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<SEC-DOCUMENT>0000898432-02-000647.txt : 20020924
<SEC-HEADER>0000898432-02-000647.hdr.sgml : 20020924
<ACCEPTANCE-DATETIME>20020924145322
ACCESSION NUMBER:		0000898432-02-000647
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		17
FILED AS OF DATE:		20020924

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC
		CENTRAL INDEX KEY:			0001178839
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-97283
		FILM NUMBER:		02771000

	BUSINESS ADDRESS:	
		STREET 1:		605 THIRD AVE
		STREET 2:		2ND FLOOR
		CITY:			NEW YOKR
		STATE:			NY
		ZIP:			10158-0180
		BUSINESS PHONE:		2124768800

	MAIL ADDRESS:	
		STREET 1:		605 THIRD AVENUE
		STREET 2:		2ND FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10158-0180

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC
		CENTRAL INDEX KEY:			0001178839
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-21168
		FILM NUMBER:		02771001

	BUSINESS ADDRESS:	
		STREET 1:		605 THIRD AVE
		STREET 2:		2ND FLOOR
		CITY:			NEW YOKR
		STATE:			NY
		ZIP:			10158-0180
		BUSINESS PHONE:		2124768800

	MAIL ADDRESS:	
		STREET 1:		605 THIRD AVENUE
		STREET 2:		2ND FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10158-0180
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>int535625.txt
<DESCRIPTION>SEPTEMBER 24, 2002
<TEXT>
                                                     1933 Act File No. 333-97283
                                                     1940 Act File No. 811-21168


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form N-2

           [X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                        [X] Pre-Effective Amendment No. 2
                        [ ] Post-Effective Amendment No.
                                       and

      [ X ] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
                        [X] Amendment No. 2

                Neuberger Berman Intermediate Municipal Fund Inc.
      (Exact Name of Registrant as Specified in Articles of Incorporation)

                      c/o Neuberger Berman Management Inc.
                           605 Third Avenue, 2nd Floor
                          New York, New York 10158-0180
                    (Address of Principal Executive Offices)

                                 (212) 476-8800
              (Registrant's Telephone Number, including Area Code)

                                Peter E. Sundman
                      c/o Neuberger Berman Management Inc.
                           605 Third Avenue, 2nd Floor
                          New York, New York 10158-0180
                     (Name and Address of Agent for Service)

                          Copies of Communications to:

       Arthur C. Delibert, Esq.                 Ellen Metzger, Esq.
       Kirkpatrick & Lockhart LLP               Neuberger Berman, LLC
       1800 Massachusetts Avenue, N.W.          605 Third Avenue
       2nd Floor                                New York, New York 10158-3698
       Washington, DC 20036-1800


Approximate Date of Proposed Public Offering:

As soon as practicable after the effective date of this Registration Statement

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

If any of the securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [_]

It is proposed that this filing will become effective (check appropriate box)

     [X]  when declared effective pursuant to section 8(c)

<PAGE>

<TABLE>

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Title of Securities       Amount Being           Proposed Maximum        Proposed Maximum       Amount of
Being Registered          Registered (1)         Offering Price Per      Aggregate Offering     Registration Fee (2)
                                                 Unit                    Price
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S>                       <C>                    <C>                     <C>                    <C>
Common Stock              28,750,000             $15.00                  $431,250,000           $39,675
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>
(1) Includes 3,750,000 shares which may be offered by the Underwriters  pursuant
to an option to cover over allotments.

(2) Of which $6,348 was previously paid.

The Registrant hereby amends this  Registration  Statement on such date or dates
as may be necessary to delay its effective date until the Registrant  shall file
a further amendment which specifically states this Registration  Statement shall
thereafter  become  effective in accordance  with Section 8(a) of the Securities
Act of 1933 or until the  Registration  Statement shall become effective on such
dates as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.

<PAGE>


PROSPECTUS                                                                [LOGO]


                                     SHARES
               NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.
                                 COMMON SHARES
                                $15.00 PER SHARE
                                ----------------

    INVESTMENT OBJECTIVE. Neuberger Berman Intermediate Municipal Fund Inc. (the
"Fund") is a newly organized, diversified, closed-end management investment
company. The Fund's investment objective is to provide common stockholders a
high level of current income exempt from federal income tax.

    PORTFOLIO CONTENTS. The Fund normally invests primarily in investment grade
municipal debt securities issued by state and local governments, including U.S.
territories and possessions, political subdivisions, agencies and public
authorities (municipal bonds) with remaining maturities of less than 15 years.
The Fund's policy is to invest, under normal market conditions, at least 80% of
its total assets in municipal bonds with remaining maturities of less than
15 years. Under normal market conditions, the Fund will invest at least 80% of
its total assets in municipal securities that pay interest that, in the opinion
of bond counsel to the issuer (or on the basis of other authority believed by
Fund's investment manager to be reliable), is exempt from federal income tax.
The Fund seeks to maintain a dollar-weighted average duration between three and
eight years. Under normal market conditions, the Fund will invest at least 80%
of its total assets in municipal bonds that, at the time of investment, are
rated in the four highest categories by a nationally recognized statistical
rating organization ("NRSRO") or are unrated but judged to be of comparable
quality by the Fund's investment manager, Neuberger Berman Management Inc. ("NB
Management"). The Fund may invest up to 20% of its total assets in municipal
bonds that at the time of investment are rated Ba/BB or B by Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Rating Agency ("S&P") or
Fitch, Inc. ("Fitch") or that are unrated but judged to be of comparable quality
by NB Management. Bonds of below investment grade quality are regarded as having
predominately speculative characteristics with respect to the issuer's capacity
to pay interest and repay principal, and are commonly referred to as "junk
bonds." There is no assurance that the Fund will achieve its investment
objective.

    NO PRIOR HISTORY. Because the Fund is newly organized, its shares of common
stock ("Common Shares") have no history of public trading. Shares of closed-end
investment companies frequently trade at a discount from their net asset value,
and investors may lose money by purchasing Common Shares in the initial public
offering. The Common Shares have been approved for listing, subject to issuance
of notice, on the American Stock Exchange. The trading or "ticker" symbol of the
Common Shares is expected to be "NBH."

    PREFERRED SHARES. The Fund intends to use leverage by issuing shares of
preferred stock ("Preferred Shares") representing approximately 38% of the
Fund's capital immediately after their issuance. The Fund also may add leverage
to the portfolio by utilizing certain derivative instruments. By using leverage,
the Fund will seek to obtain a higher return for holders of Common Shares
("Common Stockholders") than if the Fund did not use leverage. Leveraging is a
speculative technique and there are special risks involved. There can be no
assurance that a leveraging strategy will be used or that it will be successful
during any period in which it is employed. See "Preferred Shares and Related
Leverage," "Risks -- Leverage Risk" and "Risks -- Derivatives Risk."

    INVESTING IN THE FUND'S COMMON SHARES INVOLVES CERTAIN RISKS. SEE "RISKS"
BEGINNING ON PAGE 21 OF THIS PROSPECTUS.
                               ------------------

<Table>
<Caption>
                                                              PER SHARE           TOTAL
                                                              ---------           -----
<S>                                                           <C>               <C>
Public offering price.......................................    $15.00              $
Sales load..................................................     $.675              $
Estimated offering expenses(1)..............................      $.03              $
Proceeds to the Fund........................................   $14.295              $
</Table>

    (1)  In addition to the sales load, the Fund will pay organizational and
         offering expenses of up to $.03 per Common Share, estimated to total
         $       , which will reduce the "Proceeds to the Fund" (above). NB
         Management has agreed to pay organizational expenses and offering costs
         of the Fund (other than the sales load) that exceed $.03 per Common
         Share.

    The underwriters may also purchase up to an additional    Common Shares at
the public offering price, less the sales load, within 45 days from the date of
this prospectus to cover over-allotments.

    Neither the Securities and Exchange Commission nor any State Securities
Commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

    The Common Shares will be ready for delivery on or about September   , 2002.
                          ----------------------------

<Table>
<S>                                   <C>                         <C>
                                         MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC.                                               LEGG MASON WOOD WALKER
                                                                             INCORPORATED
QUICK & REILLY, INC.                     RBC CAPITAL MARKETS              WELLS FARGO SECURITIES, LLC
ADVEST, INC.                            ROBERT W. BAIRD & CO.   H&R BLOCK FINANCIAL ADVISORS, INC.
FAHNESTOCK & CO. INC.                    FERRIS, BAKER WATTS,             JANNEY MONTGOMERY SCOTT LLC
                                             INCORPORATED
</Table>

<Table>
<S>                                   <C>                         <C>
J.J.B. HILLIARD, W.L. LYONS, INC.     MCDONALD INVESTMENTS INC.         MORGAN KEEGAN & COMPANY, INC.
</Table>

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


               The date of this prospectus is September 24, 2002.

<Page>
    You should read this prospectus, which contains important information about
the Fund, before deciding whether to invest in the Common Shares, and retain it
for future reference. A Statement of Additional Information, dated            ,
2002, containing additional information about the Fund, has been filed with the
Securities and Exchange Commission and is incorporated by reference in its
entirety into this prospectus, which means that it is part of the prospectus for
legal purposes. You may request a free copy of the Statement of Additional
Information, the table of contents of which is on page 41 of this prospectus, by
calling 877-461-1899 or by writing to the Fund, or obtain a copy (and other
information regarding the Fund) from the Securities and Exchange Commission's
web site (http://www.sec.gov).

    The Fund's Common Shares do not represent a deposit or obligation of, and
are not guaranteed or endorsed by, any bank or other insured depository
institution, and are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other government agency.

                                       2
<Page>
                               TABLE OF CONTENTS


<Table>
<Caption>
                                                    PAGE
                                                    ----
<S>                                                 <C>
Prospectus Summary................................    4
Summary of Fund Expenses..........................   13
The Fund..........................................   14
Use of Proceeds...................................   14
The Fund's Investments............................   15
Preferred Shares and Related Leverage.............   19
Risks.............................................   21
How the Fund Manages Risk.........................   27
Management of the Fund............................   29
Net Asset Value...................................   30
Distributions.....................................   31
Dividend Reinvestment Plan........................   31
Description of Shares.............................   33
Anti-Takeover and Other Provisions in the
  Articles of Incorporation.......................   35
Repurchase of Common Shares; Tender Offers;
  Conversion to Open-End Fund.....................   35
Tax Matters.......................................   36
Underwriting......................................   39
Custodian and Transfer Agent......................   41
Legal Matters.....................................   41
Table of Contents for Statement of Additional
  Information.....................................   42
</Table>


    YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. THE FUND HAS NOT, AND THE UNDERWRITERS HAVE NOT,
AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE
PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON
IT. THE FUND IS NOT, AND THE UNDERWRITERS ARE NOT, MAKING AN OFFER TO SELL THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU
SHOULD ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE
DATE OF THIS PROSPECTUS. THE FUND'S BUSINESS, FINANCIAL CONDITION AND PROSPECTS
MAY HAVE CHANGED SINCE THAT DATE.

    Until            , 2002 (25 days after the date of this prospectus), all
dealers that buy, sell or trade the Common Shares, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.

                                       3
<Page>
                               PROSPECTUS SUMMARY

    THIS IS ONLY A SUMMARY. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION
THAT YOU SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON SHARES. YOU SHOULD
REVIEW THE MORE DETAILED INFORMATION CONTAINED IN THIS PROSPECTUS AND IN THE
STATEMENT OF ADDITIONAL INFORMATION.


<Table>
<S>                                                 <C>
THE FUND..........................................  Neuberger Berman Intermediate Municipal Fund Inc.
                                                    is a newly organized, diversified closed-end
                                                    management investment company. See "The Fund."

THE OFFERING......................................  The Fund is offering           shares of common
                                                    stock, with a par value of $.0001 per share, at
                                                    $15.00 per share through a group of underwriters
                                                    (the "Underwriters") led by Merrill Lynch, Pierce
                                                    Fenner & Smith Incorporated ("Merrill Lynch"). The
                                                    shares of common stock are called "Common Shares"
                                                    in the rest of this prospectus. You must purchase
                                                    at least 100 Common Shares ($1,500) in order to
                                                    participate in this offering. The Fund has given
                                                    the Underwriters an option to purchase up to
                                                    additional Common Shares to cover orders in excess
                                                    of           Common Shares. See "Underwriting."
                                                    NB Management has agreed to pay organizational
                                                    expenses and offering costs of the Fund (other
                                                    than the sales load) that exceed $.03 per Common
                                                    Share.

INVESTMENT OBJECTIVE
AND POLICIES......................................  The Fund's investment objective is to provide
                                                    Common Stockholders a high level of current income
                                                    exempt from federal income tax. This income, if
                                                    any, will be distributed to Common Stockholders
                                                    after the satisfaction of the obligation to pay
                                                    dividends on Preferred Shares. The Fund seeks to
                                                    achieve its objective by investing primarily in
                                                    investment grade municipal debt securities issued
                                                    by state and local governments, including U.S.
                                                    territories and possessions, political
                                                    subdivisions, agencies and public authorities
                                                    (municipal bonds) with remaining maturities of
                                                    less than 15 years. The Fund's policy is to
                                                    invest, under normal market conditions, at least
                                                    80% of its total assets in municipal bonds with
                                                    remaining maturities of less than 15 years. Under
                                                    normal market conditions, the Fund will invest at
                                                    least 80% of its total assets in municipal
                                                    securities that pay interest that, in the opinion
                                                    of bond counsel to the issuer (or on the basis of
                                                    other authority believed by Fund's investment
                                                    manager to be reliable), is exempt from federal
                                                    income tax. As a fundamental policy, the Fund will
                                                    invest at least 80% of its total assets in
                                                    Municipal Bonds.

                                                    The Fund seeks to maintain a dollar-weighted
                                                    average duration between three and eight years.
                                                    Under normal market conditions, the Fund will
                                                    invest at least 80% of its total assets in
                                                    municipal bonds that, at the time of investment,
                                                    are rated in the four highest rating categories by
                                                    an NRSRO or are unrated but considered to be of
                                                    comparable quality by NB Management. The Fund may
                                                    invest up to 20% of its total assets in municipal
                                                    bonds that at the time of investment are rated
                                                    Ba/BB or B by Moody's,
</Table>


                                       4
<Page>


<Table>
<S>                                                 <C>
                                                    S&P or Fitch or that are unrated but judged to be
                                                    of comparable quality by NB Management. There is
                                                    no assurance that the Fund will achieve its
                                                    investment objective. See "The Fund's
                                                    Investments."

                                                    The Fund's investments are subject to
                                                    diversification, liquidity and related guidelines
                                                    that may be established in connection with the
                                                    Fund's desire to receive from Moody's and Fitch of
                                                    ratings of "Aaa" and "AAA", respectively, for
                                                    Preferred Shares. Ratings issued by NRSROs,
                                                    including Moody's and Fitch, do not eliminate or
                                                    mitigate the risk of investing in Fund shares.

PROPOSED OFFERING OF
PREFERRED SHARES AND OTHER
FORMS OF LEVERAGE.................................  Subject to the Board's approval in light of market
                                                    conditions and other factors, approximately one to
                                                    three months after completion of this offering,
                                                    the Fund intends to offer Preferred Shares
                                                    representing approximately 38% of the Fund's
                                                    capital after their issuance. For purposes of this
                                                    prospectus, the Fund's capital means the total
                                                    assets of the Fund less all liabilities and
                                                    indebtedness not representing Preferred Shares or
                                                    other senior securities. The liquidation
                                                    preference of the Preferred Shares is not a
                                                    liability. The issuance of Preferred Shares will
                                                    leverage your investment in Common Shares.
                                                    Leverage involves special risks. There is no
                                                    assurance that the Fund will issue Preferred
                                                    Shares or that, if issued, the Fund's leveraging
                                                    strategy will be successful. The net proceeds the
                                                    Fund obtains from selling the Preferred Shares
                                                    will be invested, in accordance with the Fund's
                                                    investment objective and policies, principally in
                                                    intermediate-term municipal bonds, which generally
                                                    will pay fixed rates of interest over the life of
                                                    the bond. The Preferred Shares will pay dividends
                                                    based on short-term interest rates (which will be
                                                    redetermined periodically, pursuant to an auction
                                                    process). So long as the rate of return, net of
                                                    applicable Fund expenses, on the intermediate-term
                                                    bonds and other instruments purchased by the Fund
                                                    with the proceeds from selling the Preferred
                                                    Shares exceeds Preferred Share dividend rates as
                                                    reset periodically, plus associated expenses, the
                                                    investment of the proceeds of the Preferred Shares
                                                    will generate more income than will be needed to
                                                    pay dividends on the Preferred Shares. If so, the
                                                    excess will be used to pay higher dividends to
                                                    Common Stockholders than if the Fund were not so
                                                    leveraged through the issuance of Preferred
                                                    Shares. If not, the issuance of Preferred Shares
                                                    could reduce the return to the Common
                                                    Stockholders. The Fund also may add leverage to
                                                    the portfolio by utilizing derivative instruments.
                                                    The Fund may issue Preferred Shares so long as
                                                    after their issuance the liquidation value of the
                                                    Preferred Shares, plus the aggregate amount of
                                                    senior securities representing indebtedness, does
                                                    not exceed 50% of the Fund's capital. See
                                                    "Risks--Leverage Risk." The Fund cannot assure you
                                                    that the issuance of Preferred Shares or the use
                                                    of other forms of leverage will result in a higher
                                                    yield on your Common Shares. Once Preferred Shares
                                                    are issued and/or other
</Table>


                                       5
<Page>

<Table>
<S>                                                 <C>
                                                    forms of leverage are used, the net asset value
                                                    and market price of the Common Shares and the
                                                    yield to Common Stockholders will be more
                                                    volatile. See "Preferred Shares and Related
                                                    Leverage," "Description of Shares--Preferred
                                                    Shares" and "Risks--Leverage Risk."

INVESTMENT MANAGER................................  NB Management serves as the investment manager of
                                                    the Fund. Subject to the general supervision of
                                                    the Board of Directors, NB Management is
                                                    responsible for managing, either directly or
                                                    through others selected by it, the investment
                                                    activities of the Fund and the Fund's business
                                                    affairs and other administrative matters.
                                                    NB Management will receive a fee, payable monthly,
                                                    in a maximum annual amount equal to .55% of the
                                                    Fund's average daily total assets minus
                                                    liabilities other than the aggregate indebtedness
                                                    entered into for purposes of leverage ("Managed
                                                    Assets"). NB Management has contractually agreed
                                                    to waive a portion of the management fees it is
                                                    entitled to receive from the Fund at the annual
                                                    rate of .25% of the Fund's average daily Managed
                                                    Assets from the commencement of operations through
                                                    October 31, 2007 (I.E., roughly the first five
                                                    years of operations), and at a declining amount
                                                    for an additional four years of operations
                                                    (through October 31, 2011).

                                                    NB Management has retained Neuberger Berman, LLC
                                                    ("Neuberger Berman") to serve as the Fund's
                                                    sub-adviser. See "Sub-Adviser" below. Together,
                                                    the firms and their affiliates manage $58.7
                                                    billion in total assets (as of June 30, 2002) and
                                                    continue an asset management history that began in
                                                    1939.

                                                    Theodore P. Giuliano, Thomas J. Brophy and Lori
                                                    Canell are the portfolio managers of the Fund. See
                                                    "Management of the Fund--Investment Manager" for a
                                                    description of their backgrounds and experience.

SUB-ADVISER.......................................  NB Management retains Neuberger Berman to serve as
                                                    the Fund's sub-adviser responsible for providing
                                                    investment recommendations and research. NB
                                                    Management (and not the Fund) will pay a portion
                                                    of the fees it receives to Neuberger Berman in
                                                    return for its services.

DISTRIBUTIONS.....................................  Commencing with the Fund's first dividend, it
                                                    intends to pay regular monthly cash dividends to
                                                    you at a rate based on its projected performance.
                                                    The dividend rate that the Fund pays on its Common
                                                    Shares will depend on a number of factors,
                                                    including dividends payable on the Preferred
                                                    Shares. As portfolio and market conditions change,
                                                    the rate of dividends on the Common Shares and the
                                                    Fund's dividend policy could change. Over time,
                                                    the Fund will distribute substantially all of its
                                                    net investment income (after it pays accrued
                                                    dividends on any outstanding Preferred Shares). In
                                                    addition, at least annually, the Fund intends to
                                                    distribute to you your pro rata share of any
                                                    available net capital gains. Your initial dividend
                                                    is expected to be declared approximately 45 days,
                                                    and paid approximately 60 to 90 days, from the
                                                    completion of this offering, depending on market
</Table>

                                       6
<Page>


<Table>
<S>                                                 <C>
...................................................  conditions. Unless you electto receive
                                                    distributions in cash, all of your distributions
                                                    will be automatically reinvested in additional
                                                    Common Shares under the Fund's Dividend
                                                    Reinvestment Plan. See "Distributions" and
                                                    "Dividend Reinvestment Plan."

TAXATION..........................................  Because under normal circumstances the Fund will
                                                    invest substantially all of its assets in
                                                    municipal bonds that pay interest that is exempt
                                                    from federal income tax, the dividends paid on
                                                    Common Shares and Preferred Shares attributable to
                                                    that interest will be similarly exempt. However,
                                                    dividends paid on Common Shares and Preferred
                                                    Shares may be subject to state and local taxes.
                                                    All or a portion of the interest paid on the
                                                    municipal bonds held by the Fund may be an item of
                                                    tax preference for purposes of the federal
                                                    alternative minimum tax ("AMT") ("Tax Preference
                                                    Item"), with the result that all or a portion of
                                                    the dividends paid to Fund stockholders also would
                                                    be such an item. Common Shares thus may not be a
                                                    suitable investment if you are subject to the AMT
                                                    or would become subject thereto by investing in
                                                    Common Shares. The Fund also may realize net long-
                                                    or short-term capital gain on the sale or exchange
                                                    of its securities, which would be taxable to its
                                                    stockholders when distributed to them. Taxable
                                                    income or gain earned or realized by the Fund will
                                                    be allocated proportionately to Common
                                                    Stockholders and holders of Preferred Shares
                                                    ("Preferred Stockholders"), based on the
                                                    percentage of total dividends and capital gain
                                                    distributions, respectively, paid to each class
                                                    for that year. Accordingly, certain specified
                                                    Common Shares distributions may be subject to
                                                    federal income tax.

LISTING...........................................  The Common Shares have been approved for listing,
                                                    subject to issuance of notice, on the
                                                    American Stock Exchange. The trading or "ticker"
                                                    symbol of the Common Shares is expected to be
                                                    "NBH." See "Description of Shares--Common Shares."

CUSTODIAN AND TRANSFER AGENT......................  State Street Bank and Trust Company serves as
                                                    custodian of the Fund's assets. The Bank of New
                                                    York serves as transfer agent and dividend
                                                    disbursement agent. See "Custodian and Transfer
                                                    Agent."

MARKET PRICE OF SHARES............................  Shares of closed-end investment companies
                                                    frequently trade at prices lower than their
                                                    per-share net asset value. Net asset value will be
                                                    reduced immediately following the offering by the
                                                    sales load and the amount of organization and
                                                    offering expenses paid by the Fund. See "Use of
                                                    Proceeds." In addition to net asset value, market
                                                    price may be affected by such factors relating to
                                                    the Fund and its portfolio holdings as dividend
                                                    levels (which are in turn affected by expenses),
                                                    dividend stability, portfolio credit quality and
                                                    liquidity and call protection and market supply
                                                    and demand. See "Preferred Shares and Related
                                                    Leverage," "Risks," "Description of Shares," and
                                                    "Repurchase of Common Shares; Conversion to
                                                    Open-End Fund" in this prospectus, and the
                                                    Statement of Additional Information under
                                                    "Repurchase of Common Shares; Conversion to
                                                    Open-End Fund." The Common
</Table>


                                       7
<Page>

<Table>
<S>                                                 <C>
                                                    Shares are designed primarily for long-term
                                                    investors, and you should not view the Fund as a
                                                    vehicle for trading purposes.

SPECIAL RISK CONSIDERATIONS.......................  NO OPERATING HISTORY. The Fund is a newly
                                                    organized, diversified, closed-end management
                                                    investment company with no history of operations.

                                                    MARKET DISCOUNT RISK. Shares of closed-end
                                                    management investment companies like the Fund
                                                    frequently trade at a discount from their
                                                    per-share net asset value. The Fund's shares may
                                                    trade at a price that is less than the initial
                                                    offering price. This risk may be greater for
                                                    investors who sell their shares in a relatively
                                                    short period of time after completion of the
                                                    initial offering.

                                                    INTEREST RATE RISK. Generally, when market
                                                    interest rates fall, bond prices rise, and vice
                                                    versa. Interest rate risk is the risk that the
                                                    municipal bonds in the Fund's portfolio will
                                                    decline in value because of increases in market
                                                    interest rates. The prices of longer-term bonds
                                                    generally fluctuate more than prices of shorter-
                                                    term bonds as interest rates change. Because the
                                                    Fund will invest primarily in intermediate-term
                                                    bonds, the Common Share net asset value and market
                                                    price per share will fluctuate more in response to
                                                    changes in market interest rates than if the Fund
                                                    invested primarily in short-term bonds. The Fund's
                                                    use of leverage, as described below, will tend to
                                                    increase Common Share interest rate risk. See
                                                    "Risks--Interest Rate Risk" for additional
                                                    information.

                                                    CREDIT RISK. Credit risk is the risk that an
                                                    issuer of a municipal bond will become unable to
                                                    meet its obligation to make interest and principal
                                                    payments. In general, lower rated municipal bonds
                                                    carry a greater degree of credit risk. If rating
                                                    agencies lower their ratings of municipal bonds in
                                                    the Fund's portfolio, the value of those
                                                    obligations could decline, which could jeopardize
                                                    the rating agencies' ratings of Preferred Shares.
                                                    In addition, the underlying revenue source for a
                                                    municipal obligation other than a general
                                                    obligation bond may be insufficient to pay
                                                    principal or interest in a timely manner. Because
                                                    the primary source of income for the Fund is the
                                                    interest and principal payments on the municipal
                                                    bonds in which it invests, any default by an
                                                    issuer of a municipal obligation could have a
                                                    negative impact on the Fund's ability to pay
                                                    dividends on Common Shares and could result in the
                                                    redemption of some or all Common Shares. This risk
                                                    of default may be greater for private activity
                                                    bonds or other municipal bonds whose payments are
                                                    dependent upon a specific source of revenue. Even
                                                    if the issuer does not actually default, adverse
                                                    changes in the issuer's financial condition may
                                                    negatively affect its credit rating or presumed
                                                    creditworthiness. These developments would
                                                    adversely affect the market value of the issuer's
                                                    obligations.

                                                    The Fund may invest up to 20% of its total assets
                                                    in municipal bonds that at the time of investment
                                                    are rated Ba/BB or B by Moody's, S&P or Fitch or
                                                    that are unrated but judged to be of comparable
                                                    quality by NB Management. Bonds of below
</Table>

                                       8
<Page>


<Table>
<S>                                                 <C>
                                                    investment grade quality are regarded as having
                                                    predominantly speculative characteristics with
                                                    respect to capacity to pay interest and repay
                                                    principal, and these bonds are commonly referred
                                                    to as "junk bonds." The prices of these lower
                                                    grade bonds are more sensitive to negative
                                                    developments, such as a decline in the issuer's
                                                    revenues or a general economic downturn, than are
                                                    the prices of higher grade securities. Municipal
                                                    bonds in the lowest investment grade category may
                                                    also be considered to possess some speculative
                                                    characteristics by certain rating agencies.

                                                    MUNICIPAL BOND MARKET RISK. The amount of public
                                                    information available about the municipal bonds in
                                                    the Fund's portfolio is generally less than that
                                                    for corporate equities or bonds, and the
                                                    investment performance of the Fund may therefore
                                                    be more dependent on the analytical abilities of
                                                    NB Management than would be a stock fund or
                                                    taxable bond fund. The secondary market for
                                                    municipal bonds, particularly below investment
                                                    grade bonds in which the Fund may invest, also
                                                    tends to be less well-developed and less liquid
                                                    than many other securities markets, which may
                                                    adversely affect the Fund's ability to sell bonds
                                                    from its portfolio at attractive prices. Some
                                                    municipal bonds are supported only by the revenue
                                                    of a particular project or privately operated
                                                    facility, and are not supported by the taxing
                                                    power of any governmental entity.

                                                    The recent economic downturn, which is of
                                                    uncertain duration, has absorbed the reserves that
                                                    many states and municipalities had accumulated
                                                    during the long economic expansion of the 1990's
                                                    and has unbalanced many state and municipal
                                                    budgets. If the economy remains slow, it could
                                                    also impact many private enterprises whose
                                                    revenues support private activity bonds.

                                                    TERRORISM RISKS. Municipal securities are subject
                                                    to a risk that terror attacks could result in
                                                    substantial loss of life, damage the local economy
                                                    and damage or destroy significant portions of the
                                                    municipal infrastructure. The impact of these
                                                    events may extend beyond the immediately affected
                                                    area and beyond the time of the attack. Businesses
                                                    that leave an affected area in the wake of such an
                                                    attack may not return, and economic activity may
                                                    slow if tourists and local consumers avoid the
                                                    affected city. These events could severely affect
                                                    the tax base of a particular issuer of municipal
                                                    securities and could damage or destroy a facility
                                                    whose revenues support the payment of particular
                                                    municipal securities. These attacks, and measures
                                                    taken to prevent them, may also impose substantial
                                                    overtime costs on municipal budgets. See "Recent
                                                    Developments."

                                                    HIGH YIELD RISK. Investing in high yield bonds
                                                    involves additional risks, including credit risk.
                                                    The value of high yield, lower quality bonds is
                                                    affected by the creditworthiness of the issuers of
                                                    the securities and by general economic and
                                                    specific industry conditions. Issuers of high
                                                    yield bonds are not as strong financially as those
                                                    with higher credit ratings, so their bonds are
                                                    usually
</Table>


                                       9
<Page>

<Table>
<S>                                                 <C>
                                                    considered speculative investments. These issuers
                                                    are more vulnerable to financial setbacks and
                                                    recession than more creditworthy issuers, which
                                                    may impair their ability to make interest and
                                                    principal payments. Investments in lower grade
                                                    securities will expose the Fund to greater risks
                                                    than if the Fund owned only higher grade
                                                    securities.

                                                    REINVESTMENT RISK. Income from the Fund's
                                                    municipal bond portfolio will decline if and when
                                                    the Fund invests the proceeds from matured, traded
                                                    or called bonds at market interest rates that are
                                                    below the portfolio's current earnings rate. A
                                                    decline in income could affect the Common Shares'
                                                    market price or their overall return.

                                                    LEVERAGE RISK. The Fund's use of leverage through
                                                    the issuance of Preferred Shares creates an
                                                    opportunity for increased Common Share net income,
                                                    but also creates special risks for Common
                                                    Stockholders. There is no assurance that the
                                                    Fund's leveraging strategy will be successful. The
                                                    Preferred Shares will pay dividends based on
                                                    short-term interest rates (which will be
                                                    redetermined periodically, pursuant to an auction
                                                    process), and the Fund will invest the net
                                                    proceeds of the Preferred Shares offering
                                                    principally in intermediate-term, typically fixed
                                                    rate, municipal bonds. So long as the portfolio
                                                    securities the Fund purchases with the proceeds of
                                                    selling the Preferred Shares provide a higher rate
                                                    of return (net of Fund expenses) than the
                                                    Preferred Share dividend rate, as reset
                                                    periodically, plus associated expenses, the
                                                    leverage will allow Common Stockholders to receive
                                                    a higher current rate of return than if the Fund
                                                    were not leveraged. If, however, short-term
                                                    tax-exempt interest rates rise substantially after
                                                    the issuance of the Preferred Shares, the
                                                    Preferred Share dividend rate could approach or
                                                    exceed the acquisition yield on intermediate-term
                                                    bonds and other investments held by the Fund that
                                                    were acquired during periods of generally lower
                                                    interest rates, reducing dividend yields and
                                                    returns to Common Stockholders. Investment by the
                                                    Fund in derivative instruments may increase its
                                                    leverage and, during periods of rising interest
                                                    rates, may adversely affect its income,
                                                    distributions and total return to Common
                                                    Stockholders. See "The Fund's Investments" for a
                                                    discussion of these instruments. Preferred Shares
                                                    are expected to pay cumulative dividends, which
                                                    may tend to increase leverage risk. Leverage
                                                    creates two major types of risks for Common
                                                    Stockholders:

                                                    (1) the likelihood of greater volatility of net
                                                    asset value and market price of Common Shares,
                                                    because changes in the value of the Fund's
                                                    municipal bond portfolio (including securities
                                                    bought with the proceeds of the Preferred Shares
                                                    offering) are borne entirely by the Common
                                                    Stockholders; and

                                                    (2) the possibility either that Common Share
                                                    income will fall if the Preferred Share dividend
                                                    rate rises, or that Common Share
</Table>

                                       10
<Page>


<Table>
<S>                                                 <C>
                                                    income will fluctuate because the Preferred Share
                                                    dividend rate varies.

                                                    Because the fees received by NB Management are
                                                    based on the Managed Assets of the Fund (including
                                                    assets represented by Preferred Shares and any
                                                    leverage created thereby), NB Management has a
                                                    financial incentive for the Fund to issue
                                                    Preferred Shares, which may create a conflict of
                                                    interest between NB Management and the Common
                                                    Stockholders.

                                                    INFLATION RISK. Inflation risk is the risk that
                                                    the value of assets or income from the Fund's
                                                    investments will be worth less in the future as
                                                    inflation decreases the present value of payments
                                                    at future dates.

                                                    LIQUIDITY RISK. The Fund may invest up to 20% of
                                                    its net assets in securities that are illiquid at
                                                    the time of investment, which means a security
                                                    that cannot be sold within seven days at a price
                                                    which approximates the price at which the Fund is
                                                    carrying it. Illiquid securities may trade at a
                                                    discount from comparable, more liquid investments,
                                                    and may be subject to wide fluctuations in market
                                                    value. Also, the Fund may not be able to dispose
                                                    of illiquid securities when that would be
                                                    beneficial at a favorable time or price.

                                                    DERIVATIVES RISK. The Fund may utilize a variety
                                                    of derivative instruments for investment or risk
                                                    management purposes, such as engaging in interest
                                                    rate and other hedging and risk management
                                                    transactions, and purchasing and selling options
                                                    (including swaps, caps, floors and collars) on
                                                    municipal bonds and on indices based on municipal
                                                    bonds. In general, the Fund may purchase and sell
                                                    (or write) options on up to 20% of its total
                                                    assets. Derivatives are subject to a number of
                                                    risks described elsewhere in this prospectus, such
                                                    as liquidity risk, interest rate risk, credit risk
                                                    and management risk. In addition, investment by
                                                    the Fund in derivative instruments may increase
                                                    the Fund's leverage and, during periods of rising
                                                    interest rates, may adversely affect the Fund's
                                                    income, distributions and total returns to Common
                                                    Stockholders. Derivatives also involve the risk of
                                                    mispricing or improper valuation, and the risk
                                                    that changes in the value of a derivative may not
                                                    correlate perfectly with an underlying asset,
                                                    interest rate or index. Suitable derivative
                                                    transactions may not be available in all
                                                    circumstances and there can be no assurance that
                                                    the Fund will engage in these transactions to
                                                    reduce exposure to other risks when that would be
                                                    beneficial.

                                                    MANAGEMENT RISK. The Fund is subject to management
                                                    risk because it is an actively managed investment
                                                    portfolio. NB Management and the portfolio
                                                    managers will apply investment techniques and risk
                                                    analyses in making investment decisions for the
                                                    Fund, but there can be no guarantee that these
                                                    will produce the desired results.
</Table>


                                       11
<Page>


<Table>
<S>                                                 <C>
                                                    ECONOMIC SECTOR AND GEOGRAPHIC RISK. The Fund may
                                                    invest 25% or more of its total assets in
                                                    municipal obligations of issuers in the same state
                                                    (or U.S. territory) or in municipal obligations in
                                                    the same economic sector, including the following:
                                                    lease rental obligations of state and local
                                                    authorities; obligations dependent on annual
                                                    appropriations by a state's legislature for
                                                    payment; obligations of state and local housing
                                                    finance authorities; municipal utilities systems
                                                    or public housing authorities; obligations of
                                                    hospitals or life care facilities; and industrial
                                                    development or pollution control bonds issued for
                                                    electrical utility systems, steel companies, paper
                                                    companies or other purposes. This may make the
                                                    Fund more susceptible to adverse economic,
                                                    political or regulatory occurrences affecting a
                                                    particular state or economic sector. For example,
                                                    health care related issuers are susceptible to
                                                    Medicare, Medicaid and other third party payor
                                                    reimbursement policies, and national and state
                                                    health care legislation. As concentration
                                                    increases, so does the potential for fluctuation
                                                    in the net asset value of the Common Shares.

                                                    ANTI-TAKEOVER PROVISIONS. The Fund's Articles of
                                                    Incorporation (the "Articles") contain provisions
                                                    limiting (1) the ability of other entities or
                                                    persons to acquire control of the Fund, (2) the
                                                    Fund's freedom to engage in certain transactions
                                                    and (3) the ability of the Fund's directors or
                                                    stockholders to amend the Articles. These
                                                    provisions of the Articles may be regarded as
                                                    "anti-takeover" provisions. See "Anti-Takeover and
                                                    Other Provisions in the Articles of
                                                    Incorporation."

                                                    RECENT DEVELOPMENTS. As a result of the terrorist
                                                    attacks on the World Trade Center and the Pentagon
                                                    on September 11, 2001, some of the U.S. securities
                                                    markets were closed for a four-day period. These
                                                    terrorist attacks and related events have led to
                                                    increased short-term market volatility and may
                                                    have long-term effects on U.S. and world economies
                                                    and markets. A similar disruption of the financial
                                                    markets could impact interest rates, auctions,
                                                    secondary trading, ratings, credit risk, inflation
                                                    and other factors relating to the securities.

SPECIAL TAX CONSIDERATIONS........................  While the Fund expects most of its income to be
                                                    exempt from federal income tax, the Fund's
                                                    distributions of any taxable net investment income
                                                    and any net short-term capital gain (I.E.,
                                                    dividends) will be taxable to stockholders as
                                                    ordinary income, and distributions of any net
                                                    capital gain (the excess of net long-term capital
                                                    gain over net short-term capital loss) will be
                                                    subject to tax as long-term capital gain. See "Tax
                                                    Matters."
</Table>


                                       12
<Page>
                            SUMMARY OF FUND EXPENSES

    The following table assumes the issuance of Preferred Shares in an amount
equal to 38% of the Fund's capital (after their issuance), and shows Fund
expenses as a percentage of net assets attributable to Common Shares. Footnote 5
to the table also shows Fund expenses as a percentage of net assets attributable
to Common Shares, but assumes that no Preferred Shares are issued or outstanding
(such as will be the case prior to the Fund's expected issuance of Preferred
Shares).

<Table>
<S>                                                 <C>
STOCKHOLDER TRANSACTION EXPENSES
  Sales Load (as a percentage of offering
    price)........................................  4.50%
  Expenses Borne by the Fund......................   .20%(1)(2)
  Dividend Reinvestment Plan......................  None(3)
</Table>

<Table>
<Caption>
                                                      PERCENTAGE OF NET
                                                     ASSETS ATTRIBUTABLE
                                                      TO COMMON SHARES
                                                     (ASSUMES PREFERRED
                                                    SHARES ARE ISSUED)(5)
                                                    ---------------------
<S>                                                 <C>
ANNUAL EXPENSES
  Management Fees.................................           .89%
  Other Expenses..................................           .39%
                                                            ----
  Total Annual Expenses...........................          1.28%
  Fee Waiver (Years 1-5)(4).......................          (.40%)(6)
                                                            ----
  Net Annual Expenses (Years 1-5)(4)..............           .88%(6)
</Table>

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


(1)  NB Management has agreed to pay organizational expenses, and offering costs
     of the Fund (other than the sales load) that exceed $.03 per Common Share
     (.20% of the offering price).
(2)  If the Fund offers Preferred Shares, costs of that offering, estimated to
     be slightly more than 1.3% of the total amount of the Preferred Share
     offering, will effectively be borne by Common Stockholders and result in
     the reduction of the paid-in-capital attributable to the Common Shares.
     Assuming the issuance of Preferred Shares in an amount equal to 38% of the
     Fund's capital (after issuance), those offering costs are estimated to be
     no more than approximately $1.3 million or $.13 per Common Share (.8% of
     the offering price).
(3)  You will pay brokerage charges if you direct the Plan Agent (as defined
     below) to sell your Common Shares held in a dividend reinvestment account.
(4)  Year 1 represents the period from commencement of operations through
     October 31, 2003.
(5)  The table presented in this footnote estimates what the Fund's annual
     expenses would be, stated as percentages of the Fund's net assets
     attributable to Common Shares but, unlike the table above, assumes that no
     Preferred Shares are issued or outstanding. This will be the case, for
     instance, prior to the Fund's expected issuance of Preferred Shares. In
     accordance with these assumptions, the Fund's expenses would be estimated
     as follows:

<Table>
<Caption>
                                                     PERCENTAGE OF NET
                                                    ASSETS ATTRIBUTABLE
                                                     TO COMMON SHARES
                                                        (ASSUMES NO
                                                     PREFERRED SHARES
                                                       ARE ISSUED OR
                                                       OUTSTANDING)
                                                    -------------------
<S>                                                 <C>
ANNUAL EXPENSES
  Management Fees.................................          .55%
  Other Expenses..................................          .21%
                                                           ----
  Total Annual Expenses...........................          .76%
  Fee Waiver (Years 1-5)(4).......................         (.25)%(6)
                                                           ----
  Net Annual Expenses (Years 1-5)(4)..............          .51%(6)
</Table>


(6)  NB Management has contractually agreed to waive a portion of the management
     fees it is entitled to receive from the Fund at the annual rate of .25% of
     the Fund's Managed Assets from the commencement of operations through
     October 31, 2007 (I.E., roughly the first 5 years of Fund operations), .20%
     of average daily Managed Assets in year 6, .15% in year 7, .10% in year 8
     and .05% in year 9. NB Management has not agreed to waive any portion of
     its fees and expenses beyond October 31, 2011. Without the fee waiver, "Net
     Annual Expenses" would be estimated to be 1.28% of net assets attributable
     to Common Shares (assuming the issuance of Preferred Shares) and .76% of
     net assets attributable to Common Shares (assuming no Preferred Shares are
     issued or outstanding).

                                       13
<Page>
    The purpose of the table above and the example below is to help you
understand all fees and expenses that you, as a Common Stockholder, would bear
directly or indirectly. The Other Expenses shown in the table and related
footnotes are based on estimated amounts for the Fund's first year of operations
and assume that the Fund issues approximately 10 million Common Shares. If the
Fund issues fewer Common Shares, all other things being equal, these expenses
would increase. See "Management of the Fund" and "Dividend Reinvestment Plan."

    The following example illustrates the expenses (including the sales load of
$45, estimated offering expenses of this offering of $2 and the estimated
Preferred Share offering costs assuming Preferred Shares are issued representing
38% of the Fund's capital (after issuance) of $8) that you would pay on a $1,000
investment in Common Shares, assuming (1) net annual expenses of .88% of net
assets attributable to Common Shares (assuming the issuance of Preferred Shares)
in years 1 through 5, increasing to .96% in year 6, 1.04% in year 7, 1.12% in
year 8 and 1.20% in year 9; and (2) a 5% annual return(1):

<Table>
<Caption>
                                1 YEAR  3 YEARS  5 YEARS  10 YEARS(2)
                                ------  -------  -------  -----------
<S>                             <C>     <C>      <C>      <C>
Total Expenses incurred.......   $64      $82     $102       $169
</Table>

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

(1)  THE EXAMPLE ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
     EXPENSES. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN. The
     example assumes that the estimated "Other Expenses" set forth in the Annual
     Expenses table are accurate, that fees and expenses increase as described
     in note 2 below, and that all dividends and capital gain distributions are
     reinvested at net asset value. Actual expenses may be greater or less than
     those assumed. Moreover, the Fund's actual rate of return may be greater or
     less than the hypothetical 5% annual return shown in the example.
(2)  Assumes waiver of fees and expenses at an annual rate of .20% of the Fund's
     average daily Managed Assets in year 6, .15% in year 7, .10% in year 8 and
     .05% in year 9. NB Management has not agreed to waive any portion of the
     management fees it is entitled to receive from the Fund beyond October 31,
     2011. See "Management of the Fund--Management Agreement."

                                    THE FUND

    The Fund is a recently organized, diversified, closed-end management
investment company registered under the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder (the "1940 Act"). The Fund was
organized as a Maryland corporation on July 29, 2002. As a newly organized
entity, the Fund has no operating history. The Fund's principal office is
located at 605 Third Avenue, New York, New York 10158-0180, and its telephone
number is 877-461-1899.

                                USE OF PROCEEDS

    The net proceeds of the offering of Common Shares will be approximately
$       (or $       if the Underwriters exercise the over-allotment option in
full) after payment of the estimated organizational and offering costs. NB
Management has agreed to pay organizational expenses and offering costs of the
Fund (other than the sales load) that exceed $.03 per Common Share. The Fund
will invest the net proceeds of the offering in accordance with the Fund's
investment objective and policies as stated below. It is currently anticipated
that the Fund will be able to invest substantially all of the net proceeds in
municipal bonds that meet its investment objective and policies within three
months after the completion of the offering. Pending such investment, it is
anticipated that the proceeds will be invested in high quality, short-term,
tax-exempt securities, although the Fund may, if necessary, also invest in other
high quality, short-term securities, including mortgage-backed and corporate
debt securities, that may be either tax-exempt or taxable.

                                       14
<Page>
                             THE FUND'S INVESTMENTS

INVESTMENT OBJECTIVE AND POLICIES

    The Fund's investment objective is to provide Common Stockholders a high
level of current income exempt from federal income tax. This income, if any,
will be distributed to Common Stockholders after the satisfaction of the
obligation to pay dividends on Preferred Shares. The Fund may not achieve its
investment objective.


    The Fund normally invests primarily in investment grade municipal debt
securities issued by state and local governments, including U.S. territories and
possessions, political subdivisions, agencies and public authorities (municipal
bonds) with remaining maturities of less than 15 years. The Fund's policy is to
invest, under normal market conditions, at least 80% of its total assets in
municipal bonds with remaining maturities of less than 15 years. Under normal
market conditions, the Fund will invest at least 80% of its total assets in
municipal securities that pay interest that, in the opinion of bond counsel to
the issuer (or on the basis of other authority believed by Fund's investment
manager to be reliable), is exempt from federal income tax. The Fund seeks to
maintain a dollar-weighted average duration between three and eight years. Under
normal market conditions, the Fund will invest at least 80% of its total assets
in municipal bonds that are rated, at the time of investment, within the four
highest categories by an NRSRO or are unrated but judged to be of comparable
quality by NB Management. Investment grade debt securities are those rated "BBB"
or higher by S&P, "Baa" or higher by Moody's or within one of the four highest
rating categories by an NRSRO or are unrated but judged to be of comparable
quality by NB Management. As a fundamental policy, the Fund will invest at least
80% of its total assets in Municipal Bonds.



    Duration is a measure of a fixed income security's sensitivity to changes in
interest rates. Unlike final maturity, duration takes account of all payments
made over the life of the security. 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.


    The Fund may invest up to 20% of its total assets in municipal bonds that at
the time of investment are rated Ba/BB or B by Moody's, S&P or Fitch or that are
unrated but judged to be of comparable quality by NB Management. Bonds of below
investment grade quality are regarded as having predominately speculative
characteristics with respect to the issuer's capacity to pay interest and repay
principal, and are commonly referred to as "junk bonds."

    Municipal bonds may have all types of interest rate payment and reset terms,
including fixed rate, floating and variable rate, zero coupon, payment in kind
and auction rate features.


    The Fund will not invest more than 25% of its total assets in any industry,
nor does the Fund normally invest more than 5% of its total assets in the
securities of any single issuer. Governmental issuers of municipal bonds are not
considered part of any "industry." However, municipal bonds backed only by the
assets and revenues of nongovernmental users may for this purpose be deemed to
be issued by such nongovernmental users, and the 25% limitation would apply to
the industries of such nongovernmental users. It is nonetheless possible that
the Fund may invest more than 25% of its total assets in a broader segment of
the municipal bond market, such as hospital and other health care facilities
obligations, housing agency revenue obligations, and airport revenue
obligations. The Fund will invest more than 25% of its assets in such types of
municipal bonds if NB Management determines that the yields available from such
obligations in a particular segment justify the additional risks associated with
a large investment in that segment. These obligations could be supported by the
credit of governmental users, or by the credit of nongovernmental users engaged
in a number of industries; however, economic, business, political and other
developments generally affecting the revenues of such users (for example,
proposed legislation or pending court decisions affecting the financing of such
projects and market factors affecting the demand for their services or products)
may have a general adverse effect


                                       15
<Page>

on all such municipal bonds in such a market segment. The Fund may invest more
than 25% of its assets in industrial development bonds or in issuers located in
the same state. If the Fund were to invest more than 25% of its total assets in
issuers located in the same state, it would be more susceptible to adverse
economic, business, or regulatory conditions in that state.


    The Fund may purchase municipal bonds that are additionally secured by
insurance, bank credit agreements, or escrow accounts. The credit quality of
companies that provide such credit enhancements will affect the value of those
securities. Although the insurance feature reduces certain financial risks, the
premiums for insurance and the higher market price paid for insured obligations
may reduce the Fund's income. Insurance generally will be obtained from insurers
with a claims-paying ability rated Aaa by Moody's or AAA by S&P or Fitch. The
insurance feature does not guarantee the market value of the insured obligations
or the net asset value of the Common Shares.

    For temporary defensive purposes, and in order to keep cash on hand fully
invested, the Fund may temporarily invest to a substantial degree in
high-quality, short-term municipal bonds. If these high-quality, short-term
municipal bonds are not available or, in NB Management's judgment, do not afford
sufficient protection against adverse market conditions, the Fund may invest in
the following taxable securities: obligations of the U.S. Government, its
agencies or instrumentalities; other debt securities rated within the four
highest categories by an NRSRO; commercial paper rated in the highest category
by an NRSRO; certificates of deposit, time deposits and bankers' acceptances; or
repurchase agreements with respect to any of the foregoing investments or any
other fixed-income securities that NB Management considers consistent with such
strategy. To the extent the Fund invests in taxable securities, it will not be
able to achieve its investment objective of providing income exempt from federal
income tax.


    The Fund cannot accurately predict its portfolio turnover rate but
anticipates that its annual portfolio turnover rate will not exceed 100%. The
Fund generally will not trade securities for the purpose of realizing short-term
profits, but it will adjust its portfolio as it deems advisable in view of
prevailing or anticipated market conditions to accomplish its investment
objective. Other than for consideration of tax consequences, frequency of
portfolio turnover will not be a limiting factor if the Fund considers it
advantageous to purchase or sell securities.



    The investment objective and, unless otherwise specified, the investment
policies and limitations of the Fund are not fundamental. Any investment
objective, policy or limitation that is not fundamental may be changed by the
Board of Directors of the Fund without stockholder approval. The fundamental
investment policies and limitations of the Fund may not be changed without the
approval of the holders of a majority of the outstanding Common Shares and, if
issued, Preferred Shares voting as a single class, as well as by the vote of a
majority of the outstanding Preferred Shares tabulated separately. A "majority
of the outstanding" shares means (i) 67% or more of the shares present at a
meeting, if the holders of more than 50% of the shares are present or
represented by proxy, or (ii) more than 50% of the shares, whichever of (i) or
(ii) is less. These percentages are required by the 1940 Act.


    If you are, or as a result of an investment in the Fund would become,
subject to the AMT, the Fund may not be a suitable investment for you. Special
AMT rules apply to corporate holders. In addition, distributions of any taxable
net investment income and any net short-term capital gain (I.E., dividends) will
be taxable to stockholders as ordinary income, and distributions of any net
capital gain will be subject to tax as long-term capital gain. See "Tax
Matters."

    The following provides additional information regarding the types of
securities and other instruments in which the Fund will ordinarily invest. A
more detailed discussion of these and other instruments and investment
techniques that may be used by the Fund is provided under "Investment Objective
and Policies" in the Statement of Additional Information.

                                       16
<Page>
MUNICIPAL BONDS

    Municipal bonds are obligations issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, the interest
on which, in the opinion of bond counsel or other counsel to the issuer of such
securities is, at the time of issuance, not includable in gross income for
federal income tax purposes. Under normal market conditions, at least 80% of the
Fund's total assets will be invested in municipal bonds with remaining
maturities of less than 15 years.

    The Fund has not established any limit on the percentage of its portfolio
that may be invested in municipal bonds the interest on which is a Tax
Preference Item, and a substantial portion of the dividends paid on Common
Shares thus may be such an item. Common Shares may not be a suitable investment
for investors who are already subject to the AMT or who would become subject to
the AMT as a result of an investment in Common Shares. See "Tax Matters."

    The two principal classifications of municipal bonds are "general
obligation" bonds and "revenue" or "special obligation" bonds, which include
"private activity bonds." General obligation bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest, and, accordingly, the capacity of the issuer of a general obligation
bond as to the timely payment of interest and the repayment of principal when
due is affected by the issuer's maintenance of its tax base. Revenue or special
obligation bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special tax or other specific revenue source such as from the user of the
facility being financed; accordingly, the timely payment of interest and the
repayment of principal in accordance with the terms of the revenue or special
obligation bond is a function of the economic viability of such facility or such
revenue source. They are not supported by the general taxing authority of any
governmental agency. Although the ratings of NRSROs of the municipal bonds in
the Fund's portfolio are relative and subjective, and are not absolute standards
of quality, such ratings reflect the assessment of the NRSROs of the issuer's
ability, or the economic viability of the special revenue source, with respect
to the timely payment of interest and the repayment of principal in accordance
with the terms of the obligation. See Appendix A to the Statement of Additional
Information for a summary of ratings.

    Municipal bonds may have fixed or variable interest rates. The Fund may
purchase floating and variable rate demand notes, which are municipal bonds
normally having a stated maturity in excess of one year, but which permit the
holder to tender the notes for purchase at the principal amount thereof. The
interest rate on a floating rate demand note is based on a known lending rate,
such as a bank's prime rate, and is adjusted each time such rate is adjusted.
The interest rate on a variable rate demand note is adjusted at specified
intervals based on a specified benchmark. There generally is no secondary market
for these notes, although they may be tendered for redemption or remarketing at
face value and thus may be determined to be liquid. See "Investment Policies and
Techniques" in the Statement of Additional Information. Each such note purchased
by the Fund will meet the criteria established for the purchase of municipal
bonds.

    The Fund may invest in unrated "non-appropriation" lease obligations or
installment purchase contract obligations of municipal authorities or entities
believed by NB Management to be of comparable quality to securities that are
rated investment grade. There is no limitation on the percentage of the Fund's
assets that may be invested in these lease obligations. A lease obligation is
backed by the municipality's promise to make the payments due under the lease
obligation. Lease obligations containing "non-appropriation" clauses provide
that the municipality has no obligation to make lease installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis.

    The Fund may invest in zero coupon bonds. A zero coupon bond pays no
interest in cash to its holder during its life, although interest is accrued
during that period. Its value to an investor consists of

                                       17
<Page>
the difference between its face value at the time of maturity and the price at
which it was issued, which is generally an amount significantly less than its
face value (sometimes referred to as a "deep discount" price).

    The Fund may also engage in interest rate and other hedging and risk
management transactions; purchase and sell options (including swaps, caps,
floors and collars) on municipal bonds and on indices based on municipal bonds;
and purchase and sell municipal bonds on a "when-issued" or "delayed delivery"
basis. In general, the Fund may purchase and sell (or write) options on up to
20% of its total assets. The Securities and Exchange Commission requires that
obligations of investment companies such as the Fund, in connection with options
sold, must comply with certain segregation or cover requirements, which are more
fully described in the Statement of Additional Information. The Fund may engage
in these transactions both for speculative purposes and as a means to hedge
risk. The Fund may also engage, to a limited extent, in financial futures
contracts and related options contracts for hedging purposes. The Fund may also
hold securities or use investment techniques that provide for payments based on
or "derived" from the performance of an underlying asset, index or other
economic benchmark. Although NB Management believes that these investment
practices may further the Fund's investment objective, no assurance can be given
that these investment practices will achieve this result. See the Statement of
Additional Information for a further description of these investment practices.

SELECTION OF INVESTMENTS

    NB Management selects securities for the Fund's portfolio which it believes
entail reasonable credit risk considered in relation to the particular
investment policies of the Fund. As a result, the Fund does not necessarily
invest in the highest yielding municipal bonds permitted by its investment
policies if NB Management determines that market risks or credit risks
associated with such investments would subject the Fund's portfolio to excessive
risk. The potential for realization of capital gains resulting from possible
changes in interest rates is not a major consideration. The Fund's policy is to
invest at least 80% of its total assets in municipal bonds with remaining
maturities of less than 15 years. The Fund seeks to maintain a dollar-weighted
average duration between three and eight years. For this purpose, any scheduled
principal prepayments on municipal bonds are reflected in the calculation of
dollar-weighted average duration. NB Management may adjust the average duration
of the Fund's portfolio from time to time, depending on its assessment of the
relative yields available on securities of different maturities and its
expectations of future changes in interest rates. Duration is a measure of a
security's sensitivity to changes in market interest rates that takes account of
all payments of principal and interest scheduled to occur over the life of the
security.

    From time to time, the Fund may invest in securities of a municipal issuer,
most or all of which is held by the Fund, by itself or together with other funds
or accounts managed by NB Management. If the other funds holding the securities
are open-end investment companies, they may need to liquidate their assets to
meet shareholder redemptions, which could adversely affect the value of the same
securities held by the Fund. Because there may be relatively few potential
purchasers for such investments and, in some cases, there may be contractual
restrictions on resales, the Fund may find it more difficult to sell such
securities at a time when NB Management believes it is advisable to do so.

WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT TRANSACTIONS


    The Fund may purchase municipal bonds on a "when-issued" and "delayed
delivery" basis. No income accrues to the Fund on municipal bonds in connection
with such transactions prior to the date the Fund actually takes delivery of
such securities. These transactions are subject to market fluctuations; the
value of the municipal bonds at delivery may be more or less than their purchase
price, and yields generally available on municipal bonds when delivery occurs
may be higher than yields on the municipal bonds obtained pursuant to such
transactions. Because the Fund relies on the buyer or seller, as the case may
be, to consummate the transaction, failure by the other party to complete the
transaction may result in the Fund missing the opportunity of obtaining a price
or yield considered to be


                                       18
<Page>

advantageous. When the Fund is the buyer in such a transaction, however, it will
maintain, in a segregated account, cash or liquid securities having a value
equal to or greater than the Fund's purchase commitments, that are marked to
market daily, pursuant to guidelines established by the Board of Directors. The
Fund will make commitments to purchase municipal bonds on such basis only with
the intention of actually acquiring these securities, but the Fund may sell such
securities prior to the settlement date if such sale is considered to be
advisable.


    To the extent that the Fund engages in "when-issued" and "delayed delivery"
transactions, it will do so for the purpose of acquiring securities for the
Fund's portfolio consistent with the Fund's investment objective and policies.
However, purchases of securities on such basis may involve more risk than other
types of purchases. For example, if the Fund determines it is necessary to sell
the "when-issued" or "delayed delivery" securities before delivery, it may
realize a gain or incur a loss because of market fluctuations since the time the
commitment to purchase such securities was made. Subject to the requirement of
maintaining a segregated account, no specified limitation exists as to the
percentage of the Fund's assets which may be used to acquire securities on a
"when-issued" or "delayed delivery" basis. Use of these techniques has a
leverage-like effect on the Fund.

    For more information, see "Investment Policies and Techniques--Special
Considerations Relating to Municipal Securities" in the Statement of Additional
Information.

                     PREFERRED SHARES AND RELATED LEVERAGE


    Subject to market conditions, approximately one to three months after the
completion of the offering of the Common Shares, the Fund intends to offer
Preferred Shares representing approximately 38% of the Fund's capital
immediately after the issuance of the Preferred Shares. The Preferred Shares
will have complete priority upon distribution of assets over the Common Shares.
The issuance of Preferred Shares will leverage the Common Shares. Leverage
involves special risks and there is no assurance that the Fund's leveraging
strategies will be successful. The timing and other terms of the offering of the
Preferred Shares will be determined by the Fund's Board of Directors. If the
Fund issues Preferred Shares, costs of that offering will effectively be borne
by Common Stockholders and result in a reduction of the paid-in capital
attributable to the Common Shares. See "Summary of Fund Expenses," above. The
Fund expects to invest the net proceeds of the Preferred Shares principally in
intermediate-term municipal bonds. The Preferred Shares will pay dividends based
on short-term rates (which would be redetermined periodically by an auction
process). So long as the proceeds of the Preferred Shares (minus associated
expenses) are invested in securities that provide a higher rate of return than
the dividend rate of the Preferred Shares (after taking expenses into
consideration), the leverage will allow Common Stockholders to receive a higher
current rate of return than if the Fund were not leveraged. If, however,
short-term tax-exempt interest rates rise substantially after the issuance of
the Preferred Shares, the Preferred Share dividend rate could approach or exceed
the acquisition yield on intermediate-term bonds and other investments held by
the Fund that were acquired during periods of generally lower interest rates,
reducing distribution yields and returns to Common Stockholders.


    Changes in the value of the Fund's municipal bond portfolio (including
investments bought with the proceeds of the Preferred Shares offering) will be
borne entirely by the Common Stockholders. If there is a net decrease (or
increase) in the value of the Fund's investment portfolio, the leverage will
decrease (or increase) the net asset value per Common Share to a greater extent
than if the Fund were not leveraged. During periods in which the Fund is using
leverage, the fees paid to NB Management will be higher than if the Fund did not
use leverage because the fees paid will be calculated on the basis of the Fund's
Managed Assets, which include the proceeds from the issuance of Preferred
Shares.

                                       19
<Page>
    For tax purposes, the Fund is currently required to allocate net capital
gain and other taxable income, if any, between and among the Common Shares and
any series of Preferred Shares in proportion to total distributions paid to each
class for the taxable year in which the net capital gain or other taxable income
is realized. If net capital gain or other taxable income (instead of solely
tax-exempt income) is allocated to Preferred Shares, the Fund will have to pay
higher total dividends to Preferred Stockholders or make dividend payments
intended to compensate Preferred Stockholders for the unanticipated
characterization of a portion of their dividends as taxable ("Gross-up
Dividends"). This would reduce any advantage of the Fund's leveraged structure
to Common Stockholders.


    Under the 1940 Act, the Fund is not permitted to issue Preferred Shares
unless immediately after such issuance the value of the Fund's capital is at
least 200% of the liquidation value of the outstanding Preferred Shares plus the
aggregate amount of any senior securities of the Fund representing indebtedness
(I.E., such liquidation value plus the aggregate amount of senior securities
representing indebtedness may not exceed 50% of the Fund's capital). In
addition, the Fund is not permitted to declare any cash dividend or other
distribution on its Common Shares unless, at the time of such declaration, the
value of the Fund's capital satisfies the above-referenced 200% coverage
requirement. If Preferred Shares are issued, the Fund intends, to the extent
possible, to purchase or redeem Preferred Shares from time to time to the extent
necessary in order to maintain coverage of at least 200%. If the Fund has
Preferred Shares outstanding, two of the Fund's Directors will be elected by the
Preferred Stockholders, voting separately as a class. The remaining Directors of
the Fund will be elected by Common and Preferred Stockholders voting together as
a single class. In the event the Fund failed to pay dividends on Preferred
Shares for two consecutive years, Preferred Stockholders would be entitled to
elect a majority of the Directors of the Fund. For purposes of this prospectus,
the Fund's "capital" means the total assets of the Fund less all liabilities and
indebtedness not representing Preferred Shares or other senior securities. The
liquidation preference of the Preferred Shares is not a liability or permanent
equity.


    If the Fund issues Preferred Shares and one or more rating agencies issue
ratings for the Preferred Shares, the Fund would be subject to certain
restrictions imposed by guidelines of those agencies. These guidelines may
impose asset coverage or portfolio composition requirements that are more
stringent than those imposed on the Fund by the 1940 Act. It is not anticipated
that these covenants or guidelines will impede NB Management from managing the
Fund's portfolio in accordance with the Fund's investment objective and
policies.

EFFECTS OF LEVERAGE

    Assuming that the Preferred Shares will represent approximately 38% of the
Fund's capital and pay dividends at an annual average rate of 2%, the income
generated by the Fund's portfolio (net of expenses) would have to exceed .76% in
order to cover such dividend payments. Of course, these numbers are merely
estimates, used for illustration. Actual Preferred Share dividend rates will
vary frequently and may be significantly higher or lower than the rate
estimated.

    The following table is furnished in response to requirements of the
Securities and Exchange Commission. It is designed to illustrate the effect of
leverage on Common Share total return, assuming investment portfolio total
returns (consisting of income and changes in the value of investments held in
the Fund's portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment
portfolio returns are hypothetical figures and are not necessarily indicative of
the investment portfolio returns expected to be experienced by the Fund. The
table further assumes the issuance of Preferred Shares representing

                                       20
<Page>
approximately 38% of the Fund's total capital and the Fund's currently projected
annual Preferred Share dividend rate of 2%. See "Risks."

<Table>
<S>                        <C>     <C>    <C>    <C>   <C>
Assumed Portfolio Total
  Return (Net of
  Expenses)..............     (10)%    (5)%     0%    5%    10%
Common Share Total
  Return.................  (17.35)% (9.29)% (1.23)% 6.84% 14.90%
</Table>


    Common Share total return is composed of two elements: the Common Share
distributions paid by the Fund (the amount of which is largely determined by the
net investment income of the Fund after paying dividends on Preferred Shares and
Fund expenses) and gains or losses on the value of the securities the Fund owns.
As required by Securities and Exchange Commission rules, the table assumes that
the Fund is more likely to suffer capital losses than to enjoy capital
appreciation. For example, to assume a total return of 0%, the Fund must assume
that the tax-exempt interest it receives on its municipal bond investments is
entirely offset by losses in the value of those investments and Fund expenses.


OTHER FORMS OF LEVERAGE AND BORROWINGS

    In addition to the issuance of Preferred Shares, the Fund may use a variety
of additional strategies to add leverage to the portfolio. These include the use
of options, futures contracts, residual interest bonds and other derivative
instruments. By adding additional leverage, these strategies have the potential
to increase returns to Common Stockholders, but also involve additional risks.
Additional leverage will increase the volatility of the Fund's investment
portfolio and could result in larger losses than if the strategies were not
used.


    The Securities and Exchange Commission does not consider derivative
instruments used by the Fund to constitute senior securities (and they will not
be subject to the Fund's limitations on borrowings) to the extent that the Fund
segregates liquid assets at least equal in amount to its obligations under the
instruments, or enters into offsetting transactions or owns positions covering
its obligations. For instance, the Fund may cover its position in a forward
purchase commitment by segregating liquid assets in an amount sufficient to meet
the purchase price. The Fund has no current intention to use such instruments to
an extent that would put more than 5% of its net assets at risk.


    The Fund also may borrow money in order to repurchase its shares or as a
temporary measure for extraordinary or emergency purposes, including for the
payment of dividends or the settlement of securities transactions which
otherwise might require untimely dispositions of Fund securities.

                                     RISKS

    The net asset value of the Common Shares will fluctuate with and be affected
by, among other things, market discount risk, interest rate risk, credit risk,
municipal bond market risk, reinvestment risk, leverage risk, inflation risk,
liquidity risk, derivatives risk and management risk. An investment in Common
Shares will also be subject to the risk associated with the fact that the Fund
is newly organized. These risks are summarized below.

    NEWLY ORGANIZED. The Fund is a newly organized, diversified, closed-end
management investment company and has no operating history.

    MARKET DISCOUNT RISK. As with any stock, the price of the Fund's shares will
fluctuate with market conditions and other factors. If shares are sold, the
price received may be more or less than the original investment. Net asset value
will be reduced immediately following the initial offering by the amount of the
sales load and organizational and selling expenses paid by the Fund. Common
Shares are designed for long-term investors and should not be treated as trading
vehicles. Shares of closed-end

                                       21
<Page>
management investment companies like the Fund frequently trade at a discount
from their per-share net asset value. The Fund's shares may trade at a price
that is less than the initial offering price. This risk may be greater for
investors who sell their shares in a relatively short period of time after
completion of the initial offering.

    INTEREST RATE RISK. Interest rate risk is the risk that bonds (and the
Fund's net assets) will decline in value because of changes in market interest
rates. Generally, municipal bonds will decrease in value when interest rates
rise and increase in value when interest rates decline. This means that the net
asset value of the Common Shares will fluctuate with interest rate changes and
the corresponding changes in the value of the Fund's municipal bond holdings.
Because the Fund will invest primarily in intermediate-term bonds, the Common
Share net asset value and market price per share will fluctuate more in response
to changes in market interest rates than if the Fund invested primarily in
shorter-term bonds. The Fund's use of leverage, as described below, will tend to
increase Common Share interest rate risk.

    INCOME RISK. The Fund's income is based primarily on the interest it earns
from its investments, which can vary widely over the short term and long term.
If interest rates drop, the Fund's income available over time to make dividend
payments with respect to Preferred Shares could drop as well if the Fund
purchases securities with lower interest coupons.

    CALL RISK. If interest rates fall, it is possible that issuers of callable
bonds with higher interest coupons will "call" (or prepay) their bonds before
their maturity date. If a call were exercised by the issuer during a period of
declining interest rates, the Fund is likely to replace such called security
with a lower yielding security.

    LIQUIDITY RISK. The market for municipal obligations may be less liquid than
for corporate bonds. The market for special obligation bonds, lease obligations,
participation certificates and variable rate instruments, which the Fund may
purchase, may be less liquid than for general obligation bonds. Liquid secondary
trading in unrated municipal obligations may not exist. The Fund may not be able
to sell these securities when NB Management determines it is appropriate. When
the Fund has a need to raise cash, NB Management may be forced to sell from the
portfolio some securities it would prefer to retain.


    Less liquid markets tend to be more volatile and react more negatively to
adverse publicity and investor perception than more liquid markets. If markets
are less liquid, the Fund may not be able to dispose of municipal obligations in
a timely manner and at the price at which the Fund is carrying it. There may be
no established trading markets for certain municipal obligations, and trading in
these securities may be relatively inactive. Some of the Fund's investments may
be restricted as to resale. Although restricted securities may be sold in
private transactions, a security's value may be less than the price originally
paid by the Fund. Valuing illiquid or restricted securities is difficult, and NB
Management's judgment may play a greater role in their valuation.


    CREDIT RISK. The Fund could lose money if the issuer of a municipal bond, or
the counterparty to a derivatives contract or other obligation, is unable or
unwilling to make timely principal and/or interest payments, or to otherwise
honor its obligations. In general, lower rated municipal bonds carry a greater
degree of risk that the issuer will lose its ability to make interest and
principal payments, which could have a negative impact on the Fund's net asset
value or distributions.

    Securities rated "BBB" by S&P are regarded by S&P as having an adequate
capacity to pay interest and repay principal; whereas such securities normally
exhibit adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories.
Securities rated "Baa" by Moody's are regarded by Moody's as being medium grade
obligations; they are neither

                                       22
<Page>
highly protected nor poorly secured. Although interest payments and principal
payments for these securities appear adequate for the present, they may lack
certain protective elements or may be characteristically unreliable over any
great length of time. They also may lack outstanding investment characteristics
and may have speculative characteristics. The Fund may be more dependent upon NB
Management's investment analysis of unrated municipal bonds than is the case
with rated municipal bonds.

    The Fund may invest up to 20% of its total assets in municipal bonds that at
the time of investment are rated Ba/BB or B by Moody's, S&P or Fitch or that are
unrated but judged to be of comparable quality by NB Management. These bonds,
which are below investment grade, are regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal and are commonly referred to as "junk bonds." These securities are
subject to a greater risk of default. The prices of these lower grade bonds are
more sensitive to negative developments, such as a decline in the issuer's
revenues or a general economic downturn, than are the prices of higher grade
securities. Lower grade securities tend to be less liquid than investment grade
securities and the market values of lower grade securities tend to be more
volatile than investment grade securities.

    MUNICIPAL BOND MARKET RISK. Investing in the municipal bond market involves
certain risks. The amount of public information available about the municipal
bonds in the Fund's portfolio is generally less than that for corporate equities
or bonds, and the investment performance of the Fund may therefore be more
dependent on the analytical abilities of NB Management than would be a stock
fund or taxable bond fund. The secondary market for municipal bonds,
particularly the below investment grade bonds in which the Fund may invest, also
tends to be less well-developed or liquid than many other securities markets,
which may adversely affect the Fund's ability to sell its bonds at attractive
prices.

    The ability of municipal issuers to make timely payments of interest and
principal may be diminished during general economic downturns and as
governmental cost burdens are reallocated among federal, state and local
governments. In addition, laws enacted in the future by Congress or state
legislatures or referenda could extend the time for payment of principal and/or
interest, or impose other constraints on enforcement of such obligations. Such
laws, or political considerations, might constrain the ability of municipal
issuers to levy taxes. Issuers of municipal securities might seek protection
under the bankruptcy laws. In the event of bankruptcy of such an issuer, the
Fund could experience delays in collecting principal and interest and the Fund
may not, in all circumstances, be able to collect all principal and interest to
which it is entitled. To enforce its rights in the event of a default in the
payment of interest or repayment of principal, or both, the Fund may take
possession of, and manage, the assets securing the issuer's obligations on such
securities, which may increase the Fund's operating expenses. Any income derived
from the Fund's ownership or operation of such assets may not be tax-exempt.


    The recent economic downturn, which is of uncertain duration, has absorbed
the reserves that many states and municipalities had accumulated during the long
economic expansion of the 1990's and has unbalanced many state and municipal
budgets. Because the disclosure requirements for issuers of municipal securities
are more limited than those for issuers of other securities, it may be more
difficult to discern accurately the financial condition of a municipal issuer in
times of significant economic change. Furthermore, because this downturn follows
a long expansion, some municipal finance officers may have limited experience in
responding to such a situation. If the economy remains slow, it could also
impact many private enterprises whose revenues support private activity bonds or
form a critical part of the tax base of a state or municipality. Strife in the
Middle East could substantially increase the price of oil and thus gasoline,
which is an important expense for many municipalities.



    TERRORISM RISKS. Municipal securities are subject to a risk that terror
attacks could result in substantial loss of life, damage the local economy and
damage or destroy significant portions of the


                                       23
<Page>

municipal infrastructure. The impact of these events may extend beyond the
immediately affected area and beyond the time of the attack. Businesses that
leave an affected area in the wake of such an attack may not return, and
economic activity may slow if tourists and local consumers avoid the affected
city. These events could severely affect the tax base of a particular issuer of
municipal securities and could damage or destroy a facility whose revenues
support the payment of particular municipal securities. These attacks, and
measures taken to prevent them, may also impose substantial overtime costs on
municipal budgets. See "Recent Developments."


    HIGH YIELD RISK. Investing in high yield bonds involves additional risks,
including credit risk. The value of high yield, lower quality bonds is affected
by the creditworthiness of the issuers of the securities and by general economic
and specific industry conditions. Issuers of high yield bonds are not as strong
financially as those with higher credit ratings, so their bonds are usually
considered speculative investments. These issuers are more vulnerable to
financial setbacks and recession than more creditworthy issuers, which may
impair their ability to make interest and principal payments. Investments in
lower grade securities will expose the Fund to greater risks than if the Fund
owned only higher grade securities.

    REINVESTMENT RISK. Reinvestment risk is the risk that income from the Fund's
municipal bond portfolio will decline if and when the Fund invests the proceeds
from matured, traded or called bonds at market interest rates that are below the
portfolio's current earnings rate. A decline in income could affect the Common
Shares' market price or their overall return.

    LEVERAGE RISK. Leverage risk includes the risk associated with the issuance
of the Preferred Shares, if any, in order to leverage the Fund's portfolio.
There can be no assurance that the Fund's leveraging strategies involving
Preferred Shares or derivatives will be successful. Once the Preferred Shares
are issued or other forms of leverage are used, the net asset value and market
value of Common Shares will be more volatile, and the yield and total return to
Common Stockholders will tend to fluctuate more in response to changes in
interest rates and with changes in the short-term dividend rates on the
Preferred Shares. The Fund anticipates that the Preferred Shares, at least
initially, would likely pay cumulative dividends at rates determined over
relatively short-term periods (such as seven days), by providing for the
periodic redetermination of the dividend rate through an auction or remarketing
procedures. See "Description of Shares--Preferred Shares." The rates of return
on long-term municipal bonds are typically, although not always, higher than the
rates of return on short-term municipal bonds. If the dividend rate on the
Preferred Shares, plus associated expenses, approaches the net rate of return on
the portfolio securities the Fund purchases with the proceeds of selling the
Preferred Shares, the benefit of leverage to Common Stockholders would be
reduced. If the dividend rate on the Preferred Shares, plus associated expenses,
exceeds the net rate of return on the portfolio securities the Fund purchases
with the proceeds of selling the Preferred Shares, the leverage will result in a
lower rate of return to Common Stockholders than if the Fund were not leveraged.
Because the longer-term bonds included in the Fund's portfolio will typically
pay fixed rates of interest while the dividend rate on the Preferred Shares will
be adjusted periodically, this could occur even when both long-term and
short-term interest rates rise. In addition, the Fund will pay (and Common
Stockholders will bear) any costs and expenses relating to the issuance and
ongoing maintenance of the Preferred Shares. Furthermore, if the Fund realizes
or earns net capital gain or other taxable income (instead of solely tax-exempt
income) that is allocated to Preferred Shares, the Fund may have to pay Gross-up
Dividends to Preferred Stockholders, which would reduce any advantage of the
Fund's leveraged structure to Common Stockholders without reducing the
associated risk. See "Preferred Shares and Related Leverage." The Fund cannot
assure Common Stockholders that it will issue Preferred Shares or use other
forms of leverage or, if used, that these strategies will result in a higher
yield or return to Common Stockholders.

                                       24
<Page>
    Similarly, any decline in the net asset value of the Fund's investments will
be borne entirely by Common Stockholders. Therefore, if the market value of the
Fund's portfolio declines, any leverage will result in a greater decrease in net
asset value to Common Stockholders than if the Fund were not leveraged. Such
greater net asset value decrease will also tend to cause a greater decline in
the market price for the Common Shares. The Fund might be in danger of failing
to maintain the required 200% asset coverage or of losing its expected AAA/Aaa
ratings on the Preferred Shares or, in an extreme case, the Fund's current
investment income might not be sufficient to meet the dividend requirements on
the Preferred Shares. In order to counteract such an event, the Fund might need
to liquidate investments in order to fund a redemption of some or all of the
Preferred Shares. Liquidation at times of low municipal bond prices may result
in capital loss and may reduce returns to Common Stockholders.

    While the Fund may from time to time consider reducing leverage in response
to actual or anticipated changes in interest rates in an effort to mitigate the
increased volatility of current income and net asset value associated with
leverage, there can be no assurance that the Fund will actually reduce leverage
in the future or that any reduction, if undertaken, will benefit the Common
Stockholders. Changes in the future direction of interest rates are very
difficult to predict accurately. If the Fund were to reduce leverage based on a
prediction about future changes to interest rates, and that prediction turned
out to be incorrect, the reduction in leverage would likely operate to reduce
the income and/or total returns to Common Stockholders relative to the
circumstance if the Fund had not reduced leverage. The Fund may decide that this
risk outweighs the likelihood of achieving the desired reduction to volatility
in income and Common Share price if the prediction were to turn out to be
correct, and determine not to reduce leverage as described above.


    The Fund may invest in the securities of other investment companies. Such
securities may also be leveraged and will therefore be subject to the leverage
risks described above. Such additional leverage may in certain market conditions
serve to reduce the net asset value of the Fund's Common Shares and the returns
to Common Stockholders. The shares of other investment companies 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. If these other
investment companies engage in leverage, the Fund, as a shareholder, would bear
its proportionate share of the cost of such leveraging. The Fund may also invest
in investment companies whose income distributions are not exempt from federal
income tax, and if it does, some of the Fund's income distributions may be
taxable.


    INFLATION RISK. Inflation risk is the risk that the value of assets or
income from the Fund's investments will be worth less in the future as inflation
decreases the value of money. As inflation increases, the real, or
inflation-adjusted, value of the Common Shares and distributions can decline,
and the dividend payments on the Fund's Preferred Shares, if any, or interest
payments on Fund borrowings, if any, may increase.

    MANAGEMENT RISK. The Fund is subject to management risk because it has an
actively managed investment portfolio. NB Management and the portfolio managers
will apply investment techniques and risk analyses in making investment
decisions for the Fund, but there can be no guarantee that these will produce
the desired results.

    ECONOMIC SECTOR AND GEOGRAPHIC RISK. The Fund may invest 25% or more of its
total assets in municipal obligations of issuers in the same state (or U.S.
territory) or in municipal obligations in the same economic sector, including
without limitation the following: lease rental obligations of state and local
authorities; obligations dependent on annual appropriations by a state's
legislature for payment; obligations of state and local housing finance
authorities; municipal utilities systems or public housing

                                       25
<Page>
authorities; obligations of hospitals or life care facilities; and industrial
development or pollution control bonds issued for electrical utility systems,
steel companies, paper companies or other purposes. This may make the Fund more
susceptible to adverse economic, political or regulatory occurrences affecting a
particular state or economic sector. For example, health care related issuers
are susceptible to Medicare, Medicaid and other third party payor reimbursement
policies, and national and state health care legislation. As concentration
increases, so does the potential for fluctuation in the net asset value of the
Common Shares.

    RISKS OF CERTAIN INVESTMENTS OF THE FUND. In addition to the risks described
above, the Fund's investments are subject to certain other kinds of risk, such
as:

    -  NB Management's judgment about the attractiveness, value or income
       potential of a particular municipal obligation may prove to be incorrect;

    -  municipal obligations may fall out of favor with investors;

    -  a rise in interest rates could cause the value of the Fund's portfolio
       generally to decline;

    -  unfavorable legislation may affect the tax-exempt status of municipal
       obligations; and

    -  unfavorable regulatory action could affect the tax-exempt status of a
       particular security or type of security held by the Fund.

    The Fund may invest more than 25% of its assets in municipal obligations
that finance the same or similar types of facilities or issuers located in the
same state. If the Fund invests more than 25% of its assets in such segments, it
will be more susceptible to economic, business, political, regulatory and other
developments generally affecting issuers in those segments of the municipal
market.

    The Fund may invest in unrated "non-appropriation" lease obligations or
installment purchase contract obligations of municipal authorities or entities
believed by NB Management to be of comparable quality to securities that are
rated investment grade. Regardless of the issuer's creditworthiness, it is
possible that a municipality will fail to appropriate money in the future
because of political changes, changes in the economic viability of a project or
general economic changes. While these lease obligations generally are secured by
a lien on the leased property, disposing of foreclosed property could be costly
and time-consuming, and the Fund may not recoup its original investment.

    The Fund may invest in zero coupon bonds. Because these securities usually
trade at a deep discount, they will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of comparable
maturities which make periodic distributions of interest. On the other hand,
because there are no periodic interest payments to be reinvested prior to
maturity, zero coupon securities eliminate the reinvestment risk and lock in a
rate of return to maturity.

    Some of the Fund's income may be subject to federal taxation. The Fund may
realize taxable gain on some of its securities, and some of the Fund's income
may be a Tax Preference Item.

    The Fund may acquire securities on a "when-issued" or "delayed delivery"
basis. Subject to the requirement of maintaining a segregated account, no
specified limitation exists as to the percentage of the Fund's assets which may
be used to acquire securities on a "when-issued" or "delayed delivery" basis. If
a significant percentage of the Fund's assets are committed to the purchase of
securities on a "when-issued" and/or "delayed delivery" basis, the volatility of
the Fund's net asset value may increase and the flexibility to manage the Fund's
investments may be limited. Engaging in "when-issued" and "delayed delivery"
transactions has a leverage-like effect on the Fund.


    The Fund may invest in derivatives. A derivative contract will obligate or
entitle the Fund to deliver or receive an asset or cash payment that is based on
the change in value of one or more


                                       26
<Page>

securities or indices. Even a small investment in derivative contracts can have
a big impact on the Fund's interest-rate exposure. Therefore, using derivatives
can disproportionately increase losses and reduce opportunities for gains when
interest rates are changing. The Fund may not fully benefit from or may lose
money on derivatives if changes in their value do not correspond accurately to
changes in the value of the Fund's holdings. The other parties to certain
derivative contracts present the same types of default risk as issuers of
fixed-income securities. Derivatives can also make the Fund less liquid and
harder to value, especially in declining markets. The use of derivatives may
produce taxable income.


    RECENT DEVELOPMENTS. As a result of the terrorist attacks on the World Trade
Center and the Pentagon on September 11, 2001, some of the U.S. securities
markets were closed for a four-day period. These terrorist attacks and related
events have led to increased short-term market volatility and may have long-term
effects on U.S. and world economies and markets. A similar disruption of the
financial markets could impact interest rates, auctions, secondary trading,
ratings, credit risk, inflation and other factors relating to the securities.

    Please see "Investment Objective and Policies" in the Statement of
Additional Information for additional information regarding the investments of
the Fund and their related risks.

                           HOW THE FUND MANAGES RISK
INVESTMENT LIMITATIONS


    The Fund has adopted certain investment limitations designed to limit
investment risk and maintain portfolio diversification. These limitations are
fundamental and may not be changed without the approval of the holders of a
majority of the outstanding Common Shares and, if issued, Preferred Shares
voting as a single class, as well as by the vote of a majority of the
outstanding Preferred Shares tabulated separately. A "majority of the
outstanding" shares means (i) 67% or more of the shares present at a meeting, if
the holders of more than 50% of the shares are present or represented by proxy,
or (ii) more than 50% of the shares, whichever of (i) or (ii) is less. The Fund
may not invest more than 25% of total Fund assets in securities of issuers
having their principal business activities in any one industry. However, the
Fund may from time to time invest more than 25% of its total assets in a
particular segment of the municipal obligations market or in obligations of
issuers located in the same state. Municipalities are not considered to be in
any industry; however, where a municipal security is supported only by the
income from a particular enterprise or the assets of a particular private
company, the Fund will treat that enterprise or company as the issuer for
purposes of this limitation. The Fund also may not invest more than 5% of total
Fund assets in securities of any one issuer, except that this limitation does
not apply to bonds issued by the U.S. Government, its agencies and
instrumentalities or to the investment of 25% of the Fund's total assets in
shares of other registered investment companies. The Fund may become subject to
guidelines which are more limiting than the investment restrictions set forth
above in order to obtain and maintain ratings from Moody's or Fitch on Preferred
Shares. See the Statement of Additional Information for a complete list of the
fundamental and non-fundamental investment policies of the Fund.


    The Fund may use various investment strategies designed to limit the risk of
bond price fluctuations. These hedging strategies include purchasing put and
call options and using financial futures contracts and related options
contracts. See "Investment Policies and Techniques" in the Statement of
Additional Information.

QUALITY OF INVESTMENTS


    The Fund will invest at least 80% of its total assets in municipal bonds of
investment grade at the time of investment. Investment grade means that such
bonds are rated by national rating agencies


                                       27
<Page>

within the four highest grades (rated Baa or BBB or better by Moody's, S&P &
Fitch) or are unrated but judged to be of comparable quality by NB Management.


LIMITED ISSUANCE OF PREFERRED SHARES

    Under the 1940 Act, the Fund could issue Preferred Shares having a total
liquidation value (original purchase price of the shares being liquidated plus
any accrued and unpaid dividends) of up to one-half of the value of the net
assets of the Fund. To the extent that the Fund has outstanding any senior
securities representing indebtedness (such as through the use of derivative
instruments that constitute senior securities), the aggregate amount of such
senior securities will be added to the total liquidation value of any
outstanding Preferred Shares for purposes of this asset coverage requirement. If
the total liquidation value of the Preferred Shares plus the aggregate amount of
such other senior securities were ever more than one-half of the value of the
Fund's total net assets, the Fund would not be able to declare distributions on
the Common Shares until such liquidation value and/or aggregate amount of other
senior securities, as a percentage of the Fund's total assets, were reduced. The
Fund intends to issue Preferred Shares representing approximately 38% of the
Fund's total capital immediately after their issuance approximately one to three
months after the completion of the offering of the Common Shares. This higher
than required margin of net asset value provides a cushion against later
fluctuations in the value of the Fund's portfolio and will subject Common
Stockholders to less income and net asset value volatility than if the Fund were
more highly leveraged through Preferred Shares. It also gives the Fund
flexibility to utilize other forms of leverage in addition to Preferred Shares
from time to time in accordance with the 1940 Act asset coverage requirements
(such as derivatives) that may be more efficient or cost effective sources of
leverage than Preferred Shares under the circumstances. The Fund intends to
purchase or redeem Preferred Shares, if necessary, to keep the liquidation value
of the Preferred Shares plus the aggregate amount of other senior securities
representing indebtedness below one-half of the value of the Fund's net assets.

MANAGEMENT OF INVESTMENT PORTFOLIO AND CAPITAL STRUCTURE TO LIMIT LEVERAGE RISK

    The Fund may take certain actions if short-term interest rates increase or
market conditions otherwise change (or the Fund anticipates such an increase or
change) and the Fund's leverage begins (or is expected) to adversely affect
Common Stockholders. In order to attempt to offset such a negative impact of
leverage on Common Stockholders, the Fund may shorten the average duration of
its investment portfolio (by investing in short-term securities or implementing
certain hedging strategies) or may extend the maturity of outstanding Preferred
Shares. The Fund also may attempt to reduce leverage by redeeming or otherwise
purchasing Preferred Shares or by reducing any holdings in instruments that
create leverage. As explained above under "Risks--Leverage Risk," the success of
any such attempt to limit leverage risk depends on NB Management's ability to
accurately predict interest rate or other market changes. Because of the
difficulty of making such predictions, the Fund may not be successful in
managing its interest rate exposure in the manner described above.

    If market conditions suggest that additional leverage would be beneficial,
the Fund may sell previously unissued Preferred Shares or Preferred Shares that
the Fund previously issued but later repurchased, or utilize other forms of
leverage, such as derivative instruments.

HEDGING AND RELATED STRATEGIES

    The Fund may use various investment strategies designed to limit the risk of
price fluctuations of its portfolio securities and to preserve capital. Hedging
strategies that the Fund may use include: financial futures contracts; short
sales; swap agreements or options thereon; options on financial futures; and
options based on either an index of municipal securities or taxable debt
securities whose prices, NB Management believes, correlate with the prices of
the Fund's investments. Income earned by the Fund from many hedging activities
will be treated as capital gain and, if not offset by net realized capital loss,
will be distributed to stockholders in taxable distributions. If effectively
used, hedging

                                       28
<Page>
strategies will offset in varying percentages losses incurred on the Fund's
investments due to adverse interest rate changes. There is no assurance that
these hedging strategies will be available at any time or that NB Management
will determine to use them for the Fund or, if used, that the strategies will be
successful.

                             MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS

    The Board of Directors is broadly responsible for the management of the
Fund, including general supervision of the duties performed by NB Management and
Neuberger Berman. The names and business addresses of the Directors and officers
of the Fund and their principal occupations and other affiliations during the
past five years are set forth under "Management of the Fund" in the Statement of
Additional Information.

INVESTMENT MANAGER

    NB Management serves as the investment manager of the Fund. Subject to the
general supervision of the Board of Directors, NB Management is responsible for
managing the investment activities of the Fund and the Fund's business affairs
and other administrative matters. NB Management is located at 605 Third Avenue,
New York, New York 10158-0180.

    Continuing an asset management history that began in 1939, NB Management
provides investment management and advisory services to several open-end
investment company clients and to individuals investing in mutual funds. As of
June 30, 2002, NB Management and its affiliates had approximately $58.7 billion
in assets under management.

    NB Management has retained Neuberger Berman to serve as sub-adviser to the
Fund. See "Sub-Adviser" below. Neuberger Berman and NB Management are wholly
owned subsidiaries of Neuberger Berman Inc., a publicly owned holding company,
located at 605 Third Avenue, New York, New York 10158-3698.

    Theodore P. Giuliano, Thomas J. Brophy and Lori Canell have primary
responsibility for the day-to-day portfolio management of the Fund.
Mr. Giuliano, a Vice President and Director of NB Management and a Managing
Director of Neuberger Berman, is the manager of the Fixed Income Group of
Neuberger Berman, which he helped establish in 1984. Mr. Brophy and Ms. Canell
are Vice Presidents of NB Management. Mr. Brophy and Ms. Canell are also
Managing Directors of Neuberger Berman. Mr. Brophy has been a portfolio manager
and a credit analyst for Neuberger Berman since 1998. From 1987 to 1998, he was
employed by another investment firm. Ms. Canell joined Neuberger Berman in 1995.
From 1983 to 1995, she was employed by another investment firm.

SUB-ADVISER

    NB Management retains Neuberger Berman 605 Third Avenue, New York, New York
10158-3698, to serve as the Fund's sub-adviser, responsible for providing
investment recommendations and research.

    NB Management (and not the Fund) 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 open-end investment companies and the other closed-end investment
companies managed by NB Management. Neuberger Berman and NB Management employ
experienced professionals that work in a competitive environment.

                                       29
<Page>
MANAGEMENT AGREEMENT

    Pursuant to an investment management agreement between NB Management and the
Fund (the "Management Agreement"), the Fund has agreed to pay NB Management a
management fee payable on a monthly basis at the annual rate of .25% of the
Fund's average daily total assets minus liabilities other than the aggregate
indebtedness entered into for purposes of leverage ("Managed Assets") for the
services and facilities it provides. The liquidation preference of the Preferred
Shares is not a liability. Pursuant to an administration agreement between NB
Management and the Fund, the Fund has agreed to pay NB Management an
administration fee payable on a monthly basis at the annual rate of .30% of the
Fund's average daily Managed Assets.

    In addition to the fees of NB Management, the Fund pays all other costs and
expenses of its operations, including compensation of its Directors (other than
those affiliated with NB Management), custodial expenses, transfer agency and
dividend disbursing expenses, legal fees, expenses of independent auditors,
expenses of repurchasing shares, expenses of issuing any Preferred Shares,
expenses of preparing, printing and distributing prospectuses, stockholder
reports, notices, proxy statements and reports to governmental agencies, and
taxes, if any.

    NB Management has contractually agreed to waive a portion of the management
fees it is entitled to receive from the Fund in the amounts, and for the time
periods, set forth below (covering commencement of the Fund's operations through
October 31, 2011):

<Table>
<Caption>
                                              PERCENTAGE WAIVED (ANNUAL RATE AS A        PERCENTAGE WAIVED (ANNUAL RATE AS A
                                           PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO    PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO
FISCAL PERIOD                                     COMMON SHARES--ASSUMING NO                 COMMON SHARES--ASSUMING THE
ENDING OCTOBER 31,                        PREFERRED SHARES ARE ISSUED OR OUTSTANDING)      ISSUANCE OF PREFERRED SHARES(2))
- ------------------                        -------------------------------------------  ----------------------------------------
<S>                                       <C>                                          <C>
2002(1).................................                                .25%                                       .40%
2003....................................                                .25%                                       .40%
2004....................................                                .25%                                       .40%
2005....................................                                .25%                                       .40%
2006....................................                                .25%                                       .40%
2007....................................                                .25%                                       .40%
2008....................................                                .20%                                       .32%
2009....................................                                .15%                                       .24%
2010....................................                                .10%                                       .16%
2011....................................                                .05%                                       .08%
</Table>

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

(1)  From the commencement of the Fund's operations.
(2)  Assumes the issuance of Preferred Shares in an amount equal to 38% of the
     Fund's capital (after issuance).

