NEUBERGER BERMAN INCOME FUNDS, 485BPOS, 2000-02-29

NEUBERGER BERMAN INCOME FUNDS
485BPOS, 2000-02-29

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As filed with the Securities and Exchange Commission on February 28, 2000
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. 30 [ X ]
----

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]

Amendment No. 31 [ 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

Peter E. Sundman, 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)
X March 1, 2000 pursuant to paragraph (b)
- ---
___ 60 days after filing pursuant to paragraph (a)(1)
___ on pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on ________________ pursuant to paragraph (a)(2)

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. 30 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. 30 ON FORM N-1A

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

Cover Sheet

Contents of Post-Effective Amendment No. 30 on Form N-1A

Cross Reference Sheet

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

Part A - Prospectus

Part B - Statement of Additional Information
Neuberger Berman Income Funds
Neuberger Berman Municipal Funds

Part C - Other Information

Signature Pages

Exhibits

<PAGE>

<PAGE>
NEUBERGER BERMAN

NEUBERGER BERMAN
INCOME FUNDS-REGISTERED TRADEMARK-
- --------------------------------------------------------------------------------
PROSPECTUS MARCH 1, 2000

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

These securities, like the securities of all mutual funds, have not been
approved or disapproved by the Securities and Exchange Commission,
and the Securities and Exchange Commission has not determined if
this prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.

<PAGE>
CONTENTS
- -----------------

<TABLE>
<C> <S>
NEUBERGER BERMAN INCOME FUNDS

PAGE 2 ...... Cash Reserves

8 ...... Government Money Fund

14 ...... High Yield Bond Fund

20 ...... Limited Maturity 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 Shares

48 ...... Selling Shares
</TABLE>

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-2000 Neuberger Berman Management
Inc.

<PAGE>
- ------------------------------------------------------------

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 $54.4 billion in total assets (as of
December 31, 1999) 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).

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 TYPICALLY PROVIDE 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

- - 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
GOVERNMENT AGENCY

- - USE A MASTER/FEEDER STRUCTURE IN THEIR PORTFOLIOS; SEE PAGE 44 FOR INFORMATION
ON HOW IT WORKS

1
<PAGE>
NEUBERGER BERMAN
CASH RESERVES
- --------------------------------------------------------------------------------

<TABLE>
<C> <S>
Ticker Symbol: NBCXX
</TABLE>

"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."

2
<PAGE>
GOAL & STRATEGY
- ------------------------------------------------------------

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).

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 first-tier securities.

[ICON]
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 invest to a lesser extent in securities issued by banks that do not
represent deposits. 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.

Cash Reserves 3
<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.

[ICON] 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 securities in the first tier of credit quality 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 the fund's average yield has outpaced inflation over the
long term, it may not always do so. Your results relative to the rate of
inflation will, of course, be affected by any taxes you pay on fund
distributions. Despite its emphasis on first-tier securities, the fund is
subject to some credit risk. This is the risk that the issuers may fail, or
become less able, to make payments when due.

Because the fund may invest more than 25% of total assets in securities issued
by U.S. 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.

4 Neuberger Berman
<PAGE>
PERFORMANCE
- ------------------------------------------------------------

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.

To obtain the fund's current yield, call 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.

[ICON] The charts below provide an indication of
the risks of investing in the fund. The bar chart 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

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
1990 7.81%
1991 5.72%
1992 3.37%
1993 2.64%
1994 3.72%
1995 5.45%
1996 4.92%
1997 5.12%
1998 5.08%
1999 4.68%
BEST
QUARTER:
Q2 '90,
up 1.92%
WORST
QUARTER:
Q1 '93,
up
0.64%
</TABLE>

AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/99

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
- ------------------------------------------------------------
<S> <C> <C> <C>
CASH RESERVES 4.68 5.05 4.84
</TABLE>

Cash Reserves 5
<PAGE>
INVESTOR EXPENSES
- ------------------------------------------------------------

MANAGEMENT

THEODORE P. GIULIANO, a Vice President and Director of Neuberger Berman
Management and a Managing Director 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 1996.

JOSEPHINE MAHANEY is a Vice President of Neuberger Berman Management and a
Managing Director of Neuberger Berman, LLC. 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 10/31/99, the fees paid
to Neuberger Berman Management were 0.51% of average net assets.

[ICON] 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 0.51
PLUS: Distribution (12b-1) fees None
Other expenses 0.10
....
EQUALS: Total annual operating expenses 0.61
</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 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 $62 $195 $340 $762
</TABLE>

6 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended October 31, 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <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 0.0529 0.0486 0.0499 0.0499 0.0453
Net gains/losses -- -- -- -- --
Subtotal: income from investment
operations 0.0529 0.0486 0.0499 0.0499 0.0453
MINUS: Distributions to shareholders
Income dividends 0.0529 0.0486 0.0499 0.0499 0.0453
Subtotal: distributions to
shareholders 0.0529 0.0486 0.0499 0.0499 0.0453
................................................
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 0.63 0.63 0.61
Gross expenses(1) 0.68 0.67 -- -- --
Expenses(2) 0.65 0.66 0.63 0.64 0.61
Net investment income -- actual 5.30 4.86 4.98 5.00 4.55
- ------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested.
Total return (%) 5.42(3) 4.97(3) 5.11 5.10 4.63
Net assets at end of year (in millions of dollars) 408.9 482.0 664.1 1,024.6 1,104.2
</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 annual report (see back cover).

(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.

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

Cash Reserves 7
<PAGE>
NEUBERGER BERMAN
GOVERNMENT MONEY FUND
- --------------------------------------------------------------------------------

<TABLE>
<C> <S>
Ticker Symbol: NBGXX
</TABLE>

"CURRENTLY, THIS FUND INVESTS EXCLUSIVELY IN U.S. TREASURY
SECURITIES. THAT'S AN UNUSUALLY HIGH QUALITY STANDARD EVEN IN
THE WORLD OF GOVERNMENT MONEY MARKET FUNDS. THIS STRATEGY
OFFERS ADDITIONAL COMFORT TO INVESTORS WHO ARE LOOKING FOR
CAPITAL PRESERVATION."

8
<PAGE>
GOAL & STRATEGY
- ------------------------------------------------------------

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.

[ICON]
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.

Government Money Fund 9
<PAGE>
MAIN RISKS
- ------------------------------------------------------------

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

[ICON] 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 the fund's average yield has
outpaced inflation over the long term, it may not always do so. Your results
relative to the rate of inflation will, of course, be affected by any taxes you
pay on fund distributions.

10 Neuberger Berman
<PAGE>
PERFORMANCE
- ------------------------------------------------------------

To obtain the fund's current yield, call 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.

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

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
1990 7.32%
1991 5.45%
1992 3.27%
1993 2.50%
1994 3.41%
1995 5.16%
1996 4.69%
1997 4.75%
1998 4.65%
1999 4.19%
BEST
QUARTER:
Q2 '90,
up 1.81%
WORST
QUARTER:
Q2 '93,
up
0.60%
</TABLE>

AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/99

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
- ------------------------------------------------------------
<S> <C> <C> <C>
GOVERNMENT MONEY FUND 4.19 4.69 4.53
</TABLE>

Government Money Fund 11
<PAGE>
INVESTOR EXPENSES
- ------------------------------------------------------------

MANAGEMENT

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

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 0.08
....
EQUALS: Total annual operating expenses 0.60
</TABLE>

EXPENSE EXAMPLE

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses $61 $192 $335 $750
</TABLE>

12 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended October 31, 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <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 1.0001
PLUS: Income from investment operations
Net investment income 0.0499 0.0464 0.0468 0.0459 0.0406
Net gains/losses -- -- -- 0.0001 --
Subtotal: income from investment
operations 0.0499 0.0464 0.0468 0.0460 0.0406
MINUS: Distributions to shareholders
Income dividends 0.0499 0.0464 0.0468 0.0459 0.0406
Capital gain distributions -- -- -- -- 0.0001
Subtotal: distributions to
shareholders 0.0499 0.0464 0.0468 0.0459 0.0407
................................................
EQUALS: Share price (NAV) at end of year 1.0000 1.0000 1.0000 1.0001 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 offset arrangements had not been in effect.
Net expenses -- actual 0.65 0.67 0.63 0.63 0.60
Expenses(1) 0.65 0.67 0.64 0.64 0.60
Net investment income -- actual 5.00 4.65 4.65 4.61 4.08
- ------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested.
Total return (%) 5.10 4.74 4.78 4.69 4.14
Net assets at end of year (in millions of dollars) 308.3 363.4 308.2 367.6 653.4
</TABLE>

(1) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF
THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS.

Government Money Fund 13
<PAGE>
NEUBERGER BERMAN
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------

<TABLE>
<C> <S>
Ticker Symbol: NBHAX
</TABLE>

"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 SEEK COMPANIES WHOSE BUSINESSES ARE
CAPABLE OF SUSTAINING THE NECESSARY CASH FLOWS TO PAY DOWN DEBT
OR FUND THEIR GROWTH."

14
<PAGE>
GOAL & STRATEGY
- ------------------------------------------------------------

LOWER-RATED BONDS

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

Any bond rated below the top four categories (or if unrated, deemed to be of
comparable quality) is considered a lower-rated bond. These bonds pay higher
rates to compensate for higher risk.

High-yield 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.

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

To pursue these goals, the fund normally invests at least 65% of its total
assets 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 position and steady cash flows that are well in excess of the amounts
they need to cover interest and principal on their debt. Specifically, they seek
to invest in companies that can generate cash flows sufficient to pay down debt
or fund their growth, a process known as deleveraging.

Where possible, the managers favor companies with strong competitive positions
and low cost operations. They analyze 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 and equity owners.

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

High Yield 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 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 adverse market, economic, political or other
conditions, it may temporarily depart from its goal and invest substantially in
high quality short-term debt instruments. This could help the fund avoid losses
but may mean lost opportunities.

[ICON] Much 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 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 or if an issuer defaults on payment of its
debt obligations.

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 lower returns than stock investments.

Lower-rated bonds are less liquid and therefore may carry high transaction
costs, which could affect the fund's performance.

16 Neuberger Berman
<PAGE>
PERFORMANCE
- ------------------------------------------------------------

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.

The table compares the fund's returns to those of 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 800-877-9700. The current yield is the
fund's net income over a 30-day period expressed as an annual rate of return.

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

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999 -6.48%
BEST
QUARTER:
Q4 '98,
up 1.59%
WORST
QUARTER:
Q4 '99,
down
6.44%
</TABLE>

AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/99

<TABLE>
<CAPTION>
Since
Inception
1 Year (3/3/98)
- ----------------------------------------------------------
<S> <C> <C>
HIGH YIELD BOND FUND (6.48) (2.59)
LEHMAN BROTHERS HIGH YIELD BOND
INDEX 2.39 1.01
</TABLE>

The Lehman Brothers High Yield Bond Index is an unmanaged index of fixed rate,
publicly issued, non-investment grade debt registered with the SEC.

High Yield Bond Fund 17
<PAGE>
INVESTOR EXPENSES
- ------------------------------------------------------------

MANAGEMENT

ROBERT FRANKLIN and CATHERINE WATERWORTH are Vice Presidents of Neuberger Berman
Management and Neuberger Berman, LLC. They have co-managed the fund's assets
since 1999. From 1997 to 1999, Franklin was a vice president and high yield
research analyst for a prominent investment firm and from 1988 to 1997 was a
vice president and senior credit analyst for a major credit rating agency. From
1995 to 1998, Waterworth was a managing director of high-grade fixed income at a
major investment firm.

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 0.65
PLUS: Distribution (12b-1) fees None
Other expenses 0.78
....
EQUALS: Total annual operating expenses 1.43
</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 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

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses** $146 $452 $782 $1713
</TABLE>

** IF THE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE ABOVE WERE IN
EFFECT FOR EACH OF THE PERIODS SHOWN, YOUR COSTS FOR THE ONE-, THREE-, FIVE-
AND TEN-YEAR PERIODS WOULD BE $102, $318, $552 AND $1225, RESPECTIVELY.

18 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended October 31, 1998(1) 1999
- ------------------------------------------------------------------------------------------------------
<S> <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 10.00 9.34
PLUS: Income from investment operations
Net investment income 0.51 0.85
Net gains/losses -- realized and unrealized (0.66) (0.66)
Subtotal: income from investment operations (0.15) 0.19
MINUS: Distributions to shareholders
Income dividends 0.51 0.85
Subtotal: distributions to shareholders 0.51 0.85
..................
EQUALS: Share price (NAV) at end of year 9.34 8.68
- ------------------------------------------------------------------------------------------------------
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 1.00(2) 1.01
Gross expenses(3) 1.65(2) 1.43
Expenses(4) 1.00(2) 1.01
Net investment income -- actual 8.03(2) 9.20
- ------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold
securities.
Total return (%)(6) (1.69)(5) 1.86
Net assets at end of year (in millions of dollars) 22.6 23.8
Portfolio turnover rate (%) 16 66
</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.

(5) NOT ANNUALIZED.

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

High Yield Bond Fund 19
<PAGE>
NEUBERGER BERMAN
LIMITED MATURITY BOND FUND
- --------------------------------------------------------------------------------

<TABLE>
<C> <S>
Ticker Symbol: NLMBX
</TABLE>

"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."

20
<PAGE>
GOAL & STRATEGY
- ------------------------------------------------------------

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

Typically, with a 1% change in interest rates, an investment's value may be
expected to move in the opposite direction 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.

[ICON]
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
are below investment grade, provided that, at the time of purchase, they are
rated at least B by Moody's or Standard & Poor's or, if unrated by either of
these, deemed by the managers to be of comparable quality. When the managers
believe there are attractive opportunities in foreign markets, the fund may also
invest in foreign debt securities to enhance yield and/or total return.

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, as well as 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.

