOLIO). 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 Securities Act of 1933, as
amended, 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 trustees of Managers Trust, determines they are 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 Portfolio to value or dispose
of due to the absence of an active trading market. The sale of some illiquid
securities by the Portfolios may be subject to legal restrictions which could be
costly to the Portfolios.

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POLICIES AND LIMITATIONS. Neuberger Berman LIMITED MATURITY Bond
Portfolio and Neuberger Berman HIGH YIELD Bond Portfolio may each invest up to
15% of its net assets in illiquid securities (10% in the case of Neuberger
Berman GOVERNMENT MONEY Portfolio and Neuberger Berman CASH RESERVES Portfolio).

REPURCHASE AGREEMENTS (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN
GOVERNMENT MONEY PORTFOLIO). In a repurchase agreement, a Portfolio purchases
securities from a bank that is a member of the Federal Reserve System or from a
securities dealer that agrees to repurchase the securities from the Portfolio at
a higher price on a designated future date. Repurchase agreements generally are
for a short period of time, usually less than a week. 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.

POLICIES AND LIMITATIONS. Repurchase agreements with a maturity of more
than seven days are considered to be illiquid securities; no Portfolio may enter
into such a repurchase agreement if, as a result, more than 15% (10% in the case
of Neuberger Berman CASH RESERVES Portfolio) of the value of its net assets
would then be invested in such repurchase agreements and other illiquid
securities. A Portfolio may enter into a repurchase agreement only if (1) the
underlying securities are of the type (excluding maturity and duration
limitations) that the Portfolio's investment policies and limitations would
allow it to purchase directly, (2) the market value of the underlying
securities, including accrued interest, at all times equals or exceeds the
repurchase price, and (3) payment for the underlying securities is made only
upon satisfactory evidence that the securities are being held for the
Portfolio's account by its custodian or a bank acting as the Portfolio's agent.

SECURITIES LOANS (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN GOVERNMENT
MONEY PORTFOLIO). Each of these Portfolios 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
100% of the market value of the loaned securities, is continuously maintained by
the borrower with the Portfolio. The Portfolio may invest the cash collateral
and earn income, or it may receive an agreed upon amount of interest income from
a borrower who has delivered equivalent collateral. During the time securities
are on loan, the borrower will pay the Portfolio an amount equivalent to any
dividends or interest paid on such securities. These loans are subject to
termination at the option of the Portfolio or the borrower. The Portfolio may
pay reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. The Portfolio does not have the
right to vote securities on loan, but would terminate the loan and regain the
right to vote if that were considered important with respect to the investment.
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.

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The collateral, which must be marked to market daily, must be equal to at least
100% of the market value of the loaned securities, which will also be marked to
market daily.

RESTRICTED SECURITIES AND RULE 144A SECURITIES (ALL PORTFOLIOS EXCEPT
NEUBERGER BERMAN GOVERNMENT MONEY PORTFOLIO). The Portfolios 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 Portfolio qualify under Rule
144A and an institutional market develops for those securities, the Portfolio
likely will be able to dispose of the securities without registering them under
the 1933 Act. To the extent that institutional buyers become, for a time,
uninterested in purchasing these securities, investing in Rule 144A securities
could increase the level of a Portfolio's illiquidity. NB Management, acting
under guidelines established by the Portfolio 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 Portfolio may be obligated to pay all
or part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Portfolio may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
for which no market exists are priced by a method that the Portfolio 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 Portfolio's 15% (10% in the case of Neuberger Berman CASH RESERVES
Portfolio) limit on investments in illiquid securities.

COMMERCIAL PAPER (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN GOVERNMENT
MONEY PORTFOLIO). Commercial paper is a short-term debt security issued by a
corporation, bank, municipality, or other issuer, usually for purposes such as
financing current operations. Each Portfolio may invest in commercial paper that
cannot be resold to the public without an effective registration statement under
the 1933 Act. While restricted commercial paper normally is deemed illiquid, NB
Management may in certain cases determine that such paper is liquid, pursuant to
guidelines established by the Portfolio Trustees.

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REVERSE REPURCHASE AGREEMENTS (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN
GOVERNMENT MONEY PORTFOLIO). In a reverse repurchase agreement, a Portfolio
sells portfolio securities subject to its agreement to repurchase the securities
at a later date for a fixed price reflecting a market rate of interest. Reverse
repurchase agreements may increase fluctuations in a Portfolio's and its
corresponding Fund's NAVs and may be viewed as a form of leverage. 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 the Portfolio. NB Management monitors the creditworthiness of counterparties
to reverse repurchase agreements.

POLICIES AND LIMITATIONS. Reverse repurchase agreements are considered
borrowings for purposes of each Portfolio's investment policies and limitations
concerning borrowings. While a reverse repurchase agreement is outstanding, a
Portfolio 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 each Portfolio's obligations under the agreement.

BANKING AND SAVINGS INSTITUTION SECURITIES (ALL PORTFOLIOS EXCEPT
NEUBERGER BERMAN GOVERNMENT MONEY PORTFOLIO). These include CDs, time deposits,
bankers' acceptances, and other short-term and long-term debt obligations issued
by commercial banks and savings institutions. CDs are receipts for funds
deposited for a specified period of time at a specified rate of return; time
deposits generally are similar to CDs, but are uncertificated. Bankers'
acceptances are time drafts drawn on commercial banks by borrowers, usually in
connection with international commercial transactions. The CDs, time deposits,
and bankers' acceptances in which the Portfolios invest typically are not
covered by deposit insurance.

POLICIES AND LIMITATIONS. Neuberger Berman CASH RESERVES Portfolio may
invest 25% or more of its total assets in CDs or banker's acceptances issued by
domestic branches of U.S. banks. CD is interpreted to include similar types of
time deposits. The Portfolio may invest in securities issued by a commercial
bank or savings institution only if (1) the bank or institution has total assets
of at least $1,000,000,000, (2) the bank or institution is on NB Management's
approved list, and (3) in the case of a foreign bank or institution, the
securities are, in NB Management's opinion, of an investment quality comparable
with other debt securities that may be purchased by the Portfolio. These
limitations do not prohibit investments in securities issued by foreign branches
of U.S. banks that meet the foregoing requirements.

VARIABLE OR FLOATING RATE SECURITIES; DEMAND AND PUT FEATURES (ALL
PORTFOLIOS EXCEPT NEUBERGER BERMAN GOVERNMENT MONEY PORTFOLIO). Variable rate
securities provide for automatic adjustment of the interest rate at fixed
intervals (e.g., daily, monthly, or semi-annually); floating rate securities
provide for automatic adjustment of the interest rate whenever a specified
interest rate or index changes. The interest rate on variable and floating rate
securities (collectively, "Adjustable Rate Securities") ordinarily is determined
by reference to a particular bank's prime rate, the 90-day U.S. Treasury Bill
rate, the rate of return on commercial paper or bank CDs, an index of short-term
tax-exempt rates or some other objective measure.

Adjustable Rate Securities frequently permit the holder to demand
payment of the obligations' principal and accrued interest at any time or at
specified intervals not exceeding one year. The demand feature usually is backed

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by a credit instrument (e.g., a bank letter of credit) from a creditworthy
issuer and sometimes by insurance from a creditworthy insurer. Without these
credit enhancements, some Adjustable Rate Securities might not meet a
Portfolios' quality standards. Accordingly, in purchasing these securities, each
Portfolio relies primarily on the creditworthiness of the credit instrument
issuer or the insurer. A Portfolio can also buy fixed rate securities
accompanied by a demand feature or by a put option, which permits the Portfolio
to sell the security to the issuer or third party at a specified price. A
Portfolio may rely on the creditworthiness of issuers of the credit enhancements
in purchasing these securities.

Among the Adjustable Rate Securities in which Neuberger Berman CASH
RESERVES Portfolio may invest are so-called guaranteed investment contracts
("GICs") issued by insurance companies. In the event of insolvency of the
issuing insurance company, the ability of the Portfolio to recover its assets
may depend on the treatment of GICs under state insurance laws.

POLICIES AND LIMITATIONS. Except for Neuberger Berman CASH RESERVES
Portfolio, no Portfolio may invest more than 5% of its total assets in
securities backed by credit instruments from any one issuer or by insurance from
any one insurer. For purposes of this limitation, each Portfolio, except for
Neuberger Berman CASH RESERVES Portfolio, excludes securities that do not rely
on the credit instrument or insurance for their ratings, i.e., stand on their
own credit. Neuberger Berman Cash Reserves Portfolio may invest in securities
subject to demand features or guarantees as permitted by Rule 2a-7 under the
1940 Act.

For purposes of determining its dollar-weighted average maturity, each
Portfolio calculates the remaining maturity of variable and floating rate
instruments as provided in Rule 2a-7 under the 1940 Act. In calculating its
dollar-weighted average maturity and duration, each Portfolio is permitted to
treat certain Adjustable Rate Securities as maturing on a date prior to the date
on which the final repayment of principal must unconditionally be made. In
applying such maturity shortening devices, NB Management considers whether the
interest rate reset is expected to cause the security to trade at approximately
its par value.

GICs are generally regarded as illiquid. Thus, Neuberger Berman CASH
RESERVES Portfolio may not invest in such GICs if, as a result, more than 10% of
the value of its net assets would then be invested in such GICs and other
illiquid securities.

MORTGAGE-BACKED SECURITIES (ALL PORTFOLIOS). Mortgage-backed securities
represent direct or indirect participations in, or are secured by and payable
from, pools of mortgage loans. They may be issued or guaranteed by a U.S.
Government agency or instrumentality (such as GNMA, Fannie Mae, and Freddie
Mac), though not necessarily backed by the full faith and credit of the United
States, or may be issued by private issuers. Private issuers are generally
originators of and investors in mortgage loans and include savings associations,
mortgage bankers, commercial banks, investment bankers, and special purpose
entities. Private mortgage-backed securities may be supported by U.S. Government
Agency mortgage-backed securities or some form of non-governmental credit
enhancement.

Mortgage-backed securities may have either fixed or adjustable interest
rates. Tax or regulatory changes may adversely affect the mortgage securities
market. In addition, changes in the market's perception of the issuer may affect

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the value of mortgage-backed securities. The rate of return on mortgage-backed
securities may be affected by prepayments of principal on the underlying loans,
which generally increase as market interest rates decline; as a result, when
interest rates decline, holders of these securities normally do not benefit from
appreciation in market value to the same extent as holders of other non-callable
debt securities.

Because many mortgages are repaid early, the actual maturity and
duration of mortgage-backed securities are typically shorter than their stated
final maturity and their duration calculated solely on the basis of the stated
life and payment schedule. In calculating its dollar-weighted average maturity
and duration, a Portfolio may apply certain industry conventions regarding the
maturity and duration of mortgage-backed instruments. Different analysts use
different models and assumptions in making these determinations. The Portfolios
use an approach that NB Management believes is reasonable in light of all
relevant circumstances. If this determination is not borne out in practice, it
could positively or negatively affect the value of the Portfolio when market
interest rates change. Increasing market interest rates generally extend the
effective maturities of mortgage-backed securities, increasing their sensitivity
to interest rate changes.

Mortgage-backed securities may be issued in the form of CMOs or
collateralized mortgage-backed bonds ("CBOs"). CMOs are obligations that are
fully collateralized, directly or indirectly, by a pool of mortgages; payments
of principal and interest on the mortgages are passed through to the holders of
the CMOs, although not necessarily on a pro rata basis, on the same schedule as
they are received. CBOs are general obligations of the issuer that are fully
collateralized, directly or indirectly, by a pool of mortgages. The mortgages
serve as collateral for the issuer's payment obligations on the bonds, but
interest and principal payments on the mortgages are not passed through either
directly (as with mortgage-backed "pass-through" securities issued or guaranteed
by U.S. Government agencies or instrumentalities) or on a modified basis (as
with CMOs). Accordingly, a change in the rate of prepayments on the pool of
mortgages could change the effective maturity or the duration of a CMO but not
that of a CBO(although, like many bonds, CBOs may be callable by the issuer
prior to maturity). To the extent that rising interest rates cause prepayments
to occur at a slower than expected rate, a CMO could be converted into a
longer-term security that is subject to greater risk of price volatility.

Governmental, government-related, and private entities (such as
commercial banks, savings institutions, private mortgage insurance companies,
mortgage bankers, and other secondary market issuers, including securities
broker-dealers and special purpose entities that generally are affiliates of the
foregoing established to issue such securities) may create mortgage loan pools
to back CMOs and CBOs. Such issuers may be the originators and/or servicers of
the underlying mortgage loans, as well as the guarantors of the mortgage-backed
securities. Pools created by non-governmental issuers generally offer a higher
rate of interest than governmental and government-related pools because of the
absence of direct or indirect government or agency guarantees. Various forms of
insurance or guarantees, including individual loan, title, pool, and hazard
insurance and letters of credit, may support timely payment of interest and
principal of non-governmental pools. Governmental entities, private insurers,
and mortgage poolers issue these forms of insurance and guarantees. NB
Management considers such insurance and guarantees, as well as the
creditworthiness of the issuers thereof, in determining whether a
mortgage-backed security meets a Portfolio's investment quality standards. There

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can be no assurance that private insurers or guarantors can meet their
obligations under insurance policies or guarantee arrangements. A Portfolio may
buy mortgage-backed securities without insurance or guarantees, if NB Management
determines that the securities meet the Portfolio's quality standards. NB
Management will, consistent with the Portfolios' investment objectives, policies
and limitations and quality standards, consider making investments in new types
of mortgage-backed securities as such securities are developed and offered to
investors.

POLICIES AND LIMITATIONS. A Portfolio may not purchase mortgage-backed
securities that, in NB Management's opinion, are illiquid if, as a result, more
than 15% (10% in the case of Neuberger Berman CASH RESERVES Portfolio and
Neuberger Berman GOVERNMENT MONEY Portfolio) of the Portfolio's net assets would
be invested in illiquid securities. Neuberger Berman GOVERNMENT MONEY Portfolio
may invest in U.S. Government mortgage-backed securities only if they are backed
by the full faith and credit of the United States.

REAL ESTATE-RELATED INSTRUMENTS (Neuberger Berman HIGH YIELD Bond
Portfolio). Real estate-related instruments include 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.

Equity REITs own real estate properties, while mortgage REITs make
construction, development, and long-term mortgage loans. Their value may be
affected by changes in the value of the underlying property or the quality of
the credit extended. Both types of trusts 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 Internal Revenue Code of 1986, as amended
("Code"), and failing to maintain exemption from the 1940 Act.

ASSET-BACKED SECURITIES (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN
GOVERNMENT MONEY PORTFOLIO). Asset-backed securities represent direct or
indirect participations in, or are secured by and payable from, pools of assets
such as motor vehicle installment sales contracts, installment loan contracts,
leases of various types of real and personal property, and receivables from
revolving credit (credit card) agreements. These assets are securitized through
the use of trusts and special purpose corporations. Credit enhancements, such as
various forms of cash collateral accounts or letters of credit, may support
payments of principal and interest on asset-backed securities. Although these
securities may be supported by letters of credit or other credit enhancements,
payment of interest and principal ultimately depends upon individuals paying the
underlying loans, which may be affected adversely by general downturns in the
economy. Asset-backed securities are subject to the same risk of prepayment
described with respect to mortgage-backed securities. The risk that recovery on
repossessed collateral might be unavailable or inadequate to support payments,
however, is greater for asset-backed securities than for mortgage-backed
securities.

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Certificates for Automobile ReceivablesSM ("CARSSM") represent
undivided fractional interests in a trust whose assets consist of a pool of
motor vehicle retail installment sales contracts and security interests in the
vehicles securing those contracts. Payments of principal and interest on the
underlying contracts are passed through monthly to certificate holders and are
guaranteed up to specified amounts by a letter of credit issued by a financial
institution unaffiliated with the trustee or originator of the trust. Underlying
installment sales contracts are subject to prepayment, which may reduce the
overall return to certificate holders. Certificate holders also may experience
delays in payment or losses on CARSSM if the trust does not realize the full
amounts due on underlying installment sales contracts because of unanticipated
legal or administrative costs of enforcing the contracts; depreciation, damage,
or loss of the vehicles securing the contracts; or other factors.

Credit card receivable securities are backed by receivables from
revolving credit card agreements ("Accounts"). Credit balances on Accounts are
generally paid down more rapidly than are automobile contracts. Most of the
credit card receivable securities issued publicly to date have been pass-through
certificates. In order to lengthen their maturity or duration, most such
securities provide for a fixed period during which only interest payments on the
underlying Accounts are passed through to the security holder; principal
payments received on the Accounts are used to fund the transfer of additional
credit card charges made on the Accounts to the pool of assets supporting the
securities. Usually, the initial fixed period may be shortened if specified
events occur which signal a potential deterioration in the quality of the assets
backing the security, such as the imposition of a cap on interest rates. An
issuer's ability to extend the life of an issue of credit card receivable
securities thus depends on the continued generation of principal amounts in the
underlying Accounts and the non-occurrence of the specified events. The
non-deductibility of consumer interest, as well as competitive and general
economic factors, could adversely affect the rate at which new receivables are
created in an Account and conveyed to an issuer, thereby shortening the expected
weighted average life of the related security and reducing its yield. An
acceleration in cardholders' payment rates or any other event that shortens the
period during which additional credit card charges on an Account may be
transferred to the pool of assets supporting the related security could have a
similar effect on its weighted average life and yield.

Credit cardholders are entitled to the protection of state and federal
consumer credit laws. Many of those laws give a holder the right to set off
certain amounts against balances owed on the credit card, thereby reducing
amounts paid on Accounts. In addition, unlike the collateral for most other
asset-backed securities, Accounts are unsecured obligations of the cardholder.

Neuberger Berman LIMITED MATURITY Bond Portfolio and Neuberger Berman
HIGH Yield Bond Portfolio each may invest in trust preferred securities, which
are a type of asset-backed security. Trust preferred securities represent
interests in a trust formed by a parent company to finance its operations. The
trust sells preferred shares and invests the proceeds in debt securities of the
parent. This debt may be subordinated and unsecured. Dividend payments on the
trust preferred securities match the interest payments on the debt securities;
if no interest is paid on the debt securities, the trust will not make current
payments on its preferred securities. Unlike typical asset-backed securities,
which have many underlying payors and are usually overcollateralized, trust

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preferred securities have only one underlying payor and are not
overcollateralized. Issuers of trust preferred securities and their parents
currently enjoy favorable tax treatment. If the tax characterization of trust
preferred securities were to change, they could be redeemed by the issuers,
which could result in a loss to a Portfolio.

U.S. DOLLAR-DENOMINATED FOREIGN DEBT SECURITIES (ALL PORTFOLIOS EXCEPT
NEUBERGER BERMAN GOVERNMENT MONEY PORTFOLIO). These are securities of foreign
issuers (including banks, governments and quasi-governmental organizations) and
foreign branches of U.S. banks, including negotiable CDs, bankers' acceptances,
and commercial paper. 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 local, political, social, diplomatic and economic
developments (including political instability) and the potentially adverse
effects of unavailability of public information regarding issuers, less
governmental supervision and regulation of financial markets, reduced liquidity
of certain financial markets, and the lack of uniform accounting, auditing, and
financial reporting standards or the application of standards that are different
or less stringent than those applied in the United States. It may be difficult
to invoke legal process or to enforce contractual obligations abroad.

POLICIES AND LIMITATIONS. These investments are subject to each
Portfolio's quality, maturity, and duration standards.

FOREIGN CURRENCY DENOMINATED FOREIGN SECURITIES (NEUBERGER BERMAN HIGH
YIELD BOND PORTFOLIO AND NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO).
Foreign currency denominated foreign securities are denominated in or indexed to
foreign currencies, including (1) CDs, commercial paper, fixed time deposits,
and bankers' acceptances issued by foreign banks, (2) obligations of other
corporations, and (3) obligations of foreign governments, 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 section, and the additional risks of (1) adverse changes in foreign
exchange rates, (2) nationalization, expropriation, or confiscatory taxation,
and (3) 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 may be subject to foreign
taxes, including taxes withheld from those payments.

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 the Portfolio are uninvested
and no return is earned thereon. The inability of the Portfolio to make intended

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security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio 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.

POLICIES AND LIMITATIONS. Each Portfolio may invest up to 25% of its
net assets in foreign securities denominated in or indexed to foreign currencies
and, with respect to Neuberger Berman HIGH YIELD Bond Portfolio, American
Depositary Receipts ("ADRs") on such securities. Within that limitation,
however, neither Portfolio is restricted in the amount it may invest in
securities denominated in any one foreign currency. The Portfolios invest in
foreign currency denominated foreign securities of issuers in countries whose
governments are considered stable by NB Management.

AMERICAN DEPOSITARY RECEIPTS (Neuberger Berman HIGH YIELD Bond
Portfolio). ADRs are receipts typically issued by a U.S. bank or trust company
evidencing its ownership of the underlying foreign securities. Most ADRs are
denominated in U.S. dollars and are traded on a U.S. stock exchange. Issuers of
the securities underlying sponsored ADRs, but not unsponsored ADRs, are
contractually obligated to disclose material information in the United States.
Therefore, the market value of unsponsored ADRs is less likely to reflect the
effect of such information.

POLICIES AND LIMITATIONS. ADRs on foreign securities which are
denominated in foreign currencies are subject to the Portfolio's 25% limit on
foreign securities denominated in foreign currencies.

DOLLAR ROLLS (NEUBERGER BERMAN HIGH YIELD BOND PORTFOLIO AND NEUBERGER
BERMAN LIMITED MATURITY BOND PORTFOLIO). In a "dollar roll," a Portfolio sells
securities for delivery in the current month and simultaneously agrees to
repurchase substantially similar (i.e., same type and coupon) securities on a
specified future date from the same party. During the period before the
repurchase, the Portfolio forgoes principal and interest payments on the
securities. The Portfolio is compensated by the difference between the current
sales price and the forward price for the future purchase (often referred to as
the "drop"), as well as by the interest earned on the cash proceeds of the
initial sale. Dollar rolls may increase fluctuations in a Portfolio's and its
corresponding Fund's NAVs and may be viewed as a form of leverage. A "covered
roll" is a specific type of dollar roll in which the Portfolio holds an
offsetting cash position or a cash-equivalent securities position that matures
on or before the forward settlement date of the dollar roll transaction. There
is a risk that the contra-party will be unable or unwilling to complete the

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transaction as scheduled, which may result in losses to the Portfolio. NB
Management monitors the creditworthiness of counterparties to dollar rolls.

POLICIES AND LIMITATIONS. Dollar rolls are considered borrowings for
purposes of a Portfolios' investment policies and limitations concerning
borrowings.

WHEN-ISSUED TRANSACTIONS (ALL PORTFOLIOS). These transactions may
involve mortgage-backed securities such as GNMA, Fannie Mae, and Freddie Mac
certificates. These transactions involve a commitment by a Portfolio to purchase
securities that will be issued at a future date (ordinarily within two months,
although the Portfolio 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 are
negotiated directly with the other party, and such commitments are not traded on
exchanges.

When-issued transactions enable a Portfolio 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. In periods
of falling interest rates and rising prices, a Portfolio might purchase a
security on a when-issued basis and sell a similar security to settle such
purchase, thereby obtaining the benefit of currently higher yields. If the
seller fails to complete the sale, the Portfolio may lose the opportunity to
obtain a favorable price.

The value of securities purchased on a when-issued basis and any
subsequent fluctuations in their value are reflected in the computation of a
Portfolio's net asset value ("NAV") starting on the date of the agreement to
purchase the securities. Because the Portfolio has not yet paid for the
securities, this produces an effect similar to leverage. The Portfolio does not
earn interest on securities it has committed to purchase until the securities
are paid for and delivered on the settlement date.

POLICIES AND LIMITATIONS. A Portfolio will purchase securities on a
when-issued basis only with the intention of completing the transaction and
actually purchasing the securities. If deemed advisable as a matter of
investment strategy, however, a Portfolio may dispose of or renegotiate a
commitment after it has been entered into. A Portfolio also may sell securities
it has committed to purchase before those securities are delivered to the
Portfolio on the settlement date. The Portfolio may realize capital gains or
losses in connection with these transactions.

When a Portfolio purchases securities on a when-issued basis, it will
deposit in a segregated account with its custodian, until payment is made,
appropriate liquid securities having an aggregate market value (determined
daily) at least equal to the amount of the Portfolio's purchase commitments.
This procedure is designed to ensure that the Portfolio maintains sufficient
assets at all times to cover its obligations under when-issued purchases.

FUTURES CONTRACTS AND OPTIONS THEREON (NEUBERGER BERMAN HIGH YIELD BOND
PORTFOLIO AND NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO). The Portfolios
may purchase and sell interest rate and bond index futures contracts and options
thereon, and may purchase and sell foreign currency futures contracts (with

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interest rate and bond index futures contracts, "Futures" or "Futures
Contracts") and options thereon in an attempt to hedge against changes in the
prices of securities or, in the case of foreign currency futures and options
thereon, to hedge against changes in prevailing currency exchange rates. Because
the futures markets may be more liquid than the cash markets, the use of Futures
permits a Portfolio to enhance portfolio liquidity and maintain a defensive
position without having to sell portfolio securities. The Portfolios view
investment in (1) interest rate and bond index Futures and options thereon as a
maturity or duration management device and/or a device to reduce risk and
preserve total return in an adverse interest rate environment for the hedged
securities and (2) 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 held or intended to be acquired by
the Portfolios.

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 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 (except certain currency Futures) are traded on exchanges
that have been designated as "contract markets" by the Commodity Futures Trading
Commission ("CFTC"); Futures transactions must be executed through a futures
commission merchant that is a member of the relevant contract market. The
exchange's affiliated clearing organization guarantees performance of the
contracts between the clearing members of the exchange.

Although Futures Contracts by their terms may require the actual
delivery or acquisition of the underlying securities or currency, in most cases
the contractual obligation is extinguished by being offset before the expiration
of the contract, without the parties having to make or take delivery of the
assets. A Futures position is offset by buying (to offset an earlier sale) or
selling (to offset an earlier purchase) an identical Futures Contract calling
for delivery in the same month. This may result in a profit or loss. While
futures contracts entered into by a Portfolio will usually be liquidated in this
manner, the Portfolio may instead make or take delivery of underlying securities
whenever it appears economically advantageous for it to do so.

"Margin" with respect to Futures is the amount of assets that must be
deposited by a Portfolio with, or for the benefit of, a futures commission
merchant in order to initiate and maintain the Portfolio's Futures positions.
The margin deposit made by a Portfolio when it enters into a Futures Contract
("initial margin") is intended to assure its performance of the contract. If the
price of the Futures Contract changes -- increases in the case of a short (sale)
position or decreases in the case of a long (purchase) position -- so that the
unrealized loss on the contract causes the margin deposit not to satisfy margin
requirements, the Portfolio will be required to make an additional margin
deposit ("variation margin"). However, if favorable price changes in the Futures
Contract cause the margin on deposit to exceed the required margin, the excess
will be paid to the Portfolio. In computing its daily NAV, each Portfolio marks
to market the value of its open Futures positions. A Portfolio also must make

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margin deposits with respect to options on Futures that it has written (but not
with respect to options on futures that it has purchased). If the futures
commission merchant holding the deposit goes bankrupt, the Portfolio 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 Portfolio believes that the use of Futures Contracts 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, a
Portfolio's overall return would be lower than if it had not entered into any
such contracts. The prices of Futures 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 and of the securities and
currencies being hedged can be only approximate due to differences between the
futures and securities markets or differences between the securities or
currencies underlying a Portfolio's futures position and the securities held by
or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.

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 an 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 thus 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 investors to substantial losses. If this were to happen with respect
to a position held by a Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.

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POLICIES AND LIMITATIONS. The Portfolios may purchase and sell interest
rate and bond index Futures and may purchase and sell options thereon in an
attempt to hedge against changes in securities prices resulting from changes in
prevailing interest rates. The Portfolios engage in foreign currency Futures and
options transactions in an attempt to hedge against changes in prevailing
currency exchange rates. Neither Portfolio engages in transactions in Futures or
options thereon for speculation.

CALL OPTIONS ON SECURITIES (NEUBERGER BERMAN HIGH YIELD BOND PORTFOLIO
AND NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO). Each Portfolio may write
covered call options and may purchase call options. The purpose of writing
covered call options is to hedge (I.E., to reduce, at least in part, the effect
of price fluctuations of securities held by the Portfolio on the Portfolio's and
its corresponding Fund's NAVs) or to earn premium income. Portfolio securities
on which call options may be written and purchased by a Portfolio are purchased
solely on the basis of investment considerations consistent with the Portfolio's
investment objective.

When a Portfolio 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. That Portfolio receives a premium
for writing the option. When writing call options, each Portfolio writes only
"covered" call options on securities it owns. So long as the obligation of the
call option continues, that Portfolio may be assigned an exercise notice,
requiring it to deliver the underlying security against payment of the exercise
price. A Portfolio may be obligated to deliver securities underlying a call
option at less than the market price.

When a Portfolio purchases a call option, it pays a premium for the
right to purchase a security from the writer at a specified price until a
specified date. A Portfolio would purchase a call option to protect against an
increase in the price of securities it intends to purchase or to offset a
previously written call option.

The writing of covered call options is a conservative investment
technique that is believed to involve relatively little risk (in contrast to the
writing of "naked" or uncovered call options, which the Portfolios will not do),
but is capable of enhancing a Portfolio's total return. When writing a covered
call option, a Portfolio, in return for the premium, gives up the opportunity
for profit from a price increase in the underlying security above the exercise
price, but conversely retains the risk of loss should the price of the security
decline. When writing a put option, a Portfolio, in return for the premium,
takes the risk that it must purchase the underlying security at a price which
may be higher than the current market price of the security. If a call or put
option that a Portfolio has written expires unexercised, that Portfolio will
realize a gain in the amount of the premium; however, in the case of a call
option, that gain may be offset by a decline in the market value of the
underlying security during the option period. If the call option is exercised,
the Portfolio will realize a gain or loss from the sale of the underlying
security.

POLICIES AND LIMITATIONS. Each Portfolio may write covered call options
and may purchase call options on debt securities in its portfolio or on foreign
currencies in its portfolio for hedging purposes. Each Portfolio may write
covered call options for the purpose of producing income. Each Portfolio will
write a call option on a security only if it holds that security or currency or
has the right to obtain the security or currency at no additional cost.

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PUT OPTIONS ON SECURITIES (NEUBERGER BERMAN HIGH YIELD BOND PORTFOLIO
AND NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO). Each Portfolio may write
and purchase put options on securities. A Portfolio will receive a premium for
writing a put option, which obligates that Portfolio to acquire a security at a
certain price at any time until a certain date if the purchaser of the option
decides to exercise the option. A Portfolio may be obligated to purchase the
underlying security at more than its current value.

When a Portfolio purchases a put option, it pays a premium to the
writer for the right to sell a security to the writer for a specified amount at
any time until a certain date. A Portfolio might purchase a put option in order
to protect itself against a decline in the market value of a security it owns.

Portfolio securities on which put options may be written and purchased
by a Portfolio are purchased solely on the basis of investment considerations
consistent with the Portfolio's investment objective. When writing a put option,
a Portfolio, 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 Portfolio has written expires
unexercised, the Portfolio will realize a gain in the amount of the premium.

POLICIES AND LIMITATIONS. Each Portfolio generally writes and purchases
put options on securities or on foreign currencies for hedging purposes (i.e.,
to reduce, at least in part, the effect of price fluctuations of securities held
by the Portfolio on the Portfolio's and its corresponding Fund's NAVs).

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. The obligation under
any option written by a Portfolio 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 Portfolio and is never exercised or closed out, that
Portfolio will lose the entire amount of the premium paid.

Options are traded both on national securities exchanges and in the
over-the-counter ("OTC") market. Exchange-traded options in the U.S. 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
Portfolio and a counterparty, with no clearing organization guarantee. Thus,
when a Portfolio sells (or purchases) an OTC option, it generally will be able
to "close out" the option prior to its expiration only by entering into a
"closing transaction" with the dealer to whom (or from whom) that Portfolio
originally sold (or purchased) the option. There can be no assurance that a
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless a Portfolio is able to effect a closing purchase transaction
in a covered OTC call option it has written, it will not be able to liquidate
securities used as cover until the option expires or is exercised or until
different cover is substituted. In the event of the counterparty's insolvency, a
Portfolio may be unable to liquidate its options position and the associated

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cover. NB Management monitors the creditworthiness of dealers with which the
Portfolios may engage in OTC options transactions.

The premium received (or paid) by the Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable 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 the Portfolio for
writing an option is recorded as a liability on the Portfolio's statement of
assets and liabilities. This liability is adjusted daily to the option's current
market value, which is the last reported sales price before the time the
Portfolio's NAV is computed on the day the option is being valued or, in the
absence of any trades thereof on that day, the mean between the bid and asked
prices as of that time.

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 a Portfolio 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 the Portfolio
will be able to effect closing transactions at favorable prices. If a Portfolio
cannot enter into such a transaction, it may be required to hold a security that
it might otherwise have sold (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 Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.