    NB Management has not agreed to waive any portion of its fees beyond
October 31, 2011.

    Because the fees received by NB Management are based on the Managed Assets
of the Fund (including assets represented by Preferred Shares and any leverage
created thereby), NB Management has a financial incentive for the Fund to issue
Preferred Shares, which may create a conflict of interest between NB Management
and the holders of the Fund's Common Shares.

                                NET ASSET VALUE

    The net asset value is calculated by subtracting the Fund's total
liabilities and the liquidation preference of any outstanding Preferred Shares
from total assets (the market value of the securities the Fund holds plus cash
and other assets). The per share net asset value is calculated by dividing its
net asset value by the number of Common Shares outstanding and rounding the
result to the nearest full cent. The Fund calculates its net asset value as of
the close of regular trading on the New York Stock

                                       30
<Page>
Exchange, usually 4 p.m. Eastern time, every day on which the New York Stock
Exchange is open. Information that becomes known to the Fund or its agent after
the Fund's net asset value has been calculated on a particular day will not be
used to retroactively adjust the price of a security or the Fund's net asset
value determined earlier that day.

    The Fund values its 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 Board of Directors believes accurately
reflects fair value. The Fund periodically verifies 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.

    If NB Management believes that the price of a security obtained under the
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 Directors of the
Fund believe accurately reflects fair value.

                                 DISTRIBUTIONS

    Commencing with the first dividend, the Fund intends to pay regular monthly
cash dividends to Common Stockholders at a rate based upon its projected
performance. Dividends can be made only from net investment income after paying
any accrued dividends to Preferred Stockholders. The dividend rate that the Fund
pays will depend on a number of factors, including dividends payable on the
Preferred Shares. The Fund's net income will consist of all interest income
accrued on portfolio assets less all expenses of the Fund, which will be accrued
each day. Over time, substantially all the Fund's net investment income will be
distributed. The Fund also intends to distribute to each Common Stockholder at
least annually his or her pro rata share of any available net capital gains.
Initial dividends to Common Stockholders are expected to be declared
approximately 45 days, and paid approximately 60 to 90 days, from the completion
of this offering, depending on market conditions. Although it does not now
intend to do so, the Fund's Board of Directors may change its dividend policy
and the amount or timing of the distributions, based on a number of factors,
including the amount of the Fund's undistributed net investment income and
historical and projected investment income and the amount of the expenses and
dividend rates on any outstanding Preferred Shares.

    To permit the Fund to maintain more stable monthly dividends, it will
initially distribute less than the entire amount of net investment income earned
in a particular period. The undistributed net investment income would be
available to supplement future dividends. As a result, the dividends the Fund
pays for any particular monthly period may be more or less than the amount of
net investment income it actually earned during the period. Undistributed net
investment income will be added to the Fund's net asset value and,
correspondingly, dividends from undistributed net investment income will be
deducted from that net asset value.

                           DIVIDEND REINVESTMENT PLAN


    Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), all Common
Stockholders whose shares are registered in their own names will have all
dividends and any capital gain distributions (referred to collectively in this
section as "dividends") reinvested automatically in additional Common Shares by
The Bank of New York, as agent for the Common Stockholders (the "Plan Agent"),
unless the stockholder elects to receive cash. An election to receive cash may
be revoked or reinstated at a stockholder's option. In the case of record
stockholders such as banks, brokers or other nominees that hold Common Shares
for others who are the beneficial owners, the Plan Agent will administer the
Plan on the basis of the number of Common Shares certified from time to time by
the record stockholder as representing the total amount registered in such
stockholder's name and held for the account of beneficial owners who participate
in the Plan. Stockholders whose shares are held in the name of a bank, broker or
other nominee should contact the nominee for details. Such stockholders may not
be


                                       31
<Page>

able to transfer their shares to another nominee and continue to participate in
the Plan. All dividends to investors who elect not to participate in the Plan
(or whose bank, broker or other nominee elects not to participate on the
investor's behalf), will be paid in cash by check mailed, in the case of direct
stockholders, to the record holder by The Bank of New York, as the Fund's
dividend disbursement agent.


    Unless you (or your bank, broker or other nominee) elect not to participate
in the Plan, the number of Common Shares you will receive as a result of a Fund
dividend will be determined as follows:

    (1)  If Common Shares are trading at or above their net asset value on the
    payment date, the Fund will issue new Common Shares at the greater of
    (i) the net asset value per Common Share on the payment date or (ii) 95% of
    the market price per Common Share on the payment date. Because Common Shares
    may be issued at less than their market price, Plan participants may get a
    benefit that non-participants do not.

    (2)  If Common Shares are trading below their net asset value (minus
    estimated brokerage commissions that would be incurred upon the purchase of
    Common Shares on the open market) on the payment date, the Plan Agent will
    receive the dividend in cash and will purchase Common Shares in the open
    market, on the American Stock Exchange or elsewhere, for the participants'
    accounts. It is possible that the market price for the Common Shares may
    increase before the Plan Agent has completed its purchases. Therefore, the
    average purchase price per Common Share paid by the Plan Agent may exceed
    the market price thereof on the payment date, resulting in the purchase of
    fewer Common Shares than if the dividend had been paid in Common Shares
    issued by the Fund. The Plan Agent will use all dividends received in cash
    to purchase Common Shares in the open market on or shortly after the payment
    date, but in no event later than the ex-dividend date for the next dividend.
    Interest will not be paid on any uninvested cash payments.

    If you own Common Shares directly, you may withdraw from the Plan at any
time by giving written notice to the Plan Agent; please be sure to include your
name and account number. You may also rejoin the Plan later. Contact the Plan
Agent at the address below for information on how to do so. If you wish, the
Plan Agent will sell the Common Shares and send you the proceeds, minus
brokerage commissions.

    The Plan Agent maintains all stockholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
stockholders may need for tax records. The Plan Agent will also furnish each
Common Stockholder with written instructions detailing the procedures for
electing not to participate in the Plan and to instead receive dividends in
cash. Common Shares in your account will be held by the Plan Agent in
non-certificated form. Any proxy you receive will include all Common Shares held
for you under the Plan.

    There is no brokerage charge for reinvestment of your dividends in Common
Shares. However, all participants will pay a pro rata share of brokerage
commissions incurred by the Plan Agent when it makes open market purchases.

    Automatically reinvested dividends are taxed in the same manner as cash
dividends.


    The Fund and the Plan Agent reserve the right to amend or terminate the
Plan. There is no direct service charge to participants in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants. Additional information about the Plan may be
obtained from your broker. To change your dividend option from the Plan to cash
distributions, or vice versa, call The Bank of New York at 1-800-524-4458.


                                       32
<Page>
                             DESCRIPTION OF SHARES
COMMON SHARES


    The Articles authorize the issuance of one billion (1,000,000,000) shares of
capital stock. The Common Shares will be issued with a par value of $.0001 per
share. All Common Shares have equal rights to the payment of dividends and the
distribution of assets upon liquidation. Common Shares will, when issued, be
fully paid and non-assessable, and will have no pre-emptive or conversion rights
or rights to cumulative voting. Whenever Preferred Shares are outstanding,
Common Stockholders will not be entitled to receive any distributions from the
Fund unless all accrued dividends on Preferred Shares have been paid, and unless
asset coverage (as defined in the 1940 Act) with respect to Preferred Shares
would be at least 200% after giving effect to the distributions. See "Preferred
Shares" below.

    The Common  Shares have been  approved for  listing,  subject to issuance of
notice, on the American Stock Exchange. The Fund intends to hold annual meetings
of stockholders so long as the Common Shares are listed on a national securities
exchange and such meetings are required as a condition to such listing.


    The Fund's net asset value per share generally increases when interest rates
decline, and decreases when interest rates rise, and these changes are likely to
be greater because the Fund intends to have a leveraged capital structure. Net
asset value will be reduced immediately following the offering by the amount of
the sales load and organization and offering expenses paid by the Fund. NB
Management has agreed to pay organizational expenses and offering costs of the
Fund (other than the sales load) that exceed $.03 per Common Share.


    Unlike open-end funds, closed-end funds like the Fund do not continuously
offer shares and do not provide daily redemptions. Rather, if a stockholder
determines to buy additional Common Shares or sell shares already held, the
stockholder may do so by trading on the exchange through a broker or otherwise.
Shares of closed-end investment companies may frequently trade on an exchange at
prices lower than net asset value. The Fund's Articles limit the ability of the
Fund to convert to open-end status. See "Anti-takeover and Other Provisions in
the Articles of Incorporation."


    Because the market value of the Common Shares may be influenced by such
factors as dividend levels (which are in turn affected by expenses), call
protection, dividend stability, portfolio credit quality, net asset value,
relative demand for and supply of such shares in the market, general market and
economic conditions, and other factors beyond the control of the Fund, the Fund
cannot assure you that the Common Shares will trade at a price equal to or
higher than net asset value in the future. The Common Shares are designed
primarily for long-term investors, and investors in the Common Shares should not
view the Fund as a vehicle for trading purposes. See "Preferred Shares and
Related Leverage" and the Statement of Additional Information under "Repurchase
of Common Shares; Conversion to Open-End Fund."

PREFERRED SHARES

    The Articles authorize the Board to create additional classes of stock, and
it is currently contemplated that the Fund will issue one or more classes of
preferred stock ("Preferred Shares"). The Preferred Shares may be issued in one
or more classes or series, with such par value and rights as determined by the
Board of Directors, by action of the Board of Directors without the approval of
the Common Stockholders.

    The Fund's Board of Directors has indicated its intention to authorize an
offering of Preferred Shares (representing approximately 38% of the Fund's
capital immediately after the time the Preferred Shares are issued)
approximately one to three months after completion of the offering of Common
Shares. Any such decision is subject to market conditions and to the Board's
continuing belief that leveraging the Fund's capital structure through the
issuance of Preferred Shares is likely to achieve the benefits to the Common
Stockholders described in this prospectus. Although the terms of the Preferred

                                       33
<Page>
Shares will be determined by the Board of Directors (subject to applicable law
and the Fund's Articles) if and when it authorizes a Preferred Shares offering,
the Board has determined that the Preferred Shares, at least initially, would
likely pay cumulative dividends at rates determined over relatively short-term
periods (such as seven days), by providing for the periodic redetermination of
the dividend rate through an auction or remarketing procedure. The Board of
Directors has indicated that the preference on distribution, liquidation
preference, voting rights and redemption provisions of the Preferred Shares will
likely be as stated below.

    As used in this prospectus, unless otherwise noted, the Fund's "net assets"
include assets of the Fund attributable to any outstanding Preferred Shares,
with no deduction for the liquidation preference of the Preferred Shares. Solely
for financial reporting purposes, however, the Fund is required to exclude the
liquidation preference of Preferred Shares from "net assets," so long as the
Preferred Shares have redemption features that are not solely within the control
of the Fund. For all regulatory and tax purposes, the Fund's Preferred Shares
will be treated as stock (rather than indebtedness).

    LIMITED ISSUANCE OF PREFERRED SHARES. Under the 1940 Act, the Fund could
issue Preferred Shares with an aggregate liquidation value of up to one-half of
the value of the Fund's net assets, measured immediately after issuance of the
Preferred Shares. "Liquidation value" means the original purchase price of the
shares being liquidated plus any accrued and unpaid dividends. In addition, the
Fund is not permitted to declare any cash dividend or other distribution on its
Common Shares unless the liquidation value of the Preferred Shares is less than
one-half of the value of the Fund's capital (determined after deducting the
amount of such dividend or other distribution) immediately after the
distribution. The liquidation preference of the Preferred Shares is not a
liability. The liquidation value of the Preferred Shares is expected to be
approximately 38% of the value of the Fund's capital. The Fund intends to
purchase or redeem Preferred Shares, if necessary, to keep that percentage below
50%.

    DISTRIBUTION PREFERENCE. The Preferred Shares have complete priority over
the Common Shares as to distribution of assets.

    LIQUIDATION PREFERENCE. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Fund, Preferred
Stockholders will be entitled to receive a preferential liquidating distribution
(expected to equal the original purchase price per share plus accumulated and
unpaid dividends thereon, whether or not earned or declared) before any
distribution of assets is made to Common Stockholders.

    VOTING RIGHTS. Preferred Shares are required to be voting shares. Except as
otherwise provided in the Articles or the Fund's Bylaws or otherwise required by
applicable law, Preferred Stockholders will vote together with Common
Stockholders as a single class. Each Common Share and each Preferred Share is
entitled to one vote, and fractional shares are entitled to proportional
fractions of a vote.

    Preferred Stockholders, voting as a separate class, will also be entitled to
elect two of the Fund's Directors. The remaining Directors will be elected by
Common and Preferred Stockholders, voting together as a single class. In the
unlikely event that two full years of accrued dividends are unpaid on the
Preferred Shares, the holders of all outstanding Preferred Shares, voting as a
separate class, will be entitled to elect a majority of the Fund's Directors
until all Preferred Share dividends in arrears have been paid or declared and
set apart for payment.


    REDEMPTION, PURCHASE AND SALE OF PREFERRED SHARES BY THE FUND. The terms of
the Preferred Shares may provide that they are redeemable by the Fund at certain
times, in whole or in part, at the original purchase price per share plus
accumulated dividends. The terms also may state that the Fund may tender for or
purchase Preferred Shares and resell any shares so tendered. Any redemption or
purchase of Preferred Shares by the Fund will reduce the leverage applicable to
Common Shares, while any resale of Preferred Shares by the Fund will increase
such leverage. See "Preferred Shares and Related Leverage."


                                       34
<Page>
    The discussion above describes the Board of Directors' current intention
with respect to a possible offering of Preferred Shares. If the Board of
Directors determines to authorize such an offering, the terms of the Preferred
Shares may be the same as, or different from, the terms described above, subject
to applicable law and the Fund's Articles and Bylaws.

      ANTI-TAKEOVER AND OTHER PROVISIONS IN THE ARTICLES OF INCORPORATION

    The Articles and the Fund's Bylaws include provisions that could limit the
ability of other entities or persons to acquire control of the Fund, to cause it
to engage in certain transactions or to modify its structure.


    The Articles require a vote by holders of at least 75% of the Fund's Board
and at least 75% of the shares the Fund's capital stock outstanding and entitled
to vote, except as described below, to authorize (1) the Fund's conversion from
a closed-end to an open-end investment company; (2) any merger or consolidation
or share exchange of the Fund with or into any other company; (3) the
dissolution or liquidation of the Fund; (4) any sale, lease, or exchange of all
or substantially all of the Fund's assets to any Principal Stockholder (as
defined below); (5) a change in the nature of the business of the Fund so that
it would cease to be an investment company registered under the 1940 Act;
(6) with certain exceptions, the issuance of any securities of the Fund to any
Principal Stockholder for cash; or (7) any transfer by the Fund of any
securities of the Fund to any Principal Stockholder in exchange for cash,
securities or other property having an aggregate fair market value of $1,000,000
or more; provided, with respect to (1) through (5), if such action has been
authorized by the affirmative vote of a majority of the entire Board, including
a majority of the directors who are not "interested persons," of the Fund, as
defined in the 1940 Act ("Independent Directors"), then the affirmative vote of
the holders of only a majority of the Fund's shares of capital stock outstanding
and entitled to vote at the time is required; and provided, further, with
respect to (6) and (7), if such transaction has been authorized by the
affirmative vote of a majority of the entire Board, including a majority of the
Independent Directors, no stockholder vote is required to authorize such action.
The term "Principal Stockholder" means any person, entity or group that holds,
directly or indirectly, more than 5% of the outstanding shares of the Fund, and
includes any associates or affiliates of such person or entity or of any member
of the group. None of the foregoing provisions may be amended except by the vote
of at least 75% of the outstanding shares of capital stock of the Fund
outstanding and entitled to vote thereon. The percentage vote required under
these provisions is higher than that required under Maryland law or by the 1940
Act. The Board believes that the provisions of the Articles relating to such a
higher vote are in the best interest of the Fund and its stockholders. Even if
agreed to by the Fund, certain of the transactions described above may be
prohibited by the 1940 Act.


    The Board is classified into three classes, each with a term of three years
with only one class of Directors standing for election in any year. Such
classification may prevent replacement of a majority of the Directors for up to
a two-year period. Directors may be removed from office only for cause and only
by vote of at least 75% of the shares entitled to be voted for such Director in
an election of directors.

    Reference should be made to the Articles on file with the Securities and
Exchange Commission for the full text of these provisions. See the Statement of
Additional Information under "Certain Provisions in the Articles of
Incorporation" for a discussion of the voting requirements applicable to certain
other transactions.

    REPURCHASE OF COMMON SHARES; TENDER OFFERS; CONVERSION TO OPEN-END FUND


    The Fund is a closed-end investment company and as such its stockholders
will not have the right to cause the Fund to redeem or repurchase their shares.
Instead, the Common Shares will trade in the open market at a price that will be
a function of several factors, including dividend levels (which are in turn
affected by expenses), net asset value, call protection, dividend stability,
portfolio credit quality,


                                       35
<Page>

relative demand for and supply of such shares in the market, general market and
economic conditions and other factors. Shares of a closed-end investment company
may frequently trade at prices lower than net asset value. The Fund's Board of
Directors regularly monitors the relationship between the market price and net
asset value of the Common Shares. If the Common Shares were to trade at a
substantial discount to net asset value for an extended period of time, the
Board may consider the repurchase of its Common Shares on the open market or in
private transactions, the making of a tender offer for such shares, or the
conversion of the Fund to an open-end investment company. The Fund cannot assure
you that its Board of Directors will decide to take or propose any of these
actions, or that share repurchases or tender offers will actually reduce market
discount.


    If the Fund converted to an open-end company, it would be required to redeem
all Preferred Shares then outstanding (requiring in turn that it liquidate a
portion of its investment portfolio), and the Common Shares would no longer be
listed on the American Stock Exchange. In contrast to a closed-end investment
company, stockholders of an open-end investment company may require the company
to redeem their shares at any time (except in certain circumstances as
authorized by or under the 1940 Act) at their net asset value, less any
redemption charge that is in effect at the time of redemption.

    Before deciding whether to take any action to convert the Fund to an
open-end investment company, the Board would consider all relevant factors,
including the extent and duration of the discount, the liquidity of the Fund's
portfolio, the impact of any action that might be taken on the Fund or its
stockholders, and market considerations. Based on these considerations, even if
the Fund's shares should trade at a discount, the Board of Directors may
determine that, in the interest of the Fund and its stockholders, no action
should be taken. See the Statement of Additional Information under "Repurchase
of Common Shares; Conversion to Open-End Fund" for a further discussion of
possible action to reduce or eliminate such discount to net asset value.

                                  TAX MATTERS
GENERAL; TAXATION OF THE FUND

    The following federal income tax discussion reflects provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing Treasury
regulations, rulings published by the Internal Revenue Service (the "Service"),
and other applicable authority, as of the date of this prospectus. These
authorities are subject to change by legislative or administrative action,
possibly with retroactive effect. The following discussion is only a summary of
some of the important tax considerations generally applicable to investments in
the Fund. For more detailed information regarding tax considerations, see the
Statement of Additional Information. There may be other tax considerations
applicable to particular investors. In addition, income earned through an
investment in the Fund may be subject to state and local taxes.

    The Fund intends to qualify each year for treatment as a regulated
investment company under Subchapter M of the Code (a "RIC"), which involves
satisfying certain distribution and other requirements. If the Fund so
qualifies, it will not be subject to federal income tax on taxable income it
distributes in a timely manner to its stockholders in the form of dividends or
capital gain distributions.

    To satisfy the distribution requirement applicable to RICs, the Fund must
generally distribute as dividends to its stockholders, including holders of its
Preferred Shares, at least 90% of its taxable net investment income, net
tax-exempt income and net short-term capital gain. These distributed amounts
must qualify for the dividends-paid deduction. In certain circumstances, the
Service could take the position that dividends paid on the Preferred Shares
constitute preferential dividends under section 562(c) of the Code and thus do
not qualify for the dividends-paid deduction.

    If at any time when Preferred Shares are outstanding the Fund does not meet
applicable asset coverage requirements, it will be required to suspend
distributions to Common Stockholders until the

                                       36
<Page>
requisite asset coverage is restored. Any such suspension may cause the Fund to
pay a 4% federal excise tax (imposed on RICs that fail to distribute for a given
calendar year, generally, at least 98% of their taxable net investment income
and capital gain net income) and income tax on any undistributed income or gains
and may, in certain circumstances, prevent the Fund from continuing to qualify
for treatment as a RIC. Pursuant to any such suspension, the Fund may redeem
Preferred Shares in an effort to comply with the distribution requirement
applicable to RICs and to avoid income and excise taxes.

TAXATION OF THE FUND'S STOCKHOLDERS

    The Fund primarily invests in municipal bonds issued by states, cities and
local authorities and certain possessions and territories of the United States
(such as Puerto Rico or Guam) the income on which is, in the opinion of bond
counsel to the issuer (or on the basis of other authority believed by NB
Management to be reliable), exempt from federal income tax. Thus, substantially
all of the Fund's dividends to you will qualify as "exempt-interest dividends,"
which are not subject to federal income tax.

    All or a portion of the interest paid on the municipal bonds the Fund holds
may be a "Tax Preference Item" for purposes of the alternate minimum tax
("AMT"), with the result that all or a portion of the dividends paid on Common
Shares also would be such an item. Accordingly, if you are, or as a result of an
investment in the Fund would become, subject to the AMT, the Fund may not be a
suitable investment for you.

    The Fund may at times buy tax-exempt investments at a discount from the
price at which they were originally issued, especially during periods of rising
interest rates. For federal income tax purposes, some or all of any market
discount that is other than DE MINIMIS will be included in the Fund's taxable
income and generally will be taxable to its stockholders when it distributes
that income to them.

    The Fund's investments in certain debt obligations, such as zero coupon
municipal instruments, may cause it to recognize taxable income in excess of the
cash generated by those obligations. Thus, the Fund could be required at times
to liquidate those or other investments in order to satisfy its distribution
requirements.

    For federal income tax purposes, distributions of investment income other
than exempt-interest dividends are taxable as ordinary income to the extent of
the Fund's current or accumulated earnings and profits. Generally, a
distribution of gains the Fund realizes on the sale or exchange of investments
will be taxable to its stockholders, even though the interest income from those
investments generally will be tax-exempt. Whether distributions of net capital
gains are taxed as ordinary income or long-term capital gains is determined by
how long the Fund owned the investments that generated those capital gains,
rather than how long a stockholder has owned his or her Common Shares.
Distributions of gains from the sale of investments that the Fund owned for more
than one year will be taxable as long-term capital gains (provided the Fund
designates those distributions as capital gain dividends), whereas distributions
of gains from the sale of investments that the Fund owned for one year or less
will be taxable as ordinary income. Distributions are taxable to a stockholder
even if they are paid from income or gains the Fund earned before the
stockholder's investment (and thus were included in the price the stockholder
paid for the Common Shares), whether the stockholder receives them in cash or
reinvests them in additional Common Shares through the Dividend Reinvestment
Plan.

    Any gain resulting from a stockholder's sale or exchange of Fund shares will
also be subject to tax. In addition, the exemption from federal income tax for
exempt-interest dividends does not necessarily result in exemption for those
dividends under the income or other tax laws of any state or local taxing
authority.

    The Fund will apply backup withholding at the rate of 30% for amounts paid
during 2002 and 2003 where it is required to apply that withholding. Please see
"Tax Matters" in the Statement of

                                       37
<Page>
Additional Information for additional information about the backup withholding
tax rates for subsequent years.

    This section relates only to federal income tax consequences of investing in
the Fund; the consequences under other tax laws may differ. You should consult
your tax advisor as to the possible application of state and local income tax
laws to Fund dividends and capital gain distributions. Please see "Tax Matters"
in the Statement of Additional Information for additional information regarding
the tax aspects of investing in the Fund.

                                       38
<Page>
                                  UNDERWRITING

    Subject to the terms and conditions of a purchase agreement dated
          , 2002, each underwriter named below has severally agreed to purchase,
and the Fund has agreed to sell to such underwriter, the number of Common Shares
set forth opposite the name of such underwriter.

<Table>
<Caption>
                                                      NUMBER OF
UNDERWRITER                                         COMMON SHARES
- -----------                                         -------------
<S>                                                 <C>
Merrill Lynch, Pierce, Fenner & Smith
          Incorporated............................
A.G. Edwards & Sons, Inc..........................
Legg Mason Wood Walker, Incorporated..............
Quick & Reilly, Inc...............................
RBC Dain Rauscher Inc.............................
Wells Fargo Securities, LLC.......................
Advest, Inc.......................................
Robert W. Baird & Co. Incorporated................
H&R Block Financial Advisors, Inc.................
Fahnestock & Co. Inc..............................
Ferris, Baker Watts, Incorporated.................
Janney Montgomery Scott LLC.......................
J.J.B. Hilliard, W.L. Lyons, Inc..................
McDonald Investments Inc..........................
Morgan Keegan & Company, Inc......................
                                                     ----------
          Total...................................
                                                     ==========
</Table>

    The purchase agreement provides that the obligations of the underwriters to
purchase the shares included in this offering are subject to the approval of
certain legal matters by counsel and to certain other conditions. The
underwriters are obligated to purchase all the Common Shares sold under the
purchase agreement if any of the Common Shares are purchased. In the purchase
agreement, the Fund and NB Management have agreed to indemnify the underwriters
against certain liabilities, including certain liabilities arising under the
Securities Act of 1933, or to contribute payments the underwriters may be
required to make for any of those liabilities.

    The underwriters propose to initially offer some of the Common Shares
directly to the public at the public offering price set forth on the cover
page of this prospectus and some of the Common Shares to certain dealers at the
public offering price less a concession not in excess of $    per share. The
sales load the Fund will pay of $.675 per share is equal to 4.5% of the initial
offering price. The underwriters may allow, and the dealers may allow, a
discount not in excess of $    per share on sales to other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.

    The following table shows the public offering price, sales load and proceeds
before expenses to the Fund. The information assumes either no exercise or full
exercise by the underwriters of their over-allotment option.

<Table>
<Caption>
                                     PER SHARE  WITHOUT OPTION   WITH OPTION
                                     ---------  ---------------  ------------
<S>                                  <C>        <C>              <C>
Public offering price..............    $15.00   $                $
Sales load.........................     $.675   $                $
Proceeds, before expenses, to the
  Fund.............................   $14.325   $                $
</Table>

                                       39
<Page>

    The Fund's expenses of the offering are estimated at $      and are payable
by the Fund. The Fund has agreed to pay the underwriters $.005 per Common Share
as a partial reimbursement of expenses incurred in connection with the offering.
NB Management has agreed to pay organizational expenses and offering costs of
the Fund (other than sales load) that exceed $.03 per Common Share.


    The Fund has granted the underwriters an option to purchase up to
additional Common Shares at the public offering price, less the sale load,
within 45 days from the date of this prospectus solely to cover any
over-allotments. If the underwriters exercise this option, each will be
obligated, subject to conditions contained in the purchase agreement, to
purchase a number of additional shares proportionate to that underwriter's
initial amount reflected in the above table.

    Until the distribution of the Common Shares is complete, Securities and
Exchange Commission rules may limit underwriters and selling group members from
bidding for and purchasing the Fund's Common Shares. However, the
representatives may engage in transactions that stabilize the price of the
Common Shares, such as bids or purchases to peg, fix or maintain that price.

    If the underwriters create a short position in the Common Shares in
connection with the offering, I.E., if they sell more Common Shares than are
listed on the cover of this prospectus, the representatives may reduce that
short position by purchasing Common Shares in the open market. The
representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described above. Purchases of the Common
Shares to stabilize the price or to reduce a short position may cause the price
of the Common Shares to be higher than it might be in the absence of such
purchases.

    Neither the Fund nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Shares. In addition, neither
the Fund nor any of the underwriters makes any representation that the
representatives will engage in these transactions or that these transactions,
once commenced, will not be discontinued without notice.

    The Fund has agreed not to offer or sell any additional Common Shares for a
period of 180 days after the date of the purchase agreement without the prior
written consent of the underwriters, except for the sale of the Common Shares to
the underwriters pursuant to the purchase agreement and certain transactions
relating to the Fund's Dividend Reinvestment Plan.

    The Fund anticipates that the underwriters may from time-to-time act as
brokers or dealers in executing the Fund's portfolio transactions after they
have ceased to be underwriters. The underwriters are active underwriters of, and
dealers in, securities, and therefore can be expected to engage in portfolio
transactions with the Fund.


    The addresses of the principal underwriters are: MERRILL LYNCH & CO., World
Financial Center, North Tower, 250 Vesey Street, New York NY 10281; A.G. EDWARDS
& SONS, INC., One North Jefferson Ave., St. Louis, MO 63103; LEGG MASON WOOD
WALKER, INC., 100 Light Street, Baltimore, MD 21202; QUICK & REILLY, INC.,
26 Broadway, New York, NY 10004; RBC CAPITAL MARKETS, One Liberty Plaza, New
York, NY 10006; WELLS FARGO SECURITIES, LLC, 420 Montgomery Street, San
Francisco, CA 94104; ADVEST, INC., 90 State House Square, Hartford, CT 06103;
ROBERT W. BAIRD & CO., 777 E. Wisconsin Ave., Milwaukee, WI 53202; H&R BLOCK
FINANCIAL ADVISORS, INC., 751 Griswold Street, Detroit, MI 48226; FAHNESTOCK &
CO., INC., 125 Broad Street, New York, NY 10004; FERRIS, BAKER WATTS, INC.,
1700 Pennsylvania Ave., N.W., Washington, D.C. 20006; JANNEY MONTGOMERY SCOTT
LLC, 1801 Market Street, Philadelphia, PA 19103; J.J.B. HILLIARD, W.L. LYONS,
INC., Hilliard Lyons Center, Louisville, KY 40202-2517; MCDONALD INVESTMENTS
INC., 800 Superior Ave., Cleveland, OH 44114; MORGAN KEEGAN & COMPANY, INC.,
50 Front Street, Morgan Keegan Tower, Memphis, TN 38103.


                                       40
<Page>
    One or more of the underwriters of Common Shares may also act as an
underwriter of the Preferred Shares.

    NB Management has also agreed to pay a fee to Merrill Lynch payable
quarterly at the annual rate of .10% of the Fund's Managed Assets during the
continuance of the Management Agreement. The maximum amount of this fee will not
exceed 4.5% of the aggregate initial offering price of the Common Shares offered
hereby; provided, that in determining when the maximum amount has been paid the
value of each of the quarterly payments shall be discounted at the annual rate
of 10% to the closing date of this offering. Merrill Lynch has agreed to provide
certain after-market services to NB Management designed to maintain the
visibility of the Fund on an ongoing basis and to provide relevant information,
studies or reports regarding the Fund and the closed-end investment company
industry.

                          CUSTODIAN AND TRANSFER AGENT

    The custodian of the assets of the Fund is State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02110. The custodian
performs custodial and fund accounting services.


    The Bank of New York, ATTN: Stock Transfer Administration, 101 Barclay
Street, 11-E, New York, New York 10286, serves as the Fund's transfer agent,
registrar and dividend disbursement agent, as well as agent for the Fund's
Dividend Reinvestment Plan.


                                 LEGAL MATTERS


    Certain legal matters in connection with the Common Shares will be passed
upon for the Fund by Kirkpatrick & Lockhart LLP, Washington, D.C., and for the
Underwriters by Clifford Chance US LLP, New York, New York.


                                       41
<Page>
           TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION


<Table>
<S>                                                 <C>
Use of Proceeds...................................
Investment Objective and Policies.................
Investment Restrictions...........................
Further Investment Policies and
  Investment Techniques...........................
Further Investment Techniques.....................
Portfolio Trading and Turnover Rate...............
Management of the Fund............................
Investment Management and Administration
  Services........................................
Portfolio Transactions............................
Distributions.....................................
Description of Shares.............................
Certain Provisions in the Articles of
  Incorporation...................................
Repurchase of Common Shares; Tender Offers;
  Conversion to Open-End Fund.....................
Tax Matters.......................................
Marketing, Performance-Related and Comparative
  Information.....................................
Custodian, Transfer Agent and Dividend
  Disbursement Agent..............................
Independent Auditors..............................
Counsel...........................................
Registration Statement............................
Financial Highlights..............................
APPENDIX A Description of Securities Ratings

</Table>


                                       42
<Page>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                           SHARES

                                NEUBERGER BERMAN
                        INTERMEDIATE MUNICIPAL FUND INC.

                                 COMMON SHARES

                                ---------------
                                   PROSPECTUS
                               ------------------

                              MERRILL LYNCH & CO.
                           A.G. EDWARDS & SONS, INC.
                             LEGG MASON WOOD WALKER
                                  INCORPORATED
                              QUICK & REILLY, INC.
                              RBC CAPITAL MARKETS
                          WELLS FARGO SECURITIES, LLC
                                  ADVEST, INC.
                             ROBERT W. BAIRD & CO.
                       H&R BLOCK FINANCIAL ADVISORS, INC.
                             FAHNESTOCK & CO. INC.
                       FERRIS, BAKER WATTS, INCORPORATED
                          JANNEY MONTGOMERY SCOTT LLC
                       J.J.B. HILLIARD, W.L. LYONS, INC.
                           MCDONALD INVESTMENTS INC.
                         MORGAN KEEGAN & COMPANY, INC.


                               SEPTEMBER 24, 2002

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
C0308 08/02

<PAGE>



              NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.
                       STATEMENT OF ADDITIONAL INFORMATION



      Neuberger Berman Intermediate Municipal Fund Inc. (the "Fund") is a
newly organized, diversified closed-end management investment company.


      This Statement of Additional Information relating to shares of common
stock of the Fund ("Common Shares") is not a prospectus, and should be read in
conjunction with the Fund's prospectus relating to Common Shares dated September
24, 2002. This Statement of Additional Information does not include all
information that a prospective investor should consider before purchasing Common
Shares, and investors should obtain and read the prospectus prior to purchasing
such shares. You can get a free copy of the prospectus from Neuberger Berman
Management Inc. ("NB Management"), 605 Third Avenue, 2nd Floor, New York, New
York 10158-0180 or by calling 877-461-1899. You may also obtain a copy of the
prospectus on the web site (http://www.sec.gov) of the Securities and Exchange
Commission. Capitalized terms used but not defined in this Statement of
Additional Information have the meanings ascribed to them in the prospectus.

      No person has been authorized to give any information or to make any
representations not contained in the prospectus or in this Statement of
Additional Information 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 the Fund. The prospectus and this SAI do not
constitute an offering by the Fund in any jurisdiction in which such offering
may not lawfully be made.


      The "Neuberger Berman" name and logo are service marks of Neuberger
Berman, LLC. "Neuberger Berman Management Inc." and the name of the Fund are
either service marks or registered trademarks of Neuberger Berman Management
Inc.(C)2002 Neuberger Berman Management Inc. All rights reserved.


    This Statement of Additional Information is dated September 24, 2002.


<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE



USE OF PROCEEDS..............................................................1

INVESTMENT OBJECTIVE AND POLICIES............................................1

INVESTMENT RESTRICTIONS......................................................2

FURTHER INVESTMENT POLICIES AND INVESTMENT TECHNIQUES........................4

FURTHER INVESTMENT TECHNIQUES...............................................12

PORTFOLIO TRADING AND TURNOVER RATE.........................................24

CERTAIN RISK CONSIDERATIONS.................................................24

MANAGEMENT OF THE FUND......................................................24

INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................35

PORTFOLIO TRANSACTIONS......................................................40

DISTRIBUTIONS...............................................................42

DESCRIPTION OF SHARES.......................................................42

CERTAIN PROVISIONS IN THE ARTICLES OF INCORPORATION.........................45

REPURCHASE OF COMMON SHARES; TENDER OFFERS;  CONVERSION TO OPEN-END FUND....46

TAX MATTERS.................................................................48

MARKETING, PERFORMANCE-RELATED AND COMPARATIVE INFORMATION..................55

CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSEMENT AGENT...................57

INDEPENDENT AUDITORS........................................................57

COUNSEL.....................................................................57

REGISTRATION STATEMENT......................................................57

FINANCIAL HIGHLIGHTS........................................................59

APPENDIX A DESCRIPTION OF SECURITIES RATINGS...............................A-1



                                       i

<PAGE>

                                 USE OF PROCEEDS

      The net proceeds of the offering of Common Shares of the Fund will be
approximately $_________ (or $_________ if the Underwriters exercise the
over-allotment option in full) after payment of organization and offering costs.

      On behalf of the Fund, NB Management, the Fund's investment manager, has
agreed to pay the amount by which the aggregate of all of the Fund's
organizational expenses and all offering costs (other than the sales load)
exceeds $.03 per Common Share.

      Pending investment in municipal bonds (as described below) that meet the
Fund's investment objective and policies, it is anticipated that the net
proceeds of the offering will be invested in high quality, short-term,
tax-exempt securities. If necessary to invest fully the net proceeds of the
offering immediately, the Fund may also purchase high quality, short-term
securities, including mortgage-backed and corporate debt securities, the income
on which is subject to federal income tax.

                        INVESTMENT OBJECTIVE AND POLICIES

      The investment objective and general investment policies of the Fund are
described in the prospectus. Additional information concerning the
characteristics of certain of the Fund's investments is set forth below.

      The Fund's investment objective is to provide holders of common stock
("Common Stockholders") a high level of current income exempt from federal
income tax. The investment objective and, unless otherwise specified, the
investment policies and limitations of the Fund are not fundamental. Any
investment objective, policy or limitation that is not fundamental may be
changed by the Board of Directors of the Fund (the "Board") without stockholder
approval. The fundamental investment policies and limitations of the Fund may
not be changed without the approval of the holders of a majority of the
outstanding Common Shares and, if issued, Fund Preferred Shares voting as a
single class, as well as by the vote of a majority of the outstanding Fund
Preferred Shares tabulated separately. A "majority of the outstanding" shares
means (i) 67% or more of the shares present at a meeting, if the holders of more
than 50% of the shares are present or represented by proxy, or (ii) more than
50% of the shares, whichever of (i) or (ii) is less.

      All or a portion of the interest paid on the municipal obligations the
Fund holds may be an item of tax preference for purposes of the federal
alternative minimum tax ("AMT") ("Tax Preference Item"), with the result that
all or a portion of the dividends paid to Fund stockholders also would be such
an item. Common Shares thus may not be a suitable investment for investors who
are subject to the AMT or would become subject thereto by investing in Common
Shares. The suitability of an investment in Common Shares will depend upon a
comparison of the after-tax yield likely to be provided from the Fund with that
from comparable tax-exempt investments not subject to the AMT, and from
comparable fully taxable investments, in light of each such investor's tax
position. Special considerations apply to corporate investors. See "Tax
Matters."

      Under normal market conditions, the Fund will invest at least 80% of its
total assets in municipal bonds (as described below) rated, at the time of
investment, within the four highest categories by a nationally recognized


                                       1
<PAGE>

statistical rating organization ("NRSRO") (or, if unrated, judged by NB
Management to be of comparable quality). The Fund's policies on the credit
quality of its investments apply only at the time of the purchase of a security,
and the Fund is not required to dispose of securities if Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("S&P"), Moody's Invetor Services,
Inc. ("Moody's") or any other NRSRO downgrades its assessment of the credit
characteristics of a particular issuer or if NB Management reassesses its view
with respect to the credit quality of the issuer thereof.

      The Fund may invest up to 20% of its total assets in municipal bonds that,
at the time of investment, are rated Ba/BB or B by Moody's, S&P or Fitch, Inc.
("Fitch") or are unrated but judged to be of comparable quality by NB
Management. Bonds of below investment grade quality (Ba/BB or below) are
commonly referred to as "junk bonds." For a description of the risks associated
with lower quality securities, see "High Yield Securities (`Junk Bonds')" below.

                             INVESTMENT RESTRICTIONS


      The following investment restrictions of the Fund are fundamental and
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities as defined in the 1940 Act. The Fund may
not:


      1. DIVERSIFICATION. Purchase securities (other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities or
securities of other investment companies) of any issuer if as a result of the
purchase, more than 5% of the value of the Fund's total assets would be invested
in the securities of the issuer, except that up to 25% of the value of the
Fund's total assets may be invested without regard to this 5% limitation.

      2. CONCENTRATION. Invest 25% or more of its total assets in issuers having
their principal business activities in the same industry.

      3. SENIOR SECURITIES. Issue senior securities if such issuance is
specifically prohibited by the 1940 Act or the rules or regulations thereunder.

      4. BORROWING. Borrow money in excess of 33 1/3% of its total assets
(including the amount of money borrowed) minus liabilities (other than the
amount borrowed), except that the Fund may borrow up to an additional 5% of its
total assets for temporary purposes.

      5. LENDING. Make loans of money or property to any person, except to the
extent that the securities in which the Fund may invest are considered to be
loans and except that the Fund may lend money or property in connection with the
maintenance of the value of or the Fund's interest with respect to the municipal
securities it owns and may lend portfolio securities.

      6. UNDERWRITING. Engage in the business of underwriting the securities of
other issuers, except to the extent that the Fund may be deemed an underwriter
in connection with the sale of securities in its portfolio.

      7. REAL ESTATE. Purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments. This policy does not prevent
the Fund from investing in issuers that invest, deal, or otherwise engage in


                                       2
<PAGE>

transactions in or hold real estate or interests therein, investing in
instruments that are secured by real estate or interests therein, or exercising
rights under agreements relating to such securities, including the right to
enforce security interests.

      8. COMMODITIES. Purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments. This policy does not
prevent the Fund from engaging in transactions involving futures contracts and
options, forward contracts, swaps, caps, floors, collars, securities purchased
or sold on a forward-commitment or delayed-delivery basis or other financial
instruments, or investing in securities or other instruments that are secured by
physical commodities.


      As a fundamental policy, the Fund will invest at least 80% of its total
assets in Municipal Bonds. If because of market action, the Fund falls out of
compliance with this policy, it will make future investments in such a manner as
to bring the Fund back into compliance with the policy.


      The following investment policies and limitations of the Fund are
non-fundamental. The Fund may not:

      1. MARGIN TRANSACTIONS. Buy any securities on "margin." Neither the
deposit of initial or variation margin in connection with hedging and risk
management transactions nor short-term credits as may be necessary for the
clearance of transactions is considered the purchase of a security on margin.

      2. SHORT SALES, PUTS AND CALLS. Sell securities short (unless it owns or
has the right to obtain securities equivalent in kind and amount to the
securities sold short). This policy does not prevent the Fund from entering into
short positions in futures contracts, options, forward contracts, swaps, caps,
floors, collars, securities purchased or sold on a forward-commitment or delayed
delivery basis or other financial instruments.




      Unless otherwise indicated, all limitations applicable to the Fund's
investments (as stated above and elsewhere in this Statement of Additional
Information) are applied only at the time a transaction is entered into. If
because of changes in the value of the Fund's portfolio, the asset coverage for
any borrowings were to fall below 300%, this would limit the Fund's ability to
pay dividends and therefore, the Fund intends to restore the 300% asset coverage
as soon as practical in light of the circumstances. Any subsequent change in a
rating assigned by any NRSRO to a security (or, if unrated, any change in the
judgment of NB Management as to comparable quality), or change in the percentage
of the Fund's total assets invested in certain securities or other instruments,
or change in the average duration of the Fund's investment portfolio, resulting
from market fluctuations or other changes in the Fund's total assets, will not
require the Fund to dispose of an investment unless and until NB Management
determines that it is appropriate and practicable to sell or close out the
investment without undue market or tax consequences to the Fund. If rating
agencies assign different ratings to the same security, NB Management will
determine which rating it believes best reflects the security's quality and risk
at that time, which may be the higher of the several assigned ratings.




                                       3
<PAGE>

      Under the 1940 Act, a "senior security" does not include any promissory
note or evidence of indebtedness where such loan is for temporary purposes only
and in an amount not exceeding 5% of the value of the total assets of the issuer
at the time the loan is made. A loan is presumed to be for temporary purposes if
it is repaid within sixty days and is not extended or renewed.

      The Fund would be deemed to "concentrate" in a particular industry if it
invested 25% or more of its total assets in that industry. The Fund's industry
concentration policy does not preclude it from focusing investments in issuers
in a group of related industrial sectors (such as different types of utilities).

      To the extent the Fund covers its commitment under a derivative instrument
by the segregation of assets determined by NB Management to be liquid in
accordance with procedures adopted by the Board, and/or by holding instruments
representing offsetting commitments, such instrument will not be considered a
"senior security" for purposes of the asset coverage requirements otherwise
applicable to borrowings by the Fund or the Fund's issuance of Preferred Shares.

      The Fund interprets its policies with respect to borrowing and lending to
permit such activities as may be lawful for the Fund, to the full extent
permitted by the 1940 Act or by exemption from the provisions therefrom pursuant
to exemptive order of the SEC.

      The Fund intends to apply for ratings for its Preferred Shares from
Moody's and Fitch. In order to obtain and maintain the required ratings, the
Fund may be required to comply with investment quality, diversification and
other guidelines established by Moody's and Fitch. Such guidelines will likely
be more restrictive than the restrictions set forth above. The Fund does not
anticipate that such guidelines would have a material adverse effect on Common
Stockholders or its ability to achieve its investment objective. The Fund
currently anticipates that any Preferred Shares that it intends to issue would
be initially given the highest ratings by Moody's ("Aaa"), S&P ("AAA") and/or
Fitch ("AAA"), but no assurance can be given that such ratings will be obtained.
No minimum rating is required for the issuance of Preferred Shares by the Fund.
Moody's, S&P and Fitch receive fees in connection with their ratings issuances.


      CASH MANAGEMENT AND TEMPORARY DEFENSIVE POSITIONS. For temporary defensive
purposes, or to manage cash pending investment or payout, the Fund may invest up
to 100% of its total assets in cash and cash equivalents, U.S. Government and
Agency Securities, commercial paper and certain other money market instruments,
as well as repurchase agreements collateralized by the foregoing.

            FURTHER INVESTMENT POLICIES AND INVESTMENT TECHNIQUES


      The following information supplements the discussion of the Fund's
investment objective, policies, and techniques that are described in the
prospectus.

      The Fund's policy is to invest, under normal conditions, at least 80% of
its total assets in municipal bonds with remaining maturities of less than 15
years and to maintain a dollar-weighted average duration of the entire portfolio
between 3 and 8 years. For this purpose, any scheduled principal prepayments


                                       4
<PAGE>

will be reflected in the calculation of dollar-weighted average duration. The
Fund may invest up to 20% of its total assets in municipal bonds that, at the
time of investment, are rated Ba/BB or B by Moody's, S&P or Fitch or unrated but
judged to be of comparable quality by NB Management.

INVESTMENT IN MUNICIPAL BONDS


      Municipal bonds are issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the interest on which,
in the opinion of special bond counsel or other counsel to the issuer of such
securities is, at the time of issuance, not includable in gross income for
federal income tax purposes. Under normal market conditions, at least 80% of the
Fund's total assets will be invested in municipal bonds with remaining
maturities of less than 15 years.


      The "issuer" of municipal bonds is generally deemed to be the governmental
agency, authority, instrumentality or other political subdivision, or the
non-governmental user of a revenue bond-financed facility, the assets and
revenues of which will be used to meet the payment obligations, or the guarantee
of such payment obligations, of the municipal bonds.

      Municipal bonds may have fixed or variable interest rates. The Fund may
purchase floating and variable rate demand notes, which are municipal
obligations normally having a stated maturity in excess of one year, but which
permit the holder to tender the notes for purchase at the principal amount
thereof at shorter intervals. The interest rate on a floating rate demand note
is based on a known lending rate, such as a bank's prime rate, and is adjusted
each time such rate is adjusted. The interest rate on a variable rate demand
note is adjusted at known intervals, on the basis of a specific benchmark. There
generally is no secondary market for these notes, although they may be tendered
for redemption or remarketing at face value and thus may be determined to be
liquid. Each such note purchased by the Fund will meet the criteria established
for the purchase of municipal bonds.

      Municipal bonds that have fixed rates of interest are sensitive to changes
in market interest rates. Generally, when interest rates are rising, the value
of the Fund's municipal bond holdings can be expected to decrease. When interest
rates are declining, the value of the Fund's municipal bond holdings can be
expected to increase. The Fund's net asset value may fluctuate in response to
the increasing or decreasing value of its municipal bond holdings. Generally,
the longer the maturity of a fixed-rate instrument, the greater the change in
value in response to a given change in market interest rates.

      The issuer of a municipal obligation might declare bankruptcy, which could
cause the Fund to experience delays collecting interest and principal. To
enforce its rights, the Fund might be required to take possession of and manage
the assets securing the issuer's obligation, which may increase the Fund's
expenses and reduce its net asset value. If the Fund took possession of a
bankrupt issuer's assets, income derived from the Fund's ownership and
management of the assets might not be tax exempt and more of the Fund's total
distributions to its stockholders thus would be taxable. The Fund might not be
able to take possession of the assets of a bankrupt issuer because of laws
protecting state and local institutions, limits on the investments the Fund is


                                       5
<PAGE>

permitted to make and limits on the nature of the income the Fund is permitted
to receive imposed on it by the Internal Revenue Code of 1986, as amended (the
"Code"). If the Fund cannot take possession of a bankrupt issuer's assets and
enforce its rights, the value of the issuer's security may be greatly
diminished. This could reduce the Fund's net asset value.

      The U.S. Government has enacted laws that have restricted or diminished
the income tax exemption on some municipal bonds, and it may do so again in the
future. If this were to happen, more of the Fund's distributions to its
stockholders would be taxable. The issuer of a municipal bond may be obligated
to redeem the bond at face value, but if the Fund paid more than face value for
the bond, it may lose money when it sells the bond. Market rates of interest may
be lower for municipal bonds than for taxable securities, but this may be offset
by the federal income tax on income derived from taxable securities. There may
be less extensive information available about the financial condition of issuers
of municipal bonds than for corporate issuers with publicly traded securities.

      The Fund's investments in municipal bonds are subject to certain risks. In
addition to those discussed in the prospectus, they include the following:

      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 OR SPECIAL OBLIGATION 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 private activity bonds are revenue bonds, in that principal and
interest are payable only from the net revenues of the facility financed by the
bonds. These bonds generally do not constitute a pledge of the general credit of
the public or private operator or user of the facility. In some cases, however,
payment may be secured by a pledge of real and personal property constituting
the facility.

      RESOURCE RECOVERY BONDS. Resource recovery bonds are a type of revenue
bond issued to build facilities such as solid waste incinerators or
waste-to-energy plants. Typically, a private corporation will be involved on a
temporary basis during the construction of the facility, and the revenue stream
will be secured by fees or rents paid by municipalities for use of the
facilities. The credit and quality of resource recovery bonds may be affected by


                                       6
<PAGE>

the viability of the project itself, tax incentives for the project, and
changing environmental regulations or interpretations thereof.

       TENDER OPTION BONDS. 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.

      LEASE OBLIGATIONS. Also included within the general category of municipal
bonds are participations in lease obligations or installment purchase contract
obligations (collectively "lease obligations") of municipal authorities or
entities. Although lease obligations do not constitute general obligations of
the municipality for which the municipality's taxing power is pledged, a lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses, which provide
that the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. In addition to the "non-appropriation" risk, these securities
represent a relatively new type of financing that has not yet developed the
depth of marketability associated with more conventional bonds. Although "non
appropriation" lease obligations are often secured by the underlying property,
disposition of the property in the event of foreclosure might prove difficult.
The Fund may invest up to 100% of its assets in "non-appropriation" lease
obligations and in unrated "non-appropriation" lease obligations that, at the
time of investment, are judged by NB Management to have credit characteristics
equivalent to, and to be of comparable quality to, securities that are rated
investment grade.

      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.

      In evaluating such unrated lease obligations, NB Management will consider
such factors as it deems appropriate, including:



                                       7
<PAGE>

      o  whether the lease can be cancelled;

      o  the ability of the lease obligee to direct the sale of the underlying
         assets;

      o  the general creditworthiness of the lease obligor;

      o  the likelihood that the municipality will discontinue appropriating
         funding for the leased property if such property is no longer
         considered essential by the municipality;

      o  the legal recourse of the lease obligee in the event of such a failure
         to appropriate funding; and

      o  any limitations which are imposed on the lease obligor's ability to
         utilize substitute property or services other than those covered by the
         lease obligations.

HIGH YIELD SECURITIES ("JUNK BONDS")

      The Fund may invest up to 20% of its total assets in municipal bonds that,
at the time of investment, are rated Ba/BB or B by Moody's, S&P or Fitch or are
unrated but judged to be of comparable quality by NB Management. Bonds of below
investment grade quality (Ba/BB or below) are commonly referred to as "high
yield securities" or "junk bonds." Issuers of bonds rated Ba/BB or B are
regarded as having current capacity to make principal and interest payments but
are subject to business, financial or economic conditions that could adversely
affect such payment capacity. Municipal bonds rated Baa or BBB are considered
"investment grade" securities, although such bonds may be considered to possess
some speculative characteristics. Municipal bonds rated AAA may have been so
rated on the basis of the existence of insurance guaranteeing the timely
payment, when due, of all principal and interest.

      High yield securities are regarded as predominantly speculative with
respect to the issuer's continuing ability to meet principal and interest
payments and, therefore, carry greater price volatility and principal and income
risk, including the possibility of issuer default and bankruptcy and increased
market price volatility.


      High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in high yield security prices because the advent
of a recession could lessen the ability of an issuer to make principal and
interest payments on its debt securities. If an issuer of high yield securities
defaults, in addition to risking payment of all or a portion of interest and
principal, the Fund may incur additional expenses to seek recovery. In the case
of high yield securities structured as zero coupon securities (see "Zero Coupon
Bonds," below), their market prices are affected to a greater extent by interest
rate changes, and therefore tend to be more volatile, than securities that pay
interest periodically and in cash. NB Management seeks to reduce these risks
through diversification, credit analysis and attention to current developments
and trends in both the economy and financial markets.




                                       8
<PAGE>

      The secondary market on which high yield securities are traded may be less
liquid than the market for higher grade securities. Less liquidity in the
secondary trading market could adversely affect the price at which the Fund
could sell a high yield security, and could adversely affect the net asset value
of the shares. Adverse publicity and investor perceptions, whether or not based
on fundamental analysis, may decrease the values and liquidity of high yield
securities, especially in a thinly traded market. When secondary markets for
high yield securities are less liquid than the market for higher grade
securities, it may be more difficult to value the securities because such
valuation may require more research, and elements of judgment may play a greater
role in the valuation because there is less reliable, objective data available.
During periods of thin trading in these markets, the spread between bid and
asked prices is likely to increase significantly and the Fund may have greater
difficulty selling its portfolio securities. The Fund will be more dependent on
NB Management's research and analysis when investing in high yield securities.
NB Management seeks to minimize the risks of investing in all securities through
diversification, in-depth credit analysis and attention to current developments
in interest rates and market conditions.

      A general description of Moody's, S&P's and Fitch's ratings of municipal
bonds is set forth in Appendix A hereto. The ratings of Moody's, S&P and Fitch
represent their opinions as to the quality of the municipal bonds they rate. It
should be emphasized, however, that ratings are general and are not absolute
standards of quality. Consequently, municipal bonds with the same maturity,
coupon and rating may have different yields while obligations with the same
maturity and coupon with different ratings may have the same yield. For these
reasons, the use of credit ratings as the sole method of evaluating high yield
securities can involve certain risks. For example, credit ratings evaluate the
safety of principal and interest payments, not the market value risk of high
yield securities. Also, credit rating agencies may fail to change credit ratings
in a timely fashion to reflect events since the security was last rated. NB
Management does not rely solely on credit ratings when selecting securities for
the Fund, and develops its own independent analysis of issuer credit quality.

      The Fund's credit quality policies apply only at the time a security is
purchased, and the Fund is not required to dispose of a security if a rating
agency or NB Management downgrades its assessment of the credit characteristics
of a particular issue. In determining whether to retain or sell such a security,
NB Management may consider such factors as NB Management's assessment of the
credit quality of the issuer of such security, the price at which such security
could be sold and the rating, if any, assigned to such security by any rating
agency. However, analysis of the creditworthiness of issuers of high yield
securities may be more complex than for issuers of higher quality debt
securities.

PARTICIPATION CERTIFICATES

      Participation certificates are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities. They may represent participations in a lease, an installment
purchase contract, or a conditional sales contract. Some municipal leases and
participation certificates may not be readily marketable.



                                       9
<PAGE>

ZERO COUPON BONDS

      The Fund may invest in zero coupon bonds. 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 bonds 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 bonds are redeemed at face value when they mature. The Fund must take
discount on zero coupon bonds ("original issue discount" or "OID") into account
ratably for federal income tax purposes prior to the receipt of any actual
payments. Because the Fund must distribute substantially all of its net income
(including non-cash income attributable to zero coupon bonds and regardless of
whether the income is taxable or tax-exempt) to its stockholders each year for
federal income and excise tax purposes, it may have to dispose of portfolio
securities under disadvantageous circumstances to generate cash, or may be
required to borrow, to satisfy its distribution requirements. See "Tax Matters."

      The market prices of zero coupon bonds generally are more volatile than
the prices of securities that pay interest periodically. Zero coupon bonds 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. Because
these securities usually trade at a deep discount, they will be subject to
greater fluctuations of market value in response to changing interest rates than
debt obligations of comparable maturities that make periodic distributions of
interest. On the other hand, because there are no periodic interest payments to
be reinvested prior to maturity, zero coupon securities eliminate the
reinvestment risk and lock in a rate of return to maturity.

ILLIQUID SECURITIES

      The Fund may invest up to 20% of its net assets in securities that are
illiquid at the time of investment. The term "illiquid securities" for this
purpose means securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued the securities. Illiquid securities are considered to include, among
other things, written over-the-counter options, securities or other liquid
assets being used as cover for such options, repurchase agreements with
maturities in excess of seven days, certain loan participation interests, fixed
time deposits that are not subject to prepayment or provide for withdrawal
penalties upon prepayment (other than overnight deposits), and other securities
whose disposition is restricted under the federal securities laws.

MUNICIPAL NOTES

      Municipal notes in which the Fund may invest include the following:

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


                                       10
<PAGE>

local issuing agency, the HUD agreement provides the full faith and credit of
the United States as additional security.

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.

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.

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.

CONSTRUCTION LOAN NOTES are sold to provide construction financing. After
completion of construction, many projects receive permanent financing from
Fannie Mae (also known as the Federal National Mortgage Association) or Ginnie
Mae (also known as the Government National Mortgage Association or GNMA).

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.

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 (as defined below). The Fund can also purchase bonds issued to refund
earlier issues. The proceeds of these refunding bonds are often used for escrow
to support refunding.

TAXABLE INVESTMENTS

      From time to time, for temporary defensive purposes, or when suitable
municipal securities are not available, the Fund may invest in instruments the
income from which is taxable. These include:

U.S. GOVERNMENT AND AGENCY SECURITIES. U.S. Government Securities are
obligations of the U.S. Treasury backed by the full faith and credit of the
United States. U.S. Government Agency Securities are issued or guaranteed by
U.S. Government agencies, or instrumentalities of the U.S. Government, such as
GNMA, Fannie Mae, Freddie Mac (also known as the Federal Home Loan Mortgage
Corporation), Sallie Mae (formerly known as the Student Loan Marketing
Association), and the Tennessee Valley Authority. Some U.S. Government Agency
Securities are supported by the full faith and credit of the United States,
while others may 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


                                       11
<PAGE>

Agency mortgage-backed securities. The market prices of U.S. Government Agency
Securities are not guaranteed by the Government and generally fluctuate
inversely with changing interest rates.

COMMERCIAL PAPER. Commercial paper is a short-term debt security issued by a
corporation, bank, municipality, or other issuer, usually for purposes such as
financing current operations. The Fund may invest in commercial paper that
cannot be resold to the public without an effective registration statement under
the Securities Act of 1933 ("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 Directors.

BANKING AND SAVINGS INSTITUTION SECURITIES. These include certificates of
deposit ("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 Fund may invest
typically are not covered by deposit insurance.

                          FURTHER INVESTMENT TECHNIQUES

      The Fund may employ, among others, the investment techniques described
below, which may give rise to taxable income.

      In connection with the investment objective and policies described in this
Statement of Additional Information and in the prospectus, the Fund may:
purchase and sell options (including swaps, caps, floors and collars) on
municipal securities and on indices based on municipal securities; borrow funds
and issue senior securities to the extent permitted under the 1940 Act; engage
in interest rate and other hedging and risk management transactions; and
purchase and sell municipal securities on a "when-issued" or "delayed delivery"
basis. These investment practices entail risks. NB Management may use some or
all of the following hedging and risk management practices when their use
appears appropriate. Although NB Management believes that these investment
practices may further the Fund's investment objective, no assurance can be given
that these investment practices will achieve this result. NB Management may also
decide not to engage in any of these investment practices.

OPTIONS AND FUTURES GENERALLY

      The Fund may engage in futures and options transactions in accordance with
its investment objective and policies. The Fund may engage in such transactions
if it appears advantageous to NB Management to do so in order to pursue its
investment objective, to hedge (i.e., protect) against the effects of market
conditions and to stabilize the value of its assets. NB Management may also
decide not to engage in any of these investment practices. The use of futures
and options, and the possible benefits and attendant risks are discussed below,
along with information concerning certain other investment policies and
techniques.



                                       12
<PAGE>

      There are risks associated with futures and options transactions. Because
it is not possible to perfectly correlate the price of the securities being
hedged with the price movement in a futures contract, it is not possible to
provide a perfect offset on losses on the futures contract or the option on the
contract.

      Because there is imperfect correlation between the Fund's securities that
are hedged and the futures contract, the hedge may not be fully effective.
Losses on the Fund's security may be greater than gains on the futures contract,
or losses on the futures contract may be greater than gains on the securities
subject to the hedge. In an effort to compensate for imperfect correlation, the
Fund may over-hedge or under-hedge by entering into futures contracts or options
on futures contracts in dollar amounts greater or less than the dollar amounts
of the securities being hedged. If market movements are not as anticipated, the
Fund could lose money from these positions.

      If the Fund hedges against an increase in interest rates, and rates
decline instead, the Fund will lose all or part of the benefit of the increase
in value of the securities it hedged because it will have offsetting losses in
its futures or options positions. Also, in order to meet margin requirements,
the Fund may have to sell securities at a time it would not normally choose.

SECURITIES OPTIONS TRANSACTIONS

      The Fund may invest in options on municipal securities, traded
over-the-counter and, if applicable, traded on a national securities exchange.
In general, the Fund may purchase and sell (or write) options on up to 20% of
its total assets. The SEC requires that obligations of investment companies such
as the Fund, in connection with options sold, must comply with certain
segregation or cover requirements that are more fully described below. There is
no limitation on the amount of the Fund's assets that can be used to comply with
such segregation or cover requirements.

      A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security at the agreed-upon exercise (or
"strike") price during the period specified in the terms of the option ("option
period"). A put option gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying security at the strike price during the option
period. Purchasers of options pay an amount, known as a premium, to the option
writer in exchange for the right under the option contract. Option contracts may
be written with terms that would permit the holder of the option to purchase or
sell the underlying security only upon the expiration date of the option.

      The Fund may purchase put and call options in hedging transactions to
protect against a decline in the market value of municipal securities in the
Fund's portfolio (e.g., by the purchase of a put option) and to protect against
an increase in the cost of fixed-income securities that the Fund may seek to
purchase in the future (e.g., by the purchase of a call option). If the Fund
purchases put and call options, paying premiums therefor, and price movements in
the underlying securities are such that exercise of the options would not be
profitable for the Fund, to the extent such underlying securities correlate in
value to the Fund's portfolio securities, losses of the premiums paid may be
offset by an increase in the value of the Fund's portfolio securities (in the


                                       13
<PAGE>

case of a purchase of put options) or by a decrease in the cost of acquisition
of securities by the Fund (in the case of a purchase of call options).

      The Fund may also sell put and call options as a means of increasing the
yield on its portfolio and also as a means of providing limited protection
against decreases in market value of the portfolio. When the Fund sells an
option, if the underlying securities do not increase (in the case of a call
option) or decrease (in the case of a put option) to a price level that would
make the exercise of the option profitable to the holder of the option, the
option generally will expire without being exercised and the Fund will realize
as profit the premium received for such option. When a call option written by
the Fund is exercised, the option holder purchases the underlying security at
the strike price and the Fund does not participate in any increase in the price
of such securities above the strike price. When a put option written by the Fund
is exercised, the Fund will be required to purchase the underlying securities at
the strike price, which may be in excess of the market value of such securities.


      OPTIONS ON SECURITIES. The Fund may write covered call options so long as
it owns securities that are acceptable for escrow purposes and may write secured
put options, which means that so long as the Fund is obligated as a writer of a
put option, it will invest an amount, not less than the exercise price of the
put option, in securities consistent with its investment objective and policies
and restrictions on investment. See "Investment Objective and Policies" and
"Investment Restrictions." The premium received for writing an option will
reflect, among other things, the relationship of the exercise price to the
market price, the price volatility of the underlying security, the option
period, supply and demand and interest rates. The Fund may write or purchase
spread options, which are options for which the exercise price may be a fixed
dollar spread or yield spread between the security underlying the option and
another security that is used as a benchmark. The exercise price of an option
may be below, equal to or above the current market value of the underlying
security at the time the option is written. The buyer of a put who also owns the
related security is protected by ownership of a put option against any decline
in that security's price below the exercise price, less the amount paid for the
option. At times the Fund may wish to establish a position in a security upon
which call options are available. By purchasing a call option on such security
the Fund would be able to fix the cost of acquiring the security, which is the
cost of the call plus the exercise price of the option. This procedure also
provides some protection from an unexpected downturn in the market, because the
Fund is only at risk for the amount of the premium paid for the call option that
it can, if it chooses, permit to expire.


      OPTIONS ON SECURITIES INDICES. The Fund also may purchase and write call
and put options on securities indices. Through the writing or purchase of index
options, the Fund can achieve many of the same objectives as through the use of
options on individual securities. Options on securities indices are similar to
options on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive upon exercise of the option, an amount of
cash, if the closing level of the securities index upon which the option is
based is greater than, in the case of a call, or less than, in the case of a
put, the exercise price of the option. This amount of cash is equal to the
difference between the closing price of the index and the exercise price of the
option. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. Unlike options on securities (which


                                       14
<PAGE>

require, upon exercise, delivery of the underlying security), settlements of or
loss of an option on an index depends on price movements in the market generally
(or in a particular industry or segment of the market on which the underlying
index is based) rather than price movements in individual securities, as is the
case with respect to options on securities.

      When the Fund writes an option on a securities index, it will be required
to deposit with its custodian eligible securities equal in value to 100% of the
exercise price in the case of a put, or the contract's value in the case of a
call. In addition, where the Fund writes a call option on a securities index at
a time when the contract value exceeds the exercise price, the Fund will
segregate, until the option expires or is closed out, cash or cash equivalents
equal in value to such excess.

      Options on securities and index options involve risks similar to those
risks relating to transactions in financial futures described below. Also, an
option purchased by the Fund may expire worthless, in which case the Fund would
lose the premium paid therefor.

      OTC OPTIONS. Over-the-counter options ("OTC options") differ from
exchange-traded options in several respects. They are transacted directly with
dealers and not with a clearing corporation, and there is a risk of
non-performance by the dealer. OTC options are available for a greater variety
of securities and for a wider range of expiration dates and exercise prices than
are exchange-traded options. Because OTC options are not traded on an exchange,
pricing is normally done by reference to information from a market maker, which
information is carefully monitored by NB Management and verified in appropriate
cases. The Fund may be required to treat certain of its OTC options transactions
as illiquid securities.

      It will generally be the Fund's policy, in order to avoid the exercise of
an option sold by it, to cancel its obligation under the option by entering into
a closing purchase transaction, if available, unless it is determined to be in
the Fund's interest to sell (in the case of a call option) or to purchase (in
the case of a put option) the underlying securities. A closing purchase
transaction consists of the Fund's purchasing an option having the same terms as
the option it sold and has the effect of canceling its position as a seller. The
premium that the Fund will pay when executing a closing purchase transaction may
be higher than the premium it received when it sold the option, depending in
large part upon the relative price of the underlying security at the time of
each transaction. To the extent options sold by the Fund are exercised and it
either delivers portfolio securities to the holder of a call option or
liquidates securities in its portfolio as a source of funds to purchase
securities put to it, its portfolio turnover rate will increase, which would
cause it to incur additional brokerage expenses.

      During the option period, the Fund, as a covered call writer, gives up the
potential appreciation above the exercise price should the underlying security
rise in value, or the Fund, as a secured put writer, retains the risk of loss
should the underlying security decline in value. For the covered call writer,
substantial appreciation in the value of the underlying security would result in
the security being "called away" at the strike price of the option that may be
substantially below the fair market value of such security. For the secured put
writer, substantial depreciation in the value of the underlying security would
result in the security being "put to" the writer at the strike price of the


                                       15
<PAGE>

option which may be substantially in excess of the fair market value of such
security. If a covered call option or a secured put option expires unexercised,
the writer realizes a gain, and the buyer a loss, in the amount of the premium.


      To the extent that an active market exists or develops, whether on a
national securities exchange or over-the-counter, in options on indices based
upon municipal securities, the Fund may purchase and sell options on such
indices, subject to the limitation that the Fund may purchase and sell options
on up to 20% of its total assets. Through the writing or purchase of index
options, the Fund can achieve many of the same objectives as through the use of
options on individual securities. Options on securities indices are similar to
options on securities except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the securities index upon which the option is based
is greater than, in the case of a call, or less than, in the case of a put, the
strike price of the option.


      Price movements in securities, which the Fund owns or intends to purchase,
will not correlate perfectly with movements in the level of an index and,
therefore, the Fund bears the risk of a loss on an index option that is not
completely offset by movements in the price of such securities. Because index
options are settled in cash, a call writer cannot determine the amount of its
settlement obligations in advance and, unlike call writing on specific
securities, cannot provide in advance for, or cover, its potential settlement
obligations by acquiring and holding the underlying securities.

      The Fund and NB Management have found the dealers with which they engage
in OTC options transactions generally agreeable to and capable of entering into
closing transactions. The Fund has adopted procedures for engaging in OTC
options for the purpose of reducing any potential adverse impact of such
transactions upon the liquidity of the Fund's portfolio.

      As part of these procedures the Fund will only engage in OTC options
transactions with respect to U.S. Government securities with primary dealers
that have been specifically approved by the Board. The Fund will engage in OTC
options transactions with respect to municipal securities only with dealers that
have been specifically approved by the Board. The Fund and NB Management believe
that the approved dealers should be agreeable and able to enter into closing
transactions as necessary and, therefore, present minimal credit risk to the
Fund. The Fund anticipates entering into written agreements with those dealers
to whom the Fund may sell OTC options, pursuant to which the Fund would have the
absolute right to repurchase the OTC options from such dealers at any time at a
price with respect to U.S. Government securities set forth in such agreement.
The amount invested by the Fund in OTC options on securities other than U.S.
Government securities, including options on municipal securities, will be
treated as illiquid and subject to the Fund's 20% limitation on its net assets
that may be invested in illiquid securities.

      Gains, if any, the Fund recognizes or is deemed to recognize from
transactions in securities options will be taxable income. See "Tax Matters" for
information relating to the allocation of taxable income, if any, between the
Common Shares and Preferred Shares.



                                       16
<PAGE>

BORROWING AND LEVERAGE

      The Fund is authorized to borrow amounts up to 33 1/3% of its total assets
(including the amount borrowed) minus liabilities (other than the amount
borrowed). The use of borrowed funds involves the speculative factor known as
"leverage." The Articles of Incorporation authorize the Board to create
additional classes of stock, and it is currently contemplated that the Fund will
issue one or more classes of preferred stock. Preferred stock would permit the
Fund to assume leverage in an amount up to 50% of its total assets. Preferred
stock, including, when issued, the Preferred Shares, would have a priority on
the income and assets of the Fund over the Common Shares and would have certain
other rights with respect to voting and the election of Directors. In certain
circumstances, the net asset value of and dividends payable on shares of Common
Shares could be adversely affected by such preferences. The use of leverage
creates an opportunity for increased returns to holders of the Common Shares
but, at the same time, creates special risks. The Fund will utilize leverage
only when there is an expectation that it will benefit the Fund. To the extent
the income or other gain derived from securities purchased with the proceeds of
borrowings or preferred stock issuances exceeds the interest or dividends the
Fund would have to pay thereon, the Fund's net income or other gain would be
greater than if leverage had not been used. Conversely, if the income or other
gain from the securities purchased through leverage is not sufficient to cover
the cost of such leverage, the Fund's total return would be less than if
leverage had not been used. If leverage is used, in certain circumstances, the
Fund could be required to liquidate securities it would not otherwise sell in
order to satisfy dividend or interest obligations. The Fund may also borrow up
to an additional 5% of its total assets for temporary purposes without regard to
the foregoing limitations. See "Investment Restrictions." This could include,
for example, borrowing on a short-term basis in order to facilitate the
settlement of portfolio securities transactions.

INTEREST RATE AND OTHER HEDGING TRANSACTIONS

      In order to seek to protect the value of its portfolio securities against
declines resulting from changes in interest rates or other market changes, the
Fund may enter into the following hedging transactions: financial futures
contracts and related options contracts.

      The Fund may enter into various interest rate hedging transactions using
financial instruments with a high degree of correlation to the municipal
securities which the Fund may purchase for its portfolio, including interest
rate futures contracts (e.g., futures contracts on U.S. Treasury securities) and
futures contracts on interest rate related indices (e.g., municipal bond
indices). The Fund may also purchase and write put and call options on such
futures contracts and on the underlying instruments. The Fund may enter into
these transactions in an attempt to "lock in" a return or spread on a particular
investment or portion of its portfolio, to protect against any increase in the
price of securities it anticipates purchasing at a later date, or for other risk
management strategies such as managing the effective dollar-weighted average
duration of its portfolio. Financial futures and options contracts and the risk
attendant to the Fund's use thereof, are more completely described below. The
successful utilization of hedging and risk management transactions requires
skills different from those needed in the selection of the Fund's portfolio
securities.



                                       17
<PAGE>

      The Fund will not engage in the foregoing transactions for speculative
purposes, but only in limited circumstances as a means to hedge risks associated
with management of its portfolio. Typically, investments in futures contracts
and sales of futures options contracts require the Fund to deposit in a
custodial account a good faith deposit, known as "initial margin," in connection
with its obligations in an amount of cash or specified debt securities which
generally is equal to 1%-15% of the face amount of the contract, which initial
margin requirement may be revised periodically by the applicable exchange as the
volatility of the contract fluctuates. Thereafter, the Fund must make additional
deposits with the applicable financial intermediary equal to any net losses due
to unfavorable price movements of the contract, and will be credited with an
amount equal to any net gains due to favorable price movements. These additional
deposits or credits are calculated and required daily and are known as
"variation margin."

      The Securities and Exchange Commission generally requires that when
investment companies, such as the Fund, effect transactions of the foregoing
nature, such companies must either segregate cash or liquid securities in the
amount of their obligations under the foregoing transactions or cover such
obligations by maintaining positions in portfolio securities, futures contracts
or options that would serve to satisfy or offset the risk of such obligations.
When effecting transactions of the foregoing nature, the Fund will comply with
such segregation or cover requirements. There is no limitation on the percentage
of the Fund's assets that may be segregated with respect to such transactions.

      FINANCIAL FUTURES CONTRACTS. The Fund may enter into financial futures
contracts for the future delivery of a financial instrument, such as a security,
or the cash value of a securities index. This investment technique is designed
primarily to hedge against anticipated future changes in market conditions that
otherwise might adversely affect the value of securities the Fund holds or
intends to purchase. A "sale" of a futures contract means the undertaking of a
contractual obligation to deliver the securities, or the cash value of an index,
called for by the contract at a specified price during a specified delivery
period. At the time of delivery, in the case of fixed-income securities pursuant
to the contract, adjustments are made to recognize differences in value arising
from the delivery of securities with a different interest rate than that
specified in the contract. In some cases, securities called for by a futures
contract may not have been issued at the time the contract was written.

      Although some financial futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the contract calls
for a payment of the net value of the securities. The offsetting of a
contractual obligation is accomplished by purchasing (or selling, as the case
may be) on a commodities exchange an identical futures contract calling for
delivery in the same period. Such a transaction cancels the obligation to make
or take delivery of the securities. All transactions in the futures market are
made, offset or fulfilled through a clearinghouse associated with the exchange
on which the contracts are traded. The Fund will incur brokerage fees when it
purchases or sells contracts, and will be required to maintain margin deposits.
Futures contracts entail risk. If NB Management's judgment about the general
direction of securities markets or interest rates is wrong, the Fund's overall
performance may be poorer than if it had not entered into such contracts.



                                       18
<PAGE>

      There may be an imperfect correlation between movements in prices of
futures contracts and portfolio securities being hedged. In addition, the market
prices of futures contracts may be affected by certain factors. If participants
in the futures market elect to close out their contracts through offsetting
transactions rather than meet margin requirements, distortions in the normal
relationship between the securities and futures markets could result. Price
distortions could also result if investors in futures contracts decide to make
or take delivery of underlying securities rather than engage in closing
transactions due to the resultant reduction in the liquidity of the futures
market. In addition, because from the point of view of speculators, the margin
requirements in the futures market may be less onerous than margin requirements
in the cash market, increased participation by speculators in the futures market
could cause temporary price distortions. Due to the possibility of price
distortions in the futures market and because of the imperfect correlation
between movements in the prices of securities and movements in the prices of
futures contracts, a correct forecast of market trends by NB Management may
still not result in a successful hedging transaction. If this should occur, the
Fund could lose money on the financial futures contracts and also on the value
of its portfolio securities.

      OPTIONS ON FINANCIAL FUTURES CONTRACTS. The Fund may purchase and write
call and put options on financial futures contracts. An option on a futures
contract gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract at a specified exercise price at any
time during the period specified in the terms of the option. Upon exercise, the
writer of the option delivers the futures contract to the holder at the exercise
price. The Fund would be required to deposit with its custodian initial margin
and maintenance margin with respect to put and call options on futures contracts
written by it. Options on futures contracts involve risks similar to the risks
on options purchased by the Fund, i.e., that they may expire worthless, in which
case the Fund would lose the premium paid therefor.

      REGULATORY RESTRICTIONS. The Fund will comply with SEC guidelines
regarding "cover" for hedging transactions 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 contract or option covered by those securities
is outstanding, unless they are replaced with other suitable assets. As a
result, segregation of a large percentage of the Fund's assets could impede
portfolio management or its ability to meet current obligations. The Fund may be
unable to promptly dispose of assets that cover, or are segregated with respect
to, an illiquid future contract or option position; this inability may result in
a loss to the Fund.

      To the extent the Fund sells or purchases futures contracts or writes
options thereon that are traded on an exchange regulated by the Commodity
Futures Trading Commission ("CFTC") other than for BONA FIDE hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money") may not exceed 5% of the Fund's net assets.

      ACCOUNTING AND TAX CONSIDERATIONS. When the Fund writes an option, an
amount equal to the premium it receives is included in its Statement of Assets
and Liabilities as a liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option written. When


                                       19
<PAGE>

the Fund purchases an option, the premium the Fund pays is recorded as an asset
in that statement and is subsequently adjusted to the current market value of
the option.

      In the case of a regulated futures contract the Fund purchases or sells,
an amount equal to the initial margin deposit is recorded as an asset in its
Statement of Assets and Liabilities. The amount of the asset is subsequently
adjusted to reflect changes in the amount of the deposit as well as changes in
the value of the contract.

      For a summary of the tax consequences of the Fund's investments in options
and futures contracts, see "Tax Matters - Hedging Transactions."

      All of the foregoing transactions present certain risks. In particular,
the variable degree of correlation between price movements of futures contracts
and price movements in the securities being hedged creates the possibility that
losses on the hedge may be greater than gains in the value of the Fund's
securities. In addition, these instruments may not be liquid in all
circumstances and generally are closed out by entering into offsetting
transactions rather than by delivery or cash settlement at maturity. As a
result, in volatile markets, the Fund may not be able to close out a transaction
on favorable terms or at all. Although the contemplated use of those contracts
should tend to reduce the risk of loss due to a decline in the value of the
hedged security, at the same time the use of these contracts could tend to limit
any potential gain that might result from an increase in the value of such
security. Finally, the daily deposit requirements for futures contracts and
sales of futures options contracts create an ongoing greater potential financial
risk than do option purchase transactions, where the exposure is limited to the
cost of the premium for the option.

      Successful use of futures contracts and options thereon by the Fund is
subject to the ability of NB Management to predict correctly movements in the
direction of interest rates and other factors affecting securities markets. If
NB Management's expectations were not met, the Fund would be in a worse position
than if a hedging strategy had not been pursued. For example, if the Fund has
hedged against the possibility of an increase in interest rates which would
adversely affect the price of securities in its portfolio and the price of such
securities increases instead, the Fund will lose part or all of the benefit of
the increased value of its securities because it will have offsetting losses in
its futures positions. In addition, in such situations, if the Fund has
insufficient cash to meet daily variation margin requirements, it may have to
sell securities to meet such requirements. Such sales of securities may be, but
will not necessarily be, at increased prices, which reflect the rising market.
The Fund may have to sell securities at a time when it is disadvantageous to do
so.

      In addition to engaging in transactions utilizing options on futures
contracts, the Fund may purchase put and call options on securities and, as
developed from time to time, on interest indices and other instruments.
Purchasing options may increase investment flexibility and improve total return
but also risks loss of the option premium if an asset the Fund has the option to
buy declines in value or if an asset the Fund has the option to sell increases
in value.

      New options and futures contracts and other financial products may be
developed from time to time. The Fund may invest in any such options, contracts


                                       20
<PAGE>

and products as may be developed to the extent consistent with its investment
objective and the regulatory requirements applicable to investment companies.

      Gains, if any, the Fund recognizes or is deemed to recognize from
transactions in hedging activities will be taxable income. See "Tax Matters" for
information relating to the allocation of taxable income, if any, between the
Common Shares and Preferred Shares.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

      The Fund may purchase municipal securities on a "when-issued" and "delayed
delivery" basis. No income accrues to the Fund on municipal securities in
connection with such transactions prior to the date it actually takes delivery
of such securities. These transactions are subject to market fluctuation; the
value of the municipal securities at delivery may be more or less than their
purchase price, and yields generally available on municipal securities when
delivery occurs may be higher than yields on the municipal securities obtained
pursuant to such transactions. Because the Fund relies on the buyer or seller,
as the case may be, to consummate the transaction, failure by the other party to
complete the transaction may result in the Fund's missing the opportunity of
obtaining a price or yield considered to be advantageous. When the Fund is the
buyer in such a transaction, however, it will maintain, in a segregated account,
cash, or liquid securities, having a value equal to or greater than its purchase
commitments, provided such securities have been determined by NB Management to
be liquid and unencumbered, and are marked to market daily, pursuant to
guidelines established by the Board. The Fund will make commitments to purchase
municipal securities on such basis only with the intention of actually acquiring
these securities, but it may sell such securities prior to the settlement date
if such sale is considered to be advisable.

      To the extent that the Fund engages in "when-issued" and "delayed
delivery" transactions, it will do so for the purpose of acquiring securities
for its portfolio consistent with its investment objective and policies.
However, although the Fund does not intend to engage in such transactions for
speculative purposes, purchases of securities on such basis may involve more
risk than other types of purchases. For example, if the Fund determines it is
necessary to sell the "when-issued" or "delayed delivery" securities before
delivery, it may realize a gain or incur a loss because of market fluctuations
since the time the commitment to purchase such securities was made. Subject to
the requirement of maintaining a segregated account, no specified limitation
exists as to the percentage of the Fund's assets that may be used to acquire
securities on a "when-issued" or "delayed delivery" basis. "When issued" and
"delayed delivery" purchases have a leveraging effect on the Fund, because it is
subject to fluctuations in the value of securities for which it has not yet
paid. A significant percentage of the Fund's assets committed to the purchase of
securities on a "when-issued" or "delayed delivery" basis may increase the
volatility of its net asset value and may limit the flexibility to manage its
investments.

REPURCHASE AGREEMENTS

      The Fund may use repurchase agreements to manage its cash position. A
repurchase agreement is a contractual agreement whereby the seller of securities
(U.S. Government Securities or municipal obligations) agrees to repurchase the
same security at a specified price on a future date agreed upon by the parties.


                                       21
<PAGE>

The agreed-upon repurchase price determines the yield during the Fund's holding
period. Repurchase agreements are considered to be loans collateralized by the
underlying security that is the subject of the repurchase contract. Income, if
any, generated from transactions in repurchase agreements will be taxable. See
"Tax Matters" for information relating to the allocation of taxable income, if
any, between the Common Shares and Preferred Shares. If the other party to a
repurchase agreement defaults, the Fund may not be able to sell the underlying
securities. If the Fund must assert its rights against the other party to
recover the securities, the Fund will incur unexpected expenses, risk losing the
income on the security and bear the risk of loss in the value of the security.

INVESTMENT IN OTHER INVESTMENT COMPANIES

      The Fund does not currently invest in other investment companies and does
not currently intend to invest in them, but it may, consistent with the
provisions of the 1940 Act and the Fund's investment restrictions, determine to
do so in the future in appropriate circumstances. Currently, under the 1940 Act,
the Fund may hold securities of another registered investment company in amounts
that (i) do not exceed 3% of the total outstanding voting stock of such company,
(ii) do not exceed 5% of the value of the Fund's total assets, and (iii) when
added to all other investment company securities held by the Fund, do not exceed
10% of the value of the Fund's total assets.

      In the event of such an investment, as a shareholder in an investment
company the Fund would bear its ratable share of the investment company's
expenses, including management fees, and would remain subject to payment of the
Fund's administration fees and other expenses with respect to assets so
invested.


RESIDUAL INTEREST MUNICIPAL BONDS ("RIBS")


      The Fund may also invest up to 5% of its total assets in residual interest
municipal bonds ("RIBS"); the interest rate on a RIB bears an inverse
relationship to the interest rate on another security or the value of an index.
RIBS are created by dividing the income stream provided by the underlying bonds
to create two securities, one short-term and one long-term. The interest rate on
the short-term component is reset by an index or auction process normally every
seven to 35 days. After income is paid on the short-term securities at current
rates, the residual income from the underlying bond(s) goes to the long-term
securities. Therefore, rising short-term interest rates result in lower income
for the longer-term portion, and vice versa. The longer-term bonds can be very
volatile and may be less liquid than other municipal bonds of comparable
maturity.

      An investment in RIBS typically will involve greater risk than an
investment in a fixed rate bond. Because increases in the interest rate on the
other security or index reduce the residual interest paid on a RIB, the value of
a RIB is generally more volatile than that of a fixed rate bond. RIBS have
interest rate adjustment formulas that generally reduce or, in the extreme,
eliminate the interest paid to the Fund when short-term interest rates rise, and
increase the interest paid to the Fund when short-term interest rates fall. RIBS
have varying degrees of liquidity that approximate the liquidity of the
underlying bond(s), and the market price for these securities is volatile. These


                                       22
<PAGE>

securities generally will underperform the market of fixed rate bonds in a
rising interest rate environment, but tend to outperform the market of fixed
rate bonds when interest rates decline or remain relatively stable.

      Although volatile, RIBS typically offer the potential for yields exceeding
the yields available on fixed rate bonds with comparable credit quality, coupon,
call provisions and maturity. The Fund may also invest in RIBS for the purpose
of increasing the Fund's leverage as a more flexible alternative to the issuance
of Preferred Shares. Should short-term and long-term interest rates rise, the
combination of the Fund's investment in RIBS and its use of other forms of
leverage (including through the issuance of Preferred Shares or the use of other
derivative instruments) likely will adversely affect the Fund's net asset value
per share and income, distributions and total return to Common Stockholders.
Trusts in which RIBS may be held could be terminated, in which case the residual
bond holder would take possession of the underlying bond(s) on an unleveraged
basis.

STRUCTURED NOTES AND OTHER HYBRID INSTRUMENTS

      The Fund may invest in "structured" notes, which are privately negotiated
debt obligations where the principal and/or interest is determined by reference
to the performance of a benchmark asset, market or interest rate, such as
selected securities, an index of securities or specified interest rates, or the
differential performance of two assets or markets, such as indices reflecting
taxable and tax-exempt bonds. Depending on the terms of the note, the Fund may
forgo all or part of the interest and principal that would be payable on a
comparable conventional note. The rate of return on structured notes may be
determined by applying a multiplier to the performance or differential
performance of the referenced index(es) or other asset(s). Application of a
multiplier involves leverage that will serve to magnify the potential for gain
and the risk of loss. The Fund currently intends that any use of structured
notes will be for the purpose of reducing the interest rate sensitivity of its
portfolio (and, thereby, decreasing its exposure to interest rate risk) and, in
any event, that the interest income on the notes will normally be exempt from
federal income tax. Like other sophisticated strategies, the Fund's use of
structured notes may not work as intended; for example, the change in the value
of the structured notes may not match very closely the change in the value of
bonds that the structured notes were purchased to hedge.

      The Fund may invest in other types of "hybrid" instruments that combine
the characteristics of securities, futures, and options. For example, the
principal amount or interest rate of a hybrid could be tied (positively or
negatively) to the price of some securities index or another interest rate (each
a "benchmark"). The interest rate or (unlike most debt obligations) the
principal amount payable at maturity of a hybrid security may be increased or
decreased, depending on changes in the value of the benchmark. Hybrids can be
used as an efficient means of pursuing a variety of investment goals, including
duration management and increased total return. Hybrids may not bear interest or
pay dividends. The value of a hybrid or its interest rate may be a multiple of a
benchmark and, as a result, may be leveraged and move (up or down) more steeply
and rapidly than the benchmark. These benchmarks may be sensitive to economic
and political events that cannot be readily foreseen by the purchaser of a
hybrid. Under certain conditions, the redemption value of a hybrid could be
zero. Thus, an investment in a hybrid may entail significant market risks that


                                       23
<PAGE>

are not associated with a similar investment in a traditional, U.S.
dollar-denominated bond that has a fixed principal amount and pays a fixed rate
or floating rate of interest. The purchase of hybrids also exposes the Fund to
the credit risk of the issuer of the hybrids. These risks may cause significant
fluctuations in the net asset value of the Fund.

      Certain issuers of structured products, such as hybrid instruments, may be
deemed to be investment companies as defined in the 1940 Act. As a result, the
Fund's investments in these products may be subject to limits applicable to
investments in investment companies and may be subject to restrictions contained
in the 1940 Act. See "Investments in Other Investment Companies."

                       PORTFOLIO TRADING AND TURNOVER RATE

      The Fund cannot accurately predict its turnover rate but anticipates that
its annual turnover rate will not exceed 100%. The Fund's turnover rate is
calculated by dividing the lesser of its sales or purchases of securities during
a year (excluding any security the maturity of which at the time of acquisition
is one year or less) by the average monthly value of its securities for the
year. The Fund generally will not engage in the trading of securities for the
purpose of realizing short-term profits, but it will adjust its portfolio as it
deems advisable in view of prevailing or anticipated market conditions to
accomplish its investment objective. For example, the Fund may sell portfolio
securities in anticipation of a movement in interest rates. Higher turnover
rates can result in corresponding increases in the Fund's transaction costs,
which must be borne by the Fund and its stockholders. High portfolio turnover
may also result in the realization of substantial net short-term capital gains,
and any distributions attributable to those gains will be taxable at ordinary
income rates for federal income tax purposes. Other than for consideration of
tax consequences, frequency of portfolio turnover will not be a limiting factor
if the Fund considers it advantageous to purchase or sell securities.

                           CERTAIN RISK CONSIDERATIONS

      Although the 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 the Fund will achieve its investment objective. The
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.

                             MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS

      The Board is broadly responsible for overseeing the management of the
business and affairs of the Fund, including general supervision of the duties
performed by NB Management and Neuberger Berman. Subject to the provisions of
the Fund's Articles of Incorporation (the "Articles"), its Bylaws and Maryland
law, the Board has all powers necessary and convenient to carry out this
responsibility, including the election and removal of the Fund's officers. Among


                                       24
<PAGE>

other things, the Board generally oversees the portfolio management of the Fund
and reviews and approves the Fund's management and sub-advisory agreements and
other principal agreements.

      The following tables set forth information concerning the Directors and
officers of the Fund. All persons named as Directors and officers also serve in
similar capacities for other funds administered or managed by NB Management and
Neuberger Berman.


THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
                                               Number of
                                               Portfolios
                                               in Fund      Other Directorships
Name, Age, and                                 Complex      Held Outside Fund
Address (1)        Principal Occupation(s) (2) Overseen by  Complex by Director
                                               Director
- -----------------------------------------------------------------------------------
<S>                <C>                         <C>          <C>
                                     CLASS I

- -----------------------------------------------------------------------------------
Independent Fund Directors
- -----------------------------------------------------------------------------------
Faith Colish (66)  Attorney at Law and         31
                   President, Faith Colish, A
                   Professional Corporation;
                   1980 to present.
- -----------------------------------------------------------------------------------
C. Anne Harvey     Consultant, C. A. Harvey    31
(65)               Associates, June 2001 to
                   present; Member,
                   Individual Investors
                   Advisory Committee to the
                   New York Stock Exchange
                   Board of Directors, 1998
                   to present; Secretary,
                   Board of Associates to The
                   National Rehabilitation
                   Hospital's Board of
                   Directors; Director of
                   American Association of
                   Retired Persons (AARP),
                   1978 to December 2000;
                   Member, American Savings
                   Education Council's Policy
                   Board (ASEC), 1998-2000;
                   Member, Executive
                   Committee, Crime
                   Prevention Coalition of
                   America, 1997 - 2000.
- -----------------------------------------------------------------------------------
Cornelius T. Ryan  General Partner of Oxford   31           Formerly, Director of
(70)               Partners and Oxford                      Capital Cash
                   Bioscience Partners                      Management Trust
                   (venture capital                         (money market fund)
                   partnerships) and                        and Prime Cash Fund.
                   President of Oxford
                   Venture Corporation.
- -----------------------------------------------------------------------------------
Peter P. Trapp     Regional Manager for        31
(57)               Atlanta Region, Ford Motor
                   Credit Company since
                   August, 1997; prior
                   thereto, President, Ford
                   Life Insurance Company,
                   April 1995 until August
                   1997.
- -----------------------------------------------------------------------------------


                                       25
<PAGE>

- -----------------------------------------------------------------------------------
                                               Number of
                                               Portfolios
                                               in Fund      Other Directorships
Name, Age, and                                 Complex      Held Outside Fund
Address (1)        Principal Occupation(s) (2) Overseen by  Complex by Director
                                               Director
- -----------------------------------------------------------------------------------
Director who is an "Interested Person"
- -----------------------------------------------------------------------------------
Peter E. Sundman*  Executive Vice President    31           Executive Vice
(43)               of Neuberger Berman since                President and
                   1999; Principal of                       Director of Neuberger
                   Neuberger Berman from 1997               Berman Inc. (holding
                   until 1999; Senior Vice                  company) since 1999;
                   President of NB Management               President and
                   from 1996 until 1999;                    Director of NB
                   Director of Institutional                Management since
                   Services of NB Management                1999; Director and
                   from 1988 until 1996.                    Vice President of
                                                            Neuberger & Berman
                                                            Agency, Inc. since
                                                            2000.
- -----------------------------------------------------------------------------------

                                     CLASS II

- -----------------------------------------------------------------------------------
Independent Fund Directors
- -----------------------------------------------------------------------------------
John Cannon (72)   Retired. Formerly,          31           Independent Trustee
                   Chairman and Chief                       or Director of three
                   Investment Officer of CDC                series of
                   Capital Management                       OppenheimerFunds:
                   (registered investment                   Limited Term New York
                   adviser) (1993-Jan. 1999).               Municipal Fund,
                                                            Rochester Fund
                                                            Municipals, and
                                                            Oppenheimer
                                                            Convertible
                                                            Securities Fund, 1992
                                                            to present.
- -----------------------------------------------------------------------------------
Barry Hirsch (68)  Senior Vice President and   31
                   Senior General Counsel of
                   Loews Corporation
                   (diversified financial
                   corporation).
- -----------------------------------------------------------------------------------
John P. Rosenthal  Senior Vice President of    31           Director, 92nd Street
(69)               Burnham Securities Inc. (a               Y (non-profit), 1967
                   registered broker-dealer)                to present; Formerly,
                   since 1991.                              Director, Cancer
                                                            Treatment Holdings,
                                                            Inc.
- -----------------------------------------------------------------------------------
Director who is an "Interested Person"
- -----------------------------------------------------------------------------------
Michael M.         Executive Vice President    31           Executive Vice
Kassen* (49)       and Chief Investment                     President, Chief
                   Officer of Neuberger                     Investment Officer
                   Berman since 1999;                       and Director of
                   Executive Vice President                 Neuberger Berman Inc.
                   and Chief Investment                     (holding company)
                   Officer of NB Management                 since 1999; Chairman
                   from November 1999 to May                since May 2000 and
                   2000; Vice President of NB               Director of NB
                   Management from 1990 until               Management since
                   1999; Partner or Principal               April 1996.
                   of Neuberger Berman from
                   1993.
- -----------------------------------------------------------------------------------


                                       26
<PAGE>

- -----------------------------------------------------------------------------------
                                               Number of
                                               Portfolios
                                               in Fund      Other Directorships
Name, Age, and                                 Complex      Held Outside Fund
Address (1)        Principal Occupation(s) (2) Overseen by  Complex by Director
                                               Director
- -----------------------------------------------------------------------------------
Tom Decker Seip*   General Partner of Seip     31           Director, H&R Block,
(52)               Investments LP (a private                Inc. (financial
                   investment partnership);                 services company)
                   President and CEO of                     (the parent company
                   Westaff, Inc., May 2001 to               of one of the Fund's
                   January 2002 (temporary                  underwriters), May
                   staffing); Senior                        2001 to present;
                   Executive at the Charles                 Director, General
                   Schwab Corporation from                  Magic (voice
                   1983 to 1999, including                  recognition
                   Chief Executive Officer of               software), November
                   Charles Schwab Investment                2001 to present;
                   Management, Inc. and                     Director, Forward
                   Trustee of Schwab Family                 Management, Inc.
                   of Funds and Schwab                      (asset management),
                   Investments from 1997 to                 2001 to present;
                   1998 and Executive Vice                  Member of the Board
                   President-Retail Brokerage               of Directors of
                   for Charles Schwab                       E-Finance Corporation
                   Investment Management from               (credit decisioning
                   1994 to 1997.                            services), 1999 to
                                                            present; Director,
                                                            Save-Daily.com (micro
                                                            investing services),
                                                            1999 to present;
                                                            Formerly, Director of
                                                            Offroad Capital Inc.
                                                            (pre-public internet
                                                            commerce company).
- -----------------------------------------------------------------------------------

                                    CLASS III

- -----------------------------------------------------------------------------------
Independent Fund Directors
- -----------------------------------------------------------------------------------
Walter G. Ehlers   Consultant; Retired         31
(69)               President and Director of
                   Teachers Insurance &
                   Annuity (TIAA) and College
                   Retirement Equities Fund
                   (CREF).
- -----------------------------------------------------------------------------------
Robert A. Kavesh   Professor of Finance and    31           Director, Delaware
(74)               Economics at Stern School                Labs (cosmetics),
                   of Business, New York                    1978 to present.
                   University.
- -----------------------------------------------------------------------------------
Howard A. Mileaf   Retired.  Formerly, Vice    31           Director, State
(65)               President and Special                    Theatre of New Jersey
                   Counsel to WHX Corporation               (not-for-profit
                   (holding company); 1993 -                theater), 2000 to
                   2001.                                    present; Formerly,
                                                            Director of Kevlin
                                                            Corporation
                                                            (manufacturer of
                                                            microwave and other
                                                            products).
- -----------------------------------------------------------------------------------
William E. Rulon   Retired. Senior Vice        31           Director, Pro-Kids
(69)               President of Foodmaker.                  Golf and Learning
                   Inc. (operator and                       Academy (teach golf
                   franchiser of restaurants)               and computer usage to
                   until January 1997;                      "at risk" children),
                   Secretary of Foodmaker,                  1998 to present;
                   Inc. until July 1996.                    Director of Prandium,
                                                            Inc. (restaurants)
                                                            since March 2001.
- -----------------------------------------------------------------------------------
Candace L.         Private investor and        31           Director, Providence
Straight (54)      consultant specializing in               Washington (property
                   the insurance industry;                  and casualty
                   Advisory Director of                     insurance company),
                   Securities Capital LLC (a                December 1998 to
                   global private equity                    present; Director,
                   investment firm dedicated                Summit Global
                   to making investments in                 Partners (insurance
                   the insurance sector).                   brokerage firm),
                                                            October 2000 to
                                                            present.
- -----------------------------------------------------------------------------------
Director who is an "Interested Person"
- -----------------------------------------------------------------------------------


                                       27
<PAGE>

- -----------------------------------------------------------------------------------
                                               Number of
                                               Portfolios
                                               in Fund      Other Directorships
Name, Age, and                                 Complex      Held Outside Fund
Address (1)        Principal Occupation(s) (2) Overseen by  Complex by Director
                                               Director
- -----------------------------------------------------------------------------------
Edward I.          Member, Investment Policy   31           Director of Legg
O'Brien* (73)      Committee, Edward Jones,                 Mason, Inc.
                   1993 - 2001; President of                (financial services
                   the Securities Industry                  holding company) (the
                   Association ("SIA")                      parent company of one
                   (securities industry's                   of the Fund's
                   representative in                        underwriters), 1993
                   government relations and                 to present; Director,
                   regulatory matters at the                Boston Financial
                   federal and state levels)                Group (real estate
                   from 1974 - 1992; Adviser                and tax shelters),
                   to SIA from November 1992                1993-1999.
                   -November 1993.
- -----------------------------------------------------------------------------------

</TABLE>


* Indicates a director who is an "interested person" within the meaning of the
1940 Act. Mr. Sundman and Mr. Kassen are interested persons of the Fund by
virtue of the fact that each is an officer and/or director of NB Management and
Executive Vice President of Neuberger Berman. Mr. O'Brien is an interested
person of the Fund by virtue of the fact that he is a director of Legg Mason,
Inc., a wholly owned subsidiary of which is an one of the Fund's underwriters
that, from time to time, serves as a broker or dealer to the Fund and other
funds or accounts for which NB Management serves as investment manager. Mr.
Rulon is an interest person of the Fund by virtue of a pre-existing investment
in the securities of one of the Fund's underwriters. Mr. Seip is an interested
person of the Fund by virtue of the fact that he is a director of H&R Block,
Inc., the parent company of one of the Fund's underwriters.


(1) The business address of each listed person is 605 Third Avenue, New York,
New York 10158.


(2) Except as otherwise indicated, each person has held the positions shown for
at least the last five years. The Board of Directors shall at all times be
divided as equally as possible into three classes of Directors designated Class
I, Class II, and Class III. The terms of office of Class I, Class II, and Class
III Directors shall expire at the annual meetings of shareholders held in 2003,
2004, and 2005 respectively, and at each third annual meeting of shareholders
thereafter.


INFORMATION ABOUT THE OFFICERS OF THE FUND
<TABLE>

<CAPTION>
- -------------------------------------------------------------------------------------
                             Position and Length of
Name, Age, and Address (1)        Time Served            Principal Occupation(s)(2)
- --------------------------      ---------------        ---------------------------
- -------------------------------------------------------------------------------------
<S>                          <C>                     <C>
Claudia A. Brandon (45)      Secretary since 2002    Vice President-Mutual Fund
                                                     Board Relations of
                                                     NB Management since 2000; Vice
                                                     President of Neuberger Berman
                                                     since 2002 and employee since
                                                     1999; Vice President of NB
                                                     Management from 1986 to 1999;
                                                     Secretary of five other
                                                     registered investment
                                                     companies for which NB
                                                     Management acts as investment
                                                     manager and administrator.
- -------------------------------------------------------------------------------------
Robert Conti (46)          Vice President since 2002 Vice President of Neuberger
                                                     Berman since 1999; Senior Vice
                                                     President of NB Management
                                                     since 2000; Controller of NB
                                                     Management until 1996;
                                                     Treasurer of NB Management
                                                     from 1996 until 1999; Vice
                                                     President of five other
                                                     registered investment
                                                     companies for which NB
                                                     Management acts as investment
                                                     manager and administrator
                                                     since 2000.
- -------------------------------------------------------------------------------------


                                       28
<PAGE>

- -------------------------------------------------------------------------------------
                             Position and Length of
Name, Age, and Address (1)        Time Served          Principal Occupation(s)(2)
- --------------------------      ---------------        ---------------------------
- -------------------------------------------------------------------------------------
Stacy Cooper-Shugrue (39)     Assistant Secretary    Vice President-Mutual Fund
                                  since 2002         Board Relations of NB
                                                     Management since 2002;
                                                     Employee of Neuberger
                                                     Berman since 1999;
                                                     Assistant Vice President of
                                                     NB Management from 1993 to
                                                     1999; Assistant Secretary
                                                     of five other registered
                                                     investment companies for
                                                     which NB Management acts as
                                                     investment manager and
                                                     administrator.
- -------------------------------------------------------------------------------------
Brian J. Gaffney (48)      Vice President since 2002 Managing Director of Neuberger
                                                     Berman since 1999; Senior Vice
                                                     President of NB Management
                                                     since 2000; Vice President of
                                                     NB Management from 1997 until
                                                     1999; Vice President of five
                                                     other registered investment
                                                     companies for which NB
                                                     Management acts as investment
                                                     manager and administrator
                                                     since 2000.
- -------------------------------------------------------------------------------------
Sheila R. James (37)          Assistant Secretary    Employee of Neuberger Berman
                                  since 2002         since 1999; Employee of NB
                                                     Management from 1991 to
                                                     1999; Assistant Secretary
                                                     of five other registered
                                                     investment companies for
                                                     which NB Management acts as
                                                     investment manager and
                                                     administrator since 2002.
- -------------------------------------------------------------------------------------
John McGovern (32)            Assistant Treasurer    Employee of NB Management
                                  since 2002         since 1993; Assistant
                                                     Treasurer of five other
                                                     registered investment
                                                     companies for which NB
                                                     Management acts as
                                                     investment manager and
                                                     administrator since 2002.
- -------------------------------------------------------------------------------------
Barbara Muinos (43)         Treasurer and Principal  Vice President of Neuberger
                           Financial and Accounting  Berman since 1999; Assistant
                              Officer since 2002     Vice President of NB
                                                     Management from 1993 to 1999;
                                                     Treasurer and Principal
                                                     Financial and Accounting
                                                     Officer of five other
                                                     registered investment
                                                     companies for which NB
                                                     Management acts as investment
                                                     manager and administrator;
                                                     Assistant Treasurer from 1996
                                                     to 2002 of two other mutual
                                                     funds for which NB Management
                                                     acts as investment manager and
                                                     administrator.
- -------------------------------------------------------------------------------------
Frederic B. Soule (56)     Vice President since 2002 Vice President of Neuberger
                                                     Berman since 1999; Vice
                                                     President of NB Management
                                                     from 1995 until 1999; Vice
                                                     President of five other
                                                     registered investment
                                                     companies for which NB
                                                     Management acts as investment
                                                     manager and administrator
                                                     since 2000.
- -------------------------------------------------------------------------------------
Trani Wyman (32)              Assistant Treasurer    Employee of NB Management
                                  since 2002         since 1991.  Assistant
                                                     Treasurer of five other
                                                     registered investment
                                                     companies for which NB
                                                     Management acts as
                                                     investment manager and
                                                     administrator since 2002.
- -------------------------------------------------------------------------------------

</TABLE>


                                       29
<PAGE>

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

(1) 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.

COMMITTEES

The Board has established several standing committees to oversee particular
aspects of the Fund's management. The standing committees of the Board are
described below.

AUDIT COMMITTEE. The Audit Committee's purposes are (a) to oversee generally the
Fund's accounting and financial reporting policies and practices, its internal
controls and, as appropriate, the internal controls of certain service
providers; (b) to oversee generally the quality and objectivity of the Fund's
financial statements and the independent audit thereof; and (c) to act as a
liaison between the Fund's independent auditors and the full Board. The Audit
Committee is composed entirely of Independent Fund Directors; its members are
John Cannon, Walter G. Ehlers, Cornelius T. Ryan (Chairman), and Peter P. Trapp.

CODE OF ETHICS COMMITTEE.  The Code of Ethics Committee oversees the
administration of the Fund's Code of Ethics, which restricts the personal
securities transactions of employees, officers, and Directors.  Its members
are John Cannon, Faith Colish, Robert A. Kavesh (Chairman), and Edward I.
O'Brien. All members except for Mr. O'Brien are Independent Fund Directors.


CONTRACT REVIEW COMMITTEE.  The Contract Review Committee is responsible for
review and oversight of the Fund's principal contractual arrangements.  Its
members are Faith Colish (Chairwoman), Barry Hirsch, Howard A. Mileaf,
William E. Rulon and Tom D. Seip.  All members except for Mr. Seip are
Independent Fund Directors.

EXECUTIVE COMMITTEE. The Executive Committee has all the powers of the Directors
when the Directors are not in session. Its members are John Cannon, Faith
Colish, John P. Rosenthal, William E. Rulon, Cornelius T. Ryan and Peter E.
Sundman (Chairman). All members except for Mr. Rulon and Mr. Sundman are
Independent Fund Directors.

NOMINATING COMMITTEE.  The Nominating Committee is responsible for nominating
individuals to serve as Directors, including as Independent Fund Directors,
as members of committees, and as officers of the Fund.  Its members are
C. Anne Harvey, Barry Hirsch, Howard A. Mileaf (Chairman), Cornelius T. Ryan
and Tom D. Seip.  All members except for Mr. Seip are Independent Fund
Directors.  The Committee will consider nominees recommended by stockholders;
stockholders may send resumes of recommended persons to the attention of
Claudia Brandon, Secretary, Neuberger Berman Intermediate Municipal Fund
Inc., 605 Third Avenue, 2nd Floor, New York, New York, 10158-0180.




                                       30
<PAGE>

PORTFOLIO TRANSACTIONS COMMITTEE. The Portfolio Transactions Committee from time
to time reviews, among other things, quality of execution of portfolio trades,
actual and potential uses of portfolio brokerage commissions, agency
cross-transactions, information relating to the commissions charged by Neuberger
Berman to the Fund and to its other customers, and information concerning the
prevailing level of commissions charged by other brokers having comparable
execution capability. The Committee is composed entirely of Independent Fund
Directors; its members are Faith Colish, Walter G. Ehlers, C. Anne Harvey,
Candace L. Straight (Chairwoman) and Peter P. Trapp.


PRICING COMMITTEE.  The Pricing Committee oversees the procedures for pricing
the Fund's portfolio securities, and from time to time may be called upon to
establish or ratify the fair value of portfolio securities for which market
prices are not readily available. Its members are Michael M. Kassen,
Robert A. Kavesh, Edward I. O'Brien, John P. Rosenthal (Chairman), Tom D.
Seip and Peter P. Trapp.  All members except for Mr. Kassen, Mr. O'Brien and
Mr. Seip are Independent Fund Directors.

      The Fund's Articles provide that the Fund will indemnify its Directors and
officers against liabilities and expenses to the extent permitted by Maryland
law and the 1940 Act. This means that the Fund will indemnify its officers and
Directors against liabilities and expenses reasonably incurred in connection
with litigation in which they may be involved because of their offices with the
Fund, unless it is adjudicated that they (a) engaged in bad faith, willful
misfeasance, gross negligence, or reckless disregard of the duties involved in
the conduct of their offices, or (b) did not act in good faith in the reasonable
belief that their action was in the best interest of the Fund. 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 Directors based upon a review of
readily available facts, or in a written opinion of independent counsel) that
such officers or Directors 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 Directors of the Fund. The Fund does not have any retirement plan for its
Directors.

COMPENSATION

      The Directors' compensation and other costs of their joint meetings are
allocated pro rata based on the assets of each investment company in the
Neuberger Berman Fund Complex. It is estimated that the Directors will receive
the amounts set forth in the following table from the Fund for the fiscal year
ending October 31, 2002. For the calendar year ended December 31, 2001, the
Directors received the compensation set forth in the following table for serving
as Trustees of other investment companies in the "Fund Complex." Each officer
and Director who is a Director, officer, partner or employee of NB Management,
Neuberger Berman or any entity controlling, controlled by or under common
control with NB Management or Neuberger Berman serves without any compensation
from the Fund.




                                       31
<PAGE>


TABLE OF COMPENSATION

                                                   Total Compensation from 3
                                                     Registered Investment
                                  Estimated       Companies in the Neuberger
                                  Aggregate       Berman Fund Complex Paid to
Name and Position With the       Compensation    Directors for Calendar Year
Fund                            From the Fund*          Ended 12/31/01
- -----                           --------------          --------------

Independent Fund Directors

John Cannon                           $200                  $70,000
Director

Faith Colish                          $200                  $70,000
Director

Walter G. Ehlers                      $200                  $70,000
Director

C. Anne Harvey                        $200                  $62,500
Director

Barry Hirsch                          $200                  $70,000
Director

Robert A. Kavesh                      $200                  $70,000
Director

Howard A. Mileaf                      $200                  $70,000
Director

John P. Rosenthal                     $200                  $70,000
Director

Cornelius T. Ryan                     $200                  $70,000
Director

Candace L. Straight                   $200                  $62,500
Director

Peter P. Trapp                        $200                  $62,500
Director

Directors who are "Interested Persons"

Michael M. Kassen                     $0                      $0
Director

Edward I. O'Brien                     $200                  $70,000
Director

Tom Decker Seip                       $200                  $70,200
Director

William E. Rulon                      $200                  $70,000
Director


                                       32
<PAGE>

                                                   Total Compensation from 3
                                                     Registered Investment
                                  Estimated       Companies in the Neuberger
                                  Aggregate       Berman Fund Complex Paid to
Name and Position With the       Compensation    Directors for Calendar Year
Fund                            From the Fund*          Ended 12/31/01
- -----                           --------------          --------------

Peter E. Sundman                      $0                      $0
Director


      *Since the Fund has not completed its first fiscal year, compensation is
estimated based upon payments to be made by the Fund during the current fiscal
year and upon relative net assets of the NB Management Fund Complex. The
estimate is for the fiscal year ending October 31, 2002.

OWNERSHIP OF SECURITIES


      At September 23, 2002, the Directors and officers of the Fund, as a group,
owned beneficially or of record less than 1% of the outstanding shares of the
Fund.


      Set forth below is the dollar range of equity securities owned by each
Director as of 12/31/01.

      Since the Fund has not yet commenced operations, none of the Directors own
Fund shares as of the date of this SAI.


- ----------------------------------------------------------
                        Aggregate Dollar Range of Equity
                          Securities in all Registered
Name of Director        Investment Companies Overseen by
                        Director in Family of Investment
                                   Companies*
- ----------------------------------------------------------
Independent Fund Directors
- ----------------------------------------------------------
John Cannon             $50,001 - $100,000
- ----------------------------------------------------------
Faith Colish            Over $100,000
- ----------------------------------------------------------
Walter G. Ehlers        Over $100,000
- ----------------------------------------------------------
C. Anne Harvey          None
- ----------------------------------------------------------
Barry Hirsch            Over $100,000
- ----------------------------------------------------------
Robert A. Kavesh        $10,001 - $50,000
- ----------------------------------------------------------
Howard A. Mileaf        Over $100,000
- ----------------------------------------------------------
John P. Rosenthal       Over $100,000
- ----------------------------------------------------------
Cornelius T. Ryan       Over $100,000
- ----------------------------------------------------------
Candace L. Straight     Over $100,000
- ----------------------------------------------------------
Peter P. Trapp          $10,001 - $50,000
- ----------------------------------------------------------
Directors who are "Interested Persons"
- ----------------------------------------------------------
Michael M. Kassen       Over $100,000
- ----------------------------------------------------------
Edward I. O'Brien       Over $100,000
- ----------------------------------------------------------
William E. Rulon        Over $100,000
- ----------------------------------------------------------
Tom Decker Seip         None
- ----------------------------------------------------------
Peter E. Sundman        Over $100,000
- ----------------------------------------------------------

*As of December 31, 2001


                                       33
<PAGE>

INDEPENDENT FUND DIRECTORS OWNERSHIP OF SECURITIES

      Set forth in the table below is information regarding each Independent
Fund Director's (and his/her immediate family members) share ownership in
securities of Neuberger Berman and the ownership of securities in an entity
controlling, controlled by or under common control with Neuberger Berman (not
including registered investment companies) as of 12/31/01.


- --------------------------------------------------------------------------------
                      NAME OF
                    OWNERS AND
                   RELATIONSHIP   COMPANY     TITLE OF     VALUE OF   PERCENTAGE
 NAME OF DIRECTOR  TO DIRECTOR                  CLASS     SECURITIES*  OF CLASS
- --------------------------------------------------------------------------------
John Cannon            N/A          N/A          N/A          $0         N/A
- --------------------------------------------------------------------------------
Faith Colish           N/A          N/A          N/A          $0         N/A
- --------------------------------------------------------------------------------
Walter G. Ehlers       N/A          N/A          N/A          $0         N/A
- --------------------------------------------------------------------------------
C. Anne Harvey         N/A          N/A          N/A          $0         N/A
- --------------------------------------------------------------------------------
Barry Hirsch           N/A          N/A          N/A          $0         N/A
- --------------------------------------------------------------------------------
Robert A. Kavesh       N/A          N/A          N/A          $0         N/A
- --------------------------------------------------------------------------------
Howard A. Mileaf       N/A          N/A          N/A          $0         N/A
- --------------------------------------------------------------------------------
John P. Rosenthal      N/A          N/A          N/A          $0         N/A
- --------------------------------------------------------------------------------
Cornelius T. Ryan      N/A          N/A          N/A          $0         N/A
- --------------------------------------------------------------------------------
Candace L. Straight    N/A          N/A          N/A          $0         N/A
- --------------------------------------------------------------------------------
Peter P. Trapp         N/A          N/A          N/A          $0         N/A
- --------------------------------------------------------------------------------
*As of December 31, 2001



CODES OF ETHICS


      The Fund, NB Management and Neuberger Berman have personal securities
trading policies that restrict the personal securities transactions of
employees, officers, and Directors. 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 the Fund. Text-only versions of the codes of ethics can be viewed
online or downloaded from the EDGAR Database on the SEC's internet web site at
www.sec.gov. You may also review and copy those documents by visiting the SEC's
Public Reference Room in Washington, DC. Information on the operation of the
Public Reference Room may be obtained by calling the SEC at 202-942-8090. In
addition, copies of the codes of ethics may be obtained, after mailing the
appropriate duplicating fee, by writing to the SEC's Public Reference Section,
450 5th Street, N.W., Washington, DC 20549-0102 or by e-mail request at
publicinfo@sec.gov.




                                       34
<PAGE>

              INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES

INVESTMENT MANAGER AND ADMINISTRATOR


      NB Management serves as the investment manager to the Fund pursuant to a
management agreement with the Fund, dated September 24, 2002 ("Management
Agreement"). NB Management provides investment management and advisory services
to private accounts of institutional and individual clients and to mutual funds.
As of June 30, 2002, NB Management and its affiliates had approximately $58.7
billion in assets under management. NB Management is located at 605 Third
Avenue, New York, New York 10158-0180.


      The Management Agreement provides, in substance, that NB Management will
make and implement investment decisions for the Fund in its discretion and will
continuously develop an investment program for the Fund's assets. The Management
Agreement permits NB Management to effect securities transactions on behalf of
the 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 Fund, although NB Management has no current plans to pay a material amount
of such compensation.

Under the Management Agreement,  NB Management is not liable for any error
of judgment or mistake of law or for any loss suffered by the Fund 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 Fund or its  Stockholders  to  which NB  Management  would  otherwise  be
subject by reason of NB Management's misfeasance, bad faith, or gross negligence
in the performance of its duties, or by reason of its reckless  disregard of its
obligations and duties under the Agreement ("disabling conduct").  The Fund will
indemnify NB Management against, and hold it harmless from, any and all expenses
(including  reasonable  counsel fees and  expenses)  incurred  investigating  or
defending against claims for losses or liabilities described above not resulting
from NB Management's  negligence,  disregard of its obligations and duties under
the Agreement or disabling conduct.

      NB Management provides to the 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, Directors, and employees of the Fund who are
officers, Directors, or employees of NB Management. Two Directors of NB
Management (who are also officers of Neuberger Berman), who also serve as
officers of NB Management, currently serve as Directors and/or officers of the
Fund. See "Directors and Officers." The Fund pays NB Management a management fee
as described below.

      NB Management provides facilities, services, and personnel to the Fund
pursuant to an administration agreement with the Fund, dated September 24, 2002
("Administration Agreement"). For such administrative services, the Fund pays NB
Management a fee based on the Fund's average daily total assets minus
liabilities other than the aggregate indebtedness entered into for purposes of
leverage ("Managed Assets").

      Under the Administration Agreement, NB Management also provides certain
stockholder, stockholder-related, and other services that are not furnished by
the Fund's stockholder servicing agent. NB Management provides the direct
stockholder services specified in the Administration Agreement and assists the
stockholder servicing agent in the development and implementation of specified


                                       35
<PAGE>

programs and systems to enhance overall stockholder servicing capabilities. NB
Management solicits and gathers stockholder proxies, performs services connected
with the qualification of the 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. The Administration Agreement contains
provisions on liability and indemnification substantially identical to those in
the Management Agreement, described above.

      For administrative services, the Fund pays NB Management at the annual
rate of .30% of average daily Managed Assets. With the Fund's consent, NB
Management may subcontract to third parties some of its responsibilities to the
Fund under the administration agreement. In addition, the Fund may compensate
such third parties for accounting and other services.

      Pursuant to the Management Agreement, the Fund has agreed to pay NB
Management an annual management fee, payable on a monthly basis, at the annual
rate of .25% of the Fund's average daily Managed Assets. The liquidation
preference of the Preferred Shares is not a liability. All fees and expenses are
accrued daily and deducted before payment of dividends to investors.

      From the commencement of the Fund's operations through October 31, 2011,
NB Management has contractually agreed to waive a portion of the management fees
it is entitled to receive from the Fund in the amounts, and for the time
periods, set forth below:


- --------------------------------------------------------------------------------
                     Percentage Waived (annual rate Percentage Waived (annual as
                     a percentage of net assets rate as a percentage of
                     attributable to Common Shares net assets attributable to
Fiscal Period        - assuming no Preferred Shares  Common Shares - assuming
Ending October 31,   are issued or outstanding)      the issuance Preferred
                                                     Shares (2))
- --------------------------------------------------------------------------------
2002 (1)              .25%                            .40%
- --------------------------------------------------------------------------------
2003                  .25%                            .40%
- --------------------------------------------------------------------------------
2004                  .25%                            .40%
- --------------------------------------------------------------------------------
2005                  .25%                            .40%
- --------------------------------------------------------------------------------
2006                  .25%                            .40%
- --------------------------------------------------------------------------------
2007                  .25%                            .40%
- --------------------------------------------------------------------------------
2008                  .20%                            .32%
- --------------------------------------------------------------------------------
2009                  .15%                            .24%
- --------------------------------------------------------------------------------
2010                  .10%                            .16%
- --------------------------------------------------------------------------------
2011                  .05%                            .08%
- --------------------------------------------------------------------------------


(1)   From the commencement of the Fund's operations.

(2)   Assumes the issuance of Preferred Shares in an amount equal to 38% of
      the Fund's net assets (after issuance).

NB Management has not agreed to waive any portion of its fees beyond October 31,
2011.

      The Management Agreement continues until June 30, 2004. The Management
Agreement is renewable thereafter from year to year with respect to the Fund, so
long as its continuance is approved at least annually (1) by the vote of a


                                       36
<PAGE>

majority of the Fund Directors who are not "interested persons" of NB Management
or the Fund ("Independent Fund Directors"), 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 Directors or by a 1940 Act majority vote of the outstanding stock in
the Fund. The Administration Agreement continues for a period of two years after
the date the Fund became subject thereto. The Administration Agreement is
renewable from year to year, so long as its continuance is approved at least
annually (1) by the vote of a majority of the Independent Fund Directors, 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 Directors or by a 1940 Act majority vote
of the outstanding stock in the Fund.

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

      Except as otherwise described in the prospectus, the Fund pays, in
addition to the investment management fee described above, all expenses not
assumed by NB Management, including, without limitation, fees and expenses of
Directors who are not "interested persons" of NB Management or the Fund,
interest charges, taxes, brokerage commissions, expenses of issue of shares,
fees and expenses of registering and qualifying the Fund and its classes of
shares for distribution under federal and state laws and regulations, charges of
custodians, auditing and legal expenses, expenses of determining net asset value
of the Fund, reports to stockholders, expenses of meetings of stockholders,
expenses of printing and mailing prospectuses, proxy statements and proxies to
existing stockholders, and its proportionate share of insurance premiums and
professional association dues or assessments. The Fund is also responsible for
such nonrecurring expenses as may arise, including litigation in which the Fund
may be a party, and other expenses as determined by the Board. The Fund may have
an obligation to indemnify its officers and Directors with respect to such
litigation.

SUB-ADVISER


      NB Management retains Neuberger Berman, 605 Third Avenue, New York, New
York 10158-3698, as sub-adviser with respect to the Fund pursuant to a
sub-advisory agreement dated September 24, 2002 ("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 officers 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


                                       37
<PAGE>

Berman also serves as sub-adviser for all of the other investment companies
managed by NB Management.

      The Sub-Advisory Agreement continues until June 30, 2004 and is renewable
from year to year, subject to approval of its continuance in the same manner as
the Management Agreement. The Sub-Advisory Agreement is subject to termination,
without penalty, with respect to the Fund by the Directors or a 1940 Act
majority vote of the outstanding stock in the Fund, by NB Management, or by
Neuberger Berman on not less than 30 nor more than 60 days' prior written
notice. The Sub-Advisory Agreement also terminates automatically with respect to
the Fund if it is assigned or if the Management Agreement terminates with
respect to the Fund. Neuberger Berman and NB Management employ experienced
professionals that work in a competitive environment.

     The Management Agreement and the Sub-Advisory Agreement each provide that
NB Management or Neuberger Berman, as applicable, shall not be subject to any
liability in connection with the performance of its services thereunder in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.

BOARD CONSIDERATION OF THE MANAGEMENT AND SUB-ADVISORY AGREEMENTS

      In approving the Management and Sub-Advisory Agreements for the Fund, the
Board primarily considered the nature and quality of the services to be provided
under the Agreements and the overall fairness of the Agreements to the Fund.


      With respect to the nature and quality of the services provided, the Board
considered, among other things, the resources that NB Management plans to devote
to managing the Fund and the firm's fixed-income research and trading
capabilities. They discussed the recent and long-term performance of the other
fixed-income funds managed by NB Management and Neuberger Berman. They also
considered NB Management's and Neuberger Berman's positive compliance history,
as the firms have been free of significant compliance problems.
With respect to the overall fairness of the Management and Sub-Advisory
Agreements, the Board primarily considered the fee structure of the Agreements
and the proposed indemnity provision in the Management Agreement. The Board
reviewed information from an independent data service about the rates of
compensation paid to investment advisers, and the overall expense ratios, for
funds pursuing a comparable investment strategy to the Fund. The Board also
considered the contractual limits on the Fund's expenses undertaken by NB
Management.

      The Board concluded that the fees and other benefits likely to accrue to
NB Management and its affiliates by virtue of their relationship to the Fund are
reasonable in comparison with the benefits likely to accrue to the Fund. In
considering the fees, the Board took note of the likelihood that the Fund would
issue preferred stock and considered the effect of such issuance on the Fund's
net assets and, therefore, the fees. The Board also took note of the Additional
Compensation Agreement between NB Management and Merrill Lynch concerning the
aftermarket for Fund shares and whether there are steps the Fund should consider
taking to alleviate any discount. The Board also concluded that approval of the
Management and Sub-Advisory Agreements was in the best interests of the Fund's
stockholders. These matters were considered by the Independent Fund Directors


                                       38
<PAGE>

working with experienced 1940 Act counsel that is independent of Neuberger
Berman and NB Management.


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:
Jeffrey B. Lane, Director; Robert Matza, Director; Michael M. Kassen,
Director and Chairman; Barbara R. Katersky, Senior Vice President; Robert
Conti, Senior Vice President; Brian Gaffney, Treasurer; Thomas J. Gengler,
Jr., Senior Vice President; Joseph K. Herlihy, Senior Vice President and
Treasurer; Matthew S. Stadler, Senior Vice President and Chief Financial
Officer; Peter E. Sundman, Director and President; and Heidi S. Steiger,
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 Operating Officer; Michael M. Kassen,
Executive Vice President and Chief Investment Officer; Heidi S. Steiger,
Executive Vice President; Peter E. Sundman, Executive Vice President;
Matthew S. Stadler, Senior Vice President and Chief Financial Officer; Kevin
Handwerker, Senior Vice President, General Counsel and Secretary; Jack L.
Rivkin, Executive Vice President; Joseph K. Herlihy, Senior Vice President
and Treasurer; Robert Akeson, Senior Vice President; Steven April, Senior
Vice President; Irene Ashkenazy, Senior Vice President; Philip Callahan,
Senior Vice President; Lawrence J. Cohn, Senior Vice President; Joseph F.
Collins III, Senior Vice President; Thomas E. Gengler Jr., Senior Vice
President; Amy Gilfenbaum, Senior Vice President; Brian E. Hahn, Senior Vice
President; Barbara R. Katersky, Senior Vice President; Judith Ann Kenney,
Senior Vice President; Diane E. Lederman, Senior Vice President; Domenick
Migliorato, Senior Vice President; Jane Ringel, Senior Vice President; David
Root, Senior Vice President; Mark Shone, Senior Vice President; Robert H.
Splan, Senior Vice President; Thomas Tapen, Senior Vice President; Andrea
Trachtenberg, Senior Vice President; Robert Traversa, Senior Vice President;
Frank J. Tripodi, Senior Vice President; and Marvin C. Schwartz, Managing
Director.

      Mr. Sundman and Mr. Kassen are Directors and officers of the Fund.  Mr.
Gaffney and Mr. Conti are officers of the Fund.


      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 inside 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 S. Steiger, Director and Executive Vice President;
Michael M. Kassen, Director, Chief Investment Officer and Executive Vice
President; Robert Matza, Director, Chief Operating Officer and Executive Vice
President; Marvin C. Schwartz, Director and Vice Chairman; Kevin Handwerker,
Senior Vice President, General Counsel and Secretary; Jack L. Rivkin,
Executive Vice President; Matthew S. Stadler, Senior Vice President and Chief
Financial Officer; Richard Cantor, Vice Chairman and Director; Lawrence


                                       39
<PAGE>

Zicklin, Vice Chairman and Director; Joseph K. Herlihy, Treasurer; Maxine L.
Gerson, Assistant Secretary; and Ellen Metzger, Assistant Secretary.

                             PORTFOLIO TRANSACTIONS

INVESTMENT DECISIONS AND PORTFOLIO TRANSACTIONS

      Investment decisions for the Fund and for the other investment advisory
clients of NB Management are made with a view to achieving their respective
investment objectives. Investment decisions are the product of many factors in
addition to basic suitability for the particular client involved (including the
Fund). Some securities considered for investments by the Fund may also be
appropriate for other clients served by NB Management. Thus, a particular
security may be bought or sold for certain clients even though it could have
been bought or sold for other clients at the same time. If a purchase or sale of
securities consistent with the investment policies of the Fund and one or more
of these clients served by NB Management is considered at or about the same
time, transactions in such securities will be allocated among the Fund and
clients in a manner deemed fair and reasonable by NB Management. NB Management
may aggregate orders for the Fund with simultaneous transactions entered into on
behalf of its other clients so long as price and transaction expenses are
averaged either for that transaction or for the day. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling the security. In some instances, one client may sell a particular
security to another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged as to price and
allocated between such clients in a manner which NB Management believes is
equitable to each and in accordance with the amount being purchased or sold by
each. There may be circumstances when purchases or sales of portfolio securities
for one or more clients will have an adverse effect on other clients.


      The Fund has applied with the Securities and Exchange Commission for an
order to permit the Fund to pay Neuberger Berman, and Neuberger Berman to
receive, compensation for services as a securities lending intermediary, subject
to certain conditions. These services would be provided by a separate operating
unit of Neuberger Berman under the supervision of NB Management who are not
involved in the securities lending intermediary's lending agency operations.
Neuberger Berman would receive as compensation a reasonable fee based on
revenues earned by the Fund through the securities lending program. The order
requested by the Fund would also permit Neuberger Berman and other affiliated
broker-dealers of the Fund to borrow portfolio securities from the Fund, subject
to certain conditions. There is no guarantee that the Fund will receive the
requested order.


BROKERAGE AND RESEARCH SERVICES

      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 Fund typically does 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


                                       40
<PAGE>

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), the 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,
the Fund may pay higher brokerage commissions in return for brokerage and
research services. In any case, the 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.

      In certain instances NB Management specifically allocates brokerage for
research services (including research reports on issuers and industries as well
as economic and financial data). Such research may sometimes be available for
cash purchase. While the receipt of such services has not reduced NB
Management's normal internal research activities, NB Management's expenses could
be materially increased if it were to generate such additional information
internally. To the extent such research services are provided by others, NB
Management is relieved of expenses it may otherwise incur. In some cases
research services are generated by third parties but provided to NB Management
by or through broker dealers. Research obtained in return for brokerage may be
used in servicing any or all clients of NB Management and may be used in
connection with clients other than those client's whose brokerage commissions
are used to acquire the research services described herein. With regard to
allocation of brokerage to acquire research services, NB Management always
considers its best execution obligation.

      The commissions paid to a broker other than Neuberger Berman may be higher
than the amount another firm might charge if NB Management determines in good
faith that the amount of those commissions is reasonable in relation to the
value of the brokerage and research services provided by the broker. NB
Management believes that those research services benefit the Fund by
supplementing the information otherwise available to NB Management. That
research may be used by NB Management in servicing other funds managed by it
and, in some cases, by Neuberger Berman in servicing managed accounts. On the
other hand, research received by NB Management from brokers effecting portfolio
transactions on behalf of the other funds it manages and by Neuberger Berman
from brokers effecting portfolio transactions on behalf of managed accounts may
be used for the Fund's benefit.

      No affiliate of the Fund receives give-ups or reciprocal business in
connection with its portfolio transactions. The Fund does not effect
transactions with or through broker-dealers in accordance with any formula or
for selling shares of the 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 NB Management and Neuberger Berman
from acting as principal in the purchase of portfolio securities from, or the


                                       41
<PAGE>

sale of portfolio securities to, the Fund unless an appropriate exemption is
available.

                                  DISTRIBUTIONS

      As described in the prospectus, initial dividends to Common Stockholders
are expected to be declared approximately 45 days, and paid approximately 60 to
90 days, from the completion of the offering of the Common Shares, depending on
market conditions. To permit the Fund to maintain more stable monthly dividends,
it will initially (prior to its first dividend), and may from time to time
thereafter, distribute less than the entire amount of net investment income it
earns in a particular period. Such undistributed net investment income would be
available to supplement future dividends, including dividends that might
otherwise have been reduced by a decrease in the Fund's monthly net income due
to fluctuations in investment income or expenses or due to an increase in the
dividend rate on the Fund's outstanding Preferred Shares. As a result, the
dividends the Fund pays for any particular period may be more or less than the
amount of net investment income it actually earns during such period.
Undistributed net investment income will be added to the Fund's net asset value
and, correspondingly, dividends from undistributed net investment income will be
deducted from that net asset value.

      For information relating to the impact of the issuance of Preferred Shares
on the distributions made by the Fund to Common Stockholders, see the prospectus
under "Preferred Shares and Related Leverage."

      While any Preferred Shares are outstanding, the Fund may not declare any
cash dividend or other distribution on its Common Shares unless at the time of
such declaration (1) all accumulated dividends on the Preferred Shares have been
paid and (2) the net asset value of the Fund's portfolio (determined after
deducting the amount of such dividend or other distribution) is at least 200% of
the liquidation value of any outstanding Preferred Shares. This latter
limitation on the Fund's ability to make distributions on its Common Shares
could cause it to incur federal income and/or excise tax and, under certain
circumstances, impair its ability to maintain its qualification for taxation as
a regulated investment company.
See "Tax Matters."

                              DESCRIPTION OF SHARES

COMMON SHARES


      The Fund's Articles authorize the issuance of one billion (1,000,000,000)
shares. The Common Shares will be issued with a par value of $.0001 per share.
All Common Shares have equal rights as to the payment of dividends and the
distribution of assets upon liquidation. Common Shares will, when issued, be
fully paid and non-assessable, and will have no pre-emptive or conversion
rights or rights to cumulative voting. Whenever Preferred Shares are
outstanding, Common Stockholders will not be entitled to receive any
distributions from the Fund unless all accrued dividends on Preferred Shares
have been paid, and unless asset coverage (as defined in the 1940 Act) with
respect to Preferred Shares would be at least 200% after giving effect to such
distributions. See "Preferred Shares" below.




                                       42
<PAGE>


      The Common Shares have been authorized for listing on the American Stock
Exchange, subject to notice of issuance. The Fund intends to hold annual
meetings of stockholders so long as the Common Shares are listed on a national
securities exchange and such meetings are required as a condition to such
listing.


      Shares of closed-end investment companies may frequently trade at prices
lower than net asset value. Shares of closed-end investment companies like the
Fund that invest predominantly in investment grade municipal bonds have during
some periods traded at prices higher than net asset value and during other
periods traded at prices lower than net asset value. There can be no assurance
that Common Shares or shares of other municipal funds will trade at a price
higher than net asset value in the future. Net asset value will be reduced
immediately following the offering of Common Shares as a result of payment of
the sales load and organization and offering expenses. Net asset value generally
increases when interest rates decline, and decreases when interest rates rise,
and these changes are likely to be greater in the case of a fund, such as the
Fund, having a leveraged capital structure. Whether investors will realize gains
or losses upon the sale of Common Shares will not depend upon the Fund's net
asset value but will depend entirely upon whether the market price of the Common
Shares at the time of sale is above or below the original purchase price for the
shares. Since the market price of the Fund's Common Shares will be determined by
factors beyond the control of the Fund, the Fund cannot predict whether the
Common Shares will trade at, below, or above net asset value or at, below or
above the initial public offering price. Accordingly, the Common Shares are
designed primarily for long-term investors, and investors in the Common Shares
should not view the Fund as a vehicle for trading purposes. See "Repurchase of
Common Shares; Conversion to Open-End Fund" and the Fund's prospectus under
"Preferred Shares and Related Leverage" and "Municipal Bonds."

PREFERRED SHARES

      The Articles authorize the Board to create additional classes of stock,
and it is currently contemplated that the Fund will issue one or more classes of
preferred stock ("Preferred Shares"). The Preferred Shares may be issued in one
or more classes or series, with such rights as determined by action of the Board
without the approval of the Common Stockholders.

      The Board has indicated its intention to authorize an offering of
Preferred Shares (representing approximately 38% of the Fund's capital
immediately after the time the Preferred Shares are issued) within approximately
one to three months after completion of the offering of Common Shares, subject
to market conditions and to the Board's continuing belief that leveraging the
Fund's capital structure through the issuance of Preferred Shares is likely to
achieve the benefits to the Common Stockholders described in the prospectus and
this Statement of Additional Information. Although the terms of the Preferred
Shares, including their dividend rate, voting rights, liquidation preference and
redemption provisions, will be determined by the Board (subject to applicable
law and the Articles) if and when it authorizes a Preferred Shares offering, the
Board has indicated that the initial series of Preferred Shares would likely pay
cumulative dividends at relatively short-term periods (such as 7 days); by
providing for the periodic redetermination of the dividend rate through an
auction process or remarketing procedure. The liquidation preference, preference


                                       43
<PAGE>

on distribution, voting rights and redemption provisions of the Preferred Shares
are expected to be as stated below.

      As used in this Statement of Additional Information, unless otherwise
noted, the Fund's "net assets" include assets of the Fund attributable to any
outstanding Preferred Shares, with no deduction for the liquidation preference
of the Preferred Shares. Solely for financial reporting purposes, however, the
Fund is required to exclude the liquidation preference of Preferred Shares from
"net assets," so long as the Preferred Shares have redemption features that are
not solely within the control of the Fund. For all regulatory and tax purposes,
the Fund's Preferred Shares will be treated as stock (rather than indebtedness).

      LIMITED ISSUANCE OF PREFERRED SHARES. Under the 1940 Act, the Fund could
issue Preferred Shares with an aggregate liquidation value of up to one-half of
the value of the Fund's net assets, measured immediately after issuance of the
Preferred Shares. "Liquidation value" means the original purchase price of the
shares being liquidated plus any accrued and unpaid dividends. In addition, the
Fund is not permitted to declare any cash dividend or other distribution on its
Common Shares unless the liquidation value of the Preferred Shares is less than
one-half of the value of the Fund's net assets (determined after deducting the
amount of such dividend or distribution) immediately after the distribution. To
the extent that the Fund has outstanding any senior securities representing
indebtedness (such as through the use of derivative instruments that constitute
senior securities), the aggregate amount of such senior securities will be added
to the total liquidation value of any outstanding Preferred Shares for purposes
of these asset coverage requirements. The liquidation value of the Preferred
Shares is expected to be approximately 38% of the value of the Fund's net
assets. The Fund intends to purchase or redeem Preferred Shares, if necessary,
to keep the liquidation value of the Preferred Shares plus the aggregate amount
of other senior securities representing indebtedness at or below one-half of the
value of the Fund's net assets.

      DISTRIBUTION PREFERENCE. The Preferred Shares will have complete priority
over the Common Shares as to distribution of assets.

      LIQUIDATION PREFERENCE. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Fund, holders of
Preferred Shares ("Preferred Stockholders") will be entitled to receive a
preferential liquidating distribution (expected to equal the original purchase
price per share plus accumulated and unpaid dividends thereon, whether or not
earned or declared) before any distribution of assets is made to holders of
Common Shares. After payment of the full amount of the liquidating distribution
to which they are entitled, Preferred Stockholders will not be entitled to any
further participation in any distribution of assets by the Fund. A consolidation
or merger of the Fund with or into any business trust or corporation or a sale
of all or substantially all of the assets of the Fund shall not be deemed to be
a liquidation, dissolution or winding up of the Fund.

      VOTING RIGHTS. In connection with any issuance of Preferred Shares, the
Fund must comply with Section 18(i) of the 1940 Act, which requires, among other
things, that Preferred Shares be voting shares. Except as otherwise provided in
the Articles or the Fund's Bylaws or otherwise required by applicable law,


                                       44
<PAGE>

Preferred Stockholders will vote together with Common Stockholders as a single
class.

      In connection with the election of the Fund's Directors, Preferred
Stockholders, voting as a separate class, will also be entitled to elect two of
the Fund's Directors, and the remaining Directors shall be elected by Common
Stockholders and Preferred Stockholders, voting together as a single class. In
addition, if at any time dividends on the Fund's outstanding Preferred Shares
shall be unpaid in an amount equal to two full years' dividends thereon, the
holders of all outstanding Preferred Shares, voting as a separate class, will be
entitled to elect a majority of the Fund's Directors until all dividends in
arrears have been paid or declared and set apart for payment.

      The affirmative vote of the holders of a majority of the outstanding
Preferred Shares, voting as a separate class, shall be required to approve any
action requiring a vote of security holders under Section 13(a) of the 1940 Act
including, among other things, changes in the Fund's investment objective, the
conversion of the Fund from a closed-end to an open-end company, or changes in
the investment restrictions described as fundamental policies under "Investment
Restrictions." The class or series vote of Preferred Stockholders described
above shall in each case be in addition to any separate vote of the requisite
percentage of Common Shares and Preferred Shares necessary to authorize the
action in question.

      The foregoing voting provisions will not apply with respect to the Fund's
Preferred Shares if, at or prior to the time when a vote is required, such
shares shall have been (1) redeemed or (2) called for redemption and sufficient
funds shall have been deposited in trust to effect such redemption.

      REDEMPTION, PURCHASE AND SALE OF PREFERRED SHARES BY THE FUND. The terms
of the Preferred Shares may provide that they are redeemable at certain times,
in whole or in part, at the original purchase price per share plus accumulated
dividends, that the Fund may tender for or purchase Preferred Shares and that
the Fund may subsequently resell any shares so tendered for or purchased. Any
redemption or purchase of Preferred Shares by the Fund will reduce the leverage
applicable to Common Shares, while any resale of shares by the Fund will
increase such leverage.

      The discussion above describes the Board's current intention with respect
to a possible offering of Preferred Shares. If the Board determines to authorize
such an offering, the terms of the Preferred Shares may be the same as, or
different from, the terms described above, subject to applicable law and the
Articles of Incorporation and Bylaws.

             CERTAIN PROVISIONS IN THE ARTICLES OF INCORPORATION


      The Articles include provisions that could limit the ability of other
entities or persons to acquire control of the Fund, to cause it to engage in
certain transactions or to modify its structure.




                                       45
<PAGE>


      The Articles require a vote by holders of at least 75% of the Directors
and 75% of the shares of capital stock of the Fund outstanding and entitled to
vote, except as described below, to authorize (1) the Fund's conversion from a
closed-end to an open-end investment company; (2) any merger or consolidation or
share exchange of the Fund with or into any other company; (3) the dissolution
or liquidation of the Fund; (4) any sale, lease, or exchange of all or
substantially all of the Fund's assets to any Principal Stockholder (as defined
below); (5) a change in the nature of the business of the Fund so that it would
cease to be an investment company registered under the 1940 Act; (6) with
certain exceptions, the issuance of any securities of the Corporation to any
Principal Stockholder for cash; or (7) any transfer by the Fund of any
securities of the Fund to any Principal Stockholder in exchange for cash,
securities or other property having an aggregate fair market value of $1,000,000
or more; provided, with respect to (1) through (5), if such action has been
authorized by the affirmative vote of a majority of the entire Board, including
a majority of the Directors who are not "interested persons," of the Fund, as
defined in the 1940 Act ("Independent Directors"), then the affirmative vote of
the holders of only a majority of the Fund's shares of capital stock outstanding
and entitled to vote at the time is required; and provided, further, with
respect to (6) and (7), if such transaction has been authorized by the
affirmative vote of a majority of the entire Board, including a majority of the
Independent Directors, no stockholder vote is required to authorize such action.
The term "Principal Stockholder" means any person, entity or group that holds,
directly or indirectly, more than 5% of the outstanding shares of the Fund, and
includes any associates or affiliates of such person or entity or of any member
of the group. None of the foregoing provisions may be amended except by the vote
of at least 75% of the outstanding shares of capital stock of the Fund
outstanding and entitled to vote thereon. Certain of the transactions described
above, even if approved by stockholders, may be prohibited by the 1940 Act.


      The percentage votes required under these provisions, which are greater
than the minimum requirements under Maryland law or the 1940 Act, will make more
difficult a change in the Fund's business or management and may have the effect
of depriving Common Stockholders of an opportunity to sell shares at a premium
over prevailing market prices by discouraging a third party from seeking to
obtain control of the Fund in a tender offer or similar transaction. The Board
believes that the provisions of the Articles relating to such higher votes are
in the best interest of the Fund and its stockholders.

      Reference should be made to the Articles on file with the Securities and
Exchange Commission for the full text of these provisions.

                 REPURCHASE OF COMMON SHARES; TENDER OFFERS;
                           CONVERSION TO OPEN-END FUND

      The Fund is a closed-end investment company and as such its stockholders
will not have the right to cause the Fund to redeem their shares. Instead, the
Fund's Common Shares will trade in the open market at a price that will be a
function of several factors, including dividend levels (which are in turn
affected by expenses), net asset value, call protection, price, dividend
stability, relative demand for and supply of such shares in the market, general
market and economic conditions and other factors. Shares of a closed-end
investment company may frequently trade at prices lower than net asset value.
The Board regularly monitors the relationship between the market price and net


                                       46
<PAGE>

asset value of the Common Shares. If the Common Shares were to trade at a
substantial discount to net asset value for an extended period of time, the
Board may consider the repurchase of its Common Shares on the open market or in
private transactions, or the making of a tender offer for such shares, or the
conversion of the Fund to an open-end investment company. There can be no
assurance, however, that the Board will decide to take or propose any of these
actions, or that share repurchases or tender offers, if undertaken, will
actually reduce market discount. The Fund has no present intention to repurchase
its Common Shares and would do so only in the circumstances described in this
section.

      Notwithstanding the foregoing, at any time when the Fund's Preferred
Shares are outstanding, the Fund may not purchase, redeem or otherwise acquire
any of its Common Shares unless (1) all accrued dividends on Preferred Shares
have been paid and (2) at the time of such purchase, redemption or acquisition,
the net asset value of the Fund's portfolio (determined after deducting the
acquisition price of the Common Shares) is at least 200% of the liquidation
value of the outstanding Preferred Shares (expected to equal the original
purchase price per share plus any accrued and unpaid dividends thereon).

      Subject to its investment limitations, the Fund may borrow to finance the
repurchase of shares or to make a tender offer. Interest on any borrowings to
finance share repurchase transactions or the accumulation of cash by the Fund in
anticipation of share repurchases or tenders will reduce the Fund's net income.
Any share repurchase, tender offer or borrowing that might be approved by the
Board would have to comply with the Securities Exchange Act of 1934, as amended,
and the 1940 Act and the rules and regulations thereunder.

      The Board may also from time to time consider submitting to the holders of
the shares of stock of the Fund a proposal to convert the Fund to an open-end
investment company. In determining whether to exercise its sole discretion to
submit this issue to stockholders, the Board would consider all factors then
relevant, including the relationship of the market price of the Common Shares to
net asset value, the extent to which the Fund's capital structure is leveraged
and the possibility of re-leveraging, the spread, if any, between the yields on
securities in the Fund's portfolio and interest and dividend charges on
Preferred Shares issued by the Fund and general market and economic conditions.

      See "Certain Provisions in the Articles of Incorporation" in the
prospectus and "Certain Provisions in the Articles of Incorporation" in this
Statement of Additional Information for a discussion of voting requirements
applicable to conversion of the Fund to an open-end company. If the Fund
converted to an open-end company, it would be required to redeem all Preferred
Shares then outstanding, and the Fund's Common Shares would no longer be listed
on the American Stock Exchange. Holders of common stock of an open-end
investment company may require the company to redeem their shares on any
business day (except in certain circumstances as authorized by or under the 1940
Act) at their net asset value, less such redemption charge, if any, as might be
in effect at the time of redemption. In order to avoid maintaining large cash
positions or liquidating favorable investments to meet redemptions, open-end
companies typically engage in a continuous offering of their common stock.
Open-end companies are thus subject to periodic asset in-flows and out-flows
that can complicate portfolio management.



                                       47
<PAGE>

      The repurchase by the Fund of its shares at prices below net asset value
will result in an increase in the net asset value of those shares that remain
outstanding. However, there can be no assurance that share repurchases or
tenders at or below net asset value will result in the Fund's shares trading at
a price equal to their net asset value. Nevertheless, the fact that the Fund's
shares may be the subject of repurchase or tender offers at net asset value from
time to time, or that the Fund may be converted to an open-end company, may
reduce any spread between market price and net asset value that might otherwise
exist.

      In addition, a purchase by the Fund of its Common Shares will decrease the
Fund's total assets. This would likely have the effect of increasing the Fund's
expense ratio. Any purchase by the Fund of its Common Shares at a time when
Preferred Shares are outstanding will increase the leverage applicable to the
outstanding Common Shares then remaining. See the Fund's prospectus under "Risks
- - Leverage Risk."

      Before deciding whether to take any action if the Fund's Common Shares
trade below net asset value, the Board would consider all relevant factors,
including the extent and duration of the discount, the liquidity of the Fund's
portfolio, the impact of any action that might be taken on the Fund or its
stockholders and market considerations. Based on these considerations, even if
the Fund's shares should trade at a discount, the Board may determine that, in
the interest of the Fund and its stockholders, no action should be taken.

                                   TAX MATTERS

      TAXATION OF THE FUND. The Fund intends to qualify each year for treatment
as a regulated investment company under Subchapter M of the Code ("RIC"). To
qualify for that treatment, the Fund must, among other things:


            (a) derive at least 90% of its gross income each taxable year from
      dividends, interest, payments with respect to certain securities loans,
      and gains from the sale or other disposition of securities, or other
      income (including gains from options or futures contracts) derived with
      respect to its business of investing in securities;


            (b) distribute with respect to each taxable year at least 90% of the
      sum of its net tax-exempt income, taxable ordinary income, and the excess,
      if any, of net short-term capital gains over net long-term capital losses
      for that year; and


            (c) diversify its holdings so that, at the end of each quarter of
      its taxable year, (1) at least 50% of the value of its total assets is
      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 a value not greater than 5% of the value of the Fund's total assets and
      not more than 10% of the issuer's outstanding voting securities, and (2)
      not more than 25% of the value of the Fund's total assets is invested in
      the securities (other than those of the U.S. Government or other RICs) of
      any one issuer or of two or more issuers the Fund controls and that are
      engaged in the same, similar, or related trades or businesses.



                                       48
<PAGE>

      If the Fund qualifies for treatment as a RIC, it will not be subject to
federal income tax on income and gains it timely distributes to its stockholders
(including Capital Gain Dividends, as defined below). If the Fund failed to
qualify for treatment as a RIC for any taxable year, it would be subject to tax
on its taxable income at corporate rates, and all distributions from its
earnings and profits, including any distributions of its net tax-exempt income
and net capital gains, would be taxable to its stockholders as ordinary
(taxable) income. Those distributions would be eligible for the
dividends-received deduction in the case of corporate stockholders under certain
circumstances. In addition, the Fund could be required to recognize unrealized
gains, pay substantial taxes and interest, and make substantial distributions
before requalifying for treatment as a RIC.


      The Fund intends to distribute at least annually to its stockholders all
or substantially all of its net tax-exempt interest and any investment company
taxable income (consisting generally of taxable net investment income and net
short-term capital gain, determined without regard to any deduction for
dividends paid). The Fund also may annually distribute its net capital gain
(i.e., the excess of net long-term capital gain over net short-term capital
loss) or may retain all or a portion of its net capital gain for investment. If
the Fund retains any investment company taxable income or any net capital gain,
it will be subject to tax at regular corporate rates on the retained amount. If
the Fund retains any net capital gain, the Fund may designate all or a portion
of the retained amount as undistributed capital gains in a notice to its
stockholders who (1) would be required to include in income for federal income
tax purposes, as long-term capital gain, their shares of the undistributed
amount and (2) would be entitled to credit their proportionate shares of the tax
the Fund paid on the undistributed amount against their federal income tax
liabilities, if any, and to claim refunds to the extent the credit exceeds those
liabilities. For federal income tax purposes, the tax basis in shares owned by a
Fund stockholder would be increased by an amount equal to the difference between
the undistributed capital gains included in the stockholder's gross income and
the tax deemed paid by the stockholder under clause (2) of the preceding
sentence.

      To the extent the Fund fails to distribute in a calendar year at least an
amount equal to 98% of the sum of (1) its ordinary (taxable) income for that
year plus (2) its capital gain net income for the one-year period ending October
31 of that year, plus any retained amount from the prior year, the Fund will be
subject to a nondeductible 4% excise tax. For these purposes, the Fund will be
treated as having distributed any amount with respect to which it pays income
tax. A dividend the Fund pays to stockholders in January of any year generally
will be deemed to have been paid on December 31 of the preceding year if the
dividend is declared and payable to stockholders of record on a date in October,
November, or December of that preceding year. The Fund intends generally to make
distributions sufficient to avoid imposition of the excise tax.

      TAXATION OF THE STOCKHOLDERS

      EXEMPT-INTEREST DIVIDENDS. The Fund will qualify to pay exempt-interest
dividends to its stockholders only if, at the close of each quarter of its
taxable year, at least 50% of the value of its total assets consists of
obligations the interest on which is exempt from federal income tax under Code
section 103(a). Distributions that the Fund properly designates as
exempt-interest dividends will be treated as interest excludable from
stockholders' gross income for federal income tax purposes but may be a Tax
Preference Item and may be taxable for state and local purposes. Because the


                                       49
<PAGE>

Fund intends to qualify to pay exempt-interest dividends, it may be limited in
its ability to enter into taxable transactions involving forward commitments,
repurchase agreements, financial futures and options contracts on financial
futures, tax-exempt bond indices, and other assets.

      The receipt of exempt-interest dividends may affect the portion, if any,
of a person's Social Security and Railroad Retirement benefits (collectively
"Benefits") that will be includable in gross income subject to federal income
tax. Up to 85% of Benefits may be included in gross income where the recipient's
combined income, consisting of adjusted gross income (with certain adjustments),
tax-exempt interest income, and one-half of any Benefits, exceeds an adjusted
base amount. Stockholders receiving Benefits should consult their tax advisers.

      The Code imposes the AMT with respect to individuals, corporations (except
certain small corporations), trusts, and estates. The interest on certain
"private activity bonds" (e.g., municipal bonds issued to make loans for housing
purposes or to private entities, but not certain tax-exempt organizations such
as universities and non-profit hospitals) is treated as a Tax Preference Item
and, after reduction by applicable expenses, is included in federal alternative
minimum taxable income. The Fund will furnish to stockholders annually a report
indicating the percentage of Fund income treated as a Tax Preference Item. In
addition, interest on all tax-exempt obligations is included in "adjusted
current earnings" of corporations for purposes of the AMT. Accordingly, a
portion of the Fund's dividends that would otherwise be tax-exempt to its
stockholders may cause certain stockholders to become subject to the AMT or may
increase the tax liability of stockholders who already are subject to that tax.

      The Fund will inform investors within 60 days after each taxable year-end
of the percentage of its income dividends that qualify as exempt-interest
dividends. The percentage will be applied uniformly to all dividends paid during
the year. Thus, the percentage of any particular dividend designated as an
exempt-interest dividend may be substantially different from the percentage of
the Fund's income that was tax-exempt during the period covered by the dividend.


      OTHER FUND DISTRIBUTIONS. As long as the Fund qualifies for treatment as a
RIC, distributions from it (other than exempt-interest dividends) will be
taxable to its stockholders as ordinary income to the extent the distributions
are derived from taxable net investment income and net short-term capital gains,
and generally will not be eligible for the dividends received deduction
available to corporations. Distributions of net capital gain (after applying any
available capital loss carryovers) that are properly designated as capital gain
dividends ("Capital Gain Dividends") will be taxable to each stockholder as
long-term gain, regardless of how long the stockholder has held the shares in
the Fund.

      The Fund's expenses attributable to earning tax-exempt income do not
reduce its current earnings and profits; therefore, distributions in excess of
the sum of its net tax-exempt and taxable income may be treated as taxable
dividends to the extent of its remaining earnings and profits. Distributions in
excess of the sum of the Fund's net tax-exempt and taxable income could occur,
for example, if its book income exceeded that sum, which could arise as a result
of certain of its hedging and investment activities. See "--Tax Consequences of
Certain Investments" below.




                                       50
<PAGE>

      For federal income tax purposes, the Fund is required to allocate its
tax-exempt income, net capital gain, and other taxable income, if any, between
the Common Shares and preferred stock, including the Preferred Shares, it issues
on a PRO RATA basis in proportion to the total distributions paid to each such
class of stock for the taxable year.

      Dividends (including Capital Gain Dividends) will be taxable as described
above whether received in cash or reinvested in additional Common Shares through
the Dividend Reinvestment Plan. A Common Stockholder whose distributions are so
reinvested will be treated as having received a dividend equal to either (1) the
fair market value of the newly issued shares or (2) if the Common Shares are
trading below their net asset value, the amount of cash allocated to the
stockholder for the purchase of shares on its behalf in the open market.

      Dividends on the Fund's shares (other than exempt-interest dividends) are
generally subject to federal income tax as described herein to the extent they
do not exceed its realized income and gains, even though those dividends may
economically represent a return of a particular stockholder's investment. Those
distributions are likely to occur in respect of shares purchased when the Fund's
net asset value reflects gains that are either unrealized or realized but not
distributed, or income that is not distributed. Those realized gains may be
required to be distributed even when the Fund's net asset value also reflects
unrealized losses. Distributions are taxable to a stockholder even if they are
paid from income or gains the Fund earned before the stockholder's investment
(and thus included in the price paid by the stockholder).

      If the Fund makes a distribution to a stockholder in excess of its current
and accumulated earnings and profits, the excess distribution will be treated as
a return of capital to the extent of the stockholder's tax basis in its shares
and thereafter as capital gain. A return of capital is not taxable, but it
reduces a stockholder's tax basis in its shares, thus reducing any loss or
increasing any gain on a subsequent taxable disposition by the stockholder of
its shares. If one or more such distributions occur in any taxable year, the
available earnings and profits first will be allocated to the distributions made
to the Preferred Stockholders and only thereafter to distributions made to
Common Stockholders. As a result, the Preferred Stockholders will receive a
disproportionate share of the distributions treated as dividends, and the Common
Stockholders will receive a disproportionate share of the distributions treated
as a return of capital.


      OTHER. Part or all of the interest on indebtedness, if any, incurred or
continued by a stockholder to purchase or carry Fund shares is not deductible
for federal income tax purposes. The non-deductible part is equal to the total
interest paid or accrued on the indebtedness, multiplied by the percentage of
the Fund's total distributions (not including Capital Gain Dividends) paid to
the stockholder that are exempt-interest dividends. Under rules the Internal
Revenue Service (the "Service") uses to determine when borrowed funds are
considered used for the purpose of purchasing or carrying particular assets, the
purchase of Fund shares may be considered to have been made with borrowed funds
even though those funds are not directly traceable to the purchase of the
shares. Under a published position of the Service, a stockholder's interest
deduction generally will not be disallowed to the extent the average adjusted
basis of the stockholder's tax-exempt obligations (including shares of preferred
stock) does not exceed two percent of the average adjusted basis of the
stockholder's trade or business assets (in the case of most corporations) or
portfolio investments (in the case of individuals). Legislation has been


                                       51
<PAGE>

introduced in recent years that would limit or repeal this two percent de
minimis exception, which if enacted would reduce the total after-tax yield of a
stockholder.


      In general, exempt-interest dividends, if any, attributable to interest
received on certain private activity bonds will not be tax-exempt to any
stockholders who are "substantial users" (or persons related to "substantial
users") of facilities financed by those bonds. For these purposes, "substantial
user" is defined to include a "non-exempt person" who regularly uses in a trade
or business a part of a facility financed from the proceeds of those bonds.

      SALE OR REDEMPTION OF SHARES. The sale, exchange, or redemption of Fund
shares may give rise to a taxable gain or loss. In general, any gain or loss
realized on a taxable disposition of shares will be treated as long-term capital
gain or loss if the shares have been held for more than 12 months; otherwise,
any such gain or loss will be treated as short-term capital gain or loss.
However, if a stockholder sells shares at a loss within six months of their
purchase, (1) any loss will be disallowed for federal income tax purposes to the
extent of any exempt-interest dividends received on the shares and (2) any such
loss not so disallowed will be treated as long-term, rather than short-term, to
the extent of any Capital Gain Dividends the stockholder received with respect
to the shares. All or a portion of any loss realized on a taxable disposition of
Fund shares will be disallowed if other Fund shares are purchased within 30 days
before or after the disposition. In that case, the basis of the newly purchased
shares will be adjusted to reflect the disallowed loss.

      From time to time the Fund may make a tender offer for its Common Shares.
It is expected that the terms of any such offer will require a tendering
stockholder to tender all Common Shares and dispose of all Preferred Shares
held, or considered under certain attribution rules of the Code to be held, by
the stockholder. Stockholders who tender all Common Shares and dispose of all
Preferred Shares held, or considered to be held, by them will be treated as
having sold their shares and generally will realize a capital gain or loss. If a
stockholder tenders fewer than all of its Common Shares, or retains a
substantial portion of its Preferred Shares, the stockholder may be treated as
having received a taxable dividend (instead of capital gain or loss) on the
tender of its Common Shares. In that case, there is a remote risk that
non-tendering stockholders will be treated as having received taxable
distributions from the Fund. Likewise, if the Fund redeems some but not all of a
Preferred Stockholder's Preferred Shares and the stockholder is treated as
having received a taxable dividend on the redemption, there is a remote risk
that Common Stockholders and non-redeeming Preferred Stockholders will be
treated as having received taxable distributions from the Fund. To the extent
the Fund recognizes net gains on the liquidation of portfolio securities to meet
tenders of Common Shares, it will be required to make taxable distributions to
its stockholders, which may in turn require it to make additional distributions
to the Preferred Stockholders, if any.

      WITHHOLDING. The Fund generally is required to withhold and remit to the
U.S. Treasury a percentage of the taxable dividends (including Capital Gain
Dividends) paid to any individual or certain other non-corporate stockholder who
fails to properly furnish the Fund with a correct taxpayer identification
number, who has under-reported dividend or interest income, or who fails to
certify to the Fund that he or she is not otherwise subject to that withholding
("backup withholding"). The backup withholding rates are (1) 30% for amounts
paid during 2002 and 2003, (2) 29% for amounts paid during 2004 and 2005, and
(3) 28% for amounts paid during 2006 through 2010. The backup withholding rate


                                       52
<PAGE>

will increase to 31% for amounts paid after December 31, 2010, unless Congress
enacts tax legislation providing otherwise.

      For a foreign investor to qualify for exemption from withholding under an
income tax treaty, the investor must comply with special certification and
filing requirements. Foreign investors in the Fund should consult their tax
advisers in this regard.

      TAX CONSEQUENCES OF CERTAIN INVESTMENTS

      HEDGING TRANSACTIONS. If the Fund engages in hedging transactions,
including hedging transactions in options, futures contracts, and straddles, or
other similar transactions, it will be subject to special tax rules (including
constructive sale, mark-to-market, straddle, wash sale, and short sale rules),
the effect of which may be to increase its taxable income, accelerate income,
defer losses, cause adjustments in the holding periods of its securities,
convert long-term capital gains to short-term capital gains, and/or convert
short-term capital losses to long-term capital losses. These rules could
therefore affect the amount, timing, and character of distributions to
stockholders. Distributions to stockholders of income earned from the Fund's
hedging activities will not be eligible to be treated as exempt-interest
dividends. The Fund will endeavor to make any available elections pertaining to
such transactions in a manner believed to be in the stockholders' best
interests.


      Certain of the Fund's hedging activities are likely to produce a
difference between its book income and the sum of its net tax-exempt and taxable
income. If the Fund's book income exceeds that sum, the distribution of the
excess would be treated as (1) a taxable dividend to the extent of the Fund's
remaining earnings and profits (including earnings and profits arising from
tax-exempt income), (2) thereafter as a return of capital to the extent of the
recipient's basis in the shares, and (3) thereafter as gain from the sale or
exchange of a capital asset. If the Fund's book income is less than the sum of
its net tax-exempt and taxable income, it could be required to make
distributions exceeding book income to continue to qualify for treatment as a
RIC.

      Certain listed options and futures contracts are considered "Section 1256
contracts" for federal income tax purposes. In general, gain or loss the Fund
realizes on Section 1256 contracts will be considered 60% long-term and 40%
short-term capital gain or loss. Also, Section 1256 contracts the Fund holds at
the end of each taxable year (and at October 31 for purposes of calculating the
excise tax) will be "marked to market," that is, treated for federal income tax
purposes as though sold for fair market value on the last business day of the
taxable year (or on October 31 for purposes of the excise tax). The Fund can
elect to exempt its Section 1256 contracts that are part of a "mixed straddle"
(as described below) from the application of section 1256.


      Gain or loss the Fund realizes on the expiration or sale of certain OTC
options it holds will be either long-term or short-term capital gain or loss
depending on its holding period for the options. However, gain or loss realized
on the expiration or closing out of options the Fund wrote will be treated as
short-term capital gain or loss. In general, if the Fund exercises an option, or
an option the Fund wrote is exercised, gain or loss on the option will not be
separately recognized, but the premium received or paid will be included in the
calculation of gain or loss on disposition of the property underlying the
option.



                                       53
<PAGE>

      Any security, option, or futures contract, delayed delivery transaction,
or other position the Fund enters into or holds in conjunction with any other
position it holds may constitute a "straddle" for federal income tax purposes. A
straddle of which at least one, but not all, the positions are Section 1256
contracts will constitute a "mixed straddle." In general, straddles are subject
to certain rules that may affect the character and timing of the Fund's gains
and losses with respect to straddle positions by requiring, among other things,
that loss realized on disposition of one position of a straddle be deferred to
the extent of any unrealized gain in an offsetting position until that position
is disposed of; that the Fund's holding period in certain straddle positions be
suspended until the straddle is terminated (possibly resulting in gain being
treated as short-term capital gain rather than long-term capital gain); and that
losses recognized with respect to certain straddle positions, that otherwise
constitute short-term capital losses, be treated as long-term capital losses.
Different elections are available to the Fund that may mitigate the effects of
the straddle rules, particularly with respect to mixed straddles.

      SECURITIES ISSUED OR PURCHASED AT A DISCOUNT. The Fund may acquire zero
coupon or other municipal securities issued with OID. As a holder of those
securities, the Fund must take into account the OID that accrues on them during
the taxable year, even if it receives no corresponding payment on them during
the year. Because the Fund annually must distribute substantially all of its
investment company taxable income and net tax-exempt income, including any
tax-exempt OID, to satisfy the distribution requirement applicable to RICs, it
may be required in a particular year to distribute as a dividend an amount that
is greater than the total amount of cash it actually receives. Those
distributions will be made from the Fund's cash assets or from the proceeds of
sales of its portfolio securities, if necessary. The 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.

      The Fund may invest in municipal bonds that are purchased, generally not
on their original issue, with market discount (that is, at a price less than the
principal amount of the bond 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 that the product of
(1) .25% of the redemption price at maturity times (2) the number of complete
years to maturity after the Fund acquired the bond, then no market discount is
considered to exist. Gain on the disposition of a municipal market discount bond
(other than a bond with a fixed maturity date within one year from its issuance)
generally is treated as ordinary (taxable) income, rather than capital gain, to
the extent of the bond's accrued market discount at the time of disposition.
Market discount on such a bond generally is accrued ratably, on a daily basis,
over the period from the acquisition date to the date of maturity. In lieu of
treating the disposition gain as above, the Fund may elect to include market
discount in its gross income currently, for each taxable year to which it is
attributable.

                                    * * *

      The foregoing is a general summary of the provisions of the Code and
regulations thereunder currently in effect as they directly govern the taxation
of the Fund and its stockholders. These provisions are subject to change by
legislative or administrative action, and any such change may be retroactive.
Moreover, the foregoing does not address many of the factors that may be
determinative of whether an investor will be liable for the AMT. Stockholders
are advised to consult their own tax advisers for more detailed information


                                       54
<PAGE>

concerning the federal income tax consequences of purchasing, holding, and
disposing of Fund shares.


          MARKETING, PERFORMANCE-RELATED AND COMPARATIVE INFORMATION


      The Fund may be a suitable investment for a stockholder who is thinking of
adding bond investments to his or her portfolio to balance the appreciated
stocks that the stockholder is holding. Therefore, Common Shares may not be a
suitable investment for investors who are subject to the federal alternative
minimum tax or who would become subject to such tax by purchasing Common Shares.
The suitability of an investment in Common Shares will depend upon a comparison
of the after-tax yield likely to be provided from the Fund with that from
comparable tax-exempt investments (including those not subject to the
alternative minimum tax), and from comparable fully taxable investments, in
light of each such investor's tax position.

      The Fund may quote certain performance-related information and may compare
certain aspects of its portfolio and structure to other substantially similar
closed-end funds as categorized by Lipper, Inc. ("Lipper"), Morningstar Inc. or
other independent services. Comparison of the Fund to an alternative investment
should be made with consideration of differences in features and expected
performance. The Fund may obtain data from sources or reporting services, such
as Bloomberg Financial ("Bloomberg") and Lipper, that the Fund believes to be
generally accurate.

      The Fund, in its advertisements, may refer to pending legislation from
time to time and the possible impact of such legislation on investors,
investment strategy and related matters. This would include any tax proposals
and their effect on marginal tax rates and tax-equivalent yields. At any time in
the future, yields and total return may be higher or lower than past yields and
there can be no assurance that any historical results will continue.

      Because they enjoy special tax advantages, municipal bonds usually pay
lower interest rates than similar bonds issued by corporations or the federal
government. However, after taxes they may provide a stockholder with more
disposable income than many taxable alternatives.


      For example, if a stockholder falls into the 35.0% federal tax bracket, he
or she would need to earn 7.69% on a taxable security to match a 5.00% yield
from a tax-exempt security. If you live in the higher tax states of California
and New York, tax-free municipal bond yields are even more attractive.


COMPARE TAX-FREE YIELDS TO THE TAXABLE ALTERNATIVES:


                IF YOUR        TO EQUAL A
                COMBINED       TAX- FREE
                FEDERAL/STATE  YIELD OF:
                TAX BRACKET
                IS:            5.0%           5.5%           6.0%

                               A TAXABLE INVESTMENT WOULD HAVE TO PAY:

                27.0%          6.85%          7.53%          8.22%
                30.0%          7.14%          7.86%          8.57%


                                       55
<PAGE>

                35.0%          7.69%          8.46%          9.23%
                38.6%          8.14%          8.96%          9.77%


THIS EXAMPLE IS FOR ILLUSTRATIVE PURPOSES AND DOES NOT REFLECT THE PERFORMANCE
OF ANY SPECIFIC INVESTMENT. ACTUAL YIELDS WILL VARY WITH MARKET CONDITIONS. THE
EQUIVALENT TAXABLE YIELDS ARE BASED UPON 2002 FEDERAL INCOME TAX RATES. INCOME
FROM MUNICIPAL INVESTMENTS MAY BE SUBJECT TO STATE, LOCAL AND/OR THE ALTERNATIVE
MINIMUM TAX.

OTHER BENEFITS OF INTERMEDIATE MUNICIPAL BONDS:

o   COMPETITIVE RETURNS WITH LOWER VOLATILITY


   From January 1, 1990 until June 30, 2002, intermediate municipal bonds
   captured 99% of the return on longer-term municipal bonds, while incurring
   only 74% of the VOLATILITY, as measured by standard deviation. (SEE TABLE
   BELOW). Of course, the past performance of any market sector is no assurance
   of its future performance.


- ---------------------------------------------------------
INDEXES             ANNUALIZED RETURN STANDARD DEVIATION*
- ---------------------------------------------------------
MERRILL LYNCH 7-12  7.1%              4.3%
YEAR MUNICIPAL BOND
INDEXI
- ---------------------------------------------------------
MERRILL LYNCH 22+   7.2%              5.8%
YEARS MUNICIPAL
BOND INDEX(i)
- ---------------------------------------------------------

       *Standard deviation is a measurement of volatility: the higher
       the standard deviation, the greater the volatility.

o   ATTRACTIVE RELATIVE VALUE

      Typically, the tax-exempt yields of municipal bonds are compared to the
taxable yields of similar-maturity Treasury yields to determine their relative
value.(ii) As of June 30, 2002, intermediate municipal bond yields were trading
at nearly 86% of the yield on comparable U.S. Treasuries, an indication of
attractive relative value.

      EXCHANGE-TRADED LIQUIDITY. Common Shares have been approved for listing,
subject to issuance of notice, on the American Stock Exchange, which will
provide investors with liquidity, convenience, and daily price visibility
through electronic services and newspaper stock tables. Share prices will
fluctuate with market conditions.

- --------
(i) The Merrill Lynch Municipal Bond Indexes (7-12 Year) and (22+ Years) track
the performance of the investment grade U.S. tax-exempt bond market. Bonds
included in the 7-12 year index are within a 7-12 year maturity band, while
bonds included in the 22+ years index have maturities of 22 years or greater.

(ii) Intermediate municipal bond yields are represented by the 10-Year AAA Muni
GO. Intermediate Treasury bond yields are represented by the 10-year U.S.
Treasury Bond. Source: Bloomberg.


                                       56
<PAGE>

      ABOUT NEUBERGER BERMAN. Neuberger Berman has more than 60 years experience
managing clients' assets. The firm and its affiliates manage $58.7 billion in
total assets as of June 30, 2002, including $19.9 billion in fixed-income
securities. Firm-wide, Neuberger Berman's portfolio managers have an average of
26 years industry experience, so they're experienced at navigating a wide range
of market conditions. The firm has a tradition of independent, fundamental
research.

      NEUBERGER BERMAN'S APPROACH TO FIXED-INCOME INVESTING. Neuberger Berman
has an experienced portfolio management staff that includes more than 30
fixed-income professionals. They look for strong municipal sectors and
securities with high relative values and high credit ratings. They select
securities based on geographic and state-specific guidelines. They actively
manage duration and volatility, without major interest rate "bets." They focus
largely on general obligation, essential service revenue bonds and pre-refunded
issues with solid revenue streams and healthy debt coverage.


          CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSEMENT AGENT


      State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
02110, serves as custodian for assets of the Fund. The custodian performs
custodial and fund accounting services. The Bank of New York, 1 Wall Street, New
York, New York 10286, serves as the transfer agent, registrar and dividend
disbursement agent for the Common Shares, as well as agent for the Dividend
Reinvestment Plan relating to the Common Shares.

                              INDEPENDENT AUDITORS

      Ernst & Young, LLP, 200 Clarendon Street, Boston, MA 02116 serves as
independent auditors for the Fund. Ernst & Young, LLP provides audit services,
tax return preparation and assistance and consultation in connection with review
of the Fund's filings with the Securities and Exchange Commission.


                                     COUNSEL

      Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Washington
D.C. 20036, passes upon certain legal matters in connection with shares offered
by the Fund, and also acts as counsel to the Fund.

                             REGISTRATION STATEMENT

      A Registration Statement on Form N-2, including any amendments thereto,
relating to the shares of the Fund offered hereby, has been filed by the Fund
with the SEC, Washington, D.C. The Fund's prospectus and this Statement of
Additional Information do not contain all of the information set forth in the
Registration Statement, including any exhibits and schedules thereto. For
further information with respect to the Fund and the shares offered or to be
offered hereby, reference is made to the Fund's Registration Statement.
Statements contained in the Fund's prospectus and this Statement of Additional



                                       57
<PAGE>

Information as to the contents of any contract or other document referred to are
not necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Copies of the Registration Statement may be inspected without charge
at the SEC's principal office in Washington, D.C., and copies of all or any part
thereof may be obtained from the SEC upon the payment of certain fees prescribed
by the SEC.




























                                       58
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS


To the Shareholder and
Board of Directors of
Neuberger Berman Intermediate Municipal Fund Inc.

We have audited the accompanying statement of assets and liabilities of
Neuberger Berman Intermediate Municipal Fund Inc., (the "Fund") as of September
19, 2002. This financial statement is the responsibility of the Fund's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Neuberger Berman Intermediate
Municipal Fund Inc., at September 19, 2002, in conformity with accounting
principles generally accepted in the United States.


                                       ERNST & YOUNG LLP


Boston, Massachusetts
September 20, 2002





                                       59
<PAGE>

NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 19, 2002

ASSETS
Cash                                                         $ 100,005
Deferred offering costs                                        300,000
                                                             ------------
Total assets                                                   400,005
                                                             ------------

LIABILITIES
Payable for offering costs                                     300,000
                                                             ------------

NET ASSETS AT VALUE                                          $ 100,005
                                                             ------------

NET ASSETS CONSIST OF:
Paid-in capital                                              $ 100,005
                                                             ============

SHARES OUTSTANDING ($.0001 PAR VALUE;
  1,000,000,000 SHARES AUTHORIZED)                               6,981
                                                             ============
NET ASSET VALUE, PER SHARE                                     $14.325
                                                             ============

MAXIMUM OFFERING PRICE PER SHARE ($14.325/95.5%)                $15.00
                                                             ============

See Notes to Financial Statement.





                                       60
<PAGE>

NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.
NOTES TO FINANCIAL STATEMENT
SEPTEMBER 19, 2002


NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. ORGANIZATION:

Neuberger Berman Intermediate Municipal Fund Inc. (the "Fund") was organized as
a Maryland corporation on July 29, 2002. The Fund is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, closed-end
management investment company. The Fund has had no operations to date, other
than the sale to Neuberger Berman LLC ("Neuberger"), the Fund's sub-adviser, on
September 19, 2002 of 6,981 shares of common stock for $100,005 ($14.325 per
share).

2. ACCOUNTING POLICIES

The preparation of the financial statements in accordance with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities. Actual results may differ from those estimates.

3. CONCENTRATION OF RISK

The ability of the issuers of the debt securities held by the Fund to meet their
obligations may be affected by economic developments, including those particular
to a specific industry or region.


NOTE B  -- INVESTMENT MANAGEMENT AGREEMENT, ADMINISTRATION AGREEMENT AND OTHER
TRANSACTIONS WITH AFFILIATES

Under the terms of an Investment Management Agreement, the Fund pays Neuberger
Berman Management Inc. ("Management") a monthly fee at an annualized rate of
0.25% of the Fund's average daily Managed Assets. Managed Assets means the total
assets of the Fund less liabilities other than the aggregate indebtedness
entered into for purposes of leverage. For purposes of calculating Managed
Assets, the liquidation preference of any preferred shares outstanding is not
considered a liability.

Management has contractually agreed to waive a portion of the management fees it
is entitled to receive from the Fund at the following annual rates:


     Fiscal Period or Year Ended   % of Average
             October 31,           Daily Managed
                                     Assets
    -----------------------------------------------

                 2002                   0.25%
             2003 - 2007                0.25
                 2008                   0.20
                 2009                   0.15
                 2010                   0.10
                 2011                   0.05

Management has not agreed to waive any portion of its fees and expenses beyond
October 31, 2011.



                                       61
<PAGE>

Pursuant to an administration agreement between Management and the Fund, the
Fund has agreed to pay Management an administration fee payable on a monthly
basis at the annual rate of 0.30% of the Fund's average daily Managed Assets.
Additionally, Management retains State Street Corporation ("State Street") as
its sub-administrator under a Sub Administration Agreement. Management pays
State Street a fee for all services received under the agreement.

Management and Neuberger, a member firm of The New York Stock Exchange and
sub-adviser to the Fund, are wholly owned subsidiaries of Neuberger Berman Inc.,
a publicly held company. Neuberger is retained by Management to furnish it with
investment recommendations and research information without added cost to each
Fund. Several individuals who are officers and/or trustees of the Fund are also
employees of Neuberger and/or Management.

NOTE C -- ORGANIZATION EXPENSES AND OFFERING COSTS:

Based on an estimated Fund offering of 10,000,000 shares, organization and
offering costs are estimated to be $35,000 and $811,100, respectively.
Management has agreed to pay all organizational expenses and the amount by which
the aggregate of all of the Fund's offering costs (other than sales load) exceed
$0.03 per share. Such amount to be paid by Management is estimated to be
$511,100. The Fund will pay offering costs estimated at $300,000 from the
proceeds of the offering. Offering costs paid by the Fund will be charged as a
reduction of paid-in capital at the completion of the Fund offering.

NOTE D - FEDERAL INCOME TAXES

The Fund intends to qualify as a "regulated investment company" and to comply
with the applicable provisions of the Internal Revenue Code of 1986, as amended,
such that it will not be subject to Federal income tax.






                                       62
<PAGE>


                                                                      APPENDIX A

                       DESCRIPTION OF SECURITIES RATINGS+

MOODY'S INVESTORS SERVICE, INC.
- -------------------------------

MUNICIPAL BONDS

Aaa: Bonds which are 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
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change,  such changes as can be  visualized  are most  unlikely to impair the
fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all  standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds.  They are rated lower than the best bonds  because  margins of protection
may not be as large as in Aaa securities or  fluctuation of protective  elements
may be of greater  amplitude or there may be other  elements  present which make
the long term risk appear somewhat larger than the Aaa securities.

A: Bonds which are rated A possess many favorable investment  attributes and are
to be considered as upper-medium-grade  obligations.  Factors giving security to
principal  and interest  are  considered  adequate,  but elements may be present
which 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. Such bonds lack outstanding  investment  characteristics  and in
fact have speculative characteristics as well.

Ba:  Bonds  which are 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  other  good and bad  times  over the  future.  Uncertainty  of  position
characterizes bonds in this class.

B: Bonds  which are 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  which are 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 which are rated Ca represent  obligations which are speculative in a
high  degree.   Such  issues  are  often  in  default  or  have  other  marked
shortcomings.

<PAGE>

C: Bonds which are 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.
- ----------
+     The ratings  indicated  herein are  believed to be the most recent
      ratings  available  at the  date  of this  SAI for the  securities
      listed.  Ratings are generally  given to securities at the time of
      issuance.  While the rating  agencies may from time to time revise
      such  ratings,  they  undertake  no  obligation  to do so, and the
      ratings  indicated  do not  necessarily  represent  ratings  which
      would  be  given to  these  securities  on the date of the  Fund's
      fiscal year end.

ABSENCE OF RATING:  Where no rating has been assigned or where a rating has been
suspended or  withdrawn,  it may be for reasons  unrelated to the quality of the
issue.

Should no rating be assigned, the reason may be one of the following:

         1. An application for rating was not received or accepted.
         2. The issue or issuer  belongs to a group of securities or companies
         that are not rated as a matter of policy.
         3. There  is a lack of  essential  data  pertaining  to the  issue or
         issuer.
         4. The issue was  privately  placed,  in which case the rating is not
         published in Moody's publications.

Suspension or withdrawal may occur if new and material  circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable  up-to-date  data to permit a  judgment  to be  formed;  if a bond is
called for redemption; or for other reasons.

NOTE:  Moody's applies numerical  modifiers,  1, 2, and 3 in each generic rating
classification  from Aa  through B in its  municipal  bond  rating  system.  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  issue  ranks in the  lower  end of its  generic  rating
category.


MUNICIPAL SHORT-TERM OBLIGATIONS

MIG/VMIG RATINGS U.S. SHORT-TERM RATINGS: In municipal debt issuance,  there are
three  rating   categories  for  short-term   obligations  that  are  considered
investment grade. These ratings are designated as Moody's Investment Grade (MIG)
and are divided into three levels -- MIG 1 through MIG 3.

In addition,  those short-term  obligations that are of speculative  quality are
designated SG, or speculative grade.

In the case of variable rate demand obligations  (VRDOs), a two-component rating
is assigned.  The first element  represents  Moody's evaluation of the degree of
risk  associated  with  scheduled  principal and interest  payments.  The second
element  represents Moody's evaluation of the degree of risk associated with the
demand feature, using the MIG rating scale.

<PAGE>

The short-term  rating  assigned to the demand feature of VRDOs is designated as
VMIG.  When either the long- or short- term aspect of a VRDO is not rated,  that
piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.

MIG ratings expire at note maturity.  By contrast,  VMIG rating expirations will
be a function of each issue's specific structural or credit features.

MIG  1/VMIG 1: This  designation  denotes  superior  credit  quality.  Excellent
protection is afforded by  established  cash flows,  highly  reliable  liquidity
support, or demonstrated broad-based access to the market for refinancing.

MIG  2/VMIG 2: This  designation  denotes  strong  credit  quality.  Margins  of
protection are ample, although not as large as in the preceding group.

MIG 3/VMIG 3: This designation denotes acceptable credit quality.  Liquidity and
cash-flow  protection may be narrow, and market access for refinancing is likely
to be less well-established.

SG:  This  designation   denotes   speculative-grade   credit  quality.   Debt
instruments in this category in this category may lack  sufficient  margins of
protection.

STANDARD & POOR'S RATINGS GROUP
- -------------------------------

INVESTMENT GRADE

AAA: Debt rated AAA has the highest  rating  assigned by S&P.  Capacity to pay
interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.

A: Debt  rated A has a strong  capacity  to pay  interest  and  repay  principal
although it is somewhat more  susceptible  to the adverse  effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB:  Debt rated BBB is regarded as having an adequate  capacity to pay interest
and repay principal. Whereas it normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a  weakened  capacity  to pay  interest  and  repay  principal  for debt in this
category than in higher rated categories.

SPECULATIVE GRADE

Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates  the least degree of  speculation  and C the highest.  While such debt
will  likely  have  some  quality  and  protective  characteristics,  these  are
outweighed by large uncertainties or major exposures to adverse conditions.

BB:  Debt  rated BB has less  near-term  vulnerability  to  default  than  other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse  business,  financial,  or  economic  conditions  which  could  lead  to
inadequate  capacity to meet timely  interest  and  principal  payments.  The BB
rating  category  is also  used for debt  subordinated  to  senior  debt that is
assigned an actual or implied BBB- rating.

B: Debt rated B has a greater  vulnerability  to default but  currently  has the
capacity to meet interest payments and principal  repayments.  Adverse business,
financial,  or economic conditions will likely impair capacity or willingness to
pay interest and repay  principal.  The B rating  category is also used for debt
subordinated  to senior  debt that is  assigned  an actual or  implied BB or BB-
rating.

CCC: Debt rated CCC has a currently  identifiable  vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely  payment of interest and repayment of principal.  In the event of adverse
business,  financial,  or  economic  conditions,  it is not  likely  to have the
capacity to pay interest and repay  principal.  The CCC rating  category is also
used for debt  subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC: The rating CC is  typically  applied to debt  subordinated  to senior debt
which is assigned an actual or implied CCC debt rating.

C: The rating C is typically  applied to debt  subordinated to senior debt which
is assigned an actual or implied CCC- debt  rating.  The C rating may be used to
cover a situation where a bankruptcy  petition has been filed,  but debt service
payments are continued.

C1: The Rating C1 is reserved  for income  bonds on which no interest is being
paid.

D:  Debt  rated D is in  payment  default.  The D rating  category  is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired,  unless S&P believes that such payments
will be made during such grace  period.  The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

PLUS  (+) OR  MINUS  (-):  The  ratings  from AA to CCC may be  modified  by the
addition  of a plus or minus  sign to show  relative  standing  within the major
rating categories.

P: The letter "p" indicates that the rating is provisional. A provisional rating
assumes the  successful  completion  of the project  being  financed by the debt
being rated and indicates that payment of debt service  requirements  is largely
or entirely  dependent upon the successful and timely completion of the project.
This rating,  however,  while addressing credit quality subsequent to completion
of the project,  makes no comment on the  likelihood  of, or the risk of default
upon failure of such  completion.  The investor should exercise his own judgment
with respect to such likelihood and risk.

<PAGE>

L: The letter "L" indicates that the rating pertains to the principal  amount of
those bonds to the extent that the underlying  deposit  collateral is insured by
the Federal Deposit  Insurance Corp. and interest is adequately  collateralized.
In the case of  certificates  of  deposit,  the  letter "L"  indicates  that the
deposit, combined with other deposits being held in the same right and capacity,
will be honored for principal and accrued pre-default interest up to the federal
insurance limits within 30 days after closing of the insured  institution or, in
the event that the deposit is assumed by a successor insured  institution,  upon
maturity.