Limited Maturity 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 or produce income
could affect fund performance if the derivatives do not perform as expected.

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

[ICON] 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.

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.

Over time, the fund may produce lower returns than stock investments and less
conservative bond investments. Although the fund's average return has outpaced
inflation over the long term, it may not always do so. Your results relative to
the rate of inflation will, of course, be affected by any taxes you pay on fund
distributions.

Due to the fund's limited duration and the need to sometimes change allocation
among sectors, the fund may have a high portfolio turnover rate, which can mean
higher taxable distributions and increased transaction costs.

22 Neuberger Berman
<PAGE>
PERFORMANCE
- ------------------------------------------------------------

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.

The table compares the fund's returns to those of 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 800-877-9700. The current yield is the
fund's net income over a 30-day period expressed as an annual rate of return.

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

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
1990 8.72%
1991 11.85%
1992 5.18%
1993 6.79%
1994 -0.34%
1995 10.59%
1996 4.50%
1997 6.85%
1998 4.65%
1999 1.64%
BEST
QUARTER:
Q4 '91,
up 4.38%
WORST
QUARTER:
Q1 '94,
down
1.12%
</TABLE>

AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/99

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
- ------------------------------------------------------------
<S> <C> <C> <C>
LIMITED MATURITY BOND FUND 1.64 5.60 5.98
Merrill Lynch 1-3 Year
Treasury Index 3.06 6.51 6.59
</TABLE>

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

Limited Maturity Bond Fund 23
<PAGE>
INVESTOR EXPENSES
- ------------------------------------------------------------

MANAGEMENT

CATHERINE WATERWORTH is a Vice President of Neuberger Berman Management and
Neuberger Berman, LLC. She has co-managed the fund's assets since
December 1998. From 1995 to 1998, she was a managing director of high grade
fixed income at a major investment firm.

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

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

24 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended October 31, 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <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 9.88 10.06 9.99 10.03 9.91
PLUS: Income from investment operations
Net investment income 0.62 0.60 0.63 0.60 0.59
Net gains/losses -- realized and
unrealized 0.18 (0.07) 0.04 (0.12) (0.40)
Subtotal: income from investment
operations 0.80 0.53 0.67 0.48 0.19
MINUS: Distributions to shareholders
Income dividends 0.62 0.60 0.63 0.60 0.59
Subtotal: distributions to
shareholders 0.62 0.60 0.63 0.60 0.59
................................................
EQUALS: Share price (NAV) at end of year 10.06 9.99 10.03 9.91 9.51
- ------------------------------------------------------------------------------------------------------------
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 0.70 0.70 0.70 0.70 0.70
Gross expenses(1) 0.71 0.71 0.71 0.75 0.72
Expenses(2) 0.70 0.71 0.70 0.71 0.70
Net investment income -- actual 6.21 6.10 6.34 6.03 5.98
- ------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%)(3) 8.32 5.44 6.97 4.92 1.98
Net assets at end of year (in millions of dollars) 307.4 245.7 255.4 295.2 227.0
Portfolio turnover rate (%) 88 169 89 44 102
</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.

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

Limited Maturity Bond Fund 25
<PAGE>
NEUBERGER BERMAN
MUNICIPAL MONEY FUND
- --------------------------------------------------------------------------------

<TABLE>
<C> <S>
Ticker Symbol: NBTXX
</TABLE>

"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."

26
<PAGE>
GOAL & STRATEGY
- ------------------------------------------------------------

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.

[ICON]
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 normally invests substantially all of its assets
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.

Municipal Money Fund 27
<PAGE>
MAIN RISKS
- ------------------------------------------------------------

When the fund anticipates adverse market, economic, political or other
conditions, it may temporarily depart from its goal and invest substantially in
high-quality short-term taxable debt instruments. This strategy could help the
fund avoid losses, but could produce income that is not tax-exempt and may mean
lost opportunities.

[ICON] Most of the fund's performance depends
on credit quality and interest rates. Because the fund emphasizes high
credit quality, it could decide not to invest in higher yielding
securities of lower credit quality. This may mean that its yield is lower than
that 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 lower returns than other 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
adviser for more information.

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

28 Neuberger Berman
<PAGE>
PERFORMANCE
- ------------------------------------------------------------

To obtain the fund's current yield, call 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.

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

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
1990 5.51%
1991 4.08%
1992 2.40%
1993 1.79%
1994 2.29%
1995 3.30%
1996 2.80%
1997 3.03%
1998 2.86%
1999 2.67%
BEST
QUARTER:
Q4 '90,
up 1.42%
WORST
QUARTER:
Q1 '94,
up
0.42%
</TABLE>

AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/99

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
- ------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL MONEY FUND 2.67 2.93 3.07
</TABLE>

Municipal Money Fund 29
<PAGE>
INVESTOR EXPENSES
- ------------------------------------------------------------

MANAGEMENT

THOMAS J. BROPHY is a Vice President of Neuberger Berman Management and
Neuberger Berman, LLC. He has co-managed the fund's assets since March 2000.
From 1998 to 2000, he was a portfolio manager and credit analyst for Neuberger
Berman, LLC. From 1987 to 1998, he was a portfolio manager at another investment
firm.

KELLY M. LANDRON is a Vice President of Neuberger Berman Management. She has
co-managed the fund's assets since March 2000. From 1990 to 2000, she held
positions in fixed income trading, analysis and portfolio management for
Neuberger Berman, LLC.

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 0.15
....
EQUALS: Total annual operating expenses 0.67
</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

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses $68 $214 $373 $835
</TABLE>

30 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended October 31, 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C> <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 0.9995 0.9994 0.9993 0.9994 0.9997
PLUS: Income from investment operations
Net investment income 0.0324 0.0285 0.0296 0.0288 0.0256
Net gains/losses (0.0001) (0.0001) 0.0001 0.0003 0.0001
Subtotal: income from investment
operations 0.0323 0.0284 0.0297 0.0291 0.0257
MINUS: Distributions to shareholders
Income dividends 0.0324 0.0285 0.0296 0.0288 0.0256
Subtotal: distributions to
shareholders 0.0324 0.0285 0.0296 0.0288 0.0256
...................................................
EQUALS: Share price (NAV) at end of year 0.9994 0.9993 0.9994 0.9997 0.9998
- -------------------------------------------------------------------------------------------------------------
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 0.71 0.72 0.72 0.71 0.67
Expenses(1) 0.71 0.73 0.73 0.72 0.68
Net investment income -- actual 3.24 2.86 2.95 2.88 2.58
- -------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested.
Total return (%) 3.29 2.89 3.00 2.92 2.59
Net assets at end of year (in millions of dollars) 160.9 132.6 156.3 221.5 293.8
</TABLE>

(1) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF
THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS.

Municipal Money Fund 31
<PAGE>
NEUBERGER BERMAN
MUNICIPAL SECURITIES TRUST
- --------------------------------------------------------------------------------

<TABLE>
<C> <S>
Ticker Symbol: NBMUX
</TABLE>

"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
- ------------------------------------------------------------

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

Typically, with a 1% change in interest rates, an investment's value may be
expected to move in the opposite direction approximately 1% for each year of its
duration.

[ICON]
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 normally invests at least 80% of its total
assets in securities from municipal issuers around the country. All securities
in which the fund invests must be investment grade (rated within the four
highest categories or, if unrated, deemed by the managers to be of comparable
quality). 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 minimize its exposure to 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, as well
as 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.

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 adviser
for more information.

When the fund anticipates adverse market, economic, political or other
conditions, it may temporarily depart from its goal and invest substantially in
high-quality short-term taxable debt instruments. This strategy may mean lost
opportunities and, along with any other investments in taxable securities or
derivatives, could produce income that is not tax-exempt.

[ICON] 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.

Because the fund emphasizes higher credit quality, it could decide not to invest
in higher yielding securities of lower credit quality. This could mean that its
yield may be lower than that available from certain other municipal bond funds.

Over time, the fund may produce lower returns than stock investments.

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

34 Neuberger Berman
<PAGE>
PERFORMANCE
- ------------------------------------------------------------

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.

The table compares the fund's returns to those of 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 800-877-9700. The current yield is the
fund's net income over a 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.

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

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<S> <C>
1990 6.87%
1991 9.03%
1992 6.91%
1993 9.54%
1994 -3.98%
1995 12.71%
1996 3.56%
1997 7.37%
1998 5.94%
1999 -1.25%
BEST
QUARTER:
Q1 '95,
up 5.34%
WORST
QUARTER:
Q1 '94,
down
3.54%
</TABLE>

AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/99

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
- ------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL SECURITIES TRUST (1.25) 5.57 5.56
Lehman Brothers 7-Year GO
Index (0.16) 6.49 6.56
</TABLE>

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

Municipal Securities Trust 35
<PAGE>
INVESTOR EXPENSES
- ------------------------------------------------------------

MANAGEMENT

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 0.55
....
EQUALS: Total annual operating expenses 1.07
</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

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses** $109 $340 $590 $1306
</TABLE>

36 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended October 31, 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <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 10.26 10.83 10.78 11.02 11.34
PLUS: Income from investment operations
Net investment income 0.47 0.47 0.47 0.46 0.45
Net gains/losses -- realized and
unrealized 0.57 (0.05) 0.24 0.32 (0.56)
Subtotal: income from investment
operations 1.04 0.42 0.71 0.78 (0.11)
MINUS: Distributions to shareholders
Income dividends 0.47 0.47 0.47 0.46 0.45
Subtotal: distributions to
shareholders 0.47 0.47 0.47 0.46 0.45
................................................
EQUALS: Share price (NAV) at end of year 10.83 10.78 11.02 11.34 10.78
- ------------------------------------------------------------------------------------------------------------
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 0.65 0.65
Gross expenses(1) 0.98 1.04 1.05 1.11 1.07
Expenses(2) 0.66 0.66 0.66 0.66 0.66
Net investment income -- actual 4.45 4.32 4.30 4.13 4.03
- ------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%)(3) 10.35 3.92 6.71 7.22 (1.03)
Net assets at end of year (in millions of dollars) 44.3 38.9 31.6 40.1 35.0
Portfolio turnover rate (%) 66 3 22 24 17
</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.

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

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.
The Exchange is closed on all national holidays and Good Friday; fund shares
will not be priced on those days or any other day the Exchange is closed. 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. We cannot accept your
order until payment has been received. 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. Remember, though, any purchase or sale takes place at
the next share price calculated after your order is received.

38 Neuberger Berman
<PAGE>
PRIVILEGES
AND SERVICES
- ------------------------------------------------------------

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.

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.

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 of a bond fund just before the fund makes a
capital gain 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.

Generally, if you're investing in a tax-advantaged retirement account, there are
no tax consequences to you.

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 October.

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
other tax-exempt investors, all fund distributions you receive are generally
taxable to you, regardless of whether you take them in cash or reinvest them.

40 Neuberger Berman
<PAGE>
- ------------------------------------------------------------

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 share
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 share transactions.

Most importantly, consult your tax professional. Everyone's tax situation is
different, and your professional should be able to help you answer any questions
you may have.

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) will help clarify this for you.

Income distributions and net short-term capital gains are generally taxed as
regular 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 SHARE TRANSACTIONS ARE TAXED -- When you sell or exchange fund shares, you
generally realize a taxable gain or loss. The exception, once again, is
tax-advantaged retirement accounts.

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, 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.

We are also required to withhold 31% of all money you receive from distributions
if the IRS tells us that you are subject to backup withholding.

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 you will receive the next share price calculated after
your payment is received. Money market fund investors whose purchase orders are
converted to "federal funds" before noon will accrue a dividend the same day.
For the bond funds, dividends will not be earned or accrued until the day after
our transfer agent receives payment.

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

The funds no longer issue certificates for shares. If you have share
certificates, the only way to redeem them is by sending in the certificates.
Also, if you lose the certificate, you will be charged a fee to replace it.

42 Neuberger Berman
<PAGE>
- ------------------------------------------------------------

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.

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.

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.

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.

STATEMENTS AND CONFIRMATIONS -- Please review your account statements and
confirmations carefully as soon as you receive them. You must contact us within
30 days if you have any questions or notice any discrepancies. Otherwise, you
may adversely affect your right to make a claim about the transaction(s).

WHEN YOU EXCHANGE SHARES -- You can move 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, subject to certain restrictions. On non-retirement
accounts, this option is available to you unless you indicate on your account
application (or in a

44 Neuberger Berman
<PAGE>
- ------------------------------------------------------------

CONVERSION TO THE EURO

Like other mutual funds, the funds could be affected by problems relating to the
conversion of European currencies into the Euro, which extends from 1/1/99 to
7/1/02.

At Neuberger Berman, we are taking steps to ensure that our own computer systems
are compliant with Euro 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 this
issue.

At the same time, it is impossible to know whether the ongoing conversion, which
could disrupt fund operations and investments if problems arise, has been
adequately addressed until the conversion is completed.

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 recording
the call. As long as a fund and its representatives take reasonable measures to
verify the authenticity of calls, investors may be responsible for any losses
caused by unauthorized telephone orders.

In unusual circumstances, it may be difficult to place an order by phone. In
these cases, consider sending your order by 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

Your Investment 45
<PAGE>
BUYING SHARES

<TABLE>
<S> <C>
Method Things to know
</TABLE>

- -----------------------------------------------------------------------------
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
ANOTHER FUND

An exchange for a first investment must be for at 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

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

BY TELEPHONE

We do not accept phone orders for a first investment

Additional investments must be for at least $1,000

Shares will be purchased at the time we receive your money

Not available on retirement accounts

- -----------------------------------------------------------------------------
SETTING UP SYSTEMATIC
INVESTMENTS

All investments must be at least $100

46 Neuberger Berman
<PAGE>
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 should not invest in municipal funds.

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 notify us of your purchase

Immediately follow up with a wire or electronic transfer

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

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

Call 800-877-9700 for instructions

Your Investment 47
<PAGE>
SELLING SHARES

<TABLE>
<S> <C>
Method Things to know
</TABLE>

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

- -----------------------------------------------------------------------------
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
ANOTHER FUND

All exchanges 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

- -----------------------------------------------------------------------------
SETTING UP SYSTEMATIC
WITHDRAWALS

For accounts with at least $5,000 worth of shares in 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>
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.