A Portfolio pays brokerage commissions or spreads in connection with
purchasing or writing options, including those used to close out existing
positions. These brokerage commissions normally are higher than those applicable
to purchases and sales of portfolio securities. From time to time, the Portfolio
may purchase an underlying security for delivery in accordance with an exercise
notice of a call option assigned to it, rather than delivering the security from
its portfolio. In those cases, additional brokerage commissions are incurred.

POLICIES AND LIMITATIONS. The assets used as cover (or held in a
segregated account) for OTC options written by a Portfolio will be considered
illiquid unless the OTC options are sold to qualified dealers who agree that the
Portfolio may repurchase any OTC option it writes at a maximum price to be
calculated by a formula set forth in the option agreement. The cover for an OTC
call option written subject to this procedure will be considered illiquid only
to the extent that the maximum repurchase price under the formula exceeds the
intrinsic value of the option.

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FORWARD FOREIGN CURRENCY CONTRACTS (NEUBERGER BERMAN HIGH YIELD BOND
PORTFOLIO AND NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO). Each Portfolio
may enter into contracts for the purchase or sale of a specific foreign currency
at a future date at a fixed price ("Forward Contracts"). Each Portfolio enters
into Forward Contracts in an attempt to hedge against changes in prevailing
currency exchange rates. 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 Portfolio that are denominated
in a foreign currency or protecting the U.S. dollar equivalent of dividends,
interest, or other payments on those securities.

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 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 and 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 Portfolio could be in a less
advantageous position than if such a hedge or proxy-hedge had not been
established. If a Portfolio 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 Portfolio's securities 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 Portfolio
may experience delays in the settlement of its foreign currency transactions.

POLICIES AND LIMITATIONS. The Portfolios do not engage in transactions
in Forward Contracts for speculation; they view investments in Forward Contracts
as a means of establishing more definitely the effective return on, or the
purchase price of, securities denominated in foreign currencies that are held or
intended to be acquired by them.

OPTIONS ON FOREIGN CURRENCIES (NEUBERGER BERMAN HIGH YIELD BOND
PORTFOLIO AND NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO). Each Portfolio
may write and purchase covered call and put options on foreign currencies.
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. The Portfolio 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 dollar equivalent of dividends, interest, or other payments on
those securities.

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REGULATORY LIMITATIONS ON USING FUTURES, OPTIONS ON FUTURES, OPTIONS ON
SECURITIES AND FOREIGN CURRENCIES, AND FORWARD CONTRACTS (COLLECTIVELY, "HEDGING
INSTRUMENTS") (NEUBERGER BERMAN HIGH YIELD BOND PORTFOLIO AND NEUBERGER BERMAN
LIMITED MATURITY BOND PORTFOLIO). To the extent a Portfolio sells or purchases
Futures Contracts and/or writes options thereon or options on foreign currencies
that are traded on an exchange regulated by the CFTC other than for BONA FIDE
hedging purposes (as defined by the CFTC), the aggregate initial margin and
premiums on these positions (excluding the amount by which options are
"in-the-money") may not exceed 5% of the Portfolio's net assets.

COVER FOR HEDGING INSTRUMENTS (NEUBERGER BERMAN HIGH YIELD BOND
PORTFOLIO AND NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO). Each Portfolio
will comply with SEC guidelines regarding "cover" for Hedging Instruments and,
if the guidelines so require, set aside in a segregated account with its
custodian the prescribed amount of cash or appropriate liquid securities.
Securities held in a segregated account cannot be sold while the Futures,
option, or forward strategy covered by those securities is outstanding, unless
they are replaced with other suitable assets. As a result, segregation of a
large percentage of a Portfolio's assets could impede portfolio management or
the Portfolio's ability to meet current obligations. A Portfolio may be unable
promptly to dispose of assets which cover, or are segregated with respect to, an
illiquid Futures, options, or forward position; this inability may result in a
loss to the Portfolio.

POLICIES AND LIMITATIONS. Each Portfolio will comply with SEC
guidelines regarding "cover" for Hedging Instruments and, if the guidelines so
require, set aside in a segregated account with its custodian the prescribed
amount of cash or appropriate liquid securities.

GENERAL RISKS OF HEDGING INSTRUMENTS (NEUBERGER BERMAN HIGH YIELD BOND
PORTFOLIO AND NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO). The primary
risks in using Hedging 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 Portfolio and changes in the market value of Hedging
Instruments; (2) possible lack of a liquid secondary market for Hedging
Instruments and the resulting inability to close out Hedging Instruments when
desired; (3) the fact that the skills needed to use Hedging Instruments are
different from those needed to select a Portfolio's securities; (4) the fact
that, although use of Hedging Instruments for hedging purposes can reduce the
risk of loss, they also can reduce the opportunity for gain, or even result in
losses, by offsetting favorable price movements in hedged investments; and (5)
the possible inability of a Portfolio to purchase or sell a portfolio security
at a time that would otherwise be favorable for it to do so, or the possible
need for a Portfolio to sell a portfolio security at a disadvantageous time, due
to its need to maintain cover or to segregate securities in connection with its
use of Hedging Instruments. There can be no assurance that a Portfolio's use of
Hedging Instruments will be successful.

A Portfolio's use of Hedging Instruments may be limited by certain
provisions of the Code with which it must comply if its corresponding Fund is to
continue to qualify as a regulated investment company ("RIC"). See "Additional
Tax Information -- Taxation of Portfolios."

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POLICIES AND LIMITATIONS. NB Management intends to reduce the risk
of imperfect correlation by investing only in Hedging Instruments whose behavior
is expected to resemble or offset that of a Portfolio's underlying securities or
currency. NB Management intends to reduce the risk that a Portfolio will be
unable to close out Hedging Instruments by entering into such transactions only
if NB Management believes there will be an active and liquid secondary market.

INDEXED SECURITIES (NEUBERGER BERMAN HIGH YIELD BOND PORTFOLIO AND
NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO). The Portfolio may invest in
securities whose value is linked to interest rates, commodities, foreign
currencies, indices, or other financial indicators ("indexed securities"). 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
or to one or more options thereon. An indexed security may be more volatile than
the underlying instrument itself.

ZERO COUPON, STEP COUPON AND PAY-IN-KIND SECURITIES (ALL PORTFOLIOS).
Each Portfolio may invest in zero coupon securities; Neuberger Berman LIMITED
MATURITY Bond Portfolio and Neuberger Berman HIGH YIELD Bond Portfolio may
invest in step coupon securities. Neuberger Berman HIGH YIELD Bond Portfolio may
also invest in pay-in-kind securities. These securities 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 and step coupon securities are issued and traded at a
significant 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. Zero coupon and step coupon securities are redeemed at face value when
they mature. The discount on zero coupon and step coupon securities ("original
issue discount" or "OID") must be taken into income ratably by each such
Portfolio prior to the receipt of any actual payments. Pay-in-kind securities
pay interest through the issuance of additional securities.

Because its corresponding Fund must distribute substantially all of its
net income (including its share of the Portfolio's non-cash income attributable
to zero coupon, step coupon and pay-in-kind securities) to its shareholders each
year for income and excise tax purposes, each such Portfolio may have to dispose
of portfolio securities under disadvantageous circumstances to generate cash, or
may be required to borrow, to satisfy its corresponding Fund's distribution
requirements. See "Additional Tax Information."

The market prices of zero coupon, step coupon and pay-in-kind
securities generally are more volatile than the prices of securities that pay
interest periodically. Zero coupon securities are likely to respond to changes
in interest rates to a greater degree than other types of debt securities having
similar maturities and credit quality.

SWAP AGREEMENTS (NEUBERGER BERMAN HIGH YIELD BOND PORTFOLIO). To help
enhance the value of its portfolio or manage its exposure to different types of
investments, the Portfolio may enter into interest rate and mortgage swap
agreements and may purchase and sell interest rate "caps," "floors," and
"collars." In a typical interest-rate swap agreement, one party agrees to make

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<PAGE>

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. If a swap agreement provides for payment in different
currencies, the parties may agree to exchange the principal amount. Mortgage
swap agreements are similar to interest-rate swap agreements, except the
notional principal amount is tied to a reference pool of mortgages.

In a cap or floor, one party agrees, usually in return for a fee, to
make payments under particular circumstances. For example, the purchaser of an
interest-rate cap has the right to receive payments to the extent a specified
interest rate exceeds an agreed level; the purchaser of an interest-rate floor
has the right to receive payments to the extent a specified interest rate falls
below an agreed level. A collar entitles the purchaser to receive payments to
the extent a specified interest rate falls outside an agreed range.

Swap agreements may involve leverage and may be highly volatile;
depending on how they are used, they may have a considerable impact on the
Portfolio's performance. The risks of swap agreements depend upon the other
party's creditworthiness and ability to perform, as well as the Portfolio'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,
the Portfolio will segregate cash or 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 Portfolio will segregate only the amount of its
net obligation, if any.

MUNICIPAL OBLIGATIONS (NEUBERGER BERMAN CASH RESERVES PORTFOLIO,
NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO AND NEUBERGER BERMAN HIGH YIELD
BOND PORTFOLIO). Municipal obligations are issued by or on behalf of states, the
District of Columbia, and U.S. territories and possessions and their political
subdivisions, agencies, and instrumentalities. The interest on municipal
obligations is generally exempt from federal income tax. The tax-exempt status
of any issue of municipal obligations is determined on the basis of an opinion
of the issuer's bond counsel at the time the obligations are issued.

Municipal obligations include "general obligation" securities, which
are backed by the full taxing power of a municipality, and "revenue" securities,
which are backed only by the income from a specific project, facility, or tax.
Municipal obligations also include industrial development and private activity
bonds which are issued by or on behalf of public authorities, but are not backed
by the credit of any governmental or public authority. "Anticipation notes" are
issued by municipalities in expectation of future proceeds from the issuance of
bonds or from taxes or other revenues, and are payable from those bond proceeds,
taxes, or revenues. Municipal obligations also include tax-exempt commercial
paper, which is issued by municipalities to help finance short-term capital or
operating requirements.

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<PAGE>

generated by the facility financed by the bonds or, in certain other instances,
the provider of the credit facility backing the bonds). As with other fixed
income securities, an increase in interest rates generally will reduce the value
of a Portfolio's investments in municipal obligations, whereas a decline in
interest rates generally will increase that value.

Current efforts to restructure the federal budget and the relationship
between the federal government and state and local governments may adversely
impact the financing of some issuers of municipal securities. Some states and
localities are experiencing substantial deficits and may find it difficult for
political or economic reasons to increase taxes. Efforts are under way that may
result in a restructuring of the federal income tax system. These developments
could reduce the value of all municipal securities, or the securities of
particular issuers.

POLICIES AND LIMITATIONS. Neuberger Berman LIMITED MATURITY Bond
Portfolio may invest up to 5% of its net assets in municipal obligations.
Neuberger Berman CASH RESERVES Portfolio may invest in municipal obligations
that otherwise meet its criteria for quality and maturity. Neuberger Berman HIGH
YIELD Bond Portfolio may invest in municipal obligations but has no current
intention of doing so.

LOWER-RATED DEBT SECURITIES (NEUBERGER BERMAN LIMITED MATURITY BOND
PORTFOLIO AND NEUBERGER BERMAN HIGH YIELD BOND PORTFOLIO). Lower-rated debt
securities or "junk bonds" are those rated below the fourth highest category by
all NRSROs that have rated them (including those securities rated as low as D by
S&P) or unrated securities of comparable quality. Securities rated below
investment grade may be considered speculative. These securities are deemed to
be predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal. Lower rated debt securities generally offer a
higher current yield than that available for investment grade issues with
similar maturities, but they may involve significant risk under adverse
conditions. In particular, adverse changes in general economic conditions and in
the industries in which the issuers are engaged and changes in the financial
condition of the issuers are more likely to cause price volatility and weaken
the capacity of the issuer to make principal and interest payments than is the
case for higher-grade debt securities. In addition, a Portfolio that invests in
lower-quality securities may incur additional expenses to the extent recovery is
sought on defaulted securities. Because of the many risks involved in investing
in high-yield securities, the success of such investments is dependent on the
credit analysis of NB Management.

During periods of economic downturn or rising interest rates, highly
leveraged issuers may experience financial stress which could adversely affect
their ability to make payments of interest and principal and increase the
possibility of default. In addition, such issuers may not have more traditional
methods of financing available to them and may be unable to repay debt at
maturity by refinancing. The risk of loss due to default by such issuers is
significantly greater because such securities frequently are unsecured and
subordinated to the prior payment of senior indebtedness.

The market for lower rated debt securities has expanded rapidly in
recent years, and its growth generally paralleled a long economic expansion. In
the past, the prices of many lower rated debt securities declined substantially,
reflecting an expectation that many issuers of such securities might experience

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<PAGE>

financial difficulties. As a result, the yields on lower rated debt securities
rose dramatically. However, such higher yields did not reflect the value of the
income stream that holders of such securities expected, but rather the risk that
holders of such securities could lose a substantial portion of their value as a
result of the issuers' financial restructuring or defaults. There can be no
assurance that such declines will not recur.

The market for lower rated debt issues generally is thinner or less
active than that for higher quality securities, which may limit a Fund's ability
to sell such securities at fair value in response to changes in the economy or
financial markets. Judgment may play a greater role in pricing such securities
than it does for more liquid securities. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower rated debt securities, especially in a thinly
traded market.

See Appendix A for further information about the ratings of debt
securities assigned by S&P and Moody's.

POLICIES AND LIMITATIONS. Neuberger Berman HIGH YIELD Bond Portfolio
normally will invest at least 65% of its total assets in lower-rated debt
securities. Neuberger Berman LIMITED MATURITY Bond Portfolio may invest up to
10% of its net assets in lower-rated debt securities; the Portfolio will not
invest in such securities unless, at the time of purchase, they are rated at
least B by Moody's or S&P or, if unrated by either of those entities, deemed by
NB Management to be of comparable quality.

DIRECT DEBT INSTRUMENTS (NEUBERGER BERMAN HIGH YIELD BOND PORTFOLIO).
Direct debt includes loan participations, notes, assignments and other interests
in amounts owed to financial institutions by borrowers, such as companies and
governments, including emerging market countries. The Portfolio could buy all or
part of a loan or participate in a syndicate organized by a bank. These loans
may be secured or unsecured. Direct debt instruments are interests in amounts
owed by a corporate, governmental, or other borrowers (including emerging market
countries) to lenders or lending syndicates. Purchasers of loans and other forms
of direct indebtedness depend primarily upon the creditworthiness of the
borrower for payment of principal and interest. The borrower may be in financial
distress or may default or have a right to borrow additional cash from the
owners of direct debt. If the Portfolio does not receive scheduled interest or
principal payments on such indebtedness, the Fund's share price and yield could
be adversely affected. Direct debt instruments may involve a risk of insolvency
of the lending bank or intermediary. Direct indebtedness of developing countries
involves a risk that the governmental entities responsible for the repayment of
the debt may be unable or unwilling to pay interest and repay principal when
due. See the additional risks described under "Foreign Securities" in this SAI.

Because the Portfolio's ability to receive payments in connection with
loan participations depends on the financial condition of the borrower, NB
Management will not rely solely on a bank or other lending institution's credit
analysis of the borrower, but will perform its own investment analysis of the
borrowers. NB Management's analysis may include consideration of the borrower's
financial strength, managerial experience, debt coverage, additional borrowing
requirements or debt maturity schedules, changing financial conditions, and
responsiveness to changes in business conditions and interest rates. Loan

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<PAGE>

participations are not generally rated by independent rating agencies and
therefore, investments in a particular loan participation will depend almost
exclusively on the credit analysis of the borrower performed by NB Management
and the original lending institution.

There are usually fewer legal protections for owners of direct debt
than conventional debt securities. Loans are often administered by a lead bank,
which acts as agent for the lenders in dealing with the borrower. In asserting
rights against the borrower, the Portfolio may be dependent on the willingness
of the lead bank to assert these rights, or upon a vote of all the lenders to
authorize the action. Assets held by the lead bank for the benefit of the
Portfolio may be subject to claims of the lead bank's creditors.

Although some of the loans in which the Portfolio invests may be
secured, there is no assurance that the collateral can be liquidated in
particular cases, or that its liquidation value will be equal to the value of
the debt. Borrowers that are in bankruptcy may pay only a small portion of the
amount owed, if they are able to pay at all. Where the Portfolio purchases a
loan through an assignment, there is a possibility that the Portfolio will, in
the event the borrower is unable to pay the loan, become the owner of the
collateral, and thus will be required to bear the costs of liabilities
associated with owning and disposing of the collateral.

There may not be a recognizable, liquid public market for loan
participations.

POLICIES AND LIMITATIONS. To the extent direct debt is deemed illiquid,
such an investment is subject to the Portfolio's restriction on investing no
more than 15% of its net assets in illiquid securities. The Portfolio's policies
limit the percentage of its assets that can be invested in the securities of
issuers primarily involved in one industry. Legal interpretations by the SEC
staff may require the Portfolio, in some instances, to treat both the lending
bank and the borrower as "issuers" of a loan participation by the Portfolio. In
combination, the Portfolio's policies and the SEC staff's interpretations may
limit the amount the Portfolio can invest in loan participations.

CONVERTIBLE SECURITIES (NEUBERGER BERMAN HIGH YIELD BOND PORTFOLIO). 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 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.

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<PAGE>

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
governing instrument. If a convertible security held by the Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common stock, sell it to a third party or permit the issuer to redeem the
security. Any of these actions could have an adverse effect on the Portfolio's
and the Fund's ability to achieve their investment objectives.

POLICIES AND LIMITATIONS. Securities convertible into common stock are
subject to the Portfolio's 20% limitation on equity securities.

PREFERRED STOCK (NEUBERGER BERMAN HIGH YIELD BOND PORTFOLIO). 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.

WARRANTS (NEUBERGER BERMAN HIGH YIELD BOND PORTFOLIO). Warrants may be
acquired by the Portfolio in connection with other securities or separately and
provide the Portfolio with the right to purchase at a later date other
securities of the issuer. Warrants are securities permitting, but not
obligating, their holder to subscribe for other securities or commodities.
Warrants do not carry with them the right to dividends or voting rights with
respect to the securities that they entitle their holder to purchase, and they
do not represent any rights in the assets of the issuer. As a result, warrants
may be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities and a warrant ceases to have value if it is not
exercised prior to its expiration date.

Risks of Fixed Income Securities
- --------------------------------

Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). Lower-rated securities are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates.

RATINGS OF FIXED INCOME SECURITIES

As discussed in the Prospectus, the Portfolios may purchase securities
rated by Standard & Poor's ("S&P"), Moody's Investors Service, Inc. ("Moody's"),
or any other nationally recognized statistical rating organization ("NRSRO").
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, duration, coupon, and rating may have
different yields. Although the Portfolios may rely on the ratings of any NRSRO,
the Portfolios mainly refer to ratings assigned by S&P and Moody's, which are

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<PAGE>

described in Appendix A. Each Portfolio may also invest in unrated securities
that are deemed comparable in quality by NB Management to the rated securities
in which the Portfolio may permissibly invest.

HIGH-QUALITY DEBT SECURITIES. High-quality debt securities are
securities that have received a rating from at least one NRSRO, such as S&P or
Moody's, in one of the two highest rating categories (the highest category in
the case of commercial paper) or, if not rated by any NRSRO, such as U.S.
Government and Agency Securities, have been determined by NB Management to be of
comparable quality. If two or more NRSROs have rated a security, at least two of
them must rate it as high quality if the security is to be eligible for purchase
by Neuberger Berman CASH RESERVES Portfolio.

INVESTMENT GRADE DEBT SECURITIES. Investment grade debt securities are
securities that have received a rating from at least one NRSRO in one of the
four highest rating categories or, if not rated by any NRSRO, have been
determined by NB Management to be of comparable quality. Moody's deems
securities rated in its fourth highest category (Baa) to have speculative
characteristics; a change in economic factors could lead to a weakened capacity
of the issuer to repay.

LOWER-RATED DEBT SECURITIES. Lower-rated debt securities or "junk
bonds" are those rated below the fourth highest category by all NRSROs that have
rated them (including those securities rated as low as D by S&P) or unrated
securities of comparable quality. Securities rated below investment grade may be
considered speculative. Securities rated B are judged to be predominantly
speculative with respect to their capacity to pay interest and repay principal
in accordance with the terms of the obligations. Although these securities
generally offer higher yields than investment grade debt securities with similar
maturities, lower-quality securities involve greater risks, including the
possibility of default or bankruptcy by the issuer, or the securities may
already be in default. See the additional risks described above for lower-rated
securities.

Subsequent to its purchase by a Portfolio, an issue of debt securities
may cease to be rated or its rating may be reduced, so that the securities would
no longer be eligible for purchase by that Portfolio. In such a case, with
respect to Neuberger Berman LIMITED MATURITY Bond Portfolio, NB Management will
engage in an orderly disposition of the downgraded securities or other
securities to the extent necessary to ensure the Portfolio's holdings of
securities that are considered by the Portfolio to be below investment grade
will not exceed 10% of its net assets. Neuberger Berman LIMITED MATURITY Bond
Portfolio may hold up to 5% of its net assets in securities that are downgraded
after purchase to a rating below that permissible by the Portfolio's investment
policies. With respect to the money market Portfolios, NB Management will
consider the need to dispose of such securities in accordance with the
requirements of Rule 2a-7 under the 1940 Act.

DURATION AND MATURITY

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<PAGE>

principal. For all Portfolios except the money market portfolios, NB Management
utilizes duration as a tool in portfolio selection instead of the more
traditional measure known as "term to maturity." "Term to maturity" measures
only the time until a debt security provides its final payment, taking no
account of the pattern of the security's payments prior to maturity. Duration
incorporates a bond's yield, coupon interest payments, final maturity and call
features into one measure. Duration therefore provides a more accurate
measurement of a bond's likely price change in response to a given change in
market interest rates. The longer the duration, the greater the bond's price
movement will be as interest rates change. For any fixed income security with
interest payments occurring prior to the payment of principal, duration is
always less than maturity.

Futures, options and options on futures have durations which are
generally related to the duration of the securities underlying them. Holding
long futures or call option positions will lengthen a Portfolio's duration by
approximately the same amount as would holding an equivalent amount of the
underlying securities. Short futures or put options have durations roughly equal
to the negative of the duration of the securities that underlie these positions,
and have the effect of reducing portfolio duration by approximately the same
amount as would selling an equivalent amount of the underlying securities.

There are some situations where even the standard duration calculation
does not properly reflect the interest rate exposure of a security. For example,
floating and variable rate securities often have final maturities of ten or more
years; however, their interest rate exposure corresponds to the frequency of the
coupon reset. Another example where the interest rate exposure is not properly
captured by duration is the case of mortgage-backed securities. The stated final
maturity of such securities is generally 30 years, but current and expected
prepayment rates are critical in determining the securities' interest rate
exposure. In these and other similar situations, NB Management, where permitted,
will use more sophisticated analytical techniques that incorporate the economic
life of a security into the determination of its interest rate exposure.

Neuberger Berman GOVERNMENT MONEY Portfolio and Neuberger Berman CASH
RESERVES Portfolio are required to maintain a dollar-weighted average portfolio
maturity of no more than 90 days and invest in a portfolio of debt instruments
with remaining maturities of 397 days or less. Neuberger Berman HIGH YIELD Bond
Portfolio has no dollar-weighted average duration or maturity and has no limits
on the maturity of its individual investments. Neuberger Berman LIMITED MATURITY
Bond Portfolio's dollar-weighted average duration will not exceed four years,
although the Portfolio may invest in individual securities of any duration; the
Portfolio's dollar-weighted average maturity may range up to five years.

Risks of Equity Securities
- --------------------------

Equity securities in which Neuberger Berman HIGH YIELD Bond Fund may
invest include common stocks, preferred stocks, convertible securities and
warrants. Common stocks and preferred stocks represent shares of ownership in a
corporation. Preferred stocks usually have specific dividends and rank after
bonds and before common stock in claims on assets of the corporation should it
be dissolved. Increases and decreases in earnings are usually reflected in a
corporation's stock price. Convertible securities are debt or preferred equity
securities convertible into common stock. Usually, convertible securities pay

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<PAGE>

dividends or interest at rates higher than common stock, but lower than other
securities. Convertible securities usually participate to some extent in the
appreciation or depreciation of the underlying stock into which they are
convertible. Warrants are options to buy a stated number of shares of common
stock at a specified price anytime during the life of the warrants.

To the extent this Portfolio invests in such securities, the value of
securities held by the Portfolio will be affected by changes in the stock
markets, which may be the result of domestic or international political or
economic news, changes in interest rates or changing investor sentiment. At
times, the stock markets can be volatile and stock prices can change
substantially. The equity securities of smaller companies are more sensitive to
these changes than those of larger companies. This market risk will affect the
Portfolio's and the Fund's NAVs per share, which will fluctuate as the value of
the securities held by the Portfolio change. Not all stock prices change
uniformly or at the same time and not all stock markets move in the same
direction at the same time. Other factors affect a particular stock's prices,
such as poor earnings reports by an issuer, loss of major customers, major
litigation against an issuer, or changes in governmental regulations affecting
an industry. Adverse news affecting one company can sometimes depress the stock
prices of all companies in the same industry. Not all factors can be predicted.

CERTAIN RISK CONSIDERATIONS

A Fund's investment in its corresponding Portfolio may be affected by
the actions of other large investors in the Portfolio, if any. For example, if a
large investor in a Portfolio (other than a Fund) redeemed its interest in the
Portfolio, the Portfolio's remaining investors (including the Fund) might, as a
result, experience higher pro rata operating expenses, thereby producing lower
returns.

PERFORMANCE INFORMATION

Each Fund's performance figures are based on historical results and are
not intended to indicate future performance. The yield and total return of each
Fund will vary. The share prices of HIGH YIELD and LIMITED MATURITY will vary,
and an investment in either of these Funds, when redeemed, may be worth more or
less than an investor's original cost.

NEUBERGER BERMAN HIGH YIELD BOND FUND: PERFORMANCE OF SIMILAR ACCOUNTS.
Neuberger Berman has managed a private account with an investment objective,
policies and strategy substantially similar to those of HIGH YIELD ("Private
Account"). Below you will find historical composite total return information for
the Private Account, as compared to a market index. This composite performance
information is provided to illustrate the past performance of Neuberger Berman
in managing substantially similar accounts. It assumes reinvestment of all
dividends and other distributions. THE COMPOSITE PERFORMANCE OF THE PRIVATE
ACCOUNT DOES NOT REPRESENT THE HISTORICAL PERFORMANCE OF THE FUND AND IS NOT
INDICATIVE OF THE FUND'S FUTURE PERFORMANCE.

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<PAGE>

Certain investment restrictions imposed by law on registered investment
companies such as the Fund are not applicable to the Private Account and may
have adversely affected the performance of the Private Account had they been
applicable. In addition, the Private Accounts have lower overall expenses than
the Fund; had the expenses of the Private Account been the same as those of the
Fund, the Private Account's total return would have been lower than that shown
here.

Total Returns for the periods ending October 31, 1998:

One Year Since Inception*
-------- ----------------

Private Account 3.85% 9.37%

Lehman Brothers -0.50% 7.66%
High Yield Index+

* Inception of the Private Account, April 30, 1996.

+ The Lehman Brothers High Yield Index includes all U.S. domestic fixed
income securities having a maximum quality rating of Ba1 by Moody's (including
defaulted issues), a minimum principal amount outstanding of $100 million, and a
remaining term to maturity of at least one year, other than payment-in-kind
securities and Eurobonds. Unlike the Private Account and the Fund, the Index
does not take into account any of the actual costs of investing, such as
management fees.

The information set forth above relies on data supplied by Neuberger
Berman or derived by Neuberger Berman from statistical services, reports or
other sources Neuberger Berman believes to be reliable.

Custodial fees and any expenses for services not provided by NB
Management are not reflected in the Private Account's total return information.
The method used to calculate the total return for the Private Account is a
widely-recognized method for calculating the total return of private accounts.
This method may differ in certain respects from the method mandated by the SEC
for calculating the Funds' total return information. However, NB Management
believes that any differences in the performance calculations resulting from the
differences in these methods would be slight. If permitted by applicable law,
HIGH YIELD may advertise the Private Account's prior performance information.

Yield Calculations
- ------------------

GOVERNMENT MONEY AND CASH RESERVES. Each of these Funds may
advertise its "current yield" and "effective yield" in the financial press and
other publications. A Fund's CURRENT YIELD is based on the return for a recent
seven-day period and is computed by determining the net change (excluding

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<PAGE>

capital changes) in the value of a hypothetical account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period. The result is a
"base period return," which is then annualized -- that is, the amount of income
generated during the seven-day period is assumed to be generated each week over
a 52-week period -- and shown as an annual percentage of the investment.

The EFFECTIVE YIELD of these Funds is calculated similarly, but the
base period return is assumed to be reinvested. The assumed reinvestment is
calculated by adding 1 to the base period return, raising the sum to a power
equal to 365 divided by seven, and subtracting one from the result, according to
the following formula:

Effective Yield = [(Base Period Return + 1)365/7] - 1.

For the seven calendar days ended October 31, 1998, the current
yields of GOVERNMENT MONEY and CASH RESERVES were 4.26% and 4.74%, respectively.
For the same period, the effective yields were 4.35% and 4.85%, respectively.

HIGH YIELD AND LIMITED MATURITY. Each of these Funds may advertise
its "yield" based on a 30-day (or one month) period. This YIELD is computed by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period. The result then
is annualized and shown as an annual percentage of the investment.

The annualized yields for LIMITED MATURITY and HIGH YIELD,
respectively, for the 30-day period ended October 31, 1998 were 5.35% and 9.93%.

Tax Equivalent Yield - State and Local Taxes
- --------------------------------------------

GOVERNMENT MONEY. Substantially all of the dividends paid by
GOVERNMENT MONEY represent income received by its corresponding Portfolio on
direct obligations of the U.S. Government and, as a result, are not subject to
income tax in most states and localities. From time to time, this Fund may
advertise a "tax equivalent yield" for one or more of those states or localities
that reflects the taxable yield that an investor subject to the highest marginal
rate of state or local income tax would have had to receive in order to realize
the same level of after-tax yield produced by an investment in the Fund. TAX
EQUIVALENT YIELD is calculated according to the following formula:

Tax Equivalent Yield = Y1 over 1-MR + Y2

where Y1 equals that portion of the Fund's current or effective yield that is
not subject to state or local income tax, Y2 equals that portion of the Fund's
current or effective yield that is subject to that tax, and MR equals the
highest marginal tax rate of the state or locality for which the tax equivalent
yield is being calculated.

- 37 -
<PAGE>

The calculation of tax equivalent yield can be illustrated by the
following example. If the current yield for a 7-day period was 5%, and during
that period 100% of the income was attributable to interest on direct
obligations of the U.S. Government and, therefore, was not subject to income
taxation in most states and localities, a taxpayer residing in New York (and
subject to that state's highest marginal 1998 tax rate of 7.35%) would have to
have received a taxable current yield of 5.40% in order to equal the 5%
after-tax yield. Moreover, if that taxpayer also were subject to income taxation
by New York City at a marginal 1998 rate of 4.46%, the taxpayer would have to
have received a taxable current yield of 5.67% to equal the 5% after-tax yield.

The use of a 5% yield in this example is for illustrative purposes
only and is not indicative of the Fund's future performance. Of course, all
dividends paid by GOVERNMENT MONEY are subject to federal income taxation at
applicable rates.

Total Return Computations
- -------------------------

LIMITED MATURITY and HIGH YIELD 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:

P(1+T) (subscript)n = ERV

Average annual total return smoothes out year-to-year variations in performance
and, in that respect, differs from actual year-to-year results.

For the one-, five-, and ten-year periods ended October 31, 1998,
the average annual total returns for LIMITED MATURITY and its predecessor were
.92%, 5.12%, and 6.86%, respectively. If an investor had invested $10,000 in
that predecessor's shares on June 9, 1986, and had reinvested all capital gain
distributions and income dividends, the value of that investor's holdings would
have been $22,639 on October 31, 1998.

For the fiscal period ended October 31, 1998, the aggregate annual
total return for HIGH YIELD from commencement of operations, March 3, 1998, was
- -1.69%.

NB Management may from time to time reimburse a Fund or Portfolio
for a portion of its expenses. Such action has the effect of increasing yield
and total return. Actual reimbursements are described in the Prospectus and in
"Investment Management and Administration Services" below.