NR: NR  indicates  no rating  has been  requested,  that  there is  insufficient
information  on which to base a rating,  or that S&P does not rate a  particular
type of obligation as a matter of policy.

MUNICIPAL NOTES
S&P note ratings  reflect the liquidity  concerns and market access risks unique
to notes. Notes due in 3 years or less will likely receive a note rating.  Notes
maturing  beyond 3 years will most likely receive a long-term  debt rating.  The
following criteria will be used in making that assessment:

           -- Amortization  schedule (the larger the final maturity  relative to
            other maturities the more likely it will be treated as a note).

           -- Sources of payment (the more  dependent the issue is on the market
            for its refinancing, the more likely it will be treated as a note).

Note rating symbols are as follows:

      SP-1:  Strong  capacity to pay  principal  and  interest.  Those  issues
      determined  to  possess  very  strong  characteristics  will be  given a
      plus(+) designation.

      SP-2:  Satisfactory  capacity to pay principal  and interest,  with some
      vulnerability  to adverse  financial and economic  changes over the term
      of the notes.

      SP-3: Speculative capacity to pay principal and interest.

FITCH RATINGS
- -------------

INVESTMENT GRADE BOND RATINGS

AAA: Bonds  considered to be investment grade and of the highest credit quality.
The  obligor  has an  exceptionally  strong  ability to pay  interest  and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's  ability to pay interest and repay principal is very strong,  although
not quite as strong as bonds rated `AAA'.  Because  bonds rated in the `AAA' and
`AA'  categories  are  not  significantly   vulnerable  to  foreseeable   future
developments, short-term debt of these issuers is generally rated `F-1+'.

<PAGE>

A: Bonds  considered  to be  investment  grade and of high credit  quality.  The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more  vulnerable  to  adverse  changes  in  economic  conditions  and
circumstances than bonds with higher ratings.

BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The  obligor's  ability to pay interest and repay  principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore,  impair timely
payment.  The  likelihood  that the  ratings  of these  bonds  will  fall  below
investment grade is higher than for bonds with higher ratings.

HIGH YIELD BOND RATINGS

BB: Bonds are considered speculative.  The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes.  However,
business and  financial  alternatives  can be  identified  that could assist the
obligor in satisfying its debt service requirements.

B:  Bonds are  considered  highly  speculative.  While  bonds in this  class are
currently meeting debt service requirements, the probability of continued timely
payment of principal  and  interest  reflects the  obligor's  limited  margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC: Bonds have certain identifiable  characteristics  which, if not remedied,
may  lead  to   default.   The  ability  to  meet   obligations   requires  an
advantageous business and economic environment.

CC:  Bonds are  minimally  protected.  Default in payment of  interest  and/or
principal seems probable over time.

C: Bonds are in imminent default in payment of interest or principal.

DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds  are  extremely  speculative  and  should  be valued on the basis of their
ultimate recovery value in liquidation or  reorganization of the obligor.  `DDD'
represents the highest potential for recovery on these bonds, and `D' represents
the lowest potential for recovery.

PLUS (+) OR MINUS (-):  The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.

NR: Indicates that Fitch does not rate the specific issue.

CONDITIONAL:  A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.

<PAGE>

INVESTMENT GRADE SHORT-TERM RATINGS

Fitch's  short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit,  medium-term notes, and municipal and investment
notes.

F-1+:  Exceptionally  Strong Credit  Quality.  Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1:  Very Strong  Credit  Quality.  Issues  assigned  this rating  reflect an
assurance  of timely  payment only  slightly  less in degree than issues rated
`F-1+'.

F-2: Good Credit  Quality.  Issues  carrying  this rating have a  satisfactory
degree of  assurance  for timely  payment,  but the margin of safety is not as
great as the `F-1+' and `F-1' categories.

F-3: Fair Credit  Quality.  Issues  carrying this rating have  characteristics
suggesting  that the  degree of  assurance  for timely  payment  is  adequate,
however,  near-term  adverse  change could cause these  securities to be rated
below investment grade.

* * * * * * * *

NOTES:  Bonds which are  unrated  expose the  investor to risks with  respect to
capacity to pay  interest or repay  principal  which are similar to the risks of
lower-rated speculative bonds. The Fund is dependent on the Investment Adviser's
judgment, analysis and experience in the evaluation of such bonds.

Investors  should  note  that the  assignment  of a rating to a bond by a rating
service  may not  reflect  the  effect of recent  developments  on the  issuer's
ability to make interest and principal payments.






<PAGE>

                           PART C -- OTHER INFORMATION


ITEM 24.  FINANCIAL STATEMENTS AND EXHIBITS

      1.    Financial Statements:

            Report of Independent Auditors.

            Statement of Assets and Liabilities.

      2.    Exhibits:

            a.    Articles of  Incorporation.  (Incorporated by reference to the
                  Registrant's  Registration Statement,  File Nos. 333-97283 and
                  811-21168, filed on July 29, 2002.)

            b.    Amended and Restated By-Laws. (filed herewith)

            c.    None.

            d.    Articles Sixth, Ninth,  Tenth,  Eleventh and Thirteenth of the
                  Articles of  Incorporation  and  Articles  II, VI and X of the
                  By-Laws.

            e.    Dividend Reinvestment Plan. (filed herewith)

            f.    None.

            g.    (1)   Form of Management Agreement. (filed herewith)

                  (2)   Form of Sub-Advisory Agreement. (filed herewith)

            h.    (1)   Form of Underwriting Agreement. (filed herewith)

                  (2)   Form of  Master  Agreement  Among  Underwriters.  (filed
                        herewith)

                  (3)   Form  of  Master  Selected  Dealer   Agreement.   (filed
                        herewith)

            i.    None

            j.    Form of Custodian Contract. (filed herewith)

            k.    (1)   Form of Transfer  Agency and Service  Agreement.  (filed
                        herewith)

                  (2)   Form of Administration Agreement. (filed herewith)

                  (3)   Form of Fee Waiver Agreement. (filed herewith)

                  (4)   Form of Fee Compensation Agreement. (filed herewith)

            l.    Opinion and Consent of Counsel. (filed herewith)

            m.    None.

            n.    Consent of Independent Auditors. (filed herewith)

            o.    None.

            p.    Letter of Investment Intent. (filed herewith)

            q.    None.

            r.    Code of Ethics for Registrant,  its Investment Adviser and its
                  Sub-Adviser. (filed herewith)


ITEM 25.  MARKETING ARRANGEMENTS

      See form of Underwriting Agreement to be filed as Exhibit 2.h.(1) to this
Registration Statement.

<PAGE>

ITEM 26.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

      The following table sets forth the expenses to be incurred in connection
with the offering described in this Registration Statement:


      Securities and Exchange Commission Fees...............      $ 13,800
      American Stock Exchange LLC Listing Fees..............         5,000
      National Association of Securities Dealers, Inc. Fees.         7,400
      Federal Taxes     ....................................           --
      State Taxes and Fees..................................           --
      Printing and Engraving Expenses.......................       268,200
      Legal Fees        ....................................       296,700
      Director Fees     ....................................           --
      Accounting Expenses...................................        20,000
      Miscellaneous Expenses................................       200,000
                                                                   -------

            Total       ....................................      $811,100
                                                                  ========


ITEM 27.  PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

      None.(1)

ITEM 28.  NUMBER OF HOLDERS OF SECURITIES


<TABLE>
<CAPTION>
                                               Number of Record Shareholders as of
            Title of Class                                  September 23, 2002
            --------------                                  ------------------
<S>   <C>                                                            <C>

      Shares of Common Stock, par value $0.0001 per share            1
</TABLE>


ITEM 29.  INDEMNIFICATION

      Article Twelfth of the Registrant's  Articles of  Incorporation,  filed as
Exhibit 2.a. to this Registration Statement,  and Article IX of the Registrant's
By-Laws,  filed as  Exhibit  2.b.,  provide  that the Fund shall  indemnify  its
present and past directors,  officers, employees and agents, and persons who are
serving or have served at the Fund's  request in similar  capacities  for, other
entities to the maximum extent  permitted by applicable law (including  Maryland
law and the 1940 Act), provided,  however, that a transfer agent is not entitled
to such  indemnification  unless  specifically  approved by the Fund's  Board of
Directors.  Section 2-418(b) of the Maryland General  Corporation Law ("Maryland
Code")  permits the  Registrant to indemnify  its directors  unless it is proved
that the act or omission  of the  director  was  material to the cause of action
adjudicated in the proceeding,  and (a) the act or omission was committed in bad
faith or was the result of active or  deliberate  dishonesty or (b) the director
actually received an improper personal benefit in money, property or services or
(c) in the case of a criminal  proceeding,  the director had reasonable cause to
believe the act or omission was  unlawful.  Indemnification  may be made against
judgments,  penalties,  fines,  settlements and reasonable  expenses incurred in
connection with a proceeding,  in accordance with the Maryland Code. Pursuant to
Section 2-418(j)(1) and Section 4-418(j)(2) of the Maryland Code, the Registrant
is permitted to indemnify its officers, employees and agents to the same extent.
The provisions set forth above apply insofar as consistent with Section 17(h) of
the  Investment  Company Act of 1940, as amended ("1940 Act"),  which  prohibits
indemnification  of any  director  or  officer  of the  Registrant  against  any
liability  to the  Registrant  or its  shareholders  to which such  director  or
officer otherwise would be subject by reason of willful misfeasance,  bad faith,
gross negligence or reckless  disregard of the duties involved in the conduct of
his office.

- --------
(1) Until  such time as the  Registrant  completes  the public  offering  of its
Common Stock,  Neuberger Berman, LLC will be a control person of the Registrant.
Neuberger  Berman,  LLC is a wholly owned subsidiary of Neuberger Berman Inc., a
publicly  held  holding  company  that  has a  number  of  direct  and  indirect
subsidiaries.

                                       C-2
<PAGE>

            Sections 9.1 and 9.2 of the Management  Agreement  between Neuberger
Berman Management Inc. ("NB Management") and the Registrant provide that neither
NB Management nor any director,  officer or employee of NB Management performing
services for the  Registrant  at the  direction or request of NB  Management  in
connection  with  NB  Management's   discharge  of  its  obligations  under  the
Management Agreement shall be liable for any error of judgment or mistake of law
or for any loss  suffered by the  Registrant  in  connection  with any matter to
which the Management Agreement relates;  provided, that nothing herein contained
shall be construed  (i) to protect NB  Management  against any  liability to the
Registrant or its Stockholders to which NB Management would otherwise be subject
by reason of NB Management's misfeasance,  bad faith, or gross negligence in the
performance of NB Management's duties, or by reason of NB Management's  reckless
disregard  of  its  obligations  and  duties  under  the  Management   Agreement
("disabling conduct"),  or (ii) to protect any director,  officer or employee of
NB Management who is or was a Director or officer of the Registrant  against any
liability  to the  Registrant  or its  Stockholders  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. The Registrant will indemnify NB Management
against,  and hold it harmless from, any and all expenses (including  reasonable
counsel fees and expenses)  incurred  investigating or defending  against claims
for  losses  or  liabilities   described  in  Section  9.1  not  resulting  from
negligence,  disregard  of its  obligations  and  duties  under  the  Management
Agreement or disabling conduct by NB Management.  Indemnification  shall be made
only  following:  (i) a final  decision  on the  merits by a court or other body
before whom the  proceeding  was brought  that NB  Management  was not liable by
reason  of  negligence,  disregard  of its  obligations  and  duties  under  the
Management  Agreement  or  disabling  conduct  or (ii) in the  absence of such a
decision, a reasonable determination,  based upon a review of the facts, that NB
Management was not liable by reason of negligence,  disregard of its obligations
and duties under the Management  Agreement or disabling  conduct by (a) the vote
of a  majority  of a quorum  of  directors  of the  Registrant  who are  neither
"interested   persons"  of  the   Registrant   nor  parties  to  the  proceeding
("disinterested  non-party  directors") or (b) an independent legal counsel in a
written opinion. NB Management shall be entitled to advances from the Registrant
for payment of the  reasonable  expenses  incurred by it in connection  with the
matter as to which it is seeking indemnification  hereunder in the manner and to
the fullest extent  permissible  under the Maryland General  Corporation Law. NB
Management  shall provide to the  Registrant a written  affirmation  of its good
faith belief that the standard of conduct necessary for  indemnification  by the
Registrant  has been met and a written  undertaking to repay any such advance if
it should  ultimately  be  determined  that the standard of conduct has not been
met. In addition,  at least one of the following additional  conditions shall be
met: (a) NB Management shall provide  security in form and amount  acceptable to
the Registrant for its undertaking; (b) the Registrant is insured against losses
arising  by reason of the  advance;  or (c) a  majority  of a quorum of the full
Board  of  Directors  of the  Registrant,  the  members  of which  majority  are
disinterested  non-party  directors,  or independent legal counsel, in a written
opinion, shall have determined,  based on a review of facts readily available to
the  Registrant  at the time the advance is  proposed to be made,  that there is
reason to believe that NB Management  will ultimately be found to be entitled to
indemnification under the Management Agreement.

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

      Sections  11.1  and  11.2  of the  Administration  Agreement  between  the
Registrant  and NB  Management  provide  that  neither  NB  Management  nor  any
director,  officer or  employee of NB  Management  performing  services  for the
Registrant at the  direction or request of NB  Management in connection  with NB
Management's  discharge of its obligations  under the  Administration  Agreement
shall be liable  for any error of  judgment  or  mistake  of law or for any loss
suffered  by  the  Registrant  in  connection  with  any  matter  to  which  the
Administration Agreement relates;  provided, that nothing herein contained shall
be  construed  (i)  to  protect  NB  Management  against  any  liability  to the
Registrant or its Stockholders to which NB Management would otherwise be subject
by reason of NB Management's misfeasance,  bad faith, or gross negligence in the
performance of NB Management's duties, or by reason of NB Management's  reckless
disregard  of its  obligations  and duties  under the  Administration  Agreement

                                       C-3
<PAGE>

("disabling conduct"),  or (ii) to protect any director,  officer or employee of
NB Management who is or was a Director or officer of the Registrant  against any
liability  to the  Registrant  or its  Stockholders  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. The Registrant will indemnify NB Management
against,  and  hold it  harmless  from,  any and all  losses,  claims,  damages,
liabilities  or  expenses  (including  reasonable  counsel  fees  and  expenses)
incurred  investigating  or defending  against  claims for losses or liabilities
described  in Section  11.1 not  resulting  from  negligence,  disregard  of its
obligations and duties under the  Administration  Agreement or disabling conduct
by NB  Management.  Indemnification  shall be made only  following:  (i) a final
decision on the merits by a court or other body before whom the  proceeding  was
brought that NB Management was not liable by reason of negligence,  disregard of
its  obligations  and duties  under the  Administration  Agreement  or disabling
conduct or (ii) in the absence of such a decision,  a reasonable  determination,
based upon a review of the facts, that NB Management was not liable by reason of
negligence,  disregard of its  obligations  and duties under the  Administration
Agreement  or  disabling  conduct by (a) the vote of a  majority  of a quorum of
directors  of  the  Registrant  who  are  neither  "interested  persons"  of the
Registrant nor parties to the proceeding  ("disinterested  non-party directors")
or (b) an independent legal counsel in a written opinion. NB Management shall be
entitled to advances from the Registrant for payment of the reasonable  expenses
incurred  by it  in  connection  with  the  matter  as to  which  it is  seeking
indemnification  hereunder in the manner and to the fullest  extent  permissible
under the Maryland  General  Corporation Law. NB Management shall provide to the
Registrant a written  affirmation  of its good faith belief that the standard of
conduct  necessary  for  indemnification  by the  Registrant  has been met and a
written  undertaking  to repay  any such  advance  if it  should  ultimately  be
determined that the standard of conduct has not been met. In addition,  at least
one of the following additional conditions shall be met: (a) NB Management shall
provide  security  in form  and  amount  acceptable  to the  Registrant  for its
undertaking;  (b) the Registrant is insured  against losses arising by reason of
the advance; or (c) a majority of a quorum of the full Board of Directors of the
Registrant, the members of which majority are disinterested non-party directors,
or independent legal counsel, in a written opinion, shall have determined, based
on a review of facts readily available to the Registrant at the time the advance
is proposed to be made,  that there is reason to believe that NB Management will
ultimately  be  found  to  be  entitled  to  indemnification  hereunder.  Before
confessing any claim against it which may be subject to  indemnification  by the
Registrant  hereunder,  NB  Management  shall  give  the  Registrant  reasonable
opportunity  to defend  against  such claim in its own name or in the name of NB
Management.

      Section 6(a) of the  Underwriting  Agreement  between the  Registrant,  NB
Management,  Neuberger  Berman,  Merrill Lynch & Co. and Merrill Lynch,  Pierce,
Fenner & Smith  Incorporated  provides  that the  Registrant  and the  Advisers,
jointly and severally, agree to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter  within the meaning of Section
15 of the 1933 Act or Section  20 of the 1934 Act,  and any  director,  officer,
employee  or  affiliate  thereof  as  follows:  (i)  against  any and all  loss,
liability, claim, damage and expense whatsoever, as incurred, arising out of any
untrue statement or alleged untrue statement of a material fact contained in the
Registration  Statement  (or any  amendment  thereto),  including  the Rule 430A
Information  and the Rule 434  Information,  if  applicable,  or the omission or
alleged  omission  therefrom of a material fact required to be stated therein or
necessary to make the  statements  therein not  misleading or arising out of any
untrue  statement or alleged untrue statement of a material fact included in any
preliminary  prospectus or the final  Prospectus (or any amendment or supplement
thereto),  or the  omission or alleged  omission  therefrom  of a material  fact
necessary  in  order  to  make  the  statements  therein,  in the  light  of the
circumstances  under which they were made, not misleading;  (ii) against any and
all loss, liability,  claim, damage and expense whatsoever,  as incurred, to the
extent of the  aggregate  amount paid in settlement  of any  litigation,  or any
investigation  or proceeding by any  governmental  agency or body,  commenced or
threatened,  or of any claim  whatsoever based upon any such untrue statement or
omission,  or any such  alleged  untrue  statement or  omission;  provided  that
(subject to Section 6(e) below) any such  settlement  is effected with the prior
written  consent of the Registrant  and the Advisers;  and (iii) against any and
all expense  whatsoever,  as incurred  (including the fees and  disbursements of
counsel  chosen  by  Merrill  Lynch),   reasonably  incurred  in  investigating,
preparing  or  defending  against  any  litigation,   or  any  investigation  or
proceeding by any governmental agency or body,  commenced or threatened,  or any
claim whatsoever  based upon any such untrue statement or omission,  or any such
alleged untrue statement or omission, to the extent that any such expense is not
paid under (i) or (ii) above;  provided,  however, that this indemnity agreement
shall not apply to any loss,  liability,  claim, damage or expense to the extent
arising out of any untrue  statement or omission or alleged untrue  statement or
omission  made in  reliance  upon and in  conformity  with  written  information
furnished to the Registrant or the Advisers by any  Underwriter  through Merrill
Lynch  expressly  for  use in  the  Registration  Statement  (or  any  amendment
thereto),  including the Rule 430A Information and the Rule 434 Information,  if
applicable,  or any  preliminary  prospectus  or the  final  Prospectus  (or any
amendment or supplement  thereto);  and provided  further that the Registrant or
the  Advisers  will  not  be  liable  to any  Underwriter  with  respect  to any
Prospectus to the extent that the  Registrant or the Advisers  shall sustain the
burden of  proving  that any such  loss,  liability,  claim,  damage or  expense
resulted from the fact that such Underwriter,  in contravention of a requirement
of the Underwriting  Agreement or applicable law, sold Securities to a person to
whom such Underwriter failed to send or give, at or prior to the Closing Time, a
copy of the final  Prospectus,  as then  amended  or  supplemented  if:  (i) the


                                      C-4
<PAGE>
Company has previously furnished copies thereof  (sufficiently in advance of the
Closing Time to allow for  distribution  by the Closing Time) to the Underwriter
and the loss,  liability,  claim, damage or expense of such Underwriter resulted
from an untrue  statement or omission of a material fact contained in or omitted
from the preliminary  Prospectus which was corrected in the final Prospectus as,
if applicable,  amended or supplemented prior to the Closing Time and such final
Prospectus  was  required  by law to be  delivered  at or prior  to the  written
confirmation  of sale to such person and (ii) such  failure to give or send such
final  Prospectus  by the Closing  Time to the party or parties  asserting  such
loss,  liability,  claim,  damage or expense would have constituted a defense to
the claim asserted by such person.

      Section 6(c) of the Underwriting  Agreement provides that the Fund and the
Advisers,  jointly and  severally,  agree to indemnify  and hold  harmless  each
Underwriter  and each person,  if any, who controls any  Underwriter  within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any
and all loss,  liability,  claim,  damage and expense described in the indemnity
contained in Section  6(a),  as limited by the proviso set forth  therein,  with
respect to any sales  material in the form approved by the Fund and the Advisers
or its affiliates for use by the  Underwriters  and securities firms to whom the
Fund or the Advisers shall have  disseminated  materials in connection  with the
public offering of the Securities.

      Section  7  of  the   Underwriting   Agreement   provides   that,  if  the
indemnification  provided for in Section 6 thereof is for any reason unavailable
to or  insufficient  to hold  harmless  an  indemnified  party in respect of any
losses, liabilities,  claims, damages or expenses referred to therein, then each
indemnifying  party shall  contribute  to the  aggregate  amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred,  (i) in such  proportion  as is  appropriate  to reflect the  relative
benefits  received  by the  Fund  and  the  Advisers  on the  one  hand  and the
Underwriters  on the other hand from the offering of the Securities  pursuant to
the Underwriting  Agreement or (ii) if the allocation  provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the  relative  benefits  referred  to in clause  (i) above but also the
relative  fault  of the  Fund  and  the  Advisers  on the  one  hand  and of the
Underwriters  on the other hand in connection  with the  statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.

      The  relative  benefits  received by the Fund and the  Advisers on the one
hand and the  Underwriters  on the other hand in connection with the offering of
the Securities  pursuant to the Underwriting  Agreement shall be deemed to be in
the same  respective  proportions as the total net proceeds from the offering of
the  Securities  pursuant  to  the  Underwriting   Agreement  (before  deducting
expenses) received by the Fund and the total  underwriting  discount received by
the Underwriters (whether from the Fund or otherwise), in each case as set forth
on the  cover of the  Prospectus,  or,  if Rule 434 is used,  the  corresponding
location on the Term Sheet,  bear to the aggregate initial public offering price
of the Securities as set forth on such cover.

      The  relative  fault of the Fund and the  Advisers on the one hand and the
Underwriters  on the other hand shall be determined by reference to, among other
things,  whether any such untrue or alleged untrue  statement of a material fact
or omission or alleged  omission to state a material fact relates to information
supplied by the Fund or the  Advisers or by the  Underwriters  and the  parties'
relative intent, knowledge,  access to information and opportunity to correct or
prevent such statement or omission. However, no Underwriter shall be required to
contribute  any amount in excess of the amount by which the total price at which
the Securities  underwritten by it and distributed to the public were offered to
the  public  exceeds  the  amount of any  damages  which  such  Underwriter  has
otherwise  been  required to pay by reason of any such untrue or alleged  untrue
statement  or  omission  or alleged  omission.  No person  guilty of  fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to  contribution  from any person who was not guilty of such fraudulent
misrepresentation.

      Under Section 7 of the Underwriting  Agreement,  each person,  if any, who
controls  an  Underwriter  within  the  meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same  rights to  contribution  as such
Underwriter,  and each  director of the Fund and each  director of the Advisers,
respectively,  each officer of the Fund who signed the  Registration  Statement,
and each  person,  if any, who  controls  the Fund or the  Advisers,  within the
meaning  of  Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have
the same rights to contribution as the Fund and the Advisers,  respectively. The
Underwriters'  respective  obligations  to contribute  pursuant to Section 7 are
several in proportion to the number of Initial  Securities  allotted to them and
not joint.

                                      C-5
<PAGE>
      Section   6(f)  of  the   Underwriting   Agreement   provides   that   any
indemnification or contribution by the Fund shall be subject to the requirements
and limitations of Section 17(i) of the 1940 Act.

      Insofar as  indemnification  for liabilities  arising under the Securities
Act of 1933, as amended ("1933 Act"), may be provided to directors, 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 SEC 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  director,  officer  or  controlling  person of the  Registrant  in
connection  with the  successful  defense of any action,  suit or  proceeding or
payment pursuant to any insurance  policy) is asserted against the Registrant by
such director,  officer or controlling  person in connection with the securities
being registered,  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. The Fund also maintains Directors and Officers
Insurance.


ITEM 30.  BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER AND SUB-ADVISER

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

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

Claudia Brandon                  Secretary, Neuberger Berman Advisers
Vice President/Mutual Fund       Management Trust; Secretary, Neuberger Berman
Board Relations, NB Management   Equity Funds; Secretary, Neuberger Berman
Inc. since May 2000; Vice        Income Funds.
President, NB Management from
1986-1999; Employee, Neuberger
Berman since 1999.

Thomas J. Brophy                 None.
Vice President, Neuberger
Berman; Vice President, NB
Management Inc. since March
2000.

Lori Canell                      None.
Managing Director, Neuberger
Berman; Vice President, NB
Management Inc.

Valerie Chang                    None.
Managing Director, Neuberger
Berman; Vice President,
NB Management Inc.

Brooke A. Cobb                   None.
Managing Director, Neuberger
Berman; Vice President,
NB Management Inc.

Robert Conti                     Vice President, Neuberger Berman Income
Vice President, Neuberger        Funds; Vice President, Neuberger Berman
Berman; Senior Vice President,   Equity Funds; Vice President, Neuberger
NB Management Inc. since         Berman Advisers Management Trust
November 2000; Treasurer, NB
Management Inc. until May 2000.

                                      C-6
<PAGE>
NAME                             BUSINESS AND OTHER CONNECTIONS
- ----                             ------------------------------

Robert W. D'Alelio               None.
Managing Director, Neuberger
Berman; Vice President,
NB Management Inc.

Stanley G. Deutsch               None.
Managing Director, Neuberger
Berman; Vice President, NB
Management Inc. since September
2000.

Ingrid Dyott                     None.
Vice President, Neuberger
Berman; Vice President,
NB Management Inc.

Michael F. Fasciano              President, Fasciano Company Inc. until March
Managing Director, Neuberger     2001; Portfolio Manager, Fasciano Fund Inc.
Berman since March 2001; Vice    until March 2001.
President, NB Management Inc.
since March 2001.

Robert S. Franklin               None.
Vice President, Neuberger
Berman; Vice President,
NB Management Inc.

Brian P. Gaffney                 Vice President, Neuberger Berman Income Funds;
Managing Director, Neuberger     Vice President, Neuberger Equity Funds;
Berman since April 2000,         Vice President, Neuberger Berman Advisers
Senior Vice President,           Management Trust.
NB Managemetn Inc. since
November 2000; Vice President,
NB Management from April 1997
through November 1999.

Robert I. Gendelman              None.
Managing Director, Neuberger
Berman; Vice President,
NB Management Inc.

Thomas E. Gengler, Jr.           None.
Senior Vice President,
Neuberger Berman since February
2001, prior thereto, Vice
President, Neuberger Berman
since 1999; Senior Vice
President, NB Management Inc.
since March 2001 prior thereto,
Vice President, NB Management
Inc.

Theodore P. Giuliano             None.
Vice President (and Director
until February 2001),
NB Management Inc.; Managing
Director, Neuberger Berman

Joseph K. Herlihy                Treasurer, Neuberger Berman Inc.
Senior Vice President,
Treasurer, Neuberger Berman;
Treasurer, NB Management Inc.


                                      C-7
<PAGE>

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

Michael M. Kassen                Executive Vice President, Chief Investment
Executive Vice President and     Officer and Director, Neuberger Berman Inc.
Chief Investment Officer,
Neuberger Berman; Chairman and
Director, NB Management
Inc. since May 2000, prior
thereto, Executive Vice
President, Chief Investment
Officer and Director, NB
Management Inc. from November
1999 until May 2000; Vice
President from June 1990 until
November 1999.

Barbara R. Katersky              None.
Senior Vice President,
Neuberger Berman; Senior Vice
President, NB Management Inc.

Robert B. Ladd                   None.
Managing Director, Neuberger
Berman; Vice President,
NB Management Inc.

Kelly M. Landron                 None.
Vice President, NB Management
Inc. since March 2000.

Jeffrey B. Lane                  Director, Chief Executive Officer and
Chief Executive Officer and      President, Neuberger Berman Inc.; Director,
President, Neuberger Berman;     Neuberger Berman Trust Company from June 1999
Director, NB Management Inc.     until November 2000.
since February 2001.

Michael F. Malouf                None.
Managing Director, Neuberger
Berman; Vice President,
NB Management Inc.

Robert Matza                     Executive Vice President, Chief Operating
Executive Vice President and     Officer and Director, Neuberger Berman Inc.
Chief Operating Officer,         since January 2001, prior thereto, Executive
Neuberger Berman since January   Vice President, Chief Administrative Officer
2001, prior thereto, Executive   and Director, Neuberger Berman, Inc.
Vice President and Chief
Administrative Officer,
Neuberger Berman; Director,
NB Management Inc. since April
2000.

Ellen Metzger                    Assistant Secretary, Neuberger Berman Inc.
Vice President, Neuberger        since 2000.
Berman; Secretary,
NB Management Inc.

Arthur Moretti                   Managing Director, Eagle Capital from January
Managing Director, Neuberger     1999 until June 2001.
Berman since June 2001; Vice
President, NB Management Inc.
since June 2001.

                                      C-8
<PAGE>

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

S. Basu Mullick                  None.
Managing Director, Neuberger
Berman; Vice President,
NB Management Inc.

Janet W. Prindle                 Director, Neuberger Berman National Trust
Managing Director, Neuberger     Company since January 2001; Director
Berman; Vice President,          Neuberger Berman Trust Company of Delaware
NB Management Inc.               since April 2001.

Kevin L. Risen                   None.
Managing Director, Neuberger
Berman; Vice President,
NB Management Inc.

Benjamin E. Segal                None.
Managing Director, Neuberger
Berman since November 2000,
prior thereto, Vice President,
Neuberger Berman; Vice
President, NB Management Inc.

Heidi S. Steiger                 Executive Vice President and Director,
Executive Vice President,        Neuberger Berman Inc.; Chair and Director,
Neuberger Berman; Director, NB   Neuberger Berman National Trust Company since
Management Inc. since February   January 2001; Director, Neuberger Berman
2001.                            Trust Company of Delaware since February 2000
                                 (and Chair until January 2001); Director,
                                 Neuberger Berman Trust Company until September
                                 2001 (and Chair from September 1999 until
                                 January 2001).

Jennifer Silver                  None.
Managing Director, Neuberger
Berman; Vice President,
NB Management Inc.

Kent C. Simons                   None.
Managing Director, Neuberger
Berman; Vice President,
NB Management Inc.

Matthew S. Stadler               Senior Vice President and Chief Financial
Senior Vice President and        Officer, Neuberger Berman Inc. since August
Chief Financial Officer,         2000; Senior Vice President and Chief
Neuberger Berman since August    Financial Officer, National Discount Brokers
2000, prior thereto,             Group from May 1999 until October 1999.
Controller, Neuberger Berman
from November 1999 to August
2000; Senior Vice President and
Chief Financial Officer, NB
Management Inc. since August
2000.

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

Judith M. Vale                   None.
Managing Director, Neuberger
Berman; Vice President,
NB Management Inc.

                                      C-9
<PAGE>
NAME                             BUSINESS AND OTHER CONNECTIONS
- ----                             -----------------------------

Catherine Waterworth             None.
Vice President, Neuberger
Berman; Vice President,
NB Management Inc.

Allan R. White, III              None.
Managing Director, Neuberger
Berman; Vice President, NB
Management.

ITEM 31.  LOCATION OF ACCOUNTS AND RECORDS


      All  accounts,  books and other  documents  required to be  maintained  by
Section 31(a) of the  Investment  Company Act of 1940, as amended  ("1940 Act"),
and  the  rules  promulgated  thereunder  with  respect  to the  Registrant  are
maintained at the offices of its custodian and  accounting  agent,  State Street
Bank and Trust Company,  225 Franklin Street,  Boston,  Massachusetts 02110, and
its transfer agent,  Bank of New York, 1 Wall Street,  New York, New York 10286,
except for the Registrant's  Articles of Incorporation  and By-Laws,  minutes of
meetings of the  Registrant's  Directors and  shareholders  and the Registrant's
policies and contracts,  which are maintained at the offices of the  Registrant,
605 Third Avenue, New York, New York 10158-0180.

ITEM 32.  MANAGEMENT SERVICES

      None.

ITEM 33.  UNDERTAKINGS

      1.    The  Registrant  hereby  undertakes  to suspend the  offering of its
      shares until it amends its Prospectus if:

            (1) subsequent to the effective date of this Registration Statement,
      the net asset  value per share  declines  more than 10% from its net asset
      value per share as of the effective date of the Registration Statement; or

            (2) the net asset value  increases to an amount greater than its net
      proceeds as stated in the Prospectus.

      2.    N/A

      3.    N/A

      4.    N/A

      5.    The Registrant hereby undertakes:

            (1) For purposes of  determining  any liability  under the 1933 Act,
      the information  omitted from the form of prospectus filed as part of this
      Registration  Statement in reliance upon Rule 430A and contained in a form
      of prospectus filed by the Registrant under Rule 497(h) under the 1933 Act
      shall be deemed to be part of this  Registration  Statement as of the time
      it was declared effective; and

            (2) For the purposes of  determining  any  liability  under the 1933
      Act,  each  post-effective  amendment  that  contains a form of prospectus
      shall  be  deemed  to be a new  Registration  Statement  relating  to  the
      securities  offered  therein,  and the offering of such securities at that
      time shall be deemed to be the initial bona fide offering thereof.

      6.    The  Registrant  hereby  undertakes  to send by first  class mail or
      other  means  designed  to ensure  equally  prompt  delivery,  within  two


                                      C-10
<PAGE>

      business  days of receipt of a written or oral  request,  any Statement of
      Additional Information.



                                      C-11
<PAGE>
                                   SIGNATURES

      Pursuant to the  requirements  of the  Securities Act of 1933, as amended,
and the  Investment  Company Act of 1940, as amended,  the  Registrant  has duly
caused this Registration Statement on Form N-2 to be signed on its behalf by the
undersigned,  thereunto duly authorized,  in the City of New York, and the State
of New York, on the 24th day of September 2002.

                                          NEUBERGER BERMAN INTERMEDIATE
                                          MUNICIPAL FUND INC.


                                          By:  /s/ Michael M. Kassen
                                               -------------------------------
                                                Name:  Michael M. Kassen*
                                                Title: President and Director

Pursuant to the  requirements  of the Securities  Act of 1933, as amended,  this
Pre-Effective  Amendment  No. 2 to the  Registration  Statement  has been signed
below by the following persons in the capacities and on the dates indicated.

Signature                             Title                      Date
- ---------                             -----                      ----
                              Chairman of the Board,      September 24, 2002
                             Chief Executive Officer
/s/ Peter E. Sundman               and Director
- ----------------------------
Peter E. Sundman*

/s/ Michael M. Kassen         President and Director      September 24, 2002
- ----------------------------
Michael M. Kassen*

/s/ Barbara Muinos           Treasurer and Principal      September 24, 2002
- ---------------------------- Financial and Accounting
Barbara Muinos                       Officer

/s/ John Cannon                      Director             September 24, 2002
- ----------------------------
John Cannon*

/s/ Faith Colish                     Director             September 24, 2002
- ----------------------------
Faith Colish*

/s/ Walter G. Ehlers                 Director             September 24, 2002
- ----------------------------
Walter G. Ehlers*

/s/ C. Anne Harvey                   Director             September 24, 2002
- ----------------------------
C. Anne Harvey*

/s/ Barry Hirsch                     Director             September 24, 2002
- ----------------------------
Barry Hirsch*

/s/ Robert A. Kavesh                 Director             September 24, 2002
- ----------------------------
Robert A. Kavesh*

/s/ Howard A. Mileaf                 Director             September 24, 2002
- ----------------------------
Howard A. Mileaf*

/s/ Edward I. O'Brien                Director             September 24, 2002
- ----------------------------
Edward I. O'Brien*

                                      C-12
<PAGE>

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

/s/ John P. Rosenthal                Director             September 24, 2002
- ----------------------------
John P. Rosenthal*

/s/ William E. Rulon                 Director             September 24, 2002
- ----------------------------
William E. Rulon*

/s/ Cornelius T. Ryan                Director             September 24, 2002
- ----------------------------
Cornelius T. Ryan*

/s/ Tom Decker Seip                  Director             September 24, 2002
- ----------------------------
Tom Decker Seip*

/s/ Candace L. Straight              Director             September 24, 2002
- ----------------------------
Candace L. Straight*

/s/ Peter P. Trapp                   Director             September 24, 2002
- ----------------------------
Peter P. Trapp*



*Signatures  affixed by Arthur C.  Delibert on  September  24, 2002  pursuant to
power of attorney  dated  August 19,  2002,  which was filed with  Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement on September 3, 2002.


<PAGE>




                NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.

                                  EXHIBIT INDEX


   Exhibit        Document Description
   -------        --------------------

      a.    Articles  of  Incorporation.   (Incorporated  by  reference  to  the
            Registrant's   Registration  Statement,   File  Nos.  333-97283  and
            811-21168, filed on July 29, 2002.)

      b.    Amended and Restated By-Laws. (filed herewith)

      c.    None.

      d.    Articles  Sixth,  Ninth,  Tenth,  Eleventh  and  Thirteenth  of  the
            Articles of Incorporation and Articles II, VI and X of the By-Laws.

      e.    Dividend Reinvestment Plan. (filed herewith)

      f.    None.

      g.    (1)   Form of Management Agreement. (filed herewith)

            (2)   Form of Sub-Advisory Agreement. (filed herewith)

      h.    (1)   Form of Underwriting Agreement. (filed herewith)

            (2)   Form of Master Agreement Among Underwriters. (filed herewith)

            (3)   Form of Master Selected Dealer Agreement. (filed herewith)

      i.    None

      j.    Form of Custodian Contract. (filed herewith)

      k.    (1)   Form of Transfer Agency and Service Agreement.(filed herewith)

            (2)   Form of Administration Agreement. (filed herewith)

            (3)   Form of Fee Waiver Agreement. (filed herewith)

            (4)   Form of Compensation Agreement. (filed herewith)

      l.    Opinion and Consent of Counsel. (filed herewith)

      m.    None.

      n.    Consent of Independent Auditors. (filed herewith)

      o.    None.

      p.    Letter of Investment Intent. (filed herewith)

      q.    None.

      r.    Code of  Ethics  for  Registrant,  its  Investment  Adviser  and its
            Sub-Adviser. (filed herewith)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2B
<SEQUENCE>3
<FILENAME>a515735.txt
<TEXT>








                NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.



                             A Maryland Corporation











                           AMENDED AND RESTATED BYLAWS
















                               SEPTEMBER 12, 2002






<PAGE>




                                TABLE OF CONTENTS

                                                                           Page


ARTICLE I.....................................................................1
         NAME OF CORPORATION, LOCATION OF OFFICES AND SEAL....................1
         Section 1.  Name.....................................................1
         Section 2.  Principal Offices........................................1
         Section 3.  Seal.....................................................1


ARTICLE II....................................................................1
         STOCKHOLDERS.........................................................1
         Section 1.  Annual Meetings..........................................1
         Section 2.  Special Meetings.........................................1
         Section 3.  Notice of Meetings.......................................2
         Section 4.  Quorum and Adjournment of Meetings.......................2
         Section 5.  Voting and Inspectors....................................2
         Section 6.  Validity of Proxies......................................3
         Section 7.  Stock Ledger and List of Stockholders....................3
         Section 8.  Action Without Meeting...................................3
         Section 9.  Nomination...............................................3
         Section 10. Stockholder Proposal.....................................4
         Section 11.  Organization............................................5


ARTICLE III...................................................................5
         BOARD OF DIRECTORS...................................................5
         Section 1.  Powers...................................................5
         Section 2.  Number and Term of Directors.............................5
         Section 3.  Election.................................................6
         Section 4.  Vacancies and Newly Created Directorships................6
         Section 5.  Removal..................................................6
         Section 6.  Chairman of the Board....................................6
         Section 7.  Annual and Regular Meetings..............................7
         Section 8.  Special Meetings.........................................7
         Section 9.  Waiver of Notice.........................................7
         Section 10.  Quorum and Voting.......................................7
         Section 11.  Action Without a Meeting................................7
         Section 12.  Compensation of Directors...............................7



<PAGE>

ARTICLE IV....................................................................8
         COMMITTEES...........................................................8
         Section 1.  Organization.............................................8
         Section 2.  Executive Committee......................................8
         Section 3.  Proceedings and Quorum...................................8
         Section 4.  Other Committees.........................................8


ARTICLE V.....................................................................8
         OFFICERS.............................................................8
         Section 1.  General..................................................8
         Section 2.  Election, Tenure and Qualifications......................8
         Section 3.  Vacancies and Newly Created Officers.....................9
         Section 4.  Removal and Resignation..................................9
         Section 5.  President................................................9
         Section 6.  Vice President...........................................9
         Section 7.  Treasurer and Assistant Treasurers.......................9
         Section 8.  Secretary and Assistant Secretaries.....................10
         Section 9.  Subordinate Officers....................................10
         Section 10.  Remuneration...........................................10
         Section 11.  Surety Bond............................................10


ARTICLE VI...................................................................11
         CAPITAL STOCK.......................................................11
         Section 1.  Certificates of Stock...................................11
         Section 2.  Transfer of Shares......................................11
         Section 3.  Stock Ledgers...........................................11
         Section 4.  Transfer Agents and Registrars..........................11
         Section 5.  Fixing of Record Date...................................12
         Section 6.  Lost, Stolen or Destroyed Certificates..................12


ARTICLE VII..................................................................12
         FISCAL YEAR AND ACCOUNTANT..........................................12
         Section 1.  Fiscal Year.............................................12
         Section 2.  Accountant..............................................12


ARTICLE VIII.................................................................13
         CUSTODY OF SECURITIES...............................................13
         Section 1.  Employment of a Custodian...............................13
         Section 2.  Termination of Custodian Agreement......................13
         Section 3.  Other Arrangements......................................13



<PAGE>

ARTICLE IX...................................................................13
         INDEMNIFICATION AND INSURANCE.......................................13
         Section 1.  Indemnification of Officers, Directors,
            Employees and Agents.............................................13
         Section 2.  Insurance of Officers, Directors, Employees
            and Agents.......................................................13
         Section 3.  Amendment...............................................14


ARTICLE X....................................................................14
         AMENDMENTS..........................................................14
         Section 1.  General.................................................14
         Section 2.  By Stockholders Only....................................14



<PAGE>


                           AMENDED AND RESTATED BYLAWS

                                       OF

                NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.

                            (A MARYLAND CORPORATION)


                                    ARTICLE I
                              NAME OF CORPORATION,
                          LOCATION OF OFFICES AND SEAL


SECTION 1. NAME. The name of the  Corporation is Neuberger  Berman  Intermediate
Municipal Fund Inc.

SECTION 2. PRINCIPAL  OFFICES.  The principal  office of the  Corporation in the
State of Maryland  shall be located in the City of  Baltimore.  The  Corporation
may,  in  addition,  establish  and  maintain  such other  offices and places of
business as the Board of Directors may, from time to time, determine.

SECTION 3. SEAL. The corporate seal of the Corporation shall be circular in form
and shall bear the name of the Corporation,  the year of its incorporation,  and
the word  "Maryland." The form of the seal shall be subject to alteration by the
Board of  Directors  and the seal may be used by causing it or a facsimile to be
impressed or affixed or printed or otherwise reproduced. Any officer or director
of the  Corporation  shall have  authority  to affix the  corporate  seal of the
Corporation to any document requiring the same.

                                   ARTICLE II
                                  STOCKHOLDERS

SECTION 1. ANNUAL MEETINGS.  An annual meeting of stockholders  shall be held as
required and for the purposes  prescribed by the Investment Company Act of 1940,
as  amended  ("1940  Act"),  and the laws of the State of  Maryland  and for the
election of directors and the transaction of such other business as may properly
come before the meeting, except that no annual meeting is required to be held in
any year in which the  election of  directors  is not required to be acted upon.
Except for the first fiscal year of the  Corporation,  the meeting shall be held
annually at a time set by the Board of Directors at the Corporation's  principal
offices  or at such  other  place  within  the  United  States  as the  Board of
Directors shall select.

SECTION 2. SPECIAL  MEETINGS.  Special meetings of stockholders may be called at
any time by the Chairman of the Board,  President,  any Vice President,  or by a
majority of the Board of Directors,  and shall be held at such time and place as
may be stated in the notice of the meeting.

         Special  meetings of the  stockholders  may be called by the  Secretary
upon the written request of the holders of shares entitled to vote a majority of
all the  votes  entitled  to be cast at such  meeting,  provided  that  (1) such
request shall state the purposes of such meeting and the matters  proposed to be
acted on, and (2) the  stockholders  requesting  such meeting shall have paid to

<PAGE>

the  Corporation  the  reasonably  estimated  cost of preparing  and mailing the
notice  thereof,  which  the  Secretary  shall  determine  and  specify  to such
stockholders.

SECTION 3. NOTICE OF MEETINGS.  The  Secretary  shall cause notice of the place,
date and hour,  and, in the case of a special  meeting,  the purpose or purposes
for which the meeting is called,  to be mailed,  postage prepaid,  not less than
ten  nor  more  than  ninety  days  before  the  date  of the  meeting,  to each
stockholder entitled to vote at such meeting at his or her address as it appears
on the records of the  Corporation at the time of such mailing.  Notice shall be
deemed to be given when  deposited  in the United  States mail  addressed to the
stockholders as aforesaid. Notice of any stockholders' meeting need not be given
to any stockholder who shall sign a written waiver of such notice whether before
or after the time of such meeting,  or to any stockholder who is present at such
meeting in person or by proxy. Notice of adjournment of a stockholders'  meeting
to another time or place need not be given if such time and place are  announced
at  the  meeting.  Irregularities  in  the  notice  of any  meeting  to,  or the
nonreceipt of any such notice by, any of the  stockholders  shall not invalidate
any action otherwise properly taken by or at any such meeting.

SECTION 4. QUORUM AND ADJOURNMENT OF MEETINGS. The presence at any stockholders'
meeting, in person or by proxy, of stockholders  entitled to cast 33 1/3% of the
votes  shall  be  necessary  and  sufficient  to  constitute  a  quorum  for the
transaction of business. Subject to the rules established by the Chairman of the
stockholders'  meeting, in the absence of a quorum, the holders of a majority of
shares entitled to vote at the meeting and present in person or by proxy, or, if
no  stockholder  entitled to vote is present in person or by proxy,  any officer
present  entitled to preside or act as secretary of such meeting may adjourn the
meeting  without  determining  the date of the new  meeting or from time to time
without  further  notice  to a date not more than 120 days  after  the  original
record  date.  Any  business  that might  have been  transacted  at the  meeting
originally  called may be  transacted at any such  adjourned  meeting at which a
quorum is present.

SECTION 5. VOTING AND INSPECTORS.  Except as otherwise  provided in the Articles
of  Incorporation  or by  applicable  law, at each  stockholders'  meeting  each
stockholder  shall  be  entitled  to one  vote  for  each  share of stock of the
Corporation  validly issued and outstanding and registered in his or her name on
the books of the  Corporation on the record date fixed in accordance  with these
Bylaws,  either  in  person  or by proxy  appointed  by  instrument  in  writing
subscribed by such  stockholder or his or her duly authorized  attorney,  except
that no shares held by the Corporation shall be entitled to a vote. If no record
date has been  fixed,  the record  date for the  determination  of  stockholders
entitled to notice of or to vote at a meeting of stockholders shall be the later
of the close of business on the day on which  notice of the meeting is mailed or
the  thirtieth  day  before  the  meeting,  or,  if  notice  is  waived  by  all
stockholders,  at the close of business on the tenth day next  preceding the day
on which the meeting is held.

         Except as otherwise  provided in the Articles of Incorporation or these
Bylaws or as  required  by  provisions  of the 1940 Act,  all  matters  shall be
decided by a vote of the majority of the votes validly  cast. A plurality  shall
be sufficient to elect a director. The vote upon any question shall be by ballot
whenever requested by any person entitled to vote, but, unless such a request is
made, voting may be conducted in any way approved by the meeting.

         At any meeting at which there is an election of Directors, the chairman
of the  meeting  may,  and upon the request of the holders of ten percent of the
stock  entitled  to vote at such  election  shall,  appoint  two  inspectors  of


                                       2
<PAGE>

election who shall first subscribe an oath or affirmation to execute  faithfully
the duties of inspectors at such election with strict impartiality and according
to the best of their ability, and shall, after the election,  make a certificate
of the result of the vote taken.  No candidate for the office of Director  shall
be appointed as an inspector.

SECTION  6.  VALIDITY  OF  PROXIES.  At  all  meetings  of  stockholders,  every
stockholder of record  entitled to vote thereat shall be entitled to vote either
in person  or by proxy,  which  term  shall  include  proxies  provided  through
written, electronic, telephonic, computerized, facsimile,  telecommunication, or
telex  communication.  The  right  to  vote by  proxy  shall  exist  only if the
instrument  authorizing  such  proxy  to  act  shall  have  been  signed  by the
stockholder or by his or her duly authorized  attorney (who may be so authorized
by a writing or by any  non-written  means permitted by the laws of the State of
Maryland).  Unless a proxy provides  otherwise,  it shall not be valid more than
eleven months after its date. All proxies shall be delivered to the Secretary of
the Corporation or to the person acting as Secretary of the meeting before being
voted, who shall decide all questions  concerning  qualification of voters,  the
validity of proxies,  and the acceptance or rejection of votes. If inspectors of
election  have been  appointed by the chairman of the meeting,  such  inspectors
shall decide all such questions.  A proxy with respect to stock held in the name
of two or more  persons  shall be valid if  executed by one of them unless at or
prior to  exercise  of such proxy the  Corporation  receives a specific  written
notice to the contrary  from any one of them. A proxy  purporting to be executed
by or on behalf of a stockholder  shall be deemed valid unless  challenged at or
prior to its exercise.

SECTION 7. STOCK  LEDGER AND LIST OF  STOCKHOLDERS.  It shall be the duty of the
Secretary or  Assistant  Secretary  of the  Corporation  to cause an original or
duplicate  stock  ledger to be  maintained  at the  office of the  Corporation's
transfer  agent.  Such stock  ledger  may be in  written  form or any other form
capable of being converted into written form within a reasonable time for visual
inspection.  Any one or more  persons,  each of whom has been a  stockholder  of
record of the  Corporation for more than six months next preceding such request,
who owns in the  aggregate 5% or more of the  outstanding  capital  stock of the
Corporation,  may submit  (unless  the  Corporation  at the time of the  request
maintains  a  duplicate  stock  ledger at its  principal  office in  Maryland) a
written  request to any  officer of the  Corporation  or its  resident  agent in
Maryland for a list of the stockholders of the Corporation. Within 20 days after
such a request, there shall be prepared and filed at the Corporation's principal
office in Maryland a list containing the names and addresses of all stockholders
of the  Corporation  and  the  number  of  shares  of  each  class  held by each
stockholder, certified as correct by an officer of the Corporation, by its stock
transfer agent, or by its registrar.

SECTION 8. ACTION WITHOUT MEETING.  Any action required or permitted to be taken
by stockholders  at a meeting of stockholders  may be taken without a meeting if
(1) all  stockholders  entitled  to vote on the matter  consent to the action in
writing, (2) all stockholders entitled to notice of the meeting but not entitled
to vote  at it sign a  written  waiver  of any  right  to  dissent,  and (3) the
consents and waivers are filed with the records of the meetings of stockholders.
Such consent shall be treated for all purposes as a vote at the meeting.

SECTION 9.  NOMINATION.  Subject to the rights of holders of any class or series
of stock having a preference over the Corporation's common stock as to dividends
or upon  liquidation,  nominations  for the election of directors may be made by
the Board of Directors or a committee  appointed by the Board of Directors or by
any  stockholder  entitled to vote in the election of  directors.  However,  any


                                       3
<PAGE>

stockholder  entitled  to vote in the  election  of  directors  at a meeting may
nominate a director only by notice in writing delivered or mailed by first class
United States mail,  postage prepaid,  to the Secretary of the Corporation,  and
received by the Secretary not less than (i) with respect to any nomination to be
introduced at an annual meeting of  stockholders,  ninety days in advance of the
date of the Corporation's proxy statement released to stockholders in connection
with the previous year's annual meeting, and (ii) with respect to any nomination
to be introduced at a special meeting of stockholders,  the close of business on
the  seventh day  following  the date on which  notice of such  meeting is first
given to  stockholders.  Each  such  notice  shall set  forth:  (a) the name and
address of the  stockholder who intends to make the nomination and of the person
or persons to be  nominated;  (b) a  representation  that the  stockholder  is a
holder of record or  beneficial  owner of stock of the  Corporation  entitled to
vote at such  meeting  (together  with  such  proof  thereof  as would  meet the
requirements  for proposals that are to be included in the  Corporation's  proxy
statements  pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended,  or any  successor  to such Rule) and intends to appear in person or by
proxy at the meeting to nominate the person or persons  specified in the notice;
(c) the class and number of shares of stock held of record,  owned  beneficially
and  represented  by proxy by such  stockholder  as of the  record  date for the
meeting (if such date shall then have been made  publicly  available)  and as of
the  date  of  such  notice.  The  chairperson  of the  meeting  may  refuse  to
acknowledge a nomination by any stockholder  that is not made in compliance with
the foregoing procedure.

SECTION 10. STOCKHOLDER PROPOSAL. Any stockholder who is entitled to vote in the
election of directors  and who meets the  requirements  of the proxy rules under
the  Securities  Exchange  Act of 1934,  as amended,  may submit to the Board of
Directors  proposals to be considered for submission to the  stockholders of the
Corporation for their vote. The  introduction  of any stockholder  proposal that
the Board of Directors  decides  should be voted on by the  stockholders  of the
Corporation,  shall be made by notice in  writing  delivered  or mailed by first
class United States mail, postage prepaid,  to the Secretary of the Corporation,
and received by the  Secretary not less than (i) with respect to any proposal to
be introduced at an annual  meeting of  stockholders,  ninety days in advance of
the date of the  Corporation's  proxy  statement  released  to  stockholders  in
connection with the previous year's annual meeting, and (ii) with respect to any
proposal to be introduced  at a special  meeting of  stockholders,  the close of
business on the seventh day  following  the date on which notice of such meeting
is first  given to  stockholders.  Each such  notice  shall set  forth:  (a) the
proposal  to be  introduced;  (b) the name and  address of the  stockholder  who
intends to make the proposal;  (c) a  representation  that the  stockholder is a
holder of record or  beneficial  owner of stock of the  Corporation  entitled to
vote at such  meeting  (together  with  such  proof  thereof  as would  meet the
requirements  for proposals that are to be included in the  Corporation's  proxy
statements  pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended,  or any  successor  to such Rule) and intends to appear in person or by
proxy at the meeting to introduce  the proposal or  proposals,  specified in the
notice;  and (d) the class and number of shares of stock  held of record,  owned
beneficially  and represented by proxy by such stockholder as of the record date
for the meeting (if such date shall then have been made publicly  available) and
as of the date of such  notice.  The  chairperson  of the  meeting may refuse to
acknowledge the introduction of any stockholder  proposal not made in compliance
with the foregoing procedure.




                                       4
<PAGE>

SECTION 11. ORGANIZATION. At every meeting of stockholders,  the Chairman of the
Board,  if there be one, shall conduct the meeting or, in the case of vacancy in
office or absence of the  Chairman of the Board,  one of the  following  present
shall conduct the meeting in the order stated:  the Vice  Chairman,  if there be
one, the President,  Vice Presidents,  in their order of rank and seniority, or,
in  the  absence  of  such  Director  or  officers,  a  Chairman  chosen  by the
stockholders  entitled to cast a majority  of the votes  which all  stockholders
present in person or by proxy are entitled to cast,  shall act as Chairman,  and
the  Secretary,  or in his or her  absence,  an assistant  secretary,  or in the
absence of both the Secretary and assistant  secretaries,  a person appointed by
the Chairman  shall act as  Secretary of the meeting.  The order of business and
all  other  matters  of  procedure  at any  meeting  of  stockholders  shall  be
determined  by the  Chairman  of the  meeting.  The  Chairman of the meeting may
prescribe such rules, regulations and procedures and take such action as, in the
discretion  of such  Chairman,  are  appropriate  for the proper  conduct of the
meeting,  including,  without limitation,  (a) restricting admission to the time
set for the commencement of the meeting;  (b) limiting attendance at the meeting
to stockholders of record of the Corporation,  their duly authorized  proxies or
other such  persons as the Chairman of the meeting may  determine;  (c) limiting
participation  at the  meeting  on any matter to  stockholders  of record of the
Corporation  entitled to vote on any such matter,  their duly authorized proxies
or other such persons as the Chairman of the meeting may determine; (d) limiting
the time  allotted to questions  or comments by  participants;  (e)  maintaining
order and security at the meeting;  and (f) recessing or adjourning  the meeting
to a later date, time and place announced by the Chairman of the meeting. Unless
otherwise  determined by the Chairman of the meeting,  meetings of  stockholders
shall not be required to be held in accordance  with the rules of  parliamentary
procedure.



                                   ARTICLE III
                               BOARD OF DIRECTORS

SECTION 1.  POWERS.  Except as  otherwise  provided by  operation of law, by the
Articles of Incorporation,  or by these Bylaws,  the business and affairs of the
Corporation  shall be managed  under the  direction of and all the powers of the
Corporation shall be exercised by or under authority of its Board of Directors.

SECTION  2.  NUMBER  AND TERM OF  DIRECTORS.  Except  for the  initial  Board of
Directors, the Board of Directors shall consist of not fewer than three nor more
than sixteen Directors, as specified by a resolution of a majority of the entire
Board of  Directors.  Except for the initial  Board of  Directors,  the Board of
Directors  shall at all times be  divided  as  equally  as  possible  into three
classes of directors,  designated Class I, Class II, and Class III. The terms of
office of Class I, Class II, and Class III directors  shall expire at the annual
meeting of stockholders held in 2003, 2004, and 2005, respectively,  and at each
third  annual  meeting of  stockholders  thereafter.  At least one member of the
Board of Directors  shall be a person who is not an  "interested  person" of the
Corporation, as that term is defined in the 1940 Act. All other directors may be
interested  persons of the  Corporation if the  requirements of the 1940 Act and
the  rules  and  regulations  thereunder  are  met by the  Corporation  and  its
investment adviser.  Directors need not be stockholders of the Corporation.  All
acts done at any meeting of the Directors or by any person acting as a Director,
so long as his or her  successor  shall not have been duly elected or appointed,
shall,  notwithstanding  that it be  afterwards  discovered  that there was some


                                       5
<PAGE>

defect in the election of the  Directors or of such person  acting as a Director
or that they or any of them were  disqualified,  be as valid as if the Directors
or such other person,  as the case may be, had been duly elected and were or was
qualified to be Directors or a Director of the Corporation.  Each Director shall
hold office until his or her  successor is elected and qualified or until his or
her earlier death, resignation or removal.

SECTION 3.  ELECTION.  At the first annual  meeting of  stockholders,  Directors
shall be elected by vote of the holders of a plurality of the shares  present in
person or by proxy and entitled to vote thereon. Thereafter, except as otherwise
provided in these Bylaws,  the Directors shall be elected by the stockholders at
a meeting held on a date fixed by the Board of Directors. A plurality of all the
votes cast at a meeting at which a quorum is  present is  sufficient  to elect a
Director.

SECTION 4.  VACANCIES AND NEWLY CREATED  DIRECTORSHIPS.  If any vacancies  shall
occur in the Board of  Directors  by reason of death,  resignation,  removal  or
otherwise,  or if the  authorized  number of Directors  shall be increased,  the
Directors  then in office  shall  continue to act,  and such  vacancies  (if not
previously  filled  by the  stockholders)  may be filled  by a  majority  of the
Directors  then in  office,  although  less than a quorum,  except  that a newly
created  Directorship  may be filled only by a majority vote of the entire Board
of Directors;  provided,  however,  that if the stockholders of any class of the
Corporation's  capital  stock  are  entitled  separately  to  elect  one or more
directors,  a majority of the remaining directors elected by that class (if any)
may fill any  vacancy  among the  number of  directors  elected  by that  class;
provided further,  however, that, at any time that there are stockholders of the
Corporation, immediately after filling such vacancy at least two-thirds (2/3) of
the Directors  then holding office shall have been elected to such office by the
stockholders of the  Corporation.  In the event that at any time, other than the
time preceding the first annual stockholders'  meeting,  less than a majority of
the Directors of the Corporation holding office at that time were elected by the
stockholders,  a meeting of the  stockholders  shall be held promptly and in any
event  within  sixty days for the  purpose  of  electing  Directors  to fill any
existing vacancies in the Board of Directors, unless the Securities and Exchange
Commission shall by rule or order extend such period.

SECTION 5. REMOVAL. At any stockholders' meeting duly called,  provided a quorum
is present,  the stockholders may remove any director from office,  but only for
cause,  and may elect a successor or successors to fill any resulting  vacancies
for the unexpired  terms of the removed  director or directors.  An  affirmative
vote of 75% of the then outstanding  shares of the  Corporation's  capital stock
entitled to vote for such  director  shall be required to remove a director  for
cause.  After the initial  issuance of any shares of the  Corporation's  capital
stock,  this section may be amended only by the  affirmative  vote of 75% of the
shares of the Corporation outstanding.

SECTION 6. CHAIRMAN OF THE BOARD.  The Board of Directors  may, but shall not be
required to,  elect a Chairman of the Board.  Any Chairman of the Board shall be
elected  from among the  Directors of the  Corporation  and may hold such office
only so long as he or she  continues  to be a Director.  The  Chairman,  if any,
shall preside at all stockholders'  meetings and at all meetings of the Board of
Directors,  and may be EX  OFFICIO  a member of all  committees  of the Board of
Directors.  The Chairman, if any, shall have such powers and perform such duties
as may be assigned from time to time by the Board of Directors.



                                       6
<PAGE>

SECTION  7.  ANNUAL AND  REGULAR  MEETINGS.  The annual  meeting of the Board of
Directors for choosing  officers and transacting  other proper business shall be
held at such time and place as the Board may  determine.  The Board of Directors
from time to time may provide by resolution for the holding of regular  meetings
and fix their time and place within or outside the State of Maryland.  Except as
otherwise  provided in the 1940 Act, notice of such annual and regular  meetings
need not be given,  provided  that  notice of any change in the time or place of
such meetings shall be sent promptly to each Director not present at the meeting
at which such  change was made,  in the  manner  provided  for notice of special
meetings.  Except as otherwise provided under the 1940 Act, members of the Board
of Directors or any committee designated thereby may participate in a meeting of
such  Board  or  committee  by  means  of  a  conference  telephone  or  similar
communications equipment that allows all persons participating in the meeting to
hear each other at the same time.

SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be
held whenever  called by the Chairman of the Board,  the  President  (or, in the
absence or disability of the President, by any Vice President), the Treasurer or
by two or more Directors,  at the time and place (within or without the State of
Maryland)  specified  in the  respective  notice  or  waivers  of notice of such
meetings.  Notice of special meetings,  stating the time and place, shall be (1)
mailed to each  Director at his or her residence or regular place of business at
least three days before the day on which a special  meeting is to be held or (2)
delivered to him or her  personally or  transmitted  to him or her by telegraph,
telecopy, telex, cable or wireless at least one day before the meeting.

SECTION  9.  WAIVER OF  NOTICE.  No notice of any  meeting  need be given to any
Director  who is present at the meeting or who waives  notice of such meeting in
writing (which waiver shall be filed with the records of such  meeting),  either
before or after the time of the meeting.

SECTION 10. QUORUM AND VOTING.  At all meetings of the Board of  Directors,  the
presence  of one half or more of the number of  Directors  then in office  shall
constitute a quorum for the  transaction of business,  provided that there shall
be present at least two directors. In the absence of a quorum, a majority of the
Directors  present may adjourn the  meeting,  from time to time,  until a quorum
shall be present. The action of a majority of the Directors present at a meeting
at which a quorum is  present  shall be the  action  of the Board of  Directors,
unless  concurrence of a greater  proportion is required for such action by law,
by the Articles of Incorporation or by these Bylaws.

SECTION 11. ACTION  WITHOUT A MEETING.  Except as otherwise  provided  under the
1940 Act,  any action  required or  permitted  to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting if
a written  consent  to such  action is signed by all  members of the Board or of
such  committee,  as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or committee.

SECTION 12.  COMPENSATION  OF DIRECTORS.  Directors shall be entitled to receive
such  compensation  from the  Corporation for their services as may from time to
time be determined by resolution of the Board of Directors.



                                       7
<PAGE>

                                   ARTICLE IV
                                   COMMITTEES

SECTION 1. ORGANIZATION.  By resolution  adopted by the Board of Directors,  the
Board may designate one or more committees of the Board of Directors,  including
an Executive Committee.  The Chairmen of such committees shall be elected by the
Board of  Directors.  Each  committee  must be comprised of two or more members,
each of whom must be a  Director  and shall  hold  committee  membership  at the
pleasure of the Board.  The Board of Directors  shall have the power at any time
to  change  the  members  of  such  committees  and  to  fill  vacancies  in the
committees. The Board may delegate to these committees any of its powers, except
the power to declare a dividend or distribution on stock, authorize the issuance
of stock, recommend to stockholders any action requiring stockholders' approval,
amend these Bylaws,  approve any merger or share exchange which does not require
stockholder  approval,  approve or terminate  any contract  with an  "investment
adviser" or "principal underwriter," as those terms are defined in the 1940 Act,
or to take any other action required by the 1940 Act to be taken by the Board of
Directors.

SECTION 2. EXECUTIVE  COMMITTEE.  Unless otherwise provided by resolution of the
Board of Directors, when the Board of Directors is not in session, the Executive
Committee,  if one is designated  by the Board,  shall have and may exercise all
powers of the Board of Directors in the  management  of the business and affairs
of the Corporation that may lawfully be exercised by an Executive Committee. The
President shall automatically be a member of the Executive Committee.

SECTION 3. PROCEEDINGS AND QUORUM.  In the absence of an appropriate  resolution
of the Board of Directors,  each committee may adopt such rules and  regulations
governing its  proceedings,  quorum and manner of acting as it shall deem proper
and  desirable.  In the event any  member of any  committee  is absent  from any
meeting,  the  members  thereof  present  at the  meeting,  whether  or not they
constitute  a quorum,  may appoint a member of the Board of  Directors to act in
the place of such absent member.

SECTION  4.  OTHER  COMMITTEES.   The  Board  of  Directors  may  appoint  other
committees,  each consisting of one or more persons,  who need not be Directors.
Each such  committee  shall have such powers and  perform  such duties as may be
assigned  to it from  time to time by the  Board of  Directors,  but  shall  not
exercise  any  power  which  may  lawfully  be  exercised  only by the  Board of
Directors or a committee thereof.

                                    ARTICLE V
                                    OFFICERS

SECTION 1.  GENERAL.  The officers of the  Corporation  shall be a President,  a
Secretary,  and a  Treasurer,  and  may  include  one or more  Vice  Presidents,
Assistant Secretaries or Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 9 of this Article.

SECTION 2. ELECTION, TENURE AND QUALIFICATIONS. The officers of the Corporation,
except  those  appointed  as provided  in Section 9 of this  Article V, shall be
elected  by the Board of  Directors  at its  first  meeting  or such  subsequent
meetings  as shall be held prior to its first  annual  meeting,  and  thereafter
annually at its annual  meeting.  If any  officers are not elected at any annual


                                       8
<PAGE>

meeting,  such  officers  may be  elected at any  subsequent  regular or special
meeting of the  Board.  Except as  otherwise  provided  in this  Article V, each
officer  elected  by the Board of  Directors  shall hold  office  until the next
annual  meeting of the Board of Directors and until his or her  successor  shall
have been elected and qualified.  Any person may hold one or more offices of the
Corporation  except that no one person may serve  concurrently as both President
and Vice  President.  A person who holds more than one office in the Corporation
may not act in more than one  capacity  to  execute,  acknowledge,  or verify an
instrument  required by law to be  executed,  acknowledged,  or verified by more
than one officer. No officer need be a Director.

SECTION 3. VACANCIES AND NEWLY CREATED  OFFICERS.  If any vacancy shall occur in
any office by reason of death, resignation,  removal,  disqualification or other
cause,  or if any new office shall be created,  such  vacancies or newly created
offices  may be filled by the  Board of  Directors  at any  regular  or  special
meeting or, in the case of any office created  pursuant to Section 9 hereof,  by
any  officer  upon whom such  power  shall have been  conferred  by the Board of
Directors.

SECTION 4.  REMOVAL AND  RESIGNATION.  Any officer may be removed from office by
the vote of a  majority  of the  members  of the Board of  Directors  given at a
regular meeting or any special meeting called for such purpose, if the Board has
determined  the best interests of the  Corporation  will be served by removal of
that  officer.  Any officer may resign from office at any time by  delivering  a
written resignation to the Board of Directors,  the President, the Secretary, or
any Assistant  Secretary.  Unless otherwise specified therein,  such resignation
shall take effect upon delivery.

SECTION 5. PRESIDENT.  The President shall be the chief executive officer of the
Corporation  and, in the absence of the  Chairman of the Board or if no Chairman
of the Board has been elected,  shall preside at all stockholders'  meetings and
at all  meetings of the Board of  Directors  and shall in general  exercise  the
powers and  perform  the  duties of the  Chairman  of the Board.  Subject to the
supervision of the Board of Directors,  the President  shall have general charge
of the business, affairs and property of the Corporation and general supervision
over its officers,  employees  and agents.  Except as the Board of Directors may
otherwise  order,  the  President  may  sign in the name  and on  behalf  of the
Corporation  all deeds,  bonds,  contracts,  or agreements.  The President shall
exercise  such other  powers and perform  such other duties as from time to time
may be assigned by the Board of Directors.

SECTION 6. VICE  PRESIDENT.  The Board of Directors  may from time to time elect
one or more Vice  Presidents  who shall have such powers and perform such duties
as from time to time may be  assigned to them by the Board of  Directors  or the
President.  At  the  request  of,  or in the  absence  or in  the  event  of the
disability of, the  President,  the Vice President (or, if there are two or more
Vice Presidents, then the senior of the Vice Presidents present and able to act)
may perform all the duties of the President and, when so acting,  shall have all
the powers of and be subject to all the restrictions upon the President.

SECTION 7.  TREASURER  AND  ASSISTANT  TREASURERS.  The  Treasurer  shall be the
principal  financial and accounting  officer of the  Corporation  and shall have
general charge of the finances and books of account of the  Corporation.  Except
as  otherwise  provided  by the Board of  Directors,  the  Treasurer  shall have
general  supervision  of the funds and  property of the  Corporation  and of the
performance by the Custodian of its duties with respect  thereto.  The Treasurer
shall  render to the Board of  Directors,  whenever  directed  by the Board,  an
account of the financial condition of the Corporation and of all transactions as


                                       9
<PAGE>

Treasurer;  and as soon as possible  after the close of each  financial year the
Treasurer shall make and submit to the Board of Directors a like report for such
financial year. The Treasurer shall perform all acts incidental to the office of
Treasurer, subject to the control of the Board of Directors.

         Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer  or the Board of  Directors  may  assign,  and,  in the absence of the
Treasurer, may perform all the duties of the Treasurer.

SECTION 8. SECRETARY AND ASSISTANT  SECRETARIES.  The Secretary  shall attend to
the giving and serving of all notices of the  Corporation  and shall  record all
proceedings  of the meetings of the  stockholders  and  Directors in books to be
kept for that purpose.  The Secretary shall keep in safe custody the seal of the
Corporation,  and shall have  responsibility for the records of the Corporation,
including  the stock  books  and such  other  books  and  papers as the Board of
Directors may direct and such books,  reports,  certificates and other documents
required by law to be kept, all of which shall at all  reasonable  times be open
to  inspection by any  Director.  The Secretary  shall perform such other duties
which appertain to this office or as may be required by the Board of Directors.

         Any Assistant Secretary may perform such duties of the Secretary as the
Secretary  or the Board of  Directors  may  assign,  and,  in the absence of the
Secretary, may perform all the duties of the Secretary.

SECTION 9.  SUBORDINATE  OFFICERS.  The Board of Directors from time to time may
appoint such other  officers and agents as it may deem  advisable,  each of whom
shall have such title,  hold office for such  period,  have such  authority  and
perform  such  duties  as the Board of  Directors  may  determine.  The Board of
Directors  from time to time may delegate to one or more  officers or agents the
power to appoint any such subordinate  officers or agents and to prescribe their
respective rights, terms of office, authorities and duties. Any officer or agent
appointed in  accordance  with the  provisions of this Section 9 may be removed,
either with or without  cause,  by any  officer  upon whom such power of removal
shall have been conferred by the Board of Directors.

SECTION 10. REMUNERATION.  The salaries or other compensation of the officers of
the  Corporation  shall be fixed from time to time by resolution of the Board of
Directors in the manner  provided by Section 10 of Article III,  except that the
Board of Directors may by resolution  delegate to any person or group of persons
the power to fix the salaries or other compensation of any subordinate  officers
or agents  appointed  in  accordance  with the  provisions  of Section 9 of this
Article V.

SECTION 11. SURETY BOND. The Board of Directors may require any officer or agent
of the Corporation to execute a bond (including,  without  limitation,  any bond
required by the 1940 Act and the rules and  regulations  of the  Securities  and
Exchange Commission  promulgated  thereunder) to the Corporation in such sum and
with  such  surety  or  sureties  as  the  Board  of  Directors  may  determine,
conditioned  upon  the  faithful  performance  of  his  or  her  duties  to  the
Corporation,  including  responsibility for negligence and for the accounting of
any of the Corporation's property, funds or securities that may come into his or
her hands.



                                       10
<PAGE>

                                   ARTICLE VI
                                  CAPITAL STOCK

SECTION 1.  CERTIFICATES  OF STOCK.  The  interest  of each  stockholder  of the
Corporation  shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may from time to time  authorize,  provided,  however,
the Board of  Directors  may,  in its  discretion,  authorize  the  issuance  of
non-certificated  shares.  No certificate  shall be valid unless it is signed by
the  President or a Vice  President  and  countersigned  by the  Secretary or an
Assistant   Secretary  or  the  Treasurer  or  an  Assistant  Treasurer  of  the
Corporation and sealed with the seal of the Corporation,  or bears the facsimile
signatures  of such  officers and a facsimile of such seal.  In case any officer
who shall have signed any such  certificate,  or whose  facsimile  signature has
been  placed  thereon,  shall  cease to be such an  officer  (because  of death,
resignation or otherwise)  before such  certificate is issued,  such certificate
may be issued and delivered by the Corporation  with the same effect as if he or
she were such officer at the date of issue.

         In the event that the Board of  Directors  authorizes  the  issuance of
non-certificated  shares of stock, the Board of Directors may, in its discretion
and at any time,  discontinue  the  issuance of share  certificates  and may, by
written notice to the registered owners of each certificated share,  require the
surrender  of share  certificates  to the  Corporation  for  cancellation.  Such
surrender  and  cancellation  shall not  affect the  ownership  of shares of the
Corporation.

SECTION 2.  TRANSFER  OF  SHARES.  Shares of stock of the  Corporation  shall be
transferable  on the books of the Corporation by the holder of record thereof in
person or by his or her duly  authorized  attorney or legal  representative  (i)
upon surrender and  cancellation of a certificate or  certificates  for the same
number of shares of the same  class,  duly  endorsed  or  accompanied  by proper
instruments of assignment and transfer,  with such proof of the  authenticity of
the signature as the Corporation or its agents may reasonably  require,  or (ii)
as otherwise  prescribed by the Board of  Directors.  The shares of stock of the
Corporation may be freely transferred, and the Board of Directors may, from time
to time, adopt rules and regulations with reference to the method of transfer of
the shares of stock of the  Corporation.  The  Corporation  shall be entitled to
treat the holder of record of any share of stock as the absolute  owner  thereof
for all  purposes,  and  accordingly  shall not be bound to recognize any legal,
equitable  or other  claim or  interest  in such  share on the part of any other
person, whether or not it shall have express or other notice thereof,  except as
otherwise expressly provided by law or the statutes of the State of Maryland.

SECTION 3. STOCK LEDGERS.  The stock ledgers of the Corporation,  containing the
names and  addresses of the  stockholders  and the number of shares held by them
respectively,  shall be kept at the principal  offices of the Corporation or, if
the  Corporation  employs a transfer agent, at the offices of the transfer agent
of the Corporation.

SECTION 4. TRANSFER AGENTS AND REGISTRARS.  The Board of Directors may from time
to time appoint or remove transfer agents and registrars of transfers for shares
of stock of the Corporation, and it may appoint the same person as both transfer
agent and  registrar.  Upon any such  appointment  being  made all  certificates
representing shares of capital stock thereafter issued shall be countersigned by
one of such  transfer  agents or by one of such  registrars or by both and shall
not be valid unless so countersigned.  If the same person shall be both transfer
agent and registrar, only one countersignature by such person shall be required.



                                       11
<PAGE>

SECTION 5. FIXING OF RECORD DATE.  The Board of  Directors  may fix in advance a
date as a record  date for the  determination  of the  stockholders  entitled to
notice of or to vote at any stockholders' meeting or any adjournment thereof, or
to express  consent to  corporate  action in  writing  without a meeting,  or to
receive  payment of any  dividend  or other  distribution  or  allotment  of any
rights,  or to  exercise  any  rights in respect of any  change,  conversion  or
exchange of stock, or for the purpose of any other lawful action,  provided that
(1) such record date shall be within  ninety days prior to the date on which the
particular action requiring such  determination  will be taken; (2) the transfer
books shall not be closed for a period  longer than twenty days;  and (3) in the
case of a meeting of  stockholders,  the record  date shall be at least ten days
before the date of the meeting.

SECTION  6.  LOST,  STOLEN  OR  DESTROYED  CERTIFICATES.  Before  issuing  a new
certificate  for stock of the Corporation  alleged to have been lost,  stolen or
destroyed, the Board of Directors or any officer authorized by the Board may, in
its discretion,  require the owner of the lost, stolen or destroyed  certificate
(or his or her legal  representative)  to give the  Corporation  a bond or other
indemnity,  in such form and in such amount as the Board or any such officer may
direct and with such surety or sureties as may be  satisfactory  to the Board or
any such officer, sufficient to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss,  theft or  destruction of
any such certificate or the issuance of such new certificate.

                                   ARTICLE VII
                           FISCAL YEAR AND ACCOUNTANT

SECTION  1.  FISCAL  YEAR.  The fiscal  year of the  Corporation  shall,  unless
otherwise ordered by the Board of Directors, be twelve calendar months ending on
October 31, except as otherwise established by the Board of Directors.

SECTION 2.  ACCOUNTANT.

         A. The Corporation  shall employ an independent  public accountant or a
firm of independent public accountants as its Accountant to examine the accounts
of the Corporation  and to sign and certify  financial  statements  filed by the
Corporation.  The Accountant's  certificates and reports shall be addressed both
to the  Board  of  Directors  and to the  stockholders.  The  employment  of the
Accountant  shall be conditioned  upon the right of the Corporation to terminate
the  employment  forthwith  without  any  penalty by vote of a  majority  of the
outstanding  voting  securities  at any  stockholders'  meeting  called for that
purpose.

         B. The  members  of the  Board  of  Directors  who are not  "interested
persons"  (as  defined in the 1940 Act) of the  Corporation,  acting by majority
vote,  shall select the Accountant in accordance  with the  requirements  of the
1940 Act.

         C. Any vacancy occurring between annual meetings due to the resignation
of the  Accountant may be filled by the vote of a majority of the members of the
Board of Directors who are not interested persons.



                                       12
<PAGE>

                                  ARTICLE VIII
                              CUSTODY OF SECURITIES

SECTION 1. EMPLOYMENT OF A CUSTODIAN.  As and to the extent required by the 1940
Act and the regulations thereunder, the Corporation shall place and at all times
maintain in the  custody of a Custodian  (including  any  sub-custodian  for the
Custodian)  all  funds,   securities  and  similar   investments  owned  by  the
Corporation.  The  Custodian  (and any  sub-custodian)  shall be a bank or trust
company of good standing  having an aggregate  capital,  surplus,  and undivided
profits not less than fifty million  dollars  ($50,000,000)  that  satisfies all
applicable standards,  financial or otherwise,  pursuant to the 1940 Act or such
other  financial  institution  or other  entity as shall be permitted by rule or
order  of the  Securities  and  Exchange  Commission.  The  Custodian  shall  be
appointed  from  time to time by the  Board of  Directors,  which  shall fix its
remuneration.

SECTION 2. TERMINATION OF CUSTODIAN AGREEMENT. Upon termination of the agreement
for services  with the  Custodian  or inability of the  Custodian to continue to
serve, the Board of Directors shall promptly appoint a successor Custodian,  but
in the event  that no  successor  Custodian  can be found  who has the  required
qualifications  and is willing to serve,  the Board of  Directors  shall call as
promptly as possible a special meeting of the stockholders to determine  whether
the Corporation shall function without a Custodian or shall be liquidated. If so
directed by  resolution of the Board of Directors or by vote of the holders of a
majority of the outstanding  shares of stock of the  Corporation,  the Custodian
shall  deliver  and pay  over  all  property  of the  Corporation  held by it as
specified in such vote.

SECTION 3. OTHER ARRANGEMENTS.  The Corporation may make such other arrangements
for  the  custody  of its  assets  (including  deposit  arrangements)  as may be
required by any applicable law, rule or regulation.

                                   ARTICLE IX
                          INDEMNIFICATION AND INSURANCE

SECTION 1.  INDEMNIFICATION  OF OFFICERS,  DIRECTORS,  EMPLOYEES AND AGENTS. The
Corporation shall indemnify its present and past directors,  officers, employees
and agents, and any persons who are serving or have served at the request of the
Corporation as a director,  officer,  employee or agent of another  corporation,
partnership,  joint venture,  trust, or enterprise,  to the full extent provided
and  allowed  by  Section  2-418  of the  Maryland  General  Corporate  Law or a
successor  provision thereto  concerning  corporations,  as amended from time to
time, or any other applicable provisions of law. Notwithstanding anything herein
to  the  contrary,  no  director,   officer,  investment  adviser  or  principal
underwriter  of the  Corporation  shall be  indemnified in violation of Sections
17(h) and (i) of the 1940 Act. Expenses incurred by any such person in defending
any  proceeding  to which  he or she is a party  by  reason  of  service  in the
above-referenced  capacities  shall  be paid in  advance  or  reimbursed  by the
Corporation to the full extent  permitted by law,  including  Sections 17(h) and
(i) of the 1940 Act and other  applicable  law  (including  Maryland law and the
Investment  Company  Act of 1940.  Corporation's  Transfer  Agent  shall have no
rights to indemnification, advances or insurance under this Article IX except as
approved by the Board.

SECTION  2.  INSURANCE  OF  OFFICERS,  DIRECTORS,   EMPLOYEES  AND  AGENTS.  The
Corporation  may purchase and maintain  insurance on behalf of any person who is
or was a director,  officer, employee or agent of the Corporation,  or is or was


                                       13
<PAGE>

serving at the request of the  Corporation as a director,  officer,  employee or
agent  of  another  corporation,  partnership,  joint  venture,  trust  or other
enterprise,  against any liability  asserted against that person and incurred by
that  person  in or  arising  out of his or her  position,  whether  or not  the
Corporation would have the power to indemnify him or her against such liability.

SECTION 3. AMENDMENT. No amendment,  alteration or repeal of this Article or the
adoption,  alteration  or  amendment  of any other  provision of the Articles of
Incorporation  or Bylaws  inconsistent  with this Article shall adversely affect
any right or protection of any person under this Article with respect to any act
or failure to act which occurred prior to such amendment,  alteration, repeal or
adoption.

                                    ARTICLE X
                                   AMENDMENTS

SECTION 1.  GENERAL.  Except as  provided  in  Section 2 of this  Article X, all
Bylaws of the  Corporation,  whether  adopted by the Board of  Directors  or the
stockholders,  shall be  subject to  amendment,  alteration  or repeal,  and new
Bylaws  may be made by the  affirmative  vote of A MAJORITY  OF either:  (1) the
holders of record of the outstanding shares of stock of the Corporation entitled
to vote,  at any  annual or special  meeting,  the notice or waiver of notice of
which shall have  specified or summarized  the proposed  amendment,  alteration,
repeal or new Bylaw; or (2) the Directors, at any regular or special meeting the
notice or waiver of notice of which  shall  have  specified  or  summarized  the
proposed amendment, alteration, repeal or new Bylaw.

SECTION 2. BY  STOCKHOLDERS  ONLY.  No  amendment of any section of these Bylaws
shall be made  except  by the  stockholders  of the  Corporation  if the  Bylaws
provide that such section may not be amended,  altered or repealed except by the
stockholders. From and after the issue of any shares of the capital stock of the
Corporation, no amendment,  alteration or repeal of this Article X shall be made
except  by the  affirmative  vote  of the  holders  of  either:  (a)  more  than
two-thirds of the Corporation's outstanding shares present at a meeting at which
the holders of more than fifty percent of the outstanding  shares are present in
person  or by  proxy,  or (b)  more  than  fifty  percent  of the  Corporation's
outstanding shares.



















                                       14

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2E
<SEQUENCE>4
<FILENAME>nb_dividendplan.txt
<TEXT>
                NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.
                           DIVIDEND REINVESTMENT PLAN

         The Bank of New York ("Plan Agent") will act as Plan Agent for
shareholders who have not elected in writing to receive dividends and
distributions in cash (each a "Participant"), will open an account for each
Participant under the Dividend Reinvestment Plan ("Plan") in the same name as
their then current Shares are registered, and will put the Plan into effect for
each Participant as of the first record date for a dividend or capital gains
distribution.

         Whenever the Fund declares a dividend or distribution with respect to
the common stock of the Fund ("Shares"), each Participant will receive such
dividends and distributions in additional Shares, including fractional Shares
acquired by the Plan Agent and credited to each Participant's account. If on the
payment date for a cash dividend or distribution, the net asset value is equal
to or less than the market price per Share plus estimated brokerage commissions,
the Plan Agent shall automatically receive such Shares, including fractions, for
each Participant's account. Except in the circumstances described in the next
paragraph, the number of additional Shares to be credited to each Participant's
account shall be determined by dividing the dollar amount of the dividend or
distribution payable on their Shares by the greater of the net asset value per
Share determined as of the date of purchase or 95% of the then current market
price per Share on the payment date.

         Should the net asset value per Share exceed the market price per Share
plus estimated brokerage commissions on the payment date for a cash dividend or
distribution, the Plan Agent or a broker-dealer selected by the Plan Agent shall
endeavor, for a purchase period lasting until the last business day before the
next date on which the Shares trade on an "ex-dividend" basis, but in no event,
except as provided below, more than 30 days after the dividend payment date, to
apply the amount of such dividend or distribution on each Participant's Shares
(less their PRO RATA share of brokerage commissions incurred with respect to the
Plan Agent's open-market purchases in connection with the reinvestment of such
dividend or distribution) to purchase Shares on the open market for each
Participant's account. No such purchases may be made more than 30 days after the
payment date for such dividend except where temporary curtailment or suspension
of purchase is necessary to comply with applicable provisions of federal
securities laws. If, at the close of business on any day during the purchase
period the net asset value per Share equals or is less than the market price per
Share plus estimated brokerage commissions, the Plan Agent will not make any

<PAGE>


further open-market purchases in connection with the reinvestment of such
dividend or distribution. If the Plan Agent is unable to invest the full
dividend or distribution amount through open-market purchases during the
purchase period, the Plan Agent shall request that, with respect to the
uninvested portion of such dividend or distribution amount, the Fund issue new
Shares at the close of business on the earlier of the last day of the purchase
period or the first day during the purchase period on which the net asset value
per Share equals or is less than the market price per Share, plus estimated
brokerage commissions, such Shares to be issued in accordance with the terms
specified in the third paragraph hereof. These newly issued Shares will be
valued at the then-current market price per Share at the time such Shares are to
be issued.

         For purposes of making the dividend reinvestment purchase comparison
under the Plan, (a) the market price of the Shares on a particular date shall be
the last sales price on the New York Stock Exchange (or if the Shares are not
listed on the New York Stock Exchange, such other exchange on which the Shares
are principally traded) on that date, or, if there is no sale on such Exchange
(or if not so listed, in the over-the-counter market) on that date, then the
mean between the closing bid and asked quotations for such Shares on such
Exchange on such date and (b) the net asset value per Share on a particular date
shall be the net asset value per Share most recently calculated by or on behalf
of the Fund. All dividends, distributions and other payments (whether made in
cash or Shares) shall be made net of any applicable withholding tax.

         Open-market purchases provided for above may be made on any securities
exchange where the Fund's Shares are traded, in the over-the-counter market or
in negotiated transactions and may be on such terms as to price, delivery and
otherwise as the Plan Agent shall determine. Each Participant's uninvested funds
held by the Plan Agent will not bear interest, and it is understood that, in any
event, the Plan Agent shall have no liability in connection with any inability
to purchase Shares within 30 days after the initial date of such purchase as
herein provided, or with the timing of any purchases effected. The Plan Agent
shall have no responsibility as to the value of the Shares acquired for each
Participant's account. For the purpose of cash investments, the Plan Agent may
commingle each Participant's funds with those of other shareholders of the Fund
for whom the Plan Agent similarly acts as agent, and the average price
(including brokerage commissions) of all Shares purchased by the Plan Agent as
Plan Agent shall be the price per Share allocable to each Participant in
connection therewith.


                                       2
<PAGE>


         The Plan Agent may hold each Participant's Shares acquired pursuant to
the Plan together with the Shares of other shareholders of the Fund acquired
pursuant to the Plan in noncertificated form in the Plan Agent's name or that of
the Plan Agent's nominee. The Plan Agent will forward to each Participant any
proxy solicitation material and will vote any Shares so held for each
Participant only in accordance with the instructions set forth on proxies
returned by the participant to the Fund, Upon a Participant's written request,
the Plan Agent will deliver to the Participant, without charge, a certificate or
certificates for some or all of the whole Shares held in the Participant's
account under the Plan.

         The Plan Agent will confirm to each Participant each acquisition made
for their account as soon as practicable but not later than 60 days after the
date thereof. Although each Participant may from time to time have an undivided
fractional interest (computed to three decimal places) in a Share, no
certificates for a fractional Share will be issued. However, dividends and
distributions on fractional Shares will be credited to each Participant's
account. In the event of termination of a Participant's account under the Plan,
the Plan Agent will adjust for any such undivided fractional interest in cash at
the market value of the Shares at the time of termination, less the PRO RATA
expense of any sale required to make such an adjustment.

         Any Share dividends or split Shares distributed by the Fund on Shares
held by the Plan Agent for Participants will be credited to their accounts. In
the event that the Fund makes available to its shareholders rights to purchase
additional Shares or other securities, the Shares held for each Participant
under the Plan will be added to other Shares held by the Participant in
calculating the number of rights to be issued to each Participant.

         The Plan Agent's service fee for handling capital gains distributions
or income dividends will be paid by the Fund. Participants will be charged their
PRO RATA share of brokerage commissions on all open-market purchases.

         Each Participant may terminate their account under the Plan by
notifying the Plan Agent in writing. Such termination will be effective
immediately if the Participant's notice is received by the Plan Agent not less
than ten days prior to any dividend or distribution record date, otherwise such
termination will be effective the first trading day after the payment date for
such dividend or distribution with respect to any subsequent dividend or
distribution. The Plan may be terminated by the Plan Agent or the Fund upon
notice in writing mailed to each Participant at least 30 days prior to any
record date for the payment of any dividend or distribution by the Fund. Upon


                                       3
<PAGE>

any termination, the Plan Agent will cause a certificate or certificates for the
number of Shares held for each Participant under the Plan to be delivered to the
Participant (or if the Shares are not then in certificated form, will cause the
Shares to be transferred to the Participant) without charge.

         These terms and conditions may be amended or supplemented by the Plan
Agent or the Fund at any time or times but, except when necessary or appropriate
to comply with applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority, only by mailing to each
Participant appropriate written notice at least 30 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by each
Participant unless, prior to the effective date thereof, the Plan Agent receives
written notice of the termination of their account under the Plan. Any such
amendment may include an appointment by the Plan Agent in its place and stead of
a successor Plan Agent under these terms and conditions, with full power and
authority to perform all or any of the acts to be performed by the Plan Agent
under these terms and conditions. Upon any such appointment of any Plan Agent
for the purpose of receiving dividends and distributions, the Fund will be
authorized to pay to such successor Plan Agent, for each Participant's account,
all dividends and distributions payable on Shares held in their name or under
the Plan for retention or application by such successor Plan Agent as provided
in these terms and conditions.

         The Plan Agent shall at all times act in good faith and agrees to use
its best efforts within reasonable limits to ensure the accuracy of all services
performed under this Agreement and to comply with applicable law, but assumes no
responsibility and shall not be liable for loss or damage due to errors unless
such error is caused by the Plan Agent's negligence, bad faith, or willful
misconduct or that of its employees.

         These terms and conditions shall be governed by the laws of the State
of Maryland.




                                       4
<PAGE>


IMPORTANT NOTICE

         Please verify the Dividend/Capital Gain Distribution noted on the
attached statement. If you would like to change your option, please contact
____________ immediately at 1-800-__________.















                                       5

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2G
<SEQUENCE>5
<FILENAME>nb_mgmtagmt.txt
<DESCRIPTION>EXHIBIT 99.2G(1) MANAGEMENT AGREEMENT
<TEXT>
                              MANAGEMENT AGREEMENT
                NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.

          This Agreement is made as of September ___, 2002, between Neuberger
Berman Intermediate Municipal Fund Inc., a Maryland corporation ("Fund"), and
Neuberger Berman Management Inc., a New York corporation ("Manager").

                              W I T N E S S E T H:

          WHEREAS, Fund is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an closed-end, diversified management investment
company; and

          WHEREAS, Fund desires to retain the Manager as investment adviser to
furnish the investment advisory and portfolio management services described
herein and the Manager is willing to furnish such services;

          NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:

          1.   SERVICES OF THE MANAGER.

          1.1  INVESTMENT MANAGEMENT SERVICES. The Manager shall act as the
investment adviser to the Fund and, as such, shall (1) obtain and evaluate such
information relating to the economy, industries, businesses, securities markets
and securities as it may deem necessary or useful in discharging its
responsibilities hereunder, (ii) formulate a continuing program for the
investment of the assets of the Fund in a manner consistent with its investment
objectives, policies and restrictions, and (iii) determine from time to time
securities to be purchased, sold, retained or lent by the Fund, and implement
those decisions, including the selection of entities with or through which such
purchases, sales or loans are to be effected; provided, that the Manager will
place orders pursuant to its investment determinations either directly with the
issuer or with a broker or dealer, and if with a broker or dealer, (a) will
attempt to obtain the best net price and most favorable execution of its orders,
and (b) may nevertheless in its discretion purchase and sell portfolio

<PAGE>

securities from and to brokers and dealers who provide the Manager with
research, analysis, advice and similar services and pay such brokers and dealers
in return a higher commission or spread than may be charged by other brokers or
dealers.

          The Fund hereby authorizes any entity or person associated with the
Manager which is a member of a national securities exchange to effect or execute
any transaction on the exchange for the account of the Fund which is permitted
by Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, and the Fund hereby consents to the retention of compensation for
such transactions in accordance with Rule 11a-2(T)(a)(iv).