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

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

Your Investment 49
<PAGE>
- -------------------------------------------------------------------

NOTES

50
<PAGE>
51
<PAGE>
- -------------------------------------------------------------------

NOTES

52
<PAGE>
53
<PAGE>
OBTAINING INFORMATION
You can obtain a share-
holder 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

Website:
www.nbfunds.com
Email:
[email protected]

You can also request copies of this information from the SEC for the cost of a
duplicating fee by sending an e-mail request to [email protected] or by writing
to the SEC's Public Reference Section, Washington DC 20549-0102. They are also
available from the EDGAR Database on the SEC's website at www.sec.gov.

You may also view and copy the documents at the SEC's Public Reference Room in
Washington. Call 202-942-8090 for information about the operation of the Public
Reference Room.

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 managers 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 hereby incorporated by reference into this prospectus, making it
legally part of the prospectus.

Investment manager:
NEUBERGER BERMAN MANAGEMENT INC.
Sub-adviser:
NEUBERGER BERMAN, LLC

[LOGO]

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

[RECYCLE LOGO] A0107 03/00 SEC file number: 811-3802

<PAGE>

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

NEUBERGER BERMAN INCOME FUNDS AND PORTFOLIOS

STATEMENT OF ADDITIONAL INFORMATION

DATED MARCH 1, 2000

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 1, 2000. 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 Inc. ("NB
Management"), provides basic information that an investor should know before
investing. You can get a free copy of the Prospectus 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

<PAGE>

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.

The "Neuberger Berman" name and logo are service marks of Neuberger
Berman LLC. "Neuberger Berman Management Inc." and the fund and portfolio names
in this SAI are either service marks or registered trademarks of Neuberger
Berman Management Inc. (C) 2000 Neuberger Berman Management Inc.

<PAGE>

TABLE OF CONTENTS
-----------------

INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations....................................1
Temporary Defensive Position...........................................6
Investment Insight.....................................................6
Money Market Funds.....................................................7
Bond Funds.............................................................7
Additional Investment Information......................................9
Risks of Fixed Income Securities......................................33
Risks of Equity Securities............................................35

CERTAIN RISK CONSIDERATIONS.................................................36

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

TRUSTEES AND OFFICERS.......................................................40

INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................45
Investment Manager and Administrator..................................45
Management and Administration Fees....................................46
Expense Reimbursements................................................47
Sub-Adviser...........................................................48
Investment Companies Managed..........................................48
Management and Control of NB Management and Neuberger Berman..........51

DISTRIBUTION ARRANGEMENTS...................................................51

ADDITIONAL PURCHASE INFORMATION.............................................52
Share Prices and Net Asset Value......................................52
Automatic Investing and Dollar Cost Averaging.........................53

ADDITIONAL EXCHANGE INFORMATION.............................................53

ADDITIONAL REDEMPTION INFORMATION...........................................56
Suspension of Redemptions.............................................56
Redemptions in Kind...................................................56

DIVIDENDS AND OTHER DISTRIBUTIONS...........................................56

ADDITIONAL TAX INFORMATION..................................................57

<PAGE>

Taxation of the Funds.................................................57
Taxation of the Portfolios............................................58
Taxation of the Funds'Shareholders....................................61

VALUATION OF PORTFOLIO SECURITIES...........................................62

PORTFOLIO TRANSACTIONS......................................................62
Portfolio Turnover....................................................63

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

ORGANIZATION, CAPITALIZATION AND OTHER MATTERS..............................64
The Funds.............................................................64
The Portfolios........................................................65

CUSTODIAN AND TRANSFER AGENT................................................66

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

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

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

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

FINANCIAL STATEMENTS........................................................68

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

<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 a diversified, 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

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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
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, mortgage-backed and asset-backed securities are grouped according to
the nature of their collateral, 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.

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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 (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 CDs or banker's acceptances issued by domestic branches of U.S.
banks.

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

6. 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, as amended ("1933 Act").

7. 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.

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

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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. 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. (Although not a fundamental limitation,
Neuberger Berman CASH RESERVES Portfolio is subject to the diversification
requirements under Rule 2a-7 of the 1940 Act.)

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

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<PAGE>

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
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.

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

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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), other money market funds (except for Neuberger Berman GOVERNMENT
MONEY Portfolio and Neuberger Berman CASH RESERVES 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.

INVESTMENT INSIGHT
- ------------------

Neuberger Berman's commitment to its asset management approach is
reflected in the more than $125 million the organization's 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

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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.

For example, GOVERNMENT MONEY and CASH RESERVES are money market
funds with a dollar-weighted 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
Neuberger Berman Government Money Fund seeks to provide investors
with maximum safety and liquidity and high current income. The Fund attempts to
achieve its objective by investing in U.S. Treasury securities, although it may
invest in other types of issues backed by the full faith and credit of the U.S.
Government. Unlike other money market funds, it does not invest in repurchase
agreements or other investments commonly used by its peers. Also, the fund's
dividends are generally exempt from state and local income taxes, although not
from federal income tax. The managers select securities to maximize yield, while
attempting to maintain a consistent $1.00 net asset value.

NEUBERGER BERMAN CASH RESERVES
Neuberger Berman Cash Reserves seeks to provide investors with the
highest available current income consistent with safety and liquidity. In
pursuit of its objective, the fund invests in high quality U.S.-dollar
denominated money-market instruments. The managers select securities to maximize
yield, while seeking a stable $1.00 net asset value. They also broadly diversify
among number and types of issuers to help limit risk.

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
Neuberger Berman Limited Maturity Bond Fund seeks the highest
available current income consistent with liquidity and low risk to principal;
total return is a secondary goal. The fund invests mainly in investment-grade
bonds and other debt securities from U.S. government and corporate issuers.

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LIMITED MATURITY BOND INVESTORS CAN EXPECT:
o Actively managed portfolio duration
o Credit selection with a value bias
o Risk reduction through diversification

ACTIVELY MANAGED PORTFOLIO DURATION. The managers attempt to
increase income and preserve or enhance total return by actively managing
average portfolio duration. As one manager explains, "Historically, limited
maturity portfolios have been able to deliver much of the yield available in the
investment-grade bond market with reduced volatility." Of course, there is no
assurance that past results will continue in the future. By keeping average
duration at four years or less, the managers attempt to reduce the higher level
of volatility that is generally associated with bonds of longer duration.
Duration is the measure of how bond prices respond to shifts in interest rates,
taking into account maturity, coupon, call protection, and other factors. In
general, the longer a security's duration, the higher the yield and the greater
the volatility.

CREDIT SELECTION WITH A VALUE BIAS. As part of their credit
selection process, the managers monitor national trends in the corporate and
government securities markets, including a range of economic and financial
factors. Specifically, they look for short- to intermediate-term securities that
appear underpriced compared to bonds of similar structure and credit quality as
well as those that seem ripe for a ratings upgrade. In choosing lower-rated
securities, the managers look for companies in sound financial condition that
may not be well known to the majority of investors.

RISK REDUCTION THROUGH DIVERSIFICATION. In an attempt to reduce
credit risk, the portfolio diversifies among many different issuers and types of
securities. The Portfolio invests mainly in investment-grade bonds and other
debt securities from U.S. government and corporate issuers. In an effort to
enhance yield and add diversification, it may also invest up to 10% of net
assets in securities that are below investment grade, provided that, at the time
of purchase, they are rated at least B by Moody's or Standard & Poor's, or
unrated securities deemed by the managers to be of comparable quality. The
managers believe, "The incremental yield compensates for the additional
political and economic risks we take on." On occasion, they may also place a
portion of assets in foreign securities, which could cause greater movements in
the fund's share price.

NEUBERGER BERMAN HIGH YIELD BOND FUND
Neuberger Berman High Yield Bond Fund seeks high current income and
secondarily, capital growth by investing at least 65% of its total assets in
high yield, lower-rated debt securities (sometimes known as junk bonds). These
are securities rated below investment grade or unrated securities deemed to be
of comparable quality.

HIGH YIELD BOND INVESTORS CAN EXPECT:
o Yield enhancement through investment in lower-rated bonds
o An equity approach to high yield bond selection
o A process that searches for deleveraging opportunities

YIELD ENHANCEMENT THROUGH INVESTMENT IN LOWER-RATED BONDS. The
managers seek a high level of current income by investing a significant portion
of the portfolio's assets in lower-rated debt securities. Lower-rated bonds are

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<PAGE>

debt securities that are rated below investment grade or unrated securities
deemed by the managers to be of comparable quality. Lower-rated bonds typically
carry higher yields because they are judged to be of lesser credit quality than
alternative investments, such as U.S. government securities or investment grade
bonds. There is an inverse relationship between the price of a bond and its
yield. Generally, as yields rise the principal value of the bond falls, while
declining yields indicate a rise in the principal value of the bond.

AN EQUITY APPROACH TO HIGH YIELD BOND SELECTION. Similar to equity
securities, the performance of high-yield bonds is closely related to the
financial health of the underlying companies that issue them, as well as the
market as a whole. Therefore, the managers approach security selection using the
same bottom-up strategy as many of their equity counterparts at Neuberger
Berman. As one co-manager puts it, "We're looking for the bonds of companies we
consider capable of generating consistent or improving cash flows despite their
lower credit ratings." In addition to reviewing a company's financials, they
also assess the firm's overall strategy and quality of its senior executives.
They tend to favor companies with strong market positions, low cost operations,
and good track records.

A PROCESS THAT SEARCHES FOR DELEVERAGING OPPORTUNITIES. The managers
focus their research efforts on financially stronger companies within the high
yield universe. Specifically, they seek to invest in companies that can generate
cash flows sufficient to pay down debt or fund their growth, a process known as
deleveraging. As debt becomes a smaller portion of these companies'
capitalizations, the prices of the bonds may rise as investors become more
comfortable with the risks and anticipate ratings upgrades. However, there can
be no assurance that these bonds' prices will rise in every instance, and high
yield securities are more volatile than their investment grade counterparts.

ADDITIONAL INVESTMENT INFORMATION
- ---------------------------------

Some or all of the Portfolios, as indicated below, may make the
following investments, among others, some of which are part of the Portfolios'
principal investment strategies and some of which are not. The principal
strategies of each Portfolio are discussed in the Prospectus. 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), Sallie Mae (formerly known as "Student Loan Marketing
Association"), 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. Government Agency Securities
are not guaranteed by the Government and generally fluctuate inversely with
changing interest rates.

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POLICIES AND LIMITATIONS. Neuberger Berman CASH RESERVES
Portfolio may invest 25% or more of its total assets in U.S. Government and
Agency Securities. Under normal circumstances, Neuberger Berman HIGH YIELD
Bond Portfolio may invest up to 35% 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 1933 Act, and Rule
144A securities (restricted securities that may be traded freely among qualified
institutional buyers pursuant to an exemption from the registration requirements
of the securities laws); these securities are considered illiquid unless NB
Management, acting pursuant to guidelines established by the 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 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 a repurchase agreement with a maturity of more than seven days 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.

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 other institutional investors judged
creditworthy by NB Management. Borrowers are required continuously to secure
their obligations to return securities on loan from a Portfolio by depositing

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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.

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.

POLICIES AND LIMITATIONS. To the extent restricted commercial paper
is deemed 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.

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

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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 net asset values ("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. CDs are 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
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

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<PAGE>

Portfolio's 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.

MONEY MARKET FUNDS (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN
GOVERNMENT MONEY PORTFOLIO AND NEUBERGER BERMAN CASH RESERVES PORTFOLIO). Each
Portfolio may invest up to 10% of its total assets in the securities of money
market funds. The shares of money market funds are subject to the management
fees and other expenses of those funds. Therefore, investments in other
investment companies will cause the Portfolio (and indirectly, the Portfolio's
corresponding Fund and its shareholders) to bear proportionately the costs
incurred by the other investment companies' operations. At the same time, the
Portfolio will continue to pay its own management fees and expenses with respect
to its portfolio investments, including the shares of other investment
companies.

POLICIES AND LIMITATIONS. Each Portfolio's investment in such
securities is limited to (i) 3% of the total voting stock of any one investment
company, (ii) 5% of the Portfolio's total assets with respect to any one
investment company and (iii) 10% of the Portfolio's total assets in all
investment companies in the aggregate.

MORTGAGE-BACKED SECURITIES (ALL PORTFOLIOS). Mortgage-backed
securities represent direct or indirect participations in, or are secured by and

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<PAGE>

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 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

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<PAGE>

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
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, among other things, 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, or a
combination of the foregoing. 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

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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.

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

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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
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 political and economic developments
(including political instability, nationalization, expropriation and
confiscatory taxation) 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 SECURITIES (NEUBERGER BERMAN HIGH YIELD
BOND PORTFOLIO AND NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO). Foreign
currency denominated securities are denominated in or indexed to foreign
currencies, including (1) CDs (including similar time deposits), commercial
paper, 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 (a) adverse
changes in foreign exchange rates, (b) nationalization, expropriation, or
confiscatory taxation, and (c) adverse changes in investment or exchange control
regulations (which could prevent cash from being brought back to the United
States). Additionally, dividends and interest payable on foreign securities (and
gains realized on disposition thereof) may be subject to foreign taxes,
including taxes withheld from those payments.

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

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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
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 (sponsored or unsponsored) are receipts typically issued by
a U.S. bank or trust company evidencing its ownership of the underlying
foreign securities. Most ADRs are denominated in U.S. dollars and are traded
on a U.S. stock exchange. 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

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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 counterparty 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 dollar rolls.

