Edgar Filing: NEUBERGER BERMAN INC

Filed Pursuant to Rule 424(b)(4)
SEC Registration No. 333-62350

[NEUBERGER BERMAN LOGO]

3,937,966 Shares

Neuberger Berman Inc.

Common Stock

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All of the shares of the common stock in the offering are being sold by the
selling stockholders identified in this prospectus. These selling stockholders
are former principals of Neuberger Berman and their affiliates, and employees
of Neuberger Berman who hold their stock through the Neuberger Berman Employee
Defined Contribution Stock Incentive Plan Trust. Neuberger Berman will not
receive any of the proceeds from the sale of the shares.

The common stock is listed on the New York Stock Exchange under the symbol
"NEU". The last reported sale price of the common stock on June 28, 2001 was
$68.58 per share.

Promptly following the completion of this offering, Neuberger Berman will
repurchase an aggregate of 1,600,600 shares of common stock from a limited
number of its former principals who are not selling shares in this offering.
Neuberger Berman will repurchase these shares of common stock for a purchase
price per share equal to the estimated net proceeds per share received by the
selling stockholders in this offering after expenses.

As of May 31, 2001, Neuberger Berman's former principals and their
affiliates and Neuberger Berman's employees held approximately 84% of Neuberger
Berman's outstanding common stock. After giving effect to this offering and the
concurrent repurchase, they would have held approximately 76% of its
outstanding common stock as of that date.

See "Risk Factors" on page 10 to read about factors you should consider
before buying the common stock.

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Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.

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Per Share Total
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Initial price to public............................... $68.00 $267,781,688
Underwriting discount................................. $ 3.40 $ 13,389,084
Proceeds, before expenses, to the selling stockholders $64.60 $254,392,604

To the extent that the underwriters sell more than 3,937,966 shares of
common stock, the underwriters have the option to purchase up to an additional
590,695 shares from the selling stockholders other than the Employee Trust at
the initial price to public less the underwriting discount.

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The underwriters expect to deliver the shares against payment in New York,
New York on July 5, 2001.

Goldman, Sachs & Co. Bear, Stearns & Co. Inc.

JPMorgan Merrill Lynch & Co. Salomon Smith Barney

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Prospectus dated June 28, 2001.

[NEUBERGER BERMAN LOGO]

[CHART]

Assets Under Management
$54.8 Billion as of March 31, 2001

Mutual Fund and Institutional 58.4%
Private Asset Management 41.6%

[CHART]

Segment Pretax Margins

Three Months Ended March 31, 2001

Private Asset Management 48%
Mutual Fund & Institutional 35%
Professional Securities Services 33%

Consolidated Firm Pretax Margin: 38%

Twelve Months Ended December 31, 2000

Private Asset Management 49%
Mutual Fund & Institutional 35%
Professional Securities Services 37%

Consolidated Firm Pretax Margin: 40%

[CHART]

Pretax Earnings

Three Months Ended March 31, 2001
($ in Millions)

Management 61% of total; $36.2
Mutual Fund & Institutional 33% of total; $19.3
Professional Securities Services 14% of total; $8.5
Corporate (8)% of total; ($4.9)

Consolidated Firm Pretax Earnings: $59.1

Twelve Months Ended December 31, 2000
($ in Millions)

Private Asset Management 58% of total; $143.7
Mutual Fund & Institutional 32% of total; $78.7
Professional Securities Services 15% of total; $36.8
Corporate (5)% of total; ($12.3)

Consolidated Firm Pretax Earnings: $246.9

PROSPECTUS SUMMARY

This following summary is qualified in its entirety by the more detailed
information included elsewhere or incorporated by reference in this prospectus.
This summary does not contain all of the information that may be important to
you. You should read the entire prospectus, as well as the information
incorporated by reference, before making an investment decision. See
"Forward-Looking Statements" for information relating to statements contained
in this prospectus that are not historical facts.

When we use the terms "Neuberger Berman," the "firm," "we," "us" and "our,"
we mean, for the period prior to our October 1999 initial public offering,
Neuberger Berman, LLC, a Delaware limited liability company, and its
consolidated subsidiaries, and Neuberger Berman Management Inc., a New York
corporation, and their predecessors. When we use these terms for the period
after our initial public offering, we mean Neuberger Berman Inc., a Delaware
corporation, and its consolidated subsidiaries.

When we use the term "Trust Companies," we mean: Neuberger Berman National
Trust Company, which holds a national bank charter; Neuberger Berman Trust
Company, a non-depository trust company chartered under the New York Banking
Law; Neuberger Berman Trust Company of Delaware, a non-depository limited
purpose trust company chartered under the Delaware Banking Code; and Neuberger
Berman Trust Company of Florida, a Florida corporation authorized to engage in
trust business chartered under the Florida Banking Law.

Our Business

Neuberger Berman, with its subsidiaries, is an investment advisory firm
with $59.2 billion in assets under management as of May 31, 2001. For more than
60 years, the firm and its predecessor companies have provided clients with a
wide array of investment products, services and strategies. We conduct our
business through our subsidiaries, including Neuberger Berman, LLC and
Neuberger Berman Management Inc., both of which are registered investment
advisers and broker-dealers. Neuberger Berman, LLC is also a member of the New
York Stock Exchange, Inc. As of June 5, 2001, we conducted our business from 18
offices in 16 cities.

We were founded in 1939 to be a premier provider of investment products and
services to high net worth individuals. We have built upon the qualities that
have made us successful in the high net worth market to establish a strong
presence in the mutual fund and institutional marketplaces, and to provide
estate planning and trust services through our Trust Companies. Our clients
include individuals, institutions, corporations, pension funds, foundations and
endowments.

We believe that one of our chief competitive advantages is our dedication
to asset management, and in particular, asset management for high net worth
individuals. To build on this competitive advantage, we are actively pursuing
new hires and acquisitions, including the addition of money management teams
with existing client relationships, as well as expanding our national sales
force.

In October 1999, we completed an initial public offering of our common
stock. As of May 31, 2001, our former principals and their affiliates and our
employees held approximately 84% of our outstanding common stock. After giving
effect to this offering and the concurrent repurchase of shares of our common
stock described below, they would have held approximately 76% of our
outstanding common stock as of that date (74% assuming the exercise in full of
the underwriters' over-allotment option).

Our Principal Business Segments

Our principal businesses include Private Asset Management, Mutual Fund and
Institutional and Professional Securities Services. A fourth segment,
"Corporate," was introduced during the fourth quarter of 2000 to reflect
certain corporate results that were previously allocated primarily to our
Professional Securities Services segment.

Private Asset Management

Our Private Asset Management segment includes money management, advisory
services and trust services. This segment provides customized investment
management services for high net worth individuals, families and smaller
institutions. It represented 58.2% of net income before taxes in 2000 and 61.3%
of net income before taxes in the first quarter of 2001.

Assets under management in this segment were $22.8 billion as of March 31,
2001, including assets managed for clients of the Trust Companies. In this
segment, we managed approximately 14,500 accounts, with an average relationship
size of approximately $3.8 million, as of March 31, 2001. In the first quarter
of 2001, we experienced net cash inflows of $1.4 billion for our Private Asset
Management segment, which includes approximately $1.0 billion from three
experienced money management teams that joined us during the quarter, and
increased sales by our sales force. These net cash inflows were partially
offset by $1.1 billion of market depreciation during the quarter.

Mutual Fund and Institutional

Our Mutual Fund and Institutional segment includes our family of mutual
funds, institutional separate account products and broker-advised products
(wrap accounts), which we offer to a wide array of clients, from the smallest
individual investors to the largest institutions. The mutual funds and
portfolios in this segment cover a large range of asset types, investment
styles and market capitalization ranges. These include large-cap, mid-cap and
small-cap equity products, incorporating value, growth and blend investment
styles as well as international and socially responsive products. In this
business segment we also offer balanced, fixed-income and money market
products. We make our funds available directly to investors, without a sales
load, and through third parties and sub-advisory relationships. This segment
represented 31.9% of net income before taxes in 2000 and 32.7% of net income
before taxes in the first quarter of 2001.

Assets under management in this segment were $32.0 billion as of March 31,
2001. Despite volatility in the securities markets in the first quarter of
2001, we experienced net cash inflows of $905 million for our Mutual Fund and
Institutional segment during this period, which included approximately $500
million of institutional equity separate account assets related to the addition
of a money management team and $192 million related to the acquisition of the
assets of Fasciano Company, Inc. These net cash inflows were more than offset
by $1.9 billion of market depreciation in the first quarter of 2001, primarily
in our mutual fund and sub-advised account business.

