NEUBERGER BERMAN INCOME FUNDS, 485APOS, 2000-12-11

NEUBERGER BERMAN INCOME FUNDS
485APOS, 2000-12-11

Previous: CENDANT CORP, S-3, EX-23, 2000-12-08

Next: FREDS INC, 10-Q, 2000-12-11

As filed with the Securities and Exchange Commission on December 11, 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. [31][X]
and/or

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

Amendment No. [32][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)
__ ________________ pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)
X on February 10, 2001 pursuant to paragraph (a)(1)
--
__ 75 days after filing pursuant to paragraph (a)(2)
__ on ________________ pursuant to paragraph (a)(2)

<PAGE>

NEUBERGER BERMAN INCOME FUNDS

CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 31 ON FORM N-1A

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

Cover Sheet

Contents of Post-Effective Amendment No. 31 on Form N-1A

Cross Reference Sheet

Neuberger Berman Income Funds

Part A - Investor Class Prospectus
Trust Class Prospectus

Part B - Statement of Additional Information

Part C - Other Information

Signature Pages

Exhibits

<PAGE>

<PAGE>
NEUBERGER BERMAN

NEUBERGER BERMAN
INCOME FUNDS-REGISTERED TRADEMARK-
--------------------------------------------------------------------------------
INVESTOR CLASS SHARES
PROSPECTUS FEBRUARY 10, 2001

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
INVESTOR CLASS SHARES

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-2001 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 $ billion in total assets (as of
December 31, 2000) 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

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 a diversified portfolio of 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 seeks to maintain a stable
$1.00 share price, and seeks to reduce credit risk by diversifying among many
issuers of money market securities.

Under normal market conditions, the fund will invest more than 25% of total
assets in the obligations of companies in the financial services industries and
repurchase agreements on such obligations. Asset-backed securities will
constitute a significant percentage of the fund's investments as a result of
this policy.

The fund also may invest in the securities of other investment companies,
variable and floating rate instruments and repurchase agreements on
non-financial services obligations. With respect to one-third of its total
assets (including the value of any loan collateral), the fund may engage in
reverse repurchase agreements and securities lending, and may invest the
proceeds. (To reduce that risk, the fund does not intend to invest the proceeds
of any reverse repurchase agreement in instruments having a maturity longer than
the agreement.)

The managers monitor a range of economic and financial factors 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.

When the fund anticipates adverse market, economic, political or other
conditions, it may temporarily depart from its policy of concentrating in the
financial services group of industries. This could help the fund avoid losses
but may mean lost opportunities.

[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 is also subject to credit risk, which
is that issuers may fail, or become less able, to make payments when due.

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.

Because the fund normally concentrates in the financial services industries,
factors influencing the health of those industries could have a significant
negative effect on the fund's performance. These may include economic trends,
governmental action, changes in interest rates, as well as the availability and
cost of capital funds. Legislation exists that permits broad consolidation of
financial services companies, the impact of which is difficult to predict.
Competition among companies in different portions of the financial services
sector is likely to increase.

Reverse repurchase agreements and securities lending could create leverage,
which would amplify gains or losses. Investment in foreign securities may
involve trading practices different from those in the United States, and custody
of securities by foreign banks and depositories could expose the fund to some
risk.

The fund's performance also could be affected if unexpected interest rate trends
cause the fund's asset-backed securities to be paid off substantially earlier or
later than expected.

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 Investor Class shares of 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

BEST QUARTER: WORST QUARTER:

AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/00

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

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

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 10/31/00, the fees paid
to Neuberger Berman Management were 0.50% of average net assets.

[ICON] The fund does not charge you any fees for
buying, selling, or exchanging Investor Class 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 0.50
PLUS: Distribution (12b-1) fees None
Other expenses 0.10
....
EQUALS: Total annual operating expenses 0.60
</TABLE>

* THE FIGURES IN THIS TABLE ARE BASED ON LAST YEAR'S EXPENSES.

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 $61 $192 $335 $750
</TABLE>

6 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended October 31, 1996 1997 1998 1999 2000
------------------------------------------------------------------------------------------------------------
<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 0.0486 0.0499 0.0499 0.0453 0.0562
Net gains/losses -- -- -- -- --
Subtotal: income from investment
operations 0.0486 0.0499 0.0499 0.0453 0.0562
MINUS: Distributions to shareholders
Income dividends 0.0486 0.0499 0.0499 0.0453 0.0562
Subtotal: distributions to
shareholders 0.0486 0.0499 0.0499 0.0453 0.0562
................................................
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 0.63 0.63 0.61 0.60
Gross expenses(1) 0.67 -- -- -- --
Expenses(2) 0.66 0.63 0.64 0.61 0.60
Net investment income -- actual 4.86 4.98 5.00 4.55 5.61
------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested.
Total return (%) 4.97(3) 5.11 5.10 4.63 5.76
Net assets at end of year (in millions of dollars) 482.0 664.1 1,024.6 1,104.2 1,324.8
</TABLE>

The figures above are from the fund's predecessor feeder fund and 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 IN ALL SECURITIES ISSUED OR
GUARANTEED BY THE U.S. GOVERNMENT OR ITS AGENCIES. THIS
STRATEGY OFFERS COMFORT TO INVESTORS WHO ARE LOOKING FOR
CAPITAL PRESERVATION."

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

By investing only in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, 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, a part of 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 all securities issued or guaranteed as
to principal or interest by the U.S. Government, its agencies or
instrumentalities. The fund may invest in repurchase and reverse repurchase
agreements collateralized by these same securities. 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 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 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
------------------------------------------------------------

Borrowing and securities lending could create leverage, meaning that certain
gains or losses could be amplified, increasing share price movements.

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

BEST QUARTER: WORST QUARTER:

AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/00

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

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

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

* THE FIGURES IN THIS TABLE ARE BASED ON LAST YEAR'S EXPENSES.

EXPENSE EXAMPLE

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

12 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended October 31, 1996 1997 1998 1999 2000
------------------------------------------------------------------------------------------------------------
<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 1.0001 1.0000
PLUS: Income from investment operations
Net investment income 0.0464 0.0468 0.0459 0.0406 0.0509
Net gains/losses -- -- 0.0001 -- --
Subtotal: income from investment
operations 0.0464 0.0468 0.0460 0.0406 0.0509
MINUS: Distributions to shareholders
Income dividends 0.0464 0.0468 0.0459 0.0406 0.0509
Capital gain distributions -- -- -- 0.0001 --
Subtotal: distributions to
shareholders 0.0464 0.0468 0.0459 0.0407 0.0509
................................................
EQUALS: Share price (NAV) at end of year 1.0000 1.0000 1.0001 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 offset arrangements had not been in effect.
Net expenses -- actual 0.67 0.63 0.63 0.60 0.67
Expenses(1) 0.67 0.64 0.64 0.60 0.67
Net investment income -- actual 4.65 4.65 4.61 4.08 4.99
------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested.
Total return (%) 4.74 4.78 4.69 4.14 5.22
Net assets at end of year (in millions of dollars) 363.4 308.2 367.6 653.4 303.8
</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

BEST QUARTER: WORST QUARTER:

AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/00

<TABLE>
<CAPTION>
Since
Inception
1 Year (3/3/98)
----------------------------------------------------------
<S> <C> <C>
HIGH YIELD BOND FUND
Lehman Brothers High Yield Bond
Index
</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

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 inception in 1998.

ROBERT S. FRANKLIN and CATHERINE L. 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 1.40
....
EQUALS: Total annual operating expenses 2.05
</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 FIGURES IN THE TABLE
ARE BASED ON LAST YEAR'S EXPENSES.

EXPENSE EXAMPLE

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses** $208 $643 $1103 $2379
</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 2000
---------------------------------------------------------------------------------------------------------
<S> <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 10.00 9.34 8.68
PLUS: Income from investment operations
Net investment income 0.51 0.85 0.75
Net gains/losses -- realized and unrealized (0.66) (0.66) (1.48)
Subtotal: income from investment operations (0.15) 0.19 (0.73)
MINUS: Distributions to shareholders
Income dividends 0.51 0.85 0.75
Subtotal: distributions to shareholders 0.51 0.85 0.75
..................
EQUALS: Share price (NAV) at end of year 9.34 8.68 7.20
---------------------------------------------------------------------------------------------------------
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 1.00
Gross expenses(3) 1.65(2) 1.43 2.04
Expenses(4) 1.00(2) 1.01 1.01
Net investment income -- actual 8.03(2) 9.20 9.66
---------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold
securities.
Total return (%)(6) (1.69)(5) 1.86 (8.60)
Net assets at end of year (in millions of dollars) 22.6 23.8 12.1
Portfolio turnover rate (%) 16 66 74
</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 government, agency and investment-grade bond
markets. 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

BEST QUARTER: WORST QUARTER:

AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/00

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------------------------------------------------------------
<S> <C> <C> <C>
LIMITED MATURITY BOND FUND
Merrill Lynch 1-3 Year
Treasury Index
</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
------------------------------------------------------------

CATHERINE L. 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 0.24
....
EQUALS: Total annual operating expenses 0.76
</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 FIGURES IN THE TABLE
ARE BASED ON LAST YEAR'S EXPENSES.

EXPENSE EXAMPLE

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses** $78 $243 $422 $942
</TABLE>

24 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended October 31, 1996 1997 1998 1999 2000
------------------------------------------------------------------------------------------------------------
<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 10.06 9.99 10.03 9.91 9.51
PLUS: Income from investment operations
Net investment income 0.60 0.63 0.60 0.59 0.61
Net gains/losses -- realized and
unrealized (0.07) 0.04 (0.12) (0.40) (0.20)
Subtotal: income from investment
operations 0.53 0.67 0.48 0.19 0.41
MINUS: Distributions to shareholders
Income dividends 0.60 0.63 0.60 0.59 0.58
Tax return of capital -- -- -- -- 0.03
Subtotal: distributions to
shareholders 0.60 0.63 0.60 0.59 0.61
................................................
EQUALS: Share price (NAV) at end of year 9.99 10.03 9.91 9.51 9.31
------------------------------------------------------------------------------------------------------------
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 0.75 0.72 0.76
Expenses(2) 0.71 0.70 0.71 0.70 0.70
Net investment income -- actual 6.10 6.34 6.03 5.98 6.43
------------------------------------------------------------------------------------------------------------
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) 5.44 6.97 4.92 1.98 4.47
Net assets at end of year (in millions of dollars) 245.7 255.4 295.2 227.0 167.9
Portfolio turnover rate (%) 169 89 44 102 105
</TABLE>

The figures above are from the fund's predecessor fund and 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.

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

BEST QUARTER: WORST QUARTER:

AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/00

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

Municipal Money Fund 29
<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.
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.
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 10/31/00, the fees paid
to Neuberger Berman Management were 0.52% 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 0.52
PLUS: Distribution (12b-1) fees None
Other expenses 0.16
....
EQUALS: Total annual operating expenses 0.68
</TABLE>

* THE FIGURES IN THE TABLE ARE BASED ON LAST YEAR'S EXPENSES.

EXPENSE EXAMPLE

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses $69 $218 $379 $847
</TABLE>

30 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended October 31, 1996 1997 1998 1999 2000
-------------------------------------------------------------------------------------------------------------
<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 0.9994 0.9993 0.9994 0.9997 0.9998
PLUS: Income from investment operations
Net investment income 0.0285 0.0296 0.0288 0.0256 0.0336
Net gains/losses (0.0001) 0.0001 0.0003 0.0001 --
Subtotal: income from investment
operations 0.0284 0.0297 0.0291 0.0257 0.0336
MINUS: Distributions to shareholders
Income dividends 0.0285 0.0296 0.0288 0.0256 0.0336
Capital gain distributions -- -- -- -- 0.0001
Subtotal: distributions to
shareholders 0.0285 0.0296 0.0288 0.0256 0.0337
...................................................
EQUALS: Share price (NAV) at end of year 0.9993 0.9994 0.9997 0.9998 0.9997
-------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they
would have been if certain expense offset arrangements had not been in effect.
Net expenses -- actual 0.72 0.72 0.71 0.67 0.67
Expenses(1) 0.73 0.73 0.72 0.68 0.68
Net investment income -- actual 2.86 2.95 2.88 2.58 3.33
-------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested.
Total return (%) 2.89 3.00 2.92 2.59 3.41
Net assets at end of year (in millions of dollars) 132.6 156.3 221.5 293.8 255.5
</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

BEST QUARTER: WORST QUARTER:

AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/00

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL SECURITIES TRUST
Lehman Brothers 7-Year GO
Index
</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
------------------------------------------------------------

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 0.71
....
EQUALS: Total annual operating expenses 1.23
</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 FIGURES IN THE TABLE
ARE BASED ON LAST YEAR'S EXPENSES.

EXPENSE EXAMPLE

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses** $125 $390 $676 $1489
</TABLE>

36 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended October 31, 1996 1997 1998 1999 2000
------------------------------------------------------------------------------------------------------------
<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 10.83 10.78 11.02 11.34 10.78
PLUS: Income from investment operations
Net investment income 0.47 0.47 0.46 0.45 0.46
Net gains/losses -- realized and
unrealized (0.05) 0.24 0.32 (0.56) 0.22
Subtotal: income from investment
operations 0.42 0.71 0.78 (0.11) 0.68
MINUS: Distributions to shareholders
Income dividends 0.47 0.47 0.46 0.45 0.46
Subtotal: distributions to
shareholders 0.47 0.47 0.46 0.45 0.46
................................................
EQUALS: Share price (NAV) at end of year 10.78 11.02 11.34 10.78 11.00
------------------------------------------------------------------------------------------------------------
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) 1.04 1.05 1.11 1.07 1.22
Expenses(2) 0.66 0.66 0.66 0.66 0.66
Net investment income -- actual 4.32 4.30 4.13 4.03 4.22
------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%)(3) 3.92 6.71 7.22 (1.03) 6.46
Net assets at end of year (in millions of dollars) 38.9 31.6 40.1 35.0 28.7
Portfolio turnover rate (%) 3 22 24 17 37
</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
The price of Investor class shares of a fund is the total value of fund assets
attributable to Investor Class minus the liabilities attributable to that class,
divided by the total number of Investor Class 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 Investor Class shares of these funds do not have sales charges, the
price you pay for each share of a fund is the fund's net asset value per share.
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. (See "Maintaining
Your Account" for instructions on placing orders.) We cannot accept your
purchase 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 accepted.

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 any 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

Distributions taken in cash can be sent to you by check, by electronic transfer
to a designated bank account or invested in Investor Class shares of another
Neuberger Berman fund of the same account registration. 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. 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.

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

WHEN YOU BUY SHARES -- Instructions for buying shares are on pages 46 and 47.
Whenever you make an initial investment in one of the funds or add to an
existing account (except with an automatic investment), you will be sent a
statement confirming your transaction. All investments must be made in U.S.
dollars, and investment checks must be drawn on a U.S. bank.

When you purchase shares 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; clearance may take up to 15 calendar days from
the date of purchase.

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 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 "multiple class" structure. The
funds offer either one or two classes of shares that have identical investment
programs, but different arrangements for distribution and shareholder servicing
and, consequently, different expenses. This prospectus relates solely to
Investor Class shares of the funds.

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 their 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

Cannot include dividends accrued but not yet posted to your account

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, as
well as 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

Call 800-877-9700 to obtain the appropriate fax number

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

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
INVESTOR CLASS SHARES

- 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

[NEUBERGER BERMAN LOGO]

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

[RECYCLE LOGO] A0107 02/01 SEC file number: 811-3802

<PAGE>
NEUBERGER BERMAN

NEUBERGER BERMAN
LIMITED MATURITY BOND FUND-REGISTERED TRADEMARK-
--------------------------------------------------------------------------------

TRUST CLASS SHARES

PROSPECTUS FEBRUARY 10, 2001

<TABLE>
<C> <S>
NEUBERGER BERMAN INCOME FUNDS
TRUST CLASS SHARES

PAGE 2 ...... Limited Maturity Bond Fund

YOUR INVESTMENT

8 ...... Maintaining Your Account

10 ...... Share Prices

11 ...... Distributions and Taxes

13 ...... Fund Structure
</TABLE>

The "Neuberger Berman" name and logo are service
marks of Neuberger Berman, LLC. "Neuberger Berman
Management Inc." and the individual fund name in
this prospectus are either service marks or
registered trademarks of Neuberger Berman
Management Inc. -C-2001 Neuberger Berman Management
Inc.
<PAGE>
------------------------------------------------------------

FUND MANAGEMENT
The fund is managed by Neuberger Berman
Management Inc., in conjunction with Neuberger Berman, LLC, as sub-adviser.
Together, the firms manage more than $ billion in total assets (as of
December 31, 2000) 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).

THIS FUND:

- IS DESIGNED FOR INVESTORS SEEKING CURRENT INCOME

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

- IS A MUTUAL FUND, NOT A BANK DEPOSIT, AND IS NOT GUARANTEED OR INSURED BY THE
FDIC OR ANY OTHER GOVERNMENT AGENCY

1
<PAGE>
NEUBERGER BERMAN
LIMITED MATURITY BOND FUND
--------------------------------------------------------------------------------

<TABLE>
<C> <S>
Ticker Symbol: NBLTX
</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."

2
<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.

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

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

Limited Maturity Bond Fund 3
<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.

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

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.

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. 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.

[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>
1991 11.85
'92 5.18
'93 6.93
'94 -0.40
'95 10.58
'96 4.42
'97 6.65
'98 4.51
'99 1.50
'00
BEST
QUAR-
TER:
WORST
QUAR-
TER:
</TABLE>

AVERAGE ANNUAL TOTAL % RETURNS as of12/31/99*

<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------------------------------------------------------------
<S> <C> <C> <C>
LIMITED MATURITY BOND FUND
Merrill Lynch 1-3 Year
Treasury Index
</TABLE>

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

* THROUGH 2/09/01 LIMITED MATURITY BOND FUND TRUST CLASS WAS ORGANIZED AS A
FEEDER FUND IN A MASTER/FEEDER, RATHER THAN A MULTIPLE CLASS, STRUCTURE.
PERFORMANCE SHOWN FOR THE PERIODS AFTER AUGUST 1993 IS THAT OF THE PREDECESSOR
FEEDER FUND, WHICH HAD AN IDENTICAL INVESTMENT PROGRAM AND THE SAME EXPENSES
AS LIMITED MATURITY BOND FUND TRUST CLASS. PERFORMANCE FROM 1991 TO AUGUST
1993 IS THAT OF LIMITED MATURITY BOND FUND INVESTOR CLASS, WHICH BEGAN
OPERATIONS IN 1986. BECAUSE INVESTOR CLASS HAS MODERATELY LOWER EXPENSES, ITS
PERFORMANCE TYPICALLY SHOULD BE SLIGHTLY BETTER THAN TRUST CLASS WOULD HAVE
HAD.

Limited Maturity Bond Fund 5
<PAGE>
INVESTOR EXPENSES
------------------------------------------------------------

CATHERINE WATERWORTH is a Vice President of Neuberger Berman Man-
agement 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.

[ICON] The fund does not charge you any fees for
buying, selling, or exchanging Trust Class 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 0.75
PLUS: Distribution (12b-1) fees None
Other expenses 0.51
....
EQUALS: Total annual operating expenses 1.26
</TABLE>

* NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
THE TOTAL ANNUAL OPERATING EXPENSES OF THE FUND ARE LIMITED TO 0.80% 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.

EXPENSE EXAMPLE

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses** $128 $400 $692 $ 1523
</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 $82, $255, $444, AND $990, RESPECTIVELY.