POLICIES AND LIMITATIONS. Dollar rolls are considered borrowings
for purposes of a Portfolio's 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 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 interest rate and bond index futures contracts, "Futures" or

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"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
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 margin deposit goes bankrupt, the Portfolio
could suffer a delay in recovering its funds and could ultimately suffer a loss.

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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 traders 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.

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.

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<PAGE>

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.

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.

If a call option that a Portfolio has written expires unexercised,
that Portfolio will realize a gain in the amount of the premium; however, that
gain may be offset by a decline in the market value of the underlying security
during the option period. If the call option is exercised, the Portfolio will
realize a gain or loss from the sale of the underlying security.

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

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.

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

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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 United States
are issued by a clearing organization affiliated with the exchange on which the
option is listed; the clearing organization in effect guarantees completion of
every exchange-traded option. In contrast, OTC options are contracts between 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
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

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<PAGE>

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.

The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying market that cannot be
reflected in the options markets.

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 and thus subject to each Portfolio's 15% limitation on illiquid
securities, 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.

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

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<PAGE>

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.

Forward Contracts are traded in the interbank market directly
between dealers (usually large commercial banks) and their customers. A Forward
Contract generally has no deposit requirement, and no commissions are charged at
any stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.

At the consummation of a Forward Contract to sell currency, a
Portfolio may either make delivery of the foreign currency or terminate its
contractual obligation to deliver by purchasing an offsetting contract. If the
Portfolio chooses to make delivery of the foreign currency, it may be required
to obtain such currency through the sale of portfolio securities denominated in
such currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in Forward Contract
prices. Closing purchase transactions with respect to Forward Contracts are
usually made with the currency dealer who is a party to the original Forward
Contract.

NB Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a Forward Contract to sell that
foreign currency or a proxy-hedge involving a Forward Contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated but which is available on
more advantageous terms.

However, a hedge or proxy-hedge cannot protect against exchange rate
risks perfectly, and, if NB Management is incorrect in its judgment of future
exchange rate relationships, a 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.

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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.

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
to promptly 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 prices 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

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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. NB Management intends to reduce the risk of
imperfect correlation by investing only in Hedging Instruments whose behavior is
expected by the manager to resemble or offset that of the Portfolio's underlying
securities or currency. 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."

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
Portfolio prior to the receipt of any actual payments. Pay-in-kind securities
pay interest through the issuance of additional securities.

Because each Portfolio's 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, a
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."

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<PAGE>

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
a similar maturity 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
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, U.S. territories and possessions, and their political
subdivisions, agencies, and instrumentalities. The interest on municipal
obligations may be exempt from federal income tax. However, that exemption does
not flow through to investors in the Funds, because each Fund's corresponding
Portfolio will almost certainly invest less than half its assets in tax-exempt
securities.

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<PAGE>

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.

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 may experience 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 nationally recognized statistical rating organizations ("NRSROs") that have
rated them (including those securities rated as low as D by Standard & Poor's
("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

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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
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 Investors Service, Inc. ("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. 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 permitted by the Portfolio's
investment policies.

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.

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<PAGE>

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
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

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securities are usually subordinated to comparable-tier non-convertible
securities but rank senior to common stock in a corporation's capital structure.
The value of a convertible security is a function of (1) its yield in comparison
to the yields of other securities of comparable maturity and quality that do not
have a conversion privilege and (2) its worth if converted into the underlying
common stock.

The price of a convertible security often reflects variations in the
price of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
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 not 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 S&P, Moody's, or any other NRSRO. The ratings of an NRSRO

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<PAGE>

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 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
debt securities.

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, 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 under 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.

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<PAGE>

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 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
six 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

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<PAGE>

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
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.

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
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

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<PAGE>

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, 1999, the current
yields of GOVERNMENT MONEY and CASH RESERVES were 4.25% and 4.80%, respectively.
For the same period, the effective yields were 4.34% and 4.91%, 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, 1999 were 6.31% and
10.80%.

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 + Y2
---
1-MR

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.

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 2000 tax rate of 6.85% would have to
have received a taxable current yield of 5.37% in order to equal the 5%

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after-tax yield. Moreover, if that taxpayer also were subject to income taxation
by New York City at a marginal 2000 rate of 3.8276%, the taxpayer would have to
have received a taxable current yield of 5.60% 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)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, 1999,
the average annual total returns for LIMITED MATURITY were +1.98%, +5.50%, and
+6.10%, respectively. If an investor had invested $10,000 in the Fund'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 $23,088 on
October 31, 1999.

For the one-year period ended October 31, 1999 and the period from
March 3, 1998 to October 31, 1999, the average annual total returns for HIGH
YIELD were +1.86% and +0.08%, respectively. If an investor had invested $10,000
in the Fund's shares on March 3, 1998, and had reinvested all capital gain
distributions and income dividends, the value of that investor's holdings would
have been $10,014 on October 31, 1999.

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 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

-38-
<PAGE>

(2) recognized bond, stock, and other indices such as the Lehman
Brothers Bond Index, the Standard & Poor's 500 Composite
Stock 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.

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.

-39-
<PAGE>

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.

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

-40-
<PAGE>

officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by NB Management and Neuberger
Berman.
<TABLE>
<CAPTION>

Name, Address Positions Held
AND AGE(1) WITH THE TRUSTS PRINCIPAL OCCUPATION(S)(2)
- ---------- --------------- --------------------------
<S> <C> <C>

Claudia A. Brandon (43) Secretary of each Employee of Neuberger Berman
Trust since 1999; Vice President
of NB Management from 1986
to 1999; Secretary of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.

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

Stacy Cooper-Shugrue (36) Assistant Employee of Neuberger Berman
Secretary of each since 1999; Assistant Vice
Trust President of NB Management
from 1993 to 1999;
Assistant Secretary of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.

Barbara DiGiorgio (41) Assistant Employee of NB Management;
Treasurer of each Assistant Vice President of NB
Trust Management from 1993 to 1999;
Assistant Treasurer since
1996 of ten other mutual
funds for which NB
Management acts as
investment manager or
administrator.

Theodore P. Giuliano* (47) Chairman of the Vice President and Director of
Board and Trustee NB Management; Principal of
of each Trust Neuberger Berman from 1987 to
1999; Chairman of the
Board and Trustee of one
other mutual fund for
which NB Management acts
as administrator.

Barry Hirsch (66) Trustee of each Senior Vice President,
Loews Corporation Trust Secretary, and General Counsel
667 Madison Avenue of Loews Corporation
8th Floor (diversified financial
New York, NY 10021 corporation).
</TABLE>

-41-
<PAGE>

Name, Address Positions Held
AND AGE(1) WITH THE TRUSTS PRINCIPAL OCCUPATION(S)(2)
- ---------- --------------- --------------------------
<S> <C> <C>

Robert A. Kavesh (72) Trustee of each Professor of Finance and
110 Blecker 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.

C. Carl Randolph (62) Assistant Senior Vice President,
Secretary of each Secretary and General Counsel
Trust of Neuberger Berman Inc.
(holding company);
Assistant Secretary of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.

William E. Rulon (67) Trustee of each Retired. Senior Vice
1761 Hotel Circle South Trust President of Foodmaker, Inc.
San Diego, CA 92108 (operator and franchiser of
restaurants) until January
1997; Secretary of Foodmaker,
Inc. until July 1996.

Richard Russell (53) Treasurer and Employee of NB Management;
Principal Vice President of NB
Accounting Officer Management from 1993 to 1999;
of each Trust Treasurer and Principal
Accounting Officer of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.

Candace L. Straight (52) Trustee of each Private investor and
518 E. Passaic Avenue Trust consultant specializing in the
Bloomfield, NJ 07003 insurance industry; Advisory
Director of Securities
Capital LLC, (a global
private equity investment
firm making investments in
the insurance sector);
Trustee of Advisers
Managers Trust and
Neuberger Berman Advisers
Management Trust;
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.
</TABLE>

-42-
<PAGE>
<TABLE>
<CAPTION>

Name, Address Positions Held
AND AGE(1) WITH THE TRUSTS PRINCIPAL OCCUPATION(S)(2)
- ---------- --------------- --------------------------
<S> <C> <C>

Daniel J. Sullivan (60) Vice President of Senior Vice President of NB
each Trust Management since 1992; Vice
President of ten other
mutual funds for which NB
Management acts as
investment manager or
administrator.
Peter Sundman* (40) President and Executive Vice President and
Chief Executive Director of Neuberger Berman
Officer of each Inc. (holding company);
Trust President and Director of NB
Management; Principal of
Neuberger Berman from 1997
to 1999; Chairman of the
Board, Chief Executive
Officer and Trustee of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.
Michael J. Weiner (52) Vice President and Senior Vice President of NB
Principal Management since 1992;
Financial Officer Principal of Neuberger Berman
of each Trust from 1998-99; Treasurer of NB
Management from 1992 to
1996; Vice President and
Principal Financial
Officer of ten other
mutual funds for which NB
Management acts as
investment manager or
administrator.
Celeste Wischerth (38) Assistant Employee of NB Management;
Treasurer of each Assistant Vice President of NB
Trust Management from 1994 to 1999;
Assistant Treasurer of ten
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. Sundman and Giuliano are interested
persons by virtue of the fact that they are officers and directors of NB
Management. Mr. Sundman is an Executive Vice President, and Mr. Giuliano is
a Managing Director, of Neuberger Berman.

-43-
<PAGE>

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.

TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/99
------------------------------

Aggregate Total Compensation from Trusts
Name and Position Compensation in the Neuberger Berman Fund
WITH THE TRUST FROM THE TRUST COMPLEX PAID TO TRUSTEES
- ------------------------ --------------- ------------------------

John Cannon $24,579 $52,000
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 $23,978 $49,250
Trustee (2 other investment companies)

Robert A. Kavesh $24,215 $51,250
Trustee (2 other investment companies)

William E. Rulon $23,244 $47,750
Trustee (2 other investment companies)

Candace L. Straight $23,978 $51,500
Trustee (2 other investment companies)

* Mr. Egener retired from these positions on December 16, 1999.

-44-
<PAGE>

At January 31, 2000, 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
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
persons who are directors and officers and two persons who are officers of NB
Management (three of whom are officers of Neuberger Berman), presently serve as
trustees and/or 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

-45-
<PAGE>

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.

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, 1999, 1998, and 1997:

MANAGEMENT AND ADMINISTRATION FEES
ACCRUED FOR FISCAL YEARS
ENDED OCTOBER 31
----------------

FUND 1999 1998 1997
- ---- ---- ---- ----

GOVERNMENT MONEY $3,100,110 $1,879,933 $1,703,377

CASH RESERVES $5,332,438 $4,055,560 $3,160,143

LIMITED MATURITY $1,356,702 $1,471,759 $1,275,694

HIGH YIELD $170,119 $72,734* n/a
* From date of inception, March 3, 1998 to October 31, 1998.

-46-
<PAGE>

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, 1999, 1998, and 1997, NB Management reimbursed the Funds the
following amounts of expenses:

FUND 1999 1998 1997
- ---- ---- ---- ----

CASH RESERVES $0 $0 $0

LIMITED MATURITY $53,915 $143,344 $20,974

HIGH YIELD $111,347 $71,712* n/a

*From date of inception, March 3, 1998 to October 31, 1998.

HIGH YIELD had agreed to repay NB Management through December 31,
1999 for excess total operating expenses that NB Management had previously
reimbursed to the Fund, provided the repayments did not cause the annual expense
ratio to exceed 1.00% of average daily net assets. During the fiscal periods
ended October 31, 1998 and 1999, HIGH YIELD did not repay any
previously-reimbursed expenses to NB Management.

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 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

-47-
<PAGE>

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.

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.

INVESTMENT COMPANIES MANAGED
- ----------------------------

As of December 31, 1999, the investment companies managed by NB
Management had aggregate net assets of approximately $18.7 billion. NB
Management currently serves as investment manager of the following investment
companies:

-48-
<PAGE>

Approximate Net Assets at
NAME DECEMBER 31, 1999
---- -----------------

Neuberger Berman Cash Reserves Portfolio.......................$ 1,067,386,621
(investment portfolio for Neuberger Berman Cash Reserves)

Neuberger Berman Government Money Portfolio......................$ 496,244,470
(investment portfolio for Neuberger Berman Government Money Fund)

Neuberger Berman High Yield Bond Portfolio........................$ 17,717,320
(investment portfolio for Neuberger Berman High Yield Bond Fund)

Neuberger Berman Limited Maturity Bond Portfolio.................$ 264,519,644
(investment portfolio for Neuberger Berman Limited Maturity Bond Fund and
Neuberger Berman Limited Maturity Bond Trust)

Neuberger Berman Municipal Money Portfolio.......................$ 301,713,416
(investment portfolio for Neuberger Berman Municipal Money Fund)

Neuberger Berman Municipal Securities Portfolio...................$ 32,652,269
(investment portfolio for Neuberger Berman Municipal Securities Trust)

Neuberger Berman Century Portfolio................................$ 12,994,259
(investment portfolio for Neuberger Berman Century Fund and Neuberger
Berman Century Trust)

Neuberger Berman Focus Portfolio...............................$ 1,772,136,921
(investment portfolio for Neuberger Berman Focus Fund, Neuberger Berman
Focus Trust, and Neuberger Berman Focus Assets)

Neuberger Berman Genesis Portfolio.............................$ 1,619,248,797
(investment portfolio for Neuberger Berman Genesis Fund, Neuberger Berman
Genesis Trust, Neuberger Berman Genesis Assets and Neuberger Berman
Genesis Institutional)

Neuberger Berman Guardian Portfolio.......................... $ 4,406,419,837
(investment portfolio for Neuberger Berman Guardian Fund, Neuberger
Berman Guardian Trust, and Neuberger Berman Guardian Assets)

Neuberger Berman International Portfolio.........................$ 195,064,579
(investment portfolio for Neuberger Berman International Fund and
Neuberger Berman International Trust)

Neuberger Berman Manhattan Portfolio.............................$ 901,991,808
(investment portfolio for Neuberger Berman Manhattan Fund, Neuberger
Berman Manhattan Trust, and Neuberger Berman Manhattan Assets)
</TABLE>

-49-
<PAGE>

Neuberger Berman Millennium Portfolio............................$ 214,859,495
(investment portfolio for Neuberger Berman Millennium Fund, Neuberger
Berman Millennium Trust and Neuberger Berman Millennium Assets)

Neuberger Berman Partners Portfolio............................$ 3,489,710,309
(investment portfolio for Neuberger Berman Partners Fund, Neuberger
Berman Partners Trust, and Neuberger Berman Partners Assets)

Neuberger Berman Regency Portfolio................................$ 33,586,640
(investment portfolio for Neuberger Berman Regency Fund and Neuberger
Berman Regency Trust)

Neuberger Berman Socially Responsive Portfolio...................$ 146,960,016
(investment portfolio for Neuberger Berman Socially Responsive Fund,
Neuberger Berman Socially Responsive Trust, and Neuberger Berman Socially
Responsive Assets)

Advisers Managers Trust (eight series).........................$ 2,442,187,166

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 mutual 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
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.