Professional Securities Services

Our Professional Securities Services segment includes professional investor
clearing services, research sales and other activities. We leverage our asset
management infrastructure to provide services to the professional investment
community. Our Professional Securities Services clients call upon us for trade
execution, clearing, custody, margin financing, portfolio reporting and trust
services, as well as consulting advice. We act as a market maker for
approximately 150 securities traded primarily on the Nasdaq National Market
System. We also provide our research to about 200 outside

investment managers. Because these services are based upon the capabilities and
resources developed for our asset management businesses, we generally can
provide these services at a modest incremental cost. Our Professional
Securities Services segment represented 14.9% of net income before taxes in
2000 and 14.4% of net income before taxes in the first quarter of 2001.

Our Investment Process and Research

Our portfolio managers generally base their decisions on fundamental
research, attempting to make knowledgeable judgments about the investment
merits of industry groups and specific companies. Our centralized research
department supports all of our investment professionals. Organized primarily by
industry, our securities analysts are responsible for understanding
developments within the companies and industries they follow. To do this, they
meet with senior management of companies they follow and interview customers
and competitors of those companies. In some cases, they employ specialized
consultants and develop earnings and cash flow estimates. At March 31, 2001,
there were 14 analysts in our research department, supported by 19 associate
analysts. They follow more than 500 companies.

Our Strategy

Capitalize on Opportunities in the Growing High Net Worth Market. Managing
wealth is one of the fastest growing segments of the financial services
industry. According to the Merrill Lynch/Gemini Consulting World Wealth Report
2001, the high net worth market in North America, defined as individuals with
more than $1 million in liquid financial assets, totaled $8.8 trillion in 2000
and is expected to increase at an annual compound rate of 8.1% through 2005,
reaching $13.0 trillion. With our brand name, the broad spectrum of our
investment styles and our commitment to personalized service, we believe that
we are well positioned to take advantage of growth in this market. Our
principal initiatives to generate growth are:

. Grow Assets Under Management Through Expanded National Sales Force.
Having expanded our national sales force to 38 professionals and
increased the number of our regional offices to 13, we seek to continue
to grow assets under management through this experienced and larger
sales force. In 1999 and 2000, our national sales force generated $640
million and $807 million, respectively, of assets under management. For
the first quarter of 2001, our sales force added $400 million in new
assets under management.

. Selectively Continue to Add Experienced Money Management Teams Through
Direct Hiring and Acquisitions. In the first quarter of 2001, three
experienced money management teams joined our firm. They have added
approximately $1.0 billion of assets under management to our Private
Asset Management segment and approximately $500 million of
institutional equity separate account assets to our Mutual Fund and
Institutional segment. In December 2000, we completed the acquisition
of the private asset management business of Delta Capital Management,
which had approximately $536 million in assets under management as of
the closing of the acquisition. By continuing to add experienced money
management teams, we believe we will expand our investment capabilities
and continue to increase our assets under management.

. Build Our Wealth Management Business. We seek to promote asset
retention from generation to generation through our trust companies and
to provide related products and services in the highly specialized
market of upper echelon wealth. In the first quarter of 2001, we
received a national bank charter and established our national trust
company and

also acquired Executive Monetary Management, Inc., a wealth management
firm for high net worth individuals. As of March 31, 2001, clients for
whom Executive Monetary Management performs various services had
approximately $1.7 billion of investable assets.

Expand Mutual Fund and Distribution Capabilities. We have realized growth
in our mutual funds from the addition of new distribution channels and
strengthened relative investment performance. We believe that further
opportunities for growth will result by focusing on developing strategic
alliances and diversifying investment products for this market, as well as from
the following initiatives:

. Defined Contribution Plan Administrators. We seek to establish new
relationships with defined contribution plan administrators. With
Congress' passage of the new tax bill, which allows for increased
contributions to retirement accounts, we would expect growth from our
existing relationships. As of March 31, 2001, we had strategic
alliances with 84 administrators of defined contribution plans.

. Providers of Variable Insurance Products. We also seek to expand our
relationships with insurance companies that offer variable annuity and
variable life insurance products that invest in our mutual funds. As of
March 31, 2001, we had relationships with 41 insurance companies
offering these variable products.

. Build Wrap Fee Program Participation. We seek to continue to expand the
number of sponsors of our wrap fee equity programs, as well as increase
the variety of investment styles available through this distribution
channel. We manage assets for ten sponsors of wrap fee programs,
including three of the four largest programs. We believe that wrap fee
programs represent asset growth opportunities.

. Further Diversify Product and Service Offerings. We continue to seek to
complement our existing product offerings through the internal
development or acquisition of new investment capabilities. In the past,
we have relied primarily on our domestic equity products. Currently we
offer equity, international equity, balanced, domestic and
international fixed income and money market products. Historically, we
have primarily followed the value style of investing, but we now have
portfolio managers who follow growth or blended styles of investing. In
March 2001, we completed the acquisition of the assets of Fasciano
Company, Inc., which was the investment advisor for the Fasciano Fund.
In a related transaction, that fund reorganized into the Neuberger
Berman Fasciano Fund, a small cap blend fund, which at closing had
approximately $186 million in assets under management. We believe a
broader array of products will increase our ability to obtain
additional assets under management by attracting new clients and
through cross-selling to existing clients.

Continue to Grow Professional Securities Services. Using our
infrastructure, net revenues after interest expense of our Professional
Securities Services segment have grown by 34% from year-end 1998 to year-end
2000. We seek to continue to leverage our asset management infrastructure to
provide additional fee-earning services to the professional investment
community without a commensurate increase in expenses.

correspondent clearing and prime brokerage services to the professional
investment community. Our dedicated Marketing Group continues to target
high quality, established, registered investment advisors and hedge
funds, as well as broker-dealers with similar clientele to ours.

. Increase Sales of Research. Our dedicated Research Group continues to
provide its independent research reports to our Private Asset
Management and Mutual Fund and Institutional businesses, and makes
these reports available to third-party investment managers, who
generally place trades through us if they decide to buy or sell
securities based upon our research. Because we are not an investment
bank, we believe that our analysts' reports are unbiased.

Pursue Strategic Acquisition and Joint Venture Opportunities. In addition
to seeking to add investment teams, we will evaluate strategic acquisitions of,
or joint ventures with, companies that would add new products and services,
investment capabilities or distribution channels for our clients. It is our
intent that transactions that we consummate be both strategic and accretive to
earnings.

Recent Developments

On June 6, 2001, we announced that our assets under management rose to
$59.2 billion at May 31, 2001, up from $54.8 billion at March 31, 2001. The
Private Asset Management segment accounted for approximately $1.8 billion of
the increase, reaching a historical high of $24.6 billion in assets,
principally as a result of continued superior relative investment performance
and the contribution of $182 million in new client assets through the national
sales force for the two-month period ended May 31, 2001. In the Mutual Fund and
Institutional segment, assets under management reached $34.6 billion and net
cash flows remained positive, up $377 million for the two-month period ended
May 31, 2001.

On May 4, 2001, we completed a private placement of zero coupon senior
convertible notes with an aggregate principal amount of $175 million at their
maturity in 2021. The net proceeds to us from the zero coupon senior
convertible note offering, after deducting commissions, discounts and estimated
expenses, were approximately $147 million. We are using these proceeds for
general corporate purposes, including share repurchases under our current share
repurchase program discussed below under "--Share Repurchase Program." We also
intend to use a portion of these proceeds to repurchase shares from a limited
number of our former principals, as discussed more fully below under "--The
Concurrent Repurchase."

Our Headquarters

Our headquarters are located at 605 Third Avenue, New York, New York 10158,
telephone (212) 476-9000. Our website address is www.nb.com. We do not intend
for the information on our website to be incorporated in this prospectus.

The Offering

Unless otherwise indicated, all information in this prospectus is provided
assuming no exercise of the underwriters' option to purchase up to 590,695
additional shares to cover over-allotments. Information on the number of shares
of common stock outstanding is as of May 31, 2001 and does not include
1,620,255 shares of common stock reserved for issuance upon conversion of our
zero coupon senior convertible notes and 3,038,388 shares of common stock
reserved for issuance upon the exercise of options outstanding as of that date
under the 1999 Neuberger Berman Inc. Long-Term Incentive Plan and the 1999
Neuberger Berman Inc. Directors Stock Incentive Plan. The number of outstanding
shares does not reflect any repurchases of shares under our share repurchase
program after May 31, 2001 and prior to the consummation of this offering.

As of May 31, 2001, our former principals and their affiliates and our
employees held approximately 84% of our outstanding common stock. After giving
effect to this offering and the concurrent repurchase, they would have held
approximately 76% of our outstanding common stock as of May 31, 2001 (74%
assuming the exercise in full of the underwriters' over-allotment option).
After giving effect to this offering and the concurrent repurchase, no former
principal who is an active employee will own less than 75% of the shares the
principal owned prior to our IPO.