6 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended October 31, 1996 1997 1998 1999 2000
---------------------------------------------------------------------------------------------------------------
<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 9.61 9.53 9.57 9.45 9.06
PLUS: Income from investment operations
Net investment income 0.57 0.60 0.57 0.56 0.57
Net gains/losses -- realized and
unrealized (0.08) 0.04 (0.12) (0.39) (0.18)
Subtotal: income from investment
operations 0.49 0.64 0.45 0.17 0.39
MINUS: Distributions to shareholders
Income dividends 0.57 0.60 0.57 0.55 0.54
Distributions (in excess of net
investment income) -- -- -- 0.01 --
Tax return of capital -- -- -- -- 0.03
Subtotal: distributions to
shareholders 0.57 0.60 0.57 0.56 0.57
..................................................
EQUALS: Share price (NAV) at end of year 9.53 9.57 9.45 9.06 8.88
---------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they would
have been if certain expense reimbursement and offset arrangements had not been in effect.
Net expenses -- actual 0.80 0.80 0.80 0.80 0.80
Gross expenses(1) 1.91 1.24 1.22 1.12 1.26
Expenses(2) 0.81 0.80 0.80 0.81 0.80
Net investment income -- actual 6.06 6.25 5.94 5.87 6.34
---------------------------------------------------------------------------------------------------------------
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) 5.29 6.88 4.79 1.86 4.50
Net assets at end of year (in millions of dollars) 21.2 37.4 60.4 41.5 26.9
Portfolio turnover rate (%) 169 89 44 102 105
</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 Trust 7
<PAGE>
YOUR INVESTMENT

MAINTAINING YOUR
ACCOUNT
------------------------------------------------------------

YOUR INVESTMENT PROVIDER
The Trust Class shares described in this prospectus are available only through
investment providers such as banks, brokerage firms, workplace retirement
programs, and financial advisers.

The fees and policies outlined in this prospectus are set by the fund and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from your investment provider. This includes
information on how to buy and sell Trust Class shares, investor services, and
additional policies.

In exchange for the services it offers, your investment provider may charge
fees, which are in addition to those described in this prospectus.

To buy or sell Trust Class shares of the fund described in this prospectus,
contact your investment provider. All investments must be made in U.S. dollars,
and investment checks must be drawn on a U.S. bank. The fund does not issue
certificates for shares.

Most investment providers allow you to take advantage of the Neuberger Berman
fund exchange program, which is designed for moving money from the Trust Class
of one Neuberger Berman fund to the Trust Class of another through an exchange
of shares. However, this privilege can be withdrawn from any investor that we
believe is trying to "time the market" or is otherwise making exchanges that we
judge to be excessive. Frequent exchanges can interfere with fund management and
affect costs and performance for other shareholders.

Under certain circumstances, the fund reserves the right to:

- suspend the offering of shares

- reject any exchange or investment order

- change, suspend, or revoke the exchange privilege

- satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders

- suspend or postpone the redemption of shares on days when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the SEC

8 Neuberger Berman
<PAGE>
------------------------------------------------------------

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

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

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

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; clearance may take up to 15 calendar days from the date of purchase

If you think you may need to sell shares soon after buying them, you can avoid
the check clearing time by investing by wire or certified check.

Your Investment 9
<PAGE>
SHARE PRICES
------------------------------------------------------------

SHARE PRICE CALCULATIONS
The price of Trust Class is the total value of the assets attributable to Trust
Class minus the liabilities attributable to that class, divided by the total
number of Trust Class shares. Because the value of the fund's securities changes
every business day, the share price usually changes as well.

When valuing portfolio securities, the fund uses bid quotations.

When the 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. The fund may also use these methods to value
certain types of illiquid securities.

Because Trust Class shares of the fund do not have a sales charge, the price you
pay for each share of the fund is the fund's net asset value per share.
Similarly, because the fund does not charge any fee for selling shares, the fund
pays you the full share price when you sell shares. Remember that your
investment provider may charge fees for its services.

The fund is 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; check with your investment
provider to find out by what time your order must be received in order to be
processed the same day. The fund calculates its share price as of the end of
regular trading on the Exchange on business days, usually 4:00 p.m. eastern
time. Depending on when your investment provider accepts orders, it's possible
that the fund's share price could change on days when you are unable to buy or
sell shares.

Also, because foreign markets may be open on days when U.S. markets are closed,
the value of foreign securities owned by the fund could change on days when you
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 accepted.

10 Neuberger Berman
<PAGE>
DISTRIBUTIONS
AND TAXES
------------------------------------------------------------

How can you figure out your tax liability on fund distributions and share
transactions? One helpful tool is the tax statement that your investment
provider sends you every January. It details the distributions you received
during the past year and shows their tax status. A separate statement covers
your share transactions.

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

DISTRIBUTIONS -- The fund pays out to shareholders any net income and net
capital gains. The fund declares income dividends daily and pays them monthly.
Ordinarily, the fund makes any distributions once a year (in December). Gains
from foreign currency transactions, if any, are normally distributed in October.

Consult your investment provider about whether your income and capital gain
distributions from the fund will be reinvested in the fund or paid to you in
cash.

Fund distributions to Roth IRAs, other individual retirement accounts and
qualified retirement plans generally are tax-free. Eventual withdrawals from a
Roth IRA of these amounts also may be tax-free, while withdrawals from other
retirement accounts and plans generally are subject to tax.

Income distributions and net short-term capital gains are generally taxed as
regular income. Distributions of other capital gains 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.

Your Investment 11
<PAGE>
DISTRIBUTIONS
AND TAXES CONTINUED
-------------------------------------------------------------------

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.

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.

UNCASHED CHECKS -- When you receive a check, you may want to deposit or cash it
right away, as you will not receive interest on uncashed checks.

12 Neuberger Berman
<PAGE>
FUND STRUCTURE
------------------------------------------------------------

The fund uses a "multiple class" structure. Limited Maturity Bond Fund offers
two classes of shares that have identical investment programs, but different
arrangements for distribution and shareholder servicing and, consequently,
different expenses. This prospectus relates solely to Trust Class shares of the
fund.

Your Investment 13
<PAGE>
OBTAINING INFORMATION
You can obtain a shareholder report, SAI, and other information from your
investment provider, or from:

NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700
212-476-8800

Broker/Dealer and
Institutional Services:
800-366-6264

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

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 LIMITED MATURITY BOND FUND
TRUST CLASS SHARES

- No load

- No sales charges

- No 12b-1 fees

If you'd like further details on this fund, 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 this fund, 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] A0108 02/01 SEC file number: 811-3802

[LOGO]

Neuberger Berman
Institutional Cash Fund

TRUST CLASS SHARES
Prospectus February 10, 2001

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 the prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.

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

NEUBERGER BERMAN INCOME FUNDS
TRUST CLASS SHARES

Page 2....Institutional Cash Fund

YOUR INVESTMENT

5....Maintaining Your Account
6....Share Prices
7....Distributions and Taxes

The Neuberger Berman name and logo are service marks of
Neuberger Berman, LLC. "Neuberger Berman Management Inc." and
the individual fund name in this prospectus are either service
marks or registered trademarks of Neuberger Berman Management
Inc. (Copyright) 2001 Neuberger Berman Management Inc.

<PAGE>

--------------------------------------------------------------------------------
THIS FUND:

o is designed for investors seeking capital preservation, liquidity and income

o offers eligible accounts the opportunity to participate in financial markets
through a professionally managed money market portfolio

o is a money market sweep fund for certain eligible retirement and other
benefit plans and other accounts

o is a mutual fund, not a bank deposit, and is not guaranteed or insured by
the FDIC or any other government agency

Fund Management

The fund is managed by Neuberger Berman Management Inc., in conjunction with
Neuberger Berman, LLC, as sub-adviser. Together, the firms manage more than
$ billion in total assets (as of December 31, 2000) 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).

<PAGE>

Neuberger Berman
Institutional Cash Fund
--------------------------------------------------------------------------------

"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."

GOAL & STRATEGY

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

To pursue this goal, the fund invests in a diversified portfolio of
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
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 fund is authorized to change its goal without shareholder approval, although
it does not currently intend to do so.

Money Market Funds

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

2 Neuberger Berman

<PAGE>

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

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 is also subject to
credit risk, which is that issuers may fail, or become less able, to make
payments when due.

Because the fund normally concentrates in the financial services industries,
factors influencing the health of those industries could have a significant
negative effect on the fund's performance. These may include economic trends,
governmental action, changes in interest rates, as well as the availability and
cost of capital funds. Legislation exists that permits broad consolidation of
financial services companies, the impact of which is difficult to predict
Competition among companies in different portions of the financial services
sector is likely to increase.

Reverse repurchase agreements and securities lending could create leverage,
which would simplify gains or losses. Investment in foreign securities may
involve trading practices different from those in the United States, and
custody of securities by foreign banks and depositories could expose the fund
to some risk.

The fund's performance also could be affected if unexpected interest rate trends
cause the fund's asset-backed securities to be paid off substantially earlier
or later than expected.

Performance -- When this prospectus was prepared, the fund had not completed a
full calendar year of operations. Accordingly, performance charts are not
included.

Other Risks

Although the fund intends to maintain a stable share price, 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.

3 Institutional Cash Fund
<PAGE>

INVESTOR EXPENSES
--------------------------------------------------------------------------------

The fund does not charge you any fees for buying, selling, or exchanging Trust
Class 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.

Management fees 0.25
Plus: Distribution (12b-1) fees None
Other expenses* 0.05
----
Equals: Total annual operating expenses 0.30

* Other expenses are based on estimated amounts for the current fiscal year.

EXPENSE EXAMPLE

1 Year 3 Years
------ -------
Expenses $ 31 $ 97

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 its inception in May 2000.

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 its inception in May 2000.

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 these services, the fund pays Neuberger
Berman Management a fee at the annual rate of 0.25% of average daily net assets.

4 Neuberger Berman

<PAGE>

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

Year Ended October 31, 2000(1)
--------------------------------------------------------------------------------

Per-share data ($)

Data apply to a single share throughout the period indicated. You
can see what the fund earned (or lost), what it distributed to
investors, and how its share price changed.

Share price (NAV) at beginning of period 1.0000
Plus: Income from investment operations 0.0307
Net investment income
Subtotal: income from investment operations 0.0307

Minus: Distributions to shareholders
Income dividends 0.0307
Subtotal: distributions to shareholders 0.0307

Equals: Share price (NAV) at end of period 1.0000

Ratios (% of average net assets)

The ratios show the portfolio'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 0.35(2)

Expense(3) 0.36(2)
Net investment income -- actual 6.45(2)

Other data

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

Total return (%) 3.11(4)
Net assets at end of year (in millions of dollars) 635.4

(1) Period from 5/8/00 (beginning of operations) to 10/31/00.
(2) Annualized.
(3) Shows what expenses would have been if there had been no expense offset
arrangements.
(4) Not annualized.

5 Institutional Cash Fund
<PAGE>

Your Investment
--------------------------------------------------------------------------------

MAINTAINING YOUR ACCOUNT

The fund offers its shares to certain eligible retirement or other benefit plans
and other accounts that have established cash sweeps at Neuberger Berman. Fund
shares may be made available to other programs in the future. To open a sweep
account, contact Neuberger Berman. All investments must be made in U.S. dollars.
Contact Neuberger Berman for more information on eligible benefit plans.

The fund is offered as a money market sweep fund for the automatic investment of
free credit cash balances in eligible benefit plans and other accounts. Neither
Neuberger Berman nor any of its affiliates may recommend a specific money market
fund for automatic investment of free credit cash balances.

The fund is designed to automatically invest free credit cash balances held in
an eligible account in fund shares. All such available cash balances of $100 or
more in an eligible account are automatically invested in the fund on a daily
basis for settlement the next business day. These amounts include proceeds of
securities sold in your plan's account.

There is no sales charge or commission paid for investment in shares. The fund
does not issue certificates for shares.

Under certain circumstances, the fund reserves the right to:

o suspend the offering of shares

o reject any investment order

o satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders

o suspend or postpone the redemption of shares on days when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the SEC

The proceeds from shares sold are generally credited to your account on the same
business day the sell order is executed, and nearly always within three business
days. Proceeds may be delayed beyond this time in unusual circumstances where
the law allows additional time if needed.

Eligible Accounts

The fund shares described in this prospectus are available to qualified
retirement and other benefit plans and other accounts managed by Neuberger
Berman.

The fees and policies outlined in this prospectus are set by the fund and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from Neuberger Berman. This includes
information on how to buy and sell shares, investor services, and additional
policies.

In exchange for the services it offers, Neuberger Berman charges fees, which are
generally in addition to those described in this prospectus.

6 Your Investment

<PAGE>

SHARE PRICES
--------------------------------------------------------------------------------

Because the fund does not have a sales charge, the price your account pays for
each share of the fund is the fund's net asset value per share. Similarly,
because the fund does not charge any fee for selling shares, the fund pays the
full share price when your account sells shares. Remember that Neuberger Berman
may charge fees for its investment management services.

The fund is open for business every day that both the New York Stock Exchange
and the Federal Reserve Wire System are open. The Exchange and the Federal
Reserve are closed on all national holidays; the Exchange is also closed on Good
Friday, and the Federal Reserve is closed on Columbus Day and Veterans Day. Fund
shares will not be priced on those days and any other day the Exchange or
Federal Reserve Wire System is closed. In general, every buy or sell order you
place will go through at the next share price to be calculated after your
account's order has been accepted.

The fund calculates its share price as of the end of regular trading on the
Exchange on business days, usually 4:00 p.m. eastern time.

Share Price Calculations

The fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. The fund anticipates that its share price
will not fluctuate.

When valuing portfolio securities, the fund uses a constant amortization method.

7 Institutional Cash Fund
<PAGE>

DISTRIBUTION AND TAXES
--------------------------------------------------------------------------------

Distributions -- The fund pays out to shareholders any net income and net
capital gains it earns. The fund declares income dividends daily and pays them
monthly. The fund does not anticipate making any long-term capital gain
distributions. Any net short-term capital gains would be paid annually in
December.

Consult Neuberger Berman about whether distributions from the fund to your
account will be reinvested in the fund or paid to your account in cash.

How distributions are taxed -- Fund dividends paid to qualified retirement plan
accounts are tax-free. Eventual withdrawals from retirement plan accounts
generally are subject to tax. Fund dividends paid to non-retirement plan
accounts are generally taxable to you, regardless of whether they are paid in
cash or reinvested in the fund.

Dividends are taxable in the year you receive them. In some cases, dividends 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 (if any) are taxed as
regular income.

How share transactions are taxed -- When a qualified retirement plan sells fund
shares, there are no tax consequences to the plan or its beneficiaries. In the
case of other accounts, when you sell fund shares, you will not realize a
taxable gain or loss as long as the fund maintains a share price of $1.00.

Taxes and You

For non-retirement plan accounts, the taxes you actually owe on distributions
and transactions can vary with many factors, such as your tax bracket.

How can you figure out your tax liability on fund distributions and
transactions? One helpful tool is the tax statement that we send you every
January. It details the distributions you received during the past year and
shows their tax status. A separate statement covers your transactions.

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

Fund Structure

The fund uses a "multiple class" structure, although it currently offers only
one class. In the future, the fund may offer additional classes with identical
investment programs, but which may have different arrangements for distribution
and shareholder servicing and, consequently, different expenses. This prospectus
relates solely to Trust Class shares.

8 Institutional Cash Fund
<PAGE>

Notes

9 Institutional Cash Fund
<PAGE>

10 Institutional Cash Fund
<PAGE>

Notes

11 Institutional Cash Fund
<PAGE>

12 Institutional Cash Fund
<PAGE>

Notes

13 Institutional Cash Fund
<PAGE>

14 Institutional Cash Fund
<PAGE>

--------------------------------------------------------------------------------
Obtaining Information

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

Neuberger Berman Management Inc.
605 Third Avenue 2nd Floor
New York, NY 10158-0180

800-877-9700

Web site:
www.nbfunds.com

Email:
[email protected]

They are also available from the EDGAR Database on the SEC's Web site 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 Institutional Cash Fund
Trust Class Shares

o No load

o No sales charges

o No 12b-1 fees

If you'd like further details about this fund, 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:

o a discussion by the portfolio managers about strategies and market
conditions

o fund performance data and financial statements

o complete portfolio holdings

Statement of Additional Information -- The SAI contains more comprehensive
information about this fund, including:

o various types of securities and practices, and their risks

o investment limitations and additional policies

o information about the fund's management and business structure

The SAI is hereby incorporated by reference into this prospectus, making it
legally part of the prospectus.

Investment manager:
Neuberger Berman Management Inc.

Sub-adviser:
Neuberger Berman, LLC

[LOGO]

Neuberger Berman Management Inc.
605 Third Avenue 2nd Floor
New York, NY 10158-0180

* A0630 02/01
SEC file number 811-3802

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

NEUBERGER BERMAN INCOME FUNDS

STATEMENT OF ADDITIONAL INFORMATION

Investor Class Shares and Trust Class Shares

DATED FEBRUARY 10, 2001

Neuberger Berman CASH RESERVES
Neuberger Berman GOVERNMENT MONEY Fund
Neuberger Berman HIGH YIELD Bond Fund
Neuberger Berman INSTITUTIONAL CASH Fund
Neuberger Berman LIMITED MATURITY Bond Fund
Neuberger Berman MUNICIPAL MONEY Fund
Neuberger Berman MUNICIPAL SECURITIES Trust

605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700

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

Neuberger Berman CASH RESERVES, Neuberger Berman GOVERNMENT MONEY Fund,
Neuberger Berman HIGH YIELD Bond Fund, Neuberger Berman INSTITUTIONAL CASH Fund,
Neuberger Berman LIMITED MATURITY Bond Fund, Neuberger Berman MUNICIPAL MONEY
Fund, and Neuberger Berman MUNICIPAL SECURITIES Trust (each a "Fund") are mutual
funds that offer shares pursuant to a Prospectus dated February 10, 2001.

The Prospectus for your share class provides more information about the
Funds that an investor should know before investing. You can get a free copy of
the Prospectus from Neuberger Berman Management Inc. ("NB Management"), 605
Third Avenue, 2nd Floor, New York, NY 10158-0180 or by calling 800-877-9700. You
should read the prospectus carefully before investing.

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

No person has been authorized to give any information or to make any
representations not contained in the 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>

The "Neuberger Berman" name and logo are service marks of Neuberger
Berman LLC. "Neuberger Berman Management Inc." and the fund names in this SAI
are either service marks or registered trademarks of Neuberger Berman Management
Inc.(C)2001 Neuberger Berman Management Inc.

<PAGE>

TABLE OF CONTENTS

INVESTMENT INFORMATION........................................................1
Investment Policies and Limitations.......................................1
Temporary Defensive Position..............................................7
Investment Insight........................................................8
Money Market Funds........................................................8
Additional Investment Information........................................12
Yield and Price Characteristics of Municipal Obligations.................17
Risks of Fixed Income Securities.........................................44
Risks of Equity Securities...............................................47

CERTAIN RISK CONSIDERATIONS..................................................47

PERFORMANCE INFORMATION......................................................47
Yield Calculations.......................................................48
Tax Equivalent Yield.....................................................48
Total Return Computations................................................50
Comparative Information..................................................51
Other Performance Information............................................52

TRUSTEES AND OFFICERS........................................................53

INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES............................62
Investment Manager and Administrator.....................................62
Management and Administration Fees.......................................63
Waivers and Reimbursements...............................................64
Sub-Adviser..............................................................66
Investment Companies Managed.............................................66
Codes of Ethics..........................................................68
Management and Control of NB Management and Neuberger Berman.............68

DISTRIBUTION ARRANGEMENTS....................................................69

ADDITIONAL PURCHASE INFORMATION..............................................70
Share Prices and Net Asset Value.........................................70
Automatic Investing and Dollar Cost Averaging............................71

ADDITIONAL EXCHANGE INFORMATION..............................................71

ADDITIONAL REDEMPTION INFORMATION............................................75

i
<PAGE>

Suspension of Redemptions................................................75
Redemptions in Kind......................................................75

DIVIDENDS AND OTHER DISTRIBUTIONS............................................75

ADDITIONAL TAX INFORMATION...................................................76
Taxation of the Funds....................................................76

VALUATION OF PORTFOLIO SECURITIES............................................79

PORTFOLIO TRANSACTIONS.......................................................80
Portfolio Turnover.......................................................81

REPORTS TO SHAREHOLDERS......................................................81

ORGANIZATION, CAPITALIZATION AND OTHER MATTERS...............................82

CUSTODIAN AND TRANSFER AGENT.................................................83

INDEPENDENT AUDITORS.........................................................83

REGISTRATION STATEMENT.......................................................83

FINANCIAL STATEMENTS.........................................................84

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

ii
<PAGE>

INVESTMENT INFORMATION

Each Fund is a separate operating 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.