The Portfolios are subject to certain limitations imposed on all
advisory clients of Neuberger Berman (including the Portfolios, the Other NB
Funds, and other managed accounts) and personnel of Neuberger Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger Berman that limit
the aggregate purchases, by all accounts under management, of the outstanding
shares of public companies.

-50-
<PAGE>

MANAGEMENT AND CONTROL OF NB MANAGEMENT AND NEUBERGER BERMAN
- ------------------------------------------------------------

The directors and officers of NB Management, who are deemed
"control persons," all of whom have offices at the same address as NB
Management, are Richard A. Cantor, Director and Chairman; Theodore P.
Giuliano, Director and Vice President; Michael M. Kassen, Director, Executive
Vice President and Chief Investment Officer; Barbara Katersky, Senior Vice
President; Irwin Lainoff, Director; Daniel J. Sullivan, Senior Vice
President; Philip Ambrosio, Senior Vice President and Chief Financial
Officer; Peter E. Sundman, Director and President; Michael J. Weiner, Senior
Vice President; and Lawrence Zicklin, Director.

The directors and officers of Neuberger Berman, who are deemed
"control persons," all of whom have offices at the same address as Neuberger
Berman, are Jeffrey B. Lane, President and Chief Executive Officer; Robert
Matza, Executive Vice President and Chief Administrative Officer; Michael M.
Kassen, Executive Vice President and Chief Investment Officer; Heidi L.
Schneider, Executive Vice President; Peter E. Sundman, Executive Vice
President; Philip Ambrosio, Senior Vice President and Chief Financial
Officer; C. Carl Randolph, Senior Vice President, General Counsel and
Secretary; Robert Akeson, Senior Vice President; Salvatore A. Buonocore,
Senior Vice President; Seth J. Finkel, Senior Vice President; Robert Firth,
Senior Vice President; Brian Gaffney, Senior Vice President; Brian E. Hahn,
Senior Vice President; Lawrence J. Cohn, Senior Vice President; Joseph K.
Herlihy, Senior Vice President and Treasurer; Barbara R. Katersky, Senior
Vice President; Diane E. Lederman, Senior Vice President; Peter B. Phelan,
Senior Vice President; Robert H. Splan, Senior Vice President; Andrea
Trachtenberg, Senior Vice President; Michael J. Weiner, Senior Vice
President; Marvin C. Schwartz, Managing Director.

Messrs. Giuliano, Sundman, Sullivan, and Weiner are officers of
each Trust.

Neuberger Berman and NB Management are wholly owned subsidiaries of
Neuberger Berman Inc., a publicly owned holding company owned primarily by the
employees 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

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<PAGE>

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, 2000. Neuberger Berman
HIGH YIELD Bond Fund 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.

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<PAGE>

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 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.
<TABLE>
<CAPTION>

EQUITY FUNDS
- ------------
<S> <C>

Neuberger Berman Century Fund Seeks long-term growth of capital; dividend
income is a secondary goal. The corresponding
portfolio invests mainly in common stocks of
large-capitalization companies using a
growth-oriented approach. Its investment
program seeks companies with strong earnings
growth, priced at attractive levels relative to
their growth rates.

</TABLE>

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<PAGE>

<S> <C>

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.

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 investing
Fund 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 primarily in
securities of medium-capitalization companies
believed to have the maximum potential for
long-term capital appreciation. The
corresponding portfolio uses a growth-oriented
approach to the selection of individual
securities.
</TABLE>

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<PAGE>

<S> <C>

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 capital growth by investing primarily in
Partners Fund common stocks of medium- to
large-capitalization companies. 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
phases of the market cycle. The corresponding
portfolio uses the value-oriented investment
approach to the selection of individual
securities.

Neuberger Berman Regency Fund Seeks growth of capital by investing mainly in
common stocks of mid-capitalization companies
using a value-oriented approach. Its investment
program seeks well-managed companies whose stock
prices are undervalued.

Neuberger Berman Socially Seeks long-term growth of capital through
Responsive Fund 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
share price of $1.00.

Neuberger Berman Seeks high current income exempt from federal
Municipal Securities Trust income tax with low risk to principal and
liquidity; and secondarily, total return. The
corresponding portfolio invests in investment
grade municipal securities. The Fund maintains a
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.
</TABLE>

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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 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.

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 in "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 capital gains (both long-term and short-term), and any net

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<PAGE>

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. With respect to LIMITED MATURITY and HIGH YIELD, net
investment income and, with respect to all the Funds, 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 to "federal funds" if converted by
12:00 noon (Eastern time) that day, or the next day if so converted after that
time, 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 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 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 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 the
U.S. Postal Service cannot properly deliver Fund mailings to the shareholder for
180 days, however, 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 its NAV per share on the day the check is
reinvested. No interest will accrue on amounts represented by uncashed dividend
or other distribution checks.

ADDITIONAL TAX INFORMATION

TAXATION OF THE FUNDS
- ---------------------

To 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

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<PAGE>

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. By qualifying for
treatment as a RIC, a Fund (but not its shareholders) will be relieved of
federal income tax on the part of its investment company taxable income and net
capital gain (I.E., the excess of net long-term capital gain over net short-term
capital loss) that it distributes to its shareholders. If a Fund failed to
qualify for treatment as a RIC for any taxable year, it would be taxed on the
full amount of its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and the shareholders would treat all
those distributions, including distributions of net capital gain, 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.

Each Fund except for HIGH YIELD has received a ruling from the
Internal Revenue Service ("Service") that the Fund, 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 Fund
satisfies all the requirements described above to qualify as a RIC. Although
these rulings may not be relied on 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 the
Funds of distributions to them from their corresponding Portfolios, investments
by HIGH YIELD and LIMITED MATURITY Portfolios in certain securities, and hedging
and certain other transactions engaged in by those Portfolios.

TAXATION OF THE PORTFOLIOS
- --------------------------

Each Portfolio (except for Neuberger Berman HIGH YIELD Bond
Portfolio) has received a ruling from the Service to the effect that, among

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<PAGE>

other things, it 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 on as precedent by Neuberger Berman HIGH YIELD Bond
Portfolio, NB Management believes the reasoning thereof and, hence, their
conclusion apply to that 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.

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 or 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 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 by a
Portfolio 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.

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<PAGE>

Exchange-traded Futures Contracts, listed non-equity options thereon
(such as those on a stock index), and certain Forward Contracts subject to
section 1256 of the Code ("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 Neuberger Berman HIGH YIELD Bond Portfolio's or
Neuberger Berman LIMITED MATURITY Bond 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 HIGH YIELD or LIMITED MATURITY must distribute to
satisfy the Distribution Requirement (i.e., with respect to its share of the
portion treated as short-term capital gain for its corresponding Portfolio),
which will be taxable to its shareholders as ordinary income, and to increase
HIGH YIELD's or LIMITED MATURITY's net capital gain (i.e., its share of the net
capital gain recognized by its corresponding Portfolio), without in either case
increasing the cash available to the Fund. A Portfolio 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 to its corresponding Fund's shareholders as ordinary income when
distributed to them) and/or increasing the amount of dividends that Fund must
distribute 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.

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 position, the
Portfolio will be treated as having made an actual sale thereof, with the result
that gain will be recognized 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

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<PAGE>

respect to the same or substantially identical property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially identical property will
be deemed a constructive sale. The foregoing will not apply, however, to any
transaction by a Portfolio 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 identical or
related property, such as having an option to sell, being contractually
obligated to sell, making a short sale, or granting an option to buy
substantially identical stock or securities).

Each Portfolio (except Neuberger Berman GOVERNMENT MONEY 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
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 them 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.

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<PAGE>

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 re-establish the minimum balance after being given the opportunity to
do so. If an account that is closed pursuant to the foregoing was maintained for
an individual retirement account ("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," 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
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.

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<PAGE>

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, 1999, Neuberger Berman
LIMITED MATURITY Bond Portfolio acquired securities of the following of its
"regular brokers or dealers": Banc of America Securities LLC, Lehman Brothers
Inc., Merrill Lynch, Pierce, Fenner & Smith Inc. and Morgan Stanley Dean Witter
& Co. At October 31, 1999, that Portfolio held the securities of its "regular
brokers or dealers" with an aggregate value as follows: Lehman Brothers Inc.,
$8,071,037; and Morgan Stanley Dean Witter & Co., $5,053,799.

During the fiscal year ended October 31, 1999, Neuberger Berman HIGH
YIELD Bond Portfolio acquired securities of the following of its "regular
brokers or dealers": Merrill Lynch, Pierce, Fenner & Smith Inc. and Morgan
Stanley Dean Witter & Co. At October 31, 1999, that Portfolio held the
securities of its "regular brokers or dealers" with an aggregate value as
follows: Morgan Stanley Dean Witter & Co., $505,039.

During the fiscal year ended October 31, 1999, Neuberger Berman CASH
RESERVES Portfolio acquired securities of the following of its "regular brokers
or dealers": Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Inc.,
and Morgan Stanley Dean Witter & Co. At October 31, 1999, that Portfolio held
the securities of its "regular brokers or dealers" with an aggregate value as
follows: Merrill Lynch, Pierce, Fenner & Smith Inc., $29,951,475; and Morgan
Stanley Dean Witter & Co., $38,400,527.

During the fiscal year ended October 31, 1999, Neuberger Berman
GOVERNMENT MONEY Portfolio acquired none of the securities of its "regular
brokers or dealers." At October 31, 1999, 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

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<PAGE>

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 seven
separate 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.

Prior to November 9, 1998, the name of the Trust was "Neuberger &
Berman Income Funds," and the term "Neuberger Berman" in each Fund's name was
"Neuberger & Berman."

The predecessors of the Funds (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.

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<PAGE>

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 seven 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
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 benefiting 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

-65-
<PAGE>

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.

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.

-66-
<PAGE>

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 31, 2000:

Percentage of
NAME AND ADDRESS Ownership at
JANUARY 31 , 2000
-----------------

GOVERNMENT MONEY: Neuberger Berman* 82.59%
- ---------------- 55 Water Street, 27th Floor
Attn: Ron Staib, Ops. Control
New York, NY 10041-2799

CASH RESERVES: Neuberger Berman* 81.45%
- ------------- 55 Water Street, 27th Floor
Attn: Ron Staib, Ops. Control
New York, NY 10041-2799

LIMITED MATURITY: Charles Schwab & Co., Inc.* 21.58%
- ---------------- Attn Mutual Funds
Reinvest Acct
125 Broadway St. Fl. 15
New York, NY 10004

Nationwide Life Insurance Plan QPVA 8.77%
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, Ohio 43218-2029

Neuberger Berman * 7.41%
55 Water Street, 27th Floor
Attn: Ron Staib, Ops. Control
New York, NY 10041-2799
</TABLE>

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<PAGE>

Percentage of
NAME AND ADDRESS Ownership at
---------------- JANUARY 31 , 2000
-----------------

HIGH YIELD: Neuberger Berman * 31.24%
- ---------- 55 Water Street, 27th Floor
Attn: Ron Staib, Ops. Control
New York, NY 10041-2799
</TABLE>

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

* 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

The following financial statements and related documents are
incorporated herein by reference from the Funds' Annual Report to shareholders
for the fiscal year ended October 31, 1999:

The audited financial statements of the Funds and Portfolios and
notes thereto for the fiscal year ended October 31, 1999, and the
reports of Ernst & Young LLP, independent auditors, with respect to
such audited financial statements of Neuberger Berman CASH RESERVES
and Portfolio, Neuberger Berman GOVERNMENT MONEY Fund and Portfolio,
Neuberger Berman HIGH YIELD Bond Fund and Portfolio, and Neuberger
Berman LIMITED MATURITY Bond Fund and Portfolio.

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<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.

BAA - Bonds which are rated BAA are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.