Common Stock offered by the selling stockholders.......................... 3,937,966 shares
Common Stock outstanding before the offering and the concurrent repurchase 48,973,084 shares
Common Stock outstanding after the offering and the concurrent repurchase. 47,372,484 shares

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Use of Proceeds............... We will not receive any of the proceeds from sales of
common stock by the selling stockholders in the offering.
Risk Factors.................. For a discussion of factors that you should consider before
buying shares of common stock, see "Risk Factors".
New York Stock Exchange Symbol NEU

Why We are Registering the Shares

We are undertaking this offering to address three important objectives:

. increased public float;

. broader ownership of our common stock; and

. the orderly entry of shares into the market.

The Concurrent Repurchase

We have entered into agreements to repurchase an aggregate of 1,600,600
shares of our common stock from a limited number of our former principals
promptly following the completion of this offering. We will repurchase these
shares of common stock for a purchase price per share equal to the estimated
net proceeds per share received by the selling stockholders in this offering
after expenses. The estimated aggregate purchase price to our former principals
whose shares of common stock we repurchase will be approximately $102,500,000.
We will fund these repurchases with a portion of the net proceeds from our zero
coupon senior convertible note offering. The individuals who sell their shares
of common stock to us in the concurrent repurchase will not participate in this
offering.

Share Repurchase Program

Our Board of Directors has authorized our repurchase of up to $125 million
of our common stock in open market and/or private purchases. The acquired
shares may be used for corporate purposes, including stock option awards and
shares issued to employees under our employee stock purchase plans. As of May
31, 2001, we had repurchased 1,378,158 shares of common stock since the
inception of the program for an aggregate of approximately $51 million. We used
cash flows from operations to fund the purchases of these shares. In the
future, we may also use a portion of the net proceeds from our zero coupon
senior convertible note offering to fund additional repurchases under the
program.

The repurchase of shares from certain of our former principals promptly
following this offering has been authorized separately by our Board of
Directors, and is not part of the repurchase program discussed in the prior
paragraph.

Summary Historical Financial Data

The summary consolidated financial data presented below is derived from our
financial statements and accompanying notes. Our financial statements as of
December 31, 1999 and 2000 and for the years ended December 31, 1998, 1999 and
2000 have been audited by Arthur Andersen LLP, independent public accountants.
These financial statements are included elsewhere in this prospectus. The
summary income statement presented below for the years ended December 31, 1996
and 1997 have been derived from audited financial statements that are not
included in this prospectus. The summary income statement for the three-month
periods ended March 31, 2000 and 2001 have been taken from our unaudited
interim condensed consolidated financial statements included elsewhere in this
prospectus and, in the opinion of management, have been prepared on the same
basis as our audited consolidated financial statements included herein and
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such data. The results of operations for
an interim period are not necessarily indicative of the results for the full
year or any other interim period. The data presented below should be read in
conjunction with "Selected Consolidated Financial Data", "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and accompanying notes included elsewhere
in this prospectus.

As of and for the
Three Months
As of and for the Years Ended December 31, Ended March 31,
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Pre-IPO Post-IPO
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1996(1) 1997(1) 1998(1) 1999(1)(2) 2000(3) 2000(4) 2001
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Income Statement Data (in thousands):
Net revenues after interest expense. $416,114 $502,525 $582,134 $572,912 $616,347 $155,412 $154,832
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Employee compensation and
benefits........................... 133,476 148,301 173,379 325,310 245,445 65,933 65,572
Other operating expenses............ 71,706 80,385 114,298 124,230 123,981 29,261 30,204
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Total operating expenses............ 205,182 228,686 287,677 449,540 369,426 95,194 95,776
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Net income before taxes............. 210,932 273,839 294,457 123,372 246,921 60,218 59,056
Tax (benefit) expense............... 8,851 8,857 9,506 (12,195) 96,565 19,977 24,822
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Net income.......................... $202,081 $264,982 $284,951 $135,567 $150,356 $ 40,241 $ 34,234
======== ======== ======== ======== ======== ======== ========
Per Share Data:
Net income per share--Basic......... $ 4.79 $ 6.07 $ 6.68 $ 3.05 $ 3.06 $ 0.81 $ 0.70
Net income per share--Diluted....... $ 4.79 $ 6.07 $ 6.68 $ 3.05 $ 3.03 $ 0.81 $ 0.69

Assets Under
Management (in millions)............. $ 44,360 $ 53,511 $ 55,587 $ 54,399 $ 55,486 $ 55,470 $ 54,802

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(1) On October 7, 1999, the principals of Neuberger Berman, LLC and the
shareholders of Neuberger Berman Management Inc. exchanged their ownership
interests for 42.7 million shares of our common stock. Prior to this
exchange, we operated as a partnership and, as a result, the principals
were compensated through the receipt of distributions of capital. In
addition, Neuberger Berman, LLC did not pay United States federal and state
taxes as it was treated as a partnership for tax purposes. Neuberger Berman
Management Inc., as an S-Corporation, also did not pay United States
federal taxes.
(2) In connection with our IPO on October 8, 1999, we incurred pre-tax
reorganization and IPO charges totaling $150.1 million. These charges were
principally comprised of an initial, irrevocable non-cash contribution of
common stock to our employee defined contribution stock incentive plan of
$134.3 million (included in employee compensation and benefits), a cash
contribution to the Neuberger Berman Foundation of $10.0 million (included
in other operating expenses) and severance and other charges of $5.8
million ($5.6 million of which is included in employee compensation and
benefits and the remainder in other operating expenses).
(3) Tax expense for the year ended December 31, 2000, reflects a financial
statement tax benefit of $9.8 million related to the change in the price of
our common stock in connection with our stock incentive plan. For purposes
of comparability, exclusive of the financial statement tax benefit, tax
expense would have been $106.3 million and net income would have been
$140.6 million.

(4) Tax expense for the three months ended March 31, 2000, reflects a financial
statement tax benefit of $6.1 million related to the change in the price of
our common stock in connection with our stock incentive plan. For purposes
of comparability, exclusive of the financial statement tax benefit, tax
expense would have been $26.1 million and net income would have been $34.1
million.

RISK FACTORS

An investment in our common stock involves a number of risks, some of
which, including market, operational, legal and regulatory risks, could be
substantial and are inherent in our businesses. You should carefully consider
the following information about these risks, together with the other
information in this prospectus, before buying shares of common stock.

A decline in the prices of securities could lead to a decline in our assets
under management, revenues and earnings.

A large portion of our revenues are derived from investment advisory
contracts with our clients. Under these contracts, the investment advisory fees
we receive are typically based on the market value of assets under management.
Accordingly, a decline in the prices of securities generally may cause our
revenues and income to decline by:

. causing the value of our assets under management to decrease, which would
result in lower investment advisory fees; or

. causing our clients to withdraw funds in favor of investments they
perceive offer greater opportunity or lower risk, which would also result
in lower investment advisory fees.

If our revenues decline without a commensurate reduction in our expenses,
our net income will be reduced.

We could lose clients and suffer a decline in our revenues and earnings if the
investments we choose perform poorly, regardless of the trend in the prices of
securities.

We believe that investment performance is one of the most important factors
for the growth of our assets under management. Poor investment performance
could impair our revenues and growth because:

. existing clients might withdraw funds in favor of better performing
products, which would result in lower investment advisory fees;

. our ability to attract funds from existing and new clients might
diminish; or

. firms with which we have strategic alliances may terminate their
relationships with us, and future strategic alliances may be unavailable.

If our revenues decline without a commensurate reduction in our expenses,
our net income will be reduced.

Even when securities prices are rising, performance can be affected by
investment style. In certain recent years, growth stocks outperformed value
stocks as measured by the S&P/BARRA growth and value indices. However, because
of our historical emphasis on the value style of investing, our clients'
portfolios were less invested in growth stocks. As a result, we experienced
some loss of institutional accounts and increased repurchases of shares of the
Neuberger Berman mutual funds in those years.

Our clients can remove the assets we manage on short notice.

Our investment advisory and administrative contracts are generally
terminable at will or upon 30 to 60 days' notice, and mutual fund investors may
redeem their investments in the funds at any time without prior notice.
Institutional and individual clients, and firms with which we have strategic
alliances, can terminate their relationship with us, reduce the aggregate
amount of assets under management, or

shift their funds to other types of accounts with different rate structures for
any of a number of reasons, including investment performance, changes in
prevailing interest rates and financial market performance. In a declining
stock market the pace of mutual fund repurchases could accelerate. Poor
performance relative to other investment management firms tends to result in
decreased purchases of fund shares, increased repurchases of fund shares, and
the loss of institutional or individual accounts or strategic alliances. The
decrease in revenues that could result from any such event could have a
material adverse effect on our business.

The investment management business is intensely competitive.