Prior to February 10, 2001 the Funds' Investor Class and Trust Class
shares were organized as feeder funds in a master-feeder structure rather than a
single level multiple class structure. As feeder funds their names were
Neuberger Berman Income Funds and Neuberger Berman Income Trust, respectively.

The following information supplements the discussion in the Prospectus
of the investment objective, policies, and limitations of each Fund. The
investment objective and, unless otherwise specified, the investment policies
and limitations of each Fund are not fundamental. Any investment objective,
policy or limitation that is not fundamental may be changed by the trustees of
the Trust ("Fund Trustees") without shareholder approval. The fundamental
investment policies and limitations of a Fund may not be changed without the
approval of the lesser of:

(1) 67% of the total units of beneficial interest ("shares") of the
Fund represented at a meeting at which more than 50% of the outstanding Fund
shares are represented or

(2) a majority of the outstanding shares of the Fund.

These percentages are required by the Investment Company Act of 1940
("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, 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
-----------------------------------

For purposes of the investment limitation on concentration in a
particular industry, Neuberger Berman LIMITED MATURITY Bond Fund 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 Fund'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 Fund's quality restrictions without
credit support, the Fund 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, Neuberger Berman INSTITUTIONAL CASH
Fund and Neuberger Berman MUNICIPAL MONEY Fund determine 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

<PAGE>

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 Fund may pledge assets in connection with permitted borrowings. For
purposes of its limitation on commodities, Neuberger Berman LIMITED MATURITY
Bond Fund 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 exceeded unless the
percentage limitation is exceeded immediately after, and because of, a
transaction by a Fund. If events subsequent to a transaction result in a Fund
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 Fund are as follows:

1. BORROWING. The Fund may not borrow money, except that the Fund may
(i) borrow money from banks for temporary or emergency purposes and not for
leveraging or investment, and (ii) enter into reverse repurchase agreements for
any purpose; provided that (i) and (ii) in combination do not exceed 33-1/3% of
the value of its total assets (including the amount borrowed) less liabilities
(other than borrowings). In addition to the foregoing, the Fund may borrow from
any person for temporary purposes in an amount not exceeding 5% of the Fund's
total assets at the time the loan is made.

2. COMMODITIES AND REAL ESTATE. The Fund 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 Fund 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, provided, however that in accordance with its
investment objective, policies, and limitations, the Fund can (i) purchase debt
securities and (ii) engage in repurchase agreements.

4. INDUSTRY CONCENTRATION. The Fund may not purchase any security if,
as a result, 25% or more of its total assets (taken at current value) would be
invested in the securities of issuers having their principal business activities
in the same industry. 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 Fund may not issue senior securities, except
as permitted under the 1940 Act.

2
<PAGE>

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

7. SHORT SALES AND PUTS, CALLS, STRADDLES, OR SPREADS. The Fund 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 Fund are as follows:

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

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

The fundamental investment policies and limitations of Neuberger Berman
CASH RESERVES, Neuberger Berman INSTITUTIONAL CASH Fund, Neuberger Berman
LIMITED MATURITY Bond Fund, Neuberger Berman MUNICIPAL MONEY Fund and Neuberger
Berman MUNICIPAL SECURITIES Trust unless otherwise indicated are as follows:

1. BORROWING. No Fund may borrow money, except that a Fund may (i)
borrow money from banks for temporary or emergency purposes and not for
leveraging or investment, and (ii) enter into reverse repurchase agreements;
provided that (i) and (ii) in combination do not exceed 33-1/3% of the value of
its total assets (including the amount borrowed) less liabilities (other than
borrowings). If at any time borrowings exceed 33-1/3% of the value of a Fund's
total assets, that Fund will reduce its borrowings within three days (excluding
Sundays and holidays) to the extent necessary to comply with the 33-1/3%
limitation.

2. COMMODITIES. Neuberger Berman LIMITED MATURITY Bond Fund and
Neuberger Berman MUNICIPAL SECURITIES Trust 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 Fund
from purchasing futures contracts or options (including options on futures
contracts, but excluding options or futures contracts on physical commodities)
or from investing in securities of any kind. Neuberger Berman CASH RESERVES,
Neuberger Berman INSTITUTIONAL CASH Fund and Neuberger Berman MUNICIPAL MONEY
Fund may not purchase commodities or contracts thereon, but this restriction
shall not prohibit the Fund from purchasing the securities of issuers that own
interests in any of the foregoing.

3. DIVERSIFICATION. No Fund may, with respect to 75% of the value of
its total assets, purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities, ("U.S. Government and Agency Securities") or securities
issued by other investment companies) if, as a result, (i) more than 5% of the
value of the Fund's total assets would be invested in the securities of that
issuer or (ii) the Fund would hold more than 10% of the outstanding voting

3
<PAGE>

securities of that issuer. (Although not a fundamental limitation, Neuberger
Berman CASH RESERVES, Neuberger Berman INSTITUTIONAL CASH Fund and Neuberger
Berman MUNICIPAL MONEY Fund are subject to the diversification requirements
under Rule 2a-7 of the 1940 Act.)

4. INDUSTRY CONCENTRATION (NEUBERGER BERMAN LIMITED MATURITY, MUNICIPAL
MONEY FUNDS AND MUNICIPAL SECURITIES TRUST). No Fund 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) investments by, Neuberger Berman
MUNICIPAL MONEY Fund or Neuberger Berman MUNICIPAL SECURITIES TRUST in
certificates of deposit ("CDs") or banker's acceptances issued by domestic
branches of U.S. banks, (iii) investments by Neuberger Berman MUNICIPAL MONEY
Fund and Neuberger Berman MUNICIPAL SECURITIES Fund in municipal securities.

INDUSTRY CONCENTRATION (NEUBERGER BERMAN CASH RESERVES AND
INSTITUTIONAL CASH FUND). Neither Fund may purchase any security if, as a
result, 25% or more of its total assets (taken at current value) would be
invested in the securities of issuers having their principal business activities
in the same industry, except that each Fund normally will invest more than 25%
of its total assets in the obligations of issuers having their principal
business activities in the financial services industries or repurchase
agreements on such obligations. This limitation does not apply to purchases of
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.

5. LENDING. No Fund may lend any security or make any other loan if, as
a result, more than 33-1/3% of its total assets (taken at current value) would
be lent to other parties, except, in accordance with its investment objective,
policies, and limitations, (i) through the purchase of a portion of an issue of
debt securities or (ii) by engaging in repurchase agreements.

6. REAL ESTATE. No Fund may purchase real estate unless acquired as a
result of the ownership of securities or instruments, but this restriction shall
not prohibit a Fund from purchasing securities issued by entities or investment
vehicles that own or deal in real estate or interests therein, or instruments
secured by real estate or interests therein.

7. SENIOR SECURITIES. No Fund may issue senior securities, except as
permitted under the 1940 Act.

8. UNDERWRITING. No Fund may underwrite securities of other issuers,
except to the extent that a Fund, in disposing of portfolio securities, may be
deemed to be an underwriter within the meaning of the 1933 Act.

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

1. BORROWING. The Fund 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

4
<PAGE>

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 Fund
total assets, the Fund will reduce its borrowings within three days (excluding
Sundays and holidays) to the extent necessary to comply with the 33-1/3%
limitation.

2. COMMODITIES. The Fund may not purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit the Fund 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 Fund 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, or securities issued by other investment
companies) if, as a result, (i) more than 5% of the value of the Fund's total
assets would be invested in the securities of that issuer or (ii) the Fund would
hold more than 10% of the outstanding voting securities of that issuer.

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

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

8. UNDERWRITING. The Fund may not underwrite securities of other
issuers, except to the extent that the Fund, 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, Neuberger Berman HIGH YIELD
Bond Fund, Neuberger Berman INSTITUTIONAL CASH Fund, and Neuberger Berman
LIMITED MATURITY Bond Fund unless otherwise indicated:

5
<PAGE>

1. INVESTMENTS IN ANY ONE ISSUER. Neuberger Berman CASH RESERVES and
Neuberger Berman INSTITUTIONAL CASH Fund 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 Fund's total assets
would be invested in the securities of that issuer.

2. ILLIQUID SECURITIES. No Fund may purchase any security if, as a
result, more than 15% of its net assets (10% in the case of Neuberger Berman
CASH RESERVES and Neuberger Berman INSTITUTIONAL CASH Fund) would be invested in
illiquid securities. Illiquid securities include securities that cannot be sold
within seven days in the ordinary course of business for approximately the
amount at which the Fund has valued the securities, such as repurchase
agreements maturing in more than seven days.

3. BORROWING (NEUBERGER BERMAN HIGH YIELD BOND FUND AND NEUBERGER
BERMAN LIMITED MATURITY BOND FUND). Neither Fund may purchase securities if
outstanding borrowings, including any reverse repurchase agreements, exceed 5%
of its total assets.

BORROWING. (NEUBERGER BERMAN CASH RESERVES AND NEUBERGER BERMAN
INSTITUTIONAL CASH) These Funds may borrow from any person for temporary
purposes in an amount not exceeding 5% of the Fund's total assets at the time
the loan is made. These Funds will not invest more than 20% of total assets in
reverse repurchase agreements. Investments in reverse repurchase agreements and
securities lending transactions will be aggregated for purposes of the 20%
limit.

4. LENDING (NEUBERGER BERMAN CASH RESERVES, NEUBERGER BERMAN
INSTITUTIONAL CASH FUND AND NEUBERGER BERMAN LIMITED MATURITY BOND FUND). Except
for the purchase of debt securities and engaging in repurchase agreements, no
Fund may make any loans other than securities loans.

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

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

The non-fundamental investment policies and limitations of Neuberger
Berman MUNICIPAL MONEY Fund and Neuberger Berman MUNICIPAL SECURITIES Trust are
as follows:

1. GEOGRAPHIC CONCENTRATION. Neither Fund 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

6
<PAGE>

not apply to project notes backed by the full faith and credit of the United
States).

2. ILLIQUID SECURITIES. Neither Fund may purchase any security if, as a
result, more than 15% (10% in the case of Neuberger Berman MUNICIPAL MONEY Fund)
of its net assets would be invested in illiquid securities. Illiquid securities
include securities that cannot be sold within seven days in the ordinary course
of business for approximately the amount at which the Fund has valued the
securities, such as repurchase agreements maturing in more than seven days.

3. BORROWING. Neither Fund may purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.

4. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, neither Fund may make any loans other than securities
loans.

5. MARGIN TRANSACTIONS. Neither Fund may purchase securities on margin
from brokers or other lenders, except that a Fund may obtain such short-term
credits as are necessary for the clearance of securities transactions. For
Neuberger Berman MUNICIPAL SECURITIES Trust, 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.

Each Fund has the following fundamental investment policy:

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

TEMPORARY DEFENSIVE POSITION
----------------------------

For temporary defensive purposes, each Fund 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
Fund), other money market funds (except for Neuberger Berman GOVERNMENT MONEY
Fund and Neuberger Berman CASH RESERVES) and certain other money market
instruments, as well as (except for Neuberger Berman GOVERNMENT MONEY Fund)
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 Fund and Neuberger Berman HIGH
YIELD Bond Fund normally invest. These investments may produce taxable income
and after-tax yields for Neuberger Berman MUNICIPAL MONEY Fund and Neuberger
Berman MUNICIPAL SECURITIES Trust that are lower than the tax-equivalent yields
available on municipal securities at the time.

7
<PAGE>

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 Fund. Duration measures a bond's exposure to interest
rate risk. Duration incorporates a bond's yield, coupon interest payments, final
maturity and call features into one measure. In general, the longer you extend a
bond's duration, the greater its potential return and exposure to interest rate
fluctuations.

For example, CASH RESERVES, GOVERNMENT MONEY and INSTITUTIONAL CASH 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.

NEUBERGER BERMAN INSTITUTIONAL CASH
INSTITUTIONAL CASH seeks to provide investors a high degree of
liquidity while investing in Government and corporate money market instruments.
The Fund seeks to provide investors with the highest available current income

8
<PAGE>

consistent with safety and liquidity. In pursuit of its objective, the Fund
invests in high quality U.S. dollar-denominated money-market instruments. The
portfolio co-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.

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 Fund 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

9
<PAGE>

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 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 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.

MUNICIPAL FUNDS
---------------

10
<PAGE>

NB Management offers two municipal funds - MUNICIPAL MONEY and
MUNICIPAL SECURITIES. 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 Funds. 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 Funds 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.

Neuberger Berman MUNICIPAL SECURITIES Trust 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 Trust is actively managed and may not exceed ten years. Futures,
options and options on futures have durations which are generally related to the

11
<PAGE>

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.

MUNICIPAL SECURITIES INVESTORS CAN EXPECT:

o Tax-exempt current income
o A conservative investment philosophy
o Diversification across issuers and geographic locations

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.

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

Some or all of the Funds, as indicated below, may make the following
investments, among others, some of which are part of the Funds' principal
investment strategies and some of which are not. The principal strategies of

12
<PAGE>

each Fund 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.

DESCRIPTION OF MUNICIPAL OBLIGATIONS (ALL FUNDS EXCEPT NEUBERGER BERMAN
-----------------------------------------------------------------------
GOVERNMENT MONEY FUND)
----------------------

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.

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 Fund'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.

Unlike other types of investments, municipal obligations have
traditionally not been subject to the registration requirements of the federal
securities laws, although there have been proposals to provide for such
registration in the future. This lack of SEC regulation has adversely affected
the quantity and quality of information available to the bond markets about
issuers and their financial condition. The SEC has responded to the need for
such information with Rule 15c2-12 of the Securities Exchange Act of 1934, as
amended (the "Rule"). The Rule requires that underwriters must reasonably
determine that an issuer of municipal securities undertakes in a written
agreement for the benefit of the holders of such securities to file with a

13
<PAGE>

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 Fund. 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 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 Fund were
taxable, that income could be deemed taxable retroactive to the time of the
Fund's purchase of the relevant security.

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
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.

14
<PAGE>

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
TRUST). 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 Fund will usually invest in municipal lease obligations through
certificates of participation ("COPs"), which give the Fund 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 Fund.

MUNICIPAL NOTES. Municipal notes include the following:

15
<PAGE>

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.

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 Funds 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 TRUST).
The Fund 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

16
<PAGE>

rates and may decrease significantly when market rates increase.

TENDER OPTION BONDS (NEUBERGER BERMAN MUNICIPAL SECURITIES TRUST).
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 Fund 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 Fund will not invest in them unless NB Management has
assurances that the interest thereon will be exempt from federal income tax.

YIELD AND PRICE CHARACTERISTICS OF MUNICIPAL OBLIGATIONS
--------------------------------------------------------

Municipal obligations generally have the same yield and price
characteristics as other debt securities. Yields depend on a variety of factors,
including general conditions in the money and bond markets and, in the case of
any particular securities issue, its amount, maturity, duration, and rating.
Market prices of fixed income securities usually vary upward or downward in
inverse relationship to market interest rates.

Municipal obligations with longer maturities or durations tend to
produce higher yields. They are generally subject to potentially greater price
fluctuations, and thus greater appreciation or depreciation in value, than
obligations with shorter maturities or durations and lower yields. An increase
in interest rates generally will reduce the value of a Fund's investments,
whereas a decline in interest rates generally will increase that value. The
ability of each Fund to achieve its investment objective also is dependent on
the continuing ability of the issuers of the municipal obligations in which the
Funds 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.

POLICIES AND LIMITATIONS. Neuberger Berman MUNICIPAL MONEY Fund
normally invests at least 65% of its total assets in municipal securities. As a
fundamental policy, Neuberger Berman MUNICIPAL SECURITIES Trust invests at least
80% of its total assets in municipal obligations. Except as otherwise provided
in the Prospectus and this SAI, the Funds' 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 Fund invests in various
types of municipal obligations will vary from time to time. (Unless otherwise
indicated, both Funds may invest in the obligations described below.) Neuberger
Berman LIMITED MATURITY Bond Fund may invest up to 5% of its net assets in
municipal obligations. Neuberger Berman CASH RESERVES and INSTITUTIONAL CASH

17
<PAGE>

Funds may invest in municipal obligations that otherwise meet its criteria for
quality and maturity. Neuberger Berman HIGH YIELD Bond Fund may invest in
municipal obligations but has no current intention of doing so.

U.S. GOVERNMENT AND AGENCY SECURITIES (ALL FUNDS). 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.

POLICIES AND LIMITATIONS. Neuberger Berman CASH RESERVES and
INSTITUTIONAL CASH Funds may invest 25% or more of their total assets in U.S.
Government and Agency Securities. Under normal circumstances, Neuberger Berman
HIGH YIELD Bond Fund 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 FUNDS). The Funds 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 Fund
holds the security, the Fund 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.

18
<PAGE>

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 Fund 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 FUNDS EXCEPT NEUBERGER BERMAN GOVERNMENT MONEY
FUND). 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 Fund to value or dispose of due to the absence of an active trading
market. The sale of some illiquid securities by the Funds may be subject to
legal restrictions which could be costly to the Funds.

POLICIES AND LIMITATIONS. Neuberger Berman HIGH YIELD Bond Fund,
Neuberger Berman LIMITED MATURITY Bond Fund and Neuberger Berman MUNICIPAL
SECURITIES Trust may each invest up to 15% of its net assets in illiquid
securities (10% in the case of Neuberger Berman CASH RESERVES, INSTITUTIONAL
CASH, and MUNICIPAL MONEY Funds).

REPURCHASE AGREEMENTS. In a repurchase agreement, a Fund 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 Fund 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 Fund 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, GOVERNMENT
MONEY, INSTITUTIONAL CASH, and MUNICIPAL MONEY Fund) of the value of its net
assets would then be invested in such repurchase agreements and other illiquid
securities. A Fund may enter into a repurchase agreement only if (1) the
underlying securities are of the type (excluding maturity and duration
limitations) that the Fund's investment policies and limitations would allow it
to purchase directly, except that Neuberger Berman MUNICIPAL MONEY Fund 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

19
<PAGE>

evidence that the securities are being held for the Fund's account by its
custodian or a bank acting as the Fund's agent.

SECURITIES LOANS. Each Fund may lend portfolio securities to banks,
brokerage firms, and other institutional investors judged creditworthy by NB
Management, provided that cash or equivalent collateral, equal to at least 100%
of the market value of the loaned securities, is continuously maintained by the
borrower with the Fund. The Fund may invest the cash collateral and earn income,
or it may receive an agreed upon amount of interest income from a borrower who
has delivered equivalent collateral. During the time securities are on loan, the
borrower will pay the Fund an amount equivalent to any dividends or interest
paid on such securities. These loans are subject to termination at the option of
the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment. NB Management believes the risk of
loss on these transactions is slight because, if a borrower were to default for
any reason, the collateral should satisfy the obligation. However, as with other
extensions of secured credit, loans of portfolio securities involve some risk of
loss of rights in the collateral should the borrower fail financially.