Comparative Information
- -----------------------

From time to time each Fund's performance may be compared with:

(1) data (that may be expressed as rankings or ratings) published by
independent services or publications (including newspapers,
newsletters, and financial periodicals) that monitor the performance

- 38 -
<PAGE>

of mutual funds, such as Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Wiesenberger Investment Companies
Service, IBC/Financial Data Inc.'s Money Market Fund Report,
Investment Company Data Inc., Morningstar Inc., Micropal
Incorporated and quarterly mutual fund rankings by Money, Fortune,
Forbes, Business Week, Personal Investor, and U.S. News & World
Report magazines, The Wall Street Journal, The New York Times,
Kiplinger's Personal Finance, and Barron's Newspaper, or

(2) recognized bond, stock, and other indices such as the Lehman
Brothers Bond Index, the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500 Index"), Dow Jones Industrial Average ("DJIA"),
S&P/BARRA Index, Russell Index, and various other domestic,
international, and global indices and changes in the U.S. Department
of Labor Consumer Price Index. The S&P 500 Index is a broad index of
common stock prices, while the DJIA represents a narrower segment of
industrial companies. Each assumes reinvestment of distributions and
is calculated without regard to tax consequences or the costs of
investing. Each Portfolio may invest in different types of
securities from those included in some of the above indices.

Each Fund's performance also may be compared from time to time with
the following specific indices, among others, and other measures of performance:

GOVERNMENT MONEY'S and CASH RESERVES' performance may be
compared, respectively, with IBC/Financial Data Inc.'s
Government Money Market Funds average and Taxable General
Purpose Money Market Funds average.

LIMITED MATURITY'S performance may be compared with the Merrill
Lynch 1-3 Year Treasury Index, the Lehman Brothers Intermediate
Government/Corporate Bond Index, as well as the performance of
Treasury Securities, corporate bonds, and the Lipper Short
Investment Grade Debt Funds category.

HIGH YIELD'S performance may be compared with the Lehman
Brothers High Yield Bond Index, the Lehman Brothers Aggregate
Bond Index, the Lehman Brothers Corporate Bond Index, First
Boston High Yield Bond Fund Index, the Merrill Lynch High Yield
Master Index, and the Lipper High Yield Bond Fund Index as well
as the performance of Treasury securities and corporate bonds.

Each Fund may invest some of its assets in different types of
securities than those included in the index used as a comparison with the Fund's
historical performance. A Fund may also compare certain indices, which represent
different segments of the securities markets, for the purpose of comparing the
historical returns and volatility of those particular market segments. Measures
of volatility show the range of historical price fluctuations. Standard
deviation may be used as a measure of volatility. There are other measures of
volatility, which may yield different results.

- 39 -
<PAGE>

In addition, each Fund's performance may be compared at times with
that of various bank instruments (including bank money market accounts and CDs
of varying maturities) as reported in publications such as The Bank Rate
Monitor. Any such comparisons may be useful to investors who wish to compare a
Fund's past performance with that of certain of its competitors. Of course, past
performance is not a guarantee of future results. Unlike an investment in a
Fund, bank CDs pay a fixed rate of interest for a stated period of time and are
insured up to $100,000.

The Funds may also be compared to individual asset classes such as
common stocks, small-cap stocks, or Treasury bonds, based on information
supplied by Ibbotson and Sinquefield. Evaluations of the Funds' performance,
their yield/ total returns and comparisons may be used in advertisements and in
information furnished to current and prospective shareholders (collectively,
"Advertisements").

Other Performance Information
- -----------------------------

From time to time, information about a Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements for its corresponding Fund. This information may include the
Portfolio's portfolio diversification by asset type. Information used in
Advertisements may include statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as (1) funding retirement, (2) paying for
children's education, and (3) financially supporting aging parents.

Information (including charts and illustrations) showing the effects
of compounding interest may be included in Advertisements from time to time.
Compounding is the process of earning interest on principal plus interest that
was earned earlier. Interest can be compounded at different intervals, such as
annually, semi-annually, quarterly, monthly, or daily. For example, $1,000
compounded annually at 9% will grow to $1,090 at the end of the first year (an
increase of $90) and $1,188 at the end of the second year (an increase of $98).
The extra $8 that was earned on the $90 interest from the first year is the
compound interest. One thousand dollars compounded annually at 9% will grow to
$2,367 at the end of ten years and $5,604 at the end of twenty years. Other
examples of compounding are as follows: at 7% and 12% annually, $1,000 will grow
to $1,967 and $3,106, respectively, at the end of ten years and $3,870 and
$9,646, respectively, at the end of twenty years. All these examples are for
illustrative purposes only and are not indicative of any Fund's performance.

Information relating to inflation and its effects on the dollar also
may be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)

Information (including charts and illustrations) showing the total
return performance for government funds, 6-month CDs and money market funds may
be included in Advertisements from time to time.

- 40 -
<PAGE>

Information regarding the effects of automatic investing and
systematic withdrawal plans, investing at market highs and/or lows, and
investing early versus late for retirement plans also may be included in
Advertisements, if appropriate.

TRUSTEES AND OFFICERS

The following table sets forth information concerning the trustees
and officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by NB Management and Neuberger
Berman.
<TABLE>
<CAPTION>

Positions
Name, Address Held With
and Age(1) the TRUSTS Principal Occupation(s)(2)
- ----------- ----------- -----------------------
<S> <C> <C>

John Cannon (69) Trustee of each Senior Vice President of AMA
CDC Capital Management Trust Investment Advisers, Inc.
450 Sentry Parkway (1991-1993); Chairman and Chief
Suite 105 Investment Officer of CDC
P.O. Box 1212 Capital Management (registered
Blue Bell, PA 19422 investment adviser)
(1993-present).

Stanley Egener* (64) Chairman of the Principal of Neuberger Berman;
Board, Chief President and Director of NB
Executive Management; Chairman of the
Officer, and Board, Chief Executive Officer
Trustee of each and Trustee of nine other mutual
Trust funds for which NB Management
acts as investment manager or
administrator.

Theodore P. Giuliano*(46) President and Principal of Neuberger Berman;
Trustee of each Vice President and Director of
Trust NB Management; President and
Trustee of one other mutual fund
for which NB Management acts as
administrator.

Barry Hirsch (65) Trustee of each Senior Vice President, Secretary,
Loews Corporation Trust and General Counsel of Loews
667 Madison Avenue Corporation (diversified financial
7th Floor corporation).
New York, NY 10021

- 41 -
<PAGE>

Positions
Name, Address Held With
and Age(1) the TRUSTS Principal Occupation(s)(2)
- ----------- ----------- -----------------------

Robert A. Kavesh (71) Trustee of each Professor of Finance and
110 Bleecker Street Trust Economics at Stern School of
Apt. 24B Business, New York University;
New York, NY 10012 Director of Del Laboratories,
Inc. and Greater New York Mutual
Insurance Co.

William E. Rulon (66) Trustee of each Retired. Senior Vice President
1761 Hotel Circle South Trust of Foodmaker, Inc. (operator and
San Diego, CA 92108 franchiser of restaurants) until
January 1997; Secretary of
Foodmaker, Inc. until July 1996.

Candace L. Straight (51) Trustee of each Private investor and consultant
518 E. Passaic Avenue Trust specializing in the insurance
Bloomfield, NJ 07003 industry; Principal of Head &
Company, LLC (limited liability
company providing investment
banking and consulting services
to the insurance industry) until
March 1996; Director of Drake
Holdings (U.K. motor
insurer)until June 1996.

Daniel J. Sullivan (59) Vice President Senior Vice President of NB
of each Trust Management since 1992; prior
thereto, Vice President of NB
Management; Vice President of
nine other mutual funds for which
NB Management acts as investment
manager or administrator.

Michael J. Weiner (52) Vice President Senior Vice President of NB
and Principal Management since 1992; Treasurer
Financial of NB Management from 1992 to
Officer of each 1996; prior thereto, Vice
Trust President and Treasurer of NB
Management and Treasurer of
certain mutual funds for which NB

- 42 -
<PAGE>

Positions
Name, Address Held With
and Age(1) the TRUSTS Principal Occupation(s)(2)
- ----------- ----------- -----------------------

Management acted as investment
adviser; Vice President and
Principal Financial Officer of
nine other mutual funds for which
NB Management acts as investment
manager or administrator.

Claudia A. Brandon (42) Secretary of Vice President of NB Management;
each Trust Secretary of nine other mutual
funds for which NB Management
acts as investment manager or
administrator.

Richard Russell (52) Treasurer and Vice President of NB Management
Principal since 1993; prior thereto,
Accounting Assistant Vice President of NB
Officer of Management; Treasurer and
each Trust Principal Accounting Officer of
nine other mutual funds for
which NB Management acts as
investment manager or
administrator.

Stacy Cooper-Shugrue (36) Assistant Assistant Vice President of NB
Secretary of Management since 1993; prior
each Trust thereto, employee of NB
Management; Assistant Secretary
of nine other mutual funds for
which NB Management acts as
investment manager or
administrator.

C. Carl Randolph (61) Assistant Principal of Neuberger Berman
Secretary of since 1992; prior thereto,
each Trust employee of Neuberger Berman;
Assistant Secretary of nine other
mutual funds for which NB
Management acts as investment
manager or administrator.

Barbara DiGiorgio (40) Assistant Assistant Vice President of NB
Treasurer of Management since 1993; prior
each Trust thereto, employee of NB

- 43 -
<PAGE>

Positions
Name, Address Held With
and Age(1) the TRUSTS Principal Occupation(s)(2)
- ----------- ----------- -----------------------

Management; Assistant Treasurer of
nine other mutual funds for which
NB Management acts as investment
manager or administrator.

Celeste Wischerth (38) Assistant Assistant Vice President of NB
Treasurer of Management since 1994; prior
each Trust thereto, employee of NB
Management; Assistant Treasurer
of nine other mutual funds for
which NB Management acts as
investment manager or
administrator.
</TABLE>

- --------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, NY 10158.

(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.

* Indicates a trustee who is an "interested person" of each Trust
within the meaning of the 1940 Act. Messrs. Egener and Giuliano are interested
persons by virtue of the fact that they are officers and directors of NB
Management and principals of Neuberger Berman.

The Trust's Trust Instrument and Managers Trust's Declaration of
Trust provide that each such Trust will indemnify its trustees and officers
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, unless it is adjudicated that they (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, or by a majority of disinterested trustees based upon a review of
readily available facts, or in a written opinion of independent counsel) that
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.

The following table sets forth information concerning the
compensation of the trustees and officers of the Trust. None of the Neuberger
Berman Funds(R) has any retirement plan for its trustees or officers.

- 44 -
<PAGE>
<TABLE>
<CAPTION>

TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/98

Aggregate Total Compensation from Trusts in
Name and Position Compensation the Neuberger Berman Fund
with the Trust from the Trust Complex Paid to Trustees
- -------------- -------------- -----------------------------
<S> <C> <C>

John Cannon $_____ $_______
Trustee (2 other investment companies)

Stanley Egener $0 $0
Chairman of the Board, Chief (10 other investment
Executive Officer, and Trustee companies)

Theodore P. Giuliano $0 $0
President and Trustee (2 other investment companies)

Barry Hirsch $______ $_______
Trustee (2 other investment companies)

Robert A. Kavesh $______ $_______
Trustee (2 other investment companies)

William E. Rulon $_______ $________
Trustee (2 other investment companies)

Candace L. Straight $_______ $________
Trustee (2 other investment companies)
</TABLE>

At [January __, 1999,] the trustees and officers of the Trust and
Managers Trust, as a group, owned beneficially or of record less than 1% of the
outstanding shares of each Fund.

INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES

Investment Manager and Administrator
- ------------------------------------

Because all of the Funds' net investable assets are invested in
their corresponding Portfolios, the Funds do not need an investment manager. NB
Management serves as the Portfolios' investment manager pursuant to a management
agreement with Managers Trust, on behalf of the Portfolios, dated as of July 2,
1993 ("Management Agreement"). The Management Agreement was approved by the
holders of the interests in all the Portfolios (except for Neuberger Berman HIGH
YIELD Bond Portfolio) on July 2, 1993. The Management Agreement was approved by
the holders of the interests in Neuberger Berman High Yield Bond Portfolio on
March 2, 1998.

The Management Agreement provides, in substance, that NB Management
will make and implement investment decisions for the Portfolios in its

- 45 -
<PAGE>

discretion and will continuously develop an investment program for the
Portfolios' assets. The Management Agreement permits NB Management to effect
securities transactions on behalf of each Portfolio 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 Portfolios, although NB
Management has no current plans to pay a material amount of such compensation.

NB Management provides to each Portfolio, 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
Managers Trust who are officers, directors, or employees of NB Management. Two
officers and directors of NB Management (who also are principals of Neuberger
Berman) presently serve as trustees and officers of the Trusts. See "Trustees
and Officers." Each Portfolio pays NB Management a management fee based on the
Portfolio's average daily net assets, as described in the Prospectus.

NB Management provides similar facilities, services, and personnel
to each Fund pursuant to an administration agreement with the Trust, dated May
1, 1995 ("Administration Agreement"). For such administrative services, each
Fund pays NB Management a fee based on the Fund's average daily net assets, as
described in the Prospectus. HIGH YIELD became subject to the Administration
Agreement on February 3, 1998.

Under the Administration Agreement, NB Management also provides to
each Fund and its shareholders certain shareholder, shareholder-related, and
other services that are not furnished by the Fund's shareholder servicing agent.
NB Management provides the direct shareholder services specified in the
Administration Agreement, assists the shareholder servicing agent in the
development and implementation of specified programs and systems to enhance
overall shareholder servicing capabilities, solicits and gathers 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.
From time to time, NB Management or 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.

Management and Administration Fees
- ----------------------------------

For investment management services, each Portfolio (except Neuberger
Berman HIGH YIELD Bond Portfolio) pays NB Management a fee at the annual rate of
0.25% of the first $500 million of that Portfolio's average daily net assets,
0.225% of the next $500 million, 0.20% of the next $500 million, 0.175% of the
next $500 million, and 0.15% of average daily net assets in excess of $2
billion. Neuberger Berman HIGH YIELD Bond Portfolio pays NB Management a fee at
the annual rate of 0.38% of the first $500 million of that Portfolio's average
daily net assets, 0.355% of the next $500 million, 0.33% of the next $500
million, 0.305% of the next $500 million, and 0.28% of average daily net assets
in excess of $2 billion.

- 46 -
<PAGE>

For administrative services, each Fund pays NB Management at the
annual rate of 0.27% of that Fund's average daily net assets. With a Fund's
consent, NB Management may subcontract to third parties some of its
responsibilities to that Fund under the administration agreement. In addition, a
Fund may compensate such third parties for accounting and other services.

Each Fund accrued management and administration fees of the
following amounts (before any reimbursement of the Funds, described below) for
the fiscal years ended October 31, 1998, 1997, and 1996:

Fund 1998 1997 1996
- ---- ---- ---- ----
GOVERNMENT MONEY $1,879,933 $1,703,377 $1,476,738
CASH RESERVES $4,055,560 $3,160,143 $2,425,550
LIMITED MATURITY $1,471,759 $1,275,694 $1,480,085
HIGH YIELD $72,734 n/a n/a

Expense Reimbursements
- ----------------------

NB Management has voluntarily undertaken to reimburse each Fund
other than GOVERNMENT MONEY for its Operating Expenses (including fees under the
Administration Agreement) and the Fund's pro rata share of the corresponding
Portfolio's Operating Expenses (including fees under the Management Agreement)
that exceed, in the aggregate, 0.65% for CASH RESERVES; 0.70% per annum for
LIMITED MATURITY; and 1.00% for HIGH YIELD of that Fund's average daily net
assets. Operating Expenses exclude interest, taxes, brokerage commissions, and
extraordinary expenses. NB Management can terminate each undertaking by giving
the Fund at least 60 days' prior written notice. For the fiscal years ended
October 31, 1998, 1997, and 1996, NB Management reimbursed the Funds the
following amounts of expenses:

Fund 1998 1997 1996
- ---- ---- ---- ----
CASH RESERVES $0 $0 $90,855

LIMITED MATURITY $143,344 $20,974 $16,575

HIGH YIELD $71,712 n/a n/a

High Yield has agreed to repay NB Management through December 31,
1999 for excess total operating expenses that NB Management has previously
reimbursed to the Fund, provided the repayments do not cause the annual expense
ratio to exceed 1.00% of average daily net assets. During the fiscal year ended
October 31, 1998, High Yield repaid NB Management $0 of expenses that NB
Management reimbursed to the Fund.

The Management Agreement continues with respect to each Portfolio
for a period of two years after the date the Portfolio became subject thereto.

- 48 -
<PAGE>

The Management Agreement is renewable thereafter from year to year with respect
to each Portfolio, so long as its continuance is approved at least annually (1)
by the vote of a majority of the Portfolio Trustees who are not "interested
persons" of NB Management or Managers Trust ("Independent Portfolio Trustees"),
cast in person at a meeting called for the purpose of voting on such approval,
and (2) by the vote of a majority of the Portfolio Trustees or by a 1940 Act
majority vote of the outstanding interests in that Portfolio. The Administration
Agreement continues with respect to each Fund for a period of two years after
the date the Fund became subject thereto. The Administration Agreement is
renewable from year to year with respect to a Fund, so long as its continuance
is approved at least annually (1) by the vote of a majority of the Fund Trustees
who are not "interested persons" of NB Management or the Trust ("Independent
Fund Trustees"), cast in person at a meeting called for the purpose of voting on
such approval and (2) by the vote of a majority of the Fund Trustees or by a
1940 Act majority vote of the outstanding shares in that Fund.

The Management Agreement is terminable, without penalty, with
respect to a Portfolio on 60 days' written notice either by Managers 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.

Sub-adviser
- -----------

NB Management retains Neuberger Berman, 605 Third Avenue, New York,
NY 10158-3698, as sub-adviser with respect to each Portfolio pursuant to a
sub-advisory agreement dated July 2, 1993 ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the holders of the interests in the
Portfolios (except for Neuberger Berman HIGH YIELD Bond Portfolio) on July 2,
1993. The Sub-Advisory Agreement was approved by the holders of the interests in
Neuberger Berman HIGH YIELD Bond Portfolio on March 2, 1998.

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. Neuberger
Berman also serves as a sub-adviser for all of the other mutual funds managed by
NB Management.

- 49 -
<PAGE>

Portfolio by the Portfolio Trustees or a 1940 Act majority vote of the
outstanding interests in that Portfolio, by NB Management, or by Neuberger
Berman on not less than 30 nor more than 60 days' prior written notice to the
appropriate Fund. The Sub-Advisory Agreement also terminates automatically with
respect to each Portfolio if it is assigned or if the Management Agreement
terminates with respect to that Portfolio.

Most money managers that come to the Neuberger Berman organization
have at least fifteen years experience. Neuberger Berman and NB Management
employ experienced professionals that work in a competitive environment.

Investment Companies Managed
- ----------------------------

As of December 31, 1998, the investment companies managed by NB
Management had aggregate net assets of approximately $______ billion. NB
Management currently serves as investment manager of the following investment
companies:

Name December 31, 1998
---- -----------------

Neuberger Berman Cash Reserves Portfolio..........................$ __________
(investment portfolio for Neuberger Berman Cash Reserves)

Neuberger Berman Government Money Portfolio.......................$ __________
(investment portfolio for Neuberger Berman Government Money Fund)

Neuberger Berman High Yield Bond Portfolio........................$ __________
(investment portfolio for Neuberger Berman High Yield Bond Fund)

Neuberger Berman Limited Maturity Bond Portfolio..................$ __________
(investment portfolio for Neuberger Berman Limited Maturity Bond Fund and
Neuberger Berman Limited Maturity Bond Trust)

Neuberger Berman Municipal Money Portfolio........................$ __________
(investment portfolio for Neuberger Berman Municipal Money Fund)

Neuberger Berman Municipal Securities Portfolio...................$ __________
(investment portfolio for Neuberger Berman Municipal Securities Trust)

Neuberger Berman Focus Portfolio..................................$___________
(investment portfolio for Neuberger Berman Focus Fund, Neuberger Berman
Focus Trust, and Neuberger Berman Focus Assets)

Neuberger Berman Genesis Portfolio................................$ __________
(investment portfolio for Neuberger Berman Genesis Fund, Neuberger Berman
Genesis Trust, and Neuberger Berman Genesis Assets)

Neuberger Berman Guardian Portfolio............................. $ __________
(investment portfolio for Neuberger Berman Guardian Fund, Neuberger Berman
Guardian Trust, and Neuberger Berman Guardian Assets)

- 49 -
<PAGE>

Neuberger Berman International Portfolio..........................$ __________
(investment portfolio for Neuberger Berman International Fund and Neuberger
Berman International Trust)

Neuberger Berman Manhattan Portfolio..............................$ __________
(investment portfolio for Neuberger Berman Manhattan Fund, Neuberger Berman
Manhattan Trust, and Neuberger Berman Manhattan Assets)

Neuberger Berman Partners Portfolio................................$ _________
(investment portfolio for Neuberger Berman Partners Fund, Neuberger Berman
Partners Trust, and Neuberger Berman Partners Assets)

Neuberger Berman Socially Responsive Portfolio.....................$ _________
(investment portfolio for Neuberger Berman Socially Responsive Fund,
Neuberger Berman NYCDC Socially Responsive Trust, and Neuberger Berman
Socially Responsive Assets)

Advisers Managers Trust (seven series).............................$ _________

The investment decisions concerning the Portfolios and the other
mutual funds managed by NB Management (collectively, "Other N&B Funds") have
been and will continue to be made independently of one another. In terms of
their investment objectives, most of the Other N&B Funds differ from the
Portfolios. Even where the investment objectives are similar, however, the
methods used by the Other N&B Funds and the Portfolios to achieve their
objectives may differ. The investment results achieved by all of the funds
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 Portfolio and one or more of the Other
N&B Funds or other accounts managed by Neuberger Berman are contemporaneously
engaged in purchasing or selling the same securities from or to third parties.
When this occurs, the transactions are averaged as to price and allocated, 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 Portfolio, in other
cases it is believed that a Portfolio's ability to participate in volume
transactions may produce better executions for it. In any case, it is the
judgment of the Portfolio Trustees that the desirability of the Portfolios'
having their advisory arrangements with NB Management outweighs any
disadvantages that may result from contemporaneous transactions.

Management and Control of Nb Management
- ---------------------------------------

- 50 -
<PAGE>

D'Alelio, Vice President; Clara Del Villar, Vice President; Brian J. Gaffney,
Vice President; Joseph Galli, Vice President; Robert I. Gendelman, Vice
President; Josephine P. Mahaney, Vice President; Michael F. Malouf, Vice
President; Ellen Metzger, Vice President and Secretary; Paul Metzger, Vice
President; S. Basu Mullick, Vice President; Janet W. Prindle, Vice President;
Kevin L. Risen, Vice President; Richard Russell, Vice President; Jennifer K.
Silver, Vice President; Kent C. Simons, Vice President; Frederic B. Soule, Vice
President; Judith M. Vale, Vice President; Susan Walsh, Vice President;
Catherine Waterworth, Vice President; Allan R. White, III, Vice President;
Andrea Trachtenberg, Vice President of Marketing; Robert Conti, Treasurer;
Ramesh Babu, Assistant Vice President; Valerie Chang, Assistant Vice President;
Stacy Cooper-Shugrue, Assistant Vice President; Barbara DiGiorgio, Assistant
Vice President; Michael J. Hanratty, Assistant Vice President; Robert L. Ladd,
Assistant Vice President; Carmen G. Martinez, Assistant Vice President; Joseph
S. Quirk, Assistant Vice President; Ingrid Saukaitis, Assistant Vice President;
Josephine Velez, Assistant Vice President; Celeste Wischerth, Assistant Vice
President; and Loraine Olavarria, Assistant Secretary. Messrs. Cantor, Egener,
Gendelman, Giuliano, Kassen, Lainoff, Zicklin, Risen, Simons, Sundman and White
and Mmes. Prindle, Silver and Vale are principals of Neuberger Berman.

Mr. Giuliano and Mr. Egener are trustees and officers, and Messrs.
Russell, Sullivan and Weiner and Mmes. Brandon, Cooper-Shugrue, DiGiorgio and
Wischerth are officers, of each Trust. C. Carl Randolph, a principal of
Neuberger Berman, also is an officer of each Trust.

All of the outstanding voting stock in NB Management is owned by
persons who are also principals of Neuberger Berman.

DISTRIBUTION ARRANGEMENTS

NB Management serves as the distributor ("Distributor") in
connection with the offering of each Fund's shares on a no-load basis. In
connection with the sale of its shares, each Fund has authorized the Distributor
to give only the information, and to make only the statements and
representations, contained in the Prospectus and this SAI or that properly may
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Funds' "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
arranging for the sale of each Fund's shares without sales commission or other
compensation and bears all advertising and promotion expenses incurred in the
sale of the Funds' shares.

The Distributor or one of its affiliates may, from time to time,
deem it desirable to offer to 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 to the Funds' shareholders any investment products or
services other than those managed or distributed by NB Management or Neuberger
Berman.

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<PAGE>

The Trust, on behalf of each Fund, and the Distributor are parties
to a Distribution Agreement that continues until July 2, 1999. Neuberger Berman
HIGH YIELD Bond Portfolio became a party to the Distribution Agreement on
February 3, 1998. The Distribution Agreement may be renewed annually if
specifically approved by (1) the vote of a majority of the Fund Trustees or a
1940 Act majority vote of the Fund's outstanding shares and (2) the vote of a
majority of the Independent Fund Trustees, cast in person at a meeting called
for the purpose of voting on such approval. The Distribution Agreement may be
terminated by either party and will terminate automatically on its assignment,
in the same manner as the Management Agreement.

ADDITIONAL PURCHASE INFORMATION

Share Prices and Net Asset Value
- --------------------------------

Each Fund's shares are bought or sold at a price that is the Fund's
NAV per share. The NAVs for each Fund and its corresponding Portfolio are
calculated by subtracting liabilities from total assets (in the case of a
Portfolio, the market value of the securities the Portfolio holds plus cash and
other assets; in the case of a Fund, its percentage interest in its
corresponding Portfolio, multiplied by the Portfolio's NAV, plus any other
assets). Each Fund's per share NAV is calculated by dividing its NAV by the
number of Fund shares outstanding and rounding the result to the nearest full
cent.

Neuberger Berman Government Money Fund and Neuberger Berman Cash
Reserves try to maintain stable NAVs of $1.00 per share. Their corresponding
Portfolios value their securities at their cost at the time of purchase and
assume a constant amortization to maturity of any discount or premium. These
Portfolios and their corresponding Funds calculate their NAVs as of noon Eastern
time on each day the NYSE is open.

Neuberger Berman High Yield Bond and Neuberger Berman Limited
Maturity Bond Portfolios value their securities on the basis of bid quotations
from independent pricing services or principal market makers, or, if quotations
are not available, by a method that the trustees of Managers Trust believe
accurately reflects fair value. The Portfolios periodically verify valuations
provided by the pricing services. Short-term securities with remaining
maturities of less than 60 days may be valued at cost which, when combined with
interest earned, approximates market value. These Portfolios and their
corresponding Funds calculate their NAVs as of the close of regular trading on
the NYSE, usually 4 p.m. Eastern time, on each day the NYSE is open.

If NB Management believes that the price of a security obtained
under a Portfolio's valuation procedures (as described above) does not represent
the amount that the Portfolio reasonably expects to receive on a current sale of
the security, the Portfolio will value the security based on a method that the
trustees of Managers Trust believe accurately reflects fair value.

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<PAGE>

Automatic Investing and Dollar Cost Averaging
- ---------------------------------------------

Shareholders may arrange to have a fixed amount automatically
invested in shares of HIGH YIELD or LIMITED MATURITY each month. To do so, a
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. A shareholder who elects
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 Management Incorporated, 605 Third Avenue,
2nd Floor, New York, NY 10158-0180.

Automatic investing enables a shareholder in LIMITED MATURITY or
HIGH YIELD to take advantage of "dollar cost averaging." As a result of dollar
cost averaging, a shareholder's average cost of shares in those Funds 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 Prospectus entitled
"Shareholder Services -- Exchange Privilege," shareholders may redeem at least
$1,000 worth of a Fund's shares and invest the proceeds in shares of one or more
of the Equity, Municipal or other Income Funds that are briefly described below,
provided that the minimum investment requirements of the other fund(s) are met.

Fund shareholders who are considering exchanging shares into any of
the funds described below should note that (1) like the Funds, the Municipal
Funds are series of the Trust, (2) the Equity Funds are series of a Delaware
business trust (named "Neuberger Berman Equity Funds") that is registered with
the SEC as an open-end management investment company, (3) each of the Equity and
Municipal Funds invests all of its net investable assets in a corresponding
portfolio that has an investment objective, policies, and limitations identical
to those of the fund.

EQUITY FUNDS

Neuberger Berman Seeks long-term growth of capital through
Focus Fund investments principally in common stocks
selected from 13 multi-industry economic
sectors. The corresponding portfolio uses a
value-oriented approach to select individual
securities and then focuses its investments
in the sectors in which the undervalued
stocks are clustered. Through this approach,
90% or more of the portfolio's investments
are normally made in not more than six
sectors.

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<PAGE>

Neuberger Berman Seeks growth of capital through investments
Genesis Fund primarily in common stocks of companies with
small market capitalizations (i.e., up to
$1.5 billion) at the time of the Portfolio's
investment. The corresponding portfolio uses
a value-oriented approach to the selection
of individual securities.

Neuberger Berman Seeks long-term growth of capital through
Guardian Fund investments primarily in common stocks of
long-established, high-quality companies
that NB Management believes are
well-managed. The corresponding portfolio
uses a value-oriented approach to the
selection of individual securities. Current
income is a secondary objective. The fund
(or its predecessor) has paid its
shareholders an income dividend every
quarter, and a capital gain distribution
every year, since its inception in 1950,
although there can be no assurance that it
will be able to continue to do so.

Neuberger Berman International Seeks long-term growth of capital by
Fund investing primarily in common stocks of
foreign companies. Assets will be allocated
among economically mature countries and
emerging industrialized countries.

Neuberger Berman Seeks growth of capital, without regard to
Manhattan Fund income, through investments in securities of
small-, medium- and large-capitalization
companies (with a current focus on
medium-capitalization companies) believed to
have the maximum potential for long-term
capital appreciation. The corresponding
portfolio's investment program involves
greater risks and share price volatility
than programs that invest in more
undervalued securities.

Neuberger Berman Seeks growth of capital by investing
Millennium Fund primarily in common stocks of
small-capitalization companies (those with a
market value of no more than $1.5 billion at
the time the fund first invests in them).
The corresponding portfolio uses a
growth-oriented investment approach to the
selection of individual securities.

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<PAGE>

Neuberger Berman Seeks capital growth through an investment
Partners Fund approach that is designed to increase
capital with reasonable risk. Its investment
program seeks securities believed to be
undervalued based on strong fundamentals
such as a low price-to-earnings ratio,
consistent cash flow, and the company's
track record through all parts of the market
cycle. The corresponding portfolio uses the
value-oriented investment approach to the
selection of individual securities.
Neuberger Berman Socially Seeks long-term
growth of capital through Responsive Funds
investments primarily in securities of
companies that meet both financial and
social criteria.

MUNICIPAL FUNDS

Neuberger Berman A money market fund seeking the highest
Municipal Money Fund available current income exempt from federal
income tax, consistent with safety and
liquidity. The corresponding Portfolio
invests in high quality, short-term
municipal securities. It seeks to maintain a
constant purchase and redemption price of
$1.00.

Neuberger Berman Seeks high current income exempt from
Municipal Securities Trust federal income tax with low risk to
principal and liquidity; and secondarily,
total return. The corresponding portfolio
invests in investment grade municipal
securities. Maximum dollar-weighted average
duration of 10 years.

The Funds described herein, and any of the funds described above,
may terminate or modify their exchange privileges 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. The Municipal Funds share a prospectus with the Funds,
while the Equity Funds share a separate prospectus. An exchange is treated as a
sale for federal income tax purposes, and, depending on the circumstances, a
short- or long-term capital gain or loss may be realized.

There can be no assurance that CASH RESERVES, GOVERNMENT MONEY, or
Neuberger Berman Municipal Money Fund, each of which is a money market fund that
seeks to maintain a constant purchase and redemption share 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.

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<PAGE>

ADDITIONAL REDEMPTION INFORMATION

Suspension of Redemptions
- -------------------------

The right to redeem a Fund's shares may be suspended or payment of
the redemption price postponed (1) when the New York Stock Exchange ("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 its corresponding
Portfolio to dispose of securities it owns or fairly to determine the value of
its net assets, or (4) for such other period as the SEC may by order permit for
the protection of 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 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
- -------------------

LIMITED MATURITY and HIGH YIELD reserve the right, under certain
conditions, to honor any request 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, by making payment in whole or in part
in securities valued as described under "Share Prices and Net Asset Value"
above. GOVERNMENT MONEY and CASH RESERVES also reserve the right, under certain
conditions, to honor any request for redemption by making payment in whole or in
part in securities. If payment is made in securities, a shareholder 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 substantially all of its
share of any net investment income (after deducting expenses incurred directly
by the Fund), any net realized capital gains (both long-term and short-term),
and any net realized gains from foreign currency transactions earned or realized
by its corresponding Portfolio. A Portfolio's net investment income consists of
all income accrued on portfolio assets less accrued expenses but does not
include capital and foreign currency gains and losses. Net investment income and
net gains and losses are reflected in a Portfolio's NAV (and, hence, its
corresponding Fund's NAV) until they are distributed. GOVERNMENT MONEY and CASH
Reserves calculate their net investment income and share price as of noon
(Eastern time) on each Business Day; the other Funds calculate their net
investment income and share price as of the close of regular trading on the NYSE
on each Business Day (usually 4 p.m. Eastern time).