          The Manager shall carry out its duties with respect to the Fund's
investments in accordance with applicable law and the investment objectives,
policies and restrictions of the Fund adopted by the directors of Fund
("Directors"), and subject to such further limitations as the Fund may from time
to time impose by written notice to the Manager.

          1.2 The Manager can use any of the officers and employees of Neuberger
Berman, LLC to provide any of the non-investment advisory services described
herein, and can subcontract to third parties, provided the Manager remains as
fully responsible to the Fund under this contract as if the Manager had provided
services directly.

          2.   EXPENSES OF THE FUND.

          2.1  EXPENSES TO BE PAID BY THE MANAGER. The Manager shall pay all
salaries, expenses and fees of the officers, directors and employees of the Fund
who are officers, directors or employees of the Manager.

          In the event that the Manager pays or assumes any expenses of the Fund
not required to be paid or assumed by the Manager under this Agreement, the
Manager shall not be obligated hereby to pay or assume the same or any similar
expense in the future; PROVIDED, that nothing herein contained shall be deemed

                                     - 2 -

<PAGE>

to relieve the Manager of any obligation to the Fund under any separate
agreement or arrangement between the parties.

          2.2  EXPENSES TO BE PAID BY THE FUND. The Fund shall bear the expenses
of its operation, except those specifically allocated to the Manager under this
Agreement or under any separate agreement between the Fund and the Manager.
Subject to any separate agreement or arrangement between the Fund and the
Manager, the expenses hereby allocated to the Fund, and not to the Manager,
include, but are not limited to:

          2.2.1  CUSTODY.  All charges of depositories, custodians, and other
agents for the transfer, receipt, safekeeping, and servicing of its cash,
securities, and other property.

          2.2.2 STOCKHOLDER SERVICING. All expenses of maintaining and servicing
Stockholder accounts, including but not limited to the charges of any
Stockholder servicing agent, dividend disbursing agent or other agent engaged by
the Fund to service Stockholder accounts.

          2.2.3 STOCKHOLDER REPORTS. All expenses of preparing, setting in type,
printing and distributing reports and other communications to Stockholders of
the Fund.

          2.2.4  PRICING AND PORTFOLIO VALUATION. All expenses of computing the
Fund's net asset value per share, including any equipment or services obtained
for the purpose of pricing shares or valuing the Fund's investment portfolio.

          2.2.5  COMMUNICATIONS.  All charges for equipment or services used for
communications between the Manager or the Fund and any custodian, Stockholder
servicing agent, portfolio accounting services agent, dividend disbursing agent,
dividend reinvestment plan agent or other agent engaged by the Fund.

          2.2.6 LEGAL AND ACCOUNTING FEES. All charges for services and expenses
of the Fund's legal counsel and independent auditors.

                                     - 3 -

<PAGE>

          2.2.7  DIRECTORS' FEES AND EXPENSES. All compensation of Directors
other than those affiliated with the Manager, all expenses incurred in
connection with such unaffiliated Directors' services as Directors, and all
other expenses of meetings of the Directors or committees thereof.

          2.2.8  STOCKHOLDER MEETINGS. All expenses incidental to holding
meetings of Stockholders, including the printing of notices and proxy materials,
and proxy solicitation therefor.

          2.2.9  BONDING AND INSURANCE. All expenses of bond, liability, and
other insurance coverage required by law or regulation or deemed advisable by
the Directors, including, without limitation, such bond, liability and other
insurance expense that may from time to time be allocated to the Fund in a
manner approved by the Directors.

          2.2.10  BROKERAGE COMMISSIONS.  All brokers' commissions and other
charges incident to the purchase, sale or lending of the Fund's portfolio
securities.

          2.2.11  TAXES.  All taxes or governmental fees payable by or with
respect to the Fund to federal, state or other governmental agencies, domestic
or foreign, including stamp or other transfer taxes.

          2.2.12  TRADE ASSOCIATION FEES.  All fees, dues and other expenses
incurred in connection with the Fund's membership in any trade association or
other investment organization.

          2.2.13  NONRECURRING AND EXTRAORDINARY EXPENSES. Such nonrecurring and
extraordinary expenses as may arise, including the costs of actions, suits, or
proceedings to which the Fund is a party and the expenses the Fund may incur as
a result of its legal obligation to provide indemnification to Fund's officers,
Directors and agents.

                                     - 4 -
<PAGE>

          2.2.14 ORGANIZATIONAL EXPENSES AND OFFERING EXPENSES FOR COMMON STOCK.
Any and all organizational expenses of the Fund and any and all offering
expenses for shares of the Fund's common stock paid by the Manager shall be
reimbursed by the Fund if and at such time or times agreed by the Fund and the
Manager.

          2.2.15  EXPENSES OF LISTING ON A NATIONAL SECURITIES EXCHANGE. Any and
all expenses of listing and maintaining the listing of shares of the Fund's
common stock on any national securities exchange.

          2.2.16 OFFERING EXPENSES FOR ANY PREFERRED STOCK. Any and all offering
expenses (including rating agency fees) for any preferred stock of the Fund paid
by the Manager shall be reimbursed by the Fund if and at such time or times
agreed by the Fund and the Manager.

          2.2.17  DIVIDEND REINVESTMENT PLAN.  Any and all expenses incident to
any dividend reinvestment plan.

          2.2.18  INTEREST. Such interest as may accrue on borrowings of the
Fund.

          3. ADVISORY FEE.

          3.1  FEE.  As compensation for all services rendered, facilities
provided and expenses paid or assumed by the Manager under this Agreement, the
Fund shall pay the Manager an annual fee equal to ___% of the Fund's average
daily total assets minus liabilities other than the aggregate indebtedness
entered into for purposes of leverage ("Managed Assets").

          3.2  COMPUTATION AND PAYMENT OF FEE. The advisory fee shall accrue on
each calendar day, and shall be payable monthly on the first business day of the
next succeeding calendar month. The daily fee accruals shall be computed by
multiplying the fraction of one divided by the number of days in the calendar
year by the annual advisory fee rate, and multiplying this product by the

                                     - 5 -
<PAGE>

Managed Assets of the Fund, determined in the manner established by the
Directors, as of the close of business on the last preceding business day on
which the Fund's net asset value was determined.

          4.  OWNERSHIP OF RECORDS.

          All records required to be maintained and preserved by the Fund
pursuant to the provisions or rules or regulations of the Securities and
Exchange Commission under Section 31 (a) of the 1940 Act and maintained and
preserved by the Manager on behalf of the Fund are the property of the Fund and
shall be surrendered by the Manager promptly on request by the Fund; provided,
that the Manager may at its own expense make and retain copies of any such
records.

          5.  REPORTS TO MANAGER.

          The Fund shall furnish or otherwise make available to the Manager such
copies of the Fund's financial statements, proxy statements, reports, and other
information relating to its business and affairs as the Manager may, at any time
or from time to time, reasonably require in order to discharge its obligations
under this Agreement.

          6.  REPORTS TO THE FUND.

          The Manager shall prepare and furnish to the Fund such reports,
statistical data and other information in such form and at such intervals as the
Fund may reasonably request.

          7.  RETENTION OF SUB-ADVISER.

          Subject to the Fund obtaining the initial and periodic approvals
required under Section 15 of the 1940 Act, the Manager may retain a sub-adviser,
at the Manager's own cost and expense, for the purpose of making investment
recommendations and research information available to the Manager. Retention of
a sub-adviser shall in no way reduce the responsibilities or obligations of the
Manager under this Agreement and the Manager shall be responsible to Fund for

                                     - 6 -
<PAGE>

all acts or omissions of the sub-adviser in connection with the performance of
the Manager's duties hereunder.

          8.  SERVICES TO OTHER CLIENTS.

          Nothing herein contained shall limit the freedom of the Manager or any
affiliated person of the Manager to render investment management and
administrative services to other investment companies, to act as investment
adviser or investment counselor to other persons, firms or corporations, or to
engage in other business activities.

          9.   LIMITATION OF LIABILITY OF MANAGER AND ITS PERSONNEL.

          9.1 Neither the Manager nor any director, officer or employee of the
Manager performing services for the Fund at the direction or request of the
Manager in connection with the Manager's discharge of its obligations hereunder
shall be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with any matter to which this Agreement
relates; provided, that nothing herein contained shall be construed (i) to
protect the Manager against any liability to the Fund or its Stockholders to
which the Manager would otherwise be subject by reason of the Manager's
misfeasance, bad faith, or gross negligence in the performance of the Manager's
duties, or by reason of the Manager's reckless disregard of its obligations and
duties under this Agreement ("disabling conduct"), or (ii) to protect any
director, officer or employee of the Manager who is or was a Director or officer
of the Fund against any liability to the Fund or its Stockholders 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 Fund.

          9.2 The Fund will indemnify the Manager against, and hold it harmless
from, any and all expenses (including reasonable counsel fees and expenses)
incurred investigating or defending against claims for losses or liabilities
described in Section 9.1 not resulting from negligence, disregard of its
obligations and duties under this Agreement or disabling conduct by the Manager.
Indemnification shall be made only following: (i) a final decision on the merits
by a court or other body before whom the proceeding was brought that the Manager


                                     - 7 -
<PAGE>

was not liable by reason of negligence, disregard of its obligations and duties
under this Agreement or disabling conduct or (ii) in the absence of such a
decision, a reasonable determination, based upon a review of the facts, that the
Manager was not liable by reason of negligence, disregard of its obligations and
duties under this Agreement or disabling conduct by (a) the vote of a majority
of a quorum of directors of the Fund who are neither "interested persons" of the
Fund nor parties to the proceeding ("disinterested non-party directors") or (b)
an independent legal counsel in a written opinion. The Manager shall be entitled
to advances from the Fund for payment of the reasonable expenses incurred by it
in connection with the matter as to which it is seeking indemnification
hereunder in the manner and to the fullest extent permissible under the Maryland
General Corporation Law. The Manager shall provide to the Fund a written
affirmation of its good faith belief that the standard of conduct necessary for
indemnification by the Fund has been met and a written undertaking to repay any
such advance if it should ultimately be determined that the standard of conduct
has not been met. In addition, at least one of the following additional
conditions shall be met: (a) the Manager shall provide security in form and
amount acceptable to the Fund for its undertaking; (b) the Fund is insured
against losses arising by reason of the advance; or (c) a majority of a quorum
of the full Board of Directors of the Fund, the members of which majority are
disinterested non-party directors, or independent legal counsel, in a written
opinion, shall have determined, based on a review of facts readily available to
the Fund at the time the advance is proposed to be made, that there is reason to
believe that the Manager will ultimately be found to be entitled to
indemnification hereunder.

          10.  EFFECT OF AGREEMENT.

          Nothing herein contained shall be deemed to require the Fund to take
any action contrary to the Articles of Incorporation or By-Laws of the Fund, any
actions of the Directors binding upon the Fund, or any applicable law,
regulation or order to which the Fund is subject or by which it is bound, or to
relieve or deprive the Directors of their responsibility for and control of the
conduct of the business and affairs of the Fund.

          11.  TERM OF AGREEMENT.

          The term of this Agreement shall begin on the date first above written
and, unless sooner terminated as hereinafter provided, this Agreement shall
remain in effect through June 30, 2004. Thereafter, this Agreement shall

                                     - 8 -
<PAGE>

continue in effect from year to year, subject to the termination provisions and
all other terms and conditions hereof, provided, such continuance is approved at
least annually by vote of the holders of a majority of the outstanding voting
securities of the Fund or by the Directors, provided, that in either event such
continuance is also approved annually by the vote, cast in person at a meeting
called for the purpose of voting on such approval, of a majority of the
Directors who are not parties to this Agreement or interested persons of either
party hereto; and provided further that the Manager shall not have notified the
Fund in writing at least sixty (60) days prior to the first expiration date
hereof or at least sixty (60) days prior to any expiration date hereof of any
year thereafter that it does not desire such continuation. The Manager shall
furnish to the Fund, promptly upon its request, such information as may
reasonably be necessary to evaluate the terms of this Agreement or any
extension, renewal or amendment thereof.

          12.  AMENDMENT OR ASSIGNMENT OF AGREEMENT.

          Any amendment to this Agreement shall be in writing signed by the
parties hereto; provided, that no such amendment shall be effective unless
authorized on behalf of the Fund (i) by resolution of the Directors, including
the vote or written consent of a majority of the Directors who are not parties
to this Agreement or interested persons of either party hereto, and (ii) by vote
of a majority of the outstanding voting securities of the Fund. This Agreement
shall terminate automatically and immediately in the event of its assignment.

          13.  TERMINATION OF AGREEMENT.

          This Agreement may be terminated at any time by either party hereto,
without the payment of any penalty, upon sixty (60) days' prior written notice
to the other party; provided, that in the case of termination by the Fund, such
action shall have been authorized (i) by resolution of the Directors, including
the vote or written consent of a majority of Directors who are not parties to
this Agreement or interested persons' of either party hereto, or (ii) by vote of
a majority of the outstanding voting securities of the Fund.

                                     - 9 -
<PAGE>

          14.  NAME OF THE FUND.

          The Fund hereby agrees that if the Manager shall at any time for any
reason cease to serve as investment adviser to the Fund, the Fund shall, if and
when requested by the Manager, eliminate from the Fund's name the name
"Neuberger Berman" and thereafter refrain from using the name "Neuberger Berman"
or the initials "NB" in connection with its business or activities, and the
foregoing agreement of the Fund shall survive any termination of this Agreement
and any extension or renewal thereof.

          15.  INTERPRETATION AND DEFINITION OF TERMS.

          Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the 1940 Act shall be resolved by reference to such term or provision of the
1940 Act and to interpretation thereof, if any, by the United States courts or,
in the absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange Commission validly issued
pursuant to the 1940 Act. Specifically, the terms "vote of a majority of the
outstanding voting securities," "interested person," "assignment" and
"affiliated person," as used in this Agreement shall have the meanings assigned
to them by Section 2(a) of the 1940 Act. In addition, when the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
modified, interpreted or relaxed by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.

          16.  CHOICE OF LAW.

          This Agreement is made and to be principally performed in the State of
New York and except insofar as the 1940 Act or other federal laws and
regulations may be controlling, this Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of New
York.

                                     - 10 -
<PAGE>

          17.  CAPTIONS.

          The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.

          18.  EXECUTION IN COUNTERPARTS.

          This Agreement may be executed simultaneously in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.


                                     - 11 -
<PAGE>


                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto duly authorized
and their respective seals to be hereunto affixed, as of the day and year first
above written.

                                       NEUBERGER BERMAN INTERMEDIATE
                                       MUNICIPAL FUND INC.


                                       By:
                                           -------------------------------------

                                       Title:
                                              ----------------------------------


                                       NEUBERGER BERMAN MANAGEMENT INC.


                                       By:
                                           -------------------------------------

                                       Title:
                                              ----------------------------------



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2G
<SEQUENCE>6
<FILENAME>nb_subadvagmt.txt
<DESCRIPTION>EXHIBIT 99.2G(2) SUB-ADVISORY AGREEMENT
<TEXT>
                             SUB-ADVISORY AGREEMENT

                         NEUBERGER BERMAN MANAGEMENT INC.
                                605 Third Avenue
                          New York, New York 10158-0006


September __, 2002

Neuberger Berman, LLC
605 Third Avenue
New York, New York 10158-3698


Dear Sirs:

        We have entered into a Management Agreement with Neuberger Berman
Intermediate Municipal Fund Inc. ("Fund") pursuant to which we are to act as
investment adviser to the Fund. We hereby agree with you as follows:

        1.    You agree for the duration of this Agreement to furnish us with
              such investment recommendations and research information, of the
              same type as that which you from time to time provide to your
              employees for use in managing client accounts, all as we shall
              reasonably request. In the absence of willful misfeasance, bad
              faith or gross negligence in the performance of your duties, or of
              the reckless disregard of your duties and obligations hereunder,
              you shall not be subject to liability for any act or omission or
              any loss suffered by the Fund or its security holders in
              connection with the matters to which this Agreement relates.

        2.    In consideration of your agreements set forth in paragraph 1
              above, we agree to pay you on the basis of direct and indirect
              costs to you of performing such agreements. Indirect costs shall
              be allocated on a basis mutually satisfactory to you and to us.

        3.    As used in this Agreement, the terms "assignment" and "vote of a
              majority of the outstanding voting securities" shall have the
              meanings given to them by Section 2(a)(4) and 2(a)(42),
              respectively, of the Investment Company Act of 1940, as amended.

                      This Agreement shall terminate automatically in the
              event of its assignment, or upon termination of the Management
              Agreement between the Fund and the undersigned.

                      This Agreement may be terminated at any time, without
              the payment of any penalty, (a) by the Directors of the Fund or by
              vote of a majority of the outstanding securities of the Fund or by
              the undersigned on not less than sixty days' written notice
              addressed to you at your principal place of business; and (b) by

<PAGE>

              you, without the payment of any penalty, on not less than thirty
              nor more than sixty days' written notice addressed to the Fund and
              the undersigned at the Fund's principal place of business.

                      This Agreement shall remain in full force and effect
              until June 30, 2004 (unless sooner terminated as provided above)
              and from year to year thereafter only so long as its continuance
              is approved in the manner required by the Investment Company Act
              of 1940, as from time to time amended.

                      If you are in agreement with the foregoing, please
              sign the form of acceptance on the enclosed counterpart hereof and
              return the same to us.


                                           Very truly yours,

                                           NEUBERGER BERMAN MANAGEMENT INC.


                                           By:
                                               ---------------------------------
                                               President



              The foregoing is hereby accepted as
              of the date first above written.

              NEUBERGER BERMAN, LLC


              By:
                  -------------------------------

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2H
<SEQUENCE>7
<FILENAME>exhibit99-2h1_535797.txt
<DESCRIPTION>EXHIBIT 99.2H(1) UNDERWRITING
<TEXT>


              Neuberger Berman Intermediate Municipal Fund Inc.
                            (a Maryland corporation)


                           [ ] Shares of Common Stock
                          (Par Value $.0001 Per Share)


                               PURCHASE AGREEMENT

                                                        September [    ], 2002

Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
          Incorporated
[other Underwriters]

c/o Merrill Lynch, Pierce, Fenner & Smith
            Incorporated
North Tower
World Financial Center
New York, New York 10080

Ladies and Gentlemen:

Neuberger Berman Intermediate  Municipal Fund Inc., a Maryland  corporation (the
"Fund"), the Fund's investment adviser,  Neuberger Berman Management Inc., a New
York corporation ("NB Management"),  and its investment  sub-adviser,  Neuberger
Berman, LLC, a Delaware limited liability company ("NB LLC") (each, an "Adviser"
and together, the "Advisers"),  each confirms its agreement with Merrill Lynch &
Co., Merrill Lynch,  Pierce,  Fenner & Smith Incorporated  ("Merrill Lynch") and
each of the other  Underwriters  named in Schedule A hereto  (collectively,  the
"Underwriters",  which term shall also include any  underwriter  substituted  as
hereinafter  provided in Section 10 hereof),  for whom Merrill  Lynch and [other
Underwriters]   are   acting  as   representatives   (in  such   capacity,   the
"Representatives"),  with  respect  to the  issue  and  sale by the Fund and the
purchase  by  the  Underwriters,  acting  severally  and  not  jointly,  of  the
respective  number of shares of common stock, par value $.0001 per share, of the
Fund  ("Common  Shares")  set forth in said  SCHEDULE A, and with respect to the
grant by the Fund to the Underwriters,  acting severally and not jointly, of the
option  described  in Section  2(b) hereof to purchase  all or any part of [   ]
additional Common Shares to cover  over-allotments,  if any. The aforesaid [   ]
Common Shares (the "Initial Securities") to be purchased by the Underwriters and
all or any part of the [   ] Common  Shares  subject to the option  described in
Section  2(b)  hereof  (the  "Option   Securities")   are  hereinafter   called,
collectively, the "Securities."

      The  Fund  understands  that  the  Underwriters  propose  to make a public
offering of the Securities as soon as the  Representatives  deem advisable after
this Agreement has been executed and delivered.

      The Fund has  filed  with the  Securities  and  Exchange  Commission  (the
"Commission")  a  registration  statement  on Form  N-2 (No.  333-97283  and No.
811-21168)  covering the registration of the Securities under the Securities Act
of 1933,  as  amended  (the  "1933  Act"),  including  the  related  preliminary
prospectus or  prospectuses,  and a notification on Form N-8A of registration of
the Fund as an investment  company under the Investment  Company Act of 1940, as
amended (the "1940 Act"),  and the rules and regulations of the Commission under
the 1933 Act and the 1940 Act (the  "Rules  and  Regulations").  Promptly  after
execution and delivery of this  Agreement,  the Fund will either (i) prepare and
file a prospectus in accordance  with the  provisions of Rule 430A ("Rule 430A")
of the Rules and  Regulations  and paragraph (c) or (h) of Rule 497 ("Rule 497")


<PAGE>

of the Rules and  Regulations  or (ii) if the Fund has elected to rely upon Rule
434 ("Rule 434") of the Rules and Regulations,  prepare and file a term sheet (a
"Term  Sheet") in accordance  with the  provisions of Rule 434 and Rule 497. The
information  included in any such  prospectus or in any such Term Sheet,  as the
case may be, that was omitted  from such  registration  statement at the time it
became effective but that is deemed to be part of such registration statement at
the time it became  effective,  if applicable,  (a) pursuant to paragraph (b) of
Rule 430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph
(d) of Rule 434 is referred to as "Rule 434  Information."  Each prospectus used
before such  registration  statement became  effective,  and any prospectus that
omitted,  as applicable,  the Rule 430A Information or the Rule 434 Information,
that was used after such  effectiveness  and prior to the execution and delivery
of  this  Agreement,   is  herein  called  a  "preliminary   prospectus."   Such
registration statement,  including the exhibits thereto and schedules thereto at
the time it became  effective and including  the Rule 430A  Information  and the
Rule  434  Information,  as  applicable,  is  herein  called  the  "Registration
Statement."  Any  registration  statement  filed  pursuant to Rule 462(b) of the
Rules and  Regulations  is herein  referred to as the "Rule 462(b)  Registration
Statement,"  and after  such  filing  the term  "Registration  Statement"  shall
include the Rule 462(b) Registration Statement. The final prospectus in the form
first furnished to the  Underwriters  for use in connection with the offering of
the Securities is herein called the  "Prospectus." If Rule 434 is relied on, the
term  "Prospectus"  shall refer to the  preliminary  prospectus  dated [ ], 2002
together with the Term Sheet and all references in this Agreement to the date of
the  Prospectus  shall mean the date of the Term  Sheet.  For  purposes  of this
Agreement,  all  references  to  the  Registration  Statement,  any  preliminary
prospectus,  the  Prospectus or any Term Sheet or any amendment or supplement to
any of the  foregoing  shall  be  deemed  to  include  the copy  filed  with the
Commission  pursuant to its Electronic  Data  Gathering,  Analysis and Retrieval
system ("EDGAR").

      All references in this Agreement to financial statements and schedules and
other  information   which  is  "contained,"   "included"  or  "stated"  in  the
Registration  Statement,  any preliminary prospectus or the Prospectus (or other
references  of like  import)  shall  be  deemed  to mean  and  include  all such
financial  statements and schedules and other  information which is incorporated
by reference in the Registration  Statement,  any preliminary  prospectus or the
Prospectus, as the case may be.

      SECTION 1. Representations and Warranties.

      (a) REPRESENTATIONS AND WARRANTIES BY THE FUND AND THE ADVISERS.  The Fund
and the Advisers jointly and severally represent and warrant to each Underwriter
as of the date  hereof,  as of the  Closing  Time  referred  to in Section  2(c)
hereof,  and as of each Date of Delivery  (if any)  referred to in Section  2(b)
hereof, and agree with each Underwriter, as follows:

            (i)  COMPLIANCE  WITH   REGISTRATION   REQUIREMENTS.   Each  of  the
      Registration  Statement  and any Rule 462(b)  Registration  Statement  has
      become  effective  under  the 1933 Act and no stop  order  suspending  the
      effectiveness   of  the   Registration   Statement   or  any  Rule  462(b)
      Registration  Statement  has been  issued  under the 1933 Act, or order of
      suspension or revocation of  registration  pursuant to Section 8(e) of the
      1940 Act, and no proceedings  for any such purpose have been instituted or
      are  pending  or,  to the  knowledge  of the  Fund  or the  Advisers,  are
      contemplated  by the  Commission,  and  any  request  on the  part  of the
      Commission for additional information has been complied with.

            At the respective times the Registration Statement,  any Rule 462(b)
      Registration  Statement and any  post-effective  amendments thereto became
      effective  and at the  Closing  Time (and,  if any Option  Securities  are
      purchased, at the Date of Delivery),  the Registration Statement, the Rule
      462(b)  Registration  Statement,  the  notification  of Form  N-8A and any
      amendments  and  supplements  thereto  complied  and  will  comply  in all
      material  respects with the requirements of the 1933 Act, the 1940 Act and
      the  Rules  and  Regulations  and did not and will not  contain  an untrue
      statement of a material  fact or omit to state a material fact required to
      be  stated  therein  or  necessary  to make  the  statements  therein  not


                                       2
<PAGE>

      misleading.  Neither the  Prospectus  nor any  amendments  or  supplements
      thereto,  at the time the  Prospectus or any such  amendment or supplement
      was issued and at the  Closing  Time (and,  if any Option  Securities  are
      purchased,  at the Date of  Delivery),  included or will include an untrue
      statement  of a material  fact or omitted or will omit to state a material
      fact  necessary in order to make the statements  therein,  in the light of
      the circumstances under which they were made, not misleading.  If Rule 434
      is used,  the Fund will comply with the  requirements  of Rule 434 and the
      Prospectus  shall not be "materially  different",  as such term is used in
      Rule 434, from the prospectus  included in the  Registration  Statement at
      the time it became effective.  The  representations and warranties in this
      subsection  shall  not  apply  to  statements  in or  omissions  from  the
      Registration  Statement  or  Prospectus  made  in  reliance  upon  and  in
      conformity  with  information  furnished  to the  Fund in  writing  by any
      Underwriter  through Merrill Lynch  expressly for use in the  Registration
      Statement or Prospectus.

            Each preliminary  prospectus and the prospectus filed as part of the
      Registration  Statement as  originally  filed or as part of any  amendment
      thereto,  or filed pursuant to Rule 497 under the 1933 Act,  complied when
      so filed in all material  respects with the Rules and Regulations and each
      preliminary  prospectus and the Prospectus  delivered to the  Underwriters
      for  use  in   connection   with  this   offering  was  identical  to  the
      electronically  transmitted  copies  thereof  filed  with  the  Commission
      pursuant to EDGAR, except to the extent permitted by Regulation S-T.

            If a Rule 462(b)  Registration  Statement is required in  connection
      with the  offering  and sale of the  Securities,  the Fund has complied or
      will  comply  with  the  requirements  of Rule  111  under  the  1933  Act
      Regulations relating to the payment of filing fees thereof.

            (ii)  INDEPENDENT  ACCOUNTANTS.  The  accountants  who certified the
      statement of assets and liabilities included in the Registration Statement
      are  independent  public  accountants  as required by the 1933 Act and the
      Rules and Regulations.

            (iii) FINANCIAL STATEMENTS.  The statement of assets and liabilities
      included in the Registration  Statement and the Prospectus,  together with
      the related notes,  presents fairly in accordance with generally  accepted
      accounting  principals  ("GAAP") in all material  respects  the  financial
      position  of the  Fund at the  date  indicated;  said  statement  has been
      prepared in conformity with GAAP.

            (iv) EXPENSE SUMMARY. The information set forth in the Prospectus in
      the Fee Table has been  prepared in  accordance  in all material  respects
      with  the  requirements  of  Form  N-2  and to  the  extent  estimated  or
      projected,  such  estimates or projections  are reasonably  believed to be
      attainable and reasonably based.

            (v) NO MATERIAL  ADVERSE  CHANGE.  Since the respective  dates as of
      which  information  is  given  in  the  Registration   Statement  and  the
      Prospectus,  except as  otherwise  stated  therein,  (A) there has been no
      material  adverse change in the condition,  financial or otherwise,  or in
      the earnings,  business affairs or business prospects of the Fund, whether
      or not arising in the  ordinary  course of business (a  "Material  Adverse
      Effect"),  (B) there have been no  transactions  entered into by the Fund,
      other than those in the ordinary  course of  business,  which are material
      with  respect  to the  Fund,  and  (C)  there  has  been  no  dividend  or
      distribution  of any kind declared,  paid or made by the Fund on any class
      of its capital stock.

            (vi) GOOD STANDING OF THE FUND. The Fund has been duly organized and
      is validly  existing as a corporation  in good standing  under the laws of
      the State of Maryland and has corporate  power and authority to own, lease
      and operate its properties and to conduct its business as described in the
      Prospectus  and to enter  into and  perform  its  obligations  under  this
      Agreement;  and the Fund is duly  qualified  as a foreign  corporation  to


                                        3
<PAGE>

      transact  business and is in good standing in each other  jurisdiction  in
      which such  qualification is required,  whether by reason of the ownership
      or leasing  of  property  or the  conduct of  business,  except  where the
      failure  so to  qualify  or to be in good  standing  would not result in a
      Material Adverse Effect.

            (vii) NO SUBSIDIARIES. The Fund has no subsidiaries.

            (viii) INVESTMENT  COMPANY STATUS.  The Fund is duly registered with
      the  Commission  under  the  1940  Act  as  a  closed-end  non-diversified
      management investment company, and no order of suspension or revocation of
      such registration has been issued or proceedings therefor initiated or, to
      the knowledge of the Fund, threatened by the Commission.

            (ix)  OFFICERS AND  DIRECTORS.  No person is serving or acting as an
      officer,  director or investment  adviser of the Fund except in accordance
      with the provisions of the 1940 Act and the Rules and  Regulations  and no
      person is serving or acting as an investment adviser of the Fund except in
      accordance with the provisions of the Investment  Advisers Act of 1940, as
      amended  (the  "Advisers  Act"),  and the  rules  and  regulations  of the
      Commission promulgated under the Advisers Act (the "Advisers Act Rules and
      Regulations").  Except as disclosed in the  Registration  Statement or the
      Prospectus  (or any  amendment or  supplement  to either of them),  to the
      knowledge  of the Fund after due  inquiry,  no  director of the Fund is an
      "interested  person"  (as  defined  in the  1940  Act)  of the  Fund or an
      "affiliated person" (as defined in the 1940 Act) of any Underwriter.

            (x) CAPITALIZATION. The authorized, issued and outstanding shares of
      common stock of the Fund are as set forth in the Prospectus as of the date
      thereof  under  the  caption  "Description  of  Shares."  All  issued  and
      outstanding  shares of common stock of the Fund have been duly  authorized
      and  validly  issued and are fully paid and  non-assessable  and have been
      offered  and  sold  or  exchanged  by the  Fund  in  compliance  with  all
      applicable  laws  (including,   without  limitation,   federal  and  state
      securities  laws);  none of the outstanding  shares of common stock of the
      Fund were issued in violation of the preemptive or other similar rights of
      any securityholder of the Fund.

            (xi) AUTHORIZATION AND DESCRIPTION OF SECURITIES.  The Securities to
      be purchased by the  Underwriters  from the Fund have been duly authorized
      for issuance and sale to the Underwriters  pursuant to this Agreement and,
      when issued and delivered by the Fund pursuant to this  Agreement  against
      payment of the consideration set forth herein,  will be validly issued and
      fully paid and  non-assessable.  The Common Shares conform in all material
      respects to all statements  relating  thereto  contained in the Prospectus
      and such description  conforms in all material  respects to the rights set
      forth in the  instruments  defining  the  same;  and the  issuance  of the
      Securities is not subject to the preemptive or other similar rights of any
      securityholder of the Fund.

            (xii)  AUTHORIZATION  OF  AGREEMENT.  This  Agreement  has been duly
      authorized, executed and delivered by the Fund.

            (xiii)  ABSENCE  OF  DEFAULTS  AND  CONFLICTS.  The  Fund  is not in
      violation of its articles of  incorporation  or by-laws,  or in default in
      the  performance or observance of any obligation,  agreement,  covenant or
      condition contained in any contract,  indenture,  mortgage, deed of trust,
      loan or credit agreement,  note, lease or other agreement or instrument to
      which  it is a party  or by which  it is  bound,  or to  which  any of the
      property or assets of the Fund is subject  (collectively,  "Agreements and
      Instruments") except for such violations or defaults that would not result
      in a Material Adverse Effect; and the execution,  delivery and performance
      of this Agreement,  the Management Agreement,  the Sub-Advisory Agreement,
      the  Administration  Agreement,  the Custodian  Agreement and the Transfer


                                        4
<PAGE>

      Agent and Service Agreement referred to in the Registration  Statement (as
      used herein, the "Management Agreement," the "Sub-Advisory  Agreement, the
      "Administration  Agreement,"  the "Custodian  Agreement" and the "Transfer
      Agency Agreement,"  respectively) and the consummation of the transactions
      contemplated  herein  and in the  Registration  Statement  (including  the
      issuance and sale of the  Securities  and the use of the proceeds from the
      sale of the  Securities as described in the  Prospectus  under the caption
      "Use of  Proceeds")  and  compliance  by the  Fund  with  its  obligations
      hereunder have been duly authorized by all necessary  corporate action and
      do not and will  not,  whether  with or  without  the  giving of notice or
      passage  of time or both,  conflict  with or  constitute  a breach  of, or
      default or  Repayment  Event (as defined  below)  under,  or result in the
      creation  or  imposition  of any  lien,  charge  or  encumbrance  upon any
      property or assets of the Fund pursuant to, the Agreements and Instruments
      (except for such  conflicts,  breaches  or  defaults or liens,  charges or
      encumbrances that would not result in a Material Adverse Effect), nor will
      such action result in any  violation of the  provisions of the articles of
      incorporation or by-laws of the Fund or any applicable law, statute, rule,
      regulation, judgment, order, writ or decree of any government,  government
      instrumentality or court,  domestic or foreign,  having  jurisdiction over
      the Fund or any of its assets,  properties or operations  (except for such
      violations that would not result in a Material  Adverse  Effect).  As used
      herein,  a "Repayment  Event" means any event or condition which gives the
      holder of any note,  debenture or other evidence of  indebtedness  (or any
      person  acting  on  such  holder's   behalf)  the  right  to  require  the
      repurchase,   redemption  or  repayment  of  all  or  a  portion  of  such
      indebtedness by the Fund.

            (xiv) ABSENCE OF PROCEEDINGS.  There is no action, suit, proceeding,
      inquiry or  investigation  before or brought by any court or  governmental
      agency or body, domestic or foreign,  now pending, or, to the knowledge of
      the Fund or the Advisers, threatened, against or affecting the Fund, which
      is required to be disclosed in the  Registration  Statement (other than as
      disclosed  therein),  or which would reasonably be expected to result in a
      Material  Adverse  Effect,  or  which  would  reasonably  be  expected  to
      materially  and adversely  affect the  properties or assets of the Fund or
      the consummation of the transactions contemplated in this Agreement or the
      performance by the Fund of its obligations hereunder. The aggregate of all
      pending legal or governmental  proceedings to which the Fund is a party or
      of which  any of its  property  or  assets  is the  subject  which are not
      described  in  the  Registration  Statement,  including  ordinary  routine
      litigation incidental to the business, could not reasonably be expected to
      result in a Material Adverse Effect.

            (xv) ACCURACY OF EXHIBITS. There are no contracts or documents which
      are  required  to be  described  in  the  Registration  Statement  or  the
      Prospectus  or to be filed as exhibits  thereto by the 1933 Act,  the 1940
      Act or by the Rules and  Regulations  which have not been so described and
      filed as required.

            (xvi)  POSSESSION  OF  INTELLECTUAL   PROPERTY.  The  Fund  owns  or
      possesses,  or can acquire on reasonable terms,  adequate patents,  patent
      rights,  licenses,  inventions,   copyrights,  know-how  (including  trade
      secrets  and  other   unpatented   and/or   unpatentable   proprietary  or
      confidential  information,  systems or  procedures),  trademarks,  service
      marks,   trade  names  or  other  intellectual   property   (collectively,
      "Intellectual  Property")  necessary to carry on the business now operated
      by the Fund,  and the Fund has not received any notice or is not otherwise
      aware of any  infringement  of or conflict with asserted  rights of others
      with respect to any Intellectual Property or of any facts or circumstances
      which would render any  Intellectual  Property  invalid or  inadequate  to
      protect  the  interest  of the Fund  therein,  and which  infringement  or
      conflict (if the subject of any unfavorable  decision,  ruling or finding)
      or invalidity or inadequacy, singly or in the aggregate, would result in a
      Material Adverse Effect.



                                        5
<PAGE>

            (xvii)  ABSENCE  OF  FURTHER   REQUIREMENTS.   No  filing  with,  or
      authorization,    approval,   consent,   license,   order,   registration,
      qualification or decree of, any court or governmental  authority or agency
      is  necessary  or  required  for  the  performance  by  the  Fund  of  its
      obligations hereunder,  in connection with the offering,  issuance or sale
      of the  Securities  hereunder  or  the  consummation  of the  transactions
      contemplated by this Agreement,  except such as have been already obtained
      or as may be required  under the 1933 Act,  the 1940 Act,  the  Securities
      Exchange Act of 1934,  as amended (the "1934 Act"),  or under the rules of
      the National  Association of Securities Dealers,  Inc. ("NASD"),  or state
      securities laws.

            (xviii) POSSESSION OF LICENSES AND PERMITS.  The Fund possesses such
      permits,   licenses,   approvals,   consents   and  other   authorizations
      (collectively, "Governmental Licenses") issued by the appropriate federal,
      state, local or foreign regulatory agencies or bodies necessary to operate
      its  properties  and  to  conduct  the  business  as  contemplated  in the
      Prospectus; the Fund is in compliance with the terms and conditions of all
      such  Governmental  Licenses,  except where the failure so to comply would
      not, singly or in the aggregate,  have a Material  Adverse Effect;  all of
      the Governmental  Licenses are valid and in full force and effect,  except
      when the invalidity of such  Governmental  Licenses or the failure of such
      Governmental  Licenses  to be in full  force and  effect  would not have a
      Material  Adverse  Effect;  and the Fund has not  received  any  notice of
      proceedings  relating  to the  revocation  or  modification  of  any  such
      Governmental Licenses which, singly or in the aggregate, if the subject of
      an  unfavorable  decision,  ruling or finding,  would result in a Material
      Adverse Effect.

            (xix)  ADVERTISEMENTS.  Any  advertising,  sales literature or other
      promotional  material  (including  "prospectus  wrappers",  "broker kits,"
      "road show slides" and "road show  scripts")  authorized  in writing by or
      prepared by the Fund or the Advisers  used in  connection  with the public
      offering  of the  Securities  (collectively,  "Sales  Material")  does not
      contain an untrue statement of a material fact or omit to state a material
      fact  required to be stated  therein or necessary  to make the  statements
      therein  in light of the  circumstances  under  which  they  were made not
      misleading.  Moreover,  all Sales Material complied and will comply in all
      material  respects with the applicable  requirements  of the 1933 Act, the
      1940 Act, the Rules and Regulations and the rules and  interpretations  of
      the NASD.

            (xx)  SUBCHAPTER M. The Fund intends to direct the investment of the
      proceeds of the offering described in the Registration Statement in such a
      manner as to comply with the  requirements of Subchapter M of the Internal
      Revenue  Code of 1986,  as  amended  ("Subchapter  M of the  Code" and the
      "Code,"  respectively),  and intends to qualify as a regulated  investment
      company under Subchapter M of the Code.

            (xxi) MATERIAL AGREEMENTS. This Agreement, the Management Agreement,
      the  Administration  Agreement,  the Custodian  Agreement and the Transfer
      Agency Agreement have each been duly authorized by all requisite action on
      the part of the Fund,  executed and delivered by the Fund, as of the dates
      noted therein and each complies with all applicable provisions of the 1940
      Act.  Assuming  due  authorization,  execution  and  delivery by the other
      parties  thereto  with  respect  to  the  Administration   Agreement,  the
      Custodian  Agreement  and  the  Transfer  Agency  Agreement,  each  of the
      Management  Agreement,   the  Administration   Agreement,   the  Custodian
      Agreement  and the  Transfer  Agency  Agreement  constitutes  a valid  and
      binding agreement of the Fund,  enforceable  against it in accordance with
      its  terms,  except as  affected  by  bankruptcy,  insolvency,  fraudulent
      conveyance, reorganization,  moratorium and other similar laws relating to
      or affecting  creditors'  rights generally,  general equitable  principles
      (whether  considered  in a  proceeding  in equity or at law) or an implied
      covenant of good faith and fair dealing.



                                        6
<PAGE>

            (xxii) REGISTRATION  RIGHTS.  There are no persons with registration
      rights or other similar rights to have any securities  registered pursuant
      to the  Registration  Statement or otherwise  registered by the Fund under
      the 1933 Act.

      (b) REPRESENTATIONS AND WARRANTIES BY THE ADVISERS. The Advisers represent
and warrant to each  Underwriter  as of the date hereof,  as of the Closing Time
referred to in Section  2(c)  hereof,  and as of each Date of Delivery  (if any)
referred to in Section 2(b) hereof as follows:

            (i) GOOD  STANDING  OF THE  ADVISERS.  NB  Management  has been duly
      organized  and is validly  existing and in good  standing as a corporation
      under  the  laws  of the  State  of New  York,  and NB LLC has  been  duly
      organized  and is  validly  existing  and in good  standing  as a  limited
      liability  company  under  the laws of the  State of  Delaware  with  full
      corporate or limited liability company, respectively,  power and authority
      to own,  lease and operate its  properties  and to conduct its business as
      described  in the  Prospectus  and  each is duly  qualified  as a  foreign
      corporation  or  limited  liability  company,  respectively,  to  transact
      business and is in good standing in each other  jurisdiction in which such
      qualification  is  required  except as would not,  individually  or in the
      aggregate, result in a material adverse change in the condition, financial
      or otherwise,  or in the earnings,  business affairs or business prospects
      of such Adviser, whether or not arising in the ordinary course of business
      (an "Adviser Material Adverse Effect").

            (ii)  INVESTMENT  ADVISER  STATUS.  Each  of the  Advisers  is  duly
      registered  and in good  standing  with the  Commission  as an  investment
      adviser under the Advisers Act, and is not  prohibited by the Advisers Act
      or the 1940 Act, or the rules and regulations under such acts, from acting
      under  the  Management  Agreement  for  the  Fund as  contemplated  by the
      Prospectus.

            (iii)  CAPITALIZATION.  Each  of  the  Advisers  has  the  financial
      resources  available to it necessary for the  performance  of its services
      and obligations as contemplated in the Prospectus.

            (iv) AUTHORIZATION OF AGREEMENTS; ABSENCE OF DEFAULTS AND CONFLICTS.
      This Agreement,  the Management Agreement,  the Sub-Advisory Agreement and
      the  Additional  Compensation  Agreement  have each been duly  authorized,
      executed  and  delivered  by each  Adviser  that is a party  thereto,  and
      (assuming  the due  authorization,  execution  and delivery by each of the
      parties thereto) the Management Agreement,  the Sub-Advisory Agreement and
      the Additional  Compensation Agreement each constitute a valid and binding
      obligation  of  each  respective   Adviser,   enforceable  against  it  in
      accordance with its terms,  except as affected by bankruptcy,  insolvency,
      fraudulent conveyance,  reorganization,  moratorium and other similar laws
      relating to or affecting  creditors' rights  generally,  general equitable
      principles  (whether considered in a proceeding in equity or at law) or an
      implied covenant of good faith and fair dealing; and neither the execution
      and delivery of this Agreement, the Management Agreement, the Sub-Advisory
      Agreement and the Additional Compensation Agreement nor the performance by
      either of the Advisers of its  obligations  hereunder or  thereunder  will
      conflict  with,  or result in a breach of any of the terms and  provisions
      of, or  constitute,  with or without the giving of notice or lapse of time
      or both, a default under,  (i) any agreement or instrument to which either
      Adviser  is a party or by  which it is  bound,  (ii)  the  certificate  of
      incorporation,  the  by-laws  or  other  organizational  documents  of the
      Advisers,  or (iii) to each Adviser's  knowledge,  any law, order, decree,
      rule or regulation applicable to it of any jurisdiction, court, federal or
      state regulatory body,  administrative  agency or other governmental body,
      stock  exchange or securities  association  having  jurisdiction  over the
      Advisers or their  respective  properties  or  operations  other than,  in
      clauses (i) and (iii),  any  conflict,  breach or default  that would not,
      individually  or in the aggregate,  reasonably be expected to result in an
      Adviser Material Adverse Effect; and no consent,  approval,  authorization
      or order of any court or governmental  authority or agency is required for
      the consummation by the Advisers of the transactions  contemplated by this
      Agreement, the Management Agreement or the Sub-Advisory Agreement,  except
      as have been obtained or will have been obtained prior to the Closing Time


                                        7
<PAGE>

      or may be required under the 1933 Act, the 1940 Act, the 1934 Act or state
      securities laws.

            (v) NO MATERIAL  ADVERSE  CHANGE.  Since the respective  dates as of
      which  information  is  given  in  the  Registration   Statement  and  the
      Prospectus, except as otherwise stated therein, there has not occurred any
      event which  should  reasonably  be  expected  to have a material  adverse
      effect  on the  ability  of  either  Adviser  to  perform  its  respective
      obligations under this Agreement and the respective  Management  Agreement
      and Sub-Advisory Agreement to which it is a party.

            (vi) ABSENCE OF PROCEEDINGS.  There is no action, suit,  proceeding,
      inquiry or  investigation  before or brought by any court or  governmental
      agency or body, domestic or foreign,  now pending, or, to the knowledge of
      the  Advisers,  threatened  against  or  affecting  the  Advisers  or  any
      "affiliated  person" of the  Advisers (as such term is defined in the 1940
      Act) or any partners,  directors,  officers or employees of the foregoing,
      whether or not arising in the  ordinary  course of  business,  which would
      reasonably be expected to result in any Adviser Material Adverse Effect or
      materially and adversely affect the ability of the Advisers to function as
      an  investment   adviser  with  respect  to  the  Fund  or  perform  their
      obligations under the Management Agreement or the Sub-Advisory  Agreement,
      or which is required to be disclosed in the Registration Statement and the
      Prospectus.

            (vii)  Absence  of  Violation  or  Default.  Each  Adviser is not in
      violation  of  its   certificate  of   incorporation,   by-laws  or  other
      organizational  documents or in default under any agreement,  indenture or
      instrument,  except for such  violations or defaults that would not result
      in an Adviser Material Adverse Effect.

      (c) OFFICER'S  CERTIFICATES.  Any certificate signed by any officer of the
Fund or the  Advisers  delivered  to the  Representatives  or to counsel for the
Underwriters  shall be deemed a  representation  and warranty by the Fund or the
Advisers,  as the case may be, to each  Underwriter  as to the  matters  covered
thereby.

      SECTION 2. Sale and Delivery to Underwriters; Closing.

      (a) INITIAL SECURITIES. On the basis of the representations and warranties
herein  contained and subject to the terms and conditions  herein set forth, the
Fund agrees to sell to each  Underwriter,  severally  and not jointly,  and each
Underwriter, severally and not jointly, agrees to purchase from the Fund, at the
price per share set forth in  SCHEDULE B, the number of Initial  Securities  set
forth in SCHEDULE A opposite the name of such  Underwriter,  plus any additional
number of Initial  Securities  which such  Underwriter  may become  obligated to
purchase pursuant to the provisions of Section 10 hereof.

      (b) OPTION SECURITIES.  In addition,  on the basis of the  representations
and warranties  herein contained and subject to the terms and conditions  herein
set forth, the Fund hereby grants an option to the  Underwriters,  severally and
not jointly,  to purchase up to an additional [ ] Common Shares in the aggregate
at the price per share set forth in  SCHEDULE  B, less an amount per share equal
to any  dividends  or  distributions  declared  by the Fund and  payable  on the
Initial Securities but not payable on the Option  Securities.  The option hereby
granted  will expire 45 days after the date hereof and may be exercised in whole
or in part from time to time only for the  purpose of  covering  over-allotments
which  may be made in  connection  with the  offering  and  distribution  of the
Initial Securities upon notice by the  Representatives to the Fund setting forth
the number of Option  Securities as to which the several  Underwriters  are then
exercising  the option and the time and date of payment  and  delivery  for such
Option  Securities.  Any such time and date of delivery  (a "Date of  Delivery")
shall be  determined by the  Representatives,  but shall not be later than seven
full business days and no earlier than three business days after the exercise of
said option, nor in any event prior to the Closing Time, as hereinafter defined.
If the option is  exercised  as to all or any portion of the Option  Securities,
each of the Underwriters,  acting severally and not jointly,  will purchase that


                                       8
<PAGE>

proportion of the total number of Option  Securities  then being purchased which
the number of Initial  Securities  set forth in SCHEDULE A opposite  the name of
such  Underwriter  bears to the total number of Initial  Securities,  subject in
each case to such  adjustments as Merrill Lynch in its discretion  shall make to
eliminate any sales or purchases of a fractional number of Option Securities.

      (c)  PAYMENT.   Payment  of  the  purchase  price  for,  and  delivery  of
certificates  for,  the  Initial  Securities  shall  be made at the  offices  of
Clifford  Chance US LLP,  or at such other  place as shall be agreed upon by the
Representatives and the Fund, at 10:00 A.M. (Eastern time) on the third (fourth,
if the pricing occurs after 4:30 P.M.  (Eastern time) on any given day) business
day after the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such date
as shall be agreed upon by the  Representatives and the Fund (such time and date
of payment and delivery being herein called "Closing Time").

      In  addition,  in the event that any or all of the Option  Securities  are
purchased by the  Underwriters,  payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices,  or at such other place as shall be agreed upon by the  Representatives
and the Fund,  on each Date of  Delivery  as  specified  in the notice  from the
Representatives to the Fund.

      Payment  shall  be  made  to the  Fund by  wire  transfer  of  immediately
available funds to a bank account  designated by the Fund,  against  delivery to
the   Representatives  for  the  respective  accounts  of  the  Underwriters  of
certificates  for the Securities to be purchased by them. It is understood  that
each Underwriter has authorized the Representatives,  for its account, to accept
delivery  of,  receipt  for,  and make  payment of the  purchase  price for, the
Initial  Securities  and the Option  Securities,  if any, which it has agreed to
purchase.   Merrill  Lynch,  individually  and  not  as  representative  of  the
Underwriters,  may (but shall not be obligated  to) make payment of the purchase
price  for the  Initial  Securities  or the  Option  Securities,  if any,  to be
purchased by any  Underwriter  whose funds have not been received by the Closing
Time or the  relevant  Date of  Delivery,  as the case may be, but such  payment
shall not relieve such Underwriter from its obligations hereunder.

      (d) DENOMINATIONS;  REGISTRATION.  Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the  Representatives  may  request in writing at least one full
business day before the Closing Time or the  relevant  Date of Delivery,  as the
case  may  be.  The  certificates  for the  Initial  Securities  and the  Option
Securities,  if any, will be made available for examination and packaging by the
Representatives in the City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant  Date of Delivery,
as the case may be.

      SECTION 3. Covenants.

      (a) The Fund covenants with each Underwriter as follows:

            (i) COMPLIANCE WITH SECURITIES  REGULATIONS AND COMMISSION REQUESTS.
      The Fund,  subject to Section 3(a)(ii),  will comply with the requirements
      of  Rule  430A  or  Rule  434,   as   applicable,   and  will  notify  the
      Representatives  immediately,  and confirm the notice in writing, (i) when
      any  post-effective  amendment to the Registration  Statement shall become
      effective,  or any supplement to the Prospectus or any amended  Prospectus
      shall  have been  filed,  (ii) of the  receipt  of any  comments  from the
      Commission,  (iii) of any request by the  Commission  for any amendment to
      the  Registration   Statement  or  any  amendment  or  supplement  to  the
      Prospectus or for additional information,  and (iv) of the issuance by the
      Commission  of  any  stop  order  suspending  the   effectiveness  of  the
      Registration Statement or of any order preventing or suspending the use of
      any preliminary  prospectus,  or of the suspension of the qualification of
      the  Securities  for  offering  or  sale  in any  jurisdiction,  or of the
      initiation or threatening of any proceedings for any of such purposes. The


                                       9
<PAGE>

      Fund will promptly effect the filings  necessary  pursuant to Rule 497 and
      will take such steps as it deems necessary to ascertain  promptly  whether
      the form of prospectus  transmitted for filing under Rule 497 was received
      for filing by the  Commission  and,  in the event that it was not, it will
      promptly file such prospectus.  The Fund will make every reasonable effort
      to prevent  the  issuance  of any stop order,  or order of  suspension  or
      revocation of registration  pursuant to Section 8(e) of the 1940 Act, and,
      if  any  such  stop  order  or  order  of   suspension  or  revocation  of
      registration  is issued,  to obtain the  lifting  thereof at the  earliest
      possible moment.

            (ii) FILING OF  AMENDMENTS.  The Fund will give the  Representatives
      notice  of  its  intention  to  file  or  prepare  any  amendment  to  the
      Registration  Statement (including any filing under Rule 462(b)), any Term
      Sheet or any  amendment,  supplement or revision to either the  prospectus
      included in the Registration  Statement at the time it became effective or
      to the  Prospectus,  will furnish the  Representatives  with copies of any
      such documents a reasonable  amount of time prior to such proposed  filing
      or use, as the case may be, and will not file or use any such  document to
      which the Representatives or counsel for the Underwriters shall object.

            (iii) DELIVERY OF REGISTRATION STATEMENTS. The Fund has furnished or
      will  deliver to the  Representatives  and counsel  for the  Underwriters,
      without charge, signed copies of the Registration  Statement as originally
      filed and of each amendment thereto (including exhibits filed therewith or
      incorporated  by reference  therein) and signed copies of all consents and
      certificates  of experts,  and will also  deliver to the  Representatives,
      without  charge,  a  conformed  copy  of  the  Registration  Statement  as
      originally filed and of each amendment thereto (without exhibits) for each
      of the  Underwriters.  The copies of the  Registration  Statement and each
      amendment  thereto  furnished to the Underwriters will be identical to the
      electronically  transmitted  copies  thereof  filed  with  the  Commission
      pursuant to EDGAR, except to the extent permitted by Regulation S-T.

            (iv)  DELIVERY  OF  PROSPECTUSES.  The  Fund has  delivered  to each
      Underwriter, without charge, as many copies of each preliminary prospectus
      as such Underwriter reasonably requested,  and the Fund hereby consents to
      the use of such copies for  purposes  permitted  by the 1933 Act. The Fund
      will furnish to each Underwriter,  without charge,  during the period when
      the Prospectus is required to be delivered  under the 1933 Act or the 1934
      Act, such number of copies of the Prospectus (as amended or  supplemented)
      as  such  Underwriter  may  reasonably  request.  The  Prospectus  and any
      amendments or supplements  thereto  furnished to the Underwriters  will be
      identical to the electronically  transmitted copies thereof filed with the
      Commission pursuant to EDGAR, except to the extent permitted by Regulation
      S-T.

            (v) CONTINUED COMPLIANCE WITH SECURITIES LAWS. If at any time when a
      prospectus is required by the 1933 Act to be delivered in connection  with
      sales of the Securities, any event shall occur or condition shall exist as
      a result of which it is necessary,  in the  reasonable  opinion of counsel
      for the Underwriters or for the Fund, to amend the Registration  Statement
      or amend or supplement the  Prospectus in order that the  Prospectus  will
      not include any untrue  statements  of a material  fact or omit to state a
      material  fact  necessary  in  order to make the  statements  therein  not
      misleading  in the light of the  circumstances  existing at the time it is
      delivered to a purchaser,  or if it shall be necessary,  in the opinion of
      such  counsel,  at any such time to amend the  Registration  Statement  or
      amend  or  supplement   the   Prospectus  in  order  to  comply  with  the
      requirements of the 1933 Act or the Rules and  Regulations,  the Fund will
      promptly  prepare  and  file  with  the  Commission,  subject  to  Section
      3(a)(ii), such amendment or supplement as may be necessary to correct such
      statement  or  omission  or to  make  the  Registration  Statement  or the
      Prospectus comply with such requirements, and the Fund will furnish to the
      Underwriters  such number of copies of such amendment or supplement as the
      Underwriters may reasonably request.



                                       10
<PAGE>

            (vi)  BLUE SKY  QUALIFICATIONS.  The Fund  will  cooperate  with the
      Underwriters,  to qualify the  Securities  for offering and sale under the
      applicable  securities laws of such states and other  jurisdictions of the
      United  States as the  Representatives  may designate and to maintain such
      qualifications so long as required for the distribution of the Securities;
      provided,  however,  that  the Fund  shall  not be  obligated  to file any
      general  consent  to  service  of  process  or  to  qualify  as a  foreign
      corporation or as a dealer in securities in any  jurisdiction  in which it
      is not so qualified  or to subject  itself to taxation in respect of doing
      business in any jurisdiction in which it is not otherwise so subject.

            (vii) RULE 158. The Fund will timely file such  reports  pursuant to
      the 1934 Act as are necessary in order to make generally  available to its
      securityholders  as soon as  practicable  an  earnings  statement  for the
      purposes  of,  and to  provide  the  benefits  contemplated  by,  the last
      paragraph of Section 11(a) of the 1933 Act.

            (viii) USE OF PROCEEDS.  The Fund will use the net proceeds received
      by it from the  sale of the  Securities  in the  manner  specified  in the
      Prospectus under "Use of Proceeds".

            (ix)  LISTING.  The Fund will use its best  efforts  to  effect  the
      listing of the Securities on the American Stock Exchange ("AMEX").

            (x)  RESTRICTION ON SALE OF SECURITIES.  During a period of 180 days
      from the date of the  Prospectus,  the Fund  will not,  without  the prior
      written  consent of Merrill  Lynch,  (A)  directly or  indirectly,  offer,
      pledge,  sell,  contract to sell, sell any option or contract to purchase,
      purchase  any  option or  contract  to sell,  grant any  option,  right or
      warrant to purchase or otherwise  transfer or dispose of Common  Shares or
      any securities  convertible into or exercisable or exchangeable for Common
      Shares or file any registration  statement under the 1933 Act with respect
      to any of the foregoing or (B) enter into any swap or any other  agreement
      or any  transaction  that  transfers,  in whole or in  part,  directly  or
      indirectly,  the economic  consequence  of ownership of the Common Shares,
      whether any such swap or transaction  described in clause (A) or (B) above
      is to be settled by delivery of Common Shares or such other securities, in
      cash or  otherwise.  The  foregoing  sentence  shall  not apply to (1) the
      Securities to be sold  hereunder or (2) Common  Shares issued  pursuant to
      any dividend reinvestment plan.

            (xi) REPORTING  REQUIREMENTS.  The Fund,  during the period when the
      Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
      will file all documents required to be filed with the Commission  pursuant
      to the 1940 Act and the 1934 Act within the time  periods  required by the
      1940 Act and the Rules and  Regulations and the 1934 Act and the rules and
      regulations of the Commission thereunder, respectively.

            (xii)  SUBCHAPTER  M. The Fund will use its best efforts to maintain
      its qualification as a regulated  investment company under Subchapter M of
      the Code.

            (xiii) NO  MANIPULATION  OF MARKET  FOR  SECURITIES.  Except for the
      authorization  of actions  permitted  to be taken by the  Underwriters  as
      contemplated  herein  or in the  Prospectus,  the Fund  will not (a) take,
      directly or indirectly,  any action  designed to cause or to result in, or
      that would  reasonably be expected to  constitute,  the  stabilization  or
      manipulation  of the price of any security of the Fund to  facilitate  the
      sale or resale of the  Securities,  and (b) until the Closing Date, or the
      Date of Delivery,  if any, (i) sell, bid for or purchase the Securities or
      pay any person any compensation for soliciting purchases of the Securities
      or (ii) pay or agree to pay to any person any  compensation for soliciting
      another to purchase any other securities of the Fund .

            (xiv) RULE 462(B) REGISTRATION STATEMENT. If the Fund elects to rely
      upon Rule 462(b), the Fund shall file a Rule 462(b) Registration Statement
      with the  Commission  in  compliance  with  Rule  462(b)  by  10:00  P.M.,
      Washington,  D.C. time, on the date of this Agreement,  and the Fund shall


                                       11
<PAGE>

      at the time of filing either pay to the  Commission the filing fee for the
      Rule 462(b)  Registration  Statement or give irrevocable  instructions for
      the payment of such fee pursuant to Rule 111(b) under the 1933 Act.

      (b) Each Adviser  covenants with each Underwriter that for a period of 180
days from the date of the Prospectus,  each Adviser will not, without your prior
written  consent  which  consent  shall  not be  unreasonably  withheld,  act as
investment adviser to any other closed end registered investment company,  other
than Neuberger Berman Intermediate  Municipal Fund Inc. and Neuberger Berman New
York Intermediate Municipal Fund Inc., having an investment objective,  policies
and restrictions substantially similar to those of the Fund.

      SECTION 4. Payment of Expenses.

      (a) EXPENSES.  The Fund will pay all expenses  incident to the performance
of its obligations under this Agreement, including (i) the preparation, printing
and filing of the Registration  Statement  (including  financial  statements and
exhibits)  as  originally  filed  and  of  each  amendment  thereto,   (ii)  the
preparation,  printing and delivery to the  Underwriters of this Agreement,  any
Agreement  among  Underwriters  and such other  documents  as may be required in
connection  with the  offering,  purchase,  sale,  issuance  or  delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Underwriters,  including any stock or other transfer taxes
and any stamp or other duties payable upon the sale, issuance or delivery of the
Securities to the  Underwriters,  (iv) the fees and  disbursements of the Fund's
counsel, accountants and other advisors, (v) the qualification of the Securities
under  securities  laws in accordance  with the  provisions of Section  3(a)(vi)
hereof,  including  filing fees and the  reasonable  fees and  disbursements  of
counsel for the  Underwriters  in  connection  therewith,  (vi) the printing and
delivery  to  the  Underwriters  of  copies  of  each  preliminary   prospectus,
Prospectus  and any amendments or supplements  thereto,  (vii) the  preparation,
printing and delivery to the  Underwriters  of copies of the Blue Sky Survey and
any  supplement  thereto,  (viii) the fees and expenses of any transfer agent or
registrar  for the  Securities,  (ix)  the  filing  fees  incident  to,  and the
reasonable fees and  disbursements  of counsel to the Underwriters in connection
with,  the  review  by the NASD of the terms of the sale of the  Securities  and
marketing  materials,  (x) the fees and expenses incurred in connection with the
listing  of the  Securities  on the  AMEX,  and (xi) the  printing  of any Sales
Material.  Also,  the  Fund  shall  pay  to  Merrill  Lynch,  on  behalf  of the
Underwriters,  $.005  per share of the  securities  purchased  pursuant  to this
agreement as partial  reimbursement of expenses  incurred in connection with the
offering.  NB Management  shall pay  organizational  expenses and offering costs
(other than sales load) of the Fund that exceed $.03 per share.

      (b)  TERMINATION  OF  AGREEMENT.  If this  Agreement is  terminated by the
Representatives  in accordance  with the provisions of Section 5 or Section 9(a)
hereof,  the Fund or the Advisers shall  reimburse the  Underwriters  for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.

      SECTION 5. Conditions of Underwriters' Obligations.

      The obligations of the several  Underwriters  hereunder are subject to the
accuracy of the  representations  and  warranties  of the Fund and the  Advisers
contained in Section 1 hereof or in  certificates  of any officer of the Fund or
the Advisers  delivered pursuant to the provisions hereof, to the performance by
the Fund and the Advisers of their  respective  covenants and other  obligations
hereunder, and to the following further conditions:

      (a) EFFECTIVENESS OF REGISTRATION  STATEMENT.  The Registration Statement,
including any Rule 462(b)  Registration  Statement,  has become effective and at
Closing Time no stop order  suspending  the  effectiveness  of the  Registration
Statement shall have been issued under the 1933 Act, no notice or order pursuant
to Section 8(e) of the 1940 Act shall have been issued,  and no proceedings with
respect to either shall have been initiated or threatened by the Commission, and


                                       12
<PAGE>

any request on the part of the Commission for additional  information shall have
been  complied  with  to  the   reasonable   satisfaction   of  counsel  to  the
Underwriters.  A prospectus containing the Rule 430A Information shall have been
filed  with the  Commission  in  accordance  with Rule 497 (or a  post-effective
amendment  providing  such  information  shall  have  been  filed  and  declared
effective in accordance with the  requirements of Rule 430A) or, if the Fund has
elected  to rely upon Rule 434,  a Term  Sheet  shall  have been  filed with the
Commission in accordance with Rule 497.

      (b) OPINIONS OF COUNSEL FOR FUND AND THE ADVISERS.  At Closing  Time,  the
Representatives shall have received the favorable opinions,  dated as of Closing
Time, of Kirkpatrick and Lockhart LLP,  counsel for the Fund and of Willkie Farr
& Gallagher,  counsel to the  Advisers,  in form and substance  satisfactory  to
counsel for the Underwriters,  together with signed or reproduced copies of such
letters  for each of the  other  Underwriters  as to the  matters  set  forth in
EXHIBIT A and EXHIBIT B hereto.

      (c)  OPINION  OF  COUNSEL  FOR   UNDERWRITERS.   At  Closing   Time,   the
Representatives  shall have received the favorable opinion,  dated as of Closing
Time, of Clifford  Chance US LLP,  counsel for the  Underwriters,  together with
signed or  reproduced  copies of such letter for each of the other  Underwriters
with respect to the matters set forth in clauses (i), (ii),  (vi), (vii) (solely
as to preemptive or other  similar  rights  arising by operation of law or under
the  articles or by-laws of the Fund),  (viii)  through (x),  inclusive,  (xii),
(xiv) (solely as to the  information in the  Prospectus  under  "Description  of
Capital  Stock") and the  penultimate  paragraph of EXHIBIT A hereto.  In giving
such opinion such  counsel may rely,  as to all matters  governed by the laws of
jurisdictions other than the law of the State of New York and the federal law of
the  United  States,   upon  the  opinions  of  counsel   satisfactory   to  the
Representatives.  Such  counsel  may also state  that,  insofar as such  opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Fund and certificates of public officials.

      (d) OPINION OF SPECIAL  COUNSEL FOR  UNDERWRITERS.  At Closing  Time,  the
Representatives  shall have received the favorable opinion,  dated as of Closing
Time,  of  Cleary,  Gottlieb,   Steen  &  Hamilton,   special  counsel  for  the
Underwriters,   in  form  and   substance   satisfactory   to  counsel  for  the
Underwriters.

      (e) OFFICERS'  CERTIFICATES.  At Closing Time,  there shall not have been,
since the date hereof or since the respective  dates as of which  information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings,  business affairs or business prospects of the
Fund,  whether  or not  arising  in the  ordinary  course of  business,  and the
Representatives  shall have  received a  certificate  of the President or a Vice
President of the Fund and of the chief financial or chief accounting  officer of
the Fund and of the President or a Vice President of each of the Advisers, dated
as of  Closing  Time,  to the  effect  that (i) there has been no such  material
adverse change, (ii) the representations and warranties in Sections 1(a) and (b)
hereof are true and correct  with the same force and effect as though  expressly
made at and as of  Closing  Time,  (iii)  each  of the  Fund  and the  Advisers,
respectively,  has complied with all  agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to Closing  Time,  and (iv) no
stop order suspending the effectiveness of the Registration  Statement, or order
of suspension or revocation of registration pursuant to Section 8(e) of the 1940
Act,  has  been  issued  and no  proceedings  for any  such  purpose  have  been
instituted or are pending or, to the knowledge of the Fund or the Advisers,  are
contemplated by the Commission.

      (f)  ACCOUNTANT'S  COMFORT  LETTER.  At the time of the  execution of this
Agreement,  the Representatives shall have received from [ ] a letter dated such
date, in form and substance  satisfactory to the Representatives,  together with
signed or  reproduced  copies of such letter for each of the other  Underwriters
containing  statements  and  information  of the  type  ordinarily  included  in
accountants'  "comfort  letters" to  underwriters  with respect to the financial
statements  and certain  financial  information  contained  in the  Registration
Statement and the Prospectus.



                                       13
<PAGE>

      (g) BRING-DOWN COMFORT LETTER. At Closing Time, the Representatives  shall
have received from [    ] a letter, dated as of Closing Time, to the effect that
they reaffirm the statements made in the letter furnished pursuant to subsection
(f) of this Section,  except that the specified date referred to shall be a date
not more than three business days prior to Closing Time.

      (h) APPROVAL OF LISTING.  At Closing Time, the Securities  shall have been
approved for listing on the AMEX, subject only to official notice of issuance.

      (i)  EXECUTION OF  ADDITIONAL  COMPENSATION  AGREEMENT.  At Closing  Time,
Merrill Lynch shall have received the Additional Compensation  Agreement,  dated
the date of the Closing Time, as executed by NB Management.

      (j) NO  OBJECTION.  The  NASD has  confirmed  that it has not  raised  any
objection with respect to the fairness and  reasonableness  of the  underwriting
terms and arrangements.

      (k) MATERIAL AGREEMENTS.  At Closing Time, the Representatives  shall have
received a  certificate  from the  President or a Vice  President of each of the
Advisers,  dated as of Closing  Time, to the effect that EXHIBIT D is a true and
complete list of all contracts,  indentures,  mortgages, deeds of trust, loan or
credit agreements,  notes,  leases or other agreements or instruments of each of
the  Advisers  that are material to the  business or  operations  of each of the
Advisers.

      (l)  CONDITIONS  TO PURCHASE OF OPTION  SECURITIES.  In the event that the
Underwriters  exercise their option  provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities,  the representations and warranties
of the Fund contained herein and the statements in any certificates furnished by
the Fund hereunder shall be true and correct as of each Date of Delivery and, at
the relevant Date of Delivery, the Representatives shall have received:

            (i)  OFFICERS'  CERTIFICATES.   Certificates,  dated  such  Date  of
      Delivery,  of the  President  or a Vice  President  of the Fund and of the
      chief  financial  or  chief  accounting  officer  of the  Fund  and of the
      President or a Vice President of each of the Advisers  confirming that the
      information  contained in the certificate delivered by each of them at the
      Closing Time  pursuant to Section 5(e) hereof  remains true and correct as
      of such Date of Delivery.

            (ii)  OPINIONS  OF  COUNSEL  FOR  THE  FUND  AND THE  ADVISERS.  The
      favorable  opinions of Kirkpatrick and Lockhart LLP,  counsel for the Fund
      and of Willkie Farr & Gallagher,  counsel to the Advisers, dated such Date
      of  Delivery,  relating to the Option  Securities  to be purchased on such
      Date of Delivery and otherwise to the same effect as the opinion  required
      by Section 5(b) hereof.

            (iii) OPINION OF COUNSEL FOR THE UNDERWRITERS. The favorable opinion
      of Clifford Chance US LLP, counsel for the  Underwriters,  dated such Date
      of  Delivery,  relating to the Option  Securities  to be purchased on such
      Date of Delivery and otherwise to the same effect as the opinion  required
      by Section 5(c) hereof.

            (iv) OPINION OF SPECIAL COUNSEL FOR THE UNDERWRITERS.  The favorable
      opinion of Cleary,  Gottlieb,  Steen & Hamilton,  special  counsel for the
      Underwriters,  in form  and  substance  satisfactory  to  counsel  for the
      Underwriters,  dated  such  Date  of  Delivery,  relating  to  the  Option
      Securities  to be purchases on such Date of Delivery and  otherwise to the
      same effect as the opinion required by Section 5(d) hereof.

            (v) BRING-DOWN  COMFORT LETTER.  A letter from [     ],  in form and
      substance  satisfactory  to the  Representatives  and  dated  such Date of
      Delivery,  substantially  in the same  form and  substance  as the  letter
      furnished to the Representatives  pursuant to Section 5(g) hereof,  except


                                       14
<PAGE>

      that  the  "specified  date"  in the  letter  furnished  pursuant  to this
      paragraph  shall be a date not more than  five days  prior to such Date of
      Delivery.

            (vi) MATERIAL AGREEMENTS.  Certificate, dated such Date of Delivery,
      of the  President or a Vice  President of each of the Advisers  confirming
      that the information contained in the certificate delivered by them at the
      Closing Time  pursuant to Section 5(k) hereof  remains true and correct as
      of such Date of Delivery.

      (n)  ADDITIONAL  DOCUMENTS.  At Closing Time and at each Date of Delivery,
counsel for the  Underwriters  shall have been furnished with such documents and
opinions as they may reasonably require for the purpose of enabling them to pass
upon the issuance and sale of the Securities as herein contemplated, or in order
to evidence the accuracy of any of the  representations  or  warranties,  or the
fulfillment of any of the  conditions,  herein  contained;  and all  proceedings
taken by the Fund and the  Advisers  in  connection  with the  organization  and
registration  of the Fund  under the 1940 Act and the  issuance  and sale of the
Securities as herein  contemplated shall be reasonably  satisfactory in form and
substance to the Representatives and counsel for the Underwriters.

      (o) TERMINATION OF AGREEMENT.  If any condition  specified in this Section
shall  not have  been  fulfilled  when and as  required  to be  fulfilled,  this
Agreement,  or,  in  the  case  of  any  condition  to the  purchase  of  Option
Securities,  on a Date  of  Delivery  which  is  after  the  Closing  Time,  the
obligations  of  the  several  Underwriters  to  purchase  the  relevant  Option
Securities,  may be terminated by the  Representatives  by notice to the Fund at
any time at or prior to Closing Time or such Date of  Delivery,  as the case may
be, and such  termination  shall be without  liability of any party to any other
party except as provided in Section 4 and except that Sections 1, 6, 7, 8 and 13
shall survive any such termination and remain in full force and effect.

      SECTION 6. Indemnification.

      (a)  INDEMNIFICATION OF UNDERWRITERS.  The Fund and the Advisers,  jointly
and severally,  agree to indemnify and hold harmless each  Underwriter  and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, and any director,  officer, employee
or affiliate thereof as follows:

            (i) against any and all loss,  liability,  claim, damage and expense
      whatsoever,  as incurred,  arising out of any untrue  statement or alleged
      untrue  statement  of  a  material  fact  contained  in  the  Registration
      Statement (or any amendment thereto),  including the Rule 430A Information
      and the Rule 434  Information,  if applicable,  or the omission or alleged
      omission  therefrom of a material  fact  required to be stated  therein or
      necessary to make the statements  therein not misleading or arising out of
      any  untrue  statement  or alleged  untrue  statement  of a material  fact
      included in any preliminary prospectus or the Prospectus (or any amendment
      or supplement thereto), or the omission or alleged omission therefrom of a
      material fact  necessary in order to make the statements  therein,  in the
      light of the circumstances under which they were made, not misleading;

            (ii) against any and all loss, liability,  claim, damage and expense
      whatsoever,  as incurred,  to the extent of the  aggregate  amount paid in
      settlement of any litigation,  or any  investigation  or proceeding by any
      governmental  agency or body,  commenced  or  threatened,  or of any claim
      whatsoever based upon any such untrue  statement or omission,  or any such
      alleged  untrue  statement or omission;  provided that (subject to Section
      6(e) below) any such settlement is effected with the prior written consent
      of the Fund and the Advisers; and

            (iii) against any and all expense whatsoever, as incurred (including
      the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
      incurred in investigating,  preparing or defending against any litigation,
      or any  investigation  or proceeding by any  governmental  agency or body,


                                       15
<PAGE>

      commenced  or  threatened,  or any claim  whatsoever  based  upon any such
      untrue  statement or omission,  or any such  alleged  untrue  statement or
      omission,  to the  extent  that any such  expense is not paid under (i) or
      (ii) above;

provided,  however,  that this indemnity  agreement shall not apply to any loss,
liability,  claim,  damage or expense to the  extent  arising  out of any untrue
statement or omission or alleged  untrue  statement or omission made in reliance
upon and in  conformity  with written  information  furnished to the Fund or the
Advisers by any  Underwriter  through  Merrill  Lynch  expressly  for use in the
Registration  Statement  (or any  amendment  thereto),  including  the Rule 430A
Information  and the Rule 434  Information,  if applicable,  or any  preliminary
prospectus  or the  Prospectus  (or any amendment or  supplement  thereto);  and
provided  further  that  the Fund or the  Advisers  will  not be  liable  to any
Underwriter  with respect to any  Prospectus  to the extent that the Fund or the
Advisers  shall  sustain  the burden of proving  that any such loss,  liability,
claim,  damage or  expense  resulted  from the fact that  such  Underwriter,  in
contravention  of a  requirement  of this  Agreement  or  applicable  law,  sold
Securities  to a person to whom such  Underwriter  failed to send or give, at or
prior to the Closing  Time, a copy of the final  Prospectus,  as then amended or
supplemented  if:  (i) the  Company  has  previously  furnished  copies  thereof
(sufficiently  in advance of the Closing Time to allow for  distribution  by the
Closing  Time) to the  Underwriter  and the loss,  liability,  claim,  damage or
expense of such  Underwriter  resulted from an untrue statement or omission of a
material fact contained in or omitted from the preliminary  Prospectus which was
corrected in the final  Prospectus  as, if applicable,  amended or  supplemented
prior to the Closing  Time and such final  Prospectus  was required by law to be
delivered  at or prior to the  written  confirmation  of sale to such person and
(ii) such failure to give or send such final  Prospectus  by the Closing Time to
the party or parties asserting such loss,  liability,  claim,  damage or expense
would have constituted a defense to the claim asserted by such person.

      (b) INDEMNIFICATION OF FUND, ADVISERS, DIRECTORS,  DIRECTORS AND OFFICERS.
Each  Underwriter  severally  agrees to indemnify and hold harmless the Fund and
the  Advisers,  their  respective  directors  and  officers,  each of the Fund's
officers who signed the  Registration  Statement,  and each person,  if any, who
controls the Fund or the  Advisers  within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act  against any and all loss,  liability,  claim,
damage and expense  described in the indemnity  contained in  subsection  (a) of
this  Section,  as  incurred,  but only with  respect  to untrue  statements  or
omissions,  or alleged untrue statements or omissions,  made in the Registration
Statement (or any amendment  thereto),  including the Rule 430A  Information and
the Rule 434 Information,  if applicable,  or any preliminary  prospectus or the
Prospectus  (or any  amendment or  supplement  thereto) in reliance  upon and in
conformity  with  written  information  furnished to the Fund or the Advisers by
such  Underwriter  through Merrill Lynch  expressly for use in the  Registration
Statement  (or any  amendment  thereto) or such  preliminary  prospectus  or the
Prospectus (or any amendment or supplement thereto).

      (c) INDEMNIFICATION FOR MARKETING MATERIALS.  In addition to the foregoing
indemnification, the Fund and the Advisers also, jointly and severally, agree to
indemnify  and hold  harmless  each  Underwriter  and each  person,  if any, who
controls  any  Underwriter  within the  meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all loss,  liability,  claim, damage
and expense described in the indemnity  contained in Section 6(a), as limited by
the proviso set forth  therein,  with respect to any Sales  Material in the form
approved  by the  Fund  and  the  Advisers  or  its  affiliates  for  use by the
Underwriters  and  securities  firms to whom the Fund or the Advisers shall have
disseminated materials in connection with the public offering of the Securities.

      (d) ACTIONS AGAINST PARTIES;  NOTIFICATION.  Each indemnified  party shall
give notice as promptly as reasonably  practicable to each indemnifying party of
any action  commenced  against it in  respect of which  indemnity  may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying  party  from  any  liability  hereunder  to  the  extent  it is not
materially  prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity


                                       16
<PAGE>

agreement.  In the case of parties  indemnified  pursuant to Section 6(b) above,
counsel to the indemnified  parties shall be selected by Merrill Lynch,  and, in
the case of parties indemnified  pursuant to Section 6(b) above,  counsel to the
indemnified  parties  shall  be  selected  by the  Fund  and  the  Advisers.  An
indemnifying party may participate at its own expense in the defense of any such
action;  provided,  however,  that counsel to the  indemnifying  party shall not
(except  with the  consent  of the  indemnified  party)  also be  counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and  expenses  of more than one  counsel  (in  addition  to any  local  counsel)
separate from their own counsel for all  indemnified  parties in connection with
any  one  action  or  separate  but  similar  or  related  actions  in the  same
jurisdiction  arising out of the same general  allegations or circumstances.  No
indemnifying  party shall,  without the prior written consent of the indemnified
parties,  settle or  compromise  or  consent to the entry of any  judgment  with
respect  to  any  litigation,   or  any   investigation  or  proceeding  by  any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which  indemnification  or  contribution  could be sought  under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional  release of each indemnified  party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.

      (e) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE.  If at any time an
indemnified  party shall have requested an  indemnifying  party to reimburse the
indemnified  party for fees and  expenses of counsel,  such  indemnifying  party
agrees that it shall be liable for any settlement of the nature  contemplated by
Section 6(a)(ii)  effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such  indemnifying  party of the
aforesaid  request,  (ii) such indemnifying  party shall have received notice of
the terms of such  settlement  at least 30 days prior to such  settlement  being
entered into and (iii) such  indemnifying  party shall not have  reimbursed such
indemnified  party in  accordance  with such  request  prior to the date of such
settlement; provided that an indemnifying party shall not be liable for any such
settlement effected without its consent if such indemnifying party, prior to the
date of such  settlement,  (1) reimburses such  indemnified  party in accordance
with such  request  for the amount of such fees and  expenses  of counsel as the
indemnifying  party  believes in good faith to be  reasonable,  and (2) provides
written notice to the indemnified party that the indemnifying  party disputes in
good faith the reasonableness of the unpaid balance of such fees and expenses.

      (f)  INDEMNIFICATION  BY THE FUND. Any  indemnification or contribution by
the Fund shall be subject to the  requirements  and limitations of Section 17(i)
of the 1940 Act.

      SECTION 7. Contribution.

      If the indemnification  provided for in Section 6 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified  party in respect
of any losses,  liabilities,  claims,  damages or expenses  referred to therein,
then each  indemnifying  party shall  contribute to the aggregate amount of such
losses,  liabilities,  claims, damages and expenses incurred by such indemnified
party,  as incurred,  (i) in such  proportion as is  appropriate  to reflect the
relative  benefits received by the Fund and the Advisers on the one hand and the
Underwriters  on the other hand from the offering of the Securities  pursuant to
this Agreement or (ii) if the allocation provided by clause (i) is not permitted
by applicable  law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Fund and the Advisers on the one hand and of the  Underwriters  on the other
hand in  connection  with the  statements  or omissions  which  resulted in such
losses, liabilities,  claims, damages or expenses, as well as any other relevant
equitable considerations.

      The  relative  benefits  received by the Fund and the  Advisers on the one
hand and the  Underwriters  on the other hand in connection with the offering of
the  Securities  pursuant  to this  Agreement  shall be deemed to be in the same


                                       17
<PAGE>

respective  proportions  as the  total net  proceeds  from the  offering  of the
Securities  pursuant to this Agreement (before deducting  expenses)  received by
the  Fund and the  total  underwriting  discount  received  by the  Underwriters
(whether from the Fund or otherwise),  in each case as set forth on the cover of
the Prospectus,  or, if Rule 434 is used, the corresponding location on the Term
Sheet,  bear to the aggregate initial public offering price of the Securities as
set forth on such cover.

      The  relative  fault of the Fund and the  Advisers on the one hand and the
Underwriters  on the other hand shall be determined by reference to, among other
things,  whether any such untrue or alleged untrue  statement of a material fact
or omission or alleged  omission to state a material fact relates to information
supplied by the Fund or the  Advisers or by the  Underwriters  and the  parties'
relative intent, knowledge,  access to information and opportunity to correct or
prevent such statement or omission.

      The Fund,  the  Advisers and the  Underwriters  agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined by
pro rata  allocation  (even if the  Underwriters  were treated as one entity for
such purpose) or by any other method of  allocation  which does not take account
of the  equitable  considerations  referred  to  above  in this  Section  7. The
aggregate amount of losses,  liabilities,  claims, damages and expenses incurred
by an indemnified  party and referred to above in this Section 7 shall be deemed
to include any legal or other expenses  reasonably  incurred by such indemnified
party in investigating,  preparing or defending  against any litigation,  or any
investigation  or proceeding by any  governmental  agency or body,  commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.

      Notwithstanding  the provisions of this Section 7, no Underwriter shall be
required  to  contribute  any  amount in excess of the amount by which the total
price at which the Securities  underwritten  by it and distributed to the public
were  offered  to the  public  exceeds  the  amount of any  damages  which  such
Underwriter  has otherwise  been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.

      No person  guilty of fraudulent  misrepresentation  (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

      For  purposes of this  Section 7, each  person,  if any,  who  controls an
Underwriter  within  the  meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Fund and each director of the Advisers,  respectively, each
officer of the Fund who signed the Registration  Statement,  and each person, if
any, who controls the Fund or the Advisers,  within the meaning of Section 15 of
the  1933  Act or  Section  20 of the 1934 Act  shall  have the same  rights  to
contribution  as the  Fund and the  Advisers,  respectively.  The  Underwriters'
respective  obligations to contribute  pursuant to this Section 7 are several in
proportion  to the  number  of  Initial  Securities  set  forth  opposite  their
respective names in SCHEDULE A hereto and not joint.

      SECTION 8. Representations, Warranties and Agreements to Survive Delivery.

      All representations, warranties and agreements contained in this Agreement
or in  certificates of officers of the Fund or the Advisers  submitted  pursuant
hereto,  shall remain operative and in full force and effect,  regardless of any
investigation made by or on behalf of any Underwriter or controlling  person, or
by or on behalf of the Fund or the Advisers,  and shall survive  delivery of the
Securities to the Underwriters.

      SECTION 9. Termination of Agreement.

      (a)  TERMINATION;   GENERAL.   The   Representatives  may  terminate  this
Agreement, by notice to the Fund, at any time at or prior to Closing Time (i) if
there has been,  since the date hereof or since the respective dates as of which
information  is given in the  Prospectus,  any  material  adverse  change in the


                                       18
<PAGE>

condition,  financial or  otherwise,  or in the  earnings,  business  affairs or
business  prospects of the Fund or the  Advisers,  whether or not arising in the
ordinary course of business,  or (ii) if there has occurred any material adverse
change in the  financial  markets  in the  United  States  or the  international
financial  markets,  any outbreak of hostilities or escalation  thereof or other
calamity or crisis or any change or development  involving a prospective  change
in national or international  political,  financial or economic  conditions,  in
each  case the  effect of which is such as to make it,  in the  judgment  of the
Representatives,  impracticable  or  inadvisable  to market the Securities or to
enforce  contracts  for the sale of the  Securities,  or (iii) if trading in the
Common  Shares  of the Fund has been  suspended  or  materially  limited  by the
Commission or the AMEX, or if trading  generally on the New York Stock  Exchange
or the AMEX or in the Nasdaq  National  Market has been  suspended or materially
limited,  or minimum or maximum  prices for trading have been fixed,  or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission,  the NASD or any other governmental authority, or
a  material   disruption  has  occurred  in  commercial  banking  or  securities
settlement  or  clearance  services in the United  States,  or (iv) if a banking
moratorium has been declared by either Federal or New York authorities.

      (b) LIABILITIES. If this Agreement is terminated pursuant to this Section,
such  termination  shall be without  liability  of any party to any other  party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7, 8 and 13 shall survive such termination and remain in full force and effect.

      SECTION 10. Default by One or More of the Underwriters.

      If one or more of the Underwriters shall fail at Closing Time or a Date of
Delivery to purchase the  Securities  which it or they are obligated to purchase
under this Agreement (the "Defaulted  Securities"),  the  Representatives  shall
have the right, within 24 hours thereafter, to make arrangements for one or more
of the non-defaulting Underwriters,  or any other underwriters, to purchase all,
but not less than all, of the  Defaulted  Securities  in such  amounts as may be
agreed  upon  and  upon  the  terms   herein  set  forth;   if,   however,   the
Representatives  shall not have completed such arrangements  within such 24-hour
period, then:

      (a) if the  number of  Defaulted  Securities  does not  exceed  10% of the
number of  Securities to be purchased on such date,  each of the  non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective underwriting obligations
hereunder  bear  to  the   underwriting   obligations   of  all   non-defaulting
Underwriters, or

      (b) if the number of  Defaulted  Securities  exceeds  10% of the number of
Securities to be purchased on such date,  this Agreement or, with respect to any
Date of Delivery  which occurs after the Closing  Time,  the  obligation  of the
Underwriters  to purchase  and of the Fund to sell the Option  Securities  to be
purchased and sold on such Date of Delivery shall terminate without liability on
the part of any non-defaulting Underwriter.

      No action taken  pursuant to this  Section  shall  relieve any  defaulting
Underwriter from liability in respect of its default.

      In the event of any such default which does not result in a termination of
this  Agreement or, in the case of a Date of Delivery which is after the Closing
Time,  which  does  not  result  in a  termination  of  the  obligation  of  the
Underwriters to purchase and the Fund to sell the relevant Option Securities, as
the case may be, either the  Representatives or the Fund shall have the right to
postpone Closing Time or the relevant Date of Delivery,  as the case may be, for
a period not exceeding seven days in order to effect any required changes in the
Registration  Statement or Prospectus or in any other documents or arrangements.
As used herein,  the term  "Underwriter"  includes any person substituted for an
Underwriter under this Section 10.



                                       19
<PAGE>

      SECTION 11. Notices.

      All notices  and other  communications  hereunder  shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication.  Notices to the Underwriters shall be directed to the
Representatives,  c/o Merrill Lynch & Co., North Tower,  World Financial Center,
New York, New York 10080,  attention of Equity Capital  Markets;  notices to the
Fund shall be directed to the office of Neuberger Berman  Management Inc. at 605
Third Avenue, New York, New York 10158-0180,  attention of Peter E. Sundman, cc:
Art Delibert,  Kirkpatrick & Lockhart,  599 Lexington Avenue, New York, New York
10022;  and notices to the Advisers shall be directed to the office of Neuberger
Berman  Management  Inc. at 605 Third  Avenue,  New York,  New York  10158-0180,
attention of Peter E. Sundman,  cc: Ellen Metzger,  Neuberger Berman  Management
Inc., 605 Third Avenue, New York, New York 10158-0180.

      SECTION 12. Parties.

      This  Agreement  shall  inure to the  benefit of and be  binding  upon the
Underwriters,   the  Fund,  the  Advisers  and  their  respective  partners  and
successors.  Nothing  expressed or  mentioned  in this  Agreement is intended or
shall be  construed  to give any  person,  firm or  corporation,  other than the
Underwriters,  the Fund,  the Advisers and their  respective  successors and the
controlling  persons  and  officers,  directors  and  directors  referred  to in
Sections  6 and 7 and  their  heirs  and  legal  representatives,  any  legal or
equitable  right,  remedy or claim under or in respect of this  Agreement or any
provision  herein  contained.  This  Agreement and all conditions and provisions
hereof  are  intended  to  be  for  the  sole  and  exclusive   benefit  of  the
Underwriters,   the  Fund,  the  Advisers  and  their  respective  partners  and
successors,  and said controlling persons and officers,  and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation.  No purchaser of Securities from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.

      SECTION 13. GOVERNING LAW AND TIME.

      THIS AGREEMENT  SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE  WITH THE
LAWS OF THE STATE OF NEW YORK  APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
IN SAID STATE.  UNLESS  OTHERWISE  EXPLICITLY  PROVIDED,  SPECIFIED TIMES OF DAY
REFER TO NEW YORK CITY TIME.

SECTION 14. Effect of Headings.

      The Article and Section headings herein are for convenience only and shall
not affect the construction hereof.




                                       20
<PAGE>

      If  the  foregoing  is  in  accordance  with  your  understanding  of  our
agreement,  please sign and return to us a counterpart  hereof,  whereupon  this
instrument,  along with all counterparts,  will become a binding agreement among
the Underwriters, the Fund and the Advisers in accordance with its terms.



                                          Very truly yours,


                                          Neuberger Berman Intermediate
                                             Municipal Fund Inc.


                                          By:
                                              ----------------------------------
                                             Name:
                                             Title:


                                          Neuberger Berman Management Inc.


                                          By:
                                              ----------------------------------
                                             Name:
                                             Title:


                                          Neuberger Berman, LLC


                                          By:
                                              ----------------------------------
                                             Name:
                                             Title:

CONFIRMED AND ACCEPTED,
  as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
               INCORPORATED
[Other Underwriters]


By:   MERRILL LYNCH, PIERCE, FENNER & SMITH
                     INCORPORATED


By:
   --------------------------------
   Authorized Signatory

For themselves and as
Representatives of the
other Underwriters named
in SCHEDULE A hereto.





                                       21
<PAGE>

                                   SCHEDULE A







                                                                 Number of
                   Name of Underwriter                      Initial Securities
                   -------------------                      ------------------

Merrill Lynch, Pierce, Fenner & Smith Incorporated ....
                                                                 [          ]
[Other Underwriters]...................................
                                                                 [          ]
      Total............................................
                                                                 [          ]







                                    Sch A-1

<PAGE>


                                   SCHEDULE B

              NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.
                   [               ] Shares of Common Stock
                          (Par Value $.0001 Per Share)



      1. The  initial  public  offering  price  per  share  for the  Securities,
determined as provided in said Section 2, shall be $15.00.

      2. The  purchase  price  per share  for the  Securities  to be paid by the
several  Underwriters shall be $[ ], being an amount equal to the initial public
offering price set forth above less $_____ per share; provided that the purchase
price per share for any Option  Securities  purchased  upon the  exercise of the
over-allotment  option  described  in Section 2(b) shall be reduced by an amount
per share  equal to any  dividends  or  distributions  declared  by the Fund and
payable on the Initial Securities but not payable on the Option Securities.















                                     Sch B-1

<PAGE>


                                                                       Exhibit A

                            FORM OF OPINION OF FUND'S
                       COUNSEL TO BE DELIVERED PURSUANT TO
                                  SECTION 5(b)

      (i) The  Fund  has  been  duly  organized  and is  validly  existing  as a
corporation in good standing under the laws of the State of Maryland.

      (ii) The Fund has corporate  power and authority to own, lease and operate
its properties and to conduct its business as described in the Prospectus and to
enter into and perform its obligations under the Purchase Agreement.

      (iii) The Fund is duly  qualified  as a foreign  corporation  to  transact
business  and is in good  standing  in each  other  jurisdiction  in which  such
qualification  is  required,  whether by reason of the  ownership  or leasing of
property or the conduct of  business,  except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.

      (iv) To our knowledge, the Fund does not have any subsidiaries.

      (v) The authorized,  issued and outstanding  shares of common stock of the
Fund is as set forth in the Prospectus under the caption  "Description of Shares
- -- Common Shares"  (except for  subsequent  issuances,  if any,  pursuant to the
Purchase  Agreement);  all issued and outstanding  shares of common stock of the
Fund  have  been duly  authorized  and  validly  issued  and are fully  paid and
non-assessable  and  have  been  offered  and sold or  exchanged  by the Fund in
compliance with all applicable laws (including,  without limitation, federal and
state securities laws); the Common Shares conform in all material respects as to
legal matters to all statements relating thereto contained in the Prospectus and
such  description  conforms in all material  respects to the rights set forth in
the instruments  defining the same; and none of the outstanding shares of common
stock of the Fund was issued in violation  of the  preemptive  or other  similar
rights of any securityholder of the Fund.

      (vi) The Securities to be purchased by the Underwriters from the Fund have
been duly authorized for issuance and sale to the  Underwriters  pursuant to the
Purchase  Agreement  and,  when issued and delivered by the Fund pursuant to the
Purchase  Agreement  against  payment  of the  consideration  set  forth  in the
Purchase Agreement, will be validly issued and fully paid and non-assessable.