POLICIES AND LIMITATIONS. In order to realize income, each Fund may
lend portfolio securities with a value not exceeding 33-1/3% of its total assets
to banks, brokerage firms, or other institutional investors judged creditworthy
by NB Management. Borrowers are required continuously to secure their
obligations to return securities on loan from a Fund by depositing collateral in
a form determined to be satisfactory by the Fund Trustees. The collateral, which
must be marked to market daily, must be equal to at least 100% of the market
value of the loaned securities, which will also be marked to market daily. For
Neuberger Berman CASH RESERVES and Neuberger Berman INSTITUTIONAL CASH Fund,
investments in reverse repurchase agreements and securities lending transactions
will be aggregated for purposes of the 33-1/3% limitation. However, as an
operating policy, each of CASH RESERVES and INSTITUTIONAL CASH will not invest
more than 20% of its total assets in securities lending transactions.
Investments in reverse repurchase agreements and securities lending transactions
will be aggregated for purposes of the 20% limit. Borrowers are required
continuously to secure their obligations to return securities on loan from the
Fund by depositing collateral in a form determined to be satisfactory by the
Fund Trustees.

RESTRICTED SECURITIES AND RULE 144A SECURITIES (ALL FUNDS EXCEPT
NEUBERGER BERMAN GOVERNMENT MONEY FUND). The Funds may invest in restricted
securities, which are securities that may not be sold to the public without an
effective registration statement under the 1933 Act. Before they are registered,
such securities may be sold only in a privately negotiated transaction or
pursuant to an exemption from registration. In recognition of the increased size
and liquidity of the institutional market for unregistered securities and the
importance of institutional investors in the formation of capital, the SEC has
adopted Rule 144A under the 1933 Act. Rule 144A is designed to facilitate
efficient trading among institutional investors by permitting the sale of
certain unregistered securities to qualified institutional buyers. To the extent
privately placed securities held by a Fund qualify under Rule 144A and an
institutional market develops for those securities, the Fund likely will be able

20
<PAGE>

to dispose of the securities without registering them under the 1933 Act. To the
extent that institutional buyers become, for a time, uninterested in purchasing
these securities, investing in Rule 144A securities could increase the level of
a Fund's illiquidity. NB Management, acting under guidelines established by the
Fund Trustees, may determine that certain securities qualified for trading under
Rule 144A are liquid. Regulation S under the 1933 Act permits the sale abroad of
securities that are not registered for sale in the United States.

Where registration is required, a Fund may be obligated to pay all or
part of the registration expenses, and a considerable period may elapse between
the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell. Restricted securities for which no
market exists are priced by a method that the Fund Trustees believe accurately
reflects fair value.

POLICIES AND LIMITATIONS. To the extent restricted securities,
including Rule 144A securities, are illiquid, purchases thereof will be subject
to each Fund's 15% (10% in the case of the Neuberger Berman CASH RESERVES,
INSTITUTIONAL CASH and MUNICIPAL MONEY Funds) limit on investments in illiquid
securities.

COMMERCIAL PAPER (ALL FUNDS EXCEPT NEUBERGER BERMAN GOVERNMENT MONEY
FUND). 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 Fund 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 Fund Trustees.

POLICIES AND LIMITATIONS. To the extent restricted commercial paper is
deemed illiquid, purchases thereof will be subject to each Fund's 15% (10% in
the case of Neuberger Berman CASH RESERVES, INSTITUTIONAL CASH and MUNICIPAL
MONEY Fund) limit on investments in illiquid securities. Neuberger Berman
MUNICIPAL MONEY Fund and Neuberger Berman MUNICIPAL SECURITIES Trust 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.

REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
Fund sells portfolio securities subject to its agreement to repurchase the
securities at a later date for a fixed price reflecting a market rate of
interest. Reverse repurchase agreements may increase fluctuations in a 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 Fund. NB Management monitors the creditworthiness of counterparties to
reverse repurchase agreements.

For Neuberger Berman CASH RESERVES and Neuberger Berman INSTITUTIONAL
CASH Fund, their investment of the proceeds of a reverse repurchase agreement
involves the speculative factor known as leverage. The Funds generally will
enter into a reverse repurchase agreement only if the adviser anticipates that

21
<PAGE>

the interest income from investment of the proceeds will be greater than the
interest expense of the transaction and the proceeds are invested for a period
no longer than the term of the agreement. In certain circumstances the proceeds
from the reverse repurchase agreement may be invested for a longer period of
time than the term of the agreement, such as where the Funds receive a
large-scale redemption near the close of regular trading on the NYSE.

POLICIES AND LIMITATIONS. Reverse repurchase agreements are considered
borrowings for purposes of each Fund's investment policies and limitations
concerning borrowings. While a reverse repurchase agreement is outstanding, a
Fund will deposit in a segregated account with its custodian cash or appropriate
liquid securities, marked to market daily, in an amount at least equal to each
Fund's obligations under the agreement. Neuberger Berman CASH RESERVES and
Neuberger Berman INSTITUTIONAL CASH Fund may invest up to one-third of their
total assets in reverse repurchase agreements. Investments in reverse repurchase
agreements and securities lending transactions will be aggregated for purposes
of this investment limitation. However, as an operating policy, neither Fund
will invest more than 20% of its total assets in reverse repurchase agreements.
Investments in reverse repurchase agreements and securities lending transactions
will be aggregated for purposes of the 20% limit. While a reverse repurchase
agreement is outstanding, the Fund will deposit in a segregated account with its
custodian cash or appropriate liquid securities, marked to market daily, in an
amount at least equal to the Fund's obligations under the agreement.

BANKING AND SAVINGS INSTITUTION SECURITIES (ALL FUNDS EXCEPT NEUBERGER
BERMAN GOVERNMENT MONEY FUND). 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 Funds invest typically are not covered by deposit
insurance.

FINANCIAL SERVICES OBLIGATIONS (NEUBERGER BERMAN CASH RESERVES AND
NEUBERGER BERMAN INSTITUTIONAL CASH FUND). Obligations of issuers in the
financial services industries include, but are not limited to, CDs, time
deposits, bankers' acceptances, and other short-term and long-term debt
obligations issued by domestic and foreign banks, savings institutions, consumer
and industrial finance companies, issuers of asset-backed securities, securities
brokerage companies and a variety of firms in the insurance field. Because the
Fund normally will concentrate more than 25% of its total assets in the
obligations of companies in the financial services industries, it will have
greater exposure to the risks associated with those industries, such as adverse
interest rate trends, increased credit defaults, potentially burdensome
government regulation, the availability and cost of capital funds, and general
economic conditions.

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.

22
<PAGE>

The CDs, time deposits, and bankers' acceptances in which the Fund invests
typically are not covered by deposit insurance.

POLICIES AND LIMITATIONS. The Fund normally will invest more than 25%
of its total assets in the obligations of companies in the financial services
industries.

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, 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 Fund's
quality standards. Accordingly, in purchasing these securities, each Fund relies
primarily on the creditworthiness of the credit instrument issuer or the
insurer. A Fund can also buy fixed rate securities accompanied by a demand
feature or by a put option, which permits the Fund to sell the security to the
issuer or third party at a specified price. A Fund may rely on the
creditworthiness of issuers of the credit enhancements in purchasing these
securities.

The Adjustable Rate Securities in which Neuberger Berman MUNICIPAL
MONEY Fund and Neuberger Berman MUNICIPAL SECURITIES Trust, invest are municipal
obligations. Among the Adjustable Rate Securities in which Neuberger Berman CASH
RESERVES 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 Fund to recover its assets may depend on
the treatment of GICs under state insurance laws.

POLICIES AND LIMITATIONS. Except for Neuberger Berman CASH RESERVES,
Neuberger Berman INSTITUTIONAL CASH Fund and Neuberger Berman MUNICIPAL MONEY
Fund, no Fund 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 Fund excludes securities that do not rely
on the credit instrument or insurance for their ratings, i.e., stand on their
own credit. The Neuberger Berman CASH RESERVES, INSTITUTIONAL CASH and MUNICIPAL
MONEY Funds 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
Fund 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 Fund is permitted to treat certain
Adjustable Rate Securities as maturing on a date prior to the date on which the

23
<PAGE>

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, the Neuberger Berman
CASH RESERVES and INSTITUTIONAL CASH Funds may not invest in such GICs if, as a
result, more than 10% of the value of their net assets would then be invested in
such GICs and other illiquid securities.

PURCHASES WITH A STANDBY COMMITMENT TO REPURCHASE (NEUBERGER BERMAN
MUNICIPAL MONEY FUND AND NEUBERGER BERMAN MUNICIPAL SECURITIES TRUST). When a
Fund 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 Fund that terminates if
the Fund sells the obligations to a third party.

The Funds may enter into standby commitments only with banks and (if
permitted under the 1940 Act) securities dealers determined to be creditworthy.
A Fund'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 Fund may be unable to recover all or even part of
any loss it may sustain from having to sell the obligations elsewhere.

Although neither Fund currently intends to invest in standby
commitments, each reserves the right to do so. By enabling a Fund to dispose of
municipal obligations at a predetermined price prior to maturity, this
investment technique allows the Fund 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 Fund
is not shortened by a standby commitment. Therefore, standby commitments do not
affect the dollar-weighted average maturity or duration of the Fund's investment
portfolio.

POLICIES AND LIMITATIONS. Neither Fund will invest in standby
commitments unless it receives an opinion of counsel or a ruling of the Internal
Revenue Service ("Service") satisfactory to the Fund Trustees that the interest
earned by the Fund on municipal obligations subject to a standby commitment will
be exempt from federal income tax. Neither Fund will acquire standby commitments
with a view to exercising them when the exercise price exceeds the current value
of the underlying obligations; a Fund will do so only to facilitate portfolio
liquidity.

PARTICIPATION INTERESTS (NEUBERGER BERMAN MUNICIPAL MONEY FUND AND
NEUBERGER BERMAN MUNICIPAL SECURITIES TRUST). The Funds may purchase from banks
participation interests in all or part of specific holdings of short-term
municipal obligations. Each participation interest is backed by an irrevocable
letter of credit issued by a selling bank determined to be creditworthy. A Fund
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

24
<PAGE>

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 Fund currently intends to acquire
participation interests, each reserves the right to do so in the future.

POLICIES AND LIMITATIONS. No Fund will purchase participation interests
unless it receives an opinion of counsel or a ruling of the Service satisfactory
to the Fund Trustees that interest earned by the Fund on municipal obligations
in which it holds participation interests is exempt from federal income tax.

MONEY MARKET FUNDS (ALL FUNDS EXCEPT NEUBERGER BERMAN GOVERNMENT MONEY
FUND AND NEUBERGER BERMAN CASH RESERVES). Each Fund 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 Fund to bear
proportionately the costs incurred by the other investment companies'
operations. At the same time, the Fund 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. For cash management purposes, each Fund may
invest up to 25% of its assets in a money market fund managed by NB Management
or its affiliates, pursuant to an SEC exemptive order. None of the Funds has any
current intention to make use of this authority. Otherwise, each Fund's
investment in securities of other investment companies is limited to (i) 3% of
the total voting stock of any one investment company, (ii) 5% of the Fund's
total assets with respect to any one investment company and (iii) 10% of the
Fund's total assets in all investment companies in the aggregate.

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

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

25
<PAGE>

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 Fund 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 Funds 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 Fund when market interest rates
change. Increasing market interest rates generally extend the effective
maturities of mortgage-backed securities, increasing their sensitivity to
interest rate changes.

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

Governmental, government-related, and private entities (such as
commercial banks, savings institutions, private mortgage insurance companies,
mortgage bankers, and other secondary market issuers, including securities
broker-dealers and special purpose entities that generally are affiliates of the
foregoing established to issue such securities) may create mortgage loan pools
to back CMOs and CBOs. Such issuers may be the originators and/or servicers of
the underlying mortgage loans, as well as the guarantors of the mortgage-backed
securities. Pools created by non-governmental issuers generally offer a higher
rate of interest than governmental and government-related pools because of the
absence of direct or indirect government or agency guarantees. Various forms of
insurance or guarantees, including individual loan, title, pool, and hazard
insurance and letters of credit, may support timely payment of interest and
principal of non-governmental pools. Governmental entities, private insurers,
and mortgage poolers issue these forms of insurance and guarantees. NB
Management considers such insurance and guarantees, as well as the
creditworthiness of the issuers thereof, in determining whether a
mortgage-backed security meets a Fund'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 Fund may buy
mortgage-backed securities without insurance or guarantees, if NB Management
determines that the securities meet the Fund's quality standards. NB Management
will, consistent with the Funds' 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.

26
<PAGE>

POLICIES AND LIMITATIONS. A Fund 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, Neuberger Berman
INSTITUTIONAL CASH Fund and Neuberger Berman GOVERNMENT MONEY Fund) of the
Fund's net assets would be invested in illiquid securities. Neuberger Berman
GOVERNMENT MONEY Fund 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
FUND). 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 FUNDS EXCEPT NEUBERGER BERMAN GOVERNMENT
MONEY FUND, NEUBERGER BERMAN MUNICIPAL MONEY FUND AND NEUBERGER BERMAN MUNICIPAL
SECURITIES TRUST). 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 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 Receivables(SERVICEMARK)
("CARS SERVICEMARK") 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

27
<PAGE>

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

U.S. DOLLAR-DENOMINATED FOREIGN DEBT SECURITIES (ALL FUNDS EXCEPT
NEUBERGER BERMAN GOVERNMENT MONEY FUND, NEUBERGER BERMAN MUNICIPAL MONEY FUND
AND NEUBERGER BERMAN MUNICIPAL SECURITIES TRUST). These are securities of

28
<PAGE>

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 Fund's
quality, maturity, and duration standards.

FOREIGN CURRENCY DENOMINATED SECURITIES (NEUBERGER BERMAN HIGH YIELD
BOND FUND AND NEUBERGER BERMAN LIMITED MATURITY BOND FUND). 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
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 Fund are uninvested and no
return is earned thereon. The inability of the Fund to make intended security
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of portfolio securities due to
settlement problems could result in losses to the Fund due to subsequent
declines in value of the securities or, if the Fund has entered into a contract
to sell the securities, could result in possible liability to the purchaser.

29
<PAGE>

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 Fund 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 Fund, American Depositary
Receipts ("ADRs") on such securities. Within that limitation, however, neither
Fund is restricted in the amount it may invest in securities denominated in any
one foreign currency. The Funds 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 FUND).
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 Fund's 25% limit on foreign
securities denominated in foreign currencies.

DOLLAR ROLLS (NEUBERGER BERMAN HIGH YIELD BOND FUND AND NEUBERGER
BERMAN LIMITED MATURITY BOND FUND). In a "dollar roll," a Fund 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
Fund forgoes principal and interest payments on the securities. The Fund 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 Fund's NAVs and may be viewed as a form of leverage.
A "covered roll" is a specific type of dollar roll in which the Fund 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 Fund. NB Management
monitors the creditworthiness of counterparties to dollar rolls.

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

30
<PAGE>

WHEN-ISSUED TRANSACTIONS (ALL FUNDS). These transactions may involve
mortgage-backed securities such as GNMA, Fannie Mae, and Freddie Mac
certificates. These transactions involve a commitment by a Fund to purchase
securities that will be issued at a future date (ordinarily within two months,
although the Fund may agree to a longer settlement period). The price of the
underlying securities (usually expressed in terms of yield) and the date when
the securities will be delivered and paid for (the settlement date) are fixed at
the time the transaction is negotiated. When-issued purchases are negotiated
directly with the other party, and such commitments are not traded on exchanges.

When-issued transactions enable a Fund to "lock in" what NB Management
believes to be an attractive price or yield on a particular security for a
period of time, regardless of future changes in interest rates. In periods of
falling interest rates and rising prices, a Fund 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 Fund 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
Fund's NAV starting on the date of the agreement to purchase the securities.
Because the Fund has not yet paid for the securities, this produces an effect
similar to leverage. The Fund 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 Neuberger Berman MUNICIPAL MONEY Fund
nor Neuberger Berman MUNICIPAL SECURITIES Trust may invest more than 10% of its
total assets in when-issued securities. A Fund 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 Fund may dispose of or renegotiate a commitment
after it has been entered into. A Fund also may sell securities it has committed
to purchase before those securities are delivered to the Fund on the settlement
date. The Fund may realize capital gains or losses in connection with these
transactions.

When a Fund 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 Fund's purchase commitments. This
procedure is designed to ensure that the Fund maintains sufficient assets at all
times to cover its obligations under when-issued purchases.

LEVERAGE (NEUBERGER BERMAN CASH RESERVES AND NEUBERGER BERMAN
INSTITUTIONAL CASH FUND). Each Fund may make investments while borrowings are
outstanding. Leverage creates an opportunity for increased total return but, at
the same time, creates special risk considerations. For example, leverage may
amplify changes in a Fund's NAVs. Although the principal of such borrowings will
be fixed, a Fund's assets may change in value during the time the borrowing is
outstanding. Leverage from borrowing creates interest expenses for a Fund. To
the extent the income derived from securities purchased with borrowed funds
exceeds the interest a Fund will have to pay, that Fund's total return will be
greater than it would be if leverage were not used. Conversely, if the income
from the assets obtained with borrowed funds is not sufficient to cover the cost

31
<PAGE>

of leveraging, the net income of a Fund will be less than it would be if
leverage were not used, and therefore the amount available for distribution to
that Fund's shareholders as dividends will be reduced. Reverse repurchase
agreements, securities lending transactions and when-issued transactions may
create leverage.

POLICIES AND LIMITATIONS. Each Fund may borrow money from banks for
temporary or emergency purposes or enter into reverse repurchase agreements for
any purpose, as long as such borrowings do not exceed 33-1/3% of the value of
its total assets (including the amount borrowed) less liabilities (other than
borrowings). Each may also borrow up to 5% of its total assets for temporary
purposes, e.g., for the purpose of settling purchase and sale transactions;
these temporary borrowings are not subject to the 33-1/3% limitation. However,
as an operating policy, neither Fund will invest more than 20% of its total
assets in reverse repurchase agreements and securities lending transactions in
the aggregate.

FUTURES CONTRACTS AND OPTIONS THEREON (NEUBERGER BERMAN HIGH YIELD BOND
FUND, NEUBERGER BERMAN LIMITED MATURITY BOND FUND AND NEUBERGER BERMAN MUNICIPAL
SECURITIES TRUST). The Funds may purchase and sell interest rate and bond index
futures contracts and options thereon, and Neuberger Berman HIGH YIELD Bond Fund
and Neuberger Berman LIMITED MATURITY Bond Fund may purchase and sell foreign
currency futures contracts (with interest rate and bond index futures contracts,
"Futures" or "Futures Contracts") and options thereon in an attempt to hedge
against changes in the prices of securities or, in the case of foreign currency
futures and options thereon, to hedge against changes in prevailing currency
exchange rates. Because the futures markets may be more liquid than the cash
markets, the use of Futures permits a Fund to enhance portfolio liquidity and
maintain a defensive position without having to sell portfolio securities. The
Funds 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 Funds.

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.

32
<PAGE>

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 Fund will usually be liquidated in this
manner, the Fund 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 Fund with, or for the benefit of, a futures commission merchant
in order to initiate and maintain the Fund's Futures positions. The margin
deposit made by a Fund when it enters into a Futures Contract ("initial margin")
is intended to assure its performance of the contract. If the price of the
Futures Contract changes -- increases in the case of a short (sale) position or
decreases in the case of a long (purchase) position -- so that the unrealized
loss on the contract causes the margin deposit not to satisfy margin
requirements, the Fund will be required to make an additional margin deposit
("variation margin"). However, if favorable price changes in the Futures
Contract cause the margin on deposit to exceed the required margin, the excess
will be paid to the Fund. In computing its daily NAV, each Fund marks to market
the value of its open Futures positions. A Fund also must make margin deposits
with respect to options on Futures that it has written (but not with respect to
options on futures that it has purchased). If the futures commission merchant
holding the margin deposit goes bankrupt, the Fund could suffer a delay in
recovering its funds and could ultimately suffer a loss.