Income dividends are declared daily; dividends declared for each
month are paid on the last Business Day of the month. Shares of GOVERNMENT MONEY
and CASH RESERVES begin earning income dividends on the Business Day the
proceeds of the purchase order are converted into "federal funds" and continue
to earn dividends through the Business Day before they are redeemed; shares of
the other Funds begin earning income dividends on the Business Day after the

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<PAGE>

proceeds of the purchase order have been converted to "federal funds" and
continue to earn dividends through the Business Day they are redeemed.
Distributions of net realized capital and foreign currency gains, if any,
normally are paid once annually, in December.

Dividends and other distributions are automatically reinvested in
additional shares of the distributing Fund, unless the shareholder elects to
receive them in cash ("cash election"). 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 through an
electronic transfer to a bank account designated in the shareholder's original
account application. To the extent dividends and other distributions are subject
to federal, state, or local income taxation, they are taxable to the
shareholders whether received in cash or reinvested in Fund shares.

A cash election with respect to any Fund remains in effect until the
shareholder notifies State Street in writing to discontinue the election. If it
is determined, however, that the U.S. Postal Service cannot properly deliver
Fund mailings to the 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 until
the shareholder notifies State Street or the Fund in writing to request 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 Fund at the Fund's price on the day the check is
reinvested. No interest will accrue on amounts represented by uncashed dividend
or distribution checks.

ADDITIONAL TAX INFORMATION

Taxation of the Funds
- ---------------------

In order to continue to qualify for treatment as a RIC under the
Code, each Fund must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income (consisting generally of
taxable net investment income, net short-term capital gain, and, for LIMITED
MATURITY and HIGH YIELD, net gains from certain foreign currency transactions)
("Distribution Requirement") and must meet several additional requirements. With
respect to each Fund, these requirements include the following: (1) the Fund
must derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of securities or foreign currencies, or other income
(including gains from Hedging Instruments) derived with respect to its business
of investing in securities or those currencies ("Income Requirement"); 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, and (ii) not more than 25% of the value
of its total assets may be invested in securities (other than U.S. Government
securities or securities of other RICs) of any one issuer.

- 57 -
<PAGE>

If a Fund failed to qualify for treatment as a RIC for any taxable
year, (1) it would be taxed on the full amount of its taxable income for that
year without being able to deduct the distributions it makes to its shareholders
and (2) the shareholders would treat all those distributions, including
distributions of net capital gain (the excess of net long-term capital gain over
net short-term capital loss), as dividends (that is, ordinary income) to the
extent of the Fund's earnings and profits. 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.

The Funds (except for HIGH YIELD) have received rulings from the
Internal Revenue Service ("Service") that each series, as an investor in its
corresponding Portfolio, will be deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the series
satisfies all the requirements described above to qualify as a RIC. Although
these rulings may not be relied upon as precedent by HIGH YIELD, NB Management
believes the reasoning thereof and, hence, their conclusion apply to HIGH YIELD
as well.

Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.

See the next section for a discussion of the tax consequences to
HIGH YIELD and LIMITED MATURITY of distributions to them from their
corresponding Portfolios, investments by those Portfolios in certain securities,
and hedging and certain other transactions engaged in by those Portfolios.

Taxation of the Portfolios
- --------------------------

The Portfolios (except for Neuberger Berman HIGH YIELD Bond
Portfolio) have received rulings from the Service to the effect that, among
other things, each Portfolio will be treated as a separate partnership for
federal income tax purposes and will not be a "publicly traded partnership."
Although these rulings may not be relied upon as precedent by Neuberger Berman
HIGH YIELD Bond Portfolio, NB Management believes the reasoning thereof and,
hence, their conclusion apply to the Portfolio as well. As a result, no
Portfolio is subject to federal income tax; instead, each investor in a
Portfolio, such as a Fund, is required to take into account in determining its
federal income tax liability its share of the Portfolio's income, gains, losses,
deductions, credits, and tax preference items, without regard to whether it has
received any cash distributions from the Portfolio. Each Portfolio also is not
subject to Delaware or New York income or franchise tax.

Because each Fund is deemed to own a proportionate share of its
corresponding Portfolio's assets and income for purposes of determining whether
the Fund satisfies the requirements to qualify as a RIC, each Portfolio intends
to continue to conduct its operations so that its corresponding Fund will be
able to continue to satisfy all those requirements.

- 58 -
<PAGE>

Distributions to a Fund from its corresponding Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
the Fund's recognition of any gain or loss for federal income tax purposes,
except that (1) gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, (3)
loss may be recognized if a liquidation distribution consists solely of cash
and/or unrealized receivables and (4) gain (and, in certain situations, loss)
may be recognized on an in-kind distribution by the Portfolio. A Fund's basis
for its interest in its corresponding Portfolio generally equals the amount of
cash and the basis of any property the Fund invests in the Portfolio, increased
by the Fund's share of the Portfolio's net income and capital gains and
decreased by (a) the amount of cash and the basis of any property the Portfolio
distributes to the Fund and (b) the Fund's share of the Portfolio's losses.

Dividends and interest received by a Portfolio and gains realized by
a Portfolio may be subject to income, withholding, or other taxes imposed by
foreign countries and U.S. possessions that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate these foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors.

The use by Neuberger Berman HIGH YIELD Bond Portfolio and Neuberger
Berman LIMITED MATURITY Bond Portfolio of hedging strategies, such as writing
(selling) and purchasing Futures Contracts and options 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
Portfolios realize in connection therewith. For each of these Portfolios, gains
from the disposition of foreign currencies (except certain gains that may be
excluded by future regulations), and gains from Hedging Instruments derived with
respect to its business of investing in securities or foreign currencies, will
qualify as permissible income for its corresponding Fund under the Income
Requirement.

Exchange-traded Futures Contracts, listed options thereon, and
certain Forward Contracts ("Section 1256 contracts") are required to be marked
to market (that is, treated as having been sold at market value) for federal
income tax purposes at the end of a Portfolio'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, and 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, which will be taxable to the shareholders as ordinary income, and
to increase the net capital gain recognized by a Fund, without in either case
increasing the cash available to the Fund. A Fund may elect to exclude certain
transactions from the operation of these rules, although doing so may have the
effect of increasing the relative proportion of net short-term capital gain
(taxable as ordinary income) and/or increasing the amount of dividends that must
be distributed to meet the Distribution Requirement and avoid imposition of the
Excise Tax.

Section 988 of the Code also may apply to Forward Contracts and
options on foreign currencies. Under section 988 each foreign currency gain or
loss generally is computed separately and treated as ordinary income or loss. In
the case of overlap between sections 1256 and 988, special provisions determine
the character and timing of any income, gain or loss.

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<PAGE>

When a covered call option written (sold) by a Portfolio expires, it
realizes a short-term capital gain equal to the amount of the premium it
received for writing the option. When a Portfolio terminates its obligations
under such an option by entering into a closing transaction, it realizes a
short-term capital gain (or loss), depending on whether the cost of the closing
transaction is less (or more) than the premium it received when it wrote the
option. When a covered call option written by a Portfolio is exercised, the
Portfolio is treated as having sold the underlying security, producing long-term
or short-term capital gain or loss, depending on the holding period of the
underlying security and whether the sum of the option price received on the
exercise plus the premium received when it wrote the option is more or less than
the basis of the underlying security.

If a Portfolio 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 same or
substantially similar property, the Portfolio will be treated as having made an
actual sale thereof, with the result that it will recognize a gain at that time.
A constructive sale generally consists of a short sale, an offsetting notional
principal contract, or a Futures or Forward Contract entered into by a Portfolio
or a related person with respect to the same or substantially similar property.
In addition, if the appreciated financial position is itself a short sale or
such a contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale. The foregoing will not apply,
however, to any 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 Portfolio holds the appreciated financial position
unhedged for 60 days after that closing (I.E., at no time during that 60-day
period is the Portfolio's risk of loss regarding that position reduced by reason
of certain specified transactions with respect to substantially similar 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 CASH RESERVES Portfolio and Neuberger
Berman LIMITED MATURITY Bond Portfolio may invest in municipal bonds that are
purchased with market discount (that is, at a price less than the bond's
principal amount or, in the case of a bond that was issued with OID, a price
less than the amount of the issue price plus accrued OID) ("municipal market
discount bonds"). If a bond's market discount is less than the product of (1)
0.25% of the redemption price at maturity times (2) the number of complete years
to maturity after the taxpayer acquired the bond, then no market discount is
considered to exist. Gain on the disposition of a municipal market discount bond
purchased by a Portfolio (other than a bond with a fixed maturity date within
one year from its issuance) generally is treated as ordinary (taxable) income,
rather than capital gain, to the extent of the bond's accrued market discount at
the time of disposition. Market discount on such a bond generally is accrued
ratably, on a daily basis, over the period from the acquisition date to the date
of maturity. In lieu of treating the disposition gain as described above, a
Portfolio may elect to include market discount in its gross income currently,
for each taxable year to which it is attributable.

Each Portfolio may acquire zero coupon or other securities issued
with OID. Neuberger Berman HIGH YIELD Bond Portfolio may also acquire
pay-in-kind securities, which pay interest through the issuance of additional

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<PAGE>

securities. As a holder of those securities, each Portfolio (and, through it,
its corresponding Fund) must take into income the OID and other non-cash income
that accrues on the securities during the taxable year, even if it receives no
corresponding payment on the securities during the year. Because each Fund
annually must distribute substantially all of its investment company taxable
income (including its share of its corresponding Portfolio's accrued OID and
other non-cash income) to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax, a Fund may be required in a particular year to
distribute as a dividend an amount that is greater than its share of the total
amount of cash its corresponding Portfolio actually receives. Those
distributions will be made from a Fund's (or its share of its corresponding
Portfolio's) cash assets or, if necessary, from the proceeds of sales of that
Portfolio's securities. A Portfolio may realize capital gains or losses from
those sales, which would increase or decrease its corresponding Fund's
investment company taxable income and/or net capital gain.

Taxation of the Funds' Shareholders
- -----------------------------------

If shares of HIGH YIELD or LIMITED MATURITY 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 31% of all dividends and capital
gain distributions, and each of HIGH YIELD and LIMITED MATURITY is required to
withhold 31% of redemption proceeds, payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Withholding at that rate also is required from
dividends and capital gain distributions payable to such shareholders who
otherwise are subject to backup withholding.

As described in "Maintaining Your Account" in the Prospectus, a Fund
may close a shareholder's account with the Fund and redeem the remaining shares
if the account balance falls below the specified minimum and the shareholder
fails to reestablish 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 ("IRA") (including an education IRA and a Roth
IRA) or a qualified retirement plan (including a simplified employee pension
plan, "Savings Incentive Match Plan for Employees" ("SIMPLE"), self-employed
individual retirement plan (so-called "Keogh plan"), corporate profit-sharing
and money purchase pension plan, section 401(k) plan, and section 403(b)(7)
account), the Fund's payment of the redemption proceeds may result in adverse
tax consequences for the accountholder. The accountholder should consult his or
her tax adviser regarding any such consequences.

VALUATION OF PORTFOLIO SECURITIES

Each of Neuberger Berman GOVERNMENT MONEY Portfolio and Neuberger
Berman CASH RESERVES Portfolio relies on Rule 2a-7 under the 1940 Act to use the
amortized cost method of valuation to enable its corresponding Fund to stabilize
the purchase and redemption price of its shares at $1.00 per share. This method
involves valuing portfolio securities at their cost at the time of purchase and
thereafter assuming a constant amortization (or accretion) to maturity of any
premium (or discount), regardless of the impact of interest rate fluctuations on
the market value of the securities. Although the Portfolios' reliance on Rule

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<PAGE>

2a-7 and use of the amortized cost valuation method should enable the Funds,
under most conditions, to maintain a stable $1.00 share price, there can be no
assurance they will be able to do so. An investment in either of these Funds, as
in any mutual fund, is neither insured nor guaranteed by the U.S. Government.

PORTFOLIO TRANSACTIONS

Purchases and sales of portfolio securities generally are transacted
with issuers, underwriters, or dealers that serve as primary market-makers, who
act as principals for the securities on a net basis. The Portfolios typically do
not pay brokerage commissions for such purchases and sales. Instead, the price
paid for newly issued securities usually includes a concession or discount paid
by the issuer to the underwriter, and the prices quoted by market-makers reflect
a spread between the bid and the asked prices from which the dealer derives a
profit.

In purchasing and selling portfolio securities other than as
described above (for example, in the secondary market), each Portfolio seeks to
obtain best execution at the most favorable prices through responsible
broker-dealers and, in the case of agency transactions, at competitive
commission rates. In selecting broker-dealers to execute transactions, NB
Management considers such factors as the price of the security, the rate of
commission, the size and difficulty of the order, and the reliability,
integrity, financial condition, and general execution and operational
capabilities of competing broker-dealers. NB Management also may consider the
brokerage and research services that broker-dealers provide to the Portfolio or
NB Management. Under certain conditions, a Portfolio may pay higher brokerage
commissions in return for brokerage and research services, although no Portfolio
has a current arrangement to do so. In any case, each Portfolio may effect
principal transactions with a dealer who furnishes research services, may
designate any dealer to receive selling concessions, discounts, or other
allowances, or otherwise may deal with any dealer in connection with the
acquisition of securities in underwritings.

During the fiscal year ended October 31, 1998, Neuberger Berman
LIMITED MATURITY Bond Portfolio acquired securities of the following of its
"regular brokers or dealers": Goldman, Sachs & Co., Lehman Brothers Inc.,
Merrill Lynch, Pierce, Fenner & Smith Inc. and Morgan Stanley, Dean Witter,
Discover & Co. At October 31, 1998, that Portfolio held the securities of its
"regular brokers or dealers" with an aggregate value as follows: Goldman, Sachs
& Co., $________; Merrill Lynch, Pierce, Fenner & Smith Inc., $7,765,906.

During the fiscal year ended October 31, 1998, Neuberger Berman HIGH
YIELD Bond Portfolio acquired securities of the following of its "regular
brokers or dealers": _________. At October 31, 1998, that Portfolio held the
securities of its "regular brokers or dealers" with an aggregate value as
follows: $_________.

During the fiscal year ended October 31, 1998, Neuberger Berman CASH
RESERVES Portfolio acquired securities of the following of its "regular brokers
or dealers": American Express Credit Corp., First Chicago Capital Markets Inc.,
Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Inc., Morgan (J.P.)
Securities Inc., and Morgan Stanley, Dean Witter, Discover & Co. At October 31,
1998, that Portfolio held the securities of its "regular brokers or dealers"
with an aggregate value as follows: American Express Credit Corp., $39,137,557;
Goldman, Sachs & Co., $9,987,822; Merrill Lynch, Pierce, Fenner & Smith Inc.,

- 62 -
<PAGE>

$33,448,653; Morgan (J.P.) Securities Inc., $_________; and Morgan Stanley, Dean
Witter, Discover & Co., $599,987.

During the fiscal year ended October 31, 1998, Neuberger Berman
GOVERNMENT MONEY Portfolio acquired none of the securities of its "regular
brokers or dealers." At October 31, 1998, that Portfolio held none of the
securities of its "regular brokers or dealers."

No affiliate of any Portfolio receives give-ups or reciprocal
business in connection with its portfolio transactions. No Portfolio effects
transactions with or through broker-dealers in accordance with any formula or
for selling shares of any Fund. However, broker-dealers who execute portfolio
transactions may from time to time effect purchases of Fund shares for their
customers. The 1940 Act generally prohibits Neuberger Berman from acting as
principal in the purchase of portfolio securities from, or the sale of portfolio
securities to, a Portfolio unless an appropriate exemption is available.

Portfolio Turnover
- ------------------

Neuberger Berman HIGH YIELD Bond Portfolio and Neuberger Berman
LIMITED MATURITY Bond Portfolio calculate their portfolio turnover rates by
dividing (1) the lesser of the cost of the securities purchased or the proceeds
from the securities sold by the Portfolio 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 Portfolio during the fiscal year.

REPORTS TO SHAREHOLDERS

Shareholders of each Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors for the Fund and for its corresponding Portfolio. Each Fund's
statements show the investments owned by its corresponding Portfolio and the
market values thereof and provide other information about the Fund and its
operations, including the Fund's beneficial interest in its corresponding
Portfolio.

ORGANIZATION, CAPITALIZATION AND OTHER MATTERS

The Funds
- ---------

Each Fund is a separate series of the Trust, a Delaware business
trust organized pursuant to a Trust Instrument dated as of December 23, 1992.
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 six separate
operating series. Each Fund invests all of its net investable assets in its
corresponding Portfolio, in each case receiving a beneficial interest in that
Portfolio. The trustees of the Trust may establish additional series or classes
of shares without the approval of shareholders. The assets of each series belong
only to that series, and the liabilities of each series are borne solely by that
series and no other.

- 63 -
<PAGE>

The predecessors of the Fund (except for HIGH YIELD) were converted
into separate series of the Trust on July 2, 1993; these conversions were
approved by the shareholders of the Funds in April 1993.

DESCRIPTION OF SHARES. Each Fund is authorized to issue an unlimited
number of shares of beneficial interest (par value $0.001 per share). Shares of
each Fund represent equal proportionate interests in the assets of that Fund
only and have identical voting, dividend, redemption, liquidation, and other
rights. All shares issued are fully paid and non-assessable, and shareholders
have no preemptive or other rights to subscribe to any additional shares.

SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to
hold annual meetings of shareholders of the Funds. The trustees will call
special meetings of shareholders of a Fund only if required under the 1940 Act
or in their discretion or upon the written request of holders of 10% or more of
the outstanding shares of that Fund entitled to vote.

CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of a Fund will not be personally liable for the obligations of any
Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of 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.

The Portfolios
- --------------

Each Portfolio is a separate operating series of Managers Trust, a
New York common law trust organized as of December 1, 1992. Managers Trust is
registered under the 1940 Act as a diversified, open-end management investment
company. Managers Trust has six separate Portfolios. The assets of each
Portfolio belong only to that Portfolio, and the liabilities of each Portfolio
are borne solely by that Portfolio and no other.

FUNDS' INVESTMENTS IN PORTFOLIOS. Each Fund is a "feeder fund" that
seeks to achieve its investment objective by investing all of its net investable
assets in its corresponding Portfolio, which is a "master fund." The Portfolio,
which has the same investment objective, policies, and limitations as the Fund,
in turn invests in securities; the Fund thus acquires an indirect interest in
those securities.

Each Fund's investment in its corresponding Portfolio is in the form
of a non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in a Portfolio. Neuberger Berman LIMITED MATURITY
Bond Trust, a series of Neuberger Berman Income Trust ("Income Trust"), invests
all of its net assets in a corresponding Portfolio of Managers Trust. Income
Trust does not sell its shares directly to members of the general public.

Each Portfolio may also permit other investment companies and/or
other institutional investors to invest in the Portfolio. All investors will
invest in a Portfolio on the same terms and conditions as a Fund and will pay a

- 64 -
<PAGE>

proportionate share of the Portfolio's expenses. Other investors in a Portfolio
are not required to sell their shares at the same public offering price as a
Fund, could have a different administration fee and expenses than a Fund, and
(except Income Trust) might charge a sales commission. Therefore, Fund
shareholders may have different returns than shareholders in another investment
company that invests exclusively in the Portfolio. There is currently no such
other investment company that offers its shares directly to members of the
general public. Information regarding any Fund that invests in a Portfolio is
available from NB Management by calling 800-877-9700.

The trustees of the Trust believe that investment in a Portfolio by
a series of Income Trust or by other potential investors in addition to a Fund
may enable the Portfolio to realize economies of scale that could reduce its
operating expenses, thereby producing higher returns and benefitting all
shareholders. However, a Fund's investment in its corresponding Portfolio may be
affected by the actions of other large investors in a Portfolio, if any. For
example, if a large investor in a Portfolio (other than a Fund) redeemed its
interest in the Portfolio, the Portfolio's remaining investors (including the
Fund) might, as a result, experience higher pro rata operating expenses, thereby
producing lower returns.

Each Fund may withdraw its entire investment from its corresponding
Portfolio at any time, if the trustees of the Trust determine that it is in the
best interests of the Fund and its shareholders to do so. A Fund might withdraw,
for example, if there were other investors in a Portfolio with power to, and who
did by a vote of all investors (including the Fund), change the investment
objective, policies, or limitations of the Portfolio in a manner not acceptable
to the trustees of the Trust. A withdrawal could result in a distribution in
kind of portfolio securities (as opposed to a cash distribution) by the
Portfolio to the Fund. That distribution could result in a less diversified
portfolio of investments for the Fund and could affect adversely the liquidity
of the Fund's investment portfolio. If a Fund decided to convert those
securities to cash, it usually would incur brokerage fees or other transaction
costs. If the Fund withdrew its investment from a Portfolio, the trustees of the
Trust would consider what actions might be taken, including the investment of
all of the Fund's net investable assets in another pooled investment entity
having substantially the same investment objective as the Fund or the retention
by the Fund of its own investment manager to manage its assets in accordance
with its investment objective, policies, and limitations. The inability of the
Fund to find a suitable replacement could have a significant impact on
shareholders.

INVESTOR MEETINGS AND VOTING. Each Portfolio normally will not hold
meetings of investors except as required by the 1940 Act. Each investor in a
Portfolio will be entitled to vote in proportion to its relative beneficial
interest in the Portfolio. On most issues subjected to a vote of investors, a
Fund will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the Fund's shareholders. If
there are other investors in a Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all Portfolio investors; indeed, if other
investors hold a majority interest in a Portfolio, they could have voting
control of the Portfolio.

- 65 -
<PAGE>

investment on account of such liability would be limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets. Upon liquidation of a Portfolio, investors would
be entitled to share pro rata in the net assets of the Portfolio available for
distribution to investors.

CUSTODIAN AND TRANSFER AGENT

Each Fund and Portfolio 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 correspondence should be mailed to Neuberger Berman Funds, c/o Boston
Service Center, P.O. Box 8403, Boston, MA 02266-8403.

INDEPENDENT AUDITORS

Each Fund and Portfolio has selected Ernst & Young LLP, 200
Clarendon Street, Boston, MA 02116, as the independent auditors who will audit
its financial statements.

LEGAL COUNSEL

Each Fund and Portfolio has selected Kirkpatrick & Lockhart LLP,
1800 Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as its
legal counsel.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

The following table sets forth the name, address, and percentage of
ownership of each person who was known by each Fund to own beneficially or of
record 5% or more of that Fund's outstanding shares at January __, 1999:

Percentage of
Ownership at
Name and Address January , 1999
---------------- --------------

GOVERNMENT MONEY: Neuberger Berman* ____%
11 Broadway
New York, NY 10004

CASH RESERVES: Neuberger Berman* ____%
11 Broadway
New York, NY 10004

LIMITED MATURITY: Charles Schwab & Co., Inc.* ____%
101 Montgomery Street
San Francisco, CA 94104-4122

Nationwide Life Insurance Plan QPVA
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, Ohio 43218-2029

- 66 -
<PAGE>

Neuberger Berman Trust Co., The Neuberger ____%
Berman Employees Profit Sharing Plan Utd
5/20/71
Attn Al Boccardo
605 Third Ave
36th Floor
New York, NY 10158

- ---------------------------

* Charles Schwab & Co., Inc. and Neuberger Berman hold these shares of
record for the accounts of certain of their clients and have informed the
Funds of their policies to maintain the confidentiality of holdings in
their client accounts unless disclosure is expressly required by law.

REGISTRATION STATEMENT

This SAI and the Prospectus do not contain all the information
included in the Trust's registration statement filed with the SEC under the 1933
Act with respect to the securities offered by the Prospectus. 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 and Portfolios.

Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of any contract or
other document filed as an exhibit to the registration statement, each such
statement being qualified in all respects by such reference.

FINANCIAL STATEMENTS

[To be filed.]

- 67 -
<PAGE>

<PAGE>

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 best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or an exceptionally
stable margin, and principal is secure. Although the various protective elements
are likely to change, the changes that can be visualized are most unlikely to
impair the fundamentally strong position of the issuer.

AA - Bonds rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally known

A-1

<PAGE>

as "high grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in AAA-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in AAA-rated
securities.

A - Bonds rated A possess many favorable investment attributes and
are considered to be upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.

- Bonds which are rated BAA are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.

BA - Bonds rated BA are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

CAA - Bonds rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA - Bonds rated CA represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C - Bonds rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3 in
each generic rating classification described above. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issuer ranks in the lower end of its generic rating 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
<PAGE>

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
<PAGE>

---------------------------------------------------------------

NEUBERGER BERMAN MUNICIPAL FUNDS AND PORTFOLIOS

STATEMENT OF ADDITIONAL INFORMATION

DATED FEBRUARY __, 1999

Neuberger Berman Neuberger Berman
Municipal Money Fund Municipal Securities Trust
(and Neuberger Berman Municipal Money (and Neuberger Berman Municipal
Portfolio) Securities Portfolio)

No-Load Mutual Funds
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
-----------------------------------------------------------------

Neuberger Berman MUNICIPAL MONEY Fund ("Municipal Money") and Neuberger
Berman MUNICIPAL SECURITIES Trust ("Municipal Securities") (each a "Fund") are
no-load mutual funds that offer shares pursuant to a Prospectus dated February
___, 1999. The Funds invest all of their net investable assets in Neuberger
Berman MUNICIPAL MONEY Portfolio and Neuberger Berman MUNICIPAL SECURITIES
Portfolio (each a "Portfolio"), respectively.

The Funds' Prospectus, which is also the prospectus for certain taxable
fixed income funds administered by Neuberger Berman Management Incorporated ("NB
Management"), provides basic information that an investor should know before
investing. A copy of the Prospectus may be obtained, without charge, from NB
Management, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180 or by calling
800-877-9700.

This Statement of Additional Information ("SAI") is not a prospectus and
should be read in conjunction with the Prospectus.

No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by a Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by a Fund or its distributor in any jurisdiction in which such offering
may not lawfully be made.

<PAGE>

TABLE OF CONTENTS

Page

INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations....................................1
Temporary Defensive Position...........................................4
Investment Approach of Neuberger Berman MUNICIPAL SECURITIES Portfolio.4
Overview of Each Fund..................................................4
Description of Municipal Obligations...................................5
Yield and Price Characteristics of Municipal Obligations...............9
Investment in Taxable Securities.......................................9
Additional Investment Information.....................................13
Risks of Fixed Income Securities......................................19

CERTAIN RISK CONSIDERATIONS.................................................21

PERFORMANCE INFORMATION.....................................................22

Yield Calculations..........................................................22
Tax Equivalent Yield..................................................23
Total Return Computations.............................................23
Comparative Information...............................................24
Other Performance Information.........................................25

TRUSTEES AND OFFICERS.......................................................26

INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................31
Investment Manager and Administrator..................................31
Management and Administration Fees....................................32
Expense Reimbursements................................................32
Sub-Adviser...........................................................33
Investment Companies Managed..........................................34
Management and Control of NB Management...............................35

DISTRIBUTION ARRANGEMENTS...................................................36

ADDITIONAL PURCHASE INFORMATION.............................................37
Shares Prices and Net Asset Value.....................................37
Automatic Investing and Dollar Cost Averaging.........................37

ADDITIONAL EXCHANGE INFORMATION.............................................38

ADDITIONAL REDEMPTION INFORMATION...........................................41
Suspension of Redemptions.............................................41
Redemptions in Kind...................................................41

-i-

<PAGE>

DIVIDENDS AND OTHER DISTRIBUTIONS...........................................41

ADDITIONAL TAX INFORMATION..................................................42
Taxation of the Funds.................................................42
Taxation of the Portfolios............................................43
Taxation of the Funds' Shareholders...................................46

VALUATION OF PORTFOLIO SECURITIES...........................................47

PORTFOLIO TRANSACTIONS......................................................47
Portfolio Turnover....................................................48

REPORTS TO SHAREHOLDERS.....................................................48

ORGANIZATION, CAPITALIZATION AND OTHER MATTERS..............................48

CUSTODIAN AND TRANSFER AGENT................................................50

INDEPENDENT AUDITORS........................................................50

LEGAL COUNSEL...............................................................51

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................51

REGISTRATION STATEMENT......................................................51

FINANCIAL STATEMENTS........................................................52

Appendix A.................................................................A-1
RATINGS OF MUNICIPAL OBLIGATIONS AND COMMERCIAL PAPER

-ii-

<PAGE>

INVESTMENT INFORMATION

Each Fund is a separate series of Neuberger Berman Income Funds ("Trust"),
a Delaware business trust that is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company. Each Fund seeks
its investment objective by investing all of its net investable assets in a
Portfolio of Income Managers Trust ("Managers Trust") that has an investment
objective identical to, and a name similar to, that of the Fund. Each Portfolio,
in turn, invests in securities in accordance with an investment objective,
policies, and limitations identical to those of its corresponding Fund. (The
Trust and Managers Trust, which is an open-end management investment company
managed by NB Management, are together referred to below as the "Trusts.")

The following information supplements the discussion in the Prospectus of
the investment objective, policies, and limitations of each Fund and Portfolio.
The investment objective and, unless otherwise specified, the investment
policies and limitations of each Fund and Portfolio are not fundamental. Any
investment objective, policy or limitation that is not fundamental may be
changed by the trustees of the Trust ("Fund Trustees") or of Managers Trust
("Portfolio Trustees") without shareholder approval. The fundamental investment
policies and limitations of a Fund or a Portfolio may not be changed without the
approval of the lesser of (1) 67% of the total units of beneficial interest
("shares") of the Fund or Portfolio represented at a meeting at which more than
50% of the outstanding Fund or Portfolio shares are represented or (2) a
majority of the outstanding shares of the Fund or Portfolio. 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." Whenever a Fund is
called upon to vote on a change in a fundamental investment policy or limitation
of its corresponding Portfolio, the Fund casts its votes thereon in proportion
to the votes of its shareholders at a meeting thereof called for that purpose.

INVESTMENT POLICIES AND LIMITATIONS

MUNICIPAL MONEY and MUNICIPAL SECURITIES have the following fundamental
investment policy, to enable them to invest in their corresponding Portfolios:

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.

For purposes of the investment limitation on concentration in a particular
industry, Neuberger Berman MUNICIPAL SECURITIES Portfolio determines the
"issuer" of a municipal obligation that is not a general obligation note or bond
based on the obligation's characteristics. The most significant of these
characteristics is the source of funds for the repayment of principal and

<PAGE>

payment of interest on the obligation. If an obligation is backed by an
irrevocable letter of credit or other guarantee, without which the obligation
would not qualify for purchase under the Portfolio's quality restrictions, the
issuer of the letter of credit or the guarantee is considered an issuer of the
obligation. If an obligation meets the Portfolio's quality restrictions without
credit support, the Portfolio treats the commercial developer or the industrial
user, rather than the governmental entity or the guarantor, as the only issuer
of the obligation, even if the obligation is backed by a letter of credit or
other guarantee. Neuberger Berman MUNICIPAL MONEY Portfolio determines the
"issuer" of a municipal obligation for purposes of its policy on industry
concentration in accordance with the principles of Rule 2a-7 under the 1940 Act.

Except for the limitation on borrowing and the limitation on illiquid
securities, any maximum percentage of securities or assets contained in an
investment policy or limitation will not be considered to be exceeded unless the
percentage limitation is exceeded immediately after, and because of, a
transaction by a Portfolio. If events subsequent to a transaction result in a
Portfolio exceeding the percentage limitation on borrowing or illiquid
securities, NB Management will take appropriate steps to reduce the percentage
of borrowings or the percentage held in illiquid securities, as may be required
by law, within a reasonable amount of time.

The fundamental investment policies and limitations of Neuberger Berman
MUNICIPAL MONEY and Neuberger Berman MUNICIPAL SECURITIES Portfolios are as
follows:

1. BORROWING. Neither Portfolio may borrow money, except that a Portfolio
may (i) borrow money from banks for temporary or emergency purposes and not for
leveraging or investment and (ii) enter into reverse repurchase transactions for
any purpose; provided that (i) and (ii) in combination do not exceed 33-1/3% of
the value of its total assets (including the amount borrowed) less liabilities
(other than borrowings). If at any time borrowings exceed 33-1/3% of the value
of a Portfolio's total assets, the Portfolio will reduce its borrowings within
three days (excluding Sundays and holidays) to the extent necessary to comply
with the 33-1/3% limitation.

2. COMMODITIES. Neuberger Berman MUNICIPAL MONEY Portfolio may not
purchase commodities or contracts thereon, except that it may purchase the
securities of issuers that own interests in any of the foregoing. Neuberger
Berman MUNICIPAL SECURITIES Portfolio may not purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit Neuberger Berman MUNICIPAL
SECURITIES Portfolio from purchasing futures contracts or options (including
options on futures contracts, but excluding options or future contracts on
physical commodities) or from investing in securities of any kind.