We face substantial competition in every aspect of our business. Factors
affecting our business include brand recognition, business reputation,
investment performance, quality of service and the continuity of both client
relationships and assets under management. Fee competition also affects the
business, as do expenses, commissions, compensation, administration and/or
other expenses paid to intermediaries.

We compete with a large number of investment management firms. These
include global and domestic investment management companies, commercial banks,
brokerage firms and broker-dealers, insurance companies and other financial
institutions. Many competing firms are parts of larger financial services
companies and attract business through numerous avenues including retail bank
offices, investment banking and underwriting contacts, insurance agencies and
broker-dealers. A number of our competitors have greater capital and other
resources, and offer more comprehensive lines of products and services, than we
do.

U.S. banks and insurance companies can now affiliate with securities firms.
This has accelerated consolidation within the money management and financial
services industries. It has also increased the variety of competition for
traditional money management firms, which businesses are limited to investing
assets on behalf of institutional and individual clients. Foreign banks and
investment firms have entered the U.S. money management industry, either
directly or through partnerships or acquisitions.

Our competitors seek to expand their market share in many of the same areas
that we serve. Financial intermediaries that provide our products to their
clients may also provide competing products from competing firms, many of which
employ such advisers. Many current and potential competitors have greater brand
name recognition and more extensive client bases, which could be used to our
disadvantage.

We face significant competition from other registered open-end investment
companies. They vary both in size and investment philosophy. Their shares are
offered to the public on a load and no-load basis. Advertising, sales
promotions, the type and quality of services offered, and investment
performance influence competition for mutual fund sales.

Our business may be adversely affected by an inability to recruit, retain and
motivate key employees.

Our ability to attract and retain clients and mutual fund shareholders and
compete effectively in our businesses is dependent on our ability to attract
and retain highly skilled investment management, research, client service,
legal, fiduciary and sales professionals.

The market for such professionals is very competitive and has grown more so
in recent periods as the investment management industry has experienced
substantial growth. Our policy has been to

provide our professionals with compensation and benefits that we believe to be
competitive with other leading investment management firms. The inability to
continue to provide competitive compensation and benefits could affect our
ability to attract or retain skilled professionals.

While we have historically experienced little turnover among our
professionals, we cannot be sure that we will continue to be successful in
retaining our key personnel or in attracting highly qualified professionals. We
do not maintain "key person" insurance on any of our personnel.

We may be unable to continue successfully our strategic initiative of acquiring
companies or adding experienced investment management teams.

As one of our strategic initiatives to generate growth, we intend to
continue to acquire companies and add experienced investment management teams
where such additions would be both strategic and accretive to earnings.
However, we may not be able to identify suitable acquisition targets or
investment teams to add to our firm. In addition, if we do identify suitable
candidates, we may not be able to complete any such acquistion or addition of
teams in a timely manner or on terms that are commercially acceptable to us.
Our management may need to devote significant time and effort to pursuing these
acquisitions or the addition of teams. If we are unable to identify or complete
successfully these acquisitions or additions, we may fail to maintain or
increase assets under management.

We depend on accessing clients through intermediaries.

Our ability to market our mutual funds and subadvisory services is highly
dependent on access to the client base of national and regional securities
firms, banks, insurance companies, defined contribution plan administrators and
other intermediaries which generally offer competing investment products. To a
lesser extent, our Private Asset Management business depends on referrals from
accountants, lawyers, financial planners and other professional advisors.
Although we have historically been successful in gaining access to these
channels, we cannot be sure that we will continue to be able to do so. The
inability to have this access could have a material adverse effect on our
ability to maintain or increase assets under management.

We are subject to extensive regulation; violations of regulatory requirements
could impair our ability to operate or result in fines or damage to our
reputation.

As with all investment management companies and broker-dealers, we and our
mutual fund business are heavily regulated. Noncompliance with applicable
statutes or regulations could result in sanctions including:

. the revocation of licenses to operate certain businesses;

. the suspension or expulsion from a particular jurisdiction or market of
our business organizations or key personnel;

. the imposition of fines and censures; and

. reputational loss.

Any of these events could have a material adverse effect on our business.

Our business and the securities industry in general are subject to
extensive regulation in the United States at both the federal and state level,
as well as by self-regulatory organizations. The financial services industry is
one of the nation's most extensively regulated industries. The Securities and
Exchange Commission is responsible for enforcing the federal securities laws
and serves as a supervisory body for all investment advisers to mutual funds,
as well as for national securities

exchanges and associations. Our subsidiaries, Neuberger Berman, LLC and
Neuberger Berman Management Inc., are registered broker-dealers. The regulation
of broker-dealers has, to a large extent, been delegated by the federal
securities laws to self-regulatory organizations, including the national
securities and commodities exchanges and the National Association of Securities
Dealers, Inc., or the NASD. In addition, these subsidiaries are subject to
regulation under the laws of the fifty states, the District of Columbia and
certain foreign countries in which they are registered to conduct securities,
investment advisory or commodities businesses.

Broker-dealers are subject to regulations which cover all aspects of the
securities business, including sales practices, market making and trading among
broker-dealers, use and safekeeping of clients' funds and securities, capital
structure, recordkeeping and the conduct of directors, officers and employees.
Violation of applicable regulations can result in the revocation of
broker-dealer licenses, the imposition of censures or fines and the suspension
or expulsion of a firm, its officers or employees. Neuberger Berman, LLC and
Neuberger Berman Management Inc. are also subject to "Risk Assessment Rules"
imposed by the SEC which require, among other things, that certain
broker-dealers maintain and preserve certain information, describe risk
management policies and procedures and report on the financial condition of
certain affiliates whose financial and securities activities are reasonably
likely to have material impact on the financial and operational condition of
broker-dealers.

Our trust company subsidiaries are supervised by federal or relevant state
banking authorities, which regulate such matters as policies and procedures
relating to conflicts of interest, account administration and overall
governance and supervisory procedures.

Additional legislation and regulations, including those relating to the
activities of investment advisers and broker-dealers, changes in rules imposed
by the SEC or other U.S. or foreign regulatory authorities and self-regulatory
organizations or changes in the interpretation or enforcement of existing laws
and rules may adversely affect our business and profitability. Our businesses
may be materially affected not only by regulations applicable to it as an
investment adviser or broker-dealer, but also by regulations of general
application. For example, the volume of our principal investment advisory
business in a given time period could be affected by, among other things,
existing and proposed tax legislation and other governmental regulations and
policies (including the interest rate policies of the Federal Reserve Board)
and changes in the interpretation or enforcement of existing laws and rules
that affect the business and financial communities.

We are subject to net capital rules that could limit our ability to repay debt
or pay dividends on our common stock.

As registered broker-dealers and members of the NYSE and NASD, Neuberger
Berman, LLC and Neuberger Berman Management Inc. are subject to the SEC's
Uniform Net Capital Rule 15c3-1 which could limit our ability to repay debt or
pay dividends on our common stock. Rule 15c3-1 specifies the minimum level of
net capital a broker-dealer must maintain and also requires that part of its
assets be kept in relatively liquid form. Neuberger Berman, LLC is also subject
to the net capital requirements of various securities and other self-regulatory
organizations.

The SEC and various self-regulatory organizations impose rules that require
notification when net capital falls below certain predefined criteria, dictate
the ratio of subordinated debt to equity in the regulatory capital composition
of a broker-dealer and constrain the ability of a broker-dealer to expand its
business under certain circumstances. Additionally, Rule 15c3-1 imposes certain
requirements that may have the effect of prohibiting a broker-dealer from
distributing or withdrawing capital and requiring prior notice to the SEC for
certain withdrawals of capital. Since our principal assets are our ownership of
our broker-dealer subsidiaries, the rules governing net capital and
restrictions on capital withdrawals could limit our ability to repay debt or
pay dividends on our common stock.

As of March 31, 2001, Neuberger Berman, LLC was required to maintain
minimum net capital of approximately $22,393,000 and had total excess net
capital of approximately $146,642,000. As of March 31, 2001, Neuberger Berman
Management Inc. was required to maintain minimum net capital of $250,000 and
had total excess net capital of approximately $23,254,000.

Our business is heavily dependent upon computer-based systems to process
transactions; systems failures may disrupt our business and limit our growth.

Our business is highly dependent on communications and information systems
and those of our key service vendors. Any failure or interruption of such
systems could have a material adverse effect on our operating results.
Operational risk arises from mistakes made in the confirmation or settlement of
transactions or from the improper recording or accounting of transactions. We
are highly dependent on our ability to process a large number of transactions
on a daily basis, and rely heavily on financial, accounting and other data
processing systems. If any of these do not function properly, we could suffer
financial loss, business disruption, liability to clients, regulatory
intervention or damage to our reputation. If systems are unable to accommodate
an increasing volume of transactions, our ability to expand could be affected.
Although we have back-up systems in place, we cannot be sure that any such
systems failure or interruption, whether caused by a fire, other natural
disaster, power or telecommunications failure, act of war or otherwise will not
occur, or that back-up procedures and capabilities in the event of any such
failure or interruption will be adequate.