An option on a Futures Contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short Futures
position (if the option is a call) or a long Futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's Futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the Futures Contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.

Although each Fund believes that the use of Futures Contracts 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
Fund'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 Fund's
futures position and the securities held by or to be purchased for the Fund. 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

33
<PAGE>

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 Fund, it could (depending on the size of the position) have
an adverse impact on the NAV of the Fund.

POLICIES AND LIMITATIONS. The Funds 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 Funds engage in foreign currency Futures and
options transactions in an attempt to hedge against changes in prevailing
currency exchange rates. Neither Fund engages in transactions in Futures or
options thereon for speculation.

CALL OPTIONS ON SECURITIES (NEUBERGER BERMAN HIGH YIELD BOND AND
LIMITED MATURITY BOND FUND). Each Fund 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 Fund on the Fund's NAVs) or to earn premium income. Fund
securities on which call options may be written and purchased by a Fund are
purchased solely on the basis of investment considerations consistent with the
Fund's investment objective.

When a Fund writes a call option, it is obligated to sell a security to
a purchaser at a specified price at any time until a certain date if the
purchaser decides to exercise the option. That Fund receives a premium for
writing the option. When writing call options, each Fund writes only "covered"
call options on securities it owns. So long as the obligation of the call option
continues, that Fund may be assigned an exercise notice, requiring it to deliver
the underlying security against payment of the exercise price. A Fund 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 Funds will not do), but
is capable of enhancing a Fund's total return. When writing a covered call
option, a Fund, in return for the premium, gives up the opportunity for profit

34
<PAGE>

from a price increase in the underlying security above the exercise price, but
conversely retains the risk of loss should the price of the security decline.

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

When a Fund purchases a call option, it pays a premium for the right to
purchase a security from the writer at a specified price until a specified date.
A Fund 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 Fund 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 Fund may write covered
call options for the purpose of producing income. Each Fund 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 FUND AND
NEUBERGER BERMAN LIMITED MATURITY BOND FUND). Each Fund may write and purchase
put options on securities. A Fund will receive a premium for writing a put
option, which obligates that Fund 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 Fund may be obligated to purchase the underlying security at more
than its current value.

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

Fund securities on which put options may be written and purchased by a
Fund are purchased solely on the basis of investment considerations consistent
with the Fund's investment objective. When writing a put option, a Fund, in
return for the premium, takes the risk that it must purchase the underlying
security at a price that may be higher than the current market price of the
security. If a put option that the Fund has written expires unexercised, the
Fund will realize a gain in the amount of the premium.

POLICIES AND LIMITATIONS. Each Fund 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 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 Fund terminates upon expiration of the option or, at an

35
<PAGE>

earlier time, when the writer offsets the option by entering into a "closing
purchase transaction" to purchase an option of the same series. If an option is
purchased by a Fund and is never exercised or closed out, that Fund will lose
the entire amount of the premium paid.

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

The premium received (or paid) by the Fund 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 Fund for writing
an option is recorded as a liability on the Fund's statement of assets and
liabilities. This liability is adjusted daily to the option's current market
value, which is the last reported sales price before the time the Fund'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 Fund 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 Fund will be
able to effect closing transactions at favorable prices. If a Fund cannot enter
into such a transaction, it may be required to hold a security that it might
otherwise have sold (or purchase a security that it would not have otherwise
bought), in which case it would continue to be at market risk on the security.

A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Fund; however, the Fund could be in a less advantageous

36
<PAGE>

position than if it had not written the call option.

A Fund pays brokerage commissions or spreads in connection with
purchasing or writing options, including those used to close out existing
positions. These brokerage commissions normally are higher than those applicable
to purchases and sales of portfolio securities. From time to time, the Fund 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 Fund will be considered
illiquid and thus subject to each Fund's 15% limitation on illiquid securities,
unless the OTC options are sold to qualified dealers who agree that the Fund may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC call option
written subject to this procedure will be considered illiquid only to the extent
that the maximum repurchase price under the formula exceeds the intrinsic value
of the option.

FORWARD FOREIGN CURRENCY CONTRACTS (NEUBERGER BERMAN HIGH YIELD BOND
FUND AND NEUBERGER BERMAN LIMITED MATURITY BOND FUND). Each Fund 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 Fund enters into Forward
Contracts in an attempt to hedge against changes in prevailing currency exchange
rates. Forward Contract transactions include forward sales or purchases of
foreign currencies for the purpose of protecting the U.S. dollar value of
securities held or to be acquired by a Fund 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 Fund may
either make delivery of the foreign currency or terminate its contractual
obligation to deliver by purchasing an offsetting contract. If the Fund chooses
to make delivery of the foreign currency, it may be required to obtain such
currency through the sale of portfolio securities denominated in such currency
or through conversion of other assets of the Fund into such currency. If the
Fund engages in an offsetting transaction, it will incur a gain or a loss to the
extent that there has been a change in Forward Contract prices. Closing purchase
transactions with respect to Forward Contracts are usually made with the
currency dealer who is a party to the original Forward Contract.

37
<PAGE>

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 Fund could be in a less advantageous position
than if such a hedge or proxy-hedge had not been established. If a Fund uses
proxy-hedging, it may experience losses on both the currency in which it has
invested and the currency used for hedging if the two currencies do not vary
with the expected degree of correlation. Using Forward Contracts to protect the
value of a Fund's securities against a decline in the value of a currency does
not eliminate fluctuations in the prices of the underlying securities. Because
Forward Contracts are not traded on an exchange, the assets used to cover such
contracts may be illiquid. A Fund may experience delays in the settlement of its
foreign currency transactions.

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

OPTIONS ON FOREIGN CURRENCIES (NEUBERGER BERMAN HIGH YIELD BOND FUND
AND NEUBERGER BERMAN LIMITED MATURITY BOND FUND). Each Fund may write and
purchase covered call and put options on foreign currencies. Currency options
have characteristics and risks similar to those of securities options, as
discussed herein. Certain options on foreign currencies are traded on the OTC
market and involve liquidity and credit risks that may not be present in the
case of exchange-traded currency options.

POLICIES AND LIMITATIONS. The Fund would use options on foreign
currencies to protect against declines in the U.S. dollar value of portfolio
securities or increases in the U.S. dollar cost of securities to be acquired, or
to protect the 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 FUND, NEUBERGER BERMAN LIMITED
MATURITY BOND FUND AND NEUBERGER BERMAN MUNICIPAL SECURITIES TRUST). To the
extent a Fund 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

38
<PAGE>

by which options are "in-the-money") may not exceed 5% of the Fund's net assets.

COVER FOR HEDGING INSTRUMENTS (NEUBERGER BERMAN HIGH YIELD BOND FUND,
NEUBERGER BERMAN LIMITED MATURITY BOND FUND AND NEUBERGER BERMAN MUNICIPAL
SECURITIES TRUST). Each Fund 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 Fund's assets could impede
portfolio management or the Fund's ability to meet current obligations. A Fund
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 Fund.

POLICIES AND LIMITATIONS. Each Fund 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
FUND, NEUBERGER BERMAN LIMITED MATURITY BOND FUND AND NEUBERGER BERMAN MUNICIPAL
SECURITIES TRUST). 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 Fund 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 Fund'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 Fund to purchase or sell a portfolio
security at a time that would otherwise be favorable for it to do so, or the
possible need for a Fund to sell a portfolio security at a disadvantageous time,
due to its need to maintain cover or to segregate securities in connection with
its use of 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 Fund's underlying
securities or currency. There can be no assurance that a Fund's use of Hedging
Instruments will be successful.

A Fund's use of Hedging Instruments may be limited by certain
provisions of the Code with which it must comply if it 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 Fund's underlying securities or
currency. NB Management intends to reduce the risk that a Fund will be unable to
close out Hedging Instruments by entering into such transactions only if NB

39
<PAGE>

Management believes there will be an active and liquid secondary market.

INDEXED SECURITIES (NEUBERGER BERMAN HIGH YIELD BOND FUND AND NEUBERGER
BERMAN LIMITED MATURITY BOND FUND). The Fund 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 FUNDS). Each
Fund may invest in zero coupon securities; Neuberger Berman LIMITED MATURITY
Bond Fund and Neuberger Berman HIGH YIELD Bond Fund may invest in step coupon
securities. Neuberger Berman HIGH YIELD Bond Fund 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 Fund prior to the receipt of any actual
payments. Pay-in-kind securities pay interest through the issuance of additional
securities.

Because each Fund must distribute substantially all of its net income
(including its share of 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 Fund may have to dispose of portfolio securities under
disadvantageous circumstances to generate cash, or may be required to borrow, to
satisfy its distribution requirements. See "Additional Tax Information."

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

SWAP AGREEMENTS (NEUBERGER BERMAN HIGH YIELD BOND FUND AND NEUBERGER
BERMAN MUNICIPAL SECURITIES TRUST). To help enhance the value of its portfolio
or manage its exposure to different types of investments, the Fund 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

40
<PAGE>

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
Fund's performance. The risks of swap agreements depend upon the other party's
creditworthiness and ability to perform, as well as the Fund's ability to
terminate its swap agreements or reduce its exposure through offsetting
transactions. Swap agreements may be illiquid. The swap market is relatively new
and is largely unregulated.

POLICIES AND LIMITATIONS. In accordance with SEC staff requirements,
the Fund 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 Fund will segregate only the amount of its net
obligation, if any.

LOWER-RATED DEBT SECURITIES (NEUBERGER BERMAN LIMITED MATURITY BOND
FUND AND NEUBERGER BERMAN HIGH YIELD BOND FUND). 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 Fund that invests in lower-quality securities
may incur additional expenses to the extent recovery is sought on defaulted
securities. Because of the many risks involved in investing in high-yield
securities, the success of such investments is dependent on the credit analysis
of NB Management.

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

41
<PAGE>

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 Fund
normally will invest at least 65% of its total assets in lower-rated debt
securities. Neuberger Berman LIMITED MATURITY Bond Fund may invest up to 10% of
its net assets in lower-rated debt securities; the Fund 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 Fund may hold up
to 5% of its net assets in securities that are downgraded after purchase to a
rating below that permitted by the Fund's investment policies.

DIRECT DEBT INSTRUMENTS (NEUBERGER BERMAN HIGH YIELD BOND FUND). 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 Fund 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 Fund 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.

42
<PAGE>

Because the Fund'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 Fund 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 Fund may be
subject to claims of the lead bank's creditors.

Although some of the loans in which the Fund 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 Fund purchases a loan through an assignment,
there is a possibility that the Fund 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 Fund's restriction on investing no more
than 15% of its net assets in illiquid securities. The Fund'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 Fund, in some instances, to treat both the lending bank and the
borrower as "issuers" of a loan participation by the Fund. In combination, the
Fund's policies and the SEC staff's interpretations may limit the amount the
Fund can invest in loan participations.

CONVERTIBLE SECURITIES (NEUBERGER BERMAN HIGH YIELD BOND FUND). A
convertible security is a bond, debenture, note, preferred stock, or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or different issuer within a particular period of time
at a specified price or formula. Convertible securities generally have features
of both common stocks and debt securities. A convertible security entitles the
holder to receive the interest paid or accrued on debt or the dividend paid on
preferred stock until the convertible security matures or is redeemed, converted
or exchanged. Before conversion, such securities ordinarily provide a stream of
income with generally higher yields than common stocks of the same or similar
issuers, but lower than the yield on non-convertible debt. Convertible
securities are usually subordinated to comparable-tier non-convertible
securities but rank senior to common stock in a corporation's capital structure.
The value of a convertible security is a function of (1) its yield in comparison
to the yields of other securities of comparable maturity and quality that do not
have a conversion privilege and (2) its worth if converted into the underlying
common stock.

43
<PAGE>

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

POLICIES AND LIMITATIONS. Securities convertible into common stock are
not subject to the Fund's 20% limitation on equity securities.

PREFERRED STOCK (NEUBERGER BERMAN HIGH YIELD BOND FUND). 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 FUND). Warrants may be
acquired by the Fund in connection with other securities or separately and
provide the Fund 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 Funds may purchase securities rated
by S&P, Moody's, or any other NRSRO. The ratings of an NRSRO represent its
opinion as to the quality of securities it undertakes to rate. Ratings are not

44
<PAGE>

absolute standards of quality; consequently, securities with the same maturity,
duration, coupon, and rating may have different yields. Although the Funds may
rely on the ratings of any NRSRO, the Funds mainly refer to ratings assigned by
S&P and Moody's, which are described in Appendix A. Each Fund may also invest in
unrated securities that are deemed comparable in quality by NB Management to the
rated securities in which the Fund 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, INSTITUTIONAL CASH and MUNICIPAL MONEY Funds.

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

45
<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 Funds 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 Fund'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 Fund, Neuberger Berman CASH RESERVES
Neuberger Berman INSTITUTIONAL CASH Fund and Neuberger Berman MUNICIPAL MONEY
Fund 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 Fund has no
dollar-weighted average duration or maturity and has no limits on the maturity
of its individual investments. Neuberger Berman LIMITED MATURITY Bond Fund's
dollar-weighted average duration will not exceed four years, although the Fund
may invest in individual securities of any duration; the Fund's dollar-weighted
average maturity may range up to six years. Neuberger Berman MUNICIPAL
SECURITIES Trust's dollar-weighted average duration will not exceed ten years.

46
<PAGE>

RISKS OF EQUITY SECURITIES
--------------------------

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

Although each Fund seeks to reduce risk by investing in a diversified
portfolio of securities, diversification does not eliminate all risk. There can,
of course, be no assurance any Fund will achieve its investment objective. Each
Fund's ability to achieve its investment objective is dependent on the
continuing ability of the issuers of municipal obligations in which the Fund
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.

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 Neuberger Berman HIGH YIELD Fund, Neuberger
Berman LIMITED MATURITY Fund and Neuberger Berman MUNICIPAL SECURITIES Trust
will vary, and an investment in either of these Funds, when redeemed, may be
worth more or less than an investor's original cost.

Until February 9, 2001, the Investor and Trust Classes of each of the
Funds were separate feeder funds in a master/feeder structure. Performance
results shown represent the performance of each Class' predecessor feeder fund,

47
<PAGE>

which had an identical investment program and the same fees as the corresponding
Investor and Trust Class Fund.

YIELD CALCULATIONS
------------------

NEUBERGER BERMAN CASH RESERVES, NEUBERGER BERMAN INSTITUTIONAL CASH
FUND, NEUBERGER BERMAN GOVERNMENT MONEY FUND AND NEUBERGER BERMAN MUNICIPAL
MONEY FUND. 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 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.

NEUBERGER BERMAN HIGH YIELD BOND FUND, NEUBERGER BERMAN LIMITED
MATURITY BOND FUND AND NEUBERGER BERMAN MUNICIPAL SECURITIES TRUST. 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 Neuberger Berman LIMITED MATURITY Bond Fund
Investor Class, Neuberger Berman HIGH YIELD Bond Fund and Neuberger Berman
MUNICIPAL SECURITIES Trust, respectively, for the 30-day period ended October
31, 2000 were ___%, ____% and ____%. The annualized yield for the predecessor to
Neuberger Berman LIMITED MATURITY Bond Fund Trust Class for the same period was
____%.

TAX EQUIVALENT YIELD
--------------------

NEUBERGER BERMAN GOVERNMENT MONEY FUND. Much of the dividends paid by
GOVERNMENT MONEY may represent income received by it 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

48
<PAGE>

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%
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.

NEUBERGER BERMAN MUNICIPAL MONEY FUND AND NEUBERGER BERMAN MUNICIPAL
SECURITIES TRUST. 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

49
<PAGE>

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.

TOTAL RETURN COMPUTATIONS
-------------------------

Neuberger Berman HIGH YIELD Bond Fund, Neuberger Berman LIMITED
MATURITY Bond Fund and Neuberger Berman MUNICIPAL SECURITIES Trust 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, 2000, the
average annual total returns for LIMITED MATURITY Investor Class were ____%,
____%, and ____%, 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
$________ on October 31, 2000.

For the one-, five-, and ten-year periods ended October 31, 2000, the
average annual total returns for LIMITED MATURITY Trust Class were ____%, ____%,
and ____%, 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
$________ on October 31, 2000

For the one-year period ended October 31, 2000 and the period from
March 3, 1998 to October 31, 2000, the average annual total returns for HIGH
YIELD were ____% and ____%, 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 $_______ on October 31, 2000.

For the one-, five- and ten-year periods ended October 31, 2000, the
average annual total returns for MUNICIPAL SECURITIES and its predecessor were
____%, ____%, and ____%, respectively. If an investor had invested $10,000 in
that predecessor's shares on July 9, 1987, and had reinvested all distributions,

50
<PAGE>

the value of that investor's holdings would have been $_____ on October 31,
2000.

NB Management may from time to time reimburse a Fund 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 Lehman
Brothers Bond Index, the Municipal Bond Buyers Indicies (and other
indicies of municipal obligations), Shearson Lehman 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 Fund 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, INSTITUTIONAL CASH'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

51
<PAGE>

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.

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 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,
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 Fund's portfolio allocation and
holdings as of a particular date may be included in its Advertisements. This
information may include the Fund'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

52
<PAGE>

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 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, investing at market highs and/or lows, and investing early
versus late for retirement plans also may be included in Advertisements, if
appropriate.

TRUSTEES AND OFFICERS

The following table sets forth information concerning the trustees and
officers of the Trust, including their addresses and principal business
experience during the past five years. Each person named as a trustee or officer
also serves in similar capacities for two other investment companies
administered or managed by NB Management and Neuberger Berman.

53
<PAGE>

THE TRUST
---------
<TABLE>
<CAPTION>
Positions Held
Name, Age, And Address (1) With the Trust Principal Occupation(s) (2)
-------------------------- -------------- ---------------------------
<S> <C> <C>

Claudia A. Brandon (44) Secretary Employee of Neuberger Berman since 1999;
Vice President of NB Management from 1986
to 1999; Secretary of two other mutual
funds for which NB Management acts as
investment manager or administrator.

John Cannon (70) Trustee Retired. Formerly, Chairman and Chief
531 Willow Avenue Investment Officer of CDC Capital Management
Ambler, PA 19002 (registered investment adviser) (1993-Jan.
1999).

Faith Colish (65) Trustee Attorney at Law, Faith Colish, A
63 Wall Street Professional Corporation.
24th Floor
New York, NY 10005

Robert Conti (44) Vice President Vice President of Neuberger Berman since
1999; Senior Vice President of NB
Management since 2000; Vice President
since 2000 of four other mutual funds for
which NB Management acts as investment
manager or administrator; Controller of
NBMI until 1996; Treasurer of NB
Management from 1996 until 1999.

Stacy Cooper-Shugrue (37) Assistant Secretary Employee of Neuberger Berman since 1999;
Assistant Vice President of NB Management
from 1993 to 1999; Assistant Secretary of
four other mutual funds for which NB
Management acts as investment manager or
administrator.

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

54
<PAGE>

Positions Held
Name, Age, And Address (1) With the Trust Principal Occupation(s) (2)
-------------------------- -------------- ---------------------------
<S> <C> <C>
Walter G. Ehlers (67) Trustee Consultant, Director of the Turner
6806 Suffolk Place Corporation, A.B. Chance Company and
Harvey Cedars, NJ 08008 Crescent Jewelry, Inc.

Brian J. Gaffney (47) Vice President Managing Director of Neuberger Berman since
1999; Senior Vice President of NBMI since
2000; Vice President of NB Management
from 1997 until 1999; Vice President
since 2000 of four other mutual funds for
which NB Management acts as investment
manager or administrator.