      (vii) The issuance of the Securities is not subject to preemptive or other
similar rights of any securityholder of the Fund.

      (viii) The  Purchase  Agreement  has been duly  authorized,  executed  and
delivered by the Fund.

      (ix) The Registration  Statement,  including any Rule 462(b)  Registration
Statement,  has been declared  effective under the 1933 Act; any required filing
of the  Prospectus  pursuant  to Rule 497(c) or Rule 497(h) has been made in the
manner and within the time period  required by Rule 497; and, to our  knowledge,
no stop order suspending the effectiveness of the Registration  Statement or any
Rule 462(b)  Registration  Statement has been issued under the 1933 Act, and, to
our knowledge,  no order of suspension or revocation of registration pursuant to
Section 8(e) of the 1940 Act has been issued,  and no  proceedings  for any such
purpose have been instituted or are pending or threatened by the Commission.

      (x) The  Registration  Statement,  including any Rule 462(b)  Registration
Statement,  the  Rule  430A  Information  and  the  Rule  434  Information,   as
applicable,  the Prospectus and each amendment or supplement to the Registration


                                      A-1
<PAGE>

Statement and Prospectus as of their respective  effective or issue dates (other
than the financial  statements  and  supporting  schedules  included  therein or
omitted therefrom, as to which we need express no opinion), and the notification
on Form N-8A complied as to form in all material  respects with the requirements
of the 1933 Act, the 1940 Act and the Rules and Regulations.

      (xi) If Rule 434 has been relied upon, the Prospectus was not  "materially
different,"  as such term is used in Rule 434, from the  prospectus  included in
the Registration Statement at the time it became effective.

      (xii) The form of certificate  used to evidence the Common Shares complies
in all material respects with all applicable  statutory  requirements,  with any
applicable requirements of the articles of incorporation and by-laws of the Fund
and the requirements of the American Stock Exchange.

      (xiii) To our  knowledge,  there is not pending or threatened  any action,
suit, proceeding, inquiry or investigation,  to which the Fund is a party, or to
which the  property  of the Fund is  subject,  before or brought by any court or
governmental  agency or body,  which would reasonably be expected to result in a
Material Adverse Effect, or which would reasonably be expected to materially and
adversely affect the properties or assets of the Fund or the consummation of the
transactions  contemplated  in the Purchase  Agreement or the performance by the
Fund of its obligations thereunder.

      (xiv) The information in the Prospectus under  "Description of Shares" and
"Tax  Matters"  (except as to  California  or New York tax  matters)  and in the
Registration  Statement under Item 29  (Indemnification),  to the extent that it
constitutes  matters of law, summaries of legal matters,  the Fund's articles of
incorporation and by-laws or legal proceedings,  or legal conclusions,  has been
reviewed by us and is correct in all material respects.

      (xv) Each of the Management  Agreement,  the Sub-Advisory  Agreement,  the
Administration Agreement, the Custodian Agreement, the Transfer Agency Agreement
and the Purchase Agreement,  as and to the extent they call for representations,
warranties, or performance by the Fund, comply in all material respects with all
applicable  provisions of the 1940 Act,  Advisers Act, the Rules and Regulations
and the Advisers Act Rules and Regulations.

      (xvi) The Fund is duly registered  with the Commission  under the 1940 Act
as a  closed-end  non-diversified  management  investment  company;  and, to our
knowledge,  no order of suspension or revocation of such  registration  has been
issued or proceedings therefor initiated or threatened by the Commission.

      (xvii) To our knowledge,  no person is serving as an officer,  director or
investment  adviser of the Fund except in  accordance  with the 1940 Act and the
Rules and Regulations and the Investment Advisers Act and the Advisers Act Rules
and Regulations. Except as disclosed in the Registration Statement or Prospectus
(or any  amendment  or  supplement  to  either of them),  to our  knowledge,  no
director of the Fund is an  "interested  person" (as defined in the 1940 Act) of
the  Fund  or an  "affiliated  person"  (as  defined  in  the  1940  Act)  of an
Underwriter.

      (xviii) To our knowledge,  there are no statutes or  regulations  that are
required to be described in the Prospectus that are not described as required.

      (xix) All  descriptions  in the  Registration  Statement of contracts  and
other  documents  to which  the Fund is a party  are  accurate  in all  material
respects.  To our  knowledge,  there are no franchises,  contracts,  indentures,
mortgages,  loan agreements,  notes, leases or other instruments  required to be
described  or  referred  to in the  Registration  Statement  or to be  filed  as
exhibits  thereto other than those  described or referred to therein or filed or


                                      A-2
<PAGE>

incorporated by reference as exhibits thereto,  and the descriptions  thereof or
references thereto are correct in all material respects.

      (xx) To our  knowledge,  the Fund is not in  violation  of its articles of
incorporation  or  by-laws  and  no  default  by the  Fund  exists  in  the  due
performance  or observance of any material  obligation,  agreement,  covenant or
condition contained in any contract, indenture,  mortgage, loan agreement, note,
lease or other  agreement or instrument  that is described or referred to in the
Registration  Statement or the Prospectus or filed or  incorporated by reference
as an exhibit to the Registration Statement.

      (xxi) To our  knowledge  after  reasonable  inquiry,  no filing  with,  or
authorization, approval, consent, license, order, registration, qualification or
decree of, any federal or Maryland  court or  governmental  authority  or agency
(other  than  under  the 1933 Act,  the 1940 Act and the Rules and  Regulations,
which have been obtained, or as may be required under the securities or blue sky
laws of the  various  states,  in each  case,  as to  which we need  express  no
opinion)  is   necessary  or  required  in   connection   with  the  Fund's  due
authorization,  execution  and  delivery of the  Purchase  Agreement  or for the
offering, issuance or sale of the Securities.

      (xxii) The execution,  delivery and performance of the Purchase  Agreement
by the Fund and the consummation by the Fund of the transactions contemplated in
the Purchase Agreement and in the Registration Statement (including the issuance
and  sale of the  Securities  and the use of the  proceeds  from the sale of the
Securities as described in the  Prospectus  under the caption "Use of Proceeds")
and compliance by the Fund with its obligations under the Purchase  Agreement do
not and will not,  whether with or without the giving of notice or lapse of time
or both,  conflict with or constitute a breach of, or default or Repayment Event
(as defined in Section 1(a)(xiii) of the Purchase  Agreement) under or result in
the creation or imposition of any lien,  charge or encumbrance upon any property
or assets of the Fund pursuant to any  contract,  indenture,  mortgage,  deed of
trust,  loan  or  credit  agreement,  note,  lease  or any  other  agreement  or
instrument,  known to us,  to which the Fund is a party or by which it is bound,
or to which any of the  property  or assets of the Fund is subject  (except  for
such  conflicts,  breaches or defaults or liens,  charges or  encumbrances  that
would not have a  Material  Adverse  Effect),  nor will such  action by the Fund
result in any violation of the provisions of the charter or by-laws of the Fund,
or any applicable law,  statute,  rule,  regulation,  judgment,  order,  writ or
decree, known to us, of any government, government instrumentality or federal or
Maryland  court,  having  jurisdiction  over the Fund or any of its  properties,
assets or operations.

      (xxiii)  The   Purchase   Agreement,   the   Management   Agreement,   the
Administration  Agreement,  the  Custodian  Agreement  and the  Transfer  Agency
Agreement have each been duly authorized by all requisite  action on the part of
the Fund,  executed and  delivered by the Fund,  as of the dates noted  therein.
Assuming due authorization,  execution and delivery by the other parties thereto
with  respect  to the  Administration  Agreement,  Custodian  Agreement  and the
Transfer Agency Agreement,  each of the Management Agreement, the Administration
Agreement, the Custodian Agreement and the Transfer Agency Agreement constitutes
a valid and binding  agreement of the Fund,  enforceable in accordance  with its
terms,  except as affected by  bankruptcy,  insolvency,  fraudulent  conveyance,
reorganization,  moratorium  and other  similar  laws  relating to or  affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) or an implied  covenant of good faith and fair
dealing,  except as rights to indemnity  thereunder may be limited by federal or
state securities laws.

      In addition,  we have  participated in the preparation of the Registration
Statement  and the  Prospectus  and  participated  in  discussions  with certain
officers,  directors  and  employees  of the Fund,  representatives  of [ ], the



                                      A-3
<PAGE>

independent  accountants who examined the statement of assets and liabilities of
the Fund included or incorporated by reference in the Registration Statement and
the Prospectus,  and you and your  representatives  and we have reviewed certain
Fund records and documents. While we have not independently verified and are not
passing  upon,  and  do  not  assume  any  responsibility   for,  the  accuracy,
completeness  or  fairness  of the  information  contained  in the  Registration
Statement and the  Prospectus,  on the basis of such  participation  and review,
nothing has come to our attention that leads us to believe that the Registration
Statement  (except for  financial  statements,  supporting  schedules  and other
financial  data  included  therein  or  omitted  therefrom  and for  statistical
information  derived from such  financial  statements,  supporting  schedules or
other  financial  data,  as to which we do not express any belief),  at the time
such Registration Statement became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated  therein
or  necessary  to make  the  statements  therein  not  misleading  or  that  the
Prospectus  (except for  financial  statements,  supporting  schedules and other
financial  data  included  therein  or  omitted  therefrom  and for  statistical
information  derived from such  financial  statements,  supporting  schedules or
other financial data, as to which we do not express any belief), at the time the
Prospectus  was issued,  or at the Closing Time,  included or includes an untrue
statement  of a  material  fact or  omitted  or omits to state a  material  fact
necessary  in  order  to  make  the  statements  therein,  in the  light  of the
circumstances under which they were made, not misleading.












                                      A-4
<PAGE>

                                                                       Exhibit B

                     FORM OF OPINION OF ADVISERS' COUNSEL
                   TO BE DELIVERED PURSUANT TO SECTION 5(b)

      (i) NB  Management is validly  existing as a corporation  in good standing
under  the  laws  of New  York,  and NB LLC is  validly  existing  as a  limited
liability company in good standing under the laws of Delaware.

      (ii) Each Adviser has full corporate or limited liability company,  as the
case may be, power and authority to own, lease and operate its properties and to
conduct  its  business  as  described  in the  Prospectus  and to enter into and
perform its obligations under the Purchase Agreement.

      (iii) Each Adviser is duly  qualified as a foreign  corporation or limited
liability  company,  as the case may be,  to  transact  business  and is in good
standing  in each  state set  forth  opposite  its name on Annex A hereto  (such
counsel  being  entitled  to rely in respect of the  opinion in this clause upon
certificates  of government  officials in the relevant  jurisdictions  regarding
each  Adviser's  qualification  as a foreign  corporation  or limited  liability
company,  as the case may be, and in good  standing and in respect of matters of
fact upon certificates of the Advisers).

      (iv) Each Adviser is duly  registered with the Commission as an investment
adviser  under the Advisers Act and is not  prohibited  by the Advisers Act, the
Advisers Act Rules and  Regulations,  the 1940 Act or the Rules and  Regulations
from acting under the Management  Agreement for the Fund as  contemplated by the
Prospectus.

      (v) The Purchase  Agreement,  the Management  Agreement,  the Sub-Advisory
Agreement and the Additional  Compensation  Agreement have been duly authorized,
executed  and  delivered  by the  respective  Adviser,  and  (assuming  the  due
authorization,  execution and delivery by each of the other parties thereto) the
Management Agreement, the Sub-Advisory Agreement and the Additional Compensation
Agreement  each  constitutes a valid and binding  obligation  of the  respective
Adviser,  enforceable  against it in  accordance  with its  terms,  as rights to
indemnity and  contribution  hereunder and  thereunder  may be limited by public
policy or federal or state securities laws and except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization,  moratorium and other similar
laws relating to or affecting  creditors'  rights  generally,  general equitable
principles  (whether  considered  in a  proceeding  in  equity or at law) and an
implied  covenant of good faith and fair dealing  (except that counsel may state
that  it  expresses  no  opinion  as  to  the   reasonableness  or  fairness  of
compensation   payable  under  the  Management  Agreement  or  the  Sub-Advisory
Agreement).

      (vi) To our  knowledge,  there is not  pending or  threatened  any action,
suit, proceeding,  inquiry or investigation,  to which the Advisers are a party,
or to which the  property of the  Advisers is subject,  before or brought by any
court or  governmental  agency  or  body,  domestic  or  foreign,  which  would,
individually  or in the  aggregate,  reasonably  be  expected  to  result in any
Adviser  Material  Adverse Effect or materially and adversely affect the ability
of  the  Advisers  to  function  as  an  investment  adviser  or  perform  their
obligations under the Management Agreement or the Sub-Advisory Agreement.

      (vii) To our  knowledge,  no  filing  with,  or  authorization,  approval,
consent, license, order, registration, qualification or decree of, any New York,
Delaware  (insofar as Delaware  limited  liability  company law is concerned) or
United  States  federal  court or  governmental  authority or agency (other than
under the 1933 Act, the 1940 Act and the Rules and Regulations,  which have been
obtained,  or as may be required  under the  securities  or blue sky laws of the


                                      B-1
<PAGE>

various  states,  in each  case,  as to which we need  express  no  opinion)  is
necessary or required in connection  with the due  authorization,  execution and
delivery of the Purchase Agreement.

      (viii) The execution,  delivery and performance of the Purchase Agreement,
the  Management  Agreement,   the  Sub-Advisory  Agreement,  the  Administration
Agreement and the Additional  Compensation Agreement and the consummation of the
transactions  contemplated in the Purchase Agreement,  the Management Agreement,
the  Sub-Advisory  Agreement,  the  Administration  Agreement and the Additional
Compensation  Agreement and in the Registration Statement and compliance by each
Adviser  that is a party  thereto  with  their  obligations  under the  Purchase
Agreement,   the  Management   Agreement,   the  Sub-Advisory   Agreement,   the
Administration  Agreement and the Additional  Compensation  Agreement (i) do not
and will not,  whether  with or without the giving of notice or lapse of time or
both, conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(xiii) of the Purchase  Agreement) under or result in the
creation or imposition of any lien,  charge or encumbrance  upon any property or
assets of the Advisers pursuant to any contract,  indenture,  mortgage,  deed of
trust,  loan  or  credit  agreement,  note,  lease  or any  other  agreement  or
instrument,  set  forth  in the  certificate  provided  by each of the  Advisers
pursuant to Section 5(l) of the Purchase Agreement,  (except for such conflicts,
breaches or defaults or liens,  charges or  encumbrances  that would not have an
Adviser  Material  Adverse  Effect),  (ii) nor will  such  action  result in any
violation of (A) the  provisions of the charter or by-laws of the  Advisers,  or
(B) any applicable law,  statute,  rule,  regulation,  judgment,  order, writ or
decree,  known to us, of any New York,  Delaware  (insofar as  Delaware  limited
liability  company  law is  concerned)  or  United  States  federal  government,
government  instrumentality or court,  having  jurisdiction over the Advisers or
any of its properties, assets or operations (except for such conflicts, breaches
or defaults  or liens,  charges or  encumbrances  that would not have an Adviser
Material Adverse Effect).





                                      B-2
<PAGE>

                                                                         Annex A

Neuberger Berman Management Inc.
- --------------------------------

California
Georgia
Illinois
Maryland
Massachusetts
Texas
Colorado

Neuberger Berman, LLC
- ---------------------

California
District of Columbia
Florida
Georgia
Illinois
Massachusetts
Missouri
New York
North Dakota
Ohio
Oklahoma
Pennsylvania
Texas






                                      B-3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2H
<SEQUENCE>8
<FILENAME>nb535537.txt
<DESCRIPTION>EXHIBIT 99.2H2 MSTR AGRMN UUNDERWRITERS
<TEXT>
                       MASTER AGREEMENT AMONG UNDERWRITERS
                       -----------------------------------

                                                                  April 15, 1985

Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, N.Y. 10281-1305

Dear Sirs:

      We understand that from time to time you may act as  Representative  or as
one  of  the  Representatives  of  the  several  underwriters  of  offerings  of
securities of various  issuers.  This  Agreement  shall apply to any offering of
securities  in  which  we elect to act as an  underwriter  after  receipt  of an
invitation  from you  which  shall  identify  the  issuer,  contain  information
regarding certain  information terms of the securities to be offered and specify
the  amount  of  our  proposed   participation   and  the  names  of  the  other
Representatives,  if any, and that our  participation  as an  underwriter in the
offering shall be subject to the provisions of this  Agreement.  Your invitation
will include instructions for our acceptance of such invitation.  At or prior to
the time of an offering, you will advise us, to the extent applicable, as to the
expected  offering date, the expected  closing date, the initial offering price,
the  interest  or  dividend  rate (or the  method  by which  such  rate is to be
determined) the conversion  price, that  underwriting  discount,  the management
fee, the selling  concession  and the  reallowance,  except that if the offering
price of the securities is to be determined as  contemplated  by Rule 430A under
the  Securities Act of 1933 (such  procedure  being  hereinafter  referred to as
"430A  Pricing"),  you  shall  so  advise  us  and  shall  specify  the  maximum
underwriting discount,  management fee and selling concession.  Such information
may be  conveyed  by you in one  or  more  communications  (such  communications
received  by us  with  respect  to the  offering  are  hereinafter  collectively
referred to as the  "Invitation").  If the Purchase  Agreement  (as  hereinafter
defined)  provides  for  the  granting  of  an  option  to  purchase  additional
securities to cover  over-allotments or otherwise (an  "over-allotment  option")
you will  notify  us,  in the  Invitation,  of such  option  and of our  maximum
obligation upon exercise of such option.

      This Agreement, as amended or supplemented by the Invitation, shall become
effective with respect to our  participation in an offering of securities if you
receive  our  oral or  written  acceptance  and  you do not  receive  a  written
communication  revoking our  acceptance  prior to the time and date specified in
the Invitation (our unrevoked  acceptance after expiration of such time and date
being  hereinafter  referred  to  as  our  "Acceptance").  Our  Acceptance  will
constitute our confirmation that, except as otherwise stated in such Acceptance,
each statement included in the Master  Underwriters'  Questionnaire set forth as
Exhibit A hereto (or  otherwise  furnished to us) is correct.  The issuer of the
securities  in any offering of  securities  made  pursuant to this  Agreement is
hereinafter  referred to as the  "Issuer".  If the Purchase  Agreement  does not
provide  for an  over-allotment  option,  the  securities  to be  purchased  arc
hereinafter referred to as the "Securities";  if the Purchase Agreement provides
for an  over-allotment  option,  the securities the Underwriters (as hereinafter
defined) are initially  obligated to purchase pursuant to the Purchase Agreement
are hereinafter  called the "Initial  Securities" and any additional  securities

<PAGE>

which  may  be  purchased  upon  exercise  of  the  over-allotment   option  are
hereinafter called the "Option Securities",  with the Initial Securities and all
or any part of the Option Securities being hereinafter  collectively referred to
as the  "Securities".  Any  underwriters  of  Securities  under this  Agreement,
including  the  Representatives  (as  hereinafter   defined),   are  hereinafter
collectively  referred to as the "Underwriters".  All references herein to "you"
or to the  "Representatives"  shall mean Merrill Lynch,  Pierce,  Fenner & Smith
Incorporated and the other firms, if any, which are named as  Representatives in
the  Invitation.  The  Securities to be offered may, but need not, be registered
for a delayed or continuous  offering  pursuant to Rule 415 under the Securities
Act of 1933 (the "1933 Act").

      The following  provisions of this Agreement shall apply separately to each
individual offering of Securities. This Agreement may be supplemented or amended
by you by written  notice to us and,  except for  supplements  or amendments set
forth in an Invitation relating to a particular offering of Securities, any such
supplement or amendment to this Agreement shall be effective with respect to any
offering of Securities to which this  Agreement  applies after this Agreement is
so amended or supplemented.

      Section 1. PURCHASE AGREEMENT: AUTHORITY OF REPRESENTATIVES.  We authorize
you to execute and deliver a purchase  agreement and any amendment or supplement
thereto  and  any  associated   Terms  Agreement  or  other  similar   agreement
(collectively,  the "Purchase  Agreement")  on our behalf with the Issuer and/or
any selling  securityholder  with respect to the  Securities in such form as you
determine.  We will be bound by all terms of the Purchase Agreement as executed.
We understand that changes may be made in those who are to be Underwriters,  and
in the  amount  of  Securities  to be  purchased  by  them,  but the  amount  of
Securities to be purchased by us in accordance with the terms of this Agreement,
including the maximum amount of Option  Securities,  if any, which we may become
obligated  to purchase by reason of the  exercise of any  over-allotment  option
provided in the  Purchase  Agreement,  shall not be changed  without our consent
except as provided in the Purchase Agreement.

      As  Representatives  of the Underwriters,  you are authorized to take such
action as you deem  necessary  or  advisable  to carry out this  Agreement,  the
Purchase Agreement, and the purchase and sale of the Securities, and to agree to
any waiver or  modification of any provision of the Purchase  Agreement.  To the
extent applicable, you are also authorized to determine (i) the amount of Option
Securities,  if  any,  to be  purchased  by  the  Underwriters  pursuant  to any
over-allotment option and (ii) with respect to offerings using 430A Pricing, the
initial offering price and the price at which the Securities are to be purchased
in accordance  with the Purchase  Agreement.  It is  understood  and agreed that
Merrill  Lynch,  Pierce,  Fenner & Smith  Incorporated  may act on behalf of all
Representatives.

      It is understood that, if so specified in the Invitation, arrangements may
be made for the sale of  Securities by the Issuer  pursuant to delayed  delivery
contracts (hereinafter referred to as "Delayed Delivery Contracts").  References
herein  to  delayed  delivery  and  Delayed  Delivery  Contracts  apply  only to
offerings  to which  delayed  delivery  is  applicable.  The term  "underwriting
obligation",  as used in this Agreement with respect to any  Underwriter,  shall
refer to the amount of Securities,  including any Option  Securities  (plus such
additional  Securities as may be required by the Purchase Agreement in the event
of a default  by one or more of the  Underwriters)  which  such  Underwriter  is
obligated to purchase  pursuant to the  provisions  of the  Purchase  Agreement,

                                      2


<PAGE>

without  regard to any  reduction  in such  obligation  as a result  of  Delayed
Delivery Contracts which may be entered into by the Issuer.

      If the Securities consist in whole or in part of debt obligations maturing
serially,  the serial Securities being purchased by each Underwriter pursuant to
the Purchase  Agreement  will consist,  subject to adjustment as provided in the
Purchase Agreement,  of serial Securities of each maturity in a principal amount
which bears the same proportion to the aggregate  principal amount of the serial
Securities  of such  maturity to be  purchased  by all the  Underwriters  as the
respective  principal  amount  of serial  Securities  set  forth  opposite  such
Underwriter's  name in the Purchase  Agreement bears to the aggregate  principal
amount of the serial Securities to be purchased by all the Underwriters.

      Section 2. REGISTRATION  STATEMENT AND PROSPECTUS:  OFFERING CIRCULAR.  In
the case of an Invitation regarding an offer of Securities  registered under the
1933 Act (a "Registered  Offering"),  you will furnish to us, to the extent made
available  to  you by the  Issuer,  copies  of  any  registration  statement  or
registration  statements  relating to the Securities which may be filed with the
Securities and Exchange  Commission (the "Commission")  pursuant to the 1933 Act
and of each amendment  thereto  (excluding  exhibits but including any documents
incorporated by reference therein).  Such registration  statement(s) as amended,
and  the  prospectus(es)  relating  to the  sale  of  Securities  by the  Issuer
constituting  a part thereof,  including all documents  incorporated  therein by
reference,  as from  time to time  amended  or  supplemented  by the  filing  of
documents pursuant to the Securities  Exchange Act of 1934 (the "1934 Act"), the
1933 Act or otherwise,  are referred to herein as the  "Registration  Statement"
and the "Prospectus",  respectively;  provided however, that a supplement to the
Prospectus  filed with the  Commission  pursuant  to Rule 424 under the 1933 Act
with respect to an offering of Securities (a "Prospectus  Supplement")  shall be
deemed to have  supplemented the Prospectus only with respect to the offering of
Securities to which it relates.

      With respect to Securities  for which no  Registration  Statement is filed
with the Commission, you will furnish to us, to the extent made available to you
by the Issuer, copies of any private placement memorandum,  offering circular or
other  offering  materials  to be used in  connection  with the  offering of the
Securities and of each amendment thereto (the "Offering Circular").

      Section  3.  OFFERING.  The sale of the  securities  to the  public  shall
commence as soon as you deem  advisable.  We will not sell any Securities  until
they  are  released  by you for  that  purpose.  When  notified  by you that the
Securities are released for sale, we will offer in conformity  with the terms of
the  offering  set forth in the  Prospectus  or Offering  Circular,  such of the
Securities to be purchased by us as are not reserved for our account for sale to
Selected  Dealers and others pursuant to Section 5. After the initial  offering,
the offering price and the  concession and discount  therefrom may be changed by
you by notice to the Underwriters, and we agree to be bound by any such change.

      If, in accordance  with the terms of offering set forth in the  Prospectus
or Offering Circular, the offering of the Securities is not at a fixed price but
at varying  prices set by individual  Underwriters  based on market prices or at
negotiated  prices,  the  provisions  above relating to your right to change the
offering price and concession and discount to dealers shall not apply, and other

                                       3

<PAGE>

references  in this  Section,  and  elsewhere in this  Agreement to the offering
price or  Selected  Dealers'  concession  shall be deemed to mean the prices and
concessions determined by you from time to time in your discretion.

      Unless  otherwise  permitted  in the  Invitation,  we will  not  sell  any
Securities to any account over which we have  discretionary  authority.  We will
also  comply  with  any  other  restrictions  which  may  be  set  forth  in the
Invitation.

      The initial public  advertisement,  if any, with respect to the Securities
shall  appear  on  such  date,  and  shall  include  the  names  of  such of the
Underwriters, as you may determine.

      Section 4. DELAYED DELIVERY  ARRANGEMENTS.  We authorize you to act on our
behalf in making all  arrangements  for the  solicitation  of offers to purchase
Securities from the Issuer pursuant to Delayed Delivery Contracts,  and we agree
that all such  arrangements  will be made only through you  (directly or through
Underwriters or Selected Dealers).  You may allow to Selected Dealers in respect
to such  Securities a  commission  equal to the  concession  allowed to Selected
Dealers pursuant to Section 5.

      The obligations of the  Underwriters  shall be reduced in the aggregate by
the principal amount of Securities covered by Delayed Delivery Contracts made by
the Issuer,  the  obligation of each  Underwriter to be reduced by the principal
amount of such Securities,  if any,  allocated by you to such Underwriter.  Your
determination  of the  allocation  of  Securities  covered by  Delayed  Delivery
Contracts among the several  Underwriters shall be final and conclusive,  and we
agree to be bound by any notice delivered by you to the Issuer setting forth the
amount  of the  reduction  in our  obligation  as a result of  Delayed  Delivery
Contracts.

      Upon  receiving  payment from the Issuer of the fee for arranging  Delayed
Delivery  Contracts,  you will credit our  account  with the portion of such fee
applicable to the Securities covered by Delayed Delivery Contracts  allocated to
us. You will  charge our  account  with any  commission  allocated  to  Selected
Dealers in respect of Securities covered by Delayed Delivery Contracts allocated
to us.

      Section  5.  OFFERING  TO  SELECTED  DEALERS  AND  OTHERS;  MANAGEMENT  OF
OFFERING.  We authorize  you,  for our account,  to reserve for sale and sell to
dealers  ("Selected  Dealers"),  among  whom  any  of  the  Underwriters  may be
included,  such  amount  of  Securities  to be  purchased  by us  as  you  shall
determine.  Reservations  for sales to Selected Dealers for our account need not
be in  proportion  to our  underwriting  obligation,  but  sales  of  Securities
reserved for our account for sale to Selected Dealers shall be made as nearly as
practicable in the ratio which the amount of Securities reserved for our account
bears to the  aggregate  amount of  Securities  reserved  for the account of all
Underwriters,  as calculated  from day to day. Sales to Selected  Dealers may be
made under the  Merrill  Lynch,  Pierce,  Fenner & Smith  Incorporated  Standard
Dealer Agreement, or otherwise. The price to Selected Dealers initially shall be
the  offering  price less a  concession  not in excess of the  Selected  Dealers
concession  set forth in the  Invitation.  Selected  Dealers  shall be  actually
engaged in the investment banking or securities business and shall be either (i)
members in good standing of the National Association of Securities Dealers, Inc.
(the  "NASD") or (ii)  dealers with their  principal  place of business  located
outside  the  United  States,  its  territories  and  its  possessions  and  not

                                       4

<PAGE>

registered  under  the 1934 Act who  agree to make no sales  within  the  United
States,  its  territories  or its  possessions  or to persons who are  nationals
thereof or residents therein or (iii) banks that are not eligible for membership
in the NASD.  Each Selected  Dealer shall agree to comply with the provisions of
Section 24 of Article III of the Rules of Fair  Practice  of the NASD,  and each
foreign Selected Dealer or bank who is not a member of the NASD also shall agree
to comply  with the  NASD's  interpretation  with  respect  to  free-riding  and
withholding,  to  comply,  as  though  it were a member  of the  NASD,  with the
provisions  of Sections 8 and 36 of Article III of such Rules of Fair  Practice,
and so comply with Section 25 of Article III thereof as that Section  applies to
a non-member foreign dealer or bank.

      With your consent,  the  Underwriters  may allow, and Selected Dealers may
reallow, a discount on sales to any dealer who meets the above NASD requirements
in an amount not in excess of the amount set forth in the Invitation.  Upon your
request,  we will advise you of the identity of any dealer to whom we allow such
a discount and any  Underwriter  or Selected  Dealer from whom we receive such a
discount.

      We also  authorize  you, for our account,  to reserve for sale and to sell
Securities  to be  purchased by us at the  offering  price to others,  including
institutions and retail  purchasers.  Except for such sales which are designated
by a  purchaser  to  be  for  the  account  of a  particular  Underwriter,  such
reservations  and sales shall be made as nearly as  practicable in proportion to
our  underwriting  obligation,  unless you agree to a smaller  proportion at our
request.

      At or before the time the  Securities  are  released  for sale,  you shall
notify us of the  amount of  Securities  which  have not been  reserved  for our
account for sale to  Selected  Dealers and others and which is to be retained by
us for direct sale.

      We will from time to time, upon your request,  report to you the amount of
Securities  retained by us for direct sale which  remains  unsold and, upon your
request,  deliver to you for our account,  or sell to you for the account of one
or more  of the  Underwriters,  such  amount  of  unsold  Securities  as you may
designate at the offering  price less an amount  determined by you not in excess
of the concession to Selected Dealers.  You may also repurchase  Securities from
other  Underwriters and Selected Dealers,  for the account of one or more of the
Underwriters,  at prices  determined by you not in excess of the offering  price
less the concession to Selected Dealers.

      You may  from  time to  time  deliver  to any  Underwriter,  for  carrying
purposes or for sale by such  Underwriter,  any of the Securities  then reserved
for sale to, but not  purchased and paid for by,  Selected  Dealers or others as
above  provided,  but to the extent that Securities are so delivered for sale by
such Underwriter, the amount of Securities then reserved for the account of such
Underwriter shall be correspondingly reduced.  Securities delivered for carrying
purposes only shall be redelivered to you upon demand.

      The  Underwriters  and Selected  Dealers may, with your consent,  purchase
Securities  from and sell  Securities to each other at the offering price less a
concession not in excess of the concession to Selected Dealers.

      Section 6. REPURCHASE OF SECURITIES NOT EFFECTIVELY PLACED. In recognition
of the  importance of  distributing  the Securities to bona fide  investors,  we
agree to repurchase  on demand any  Securities  sold by us, except  through you,
which  arc  purchased  by you in the open  market or  otherwise  during a period

                                       5

<PAGE>

terminating  as  provided  in Section  16, at a price  equal to the cost of such
purchase, including accrued interest, amortization of original issue discount or
dividends,  commissions and transfer and other taxes, if any, on redelivery. The
certificates delivered to us need not be identical certificates delivered to you
in respect of the Securities  purchased.  In lieu of requiring  repurchase,  you
may, in your  discretion,  sell such  Securities for our account at such prices,
upon such terms and to such persons, including any of the other Underwriters, as
you may determine, charging the amount of any loss and expense, or crediting the
amount of any net profit,  resulting from such sale, to our account,  or you may
charge  our  account  with an  amount  determined  by you not in  excess  of the
concession to Selected Dealers.

      Section 7.  STABILIZATION AND  OVER-ALLOTMENT.  In order to facilitate the
sale of the Securities,  we authorize you, in your  discretion,  to purchase and
sell  Securities  or any other  securities of the Issuer or any guarantor of the
Securities specified in the Invitation in the open market or otherwise, for long
or short  account,  at such prices as you may  determine,  and, in arranging for
sales to Selected Dealers or others,  to over-allot.  You may liquidate any long
position or cover any short position  incurred  pursuant to this Section at such
prices as you may determine.  You shall make such purchases and sales (including
over-allotments)  for the accounts of the  Underwriters as nearly as practicable
in proportion to their  respective  underwriting  obligations.  It is understood
that, in  connection  with any  particular  offering of Securities to which this
Agreement  applies,  you may have made  purchases of securities of the Issuer or
securities of any guarantor of the Securities for stabilizing  purposes prior to
the time when we become an Underwriter, and we agree that any such securities so
purchased shall be treated as having been purchased for the respective  accounts
of the  Underwriters  pursuant to the foregoing  authorization.  At the close of
business  on any day our net  commitment,  either  for  long or  short  account,
resulting from such  purchases or sales  (including  over-allotments)  shall not
exceed 20% (or such other amount as may be specified in the  Invitation)  of our
underwriting  obligation,  except that such percentage may be increased with the
approval of a majority in interest of the Underwriters.  We will take up at cost
on demand any Securities or other  securities of the Issuer or any securities of
any  guarantor  of the  Securities  so sold  or  over-alloted  for our  account,
including  accrued   interest,   amortization  of  original  issue  discount  or
dividends, and we will pay to you on demand the amount of any losses or expenses
incurred for our account  pursuant to this  Section.  In the event of default by
any  Underwriter  in  respect  of  its  obligations  under  this  Section,  each
non-defaulting  Underwriter,  shall assume its share of the  obligations of such
defaulting Underwriter in the proportion that its underwriting  obligation bears
to the  underwriting  obligations  of all  non-defaulting  Underwriters  without
relieving such defaulting Underwriter of its liability hereunder.

      If you effect any stabilizing purchase pursuant to this Section, you shall
promptly  notify us of the date and time of the first  stabilizing  purchase and
the date and time  when  stabilizing  was  terminated.  You  shall  prepare  and
maintain  such  records  as are  required  to be  maintained  by you as  manager
pursuant to Rule 17a-2 under the 1934 Act.

      Section 8. OPEN MARKET; TRANSACTIONS. We represent and agree in connection
with the  offering  of  Securities  we have  complied  and will  comply with the
provisions  of Rule  10b-6  under  the 1934 Act with  regard to  trading  in the
Securities.  For purposes of the foregoing sentence,  we agree that, in addition
to the Securities, other securities of the Issuer or securities of any guarantor
of the  Securities  or the right or option to purchase or otherwise  acquire any

                                       6

<PAGE>

securities of the Issuer or any  securities  of any guarantor of the  Securities
specified in the Invitation shall be considered securities of the same class and
series as the Securities.

      Section 9. PAYMENT AND DELIVERY. At or before such time, on such dates and
at such places as you may specify in the  Invitation,  we will  deliver to you a
certified  or  official  bank  check  in  such  funds  as are  specified  in the
Invitation,  payable  to the  order of  Merrill  Lynch,  Pierce,  Fenner & Smith
Incorporated  (unless otherwise  specified in the Invitation) in an amount equal
to,  as you  direct,  either  (i) the  offering  price or  prices  plus  accrued
interest,  amortization  of original  issue  discount or dividends,  if any, set
forth in the  Prospectus or Offering  Circular  less the  concession to Selected
Dealers  in  respect  of the  amount  of  Securities  to be  purchased  by us in
accordance with the terms of this Agreement, or (ii) the amount set forth in the
Invitation  with respect to the  Securities  to be purchased by us. We authorize
you to make payment for our account of the purchase  price for the Securities to
be purchased by us against  delivery to you of such Securities  (which may be in
temporary  form),  and  the  difference  between  such  purchase  price  of  the
Securities  and the  amount  of our funds  delivered  to you  therefor  shall be
credited to our account.

      Delivery to us of Securities  retained by us for direct sale shall be made
by you as soon  as  practicable  after  your  receipt  of the  Securities.  Upon
termination  of the  provisions of this Agreement as provided in Section 16, you
shall deliver to us any Securities reserved for our account for sale to Selected
Dealers and others which remain unsold at that time.

      You are authorized to make appropriate arrangements for payment for and/or
delivery  through the  facilities  of The  Depository  Trust Company or any such
other depository or similar facility,  the Securities to be purchased by us, or,
if we are not a member, settlement may be made through a correspondent that is a
member pursuant to our timely instructions to you.

      Upon  receiving  payment for  Securities  sold for our account to Selected
Dealers and others,  you shall remit to us an amount equal to the amount paid by
us to you in respect of such  Securities  and credit or charge our account  with
the  difference,  if any,  between  such  amount  and the  price at  which  such
Securities were sold.

      In the event that the Purchase  Agreement for an offering provides for the
payment of a commission or other compensation to the Underwriters,  we authorize
you to receive such commission or other compensation for our account.

      Section 10. MANAGEMENT COMPENSATION.  As compensation for your services in
the  management  of the  offering,  we  will  pay  you an  amount  equal  to the
management  fee specified in the  Invitation in respect of the  Securities to be
purchased by us pursuant to the  Purchase  Agreement,  and we  authorize  you to
charge our account with such amount.  If there is more than one  Representative,
such compensation shall be divided among the Representatives in such proportions
as they may determine.

      Section 11.  AUTHORITY  TO BORROW.  We  authorize  you to advance your own
funds for our account,  charging current interest rates, or to arrange loans for
our account or the account of the  Underwriters,  as you may deem  necessary  or
advisable for the purchase,  carrying,  sale and distribution of the Securities.
You may  execute  and  deliver  any  notes  or  other  instruments  required  in

                                       7

<PAGE>

connection therewith and may hold or pledge as security therefor all or any part
of the Securities  which we or such  Underwriters  have agreed to purchase.  The
obligations  of the  Underwriters  under loans arranged on their behalf shall be
several in proportion to their respective  participations in such loans, and not
joint.  Any  lender  is  authorized  to  accept  your  instructions  as  to  the
disposition of the proceeds of any such loans. You shall credit each Underwriter
with the proceeds of any loans made for its account.

      Section 12. LEGAL  QUALIFICATIONS.  You shall inform us, upon request,  of
the states and other  jurisdictions of the United States in which it is believed
that the  Securities  are  qualified  for sale  under,  or are  exempt  from the
requirements   of,  their   respective   securities  laws,  but  you  assume  no
responsibility with respect to our right to sell Securities in any jurisdiction.
You are authorized to file with the Department of State of the State of New York
a Further State Notice with respect to the Securities, if necessary.

      If  we  propose  to  offer  Securities  outside  the  United  States,  its
territories or its possessions,  we will take, at our own expense,  such action,
if any, as may be necessary to comply with the laws of each foreign jurisdiction
in which we propose to offer Securities.

      Section 13.  MEMBERSHIP IN NATIONAL  ASSOCIATION  OF  SECURITIES  DEALERS,
FOREIGN  UNDERWRITERS  AND BANKS.  We  understand  that you are a member in good
standing of the NASD. We confirm that we are actually  engaged in the investment
banking or  securities  business and are either (i) a member in good standing of
the NASD or (ii) a dealer with its principal  place of business  located outside
the United States,  its territories and its possessions and not registered under
the 1934 Act who hereby  agrees to make no sales  within the United  States,  it
territories  or its  possessions  or to  persons  who are  nationals  thereof or
residents  therein (except that we may participate in sales so Selected  Dealers
and others under  Section 5 of this  Agreement) or (iii) a bank not eligible for
membership in the NASD. We hereby agree to comply with Section 24 of Article III
of the Rules of Fair  Practice  of the NASD,  and if we are a foreign  dealer or
bank and not a member  at the NASD,  we also  hereby  agree to  comply  with the
NASD's interpretation with respect to free-riding and withholding, to comply, as
though we were a member of the NASD, with the provisions of Sections 8 and 36 of
Article III of such Rules of Fair  Practice,  and to comply  with  Section 25 of
Article III thereof as that Section  applies to a non-member  foreign  dealer or
bank.

      Section 14.  DISTRIBUTION  OF  PROSPECTUSES;  OFFERING  CIRCULARS.  We arc
familiar with  Securities Act of 1933 Release No. 4968 and Rule 15c2-8 under the
1934 Act,  relating to the  distribution of preliminary and final  prospectuses,
and we confirm  that we will  comply  therewith,  to the extent  applicable,  in
connection with any sale of Securities.  You shall cause to be made available to
us, to the extent made available to you by the Issuer,  such number of copies of
the Prospectus as we may  reasonably  request for purposes  contemplated  by the
1933 Act, the 1934 Act and the rules and regulations thereunder.

      Our  Acceptance of an Invitation  relating to an offering made pursuant to
an Offering  Circular shall  constitute our agreement that, if requested by you,
we will  furnish a copy of any  amendment  to a  preliminary  or final  Offering
Circular to each person to whom we shall have  furnished a previous  preliminary
or final Offering  Circular.  Our Acceptance  shall  constitute our confirmation
that we have  delivered and our agreement  that we will deliver all  preliminary

                                       8

<PAGE>

and final Offering Circulars required for compliance with the applicable federal
and state laws and the applicable  rules and  regulations of any regulatory body
promulgated  thereunder governing the use and distribution of offering circulars
by underwriters and any additional instructions contained in the Invitation and,
to the extent  consistent with such laws, rules and regulations,  our Acceptance
shall constitute our confirmation  that we have delivered and our agreement that
we will  deliver all  preliminary  and find  Offering  Circulars  which would be
required if the provisions of Rule 15c2-8 (or any successor provision) under the
1934 Act applied to such offering.

      Section 15. NET CAPITAL. The incurrence by us of our obligations hereunder
and  under  the  Purchase  Agreement  in  connection  with the  offering  of the
Securities  will not place us in  violation of the net capital  requirements  of
Rule 15c3-1 under the 1934 Act, or, if we are a financial institution subject to
regulation  by the  Board  of  Governors  of the  Federal  Reserve  System,  the
Comptroller of the Currency or the Federal Deposit Insurance  Corporation,  will
not place us in violation of the capital  requirements  of such regulator or any
other regulator to which we are subject.

      Section 16.  TERMINATION.  With  respect to each  offering  of  Securities
pursuant to this  Agreement,  all  limitations in this Agreement on the price at
which the  Securities  may be sold, the period of time referred to in Section 6,
the authority  granted by the first sentence of Section 7, and the  restrictions
contained in Section 8 shall  terminate at the close of business on the 45th day
after the commencement of the offering of such Securities. You may terminate any
or  all  of  such  provisions  at  any  time  prior  thereto  by  notice  to the
Underwriters.  All other provisions of this Agreement shall remain operative and
in full force and effect with respect to such offering.

      Section 17. EXPENSES AND  SETTLEMENT.  You may charge our account with any
transfer  taxes  on  sales  of  Securities  made  for our  account  and with our
proportionate  share  (based  upon our  underwriting  obligation)  of all  other
expenses  incurred by you under this  Agreement or otherwise in connection  with
the purchase,  carrying, sale or distribution of the Securities. With respect to
each offering of Securities pursuant to this Agreement,  the respective accounts
of the  Underwriters  shall be  settled as  promptly  as  practicable  after the
termination  of all the  provisions of this Agreement as provided in Section 16,
but you may  reserve  such  amounts  as you may deem  advisable  for  additional
expenses.  Your  determination  of the  amount  to be paid to or by us  shall be
conclusive. You may at any time make partial distributions of credit balances or
call for payment of debit  balances.  Any of our funds in your hands may be held
with your general funds without accountability for interest. Notwithstanding any
settlement, we will remain liable for any taxes on transfers for our account and
for our  proportionate  share (based upon our  underwriting  obligation)  of all
expenses  and  liabilities  which may be incurred by or for the  accounts of the
Underwriters  with  respect to each  offering  of  Securities  pursuant  to this
Agreement.

      Section 18.  INDEMNIFICATION.  With respect to each offering of Securities
pursuant to this  Agreement,  we will  indemnify  and hold  harmless  each other
Underwriter and each person, if any, who controls each other Underwriter  within
the  meaning of Section 15 of the 1933 Act,  to the extent that and on the terms
upon  which  we agree to  indemnify  and hold  harmless  the  issuer  and  other
specified persons as set forth in the Purchase Agreement.

      Section 19. CLAIMS AGAINST UNDERWRITERS.  With respect to each offering of
Securities  pursuant to this Agreement,  if at any time any person other than an
Underwriter asserts a claim (including any commenced or threatened investigation

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<PAGE>

or  proceeding  by any  governmental  agency or body) against one or more of the
Underwriters or against you as Representatives  of the Underwriters  arising out
of an alleged untrue statement or omission in the Registration Statement (or any
amendment  thereto) or in any  preliminary  prospectus or the  Prospectus or any
amendment  or  supplement  thereto,  or in any  preliminary  or  final  Offering
Circular,  or relating to any transaction  contemplated  by this  Agreement,  we
authorize  you to make  such  investigation,  to  retain  such  counsel  for the
Underwriters  and to take such  action in the  defense  of such claim as you may
deem  necessary or  advisable.  You may settle such claim with the approval of a
majority in interest of the Underwriters.  We will pay our  proportionate  share
(based  upon  our  underwriting  obligation)  of all  expenses  incurred  by you
(including the fees and expenses of counsel for the  Underwriters)  as incurred,
in investigating and defending against such claim and our proportionate share of
the aggregate  liability  incurred by all  Underwriters in respect to such claim
(after deducting any contribution or  indemnification  obtained  pursuant to the
Purchase  Agreement,  or,  otherwise,  from  persons  other than  Underwriters),
whether such  liability  is the result of a judgment  against one or more of the
Underwriters  or the result of any such  settlement.  Any Underwriter may retain
separate counsel at its own expense.  A claim against or liability incurred by a
person who controls an Underwriter  shall be deemed to have been made against or
incurred by such  Underwriter.  In the event of default by any  Underwriter,  in
respect of its obligations under this Section,  the non-defaulting  Underwriters
shall be obligated to pay the full amount thereof in the proportions  that their
respective underwriting  obligations bear to the underwriting obligations of all
non-defaulting Underwriters without relieving such defaulting Underwriter of its
liability hereunder.

      Section 20. DEFAULT BY UNDERWRITERS. Default by any Underwriter in respect
of its obligations  hereunder or under the Purchase  Agreement shall not release
us from  any of our  obligations  or in any way  affect  the  liability  of such
defaulting Underwriter to the other Underwriters for damages resulting from such
default. If one or more Underwriters  default under the Purchase  Agreement,  if
provided in such  Purchase  Agreement  you may (but shall not be  obligated  to)
arrange  for the  purchase  by others,  which may  include  yourselves  or other
non-defaulting Underwriters,  of all or a portion of the Securities not taken up
by the defaulting Underwriters.

      In the event that such arrangements are made, the respective  underwriting
obligations of the non-defaulting Underwriters and the amounts of the Securities
to be  purchased by others,  if any,  shall be taken as the basis for all rights
and obligations hereunder; but this shall not in any way affect the liability of
any defaulting  Underwriter to the other Underwriters for damages resulting from
its default,  nor shall any such default relieve any other Underwriter of any of
its obligations  hereunder or under the Purchase  Agreement  except as herein or
therein  provided.  In  addition,  in the  event  of  default  by  one  or  more
Underwriters  in respect of their  obligations  under the Purchase  Agreement to
purchase the Securities  agreed to be purchased by them  thereunder  and, to the
extent  that  arrangements  shall not have  been  made by you for any  person to
assume the obligations of such defaulting Underwriter or Underwriters, we agree,
if provided in the Purchase Agreement,  to assume our proportionate share, based
upon our  underwriting  obligation,  of the  obligations of each such defaulting
Underwriter  (subject to the  limitations  contained in the Purchase  Agreement)
without relieving such defaulting Underwriter of its liability therefor.


                                       10

<PAGE>

      In the event of  default by one or more  Underwriters  in respect of their
obligations  under  this  Agreement  to  take  up and  pay  for  any  securities
purchased,  or to deliver any securities  sold or  over-alloted,  by you for the
respective accounts of the Underwriters, or to bear their proportion of expenses
or liabilities  pursuant to this Agreement,  and to the extent that arrangements
shall not have been made by you for any  persons  to assume the  obligations  of
such   defaulting   Underwriter  or   Underwriters,   we  agree  to  assume  our
proportionate share, based upon our respective underwriting  obligation,  of the
obligations of each defaulting Underwriter without relieving any such defaulting
Underwriter of its liability therefor.

      Section 21. LEGAL RESPONSIBILITY.  As Representatives of the Underwriters,
you shall have no  liability  to us,  except for your lack of good faith and for
obligations assumed by you in this Agreement and except that we do not waive any
rights  that we may have  under  the 1933 Act or the 1934 Act or the  rules  and
regulations  thereunder.  No  obligations  not expressly  assumed by you in this
Agreement shall be implied herefrom.

      Nothing herein continued shall constitute the Underwriters an association,
or partners,  with you, or with each other,  or,  except as  otherwise  provided
herein or in the  Purchase  Agreement,  render  any  Underwriter  liable for the
obligations  of  any  other  Underwriter;   and  the  rights,   obligations  and
liabilities of the  Underwriters are several in accordance with their respective
Underwriting obligations, and not joint.

      If the  Underwriters  are deemed to constitute a  partnership  for federal
income tax purposes,  we elect to be excluded from the application of Subchapter
K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1954, as amended,  and
agree not to take any  position  inconsistent  with such  election,  and you, as
Representatives, are authorized, in your discretion, to execute on behalf of the
Underwriters  such  evidence of such election as may be required by the Internal
Revenue Service.

      Unless we have promptly notified you in writing otherwise,  our name as it
should  appear in the  Prospectus  or Offering  Circular and our address are set
forth on the signature pages hereof.

      Section 22. NOTICES. Any notice from you shall be deemed to have been duly
given if mailed or transmitted so us at our address appearing below.

      Section 23.  GOVERNING  LAWS. This Agreement shall be governed by the laws
of the State of New York  applicable to agreements  made and to agreements  made
and to be performed in said State.

                                       11

<PAGE>

Please confirm this Agreement and deliver a copy to us.

                                          Very truly yours,

                                          Name of Firm:



                                          By:_________________________________
                                               Authorized Officer or Partner

                                          Address:

                                          ____________________________________

                                          ____________________________________

                                          ____________________________________

Confirmed as of the date
  First above written.

Merrill Lynch, Pierce, Fenner & Smith
           Incorporated


By:____________________________
      Name: Fred F. Hessinger


                                       12

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2H
<SEQUENCE>9
<FILENAME>nb535533.txt
<DESCRIPTION>EXHIBIT 99.2H(3) MASTER SELECTED DEALER AGREEMENT
<TEXT>

                                                           REVISED JULY 16, 2001

[GRAPHIC OMITTED]             MERRILL LYNCH & Co.
               MERRILL LYNCH, PIERCE, FENNER & Smith Incorporated
                        MERRILL LYNCH WORLD HEADQUARTERS
                            4 WORLD FINANCIAL CENTER
                              NEW YORK, N.Y. 10800

                            STANDARD DEALER AGREEMENT
                            -------------------------

Dear Sirs:

   In connection with public offerings of securities underwritten by us, or by a
group of underwriters (the "Underwriters") represented by us, you may be offered
the  opportunity to purchase a portion of such  securities,  as principal,  at a
discount  from  the  offering  price   representing  a  selling   concession  or
reallowance granted as consideration for services rendered by you in the sale of
such  securities.  We  request  that  you  agree  to  the  following  terms  and
provisions,  and make the following  representations,  which,  together with any
additional  terms and  provisions set forth in any wire or letter sent to you in
connection  with a  particular  offering,  will  govern  all such  purchases  of
securities and the reoffering thereof by you.

   YOUR  SUBSCRIPTION  TO, OR PURCHASE OF, SUCH  SECURITIES WILL CONSTITUTE YOUR
REAFFIRMATION OF THIS AGREEMENT.

     1.     When we are acting as representative (the  "Representative")  of the
Underwriters  in offering  securities to you, it should be  understood  that all
offers are made subject to prior sale of the subject securities, when, as and if
such securities are delivered to and accepted by the Underwriters and subject to
the approval of legal matters by their  counsel.  In such cases,  any order from
you for securities will be strictly  subject to confirmation  and we reserve the
right in our  uncontrolled  discretion  to reject any order in whole or in part.
Upon release by us, you may reoffer such  securities at the offering price fixed
by us.  With  our  consent,  you may  allow a  discount,  not in  excess  of the
reallowance  fixed by us, in selling such securities to other dealers,  provided
that in doing so you comply with the Conduct  Rules of the National  Association
of Securities Dealers,  Inc. (the "NASD").  Upon our request, you will advise us
of the  identity  of any  dealer  to whom  you  allow  such a  discount  and any
Underwriter  or  dealer  from  whom  you  receive  such a  discount.  After  the
securities  are released for sale to the public,  we may vary the offering price
and other setting terms.

     2.     You  represent  that  you  are a  dealer  actually  engaged  in  the
investment  banking or securities  business and that you are either (i) a member
in good  standing  of the NASD or (ii) a  dealer  with  its  principal  place of
business  located outside the United States,  its territories or possessions and
not registered under the Securities  Exchange Act of 1934 (a "non-member foreign
dealer") or (iii) a bank not eligible for  membership  in the NASD. If you are a
non-member  foreign dealer,  you agree to make no sales of securities within the
United  States,  its  territories  or its  possessions  or to  persons  who  are
nationals  thereof or residents  therein.  Non-member  foreign dealers and banks
agree,  in making  any sales,  to comply  with the  NASD's  interpretation  with
respect to free-riding and withholding.  In accepting a selling concession where
we are acting as Representative of the Underwriters,  in accepting a reallowance
from us whether or not we are acting as such  Representative,  and in allowing a
discount to any other  person,  you agree to comply with the  provisions of Rule
2740 of the Conduct Rules of the NASD, and, in addition, if you are a non-member
foreign dealer or bank, you agree to comply,  as though you were a member of the
NASD,  with the  provisions  of Rules 2730 and 2750 of such Conduct Rules and to
comply  with Rule 2420  thereof  as that Rule  applies to a  non-member  foreign
dealer  or bank.  You  represent  that you are  fully  familiar  with the  above
provisions of the Conduct Rules of the NASD.

     3.     If the securities have been  registered  under the Securities Act of
1933 (the "1933  Act"),  in offering and selling  such  securities,  you are not
authorized to give any information or make any  representation  not contained in
the  prospectus  relating  thereto.  You confirm that you are familiar  with the
rules and policies of the  Securities  and Exchange  Commission  relating to the

<PAGE>

distribution of preliminary and final prospectuses,  and you agree that you will
comply therewith in any offering covered by this Agreement.  If we are acting as
Representative of the Underwriters, we will make available to you, to the extent
made available to us by the issuer of the  securities,  such number of copies of
the prospectus or offering  documents,  for securities not registered  under the
1933 Act, as you may reasonably request.

     4.     If we are acting as Representative of the Underwriters of securities
of an issuer that is not required to file reports under the Securities  Exchange
Act of 1934  (the  "1934  Act"),  you  agree  that  you will not sell any of the
securities to any account over which you have discretionary authority.

     5.     Payment for securities purchased by you is to be made at our office,
One Liberty Plaza, 165 Broadway, New York, N.Y. 10006 (or at such other place as
we may advise),  at the offering  price less the  concession  allowed to you, on
such date as we may advise,  by  certified  or  official  bank check in New York
Clearing  House  funds (or such other  funds as we may  advise),  payable to our
order,  against delivery of the securities to be purchased by you. We shall have
authority  to make  appropriate  arrangements  for payment  for and/or  delivery
through  the  facility  of  The  Depository  Trust  Company  or any  such  other
depository or similar facility for the securities.

     6.     In the event that,  prior to the completion of the  distribution  of
securities  covered  by this  Agreement,  we  purchase  in the  open  market  or
otherwise any securities delivered to you, if we are acting as Representative of
the Underwriters,  you agree to repay to us for the accounts of the Underwriters
the amount of the concession  allowed to you plus brokerage  commissions and any
transfer taxes paid in connection with such purchase.

     7.     At  any  time  prior  to  the  completion  of  the  distribution  of
securities   covered  by  this   Agreement   you  will,   upon  our  request  as
Representative  of the  Underwriters,  report  to us the  amount  of  securities
purchased by you which then remains unsold and will,  upon our request,  sell to
us for the account of one or more of the Underwriters such amount of such unsold
securities  as we may  designate,  at the  offering  price  less an amount to be
determined by us not in excess of the concession allowed to you.

     8.     If we  are  acting  as  Representative  of  the  Underwriters,  upon
application to us, we will inform you of the states and other  jurisdictions  of
the United States in which it is believed that the securities  being offered are
qualified  for sale  under,  or are  exempt  from  the  requirements  of,  their
respective securities laws, but we assume no responsibility with respect to your
right to sell  securities in any  jurisdiction.  We shall have authority to file
with the  Department  of State of the State of New York a Further  State  Notice
with respect to the securities, if necessary.

     9.     You agree that in connection with any offering of securities covered
by this Agreement you will comply with the applicable provisions of the 1933 Act
and the 1934 Act and the applicable  rules and regulations of the Securities and
Exchange  Commission  thereunder,  the applicable  rules and  regulations of the
NASD, and the applicable  rules of any securities  exchange having  jurisdiction
over the offering.

     10.    We shall  have full  authority  to take  such  action as we may deem
advisable in respect of all matters  pertaining to any offering  covered by this
Agreement.  We shall be under no  liability  to you  except for our lack of good
faith and for obligations  assumed by us in this  Agreement,  except that you do
not  waive  any  rights  that you may have  under  the 1933 Act or the rules and
regulations thereunder.

     11.    Any notice from us shall be deemed to have been duly given if mailed
or transmitted by any standard form of written  telecommunications to you at the
above address or at such other address as you shall specify to us in writing.

     12.    With  respect  to  any  offering  of  securities   covered  by  this
Agreement,  the price  restrictions  contained  in  Paragraph  1 hereof  and the
provisions of  Paragraphs 6 and 7 hereof shall  terminate as to such offering at
the close of business on the 45th day after the securities are released for sale
or, as to any or all such provisions, at such earlier time as we may advise. All
other  provisions of this Agreement shall remain operative and in full force and
effect with respect to such offering.

     13.    This  Agreement  shall be  governed  by the laws of the State of New
York.

                                       2
<PAGE>

      Please  confirm your  agreement  hereto by signing the enclosed  duplicate
copy hereof in the place provided below and returning such signed duplicate copy
to us at World  Headquarters,  4 World Financial  Center,  New York, N.Y. 10080,
Attention:  Syndicate Operations. Upon receipt thereof, this instrument and such
signed duplicate copy will evidence the agreement between us.


                                         Very truly yours,

                                         MERRILL LYNCH, PIERCE, FENNER & SMITH
                                                     INCORPORATED


                                         By:
                                               ---------------------------------
                                                Name:  Mario Patella


Confirmed and accepted as of the
      day of            , 20


- -----------------------------------------
             NAME OF DEALER



- -----------------------------------------
     AUTHORIZED OFFICER OR PARTNER
(if not Officer or Partner, attach copy of
      Instrument of Authorization)



                                       3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2J
<SEQUENCE>10
<FILENAME>nb535522.txt
<DESCRIPTION>CUSTODIAN CONTRACT
<TEXT>
                               CUSTODIAN AGREEMENT

      This Agreement between NEUBERGER BERMAN INTERMEDIATE  MUNICIPAL FUND INC.,
a corporation  organized and existing  under the laws of Maryland and registered
with  the  Securities  and  Exchange  Commission  as a  diversified,  closed-end
management  investment  company  (the  "FUND"),  and STATE STREET BANK and TRUST
COMPANY, a Massachusetts trust company (the "CUSTODIAN"),

      WITNESSETH:  that in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:

SECTION 1.  EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
            -----------------------------------------------------

The Fund hereby employs the Custodian as the custodian of its assets,  including
securities  which the Fund desires to be held in places within the United States
("DOMESTIC  SECURITIES") and securities it desires to be held outside the United
States ("FOREIGN  SECURITIES").  The Fund agrees to deliver to the Custodian all
securities  and cash  owned by it,  and all  payments  of  income,  payments  of
principal or capital distributions received by it with respect to all securities
owned by it from time to time,  and the cash  consideration  received  by it for
such new or treasury  shares of stock of the Fund ("SHARES") as may be issued or
sold from time to time. The Custodian  shall not be responsible for any property
of the Fund held or received by the Fund and not delivered to the Custodian.

Upon  receipt  of  "PROPER  INSTRUCTIONS"  (as such term is defined in Section 6
hereof), the Custodian shall from time to time employ one or more sub-custodians
located in the United States,  but only in accordance with an applicable vote by
the Board of  *[Trustees/Directors] of the Fund (the "Board"). The Custodian may
employ as  sub-custodian  for the Fund's foreign  securities the foreign banking
institutions and foreign securities depositories designated in Schedules A and B
hereto, but only in accordance with the applicable  provisions of Sections 3 and
4. The Custodian shall have no more or less  responsibility  or liability to the
Fund on account of any actions or  omissions  of any  sub-custodian  so employed
than any such sub-custodian has to the Custodian.


SECTION 2.  DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
            ------------------------------------------------------------------
            BY THE CUSTODIAN IN THE UNITED STATES
            -------------------------------------

      SECTION 2.1 HOLDING  SECURITIES.  The Custodian  shall hold and physically
segregate for the account of the Fund all non-cash property, to be held by it in
the United  States,  including all domestic  securities  owned by the Fund other
than  securities  which are  maintained  pursuant  to Section  2.8 in a clearing
agency  which  acts  as  a  securities  depository  or  in a  book-entry  system
authorized by the U.S.  Department  of the Treasury  (each,  a "U.S.  SECURITIES
SYSTEM").


<PAGE>

      SECTION 2.2  DELIVERY  OF  SECURITIES.  The  Custodian  shall  release and
deliver domestic securities owned by the Fund held by the Custodian or in a U.S.
Securities  System  account  of  the  Custodian  only  upon  receipt  of  Proper
Instructions,  which may be continuing  instructions when deemed  appropriate by
the parties, and only in the following cases:

      1)    Upon sale of such securities for the account of the Fund and
            receipt of payment therefor;

      2)    Upon the  receipt  of  payment  in  connection  with any  repurchase
            agreement related to such securities entered into by the Fund;

      3)    In the case of a sale effected through a U.S. Securities System,
            in accordance with the provisions of Section 2.8 hereof;

      4)    To the depository agent in connection with tender or other
            similar offers for securities of the Fund;

      5)    To the issuer thereof or its agent when such  securities are called,
            redeemed, retired or otherwise become payable; provided that, in any
            such case, the cash or other consideration is to be delivered to the
            Custodian;

      6)    To the issuer thereof,  or its agent,  for transfer into the name of
            the  Fund or  into  the  name  of any  nominee  or  nominees  of the
            Custodian  or into the name or nominee  name of any agent  appointed
            pursuant  to  Section  2.7 or into the name or  nominee  name of any
            sub-custodian appointed pursuant to Section 1; or for exchange for a
            different   number  of  bonds,   certificates   or  other   evidence
            representing  the same  aggregate  face  amount  or number of units;
            PROVIDED  that,  in any  such  case,  the new  securities  are to be
            delivered to the Custodian;

      7)    Upon the sale of such securities for the account of the Fund, to the
            broker or its clearing agent,  against a receipt, for examination in
            accordance with "street delivery" custom;  provided that in any such
            case, the Custodian  shall have no  responsibility  or liability for
            any loss  arising  from the  delivery  of such  securities  prior to
            receiving  payment for such securities  except as may arise from the
            Custodian's own negligence or willful misconduct;

      8)    For  exchange  or  conversion   pursuant  to  any  plan  of  merger,
            consolidation,  recapitalization,  reorganization or readjustment of
            the  securities  of the issuer of such  securities,  or  pursuant to
            provisions for conversion contained in such securities,  or pursuant
            to any deposit  agreement;  provided that, in any such case, the new
            securities and cash, if any, are to be delivered to the Custodian;


                                       2
<PAGE>

      9)    In the case of warrants, rights or similar securities, the surrender
            thereof  in  the  exercise  of  such  warrants,  rights  or  similar
            securities  or  the  surrender  of  interim  receipts  or  temporary
            securities  for  definitive  securities;  provided that, in any such
            case,  the new  securities  and cash, if any, are to be delivered to
            the Custodian;

      10)   For delivery in connection  with any loans of securities made by the
            Fund, BUT ONLY against receipt of adequate collateral as agreed upon
            from time to time by the Custodian and the Fund, which may be in the
            form of cash or obligations  issued by the United States government,
            its agencies or  instrumentalities,  except that in connection  with
            any loans for which  collateral is to be credited to the Custodian's
            account in the book-entry system  authorized by the U.S.  Department
            of  the  Treasury,   the  Custodian  will  not  be  held  liable  or
            responsible  for the delivery of securities  owned by the Fund prior
            to the receipt of such collateral;

      11)   For  delivery as security in  connection  with any  borrowing by the
            Fund  requiring  a pledge of assets  by the Fund,  BUT ONLY  against
            receipt of amounts borrowed;

      12)   For delivery in  accordance  with the  provisions  of any  agreement
            among the Fund, the Custodian and a broker-dealer  registered  under
            the  Securities  Exchange  Act of 1934  (the  "EXCHANGE  ACT") and a
            member of The  National  Association  of  Securities  Dealers,  Inc.
            ("NASD"),  relating  to  compliance  with the  rules of The  Options
            Clearing  Corporation  and of  any  registered  national  securities
            exchange, or of any similar organization or organizations, regarding
            escrow or other  arrangements in connection with transactions by the
            Fund;

      13)   For delivery in  accordance  with the  provisions  of any  agreement
            among the Fund, the  Custodian,  and a futures  commission  merchant
            registered under the Commodity  Exchange Act, relating to compliance
            with the rules of the Commodity Futures Trading Commission  ("CFTC")
            and/or  any  contract  market,   or  any  similar   organization  or
            organizations,   regarding   account  deposits  in  connection  with
            transactions by the Fund;

      14)   Upon receipt of  instructions  from the transfer  agent for the Fund
            (the "TRANSFER AGENT") for delivery to such Transfer Agent or to the
            holders of Shares in connection with  distributions  in kind, as may
            be  described  from time to time in the Fund's  currently  effective
            prospectus   and   statement   of   additional    information   (the
            "PROSPECTUS"),  in satisfaction of requests by holders of Shares for
            repurchase or redemption; and

      15)   For any other purpose,  BUT ONLY upon receipt of Proper Instructions
            specifying the securities of the Fund to be delivered and naming the
            person or persons to whom delivery of such securities shall be made.


                                       3
<PAGE>


      SECTION 2.3  REGISTRATION OF SECURITIES.  Domestic  securities held by the
Custodian (other than bearer  securities) shall be registered in the name of the
Fund  or in the  name  of any  nominee  of the  Fund  or of any  nominee  of the
Custodian  which nominee shall be assigned  exclusively to the Fund,  UNLESS the
Fund has authorized in writing the appointment of a nominee to be used in common
with other registered investment companies having the same investment advisor as
the Fund,  or in the name or nominee  name of any agent  appointed  pursuant  to
Section  2.7 or in the  name  or  nominee  name of any  sub-custodian  appointed
pursuant to Section 1. All securities accepted by the Custodian on behalf of the
Fund under the terms of this  Agreement  shall be in "street name" or other good
delivery  form.  If,  however,  the  Fund  directs  the  Custodian  to  maintain
securities in "street name",  the Custodian  shall utilize its best efforts only
to timely collect income due the Fund on such  securities and to notify the Fund
on a best efforts basis only of relevant  corporate actions  including,  without
limitation, pendency of calls, maturities, tender or exchange offers.

      SECTION  2.4 BANK  ACCOUNTS.  The  Custodian  shall  open and  maintain  a
separate  bank account or accounts in the United States in the name of the Fund,
subject only to draft or order by the Custodian  acting pursuant to the terms of
this  Agreement,  and shall  hold in such  account or  accounts,  subject to the
provisions  hereof, all cash received by it from or for the account of the Fund,
other than cash maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment  Company Act of 1940, as amended
(the "1940 ACT").  Monies held by the Custodian for the Fund may be deposited by
it to its credit as Custodian in the banking  department  of the Custodian or in
such other banks or trust  companies as it may in its discretion  deem necessary
or desirable;  PROVIDED, however, that every such bank or trust company shall be
qualified  to act as a  custodian  under the 1940 Act and that each such bank or
trust  company  and the  monies  to be  deposited  with  each such bank or trust
company shall be approved by vote of a majority of the Board.  Such monies shall
be  deposited  by the  Custodian  in its  capacity  as  Custodian  and  shall be
withdrawable by the Custodian only in that capacity.

      SECTION 2.5  COLLECTION  OF INCOME.  Subject to the  provisions of Section
2.3, the Custodian shall collect on a timely basis all income and other payments
with respect to registered  domestic securities held hereunder to which the Fund
shall  be  entitled  either  by law or  pursuant  to  custom  in the  securities
business, and shall collect on a timely basis all income and other payments with
respect to bearer domestic  securities if, on the date of payment by the issuer,
such  securities are held by the Custodian or its agent thereof and shall credit
such income, as collected, to the Fund's custodian account. Without limiting the
generality of the foregoing,  the Custodian shall detach and present for payment
all coupons  and other  income  items  requiring  presentation  as and when they
become due and shall collect  interest when due on  securities  held  hereunder.
Income due the Fund on securities  loaned  pursuant to the provisions of Section
2.2 (10) shall be the  responsibility of the Custodian so long as the securities
are  registered  and  remain  in the name of the  Fund,  the  Custodian,  or its
nominee, or in the Depository Trust Company account of the Custodian,  but shall
otherwise be the  responsibility of the Fund. The Custodian will have no duty or


                                       4
<PAGE>

responsibility in connection therewith, other than to provide the Fund with such
information  or data as may be necessary to assist the Fund in arranging for the
timely  delivery  to the  Custodian  of the income to which the Fund is properly
entitled.

      SECTION 2.6 PAYMENT OF FUND MONIES.  Upon receipt of Proper  Instructions,
which may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases only:

      1)    Upon the purchase of domestic securities, options, futures contracts
            or options on futures contracts for the account of the Fund but only
            (a) against the delivery of such  securities or evidence of title to
            such options,  futures  contracts or options on futures contracts to
            the  Custodian  (or any bank,  banking firm or trust  company  doing
            business in the United States or abroad which is qualified under the
            1940  Act to act as a  custodian  and  has  been  designated  by the
            Custodian as its agent for this  purpose)  registered in the name of
            the Fund or in the name of a nominee of the Custodian referred to in
            Section 2.3 hereof or in proper form for  transfer;  (b) in the case
            of  a  purchase  effected  through  a  U.S.  Securities  System,  in
            accordance with the conditions set forth in Section 2.8 hereof;  (c)
            in the case of repurchase  agreements  entered into between the Fund
            and the Custodian,  or another bank, or a  broker-dealer  which is a
            member of NASD,  (i) against  delivery of the  securities  either in
            certificate  form or  through  an entry  crediting  the  Custodian's
            account at the Federal  Reserve  Bank with such  securities  or (ii)
            against delivery of the receipt  evidencing  purchase by the Fund of
            securities owned by the Custodian along with written evidence of the
            agreement by the Custodian to repurchase  such  securities  from the
            Fund;  or (d) for transfer to a time deposit  account of the Fund in
            any bank, whether domestic or foreign; such transfer may be effected
            prior  to  receipt  of a  confirmation  from  a  broker  and/or  the
            applicable  bank  pursuant to Proper  Instructions  from the Fund as
            defined herein;

      2)    In connection with  conversion,  exchange or surrender of securities
            owned by the Fund as set forth in Section 2.2 hereof;

      3)    For the redemption or repurchase of Shares issued as set forth in
            Section 5 hereof;

      4)    For the  payment of any expense or  liability  incurred by the Fund,
            including but not limited to the following  payments for the account
            of the Fund: interest, taxes, management, accounting, transfer agent
            and legal fees,  and  operating  expenses of the Fund whether or not
            such expenses are to be in whole or part  capitalized  or treated as
            deferred expenses;

      5)    For the payment of any dividends on Shares declared pursuant to
            the governing documents of the Fund;



                                       5
<PAGE>

      6)    For payment of the amount of dividends received in respect of
            securities sold short; and

      7)    For any other purpose,  BUT ONLY upon receipt of Proper Instructions
            specifying  the  amount of such  payment  and  naming  the person or
            persons to whom such payment is to be made.

      SECTION  2.7  LIABILITY  FOR  PAYMENT IN ADVANCE OF RECEIPT OF  SECURITIES
 PURCHASED.  Except as specifically  stated otherwise in this Agreement,  in any
 and every case where payment for purchase of domestic securities is made by the
 Custodian in advance of receipt of the  securities  purchased in the absence of
 specific  instructions from the Fund to so pay in advance,  the Custodian shall
 be absolutely  liable to the Fund for such  securities to the same extent as if
 the securities had been received by the Custodian.

      SECTION 2.8 APPOINTMENT OF AGENTS.  The Custodian may at any time or times
in its  discretion  appoint (and may at any time remove) any other bank or trust
company which is itself  qualified under the 1940 Act to act as a custodian,  as
its agent to carry out such of the provisions of this Section 2 as the Custodian
may from time to time direct;  PROVIDED,  however,  that the  appointment of any
agent shall not relieve the  Custodian of its  responsibilities  or  liabilities
hereunder.

      SECTION 2.9 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS.  The
Custodian may deposit and/or maintain securities owned by the Fund in a U.S.
Securities System subject to the following provisions:

      1)    The Custodian may keep  securities of the Fund in a U.S.  Securities
            System  provided that such  securities are represented in an account
            of the Custodian in the U.S. Securities System (the "U.S. SECURITIES
            SYSTEM  ACCOUNT")  which account shall not include any assets of the
            Custodian  other  than  assets  held as a  fiduciary,  custodian  or
            otherwise for customers;

      2)    The records of the Custodian with respect to securities of the
            Fund which are maintained in a U.S. Securities System shall
            identify by book-entry those securities belonging to the Fund;

      3)    The Custodian shall pay for securities  purchased for the account of
            the Fund upon (i) receipt of advice from the U.S.  Securities System
            that such  securities have been  transferred to the U.S.  Securities
            System  Account,  and (ii) the making of an entry on the  records of
            the  Custodian  to reflect such payment and transfer for the account
            of the Fund. The Custodian  shall transfer  securities  sold for the
            account  of the  Fund  upon  (i)  receipt  of  advice  from the U.S.
            Securities   System  that  payment  for  such  securities  has  been
            transferred  to the U.S.  Securities  System  Account,  and (ii) the
            making of an entry on the records of the  Custodian  to reflect such
            transfer  and  payment  for the  account of the Fund.  Copies of all
            advices from the U.S.  Securities  System of transfers of securities


                                       6
<PAGE>

            for the account of the Fund shall  identify the Fund,  be maintained
            for the Fund by the  Custodian  and be  provided  to the Fund at its
            request.   Upon  request,  the  Custodian  shall  furnish  the  Fund
            confirmation  of each transfer to or from the account of the Fund in
            the form of a written advice or notice and shall furnish to the Fund
            copies  of  daily   transaction   sheets   reflecting   each   day's
            transactions  in the U.S.  Securities  System for the account of the
            Fund;

      4)    The Custodian shall provide the Fund with any report obtained by
            the Custodian on the U.S. Securities System's accounting system,
            internal accounting control and procedures for safeguarding
            securities deposited in the U.S. Securities System;

      5)    Anything to the  contrary  in this  Agreement  notwithstanding,  the
            Custodian  shall be liable to the Fund for any loss or damage to the
            Fund resulting from use of the U.S.  Securities  System by reason of
            any negligence, misfeasance or misconduct of the Custodian or any of
            its agents or of any of its or their  employees  or from  failure of
            the Custodian or any such agent to enforce  effectively  such rights
            as it may have against the U.S.  Securities  System; at the election
            of the Fund,  it shall be entitled to be subrogated to the rights of
            the Custodian with respect to any claim against the U.S.  Securities
            System  or any  other  person  which  the  Custodian  may  have as a
            consequence of any such loss or damage if and to the extent that the
            Fund has not been made whole for any such loss or damage.

      SECTION  2.10  SEGREGATED  ACCOUNT.  The  Custodian  shall upon receipt of
Proper Instructions  establish and maintain a segregated account or accounts for
and on behalf of the Fund,  into which  account or accounts  may be  transferred
cash and/or  securities,  including  securities  maintained in an account by the
Custodian  pursuant to Section 2.9 hereof, (i) in accordance with the provisions
of any agreement  among the Fund, the Custodian and a  broker-dealer  registered
under  the  Exchange  Act and a member  of the NASD (or any  futures  commission
merchant  registered under the Commodity  Exchange Act),  relating to compliance
with  the  rules  of The  Options  Clearing  Corporation  and of any  registered
national securities exchange (or the CFTC or any registered contract market), or
of  any  similar  organization  or  organizations,  regarding  escrow  or  other
arrangements in connection  with  transactions by the Fund, (ii) for purposes of
segregating cash or government  securities in connection with options purchased,
sold or written by the Fund or commodity  futures  contracts or options  thereon
purchased or sold by the Fund,  (iii) for the purposes of compliance by the Fund
with the procedures required by Investment Company Act Release No. 10666, or any
subsequent release of the U.S.  Securities and Exchange  Commission (the "SEC"),
or  interpretative  opinion of the staff of the SEC, relating to the maintenance
of segregated  accounts by  registered  investment  companies,  and (iv) for any
other purpose upon receipt of Proper Instructions.


                                       7
<PAGE>

      SECTION 2.11 OWNERSHIP  CERTIFICATES FOR TAX PURPOSES. The Custodian shall
execute  ownership and other  certificates  and  affidavits  for all federal and
state tax purposes in connection  with receipt of income or other  payments with
respect to domestic  securities  of the Fund held by it and in  connection  with
transfers of securities.

      SECTION 2.12 PROXIES.  The Custodian  shall,  with respect to the domestic
securities  held  hereunder,  cause to be promptly  executed  by the  registered
holder of such  securities,  if the securities are registered  otherwise than in
the name of the Fund or a nominee of the Fund, all proxies,  without  indication
of the manner in which such proxies are to be voted,  and shall promptly deliver
to the Fund  such  proxies,  all  proxy  soliciting  materials  and all  notices
relating to such securities.

      SECTION 2.13  COMMUNICATIONS  RELATING TO FUND SECURITIES.  Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the Fund all
written  information  (including,  without  limitation,  pendency  of calls  and
maturities  of  domestic  securities  and  expirations  of rights in  connection
therewith  and notices of  exercise of call and put options  written by the Fund
and the maturity of futures contracts purchased or sold by the Fund) received by
the  Custodian  from  issuers of the  securities  being held for the Fund.  With
respect to tender or exchange offers,  the Custodian shall transmit  promptly to
the Fund all written  information  received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party (or its agents)
making the tender or  exchange  offer.  If the Fund  desires to take action with
respect to any tender offer,  exchange  offer or any other similar  transaction,
the Fund shall (when  possible  using its best efforts)  notify the Custodian at
least three  business  days prior to the date on which the  Custodian is to take
such action.


SECTION 3.  PROVISIONS RELATING TO RULES 17F-5 AND 17F-7
            --------------------------------------------

      SECTION 3.1.      DEFINITIONS.  As used throughout this Agreement, the
following capitalized terms shall have the indicated meanings:

"Country  Risk" means all factors  reasonably  related to the  systemic  risk of
holding Foreign Assets in a particular  country  including,  but not limited to,
such  country's  political  environment,  economic and financial  infrastructure
(including  any  Eligible  Securities  Depository  operating  in  the  country),
prevailing  or  developing  custody  and  settlement  practices,  and  laws  and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.

"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5,  including a  majority-owned  or indirect  subsidiary  of a U.S. Bank (as
defined in Rule 17f-5),  a bank holding company  meeting the  requirements of an
Eligible Foreign  Custodian (as set forth in Rule 17f-5 or by other  appropriate
action of the SEC, or a foreign branch of a Bank (as defined in Section  2(a)(5)
of the 1940 Act) meeting the  requirements of a custodian under Section 17(f) of
the 1940 Act; the term does not include any Eligible Securities Depository.


                                       8
<PAGE>

"Eligible Securities  Depository" has the meaning set forth in section (b)(1) of
Rule 17f-7.

"Foreign  Assets"  means  any  of  the  Fund's  investments  (including  foreign
currencies)  for which the primary  market is outside the United States and such
cash and cash  equivalents  as are  reasonably  necessary  to effect  the Fund's
transactions in such investments.

"Foreign  Custody  Manager" has the meaning set forth in section  (a)(3) of Rule
17f-5.

"Rule 17f-5" means Rule 17f-5 promulgated under the 1940 Act.

"Rule 17f-7" means Rule 17f-7 promulgated under the 1940 Act.

      SECTION 3.2.      THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
                        ----------------------------------------

            3.2.1  DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY  MANAGER.  The
Fund, by resolution  adopted by its Board,  hereby  delegates to the  Custodian,
subject to Section (b) of Rule  17f-5,  the  responsibilities  set forth in this
Section 3.2 with respect to Foreign Assets held outside the United  States,  and
the Custodian  hereby accepts such  delegation as Foreign Custody Manager of the
Fund.

            3.2.2  COUNTRIES  COVERED.  The  Foreign  Custody  Manager  shall be
responsible  for  performing the delegated  responsibilities  defined below only
with respect to the  countries  and custody  arrangements  for each such country
listed on Schedule A to this  Contract,  which list of countries  may be amended
from time to time by the Fund with the agreement of the Foreign Custody Manager.
The  Foreign  Custody  Manager  shall list on  Schedule A the  Eligible  Foreign
Custodians  selected  by the  Foreign  Custody  Manager to  maintain  the Fund's
assets,  which list of Eligible  Foreign  Custodians may be amended from time to
time in the sole discretion of the Foreign Custody Manager.  The Foreign Custody
Manager will provide  amended  versions of Schedule A in accordance with Section
3.2.5 hereof.

Upon the receipt by the Foreign Custody  Manager of Proper  Instructions to open
an  account  or to place or  maintain  Foreign  Assets  in a  country  listed on
Schedule A, and the  fulfillment by the Fund of the applicable  account  opening
requirements  for such country,  the Foreign  Custody Manager shall be deemed to
have been delegated by the Board  responsibility as Foreign Custody Manager with
respect to that country and to have accepted such delegation.  Execution of this
Agreement  by the Fund  shall be  deemed to be a Proper  Instruction  to open an
account,  or to place or maintain  Foreign  Assets,  in each  country  listed on
Schedule A in which the Custodian has previously  placed or currently  maintains
Foreign Assets  pursuant to the terms of the Contract.  Following the receipt of
Proper  Instructions  directing the Foreign Custody Manager to close the account
of the Fund with the Eligible Foreign Custodian  selected by the Foreign Custody
Manager in a designated country, the delegation by the Board to the Custodian as


                                       9
<PAGE>

Foreign  Custody Manager for that country shall be deemed to have been withdrawn
and the Custodian shall  immediately  cease to be the Foreign Custody Manager of
the Fund with respect to that country.

The  Foreign   Custody   Manager  may  withdraw  its   acceptance  of  delegated
responsibilities with respect to a designated country upon written notice to the
Fund.  Thirty days (or such longer period to which the parties agree in writing)
after  receipt  of any such  notice by the Fund,  the  Custodian  shall  have no
further  responsibility  in its capacity as Foreign  Custody Manager to the Fund
with respect to the country as to which the Custodian's acceptance of delegation
is withdrawn.

            3.2.3       SCOPE OF DELEGATED RESPONSIBILITIES:
                        -----------------------------------

      (a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions of
this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign
Assets in the care of the  Eligible  Foreign  Custodian  selected by the Foreign
Custody  Manager in each  country  listed on Schedule A, as amended from time to
time. In performing its delegated responsibilities as Foreign Custody Manager to
place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign
Custody  Manager  shall  determine  that the  Foreign  Assets will be subject to
reasonable care, based on the standards  applicable to custodians in the country
in which the Foreign  Assets will be held by that  Eligible  Foreign  Custodian,
after  considering  all factors  relevant  to the  safekeeping  of such  assets,
including, without limitation the factors specified in Rule 17f-5(c)(1).

      (b)  CONTRACTS  WITH  ELIGIBLE  FOREIGN  CUSTODIANS.  The Foreign  Custody
Manager  shall  determine  that  the  contract  governing  the  foreign  custody
arrangements  with each  Eligible  Foreign  Custodian  selected  by the  Foreign
Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).

      (c)  MONITORING.  In each  case  in  which  the  Foreign  Custody  Manager
maintains  Foreign  Assets with an Eligible  Foreign  Custodian  selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system to
monitor (i) the  appropriateness  of  maintaining  the Foreign  Assets with such
Eligible  Foreign  Custodian  and  (ii)  the  contract   governing  the  custody
arrangements  established  by the  Foreign  Custody  Manager  with the  Eligible
Foreign Custodian.  In the event the Foreign Custody Manager determines that the
custody  arrangements  with an Eligible Foreign Custodian it has selected are no
longer  appropriate,  the  Foreign  Custody  Manager  shall  notify the Board in
accordance with Section 3.2.5 hereunder.



                                       10
<PAGE>


            3.2.4  GUIDELINES  FOR THE  EXERCISE  OF  DELEGATED  AUTHORITY.  For
purposes of this Section 3.2, the Board shall be deemed to have  considered  and
determined to accept such Country Risk as is incurred by placing and maintaining
the Foreign Assets in each country for which the Custodian is serving as Foreign
Custody Manager of the Fund.

            3.2.5  REPORTING  REQUIREMENTS.  The Foreign  Custody  Manager shall
report the withdrawal of the Foreign Assets from an Eligible  Foreign  Custodian
and the placement of such Foreign Assets with another Eligible Foreign Custodian
by  providing  to the Board an  amended  Schedule  A at the end of the  calendar
quarter in which an amendment to such Schedule has occurred. The Foreign Custody
Manager shall make written  reports  notifying  the Board of any other  material
change in the foreign custody arrangements of the Fund described in this Section
3.2 after the occurrence of the material change.

            3.2.6  STANDARD OF CARE AS FOREIGN  CUSTODY  MANAGER OF THE FUND. In
performing the  responsibilities  delegated to it, the Foreign  Custody  Manager
agrees to exercise  reasonable  care,  prudence and  diligence  such as a person
having  responsibility  for the  safekeeping of assets of management  investment
companies registered under the 1940 Act would exercise.

            3.2.7  REPRESENTATIONS  WITH  RESPECT  TO RULE  17F-5.  The  Foreign
Custody  Manager  represents  to the Fund that it is a U.S.  Bank as  defined in
section  (a)(7) of Rule 17f-5.  The Fund  represents to the  Custodian  that the
Board  has  determined  that  it is  reasonable  for  the  Board  to rely on the
Custodian to perform the responsibilities delegated pursuant to this Contract to
the Custodian as the Foreign Custody Manager of the Fund.

            3.2.8  EFFECTIVE  DATE AND  TERMINATION  OF THE CUSTODIAN AS FOREIGN
CUSTODY  MANAGER.  The Board's  delegation to the  Custodian as Foreign  Custody
Manager of the Fund shall be effective as of the date hereof and shall remain in
effect until terminated at any time, without penalty, by written notice from the
terminating  party  to  the  non-terminating  party.   Termination  will  become
effective  thirty (30) days after receipt by the  non-terminating  party of such
notice.  The  provisions of Section 3.2.2 hereof shall govern the  delegation to
and  termination  of the Custodian as Foreign  Custody  Manager of the Fund with
respect to designated countries.

      SECTION 3.3 ELIGIBLE SECURITIES DEPOSITORIES.
                  --------------------------------

            3.3.1 ANALYSIS AND  MONITORING.  The Custodian shall (a) provide the
Fund (or its  duly-authorized  investment manager or investment advisor) with an
analysis  of the  custody  risks  associated  with  maintaining  assets with the
Eligible  Securities  Depositories  set forth on Schedule B hereto in accordance
with  section  (a)(1)(i)(A)  of Rule  17f-7,  and (b)  monitor  such  risks on a
continuing  basis,  and  promptly  notify  the  Fund  (or  its   duly-authorized
investment manager or investment  advisor) of any material change in such risks,
in accordance with section (a)(1)(i)(B) of Rule 17f-7.

                                       11
<PAGE>

            3.3.2 STANDARD OF CARE. The Custodian agrees to exercise  reasonable
care,  prudence  and  diligence  in  performing  the duties set forth in Section
3.3.1.



 SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD
            ------------------------------------------------------------------
            OUTSIDE THE UNITED STATES
            -------------------------

      SECTION 4.1 DEFINITIONS.  As used throughout this Agreement, the following
capitalized terms shall have the indicated meanings:

"Foreign  Securities System" means an Eligible  Securities  Depository listed on
Schedule B hereto.

"Foreign  Sub-Custodian"  means a  foreign  banking  institution  serving  as an
Eligible Foreign Custodian.

      SECTION 4.2. HOLDING SECURITIES. The Custodian shall identify on its books
as  belonging  to  the  Fund  the  foreign   securities  held  by  each  Foreign
Sub-Custodian  or Foreign  Securities  System.  The  Custodian  may hold foreign
securities  for all of its  customers,  including  the  Fund,  with any  Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the  benefit of its  customers,  provided  however,  that (i) the records of the
Custodian with respect to foreign securities of the Fund which are maintained in
such account shall identify those  securities as belonging to the Fund and (ii),
to the extent  permitted  and  customary  in the market in which the  account is
maintained,  the Custodian  shall require that securities so held by the Foreign
Sub-Custodian  be held separately from any assets of such Foreign  Sub-Custodian
or of other customers of such Foreign Sub-Custodian.

      SECTION 4.3.      FOREIGN SECURITIES SYSTEMS.  Foreign securities shall
be maintained in a Foreign Securities System in a designated country through
arrangements implemented by the Custodian or a Foreign Sub-Custodian, as
applicable, in such country.

      SECTION 4.4.      TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
                        ---------------------------------------

            4.4.1.  DELIVERY  OF  FOREIGN  ASSETS.  The  Custodian  or a Foreign
Sub-Custodian  shall release and deliver foreign  securities of the Fund held by
the Custodian or such Foreign  Sub-Custodian,  or in a Foreign Securities System
account,  only upon  receipt  of Proper  Instructions,  which may be  continuing
instructions when deemed  appropriate by the parties,  and only in the following
cases:

      (i)   upon the sale of such foreign  securities for the Fund in accordance
            with  commercially  reasonable  market practice in the country where
            such  foreign  securities  are held or  traded,  including,  without
            limitation:  (A) delivery  against  expectation  of receiving  later
            payment;  or (B) in the case of a sale  effected  through  a Foreign


                                       12
<PAGE>

            Securities  System,  in  accordance  with the  rules  governing  the
            operation of the Foreign Securities System;

      (ii)  in connection with any repurchase agreement related to foreign
            securities;

      (iii) to the depository agent in connection with tender or other
            similar offers for foreign securities of the Fund;

      (iv)  to the issuer thereof or its agent when such foreign  securities are
            called, redeemed, retired or otherwise become payable;

      (v)   to the issuer thereof,  or its agent,  for transfer into the name of
            the Custodian (or the name of the respective  Foreign  Sub-Custodian
            or of any nominee of the Custodian or such Foreign Sub-Custodian) or
            for exchange for a different number of bonds,  certificates or other
            evidence  representing  the same  aggregate face amount or number of
            units;

      (vi)  to brokers,  clearing banks or other clearing agents for examination
            or trade execution in accordance  with market custom;  provided that
            in  any  such  case  the   Foreign   Sub-Custodian   shall  have  no
            responsibility  or liability  for any loss arising from the delivery
            of such  securities  prior to receiving  payment for such securities
            except as may arise from the Foreign  Sub-Custodian's own negligence
            or willful misconduct;

      (vii) for  exchange  or  conversion   pursuant  to  any  plan  of  merger,
            consolidation,  recapitalization,  reorganization or readjustment of
            the  securities  of the issuer of such  securities,  or  pursuant to
            provisions for conversion contained in such securities,  or pursuant
            to any deposit agreement;

      (viii)in the case of warrants,  rights or similar foreign securities,  the
            surrender  thereof  in the  exercise  of such  warrants,  rights  or
            similar securities or the surrender of interim receipts or temporary
            securities for definitive securities;

      (ix)  for delivery as security in connection with any borrowing by the
            Fund requiring a pledge of assets by the Fund;

      (x)   in connection with trading in options and futures contracts,
            including delivery as original margin and variation margin;

      (xi)  in connection with the lending of foreign securities; and

      (xii) for any other purpose,  but only upon receipt of Proper Instructions
            specifying  the foreign  securities  to be delivered  and naming the
            person or persons to whom delivery of such securities shall be made.


                                       13
<PAGE>

            4.4.2.PAYMENT OF FUND MONIES.  Upon receipt of Proper  Instructions,
which may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out, or direct the respective  Foreign  Sub-Custodian or the
respective  Foreign  Securities  System  to pay out,  monies  of the Fund in the
following cases only:

      (i)   upon the purchase of foreign securities for the Fund, unless
            otherwise directed by Proper Instructions, by (A) delivering
            money to the seller thereof or to a dealer therefor (or an agent
            for such seller or dealer) against expectation of receiving later
            delivery of such foreign securities; or (B) in the case of a
            purchase effected through a Foreign Securities System, in
            accordance with the rules governing the operation of such Foreign
            Securities System;

      (ii)  in connection with the conversion, exchange or surrender of
            foreign securities of the Fund;

      (iii) for the payment of any expense or liability  of the Fund,  including
            but  not  limited  to  the  following  payments:   interest,  taxes,
            investment  advisory  fees,  transfer  agency fees,  fees under this
            Contract, legal fees, accounting fees, and other operating expenses;

      (iv)  for the  purchase or sale of foreign  exchange  or foreign  exchange
            contracts  for the Fund,  including  transactions  executed  with or
            through the Custodian or its Foreign Sub-Custodians;

      (v)   in connection with trading in options and futures contracts,
            including delivery as original margin and variation margin;

      (vi)  for payment of part or all of the dividends received in respect
            of securities sold short;

      (vii) in connection with the borrowing or lending of foreign
            securities; and

      (viii)for any other purpose,  but only upon receipt of Proper Instructions
            specifying  the  amount of such  payment  and  naming  the person or
            persons to whom such payment is to be made.

            4.4.3.  MARKET  CONDITIONS.  Notwithstanding  any  provision of this
Contract to the contrary, settlement and payment for Foreign Assets received for
the  account of the Fund and  delivery  of  Foreign  Assets  maintained  for the
account of the Fund may be effected in accordance with the customary established
securities  trading or  processing  practices  and  procedures in the country or
market  in  which  the  transaction  occurs,   including,   without  limitation,
delivering  Foreign Assets to the purchaser  thereof or to a dealer therefor (or
an agent for such purchaser or dealer) with the  expectation of receiving  later
payment for such Foreign Assets from such purchaser or dealer.