BA - Bonds rated BA are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

CAA - Bonds rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA - Bonds rated CA represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C - Bonds rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3 in
each generic rating classification described above. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issuer ranks in the lower end of its generic rating 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 MARCH 1, 2000

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 March 1,
2000. 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 Inc. ("NB
Management"), provides basic information that an investor should know before
investing. You can get a free copy of the Prospectus 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
Investment Insight....................................................5
Description of Municipal Obligations..................................6
Yield and Price Characteristics of Municipal Obligations.............10
Investment in Taxable Securities.....................................10
Additional Investment Information....................................14
Risks of Fixed Income Securities.....................................20

CERTAIN RISK CONSIDERATIONS...................................................22

PERFORMANCE INFORMATION.......................................................23
Yield Calculations...................................................23
Tax Equivalent Yield.................................................24
Total Return Computations............................................25
Comparative Information..............................................25
Other Performance Information........................................26

TRUSTEES AND OFFICERS.........................................................27

INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES.............................32
Investment Manager and Administrator.................................32
Management and Administration Fees...................................33
Expense Reimbursements...............................................33
Sub-Adviser..........................................................34
Investment Companies Managed.........................................35
Management and Control of NB Management and Neuberger Berman.........37

DISTRIBUTION ARRANGEMENTS.....................................................38

ADDITIONAL PURCHASE INFORMATION...............................................38
Shares Prices and Net Asset Value....................................38
Automatic Investing and Dollar Cost Averaging........................39

ADDITIONAL EXCHANGE INFORMATION...............................................39

-i-
<PAGE>

ADDITIONAL REDEMPTION INFORMATION.............................................42
Suspension of Redemptions............................................42
Redemptions in Kind..................................................43

DIVIDENDS AND OTHER DISTRIBUTIONS.............................................43

ADDITIONAL TAX INFORMATION....................................................44
Taxation of the Funds................................................44
Taxation of the Portfolios...........................................45
Taxation of the Funds' Shareholders..................................47

VALUATION OF PORTFOLIO SECURITIES.............................................48

PORTFOLIO TRANSACTIONS........................................................49
Portfolio Turnover...................................................50

REPORTS TO SHAREHOLDERS.......................................................50

ORGANIZATION, CAPITALIZATION AND OTHER MATTERS................................50
The Funds............................................................50
The Portfolios.......................................................51

CUSTODIAN AND TRANSFER AGENT..................................................52

INDEPENDENT AUDITORS..........................................................52

LEGAL COUNSEL.................................................................53

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................53

REGISTRATION STATEMENT........................................................53

FINANCIAL STATEMENTS..........................................................54

Appendix A...................................................................A-1

-ii-
<PAGE>

INVESTMENT INFORMATION

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.

<PAGE>

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
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 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
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

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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. (Although not a fundamental
limitation, Neuberger Berman MUNICIPAL MONEY Portfolio is subject to the
diversification requirements under Rule 2a-7 of the 1940 Act.)

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.

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.

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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
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, other money market funds 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 $10.9 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.

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INVESTMENT INSIGHT

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 and/or maturity of the Portfolios is
managed in an effort 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

Neuberger Berman Municipal Money Fund seeks to provide investors with
the highest available current income exempt from federal income tax consistent
with safety and liquidity. In its efforts to achieve this goal, the portfolio
invests in high-quality, short-term municipal obligations from a number of
different states and issuers. Since the Fund primarily provides earnings that
are federally tax-exempt, the after-tax return may be greater than the return
from taxable funds that appear to offer higher yields. The managers select
securities to maximize yield, while attempting to maintain a consistent $1.00
net asset value per share. Also, a portion of the Fund's dividends may be exempt
from state and local income taxes, which could be advantageous to investors
living in high tax jurisdictions, like New York State, New York City, or
California. Please consult your tax advisor for more information regarding your
specific tax consequences.

NEUBERGER BERMAN MUNICIPAL SECURITIES TRUST

Neuberger Berman MUNICIPAL SECURITIES Trust 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.

MUNICIPAL SECURITIES INVESTORS CAN EXPECT:

o Tax-exempt current income

o A conservative investment philosophy

o Diversification across issuers and geographic locations

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TAX-EXEMPT CURRENT INCOME. According to one manager, "it's not what you
earn, it's what you keep." The reality is that high tax-bracket investors can
lose up to 39.6% of their investment income to federal tax. That high figure is
why many people look to one of the last genuine tax shelters left in America for
help a municipal bond fund such as Neuberger Berman MUNICIPAL SECURITIES Trust.
Additionally, for residents of particular states, such as New York and
California, a portion of the income generated may be triple tax-free (free from
state and local income taxes as well as federal income tax). Please consult your
tax advisor for more information regarding your specific tax consequences.

A CONSERVATIVE INVESTMENT PHILOSOPHY. The managers attempt to increase
income and preserve or enhance total return by actively managing average
portfolio duration. Under normal circumstances the managers keep the portfolio's
average duration at ten years or less, although they can invest in securities of
any maturity. Duration is the measure of how bond prices respond to shifts in
interest rates, taking into account maturity, coupon, call protection, and other
factors. In general, the longer a security's duration, the higher the yield and
the greater the volatility. Typically, with a 1% change in interest rates, an
investment's value may be expected to move in the opposite direction
approximately 1% for each year of its duration.

DIVERSIFICATION ACROSS ISSUERS AND GEOGRAPHIES. The managers seek to
reduce credit risk by diversifying the fund's assets among many municipal
issuers around the country and among the many different types of municipal
securities available, such as general obligation and revenue bonds. They
generally avoid securities from states or regions with weak economies or other
revenue problems. Unlike a single-state municipal bond fund, the fund's
portfolio is made up of municipal bonds from around the nation.

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.

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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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 may experience 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 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,
(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

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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 United States as additional security.

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.

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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
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.

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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 (also known
as the Federal National Mortgage Association), Freddie Mac (also known as the
Federal Home Loan Mortgage Corporation), ), Sallie Mae (formerly known as
"Student Loan Marketing Association"), 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.

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.

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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 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.

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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. Repurchase agreements with a maturity of more
than seven days are considered to be illiquid securities. Neither Portfolio may
enter into a repurchase agreement with a maturity of more than seven days 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 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 Service, 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
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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creditworthy by NB Management. 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.

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.

POLICIES AND LIMITATIONS. To the extent restricted commercial paper is
deemed illiquid, purchases thereof will be subject to Neuberger Berman MUNICIPAL
SECURITIES Portfolio's 15% limitation and Neuberger Berman MUNICIPAL MONEY
Portfolio's 10% limitation on investment in illiquid securities.

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.

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<PAGE>

OTHER MONEY MARKET FUNDS. Each Portfolio may invest up to 10% of its
total assets in the securities of money market funds. The shares of money market
funds are subject to the management fees and other expenses of those funds.
Therefore, investments in other investment companies will cause a Portfolio (and
indirectly, the Portfolio's corresponding Fund and its shareholders) to bear
proportionately the costs incurred by the other investment companies'
operations. At the same time, the Portfolio will continue to pay its own
management fees and expenses with respect to its portfolio investments,
including the shares of other investment companies.

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

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<PAGE>

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.

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

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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.

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.

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. 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.

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<PAGE>

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.

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.

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 a 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, a 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.

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<PAGE>

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.

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 margin 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

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<PAGE>

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.

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

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

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to meet current obligations. The Portfolio may be unable to promptly 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 the prices 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 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

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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.

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.

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

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<PAGE>

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.

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

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<PAGE>

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.

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 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

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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:

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

For the seven calendar days ended October 31, 1999, the current yield
and effective yield of MUNICIPAL MONEY were 2.79% and 2.83%, 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, 1999, the
annualized yield of MUNICIPAL SECURITIES was 4.38%.

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, 1999,
were 4.62% and 4.73%, respectively, assuming a marginal tax rate of 39.6%. The
tax-equivalent yield of MUNICIPAL SECURITIES for the 30-day period ended that
date was 7.25%, 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.

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<PAGE>

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:

n
P (1+T) = ERV

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

For the one-, five- and ten-year periods ended October 31, 1999, the
average annual total returns for MUNICIPAL SECURITIES and its predecessor were
- -1.03%, +5.36%, and +5.71%, 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 $20,172 on October 31,
1999.

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., 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 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

-25-
<PAGE>

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/Financial
Data Inc.'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.

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 the 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.

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.

-26-
<PAGE>

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 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.

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<PAGE>

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

Claudia A. Brandon (43) Secretary of each Employee of Neuberger
Trust Berman since 1999; Vice
Vice President of NB
Management from 1986 to
1999; Secretary of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.

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

Stacy Cooper-Shugrue (36) Assistant Secretary of Employee of Neuberger
each Trust Berman since 1999;
Assistant Vice President
of NB Management from 1993
to 1999; Assistant
Secretary of ten other
mutual funds for which NB
Management acts as
investment manager or
administrator.

Barbara DiGiorgio (41) Assistant Treasurer of Employee of NB Management;
each Trust Assistant Vice President
of NB Management from 1993
to 1999; Assistant
Treasurer since 1996 of
ten other mutual funds for
which NB Management acts
as investment manager or
administrator.

Theodore P. Giuliano* (47) Chairman of the Vice President and
Board and Trustee of Director of NB Management;
each Trust Principal of Neuberger
Berman from 1987 to 1999;
Chairman of the Board and
Trustee of one other
mutual fund for which NB
Management acts as
administrator.

Barry Hirsch (66) Trustee of each Trust Senior Vice President,
Loews Corporation Secretary, and General
667 Madison Avenue Counsel of Loews
8th Floor Corporation (diversified
New York, NY 10021 financial corporation).

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<PAGE>

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

Robert A. Kavesh (72) Trustee of each Trust Professor of Finance and
110 Blecker Street School of Business, New
Apt. 24B York University; Director
New York, NY 10012 of Del Laboratories, Inc.
and Greater New York
Mutual Insurance Co.

C. Carl Randolph (62) Assistant Secretary of Senior Vice President,
each Trust Secretary and General
Counsel of Neuberger
Berman Inc. (holding
company); Assistant
Secretary of ten other
mutual funds for which NB
Management acts as
investment manager or
administrator.

William E. Rulon (67) Trustee of each Trust Retired. Senior Vice
1761 Hotel Circle South President of Foodmaker,
San Diego, CA 92108 Inc. (operator and
franchiser of restaurants)
until January 1997;
Secretary of Foodmaker,
Inc. until July 1996.

Richard Russell (53) Treasurer and Employee of NB Management;
Principal Accounting Vice President of
Officer of each Trust Principal Accounting NB
Management from 1993 to
1999; Treasurer and
Officer of ten other
mutual funds for which NB
Management acts as
investment manager or
administrator.

Candace L. Straight (52) Trustee of each Trust Private investor and
518 E. Passaic Avenue consultant specializing in
Bloomfield, NJ 07003 the insurance industry;
Advisory Director of
Securities Capital LLC, (a
global private equity
investment firm making
investments in the
insurance sector); Trustee
of Advisers Managers Trust
and Neuberger Berman
Advisers Management Trust;
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.

-29-
<PAGE>

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

Daniel J. Sullivan (60) Vice President of each Senior Vice President of
Trust NB Management since 1992;
Vice President of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.

Peter Sundman* (40) President and Chief Executive Vice President
Executive Officer of and Director of Neuberger
each Trust Berman Inc. (holding
company); President and
Director of NB Management;
Principal of Neuberger
Berman from 1997 to 1999;
Chairman of the Board,
Chief Executive Officer
and Trustee of ten other
mutual funds for which NB
Management acts as
investment manager or
administrator.

Michael J. Weiner (52) Vice President and Senior Vice President of
Principal Financial NB Management since 1992;
Officer of each Trust Principal of Neuberger
Berman from 1998-99;
Treasurer of NB Management
from 1992 to 1996; Vice
President and Principal
Financial Officer of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.

Celeste Wischerth (38) Assistant Treasurer of Employee of NB Management;
each Trust Assistant Vice President
of NB Management from 1994
to 1999; Assistant
Treasurer of ten other
mutual funds for which NB
Management acts as
investment manager or
administrator.

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

(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. Sundman and Giuliano are interested

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<PAGE>

persons by virtue of the fact that they are officers and directors of NB
Management. Mr. Sundman is an Executive Vice President and Mr. Giuliano is a
Managing Director, 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.

TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/99

Total Compensation
Aggregate from Trusts in the Neuberger
Compensation Berman Funds Complex Paid
Name and Position from the Trust to Trustees
with the Trust
- -----------------

John Cannon $24,579 $52,000
Trustee (2 other investment companies)

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

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

Barry Hirsch $23,978 $49,250
Trustee (2 other investment companies)

Robert A. Kavesh $24,215 $51,250
Trustee (2 other investment companies)

William E. Rulon $23,244 $47,750
Trustee (2 other investment companies)

Candace L. Straight $23,978 $51,500
Trustee (2 other investment companies)

-31-
<PAGE>

- ----------------------------
* Mr. Egener retired from these positions on December 16, 1999.

At January 31, 2000, 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 MUNICIPAL MONEY and MUNICIPAL Securities, respectively.

INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES

INVESTMENT MANAGER AND ADMINISTRATOR

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
persons who are directors and officers and two persons who are officers of NB
Management (three of whom are officers of Neuberger Berman), presently serve as
trustees and/or 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.

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

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<PAGE>

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 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.

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, 1999, 1998, and 1997:

Management and Administration Fees
Accrued for Fiscal Years
Ended October 31

Fund 1999 1998 1997
- ---- ---- ---- ----

MUNICIPAL MONEY $1,164,328 $980,936 $736,228

MUNICIPAL SECURITIES $198,218 $178,862 $171,589

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 this undertaking by giving the Fund at
least 60 days' prior written notice. For the fiscal years ended October 31,
1999, 1998, and 1997, NB Management reimbursed the Municipal Securities Trust
the following amounts of expenses:

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<PAGE>

1999 1998 1997
---- ---- ----
$157,108 $155,100 $131,519

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 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

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

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<PAGE>

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.