C. Anne Harvey (63) Trustee Director of American Association of Retired
2555 Pennsylvania Avenue, N.W. Persons ("AARP"); Program Services and
Washington, DC 20037 Administrator of AARP Foundation; The
National Rehabilitation Hospital's Board
of Advisors; Individual Investors
Advisory Committee to the New York Stock
Exchange Board of Directors; Steering
Committee for the U.S. Securities and
Exchange Commission Facts on Saving and
Investing Campaign; and American Savings
Education Council's Policy Board (ASEC).

Barry Hirsch (67) Trustee Senior Vice President, Secretary, and
Loews Corporation General Counsel of Loews Corporation
667 Madison Avenue (diversified financial corporation).
7th Floor
New York, NY 10021

Michael M. Kassen* (47) President and Trustee Executive Vice President, Chief Investment
Officer and Director of Neuberger Berman,
Inc. (holding company) since 1999;
Executive Vice President and Chief
Investment Officer of Neuberger Berman
since 1999; Chairman of the Board (since
________) and Director of NB Management
since 1999 (or 2000); formerly, Executive
Vice President and Chief Investment
Officer of NB Management from November
1999 until ________; Vice President from
1990 to 1999; Partner of Neuberger Berman
from 1993 until 1996 when he became a
principal; President and Trustee since
2000 of four other mutual funds for which
NB Management acts as investment manager
or administrator.

55
<PAGE>

Positions Held
Name, Age, And Address (1) With the Trust Principal Occupation(s) (2)
-------------------------- -------------- ---------------------------
<S> <C> <C>
Robert A. Kavesh (73) Trustee Professor of Finance and Economics at Stern
110 Bleecker Street School of Business, New York University.
Apt. 24B
New York, NY 10012

Howard A. Mileaf (63) Trustee Vice President and Special Counsel to WHX
WHX Corporation Corporation (holding company) since 1992;
110 East 59th Street Director of Kevlin Corporation (manufacturer
30th Floor of microwave and other products).
New York, NY 10022

Edward I. O'Brien* (72) Trustee Private Investment Management; President of
12 Woods Lane the Securities Industry Association ("SIA")
Scarsdale, NY 10583 (securities industry's representative in
government relations and regulatory
matters at the federal and state levels)
from 1974 to 1992; Adviser to SIA from
November 1992 to November 1993; Director
of Legg Mason, Inc.

John P. Rosenthal (68) Trustee Senior Vice President of Burnham Securities
Burnham Securities Inc. Inc. (a registered broker-dealer) since
Burnham Asset Management Corp. 1991; Director, Cancer Treatment Holdings,
1325 Avenue of the Americas Inc.
26th Floor
New York, NY 10019

William E. Rulon (68) Trustee Retired. Senior Vice President of
2980 Bayside Walk Foodmaker. Inc. (operator and Franchiser of
San Diego, CA 92109 Restaurants) until January 1997; Secretary
of Foodmaker, Inc. until July 1996.

56
<PAGE>

Positions Held
Name, Age, And Address (1) With the Trust Principal Occupation(s) (2)
-------------------------- -------------- ---------------------------
<S> <C> <C>
Richard Russell (54) Treasurer and Principal Vice President of Neuberger Berman since
Financial and Accounting 1999; Employee of NB Management since
Officer 1999; Vice President of NB Management from
1993 to 1999; Treasurer and Principal
Financial and Accounting Officer of four
other mutual funds for which NB
Management acts as investment manager or
administrator.

Cornelius T. Ryan (69) Trustee General Partner of Oxford Partners and
Oxford Bioscience Partners Oxford Bioscience Partners (venture capital
315 Post Road West partnerships) and President of Oxford
Westport, CT 06880 Venture Corporation; Director of Capital
Cash Management Trust (money market fund)
and Prime Cash Fund.

Tom Decker Seip (50) Trustee General Partner of Seip Investments LP (a
30 Ridge Lane private investment partnership); Member of
Orinda, CA 94563 the Board of Directors of Offroad Capital
Inc. and E-Finance Corporation
(pre-public internet commerce companies);
Trustee of Hambrecht and Quist Fund
Trust; Member of the Board of Directors
of AmericaOne; Senior Executive at the
Charles Schwab Corporation from 1983 to
1999; including Chief Executive Officer
of Charles Schwab Investment Management,
Inc. and Trustee of Schwab Family of
Funds and Schwab Investments from 1997 to
1998; Executive Vice President-Retail
Brokerage for Charles Schwab Investment
Management from 1994 to 1997.

57
<PAGE>

Positions Held
Name, Age, And Address (1) With the Trust Principal Occupation(s) (2)
-------------------------- -------------- ---------------------------
<S> <C> <C>
Gustave H. Shubert (71) Trustee Senior Fellow/Corporate Advisor and Advisory
13838 Sunset Boulevard Trustee of Rand (a non-profit public
Pacific Palisades, CA 90272 interest research institution) since 1989;
Honorary Member of the Board of Overseers
of the Institute for Civil Justice, the
Policy Advisory Committee of the Clinical
Scholars Program at the University of
California, the American Association for
the Advancement of Science, the Council
on Foreign Relations, and the Institute
for Strategic Studies (London); advisor
to the Program Evaluation and Methodology
Division of the U.S. General Accounting
Office; formerly Senior Vice President
and Trustee of Rand.

Frederic B. Soule (54) Vice President Vice President of Neuberger Berman since
1999; Vice President of NB Management
from 1995 to 1999; Vice President since
2000 of four other mutual funds for which
NB Management acts as manager or
administrator.

Candace L. Straight (53) Trustee Private investor and consultant specializing
518 Passaic Avenue in the insurance industry; Advisory Director
Bloomfield, NJ 07003 of Securities Capital LLC (a global private
equity investment firm dedicated to
making investments in the insurance
sector); 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.

58
<PAGE>

Positions Held
Name, Age, And Address (1) With the Trust Principal Occupation(s) (2)
-------------------------- -------------- ---------------------------
<S> <C> <C>
Peter E. Sundman* (41) Chairman of the Board, Executive Vice President and Director of
Chief Executive Officer Neuberger Berman Inc. (holding company)
and Trustee since 1999; Executive Vice President of
Neuberger Berman since 1999; Principal of
Neuberger Berman from 1997 until 1999;
President and Director of NB Management
since 1999; Senior Vice President of NB
Management from 1986 until 1999; Director
of Institutional Services of of NB
Management from 1988 until 1996; Chairman
of the Board and Trustee since 2000 of
four other mutual funds for which NB
Management acts as investment manager or
administrator.

Peter P. Trapp (55) Trustee Regional Manager for Atlanta Region, Ford
Ford Motor Credit Company Motor Credit Company since August, 1997;
1455 Lincoln Parkway prior thereto, President, Ford Life
Atlanta, GA 30346-2209 Insurance Company, April 1995 until August
1997.

Celeste Wischerth (39) Assistant Treasurer Vice President of Neuberger Berman since
1999; Assistant Vice President of NB
Management from 199_ to 1999; Assistant
Treasurer since 1996 of four 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, New York 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" within the meaning of the
1940 Act. Mr. Sundman and Mr. Kassen are interested persons of the Trust by
virtue of the fact that they are officers and/or directors of NB Management and
Executive Vice Presidents of Neuberger Berman. Mr. O'Brien is an interested
person of the Trust by virtue of the fact that he is a director of Legg Mason,
Inc., a wholly owned subsidiary of which, from time to time, serves as a broker
or dealer to the Funds and other funds for which NB Management serves as
investment manager.

The Trust's Trust Instrument provides that the 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

59
<PAGE>

faith, willful misfeasance, gross negligence, or reckless disregard of the
duties involved in the conduct of their offices, or (b) did not act in good
faith in the reasonable belief that their action was in the best interest of the
Trust. In the case of settlement, such indemnification will not be provided
unless it has been determined (by a court or other body approving the settlement
or other disposition, by a majority of disinterested trustees based upon a
review of readily available facts, or in a written opinion of independent
counsel) that such officers or 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 of the Trust. Neuberger Berman Income Funds does not have any
retirement plan for its trustees.

<TABLE>

TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/00
<CAPTION>

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

John Cannon $ $
Trustee

Faith Colish $ $
Trustee (5 other investment companies)

Walter G. Ehlers $ $
Trustee

C. Anne Harvey $ $
Trustee

Barry Hirsch $ $
Trustee

Michael M. Kassen $ $
Trustee

Robert A. Kavesh $ $
Trustee

Howard A. Mileaf $ $
Trustee
(4 other investment companies)
Edward I. O'Brien $ $
Trustee
(3 other investment companies)
John T. Patterson, Jr.* $ $
Trustee
(4 other investment companies)
John P. Rosenthal $ $
Trustee (4 other investment companies)

William E. Rulon $ $
Trustee

60
<PAGE>

Cornelius T. Ryan $ $
Trustee (3 other investment companies)

Tom Decker Seip $ $
Trustee

Gustave H. Shubert $ $
Trustee (3 other investment companies)

Candace L. Straight $ $
Trustee

Peter E. Sundman $ $
Trustee

Peter P. Trapp $ $
Trustee

* Deceased, September 26, 2000.
</TABLE>

At November 30, 2000, the trustees and officers of the Trust, as a
group, owned beneficially or of record less than 1% of the outstanding shares of
each Fund.

INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES

INVESTMENT MANAGER AND ADMINISTRATOR
------------------------------------

NB Management serves as the investment manager to all the Funds
pursuant to a management agreement with the Trust, dated February 9, 2001
("Management Agreement").

The Management Agreement provides, in substance, that NB Management
will make and implement investment decisions for the Funds in its discretion and
will continuously develop an investment program for the Funds' assets. The
Management Agreement permits NB Management to effect securities transactions on
behalf of each Fund through associated persons of NB Management. The Management
Agreement also specifically permits NB Management to compensate, through higher
commissions, brokers and dealers who provide investment research and analysis to
the Funds, although NB Management has no current plans to pay a material amount
of such compensation.

NB Management provides to each Fund, without separate cost, office
space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. NB Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of the
Trust who are officers, directors, or employees of NB Management. One director
of NB Management (who is also an officer of Neuberger Berman), who also serves
as an officer of NB Management, presently serves as a trustee and/or officer of
the Trust. See "Trustees and Officers." Each Fund pays NB Management a

61
<PAGE>

management fee based on the Fund's average daily net assets, as described below.

NB Management provides facilities, services, and personnel to each Fund
pursuant to an administration agreement with the Trust, dated February 9, 2001
("Administration Agreement"). For such administrative services, each Fund pays
NB Management a fee based on the Fund's average daily net assets, as described
below.

Under the Administration Agreement for each class of shares, NB
Management also provides to each Fund and its shareholders certain shareholder,
shareholder-related, and other services that are not furnished by the Fund's
shareholder servicing agent. NB Management provides the direct shareholder
services specified in the Administration Agreement, assists the shareholder
servicing agent in the development and implementation of specified programs and
systems to enhance overall shareholder servicing capabilities, solicits and
gathers shareholder proxies, performs services connected with the qualification
of each Fund's shares for sale in various states, and furnishes other services
the parties agree from time to time should be provided under the Administration
Agreement.

From time to time, NB Management or a Fund may enter into arrangements
with registered broker-dealers or other third parties pursuant to which it pays
the broker-dealer or third party a per account fee or a fee based on a
percentage of the aggregate net asset value of Fund shares purchased by the
broker-dealer or third party on behalf of its customers, in payment for
administrative and other services rendered to such customers.

MANAGEMENT AND ADMINISTRATION FEES
----------------------------------

For investment management services, each Fund (except Neuberger Berman
HIGH YIELD Bond Fund and Neuberger Berman INSTITUTIONAL CASH Fund) pays NB
Management a fee at the annual rate of 0.25% of the first $500 million of that
Fund'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 Fund pays
NB Management a fee at the annual rate of 0.38% of the first $500 million of
that Fund'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. Neuberger Berman INSTITUTIONAL CASH
Fund pays NB Management a fee at the annual rate of 0.10% of the Fund's average
daily net assets.

For administrative services, the Investor Class of each Fund pays NB
Management at the annual rate of 0.27% of that Class'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, 2000, 1999, and 1998:

62
<PAGE>

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

INVESTOR CLASS 2000 1999 1998
-------------- ---- ---- ----
<S> <C> <C> <C>

CASH RESERVES $5,726,553 $5,332,438 $4,055,560

GOVERNMENT MONEY $2,147,068 $3,100,110 $1,879,933

HIGH YIELD $102,356 $170,119 $72,734*

LIMITED MATURITY $1,015,491 $1,356,702 $1,471,759

MUNICIPAL MONEY $1,422,293 $1,164,328 $980,936

MUNICIPAL SECURITIES $161,292 $198,218 $178,862
</TABLE>

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

For administrative services, the Trust Class of the Neuberger Berman
INSTITUTIONAL CASH Fund and Neuberger Berman LIMITED MATURITY Bond Fund pay NB
Management at the annual rate of 0.15% and 0.50% of that Class's average daily
net assets, respectively. With the Funds' consent, NB Management may subcontract
to third parties some of its responsibilities to the Class under the
administration agreement. In addition, the Fund may compensate such third
parties for accounting and other services.

<TABLE>
<CAPTION>
MANAGEMENT AND ADMINISTRATION FEES
ACCRUED FOR FISCAL YEARS
ENDED OCTOBER 31
-----------------------------------

TRUST CLASS 2000 1999 1998
----------- ---- ---- ----
<S> <C> <C> <C>

INSTITUTIONAL CASH $466,171* N/A N/A

LIMITED MATURITY $268,903 $415,445 $372,713
* For the period from May 8, 2000 (commencement of operations to October 31, 2000.
</TABLE>

WAIVERS AND REIMBURSEMENTS
--------------------------

INVESTOR CLASS
--------------

NB Management has voluntarily undertaken to reimburse the Investor
Class of each Fund other than Neuberger Berman GOVERNMENT MONEY Fund and
Neuberger Berman MUNICIPAL MONEY Fund for its Operating Expenses (including fees
under the Administration Agreement) and the Fund's pro rata share of the it's
Operating Expenses (including fees under the Management Agreement) that exceed,
in the aggregate, 0.65% for CASH RESERVES and MUNICIPAL MONEY; 0.70% per annum
for LIMITED MATURITY; and 1.00% for HIGH YIELD of that Class's average daily net
assets. Operating Expenses exclude interest, taxes, brokerage commissions, and
extraordinary expenses. NB Management can terminate each undertaking by giving

63
<PAGE>

the Fund at least 60 days' prior written notice. For the fiscal years ended
October 31, 2000, 1999, and 1998, NB Management reimbursed the Funds the
following amounts of expenses:

<TABLE>
<CAPTION>
INVESTOR CLASS 2000 1999 1998
-------------- ---- ---- ----
<S> <C> <C> <C>

CASH RESERVES $0 $0 $0

HIGH YIELD $165,780 $111,347 $71,712*

LIMITED MATURITY $120,662 $53,915 $143,344

MUNICIPAL SECURITIES $179,807 $157,108 $155,100
*From date of inception, March 3, 1998 to October 31, 1998.
</TABLE>

TRUST CLASS
-----------

NB Management has voluntarily undertaken to reimburse the Trust Class
of each Fund for its Operating Expenses (including fees under the Administration
Agreement) and the Fund's pro rata share of the it's Operating Expenses
(including fees under the Management Agreement) that exceed, in the aggregate,
0.41% for INSTITUTIONAL CASH and 0.80% for LIMITED MATURITY of that Class'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, 2000, 1999, and 1998, NB Management reimbursed
each Class's predecessor fund the following amounts of expenses:

<TABLE>
<CAPTION>
TRUST CLASS 2000 1999 1998
----------- ---- ---- ----
<S> <C> <C> <C>
LIMITED MATURITY $167,032 $174,589 $206,630
INSTITUTIONAL CASH $0* N/A N/A
* For the period from May 8, 2000 (commencement of operations) to October 31, 2000.
</TABLE>

The Management Agreement continues with respect to each Fund for a
period of two years after the date the Fund became subject thereto. The
Management Agreement is renewable thereafter from year to year with respect to
each Fund, so long as its continuance is approved at least annually (1) by the
vote of a majority of the Fund Trustees who are not "interested persons" of NB
Management or Managers 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 interests in that Fund. 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

64
<PAGE>

the vote of a majority of the Fund Trustees or by a 1940 Act majority vote of
the outstanding shares in that Fund.

The Management Agreement is terminable, without penalty, with respect
to a Fund on 60 days' written notice either by Managers Trust or by NB
Management. The Administration Agreement is terminable, without penalty, with
respect to a Fund on 60 days' written notice either by NB Management or by the
Trust. Each Agreement terminates automatically if it is assigned.

SUB-ADVISER
-----------

NB Management retains Neuberger Berman, 605 Third Avenue, New York, NY
10158-3698, as sub-adviser with respect to each Fund pursuant to a sub-advisory
agreement dated December 15, 2000 ("Sub-Advisory Agreement").

The Sub-Advisory Agreement provides in substance that Neuberger Berman
will furnish to NB Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, NB Management expects to have available to it, in
addition to research from other professional sources, the capability of the
research staff of Neuberger Berman. This staff consists of numerous investment
analysts, each of whom specializes in studying one or more industries, under the
supervision of the Director of Research, who is also available for consultation
with NB Management. The Sub-Advisory Agreement provides that NB Management will
pay for the services rendered by Neuberger Berman based on the direct and
indirect costs to Neuberger Berman in connection with those services. Neuberger
Berman also serves as sub-adviser for all of the other mutual funds managed by
NB Management.

The Sub-Advisory Agreement continues until August 2, 2001 and is
renewable from year to year, subject to approval of their continuance in the
same manner as the Management Agreement. The Sub-Advisory Agreement is subject
to termination, without penalty, with respect to each Fund by the Fund Trustees
or a 1940 Act majority vote of the outstanding interests in that Fund, by NB
Management, or by Neuberger Berman on not less than 30 nor more than 60 days'
prior written notice. The Sub-Advisory Agreements also terminate automatically
with respect to each Fund if they are assigned or if the Management Agreement
terminates with respect to that Fund.

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

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

As of December 31, 2000, the investment companies managed by NB
Management had aggregate net assets of approximately $____ billion. NB
Management currently serves as investment manager of the following investment
companies:

65
<PAGE>

Approximate
Net Assets at
Name December 31, 2000
---- -----------------

Neuberger Berman Cash Reserves................................................$

Neuberger Berman Government Money Fund........................................$

Neuberger Berman High Yield Bond Fund.........................................$

Neuberger Berman Institutional Cash Fund .....................................$

Neuberger Berman Limited Maturity Bond Fund...................................$

Neuberger Berman Municipal Money Fund.........................................$

Neuberger Berman Municipal Securities Trust...................................$

Neuberger Berman Century Fund.................................................$

Neuberger Berman Focus Fund...................................................$

Neuberger Berman Genesis Fund.................................................$

Neuberger Berman Guardian Fund................................................$

Neuberger Berman International Fund...........................................$

Neuberger Berman Manhattan Fund...............................................$

Neuberger Berman Millennium Fund..............................................$

Neuberger Berman Partners Fund................................................$

Neuberger Berman Regency Fund.................................................$

Neuberger Berman Socially Responsive Fund.....................................$

Neuberger Berman Technology Fund..............................................$

Advisers Management Trust.....................................................$

The investment decisions concerning the Funds 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 Funds. Even
where the investment objectives are similar, however, the methods used by the
Other NB Funds and the Funds to achieve their objectives may differ. The
investment results achieved by all of the mutual funds managed by NB Management

66
<PAGE>

have varied from one another in the past and are likely to vary in the future.

There may be occasions when a Fund and one or more of the Other NB
Funds or other accounts managed by Neuberger Berman are contemporaneously
engaged in purchasing or selling the same securities from or to third parties.
When this occurs, the transactions are averaged as to price and allocated, in
terms of amount, in accordance with a formula considered to be equitable to the
funds involved. Although in some cases this arrangement may have a detrimental
effect on the price or volume of the securities as to a Fund, in other cases it
is believed that a Fund's ability to participate in volume transactions may
produce better executions for it. In any case, it is the judgment of the Fund
Trustees that the desirability of the Funds' having their advisory arrangements
with NB Management outweighs any disadvantages that may result from
contemporaneous transactions.