                                       14
<PAGE>

The Custodian shall provide to the Board the information with respect to custody
and settlement  practices in countries in which the Custodian  employs a Foreign
Sub-Custodian  described  on Schedule C hereto at the time or times set forth on
such Schedule.  The Custodian may revise Schedule C from time to time,  provided
that  no  such  revision   shall  result  in  the  Board  being   provided  with
substantively less information than had been previously provided hereunder.

      SECTION 4.5.  REGISTRATION OF FOREIGN  SECURITIES.  The foreign securities
maintained  in  the  custody  of a  Foreign  Sub-Custodian  (other  than  bearer
securities)  shall be  registered  in the name of the Fund or in the name of the
Custodian  or in the  name of any  Foreign  Sub-Custodian  or in the name of any
nominee of the foregoing,  and the Fund agrees to hold any such nominee harmless
from any  liability  as a holder  of  record  of such  foreign  securities.  The
Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities
on behalf of the Fund under the terms of this  Contract  unless the form of such
securities  and the manner in which they are delivered  are in  accordance  with
reasonable market practice.

      SECTION 4.6 BANK  ACCOUNTS.  The Custodian  shall identify on its books as
belonging to the Fund cash  (including cash  denominated in foreign  currencies)
deposited  with the  Custodian.  Where the  Custodian is unable to maintain,  or
market practice does not facilitate the maintenance of, cash on the books of the
Custodian,  a bank  account  or bank  accounts  shall be opened  and  maintained
outside  the United  States on behalf of the Fund with a Foreign  Sub-Custodian.
All accounts referred to in this Section shall be subject only to draft or order
by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant
to the  terms of this  Agreement  to hold  cash  received  by or from or for the
account of the Fund.  Cash  maintained on the books of the Custodian  (including
its branches, subsidiaries and affiliates), regardless of currency denomination,
is maintained in bank accounts  established  under,  and subject to the laws of,
The Commonwealth of Massachusetts.

      SECTION 4.7.  COLLECTION  OF INCOME.  The Custodian  shall use  reasonable
commercial  efforts to collect all income and other payments with respect to the
Foreign  Assets held  hereunder  to which the Fund shall be  entitled  and shall
credit such income, as collected,  to the Fund. In the event that  extraordinary
measures are required to collect such income,  the Fund and the Custodian  shall
consult as to such  measures  and as to the  compensation  and  expenses  of the
Custodian relating to such measures.

      SECTION 4.8  SHAREHOLDER  RIGHTS.  With respect to the foreign  securities
held pursuant to this Section 4, the Custodian  will use  reasonable  commercial
efforts to  facilitate  the  exercise  of voting and other  shareholder  rights,
subject always to the laws, regulations and practical constraints that may exist
in the country where such  securities  are issued.  The Fund  acknowledges  that
local conditions,  including lack of regulation, onerous procedural obligations,
lack of notice and other  factors may have the effect of severely  limiting  the
ability of the Fund to exercise shareholder rights.

      SECTION 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES.  The Custodian
shall  transmit  promptly  to the  Fund  written  information  with  respect  to
materials received by the Custodian via the Foreign  Sub-Custodians from issuers


                                       15
<PAGE>

of the foreign  securities  being held for the  account of the Fund  (including,
without  limitation,  pendency of calls and maturities of foreign securities and
expirations  of rights  in  connection  therewith).  With  respect  to tender or
exchange  offers,  the  Custodian  shall  transmit  promptly to the Fund written
information  with respect to materials so received by the Custodian from issuers
of the foreign  securities  whose tender or exchange is sought or from the party
(or its agents) making the tender or exchange offer.  The Custodian shall not be
liable for any untimely exercise of any tender, exchange or other right or power
in connection with foreign  securities or other property of the Fund at any time
held by it unless (i) the Custodian or the respective  Foreign  Sub-Custodian is
in  actual  possession  of such  foreign  securities  or  property  and (ii) the
Custodian  receives Proper  Instructions with regard to the exercise of any such
right or power,  and both (i) and (ii) occur at least three  business days prior
to the date on which the  Custodian is to take action to exercise  such right or
power.

      SECTION 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant
to which the  Custodian  employs a Foreign  Sub-Custodian  shall,  to the extent
possible,  require the Foreign  Sub-Custodian to exercise reasonable care in the
performance of its duties,  and to indemnify,  and hold harmless,  the Custodian
from and against any loss, damage, cost, expense, liability or claim arising out
of or in  connection  with  the  Foreign  Sub-Custodian's  performance  of  such
obligations.  At the Fund's  election,  it shall be entitled to be subrogated to
the  rights  of the  Custodian  with  respect  to any  claims  against a Foreign
Sub-Custodian  as a  consequence  of  any  such  loss,  damage,  cost,  expense,
liability  or claim if and to the  extent  that the Fund has not been made whole
for any such loss, damage, cost, expense, liability or claim.

      SECTION  4.11 TAX LAW.  The  Custodian  shall  have no  responsibility  or
liability  for any  obligations  now or  hereafter  imposed  on the  Fund or the
Custodian as custodian of the Fund by the tax law of the United States or of any
state or political  subdivision  thereof.  It shall be the responsibility of the
Fund to notify  the  Custodian  of the  obligations  imposed  on the Fund or the
Custodian as custodian of the Fund by the tax law of countries  other than those
mentioned in the above sentence,  including  responsibility  for withholding and
other taxes,  assessments  or other  governmental  charges,  certifications  and
governmental reporting.  The sole responsibility of the Custodian with regard to
such tax law shall be to use reasonable  efforts to assist the Fund with respect
to any claim for  exemption or refund  under the tax law of countries  for which
the Fund has provided such information.

      SECTION 4.12.  LIABILITY OF CUSTODIAN.  The Custodian  shall be liable for
the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth
with respect to  sub-custodians  generally in the Contract  and,  regardless  of
whether  assets are  maintained in the custody of a Foreign  Sub-Custodian  or a
Foreign  Securities  System,  the  Custodian  shall not be liable  for any loss,
damage,  cost,  expense,  liability  or claim  resulting  from  nationalization,
expropriation,  currency restrictions, or acts of war or terrorism, or any other
loss where the Sub-Custodian has otherwise acted with reasonable care.


                                       16
<PAGE>


SECTION 5.  PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
            ----------------------------------------------------------

The  Custodian  shall  receive from the  distributor  for the Shares or from the
Transfer Agent and deposit into the Fund's account such payments as are received
for Shares  thereof  issued or sold from time to time by the Fund. The Custodian
will  provide  timely  notification  to the Fund and the  Transfer  Agent of any
receipt by it of payments for Shares of the Fund.

From such funds as may be available for the purpose,  the Custodian shall,  upon
receipt of  instructions  from the  Transfer  Agent,  make funds  available  for
payment to holders of Shares who have  delivered to the Transfer Agent a request
for redemption or repurchase of their Shares.  In connection with the redemption
or  repurchase  of  Shares,   the  Custodian  is  authorized   upon  receipt  of
instructions  from the  Transfer  Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian
by a holder of  Shares,  which  checks  have been  furnished  by the Fund to the
holder of Shares,  when  presented  to the  Custodian  in  accordance  with such
procedures  and controls as are  mutually  agreed upon from time to time between
the Fund and the Custodian.


SECTION 6.  PROPER INSTRUCTIONS
            -------------------

Proper Instructions, which may also be standing instructions, as used throughout
this Agreement, shall mean instructions received by the Custodian from the Fund,
the Fund's investment  manager,  or a person or entity duly authorized by either
of them. Such  instructions may be in writing signed by the authorized person or
persons  or may be in a tested  communication  or in a  communication  utilizing
access codes effected between electro-mechanical or electronic devices or may be
by such other means and utilizing such intermediary systems and utilities as may
be agreed to from time to time by the  Custodian and the person or entity giving
such instructions,  provided that the Fund has followed any security  procedures
agreed to from time to time by the Fund and the  Custodian,  including,  but not
limited to, the security  procedures  selected by the Fund in the Funds Transfer
Addendum  to  this  Agreement.  Oral  instructions  will  be  considered  Proper
Instructions if the Custodian  reasonably  believes them to have been given by a
person  authorized  to give such  instructions  with respect to the  transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
For purposes of this Section,  Proper  Instructions  shall include  instructions
received by the Custodian pursuant to any multi-party agreement which requires a
segregated asset account in accordance with Section 2.10 of this Agreement.  The
Fund shall  cause its duly  authorized  officer to certify to the  Custodian  in
writing the names and specimen  signatures of persons  authorized to give Proper
Instructions.  The  Custodian  shall be entitled to rely upon the  identity  and
authority  of such  persons  until  it  receives  notice  from  the  Fund to the
contrary.


SECTION 7.  ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
            -------------------------------------------

The Custodian may in its discretion, without express authority from the Fund:


                                       17
<PAGE>

      1)    make  payments  to itself or others for minor  expenses  of handling
            securities or other similar items  relating to its duties under this
            Agreement, PROVIDED that all such payments shall be accounted for to
            the Fund;

      2)    surrender securities in temporary form for securities in
            definitive form;

      3)    endorse for collection, in the name of the Fund, checks, drafts
            and other negotiable instruments; and

      4)    in general,  attend to all  non-discretionary  details in connection
            with the sale, exchange, substitution,  purchase, transfer and other
            dealings  with the  securities  and  property  of the Fund except as
            otherwise directed by the Board.


SECTION 8.  EVIDENCE OF AUTHORITY
            ---------------------

The  Custodian  shall be  protected  in acting  upon any  instructions,  notice,
request,  consent,  certificate or other instrument or paper reasonably believed
by it to be genuine  and to have been  properly  executed by or on behalf of the
Fund.  The Custodian may receive and accept a copy of a resolution of the Board,
certified by the  Secretary or an  Assistant  Secretary of the Fund  ("CERTIFIED
RESOLUTION"),  as conclusive  evidence (a) of the authority of any person to act
in accordance with such resolution or (b) of any  determination or of any action
by the  Board  as  described  in such  resolution,  and such  resolution  may be
considered as in full force and effect until receipt by the Custodian of written
notice to the contrary.

SECTION 9.  DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
            -------------------------------------------------------------
            CALCULATION OF NET ASSET VALUE AND NET INCOME
            ---------------------------------------------

The Custodian  shall  cooperate  with and supply  necessary  information  to the
entity or  entities  appointed  by the Board to keep the books of account of the
Fund and/or compute the net asset value per Share of the outstanding  Shares or,
if  directed  in writing to do so by the Fund,  shall  itself keep such books of
account  and/or  compute  such net asset value per Share.  If so  directed,  the
Custodian  shall also calculate daily the net income of the Fund as described in
the  Prospectus  and shall advise the Fund and the  Transfer  Agent daily of the
total  amounts of such net income and, if instructed in writing by an officer of
the Fund to do so, shall advise the Transfer Agent  periodically of the division
of such net income among its various  components.  The  calculations  of the net
asset value per Share and the daily income of the Fund shall be made at the time
or times described from time to time in the Prospectus.


                                       18
<PAGE>

SECTION 10. RECORDS
            -------

The Custodian  shall create and maintain all records  relating to its activities
and obligations under this Agreement in such manner as will meet the obligations
of the Fund under the 1940 Act, with particular  attention to Section 31 thereof
and Rules 31a-1 and 31a-2 thereunder.  All such records shall be the property of
the Fund  and  shall at all  times  during  the  regular  business  hours of the
Custodian  be open for  inspection  by duly  authorized  officers,  employees or
agents of the Fund and employees and agents of the SEC. The Custodian  shall, at
the Fund's request, supply the Fund with a tabulation of securities owned by the
Fund and held by the  Custodian and shall,  when  requested to do so by the Fund
and for such  compensation  as shall be  agreed  upon  between  the Fund and the
Custodian, include certificate numbers in such tabulations.


SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
            ----------------------------------------

The Custodian  shall take all  reasonable  action,  as the Fund may from time to
time  request,  to obtain from year to year  favorable  opinions from the Fund's
independent  accountants with respect to its activities  hereunder in connection
with the  preparation  of the Fund's  Form N-2,  and Form N-SAR or other  annual
reports to the SEC and with respect to any other requirements thereof.


SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
            -------------------------------------------------

The Custodian  shall provide the Fund, at such times as the Fund may  reasonably
require,  with  reports by  independent  public  accountants  on the  accounting
system, internal accounting control and procedures for safeguarding  securities,
other  assets,  futures  contracts and options on futures  contracts,  including
securities  deposited and/or maintained in a U.S. Securities System or a Foreign
Securities System, relating to the services provided by the Custodian under this
Agreement;  such reports, shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Fund to provide  reasonable  assurance that
any material inadequacies would be disclosed by such examination,  and, if there
are no such inadequacies, the reports shall so state.


SECTION 13. COMPENSATION OF CUSTODIAN
            -------------------------

The Custodian shall be entitled to reasonable  compensation for its services and
expenses as Custodian, as agreed upon from time to time between the Fund and the
Custodian.


SECTION 14. RESPONSIBILITY OF CUSTODIAN
            ---------------------------

So long as and to the extent that it is in the exercise of reasonable  care, the
Custodian shall not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered by it pursuant
to this Agreement and shall be held harmless in acting upon any notice, request,
consent, certificate or other instrument reasonably believed by it to be genuine
and to be  signed  by  the  proper  party  or  parties,  including  any  futures


                                       19

<PAGE>

commission  merchant  acting  pursuant to the terms of a three-party  futures or
options  agreement.  The  Custodian  shall be held to the exercise of reasonable
care in  carrying  out the  provisions  of this  Agreement,  but  shall  be kept
indemnified  by and shall be without  liability to the Fund for any action taken
or  omitted  by  it  in  good  faith  without  negligence,   including,  without
limitation,  acting  in  accordance  with any  Proper  Instruction.  It shall be
entitled to rely on and may act upon  advice of counsel  (who may be counsel for
the  Fund)  on all  matters,  and  shall be  without  liability  for any  action
reasonably  taken or omitted  pursuant to such advice.  The  Custodian  shall be
without  liability  to the  Fund  for any  loss,  liability,  claim  or  expense
resulting  from or caused by anything  which is part of Country Risk (as defined
in   Section  3   hereof),   including   without   limitation   nationalization,
expropriation,  currency  restrictions,  or acts of war,  revolution,  riots  or
terrorism.

Except as may arise from the Custodian's  own  negligence,  bad faith or willful
misconduct or the negligence or willful  misconduct of a sub-custodian or agent,
the Custodian  shall be without  liability to the Fund for any loss,  liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the  reasonable  control of the  Custodian or any  sub-custodian  or  Securities
System or any  agent or  nominee  of any of the  foregoing,  including,  without
limitation,  the  interruption,  suspension or  restriction of trading on or the
closure of any securities  market,  power or other  mechanical or  technological
failures or interruptions,  computer viruses or communications disruptions, work
stoppages,  natural  disasters,  or other similar events or acts; (ii) errors by
the Fund or its  duly-authorized  investment  manager or  investment  advisor in
their  instructions  to the Custodian  provided such  instructions  have been in
accordance with this Agreement;  (iii) the insolvency of or acts or omissions by
a  Securities  System;  (iv)  any  delay  or  failure  of any  broker,  agent or
intermediary,  central bank or other commercially  prevalent payment or clearing
system to deliver to the Custodian's sub-custodian or agent securities purchased
or in the remittance or payment made in connection with securities sold; (v) any
delay or  failure  of any  company,  corporation,  or other  body in  charge  of
registering or transferring  securities in the name of the Custodian,  the Fund,
the Custodian's  sub-custodians,  nominees or agents or any consequential losses
arising  out of such delay or  failure to  transfer  such  securities  including
non-receipt  of bonus,  dividends  and rights and other  accretions or benefits;
(vi) delays or  inability  to perform  its duties due to any  disorder in market
infrastructure with respect to any particular security or Securities System; and
(vii) any  provision of any present or future law or  regulation or order of the
United  States of  America,  or any state  thereof,  or any  other  country,  or
political subdivision thereof or of any court of competent jurisdiction.

The  Custodian  shall  be  liable  for  the  acts  or  omissions  of  a  Foreign
Sub-Custodian  (as  defined in Section 4 hereof) to the same extent as set forth
with respect to sub-custodians generally in this Agreement.

If the  Fund  requires  the  Custodian  to  take  any  action  with  respect  to
securities,  which action  involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being  liable for the payment of money or  incurring  liability of some
other form, the Fund, as a prerequisite  to requiring the Custodian to take such


                                       20
<PAGE>

action,  shall  provide  indemnity  to  the  Custodian  in an  amount  and  form
satisfactory to it.

If the Fund requires the Custodian,  its affiliates,  subsidiaries or agents, to
advance  cash or  securities  for any  purpose  (including  but not  limited  to
securities settlements, foreign exchange contracts and assumed settlement) or in
the event that the  Custodian  or its nominee  shall  incur or be  assessed  any
taxes, charges, expenses,  assessments, claims or liabilities in connection with
the  performance  of this  Agreement,  except  such as may arise from its or its
nominee's own negligent action,  negligent failure to act or willful misconduct,
any  property  at any time held for the  account of the Fund  shall be  security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize  available cash and to dispose of the Fund's assets
to the extent necessary to obtain reimbursement.

In no event shall the Custodian be liable for indirect, special or consequential
damages.


SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
            -------------------------------------------

This Agreement  shall become  effective as of its  execution,  shall continue in
full force and effect until terminated as hereinafter  provided,  may be amended
at any time by mutual  agreement of the parties  hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other  party,  such  termination  to take effect not sooner than thirty (30)
days after the date of such  delivery or mailing;  PROVIDED,  however,  that the
Fund  shall  not amend or  terminate  this  Agreement  in  contravention  of any
applicable federal or state regulations, or any provision of the Fund's Articles
of Incorporation,  and further provided, that the Fund may at any time by action
of its Board (i)  substitute  another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately terminate
this Agreement in the event of the  appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.

Upon  termination  of the  Agreement,  the Fund shall pay to the Custodian  such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.


SECTION 16. SUCCESSOR CUSTODIAN
            -------------------

If a  successor  custodian  for the Fund shall be  appointed  by the Board,  the
Custodian shall,  upon termination,  deliver to such successor  custodian at the
office  of the  Custodian,  duly  endorsed  and in the  form for  transfer,  all
securities  of the Fund  then held by it  hereunder  and  shall  transfer  to an
account of the successor  custodian all of the  securities of the Fund held in a
Securities System.


                                       21
<PAGE>

If no such successor custodian shall be appointed,  the Custodian shall, in like
manner,  upon  receipt of a Certified  Resolution,  deliver at the office of the
Custodian and transfer such securities, funds and other properties in accordance
with such resolution.

In the  event  that no  written  order  designating  a  successor  custodian  or
Certified Resolution shall have been delivered to the Custodian on or before the
date when such termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of
its own selection,  having an aggregate capital, surplus, and undivided profits,
as  shown by its last  published  report,  of not  less  than  $25,000,000,  all
securities,  funds and other properties held by the Custodian  hereunder and all
instruments  held by the Custodian  relative thereto and all other property held
by it under this  Agreement on behalf of the Fund, and to transfer to an account
of such successor  custodian all of the Fund's securities held in any Securities
System.  Thereafter,  such bank or trust  company  shall be the successor of the
Custodian under this Agreement.

In  the  event  that  securities,  funds  and  other  properties  remain  in the
possession  of the  Custodian  after  the date of  termination  hereof  owing to
failure of the Fund to procure the  Certified  Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.


SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
            --------------------------------------

In connection with the operation of this  Agreement,  the Custodian and the Fund
may from time to time agree on such provisions interpretive of or in addition to
the  provisions  of this  Agreement as may in their joint  opinion be consistent
with the general tenor of this  Agreement.  Any such  interpretive or additional
provisions  shall be in a writing  signed by both  parties  and shall be annexed
hereto,  PROVIDED  that no such  interpretive  or  additional  provisions  shall
contravene any applicable  federal or state  regulations or any provision of the
Fund's Articles of Incorporation.  No interpretive or additional provisions made
as provided in the preceding sentence shall be deemed to be an amendment of this
Agreement.


SECTION 18. MASSACHUSETTS LAW TO APPLY
            --------------------------

This Agreement shall be construed and the provisions  thereof  interpreted under
and in accordance with laws of The Commonwealth of Massachusetts.



                                       22
<PAGE>

SECTION 19. PRIOR AGREEMENTS
            ----------------

This  Agreement  supersedes  and  terminates,  as of the date hereof,  all prior
Agreements  between  the Fund and the  Custodian  relating to the custody of the
Fund's assets.


SECTION 20. NOTICES.
            -------

Any notice,  instruction or other instrument  required to be given hereunder may
be delivered in person to the offices of the parties as set forth herein  during
normal business hours or delivered prepaid registered mail or by telex, cable or
telecopy to the parties at the  following  addresses or such other  addresses as
may be notified by any party from time to time.

To the Fund:            NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.
                        605 Third Avenue
                        New York, NY 10158
                        Attention: Frederic Soule
                        Telephone: 212-476-8130
                        Telecopy: 212-476-8939


To the Custodian:       STATE STREET BANK AND TRUST COMPANY
                        2 Avenue de Lafayette
                        Boston, MA  02111
                        Attention: Robert F. Dempsey
                        Telephone: 617-662-2246
                        Telecopy: 617-662-1838

Such notice, instruction or other instrument shall be deemed to have been served
in the case of a registered letter at the expiration of five business days after
posting,  in the case of cable twenty-four hours after dispatch and, in the case
of telex, immediately on dispatch and if delivered outside normal business hours
it shall be deemed to have been  received at the next time after  delivery  when
normal  business hours  commence and in the case of cable,  telex or telecopy on
the  business  day after the  receipt  thereof.  Evidence  that the  notice  was
properly  addressed,  stamped and put into the post shall be conclusive evidence
of posting.


SECTION 21. REPRODUCTION OF DOCUMENTS
            -------------------------

This Agreement and all schedules, addenda, exhibits,  attachments and amendments
hereto  may  be  reproduced  by  any   photographic,   photostatic,   microfilm,
micro-card,  miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original  is in  existence  and whether or not such  reproduction  was made by a
party in the regular course of business, and that any enlargement,  facsimile or


                                       23
<PAGE>

further  reproduction  of such  reproduction  shall  likewise be  admissible  in
evidence.

SECTION 22. REMOTE ACCESS SERVICES ADDENDUM
            -------------------------------

The  Custodian  and the Fund agree to be bound by the terms of the Remote Access
Services Addendum attached hereto.

SECTION 23. SHAREHOLDER COMMUNICATIONS ELECTION
            -----------------------------------

SEC Rule 14b-2 requires banks which hold securities for the account of customers
to respond to requests by issuers of  securities  for the names,  addresses  and
holdings  of  beneficial  owners of  securities  of that issuer held by the bank
unless  the  beneficial  owner has  expressly  objected  to  disclosure  of this
information.  In order to comply with the rule, the Custodian  needs the Fund to
indicate  whether  it  authorizes  the  Custodian  to provide  the Fund's  name,
address,  and share position to requesting  companies whose  securities the Fund
owns. If the Fund tells the Custodian  "no", the Custodian will not provide this
information to requesting  companies.  If the Fund tells the Custodian  "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat  the Fund as  consenting  to  disclosure  of this  information  for all
securities  owned by the Fund or any funds or accounts  established by the Fund.
For the Fund's protection,  the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please  indicate  below  whether the Fund consents or objects by checking one of
the alternatives below.

YES    [ ]   The Custodian is  authorized  to release the Fund's name,  address,
             and share positions.

NO     [X]   The  Custodian  is not  authorized  to  release  the  Fund's  name,
             address, and share positions.

SECTION 24.  CONFIDENTIALITY.  The  Custodian  agrees  that all books,  records,
information  and data pertaining to the business of the Fund which are exchanged
or received  pursuant to the negotiation or carrying out of this Agreement shall
remain confidential,  shall not be disclosed to any other person,  except as may
be required by law,  regulation  or order by a court of competent  jurisdiction,
and shall not be used by the custodian  for any purpose not directly  related to
the business of the Fund, except with the Fund's written consent.

SECTION 24 ASSIGNMENT.  Neither the Fund nor the Custodian  shall have the right
to assign any of its rights or  obligations  under this  Agreement  without  the
prior written  consent of the other party,  such consent not to be  unreasonably
withheld.


                                       24
<PAGE>













                  [Remainder of page left intentionally blank]





                                       25
<PAGE>
      IN WITNESS  WHEREOF,  each of the parties has caused this instrument to be
executed in its name and behalf by its duly  authorized  representative  and its
seal to be hereunder affixed as of September 19, 2002.

NEUBERGER BERMAN INTERMEDIATE             FUND SIGNATURE  ATTESTED TO BY:
MUNICIPAL FUND INC.


By:                                       By:
      -------------------------                 -------------------------

Name:                                     Name:
      -------------------------                 -------------------------

Title:                                    Title:
      -------------------------                 -------------------------




STATE STREET BANK AND TRUST COMPANY       SIGNATURE ATTESTED TO BY:


By:                                       By:
      -------------------------                 -------------------------

Name:  JOSEPH L. HOOLEY                   Name:
      -------------------------                 -------------------------

Title: EXECUTIVE VICE PRESIDENT           Title:
       -------------------------                 ------------------------


<PAGE>

             REMOTE ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT


      ADDENDUM to that certain  Custodian  Agreement  dated as of September  __,
2002 (the "Custodian  Agreement") between Neuberger Berman New York Intermediate
Municipal  Fund Inc. (the  "Customer")  and State Street Bank and Trust Company,
including its subsidiaries and affiliates ("State Street").

      State Street has developed and utilizes  proprietary  accounting and other
systems in conjunction  with the custodian  services which State Street provides
to the Customer.  In this regard,  State Street maintains certain information in
databases  under its  control  and  ownership  which it makes  available  to its
customers (the "Remote Access Services").

The Services
- ------------

State  Street  agrees to provide the  Customer,  and its  designated  investment
advisors,  consultants  or  other  third  parties  authorized  by  State  Street
("Authorized  Designees") with access to In-SightSM as described in Exhibit A or
such  other  systems  as may be offered  from time to time (the  "System")  on a
remote basis.

Security Procedures
- -------------------

The Customer  agrees to comply and to cause its Authorized  Designees to comply,
with  remote  access   operating   standards  and   procedures   and  with  user
identification  or  other  password  control  requirements  and  other  security
procedures  as may be issued  from time to time by State  Street  for use of the
System and access to the Remote Access  Services.  The Customer agrees to advise
State  Street  immediately  in the event that it learns or has reason to believe
that any person to whom it has given  access to the System or the Remote  Access
Services has  violated or intends to violate the terms of this  Addendum and the
Customer  will  cooperate  with  State  Street in  seeking  injunctive  or other
equitable  relief.  The  Customer  agrees to  discontinue  use of the System and
Remote Access  Services,  if requested,  for any security reasons cited by State
Street.

Fees
- ----

Fees and charges for the use of the System and the Remote  Access  Services  and
related  payment  terms  shall be as set forth in the  Custody  Fee  Schedule in
effect from time to time between the parties (the "Fee Schedule").  The Customer
shall be responsible  for any tariffs,  duties or taxes imposed or levied by any
government or governmental agency by reason of the transactions  contemplated by
this Addendum,  including,  without limitation,  federal, state and local taxes,
use, value added and personal  property  taxes (other than income,  franchise or
similar  taxes  which may be imposed or  assessed  against  State  Street).  Any
claimed  exemption  from such  tariffs,  duties or taxes shall be  supported  by
properly documented evidence delivered to State Street.

Proprietary Information/Injunctive Relief
- -----------------------------------------

The  System and  Remote  Access  Services  described  herein and the  databases,
computer   programs,   screen  formats,   report  formats,   interactive  design
techniques,   formulae,   processes,  systems,  software,  knowhow,  algorithms,


                                       i
<PAGE>


programs,  training aids, printed materials,  methods,  books,  records,  files,
documentation  and other  information  made  available  to the Customer by State
Street as part of the Remote  Access  Services and through the use of the System
and all copyrights, patents, trade secrets and other proprietary rights of State
Street related thereto are the exclusive,  valuable and confidential property of
State Street and its relevant  licensors (the  "Proprietary  Information").  The
Customer  agrees on behalf of itself and its  Authorized  Designees  to keep the
Proprietary  Information  confidential  and to limit access to its employees and
Authorized  Designees  (under a similar  duty of  confidentiality)  who  require
access to the System for the purposes intended. The foregoing shall not apply to
Proprietary  Information  in the  public  domain or  required  by law to be made
public.

The Customer  agrees to use the Remote Access  Services only in connection  with
the proper  purposes of this Addendum.  The Customer will not, and will use best
efforts to cause its employees and  Authorized  Designees not to, (i) permit any
third party to use the System or the Remote Access  Services,  (ii) sell,  rent,
license  or  otherwise  use the  System or the  Remote  Access  Services  in the
operation  of a  service  bureau  or for any  purpose  other  than as  expressly
authorized  under  this  Addendum,  (iii) use the  System or the  Remote  Access
Services  for any fund,  trust or other  investment  vehicle  without  the prior
written  consent  of  State  Street,  or (iv)  allow or  cause  any  information
transmitted  from State  Street's  databases,  including  data from third  party
sources,  available through use of the System or the Remote Access Services,  to
be published,  redistributed or retransmitted for other than use or on behalf of
the Customer, as State Street's customer.

The Customer agrees that neither it nor its Authorized Designees will modify the
System in any way; enhance or otherwise  create  derivative works based upon the
System;  nor  will the  Customer  or  Customer's  Authorized  Designees  reverse
engineer,  decompile or  otherwise  attempt to secure the source code for all or
any part of the System.

The Customer acknowledges that the disclosure of any Proprietary Information, or
of any  information  which at law or equity ought to remain  confidential,  will
immediately  give  rise  to  continuing   irreparable  injury  to  State  Street
inadequately  compensable  in  damages  at law and that  State  Street  shall be
entitled to obtain immediate  injunctive relief against the breach or threatened
breach of any of the  foregoing  undertakings,  in  addition  to any other legal
remedies which may be available.

Limited Warranties
- ------------------

State Street  represents  and warrants that it is the owner of and has the right
to grant  access  to the  System  and to  provide  the  Remote  Access  Services
contemplated herein.  Because of the nature of computer information  technology,
including  but not  limited to the use of the  Internet,  and the  necessity  of
relying upon third party sources, and data and pricing information obtained from
third parties,  the System and Remote Access  Services are provided "AS IS", and
the Customer and its Authorized  Designees  shall be solely  responsible for the
investment  decisions,  results  obtained,  regulatory  reports  and  statements
produced  using the  Remote  Access  Services.  State  Street  and its  relevant
licensors will not be liable to the Customer or its Authorized Designees for any
direct or  indirect,  special,  incidental,  punitive or  consequential  damages
arising  out of or in any way  connected  with the System or the  Remote  Access
Services,  nor shall either party be  responsible  for delays or  nonperformance


                                       ii
<PAGE>


under  this  Addendum  arising  out of any cause or event  beyond  such  party's
control.

State Street will take  reasonable  steps to ensure that its products (and those
of its third-party  suppliers) reflect the available state of the art technology
to offer products that are Year 2000 compliant,  including,  but not limited to,
century  recognition of dates,  calculations that correctly compute same century
and multi century  formulas and date values,  and interface  values that reflect
the data issues arising between now and the next  one-hundred  years, and if any
changes are  required,  State Street will make the changes to its products at no
cost to you  and in a  commercially  reasonable  time  frame  and  will  require
third-party  suppliers  to do likewise.  The  Customer  will do likewise for its
systems.

EXCEPT AS EXPRESSLY SET FORTH IN THIS ADDENDUM, STATE STREET, FOR ITSELF AND ITS
RELEVANT LICENSORS,  EXPRESSLY  DISCLAIMS ANY AND ALL WARRANTIES  CONCERNING THE
SYSTEM AND THE  SERVICES TO BE RENDERED  HEREUNDER,  WHETHER  EXPRESS OR IMPLIED
INCLUDING,  WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A
PARTICULAR PURPOSE.

Infringement
- ------------

State Street will defend or, at our option,  settle any claim or action  brought
against  the  Customer  to the extent  that it is based upon an  assertion  that
access to the System or use of the Remote Access  Services by the Customer under
this  Addendum  constitutes  direct  infringement  of any patent or copyright or
misappropriation  of a trade secret,  provided that the Customer  notifies State
Street  promptly in writing of any such claim or proceeding and cooperates  with
State  Street in the defense of such claim or  proceeding.  Should the System or
the Remote  Access  Services or any part thereof  become,  or in State  Street's
opinion be likely to become,  the subject of a claim of infringement or the like
under any  applicable  patent or copyright  or trade  secret laws,  State Street
shall have the right,  at State  Street's  sole  option,  to (i) procure for the
Customer the right to continue  using the System or the Remote Access  Services,
(ii)  replace or modify the System or the  Remote  Access  Services  so that the
System or the Remote Access Services becomes  noninfringing,  or (iii) terminate
this Addendum without further obligation.

Termination
- -----------

Either party to the Custodian  Agreement may terminate this Addendum (i) for any
reason by giving the other  party at least  one-hundred  and eighty  (180) days'
prior written notice in the case of notice of termination by State Street to the
Customer or thirty (30) days'  notice in the case of notice from the Customer to
State Street of termination,  or (ii) immediately for failure of the other party
to comply in a material  respect  with any  material  term and  condition of the
Addendum by giving the other party written notice of termination.  This Addendum
shall in any event  terminate  within ninety (90) days after the  termination of
the Custodian Agreement.  In the event of termination,  the Customer will return
to State Street all copies of documentation and other  confidential  information
in  its  possession  or in  the  possession  of its  Authorized  Designees.  The
foregoing  provisions  with respect to  confidentiality  and  infringement  will
survive termination for a period of three (3) years.

                                      iii

<PAGE>

Miscellaneous
- -------------

This Addendum and the exhibits hereto constitute the entire understanding of the
parties to the Custodian  Agreement with respect to access to the System and the
Remote Access Services.  This Addendum cannot be modified or altered except in a
writing  duly  executed by each of State  Street and the  Customer  and shall be
governed by and construed in  accordance  with the laws of the  Commonwealth  of
Massachusetts.

By its execution of the Custodian Agreement, the Customer accepts responsibility
for its  and  its  Authorized  Designees'  compliance  with  the  terms  of this
Addendum.


                                       iv

<PAGE>


                                    EXHIBIT A

                                       TO

             REMOTE ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
             ------------------------------------------------------

                                  IN-SIGHT(SM)
                           System Product Description


In-Sight(SM)  provides bilateral  information  delivery,  interoperability,  and
on-line  access to State  Street.  In-Sight(SM)  allows  users a single point of
entry into State Street's  diverse  systems and  applications.  Reports and data
from systems such as Investment Policy Monitor(SM),  Multicurrency  Horizon(SM),
Securities Lending,  Performance & Analytics,  and Electronic Trade Delivery can
be accessed through In-Sight(SM).  This Internet-enabled application is designed
to run from a Web browser and perform  across  low-speed data lines or corporate
high-speed  backbones.  In-Sight(SM)  also  offers  users  a  flexible  toolset,
including  an  ad-hoc  query  function,  a  custom  graphics  package,  a report
designer,  and  a  scheduling  capability.  Data  and  reports  offered  through
In-Sight(SM)  will continue to increase in direct  proportion  with the customer
roll out,  as it is viewed as the  information  delivery  system  will grow with
State Street's customers.






                                       v




<PAGE>
                                                               [GRAPHIC OMITTED]

                             FUNDS TRANSFER ADDENDUM

OPERATING GUIDELINES
- --------------------

1.   OBLIGATION OF THE SENDER: State Street is authorized to promptly debit
Client's account(s) upon the receipt of a payment order in compliance with the
selected Security Procedure chosen for funds transfer and in the amount of money
that State Street has been instructed to transfer. State Street shall execute
payment orders in compliance with the Security Procedure and with the Client's
instructions on the execution date provided that such payment order is received
by the customary deadline for processing such a request, unless the payment
order specifies a later time. All payment orders and communications received
after this time will be deemed to have been received on the next business day.

2.   SECURITY PROCEDURE: The Client acknowledges that the Security Procedure it
has designated on the Selection Form was selected by the Client from Security
Procedures offered by State Street. The Client agrees that the Security
Procedures are reasonable and adequate for its wire transfer transactions and
agrees to be bound by any payment orders, amendments and cancellations, whether
or not authorized, issued in its name and accepted by State Street after being
confirmed by any of the selected Security Procedures. The Client also agrees to
be bound by any other valid and authorized payment order accepted by State
Street. The Client shall restrict access to confidential information relating to
the Security Procedure to authorized persons as communicated in writing to State
Street. The Client must notify State Street immediately if it has reason to
believe unauthorized persons may have obtained access to such information or of
any change in the Client's authorized personnel. State Street shall verify the
authenticity of all instructions according to the Security Procedure.

3.   ACCOUNT NUMBERS: State Street shall process all payment orders on the basis
of the account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the account
number, the account number shall take precedence and govern. Financial
institutions that receive payment orders initiated by State Street at the
instruction of the Client may also process payment orders on the basis of
account numbers, regardless of any name included in the payment order. State
Street will also rely on any financial institution identification numbers
included in any payment order, regardless of any financial institution name
included in the payment order.

4.   REJECTION: State Street reserves the right to decline to process or delay
the processing of a payment order which (a) is in excess of the collected
balance in the account to be charged at the time of State Street's receipt of
such payment order; (b) if initiating such payment order would cause State
Street, in State Street's sole judgment, to exceed any volume, aggregate dollar,
network, time, credit or similar limits upon wire transfers which are applicable
to State Street; or (c) if State Street, in good faith, is unable to satisfy
itself that the transaction has been properly authorized.

5.   CANCELLATION OR AMENDMENT: State Street shall use reasonable efforts to act
on all authorized requests to cancel or amend payment orders received in
compliance with the Security Procedure provided that such requests are received
in a timely manner affording State Street reasonable opportunity to act.
However, State Street assumes no liability if the request for amendment or
cancellation cannot be satisfied.

6.   ERRORS: State Street shall assume no responsibility for failure to detect
any erroneous payment order provided that State Street complies with the payment
order instructions as received and State Street complies with the Security
Procedure. The Security Procedure is established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.

7.   INTEREST AND LIABILITY LIMITS: State Street shall assume no responsibility
for lost interest with respect to the refundable amount of any unauthorized
payment order, unless State Street is notified of the unauthorized payment order
within thirty (30) days of notification by State Street of the acceptance of
such payment order. In no event shall State Street be liable for special,
indirect or consequential damages, even if advised of the possibility of such
damages and even for failure to execute a payment order.

8.   AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS: When
a Client initiates or receives ACH credit and debit entries pursuant to these
Guidelines and the rules of the National Automated Clearing House Association
and the New England Clearing House Association, State Street will act as an
Originating Depository Financial Institution and/or Receiving Depository
Institution, as the case may be, with respect to such entries. Credits given by
State Street with respect to an ACH credit entry are provisional until State
Street receives final settlement for such entry from the Federal Reserve Bank.
If State Street does not receive such final settlement, the Client agrees that
State Street shall receive a refund of the amount credited to the Client in
connection with such entry, and the party making payment to the Client via such
entry shall not be deemed to have paid the amount of the entry.

9.  CONFIRMATION STATEMENTS: Confirmation of State Street's execution of
payment orders shall ordinarily be provided within 24 hours. Notice may be
delivered through State Street's proprietary information systems, such as, but
not limited to Horizon and GlobalQuest(R), account statements, advices, or by
facsimile or callback. The Client must report any objections to the execution of
a payment order within 30 days.


                                       1
<PAGE>



                                                               [GRAPHIC OMITTED]

                             FUNDS TRANSFER ADDENDUM


10.  LIABILITY ON FOREIGN ACCOUNTS: State Street shall not be required to repay
any deposit made at a non-U.S. branch of State Street, or any deposit made with
State Street and denominated in a non-U.S. dollar currency, if repayment of such
deposit or the use of assets denominated in the non-U.S. dollar currency is
prevented, prohibited or otherwise blocked due to: (a) an act of war,
insurrection or civil strife; (b) any action by a non-U.S. government or
instrumentality or authority asserting governmental, military or police power of
any kind, whether such authority be recognized as a defacto or a dejure
government, or by any entity, political or revolutionary movement or otherwise
that usurps, supervenes or otherwise materially impairs the normal operation of
civil authority; or(c) the closure of a non-U.S. branch of State Street in order
to prevent, in the reasonable judgment of State Street, harm to the employees or
property of State Street. The obligation to repay any such deposit shall not be
transferred to and may not be enforced against any other branch of State Street.

The foregoing provisions constitute the disclosure required by Massachusetts
General Laws, Chapter 1 67D, Section 36.

While State Street is not obligated to repay any deposit made at a non-U.S.
branch or any deposit denominated in a non-U.S. currency during tie period in
which its repayment has been prevented, prohibited or otherwise blocked, State
Street will repay such deposit when and if all circumstances preventing,
prohibiting or otherwise blocking repayment cease to exist.

11.  MISCELLANEOUS: State Street and the Client agree to cooperate to attempt to
recover any funds erroneously paid to the wrong party or parties, regardless of
any fault of State Street or the Client, but the party responsible for the
erroneous payment shall bear all costs and expenses incurred in trying to effect
such recovery. These Guidelines may not be amended except by a written agreement
signed by the parties.


                                       2

<PAGE>
                                                               [GRAPHIC OMITTED]

                             FUNDS TRANSFER ADDENDUM


SECURITY PROCEDURE(S) SELECTION FORM
- ------------------------------------
Please select one or more of the funds transfer security procedures indicated
below.

[ ]SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions that
provides telecommunication services for its membership. Participation is limited
to securities brokers and dealers, clearing and depository institutions,
recognized exchanges for securities, and investment management institutions.
SWIFT provides a number of security features through encryption and
authentication to protect against unauthorized access, loss or wrong delivery of
messages, transmission errors, loss of confidentiality and fraudulent changes to
messages. SWIFT is considered to be one of the most secure and efficient
networks for the delivery of funds transfer instructions. Selection of this
security procedure would be most appropriate for existing SWIFT members.

[ ]STANDING INSTRUCTIONS
Standing Instructions may be used where funds are transferred to a broker on the
Client's established list of brokers with which it engages in foreign exchange
transactions. Only the date, the currency and the currency amount are variable.
In order to establish this procedure, State Street will send to the Client a
list of the brokers that State Street has determined are used by the Client. The
Client will confirm the list in writing, and State Street will verify the
written confirmation by telephone. Standing Instructions will be subject to a
mutually agreed upon limit If the payment order exceeds the established limit,
the Standing Instruction will be confirmed by telephone prior to execution.

[ ]REMOTE BATCH TRANSMISSION
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data
communications between the Client and State Street. Security procedures include
encryption and or the use of a test key by those individuals authorized as
Automated Batch Verifiers. Clients selecting this option should have an existing
facility for completing CPU-CPU transmissions. This delivery mechanism is
typically used for high-volume business.

[ ]GLOBAL HORIZON INTERCHANGE(SM) FUNDS TRANSFER SERVICE
Global Horizon Interchange Funds Transfer Service (FTS) is a State Street
proprietary microcomputer-based wire initiation system. FTS enables Clients to
electronically transmit authenticated Fedwire, CHIPS or internal book transfer
instructions to State Street This delivery mechanism is most appropriate for
Clients with a low-to-medium number of transactions (5-75 per day), allowing
Clients to enter, batch, and review wire transfer instructions on their PC prior
to release to State Street.

[ ]TELEPHONE CONFIRMATION (CALLBACK)
Telephone confirmation will be used to verify all non-repetitive funds transfer
instructions received via untested facsimile or phone. This procedure requires
Clients to designate individuals as authorized initiators and authorized
verifiers. State Street will verify that the instruction contains the signature
of an authorized person and prior to execution, will contact someone other than
the originator at the Client's location to authenticate the instruction.
Selection of this alternative is appropriate for Clients who do not have the
capability to use other security procedures.

[ ]REPETITIVE WIRES
For situations where funds are transferred periodically (minimum of one
instruction per calendar quarter) from an existing authorized account to the
same payee (destination bank and account number) and only the date and currency
amount are variable, a repetitive wire may be implemented. Repetitive wires will
be subject to a mutually agreed upon limit. If the payment order exceeds the
established limit, the instruction will be confirmed by telephone prior to
execution. Telephone confirmation is used to establish this process. Repetitive
wire instructions must be reconfirmed annually. This alternative is recommended
whenever funds are frequently transferred between the same two accounts.

[ ]TRANSFERS INITIATED BY FACSIMILE
The Client faxes wire transfer instructions directly to State Street Mutual Fund
Services. Standard security procedure requires the use of a random number test
key for all transfers. Every six months the Client receives test key logs from
State Street. The test key contains alpha-numeric characters, which the Client
puts on each document faxed to State Street. This procedure ensures all wire
instructions received via fax are authorized by the Client. We provide this
option for Clients who wish to batch wire instructions and transmit these as a
group to State Street Mutual Fund Services once or several times a day.

[ ]AUTOMATED CLEARING HOUSE (ACH)


                                       3

<PAGE>
                                                               [GRAPHIC OMITTED]

                             FUNDS TRANSFER ADDENDUM


State Street receives an automated transmission or a magnetic tape from a Client
for the initiation of payment (credit) or collection (debit) transactions
through the ACH network. The transactions contained on each transmission or tape
must be authenticated by the Client. Clients using ACH must select one or more
of the following delivery options:


[ ]GLOBAL HORIZON INTERCHANGE AUTOMATED CLEARING HOUSE SERVICE
Transactions are created on a microcomputer, assembled into batches and
delivered to State Street via fully authenticated electronic transmissions in
standard NACHA formats.

[ ]Transmission from Client PC to State Street Mainframe with Telephone Callback


[ ]Transmission from Client Mainframe to State Street Mainframe with Telephone
   Callback

[ ]Transmission from DST Systems to State Street Mainframe with Encryption


[ ]Magnetic Tape Delivered to State Street with Telephone Callback


State Street is hereby instructed to accept funds transfer instructions only via
the delivery methods and security procedures indicated. The selected delivery
methods and security procedure(s) will be effective_____________________________
for payment orders initiated by our organization.


KEY CONTACT INFORMATION

Whom shall we contact to implement your selection(s)?

CLIENT OPERATIONS CONTACT                       ALTERNATE CONTACT

- ------------------------------            ---------------------------------
      Name                                          Name

- ------------------------------            ---------------------------------
      Address                                       Address

- ------------------------------            ---------------------------------
      City/State/Zip Code                           City/State/Zip Code

- ------------------------------            ---------------------------------
      Telephone Number                              Telephone Number

- ------------------------------            ---------------------------------
      Facsimile Number                              Facsimile Number

- ------------------------------
      SWIFT Number

- ------------------------------
      Telex Number

                                       4


<PAGE>


                                                               [GRAPHIC OMITTED]


                             FUNDS TRANSFER ADDENDUM


INSTRUCTION(S)
- --------------

TELEPHONE CONFIRMATION
- ----------------------

FUND                  Neuberger Berman Intermediate Municipal Fund Inc.
                      -------------------------------------------------
INVESTMENT ADVISER    Neuberger Berman Management Inc.
                      --------------------------------
AUTHORIZED INITIATORS
   Please Type or Print

PLEASE PROVIDE A LISTING OF FUND OFFICERS OR OTHER INDIVIDUALS WHO ARE CURRENTLY
AUTHORIZED TO INITIATE WIRE TRANSFER INSTRUCTIONS TO STATE STREET:
<TABLE>
<CAPTION>

NAME                              TITLE (Specify whether position            SPECIMEN SIGNATURE
                                  is with Fund or Investment
                                  Adviser)
<S>                               <C>                                   <C>

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

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

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

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

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


AUTHORIZED VERIFIERS
   Please Type or Print

Please provide a listing of Fund officers or other individuals who will be
CALLED BACK to verify the initiation of repetitive wires of $10 million or more
and all non-repetitive wire instructions:

<TABLE>
<CAPTION>

NAME                              CALLBACK PHONE NUMBER                      DOLLAR LIMITATION (IF ANY)
<S>                               <C>                                   <C>

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

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

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

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


                                       5


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K
<SEQUENCE>11
<FILENAME>nb535701.txt
<DESCRIPTION>EXHIBIT 99.2K(1) TRANSFER AGENCY AGREEMENT
<TEXT>
                         STOCK TRANSFER AGENCY AGREEMENT


      AGREEMENT, made as of ______________, 2002, by and between NEUBERGER
BERMAN INTERMEDIATE NEW YORK MUNICIPAL FUND INC., a corporation organized and
existing under the laws of the State of Maryland (hereinafter referred to as the
"Customer"), and THE BANK OF NEW YORK, a New York trust company (hereinafter
referred to as the "Bank"). Schedule A is deemed a part of this Agreement and
all functions and activities contained in Schedule A are subject to the
provisions of this Agreement.

                              W I T N E S S E T H:

      That for and in  consideration  of the  mutual  promises  hereinafter  set
forth, the parties hereto covenant and agree as follows:

                                    ARTICLE I
                                   DEFINITIONS
                                   -----------

      Whenever used in this  Agreement,  the  following  words and phrases shall
have the following meanings:

      1.  "Business  Day"  shall be deemed to be each day on which the Bank is
open for business.

      2. "Certificate" shall mean any notice,  instruction,  or other instrument
in writing,  authorized or required by this Agreement to be given to the Bank by
the  Customer  which is signed  by any  Officer,  as  hereinafter  defined,  and
actually received by the Bank.

      3. "Officer" shall be deemed to be the Customer's Chief Executive Officer,
President, any Vice President, the Secretary, the Treasurer, the Controller, any
Assistant Treasurer, and any Assistant Secretary duly authorized by the Board of
Directors of the  Customer to execute any  Certificate,  instruction,  notice or
other  instrument on behalf of the Customer and named in a Certificate,  as such
Certificate may be amended from time to time.

      4.  "Shares"  shall  mean all or any part of each  class of the  shares of
capital  stock of the  Customer  which from time to time are  authorized  and/or
issued by the Customer and  identified in a Certificate  of the Secretary of the

<PAGE>

Customer under corporate  seal, as such  Certificate may be amended from time to
time, with respect to which the Bank is to act hereunder.

                                   ARTICLE II
                               APPOINTMENT OF BANK
                               -------------------

      1. The Customer  hereby  constitutes and appoints the Bank as its agent to
perform the  services  described  herein and as more  particularly  described in
Schedule  I  attached  hereto  (the  "Services"),  and the Bank  hereby  accepts
appointment as such agent and agrees to perform the Services in accordance  with
the terms hereinafter set forth.

      2. In  connection  with such  appointment,  the Customer  shall  deliver
the following documents to the Bank:

      (a)   A  certified  copy of the  Certificate  of  Incorporation  or  other
            document   evidencing  the  Customer's  form  of  organization  (the
            "Charter") and all amendments thereto;

      (b)   A certified copy of the By-Laws of the Customer;

      (c)   A certified  copy of a  resolution  of the Board of Directors of the
            Customer appointing the Bank to perform the Services and authorizing
            the execution and delivery of this Agreement;

      (d)   A Certificate  signed by the  Secretary of the Customer  specifying:
            the  number of  authorized  Shares,  the  number of such  authorized
            Shares issued and currently outstanding,  and the names and specimen
            signatures of all persons duly  authorized by the Board of Directors
            of  the  Customer  to  execute  any  Certificate  on  behalf  of the
            Customer, as such Certificate may be amended from time to time;

      (e)   A Specimen  Share  certificate  for each class of Shares in the form
            approved by the Board of Directors of the Customer,  together with a
            Certificate  signed  by the  Secretary  of the  Customer  as to such
            approval  and  covenanting  to  supply  a new such  Certificate  and
            specimen whenever such form shall change;


                                      -2-
<PAGE>

      (f)   An opinion  of  counsel  for the  Customer,  in a form  reasonably
            satisfactory  to the Bank,  with  respect to the  validity  of the
            authorized and outstanding  Shares, the obtaining of all necessary
            governmental  consents,  whether  such  Shares  are fully paid and
            non-assessable  and the status of such Shares under the Securities
            Act  of  1933,  as  amended,  and  any  other  applicable  law  or
            regulation (I.E., if subject to registration,  that they have been
            registered  and  that  the   Registration   Statement  has  become
            effective or, if exempt, the specific grounds therefor);

      (g)   A  list  of  the  name,   address,   social   security  or  taxpayer
            identification  number of each Shareholder,  number of Shares owned,
            certificate numbers, and whether any "stops" have been placed; and

      (h)   An opinion of counsel for the Customer,  in a form  satisfactory  to
            the Bank, with respect to the due  authorization by the Customer and
            the validity and effectiveness of the use of facsimile signatures by
            the Bank in connection  with the  countersigning  and registering of
            Share certificates of the Customer.

      3. The Customer  shall furnish the Bank with a sufficient  supply of blank
Share  certificates and from time to time will renew such supply upon request of
the Bank. Such blank Share  certificates  shall be properly signed, by facsimile
or otherwise, by Officers of the Customer authorized by law or by the By-Laws to
sign Share  certificates,  and, if required,  shall bear the corporate seal or a
facsimile thereof.

                                   ARTICLE III
                      AUTHORIZATION AND ISSUANCE OF SHARES
                      ------------------------------------

      1. The Customer  shall deliver to the Bank the  following  documents on or
before the effective date of any increase, decrease or other change in the total
number of Shares authorized to be issued:

      (a)   A certified  copy of the amendment to the Charter giving effect to
            such increase, decrease or change;

      (b)   An opinion of counsel for the Customer,  in a form satisfactory to
            the  Bank,  with  respect  to  the  validity  of the  Shares,  the
            obtaining of all  necessary  governmental  consents,  whether such



                                      -3-
<PAGE>
            Shares  are fully paid and  non-assessable  and the status of such
            Shares  under the  Securities  Act of 1933,  as  amended,  and any
            other applicable  federal law or regulations  (I.E., if subject to
            registration,   that  they  have  been  registered  and  that  the
            Registration  Statement has become  effective  or, if exempt,  the
            specific grounds therefor); and

      (c)   In the  case of an  increase,  if the  appointment  of the  Bank was
            theretofore  expressly  limited, a certified copy of a resolution of
            the Board of Directors of the Customer  increasing  the authority of
            the Bank.

      2.  Prior to the  issuance  of any  additional  Shares  pursuant  to stock
dividends,  stock splits or otherwise,  and prior to any reduction in the number
of Shares outstanding, the Customer shall deliver the following documents to the
Bank:

      (a)   A  certified  copy  of  the  resolutions  adopted  by the  Board  of
            Directors and/or the  shareholders of the Customer  authorizing such
            issuance of additional Shares of the Customer or such reduction,  as
            the case may be;

      (b)   A  certified  copy of the order or consent of each  governmental  or
            regulatory  authority  required  by  law  as a  prerequisite  to the
            issuance or  reduction  of such  Shares,  as the case may be, and an
            opinion of counsel for the  Customer  that no other order or consent
            is required; and

      (c)   An opinion of counsel for the Customer,  in a form satisfactory to
            the  Bank,  with  respect  to  the  validity  of the  Shares,  the
            obtaining of all  necessary  governmental  consents,  whether such
            Shares  are fully paid and  non-assessable  and the status of such
            Shares  under the  Securities  Act of 1933,  as  amended,  and any
            other   applicable  law  or  regulation   (I.E.,   if  subject  to
            registration,   that  they  have  been  registered  and  that  the
            Registration  Statement has become effective,  or, if exempt,  the
            specific grounds therefor).


                                      -4-
<PAGE>
                                   ARTICLE IV
                     RECAPITALIZATION OR CAPITAL ADJUSTMENT
                     --------------------------------------

      1. In the case of any  negative  stock  split,  recapitalization  or other
capital  adjustment  requiring a change in the form of Share  certificates,  the
Bank will issue  Share  certificates  in the new form in  exchange  for, or upon
transfer of, outstanding Share certificates in the old form, upon receiving:

      (a)   A Certificate  authorizing  the issuance of Share  certificates in
            the new form;

      (b)   A certified  copy of any  amendment to the Charter with respect to
            the change;

      (c)   Specimen Share certificates for each class of Shares in the new form
            approved  by  the  Board  of  Directors  of  the  Customer,  with  a
            Certificate  signed  by the  Secretary  of the  Customer  as to such
            approval;

      (d)   A  certified  copy of the order or consent of each  governmental  or
            regulatory  authority  required  by  law  as a  prerequisite  to the
            issuance  of the  Shares in the new form,  and an opinion of counsel
            for the Customer that the order or consent of no other  governmental
            or regulatory authority is required; and

      (e)   An opinion of counsel for the Customer,  in a form satisfactory to
            the Bank,  with  respect to the  validity of the Shares in the new
            form,  the  obtaining  of  all  necessary  governmental  consents,
            whether  such  Shares  are fully paid and  non-assessable  and the
            status  of such  Shares  under  the  Securities  Act of  1933,  as
            amended,  and any other  applicable  law or regulation  (I.E.,  if
            subject to registration,  that the Shares have been registered and
            that the  Registration  Statement  has  become  effective  or,  if
            exempt, the specific grounds therefor).

      2. The Customer  shall furnish the Bank with a sufficient  supply of blank
Share  certificates  in the new form,  and from time to time will replenish such
supply upon the  request of the Bank.  Such blank  Share  certificates  shall be
properly  signed,  by  facsimile  or  otherwise,  by  Officers  of the  Customer


                                      -5-
<PAGE>

authorized by law or by the By-Laws to sign Share certificates and, if required,
shall bear the corporate seal or a facsimile thereof.


                                    ARTICLE V
                         ISSUANCE AND TRANSFER OF SHARES
                         -------------------------------

      1.  The Bank will issue and transfer Shares in certificated form as
follows:

      (a)   The  Bank  will  issue  Share   certificates  upon  receipt  of  a
            Certificate  from an  Officer,  but shall not be required to issue
            Share  certificates  after  it has  received  from an  appropriate
            federal or state authority  written  notification that the sale of
            Shares has been suspended or  discontinued,  and the Bank shall be
            entitled to rely upon such  written  notification.  The Bank shall
            not be responsible  for the payment of any original issue or other
            taxes  required to be paid by the Customer in connection  with the
            issuance of any Shares.

      (b)   Shares will be transferred upon  presentation to the Bank of Share
            certificates  in form  deemed by the Bank  properly  endorsed  for
            transfer,   accompanied  by  such  documents  as  the  Bank  deems
            necessary  to evidence  the  authority  of the person  making such
            transfer,  and  bearing  satisfactory  evidence  of the payment of
            applicable  stock  transfer  taxes.  In the case of small  estates
            where  no  administration  is  contemplated,  the Bank  may,  when
            furnished  with an appropriate  surety bond,  and without  further
            approval of the Customer,  transfer Shares  registered in the name
            of the  decedent  where the  current  market  value of the  Shares
            being  transferred does not exceed such amount as may from time to
            time be  prescribed by the various  states.  The Bank reserves the
            right to refuse to transfer  Shares until it is satisfied that the
            endorsements on Share certificates are valid and genuine,  and for
            that purpose it may require,  unless  otherwise  instructed  by an
            Officer of the  Customer,  a guaranty of signature by an "eligible
            guarantor  institution"  meeting  the  requirements  of the  Bank,
            which  requirements  include  membership or participation in STAMP
            or such other "signature  guarantee  program" as may be determined


                                      -6-
<PAGE>

            by the Bank in addition to, or in substitution  for, STAMP, all in
            accordance  with the Securities  Exchange Act of 1934, as amended.
            The Bank also  reserves  the right to  refuse to  transfer  Shares
            until it is  satisfied  that the  requested  transfer  is  legally
            authorized,  and it shall  incur no  liability  for the refusal in
            good faith to make  transfers  which the Bank,  in its  reasonable
            judgment,   deems  improper  or  unauthorized,   or  until  it  is
            satisfied  that  there is no basis to any  claims  adverse to such
            transfer.  The Bank may, in effecting  transfers  of Shares,  rely
            upon those  provisions  of the Uniform Act for the  Simplification
            of Fiduciary  Security  Transfers or the Uniform  Commercial Code,
            as the same may be amended  from time to time,  applicable  to the
            transfer of securities,  and the Customer shall indemnify the Bank
            for any act done or omitted by it in good faith in  reliance  upon
            such laws.

      (c)   All   certificates   representing   Shares  that  are  subject  to
            restrictions on transfer (E.G.,  securities  acquired  pursuant to
            an  investment  representation,  securities  held  by  controlling
            persons,  securities  subject to stockholders'  agreement,  etc.),
            shall  be  stamped  with  a  legend   describing  the  extent  and
            conditions of the  restrictions or referring to the source of such
            restrictions.  The Bank assumes no responsibility  with respect to
            the  transfer  of  restricted  securities  where  counsel  for the
            Customer advises that such transfer may be properly effected.

      2. The Bank  will  issue  and  transfer  Shares  in  book-entry  form as
follows:

      (a)   Shares may be maintained by the Bank in book-entry form known as the
            "Direct Registration  System" ("DRS").  Upon issuance of Shares, the
            Shares of each  registered  owner will be credited to the account of
            each  such  registered  owner  (the  registered  owner of  Shares is
            referred  to herein  as,  or, if there are more than one  registered
            owner of the same Shares,  such registered  owners are  collectively
            referred to herein as, the "Registered Owner").

       (b)  Customer  understands  that  Profile is a  required  feature of DRS.
            Profile  allows a DTC  participant  claiming to act on behalf of the
            Registered  Owner of Shares,  to direct the Bank to transfer to such


                                      -7-
<PAGE>

            DTC  participant  the  Shares  designated  by such  DTC  participant
            without receipt by the Bank of such prior written authorization from
            the Registered Owner to transfer such Shares.

       (c)  Customer  understands  the  Bank  will  not  verify,   determine  or
            otherwise ascertain that the DTC participant which is claiming to be
            acting on behalf of a Registered  Owner is, in fact,  authorized  to
            act on behalf of such Registered  Owner.  Moreover,  Customer agrees
            that the Bank shall have no liability for relying upon and complying
            with  directions  from a DTC  participant  as set forth  above;  and
            Customer shall indemnify and hold harmless the Bank from and against
            any liability,  expense,  damage,  loss and judgment arising from or
            related to the foregoing  (including  reasonable  attorneys fees and
            expenses and expenses arising from or connected with the enforcement
            of this  provision).  For the avoidance of doubt, (i) the Bank shall
            be fully  protected by the  foregoing  limitation  of liability  and
            indemnification  with respect to reliance upon and  compliance  with
            instructions  from the DTC  participant  even if the Bank's reliance
            on, and compliance with, such instructions is determined by a final,
            non-appealable   order  or   judgment   of  a  court  of   competent
            jurisdiction to constitute negligence, willful misconduct, breach of
            any duty owed by the Bank to such  Registered  Owner or violation of
            any law and (ii) the forgoing shall not apply to the manner in which
            the Bank  carries out actual  transfer  of the Shares  which are the
            subject of the DTC participant's  instruction,  which transfer shall
            continue to be governed by Article VIII, Section 6 hereof. By way of
            example and not by way of limitation, if a court determines that the
            transfer  of  Shares  pursuant  to a DTC  participant's  instruction
            without  obtaining  prior  authorization  from the Registered  Owner
            constitutes  negligence,  the Bank will  nevertheless  be  protected
            under this subparagraph (c); on the other hand, in carrying out such
            instructions, if the Bank transfers Shares from the wrong account or
            to the wrong DTC  participant,  the obligation to indemnify the Bank
            shall be  determined  in  accordance  with Article  VIII,  Section 6
            hereof.



                                      -8-
<PAGE>

                                   ARTICLE VI
                           DIVIDENDS AND DISTRIBUTIONS
                           ---------------------------

      1. The Customer  shall  furnish to the Bank a copy of a resolution  of its
Board of  Directors,  certified  by the  Secretary or any  Assistant  Secretary,
either  (i)  setting  forth  the  date  of  the  declaration  of a  dividend  or
distribution,  the date of  accrual or  payment,  as the case may be, the record
date as of which shareholders  entitled to payment,  or accrual, as the case may
be, shall be determined,  the amount per Share of such dividend or distribution,
the payment date on which all previously  accrued and unpaid dividends are to be
paid, and the total amount, if any, payable to the Bank on such payment date, or
(ii)  authorizing the declaration of dividends and  distributions  on a periodic
basis  and  authorizing  the Bank to rely on a  Certificate  setting  forth  the
information described in subsection (i) of this paragraph.

      2. Prior to the payment date specified in such  Certificate or resolution,
as the case may be,  the  Customer  shall,  in the  case of a cash  dividend  or
distribution, pay to the Bank an amount of cash, sufficient for the Bank to make
the payment, specified in such Certificate or resolution, to the shareholders of
record as of such payment  date.  The Bank will,  upon receipt of any such cash,
(i) in the case of shareholders who are participants in a dividend  reinvestment
and/or cash  purchase  plan of the  Customer,  reinvest  such cash  dividends or
distributions in accordance with the terms of such plan, and (ii) in the case of
shareholders  who are not  participants  in any such plan,  make payment of such
cash dividends or  distributions  to the shareholders of record as of the record
date by mailing a check, payable to the registered  shareholder,  to the address
of record or  dividend  mailing  address.  The Bank  shall not be liable for any
improper  payment made in accordance with a Certificate or resolution  described
in the preceding paragraph.  If the Bank shall not receive sufficient cash prior
to the  payment  date to make  payments  of any cash  dividend  or  distribution
pursuant to subsections  (i) and (ii) above to all  shareholders of the Customer
as of the record date,  the Bank shall,  upon  notifying the Customer,  withhold
payment  to  all  shareholders  of the  Customer  as of the  record  date  until
sufficient cash is provided to the Bank.

      3. It is  understood  that the Bank shall in no way be  responsible  for
the  determination  of the rate or form of dividends or  distributions  due to
the shareholders.


                                      -9-
<PAGE>

      4. It is understood that the Bank shall file such appropriate  information
returns  concerning the payment of dividends and  distributions  with the proper
federal,  state and local  authorities as are required by law to be filed by the
Customer but shall in no way be responsible for the collection or withholding of
taxes due on such dividends or  distributions  due to  shareholders,  except and
only to the extent required of it by applicable law.

                                   ARTICLE VII
                             CONCERNING THE CUSTOMER
                             -----------------------

      1. The Customer shall  promptly  deliver to the Bank written notice of any
change in the  Officers  authorized  to sign Share  certificates,  Certificates,
notifications  or  requests,  together  with a  specimen  signature  of each new
Officer.  In the event any  Officer  who shall  have  signed  manually  or whose
facsimile  signature shall have been affixed to blank Share  certificates  shall
die, resign or be removed prior to issuance of such Share certificates, the Bank
may issue such Share  certificates  as the Share  certificates  of the  Customer
notwithstanding  such death,  resignation  or removal,  and the  Customer  shall
promptly  deliver to the Bank such approvals,  adoptions or ratifications as may
be required by law.

      2. Each copy of the Charter of the Customer  and copies of all  amendments
thereto  shall be  certified  by the  Secretary  of State (or other  appropriate
official) of the state of  incorporation,  and if such Charter and/or amendments
are required by law also to be filed with a county or other  officer or official
body,  a  certificate  of such  filing  shall be  filed  with a  certified  copy
submitted  to the Bank.  Each copy of the By-Laws  and copies of all  amendments
thereto,  and copies of  resolutions  of the Board of Directors of the Customer,
shall be  certified by the  Secretary or an Assistant  Secretary of the Customer
under the corporate seal.

      3.  Customer hereby represents and warrants:

      (a)   It is a corporation duly organized and validly existing under the
            laws of Maryland.

      (b)   This  Agreement has been duly  authorized,  executed and delivered
            on its  behalf  and  constitutes  the  legal,  valid  and  binding


                                      -10-
<PAGE>

            obligation of Customer.  The execution,  delivery and  performance
            of this  Agreement  by  Customer  do not and will not  violate any
            applicable  law or  regulation  and do not  require the consent of
            any   governmental  or  other  regulatory  body  except  for  such
            consents  and  approvals  as have  been  obtained  and are in full
            force and effect.

                                  ARTICLE VIII
                               CONCERNING THE BANK

      1.  The Bank represents and warrants to the Customer that:

      (a)   It is a national banking  association with trust powers existing and
            in good standing under the laws of the United States.

      (b)   It is duly  qualified to carry on its business in the State of New
            York.

      (c)   This  Agreement has been duly  authorized,  executed and delivered
            on its  behalf  and  constitutes  the  legal,  valid  and  binding
            obligation of the Bank.  The execution,  delivery and  performance
            of this  Agreement  by the Bank do not and will  not  violate  any
            applicable  law or  regulation  and do not  require the consent of
            any   governmental  or  other  regulatory  body  except  for  such
            consents  and  approvals  as have  been  obtained  and are in full
            force and effect.

      (d)   It will maintain its registration as a transfer agent as provided in
            Section 17(A)(c) of the Securities Exchange Act of 1934, as amended,
            (the "1934 Act") and shall comply with all applicable  provisions of
            Section 17A of the 1934 Act and the rules promulgated thereunder, as
            may be amended from time to time, including rules relating to record
            retention.

      (e)   It shall create and maintain all records  required of it pursuant to
            its duties  hereunder  and as set forth in Schedule A in  accordance
            with all applicable laws, rules and regulations,  including  records
            required by Section 31(a) of the Investment  Company Act of 1940, as
            amended ("1940 Act"), and the rules  thereunder.  Where  applicable,
            such records  shall be maintained by the Bank for the periods and in
            the places required by Rule 31a-2 under the 1940 Act. To the extent


                                      -11-
<PAGE>

            required by Section 31 of the 1940 Act and the rules thereunder, all
            such  records  prepared or  maintained  by the Bank  relating to the
            services to be performed by the Bank  hereunder  are the property of
            the Customer and will be preserved, maintained and made available in
            accordance  with such  Section  and Rules,  and will be  surrendered
            promptly to the Customer on and in accordance with its request.

      (f)   It has and will continue to have access to the necessary facilities,
            equipment and personnel to perform its duties and obligations  under
            this Agreement.

      2. The Bank  shall not be liable  and shall be fully  protected  in acting
upon any oral instruction,  writing or document  reasonably believed by it to be
genuine and to have been given,  signed or made by the proper  person or persons
and shall  not be held to have any  notice of any  change  of  authority  of any
person until receipt of written  notice thereof from an Officer of the Customer.
It shall also be protected in processing Share  certificates which it reasonably
believes  to  bear  the  proper  manual  or  facsimile  signatures  of the  duly
authorized  Officer or Officers of the Customer and the proper  countersignature
of the Bank.

      3.  The  Bank  may  establish  such  additional   procedures,   rules  and
regulations  governing the transfer or registration of Share  certificates as it
may deem  advisable and  consistent  with such rules and  regulations  generally
adopted by bank transfer agents.

      4.  The  Bank  may  keep  such  records  as it  deems  advisable  but  not
inconsistent with resolutions adopted by the Board of Directors of the Customer.
The Bank may deliver to the Customer  from time to time at its  discretion,  for
safekeeping or disposition by the Customer in accordance with law, such records,
papers, Share certificates which have been cancelled in transfer or exchange and
other documents accumulated in the execution of its duties hereunder as the Bank
may deem  expedient,  other  than  those  which the Bank is itself  required  to
maintain  pursuant to applicable  laws and  regulations,  and the Customer shall
assume all  responsibility  for any  failure  thereafter  to produce any record,
paper,  cancelled Share  certificate or other document so returned,  if and when
required.  The records  maintained by the Bank pursuant to this paragraph  which


                                      -12-
<PAGE>

have not been  previously  delivered to the Customer  pursuant to the  foregoing
provisions  of this  paragraph  shall be  considered  to be the  property of the
Customer,  shall be made  available upon request for inspection by the Officers,
employees and auditors of the  Customer,  and shall be delivered to the Customer
upon request and in any event upon the date of termination of this Agreement, as
specified  in Article IX of this  Agreement,  in the form and manner kept by the
Bank on such date of termination or such earlier date as may be requested by the
Customer.

      5. The Bank may employ agents or  attorneys-in-fact  and the expense shall
be borne in accordance  with Schedule A hereto,  and shall not be liable for any
loss or expense arising out of, or in connection  with, the actions or omissions
to act of its  agents  or  attorneys-in-fact,  so long as the Bank  acts in good
faith and  without  negligence  or willful  misconduct  in  connection  with the
selection or retention of such agents or attorneys-in-fact.

      6. The Bank shall only be liable for any loss or damage arising out of its
own negligence or willful misconduct; provided, however, that the Bank shall not
be liable for any indirect, special, punitive or consequential damages.

      7. The  Customer  shall  indemnify  and hold  harmless  the Bank  from and
against  any and all  claims  (whether  with or  without  basis in fact or law),
costs, demands, expenses and liabilities,  including reasonable attorney's fees,
which the Bank may  sustain or incur or which may be  asserted  against the Bank
except for any liability which the Bank has assumed  pursuant to the immediately
preceding  section.  The Bank shall be deemed not to have acted with  negligence
and not to have engaged in willful misconduct by reason of or as a result of any
action  taken or omitted to be taken by the Bank without its own  negligence  or
willful  misconduct in reliance upon (i) any provision of this  Agreement,  (ii)
any  instrument,  order or Share  certificate  reasonably  believed  by it to be
genuine  and to be signed,  countersigned  or  executed  by any duly  authorized
Officer of the  Customer,  (iii) any  Certificate  or other  instructions  of an
Officer,  (iv) any opinion of legal counsel for the Customer or the Bank, or (v)
any law, act, regulation or any interpretation of the same even though such law,
act,  or  regulation  may  thereafter  have been  altered,  changed,  amended or
repealed. Nothing contained herein shall limit or in any way impair the right of
the Bank to indemnification under any other provision of this Agreement.


                                      -13-
<PAGE>

      8. If an action,  claim or legal  proceeding  (collectively  "Proceeding")
shall be brought or asserted  against the Bank in respect of which indemnity may
be  sought by the Bank  pursuant  to the  preceding  paragraph,  the Bank  shall
promptly  (and in no event  more than ten (10) days  after  receipt of notice of
such Proceeding) notify the Customer of such Proceeding. The failure of the Bank
to so  notify  the  Customer  shall  not  impair  the  Bank's  ability  to  seek
indemnification from the Customer (but only for costs,  expenses and liabilities
incurred after such notice) unless such failure adversely affects the Customer's
ability to  adequately  oppose or defend such  Proceeding.  Upon receipt of such
notice from the Bank,  the  Customer  shall be entitled to  participate  in such
Proceeding  and, to the extent that it shall so desire and  provided no conflict
of interest exists as specified in subparagraph  (b) below or there are no other
defenses available to the Bank as specified in subparagraph (d) below, to assume
the defense thereof with counsel  reasonably  satisfactory to the Bank (in which
case all  attorney's  fees and expenses  shall be borne by the Customer) and the
Customer  shall in good faith defend the Bank.  The Bank shall have the right to
employ separate counsel in any such Proceeding and to participate in the defense
thereof,  but the fees and expenses of such  counsel  shall be borne by the Bank
unless (a) the Customer agrees in writing to pay such fees and expenses, (b) the
Bank shall have  reasonably and in good faith concluded that there is a conflict
of interest  between the  Customer and the Bank in the conduct of the defense of
such action, which the parties are not willing to waive, (c) the Customer fails,
within  ten (10) days  prior to the date the first  response  or  appearance  is
required to be made in such Proceeding, to assume the defense of such Proceeding
with counsel reasonably satisfactory to the Bank or (d) there are legal defenses
available  to the  Bank  that are  different  from or are in  addition  to those
available to the Customer.

      9.  Specifically,  but  not by  way  of  limitation,  the  Customer  shall
indemnify  and hold  harmless  the  Bank  from and  against  any and all  claims
(whether with or without  basis in fact or law),  costs,  demands,  expenses and
liabilities, including reasonable attorney's fees, of any and every nature which
the Bank may  sustain  or incur or which  may be  asserted  against  the Bank in
connection  with  the  genuineness  of  a  Share  certificate,  the  Bank's  due
authorization  by the  Customer  to issue  Shares  and the form  and  amount  of
authorized Shares.


                                      -14-
<PAGE>

      10. The Bank shall not incur any  liability  hereunder if by reason of any
act of God  or  war or  other  circumstances  beyond  its  control,  it,  or its
employees,  officers or directors shall be prevented, delayed or forbidden from,
or be  subject  to any  civil  or  criminal  penalty  on  account  of,  doing or
performing  any act or thing which by the terms of this Agreement it is provided
shall be done or performed or by reason of any  nonperformance or delay,  caused
as aforesaid,  in the performance of any act or thing which by the terms of this
Agreement it is provided  shall or may be done or  performed,  provided that the
Bank maintains and  implements a disaster  recovery plan designed to comply with
applicable banking regulations.

      11.  At any time the Bank may  apply to an  Officer  of the  Customer  for
written  instructions  with respect to any matter arising in connection with the
Bank's duties and obligations  under this  Agreement,  and the Bank shall not be
liable for any action  taken or omitted to be taken by the Bank in good faith in
accordance with such instructions. Such application by the Bank for instructions
from an Officer of the  Customer  may,  at the option of the Bank,  set forth in
writing any action  proposed to be taken or omitted to be taken by the Bank with
respect to its duties or obligations under this Agreement and the date on and/or
after which such action shall be taken, and the Bank shall not be liable for any
action taken or omitted to be taken in  accordance  with a proposal  included in
any such  application on or after the date specified  therein  unless,  prior to
taking  or  omitting  to take any such  action,  the Bank has  received  written
instructions in response to such  application  specifying the action to be taken
or omitted.  The Bank may consult counsel to the Customer or its own counsel, at
the  reasonable  expense  of the  Customer,  and shall be fully  protected  with
respect to anything done or omitted by it in good faith in  accordance  with the
advice or opinion of such counsel.

      12. When mail is used for delivery of non-negotiable  Share  certificates,
the value of which does not exceed the limits of the Bank's  Blanket  Bond,  the
Bank shall send such non-negotiable  Share certificates by first class mail, and
such  deliveries  will be covered  while in transit by the Bank's  Blanket Bond.
Non-negotiable  Share certificates,  the value of which exceed the limits of the
Bank's Blanket Bond, will be sent by insured  registered mail.  Negotiable Share
certificates will be sent by insured  registered mail. The Bank shall advise the
Customer of any Share certificates  returned as undeliverable after being mailed
as herein provided for.


                                      -15-
<PAGE>

      13.  The  Bank  may  issue  new  Share  certificates  in  place  of  Share
certificates  represented to have been lost,  stolen or destroyed upon receiving
instructions in writing from an Officer and indemnity  satisfactory to the Bank.
Such  instructions  from the  Customer  shall be in such form as approved by the
Board of Directors  of the Customer in  accordance  with  applicable  law or the
By-Laws of the Customer  governing  such matters.  If the Bank receives  written
notification  from the owner of the lost,  stolen or destroyed Share certificate
within a  reasonable  time after he has  notice of it,  the Bank shall  promptly
notify the Customer and shall act pursuant to written  instructions signed by an
Officer.  If the Customer  receives such written  notification from the owner of
the lost, stolen or destroyed Share  certificate  within a reasonable time after
he has notice of it, the Customer  shall  promptly  notify the Bank and the Bank
shall act pursuant to written  instructions signed by an Officer. The Bank shall
not be  liable  for any act  done  or  omitted  by it  pursuant  to the  written
instructions  described  herein.  The Bank may issue new Share  certificates  in
exchange for, and upon surrender of, mutilated Share certificates.

      14. The Bank will issue and mail subscription  warrants for Shares, Shares
representing  stock dividends,  exchanges or splits,  or act as conversion agent
upon receiving written  instructions from an Officer and such other documents as
the Bank may deem necessary.

      15. The Bank will supply  shareholder  lists to the Customer  from time to
time upon receiving a request therefor from an Officer of the Customer.

      16.  The  Bank  agrees  that  all  books,  records,  information  and data
pertaining  to the business of the  Customer or its prior,  present or potential
shareholders  which are exchanged or received pursuant to the negotiation or the
carrying out of this Agreement shall remain confidential, shall be used only for
the  purposes  contemplated  by this  Agreement,  and shall  not be  voluntarily
disclosed to any other  person,  except as may be  requested  by a  governmental
entity  or as may be  required  by law or  which  the  Bank  deems  in its  sole
discretion to be necessary for the  performance  of the services.  The foregoing
shall not apply to information  which (a) is in the public domain at the time of
the disclosure,  (b) prior to disclosure is within the legitimate  possession of
the Bank, (c) becomes known to the Bank from a third party without  restriction,


                                      -16-
<PAGE>

(d) is  independently  developed  by the Bank or (e) is approved  for release by
written  authorization  of the Customer.  In case of any requests or demands for
the inspection of the shareholder records of the Customer,  the Bank will notify
the  Customer  and  endeavor to secure  instructions  from an Officer as to such
inspection.  The Bank reserves the right,  however,  to exhibit the  shareholder
records to any person  whenever  it is  advised by its  counsel  that there is a
reasonable  likelihood  that the Bank will be held  liable  for the  failure  to
exhibit the shareholder records to such person.

      17. At the  request of an  Officer,  the Bank will  address  and mail such
appropriate notices to shareholders as the Customer may direct.

      18.  Notwithstanding any provisions of this Agreement to the contrary, the
Bank  shall be under no duty or  obligation  to inquire  into,  and shall not be
liable for:

      (a)   The  legality of the issue,  sale or  transfer  of any  Shares,  the
            sufficiency of the amount to be received in connection therewith, or
            the  authority  of the Customer to request  such  issuance,  sale or
            transfer;

      (b)   The legality of the purchase of any Shares,  the  sufficiency of the
            amount to be paid in connection  therewith,  or the authority of the
            Customer to request such purchase;

      (c)   The legality of the  declaration  of any dividend by the Customer,
            or the  legality  of the  issue of any  Shares in  payment  of any
            stock dividend; or

      (d)   The  legality  of  any  recapitalization  or  readjustment  of the
            Shares.

      19. The Bank shall be entitled to receive and the Customer  hereby  agrees
to pay to the Bank for its  performance  hereunder (i) reasonable  out-of-pocket
expenses  (including  reasonable legal expenses and reasonable  attorney's fees)
incurred in connection  with this Agreement and its performance  hereunder,  and
(ii) the compensation for services as set forth in Schedule I.

      20.  The Bank  shall not be  responsible  for any  money,  whether  or not
represented  by any check,  draft or other  instrument for the payment of money,


                                      -17-
<PAGE>

received by it on behalf of the Customer,  until the Bank actually  receives and
collects such funds.

      21. The Bank shall have no duties or  responsibilities  whatsoever  except
such  duties  and  responsibilities  as  are  specifically  set  forth  in  this
Agreement,  and no covenant or obligation  shall be implied  against the Bank in
connection with this Agreement.


                                   ARTICLE IX
                                   TERMINATION
                                   -----------

      Either of the parties hereto may terminate this Agreement by giving to the
other party a notice in writing  specifying the date of such termination,  which
shall be not less than 60 days after the date of receipt of such notice.  In the
event such notice is given by the Customer, it shall be accompanied by a copy of
a  resolution  of the  Board of  Directors  of the  Customer,  certified  by its
Secretary,  electing to terminate  this  Agreement  and  designating a successor
transfer  agent or  transfer  agents.  In the event such  notice is given by the
Bank, the Customer shall, on or before the termination date, deliver to the Bank
a copy of a  resolution  of its Board of Directors  certified  by its  Secretary
designating a successor  transfer  agent or transfer  agents.  In the absence of
such  designation by the Customer,  the Bank may designate a successor  transfer
agent. If the Customer fails to designate a successor  transfer agent and if the
Bank is unable to find a successor  transfer agent, the Customer shall, upon the
date  specified in the notice of  termination  of this Agreement and delivery of
the records maintained hereunder, be deemed to be its own transfer agent and the
Bank shall thereafter be relieved of all duties and responsibilities  hereunder.
Upon termination hereof, the Customer shall pay to the Bank such compensation as
may be due to the Bank as of the date of such  termination,  and shall reimburse
the Bank for any  disbursements  and  expenses  made or incurred by the Bank and
payable  or  reimbursable   hereunder.   The  Bank  shall,  promptly  upon  such
termination,  transfer  all records and shall  cooperate in the transfer of such
duties and responsibilities.



                                      -18-
<PAGE>
                                    ARTICLE X
                                  MISCELLANEOUS
                                  -------------

      1. The indemnities and confidentiality  provisions  contained herein shall
be  continuing   obligations  of  the  Customer,  its  successors  and  assigns,
notwithstanding the termination of this Agreement.

      2. Any notice or other  instrument  in writing,  authorized or required by
this  Agreement  to be given to the  Customer  shall  be  sufficiently  given if
addressed to the Customer and mailed or delivered to it at  _________________  ,
or or at such other place as the  Customer  may from time to time  designate  in
writing.

      3. Any notice or other  instrument  in writing,  authorized or required by
this Agreement to be given to the Bank shall be sufficiently  given if addressed
to the Bank and mailed or  delivered  to it at its office at 101 Barclay  Street
(12W), New York, New York 10286 or at such other place as the Bank may from time
to time designate in writing.

      4. This Agreement may not be amended or modified in any manner except by a
written  agreement  duly  authorized  and  executed  by both  parties.  Any duly
authorized  Officer may amend any  Certificate  naming  Officers  authorized  to
execute and deliver  Certificates,  instructions,  notices or other instruments,
and the Secretary or any Assistant  Secretary may amend any Certificate  listing
the shares of capital stock of the Customer for which the Bank performs Services
hereunder.

      5. This  Agreement  shall  extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement  shall not be  assignable  by either party  without the prior  written
consent of the other party,  and  provided,  further,  that any  reorganization,
merger,  consolidation,  or sale of  assets,  by the Bank shall not be deemed to
constitute an assignment of this Agreement,  provided that the surviving  entity
is duly registered as a transfer agent pursuant to Section 17A(c)(2) of the 1934
Act and is qualified to perform all duties required under this Agreement.

      6. This  Agreement  shall be governed by and construed in accordance  with
the laws of the State of New York.  The  parties  agree  that,  all  actions and
proceedings   arising  out  of  this  Agreement  or  any  of  the   transactions
contemplated  hereby,  shall be brought in the United States  District Court for


                                      -19-
<PAGE>

the Southern  District of New York or in a New York State Court in the County of
New York and that, in connection  with any such action or proceeding,  submit to
the jurisdiction  of, and venue in, such court.  Each of the parties hereto also
irrevocably  waives  all  right to trial by jury in any  action,  proceeding  or
counterclaim  arising out of this  Agreement  or the  transactions  contemplated
hereby.

      7. This  Agreement may be executed in any number of  counterparts  each of
which shall be deemed to be an original; but such counterparts,  together, shall
constitute only one instrument.

      8. The  provisions of this Agreement are intended to benefit only the Bank
and the  Customer,  and no rights shall be granted to any other person by virtue
of this Agreement.

      IN WITNESS  WHEREOF,  the parties  hereto have caused this Agreement to be
executed by their respective  corporate officers,  thereunto duly authorized and
their respective  corporate seals to be hereunto affixed, as of the day and year
first above written.


Attest:                                   NEUBERGER BERMAN NEW YORK INTERMEDIATE
                                          MUNICIPAL FUND INC.


                                          By:
- -------------------------------              -------------------------------
                                          Name:
                                               -----------------------------
                                          Title:
                                                -----------------------------

Attest:                                   THE BANK OF NEW YORK


                                          By:
- -------------------------------              -------------------------------
                                          Name:
                                               -----------------------------
                                          Title:
                                                -----------------------------



                                      -20-
<PAGE>
                                   SCHEDULE I


<PAGE>


                                                                         PROFILE



================================================================================






                         STOCK TRANSFER AGENCY AGREEMENT


                                     between


                            NEUBERGER BERMAN NEW YORK


                         INTERMEDIATE MUNICIPAL FUND INC.


                                       and


                              THE BANK OF NEW YORK


                    Dated as of ______________________, 2002








                  ACCOUNT NUMBER(S) ___________________________





================================================================================

<PAGE>
                                                                        ________
                                                                           THE
                                                                         BANK OF
                                                                        NEW YORK
                                                                        ________

                          STOCK TRANSFER FEE PROPOSAL
                                      FOR
                        NEUBERGER BERMAN CLOSED END FUND

                                 July 26, 2002


ISSUES COVERED:  CLOSED END FUND

MINIMUM SERVICE FEE
- -------------------
- --------------------------------------------------------------------------------
  ANNUAL MINIMUM FEE FOR FUNDS - MONTHLY DIVIDEND

    BILLED MONTHLY PER FUND.....................................$ 35,000.00

  (If the fees from the services individually priced below do not exceed
  the MONTHLY MINIMUM, PER FUND, the difference will be billed to your
  account)
- --------------------------------------------------------------------------------


ACCOUNT MAINTENANCE
- -------------------
- --------------------------------------------------------------------------------
  EACH ACTIVE ACCOUNT MAINTAINED (PER ANNUM - BILLED MONTHLY)......$   3.60

  EACH INACTIVE OR CLOSED ACCOUNT MAINTAINED (PER ANNUM-BILLED
    MONTHLY)...................................................... $   1.20
    INACTIVE: AN ACCOUNT WITH A ZERO BALANCE, UN-CASHED CHECKS, STOP
    NOTATIONS ON CERTIFICATE HISTORY OR PENDING 1099 TAX REPORTING.

    CLOSED: AN ACCOUNT MAINTAINED ON THE DATABASE FOR EIGHTEEN MONTHS
    TO FACILITATE RESEARCH REQUESTS FROM SHAREOWNERS. THERE IS A ZERO
    BALANCE AND NO PENDING ACTIVITY IN ANY CATEGORY. A CLOSED ACCOUNT
    IS SCHEDULED TO BE PURGED FROM THE DATA-BASE.

    (The maintenance fee includes `general services' and all services
     identified as "included")
- --------------------------------------------------------------------------------

A.  General Services
    ----------------

     |_| Opening new accounts and soliciting taxpayer identification numbers,
         where necessary
     |_| Posting debits and credits
     |_| Maintaining certificate history
     |_| Placing and releasing stop transfer notations
     |_| Processing address changes
     |_| Maintaining dividend and/or seasonal addresses
     |_| Responding to shareowner correspondence
     |_| Obtaining and posting Taxpayer Identification Number certifications
     |_| Purging closed accounts that meet selective criteria (e.g., no
         outstanding checks, no stops maintained against certificates, etc.)