The securities brokerage business has inherent risks.

The securities brokerage business is, by its nature, subject to numerous
and substantial risks, particularly in volatile or illiquid markets, and in
markets influenced by sustained periods of low or negative economic growth,
including the risk of losses resulting from the ownership of securities,
trading, principal activities, counterparty failure to meet commitments, client
fraud, employee errors, misconduct and fraud (including unauthorized
transactions by traders), failures in connection with the processing of
securities transactions and litigation. Our trading activities for our own
account are limited. Therefore, the principal risks of trading are those
relating to counterparty failure and unauthorized trading. We have risk
management procedures and internal controls to address these risks but we
cannot be certain that these procedures and controls will prevent losses from
occurring.

We are effectively controlled by our principal stockholders whose interests may
differ from those of other stockholders.

After giving effect to this offering and the concurrent repurchase of
shares of our common stock, the former Neuberger Berman principals who are
currently employed by us and their affiliates would have held approximately 53%
of our outstanding common stock as of May 31, 2001 (52% assuming the exercise
in full of the underwriters' over-allotment option). Neuberger Berman is a
party to a Stockholders Agreement with the former Neuberger Berman principals
and certain family limited partnerships and trusts formed by them providing
that:

. before every stockholders' meeting, the former Neuberger Berman
principals who are currently employed by us and their affiliates will
take a separate preliminary vote on all the issues that will be presented
at the stockholders' meeting; and

. all shares held by them must be voted as a block in accordance with the
majority of shares voted in such preliminary vote.

As a result, the former Neuberger Berman principals who are currently employed
by us and their affiliates control our board of directors, and, therefore, our
business, policies and affairs including certain corporate transactions that
require stockholder approval, such as mergers and sales of our assets. The
control exerted by these former Neuberger Berman principals and their
affiliates and the transfer restrictions in the Stockholders Agreement could
preclude any unsolicited acquisition of Neuberger Berman and, consequently,
adversely affect the market price of the common stock or prevent our
stockholders from realizing a premium on their shares. See "Description of
Capital Stock--Stockholders Agreement."

Provisions of our organizational documents and Delaware law may discourage an
acquisition of Neuberger Berman and prevent our stockholders from realizing a
premium on their shares.

Our organizational documents contain provisions that may discourage a third
party from making a proposal to acquire us. For example, the Board of Directors
may, without the consent of stockholders, issue preferred stock with greater
voting rights than our common stock. In addition, the Delaware corporation law
imposes restrictions on mergers and other business combinations between us and
any holder of 15% or more of our voting stock. See "Description of Capital
Stock" for a more detailed description of our capital stock and relevant
Delaware corporation law. These provisions could preclude any unsolicited
acquisition of Neuberger Berman and, consequently, adversely affect the market
price of the common stock or prevent our stockholders from realizing a premium
on their shares.

Our share price may decline due to the large number of shares eligible for
future sale.

As of May 31, 2001, 48,973,084 shares of our common stock were issued and
outstanding. Sales, or the possibility of sales, of substantial amounts of
common stock by the former Neuberger Berman principals and their affiliates may
materially adversely affect the market price of the common stock prevailing
from time to time. The Stockholders Agreement to which the former Neuberger
Berman principals and their affiliates are parties generally provides that
shares of common stock acquired in the exchange cannot be sold until January 1,
2002. The restrictions on the disposition of shares contained in the
Stockholders Agreement can be waived by our Board of Directors or its designee
without notice to or consent of our stockholders. Our Board of Directors has
waived these restrictions with respect to the shares of common stock being sold
in this offering by the selling stockholders and our concurrent repurchase of
shares of common stock from certain other stockholders. Any shares sold by a
participating former principal in this offering or the concurrent repurchase
will reduce the number of shares that such participating former principal would
otherwise be able to sell under the Stockholders Agreement beginning on January
1, 2002. After giving effect to this offering and the concurrent repurchase and
without giving effect to any further waivers to permit additional transfers
before January 1, 2002, the former principals will be able to sell an aggregate
of 1,109,778 shares of common stock under the Stockholders Agreement beginning
on January 1, 2002 or an aggregate of 519,083 shares if the underwriters'
over-allotment option is exercised in full. However, we currently anticipate
that we will permit our former principals to make charitable contributions in
December 2001 of shares that would otherwise not be eligible for transfer under
the Stockholders Agreement until January 1, 2002.

The Neuberger Berman Employee Defined Contribution Stock Incentive Plan
Trust holds an aggregate of 4,264,344 shares of common stock on behalf of
participants in our Employee Defined Contribution Stock Incentive Plan. The
right of a participant to receive shares allocated to his or her account
generally becomes vested, and the shares become distributable to the
participant, in three equal installments on the second, third and fourth
anniversaries of the allocation to the participant, subject to the satisfaction
of certain conditions. Accordingly, 1,237,516 shares of common stock held by
the Trust are scheduled to vest in October 2001. Neuberger Berman will
accelerate the vesting of these 1,237,516 shares to the date on which this
offering is completed. Of these 1,237,516 shares, the Trust is selling
1,009,089 shares in this offering, with the remaining 228,427 shares being
eligible for sale by plan participants immediately following the completion of
this offering. However, we have provided that plan participants may not
transfer those shares during the 90-day period from the date of this
prospectus. See "Description of Capital Stock--Stockholders Agreement--Transfer
Restrictions."

FORWARD LOOKING STATEMENTS

Our disclosure and analysis in this prospectus and in documents that are
incorporated by reference contain some forward looking statements. Forward
looking statements give our current expectations or forecasts of future events.
You can identify these statements by the fact that they do not relate strictly
to historical or current facts. They use words such as "anticipate",
"estimate", "expect", "project", "intend", "plan", "believe", and other words
and terms of similar meaning in connection with any discussion of future
operating or financial performance. In particular, these include

statements relating to future actions, future performance of our products,
expenses, the outcome of any legal proceedings, and financial results. Although
we believe that our expectations and beliefs are based on reasonable
assumptions within the bounds of our knowledge of our business and operations,
there can be no assurance that our actual results will not differ materially
from our expectations or beliefs. Some of the factors that could cause our
actual results to differ from our expectations or beliefs include, without
limitation, the adverse effect from a decline in the securities markets or if
our products' performance declines, a general downturn in the economy, changes
in government policy or regulation, our inability to attract or retain key
employees and unforeseen costs and other effects related to legal proceedings
or investigations or governmental and self-regulatory organizations. These
statements are provided as permitted by the Private Securities Litigation
Reform Act of 1995.

USE OF PROCEEDS

We will not receive any proceeds from the sale of common stock by the
selling stockholders in this offering.

PRICE RANGE OF OUR COMMON STOCK AND DIVIDENDS

On October 6, 1999, our common stock commenced trading on the New York
Stock Exchange under the symbol "NEU". Prior to that there was no public market
for our common stock. The following table sets forth, for the calendar quarters
indicated, the high and low closing prices per share of our common stock as
reported by the NYSE.

Price Range of
Common Stock Dividends Dividends
--------------- Declared Paid
Period High Low Per Share Per Share
------ ------- ------- --------- ---------

1999
Fourth Quarter (from October 6,
1999)......................... $32.000 $23.750 $0.10 $ --

2000
First Quarter................... $28.875 $23.875 $ -- $0.10
Second Quarter.................. 47.500 27.500 0.10 0.10
Third Quarter................... 63.375 44.938 0.10 0.10
Fourth Quarter.................. 84.000 57.875 0.10 0.10

2001
First Quarter................... $82.810 $60.370 $0.10 $0.10
Second Quarter (through June 28,
2001)......................... 83.02 57.04 0.10 0.10

On June 28, 2001, the closing sales price per share for our common stock on
the NYSE was $68.58. There were approximately 18 stockholders of record of our
common stock as of March 15, 2001. As of March 15, 2001, there were
approximately 3,789 beneficial stockholders whose shares are held in street
name.

The declaration of dividends by Neuberger Berman is subject to the
discretion of our Board of Directors. Our Board of Directors will take into
account such matters as general business conditions, our financial results,
capital requirements, contractual, legal and regulatory restrictions on the
payment of dividends by us to our stockholders or by our subsidiaries to us,
and such other factors as our Board of Directors may deem relevant.