3. DIVERSIFICATION. Neither Portfolio may, with respect to 75% of the
value of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities ("U.S. Government and Agency Securities")) if, as a result,
(i) more than 5% of the value of the Portfolio's total assets would be invested
in the securities of that issuer or (ii) the Portfolio would hold more than 10%
of the outstanding voting securities of that issuer.

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4. INDUSTRY CONCENTRATION. Neither Portfolio may invest 25% or more of its
total assets in the securities of issuers having their principal business
activities in the same industry, except that this limitation does not apply to
(i) U.S. Government and Agency Securities, (ii) municipal securities, or (iii)
certificates of deposit ("CDs") or bankers' acceptances issued by domestic
banks.

5. LENDING. Neither Portfolio may lend any securities 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 and (ii) by engaging in repurchase agreements.

6. REAL ESTATE. Neither Portfolio may purchase real estate unless acquired
as a result of the ownership of securities or instruments, but this restriction
shall not prohibit a Portfolio from purchasing securities issued by entities or
investment vehicles that own or deal in real estate or interests therein, or
instruments secured by real estate or interests therein.

7. SENIOR SECURITIES. Neither Portfolio may issue senior securities,
except as permitted under the 1940 Act.

8. UNDERWRITING. Neither Portfolio may underwrite securities of other
issuers, except to the extent that a Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933, as amended ("1933 Act").

The non-fundamental investment policies and limitations of Neuberger
Berman MUNICIPAL MONEY and Neuberger Berman MUNICIPAL SECURITIES Portfolios are
as follows:

1. GEOGRAPHIC CONCENTRATION. Neither Portfolio will invest 25% or more of
its total assets in securities issued by governmental units located in any one
state, territory, or possession of the United States (but this limitation does
not apply to project notes backed by the full faith and credit of the United
States).

2. ILLIQUID SECURITIES. Neither Portfolio may purchase any security if, as
a result, more than 15% (10% in the case of Neuberger Berman MUNICIPAL MONEY
Portfolio) of its net assets would be invested in illiquid securities. Illiquid
securities include securities that cannot be sold within seven days in the
ordinary course of business for approximately the amount at which the Portfolio
has valued the securities, such as repurchase agreements maturing in more than
seven days.

3. BORROWING. Neither Portfolio may purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.

4. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, neither Portfolio may make any loans other than
securities loans.

5. MARGIN TRANSACTIONS. Neither Portfolio may purchase securities on
margin from brokers or other lenders, except that a Portfolio may obtain such
short-term credits as are necessary for the clearance of securities

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transactions. For Neuberger Berman MUNICIPAL SECURITIES Portfolio, 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.

TEMPORARY DEFENSIVE POSITION

For temporary defensive purposes, each Portfolio may invest up to 100% of
its total assets in cash or cash equivalents, U.S. Government and Agency
Securities, commercial paper and certain other money market instruments, as well
as repurchase agreements on U.S. Government and Agency Securities, the interest
on which may be subject to federal and state income taxes, and may adopt shorter
than normal weighted average maturities or durations. These investments may
produce after-tax yields that are lower than the tax-equivalent yields available
on municipal securities at the time.

INVESTMENT APPROACH OF NEUBERGER BERMAN MUNICIPAL SECURITIES PORTFOLIO

Neuberger Berman MUNICIPAL SECURITIES Portfolio is managed in accordance
with an investment approach developed by its sub-adviser, Neuberger Berman, LLC
("Neuberger Berman"), and currently used by that firm in managing taxable and
tax-exempt fixed income portfolios with an aggregate value of approximately $9.3
billion. In the tax-exempt area, the approach is based, in part, on market
studies that compared the yield and price volatility of short- to
intermediate-term municipal obligations -- securities having maturities of five
to ten years -- with the yield and price volatility of long-term municipal bonds
- -- securities having maturities of up to thirty years. The studies showed that
municipal obligations with maturities of five to ten years have generally
produced from 80% to 90% of the yield but have been subject to only one-half to
two-thirds of the price volatility of 30-year municipal bonds.

The dollar-weighted average duration of Neuberger Berman MUNICIPAL
SECURITIES Portfolio is actively managed and may not exceed ten years. Futures,
options and options on futures have durations which are generally related to the
duration of the securities underlying them. There are some situations where even
the standard duration calculation does not properly reflect the interest rate
exposure of a security. For example, variable or floating rate securities often
have final maturities of ten or more years; however, their interest rate
exposure corresponds to the frequency of the coupon reset. See "Investment
Information -- Variable or Floating Rate Securities; Demand and Put Features."
In this and other, similar situations, NB Management, where permitted, will use
more sophisticated analytical techniques that incorporate the economic life of a
security into the determination of its interest rate exposure.

OVERVIEW OF EACH FUND

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NB Management offers two municipal funds - MUNICIPAL MONEY and MUNICIPAL
SECURITIES. Through their Portfolios, these Funds invest in municipal
securities. These Funds are oriented to investors who seek to benefit from the
tax-advantaged status of municipal bonds. (Each Fund may invest in securities
the interest on which is an item of tax preference for purposes of the federal
alternative minimum tax.)

We take a similar approach to the management of both Portfolios.
Investments are made in municipal bond sectors that offer higher yields than
other sectors with what we believe is appropriate risk. Within the sectors, we
seek individual securities that offer attractive income as well as liquidity
appropriate to the Fund. The duration of the Portfolios is managed in order to
protect principal in difficult environments and to provide a high level of
tax-exempt income. Duration incorporates a bond's yield, coupon interest
payments, final maturity and call features into one measure. In general, the
longer you extend a bond's duration, the greater its potential return and
exposure to interest rate fluctuations.

NEUBERGER BERMAN MUNICIPAL MONEY FUND
MUNICIPAL MONEY seeks to provide maximum current tax-exempt income while
seeking to maintain a constant one dollar net asset value. Through its
Portfolio, this Fund invests in high quality, short-term municipal securities
that are selected based upon their perceived ability to provide high current
income consistent with safety and liquidity. Since this Portfolio invests
exclusively in short-term municipal securities, the Fund's shareholders avoid
the market fluctuations and risk that come with investment in longer-term
municipal bonds, while receiving dividends that are exempt from federal income
tax.

NEUBERGER & BERMAN MUNICIPAL SECURITIES TRUST
MUNICIPAL SECURITIES seeks to maximize total return on a risk-adjusted
basis by generating high tax-exempt current income and investing strategically
in short-to-intermediate maturities. Our studies have shown that municipal
portfolios of up to ten years in duration deliver a significant portion of the
income and performance of longer, more volatile issues. As we focus on this
intermediate area of the market, we also seek to increase returns through sector
diversification. Sectors utilized include pre-refunded bonds, general obligation
issues and essential service revenue bonds such as water and sewer authorities.
In addition, we selectively choose among Housing Authority, health care and
pollution control revenue issues. In order to further reduce risk, all the
securities we purchase are of at least investment grade. In addition, we
actively manage the Portfolio's duration with the objective of protecting
principal, and enhancing total return through capital appreciation. The maximum
average duration of the Portfolio is ten years.

DESCRIPTION OF MUNICIPAL OBLIGATIONS

Municipal obligations are issued by or on behalf of states, the District
of Columbia, and U.S. territories and possessions and their political
subdivisions, agencies, and instrumentalities. The interest on municipal
obligations is generally exempt from federal income tax. The tax-exempt status
of any issue of municipal obligations is determined on the basis of an opinion
of the issuer's bond counsel at the time the obligations are issued.

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Municipal obligations include "general obligation" securities, which are
backed by the full taxing power of a municipality, and "revenue" securities,
which are backed only by the income from a specific project, facility, or tax.
Municipal obligations also include industrial development and private activity
bonds which are issued by or on behalf of public authorities, but are not backed
by the credit of any governmental or public authority. "Anticipation notes" are
issued by municipalities in expectation of future proceeds from the issuance of
bonds or from taxes or other revenues, and are payable from those bond proceeds,
taxes, or revenues. Municipal obligations also include tax-exempt commercial
paper, which is issued by municipalities to help finance short-term capital or
operating requirements.

The value of municipal obligations is dependent on the continuing payment
of interest and principal when due by the issuers of the municipal obligations
(or, in the case of industrial development bonds, the revenues generated by the
facility financed by the bonds or, in certain other instances, the provider of
the credit facility backing the bonds). As with other fixed income securities,
an increase in interest rates generally will reduce the value of a Portfolio's
investments in municipal obligations, whereas a decline in interest rates
generally will increase that value.

POLICIES AND LIMITATIONS. Neuberger Berman MUNICIPAL MONEY Portfolio
normally invests at least 65% of its total assets in municipal securities. As a
fundamental policy, Neuberger Berman MUNICIPAL SECURITIES Portfolio invests at
least 80% of its total assets in municipal obligations.

Except as otherwise provided in the Prospectus and this SAI, the
Portfolios' investment portfolios may consist of any combination of the types of
municipal obligations described in the Prospectus or in this SAI. The
proportions in which each Portfolio invests in various types of municipal
obligations will vary from time to time. (Unless otherwise indicated, both
Portfolios may invest in the obligations described below.)

GENERAL OBLIGATION BONDS. A general obligation bond is backed by the
governmental issuer's pledge of its full faith and credit and power to raise
taxes for payment of principal and interest under the bond. The taxes or special
assessments that can be levied for the payment of debt service may be limited or
unlimited as to rate or amount. Many jurisdictions face political and economic
constraints on their ability to raise taxes. These limitations and constraints
may adversely affect the ability of the governmental issuer to meet its
obligations under the bonds in a timely manner.

REVENUE BONDS. Revenue bonds are backed by the income from a specific
project, facility or tax. Revenue bonds are issued to finance a wide variety of
public projects, including (1) housing, (2) electric, gas, water, and sewer
systems, (3) highways, bridges, and tunnels, (4) port and airport facilities,

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(5) colleges and universities, and (6) hospitals. In some cases, repayment of
these bonds depends upon annual legislative appropriations; in other cases, if
the issuer is unable to meet its legal obligation to repay the bond, repayment
becomes an unenforceable "moral commitment" of a related governmental unit
(subject, however, to appropriations). Revenue bonds issued by housing finance
authorities are backed by a wider range of security, including partially or
fully insured mortgages, rent subsidized and/or collateralized mortgages, and
net revenues from housing projects.

Most industrial development bonds are revenue bonds, in that principal and
interest are payable only from the net revenues of the facility financed by the
bonds. These bonds generally do not constitute a pledge of the general credit of
the public or private operator or user of the facility. In some cases, however,
payment may be secured by a pledge of real and personal property constituting
the facility.

RESOURCE RECOVERY BONDS. Resource recovery bonds are a type of revenue
bond issued to build facilities such as solid waste incinerators or
waste-to-energy plants. Typically, a private corporation will be involved on a
temporary basis during the construction of the facility, and the revenue stream
will be secured by fees or rents paid by municipalities for use of the
facilities. The credit and quality of resource recovery bonds may be affected by
the viability of the project itself, tax incentives for the project, and
changing environmental regulations or interpretations thereof.

MUNICIPAL LEASE OBLIGATIONS (NEUBERGER BERMAN MUNICIPAL SECURITIES
PORTFOLIO). These obligations, which may take the form of a lease, an
installment purchase, or a conditional sale contract, are issued by a state or
local government or authority to acquire land and a wide variety of equipment
and facilities. The Portfolio will usually invest in municipal lease obligations
through certificates of participation ("COPs"), which give the Portfolio a
specified, undivided interest in the obligation. For example, a COP may be
created when long-term revenue bonds are issued by a governmental corporation to
pay for the acquisition of property. The payments made by the municipality under
the lease are used to repay interest and principal on the bonds. Once these
lease payments are completed, the municipality gains ownership of the property.
These obligations are distinguished from general obligation or revenue bonds in
that they typically are not backed fully by the municipality's credit, and their
interest may become taxable if the lease is assigned. The lease subject to the
transaction usually contains a "non-appropriation" clause. A non-appropriation
clause states that, while the municipality will use its best efforts to make
lease payments, the municipality may terminate the lease without penalty if the
municipality's appropriating body does not allocate the necessary funds. Such
termination would result in a significant loss to the Portfolio.

MUNICIPAL NOTES. Municipal notes include the following:

1. PROJECT NOTES are issued by local issuing agencies created under the
laws of a state, territory, or possession of the United States to finance
low-income housing, urban redevelopment, and similar projects. These notes are
backed by an agreement between the local issuing agency and the Department of
Housing and Urban Development ("HUD"). Although the notes are the primary
obligations of the local issuing agency, the HUD agreement provides the full
faith and credit of the U.S. as additional security.

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2. TAX ANTICIPATION NOTES are issued to finance working capital needs of
municipalities. Generally, they are issued in anticipation of future seasonal
tax revenues, such as income, sales, use, and business taxes, and are payable
from these future revenues.

3. REVENUE ANTICIPATION NOTES are issued in expectation of receipt of
other types of revenue, such as that available under federal revenue-sharing
programs. Because of proposed measures to reform the federal budget and alter
the relative obligations of federal, state, and local governments, many
revenue-sharing programs are in a state of uncertainty.

4. BOND ANTICIPATION NOTES are issued to provide interim financing until
long-term bond financing can be arranged. In most cases, the long-term bonds
provide the funds for the repayment of the notes.

5. CONSTRUCTION LOAN NOTES are sold to provide construction financing.
After completion of construction, many projects receive permanent financing from
Fannie Mae or the Government National Mortgage Association ("GNMA").

6. TAX-EXEMPT COMMERCIAL PAPER is a short-term obligation issued by state
or local governments or their agencies to finance seasonal working capital needs
or as short-term financing in anticipation of longer-term financing.

7. PRE-REFUNDED AND "ESCROWED" MUNICIPAL BONDS are bonds with respect to
which the issuer has deposited, in an escrow account, an amount of securities
and cash, if any, that will be sufficient to pay the periodic interest on and
principal amount of the bonds, either at their stated maturity date or on the
date the issuer may call the bonds for payment. This arrangement gives the
investment a quality equal to the securities in the account, usually U.S.
Government Securities. The Portfolios can also purchase bonds issued to refund
earlier issues. The proceeds of these refunding bonds are often used for escrow
to support refunding.

RESIDUAL INTEREST BONDS (NEUBERGER BERMAN MUNICIPAL SECURITIES PORTFOLIO).
The Portfolio may purchase one component of a municipal security that is
structured in two parts: a variable rate security and a residual interest bond.
The interest rate for the variable rate security is determined by an index or an
auction process held approximately every 35 days, while the residual interest
bond holder receives the balance of the income less an auction fee. These
instruments are also known as inverse floaters because the income received on
the residual interest bond is inversely related to the market rates. The market
prices of residual interest bonds are highly sensitive to changes in market
rates and may decrease significantly when market rates increase.

TENDER OPTION BONDS (NEUBERGER BERMAN MUNICIPAL SECURITIES PORTFOLIO).
Tender option bonds are created by coupling an intermediate- or long-term fixed
rate tax-exempt bond (generally held pursuant to a custodial arrangement) with a
tender agreement that gives the holder the option to tender the bond at its face
value. As consideration for providing the tender option, the sponsor (usually a
bank, broker-dealer, or other financial institution) receives periodic fees
equal to the difference between the bond's fixed coupon rate and the rate
(determined by a remarketing or similar agent) that would cause the bond,
coupled with the tender option, to trade at par on the date of such
determination. After payment of the tender option fee, the Portfolio effectively

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holds a demand obligation that bears interest at the prevailing short-term
tax-exempt rate. NB Management considers the creditworthiness of the issuer of
the underlying bond, the custodian, and the third party provider of the tender
option. In certain instances, a sponsor may terminate a tender option if, for
example, the issuer of the underlying bond defaults on interest payments or the
bond's rating falls below investment grade. The tax treatment of tender option
bonds is unclear and the Portfolio will not invest in them unless NB Management
has assurances that the interest thereon will be exempt from federal income tax.

YIELD AND PRICE CHARACTERISTICS OF MUNICIPAL OBLIGATIONS

Municipal obligations generally have the same yield and price
characteristics as other debt securities. Yields depend on a variety of factors,
including general conditions in the money and bond markets and, in the case of
any particular securities issue, its amount, maturity, duration, and rating.
Market prices of fixed income securities usually vary upward or downward in
inverse relationship to market interest rates.

Municipal obligations with longer maturities or durations tend to produce
higher yields. They are generally subject to potentially greater price
fluctuations, and thus greater appreciation or depreciation in value, than
obligations with shorter maturities or durations and lower yields. An increase
in interest rates generally will reduce the value of a Portfolio's investments,
whereas a decline in interest rates generally will increase that value. The
ability of each Portfolio to achieve its investment objective also is dependent
on the continuing ability of the issuers of the municipal obligations in which
the Portfolios invest (or, in the case of industrial development bonds, the
revenues generated by the facility financed by the bonds or, in certain other
instances, the provider of the credit facility backing the bonds) to pay
interest and principal when due.

INVESTMENT IN TAXABLE SECURITIES

The types of taxable securities in which each Portfolio temporarily may
invest are limited to the following short-term fixed income securities, with
maturities of one year or less from the time of purchase:

U.S. GOVERNMENT AND AGENCY SECURITIES. U.S. Government Securities are
obligations of the U.S. Treasury backed by the full faith and credit of the
United States. U.S. Government Agency Securities are issued or guaranteed by
U.S. Government agencies, or by instrumentalities of the U.S. Government, such
as the Government National Mortgage Association ("GNMA"), Fannie Mae (formerly,
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 Tennessee Valley Authority. Some U.S. Government
Agency Securities are supported by the full faith and credit of the United
States, while others may be supported by the issuer's ability to borrow from the
U.S. Treasury, subject to the Treasury's discretion in certain cases, or only by
the credit of the issuer. U.S. Government Agency Securities include U.S.
Government Agency mortgage-backed securities. The market prices of U.S.
Government Agency Securities are not guaranteed by the Government and generally
fluctuate inversely with changing interest rates.

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ILLIQUID SECURITIES. 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 Securities Act of
1933, as amended, 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 trustees of Managers Trust, determines they are liquid.
Illiquid securities may be difficult for a Portfolio to value or dispose of due
to the absence of an active trading market. The sale of some illiquid securities
by the Portfolios may be subject to legal restrictions which could be costly to
the Portfolios.

POLICIES AND LIMITATIONS. Neuberger Berman MUNICIPAL SECURITIES Portfolio
may invest up to 15% of its net assets and Neuberger Berman MUNICIPAL MONEY
Portfolio may invest up to 10% of its net assets in illiquid securities.

RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolios 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
further to facilitate efficient trading among institutional investors by
permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by a
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of a Portfolio's
illiquidity. NB Management, acting under guidelines established by the Portfolio
Trustees, may determine that certain securities qualified for trading under Rule
144A are liquid.

Where registration is required, a Portfolio may be obligated to pay all or
part of the registration expenses, and a considerable period may elapse between
the decision to sell and the time the Portfolio may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
for which no market exists are priced by a method that the Portfolio 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, in the
case of Neuberger Berman MUNICIPAL SECURITIES Portfolio, a 15% limit or in the
case of Neuberger Berman MUNICIPAL MONEY Portfolio, a 10% limit on investments
in illiquid securities.

BANKING SECURITIES. These securities include CDs, time deposits, bankers'
acceptances, and other short-term and long-term debt obligations issued by U.S.
commercial banks. CDs are receipts for funds deposited for a specified period of

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time at a specified rate of return; time deposits generally are similar to CDs,
but are uncertificated. Bankers' acceptances are time drafts drawn on commercial
banks by borrowers, usually in connection with international commercial
transactions. The CDs, time deposits, and bankers' acceptances in which the
Portfolios invest typically are not covered by deposit insurance.

POLICIES AND LIMITATIONS. A Portfolio may invest in securities issued by a
U.S. commercial bank only if (1) the bank has total assets of at least
$1,000,000,000, and (2) the bank is on NB Management's approved list.

REPURCHASE AGREEMENTS. In a repurchase agreement, a Portfolio purchases
securities from a bank that is a member of the Federal Reserve System or a
securities dealer that agrees to repurchase the securities from the Portfolio at
a higher price on a designated future date. Repurchase agreements generally are
for a short period of time, usually less than a week.

POLICIES AND LIMITATIONS. Borrowers are required continuously to secure
their obligations to return securities on loan from a Portfolio by depositing
collateral in a form determined to be satisfactory by the Portfolio Trustees.
The collateral, which must be marked to market daily, must be equal to at least
100% of the market value of the loaned securities, which will also be marked to
market daily.

Repurchase agreements with a maturity of more than seven days are
considered to be illiquid securities. Neither Portfolio may enter into such a
repurchase agreement if, as a result, more than 15% in the case of Neuberger
Berman MUNICIPAL SECURITIES Portfolio or 10% in the case of Neuberger Berman
MUNICIPAL MONEY Portfolio of the value of its net assets would then be invested
in such repurchase agreements and other illiquid securities. A Portfolio may
enter into a repurchase agreement only if (1) the underlying securities are of
the type (excluding maturity and duration limitations) that the Portfolio's
investment policies and limitations would allow it to purchase directly, except
that Neuberger Berman MUNICIPAL MONEY Portfolio may invest only in repurchase
agreements with respect to securities rated in the highest rating category by
Standard & Poor's ("S&P"), Moody's Investors Services, Inc. ("Moody's"), or any
other nationally recognized statistical rating organization ("NRSRO") or unrated
securities determined by NB Management to be of comparable quality, (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 Portfolio's account by its custodian or a bank acting as the
Portfolio's agent.

SECURITIES LOANS. Each Portfolio 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 100%
of the market value of the loaned securities, is continuously maintained by the
borrower with the Portfolio. The Portfolio may invest the cash collateral and
earn income, or it may receive an agreed upon amount of interest income from a
borrower who has delivered equivalent collateral. During the time securities are
on loan, the borrower will pay the Portfolio an amount equivalent to any
dividends or interest paid on such securities. These loans are subject to
termination at the option of the Portfolio or the borrower. The Portfolio may
pay reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or equivalent

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collateral to the borrower or placing broker. The Portfolio does not have the
right to vote securities on loan, but would terminate the loan and regain the
right to vote if that were considered important with respect to the investment.
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.

POLICIES AND LIMITATIONS. In order to realize income, each Portfolio may
lend portfolio securities with a value not exceeding 33-1/3% of its total assets
to banks, brokerage firms, or institutional investors judged creditworthy by NB
Management.

COMMERCIAL PAPER. Commercial paper is a short-term debt security issued by
a corporation, bank, municipality, or other issuer, usually for purposes such as
financing current operations. Each Portfolio may invest only in commercial paper
receiving the highest rating from S&P (A-1) or Moody's (P-1), or deemed by NB
Management to be of equivalent quality. Each Portfolio may invest in commercial
paper that cannot be resold to the public without an effective registration
statement under the 1933 Act. While restricted commercial paper normally is
deemed illiquid, NB Management may in certain cases determine that such paper is
liquid, pursuant to guidelines established by the Portfolio Trustees.

SWAP AGREEMENTS (NEUBERGER BERMAN MUNICIPAL SECURITIES PORTFOLIO). To help
enhance the value of its Portfolio or manage its exposure to different types of
investments, the Portfolio may enter into interest rate and mortgage swap
agreements and may purchase and sell interest rate "caps," "floors," and
"collars." In a typical interest-rate 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. Mortgage swap agreements are similar to interest-rate
swap agreements, except the notional principal amount is tied to a reference
pool of mortgages.

In a cap or floor, one party agrees, usually in return for a fee, to make
payments under particular circumstances. For example, the purchaser of an
interest-rate cap has the right to receive payments to the extent a specified
interest rate exceeds an agreed level; the purchaser of an interest-rate floor
has the right to receive payments to the extent a specified interest rate falls
below an agreed level. A collar entitles the purchaser to receive payments to
the extent a specified interest rate falls outside an agreed range.

Swap agreements may involve leverage and may be highly volatile; depending
on how they are used, they may have a considerable impact on the Portfolio's
performance. The risks of swap agreements depend upon the other party's
creditworthiness and ability to perform, as well as the Portfolio'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.

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<PAGE>

payments by the two parties, the Portfolio will segregate only the amount of its
net obligation, if any.

ADDITIONAL INVESTMENT INFORMATION

The Portfolios' investments in municipal obligations and taxable
securities may take the form of the following types of investments:

VARIABLE OR FLOATING RATE SECURITIES; DEMAND AND PUT FEATURES. Variable
rate securities provide for automatic adjustment of the interest rate at fixed
intervals (e.g., daily, weekly, monthly, or semi-annually); floating rate
securities provide for automatic adjustment of the interest rate whenever a
specified interest rate or index changes. The interest rate on variable and
floating rate securities (collectively, "Adjustable Rate Securities") ordinarily
is determined by reference to a particular bank's prime rate, the 90-day U.S.
Treasury Bill rate, the rate of return on commercial paper or bank CDs, an index
of short-term tax-exempt rates, or some other objective measure.

Adjustable Rate Securities in which the Portfolios invest are municipal
obligations which frequently permit the holder to demand payment of the
obligations' principal and accrued interest at any time or at specified
intervals not exceeding one year. The demand feature usually is backed by a
credit instrument (e.g., a bank letter of credit) from a creditworthy issuer and
sometimes by municipal bond insurance from a creditworthy insurer. Without these
credit enhancements, some Adjustable Rate Securities might not meet the
Portfolios' quality standards. Accordingly, in purchasing these securities, each
Portfolio relies primarily on the creditworthiness of the credit instrument
issuer or the insurer.

A Portfolio can also buy fixed rate securities accompanied by a demand
feature or by a put option, which permits the Portfolio to sell the security to
the issuer or third party at a specified price. A Portfolio may rely on the
creditworthiness of issuers of the credit enhancements in purchasing these
securities.

POLICIES AND LIMITATIONS. Neuberger Berman MUNICIPAL SECURITIES Portfolio
may not invest more than 5% of its total assets in securities backed by credit
instruments from any one issuer or by insurance from any one insurer. For
purposes of this limitation, Neuberger Berman MUNICIPAL SECURITIES Portfolio
excludes securities that do not rely on the credit instrument or insurance for
their ratings, i.e., stand on their own credit. Neuberger Berman MUNICIPAL MONEY
Portfolio may invest in securities subject to demand features or guarantees as
permitted by Rule 2a-7 under the 1940 Act.

For purposes of determining its dollar-weighted average maturity, each
Portfolio calculates the remaining maturity of variable and floating rate
instruments as provided in Rule 2A-7 under the 1940 Act. In calculating its
dollar-weighted average maturity and duration, each Portfolio is permitted to
treat certain Adjustable Rate Securities as maturing on a date prior to the date
on which the final repayment of principal must unconditionally be made. In
applying such maturity shortening devices, NB Management considers whether the
interest rate reset is expected to cause the security to trade at approximately
its par value.

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PURCHASES WITH A STANDBY COMMITMENT TO REPURCHASE. When a Portfolio
purchases municipal obligations, it also may acquire a standby commitment
obligating the seller to repurchase the obligations at an agreed price on a
specified date or within a specified period. A standby commitment is the
equivalent of a nontransferable "put" option held by a Portfolio that terminates
if the Portfolio sells the obligations to a third party.

The Portfolios may enter into standby commitments only with banks and (if
permitted under the 1940 Act) securities dealers determined to be creditworthy.
A Portfolio's ability to exercise a standby commitment depends on the ability of
the bank or securities dealer to pay for the obligations on exercise of the
commitment. If a bank or securities dealer defaults on its commitment to
repurchase such obligations, a Portfolio may be unable to recover all or even
part of any loss it may sustain from having to sell the obligations elsewhere.

Although neither Portfolio currently intends to invest in standby
commitments, each reserves the right to do so. By enabling a Portfolio to
dispose of municipal obligations at a predetermined price prior to maturity,
this investment technique allows the Portfolio to be fully invested while
preserving the flexibility to make commitments for when-issued securities, take
advantage of other buying opportunities, and meet redemptions.

Standby commitments are valued at zero in determining net asset value
("NAV"). The maturity or duration of municipal obligations purchased by a
Portfolio is not shortened by a standby commitment. Therefore, standby
commitments do not affect the dollar-weighted average maturity or duration of
the Portfolio's investment portfolio.

POLICIES AND LIMITATIONS. Neither Portfolio will invest in standby
commitments unless it receives an opinion of counsel or a ruling of the Internal
Revenue Service ("Service") satisfactory to the Portfolio Trustees that the
interest earned by the Portfolio on municipal obligations subject to a standby
commitment will be exempt from federal income tax. Neither Portfolio will
acquire standby commitments with a view to exercising them when the exercise
price exceeds the current value of the underlying obligations; a Portfolio will
do so only to facilitate portfolio liquidity.

PARTICIPATION INTERESTS. The Portfolios may purchase from banks
participation interests in all or part of specific holdings of short-term
municipal obligations. Each participation interest is backed by an irrevocable
letter of credit issued by a selling bank determined to be creditworthy. A
Portfolio has the right to sell the participation interest back to the bank,
usually after seven days' notice, for the full principal amount of its
participation, plus accrued interest, but only (1) to provide portfolio
liquidity, (2) to maintain portfolio quality, or (3) to avoid losses when the
underlying municipal obligations are in default. Although no Portfolio currently
intends to acquire participation interests, each reserves the right to do so in
the future.

POLICIES AND LIMITATIONS. No Portfolio will purchase participation
interests unless it receives an opinion of counsel or a ruling of the Service
satisfactory to the Portfolio Trustees that interest earned by the Portfolio on
municipal obligations in which it holds participation interests is exempt from
federal income tax.

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<PAGE>

WHEN-ISSUED TRANSACTIONS. These transactions involve a commitment by a
Portfolio to purchase securities that will be issued at a future date
(ordinarily within two months, although the Portfolio 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 are negotiated directly with the other party, and such
commitments are not traded on exchanges.

POLICIES AND LIMITATIONS. Neither Portfolio may invest more than 10% of
its total assets in when-issued securities. A Portfolio will purchase securities
on a when-issued basis only with the intention of completing the transaction and
actually purchasing the securities. If deemed advisable as a matter of
investment strategy, however, a Portfolio may dispose of or renegotiate a
commitment after it has been entered into. A Portfolio also may sell securities
it has committed to purchase before those securities are delivered to the
Portfolio on the settlement date. The Portfolio may realize capital gains or
losses in connection with these transactions.

REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
Portfolio sells portfolio securities subject to its agreement to repurchase the
securities at a later date for a fixed price reflecting a market rate of
interest. There is a risk that the counterparty to a reverse repurchase
agreement will be unable or unwilling to complete the transaction as scheduled,
which may result in losses to the Portfolio.

POLICIES AND LIMITATIONS. These agreements are considered borrowings for
purposes of each Portfolio's investment policies and limitations concerning
borrowings. While a reverse repurchase agreement is outstanding, a Portfolio
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 each
Portfolio's obligations under the agreement.

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<PAGE>

ZERO COUPON SECURITIES. Zero coupon securities 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
securities, and the perceived credit quality of the issuer.

Zero coupon securities are redeemed at face value when they mature. The
discount on zero coupon securities ("original issue discount" or "OID") must be
taken into account ratably by each Portfolio prior to the receipt of any actual
payments. Because its corresponding Fund must distribute substantially all of
its net income (including its share of the Portfolio's accrued tax-exempt OID)
to its shareholders each year for income tax purposes, each Portfolio may have
to dispose of portfolio securities under disadvantageous circumstances to
generate cash, or may be required to borrow, to satisfy its corresponding Fund's
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 the same or similar maturities
and credit quality.

FUTURES CONTRACTS AND OPTIONS THEREON (NEUBERGER BERMAN MUNICIPAL
SECURITIES Portfolio). Neuberger Berman MUNICIPAL SECURITIES Portfolio may
purchase and sell interest rate and bond index futures contracts and options
thereon ("Futures" or "Futures Contracts") in an attempt to hedge against
changes in the prices of municipal obligations and other securities resulting
from changes in prevailing interest rates. Because the futures markets may be
more liquid than the cash markets, the use of Futures permits the Portfolio to
enhance portfolio liquidity and maintain a defensive position without having to
sell portfolio securities. The Portfolio views investment in Futures and options
thereon as a duration management device and/or a device to reduce risk and
preserve total return in an adverse interest rate environment for the hedged
securities.

A "sale" of a Futures Contract (or a "short" Futures position) entails the
assumption of a contractual obligation to deliver the securities 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 underlying the contract at a
specified price at a specified future time. Certain Futures, including 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 are traded on exchanges that have been designated as
"contract markets" by the Commodity Futures Trading Commission ("CFTC"); Futures
transactions must be executed through a futures commission merchant that is a
member of the relevant contract market. The exchange's affiliated clearing
organization guarantees performance of the contracts between the clearing
members of the exchange.