B.  Basic Proxy and Annual Meeting Services:
    ---------------------------------------
    ----------------------------------------------------------------------------
      PROVIDING PROXY SERVICES FOR ANNUAL SHAREHOLDER MEETING......INCLUDED

      CONVERTING PROXY TAPE FILES FROM OUTSIDE AGENT FOR ISSUANCE
        OF PROXY MATERIAL (PER TAPE, UP TO 5,000 HOLDERS/ACCOUNTS)..$500.00
    ----------------------------------------------------------------------------

                 Neuberger Berman Closed End Fund - Fee page 1
                               Issued July 26, 2002

<PAGE>
                                                                        ________
                                                                           THE
                                                                         BANK OF
                                                                        NEW YORK
                                                                        ________


Basic proxy and annual meeting services functions include the following:

     |_| Supplying broker and nominee list to solicitor to identify
         requirements for material needed
     |_| Printing name, address and number of shares on proxy cards
     |_| Mailing proxy material and annual report
     |_| Suppressing the mailing of multiple annual reports as requested
     |_| Tabulating proxies returned by shareowners
     |_| Tracking proxy cards marked for attendance at the annual meeting
     |_| Providing un-voted listing for registered holders and DTC participants
     |_| Providing one Inspector of Election for the annual meeting
     |_| Providing remote access to the proxy tabulation file for the client
         and solicitor (if any) for daily tabulation results
     |_| Preparing a list of record date holders
     |_| Preparing daily tabulation reports and report of final vote
     |_| Maintaining an automated link with DTC and ADP to receive
         transmissions of broker votes
     |_| Processing omnibus proxies for respondent banks
     |_| Providing copies of proxies containing shareowner comments


C.  Stock Transfer Inform System Access:
    -----------------------------------
- --------------------------------------------------------------------------------
    MONTHLY FEE FOR ACCESS TO THE SYSTEM .........................INCLUDED
- --------------------------------------------------------------------------------

     |_| Providing access to The Bank of New York's mainframe inquiry and
         internet-based system for management reporting and shareowner records
         from company's office
     |_| Providing daily data for registered holders and DTC participants
         (including geographic analyses, VIP reporting, share distribution,
         etc.) (Reporting DTC data is subject to additional charge to company
         directly from DTC)
     |_| Providing daily access to proxy tabulation file during annual meeting
         season


D.   TELEPHONE CALLS
     ---------------
- --------------------------------------------------------------------------------
     EACH TELEPHONE CALL RECEIVED FROM SHAREOWNERS:

     IVR CALLS (EACH CALL COMPLETED THROUGH THE IVR) ..............$  0.75

     EACH CALL HANDLED BY A LIVE CSR (FOR SHAREOWNERS THAT
        OPT OUT OF IVR) ...........................................$  3.25
- --------------------------------------------------------------------------------

     |_| Provide general 800 number for shareowner inquiries and Interactive
         Voice Response (IVR) system
     |_| Provide adequate staffing to manage and achieve an acceptable
         average speed of answer (ASA)


E.   CERTIFICATE ISSUANCE
     --------------------
- --------------------------------------------------------------------------------
     EACH CERTIFICATE OR DRS STATEMENT ISSUED AND REGISTERED
     (ROUTINE TURNAROUND) .........................................$  2.50

     EACH LEGAL TRANSFER PROCESSED (NON-ROUTINE TURNAROUND) .......$ 25.00

     EACH OPTION EXERCISED (PER TRANSACTION) ......................$ 15.00

     EACH SAME DAY ISSUANCE TRANSACTION (INCLUDING DWACS)..........$ 25.00
- --------------------------------------------------------------------------------

                 Neuberger Berman Closed End Fund - Fee page 2
                               Issued July 26, 2002

<PAGE>
                                                                        ________
                                                                           THE
                                                                         BANK OF
                                                                        NEW YORK
                                                                        ________

Certificate issuance functions include the following:

     |_| Qualifying under rules of the NYSE, AMEX, and NASDAQ to act in dual
         capacity of transfer agent and registrar
     |_| Maintaining mail and window facilities for the receipt of transfer
         requests as required by NYSE and AMEX rules
     |_| Examining transfer requests for proper documentation-routine
         and non-routine
     |_| Verifying that an original issuance is properly authorized and has
         all necessary approvals
     |_| Verifying that no stop orders are held against the surrendered
         certificates
     |_| Recording canceled and issued certificates by registration,
         certificate number, number of shares and date issued/canceled
     |_| Processing restricted transfers
     |_| Processing legal transfers based on supporting documentation
     |_| Replacing lost, destroyed or stolen certificates
     |_| Furnishing daily transfer journals


F.   DIVIDEND DISBURSEMENT (When applicable)
     ---------------------
- --------------------------------------------------------------------------------
     EACH CHECK ISSUED.............................................$   0.50
     EACH WIRE TRANSFER MADE.......................................$  15.00
     SET-UP OF ACH INFORMATION (PER ACCOUNT).......................$   3.00
     EACH ACH TRANSMISSION (PER ACCOUNT)...........................$   0.10
       MINIMUM FEE (PER TRANSMISSION)..............................$ 250.00
     EACH ACH ACKNOWLEDGMENT MAILED................................$   0.25
       MINIMUM FEE (PER MAILING)...................................$ 250.00
- --------------------------------------------------------------------------------

Dividend disbursement functions include the following:

     |_| Calculating dividend and mailing checks
     |_| Reconciling checks
     |_| Preparing payment register in list or microfiche form
     |_| Withholding and filing taxes for non-resident aliens and uncertified
         accounts
     |_| Filing federal tax information returns on tape
     |_| Mailing required statements (Form 1099) to registered holders
     |_| Maintaining stop files and issuing replacement checks
     |_| Maintaining payment orders and addresses


G.   DIVIDEND REINVESTMENT PLAN
     --------------------------
- --------------------------------------------------------------------------------
     COMPANY PAID
     ------------
     MONTHLY ADMINISTRATION FEE (PER PLAN)...................... INCLUDED
     EACH DIVIDEND REINVESTED (PER ACCOUNT).....................$    1.50
     EACH OPTIONAL CASH INVESTMENT (PER TRANSACTION)............$    5.00
     BROKERAGE COMMISSION (PER SHARE PURCHASED).................$    0.10
     EACH ACH DEBIT PROCESSED...................................$    2.00

     SHAREOWNER PAID
     ---------------
     EACH FULL OR PARTIAL SALE OF SHARES UPON LIQUIDATION
       OR TERMINATION (PER TRANSACTION).........................$   15.00
     EACH WITHDRAWAL OF SHARES (PER OCCURRENCE)..................INCLUDED
     EACH DEPOSIT OF SHARE CERTIFICATES (PER OCCURRENCE).........INCLUDED
     EACH BOOK-TO-BOOK TRANSFER (PER OCCURRENCE).................INCLUDED
     BROKERAGE COMMISSION (PER SHARE SOLD)......................$    0.10
- --------------------------------------------------------------------------------

                 Neuberger Berman Closed End Fund - Fee page 3
                               Issued July 26, 2002

<PAGE>
                                                                        ________
                                                                           THE
                                                                         BANK OF
                                                                        NEW YORK
                                                                        ________

Dividend reinvestment plan functions include the following:

     |_| Processing enrollments of new accounts
     |_| Processing dividends for reinvestment
     |_| Processing optional cash payments on periodic basis (weekly,
         bi-monthly, monthly, etc.)
     |_| Monitoring cash payments for amounts in excess of plan limits
     |_| Preparing participant statements of account, after each
         transaction, showing activity for current period
     |_| Processing requests for liquidation and termination according
         to plan specifications
     |_| Issuing certificates to participants upon request for withdrawal
     |_| Receiving certificates from participants for deposit into the plan
     |_| Processing requests from participants for Book-to-Book transfers
     |_| Providing periodic investment reports to the company
     |_| Preparing Form 1099B to report sale proceeds


LOST SHAREHOLDER SEARCH (Required under SEC Rule 17ad-17 and 17a-24)
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
     ELECTRONIC SEARCH PROGRAM (Two Required Annually)
     -------------------------

       MANAGEMENT AND SET-UP FEE PER SEARCH)........................$ 75.00
       EACH LOST ACCOUNT SEARCHED...................................$  3.50
                                           AND
                                           ---
     IN-DEPTH SEARCH PROGRAM
     -----------------------
       MANAGING AND CONDUCTING LOST ACCOUNT SEARCH.......No Additional Cost
- --------------------------------------------------------------------------------

Lost shareholder search functions include the following:
     |_| Searching for better addresses semi-annually
     |_| Sending verification notice to shareholder
     |_| Reviewing and clearing legal items
     |_| Posting new address and clearing unclaimed property
     |_| Conducting in-depth research in conjunction with a third party vendor.
         (may involve charge to shareholder if they request the third party
         vendor services)

     ADDITIONAL SERVICES EXCLUDED FROM THE PER FUND MONTHLY MINIMUM FEE
     ------------------------------------------------------------------

SHAREOWNER LISTS & ANALYSES:
- ---------------------------
- --------------------------------------------------------------------------------
     SIX STANDARD SHAREOWNER LISTS, ANALYSES OR SET OF LABELS
        (Per Fund) ............................................. INCLUDED

     IN EXCESS OF SIX  LISTS, ANALYSES OR SET OF LABELS PER FUND
     -----------------------------------------------------------

     STANDARD SHAREOWNER LISTS, ANALYSES OR LABELS
        (Per Account, Per Fund)................................. $   0.03
     MINIMUM FEE PER LIST, ANALYSIS OR LABEL ................... $ 500.00

     ADDITIONAL WEEKLY, MONTHLY OR CUSTOM LISTS OR ANALYSES ....APPRAISAL
- --------------------------------------------------------------------------------


SPECIAL & OTHER MAILINGS:
- ------------------------
- --------------------------------------------------------------------------------
     MINIMUM FEE PER MAILING ....................................$ 250.00
     SEPARATE MAILING OF MISCELLANEOUS REPORTS
        (Per Account) .......................................... $   0.10

     ALL OTHER MAILINGS:
     ------------------
     PREPARING AND MACHINE INSERTING UP TO TWO ENCLOSURES
        (Per Account) .......................................... $   0.10
     INSERTING ADDITIONAL ENCLOSURES (Per Enclosure).............$   0.03
     INSERTING ENCLOSURES MANUALLY AND OR MATCHED MAILINGS .....APPRAISAL
- --------------------------------------------------------------------------------

                 Neuberger Berman Closed End Fund - Fee page 4
                               Issued July 26, 2002

<PAGE>
                                                                        ________
                                                                           THE
                                                                         BANK OF
                                                                        NEW YORK
                                                                        ________

ESCHEATMENT
- -----------
- --------------------------------------------------------------------------------
     DUE DILIGENCE MAILING (PER ACCOUNT)...........................$   1.00
       MINIMUM FEE.................................................$ 250.00
     EACH ABANDONED PROPERTY REPORT FILED DIRECTLY (PER STATE).....$  75.00
     EACH ABANDONED PROPERTY REPORT PROVIDED TO CLIENT (PER STATE).$  50.00
     EACH SHAREOWNER ACCOUNT REPORTED..............................$   2.00
- --------------------------------------------------------------------------------

Escheatment functions include the following:

     |_| Preparing preliminary report of abandoned property
     |_| Performing "due diligence" mailing to holders with abandoned property
     |_| Clearing property for holders responding to the mailing
     |_| Preparing final report and remitting abandoned property to each State


OPTIONAL PROXY & ANNUAL MEETING SERVICES:
- ----------------------------------------
- --------------------------------------------------------------------------------
     INTERNET / TELEPHONE VOTING
     SET-UP AND ADMINISTRATION (INCLUDES DEDICATED 800#).........$ 4,000.00

     CUSTOM CHANGES TO 800 #......................................APPRAISAL
     CUSTOM CHANGES TO WEBSITE....................................APPRAISAL
     ALTERATIONS TO WEBSITE AFTER FINAL SIGN-OFF .................APPRAISAL

     EACH PROXY VOTED BY PHONE...................................$     0.22

     EACH PROXY VOTED BY INTERNET................................$     0.07
- --------------------------------------------------------------------------------

OTHER SERVICES
- --------------

The following services, not included in our basic services, are available upon
request:

     |_| Stock option plan administration
     |_| Direct stock purchase and sale plan administration
     |_| Automated direct dividend deposit service solicitation
     |_| Stock dividend / split processing
     |_| Rights Agent
     |_| Warrant Agent
     |_| Reorganization services for corporate actions (e.g., tenders,
         exchanges, spin offs, etc.)
     |_| Odd lot processing
     |_| Direct Report -- an alternative to mailing quarterly reports
     |_| Non-shareowner mailing list maintenance
     |_| Second mailing for proxies
     |_| Processing outgoing tape files
     |_| Processing incoming tape files (in BNY format)
     |_| Processing external proxy files (in BNY format)
- --------------------------------------------------------------------------------

CONTRACT EXPIRATION
- -------------------
Our fees are effective for a period of TWO years, and are billed monthly.


                 Neuberger Berman Closed End Fund - Fee page 5
                              Issued July 26, 2002

<PAGE>
                                                                        ________
                                                                           THE
                                                                         BANK OF
                                                                        NEW YORK
                                                                        ________

                          EXPENSES AND OTHER CHARGES

OUT-OF-POCKET EXPENSES
Out-of-pocket expenses include, but is not limited to: the cost of stationery
and supplies, such as transfer sheets, dividend checks, etc., together with any
disbursement for telephone, including allocation for 800 carrier phone service,
mail insurance premiums, bulk rate handling, records storage, travel for annual
meeting, individual client link-up charges for ADP, tape charges from DTC, legal
counsel etc. are billed in addition to the above fees.

SECONDARY OFFERINGS
A fee of $3,500 will be imposed for additional activities associated with the
acceptance of appointments involving secondary public offerings.

OTHER SERVICES
Fees for any services not specified above will be based on an appraisal of the
work to be performed or on the Bank's standard fees at the time of the request.

REGULATORY CHANGES
Fees for any new services or requirements requested by any governmental
regulatory agency will be assessed on the appraisal of the work to be performed
at the time of the request from the agency.

INTEREST
Interest of one and one-half percent (1.5%) per month WILL BE charged on all
invoices unpaid for more than 30 days from receipt of invoice.

CONVERSION
There is usually no charge for converting the company's files to the Bank's
system with the exception of any manual processing that may be necessary (e.g.,
outstanding check history from the current agent's file). A review of the
current files and formats will be made to determine if any situation exists
which will require extraordinary effort to complete the conversion. A charge may
also be imposed for any significant number of closed shareholder accounts that
the company requests be converted to the Bank's system. Any charge will be
discussed with the company prior to work commencing.

TERMS OF PROPOSAL
THE BANK OF NEW YORK'S FINAL ACCEPTANCE OF THIS APPOINTMENT IS SUBJECT TO THE
FULL REVIEW AND APPROVAL OF ALL RELATED DOCUMENTATION. THE FEES PRESENTED HEREIN
ARE BASED ON DATA CURRENTLY AVAILABLE. IF THERE ARE ANY CHANGES IN THE SCOPE OR
COMPLEXITY OF THE JOB REQUIREMENTS, THE FEES WILL BE REVIEWED AND ADJUSTED
ACCORDINGLY. THIS OFFER IS SUBJECT TO REVISION IF WE DO NOT ENTER INTO A WRITTEN
AGREEMENT WITHIN SIXTY DAYS OF THE DATE OF THIS PROPOSAL.

DOCUMENTATION OF APPOINTMENT
The Bank of New York reserves the right to suspend all conversion activities,
(or closing activities in the case of an Initial Public Offering), if the
following documentation is not received prior to our effective date as transfer
agent and registrar. YOUR BANK OF NEW YORK STOCK TRANSFER RELATIONSHIP MANAGER
WILL PROVIDE SAMPLES OF THE FOLLOWING DOCUMENTATION AS NEEDED.

o  STOCK TRANSFER AGENCY AGREEMENT

o  OPINION OF COUNSEL AS TO: THE VALIDITY OF SHARES OUTSTANDING, PROPER
   ORGANIZATION OF COMPANY, ETC.


                 Neuberger Berman Closed End Fund - Fee page 6
                              Issued July 26, 2002

<PAGE>
                                                                        ________
                                                                           THE
                                                                         BANK OF
                                                                        NEW YORK
                                                                        ________

DOCUMENTATION OF APPOINTMENT (CONTINUED)

o     UNDER THE SEAL OF THE CORPORATE SECRETARY
         A Copy of the Corporate By-Laws
         Specimen stock certificate
         Certificate of Incorporation with amendments
         List and sample signature of authorized signers

o     SECRETARY'S CERTIFICATION AS TO:
         Number of shares, by each class; chartered, authorized, issued and
         outstanding on effective date All remaining shares to be issued out of
         each reserve established for option plans, restricted stock, new and
         secondary issues, etc.

o     NEW YORK STATE TAX FORM

o     EMPLOYER APPOINTMENT OF AGENT - I.R.S. FORM 2678


TERMINATION
The Bank's appointment as stock transfer agent may be terminated only in
accordance with the provisions of the Agreement. At any client termination
outside of the provisions, a fee of ten percent (10%) -PER FUND- of the previous
twelve (12) months' fees, will be charged plus associated expenses for lists,
tapes, etc., requested by the successor agent. These charges are made to
compensate for the additional time and expense involved in re-routing
certificates and correspondence sent to us and for other related administrative
and clerical duties.

CONFIDENTIALITY
The information contained in this proposal is confidential. It is intended only
for the directors, officers, employees and consultants of the Company who must
analyze it to make a determination regarding the services to be provided.

By receipt of this proposal, recipient agrees not to divulge any of the
information contained herein to any third party.


                 Neuberger Berman Closed End Fund - Fee page 7
                              Issued July 26, 2002



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K
<SEQUENCE>12
<FILENAME>nb_adminagmt.txt
<DESCRIPTION>EXHIBIT 99.2K(2) ADMINISTRATION AGREEMENT
<TEXT>
                NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.
                            ADMINISTRATION AGREEMENT

         This Agreement is made as of September __, 2002, between Neuberger
Berman Intermediate Municipal Fund Inc., a Maryland corporation ("Fund"), and
Neuberger Berman Management Inc., a New York corporation ("Administrator").

         WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as a closed-end, diversified management
investment company;

         WHEREAS, the Fund desires to retain the Administrator to furnish
administrative services, including stockholder accounting, recordkeeping, and
other services to stockholders and the Administrator is willing to furnish such
services,

         NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:

         1.   SERVICES OF THE ADMINISTRATOR.
              -----------------------------

              1.1 ADMINISTRATIVE SERVICES. The Administrator shall supervise the
business and affairs of the Fund and shall provide such services required for
effective administration of the Fund as are not provided by employees or other
agents engaged by the Fund; PROVIDED, that the Administrator shall not have any
obligation to provide under this Agreement any services related to the
distribution of the Fund's shares, or any other services that are the subject of
a separate agreement or arrangement between the Fund and the Administrator. The
Administrator can use any of the officers and employees of Neuberger Berman, LLC
to provide any of the services or reports required under this agreement. Subject
to the foregoing, in providing administrative services hereunder, the
Administrator shall:

<PAGE>

                   1.1.1 OFFICE SPACE, EQUIPMENT AND FACILITIES. Furnish without
cost to the Fund, or pay the cost of, such office space, office equipment and
office facilities as are adequate for the needs of the Fund;

                   1.1.2 PERSONNEL. Provide, without remuneration from or other
cost to the Fund, the services of individuals competent to perform all of the
executive, administrative and clerical functions of the Fund that are not
performed by employees or other agents engaged by the Fund or by the
Administrator acting in some other capacity pursuant to a separate agreement or
arrangement with the Fund;

                   1.1.3 AGENTS. Assist the Fund in selecting and coordinating
the activities of the other agents engaged by the Fund, including the Fund's
stockholder servicing agent, dividend disbursing agent, custodian, independent
auditors and legal counsel;

                   1.1.4 DIRECTORS AND OFFICERS. Authorize and permit the
Administrator's directors, officers or employees who may be elected or appointed
as officers of the Fund or directors of the Fund ("Directors") to serve in such
capacities, without remuneration from or other cost to the Fund;

                   1.1.5 BOOKS AND RECORDS. Assure that all financial,
accounting and other records required to be maintained and preserved by the Fund
are maintained and preserved by it or on its behalf in accordance with
applicable laws and regulations; and

                   1.1.6 REPORTS AND FILINGS. Assist in the preparation of (but
not pay for) all periodic reports by the Fund to stockholders of the Fund and
all reports and filings required to maintain the registration, qualification and
listing on a national securities exchange of the Fund and the shares of the


                                     - 2 -
<PAGE>

Fund, or to meet other regulatory or tax requirements applicable to the Fund or
the shares of the Fund, under federal and state securities and tax laws.

              1.2 STOCKHOLDER AND RELATED SERVICES. The Administrator shall
provide such of the following services as are required by the Fund or its
stockholders:

              1.2.1  Direct stockholder services, consisting of:

                     (a) Responding to telephonic and in-person inquiries from
existing stockholders or their representatives requesting information regarding
matters such as stockholder account or transaction status, net asset value
("NAV") of Fund shares, and Fund performance, Fund services, plans and options,
Fund investment policies, Fund portfolio holdings, and Fund distributions and
classification thereof for tax purposes;

                     (b) Dealing with stockholder complaints and correspondence
directed to or brought to the attention of the Administrator; and

                     (c) Generating or developing and distributing special data,
notices, reports, programs and literature required by large stockholders, by
stockholders with specialized informational needs, or by stockholders generally
in light of developments, such as changes in tax laws.

              1.2.2 Soliciting and gathering stockholder proxies.

              1.2.3 Such other stockholder and stockholder-related services,
whether similar to or different from those described in Subparagraphs 1.2.1 and
1.2.2 of this Paragraph 1.2, as the parties may from time to time agree in
writing.

         1.3 BLUE SKY SERVICES. The Administrator shall maintain under this
Agreement the registration or qualification of the Fund and its shares under
state Blue Sky or securities laws and regulations, as necessary; PROVIDED that


                                     - 3 -
<PAGE>

such Fund shall pay all related filing fees and registration or qualification
fees.

         1.4 OTHER SERVICES. The Administrator shall provide such other services
required by the Fund as the parties may from time to time agree in writing are
appropriate to be provided under this Agreement.

         2.   EXPENSES OF THE FUND.
              --------------------

              2.1 EXPENSES TO BE PAID BY THE ADMINISTRATOR. The Administrator
shall pay all salaries, expenses and fees of the officers, Directors, or
employees of the Fund who are officers, directors or employees of the
Administrator. If the Administrator pays or assumes any expenses of the Fund not
required to be paid or assumed by the Administrator under this Agreement, the
Administrator shall not be obligated hereby to pay or assume the same or any
similar expense in the future; PROVIDED, that nothing herein contained shall be
deemed to relieve the Administrator of any obligation to the Fund under any
separate agreement or arrangement between the parties.

              2.2 EXPENSES TO BE PAID BY THE FUND. The Fund shall bear all
expenses of its operation, except those specifically allocated to the
Administrator under this Agreement or under any separate agreement between the
Fund and the Administrator. Subject to any separate agreement or arrangement
between the Fund and the Administrator, the expenses hereby allocated to the
Fund, and not to the Administrator, include, but are not limited to:

                   2.2.1 CUSTODY. All charges of depositories, custodians, and
other agents for the transfer, receipt, safekeeping, and servicing of its cash,
securities, and other property;

                   2.2.2 STOCKHOLDER SERVICING. All expenses of maintaining and
servicing stockholder accounts, including but not limited to the charges of any
stockholder servicing agent, dividend disbursing agent, dividend reinvestment
plan agent or other agent (other than the Administrator hereunder) engaged by
the Fund to service stockholder accounts;


                                     - 4 -
<PAGE>


                   2.2.3 STOCKHOLDER REPORTS. All expenses of preparing, setting
in type, printing and distributing reports and other communications to
stockholders of the Fund;

                   2.2.4 PROSPECTUSES. All expenses of preparing, setting in
type, printing and mailing annual or more frequent revisions of the Fund's
Prospectus and SAI and any supplements thereto and of supplying them to
stockholders of the Fund and Account holders;

                   2.2.5 PRICING AND PORTFOLIO VALUATION. All expenses of
computing the Fund's NAV per share, including any equipment or services obtained
for the purpose of pricing shares or valuing the Fund's investment portfolio;

                   2.2.6 COMMUNICATIONS. All charges for equipment or services
used for communications between the Administrator or the Fund and any custodian,
stockholder servicing agent, portfolio accounting services agent, or other agent
engaged by the Fund;

                   2.2.7 LEGAL AND ACCOUNTING FEES. All charges for services and
expenses of the Fund's legal counsel and independent auditors;

                   2.2.8 DIRECTORS' FEES AND EXPENSES. All compensation of
Directors other than those affiliated with the Administrator, all expenses
incurred in connection with such unaffiliated Directors' services as Directors,
and all other expenses of meetings of the Directors or committees thereof;

                   2.2.9 STOCKHOLDER MEETINGS. All expenses incidental to
holding meetings of stockholders, including the printing of notices and proxy
materials, and proxy solicitation therefor;


                                     - 5 -
<PAGE>

                   2.2.10 FEDERAL REGISTRATION FEES. All fees and expenses of
registering and maintaining the registration of the Fund under the 1940 Act and
the registration of the Fund's shares under the Securities Act of 1933 (the
"1933 Act"), including all fees and expenses incurred in connection with the
preparation, setting in type, printing, and filing of any Registration
Statement, Prospectus and SAI under the 1933 Act or the 1940 Act, and any
amendments or supplements that may be made from time to time;

                   2.2.11 STATE REGISTRATION FEES. All fees and expenses of
qualifying and maintaining the qualification of the Fund and of the Fund's
shares for sale under securities laws of various states or jurisdictions, and of
registration and qualification of the Fund under all other laws applicable to
the Fund or its business activities (including registering the Fund as a
broker-dealer, or any officer of the Fund or any person as agent or salesman of
the Fund in any state);

                   2.2.12 SHARE CERTIFICATES. All expenses of preparing and
transmitting the Fund's share certificates, if any;

                   2.2.13 CONFIRMATIONS. All expenses incurred in connection
with the issue and transfer of the Fund's shares, including the expenses of
confirming all share transactions;

                   2.2.14 BONDING AND INSURANCE. All expenses of bond,
liability, and other insurance coverage required by law or regulation or deemed
advisable by the Directors, including, without limitation, such bond, liability
and other insurance expense that may from time to time be allocated to the Fund
in a manner approved by the Directors;

                   2.2.15 BROKERAGE COMMISSIONS. All brokers' commissions and
other charges incident to the purchase, sale or lending of the Fund's portfolio
securities;


                                     - 6 -
<PAGE>

                   2.2.16 TAXES. All taxes or governmental fees payable by or
with respect to the Fund to federal, state or other governmental agencies,
domestic or foreign, including stamp or other transfer taxes;

                   2.2.17 TRADE ASSOCIATION FEES. All fees, dues and other
expenses incurred in connection with the Fund's membership in any trade
association or other investment organization;

                   2.2.18 NONRECURRING AND EXTRAORDINARY EXPENSES. Such
nonrecurring and extraordinary expenses as may arise, including the costs of
actions, suits, or proceedings to which the Fund is a party and the expenses the
Fund may incur as a result of its legal obligation to provide indemnification to
the Fund's officers, Directors and agents;

                   2.2.19 ORGANIZATIONAL EXPENSES AND OFFERING EXPENSES FOR
COMMON STOCK. Any and all organizational expenses and any and all offering
expenses for shares of the Fund's common stock paid or assessed by the
Administrator, which the Fund shall reimburse to the Administrator if and at
such time or times agreed by the Fund and the Administrator; and

                   2.2.20 INVESTMENT ADVISORY SERVICES. Any fees and expenses
for investment advisory services that may be incurred or contracted for by the
Fund.

                   2.2.21 EXPENSES OF LISTING ON A NATIONAL SECURITIES EXCHANGE.
Any and all expenses of listing and maintaining the listing of shares of the
Fund's common stock on any national securities exchange.

                   2.2.22 OFFERING EXPENSES FOR ANY PREFERRED STOCK. Any and all
offering expenses (including rating agency fees) for any preferred stock of the
Fund paid or assessed by the Administrator shall be reimbursed by the Fund if
and at such time or times agreed by the Fund and the Administrator.


                                     - 7 -
<PAGE>

                   2.2.23 DIVIDEND REINVESTMENT PLAN. Any and all expenses
incident to any dividend reinvestment plan.

                   2.2.24 INTEREST. Such interest as may accrue on borrowings of
the Fund.

         3.   ADMINISTRATION FEE.
              ------------------

              3.1 FEE. As compensation for all services rendered, facilities
provided and expenses paid or assumed by the Administrator to or for the Fund
under this Agreement, the Fund shall pay the Administrator an annual fee as set
out in Schedule A to this Agreement.

              3.2 COMPUTATION AND PAYMENT OF FEE. The administration fee shall
accrue on each calendar day, and shall be payable monthly on the first business
day of the next succeeding calendar month. The daily fee accruals for the Fund
shall be computed by multiplying the fraction of one divided by the number of
days in the calendar year by the applicable annual administration fee rate (as
set forth in Schedule A hereto), and multiplying this product by the total
assets minus liabilities other than the aggregate indebtedness entered into for
purposes of leverage ("Managed Assets") of the Fund, determined in the manner
set forth in the Fund's Prospectus, as of the close of business on the last
preceding business day on which the Fund's NAV was determined.

         4. OWNERSHIP OF RECORDS. All records required to be maintained and
preserved by the Fund pursuant to the provisions or rules or regulations of the
Securities and Exchange Commission ("SEC") under Section 31(a) of the 1940 Act
and maintained and preserved by the Administrator on behalf of the Fund are the
property of the Fund and shall be surrendered by the Administrator promptly on
request by the Fund; PROVIDED, that the Administrator may at its own expense
make and retain copies of any such records.


                                     - 8 -
<PAGE>

         5. REPORTS TO ADMINISTRATOR. The Fund shall furnish or otherwise make
available to the Administrator such copies of the Fund's Prospectus, SAI,
financial statements, proxy statements, reports, and other information relating
to its business and affairs as the Administrator may, at any time or from time
to time, reasonably require in order to discharge its obligations under this
Agreement.

         6. REPORTS TO THE FUND. The Administrator shall prepare and furnish to
the Fund such reports, statistical data and other information in such form and
at such intervals as the Fund may reasonably request.

         7. OWNERSHIP OF SOFTWARE AND RELATED MATERIALS. All computer programs,
written procedures and similar items developed or acquired and used by the
Administrator in performing its obligations under this Agreement shall be the
property of the Administrator, and the Fund will not acquire any ownership
interest therein or property rights with respect thereto.

         8. CONFIDENTIALITY. The Administrator agrees, on its own behalf and on
behalf of its employees, agents and contractors, to keep confidential any and
all records maintained and other information obtained hereunder which relates to
the Fund or to any of the Fund's former, current or prospective stockholders,
EXCEPT that the Administrator may deliver records or divulge information (a)
when requested to do so by duly constituted authorities after prior notification
to and approval in writing by the Fund (which approval will not be unreasonably
withheld and may not be withheld by the Fund where the Administrator advises the
Fund that it may be exposed to civil or criminal contempt proceedings or other
penalties for failure to comply with such request) or (b) whenever requested in
writing to do so by the Fund.


                                     - 9 -
<PAGE>

         9.  THE ADMINISTRATOR'S ACTIONS IN RELIANCE ON FUND'S INSTRUCTIONS,
LEGAL OPINIONS, ETC.; FUND'S COMPLIANCE WITH LAWS.

              9.1 The Administrator may at any time apply to an officer of the
Fund for instructions, and may consult with legal counsel for the Fund or with
the Administrator's own legal counsel, in respect of any matter arising in
connection with this Agreement; and the Administrator shall not be liable for
any action taken or omitted to be taken in good faith and with due care in
accordance with such instructions or with the advice or opinion of such legal
counsel. The Administrator shall be protected in acting upon any such
instructions, advice or opinion and upon any other paper or document delivered
by the Fund or such legal counsel which the Administrator believes to be genuine
and to have been signed by the proper person or persons, and the Administrator
shall not be held to have notice of any change of status or authority of any
officer or representative of the Fund, until receipt of written notice thereof
from the Fund.

              9.2 Except as otherwise provided in this Agreement or in any
separate agreement between the parties and except for the accuracy of
information furnished to the Fund by the Administrator, the Fund assumes full
responsibility for the preparation, contents, filing and distribution of its
Prospectus and SAI, and full responsibility for other documents or actions
required for compliance with all applicable requirements of the 1940 Act, the
Securities Exchange Act of 1934, the 1933 Act, and any other applicable laws,
rules and regulations of governmental authorities having jurisdiction over the
Fund.

         10. SERVICES TO OTHER CLIENTS. Nothing herein contained shall limit the
freedom of the Administrator or any affiliated person of the Administrator to
render administrative or stockholder services to other investment companies, to
act as administrator to other persons, firms, or corporations, or to engage in
other business activities.


                                     - 10 -
<PAGE>

         11.1 LIABILITY OF THE ADMINISTRATOR. Neither the Administrator nor any
director, officer or employee of the Administrator performing services for the
Fund at the direction or request of the Administrator in connection with the
Administrator's discharge of its obligations hereunder shall be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with any matter to which this Agreement relates; provided, that
nothing herein contained shall be construed (i) to protect the Administrator
against any liability to the Fund or its Stockholders to which the Administrator
would otherwise be subject by reason of the Administrator's misfeasance, bad
faith, or gross negligence in the performance of the Administrator's duties, or
by reason of the Administrator's reckless disregard of its obligations and
duties under this Agreement ("disabling conduct"), or (ii) to protect any
director, officer or employee of the Administrator who is or was a Director or
officer of the Fund against any liability to the Fund or its Stockholders 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 Fund.

         11.2 INDEMNIFICATION BY THE FUND. The Fund will indemnify the
Administrator against, and hold it harmless from, any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) incurred investigating or defending against claims for losses or
liabilities described in Section 11.1 not resulting from negligence, disregard
of its obligations and duties under this Agreement or disabling conduct by the
Administrator. Indemnification shall be made only following: (i) a final
decision on the merits by a court or other body before whom the proceeding was
brought that the Administrator was not liable by reason of negligence, disregard
of its obligations and duties under this Agreement or disabling conduct or (ii)
in the absence of such a decision, a reasonable determination, based upon a
review of the facts, that the Administrator was not liable by reason of
negligence, disregard of its obligations and duties under this Agreement or
disabling conduct by (a) the vote of a majority of a quorum of directors of the
Fund who are neither "interested persons" of the Fund nor parties to the
proceeding ("disinterested non-party directors") or (b) an independent legal
counsel in a written opinion. The Administrator shall be entitled to advances
from the Fund for payment of the reasonable expenses incurred by it in
connection with the matter as to which it is seeking indemnification hereunder
in the manner and to the fullest extent permissible under the Maryland General
Corporation Law. The Administrator shall provide to the Fund a written
affirmation of its good faith belief that the standard of conduct necessary for
indemnification by the Fund has been met and a written undertaking to repay any
such advance if it should ultimately be determined that the standard of conduct
has not been met. In addition, at least one of the following additional
conditions shall be met: (a) the Administrator shall provide security in form
and amount acceptable to the Fund for its undertaking; (b) the Fund is insured
against losses arising by reason of the advance; or (c) a majority of a quorum
of the full Board of Directors of the Fund, the members of which majority are
disinterested non-party directors, or independent legal counsel, in a written
opinion, shall have determined, based on a review of facts readily available to
the Fund at the time the advance is proposed to be made, that there is reason to
believe that the Administrator will ultimately be found to be entitled to
indemnification hereunder.

         12. INDEMNIFICATION BY THE ADMINISTRATOR. The Administrator shall
indemnify the Fund and hold it harmless from and against any and all losses,
damages and expenses, including reasonable attorneys' fees and expenses,
incurred by the Fund which result from: (i) the Administrator's failure to
comply with the terms of this Agreement; or (ii) the Administrator's lack of
good faith in performing its obligations hereunder; or (iii) the Administrator's
negligence or misconduct or that of its employees, agents or contractors in
connection herewith. The Fund shall not be entitled to such indemnification in
respect of actions or omissions constituting negligence or misconduct on the
part of the Fund or its employees, agents or contractors other than the
Administrator unless such negligence or misconduct results from or is
accompanied by negligence or misconduct on the part of the Administrator, any
affiliated person of the Administrator, or any affiliated person of an


                                     - 11 -
<PAGE>

affiliated person of the Administrator. Before confessing any claim against it
which may be subject to indemnification hereunder, the Fund shall give the
Administrator reasonable opportunity to defend against such claim in its own
name or in the name of the Fund.

         13. EFFECT OF AGREEMENT. Nothing herein contained shall be deemed to
require the Fund to take any action contrary to the Articles of Incorporation or
By-laws of the Fund or any applicable law, regulation or order to which it is
subject or by which it is bound, or to relieve or deprive the Directors of their
responsibility for and control of the conduct of the business and affairs of the
Fund.

         14. TERM OF AGREEMENT. The term of this Agreement shall begin on
September __, 2002 and, unless sooner terminated as hereinafter provided, this
Agreement shall remain in effect through June 30, 2004. Thereafter, this
Agreement shall continue in effect from year to year, subject to the termination
provisions and all other terms and conditions hereof; PROVIDED, such continuance
is approved at least annually by vote or written consent of the Directors,
including a majority of the Directors who are not interested persons of either
party hereto ("Disinterested Directors"); and PROVIDED FURTHER, that the
Administrator shall not have notified the Fund in writing at least sixty days
prior to the first expiration date hereof or at least sixty days prior to any
expiration date in any year thereafter that it does not desire such
continuation. The Administrator shall furnish the Fund, promptly upon its
request, such information as may reasonably be necessary to evaluate the terms
of this Agreement or any extension, renewal or amendment thereof.

         15. AMENDMENT OR ASSIGNMENT OF AGREEMENT. Any amendment to this
Agreement shall be in writing signed by the parties hereto; PROVIDED, that no
such amendment shall be effective unless authorized on behalf of any Fund (i) by
resolution of the Directors, including the vote or written consent of a majority
of the Disinterested Directors, or (ii) by vote of a majority of the outstanding


                                     - 12 -
<PAGE>

voting securities of the Fund. This Agreement shall terminate automatically and
immediately in the event of its assignment; provided, that with the consent of
the Fund, the Administrator may subcontract to another person any of its
responsibilities with respect to the Fund.

         16. TERMINATION OF AGREEMENT. This Agreement may be terminated at any
time by either party hereto, without the payment of any penalty, upon at least
sixty days' prior written notice to the other party; PROVIDED, that in the case
of termination by the Fund, such action shall have been authorized (i) by
resolution of the Directors, including the vote or written consent of the
Disinterested Directors, or (ii) by vote of a majority of the outstanding voting
securities of the Fund.

         17. NAME OF THE FUND. The Fund hereby agrees that if the Administrator
shall at any time for any reason cease to serve as administrator to the Fund,
the Fund shall, if and when requested by the Administrator, eliminate from the
Fund's name the name "Neuberger Berman" and thereafter refrain from using the
name "Neuberger Berman" or the initials "NB" in connection with its business or
activities, and the foregoing agreement of the Fund shall survive any
termination of this Agreement and any extension or renewal thereof.

         18. INTERPRETATION AND DEFINITION OF TERMS. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the Act shall be resolved by
reference to such term or provision of the 1940 Act and to interpretation
thereof, if any, by the United States courts or, in the absence of any
controlling decision of any such court, by rules, regulations or orders of the
SEC validly issued pursuant to the 1940 Act. Specifically, the terms "vote of a
majority of the outstanding voting securities," "interested persons,"
"assignment" and "affiliated person," as used in this Agreement shall have the
meanings assigned to them by Section 2(a) of the 1940 Act. In addition, when the
effect of a requirement of the 1940 Act reflected in any provision of this
Agreement is modified, interpreted or relaxed by a rule, regulation or order of


                                     - 13 -
<PAGE>

the SEC, whether of special or of general application, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.

         19. CHOICE OF LAW. This Agreement is made and to be principally
performed in the State of New York, and except insofar as the Act or other
federal laws and regulations may be controlling, this Agreement shall be
governed by, and construed and enforced in accordance with, the internal laws of
the State of New York.

         20. CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.

         21. EXECUTION IN COUNTERPARTS. This Agreement may be executed
simultaneously in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.

             IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their respective officers thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.

                                    NEUBERGER BERMAN INTERMEDIATE
                                    MUNICIPAL FUND INC.


                                    By:
                                       --------------------------------------

                                    Title:
                                          -----------------------------------


                                    NEUBERGER BERMAN MANAGEMENT INC.


                                    By:
                                       --------------------------------------

                                    Title:
                                          -----------------------------------


                                     - 14 -
<PAGE>



                NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.
                            ADMINISTRATION AGREEMENT

                                   SCHEDULE A


                  Compensation pursuant to Paragraph 3 of the Neuberger Berman
Intermediate Municipal Fund Inc. Administration Agreement shall be:

         (1)      For the services provided to the Fund and its stockholders
                  (including amounts paid to third parties), ___% per annum of
                  the average daily total assets minus liabilities other than
                  the aggregate indebtedness entered into for purposes of
                  leverage ("Managed Assets") of the Fund; plus

         (2)      Certain out-of-pocket expenses for technology used for
                  stockholder servicing and stockholder communication, subject
                  to the prior approval of an annual budget by the Fund's Board
                  of Directors, including a majority of those Directors who are
                  not interested persons of the Fund or of Neuberger Berman
                  Management Inc., and periodic reports to the Board of
                  Directors on actual expenses.



DATED:  September __, 2002



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K
<SEQUENCE>13
<FILENAME>nb526807.txt
<DESCRIPTION>EXHIBIT 99.2K(3) FEE WAIVER AGREEMENT
<TEXT>
                NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC.

                                605 Third Avenue
                          New York, New York 10158-0180



September __, 2002

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

Dear Ladies and Gentlemen:

      Neuberger Berman  Intermediate  Municipal Fund Inc.  ("Fund"),  a Maryland
corporation,  has entered into a Management  Agreement with you dated  September
__,  2002.  Under  the  Management  Agreement,  the  Fund  agrees  to pay  you a
management fee (the  "Management  Fee") payable on a monthly basis at the annual
rate of 0.25% of the Fund's average daily total assets minus  liabilities  other
than the aggregate  indebtedness entered into for purposes of leverage ("Managed
Assets"). (The liquidation preference of any preferred shares issued by the Fund
is not a liability.)

      In  consideration  of the  Fund  agreeing  to enter  into  the  Management
Agreement  with you,  you  hereby  agree to waive  payment  of a portion  of the
Management Fee, according to the following schedule:

FISCAL PERIOD                       PERCENTAGE WAIVED (ANNUAL RATE AS A
ENDING OCTOBER 31,                  PERCENTAGE OF MANAGED ASSETS)
- ------------------                  ------------------------------------

      2002....................................    0.25%
      2003....................................    0.25%
      2004....................................    0.25%
      2005....................................    0.25%
      2006....................................    0.25%
      2007....................................    0.25%
      2008....................................    0.20%
      2009....................................    0.15%
      2010....................................    0.10%
      2011....................................    0.05%

      You agree that the Fund will not be required to reimburse  you for amounts
waived pursuant to this agreement.  The Fund agrees to furnish or otherwise make
available to you such copies of its  financial  statements,  reports,  and other

<PAGE>

information relating to its business and affairs as you may, at any time or from
time to time, reasonably request in connection with this Agreement.

      This agreement is made and to be performed principally in the State of New
York, and except insofar as the Investment  Company Act of 1940, as amended,  or
other federal laws and regulations  may be controlling,  this agreement shall be
governed by, and construed and enforced in accordance with, the internal laws of
the State of New York.  Any  amendment  to this  agreement  shall be in  writing
signed by the parties hereto.

      If you are in  agreement  with  the  foregoing,  please  sign  the form of
acceptance on the enclosed counterpart hereof and return the same to us.

                                    Very truly yours,

                                    NEUBERGER BERMAN INTERMEDIATE MUNICIPAL
                                    FUND INC.



                                    By:
                                        -----------------------------------

                                    Title:
                                           ----------------------------------

The foregoing agreement is hereby accepted as of September __, 2002.

NEUBERGER BERMAN MANAGEMENT INC.




By:
    -----------------------------------

Title:
       ----------------------------------

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K
<SEQUENCE>14
<FILENAME>nb535698.txt
<DESCRIPTION>EXHIBIT 99.2K(4) COMPENSATION AGREEMENT
<TEXT>
                        ADDITIONAL COMPENSATION AGREEMENT



      ADDITIONAL COMPENSATION AGREEMENT (the "Agreement"), dated as of September
27, 2002,  between Merrill Lynch & Co.,  Merrill Lynch,  Pierce,  Fenner & Smith
Incorporated  ("Merrill  Lynch")  and  Neuberger  Berman  Management  Inc.  ("NB
Management").

      WHEREAS,  Neuberger Berman Intermediate Municipal Fund Inc. (including any
successor by merger or otherwise, the "Fund") is a newly organized, diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"),  and its common shares are  registered
under the Securities Act of 1933, as amended; and

      WHEREAS, NB Management is the investment advisor of the Fund;

      WHEREAS,  Merrill Lynch is acting as lead  underwriter  in an offering
of the Fund's common shares;

      WHEREAS,  NB  Management  desires to provide  additional  compensation  to
Merrill Lynch for acting as lead underwriter in an offering of the Fund's common
shares; and

      WHEREAS,  NB  Management  desires  to  retain  Merrill  Lynch  to  provide
after-market support services designed to maintain the visibility of the Fund on
an ongoing basis, and Merrill Lynch is willing to render such services;

      NOW,  THEREFORE,  in  consideration of the mutual terms and conditions set
forth below, the parties hereto agree as follows:

1.    (a)   NB Management  hereby employs  Merrill Lynch,  for the period and on
            the terms and conditions set forth herein,  to provide the following
            services at the reasonable request of NB Management:

              (1) to provide  after-market support services designed to maintain
                  the visibility of the Fund on an ongoing basis;

              (2) to provide relevant information,  studies or reports regarding
                  general trends in the closed-end  investment company and asset
                  management industries,  if reasonably obtainable,  and consult
                  with representatives of NB Management in connection therewith;
                  and

              (3) to provide  information to and consult with NB Management with
                  respect to applicable  strategies  designed to address  market
                  value discounts, if any.

      (b)   At the request of NB Management,  Merrill Lynch shall limit or cease
            any action or service  provided  hereunder to the extent and for the
            time period  requested by NB  Management;  provided,  however,  that
            pending  termination  of this Agreement as provided for in Section 5
            hereof,  any such  limitation  or  cessation  shall not  relieve  NB
            Management of its payment obligations pursuant to Section 2 hereof.

      (c)   Merrill Lynch will promptly notify NB Management if it learns of any
            material  inaccuracy or misstatement in, or material  omission from,
            any  written  information,  as of  the  date  such  information  was

<PAGE>

            published,  provided by Merrill Lynch to NB Management in connection
            with the  performance  of  services  by  Merrill  Lynch  under  this
            Agreement.

2.    NB Management  shall pay Merrill  Lynch a fee computed  weekly and payable
      quarterly in arrears  commencing [ ], 2002 at an annualized  rate of 0.10%
      of the Fund's  managed assets for a term as described in Section 5 hereof;
      provided that the total amount of the fee hereunder  shall not exceed 4.5%
      of the total price (including all Initial Securities and Option Securities
      as such terms are described in the Purchase Agreement, dated September 24,
      2002 (the "Purchase Agreement"),  by and among the Fund, NB Management and
      each of the Underwriters named therein) to the public of the Fund's common
      shares  offered by the prospectus  dated  September 24, 2002; and provided
      further,  that in determining  when this maximum fee amount has been paid,
      the  value  of each of the  quarterly  payments  made  hereunder  shall be
      discounted at the annual rate of 10% to the closing date of offering.  All
      quarterly fees payable  hereunder shall be paid to Merrill Lynch within 15
      days following the end of each calendar quarter.

3.    NB Management acknowledges that the services of Merrill Lynch provided for
      hereunder  do not  include  any  advice as to the value of  securities  or
      regarding the advisability of purchasing or selling any securities for the
      Fund's  portfolio.  No provision of this Agreement  shall be considered as
      creating,  nor shall any provision  create,  any obligation on the part of
      Merrill Lynch, and Merrill Lynch is not hereby  agreeing,  to: (i) furnish
      any advice or make any  recommendations  regarding the purchase or sale of
      portfolio   securities  or  (ii)  render  any   opinions,   valuations  or
      recommendations  of any kind or to perform  any such  similar  services in
      connection with providing the services described in Section 1 hereof.

4.    Nothing  herein  shall be construed as  prohibiting  Merrill  Lynch or its
      affiliates  from providing  similar or other services to any other clients
      (including  other  registered  investment  companies  or other  investment
      managers),  so long as Merrill  Lynch's  services to NB Management are not
      impaired thereby.

5.    The term of this Agreement  shall commence upon the date referred to above
      and  shall be in effect so long as NB  Management  acts as the  investment
      manager to the Fund pursuant to the  Investment  Management  Agreement (as
      such term is defined in the Purchase Agreement), by and among the Fund, NB
      Management and each of the Underwriters named therein, or other subsequent
      advisory agreement.

6.    NB Management will furnish Merrill Lynch with such  information as Merrill
      Lynch  reasonably  believes  appropriate to its assignment  hereunder (all
      such  information  so furnished  being the  "Information").  NB Management
      recognizes and confirms that Merrill Lynch (a) will use and rely primarily
      on the Information and on information  available from generally recognized
      public sources in performing the services  contemplated  by this Agreement
      without  having  independently  verified  the same and (b) does not assume
      responsibility  for the accuracy or  completeness  of the  Information and
      such other  information.  To the best of NB  Management's  knowledge,  the
      Information to be furnished by NB Management when delivered,  will be true
      and correct in all  material  respects  and will not contain any  material
      misstatement  of fact or omit to state any material fact necessary to make
      the  statements  contained  therein not  misleading.  NB  Management  will
      promptly  notify Merrill Lynch if it learns of any material  inaccuracy or
      misstatement in, or material  omission from, any Information  delivered to
      Merrill Lynch.

7.    It is understood that Merrill Lynch is being engaged  hereunder  solely to
      provide the services  described  above to NB  Management  and that Merrill
      Lynch is not acting as an agent or fiduciary  of, and shall have no duties
      or liability to the current or future shareholders of the Fund or any

                                       2
<PAGE>

      other third party in  connection  with its  engagement  hereunder,  all of
      which are hereby expressly waived.

8.    NB  Management  agrees that  Merrill  Lynch shall have no  liability to NB
      Management  or the Fund for any act or omission to act by Merrill Lynch in
      the course of its  performance  under this  Agreement,  in the  absence of
      gross  negligence or willful  misconduct on the part of Merrill Lynch.  NB
      Management agrees to the  indemnification and other agreement set forth in
      the Indemnification Agreement attached hereto, the provisions of which are
      incorporated  herein by  reference  and  shall  survive  the  termination,
      expiration or supersession of this Agreement.

9.    This  Agreement  and any  claim,  counterclaim  or  dispute of any kind or
      nature whatsoever  arising out of or in any way relating to this Agreement
      ("Claim")  shall be governed by and construed in accordance  with the laws
      of the State of New York.

10.   No Claim may be commenced, prosecuted or continued in any court other than
      the courts of the State of New York  located in the City and County of New
      York or in the United States  District Court for the Southern  District of
      New  York,  which  courts  shall  have  exclusive  jurisdiction  over  the
      adjudication of such matters,  and NB Management and Merrill Lynch consent
      to the  jurisdiction  of such courts and  personal  service  with  respect
      thereto. Each of Merrill Lynch and NB Management waives all right to trial
      by jury in any proceeding (whether based upon contract, tort or otherwise)
      in any way arising out of or relating  to this  Agreement.  NB  Management
      agrees that a final judgment in any proceeding or counterclaim  brought in
      any such court shall be conclusive  and binding upon NB Management and may
      be enforced in any other courts to the jurisdiction of which NB Management
      is or may be subject, by suit upon such judgment.

11.   This  Agreement  may not be  assigned  by either  party  without the prior
      written consent of the other party.

12.   This Agreement (including the attached Indemnification Agreement) embodies
      the entire  agreement  and  understanding  between the parties  hereto and
      supersedes all prior agreements and understandings relating to the subject
      matter  hereof.  If any  provision of this  Agreement is  determined to be
      invalid or  unenforceable  in any  respect,  such  determination  will not
      affect such provision in any other respect or any other  provision of this
      Agreement,  which will remain in full force and effect. This Agreement may
      not be amended or otherwise  modified or waived except by an instrument in
      writing signed by both Merrill Lynch and NB Management.

13.   All notices required or permitted to be sent under this Agreement shall be
      sent, if to NB Management:


      Neuberger Berman Management Inc.
      605 Third Avenue
      New York, New York 10158-0180
      Attention: [Ellen Metzger]

      or if to Merrill Lynch:

      Merrill Lynch & Co.
      Merrill Lynch, Pierce, Fenner & Smith
                Incorporated
      North Tower, World Financial Center
      New York, New York 10080
      Attention: [Matt Abrusci]


                                       3
<PAGE>

      or such  other  name or  address  as may be given in  writing to the other
      parties.  Any notice  shall be deemed to be given or received on the third
      day after deposit in the US mail with  certified  postage  prepaid or when
      actually received,  whether by hand, express delivery service or facsimile
      transmission, whichever is earlier.

14.   This Agreement may be executed in separate counterparts,  each of which is
      deemed to be an original and all of which taken  together  constitute  one
      and the same agreement.



                                       4
<PAGE>


      IN WITHESS WHEREOF,  the parties hereto have duly executed this Additional
Compensation Agreement as of the date first above written.

NEUBERGER BERMAN MANAGEMENT INC.             MERRILL LYNCH & CO.
                                             MERRILL LYNCH, PIERCE, FENNER &
                                                            SMITH INCORPORATED



By:                                          By:
    -----------------------------               -----------------------------
   Name:                                        Name:
   Title:                                       Title:


                                       5
<PAGE>

               MERRILL LYNCH & CO. INDEMNIFICATION AGREEMENT
               ---------------------------------------------



                                                          September 27, 2002

Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
          Incorporated
North Tower, World Financial Center
New York, New York  10080

Ladies and Gentlemen:

      In connection  with the engagement of Merrill Lynch & Co.,  Merrill Lynch,
Pierce,  Fenner & Smith Incorporated  ("Merrill Lynch") to advise and assist the
undersigned  (together with its affiliates and subsidiaries,  referred to as the
"Company")  with the matters set forth in the Agreement dated September 27, 2002
between  the  Company and  Merrill  Lynch (the  "Agreement"),  in the event that
Merrill  Lynch  becomes  involved in any  capacity in any claim,  suit,  action,
proceeding,   investigation  or  inquiry  (including,  without  limitation,  any
shareholder or derivative  action or arbitration  proceeding)  (collectively,  a
"Proceeding")  in connection  with any matter in any way relating to or referred
to in the Agreement or arising out of the matters contemplated by the Agreement,
including, without limitation, related services and activities prior to the date
of the Agreement, the Company agrees to indemnify, defend and hold Merrill Lynch
harmless to the fullest  extent  permitted by law,  from and against any losses,
claims,  damages,  liabilities and expenses in connection with any matter in any
way  relating to or referred to in the  Agreement  or arising out of the matters
contemplated by the Agreement,  including, without limitation,  related services
and activities prior to the date of the Agreement,  except to the extent that it
shall be determined by a court of competent  jurisdiction in a judgment that has
become  final in that it is no longer  subject to appeal or other  review,  that
such losses, claims,  damages,  liabilities and expenses resulted from the gross
negligence or willful  misconduct of Merrill  Lynch.  In addition,  in the event
that  Merrill  Lynch  becomes  involved  in any  capacity in any  Proceeding  in
connection  with  any  matter  in any  way  relating  to or  referred  to in the
Agreement  or  arising  out  of  the  matters  contemplated  by  the  Agreement,
including, without limitation, related services and activities prior to the date
of the  Agreement,  the Company will  reimburse  Merrill Lynch for its legal and
other expenses (including the cost of any investigation and preparation) as such
expenses are reasonably  incurred by Merrill Lynch in connection  therewith.  If
such indemnification were not to be available for any reason, the Company agrees
to contribute to the losses, claims, damages,  liabilities and expenses involved
(i) in the proportion  appropriate to reflect the relative  benefits received or
sought to be received by the Company and its  stockholders  and  affiliates  and
other constituencies,  on the one hand, and Merrill Lynch, on the other hand, in
the matters  contemplated  by the  Agreement  or (ii) if (but only if and to the
extent)  the  allocation  provided  for in  clause  (i) is for any  reason  held
unenforceable,  in such  proportion  as is  appropriate  to reflect not only the
relative  benefits  referred to in clause (i) but also the relative fault of the
Company and its stockholders and affiliates and other constituencies, on the one
hand, and the party entitled to contribution,  on the other hand, as well as any
other  relevant  equitable  considerations.  The  Company  agrees  that  for the
purposes of this  paragraph  the  relative  benefits  received,  or sought to be
received,  by the Company and its stockholders and affiliates,  on the one hand,
and the party entitled to  contribution,  on the other hand, of a transaction as
contemplated  shall be deemed to be in the same  proportion that the total value
received  or paid or  contemplated  to be received or paid by the Company or its
stockholders  or affiliates and other  constituencies,  as the case may be, as a
result of or in connection with the transaction (whether or not consummated) for
which Merrill Lynch has been retained to perform financial services bears to the
fees paid to Merrill Lynch under the Agreement; provided, that in no event shall

                                       6

<PAGE>

the Company  contribute  less than the amount  necessary  to assure that Merrill
Lynch is not liable for losses,  claims,  damages,  liabilities  and expenses in
excess of the amount of fees actually  received by Merrill Lynch pursuant to the
Agreement.  Relative  fault shall be  determined  by  reference  to, among other
things,  whether any alleged  untrue  statement or omission or any other alleged
conduct  relates to information  provided by the Company or other conduct by the
Company  (or its  employees  or other  agents),  on the one hand,  or by Merrill
Lynch,  on  the  other  hand.  The  Company  shall  not  be  liable  under  this
Indemnification   Agreement  to  Merrill  Lynch   regarding  any  settlement  or
compromise  or  consent  to  the  entry  of any  judgment  with  respect  to any
Proceeding in respect of which  indemnification  or  contribution  may be sought
hereunder  (whether or not the Company is an actual or  potential  party to such
Proceeding)  unless such  settlement,  compromise or judgment is consented to by
the Company. The Company shall not, without the prior written consent of Merrill
Lynch, settle or compromise or consent to the entry of any judgment with respect
to any Proceeding in respect of which  indemnification  or contribution could be
sought under this Indemnification  Agreement (whether or not Merrill Lynch is an
actual or  potential  party  thereto),  unless such  settlement,  compromise  or
consent  (i)  includes  an  unconditional  release  of  Merrill  Lynch  from all
liability  arising out of such  Proceeding and (ii) does not include a statement
as to or an admission of fault,  culpability or a failure to act by or on behalf
of Merrill Lynch. For purposes of this Indemnification Agreement,  Merrill Lynch
shall  include  Merrill  Lynch & Co.,  Merrill  Lynch,  Pierce,  Fenner  & Smith
Incorporated,  any of its  affiliates,  each other person,  if any,  controlling
Merrill Lynch or any of its affiliates,  their respective officers,  current and
former directors, employees and agents, and the successors and assigns of all of
the foregoing persons. The foregoing indemnity and contribution  agreement shall
be in addition to any rights that any  indemnified  party may have at common law
or otherwise.

      The Company agrees that neither  Merrill Lynch nor any of its  affiliates,
directors,  agents, employees or controlling persons shall have any liability to
the  Company  or any  person  asserting  claims  on behalf of or in right of the
Company in connection with or as a result of either Merrill  Lynch's  engagement
under the  Agreement  or any matter  referred  to in the  Agreement,  including,
without  limitation,  related  services and activities  prior to the date of the
Agreement,  except  to the  extent  that it  shall be  determined  by a court of
competent  jurisdiction  in a judgment  that has  become  final in that it is no
longer  subject to appeal or other  review  that any  losses,  claims,  damages,
liabilities  or  expenses  incurred  by the  Company  resulted  from  the  gross
negligence or willful  misconduct  of Merrill  Lynch in performing  the services
that are the subject of the Agreement.

      THIS INDEMNIFICATION  AGREEMENT AND ANY CLAIM,  COUNTERCLAIM OR DISPUTE OF
ANY KIND OR NATURE  WHATSOEVER  ARISING  OUT OF OR IN ANY WAY  RELATING  TO THIS
AGREEMENT ("CLAIM"),  DIRECTLY OR INDIRECTLY, SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS SET FORTH BELOW,
NO CLAIM MAY BE  COMMENCED,  PROSECUTED OR CONTINUED IN ANY COURT OTHER THAN THE
COURTS OF THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK OR IN
THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF NEW YORK,  WHICH
COURTS SHALL HAVE EXCLUSIVE  JURISDICTION OVER THE ADJUDICATION OF SUCH MATTERS,
AND THE COMPANY AND MERRILL LYNCH CONSENT TO THE JURISDICTION OF SUCH COURTS AND
PERSONAL SERVICE WITH RESPECT  THERETO.  THE COMPANY HEREBY CONSENTS TO PERSONAL
JURISDICTION,  SERVICE AND VENUE IN ANY COURT IN WHICH ANY CLAIM  ARISING OUT OF
OR IN ANY WAY RELATING TO THIS  AGREEMENT IS BROUGHT BY ANY THIRD PARTY  AGAINST
MERRILL LYNCH OR ANY  INDEMNIFIED  PARTY.  EACH OF MERRILL LYNCH AND THE COMPANY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING OR CLAIM (WHETHER BASED UPON
CONTRACT,  TORT OR  OTHERWISE)  ARISING  OUT OF OR IN ANY WAY  RELATING  TO THIS
AGREEMENT.  THE COMPANY  AGREES THAT A FINAL JUDGMENT IN ANY PROCEEDING OR CLAIM

                                       7
<PAGE>

ARISING  OUT OF OR IN ANY WAY  RELATING  TO THIS  AGREEMENT  BROUGHT IN ANY SUCH
COURT SHALL BE  CONCLUSIVE  AND BINDING  UPON THE COMPANY AND MAY BE ENFORCED IN
ANY OTHER COURTS TO THE  JURISDICTION OF WHICH THE COMPANY IS OR MAY BE SUBJECT,
BY SUIT UPON SUCH JUDGMENT.


                                        8
<PAGE>
      The  foregoing  Indemnification  Agreement  shall remain in full force and
effect  notwithstanding  any  termination of Merrill  Lynch's  engagement.  This
Indemnification  Agreement may be executed in two or more counterparts,  each of
which shall be deemed an original, but all of which shall constitute one and the
same agreement.

                                    Very truly yours,

                                    NEUBERGER BERMAN MANAGEMENT INC.



                                    By:
                                       -----------------------------
                                       Name:
                                       Title:


Accepted and agreed to as of
the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
               INCORPORATED


By
   ---------------------------
   Name:
   Title:

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2L
<SEQUENCE>15
<FILENAME>inter533881.txt
<TEXT>
KIRKPATRICK & LOCKHART LLP                       1800 Massachusetts Avenue, N.W.
                                                 Second Floor
                                                 Washington, D.C. 20036
                                                 202.778.9000
                                                 202.778.9100 Fax
                                                 www.kl.com



                               September 24, 2002



Neuberger Berman Intermediate Municipal Fund Inc.
605 Third Avenue
New York, NY  10158


Ladies and Gentlemen:

         You  have  requested  our  opinion,  as  counsel  to  Neuberger  Berman
Intermediate  Municipal Fund Inc. ("Fund"),  as to certain matters regarding the
issuance of those shares of the Fund's common stock, par value $.0001 per share,
that currently are being registered under the Securities Act of 1933, as amended
("1933 Act"),  pursuant to the Fund's  registration  statement on Form N-2 (File
Nos. 811-21168 and 333-97283) (the  "Registration  Statement") in the amount set
forth under "Amount  Being  Registered"  on the facing page of the  Registration
Statement ("Shares").

         As counsel to the Fund,  we have  examined  certified or other  copies,
believed  by us to be  genuine,  of the Fund's  Articles  of  Incorporation  and
Amended and Restated Bylaws and such  resolutions and minutes of meetings of the
Fund's Board of Directors and other documents  relating to its  organization and
operation as we have deemed  relevant to our opinion,  as set forth herein.  Our
opinion is limited to the laws and facts in existence on the date hereof, and it
is further  limited to the laws  (other  than the  conflict of law rules) of the
State of Maryland that in our experience are normally applicable to the issuance
of shares by  corporations  and to the 1933 Act, the  Investment  Company Act of
1940, as amended ("1940 Act") and the regulations of the Securities and Exchange
Commission ("SEC") thereunder.

         Based on the foregoing,  we are of the opinion that the issuance of the
Shares has been duly  authorized  by the Fund and that,  when issued and sold in
accordance with the terms contemplated by the Registration Statement,  including
receipt by the Fund of full payment for the Shares and compliance  with the 1933
Act and the 1940 Act, the Shares will have been validly issued and will be fully
paid and non-assessable.

         We hereby consent to this opinion being an exhibit to the  Registration
Statement or a Pre-Effective Amendment thereto when it is filed with the SEC and

<PAGE>


Neuberger Berman Intermediate Municipal Fund Inc.
September 24, 2002
Page 2



to the  reference to our firm in the  prospectus  and  statement  of  additional
information that are being filed as part of the Registration Statement.

                                       Very truly yours,


                                       /s/ Kirkpatrick & Lockhart LLP
                                       --------------------------------
                                       Kirkpatrick & Lockhart LLP




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>16
<FILENAME>nb_consent.txt
<DESCRIPTION>EXHIBIT 99.2N
<TEXT>
               CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


We consent to the reference to our firm under the caption "Independent Auditors"
and to the  use of  our  report  dated  September  20,  2002,  in  Pre-Effective
Amendment  Number 2 to the  Registration  Statement (Form N-2 No.  333-97283 and
811-21168) of Neuberger Berman Intermediate Municipal Fund Inc.


                                                              ERNST & YOUNG LLP

Boston, Massachusetts
September 20, 2002


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2P
<SEQUENCE>17
<FILENAME>n533108.txt
<DESCRIPTION>LETTER OF INVESTMENT INTENT
<TEXT>

Neuberger Berman, LLC
605 Third Avenue
New York, New York 10158-0180






                               September 23, 2002


Neuberger Berman Intermediate Municipal Fund Inc.
605 Third Avenue
New York, New York 10158

Ladies and Gentlemen:

         We are writing to confirm the  purchase of 6,981 shares of common stock
of Neuberger  Berman  Intermediate  Municipal Fund Inc., which we have purchased
from  you at a  price  of $15 per  share.  This is to  advise  you  that we have
purchased these shares for investment only with no present  intention of selling
any such  shares,  and we do not now  have any  intention  of  selling  any such
shares.


                                                  Sincerely,


                                                  /s/   Peter E. Sundman
                                                  ------------------------
                                                  Name: Peter E. Sundman
                                                  Title:Executive Vice President


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2R
<SEQUENCE>18
<FILENAME>code-ethics.txt
<TEXT>

                      CODE OF ETHICS - AMENDED AND RESTATED

This Code of Ethics  ("Code") is adopted  pursuant to Rule 17j-1  promulgated by
the Securities and Exchange Commission (the "Rule") under the Investment Company
Act of 1940 by:

Each of the following  registered  investment  companies  (each such  registered
investment  company, a "Trust" and collectively,  the "Trusts") on behalf of its
respective series (each such series, a "Fund"):

                              Equity Managers Trust
                              Income Managers Trust
                              Global Managers Trust
                   Neuberger Berman Advisers Management Trust
                          Neuberger Berman Equity Funds
                          Neuberger Berman Equity Trust
                         Neuberger Berman Equity Assets
                         Neuberger Berman Equity Series
                          Neuberger Berman Income Funds
                          Neuberger Berman Income Trust
          Neuberger Berman California Intermediate Municipal Fund Inc.
                Neuberger Berman Intermediate Municipal Fund Inc.
           Neuberger Berman New York Intermediate Municipal Fund Inc.

Neuberger  Berman  Management  Inc.  ("NB  Management"),   in  its  capacity  as
investment  manager of certain  Trusts or as  administrator  and  distributor of
certain Trusts; and

Neuberger Berman, LLC ("NB"), in its capacity as sub-adviser of certain Trusts.

                         STATEMENT OF GENERAL PRINCIPLES

This Code of Ethics is adopted in recognition of the following  principles  that
govern personal  investment  activities of all  individuals  associated with the
Trust, Fund, NB Management, and NB:

           It is  their  duty  at all  times  to  place  the  interests  of Fund
           shareholders  ahead of their  personal  interests.  Priority  must be
           given to Fund trades over personal securities trades.

           All personal  securities  transactions  must be conducted  consistent
           with this Code of Ethics  and in such a manner as to avoid any actual
           or  potential  conflict of  interest or any abuse of an  individual's
           position of trust and responsibility.

           Individuals  should not take advantage of their  positions to benefit
           themselves at the expense of any Fund.

           In  personal  securities  investing,   individuals  should  follow  a
           philosophy of investment rather than trading.


<PAGE>


                                TABLE OF CONTENTS

1.         General Prohibitions..........................................     4


2.         Definitions...................................................     4

           Access Person.................................................     4
           Advisory Person...............................................     4
           Beneficial Interest...........................................     5
           Blind Trust...................................................     5
           Covered Security..............................................     6
           Day...........................................................     6
           Immediate Family..............................................     6
           Investment Company............................................     6
           Investment Personnel..........................................     6
           Legal and Compliance Department...............................     7
           Related Issuer................................................     7
           Trading Desk..................................................     7

3.         Required Compliance Procedures................................     7

           3.1 All Securities Accounts and Positions at
                 Neuberger Berman........................................     7
           3.2 Preclearance of Securities Transactions by
                  Access Persons.........................................     8
           3.3 Post-Trade Monitoring of Precleared Transactions..........     9
           3.4 Notification of Reporting Obligations.....................     9
           3.5 Certification of Compliance with Code of Ethics...........     9

4.         Restrictions..................................................     9

           4.1 Initial Public Offerings..................................     9
           4.2 Private Placements........................................    10
           4.3 Related Issuers...........................................    10
           4.4 Blackout Period...........................................    10
           4.5 Price Switches............................................    11
           4.6 Gifts.....................................................    12
           4.7 Service as Director of Publicly Traded Companies..........    12

5.         Procedures with Regard to Dissemination of Information........    13




                                     - 2 -
<PAGE>



6.         Reports of Holdings by Access Persons.........................    13

           6.1 Initial Report............................................    13
           6.2 Annual Report.............................................    14
           6.3 Exceptions................................................    14

7.         Quarterly Reports of Transactions by Access Persons...........    14

           7.1 General Requirement.......................................    14
           7.2 Disinterested Trustees....................................    14
           7.3 Contents..................................................    15
           7.4 Exceptions................................................    15

8.         Quarterly Reports by Access Persons

           Regarding Securities Accounts.................................    15

9.         Code of Ethics Committee......................................    16

10.        Annual Report to Board of Trustees............................    16

11.        Implementation................................................    17

           11.1 Violations...............................................    17
           11.2 Sanctions................................................    17
           11.3 Forms....................................................    17
           11.4 Exceptions...............................................    17



                                     - 3 -
<PAGE>


1. GENERAL PROHIBITIONS

No  person  associated  with the  Trust,  any  Fund,  NB  Management,  or NB, in
connection with the purchase or sale, directly or indirectly,  by such person of
a security held or to be acquired by such Trust or Fund, shall:

           Employ any device, scheme or artifice to defraud such Trust or Fund;

           Make to such Trust or Fund any untrue statement of a material fact or
           omit to state to such  Trust or Fund a  material  fact  necessary  in
           order  to make the  statements  made,  in light of the  circumstances
           under which they are made, not misleading;

           Engage in any act, practice,  or course of business which operates or
           would operate as a fraud or deceit upon any such Trust or Fund;

           Engage in any  manipulative  practice  with  respect to such Trust or
           Fund;

           Engage  in any  transaction  in a  security  while in  possession  of
           material nonpublic  information  regarding the security or the issuer
           of the security; or

           Engage in any transaction  intended to raise,  lower, or maintain the
           price of any  security  or to  create a false  appearance  of  active
           trading.

2. DEFINITIONS

The  following  words have the  following  meanings,  regardless of whether such
terms are capitalized or not in this Code:

           ACCESS PERSON - any Trustee, director, officer, or Advisory Person of
the Trust, NB Management or NB. The determination as to whether an individual is
an Access Person shall be made by the Legal and Compliance Department.

           ADVISORY  PERSON - any employee of the Trust,NB  Management or NB (or
of any company in a control  relationship to the Trust, NBor NB Management) who,
in connection with his or her regular functions or duties,  makes,  participates
in, or obtains information  regarding the purchase or sale of Covered Securities
by a Fund that is a series of the Trust, or whose functions relate to the making
of any recommendations  with respect to such purchases or sales; and any natural
person in a control  relationship to such Trust, NB Management or NB who obtains
information  concerning  recommendations  made to such Fund  with  regard to the
purchase or sale of Covered Securities by such Fund.



                                     - 4 -
<PAGE>

           BENEFICIAL  INTEREST  - a  person  has a  Beneficial  Interest  in an
account in which he or she may profit or share in the profit from  transactions.
Without  limiting the  foregoing,  a person has a Beneficial  Interest  when the
securities in the account are held:

           (i)       in his or her name;

           (ii)      in the name of any of his or her Immediate Family;

           (iii)     in his or her name as trustee for himself or herself or for
                     his or her Immediate Family;

           (iv)      in a trust in which he or she has a Beneficial  Interest or
                     is the settlor with a power to revoke;

           (v)       by  another  person  and he or  she  has a  contract  or an
                     understanding  with such person that the securities held in
                     that person's name are for his or her benefit;

           (vi)      in the  form of a right  to  acquisition  of such  security
                     through  the  exercise of  warrants,  options,  rights,  or
                     conversion rights;

           (vii)     by a partnership of which he or she is a member;

           (viii)    by a corporation which he or she uses as a personal trading
                     medium;

           (ix)      by a holding company which he or she controls; or

           (x)       any  other  relationship  in  which  a  person  would  have
                     beneficial   ownership   under  Rule   16a-1(a)(2)  of  the
                     Securities   Exchange   Act  of  1934  and  the  rules  and
                     regulations  thereunder,  except that the  determination of
                     direct or indirect  Beneficial  Interest shall apply to all
                     securities which an Access Person has or acquires.

Any person who wishes to disclaim a Beneficial  Interest in any securities  must
submit a written request to the Legal and Compliance  Department  explaining the
reasons therefor. Any disclaimers granted by the Legal and Compliance Department
must be made in writing.  Without  limiting the  foregoing,  if a disclaimer  is
granted to any person with  respect to shares held by a member or members of his
or her Immediate  Family,  the  provisions of this Code of Ethics  applicable to
such  person  shall not apply to any member or  members of his or her  Immediate
Family  for  which  such   disclaimer  was  granted,   except  with  respect  to
requirements specifically applicable to members of a person's Immediate Family.

         BLIND  TRUST - a trust  in which  an  Access  Person  or  employee  has
Beneficial  Interest or is the settlor  with a power to revoke,  with respect to
which the Legal and Compliance Department has determined that such Access Person


                                     - 5 -
<PAGE>

or employee has no direct or indirect influence or control over the selection or
disposition of securities and no knowledge of  transactions  therein,  PROVIDED,
HOWEVER, that direct or indirect influence or control of such trust is held by a
person or entity  not  associated  with  Neuberger  Berman or any  affiliate  of
Neuberger Berman and not a relative of such Access Person or employee.

         COVERED  SECURITY  -  (a)  any  note,  stock,   treasury  stock,  bond,
debenture, evidence of indebtedness, certificate of interest or participation on
any  profit-sharing  agreement,  collateral-trust  certificate,  preorganization
certificate  or   subscription,   transferable   share,   investment   contract,
voting-trust  certificate,  certificate  of  trust  for a  security,  fractional
undivided  interest  in oil,  gas,  or other  mineral  rights,  any  put,  call,
straddle,  option,  or  privilege on any security  (including a  certificate  of
deposit) or on any group or index of securities  (including any interest therein
or based on the value thereof), or any put, call, straddle, option, or privilege
entered into on a national securities exchange relating to foreign currency, or,
in general,  any interest or instrument  commonly  know as a "security",  or any
certificate of interest or participation  in,  temporary or interim  certificate
for, receipt for, guarantee of, or warrant or right to subscribe to or purchase,
any of the  foregoing;  and (b) any security or  instrument  related to, but not
necessarily  the same as, those held or to be acquired by a particular Fund that
is a series of the Trust;  The term Covered  Security  does not include:  direct
obligations of the Government of the United States;  bankers' acceptances,  bank
certificates  of deposit,  commercial  paper and high  quality  short-term  debt
instruments,  including repurchase agreements; and shares of registered open-end
investment companies.

         DAY - a calendar day.

         IMMEDIATE  FAMILY - any of the  following  relatives  sharing  the same
household with an individual: child, stepchild,  grandchild, parent, stepparent,
grandparent,   spouse,  sibling,   mother-in-law,   father-in-law,   son-in-law,
daughter-in-law,     brother-in-law,     sister-in-law,    including    adoptive
relationships.

         INVESTMENT  COMPANY - each  registered  investment  company  and series
thereof for which NB Management is the investment  manager,  investment adviser,
sub-adviser,  administrator  or  distributor,  or for which NB is the investment
adviser or sub-adviser.

         INVESTMENT  PERSONNEL - Any employee of the Trust,  NB Management or NB
(or of any company in a control  relationship to the Trust, NB Management or NB)
who,  in  connection  with his or her  regular  functions  or  duties,  makes or
participates  in  making  recommendations  regarding  the  purchase  or  sale of
securities by a Fund that is a series of the Trust;  and any natural  person who
controls the Trust, NB Management or NB and who obtains  information  concerning
recommendations  made to such Fund  regarding the purchase or sale of securities
by such Fund.  Each member of this  category is  individually  referred to as an
INVESTMENT  PERSON.  The  determination  as  to  whether  an  individual  is  an
Investment Person shall be made by the Legal and Compliance Department.


                                     - 6 -
<PAGE>


         LEGAL AND COMPLIANCE DEPARTMENT - NB Legal and Compliance Department.
         -------------------------------

         RELATED  ISSUER - an issuer with respect to which an Investment  Person
or his or her Immediate Family: (i) has a business relationship with such issuer
or any promoter, underwriter,  officer, director, or employee of such issuer; or
(ii) is related to any officer,  director or senior management  employee of such
issuer.

         TRADING DESK - NB Trading Desk.
         ------------


3. REQUIRED COMPLIANCE PROCEDURES

         3.1 ALL SECURITIES ACCOUNTS AND POSITIONS AT NEUBERGER BERMAN.

         (a)  Every  Access  Person,   and  every  employee  of  the  Trust,  NB
Management,  or NB is  required  to execute in an  account at  Neuberger  Berman
("NB") all transactions in Covered  Securities held in his or her own name or in
which he or she has a direct or indirect Beneficial Interest.  In addition,  all
securities and securities  accounts in which an Access Person and every employee
of the Trust,  NB Management or NB has a beneficial  interest must be held in an
account at NB.

         (b)  Paragraph (a) shall not apply to: (i) any Trustee of the Trust who
is unaffiliated  with Neuberger  Berman or any of its affiliates  (other than by
virtue of serving as a Trustee of one or more  investment  companies  managed or
advised by NB Management or NB); and (ii) Blind Trusts.

         (c)  Exceptions  will only be  granted  upon a showing  of  extenuating
circumstances.  Any individual seeking an exception to this policy must submit a
written  request to the Legal and Compliance  Department  explaining the reasons
therefor. Any exceptions granted must be made in writing.

         (d) Any  individual  granted an  exception is required to direct his or
her broker,  adviser or trustee,  as the case may be, to supply to the Legal and
Compliance  Department,  on a timely basis, duplicate copies of confirmations of
all personal  securities  transactions and copies of periodic statements for all
securities  accounts  in  his  or her  own  name  or in  which  he or she  has a
Beneficial Interest.

         (e)  Individuals are not required to execute through NB transactions in
which they are  establishing a dividend  reinvestment  plan directly  through an
issuer.  However,  individuals  must obtain written  approval from the Legal and
Compliance  Department  prior to  establishing  any such plan and  supply to the
Legal and  Compliance  Department,  on a timely basis,  duplicate  copies of all
confirmations relating to the plan.




                                     - 7 -
<PAGE>

         3.2 PRECLEARANCE OF SECURITIES TRANSACTIONS BY ACCESS PERSONS.

         (a)  Every  Access Person must obtain prior  approval  from the Trading
Desk before  executing any transaction in Covered  Securities held in his or her
own name or in which he or she has a Beneficial  Interest.  Before granting such
approval, the Trading Desk shall determine that:

                 (i)   No Investment Company has a pending "buy" or "sell" order
                       in that security;



                 (ii)  The security does not appear on any "restricted"  list of
                       NB; and

                 (iii) Such  transaction  is not short selling or option trading
                       that is economically opposite any pending transaction for
                       any Investment Company.

         (b)  The   following    securities   are   exempt   from   preclearance
requirements:

                 (i)   Securities transactions effected in blind trusts;

                 (ii)  The  acquisition of securities  through stock  dividends,
                       dividend  reinvestments,   stock  splits,  reverse  stock
                       splits,  mergers,  consolidations,  spin-offs,  or  other
                       similar   corporate   reorganizations   or  distributions
                       generally  applicable to all holders of the same class of
                       securities;

                 (iii) The  acquisition  of  securities  through the exercise of
                       rights  issued by an issuer PRO RATA to all  holders of a
                       class  of  securities,  to the  extent  the  rights  were
                       acquired  in the  issue,  and  sales  of such  rights  so
                       acquired;

                 (iv)  Options on the  Standard & Poor's "500"  Composite  Stock
                       Price Index; and

                 (v)   Other  securities  that  may  from  time  to  time  be so
                       designated in writing by the Code of Ethics Committee.

         (c)  A  disinterested  Trustee of the Trust must obtain  prior  written
approval from the Legal and Compliance  Department  regarding a transaction in a
Covered Security held in his or her own name or in which he or she has (or, as a
result  of such  transaction,  will  have) a  Beneficial  Interest  only if such
Trustee,  at the time of that  transaction,  knew or, in the ordinary  course of
fulfilling  his or her  official  duties as a Trustee of the Trust,  should have
known about any security that,  during the 15-day period  immediately  before or
after the date of the  transaction  by that Trustee,  was purchased or sold by a
Fund or was being considered by NB Management for purchase or sale by a Fund.


                                     - 8 -
<PAGE>


         (d) Obtaining preclearance approval does not constitute a waiver of any
prohibitions, restrictions, or disclosure requirements in this Code of Ethics.

         3.3 POST-TRADE MONITORING OF PRECLEARED TRANSACTIONS.

         After the Trading  Desk has granted  preclearance  to an Access  Person
with respect to any personal securities transaction,  the investment activity of
such Access Person shall be monitored by the Legal and Compliance  Department to
ascertain  that such activity  conforms to the  preclearance  so granted and the
provisions of this Code.

         3.4 NOTIFICATION OF REPORTING OBLIGATIONS.

         The Legal and Compliance  Department  shall identify all Access Persons
who are required to make reports under the Code and inform those Access  Persons
of their reporting obligations.

         3.5 CERTIFICATION OF COMPLIANCE WITH CODE OF ETHICS.

         All Access Persons,  except Trustees of the Trust who are  unaffiliated
with Neuberger Berman or any of its affiliates, are required to certify annually
in writing that they have:

         (a)  read and understand the Code of Ethics and recognize that they are
subject thereto;

         (b)  complied with the requirements of the Code of Ethics;

         (c)  disclosed  or  reported  all  personal  securities   transactions,
holdings  and  accounts  required to be  disclosed  or reported  pursuant to the
requirements of the Code; and

         (d)  with  respect  to any blind  trusts  in which  such  person  has a
Beneficial  Interest,  that such person has no direct or indirect  influence  or
control and no knowledge of any transactions therein.

4. RESTRICTIONS

         4.1 INITIAL PUBLIC OFFERINGS.

         (a)  All  Investment   Personnel  are   prohibited   from  acquiring  a
Beneficial Interest in any Covered Securities in an initial public offering,  in
order to preclude  any  possibility  of their  profiting  improperly  from their
positions on behalf of a Fund. No member of an Immediate Family of an Investment
Person may acquire a Beneficial  Interest in an initial public offering  without
the prior written consent of the Legal and Compliance Department.



                                     - 9 -
<PAGE>

         (b)  Prior  approval  shall take into  account,  among  other  factors,
whether the  investment  opportunity  should be reserved for a Trust or Fund and
its  shareholders  and whether the opportunity is being offered to an individual
by virtue of his or her position or relationship to the Trust or Fund.

         4.2 PRIVATE PLACEMENTS.

         (a)  No Investment  Person or member of his or her Immediate Family may
acquire a direct or indirect  Beneficial  Interest in any Covered  Securities in
private  placements  without prior written  approval by the Legal and Compliance
Department.

         (b)  Prior  approval  shall take into  account,  among  other  factors,
whether the  investment  opportunity  should be reserved for a Trust or Fund and
its  shareholders  and whether the opportunity is being offered to an individual
by virtue of his or her position or relationship to the Trust or Fund.

         (c)  An  Investment  Person  who has (or a member  of  whose  Immediate
Family has) acquired a Beneficial  Interest in securities in a private placement
is required to disclose that  investment to the Legal and Compliance  Department
when such Investment  Person plays a part in any subsequent  consideration of an
investment in the issuer for any Trust or Fund. In any such  circumstances,  the
decision to purchase  securities of the issuer for a Trust or Fund is subject to
an independent  review by Investment  Personnel with no personal interest in the
issuer.  Such  independent  review shall be made in writing and furnished to the
Legal and Compliance Department.

         4.3 RELATED ISSUERS.

         Investment  Personnel  are  required  to  disclose  to  the  Legal  and
Compliance  Department  when  they  play  a  part  in  any  consideration  of an
investment by a Trust or Fund in a Related  Issuer.  In any such  circumstances,
the decision to purchase securities of the Related Issuer for a Trust or Fund is
subject  to an  independent  review by  Investment  Personnel  with no  personal
interest in the Related Issuer. Such independent review shall be made in writing
and furnished to the Legal and Compliance Department.

         4.4 BLACKOUT PERIOD.

         No Access  Person  may  execute a  securities  transaction  in  Covered
Securities held in his or her own name or in which he or she has, or as a result
of such transaction,  will have, a direct or indirect  Beneficial  Interest on a
day during which any  Investment  Company has a pending "buy" or "sell" order in
that same security until that order is executed or withdrawn; PROVIDED, HOWEVER,
that  this  prohibition  shall  apply to a  disinterested  Trustee  only if such
Trustee,  at the time of that  transaction,  knew or, in the ordinary  course of
fulfilling  his or her  official  duties as a Trustee of the Trust,  should have
known that the security,  during the 15-day period  immediately  before or after
the date of the transaction by that Trustee,  was purchased or sold by a Fund or
was being considered by NB Management for purchase or sale by a Fund.


                                     - 10 -
<PAGE>


         4.5 PRICE SWITCHES.

         (a)  SAME DAY PRICE SWITCH

              (i)If any employee of the Trust,  NB  Management or NB purchases a
              Covered  Security (other than a fixed income security) held, or by
              reason  of such  transaction  held,  in his or her own  name or in
              which  he or she  has a  Beneficial  Interest  and  an  Investment
              Company  purchases the same security during the same day, then, to
              the extent that the price paid per share by the Investment Company
              for such purchase is less  favorable than the price paid per share
              by such employee, the Investment Company shall have the benefit of
              the more favorable price per share.

              (ii)If any  employee  of the Trust,  NB  Management  or NB sells a
              Covered  Security (other than a fixed income security) held in his
              or her own name or in which  he or she has a  Beneficial  Interest
              and an Investment  Company sells the same security during the same
              day,  then, to the extent that the price per share received by the
              Investment  Company for such sale is less favorable than the price
              per share received by the employee,  the Investment  Company shall
              have the benefit of the more favorable price per share.

         (b)  7-DAY PRICE SWITCH

              (i) If any Investment  Person  purchases a Covered Security (other
              than  a  fixed  income  security)  held,  or  by  reason  of  such
              transaction held, in his or her own name or in which he or she has
              a  Beneficial   Interest  and  within  seven  (7)  days  prior  or
              subsequent  thereto a Fund with  respect  to which he or she is an
              Investment  Person has purchased or purchases  the same  security,
              then, to the extent that the price paid per share by such Fund for
              such  purchase  was or is less  favorable  than the price paid per
              share by such Investment Person,  such Fund shall have the benefit
              of the more favorable price per share.

              (ii) If any Investment Person sells a Covered Security (other than
              a fixed income  security)  held in his or her own name or in which
              he or she has a  Beneficial  Interest  and  within  seven (7) days
              prior or subsequent thereto a Fund with respect to which he or she
              is an Investment Person has sold or sells the same security, then,
              to the extent that the price  received  per share by such Fund for
              such sale was or is less  favorable  than the price  received  per
              share by such Investment Person,  such Fund shall have the benefit
              of the more favorable price per share.

         (c)  An amount of money necessary to effectuate  the price switch shall
be transferred from the account of the employee or Investment  Person subject to
the price switch policies, to the Investment Company's or Fund's account, as the
case may be. The price switch shall be limited to the number of shares purchased
or sold by the employee or Investment  Person or the number of shares  purchased


                                     - 11 -
<PAGE>

or sold by the  Investment  Company or Fund,  as the case may be,  whichever  is
smaller.

         (d)  Notwithstanding the foregoing, price switching shall not apply to:

              (i) Securities transactions effected in blind trusts;

              (ii) Securities  transactions that are  non-volitional on the part
              of  either  the  employee,  Investment  Person  or the  Investment
              Company;

              (iii) The  acquisition  of  securities  through  stock  dividends,
              dividend  reinvestments,   stock  splits,  reverse  stock  splits,
              mergers,  consolidations,  spin-offs,  or other similar  corporate
              reorganizations  or  distributions  generally  applicable  to  all
              holders of the same class of securities;

              (iv) The acquisition of securities  through the exercise of rights
              issued  by an  issuer  PRO  RATA  to all  holders  of a  class  of
              securities,  to the extent the rights were  acquired in the issue,
              and sales of such rights so acquired;

              (v) Options on the Standard & Poor's "500"  Composite  Stock Price
              Index;

              (vi)Transactions   arising   through   arbitrage,   market  making
              activities or hedged options trading;

              (vii)Transactions  in the NB ERISA Profit  Sharing and  Retirement
              Plan;

              (viii) Transactions involving odd lots; and

              (ix) Other  securities that may from time to time be so designated
              in writing by the Code of Ethics Committee.

         4.6  GIFTS.

         All  Access  Persons  and  employees  are  prohibited  from  giving  or
receiving  any gift or other thing of more than One  Hundred  Dollars ($ 100) in
value to or from any person or entity  that does  business  with or on behalf of
the Fund in any one year.

         4.7  SERVICE AS DIRECTOR OF PUBLICLY TRADED COMPANIES.

         Investment  Personnel  are  prohibited  from  serving  on the Boards of
Directors of publicly traded companies.




                                     - 12 -
<PAGE>

5. PROCEDURES WITH REGARD TO DISSEMINATION OF INFORMATION

         (a)  NB, NB Management,  and the Trust, and their officers,  directors,
Trustees and employees,  shall not disclose to any disinterested  Trustee of the
Trust information  regarding the consideration or decision to purchase or sell a
particular  security  when it is  contemplated  that such  action  will be taken
within the next 15 days, unless it is:

              (i) requested in writing by a  disinterested  Trustee of the Trust
              or requested  through a formal action of the Board of the Trust or
              any committee thereof;

              (ii)given because it is determined that the disinterested  Trustee
              should  have  the  information  so that he or she may  effectively
              carry out his or her duties; or

              (iii) given so that NB or NB  Management  may carry out its duties
              as investment manager,  administrator,  distributor or sub-adviser
              of a Fund.

         (b)  If any information regarding transactions contemplated by the Fund
is given to a disinterested Trustee, such disinterested Trustee shall be subject
to the provisions of Sections 3.2, 4.4, and 7.2 of this Code with respect to any
security  held or to be acquired by the Fund,  as indicated  in the  information
which has been disclosed, for the next succeeding 15 days.

         (c)  Subject to  Sections 5(a) and 5(b),  Access  Persons and employees
of NB  Management,  NB, or the Trust are prohibited  from revealing  information
relating to current or anticipated investment intentions, portfolio transactions
or  activities  of  Funds  except  to  persons  whose  responsibilities  require
knowledge of the information.

6. REPORTS OF HOLDINGS BY ACCESS PERSONS

         6.1  INITIAL REPORT.

         No later than 10 days after a person  becomes  an Access  Person,  such
person shall report to the Trust. NB Management or NB:

         (a)  The title,  number of shares and principal  amount of each Covered
Security  in which  the  Access  Person  had a  direct  or  indirect  beneficial
ownership when the person became an Access Person;

         (b)  The name of any broker, dealer or bank with whom the Access Person
maintained  an  account  in which any  securities  were  held for the  direct or
indirect benefit of the Access Person as of the date the person become an Access
Person; and

         (c)  The date that the report is submitted by the Access Person.


                                     - 13 -
<PAGE>


         6.2  ANNUAL REPORT.

         Annually,  each Access Person shall report the  following  information,
which  must be  current  as of a date no more than 30 days  before the report is
submitted:

         (a)  The title,  number of shares and principal  amount of each Covered
Security  in which  the  Access  Person  had a  direct  or  indirect  beneficial
ownership;

         (b)  The name of any broker, dealer or bank with whom the Access Person
maintains an account in which any securities are held for the direct or indirect
benefit of the Access Person; and

         (c)  The date that the report is submitted by the Access Person.

         6.3  EXCEPTIONS.

         (a)  No report is required  with respect to holdings  where such report
would duplicate  information  recorded by NB or NB Management  pursuant to Rules
204-2(a)(12)  or  204-2(a)(13)  under the  Investment  Advisers Act of 1940. For
purposes of the foregoing, no report is required with respect to the holdings of
securities in accounts maintained at NB.

         (b)  A  disinterested  Trustee of the Trust who is  required  to make a
report  under  Section  7.2 need not make an initial  holdings  report or annual
holdings report.


7. QUARTERLY REPORTS OF TRANSACTIONS BY ACCESS PERSONS

         7.1  GENERAL REQUIREMENT.

         Every Access Person shall report, or cause to be reported, to the Trust
and Legal and  Compliance  Department the  information  described in Section 7.3
with respect to transactions in any Covered Security in which such Access Person
has,  or by  reason  of  such  transaction  acquires,  any  direct  or  indirect
Beneficial Interest.

         7.2 DISINTERESTED TRUSTEES.

         A disinterested  Trustee of the Trust need only report a transaction in
a security if such  Trustee,  at the time of that  transaction,  knew or, in the
ordinary  course of fulfilling his or her official  duties as a Trustee,  should
have known that, during the 15-day period  immediately  before or after the date
of the transaction in a Covered Security by that Trustee,  such Covered Security
was purchased or sold by a Fund or was being  considered for purchase or sale by
NB Management.


                                     - 14 -
<PAGE>


         7.3 CONTENTS OF QUARTERLY REPORTS OF TRANSACTIONS.

         Every  report shall be made not later than 10 days after the end of the
calendar quarter and shall contain the following information:

         (a)  The date of the  transaction,  the title,  the  interest  rate and
maturity date (if applicable), the number of shares, and the principal amount of
each Covered Security involved;

         (b)  The nature of the transaction (I.E.,  purchase,  sale or any other
type of acquisition or disposition); ----

         (c)  The price of the  Covered  Security at which the  transaction  was
effected;

         (d)  The name of the  broker,  dealer or bank with or through  whom the
transaction was effected; and

         (e)  The date that the report is submitted by the Access Person.

Unless  otherwise  stated,  no report  shall be construed as an admission by the
person  making such report that he or she has any direct or indirect  Beneficial
Interest in the security to which the report relates.

         7.4 EXCEPTIONS.

         No report is required  with respect to  transactions  where such report
would duplicate  information  recorded by NB or NB Management  pursuant to Rules
204-2(a)(12)  or  204-2(a)(13)  under the  Investment  Advisers Act of 1940. For
purposes of the  foregoing,  the Legal and Compliance  Department  maintains (i)
electronic records of all securities  transactions effected through NB, and (ii)
copies of any duplicate  confirmations  that have been provided to the Legal and
Compliance  Department  under this Code of Ethics  with  respect  to  securities
transactions  that,  pursuant to exceptions  granted by the Legal and Compliance
Department,  have not been  effected  through  NB;  accordingly,  no  report  is
required with respect to such transactions.

8. QUARTERLY REPORTS BY ACCESS PERSONS REGARDING SECURITIES ACCOUNTS.

         (a)  Every Access Person shall report,  or cause to be reported, to the
Trust  and  Legal and  Compliance  Department,  the  information  regarding  any
securities  account  established by the Access Person during any quarter.  Every
report  shall be made  not  later  than 10 days  after  the end of the  calendar
quarter and shall contain the following information:

              (i)The  name of the  broker,  dealer or bank with whom the  Access
              Person established the account;


                                     - 15 -
<PAGE>

              (ii) The date the account was established; and

              (iii) The date that the report is submitted by the Access Person.

         (b)  No report is required  with respect to securities  accounts  where
such report would duplicate information recorded by NB or NB Management pursuant
to Rules 204-2(a)(12) or 204-2(a)(13) under the Investment Advisers Act of 1940.
For purposes of the foregoing,  no report is required with respect to securities
accounts at NB.


9. CODE OF ETHICS COMMITTEE.

         (a)  A Code of  EthicsCommittee  shall  be  composed  of at  least  two
members who shall be disinterested Trustees selected by the Board of Trustees of
the Trust.

         (b)  The Code of Ethics  Committee  shall  consult  regularly  with the
Legal and  Compliance  Department,  and  either  the  Committee  or the Board of
Trustees of the Trust shall meet no less  frequently  than  annually  with,  the
Legal and Compliance  Department  regarding the implementation of this Code. The
Legal and Compliance  Department shall provide the Code of Ethics Committee with
such  reports as are required  herein or as are  requested by the Code of Ethics
Committee.

         (c)  A monthly  report  shall be provided to the  Trustees of the Trust
certifying  that  except  as  specifically  disclosed  to  the  Code  of  Ethics
Committee,  the Legal and  Compliance  Department  knows of no violation of this
Code. A representative  of the Legal and Compliance  Department shall attend all
regular meetings of the Trustees to report on the implementation of this Code.


10. ANNUAL REPORT TO BOARD OF TRUSTEES.

No less frequently than annually,  the Trust, NB Management and NB shall furnish
to the Board of Trustees of the Trust,  and the Board must  consider,  a written
report that:

         (i)     describes  any issues  arising  under  this Code or  procedures
                 concerning  personal  investing  since  the last  such  report,
                 including,  but not  limited  to,  information  about  material
                 violations of the Code or procedures  and sanctions  imposed in
                 response to the material violations;

         (ii)    certifies that the Trust,  NB Management and NB, as applicable,
                 have adopted procedures  reasonably necessary to prevent Access
                 Persons from violating the Code; and


                                     - 16 -
<PAGE>


         (iii)   identifies any recommended changes in existing  restrictions or
                 procedures  based upon the Fund's  experience under the Code of
                 Ethics,   evolving  industry  practices,   or  developments  in
                 applicable laws or regulations.

11. IMPLEMENTATION.

         11.1 VIOLATIONS.

         Any person who has knowledge of any violation of this Code shall report
said violation to the Legal and Compliance Department.

         11.2 SANCTIONS.

         NB  Management,  NB, and the Code of Ethics  Committee  shall each have
authority to impose  sanctions for  violations of this Code.  Such sanctions may
include a letter of censure,  suspension or termination of the employment of the
violator,  forfeiture  of profits,  forfeiture of personal  trading  privileges,
forfeiture of gifts, or any other penalty deemed to be appropriate.

         11.3 FORMS.

         The Legal and Compliance  Department is authorized,  with the advice of
counsel,  to prepare written forms for use in implementing this Code. Such forms
shall be attached as an Appendix to this Code and shall be  disseminated  to all
individuals subject to the Code.

         11.4 EXCEPTIONS.

         Exceptions to the  requirements of this Code shall rarely,  if ever, be
granted.  However,  the Legal and Compliance  Department shall have authority to
grant  exceptions on a case-by-case  basis.  Any  exceptions  granted must be in
writing and reported to the Code of Ethics Committee.


Effective September 12, 2002

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