To the extent that assets are used to meet minimum net capital requirements
of Neuberger Berman, LLC and Neuberger Berman Management Inc. under Rule
15c3-1, they are not available for distribution to stockholders as dividends.
See "Risk Factors--We are subject to net capital rules that could limit our
ability to repay debt or pay dividends on our common stock" for a discussion of
certain limitations on our receipt of funds from our regulated subsidiaries. In
addition, the debt covenants related to Neuberger Berman, LLC's outstanding $35
million subordinated note include certain covenants that may further restrict
our ability to pay dividends to stockholders.

Our Board of Directors has authorized a repurchase of up to $125 million of
our common stock in open market and/or private purchases. The acquired shares
may be used for corporate purposes,

including stock option awards and shares issued to employees under our employee
stock purchase plans. As of May 31, 2001, we had repurchased 1,378,158 shares
of common stock since the inception of the program for an aggregate of
approximately $51 million. We used cash flows from operations to fund the
purchases of these shares. In the future, we may also use a portion of the net
proceeds from our zero coupon senior convertible note offering to fund
additional repurchases under the program.

CAPITALIZATION

The following table sets forth our consolidated capitalization as of March
31, 2001:

. on an actual basis;

. on a pro forma basis to give effect to the issuance of our zero coupon
senior convertible notes on May 4, 2001; and

. on a pro forma basis to give effect to that issuance, as adjusted for the
repurchase of shares of our common stock that will occur promptly
following this offering.

This table should be read in conjunction with our consolidated financial
statements and notes therein included in this prospectus.

March 31, 2001
-----------------------------------
Pro Forma
Pro Forma for as Adjusted
the for the
Convertible Concurrent
Actual Note Offering Repurchase
-------- ------------- ----------
(Amounts in thousands, except share data)

Subordinated Liability...................................... $ 35,000 $ 35,000 $ 35,000
Convertible Senior Notes (net of $24,334 original issue
discount)................................................. -- 150,666 150,666
-------- -------- ---------
Total long term debt................................... 35,000 185,666 185,666
-------- -------- ---------
Stockholders' Equity:
Preferred Stock, par value $.01 per share; 5,000,000
shares authorized; no shares issued and outstanding,
historical, pro forma and pro forma as adjusted.......... -- -- --

Common Stock, par value $.01 per share; 250,000,000
shares authorized; 50,178,008 shares issued, historical,
pro forma and pro forma as adjusted; 48,944,822 shares
outstanding, historical and pro forma and 47,344,222
shares outstanding pro forma as adjusted(1).............. 502 502 502

Paid-in capital............................................ 339,923 339,923 339,923

Retained earnings.......................................... 90,316 90,316 90,316

Less: Treasury stock, at cost, 1,233,186 shares, historical
and pro forma and 2,833,786 shares pro forma as
adjusted(2).............................................. (45,788) (45,788) (148,226)

Unearned compensation(3)................................. (7,428) (7,428) (7,428)

-------- -------- ---------
Total stockholders' equity............................. 377,525 377,525 275,087
-------- -------- ---------
Total capitalization................................... $412,525 $563,191 $ 460,753
======== ======== =========

--------
(1) Does not include 1,620,255 shares of common stock reserved for issuance
upon conversion of our zero coupon senior convertible notes and 3,038,388
shares of common stock reserved for issuance upon the exercise of options
outstanding under the 1999 Neuberger Berman Inc. Long-Term Incentive Plan
and the 1999 Neuberger Berman Inc. Directors Stock Incentive Plan. Also,
does not give effect to any repurchases by us of our common stock under our
share repurchase program after March 31, 2001.
(2) The pro forma as adjusted amount assumes a repurchase price of
approximately $64 per share, which is equal to the estimated net proceeds
per share received by the selling stockholders in this offering after
expenses.
(3) Relates to the issuance of 100,435 shares of common stock in connection
with our Wealth Accumulation Plan and Long-Term Incentive Plan.

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below is derived from
our financial statements and accompanying notes. Our financial statements as of
December 31, 1999 and 2000 and for the years ended December 31, 1998, 1999 and
2000 have been audited by Arthur Andersen LLP, independent public accountants.
These financial statements are included elsewhere in this prospectus. The
selected income statement and balance sheet data presented below as of December
31, 1996, 1997 and 1998 and for the years ended December 31, 1996 and 1997 have
been derived from audited financial statements that are not included in this
prospectus. The selected income statement and balance sheet data as of March
31, 2001 and for the three-month periods ended March 31, 2000 and 2001 have
been taken from our unaudited interim condensed consolidated financial
statements included elsewhere in this prospectus. The March 31, 2000 selected
balance sheet data has been taken from our unaudited interim condensed
consolidated financial statements included in our Form 10-Q for the quarter
ended March 31, 2000. In the opinion of management, this information has been
prepared on the same basis as our audited consolidated financial statements
included herein and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such data. The
results of operations for an interim period are not necessarily indicative of
the results for the full year or any other interim period. The data presented
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the financial statements
and accompanying notes included elsewhere in this prospectus.

As of and for the
Three Months Ended
As of and for the Years Ended December 31, March 31,
------------------------------------------------------- ---------------------
Pre-IPO Post-IPO
-------------------------------- ----------------------------------
1996(1) 1997(1) 1998(1) 1999(1)(2) 2000(3) 2000(4) 2001
---------- ---------- ---------- ---------- ---------- ---------- ----------

Assets Under Management (in millions)......... $ 44,360 $ 53,511 $ 55,587 $ 54,399 $ 55,486 $ 55,470 $ 54,802

Income Statement Data (in thousands):
Revenues:
Investment advisory and administrative fees. $ 260,775 $ 327,898 $ 389,238 $ 379,434 $ 399,907 $ 96,951 $ 103,292
Commissions................................. 109,621 124,911 145,969 142,082 146,589 39,828 36,693
Interest.................................... 143,928 154,280 164,782 160,022 223,709 51,025 57,708
Principal transactions in securities........ 10,758 7,838 6,324 10,003 9,623 5,076 559
Clearance fees.............................. 8,152 8,332 9,146 11,081 13,532 3,622 3,814
Other income................................ 2,678 3,796 4,004 4,059 6,428 838 577
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross revenues............................. 535,912 627,055 719,463 706,681 799,788 197,340 202,643
Interest expense............................ 119,798 124,530 137,329 133,769 183,441 41,928 47,811
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net revenues after interest expense........ 416,114 502,525 582,134 572,912 616,347 155,412 154,832
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating Expenses:
Employee compensation and benefits.......... 133,476 148,301 173,379 325,310 245,445 65,933 65,572
Information technology...................... 12,954 13,642 15,634 19,172 22,925 5,221 5,450
Rent and occupancy.......................... 9,189 9,882 12,182 15,313 17,796 4,164 4,625
Brokerage, clearing and exchange fees....... 11,319 12,727 10,245 10,164 10,514 2,843 2,702
Advertising and sales promotion............. 12,732 12,659 14,707 9,259 9,251 2,452 2,546
Distribution and fund administration........ 7,105 10,031 22,832 19,437 18,977 4,392 4,371
Professional fees........................... 4,486 5,165 11,550 9,276 11,205 2,277 1,964
Depreciation and amortization............... 5,576 6,445 8,716 10,532 10,638 2,460 2,771
Other expenses.............................. 8,345 9,834 18,432 31,077 22,675 5,452 5,775
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses................... 205,182 228,686 287,677 449,540 369,426 95,194 95,776
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income before taxes.................... 210,932 273,839 294,457 123,372 246,921 60,218 59,056
Tax (benefit) expense....................... 8,851 8,857 9,506 (12,195) 96,565 19,977 24,822
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income................................. $ 202,081 $ 264,982 $ 284,951 $ 135,567 $ 150,356 $ 40,241 $ 34,234
========== ========== ========== ========== ========== ========== ==========
Balance Sheet Data (in thousands):
Total assets................................ $2,446,811 $2,410,213 $3,829,435 $3,847,608 $4,421,763 $4,347,205 $4,431,205
Total liabilities........................... 2,288,811 2,251,182 3,720,236 3,598,806 4,071,624 4,067,607 4,053,680
Total principals' capital and stockholders'
equity..................................... 158,000 159,031 109,199 248,802 350,139 279,598 377,525

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following management's discussion and analysis of the results of
operations for the three months ended March 31, 2000 and 2001 and for the years
ended December 31, 1998, 1999 and 2000 should be read in conjunction with our
consolidated financial statements together with the notes to the consolidated
financial statements.