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

CODES OF ETHICS
---------------

The Funds, NB Management and Neuberger Berman have personal securities
trading policies that restrict the personal securities transactions of
employees, officers, and trustees. Their primary purpose is to ensure that
personal trading by these individuals does not disadvantage any fund managed by
NB Management. The Fund managers and other investment personnel who comply with
the policies' preclearance and disclosure procedures may be permitted to
purchase, sell or hold certain types of securities which also may be or are held
in the funds they advise, but are restricted from trading in close conjunction
with their Funds or taking personal advantage of investment opportunities that
may belong to a Fund.

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; Robert Matza, Director; Theodore P. Giuliano,
Director and Vice President; Michael M. Kassen, Director and Chairman; Barbara
Katersky, Senior Vice President; Daniel J. Sullivan, Senior Vice President;
Matthew S. Stadler, Senior Vice President and Chief Financial Officer; Peter E.
Sundman, Director and President; and Lawrence Zicklin, Director.

The officers and employees 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; Matthew S. Stadler,

67
<PAGE>

Senior Vice President and Chief Financial Officer; Kevin Handwerker, Senior Vice
President and Secretary; Joseph K. Herlihy, Senior Vice President and Treasurer;
Robert Akeson, Senior Vice President; Steven April, Senior Vice President;
Salvatore A. Buonocore, Senior Vice President; Philip Callahan, Senior Vice
President; Lawrence J. Cohn, Senior Vice President; Joseph F. Collins III,
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; Barbara R. Katersky, Senior Vice President; Diane E.
Lederman, Senior Vice President; Peter B. Phelan, Senior Vice President; David
Root, Senior Vice President; Mark Shone, Senior Vice President; Robert H. Splan,
Senior Vice President; Andrea Trachtenberg, Senior Vice President; Marvin C.
Schwartz, Managing Director.

Mr. Sundman and Mr. Kassen are trustees and officers of the Trust. Mr.
Sullivan is an officer of the 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. The directors and officers of Neuberger Berman,
Inc. are: Jeffrey B. Lane, Director, Chief Executive Officer and President;
Peter E. Sundman, Director and Executive Vice President; Heidi L. Schneider,
Director and Executive Vice President; Michael M. Kassen, Director, Chief
Investment Officer and Executive Vice President; Robert Matza, Director, Chief
Administrative Officer and Executive Vice President; Marvin C. Schwartz,
Director and Vice Chairman; Matthew S. Stadler, Senior Vice President and Chief
Financial Officer; Kevin Handwerker, Senior Vice President and Secretary; and
Joseph K. Herlihy, Treasurer, and Ellen Metzger, Assistant Secretary.

DISTRIBUTION ARRANGEMENTS

Neuberger Berman CASH RESERVES, Neuberger Berman GOVERNMENT MONEY,
Neuberger Berman HIGH YIELD BOND, Neuberger Berman LIMITED MATURITY Bond,
Neuberger Berman MUNICIPAL MONEY Funds, and Neuberger Berman MUNICIPAL
SECURITIES Trust offer a class of shares, known as Investor Class. Neuberger
Berman LIMITED MATURITY BOND and Neuberger Berman INSTITUTIONAL CASH offer a
class of shares known as Trust Class shares.

DISTRIBUTOR
-----------

NB Management serves as the distributor ("Distributor") in connection
with the offering of each Fund's shares. Investor Class and Trust Class shares
are offered on a no-load basis. Trust Class Shares are available only through
Institutions that have made arrangements with NB Management for shareholder
servicing and administration.

In connection with the sale of its shares, each Fund has authorized the
Distributor to give only the information, and to make only the statements and
representations, contained in the 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

68
<PAGE>

arranging for the sale of each Fund's Investor Class shares without sales
commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of those shares. The Distributor also acts as
agent in arranging for the sale of each Fund's Trust Class shares to
Institutions and bears all advertising and promotion expenses incurred in the
sale of the Funds' shares.

For each Funds' Investor Class, the Distributor or one of its
affiliates may, from time to time, deem it desirable to offer to shareholders of
the Funds, through use of their shareholder lists, the shares of other mutual
funds for which the Distributor acts as distributor or other products or
services. Any such use of the Funds' shareholder lists, however, will be made
subject to terms and conditions, if any, approved by a majority of the
Independent Fund Trustees. These lists will not be used to offer the Funds'
shareholders any investment products or services other than those managed or
distributed by NB Management or Neuberger Berman.

From time to time, for the Trust Class, NB Management may enter into
arrangements pursuant to which it compensates a registered broker-dealer or
other third party for services in connection with the distribution of Fund
shares.

The Trust, on behalf of each Fund, and the Distributor are parties to a
Distribution Agreement with respect to each Class ("Distribution Agreements").
The Distribution Agreements continue until August 2, 2001. The Distribution
Agreements may be renewed annually if specifically approved by (1) the vote of a
majority of the Fund Trustees or a 1940 Act majority vote of the Fund's
outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreements may be terminated by either party and will
terminate automatically on their assignment, in the same manner as the
Management Agreements.

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 NAV for each class of a Fund is calculated by subtracting total
liabilities of that class from total assets attributable to the class (the
market value of the securities the Fund holds plus cash and other assets). The
per share NAV is calculated by dividing its NAV by the number of shares
outstanding attributable to that class and rounding the result to the nearest
full cent. Each Fund calculates its NAV as of the close of regular trading on
the NYSE, usually 4 p.m. Eastern time, on each day the NYSE is open.

Neuberger Berman CASH RESERVES, Neuberger Berman GOVERNMENT MONEY Fund,
Neuberger Berman INSTITUTIONAL CASH Fund and Neuberger Berman MUNICIPAL MONEY
Fund try to maintain stable NAVs of $1.00 per share. They value their securities
at their cost at the time of purchase and assume a constant amortization to
maturity of any discount or premium. These Funds calculate their NAVs as of noon
Eastern time on each day the NYSE is open.

69
<PAGE>

Neuberger Berman High Yield Bond and Neuberger Berman Limited Maturity
Bond Funds 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 Funds 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 Funds calculate their NAVs as
of the close of regular trading on the NYSE, usually 4 p.m. Eastern time, on
each day the NYSE is open.

If NB Management believes that the price of a security obtained under a
Fund's valuation procedures (as described above) does not represent the amount
that the Fund reasonably expects to receive on a current sale of the security,
the Fund will value the security based on a method that the trustees of Managers
Trust believe accurately reflects fair value.

AUTOMATIC INVESTING AND DOLLAR COST AVERAGING
---------------------------------------------

Each Funds' Investor Class shareholders may arrange to have a fixed
amount automatically invested in Fund shares each month. To do so, an Investor
Class 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 Investor Class shareholder's
checking account. In either case, the minimum monthly investment is $100. An
Investor Class 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 Funds, Boston Service Center, P.O. Box 8403, Boston, MA 02266-8403.

Automatic investing enables an Investor Class shareholder to take
advantage of "dollar cost averaging." As a result of dollar cost averaging, an
Investor Class shareholder's average cost of Fund shares generally would be
lower than if the Investor Class 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
"Maintaining Your Account," each funds' Investor Class shareholders may redeem
at least $1,000 worth of a Fund's shares and invest the proceeds in Investor
Class shares of one or more of the other Equity, Income and Municipal Funds that
are briefly described below, provided that the minimum investment requirements
of the other fund(s) are met. An Institution may exchange any Fund's Trust Class
shares for Trust Class shares of one or more of the other Neuberger Berman
Funds, if made available through that Institution.

70
<PAGE>

EQUITY FUNDS
------------

Neuberger Berman Century Fund Invests mainly in common stocks of
large-capitalization companies. The
manager seeks to buy companies with
strong earnings growth and the
potential for higher earnings, priced
at attractive levels relative to their
growth rates.

Neuberger Berman Focus Fund Invests principally in common stocks
selected from 13 multi-industry
sectors of the economy. To maximize
potential return, the Fund normally
makes at least 90% of its investments
in not more than six sectors of the
economy believed by the Fund managers
to be undervalued.

Neuberger Berman Genesis Fund Invests primarily in stocks of
companies with small market
capitalizations (up to $1.5 billion at
the time of the Fund's investment).
Fund managers seek to buy the stocks
of strong companies with a history of
solid performance and a proven
management team, which are selling at
attractive prices.

Neuberger Berman Guardian Fund A growth and income fund that invests
primarily in stocks of established,
high-quality companies that are not
well followed on Wall Street or are
temporarily out of favor.

Neuberger Berman International Fund Seeks long-term capital appreciation
by investing primarily in foreign
stocks of any capitalization, both in
developed economies and in emerging
markets. Fund manager seeks
undervalued companies in countries
with strong potential for growth.

Neuberger Berman Manhattan Fund Invests in securities believed to
have the maximum potential for
long-term capital appreciation. Fund
managers seek stocks of companies that
are projected to grow at above-average
rates and that appear to the managers
poised for a period of accelerated
earnings.

Neuberger Berman Millennium Fund Seeks long-term growth of capital by
investing primarily in common stocks
of small-capitalization companies,
which it defines as those with a total
market value of no more than $1.5
billion at the time of initial
investment. The Fund co-managers take
a growth approach to stock selection,
looking for new companies that are in
the developmental stage as well as
older companies that appear poised to
grow because of new products, markets
or management. Factors in identifying
these firms may include financial
strength, a strong position relative
to competitors and a stock price that
is reasonable relative to its growth
rate.

71
<PAGE>

Neuberger Berman Partners Fund Seeks capital growth through an
approach that is intended to increase
capital with reasonable risk. Fund
managers look at fundamentals,
focusing particularly on cash flow,
return on capital, and asset values.

Neuberger Berman Regency Fund Seeks long-term growth of capital by
investing primarily in common stocks
of mid-capitalization companies which
the manager believes have solid
fundamentals.

Neuberger Berman Socially Seeks long-term capital appreciation
Responsive Fund by investing in common stocks of
companies that meet both financial and
social criteria.

Neuberger Berman Technology Fund Seeks long-term capital growth by
investing in the stocks of dynamic
technology and tech-related companies
of all sizes.

INCOME FUNDS
------------

Neuberger Berman A U.S. Government money market fund
Government Money Fund seeking maximum safety and liquidity
and the highest available current
income. The Fund invests only in U.S.
Treasury obligations and other money
market instruments backed by the full
faith and credit of the United States.
It seeks to maintain a constant
purchase and redemption price of
$1.00.

Neuberger Berman A money market fund seeking the
Cash Reserves highest current income consistent with
safety and liquidity. The Fund invests
in high-quality money market
instruments. It seeks to maintain a
constant purchase and redemption price
of $1.00.

Neuberger Berman Seeks the highest current income
Limited Maturity Bond Fund consistent with low risk to principal
and liquidity and, secondarily, total
return. The Fund invests in debt
securities, primarily investment
grade; maximum 10% below investment
grade, but no lower than B.*/ Maximum
average duration of four years.

72
<PAGE>

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

MUNICIPAL FUNDS
---------------

Neuberger Berman A money market fund seeking the
Municipal Money Fund maximum current income exempt from
federal income tax, consistent with
safety and liquidity. The Fund invests
in high-quality, short-term municipal
securities. It seeks to maintain a
constant purchase and redemption price
of $1.00.

Neuberger Berman Municipal Seeks high current tax-exempt income
Securities Trust with low risk to principal, limited
price fluctuation, and liquidity and,
secondarily, total return. The Fund
invests in investment grade municipal
securities with a maximum average
duration of 10 years.

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

Any Fund described herein, and any of the Income or Municipal Funds,
may terminate or modify its exchange privilege in the future.

Before effecting an exchange, Fund shareholders must obtain and should
review a currently effective prospectus of the fund into which the exchange is
to be made. An exchange is treated as a sale for federal income tax purposes
and, depending on the circumstances, a capital gain or loss may be realized.

There can be no assurance that Neuberger Berman GOVERNMENT MONEY Fund,
Neuberger Berman CASH RESERVES, Neuberger Berman INSTITUTIONAL CASH Fund or
Neuberger Berman MUNICIPAL MONEY Fund, each of which is a money market fund that
seeks to maintain a constant purchase and redemption price of $1.00, will be
able to maintain that price. An investment in any of the above-referenced funds,
as in any other mutual fund, is neither insured nor guaranteed by the U.S.
Government.

Each Fund may terminate or modify its exchange privilege in the future.
Before effecting an exchange, shareholders should review a currently effective
prospectus of the fund into which the exchange is to be made. An exchange is
treated as a sale for federal income tax purposes and, depending on the
circumstances, a capital gain or loss may be realized.

73
<PAGE>

ADDITIONAL REDEMPTION INFORMATION

SUSPENSION OF REDEMPTIONS
-------------------------

The right to redeem a Fund's shares may be suspended or payment of the
redemption price postponed (1) when the New York Stock Exchange ("NYSE") is
closed, (2) when trading on the NYSE is restricted, (3) when an emergency exists
as a result of which it is not reasonably practicable for it 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, HIGH YIELD, MUNICIPAL MONEY and MUNICIPAL SECURITIES
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, INSTITUTIONAL CASH 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 class), any net capital gains (both long-term and short-term), and any
net gains from foreign currency transactions earned or realized. A Fund'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, HIGH YIELD, INSTITUTIONAL CASH and
MUNICIPAL SECURITIES, net investment income and, with respect to all the Funds,
net gains and losses are reflected in a Fund's NAV until they are distributed.
GOVERNMENT MONEY, MUNICIPAL 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,
INSTITUTIONAL CASH 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

74
<PAGE>

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
investment company taxable income (consisting generally of 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 Financial
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)

75
<PAGE>

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 (the excess of net long-term capital gain over
net short-term capital loss), as dividends (that is, ordinary income) to the
extent of the Fund's earnings and profits. In addition, the Fund could be
required to recognize unrealized gains, pay substantial taxes and interest, and
make substantial distributions before requalifying for RIC treatment.

Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.

Dividends and interest received by a Fund, and gains realized by a
Fund, may be subject to income, withholding, or other taxes imposed by foreign
countries and U.S. possessions ("foreign taxes") that would reduce the total
return on its securities. Tax treaties between certain countries and the United
States may reduce or eliminate foreign taxes, however, and many foreign
countries do not impose taxes on capital gains in respect of investments by
foreign investors.

The use by Neuberger Berman HIGH YIELD Bond Fund and Neuberger Berman
LIMITED MATURITY Bond Fund 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 Funds realize
in connection therewith. For each of these Funds, 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 Fund with respect
to its business of investing in securities or foreign currencies, will qualify
as permissible income under the Income Requirement.

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 Fund's or Neuberger
Berman LIMITED MATURITY Bond Fund's taxable year. Sixty percent of any net gain
or loss recognized as a result of these "deemed sales," and 60% of any net
realized gain or loss from any actual sales, of Section 1256 contracts are
treated as long-term capital gain or loss, 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, which will be taxable to its shareholders
as ordinary income, and to increase HIGH YIELD's or LIMITED MATURITY's net
capital gain, without in either case increasing the cash available to the Fund.
A Fund may elect to exclude certain transactions from the operation of these
rules, although doing so may have the effect of increasing the relative
proportion of net short-term capital gain and/or increasing the amount of

76
<PAGE>

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 Fund expires, it
realizes a short-term capital gain equal to the amount of the premium it
received for writing the option. When a Fund 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 Fund is exercised, the Fund 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 Fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures or forward contract,
or short sale) with respect to any stock, debt instrument (other than "straight
debt"), or partnership interest the fair market value of which exceeds its
adjusted basis -- and enters into a "constructive sale" of the position, the
Fund will be treated as having made an actual sale thereof, with the result that
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 Fund or a 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
during any taxable year that otherwise would be treated as a constructive sale
if the transaction is closed within 30 days after the end of that year and the
Fund holds the appreciated financial position unhedged for 60 days after that
closing (I.E., at no time during that 60-day period is the Fund's risk of loss
regarding that position reduced by reason of certain specified transactions with
respect to substantially identical or related property, such as having an option
to sell, being contractually obligated to sell, making a short sale, or granting
an option to buy substantially identical stock or securities).

Each Fund (except Neuberger Berman GOVERNMENT MONEY Fund) 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 Fund (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

77
<PAGE>

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 Fund may elect to include market discount in its
gross income currently, for each taxable year to which it is attributable.

Each Fund may acquire zero coupon or other securities issued with OID.
Neuberger Berman HIGH YIELD Bond Fund may also acquire pay-in-kind securities,
which pay interest through the issuance of additional securities. As a holder of
those securities, each 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 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 it
actually receives. Those distributions will be made from a Fund's cash assets
or, if necessary, from the proceeds of sales of that Fund's securities. A Fund
may realize capital gains or losses from those sales, which would increase or
decrease its investment company taxable income and/or net capital gain.

TAXATION OF THE FUNDS' SHAREHOLDERS
-----------------------------------

If shares of HIGH YIELD or LIMITED MATURITY are sold at a loss after
being held for six months or less, the loss will be treated as long-term,
instead of short-term, capital loss to the extent of any capital gain
distributions received on those shares.

Each Fund is required to withhold 31% of all dividends and capital gain
distributions, and each of HIGH YIELD and LIMITED MATURITY is required to
withhold 31% of redemption proceeds, payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Withholding at that rate also is required from
dividends and capital gain distributions payable to such shareholders who
otherwise are subject to backup withholding.

As described in "Maintaining Your Account" in the Prospectus, a Fund
may close a shareholder's account with the Fund and redeem the remaining shares
if the account balance falls below the specified minimum and the shareholder
fails to 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 IRA (including a Roth IRA) or a qualified retirement plan (including a
simplified employee pension plan, savings incentive match plan for employees,
Keogh plan, corporate profit-sharing and money purchase pension plan, Code
section 401(k) plan, and Code section 403(b)(7) account), 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 CASH RESERVES, Neuberger Berman GOVERNMENT
MONEY Fund, Neuberger Berman INSTITUTIONAL CASH Fund, and Neuberger Berman
MUNICIPAL MONEY Fund relies on Rule 2a-7 under the 1940 Act to use the amortized

78
<PAGE>

cost method of valuation to enable it 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 Funds' 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 Funds typically do not
pay brokerage commissions for such purchases and sales. Instead, the price paid
for newly issued securities usually includes a concession or discount paid by
the issuer to the underwriter, and the prices quoted by market-makers reflect a
spread between the bid and the asked prices from which the dealer derives a
profit.

In purchasing and selling portfolio securities other than as described
above (for example, in the secondary market), each Fund 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 Fund or NB Management. Under certain conditions, a
Fund may pay higher brokerage commissions in return for brokerage and research
services, although no Fund has a current arrangement to do so. In any case, each
Fund 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, 2000, Neuberger Berman LIMITED
MATURITY Bond Fund acquired securities of the following of its "regular brokers
or dealers": ____________________. At October 31, 2000, that Fund held the
securities of its "regular brokers or dealers" with an aggregate value as
follows: ___________, $_____; and ___________, $_________.

During the fiscal year ended October 31, 2000, Neuberger Berman HIGH
YIELD Bond Fund acquired securities of the following of its "regular brokers or
dealers": ______________________. At October 31, 2000, that Fund held the
securities of its "regular brokers or dealers" with an aggregate value as
follows: _______________, $________.

During the fiscal year ended October 31, 2000, Neuberger Berman CASH
RESERVES acquired securities of the following of its "regular brokers or
dealers": ______________. At October 31, 2000, that Fund held the securities of

79
<PAGE>

its "regular brokers or dealers" with an aggregate value as follows:
______________, $_________; and ____________________, $___________.