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<PAGE>

Although Futures Contracts by their terms may require the actual delivery
or acquisition of the underlying securities, in most cases the contractual
obligation is extinguished by being offset before the expiration of the
contract, without the parties having to make or take delivery of the assets. A
Futures position is offset by buying (to offset an earlier sale) or selling (to
offset an earlier purchase) an identical Futures Contract calling for delivery
in the same month. This may result in a profit or loss. While futures contracts
entered into by a Portfolio will usually be liquidated in this manner, the
Portfolio may instead make or take delivery of underlying securities whenever it
appears economically advantageous for it to do so.

"Margin" with respect to Futures is the amount of assets that must be
deposited by the Portfolio with, or for the benefit of, a futures commission
merchant in order to initiate and maintain the Portfolio's Futures positions.
The margin deposit made by the Portfolio when it enters into a Futures Contract
("initial margin") is intended to assure its performance of the contract. If the
price of the Futures Contract changes -- increases in the case of a short (sale)
position or decreases in the case of a long (purchase) position -- so that the
unrealized loss on the contract causes the margin deposit not to satisfy margin
requirements, the Portfolio will be required to make an additional margin
deposit ("variation margin"). However, if favorable price changes in the Futures
Contract cause the margin deposit to exceed the required margin, the excess will
be paid to the Portfolio. In computing its daily NAV, the Portfolio marks to
market the value of its open Futures positions. The Portfolio 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). If the futures
commission merchant holding the deposit goes bankrupt, the Portfolio 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 assumption of offsetting Futures positions by the
writer and holder of the option is accompanied by delivery of the accumulated
cash balance in the writer's Futures margin account 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.

Although the Portfolio believes that the use of Futures Contracts will
benefit it, if NB Management's judgment about the general direction of the
markets or about interest rate trends is incorrect, the Portfolio's overall
return would be lower than if it had not entered into any such contracts. The
prices of Futures are volatile and are influenced by, among other things, actual
and anticipated changes in interest rates, which in turn are affected by fiscal
and monetary policies and by national and international political and economic
events. At best, the correlation between changes in prices of Futures and of the
securities being hedged can be only approximate due to differences between the
futures and securities markets or differences between the securities or
currencies underlying the Portfolio's futures position and the securities held
by or to be purchased for the Portfolio.

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<PAGE>

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 an immediate and substantial loss,
or gain, to the Portfolio. 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 thus 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 option positions and
subjecting investors to substantial losses. If this were to happen with respect
to a position held by the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.

POLICIES AND LIMITATIONS. The Portfolio may purchase and sell interest
rate and bond index Futures and may purchase and sell options in an attempt to
hedge against changes in securities prices resulting from changes in prevailing
interest rates. The Portfolio does not engage in transactions in Futures or
options thereon for speculation. To the extent Neuberger Berman MUNICIPAL
SECURITIES Portfolio sells or purchases Futures Contracts and/or writes options
thereon other than for BONA FIDE hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums on these positions (excluding the amount
by which options are "in-the-money") may not exceed 5% of the Portfolio's net
assets.

COVER FOR FUTURES AND OPTIONS ON FUTURES (COLLECTIVELY, "HEDGING
INSTRUMENTS") (NEUBERGER BERMAN MUNICIPAL SECURITIES PORTFOLIO). Neuberger
Berman MUNICIPAL SECURITIES Portfolio will comply with SEC guidelines regarding
"cover" for Hedging Instruments and, if the guidelines so require, set aside in
a segregated account with its custodian the prescribed amount of cash or
appropriate liquid securities. Securities held in a segregated account cannot be
sold while the Futures or option strategy covered by those securities is
outstanding, unless they are replaced with other suitable assets. As a result,
segregation of a large percentage of Neuberger Berman MUNICIPAL SECURITIES
Portfolio's assets could impede portfolio management or the Portfolio's ability
to meet current obligations. The Portfolio may be unable promptly to dispose of
assets which cover, or are segregated with respect to, an illiquid Futures or
options position; this inability may result in a loss to the Portfolio.

POLICIES AND LIMITATIONS. Neuberger Berman MUNICIPAL SECURITIES Portfolio
will comply with SEC guidelines regarding "cover" for Hedging Instruments and,
if the guidelines so require, set aside in a segregated account with its
custodian the prescribed amount of cash or appropriate liquid securities.

GENERAL RISKS OF HEDGING INSTRUMENTS (NEUBERGER BERMAN MUNICIPAL
SECURITIES Portfolio). The primary risks in using Hedging Instruments are (1)
imperfect correlation or no correlation between changes in the market value of
the securities held or to be acquired by Neuberger Berman MUNICIPAL SECURITIES
Portfolio and changes in market value of Hedging Instruments; (2) possible lack
of a liquid secondary market for Hedging Instruments and the resulting inability

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to close out Hedging Instruments when desired; (3) the fact that the skills
needed to use Hedging Instruments are different from those needed to select the
Portfolio's securities; (4) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in hedged investments; and (5) the possible inability of the Portfolio
to purchase or sell a portfolio security at a time that would otherwise be
favorable for it to do so, or the possible need for the Portfolio to sell a
portfolio security at a disadvantageous time, due to its need to maintain cover
or to segregate securities in connection with its use of Hedging Instruments.
There can be no assurance that the Portfolio's use of Hedging Instruments will
be successful.

Neuberger Berman MUNICIPAL SECURITIES Portfolio's use of Hedging
Instruments may be limited by certain provisions of the Internal Revenue Code of
1986, as amended ("Code"), with which the Portfolio must comply if its
corresponding Fund is to continue to qualify as a regulated investment company
("RIC"). See "Additional Tax Information."

POLICIES AND LIMITATIONS. NB Management intends to reduce the risk of
imperfect correlation by investing only in Hedging Instruments whose behavior is
expected to resemble or offset that of the Portfolio's underlying securities. NB
Management intends to reduce the risk that the Portfolio will be unable to close
out Hedging Instruments by entering into such transactions only if NB Management
believes there will be an active and liquid secondary market.

RISKS OF FIXED INCOME SECURITIES

Fixed income securities are subject to the risk of an issuer's inability
to meet principal and interest payments on its obligations ("credit risk") and
are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). Lower-rated securities are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates.

RATINGS OF FIXED INCOME SECURITIES

The ratings of municipal securities by S&P, Moody's, and other NRSROs, as
well as their ratings of municipal bond insurers, represent their opinions as to
the quality of municipal obligations and companies they undertake to rate.
Ratings are not absolute standards of quality; consequently, municipal
obligations with the same maturity, duration, coupon, and rating may have
different yields. There are variations in municipal obligations and in bond
insurers, both within a particular classification and between classifications.
These variations result from numerous factors, each of which could affect the
obligation's or insurer's rating. See Appendix A to this SAI for ratings by S&P
and Moody's of municipal obligations and claims-paying ability or financial
strength of municipal bond insurers.

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<PAGE>

Agency Securities, have been determined by NB Management to be of comparable
quality. If two or more NRSROs have rated a security, at least two of them must
rate it as high quality if the security is to be eligible for purchase by
Neuberger Berman MUNICIPAL MONEY Portfolio.

Subsequent to its purchase by a Portfolio, the rating of an issue of debt
securities may be reduced, so that the securities would no longer be eligible
for purchase by that Portfolio. In such a case, NB Management will engage in an
orderly disposition of the downgraded securities or other securities to the
extent necessary to ensure that Neuberger Berman MUNICIPAL SECURITIES
Portfolio's holdings of securities that are considered by the Portfolio to be
below investment grade will not exceed 5% of its net assets. With respect to
Neuberger Berman MUNICIPAL MONEY Portfolio, NB Management will consider the need
to dispose of such securities in accordance with the requirements of Rule 2a-7
under the 1940 Act.

DURATION AND MATURITY

Duration is a measure of the sensitivity of debt securities to changes in
market interest rates, based on the entire cash flow associated with the
securities, including payments occurring before the final repayment of
principal. For Neuberger Berman MUNICIPAL SECURITIES Portfolio, NB Management
utilizes duration as a tool in portfolio selection instead of the more
traditional measure known as "term to maturity." "Term to maturity" measures
only the time until a debt security provides its final payment, taking no
account of the pattern of the security's payments prior to maturity. Duration
incorporates a bond's yield, coupon interest payments, final maturity and call
features into one measure. Duration therefore provides a more accurate
measurement of a bond's likely price change in response to a given change in
market interest rates. The longer the duration, the greater the bond's price
movement will be as interest rates change. For any fixed income security with
interest payments occurring prior to the payment of principal, duration is
always less than maturity.

Futures, options and options on futures have durations which are generally
related to the duration of the securities underlying them. Holding long futures
positions will lengthen a Portfolio's duration by approximately the same amount
as would holding an equivalent amount of the underlying securities. Short
futures positions have durations roughly equal to the negative of the duration
of the securities that underlie these positions, and have the effect of reducing
portfolio duration by approximately the same amount as would selling an
equivalent amount of the underlying securities.

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<PAGE>

years; however, their interest rate exposure corresponds to the frequency of the
coupon reset. In these and other similar situations, NB Management, where
permitted, will use more sophisticated analytical techniques that incorporate
the economic life of a security into the determination of its interest rate
exposure.

Neuberger Berman MUNICIPAL MONEY Portfolio is required to maintain a
dollar-weighted average portfolio maturity of no more than 90 days and invest in
a portfolio of debt instruments with remaining maturities of 397 days or less.
Neuberger Berman MUNICIPAL SECURITIES Portfolio's dollar-weighted average
duration will not exceed ten years.

CERTAIN RISK CONSIDERATIONS

A Fund's investment in its corresponding Portfolio may be affected by the
actions of other larger investors in the Portfolio, if any. For example, if a
large investor in a Portfolio (other than a Fund) redeemed its interest in the
Portfolio, the Portfolio's remaining investors (including the Fund) might, as a
result, experience higher pro rata operating expenses, thereby producing lower
returns.

Although each Portfolio 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 any Portfolio will achieve its investment objective.
Each Portfolio's ability to achieve its investment objective is dependent on the
continuing ability of the issuers of municipal obligations in which the
Portfolio invests (and, in certain circumstances, of banks issuing letters of
credit or insurers issuing insurance backing those obligations) to pay interest
and principal when due.
Unlike other types of investments, municipal obligations have
traditionally not been subject to the registration requirements of the federal
securities laws, although there have been proposals to provide for such
registration in the future. This lack of SEC regulation has adversely affected
the quantity and quality of information available to the bond markets about
issuers and their financial condition. The SEC has responded to the need for
such information with Rule 15c2-12 of the Securities Exchange Act of 1934, as
amended (the "Rule"). The Rule requires that underwriters must reasonably
determine that an issuer of municipal securities undertakes in a written
agreement for the benefit of the holders of such securities to file with a
nationally recognized municipal securities information repository certain
information regarding the financial condition of the issuer and material events
relating to such securities. The SEC's intent in adopting the Rule was to
provide holders and potential holders of municipal securities with more adequate
financial information concerning issuers of municipal securities. The Rule
provides exemptions for issuances with a principal amount of less than
$1,000,000 and certain privately placed issuances.

The federal bankruptcy statutes provide that, in certain circumstances,
political subdivisions and authorities of states may initiate bankruptcy
proceedings without prior notice to or consent of their creditors. These
proceedings could result in material and adverse changes in the rights of
holders of their obligations.

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From time to time, federal legislation has affected the availability of
municipal obligations for investment by each Portfolio. There can be no
assurance that legislation affecting the tax-exempt status of other municipal
obligations will not be enacted in the future. If such legislation is enacted,
each Fund and its corresponding Portfolio will reevaluate its investment
objective, policies, and limitations. The Service occasionally challenges the
tax-exempt status of the income on municipal securities. If the Service
determined that such income earned by a Portfolio were taxable, that income
could be deemed taxable retroactive to the time of the Portfolio's purchase of
the relevant security.

PERFORMANCE INFORMATION

Each Fund's performance figures are based on historical results and are
not intended to indicate future performance. The yield and total return of each
Fund will vary. The share prices of MUNICIPAL SECURITIES will vary, and an
investment in this Fund, when redeemed, may be worth more or less than an
investor's original cost.

Yield Calculations

MUNICIPAL MONEY may advertise its "current yield" and "effective yield" in
the financial press and other publications. The Fund's CURRENT YIELD is based on
the return for a recent seven-day period and is computed by determining the net
change (excluding capital changes) in the value of a hypothetical account having
a balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts, and
dividing the difference by the value of the account at the beginning of the base
period. The result is a "base period return," which is then annualized -- that
is, the amount of income generated during the seven-day period is assumed to be
generated each week over a 52-week period -- and shown as an annual percentage
of the investment.

The EFFECTIVE YIELD of MUNICIPAL MONEY is calculated similarly, but the
base period return is assumed to be reinvested. The assumed reinvestment is
calculated by adding 1 to the base period return, raising the sum to a power
equal to 365 divided by seven, and subtracting one from the result, according to
the following formula:

Effective Yield = [(Base Period Return + 1)365/7(SUPERSCRIPT)] - 1

For the seven calendar days ended October 31, 1998, the current yield and
effective yield of MUNICIPAL MONEY were ____% and ____%, respectively.

MUNICIPAL SECURITIES may advertise its "yield" based on a 30-day (or one
month) period. This YIELD is computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period. The result then is annualized and shown as an annual
percentage of the investment. For the 30-day period ended October 31, 1998, the
annualized yield of MUNICIPAL SECURITIES was ____%.

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TAX EQUIVALENT YIELD

Each Fund may advertise a "tax equivalent yield" that reflects the taxable
yield that an investor subject to the highest marginal rate of federal income
tax (currently 39.6%) would have had to receive in order to realize the same
level of after-tax yield produced by an investment in a Fund. TAX EQUIVALENT
YIELD is calculated according to the following formula:

Tax Equivalent Yield = Y1 + Y2
----
1-MR

where Y1 equals that portion of a Fund's current or effective yield that is not
subject to federal income tax, Y2 equals that portion of the Fund's current or
effective yield that is subject to that tax, and MR equals the highest marginal
federal tax rate.

For example, if the tax-free yield is 4%, there is no income subject to
federal income tax, and the maximum tax rate is 39.6%, the computation is:

4% ( ) (1 - .396) = 4 ( ) .604 = 6.62% Tax Equivalent Yield

In this example, the after-tax yield (of a taxable investment) will be lower
than the 4% tax-free investment if available taxable yields are below 6.62%;
conversely, the taxable investment will provide a higher after-tax yield when
taxable yields exceed 6.62%. This example assumes that all of the income from
the investment is exempt. The tax equivalent current yield and tax-equivalent
effective yield of MUNICIPAL MONEY for the 7-day period ended October 31, 1998,
were ____% and ____%, respectively. The tax-equivalent yield of MUNICIPAL
SECURITIES for the 30-day period ended that date was ____%, assuming a marginal
tax rate of 39.6%.

The use of a 4% yield in these examples is for illustrative purposes only
and is not indicative of the Funds' future performance.

TOTAL RETURN COMPUTATIONS

MUNICIPAL SECURITIES 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:

P (1+T)n(SUPERSCRIPT) = ERV

Average annual total return smoothes out year-to-year variations in performance
and, in that respect, differs from actual year-to-year results.

For the one-, five- and ten-year periods ended October 31, 1997, the
average annual total returns for MUNICIPAL SECURITIES and its predecessor were
+____%, +____%, and +____%, respectively. If an investor had invested $10,000 in
that predecessor's shares on July 9, 1987, and had reinvested all distributions,
the value of that investor's holdings would have been $______ on October 31,
1997.

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NB Management may from time to time reimburse MUNICIPAL SECURITIES or its
corresponding Portfolio for a portion of its expenses. Such action has the
effect of increasing yield and total return. Actual reimbursements are described
in the Prospectus and in "Investment Management and Administration Services"
below.

COMPARATIVE INFORMATION

From time to time each Fund's performance may be compared with:

(1) data (that may be expressed as rankings or ratings) published by
independent services or publications (including newspapers,
newsletters, and financial periodicals) that monitor the performance
of mutual funds, such as Lipper Analytical Services, Inc., C.D.A.
Investment Technologies, Inc., Wiesenberger Investment Companies
Service, IBC/Donoghue's Money Market Fund Report, Investment Company
Data Inc., Morningstar Inc., Micropal Incorporated and quarterly
mutual fund rankings by Money, Fortune, Forbes, Business Week,
Personal Investor, and U.S. News & World Report magazines, The Wall
Street Journal, The New York Times, Kiplinger's Personal Finance,
and Barron's Newspaper, or

(2) recognized bond, stock, and other indices such as the Municipal Bond
Buyers Indices (and other indices of municipal obligations),
Shearson Lehman Bond Index, the Standard & Poor's "500" Composite
Stock Price Index ("S&P 500 Index"), Dow Jones Industrial Average
("DJIA"), S&P/BARRA Index, Russell Index, and various other
domestic, international, and global indices and changes in the U.S.
Department of Labor Consumer Price Index. The S&P 500 Index is a
broad index of common stock prices, while the DJIA represents a
narrower segment of industrial companies. Each assumes reinvestment
of distributions and is calculated without regard to tax
consequences or the costs of investing. Each Portfolio may invest in
different types of securities from those included in some of the
above indices.

Each Fund's performance also may be compared from time to time with the
following specific indices, among others, and other measures of performance:

MUNICIPAL MONEY's performance may be compared with the IBC/Donoghue's
Tax-Free General Purpose Money Market Funds average.

MUNICIPAL SECURITIES' performance may be compared with the Lehman Brothers
3-year G.O. and 5-year G.O. Bond Indices, 3-year and 5-year general
obligation bonds, and the Lipper Intermediate Municipal Debt Funds
category.

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<PAGE>

volatility show the range of historical price fluctuations. Standard deviation
may be used as a measure of volatility. There are other measures of volatility
which may yield different results.

In addition, each Fund's performance may be compared at times with that of
various bank instruments (including bank money market accounts and CDs of
varying maturities) as reported in publications such as The Bank Rate Monitor.
Any such comparisons may be useful to investors who wish to compare a Fund's
past performance with that of certain of its competitors. Of course, past
performance is not a guarantee of future results. Unlike an investment in a
Fund, bank CDs pay a fixed rate of interest for a stated period of time and are
insured up to $100,000.

The Funds may also be compared to individual asset classes such as common
stocks, small-cap stocks, or Treasury bonds, based on information supplied by
Ibbotson and Sinquefield. Evaluations of the Funds' performance, and their
yield/total returns and comparisons may be used in advertisements and in
information furnished to current and prospective shareholders (collectively,
"Advertisements").

OTHER PERFORMANCE INFORMATION

From time to time, information about a Portfolio's portfolio allocation
and holdings as of a particular date may be included in Advertisements for its
corresponding Fund. This information may include the Portfolio's portfolio
diversification by asset type. Information used in Advertisements may include
statements or illustrations relating to the appropriateness of types of
securities and/or mutual funds that may be employed to meet specific financial
goals, such as (1) funding retirement, (2) paying for children's education, and
(3) financially supporting aging parents.

Information (including charts and illustrations) showing the effects of
compounding interest may be included in Advertisements from time to time.
Compounding is the process of earning interest on principal plus interest that
was earned earlier. Interest can be compounded at different intervals, such as
annually, semi-annually, quarterly, monthly, or daily. For example, $1,000
compounded annually at 9% will grow to $1,090 at the end of the first year (an
increase of $90) and $1,188 at the end of the second year (an increase of $98).
The extra $8 that was earned on the $90 interest from the first year is the
compound interest. One thousand dollars compounded annually at 9% will grow to
$2,367 at the end of ten years and $5,604 at the end of twenty years. Other
examples of compounding are as follows: at 7% and 12% annually, $1,000 will grow
to $1,967 and $3,106, respectively, at the end of ten years and $3,870 and
$9,646, respectively, at the end of twenty years. All these examples are for
illustrative purposes only and are not indicative of any Fund's performance.

Information relating to inflation and its effects on the dollar also may
be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)

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<PAGE>

Information relating to how much you would have to earn with a taxable
investment in order to match the tax-exempt yield of a municipal bond fund also
may be included in Advertisements. The chart below illustrates this.

Federal Tax Bracket 31.0% 36.0% 39.6%
Municipal Bond Yield 4.0% 4.0% 4.0%
Equivalent Taxable Yield 5.8% 6.3% 6.6%

Information regarding the effects of automatic investing and systematic
withdrawal plans, and investing at market highs and/or lows also may be included
in Advertisements, if appropriate.

TRUSTEES AND OFFICERS

The following table sets forth information concerning the trustees and
officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by NB Management and Neuberger
Berman.

Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s) (2)
- ---------- --------------- -----------------
<S> <C> <C>

John Cannon (68) Trustee of each Trust Senior Vice President AMA
CDC Associates, Inc. Investment Advisers, Inc.
620 Sentry Parkway (1991-1993); Chairman and
Suite 220 Chief Investment Officer of
P.O. Box 1111 CDC Associates, Inc.
Blue Bell, PA 19422 (registered investment
adviser) (1993-present).

Stanley Egener* (64) Chairman of the Principal of Neuberger Berman;
Board, Chief President and Director of NB
Executive Officer, Management; Chairman of the
and Trustee of each Board, Chief Executive Officer
Trust and Trustee of nine other
mutual funds for which NB
Management acts as investment
manager or administrator.

Theodore P. Giuliano* (45) President and Trustee Principal of Neuberger Berman;
of each Trust Vice President and Director of
NB Management; President
and Trustee of one other
mutual fund for which NB
Management acts as
administrator.

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<PAGE>

Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s) (2)
- ---------- --------------- -----------------

Barry Hirsch (64) Trustee of each Trust Senior Vice President,
Loews Corporation Secretary, and General Counsel
667 Madison Avenue of Loews Corporation
7th Floor (diversified financial
New York, NY 10021 corporation).

Robert A. Kavesh (70) Trustee of each Trust Professor of Finance and
110 Bleecker Street Economics at Stern School of
Apt. 24B Business, New York University;
New York, NY 10012 Director of Del Laboratories,
Inc. and Greater New York
Mutual Insurance Co.

William E. Rulon (65) Trustee of each Trust Retired. Senior Vice
1761 Hotel Circle So. President of Foodmaker, Inc.
San Diego, CA 92108 (operator and franchiser of
restaurants) until January
1997; Secretary of Foodmaker,
Inc. until July 1996.

Candace L. Straight (50) Trustee of each Trust Private investor and consultant
578 E. Passaic Avenue specializing in the insurance
Bloomfield, NJ 07003 industry; Principal of Head &
Company, LLC (limited liability
company providing investment
banking and consulting services
to the insurance industry) until
March 1996; Director of Drake
Holdings (U.K. motor insurer)
until June 1996.

Daniel J. Sullivan (59) Vice President of Senior Vice President of NB
each Trust Management since 1992; prior
thereto, Vice President of NB
Management; Vice President of
nine other mutual funds for
which NB Management acts as
investment manager or
administrator.

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<PAGE>

Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s) (2)
- ---------- --------------- -----------------

Michael J. Weiner (51) Vice President and Senior Vice President of NB
Principal Financial Management since 1992; Treasurer
Officer of each Trust of NB Management from 1992 to
1996; prior thereto, Vice
President and Treasurer of NB
Management and Treasurer of
certain mutual funds for which
NB Management acted as
investment adviser; Vice
President and Principal
Financial Officer of nine other
mutual funds for which NB
Management acts as investment
manager or administrator.

Claudia A. Brandon (42) Secretary of each Vice President of NB
Trust Management; Secretary of nine
other mutual funds for which
NB Management acts as
investment manager or
administrator.

Richard Russell (51) Treasurer and Vice President of NB
Principal Accounting Management since 1993; prior
Officer of each Trust thereto, Assistant Vice
President of NB Management;
Treasurer and Principal
Accounting Officer of nine
other mutual funds for which
NB Management acts as
investment manager or
administrator.

Stacy Cooper-Shugrue (35) Assistant Secretary Assistant Vice President of NB
of each Trust Management since 1993; prior
thereto, employee of NB
Management; Assistant Secretary
of nine other mutual funds for
which NB Management acts as
investment manager or
administrator.

C. Carl Randolph (61) Assistant Secretary Principal of Neuberger Berman
of each Trust since 1992; prior thereto,
employee of Neuberger Berman;
Assistant Secretary of nine
other mutual funds for which
NB Management acts as
investment manager or
administrator.

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<PAGE>

Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s) (2)
- ---------- --------------- -----------------

Barbara DiGiorgio (39) Assistant Treasurer Assistant Vice President of NB
of each Trust Management since 1993; prior
thereto, employee of NB
Management; Assistant Treasurer
of nine other mutual funds for
which NB Management acts as
investment manager or
administrator.

Celeste Wischerth (37) Assistant Treasurer Assistant Vice President of NB
of each Trust Management since 1994; prior
thereto, employee of NB
Management; Assistant Treasurer
of nine other mutual funds for
which NB Management acts as
investment manager or
administrator.
</TABLE>

- --------------------

(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, NY 10158.

(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.

* Indicates a trustee who is an "interested person" of each Trust within the
meaning of the 1940 Act. Messrs. Egener and Giuliano are interested persons by
virtue of the fact that they are officers and directors of NB Management and
principals of Neuberger Berman.

The Trust's Trust Instrument and Managers Trust's Declaration of Trust
provide that each such Trust will indemnify its trustees and officers against
liabilities and expenses reasonably incurred in connection with litigation in
which they may be involved because of their offices with the Trust, unless it is
adjudicated that they (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, or by a majority of
disinterested trustees based upon a review of readily available facts, or in a
written opinion of independent counsel) that such officers or trustees have not
engaged in willful misfeasance, bad faith, gross negligence, or reckless
disregard of their duties.

The following table sets forth information concerning the compensation of
the trustees and officers of the Trust. None of the Neuberger Berman Funds(R)
has any retirement plan for its trustees or officers.

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<PAGE>
<TABLE>
<CAPTION>

TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/98

Total Compensation
from Trusts in the Neuberger
Name and Position Aggregate Compensation Berman Funds Complex Paid
with the Trust from the Trust to Trustees
- ----------------- ---------------------- ----------------
<S> <C> <C>

John Cannon $ $
Trustee (2 other investment companies)

Stanley Egener $0 $0
Chairman of the Board, Chief (10 other investment companies)
Executive Officer, and Trustee

Theodore P. Giuliano $0 $0
President and Trustee (2 other investment companies)

Barry Hirsch $ $
Trustee (2 other investment companies)

Robert A. Kavesh $ $
Trustee (2 other investment companies)

William E. Rulon $ $
Trustee (2 other investment companies)

Candace L. Straight $ $
Trustee (2 other investment companies)
</TABLE>

At January __, 1999, the trustees and officers of the Trust, as a group,
owned beneficially or of record ____% of the outstanding shares of MUNICIPAL
MONEY and ____% of MUNICIPAL SECURITIES.

INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES

INVESTMENT MANAGER AND ADMINISTRATOR

The Management Agreement provides, in substance, that NB Management will
make and implement investment decisions for the Portfolios in its discretion and
will continuously develop an investment program for the Portfolios' assets. The
Management Agreement permits NB Management to effect securities transactions on

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<PAGE>

behalf of each Portfolio 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 Portfolios, although NB Management has no current plans to
pay a material amount of such compensation.

NB Management provides to each Portfolio, 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
Managers Trust who are officers, directors, or employees of NB Management. Two
officers and directors of NB Management (who also are principals of Neuberger
Berman) presently serve as trustees and officers of the Trusts. See "Trustees
and Officers." Each Portfolio pays NB Management a management fee based on the
Portfolio's average daily net assets, as described in the Prospectus.

NB Management provides similar facilities, services, and personnel to each
Fund pursuant to an administration agreement with the Trust dated July 2, 1993
("Administration Agreement"). For such administrative services, each Fund pays
NB Management a fee based on the Fund's average daily net assets, as described
in the Prospectus.

From time to time, NB Management or 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.

MANAGEMENT AND ADMINISTRATION FEES

For investment management services, each Portfolio pays NB Management a
fee at the annual rate of 0.25% of the first $500 million of that Portfolio's
average daily net assets, 0.225% of the next $500 million, 0.20% of the next
$500 million, 0.175% of the next $500 million, and 0.15% of average daily net
assets in excess of $2 billion.

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<PAGE>

Fund under the administration agreement. In addition, a Fund may compensate such
third parties for accounting and other services.

Each Fund accrued management and administration fees of the following
amounts (before any reimbursement of the Funds, described below) for the fiscal
years ended October 31, 1998, 1997, and 1996:

Fund 1998 1997 1996
- ---- ---- ---- ----

MUNICIPAL MONEY $ $736,228 $832,011

MUNICIPAL SECURITIES $ $171,589 $215,161

EXPENSE REIMBURSEMENTS

NB Management has voluntarily undertaken to reimburse MUNICIPAL SECURITIES
for its Operating Expenses (including fees under the Administration Agreement)
and the pro rata share of its corresponding Portfolio's Operating Expenses
(including fees under the Management Agreement) that exceed, in the aggregate
0.65% per annum of the Fund's average daily net assets. Operating Expenses
exclude interest, taxes, brokerage commissions, and extraordinary expenses. NB
Management can terminate each undertaking by giving the Fund at least 60 days'
prior written notice.

Amount of Total Operating Expenses
Reimbursed by NB Management for
Fiscal Years Ended October 31
-----------------------------

Fund 1998 1997 1996
- ---- ---- ---- ----
MUNICIPAL SECURITIES TRUST $ $131,519 $160,411

The Management Agreement continues with respect to each Portfolio for a
period of two years after the date the Portfolio became subject thereto. The
Management Agreement is renewable thereafter from year to year with respect to
each Portfolio, so long as its continuance is approved at least annually (1) by
the vote of a majority of the Portfolio Trustees who are not "interested
persons" of NB Management or Managers Trust ("Independent Portfolio Trustees"),
cast in person at a meeting called for the purpose of voting on such approval,
and (2) by the vote of a majority of the Portfolio Trustees or by a 1940 Act
majority vote of the outstanding shares in that Portfolio. The Administration
Agreement continues with respect to each Fund for a period of two years after
the date the Fund became subject thereto. The Administration Agreement is
renewable from year to year with respect to a Fund, so long as its continuance
is approved at least annually (1) by the vote of a majority of the Fund Trustees
who are not "interested persons" of NB Management or the Trust ("Independent
Fund Trustees"), cast in person at a meeting called for the purpose of voting on

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<PAGE>

such approval and (2) by the vote of a majority of the Fund Trustees or by a
1940 Act majority vote of the outstanding shares in that Fund.

The Management Agreement is terminable, without penalty, with respect to a
Portfolio on 60 days' written notice either by Managers 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.

SUB-ADVISER

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. Neuberger
Berman also serves as a sub-adviser for all of the other mutual funds managed by
NB Management.

The Sub-Advisory Agreement continues with respect to each Portfolio for a
period of two years after the date the Portfolio became subject thereto, and is
renewable thereafter from year to year, subject to approval of its continuance
in the same manner as the Management Agreement. The Sub-Advisory Agreement is
subject to termination, without penalty, with respect to each Portfolio by the
Portfolio Trustees or a 1940 Act majority vote of the outstanding interests in
that Portfolio, by NB Management, or by Neuberger Berman on not less than 30 nor
more than 60 days' prior written notice to the appropriate Fund. The
Sub-Advisory Agreement also terminates automatically with respect to each
Portfolio if it is assigned or if the Management Agreement terminates with
respect to that Portfolio.

Most money managers that come to the Neuberger Berman organization have at
least fifteen years experience. Neuberger Berman and NB Management employ
experienced professionals that work in a competitive environment.