Forward Looking Statements

Our disclosure and analysis in this prospectus and in documents that are
incorporated in this prospectus by reference contain some forward looking
statements. Forward looking statements give our current expectations or
forecasts of future events. You can identify these statements by the fact that
they do not relate strictly to historical or current facts. They use words such
as "anticipate", "estimate", "expect", "project", "intend", "plan", "believe",
and other words and terms of similar meaning in connection with any discussion
of future operating or financial performance. In particular, these include
statements relating to future actions, future performance of our products,
expenses, the outcome of any legal proceedings, and financial results. Although
we believe that our expectations and beliefs are based on reasonable
assumptions within the bounds of our knowledge of our business and operations,
there can be no assurance that our actual results will not differ from our
expectations or beliefs. Some of the factors that could cause our actual
results to differ from our expectations or beliefs include, without limitation,
the adverse effect from a decline in the securities markets or if our products'
performance declines, a general downturn in the economy, changes in government
policy or regulation, our inability to attract or retain key employees and
unforeseen costs and other effects related to legal proceedings or
investigations of governmental and self-regulatory organizations. These
statements are provided as permitted by the Private Securities Litigation
Reform Act of 1995.

Business Environment

Domestic equity markets suffered widespread losses in 2000, as technology
stocks suffered a dramatic decline and investors grew nervous about signs of a
slowing economy. The Standard & Poor's ("S&P") 500 Index, which has become
heavily weighted toward the technology sector, turned in its first negative
performance in ten years, dropping 10.1% in 2000. International stock markets
did not escape the fallout, as the Morgan Stanley Capital International Europe,
Australasia, Far East Index fell 14.0% in 2000.

Continuing the trends of 2000, the first quarter of 2001 saw additional
significant declines in major domestic equity indices, as the sell-off in
technology and telecommunications stocks spread to almost all sectors of the
market. On a total return basis, the Dow Jones Industrial Average declined
8.01%, and the S&P 500 Index lost 11.85% in the first quarter of 2001. The
technology stock laden Nasdaq Composite Index suffered its worst first quarter
ever, dropping 25.51% in the first quarter of 2001. The stock market's poor
performance occurred despite three interest rate cuts by the Federal Reserve
Board during the quarter, which brought short term rates down to 5.0% at March
31, 2001, undoing the fiscal tightening in 2000.

Despite the market downturn, our assets under management held up relatively
well in this environment. Our assets under management at March 31, 2001,
including those assets related to the acquisition of the assets of Fasciano
Company, Inc. and the addition of three experienced money management teams,
were $54.8 billion, down only 1.2% from $55.5 billion at December 31, 2000.
Assets under management in our Private Asset Management segment reached a
record level of $22.8 billion at the end of the first quarter of 2001. This
represents an increase of 1.2% from $22.5 billion at December 31, 2000. Our
Mutual Fund and Institutional segment experienced net cash inflows of $905

million in the quarter, which included approximately $500 million of
institutional equity separate account assets related to the addition of a money
management team and $192 million related to the acquisition of the assets of
Fasciano Company, Inc., compared to cash outflows of $1.2 billion in the prior
year period and $10 million in the fourth quarter of 2000. Assets under
management in our Mutual Fund and Institutional segment decreased $951 million
during the first quarter of 2001.

In this environment, we remain confident that our diversified family of
investment products and services will help us weather turbulent markets.
Notably, the value style of investing is returning to favor, as the S&P Barra
Value Index outperformed the S&P Barra Growth Index in 2000 for the first time
in seven years. While we offer all styles of investing, we believe our
longstanding expertise in value investing will serve us well in a difficult
market environment.

We also believe that the difficult conditions of 2000 could convince more
investors - both individual and institutional - of the inherent value, over the
long term, in seeking professional advice and guidance for the management of
their money.

General

Our revenues are recorded in the business segments in which they are
earned. We derive our revenues primarily from fees for investment advisory and
administrative services provided to our private asset management, mutual fund,
institutional and wrap fee clients. Investment advisory and administrative fees
that we earn are generally based on the total market value and composition of
assets under management. Our private asset management, institutional and wrap
fee clients are generally billed on a calendar quarter basis, in advance, based
upon portfolio values at the beginning of such quarter. Our mutual fund fees
are based upon daily weighted average portfolio values. As a result,
fluctuations in financial markets and client asset additions and withdrawals
have a direct effect on our net revenues and net income. Our fees vary with the
type of assets managed, with higher fees earned on actively managed equity
accounts and lower fees earned on fixed-income and cash management accounts.

Through our broker-dealer, Neuberger Berman, LLC, we earn commissions by
executing equity securities transactions for private asset management, mutual
fund and institutional clients as well as for third parties in professional
investor clearing services and research sales transactions. The majority of our
commissions are earned from transactions for private asset management clients.
Our commissions may fluctuate based on general market conditions. Also, through
Neuberger Berman, LLC, we earn clearance fees for the execution of securities
transactions for various introducing brokers.

We generate additional income by managing cash balances available as a
result of our broker-dealer activities. The three principal areas from which we
generate net interest income are treasury management (managing overnight cash
balances), securities lending activities and client cash and margin balances.
We evaluate these activities by focusing on net interest income. Net interest
income fluctuates based on general market conditions, prevailing interest rates
and the amount of client cash and margin balances.

Our operating expenses include direct expenses, such as employee
compensation and benefits, information technology and rent and occupancy, and
indirect expenses, such as general and administrative, research, execution and
clearance expenses. Direct expenses are charged to the business segment in
which they are incurred while indirect expenses are allocated to each business
segment based upon various methodologies determined by management.

Our largest operating expense is employee compensation and benefits, the
most significant component being variable compensation for portfolio managers
and sales personnel, which is based largely on commissions and advisory fees.
Historically, because we had operated as a partnership, substantially all
payments to our principals were accounted for as distributions from principals'
capital and not recorded as compensation expense.

On October 7, 1999, the principals of Neuberger Berman, LLC and the
shareholders of Neuberger Berman Management Inc. exchanged their ownership
interests for 42.7 million shares of our common stock (the "Exchange"). On
October 13, 1999, we completed our IPO. In that offering, we sold 3.0 million
shares of common stock and received net proceeds after expenses of
approximately $88 million. In addition, certain of our stockholders who
received our common stock in the Exchange sold 4,219,697 shares of that stock
in the IPO. We did not receive the proceeds from the sale of that stock. In
connection with our IPO, we incurred pre-tax reorganization and IPO charges
totaling approximately $150.1 million (the "Reorganization and IPO Charges").
The Reorganization and IPO Charges were principally comprised of an initial,
irrevocable non-cash contribution of common stock to our employee defined
contribution stock incentive plan of $134.3 million, a cash contribution to the
Neuberger Berman Foundation of $10.0 million and severance and other charges of
$5.8 million. To allow for a more consistent analysis of expenses, these
Reorganization and IPO Charges have not been directly considered in the
discussion of operating results.

Prior to the Exchange, Neuberger Berman, LLC did not pay United States
federal and state taxes because, as a limited liability company, it was treated
as a partnership for tax purposes, and our principals were taxed on their
proportionate share of Neuberger Berman, LLC's taxable income or loss.
Neuberger Berman Management Inc., as an S-Corporation, also did not pay United
States federal taxes prior to the Exchange, but was subject to certain state
and local taxes, and its shareholders were responsible for their own federal
income taxes. Effective with the Exchange, we became subject to federal, state
and local income taxes and we file a consolidated federal income tax return.

Results of Operations

Our business is divided functionally into three major business segments:
Private Asset Management, Mutual Fund and Institutional and Professional
Securities Services. Our Private Asset Management segment provides customized
investment management services for high net worth individuals, families and
smaller institutions. The investment advisory and administrative services that
we provide through our Mutual Fund and Institutional segment include: the
management of the Neuberger Berman family of mutual funds, investment
management of institutional separate account products and broker-advised
products (wrap accounts). Our Professional Securities Services segment provides
trade execution, clearing, custody, margin financing, portfolio reporting and
trust services, as well as consulting advice. In addition to our three major
business segments, we also have a Corporate segment which was created in the
fourth quarter of 2000 and reflects the results of certain corporate operations
that were previously allocated primarily to our Professional Securities
Services segment. The presentation of our results for prior periods have been
revised to conform with this presentation. Each of our business segments
represents a grouping of financial activities and products with similar
characteristics. The following tables of selected financial data present our
business segments in a manner consistent with the way that we manage our
businesses.