INVESTMENT COMPANIES MANAGED

Approximate Net Assets at
Name December 31, 1999
---- -----------------

<S> <C>
Neuberger Berman Cash Reserves Portfolio................................................$ 1,067,386,621
(investment portfolio for Neuberger Berman Cash Reserves)

Neuberger Berman Government Money Portfolio...............................................$ 496,244,470
(investment portfolio for Neuberger Berman Government Money Fund)

Neuberger Berman High Yield Bond Portfolio.................................................$ 17,717,320
(investment portfolio for Neuberger Berman High Yield Bond Fund)

Neuberger Berman Limited Maturity Bond Portfolio..........................................$ 264,519,644
(investment portfolio for Neuberger Berman Limited Maturity Bond Fund and
Neuberger Berman Limited Maturity Bond Trust)

Neuberger Berman Municipal Money Portfolio................................................$ 301,713,416
(investment portfolio for Neuberger Berman Municipal Money Fund)

Neuberger Berman Municipal Securities Portfolio............................................$ 32,652,269
(investment portfolio for Neuberger Berman Municipal Securities Trust)

Neuberger Berman Century Portfolio.........................................................$ 12,994,259

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<PAGE>

(investment portfolio for Neuberger Berman Century Fund and
Neuberger Berman Century Trust)

Neuberger Berman Focus Portfolio........................................................$ 1,772,136,921
(investment portfolio for Neuberger Berman Focus Fund, Neuberger Berman
Focus Trust, and Neuberger Berman Focus Assets)

Neuberger Berman Genesis Portfolio......................................................$ 1,619,248,797
(investment portfolio for Neuberger Berman Genesis Fund, Neuberger
Berman Genesis Trust, Neuberger Berman Genesis Assets and Neuberger
Berman Genesis Institutional)

Neuberger Berman Guardian Portfolio.....................................................$ 4,406,419,837
(investment portfolio for Neuberger Berman Guardian Fund, Neuberger
Berman Guardian Trust, and Neuberger Berman Guardian Assets)

Neuberger Berman International Portfolio..................................................$ 195,064,579
(investment portfolio for Neuberger Berman International Fund and
Neuberger Berman International Trust)

Neuberger Berman Manhattan Portfolio......................................................$ 901,991,808
(investment portfolio for Neuberger Berman Manhattan Fund,
Neuberger Berman Manhattan Trust, and Neuberger Berman Manhattan Assets)

Neuberger Berman Millennium Portfolio.....................................................$ 214,859,495
(investment portfolio for Neuberger Berman Millennium Fund,
Neuberger Berman Millennium Trust and Neuberger Berman
Millennium Assets)

Neuberger Berman Partners Portfolio.....................................................$ 3,489,710,309
(investment portfolio for Neuberger Berman Partners Fund,
Neuberger Berman Partners Trust, and Neuberger Berman Partners Assets)

Neuberger Berman Regency Portfolio.........................................................$ 33,586,640
(investment portfolio for Neuberger Berman Regency Fund and
Neuberger Berman Regency Trust)

Neuberger Berman Socially Responsive Portfolio............................................$ 146,960,016
(investment portfolio for Neuberger Berman Socially Responsive
Fund, Neuberger Berman Socially Responsive Trust, and Neuberger
Berman Socially Responsive Assets)

Advisers Managers Trust (eight series)..................................................$ 2,442,187,166
</TABLE>

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.

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<PAGE>

The investment results achieved by all of the mutual 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
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.

The Portfolios are subject to certain limitations imposed on all
advisory clients of Neuberger Berman (including the Portfolios, the Other NB
Funds, and other managed accounts) and personnel of Neuberger Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger Berman that limit
aggregate purchases, by all accounts under management, of the outstanding shares
of public companies.

MANAGEMENT AND CONTROL OF NB MANAGEMENT AND NEUBERGER BERMAN

The directors and officers of NB Management, who are deemed "control
persons," all of whom have offices at the same address as NB Management, are
Richard A. Cantor, Director and Chairman; Theodore P. Giuliano, Director and
Vice President; Michael M. Kassen, Director, Executive Vice President and Chief
Investment Officer; Barbara Katersky, Senior Vice President; Irwin Lainoff,
Director; Daniel J. Sullivan, Senior Vice President; Philip Ambrosio, Senior
Vice President and Chief Financial Officer; Peter E. Sundman, Director and
President; Michael J. Weiner, Senior Vice President; and Lawrence Zicklin,
Director.

The directors and officers of Neuberger Berman, who are deemed "control
persons," all of whom have offices at the same address as Neuberger Berman, are
Jeffrey B. Lane, President and Chief Executive Officer; Robert Matza, Executive
Vice President and Chief Administrative Officer; Michael M. Kassen, Executive
Vice President and Chief Investment Officer; Heidi L. Schneider, Executive Vice
President; Peter E. Sundman, Executive Vice President; Philip Ambrosio, Senior
Vice President and Chief Financial Officer; C. Carl Randolph, Senior Vice
President, General Counsel and Secretary; Robert Akeson, Senior Vice President;
Salvatore A. Buonocore, Senior Vice President; Seth J. Finkel, Senior Vice
President; Robert Firth, Senior Vice President; Brian Gaffney, Senior Vice
President; Brian E. Hahn, Senior Vice President; Lawrence J. Cohn, Senior Vice
President; Joseph K. Herlihy, Senior Vice President and Treasurer; Barbara R.
Katersky, Senior Vice President; Diane E. Lederman, Senior Vice President; Peter
B. Phelan, Senior Vice President; Robert H. Splan, Senior Vice President; Andrea
Trachtenberg, Senior Vice President; Michael J. Weiner, Senior Vice President;
Marvin C. Schwartz, Managing Director.

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Messrs. Giuliano, Sundman, Sullivan, and Weiner are officers of each
Trust.

Neuberger Berman and NB Management are wholly owned subsidiaries of
Neuberger Berman Inc., a publicly owned holding company owned primarily by the
employees 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.

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

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.

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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.

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

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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 Century Seeks long-term growth of capital; dividend
Fund income is a secondary goal. The
corresponding portfolio invests mainly in
common stocks of large-capitalization
companies using a growth-oriented approach.
Its investment program seeks companies with
strong earnings growth, priced at attractive
levels relative to their growth rates.

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 by
International Fund investing primarily in common stocks of
foreign companies. Assets will be allocated
among economically mature countries and
emerging industrialized countries.

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<PAGE>

Neuberger Berman Seeks growth of capital, without regard to
Manhattan Fund income, through investments primarily in
securities of medium-capitalization companies
believed to have the maximum potential for
long-term capital appreciation. The
corresponding portfolio uses a
growth-oriented approach to the selection of
individual 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.

Neuberger Berman Seeks capital growth by investing primarily
Partners Fund in common stocks of medium- to large-
capitalization companies. 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 phases of the market cycle. The
corresponding portfolio uses the
value-oriented investment approach to the
selection of individual securities.

Neuberger Berman Regency Seeks growth of capital by investing mainly
Fund in common stocks of mid-capitalization
companies using a value-oriented approach.
Its investment program seeks well-managed
companies whose stock prices are undervalued.

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 share price of $1.00.

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<PAGE>

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 share 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/ The Fund maintains a maximum
dollar-weighted average duration of four
years.

Neuberger Berman In seeking its objective of high current
High Yield Bond Fund income 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.

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

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

1/ As rated by Moody's or S&P or, if unrated by either of those entities, deemed
by NB Management to be of comparable quality.

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<PAGE>

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 in "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 capital gains (both long-term and short-term) 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 gains and losses. With respect to MUNICIPAL SECURITIES,
net investment income and with respect to both Funds, net gains 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" if converted by 12:00 noon (Eastern time)
that day, or the next day if so converted after that time, 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.

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<PAGE>

the 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 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 either Fund remains in effect until the
shareholder notifies State Street in writing to discontinue the election. If the
U.S. Postal Service cannot properly deliver Fund mailings to the shareholder for
180 days, however, 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 its NAV per share on the day the check is reinvested. No
interest will accrue on amounts represented by uncashed dividend or other
distribution checks.

ADDITIONAL TAX INFORMATION

TAXATION OF THE FUNDS

To 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 the
sum of its investment company taxable income (consisting generally of taxable
net investment income and net short-term capital gain) plus its net interest
income excludable from gross income under section 103(a) of the Code
("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 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 (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. By qualifying for treatment as a RIC, a Fund (but not its shareholders)
will be relieved of federal income tax on the part of its investment company
taxable income and net capital gain (I.E., the excess of net long-term capital
gain over net short-term capital loss) that it distributes to its shareholders.
If a Fund failed to qualify for treatment as a RIC for any taxable year, it
would be taxed on the full amount of its taxable income for that year without
being able to deduct the distributions it makes to its shareholders and the
shareholders would treat all those distributions, including distributions of net
capital gain 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

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<PAGE>

interest, and make substantial distributions before requalifying for RIC
treatment.

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 state and local income
tax laws may differ from the treatment thereof under the Code.

Each of MUNICIPAL MONEY and MUNICIPAL SECURITIES has received a ruling
from the Service that the Fund, 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 Fund 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 the
Funds of distributions to them from their corresponding Portfolios, investments
by Neuberger Berman MUNICIPAL SECURITIES Portfolio in certain securities, and
hedging and certain other transactions engaged in by that Portfolio.

TAXATION OF THE PORTFOLIOS

Each of Neuberger Berman MUNICIPAL MONEY Portfolio and Neuberger Berman
MUNICIPAL SECURITIES Portfolio has received a ruling from the Service to the
effect that, among other things, it 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.

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<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 or 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. Gains from Hedging Instruments derived by that
Portfolio with respect to its business of investing in securities will qualify
as permissible income for MUNICIPAL SECURITIES under the Income Requirement.

Exchange-traded Futures Contracts and listed non-equity options thereon
such as those on a stock index) subject to section 1256 of the Code ("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
Neuberger Berman MUNICIPAL SECURITIES 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 MUNICIPAL SECURITIES must distribute to satisfy the
Distribution Requirement, which will be taxable to its shareholders as ordinary
income, and to increase Municipal Securities net capital gain (i.e., its share
of the net capital gain recognized by the Portfolio), without in either case
increasing the cash available to the Fund. The Portfolio 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 to MUNICIPAL SECURITIES' shareholders as ordinary income when
distributed to them) and/or increasing the amount of dividends that Fund must
distribute to meet the Distribution Requirement and avoid imposition of the
Excise Tax.

If Neuberger Berman MUNICIPAL SECURITIES 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 position, the Portfolio will be treated as having made an actual
sale thereof, with the result that gain will be recognized at that time. A
constructive sale generally consists of a short sale, an offsetting notional
principal contract, or a Futures Contract entered into by the Portfolio or a

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<PAGE>

related person with respect to the same or substantially identical property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially identical
property will be deemed a constructive sale. The foregoing will not apply,
however, to any transaction by the Portfolio 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 identical or related property, such as having an option to sell,
being contractually obligated to sell, making a short sale, or granting an
option to buy substantially identical stock or securities).

Each 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 them 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
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

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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 noncorporate 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.

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

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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

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, 1999, neither Portfolio
acquired securities of its "regular brokers or dealers" (as defined in the 1940
Act). At October 31, 1999, neither Portfolio held any 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 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.

-49-
<PAGE>

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 of the
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 seven
separate 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.

Prior to November 9, 1998, the name of the Trust was "Neuberger &
Berman Income Funds," and the term "Neuberger Berman" in each Fund's name was
"Neuberger & Berman".

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.

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.

-50-
<PAGE>

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.

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 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
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.

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

-51-
<PAGE>

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.

CUSTODIAN AND TRANSFER AGENT

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.

-52-
<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

Percentage of
Ownership at
Name and Address: January 31, 2000

MUNICIPAL MONEY: Neuberger Berman* 92.23%
Attn: Ron Staib, Ops. Control
55 Water Street, 27th Floor
New York, NY 10041-2799

MUNICIPAL SECURITIES: Charles Schwab & Co., Inc.* 15.18%
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122

Charles Schwab & Co., Inc.* 8.93%
Attn: Mutual Funds
Reinvest Acct
101 Montgomery Street
San Francisco, CA 94104-4122

* 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.

-53-
<PAGE>

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.

FINANCIAL STATEMENTS

The following financial statements and related documents are
incorporated herein by reference from the Funds' Annual Report to shareholders
for the fiscal year ended October 31, 1999:

The audited financial statements of the Funds and Portfolios
and notes thereto for the fiscal year ended October 31, 1999,
and the reports of Ernst & Young LLP, independent auditors,
with respect to such audited financial statements of Neuberger
Berman MUNICIPAL MONEY Fund and Portfolio and Neuberger Berman
MUNICIPAL SECURITIES Trust and Portfolio.

-54-
<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.

<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

A-2
<PAGE>

lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.

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.

<PAGE>
NEUBERGER BERMAN INCOME FUNDS
POST-EFFECTIVE AMENDMENT NO. 30 ON FORM N-1A

PART C

OTHER INFORMATION

ITEM 23. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements: None.

(b) Exhibits:

Exhibit Description
Number
(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 (Filed February
23, 1996).

(2) Restated Certificate of Trust.
Incorporated by Reference to
Post-Effective Amendment No. 26 to
Registrant's Registration statement,
File Nos. 2-85229 and 811-3802
(Filed December 29, 1998).

(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 (Filed February
23, 1996).

(4) Schedule A - Current Series of
Neuberger Berman Income Funds.
Incorporated by Reference to
Post-Effective Amendment No. 29 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802
(Filed February 15, 2000).

(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.
(Filed February 23, 1996).

(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
(Filed February 23, 1996).

(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
(Filed February 23, 1996).

(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 (Filed February
23, 1996).

<PAGE>
(ii) Schedule A - Portfolios of
Income Managers Trust
Currently Subject to the
Management Agreement. Filed
Herewith.

(iii) Schedule B - Schedule of
Compensation under the
Management Agreement. Filed
Herewith.

(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 (Filed
February 23, 1996).

(ii) Schedule A - Portfolios of
Income Managers Trust
Currently Subject to the
Sub-Advisory Agreement.
Filed Herewith.

(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 (Filed January 31,
1997).

(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 (Filed February
23, 1996).

(2) Schedule A - Series of Neuberger
Berman Income Funds Currently
Subject to the Distribution
Agreement. Incorporated by Reference
to Post-Effective Amendment No. 29
to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802 (Filed February 15, 2000).