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<PAGE>

INVESTMENT COMPANIES MANAGED

As of December 31, 1998, the investment companies managed by NB Management
had aggregate net assets of approximately $20.7 billion. NB Management currently
serves as investment manager of the following investment companies:

Approximate
Net Assets at
Name December 31, 1998
- ---- -----------------

Neuberger Berman Cash Reserves Portfolio.......................... $ ______
(investment portfolio for Neuberger Berman Cash Reserves)

Neuberger Berman Government Money Portfolio....................... $ ______
(investment portfolio for Neuberger Berman Government Money Fund)

Neuberger Berman High Yield Bond Portfolio........................ $ ______
(investment portfolio for Neuberger Berman High Yield Bond Fund)

Neuberger Berman Limited Maturity Bond Portfolio.................. $ ______
(investment portfolio for Neuberger Berman Limited Maturity Bond
Fund and Neuberger Berman Limited Maturity Bond Trust)

Neuberger Berman Municipal Money Portfolio........................ $ ______
(investment portfolio for Neuberger Berman Municipal Money Fund)

Neuberger Berman Municipal Securities Portfolio................... $ ______
(investment portfolio for Neuberger Berman Municipal Securities Trust)

Neuberger Berman Focus Portfolio.................................. $ ______
(investment portfolio for Neuberger Berman Focus Fund, Neuberger
Berman Focus Trust, and Neuberger Berman Focus Assets)

Neuberger Berman Genesis Portfolio................................ $ ______
(investment portfolio for Neuberger Berman Genesis Fund,
Neuberger Berman Genesis Trust, and Neuberger Berman Genesis Assets)

-34-
<PAGE>

Neuberger Berman Guardian Portfolio............................... $ ______
(investment portfolio for Neuberger Berman Guardian Fund, Neuberger
Berman Guardian Trust, and Neuberger Berman Guardian Assets)

Neuberger Berman International Portfolio.......................... $ ______
(investment portfolio for Neuberger Berman International Fund and
Neuberger Berman International Trust)

Neuberger Berman Manhattan Portfolio.............................. $ ______
(investment portfolio for Neuberger Berman Manhattan Fund, Neuberger
Berman Manhattan Trust, and Neuberger Berman Manhattan Assets)

Neuberger Berman Millennium Portfolio............................. $ ______
(investment portfolio for Neuberger Berman Millennium Fund and Neuberger
Berman Millennium Trust)

Neuberger Berman Partners Portfolio............................... $ ______
(investment portfolio for Neuberger Berman Partners Fund, Neuberger
Berman Partners Trust, and Neuberger Berman Partners Assets)

Neuberger Berman Socially Responsive Portfolio.................... $ ______
(investment portfolio for Neuberger Berman Socially Responsive Fund,
Neuberger Berman Socially Responsive Trust and Neuberger
Berman NYCDC Socially Responsive Trust)

Advisers Managers Trust (seven series)............................ $ ______

The investment decisions concerning the Portfolios and the other mutual
funds 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 Portfolios.
Even where the investment objectives are similar, however, the methods used by
the Other NB Funds and the Portfolios to achieve their objectives may differ.
The investment results achieved by all of the funds 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 Portfolio 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

-35-
<PAGE>

funds involved. Although in some cases this arrangement may have a detrimental
effect on the price or volume of the securities as to a Portfolio, in other
cases it is believed that a Portfolio's ability to participate in volume
transactions may produce better executions for it. In any case, it is the
judgment of the Portfolio Trustees that the desirability of the Portfolios'
having their advisory arrangements with NB Management outweighs any
disadvantages that may result from contemporaneous transactions.

MANAGEMENT AND CONTROL OF NB MANAGEMENT

The directors and officers of NB Management, all of whom have offices at
the same address as NB Management, are Richard A. Cantor, Chairman of the Board
and director; Stanley Egener, President and director; Theodore P. Giuliano, Vice
President and director; Michael M. Kassen, Vice President and director; Irwin
Lainoff, director; Lawrence Zicklin, director; Daniel J. Sullivan, Senior Vice
President; Peter E. Sundman, Senior Vice President; Michael J. Weiner, Senior
Vice President; Claudia A. Brandon, Vice President; Patrick T. Byrne, Vice
President; Brooke A. Cobb, Vice President; Robert W. D'Alelio, Vice President;
Clara Del Villar, Vice President; Brian J. Gaffney, Vice President; Joseph
Galli, Vice President; Robert I. Gendelman, Vice President; Josephine P.
Mahaney, Vice President; Michael F. Malouf, Vice President; Ellen Metzger, Vice
President and Secretary; Paul Metzger, Vice President; S. Basu Mullick, Vice
President; Janet W. Prindle, Vice President; Kevin L. Risen, Vice President;
Richard Russell, Vice President; Jennifer K. Silver, Vice President; Kent C.
Simons, Vice President; Frederic B. Soule, Vice President; Judith M. Vale, Vice
President; Susan Walsh, Vice President; Catherine Waterworth, Vice President;
Allan R. White, III, Vice President; Andrea Trachtenberg, Vice President of
Marketing; Robert Conti, Treasurer; Ramesh Babu, Assistant Vice President;
Valerie Chang, Assistant Vice President; Stacy Cooper-Shugrue, Assistant Vice
President; Barbara DiGiorgio, Assistant Vice President; Michael J. Hanratty,
Assistant Vice President; Robert L. Ladd, Assistant Vice President; Carmen G.
Martinez, Assistant Vice President; Joseph S. Quirk, Assistant Vice President;
Ingrid Saukaitis, Assistant Vice President; Josephine Velez, Assistant Vice
President; Celeste Wischerth, Assistant Vice President; and Loraine Olavarria,
Assistant Secretary. Messrs. Cantor, Egener, Gendelman, Giuliano, Kassen,
Lainoff, Zicklin, Risen, Simons, Sundman and White and Mmes. Prindle, Silver and
Vale are principals of Neuberger Berman.

Mr. Giuliano and Mr. Egener are trustees and officers, and Messrs.
Sullivan, Weiner, and Russell and Mmes. Brandon, Cooper-Shugrue, DiGiorgio and
Wischerth are officers, of each Trust. C. Carl Randolph, a principal of
Neuberger Berman, also is an officer of each Trust.

All of the outstanding voting stock in NB Management is owned by persons
who are also principals of Neuberger Berman.

DISTRIBUTION ARRANGEMENTS

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<PAGE>

and advertisements in accordance with the 1933 Act, the 1940 Act, and applicable
rules of self-regulatory organizations. Sales may be made only by the
Prospectus, which may be delivered personally, through the mails, or by
electronic means. The Distributor is the Funds' "principal underwriter" within
the meaning of the 1940 Act and, as such, acts as agent in arranging for the
sale of each Fund's shares without sales commission or other compensation and
bears all advertising and promotion expenses incurred in the sale of the Funds'
shares.

The Distributor or one of its affiliates may, from time to time, deem it
desirable to offer to 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 to the Funds' shareholders any investment products or
services other than those managed or distributed by NB Management or Neuberger
Berman.

The Trust, on behalf of each Fund, and the Distributor are parties to a
Distribution Agreement that continues until July 2, 1998. The Distribution
Agreement may be renewed annually if specifically approved by (1) the vote of a
majority of the Fund Trustees or a 1940 Act majority vote of the Fund's
outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreement.

ADDITIONAL PURCHASE INFORMATION

SHARES PRICES AND NET ASSET VALUE

Each Fund's shares are bought or sold at a price that is the Fund's NAV
per share. The NAVs for each Fund and its corresponding Portfolio are calculated
by subtracting liabilities from total assets (in the case of a Portfolio, the
market value of the securities the Portfolio holds plus cash and other assets;
in the case of a Fund, its percentage interest in its corresponding Portfolio,
multiplied by the Portfolio's NAV, plus any other assets). Each Fund's per share
NAV is calculated by dividing its NAV by the number of Fund shares outstanding
and rounding the result to the nearest full cent.

Neuberger Berman Municipal Money Fund tries to maintain a stable NAV
of $1.00 per share. Its corresponding Portfolio values its securities at their
cost at the time of purchase and assume a constant amortization to maturity of
any discount or premium. Neuberger Berman MUNICIPAL MONEY Fund and Portfolio
calculate their NAVs as of noon Eastern time on each day the NYSE is open.

Neuberger Berman MUNICIPAL SECURITIES Portfolio uses an independent
pricing service to determine the market value of its portfolio securities and
periodically verifies the valuations. The Portfolio and its corresponding Fund
calculate their NAVs as of the close of regular trading on the NYSE, usually 4
p.m. Eastern time, on each day the NYSE is open.

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<PAGE>

If NB Management believes that the price of a security obtained under a
Portfolio's valuation procedures (as described above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security, the Portfolio will value the security based on a method that the
trustees of Managers Trust believe accurately reflects fair value.

AUTOMATIC INVESTING AND DOLLAR COST AVERAGING

Shareholders may arrange to have a fixed amount automatically invested in
shares of MUNICIPAL SECURITIES each month. To do so, a 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. A shareholder who elects 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 Management Incorporated, 605 Third Avenue, 2nd Floor, New York, NY
10158-0180.

Automatic investing enables a shareholder in MUNICIPAL SECURITIES to take
advantage of "dollar cost averaging." As a result of dollar cost averaging, a
shareholder's average cost of shares in those Funds generally would be lower
than it would be 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 Prospectus entitled
"Shareholder Services -- Exchange Privilege," shareholders may redeem at least
$1,000 worth of a Fund's shares and invest the proceeds in shares of one or more
of the other Funds or the Equity or Income Funds that are briefly described
below, provided that the minimum investment requirements of the other fund(s)
are met.

Fund shareholders who are considering exchanging shares into any of the
funds described below should note that (1) like the Funds, the Income Funds are
series of the Trust, (2) the Equity Funds are series of a Delaware business
trust (named "Neuberger Berman Equity Funds") that is registered with the SEC as
an open-end management investment company, (3) each of the Equity and Income
Funds invests all of its net investable assets in a corresponding portfolio that
has an investment objective, policies, and limitations identical to those of the
fund.

EQUITY FUNDS

Neuberger Berman Seeks long-term growth of capital through
Focus Fund investments principally in common stocks
selected from 13 multi-industry economic sectors.
The corresponding portfolio uses a value-oriented
approach to select individual securities and then
focuses its investments in the sectors in which
the undervalued stocks are clustered. Through this

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approach, 90% or more of the portfolio's
investments are normally made in not more than six
sectors.

Neuberger Berman Seeks growth of capital through investments
Genesis Fund primarily in common stocks of companies with
small market capitalizations (i.e., up to $1.5
billion) at the time of the Portfolio's
investment. The corresponding portfolio uses a
value-oriented approach to the selection of
individual securities.

Neuberger Berman Seeks long-term growth of capital through
Guardian Fund investments primarily in common stocks of
long-established, high-quality companies that NB
Management believes are well-managed. The
corresponding portfolio uses a value-oriented
approach to the selection of individual
securities. Current income is a secondary
objective. The fund (or its predecessor) has paid
its shareholders an income dividend every quarter,
and a capital gain distribution every year, since
its inception in 1950, although there can be no
assurance that it will be able to continue to do
so.

Neuberger Berman Seeks long-term growth of capital through
International Fund investments primarily in a diversified
portfolio of equity securities of foreign issuers.
Assets will be allocated among economically mature
countries and emerging industrialized countries.

Neuberger Berman Seeks growth of capital, without regard to
Manhattan Fund income, through investments in securities of
small-, medium-and large-capitalization companies
(with a current focus on medium-capitalization
companies) believed to have the maximum potential
for long-term capital appreciation. The
corresponding portfolio's investment program
involves greater risks and share price volatility
than programs that invest in more undervalued
securities.

Neuberger Berman Seeks growth of capital by investing primarily
Millennium Fund in common stocks of small-capitalization
companies (those with a market value of no more
than $1.5 billion at the time the fund first
invests in them). The corresponding portfolio uses
a growth-oriented investment approach to the
selection of individual securities.

Neuberger Berman Seeks growth of capital through an investment
Partners Fund approach that is designed to increase capital
with reasonable risk. Its investment program seeks
securities believed to be undervalued based on

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strong fundamentals such as a low
price-to-earnings ratio, consistent cash flow, and
the company's track record through all parts of
the market cycle. The corresponding portfolio uses
the value-oriented investment approach to the
selection of individual securities.

Neuberger Berman Seeks long-term growth of capital through
Socially Responsive investments primarily in securities of
Fund companies that meet both financial and social
criteria.

INCOME FUNDS

Neuberger Berman A U.S. Government money market fund seeking
Government Money Fund maximum safety and liquidity and the highest
available current income. The corresponding
portfolio invests only in U.S. Treasury
obligations and other money market instruments
backed by the full faith and credit of the United
States. It seeks to maintain a constant purchase
and redemption price of $1.00.

Neuberger Berman A money market fund seeking the highest
Cash Reserves available current income consistent with safety
and liquidity. The corresponding portfolio
invests in high-quality money market
instruments. It seeks to maintain a constant
purchase and redemption price of $1.00.

Neuberger Berman Seeks the highest available current income
Limited Maturity Bond Fund consistent with low risk to principal and
liquidity; and secondarily, total return. The
corresponding portfolio invests in debt
securities, primarily investment grade; maximum
10% below investment grade, but no lower than B.1/
Maximum dollar-weighted average duration of four
years.

Neuberger Berman In seeking its objective of high current income
High Yield Bond Fund and, secondarily, capital growth, the fund
invests primarily in lower-rated debt
securities, and in investment grade
income-producing and non-income producing debt
and equity securities.

The Funds described herein, and any of the funds described above, may
terminate or modify their exchange privileges in the future.

- --------------------

1/ As rated by Moody's or S&P or, if unrated by either of those entities, deemed
by N&B Management to be of comparable quality.

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<PAGE>

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. The Income Funds share a prospectus with the Funds, while the Equity
Funds share a separate prospectus. An exchange is treated as a sale for federal
income tax purposes, and, depending on the circumstances, a short- or long-term
capital gain or loss may be realized.

There can be no assurance that MUNICIPAL MONEY, Neuberger Berman Cash
Reserves, or Neuberger Berman Government Money Fund, each of which is a money
market fund that seeks to maintain a constant purchase and redemption share
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.

ADDITIONAL REDEMPTION INFORMATION

SUSPENSION OF REDEMPTIONS

The right to redeem a Fund's shares may be suspended or payment of the
redemption price postponed (1) when the New York Stock Exchange ("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 its corresponding
Portfolio to dispose of securities it owns or fairly to determine the value of
its net assets, or (4) for such other period as the SEC may by order permit for
the protection of 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 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 (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, by making payment in whole or in part by securities valued as
described under "Share Prices and Net Asset Value" in the Prospectus. If payment
is made in securities, a shareholder generally will incur brokerage expenses or
other transactions 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 substantially all of its share
of any net investment income (after deducting expenses incurred directly by the
Fund) and any net realized capital gains (both long-term and short-term) earned
by its corresponding Portfolio. A Portfolio's net investment income consists of
all income accrued on portfolio assets less accrued expenses but does not
include capital gains and losses. Net investment income and net capital gains

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and losses are reflected in a Portfolio's NAV (and, hence, its corresponding
Fund's NAV) until they are distributed. MUNICIPAL MONEY calculates its net
investment income and share price as of noon (Eastern time) on each Business
Day; MUNICIPAL SECURITIES calculates its net investment income and share price
as of the close of regular trading on the NYSE on each Business Day (usually 4
p.m. Eastern time).

Income dividends are declared daily; dividends declared for each month are
paid on the last Business Day of the month. Shares of MUNICIPAL MONEY begin
earning income dividends on the Business Day the proceeds of the purchase order
are converted into "federal funds" and continue to earn dividends through the
Business Day before they are redeemed; shares of MUNICIPAL SECURITIES begin
earning income dividends on the Business Day after the proceeds of the purchase
order have been converted to "federal funds" and continue to earn dividends
through the Business Day they are redeemed. Distributions of net realized
capital gains, if any, normally are paid by MUNICIPAL SECURITIES once annually,
in December.

A cash election with respect to either Fund remains in effect until the
shareholder notifies State Street in writing to discontinue the election. If it
is determined, however, that the U.S. Postal Service cannot properly deliver
Fund mailings to the 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 until
the shareholder notifies State Street or the Fund in writing to request 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 Fund at the Fund's price on the day the check is reinvested. No
interest will accrue on amounts represented by uncashed dividend or distribution
checks.

ADDITIONAL TAX INFORMATION

TAXATION OF THE FUNDS

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payments with respect to securities loans, and gains from the sale or other
disposition of securities, or other income (including gains from Hedging
Instruments) derived with respect to its business of investing in securities
("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 does
not represent more than 10% of the issuer's outstanding voting securities, and
(ii) not more than 25% of the value of its total assets may be invested in
securities (other than U.S. Government securities or securities of other RICs)
of any one issuer.

If a Fund failed to qualify for treatment as a RIC for any taxable year,
(1) it would be taxed on the full amount of its taxable income for that year
without being able to deduct the distributions it makes to its shareholders and
(2) the shareholders would treat all those distributions, including
distributions of net capital gain (the excess of net long-term capital gain over
net short-term capital loss) and distributions that otherwise would qualify as
"exempt-interest dividends" described in the following paragraph, as dividends
(that is, ordinary income) to the extent of the Fund's earnings and profits. 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.

In addition, in order to be able to pay "exempt-interest dividends" to its
shareholders, each Fund must (and intends to continue to) satisfy the additional
requirement that, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets consists of securities the interest on which is
excludable from gross income under section 103(a) of the Code. "Exempt-interest"
dividends constitute the portion of the aggregate dividends (not including
capital gain distributions), as designated by a Fund, equal to the excess of the
Fund's excludable interest over certain amounts disallowed as deductions. The
shareholders' treatment of dividends from a Fund under local and state income
tax laws may differ from the treatment thereof under the Code.

MUNICIPAL MONEY and MUNICIPAL SECURITIES have received rulings from the
Service that each series, as an investor in its corresponding Portfolio, will be
deemed to own a proportionate share of the Portfolio's assets and income for
purposes of determining whether the series satisfies all the requirements
described above to qualify as a RIC and to pay "exempt-interest" dividends to
its shareholders.

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 (taxable) ordinary income for that year and capital
gain net income for the one-year period ending on October 31 of that year, plus
certain other amounts.

See the next section for a discussion of the tax consequences to MUNICIPAL
SECURITIES of distributions to it from its corresponding Portfolio, investments
by that Portfolio in certain securities, and hedging and certain other
transactions engaged in by that Portfolio.

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<PAGE>

TAXATION OF THE PORTFOLIOS

Neuberger Berman MUNICIPAL MONEY Portfolio and Neuberger Berman MUNICIPAL
SECURITIES Portfolio have received rulings from the Service to the effect that,
among other things, each Portfolio will be treated as a separate partnership for
federal income tax purposes and will not be a "publicly traded partnership." As
a result, neither Portfolio is subject to federal income tax; instead, each
investor in a Portfolio, such as a Fund, is required to take into account in
determining its federal income tax liability its share of the Portfolio's
income, gains, losses, deductions, credits, and tax preference items, without
regard to whether it has received any cash distributions from the Portfolio.
Each Portfolio also is not subject to Delaware or New York income or franchise
tax.

Because each Fund is deemed to own a proportionate share of its
corresponding Portfolio's assets and income for purposes of determining whether
the Fund satisfies the requirements to qualify as a RIC and to pay
"exempt-interest" dividends to its shareholders, each Portfolio intends to
continue to conduct its operations so that its corresponding Fund will be able
to continue to satisfy all those requirements.

Distributions to a Fund from its corresponding Portfolio (whether pursuant
to a partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, (3) loss may be recognized if
a liquidation distribution consists solely of cash and/or unrealized
receivables, and (4) gain (and, in certain situations, loss) may be recognized
on an in-kind distribution by the Portfolio. A Fund's basis for its interest in
its corresponding Portfolio generally equals the amount of cash and the basis of
any property the Fund invests in the Portfolio, increased by the Fund's share of
the Portfolio's net income (including tax-exempt income) and capital gains and
decreased by (a) the amount of cash and the basis of any property the Portfolio
distributes to the Fund and (b) the Fund's share of the Portfolio's losses.

The use by Neuberger Berman MUNICIPAL SECURITIES Portfolio of hedging
strategies, such as writing (selling) and purchasing Hedging Instruments,
involves complex rules that will determine for income tax purposes the amount,
character, and timing of recognition of the gains and losses the Portfolio
realizes in connection therewith. For this Portfolio, gains from Hedging
Instruments derived with respect to its business of investing in securities will
qualify as permissible income for its corresponding Fund under the Income
Requirement.

Exchange-traded Futures Contracts and listed options thereon ("Section
1256 contracts") are required to be marked to market (that is, treated as having
been sold at market value) for federal income tax purposes at the end of the
Portfolio'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, and 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

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<PAGE>

to satisfy the Distribution Requirement, which will be taxable to the
shareholders as ordinary income, and to increase the net capital gain recognized
by the Fund, without in either case increasing the cash available to the Fund. A
Fund may elect to exclude certain transactions from the operation of these
rules, although doing so may have the effect of increasing the relative
proportion of net short-term capital gain (taxable as ordinary income) and/or
increasing the amount of dividends that must be distributed to meet the
Distribution Requirement and avoid imposition of the Excise Tax.

If a Portfolio has an "appreciated financial position" -- generally, an
interest (including an interest through an option, Futures 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 same or substantially
similar property, the Portfolio will be treated as having made an actual sale
thereof, with the result that it will recognize a gain at that time. A
constructive sale generally consists of a short sale, an offsetting notional
principal contract, or a Futures Contract entered into by a Portfolio or a
related person with respect to the same or substantially similar property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale. The foregoing will not apply,
however, to any 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 Portfolio holds the appreciated financial position
unhedged for 60 days after that closing (I.E., at no time during that 60-day
period is the Portfolio's risk of loss regarding that position reduced by reason
of certain specified transactions with respect to substantially similar 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 Portfolio may invest in municipal bonds that are purchased with
market discount (that is, at a price less than the bond's principal amount or,
in the case of a bond that was issued with OID, at a price less than the amount
of the issue price plus accrued OID) ("municipal market discount bonds"). If a
bond's market discount is less than the product of (1) 0.25% of the redemption
price at maturity times (2) the number of complete years to maturity after the
taxpayer acquired the bond, then no market discount is considered to exist. Gain
on the disposition of a municipal market discount bond purchased by a Portfolio
(other than a bond with a fixed maturity date within one year from its
issuance), generally is treated as ordinary (taxable) income, rather than
capital gain, to the extent of the bond's accrued market discount at the time of
disposition. Market discount on such a bond generally is accrued ratably, on a
daily basis, over the period from the acquisition date to the date of maturity.
In lieu of treating the disposition gain as described above, a Portfolio may
elect to include market discount in its gross income currently, for each taxable
year to which it is attributable.

Each Portfolio may acquire zero coupon or other municipal securities
issued with OID. As a holder of those securities, each Portfolio (and, through
it, its corresponding Fund) must take into account the OID that accrues on the
securities during the taxable year, even if it receives no corresponding payment
on the securities during the year. Because each Fund annually must distribute
substantially all of its investment company taxable income and net tax-exempt
income (including its share of its corresponding Portfolio's accrued tax-exempt
OID) to satisfy the Distribution Requirement, a Fund may be required in a

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particular year to distribute as a dividend an amount that is greater than its
share of the total amount of cash its corresponding Portfolio actually receives.
Those distributions will be made from a Fund's (or its share of its
corresponding Portfolio's) cash assets or, if necessary, from the proceeds of
sales of that Portfolio's securities. A Portfolio may realize capital gains or
losses from those sales, which would increase or decrease its corresponding
Fund's investment company taxable income and/or net capital gain.

TAXATION OF THE FUNDS' SHAREHOLDERS

Interest on indebtedness incurred or continued by a shareholder to
purchase or carry Fund shares generally is not deductible. Furthermore, entities
or persons who are "substantial users" (or related persons) of facilities
financed by industrial development bonds or private activity bonds should
consult their tax advisers before purchasing shares of a Fund because, for users
of certain of these facilities, the interest on those bonds is not exempt from
federal income tax. For these purposes, the term "substantial user" is defined
generally to include a non-exempt person who regularly uses in trade or business
a part of a facility financed from the proceeds of those bonds.

If MUNICIPAL SECURITIES shares are sold at a loss after being held for six
months or less, the loss will be disallowed to the extent of any exempt-interest
dividends received on those shares, and the allowed portion of the loss, if any,
will be treated as long-term, instead of short-term, capital loss to the extent
of any capital gain distributions received on those shares.

Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income (including
income from tax-exempt sources such as a Fund) plus 50% of their benefits
exceeds certain base amounts. Exempt-interest dividends from a Fund still are
tax-exempt to the extent described above; they are only included in the
calculation of whether a recipient's income exceeds the established amounts.

If a Portfolio invests in any instruments that generate taxable interest
income, under the circumstances described in the Prospectus, distributions by
its corresponding Fund attributable to that interest will be taxable to the
Fund's shareholders as ordinary income to the extent of the Fund's earnings and
profits. Similarly, if a Portfolio realizes capital gain as a result of market
transactions, any distribution by its corresponding Fund attributable to that
gain will be taxable to the Fund's shareholders. There may be additional federal
income tax consequences regarding the receipt of tax-exempt dividends by
shareholders such as "S" corporations, financial institutions, and property and
casualty insurance companies. A shareholder falling into any such category
should consult its tax adviser concerning its investment in shares of a Fund.

Each Fund is required to withhold 31% of all taxable dividends, and
MUNICIPAL SECURITIES is required to withhold 31% of all capital gain
distributions and redemption proceeds, 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
taxable dividends and capital gain distributions payable to such shareholders
who otherwise are subject to backup withholding.

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As described under "Maintaining Your Account" in the Prospectus, a Fund
may close a shareholder's account with the Fund and redeem the remaining shares
if the account balance falls below the specified minimum and the shareholder
fails to reestablish the minimum balance after being given the opportunity to do
so.

VALUATION OF PORTFOLIO SECURITIES

Neuberger Berman MUNICIPAL MONEY Portfolio relies on Rule 2a-7 under the
1940 Act to use the amortized cost method of valuation to enable its
corresponding Fund to stabilize the purchase and redemption price of its shares
at $1.00 per share. This method involves valuing portfolio securities at their
cost at the time of purchase and thereafter assuming a constant amortization (or
accretion) to maturity of any premium (or discount), regardless of the impact of
interest rate fluctuations on the market value of the securities. Although
Neuberger Berman MUNICIPAL MONEY Portfolio's reliance on Rule 2a-7 and use of
the amortized cost valuation method should enable the Fund, under most
conditions, to maintain a stable $1.00 share price, there can be no assurance it
will be able to do so. An investment in the Fund, as in any mutual fund, is
neither insured nor guaranteed by the U.S. Government.

PORTFOLIO TRANSACTIONS

Purchases and sales of portfolio securities generally are transacted with
issuers, underwriters, or dealers that serve as primary market-makers, who act
as principals for the securities on a net basis. The Portfolios typically do not
pay brokerage commissions for such purchases and sales. Instead, the price paid
for newly issued securities usually includes a concession or discount paid by
the issuer to the underwriter, and the prices quoted by market-makers reflect a
spread between the bid and the asked prices from which the dealer derives a
profit. In effecting securities transactions, each Portfolio seeks to obtain the
best price and execution of orders.

In purchasing and selling portfolio securities other than as described
above (for example, in the secondary market), each Portfolio seeks to obtain
best execution at the most favorable prices through responsible broker-dealers
and, in the case of agency transactions, at competitive commission rates. In
selecting broker-dealers to execute transactions, NB Management considers such
factors as the price of the security, the rate of commission, the size and
difficulty of the order, and the reliability, integrity, financial condition,
and general execution and operational capabilities of competing broker-dealers.
NB Management also may consider the brokerage and research services that
broker-dealers provide to the Portfolio or NB Management. Under certain
conditions, a Portfolio may pay higher brokerage commissions in return for
brokerage and research services, although no Portfolio has a current arrangement
to do so. In any case, each Portfolio may effect principal transactions with a
dealer who furnishes research services, may designate any dealer to receive
selling concessions, discounts, or other allowances, or otherwise may deal with
any dealer in connection with the acquisition of securities in underwritings.

During the fiscal year ended October 31, 1998, [neither Portfolio acquired
securities of its "regular brokers or dealers" (as defined in the 1940 Act). At
October 31, 1998, neither Portfolio held any securities of its "regular brokers
or dealers."]

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No affiliate of any Portfolio receives give-ups or reciprocal business in
connection with its portfolio transactions. No Portfolio effects transactions
with or through broker-dealers in accordance with any formula or for selling
shares of a Fund. However, broker-dealers who effect or execute portfolio
transactions may from time to time effect purchases of Fund shares for their
customers. The 1940 Act generally prohibits Neuberger Berman from acting as
principal in the purchase of portfolio securities from, or the sale of portfolio
securities to, a Portfolio unless an appropriate exemption is available.

PORTFOLIO TURNOVER

Neuberger Berman MUNICIPAL SECURITIES Portfolio calculates a portfolio
turnover rate by dividing (1) the lesser of the cost of the securities purchased
or the proceeds from the securities sold by the Portfolio 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 value
of such securities owned by the Portfolio during the fiscal year.

REPORTS TO SHAREHOLDERS

ORGANIZATION, CAPITALIZATION AND OTHER MATTERS

THE FUNDS

Each Fund is a separate series of the Trust, a Delaware business trust
organized pursuant to a Trust Instrument dated as of December 23, 1992. 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 six separate
operating series. Each Fund invests all of its net investable assets in its
corresponding Portfolio, in each case receiving a beneficial interest in that
Portfolio. The trustees of the Trust may establish additional series or classes
of shares without the approval of shareholders. The assets of each series belong
only to that series, and the liabilities of each series are borne solely by that
series and no other.

The predecessors of MUNICIPAL MONEY and MUNICIPAL SECURITIES were
converted into separate series of the Trust on July 2, 1993; these conversions
were approved by the shareholders of the predecessors of these Funds in April
1993.

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SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold
annual meetings of shareholders of the Funds. The trustees will call special
meetings of shareholders of a Fund only if required under the 1940 Act or in
their discretion or upon the written request of holders of 10% or more of the
outstanding shares of that Fund entitled to vote.

THE PORTFOLIOS

Each Portfolio is a separate operating series of Managers Trust, a New
York common law trust organized as of December 1, 1992. Managers Trust is
registered under the 1940 Act as a diversified, open-end management investment
company. Managers Trust has six separate Portfolios. The assets of each
Portfolio belong only to that Portfolio, and the liabilities of each Portfolio
are borne solely by that Portfolio and no other.

FUNDS' INVESTMENTS IN PORTFOLIOS. Each Fund is a "feeder fund" that seeks
to achieve its investment objective by investing all of its net investable
assets in its corresponding Portfolio, which is a "master fund." The Portfolio,
which has the same investment objective, policies, and limitations as the Fund,
in turn invests in securities; the Fund thus acquires an indirect interest in
those securities.

Each Fund's investment in its corresponding Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in a Portfolio. Each Portfolio may also permit other
investment companies and/or other institutional investors to invest in the
Portfolio. All investors will invest in a Portfolio on the same terms and
conditions as a Fund and will pay a proportionate share of the Portfolio's
expenses. Other investors in a Portfolio are not required to sell their shares
at the same public offering price as a Fund, could have a different
administration fee and expenses than a Fund, and might charge a sales
commission. Therefore, Fund shareholders may have different returns than
shareholders in another investment company that invests exclusively in the
Portfolio. There is currently no such other investment company. Information
regarding any Fund that invests in a Portfolio is available from NB Management
by calling 800-877-9700.

The trustees of the Trust believe that investment in a Portfolio by other
potential investors in addition to a Fund may enable the Portfolio to realize
economies of scale that could reduce its operating expenses, thereby producing
higher returns and benefiting all shareholders. However, a Fund's investment in
its corresponding Portfolio may be affected by the actions of other large
investors in the Portfolio, if any. For example, if a large investor in a
Portfolio (other than a Fund) redeemed its interest in the Portfolio, the
Portfolio's remaining investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby producing lower returns.

-49-
<PAGE>

Each Fund may withdraw its entire investment from its corresponding
Portfolio at any time, if the trustees of the Trust determine that it is in the
best interests of the Fund and its shareholders to do so. A Fund might withdraw,
for example, if there were other investors in a Portfolio with power to, and who
did by a vote of all investors (including the Fund), change the investment
objective, policies, or limitations of the Portfolio in a manner not acceptable
to the trustees of the Trust. A withdrawal could result in a distribution in
kind of portfolio securities (as opposed to a cash distribution) by the
Portfolio to the Fund. That distribution could result in a less diversified
portfolio of investments for the Fund and could affect adversely the liquidity
of the Fund's investment portfolio. If the Fund decided to convert those
securities to cash, it usually would incur brokerage fees or other transaction
costs. If a Fund withdrew its investment from a Portfolio, the trustees of the
Trust would consider what actions might be taken, including the investment of
all of the Fund's net investable assets in another pooled investment entity
having substantially the same investment objective as the Fund or the retention
by the Fund of its own investment manager to manage its assets in accordance
with its investment objective, policies, and limitations. The inability of the
Fund to find a suitable replacement could have a significant impact on
shareholders.

CERTAIN PROVISIONS. Each investor in a Portfolio, including a Fund, will
be liable for all obligations of the Portfolio. However, the risk of an investor
in a Portfolio incurring financial loss beyond the amount of its investment on
account of such liability would be limited to circumstances in which the
Portfolio had inadequate insurance and was unable to meet its obligations out of
its assets. Upon liquidation of a Portfolio, investors would be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.

CUSTODIAN AND TRANSFER AGENT

Each Fund and Portfolio has selected State Street Bank and Trust Company
("State Street"), 225 Franklin Street, Boston, MA 02110 as custodian for its
securities and cash. 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 correspondence should be mailed to Neuberger Berman
Funds, c/o Boston Service Center, P.O. Box 8403, Boston, MA 02266-8403.

INDEPENDENT AUDITORS

Each Fund and Portfolio has selected Ernst & Young LLP, 200 Clarendon
Street, Boston, MA 02116, as the independent auditors who will audit its
financial statements.