During the fiscal year ended October 31, 2000, Neuberger Berman
GOVERNMENT MONEY Fund acquired none of the securities of its "regular brokers or
dealers." At October 31, 2000, that Fund held none of the securities of its
"regular brokers or dealers."

During the fiscal year ended October 31, 2000, Neuberger Berman
MUNICIPAL MONEY Fund acquired none of the securities of its "regular brokers or
dealers." At October 31, 2000, that Fund held none of the securities of its
"regular brokers or dealers."

During the fiscal year ended October 31, 2000, Neuberger Berman
MUNICIPAL SECURITIES Trust acquired none of the securities of its "regular
brokers or dealers." At October 31, 2000, that Fund held none of the securities
of its "regular brokers or dealers."

During the fiscal year ended October 31, 2000, Neuberger Berman
INSTITUTIONAL CASH Fund acquired securities of the following of its "regular
brokers or dealers": ______________. At October 31, 2000, that Fund held the
securities of its "regular brokers or dealers" with an aggregate value as
follows: ______________, $_________; and ____________________, $___________.

No affiliate of any Fund receives give-ups or reciprocal business in
connection with its portfolio transactions. No Fund 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 Fund unless
an appropriate exemption is available.

PORTFOLIO TURNOVER
------------------

Neuberger Berman HIGH YIELD Bond Fund, Neuberger Berman LIMITED
MATURITY Bond Fund and Neuberger Berman MUNICIPAL SECURITIES Trust calculate
their portfolio turnover rates by dividing (1) the lesser of the cost of the
securities purchased or the proceeds from the securities sold by the Fund during
the fiscal year (other than securities, including options, whose maturity or
expiration date at the time of acquisition was one year or less) by (2) the
month-end average of the value of such securities owned by the Fund during the
fiscal year.

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. Each Fund's statements show the investments owned by it
and the market values thereof and provide other information about the Fund and
its operations.

80
<PAGE>

ORGANIZATION, CAPITALIZATION AND OTHER MATTERS

THE FUNDS
---------

Each Fund is a separate ongoing 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 operating series. 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
(except Neuberger Berman INSTITUTIONAL CASH Fund) was "Neuberger & Berman."

The predecessors of the Fund (except for Neuberger Berman HIGH YIELD,
and Neuberger Berman INSTITUTIONAL CASH Funds) 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 except that expenses allocated to a Class may be borne solely by such
Class as determined by the Trustees and a Class may have exclusive voting rights
with respect to matters affecting only that Class. All shares issued are fully
paid and non-assessable, and shareholders have no preemptive or other rights to
subscribe to any additional shares.

SHAREHOLDER MEETINGS. The 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 or Class only if required under the 1940 Act
or in their discretion or upon the written request of holders of 10% or more of
the outstanding shares of that Fund entitled to vote.

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.

OTHER. Because Trust Class shares can be bought, owed and sold only
through an account with an Institution, a client of an Institution may be unable
to purchase additional shares and/or may be required to redeem shares (and
possibly incur a tax liability) if the client no longer has a relationship with
the Institution or if the Institution no longer has a contract with NB
Management to perform services. Depending on the policies of the Institution

81
<PAGE>

involved, an investor may be able to transfer an account from one Institution to
another.

CUSTODIAN AND TRANSFER AGENT

Each Fund has selected State Street 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 Investor Class correspondence should be mailed to Neuberger
Berman Funds, c/o Boston Service Center, P.O. Box 8403, Boston, MA 02266-8403.
All Trust Class correspondence should be mailed to Neuberger Berman Funds,
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180

INDEPENDENT AUDITORS

Each Fund 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 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

As of ______________, 2000, the following are all of the beneficial and
record owners of more than five percent of each Fund. Except where indicated
with an asterisk, the owners listed are record owners. These entities hold these
shares of record for the accounts of certain of their clients and have informed
the Funds of their policy to maintain the confidentiality of holdings in their
client accounts, unless disclosure is expressly required by law.

[Insert Updated Table: Must Reflect Ownership Per Class]

REGISTRATION STATEMENT

This SAI and the Prospectuses do not contain all the information
included in the Trust's registration statement filed with the SEC under the 1933
Act with respect to the securities offered by the Prospectuses. The registration
statement, including the exhibits filed therewith, may be examined at the SEC's
offices in Washington, D.C. The SEC maintains a Website (http://www.sec.gov)
that contains this SAI, material incorporated by reference, and other
information regarding the Funds.

Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete. In each instance where reference is made to the copy of any contract

82
<PAGE>

or other document filed as an exhibit to the registration statement, each such
statement is qualified in all respects by such reference.

FINANCIAL STATEMENTS

Prior to February 10, 2001 the Funds were organized as feeder funds in
a master-feeder structure rather than a single-level multiple-class structure.
Pursuant to the master-feeder structure, each Fund invested all of its net
investable assets in a series ("Portfolio") of another registered investment
company called Income Managers Trust that had an investment objective identical
to, and a name similar to, that of the Fund. Each Portfolio, in turn, invested
in securities in accordance with an investment objective, policies, and
limitations identical to those of its corresponding Fund.

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, 2000:

The audited financial statements of the Funds
and Portfolios and notes thereto for the fiscal year
ended October 31, 2000, 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.

The audited financial statements of the Funds
and Portfolios and notes thereto for the fiscal year
ended October 31, 2000, 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.

83
<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 as "high
grade bonds." They are rated lower than the best bonds because margins of

A-1
<PAGE>

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 INCOME FUNDS
POST-EFFECTIVE AMENDMENT NO. 31 ON FORM N-1A

PART C

OTHER INFORMATION

Item 23. Exhibits
------- --------

Exhibit
Number Description
------- -----------

(a) (1) Certificate of Trust. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802 (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. To Be Filed By
Amendment.

(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
Funds and Neuberger Berman Management
Inc. To Be Filed By Amendment.

(ii) Schedule A - Series of Income Funds
Currently Subject to the Management
Agreement. To Be Filed By Amendment.

(iii) Schedule B - Schedule of Compensation
under the Management Agreement. To Be
Filed By Amendment.

<PAGE>

Exhibit
Number Description
------- -----------

(2) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Inc. and Neuberger
Berman, L.P with respect to Income
Funds. To Be Filed By Amendment.

(ii) Schedule A - Series of Income Funds
Currently Subject to the Sub-Advisory
Agreement. To Be Filed By Amendment.

(e) (1) (i) Distribution Agreement between Neuberger
Berman Income Funds and Neuberger Berman
Management Inc. with Respect to Investor
Class Shares. To Be Filed By Amendment.

(ii) Schedule A - Series of Neuberger Berman
Income Funds Currently Subject to the
Investor Class Distribution Agreement.
To Be Filed By Amendment.

(2) (i) Distribution Agreement between Neuberger
Berman Income Funds and Neuberger Berman
Management Inc. with Respect to Trust
Class Shares. To Be Filed By Amendment.

(ii) Schedule A - Series of Neuberger Berman
Income Funds Currently Subject to the
Trust Class Distribution Agreement. To
Be Filed By Amendment.

(f) Bonus, Profit Sharing Contracts. None.

(g) (1) Custodian Contract Between Neuberger Berman
Income Funds and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement, File Nos.
2-85229 and 811-3802 (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).

<PAGE>

Exhibit
Number Description
------- -----------

(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 Inc. with
Respect to Investor Class Shares.
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. To Be Filed
By Amendment.

(iii) Schedule B - Schedule of Compensation
Under the Administration Agreement. To
Be Filed By Amendment.

(3) (i) Administration Agreement Between
Neuberger Berman Income Funds and
Neuberger Berman Management Inc. with
Respect to Trust Class Shares. To Be
Filed By Amendment.

(ii) Schedule A - Series of Neuberger Berman
Income Funds Currently Subject to the
Administration Agreement. To Be Filed
By Amendment.

(iii) Schedule B - Schedule of Compensation
Under the Administration Agreement. To
Be Filed By Amendment.

(i) (1) Opinion and Consent of Kirkpatrick & Lockhart
with Respect to Securities Matters of the
Registrant. To Be Filed By Amendment.

(j) Consent of Independent Auditors. To Be Filed By
Amendment.

(k) Financial Statements Omitted from Prospectus. None.

(l) Letter of Investment Intent. None

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

<PAGE>

Exhibit
Number Description
------- -----------

(n) Plan Pursuant to Rule 18f-3. To Be Filed By
Amendment.

(p) Code of Ethics for Registrant and Neuberger Berman
Management Inc. and Neuberger Berman, LLC. To Be
Filed By Amendment.

<PAGE>

Item 24. Persons Controlled By or Under Common Control with Registrant.
------- -------------------------------------------------------------

No person is controlled by or under common control with the
Registrant.

Item 25. Indemnification.
------- ---------------

A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides
that the Registrant shall indemnify any present or former trustee, officer,
employee or agent of the Registrant ("Covered Person") to the fullest extent
permitted by law against liability and all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.

Pursuant to Article IX, Section 3 of the Trust Instrument, if any
present or former shareholder of any series ("Series") of the Registrant shall
be held personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.

Section 9 of the Management Agreement between Neuberger and Berman
Management Inc. ("NB Management") and the Registrant provides that neither NB
Management nor any director, officer or employee of NB Management performing
services for any series of the Registrant 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 series 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 the Registrant or any
series thereof or its interest holders to which NB Management would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of NB Management's reckless disregard of
its obligations and duties under the Agreement, or (ii) to protect any director,

<PAGE>

officer or employee of NB Management who is or was a trustee or officer of the
Registrant against any liability to the Registrant or any series thereof or its
interest holders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office with the Registrant.

Section 1 of the Sub-Advisory Agreement between NB Management and
Neuberger Berman, L.P. ("Neuberger Berman") with respect to the Registrant
provides that, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or of reckless disregard of its
duties and obligations under the Agreement, Neuberger Berman will not be subject
to liability for any act or omission or any loss suffered by any series or its
interest holders in connection with the matters to which the Agreement relates.

Section 12 of the Administration Agreement between the Registrant and
NB Management on behalf of each of the classes of shares of each of the
Registrant's series provides that NB Management will not be liable to the
Registrant for any action taken or omitted to be taken by NB Management or its
employees, agents or contractors in carrying out the provisions of the Agreement
if such action was taken or omitted in good faith and without negligence or
misconduct on the part of NB Management, or its employees, agents or
contractors. Section 13 of the Administration Agreement provides that the
Registrant shall indemnify NB Management and hold it harmless from and against
any and all losses, damages and expenses, including reasonable attorneys' fees
and expenses, incurred by NB Management that result from: (i) any claim, action,
suit or proceeding in connection with NB Management's entry into or performance
of the Agreement; or (ii) any action taken or omission to act committed by NB
Management in the performance of its obligations under the Agreement; or (iii)
any action of NB Management upon instructions believed in good faith by it to
have been executed by a duly authorized officer or representative of a Series;
provided, that NB Management will not be entitled to such indemnification in
respect of actions or omissions constituting negligence or misconduct on the
part of NB Management, or its employees, agents or contractors. Amounts payable
by the Registrant under this provision shall be payable solely out of assets
belonging to that Series, and not from assets belonging to any other Series of
the Registrant. Section 14 of the Administration Agreement provides that NB
Management will indemnify the Registrant and hold it harmless from and against
any and all losses, damages and expenses, including reasonable attorneys' fees
and expenses, incurred by the Registrant that result from: (i) NB Management's
failure to comply with the terms of the Agreement; or (ii) NB Management's lack
of good faith in performing its obligations under the Agreement; or (iii) the
negligence or misconduct of NB Management, or its employees, agents or
contractors in connection with the Agreement. The Registrant shall not be
entitled to such indemnification in respect of actions or omissions constituting
negligence or misconduct on the part of the Registrant or its employees, agents
or contractors other than NB Management, unless such negligence or misconduct
results from or is accompanied by negligence or misconduct on the part of NB
Management, any affiliated person of NB Management, or any affiliated person of
an affiliated person of NB Management.

Section 11 of the Distribution Agreement between the Registrant and NB
Management (on behalf of each class of the Registrant) provides that NB
Management shall look only to the assets of a Series for the Registrant's
performance of the Agreement by the Registrant on behalf of such Series, and
neither the trustees nor any of the Registrant's officers, employees or agents,
whether past, present or future, shall be personally liable 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.

<PAGE>

Item 26. Business and Other Connections of Adviser and Sub-Adviser.
------- ---------------------------------------------------------

There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or officer
of NB Management and each principal of Neuberger Berman is, or at any time
during the past two years has been, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee.

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

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

Thomas J. Brophy Vice President and Portfolio Manager,
Vice President, Columbus Circle Investors.1
NB Management

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

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
Vice President and Berman Income Funds.
Director, NB Management;
Managing Director,
Neuberger Berman

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.3
NB Management

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

Michael F. Malouf Portfolio Manager, Dresdner RCM Global
Vice President, Investors.4
NB Management

-----------------------------
1 Until 1998.
2 Until 1998.
3 Until 1998.
4 Until 1998.

<PAGE>

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

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

S. Basu Mullick Portfolio Manager, Ark Asset
Vice President, Management.5
NB Management

Kevin Handwerker Senior Vice President, Secretary
Senior Vice President, and General Counsel, Neuberger
General Counsel and Berman, Inc.
Secretary,
Neuberger Berman

Richard Russell Treasurer, Neuberger Berman
Vice President, Advisers Management Trust;
NB Management Treasurer, Advisers Managers
Trust; Treasurer, Neuberger
Berman Income Funds; Treasurer,
Neuberger Berman Equity Funds.

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

Benjamin E. Segal Assistant Portfolio Manager, GT
Vice President, NB Global Investment Management6.
Management, Managing
Director, Neuberger Berman

Daniel J. Sullivan Vice President, Neuberger Berman Advisers
Senior Vice President, Management Trust; Vice President, Neuberger
NB Management Berman Income Funds; Vice President,
Neuberger Berman Equity Funds.

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

Catherine Waterworth Managing Director, TCW Group Inc.7
Vice President, NB Management

-----------------------------
5 Until 1998.
6 Until 1998.
7 Until 1998.
<PAGE>

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

Allan R. White, III Portfolio Manager, Salomon Asset
Vice President, NB Management.8
Management; Managing
Director, Neuberger Berman

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

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 Funds

(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.

-----------------------------
8 Until 1998.

<PAGE>

NAME POSITIONS AND OFFICES POSITIONS AND
---- WITH UNDERWRITER OFFICES
--------------------- 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 Assistant Treasurer
President

Robert S. Franklin Vice President None

Robert I. Gendelman Vice President None

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

Michael M. Kassen Vice President and None
Director

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 Vice President and
President Principal Financial
Officer

Allan R. White, III Vice President None

<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, the Registrant, NEUBERGER BERMAN INCOME FUNDS
has duly caused this Post-Effective Amendment No. 31 to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City and State of New York on the 8th day of December, 2000.

NEUBERGER BERMAN INCOME FUNDS

By: /s/ Michael M. Kassen
---------------------
Michael M. Kassen
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 31 has been signed below by the following persons
in the capacities and on the date indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/Peter E. Sundman Chairman of the Board December 8, 2000
--------------------- and Trustee (Chief
Peter E. Sundman Executive Officer)

/s/Michael M. Kassen President and Trustee December 8, 2000
---------------------
Michael M. Kassen

/s/Richard Russell Treasurer (Principal Financial December 8, 2000
--------------------- and Accounting Officer)
Richard Russell

(signatures continued on next page)

<PAGE>

SIGNATURE TITLE DATE
--------- ----- ----

/s/John Cannon Trustee December 8, 2000
----------------------
John Cannon

/s/Faith Colish Trustee December 8, 2000
----------------------
Faith Colish

/s/Walter G. Ehlers Trustee December 8, 2000
----------------------
Walter G. Ehlers

/s/C. Anne Harvey Trustee December 8, 2000
----------------------
C. Anne Harvey

/s/Barry Hirsch Trustee December 8, 2000
----------------------
Barry Hirsch

/s/Robert A. Kavesh Trustee December 8, 2000
----------------------
Robert A. Kavesh

/s/Howard A. Mileaf Trustee December 8, 2000
----------------------
Howard A. Mileaf

/s/Edward I. O'Brien Trustee December 8, 2000
----------------------
Edward I. O'Brien

<PAGE>

/s/John P. Rosenthal Trustee December 8, 2000
----------------------
John P. Rosenthal

/s/William E. Rulon Trustee December 8, 2000
----------------------
William E. Rulon

/s/Cornelius T. Ryan Trustee December 8, 2000
----------------------
Cornelius T. Ryan

/s/Tom Decker Seip Trustee December 8, 2000
----------------------
Tom Decker Seip

Trustee
----------------------
Gustave H. Shubert

/s/Candace L. Straight Trustee December 8, 2000
----------------------
Candace L. Straight

/s/Peter P. Trapp Trustee December 8, 2000
----------------------
Peter P. Trapp

<PAGE>
Item 23. Exhibits
------- --------

Exhibit
Number Description
------- -----------

(a) (1) Certificate of Trust. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802 (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).

(4) Schedule A - Current Series of Neuberger
Berman Income Funds. To Be Filed By
Amendment.

(d) (1) (i) Management Agreement Between Income
Funds and Neuberger Berman Management
Inc. To Be Filed By Amendment.

(ii) Schedule A - Series of Income Funds
Currently Subject to the Management
Agreement. To Be Filed By Amendment.

(iii) Schedule B - Schedule of Compensation
under the Management Agreement. To Be
Filed By Amendment.

<PAGE>

Exhibit
Number Description
------- -----------

(2) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Inc. and Neuberger
Berman, L.P with respect to Income
Funds. To Be Filed By Amendment.

(ii) Schedule A - Series of Income Funds
Currently Subject to the Sub-Advisory
Agreement. To Be Filed By Amendment.

(e) (1) (i) Distribution Agreement between Neuberger
Berman Income Funds and Neuberger Berman
Management Inc. with Respect to Investor
Class Shares. To Be Filed By Amendment.

(ii) Schedule A - Series of Neuberger Berman
Income Funds Currently Subject to the
Investor Class Distribution Agreement.
To Be Filed By Amendment.

(2) (i) Distribution Agreement between Neuberger
Berman Income Funds and Neuberger Berman
Management Inc. with Respect to Trust
Class Shares. To Be Filed By Amendment.

(ii) Schedule A - Series of Neuberger Berman
Income Funds Currently Subject to the
Trust Class Distribution Agreement. To
Be Filed By Amendment.

(f) Bonus, Profit Sharing Contracts. None.

<PAGE>

Exhibit
Number Description
------- -----------

(ii) Schedule A - Series of Neuberger Berman
Income Funds Currently Subject to the
Administration Agreement. To Be Filed
By Amendment.

(iii) Schedule B - Schedule of Compensation
Under the Administration Agreement. To
Be Filed By Amendment.

(3) (i) Administration Agreement Between
Neuberger Berman Income Funds and
Neuberger Berman Management Inc. with
Respect to Trust Class Shares. To Be
Filed By Amendment.

(ii) Schedule A - Series of Neuberger Berman
Income Funds Currently Subject to the
Administration Agreement. To Be Filed
By Amendment.

(iii) Schedule B - Schedule of Compensation
Under the Administration Agreement. To
Be Filed By Amendment.

(i) (1) Opinion and Consent of Kirkpatrick & Lockhart
with Respect to Securities Matters of the
Registrant. To Be Filed By Amendment.

(j) Consent of Independent Auditors. To Be Filed By
Amendment.

(k) Financial Statements Omitted from Prospectus. None.

(l) Letter of Investment Intent. None

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

<PAGE>

Exhibit
Number Description
------- -----------

(n) Plan Pursuant to Rule 18f-3. To Be Filed By
Amendment.

(p) Code of Ethics for Registrant and Neuberger Berman
Management Inc. and Neuberger Berman, LLC. To Be
Filed By Amendment.