(f) Bonus, Profit Sharing or Pension Plans. None.

<PAGE>

(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 (Filed February
23, 1996).

(2) 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 (Filed January
31, 1997).

(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 (Filed
February 23, 1996).

(ii) 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 (Filed
February 23, 1996).

(iii) 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 (Filed January 31,
1997).

(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 (Filed February
23, 1996).

(ii) Schedule A - Series of
Neuberger Berman Income
Funds Currently Subject to
the Administration
Agreement. Incorporated by
Reference to Post-Effective
Amendment No. 29 to
Registrant's Registration
Statement, File Nos.
2-85229 and 811-3802 (Filed
February 15, 2000).

<PAGE>

(iii) Schedule B - Schedule of
Compensation Under the
Administration Agreement.
Incorporated by Reference
to Post-Effective Amendment
No. 29 to Registrant's
Registration Statement,
File Nos. 2-85229 and
811-3802 (Filed February
15, 2000).

(i) (1) 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 (Filed November
20, 1997).

(2) 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 (Filed February
27, 1998).

(3) Opinion and Consent of Kirkpatrick
& Lockhart LLP on Securities Matters
with respect to Neuberger Berman
Institutional Cash Fund.
Incorporated by Reference to
Post-Effective Amendment No. 28 to
Registrant's Registration Statement
(Filed December 23, 1999).

(j) Consent of Independent Auditors. Filed
Herewith.

(k) Financial Statements Omitted from Prospectus.
None.

(l) Letter of Investment Intent. None

(m) Plan Pursuant to Rule 12b-1. None.

(n) 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.

<PAGE>

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
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.

<PAGE>

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.

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

Philip Ambrosio Senior Vice President and Chief Financial
Senior Vice President and Chief Officer, Neuberger Berman Inc.
Financial Officer, Neuberger
Berman

Thomas J. Brophy Vice President and Portfolio Manager,
Vice President, Columbus Circle Investors1
NB Management

Barbara DiGiorgio Assistant Treasurer, Neuberger Berman
Assistant Vice President, Advisers Management Trust; Assistant
NB Management Treasurer, Advisers 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.

Robert S. Franklin Vice President, High Yield Fixed Income
Vice President, Analyst, Prudential Insurance Company.2
NB Management

Theodore P. Giuliano President and Trustee, Neuberger Berman
Vice President and Director, NB Income Funds; President and Trustee,
Management; Managing Director, Neuberger Berman Income Trust; President
Neuberger Berman and Trustee, Income Managers Trust.

1 Until 1998.
2 Until 1998.

<PAGE>

NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------

Michael M. Kassen Executive Vice President, Chief Investment
Executive Vice President, Officer and Director, Neuberger Berman Inc.
Neuberger Berman

Kelly M. Landron Assistant Portfolio Manager/ Analyst,
Vice President, Neuberger Berman
NB Management

Jeffrey B. Lane President, Chief Executive Officer and
President and Chief Executive Director of Neuberger Berman, Inc.
Officer, Neuberger Berman

Michael F. Malouf Portfolio Manager, Dresdner RCM Global
Vice President, Investors.3
NB Management

Robert Matza Executive Vice President, Chief
Executive Vice President and Chief Administrative Officer and Director,
Administrative Officer, Neuberger Neuberger Berman, Inc.
Berman

S. Basu Mullick Portfolio Manager, Ark Asset Management.4
Vice President,
NB Management

C. Carl Randolph Secretary and General Counsel, Neuberger
Senior Vice President, General Berman, Inc. Assistant Secretary,
Counsel and Secretary, Neuberger Berman Advisers Management
Neuberger Berman Trust; Assistant Secretary, Advisers
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.

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.

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

3 Until 1998.
4 Until 1998.

<PAGE>

NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------

Heidi L. Schneider Executive Vice President and Director,
Executive Vice President, Neuberger Neuberger Berman, Inc.
Berman

Benjamin E. Segal Assistant Portfolio Manager, GT Global
Vice President, NB Management, Investment Management.(5)
Managing Director, 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.

Peter E. Sundman Executive Vice President and Director,
President, NB Management; Executive Neuberger Berman Inc.; President and Chief
Vice President, Neuberger Berman Executive Officer, Income Managers Trust;
President and Chief Executive Officer,
Neuberger Berman Income Funds; President
and Chief Executive Officer, Neuberger
Berman Income Trust.

Catherine Waterworth Managing Director, TCW Group Inc.6
Vice President,
NB Management

Michael J. Weiner Vice President, Neuberger Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
NB Management; Senior Vice Managers Trust; Vice President, Neuberger
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.

- ------------------------
5 Until 1998.

6 Until 1998.

<PAGE>

Allan R. White, III Portfolio Manager, Salomon Asset
Vice President, NB Management.7
Management; Managing Director,
Neuberger Berman

Celeste Wischerth, Assistant Treasurer, Neuberger Berman
NB Management Advisers Management Trust; Assistant
Treasurer, Advisers 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.

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.

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 Assets
Neuberger Berman Equity Funds
Neuberger Berman Equity Series
Neuberger Berman Equity Trust
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.

- ----------------------
7 Until 1998.

<PAGE>

NAME POSITIONS AND OFFICES POSITIONS AND OFFICES
---- WITH UNDERWRITER WITH REGISTRANT
---------------- ---------------

Thomas J. Brophy Vice President None

Richard A. Cantor Chairman of the Board None

Valerie Chang Vice President None

Brooke A. Cobb Vice President None

Robert Conti Treasurer None

Robert W. D'Alelio Vice President None

Clara Del Villar Vice President None

Barbara DiGiorgio Assistant Vice President Assistant Treasurer

Robert S. Franklin Vice President None

Robert I. Gendelman Vice President None

Theodore P. Giuliano Vice President and Director Chairman of the Board
and Trustee

Michael M. Kassen Vice President and Director None

Kelly M. Landron Vice President None

Robert L. Ladd Vice President None

Josephine Mahaney Vice President None

Michael F. Malouf Vice President None

Ellen Metzger Secretary None

S. Basu Mullick Vice President None

Janet W. Prindle Vice President None

Kevin L. Risen Vice President None

Ingrid Saukaitis Vice President None

Benjamin Segal Vice President None

Jennifer K. Silver Vice President None

Kent C. Simons Vice President None

Daniel J. Sullivan Senior Vice President Vice President

Peter E. Sundman President President and Chief
Executive Officer
Judith M. Vale Vice President None

Josephine Velez 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

C-1
<PAGE>

(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.

<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 the Post-Effective Amendment No. 30
to the Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City and State of New York on the 25th day of February, 2000.

INCOME MANAGERS TRUST

By: /s/Peter E. Sundman
--------------------------
Peter E. Sundman
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933,
Post-Effective Amendment No. 30 has been signed below by the following persons
in the capacities and on the date indicated.

Signature Title Date
- --------- ----- ----

/s/John Cannon Trustee February 25, 2000
- --------------------------
John Cannon

/s/Theodore P. Giuliano Chairman of the Board February 25, 2000
- -------------------------- and Trustee
Theodore P. Giuliano

/s/Barry Hirsch Trustee February 25, 2000
- --------------------------
Barry Hirsch

/s/Robert A. Kavesh Trustee February 25, 2000
- --------------------------
Robert A. Kavesh

(Signatures continued on next page)
<PAGE>

Signature Title Date
- --------- ----- ----

/s/ William E. Rulon Trustee February 25, 2000
- --------------------------
William E. Rulon

/s/ Candace L. Straight Trustee February 25, 2000
- --------------------------
Candace L. Straight

/s/ Richard Russell Treasurer and February 25, 2000
- -------------------------- Principal Accounting Officer
Richard Russell

/s/ Michael J. Weiner Vice President and February 25, 2000
- -------------------------- Principal Financial Officer
Michael J. Weiner

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, NEUBERGER BERMAN INCOME FUNDS certifies that it
meets all of the requirements for effectiveness of the Post-Effective Amendment
No. 30 to the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City and State of New York on the 25th day of February,
2000.

NEUBERGER BERMAN INCOME FUNDS

By: /s/Peter E. Sundman
-------------------
Peter E. Sundman
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933,
Post-Effective Amendment No. 30 has been signed below by the following persons
in the capacities and on the date indicated.

Signature Title Date
- --------- ----- ----

/s/John Cannon Trustee February 25, 2000
- ----------------------------
John Cannon

/s/Theodore P. Giuliano Chairman of the Board February 25, 2000
- ---------------------------- and Trustee
Theodore P. Giuliano

/s/Barry Hirsch Trustee February 25, 2000
- ----------------------------
Barry Hirsch

/s/Robert A. Kavesh Trustee February 25, 2000
- ----------------------------
Robert A. Kavesh

(signatures continued on next page)
<PAGE>

Signature Title Date
- --------- ----- ----

/s/ William E. Rulon Trustee February 25, 2000
- ----------------------------
William E. Rulon

/s/ Candace L. Straight Trustee February 25, 2000
- ----------------------------
Candace L. Straight

/s/ Richard Russell Treasurer and February 25, 2000
- ---------------------------- Principal Accounting Officer
Richard Russell

/s/ Michael J. Weiner Vice President and February 25, 2000
- ---------------------------- Principal Financial Officer
Michael J. Weiner

<PAGE>

NEUBERGER BERMAN INCOME FUNDS
POST-EFFECTIVE AMENDMENT NO. 30 ON FORM N-1A

INDEX TO EXHIBITS

(2) Restated Certificate of Trust.
Incorporated by Reference to
Post-Effective Amendment No. 26 to
Registrant's Registration statement,
File Nos. 2-85229 and 811-3802
(Filed December 29, 1998).

(ii) Schedule A - Portfolios of
Income Managers Trust
Currently Subject to the
Management Agreement.
Filed herewith.

<PAGE>

(iii) Schedule B - Schedule of
Compensation under the
Management Agreement.
Filed herewith.

(ii) Schedule A - Portfolios of
Income Managers Trust
Currently Subject to the
Sub-Advisory Agreement.
Filed herewith.

(f) Bonus, Profit Sharing or Pension Plans. None.

<PAGE>

(j) Consent of Independent Auditors. Filed
Herewith.

(k) Financial Statements Omitted from Prospectus.
None.

(l) Letter of Investment Intent. None

(m) Plan Pursuant to Rule 12b-1. None.

(n) Plan Pursuant to Rule 18f-3. None.

EX-99.(d)(1)(ii)

INCOME MANAGERS TRUST
MANAGEMENT AGREEMENT

SCHEDULE A

The Series of Income Managers Trust currently subject to this Agreement
are as follows:

Neuberger Berman Cash Reserves Portfolio July 2, 1993
Neuberger Berman Government Money Portfolio July 2, 1993
Neuberger Berman High Yield Bond Portfolio March 2, 1998
Neuberger Berman Institutional Money Market Portfolio March 7, 2000
Neuberger Berman Limited Maturity Bond Portfolio July 2, 1993
Neuberger Berman Municipal Money Portfolio July 2, 1993
Neuberger Berman Municipal Securities Portfolio July 2, 1993

EX-99.(d)(1)(iii)
INCOME MANAGERS TRUST
MANAGEMENT AGREEMENT

SCHEDULE B

Compensation pursuant to Paragraph 3 of the Income Managers Trust
Management Agreement shall be calculated in accordance with the following
schedules:

Neuberger Berman Cash Reserves Portfolio
Neuberger Berman Government Money Portfolio
Neuberger Berman Limited Maturity Bond Portfolio
Neuberger Berman Municipal Money Portfolio
Neuberger Berman Municipal Securities Portfolio

.25% on first $500 million of average daily net assets
.225% on next $500 million of average daily net assets
.20% on next $500 million of average daily net assets
.175% on next $500 million of average daily net assets
.15% on average daily net assets in excess of $2 billion

Neuberger Berman High Yield Bond Portfolio

0.38% of the first $500 million of average daily net assets
0.355% of the next $500 million of average daily net assets
0.33% of the next $500 million of average daily net assets
0.305% of the next $500 million of average daily net assets
0.28% of average daily net assets in excess of $2 billion.

Neuberger Berman Institutional Money Market Portfolio

0.10% of the average daily net assets

EX-99(d)(2)(ii)

NEUBERGER BERMAN MANAGEMENT INCORPORATED
SUB-ADVISORY AGREEMENT

SCHEDULE A

The Series of Income Managers Trust currently subject to this Agreement are
as follows:

Neuberger Berman Cash Reserves Portfolio July 2, 1993
Neuberger Berman Government Money Portfolio July 2, 1993
Neuberger Berman High Yield Bond Portfolio March 2, 1998
Neuberger Berman Institutional Money Market March 7, 2000
Portfolio
Neuberger Berman Limited Maturity Bond Portfolio July 2, 1993
Neuberger Berman Municipal Money Portfolio July 2, 1993
Neuberger Berman Municipal Securities Portfolio July 2, 1993

EX. 99-j

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Reports to Shareholders", "Independent
Auditors" and "Financial Statements" in the Statement of Additional
Information in Post-Effective Amendment Number 30 to the Registration
Statement (Form N-1A, No. 2-85229) of Neuberger Berman Income Funds, and to
the incorporation by reference of our reports dated December 3, 1999 on
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, and Neuberger Berman Municipal
Securities Trust, six of the series comprising Neuberger Berman Income Funds,
and on Neuberger Berman Government Money Portfolio, Neuberger Berman Cash
Reserves Portfolio, Neuberger Berman Limited Maturity Bond Portfolio,
Neuberger Berman High Yield Bond Portfolio, Neuberger Berman Municipal Money
Portfolio, and Neuberger Berman Municipal Securities Portfolio, six of the
series comprising Income Managers Trust, included in the 1999 Annual Report
to Shareholders of Neuberger Berman Income Funds.

/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP

Boston, Massachusetts
February 24, 2000