-50-
<PAGE>

LEGAL COUNSEL

Each Fund and Portfolio has selected Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as its legal
counsel.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

Name and Address: Percentage of
---------------- Ownership at
January , 1999
--------------

MUNICIPAL MONEY: Neuberger Berman* ____ %
11 Broadway
New York, NY 10004

MUNICIPAL SECURITIES: Neuberger Berman* ____ %
11 Broadway
New York, NY 10004

Charles Schwab & Co., Inc.* ____ %
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122

REGISTRATION STATEMENT

This SAI and the Prospectus do not contain all the information included in
the Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered by the Prospectus. 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 and Portfolios.

Statements contained in this SAI and in the Prospectus as to the contents
of any contract or other document referred to are not necessarily complete, and
in each instance where reference is made to the copy of any contract or other
document filed as an exhibit to the registration statement, each such statement
being qualified in all respects by such reference.

-51-
<PAGE>

FINANCIAL STATEMENTS

[To be filed.]

-52-
<PAGE>

Appendix A

RATINGS OF MUNICIPAL OBLIGATIONS AND COMMERCIAL PAPER

S&P MUNICIPAL BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
PLUS (+) OR MINUS (-) - The ratings above may be modified by the addition of a
plus or minus sign to show relative standing within the major categories.

MOODY'S MUNICIPAL BOND RATINGS:
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or an exceptionally stable margin,
and principal is secure. Although the various protective elements are likely to
change, the changes that can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds rated AA are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as "high grade
bonds." They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa-rated securities, fluctuation of protective
elements may be of greater amplitude, or there may be other elements present
that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated BAA are considered as medium-grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. These bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3 in each
generic rating classification described above. The modifier 1 indicates that the
company 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 company
ranks in the lower end of its generic rating category.

A-1
<PAGE>

S&P MUNICIPAL NOTE RATINGS:
SP-1 - This designation denotes very strong or strong capacity to pay principal
and interest. Those issuers determined to possess overwhelming safety
characteristics are given a plus (+) designation. SP-2 - This designation
denotes satisfactory capacity to pay principal and interest. SP-3 - This
designation denotes speculative capacity to pay principal and interest. MOODY'S
MUNICIPAL NOTE RATINGS:
MIG 1/VMIG 1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2 - This designation denotes high quality. Margins of protection are
ample, although not so large as in the preceding group.
MIG 3/VMIG 3 - This designation denotes favorable quality. All security elements
are accounted for, but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow, and market access for
refinancing is likely to be less well established.
MIG 4/VMIG 4 - This designation denotes adequate quality, carrying specific risk
but having protection and not distinctly or predominantly speculative. The
designation VMIG indicates a variable rate demand note.
S&P COMMERCIAL PAPER RATINGS:
A-1 - This highest category indicates that the degree of safety regarding timely
payment is strong. Those issuers determined to possess extremely strong safety
characteristics are denoted with a plus sign (+).
A-2 - This designation denotes satisfactory capacity for timely payment.
However, the relative degree of safety is not as high as for issues designated
A-1.

MOODY'S COMMERCIAL PAPER RATINGS:
Issuers rated PRIME-1 (or related supporting institutions), also known as P-1,
have a superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics:

- Leading market positions in well-established industries.

- High rates of return on funds employed.

- Conservative capitalization structures with moderate reliance on
debt and ample asset protection.

- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.

- Well-established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated PRIME-2 (or related supporting institutions), also known as P-2,
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more

A-2
<PAGE>

subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions.
Ample alternate liquidity is maintained.
S&P CLAIMS-PAYING ABILITY RATINGS OF INSURANCE COMPANIES:
AAA - Insurers rated AAA offer superior financial security on both an absolute
and relative basis. They possess the highest safety and have an overwhelming
capacity to meet policyholder obligations.
MOODY'S FINANCIAL STRENGTH RATINGS OF INSURANCE COMPANIES:
Aaa - Insurers rated AAA offer exceptional financial security. While the
financial strength of these companies is likely to change, such changes as can
be visualized are most unlikely to impair their fundamentally strong positions.

A-3
<PAGE>

NEUBERGER BERMAN INCOME FUNDS
POST-EFFECTIVE AMENDMENT NO. 26 ON FORM N-1A

PART C

OTHER INFORMATION

Item 23. Financial Statements and Exhibits
- -------- ---------------------------------

(a) Financial Statements: None.

(b) Exhibits:

Exhibit
Number Description
------- -----------

(a) (1) Certificate of Trust. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-000117.

(2) Restated Certificate of Trust. Filed herewith.

(3) Trust Instrument of Neuberger Berman Income
Funds. Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement, File Nos.
2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-000117.

(4) Schedule A - Current Series of Neuberger
Berman Income Funds. Incorporated by Reference
to Post-Effective Amendment No. 25 to
Registrant's Registration Statement, File Nos.
2-85229 and 811-3802, EDGAR Accession No.
0000898432-98-000246.

(b) By-Laws of Neuberger Berman Income Funds.
Incorporated by Reference to Post-Effective
Amendment No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-000117.

(c) (1) Trust Instrument of Neuberger Berman Income
Funds, Articles IV, V, and VI. Incorporated
by Reference to Post-Effective Amendment No.
21 to Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.

(2) By-Laws of Neuberger Berman Income Funds,
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-00017.

C-1
<PAGE>

(d) (1) (i) Management Agreement Between Income
Managers Trust and Neuberger Berman
Management Incorporated. Incorporated
by Reference to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-00017.

(ii) Schedule A - Portfolios of Income
Managers Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 25 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-98-000246

(iii) Schedule B - Schedule of Compensation under
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No. 25
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-98-000246.

(2) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Incorporated and
Neuberger Berman, L.P. with respect to
Income Managers Trust. Incorporated by
Reference to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-00017.

(ii) Schedule A - Portfolios of Income
Managers Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 25 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-98-000246

(iii) Substitution Agreement Among Neuberger
Berman Management Incorporated, Income
Managers Trust, Neuberger Berman, L.P., and
Neuberger Berman, LLC. Incorporated by
Reference to Post-Effective Amendment No. 23
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802; EDGAR Accession
No. 0000898432-96-000117.

(e) (1) Distribution Agreement between Neuberger
Berman Income Funds and Neuberger Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-00017.

C-2
<PAGE>

(2) Schedule A - Series of Neuberger Berman Income
Funds Currently Subject to the Distribution
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 25 to
Registrant's Registration Statement, File Nos.
2-85229 and 811-3802, EDGAR Accession No.
0000898432-98-000246.

(f) Bonus, Profit Sharing or Pension Plans. None.

(g) (1) Custodian Contract Between Neuberger Berman
Income Funds and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement, File Nos.
2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.

(2) Agreement between Neuberger Berman Income
Funds and State Street Bank and Trust Company
Adding Neuberger Berman High Yield Bond Fund
as a Series Governed by the Custodian
Contract. Incorporated by Reference to
Post-Effective Amendment No. 25 to
Registrant's Registration Statement, File Nos.
2-85229 and 811-3802, EDGAR Accession No.
0000898432-98-000246.

(3) Schedule of Compensation under the Custodian
Contract. Incorporated by Reference to
Post-Effective Amendment No. 23 to Registrant's
Registration Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-00017.

(h) (1) (i) Transfer Agency and Service Agreement
Between Neuberger Berman Income Funds
and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.

(ii) Agreement between Neuberger Berman
Income Funds and State Street Bank and
Trust Company Adding Neuberger Berman
High Yield Bond Fund as a Series
Governed by the Transfer Agency and
Service Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 25 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-98-000246.

(iii) First Amendment to Transfer Agency and
Service Agreement between Neuberger Berman
Income Funds and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.

C-3
<PAGE>

(iv) Schedule of Compensation under the Transfer
Agency and Service Agreement. Incorporated
by Reference to Post-Effective Amendment No.
23 to Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.

(2) (i) Administration Agreement Between
Neuberger Berman Income Funds and
Neuberger Berman Management
Incorporated. Incorporated by Reference
to Post-Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.

(ii) Schedule A - Series of Neuberger Berman
Income Funds Currently Subject to the
Administration Agreement. Incorporated
by Reference to Post-Effective Amendment
No. 25 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-98-000246.

(iii) Schedule B - Schedule of Compensation Under
the Administration Agreement. Incorporated
by Reference to Post-Effective Amendment No.
23 to Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.

(i) (a) Opinion and Consent of Kirkpatrick &
Lockhart on Securities Matters with respect
to Neuberger Berman High Yield Bond Fund.
Incorporated by Reference to
Post-Effective Amendment No. 24 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-97-000503.

(b) Opinion and Consent of Kirkpatrick &
Lockhart LLP on Securities Matters with
respect to Neuberger Berman Income Funds.
Incorporated by Reference to
Post-Effective Amendment No. 25 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246.

(11) Other Opinions, Appraisals, Rulings and Consents.
To Be Filed by Amendment.

(k) Financial Statements Omitted from Prospectus. None.

(l) Letter of Investment Intent. Incorporated by
Reference to Pre-Effective Amendment No. 1 to the
Registration Statement of Neuberger Berman
Multi-Series Fund, Inc., File Nos. 33-19951 and
811-5467.

(m) Plan Pursuant to Rule 12b-1. None.

C-4
<PAGE>

(n) Financial Data Schedules. To Be Filed by Amendment.

(o) Plan Pursuant to Rule 18f-3. None.

Item 24. Persons Controlled By or Under Common Control with Registrant.
- ------- --------------------------------------------------------------

No person is controlled by or under common control with the Registrant.
(Registrant is organized in a master/feeder fund structure, and technically may
be considered to control the master fund in which it invests, Income Managers
Trust.)

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 Income Managers Trust
("Managers Trust") and Neuberger and Berman Management Incorporated ("NB
Management") provides that neither NB Management nor any director, officer or
employee of NB Management performing services for any series of Managers Trust
(each a "Portfolio") at the direction or request of NB Management in connection
with NB Management's discharge of its obligations under the Agreement shall be
liable for any error of judgment or mistake of law or for any loss suffered by a
Portfolio in connection with any matter to which the Agreement relates;
provided, that nothing in the Agreement shall be construed (i) to protect NB
Management against any liability to Managers Trust or a Portfolio or its
interestholders 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 Agreement, or (ii) to protect any director, officer or
employee of NB Management who is or was a trustee or officer of Managers Trust
against any liability to Managers Trust or a Portfolio or its interestholders to

C-5
<PAGE>

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 Managers Trust.

Section 1 of the Sub-Advisory Agreement between NB Management and
Neuberger Berman, L.P. ("Neuberger Berman") with respect to Managers Trust
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 liability for any act or omission or any loss suffered by any Portfolio or
its interestholders in connection with the matters to which the Agreement
relates.

Section 12 of the Administration Agreement between the Registrant and NB
Management 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
13 of the 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 14
of the 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 Agreement between the Registrant and NB
Management 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
therefor.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the 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.

C-6
<PAGE>

Item 26. Business and Other Connections of Adviser and Sub-Adviser.
- -------- ----------------------------------------------------------

There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of NB Management and each principal of Neuberger Berman 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
- ---- ------------------------------

Claudia A. Brandon Secretary, Neuberger Berman Advisers
Vice President, NB Management Trust; Secretary, Advisers
Management Managers Trust; Secretary, Neuberger
Berman Income Funds; Secretary, Neuberger
Berman Income Trust; Secretary, Neuberger
Berman Equity Funds; Secretary, Neuberger
Berman Equity Trust; Secretary, Income
Managers Trust; Secretary, Equity Managers
Trust; Secretary, Global Managers Trust;
Secretary, Neuberger Berman Equity Assets;
Secretary, Neuberger Berman Equity Series.

Valerie Chang
Assistant Vice Senior Securities Analyst,
President, TIAA/CREF.1
NB Management

Brooke A. Cobb
Vice President, Chief Investment Officer, Bainco
NB Management International Investors. Senior
Vice President and Senior
Portfolio Manager, Putnam
Investments.2

Stacy Cooper-Shugrue Assistant Secretary, Neuberger
Assistant Vice Berman Advisers Management Trust;
President, Assistant Secretary, Advisers
NB Management Managers Trust; Assistant
Secretary, Neuberger Berman Income Funds;
Assistant Secretary, Neuberger Berman
Income Trust; Assistant Secretary, Neuberger
Berman Equity Funds; Assistant Secretary,
Neuberger Berman Equity Trust; Assistant
Secretary, Income Managers Trust; Assistant
Secretary, Equity Managers Trust; Assistant
Secretary, Global Managers Trust; Assistant
Secretary, Neuberger Berman Equity Assets;
Assistant Secretary, Neuberger Berman
Equity Series.

Robert W. D'Alelio
Vice President, NB Senior Portfolio Manager, Putnam
Management; Principal, Investments.3
Neuberger Berman

Barbara DiGiorgio, Assistant Treasurer, Neuberger
Assistant Vice Berman Advisers Management Trust;
President, Assistant Treasurer, Advisers
NB Management Managers Trust; Assistant

_________________________

1 Until 1996.
2 Until 1997.
3 Until 1996.

C-7
<PAGE>

NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Treasurer, Neuberger Berman Income Funds;
Assistant Treasurer, Neuberger Berman
Income Trust; Assistant Treasurer,
Neuberger Berman Equity Funds; Assistant
Treasurer, Neuberger Berman Equity Trust;
Assistant Treasurer, Income Managers Trust;
Assistant Treasurer, Equity Managers Trust;
Assistant Treasurer, Global Managers Trust;
Assistant Treasurer, Neuberger Berman Equity
Assets; Assistant Treasurer, Neuberger Berman
Equity Series.

Stanley Egener Chairman of the Board and Trustee, Neuberger
President and Director, Berman Advisers Management Trust; Chairman of
NB Management; the Board and Trustee, Advisers Managers Trust;
Principal, Neuberger Chairman of the Board and Trustee, Neuberger
Berman Berman Income Funds; Chairman of the Board and
Trustee, Neuberger Berman Income Trust;
Chairman of the Board and Trustee, Neuberger
Berman Equity Funds; Chairman of the Board
and Trustee, Neuberger Berman Equity Trust;
Chairman of the Board and Trustee, Income
Managers Trust; Chairman of the Board and
Trustee, Equity Managers Trust; Chairman
of the Board and Trustee, Global Managers
Trust; Chairman of the Board and Trustee,
Neuberger Berman Equity Assets; Chairman of
the Board and Trustee, Neuberger Berman Equity
Series.

Theodore P. Giuliano President and Trustee, Neuberger Berman
Vice President and Income Funds; President and Trustee, Neuberger
Director, NB Management; Berman Income Trust; President and Trustee,
Principal, Neuberger Income Managers Trust.
Berman

Michael F. Malouf Portfolio Manager, Dresdner RCM Global
Vice President, NB Investors.4
Management

S. Basu Mullick Portfolio Manager, Ark Asset Management.5
Vice President NB
Management

C. Carl Randolph Assistant Secretary, Neuberger
Principal, Neuberger Berman Advisers Management Trust;
Berman Assistant Secretary, Advisers Managers Trust;

_______________________
4 Until 1998.
5 Until 1998.

C-8
<PAGE>

NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------

Assistant Secretary, Neuberger Berman
Income Funds; Assistant Secretary,
Neuberger Berman Income Trust; Assistant
Secretary, Neuberger Berman Equity Funds;
Assistant Secretary, Neuberger Berman Equity
Trust; Assistant Secretary, Income Managers
Trust; Assistant Secretary, Equity Managers
Trust; Assistant Secretary, Global Managers
Trust; Assistant Secretary, Neuberger Berman
Equity Assets; Assistant Secretary, Neuberger
Berman Equity Series.

Ingrid Saukaitis Project Director, Council on
Assistant Vice Economic Priorities.6
President, NB
Management

Richard Russell Treasurer, Neuberger Berman Advisers
Vice President, Management Trust; Treasurer, Advisers
NB Management Managers Trust; Treasurer, Neuberger
Berman Income Funds; Treasurer, Neuberger
Berman Income Trust; Treasurer, Neuberger
Berman Equity Funds; Treasurer, Neuberger
Berman Equity Trust; Treasurer, Income
Managers Trust; Treasurer, Equity Managers
Trust; Treasurer, Global Managers Trust;
Treasurer, Neuberger Berman Equity Assets;
Treasurer, Neuberger Berman Equity Series.

Jennifer K. Silver Portfolio Manager and Director, Putnum
Vice President, NB Investments.7
Management; Principal,
Neuberger Berman

Daniel J. Sullivan Vice President, Neuberger Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
NB Management Managers Trust; Vice President, Neuberger
Berman Income Funds; Vice President,
Neuberger Berman Income Trust; Vice
President, Neuberger Berman Equity Funds;
Vice President, Neuberger Berman Equity
Trust; Vice President, Income Managers Trust;
Vice President, Equity Managers Trust;
Vice President, Global Managers
Trust; Vice President, Neuberger Berman
Equity Assets; Vice President, Neuberger
Berman Equity Series.

Catherine Waterworth Managing Director, TCW Group Inc.8
Vice President, NB
Management

Michael J. Weiner Vice President, Neuberger Berman
_______________________
6 Until 1997.
7 Until 1997.
8 Until 1998.

C-9
<PAGE>

NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------

Senior Vice President, Advisers Management Trust; Vice
NB Management; President, Advisers Managers
Principal, Neuberger Trust; Vice President, Neuberger
Berman Berman Income Funds; Vice President,
Neuberger Berman Income Trust; Vice
President, Neuberger Berman Equity
Funds; Vice President, Neuberger Berman
Equity Trust; Vice President, Income
Managers Trust; Vice President, Equity
Managers Trust; Vice President, Global
Managers Trust; Vice President, Neuberger
Berman Equity Assets; Vice President,
Neuberger Berman Equity Series.

Allan R. White Portfolio Manager, Salomon Asset
Vice President, NB Management.8
Management; Principal,
Neuberger Berman

Celeste Wischerth, Assistant Treasurer, Neuberger
Assistant Vice Berman Advisers Management Trust;
President, Assistant Treasurer, Advisers
NB Management Managers Trust; Assistant Treasurer,
Neuberger Berman Income Funds; Assistant
Treasurer, Neuberger Berman Income
Trust; Assistant Treasurer, Neuberger
Berman Equity Funds; Assistant Treasurer,
Neuberger Berman Equity Trust; Assistant
Treasurer, Income Managers Trust; Assistant
Treasurer, Equity Managers Trust; Assistant
Treasurer, Global Managers Trust; Assistant
Treasurer, Neuberger Berman Equity Assets;
Assistant Treasurer, Neuberger Berman
Equity Series.

Lawrence Zicklin President and Trustee, Neuberger
Director, NB Management; Berman Advisers Management Trust;
Principal, Neuberger President and Trustee, Advisers
Berman Managers Trust; President and
Trustee, Neuberger Berman Equity Funds;
President and Trustee, Neuberger Berman
Equity Trust; President and Trustee,
Equity Managers Trust; President, Global
Managers Trust; President and Trustee,
Neuberger Berman Equity Assets; President
and Trustee, Neuberger Berman Equity Series.

The principal address of NB Management, Neuberger Berman, and of each of
the investment companies named above, is 605 Third Avenue, New York, New York
10158.

_______________________
8 Until 1998.

C-10
<PAGE>

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 Equity Funds
Neuberger Berman Equity Trust
Neuberger Berman Equity Assets
Neuberger Berman Equity Series
Neuberger Berman Income Trust

NB Management is also the investment manager to the master funds in
which the above-named investment companies invest.

(b) Set forth below is information concerning the directors and
officers of the Registrant's principal underwriter. The principal business
address of each of the persons listed is 605 Third Avenue, New York, New York
10158-0180, which is also the address of the Registrant's principal underwriter.

POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
Ramesh Babu Assistant Vice President None

Claudia A. Brandon Vice President Secretary

Patrick T. Byrne Vice President None

Richard A. Cantor Chairman of the Board and None
Director

Valerie Chang Assistant Vice President None

Brooke A. Cobb Vice President None

Robert Conti Treasurer None

Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary

Robert W. D'Alelio Vice President None

Clara Del Villar Vice President None

Barbara DiGiorgio Assistant Vice President Assistant Treasurer

Stanley Egener President and Director Chairman of the Board,
Chief Executive Officer,
and Trustee

Brian Gaffney Vice President None

Joseph G. Galli Assistant Vice President None

Robert I. Gendelman Vice President None

Theodore P. Giuliano Vice President and Director None

C-11
<PAGE>

POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------

Michael J. Hanratty Assistant Vice President None

Michael M. Kassen Vice President and Director None

Robert L. Ladd Assistant Vice President None

Irwin Lainoff Director None

Josephine Mahaney Vice President None

Michael F. Malouf Vice President None

Carmen G. Martinez Assistant Vice President None

Ellen Metzger Vice President and Secretary None

Paul Metzger Vice President None

S. Basu Mullick Vice President None

Loraine Olavarria Assistant Secretary None

Janet W. Prindle Vice President None

Joseph S. Quirk Assistant Vice President None

Kevin L. Risen Vice President None

Richard Russell Vice President Treasurer and
Principal Accounting
Officer

Ingrid Saukaitis Assistant Vice President None

Jennifer K. Silver Vice President None

Kent C. Simons Vice President None

Frederick B. Soule Vice President None

Daniel J. Sullivan Senior Vice President Vice President

Peter E. Sundman Senior Vice President None

Andrea Trachtenberg Vice President of Marketing None

Judith M. Vale Vice President None

Josephine Velez Assistant Vice President None

Susan Walsh Vice President None

Catherine Waterworth Vice President None

Michael J. Weiner Senior Vice President Vice President and
Principal Financial
Officer

Allan R. White, III Vice President None

Celeste Wischerth Assistant Vice President Assistant Treasurer

C-12
<PAGE>

POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------

Lawrence Zicklin Director Trustee and President

(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not an
affiliated person of the Registrant.

Item 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.

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.

C-13

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, NEUBERGER BERMAN INCOME FUNDS has duly caused
this Post-Effective Amendment No. 26 to the Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City and State
of New York on the 14th day of December, 1998.

NEUBERGER BERMAN INCOME FUNDS

By: /s/ Theodore P. Giuliano
------------------------
Theodore P. Giuliano
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 26 has been signed below by the following persons
in the capacities and on the date indicated.

Signature Title Date
- --------- ----- ----

/s/ John Cannon Trustee December 14, 1998
- ---------------
John Cannon

/s/ Stanley Egener Chairman of the Board, December 14, 1998
- ------------------ Chief Executive Officer
Stanley Egener and Trustee

/s/ Theodore P. Giuliano President and Trustee December 14, 1998
- ------------------------
Theodore P. Giuliano

/s/ Barry Hirsch Trustee December 14, 1998
- ----------------
Barry Hirsch

/s/ Robert A. Kavesh Trustee December 14, 1998
- --------------------
Robert A. Kavesh

<PAGE>

Signature Title Date
- --------- ----- ----

/s/ William E. Rulon Trustee December 14, 1998
- --------------------
William E. Rulon

/s/ Candace L. Straight Trustee December 14, 1998
- -----------------------
Candace L. Straight

/s/ Richard Russell Treasurer and December 14, 1998
- ------------------- Principal Accounting Officer
Richard Russell

/s/ Michael J. Weiner Vice President and December 14, 1998
- --------------------- Principal Financial Officer
Michael J. Weiner

- 2 -

20
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, INCOME MANAGERS TRUST certifies that it meets
all of the requirements for effectiveness of this Post-Effective Amendment No.
26 to the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City and State of New York on the 14th day of
December, 1998.

INCOME MANAGERS TRUST

By: /s/ Theodore P. Giuliano
------------------------
Theodore P. Giulano
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 26 has been signed below by the following persons
in the capacities and on the date indicated.

Signature Title Date
- --------- ----- ----

/s/ John Cannon Trustee December 14, 1998
- ---------------
John Cannon

/s/ Stanley Egener Chairman of the Board, December 14, 1998
- ------------------ Chief Executive Officer
Stanley Egener and Trustee

/s/ Theodore P. Giuliano President and Trustee December 14, 1998
- ------------------------
Theodore P. Giuliano

/s/ Barry Hirsch Trustee December 14, 1998
- ----------------
Barry Hirsch

/s/ Robert A. Kavesh Trustee December 14, 1998
- --------------------
Robert A. Kavesh

<PAGE>

Signature Title Date

/s/ William E. Rulon Trustee December 14, 1998
- --------------------
William E. Rulon

/s/ Candace L. Straight Trustee December 14, 1998
- -----------------------
Candace L. Straight

/s/ Richard Russell Treasurer and December 14, 1998
- ------------------- Principal Accounting Officer
Richard Russell

/s/ Michael J. Weiner Vice President and December 14, 1998
- --------------------- Principal Financial Officer
Michael J. Weiner

- 2 -

<PAGE>

NEUBERGER BERMAN INCOME FUNDS
POST-EFFECTIVE AMENDMENT NO. 26 ON FORM N-1A

INDEX TO EXHIBITS

Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ----

(a) (1) Certificate of Trust. Incorporated by N.A.
Reference to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-00017.

(2) Restated Certificate of Trust. Filed ____
Herewith.

(3) Trust Instrument of Neuberger Berman N.A.
Income Funds. Incorporated by
Reference to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-00017.

(4) Schedule A - Current Series of N.A.
Neuberger Berman Income Funds.
Incorporated by Reference to
Post-Effective Amendment No. 25 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246.

(b) By-Laws of Neuberger Berman Income Funds. N.A.
Incorporated by Reference to Post-Effective
Amendment No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and 811-3802,
EDGAR Accession No. 0000898432-96-00017.

(c) (1) Trust Instrument of Neuberger Berman N.A.
Income Funds, Articles IV, V, and VI.
Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.

(2) By-Laws of Neuberger Berman Income N.A.
Funds, Articles V, VI, and VIII.
Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.

(d) (1) (i) Management Agreement Between N.A.
Income Managers Trust and
Neuberger Berman Management
Incorporated. Incorporated by
Reference to Post-Effective
Amendment No. 21 to Registrant's
Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.

<PAGE>

Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ----

(ii) Schedule A - Portfolios of N.A.
Income Managers Trust Currently
Subject to the Management
Agreement. Incorporated by
Reference to Post-Effective
Amendment No. 25 to Registrant's
Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246.

(iii) Schedule B - Schedule of N.A.
Compensation Under the
Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 25
to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-98-000246.

(2) (i) Sub-Advisory Agreement Between N.A.
Neuberger Berman Management
Incorporated and Neuberger
Berman, L.P. with Respect to
Income Managers Trust.
Incorporated by Reference to
Post-Effective Amendment No. 21
to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-00017.

(ii) Schedule A - Portfolios of N.A.
Income Managers Trust Currently
Subject to the Sub-Advisory
Agreement. Incorporated by
Reference to Post-Effective
Amendment No. 25 to Registrant's
Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246.

(iii) Substitution Agreement Among N.A.
Neuberger Berman Management
Incorporated, Income Managers
Trust, Neuberger Berman, L.P.,
and Neuberger Berman, LLC.
Incorporated by Reference to
Post-Effective Amendment No. 23
to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-000117.

(e) (1) Distribution Agreement Between N.A.
Neuberger Berman Income Funds and
Neuberger Berman Management
Incorporated. Incorporated by
Reference to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-00017.

<PAGE>

Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ----

(2) Schedule A - Series of Neuberger Berman N.A.
Income Funds Currently Subject to the
Distribution Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 25 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-98-000246

(f) Bonus, Profit Sharing or Pension Plans. None. N.A.

(g) (1) Custodian Contract Between Neuberger N.A.
Berman Income Funds and State Street
Bank and Trust Company. Incorporated
by Reference to Post-Effective
Amendment No. 21 to Registrant's
Registration Statement, File Nos.
2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.

(2) Agreement between Neuberger Berman N.A.
Income Funds and State Street Bank and
Trust Company Adding Neuberger Berman
High Yield Bond Fund as a Series
Governed by the Custodian Contract.
Incorporated by Reference to
Post-Effective Amendment No. 25 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246.

(3) Schedule of Compensation under the N.A.
Custodian Contract. Incorporated by
Reference to Post-Effective Amendment
No. 23 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-00017.

(h) (1) (i) Transfer Agency and Service N.A.
Agreement Between Neuberger
Berman Income Funds and State
Street Bank and Trust Company.
Incorporated by Reference to
Post-Effective Amendment No. 21
to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-00017.

(ii) Agreement between Neuberger N.A.
Berman Income Funds and State
Street Bank and Trust Company
adding Neuberger Berman High
Yield Bond Fund as a Series
Governed by the Transfer Agency
and Service Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 25
to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-98-000246.

<PAGE>

Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ----

(iii) First Amendment to Transfer N.A.
Agency and Service Agreement
between Neuberger Berman Income
Funds and State Street Bank and
Trust Company. Incorporated by
Reference to Post-Effective
Amendment No. 21 to Registrant's
Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.

(iv) Schedule of Compensation under N.A.
the Transfer Agency and Service
Agreement. Incorporated by
Reference to Post-Effective
Amendment No. 23 to Registrant's
Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.

(2) (i) Administration Agreement Between N.A.
Neuberger Berman Income Funds
and Neuberger Berman Management
Incorporated. Incorporated by
Reference to Post-Effective
Amendment No. 21 to Registrant's
Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.

(ii) Schedule A - Series of Neuberger N.A.
Berman Income Funds Currently
Subject to the Administration
Agreement. Incorporated by
Reference to Post-Effective
Amendment No. 25 to Registrant's
Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246.

(iii) Schedule B - Schedule of N.A.
Compensation under the
Administration Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 25
to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-98-000246.

(i) (1) Opinion and Consent of Kirkpatrick & N.A.
Lockhart on Securities
Matters with respect to Neuberger
Berman High Yield Bond Fund.
Incorporated by Reference to
Post-Effective Amendment No. 24 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-97-000503.

<PAGE>

Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ----

(2) Opinion and Consent of Kirkpatrick & N.A.
Lockhart LLP on Securities Matters with
respect to Neuberger Berman Income Funds.
Incorporated by Reference to
Post-Effective Amendment No. 25 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-98-000246

(j) Other Opinions, Appraisals, Rulings and N.A.
Consents. To Be Filed by Amendment.

(k) Financial Statements Omitted from N.A.
Prospectus. None.

(l) Letter of Investment Intent. Incorporated by N.A.
Reference to Pre-Effective Amendment No. 1 to
the Registration Statement of Neuberger
Berman Multi-Series Fund, Inc., File Nos.
33-19951 and 811-5467.

(m) Plan Pursuant to Rule 12b-1. None. N.A.

(n) Financial Data Schedules. To Be Filed by N.A.
Amendment.

(o) Plan Pursuant to Rule 18f-3. None. N.A.

RESTATED CERTIFICATE OF TRUST
FOR
NEUBERGER BERMAN INCOME FUNDS
(FORMERLY NEUBERGER & BERMAN INCOME FUNDS)

This Restated Certificate of Trust is filed in accordance with the provisions of
the Delaware Business Trust Act (12 Del. Code Ann. Tit. 12 Section 3801 et seq.)
and sets forth the following:

1. The name of the trust: Neuberger Berman Income Funds

2. The name under which the trust was originally formed: Neuberger & Berman
Income Funds

3. The date of filing of the original certificate of trust: December 29, 1992

4. The business address of the registered office of the Trust and of the
registered agent of the Trust is:

Corporation Service Company
1013 Centre Road
Wilmington, Delaware 19805
New Castle County

5. This Restated Certificate of Trust is effective upon filing.

6. The Trust is a Delaware business trust registered under the Investment
Company Act of 1940. Notice is hereby given that the Trust shall consist
of one or more series. The debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a
particular series of the Trust shall be enforceable against the assets of
such series only, and not against the assets of the Trust generally or any
other series.

IN WITNESS WHEREOF, the undersigned, being a Trustee, has executed this Restated
Certificate of Trust of Neuberger Berman Income Funds this 6th day of November,
1998.

/s/ Stanley Egener
-------------------------------------

Stanley Egener, as Trustee and not individually

Address: 605 Third Avenue
New York, NY 10158

STATE OF NEW YORK
CITY OF NEW YORK

Before me this 6th day of November, 1998, personally appeared the
above-named Stanley Egener, known to me to be the person who executed the
foregoing instrument and who acknowledged that he executed the same.

/s/ Loraine Olavrria
------------------------------------
Notary Public

My commission expires 4-15-99 LORAINE OLAVRRIA
------- Notary Public, State of New York
No. 03-4979299
Qualified in Nassau County
Commission Expires 4-15-99

STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 11/09/1998
981429977 - 2320739

<PAGE>

STATE OF DELAWARE

OFFICE OF THE SECRETARY OF STATE PAGE 1
--------------------------------

I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE,

DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED

CERTIFICATE OF "NEUBERGER & BERMAN INCOME FUNDS", CHANGING ITS NAME FROM

"NEUBERGER & BERMAN INCOME FUNDS" TO "NEUBERGER BERMAN INCOME FUNDS", FILED

IN THIS OFFICE ON THE NINTH DAY OF NOVEMBER, A.D. 1998, AT 9 O'CLOCK A.M.

SEAL

SEAL /s/ Edward J. Freel
----------------------------------------
EDWARD J. FREEL, SECRETARY OF STATE

2320739 8100 AUTHENTICATION: 9395624

981429977 DATE: 11-09-98