RESULTS OF OPERATIONS
(in thousands)

Private Mutual Professional
For the Three Months Ended Asset Fund and Securities
March 31, 2001 Management Institutional Services Corporate Total
---------------------------------- ------- ------- ------- ------- --------

Net revenues (loss) after interest
expense......................... $75,850 $55,165 $25,681 $(1,864) $154,832
Operating expenses................ 39,632 35,856 17,170 3,118 95,776
------- ------- ------- ------- --------
Net income (loss) before taxes.... $36,218 $19,309 $ 8,511 $(4,982) $ 59,056
======= ======= ======= ======= ========

Private Mutual Professional
For the Three Months Ended Asset Fund and Securities
March 31, 2000 Management Institutional Services Corporate Total
---------------------------------- ------- ------- ------- ------- --------

Net revenues (loss) after interest
expense......................... $73,539 $55,399 $26,686 $ (212) $155,412
Operating expenses................ 36,854 38,447 16,601 3,292 95,194
------- ------- ------- ------- --------
Net income (loss) before taxes.... $36,685 $16,952 $10,085 $(3,504) $ 60,218
======= ======= ======= ======= ========

Private Mutual Professional
For the Year Ended Asset Fund and Securities
December 31, 2000 Management Institutional Services Corporate Total
---------------------------------- -------- -------- -------- -------- --------

Net revenues (loss) after interest
expense......................... $290,747 $226,144 $100,314 $ (858) $616,347
Operating expenses................ 147,056 147,455 63,523 11,392 369,426
-------- -------- -------- -------- --------
Net income (loss) before taxes.... $143,691 $ 78,689 $ 36,791 $(12,250) $246,921
======== ======== ======== ======== ========

Private Mutual Professional
For the Year Ended Asset Fund and Securities
December 31, 1999 Management Institutional Services Corporate Total
--------------------------------------- -------- -------- ------- ------- --------

Net revenues after interest expense.... $260,114 $234,567 $76,594 $ 1,637 $572,912
Operating expenses(1).................. 86,847 150,362 51,494 10,783 299,486
-------- -------- ------- ------- --------
Net income (loss) before Reorganization
and IPO Charges and taxes............ $173,267 $ 84,205 $25,100 $(9,146) $273,426
======== ======== ======= ======= ========

Private Mutual Professional
For the Year Ended Asset Fund and Securities
December 31, 1998 Management Institutional Services Corporate Total
----------------------------------- -------- -------- ------- -------- --------

Net revenues after interest expense $237,933 $268,743 $74,817 $ 641 $582,134
Operating expenses(1).............. 67,252 162,642 43,458 14,325 287,677
-------- -------- ------- -------- --------
Net income (loss) before taxes..... $170,681 $106,101 $31,359 $(13,684) $294,457
======== ======== ======= ======== ========

--------
(1) Total operating expenses on a pro forma basis, which assumes the Exchange
had taken place at the beginning of each year, would have been higher by
$39,504 for the year ended December 31, 1998 and $44,157 for the year ended
December 31, 1999. The pro forma adjustments are made to recognize as
compensation expense distributions of capital made prior to the Exchange.

SUMMARIZED ASSETS UNDER MANAGEMENT
(in millions)

Private Mutual
For the Three Months Ended Asset Fund and
March 31, 2001 Management(1) Institutional(2) Total
-------------------------------------------- ------------- ---------------- -------

Assets under management, beginning of period $22,510 $32,976 $55,486
------- ------- -------
Net additions............................... 1,412 905 2,317
Market depreciation......................... (1,145) (1,856) (3,001)
------- ------- -------
Net increase (decrease).................... 267 (951) (684)
------- ------- -------
Assets under management, end of period...... $22,777 $32,025 $54,802
======= ======= =======

Private Mutual
For the Three Months Ended Asset Fund and
March 31, 2000 Management(3) Institutional(3) Total
-------------------------------------------- ------------- ---------------- -------

Assets under management, beginning of period $21,539 $32,860 $54,399
------- ------- -------
Net additions (withdrawals)................. 37 (1,195) (1,158)
Market appreciation......................... 638 1,591 2,229
------- ------- -------
Net increase............................... 675 396 1,071
------- ------- -------
Assets under management, end of period...... $22,214 $33,256 $55,470
======= ======= =======

Private Mutual
For the Year Ended Asset Fund and
December 31, 2000 Management(3) Institutional(2)(3) Total
-------------------------------------------- ------------- ------------------- -------

Assets under management, beginning of year.. $21,539 $32,860 $54,399
------- ------- -------
Net additions (withdrawals)................. 1,154 (1,190) (36)
Market (depreciation) appreciation.......... (183) 1,306 1,123
------- ------- -------
Net increase............................... 971 116 1,087
------- ------- -------
Assets under management, end of year........ $22,510 $32,976 $55,486
======= ======= =======

Private Mutual
For the Year Ended Asset Fund and
December 31, 1999 Management(3) Institutional(3) Total
-------------------------------------------- ------------- ---------------- -------

Assets under management, beginning of year.. $18,267 $37,320 $55,587
------- ------- -------
Net additions (withdrawals)................. 324 (7,648) (7,324)
Market appreciation......................... 2,948 3,188 6,136
------- ------- -------
Net increase (decrease).................... 3,272 (4,460) (1,188)
------- ------- -------
Assets under management, end of year........ $21,539 $32,860 $54,399
======= ======= =======

Private Mutual
For the Year Ended Asset Fund and
December 31, 1998 Management(3) Institutional(3) Total
-------------------------------------------- ------------- ---------------- -------

Assets under management, beginning of year.. $15,819 $37,692 $53,511
------- ------- -------
Net additions (withdrawals)................. 76 (2,173) (2,097)
Market appreciation......................... 2,372 1,801 4,173
------- ------- -------
Net increase (decrease).................... 2,448 (372) 2,076
------- ------- -------
Assets under management, end of year........ $18,267 $37,320 $55,587
======= ======= =======

--------
(1) As of March 31, 2001, Private Asset Management includes $49 million of
assets invested in EMM's Fund of Funds product.
(2) Mutual Fund and Institutional includes $79 million and $88 million of
client assets invested in the Fund Advisory Service wrap mutual fund
program with third party funds as of March 31, 2001 and December 31, 2000,
respectively.
(3) Segment assets under management and related market flows for prior periods
have been reclassified to reflect presentation consistent with current
period segment reporting.

DETAILED ASSETS UNDER MANAGEMENT
(in millions)

For the Years Ended For the Three Months
December 31, Ended March 31,
----------------- -----------------
2000 1999 2001 2000
------- ------- ------- -------

PRIVATE ASSET MANAGEMENT
Assets under management(1)(3).......... $22,510 $21,539 $22,777 $22,214
======= ======= ======= =======
Market flows(1)(3)
Net additions....................... $ 1,154 $ 324 $ 1,412 $ 37
Market appreciation (depreciation).. (183) 2,948 (1,145) 638
------- ------- ------- -------
Total increase...................... $ 971 $ 3,272 $ 267 $ 675
======= ======= ======= =======
MUTUAL FUND & INSTITUTIONAL
Equity Separate Accounts
Assets under management(3)............. $ 6,402 $ 6,458 $ 6,415 $ 6,268
======= ======= ======= =======
Market flows(3)
Net additions (withdrawals)......... $ (494) $(2,592) $ 356 $ (324)
Market appreciation (depreciation).. 438 1,250 (343) 135
------- ------- ------- -------
Total increase (decrease)........... $ (56) $(1,342) $ 13 $ (189)
======= ======= ======= =======
Fixed Income Separate Accounts
Assets under management(3)............. $ 5,298 $ 5,924 $ 5,310 $ 5,717
======= ======= ======= =======
Market flows(3)
Net withdrawals..................... $(1,084) $ (932) $ (81) $ (315)
Market appreciation (depreciation).. 458 (93) 93 107
------- ------- ------- -------
Total increase (decrease)........... $ (626) $(1,025) $ 12 $ (208)
======= ======= ======= =======
Consultant Services Group
Assets under management(3)............. $ 1,796 $ 1,839 $ 2,002 $ 1,764
======= ======= ======= =======
Market flows(3)
Net additions (withdrawals)......... $ (158) $ 133 $ 205 $ (74)
Market appreciation (depreciation).. 115 35 1 (2)
------- ------- ------- -------
Total increase (decrease)........... $ (43) $ 168 $ 206 $ (76)
======= ======= ======= =======
Mutual Fund and Sub-Advised Accounts
Assets under management(2)(3).......... $19,480 $18,639 $18,298 $19,507
======= ======= ======= =======
Market flows(2)(3)
Net additions (withdrawals)......... $ 546 $(4,257) $ 425 $ (482)
Market appreciation (depreciation).. 295 1,996 (1,607) 1,351
------- ------- ------- -------
Total increase (decrease)........... $ 841 $(2,261) $(1,182) $ 869
======= ======= ======= =======
Sub-Total Mutual Fund & Institutional
Assets under management................ $32,976 $32,860 $32,025 $33,256
======= ======= ======= =======
Market flows
Net additions (withdrawals)......... $(1,190) $(7,648) $ 905 $(1,195)
Market appreciation (depreciation).. 1,306 3,188 (1,856) 1,591
------- ------- ------- -------
Total increase (decrease)........... $ 116 $(4,460) $ (951) $ 396
======= ======= ======= =======
TOTAL
Assets under management................ $55,486 $54,399 $54,802 $55,470
======= ======= ======= =======
Market flows
Net additions (withdrawals)......... $ (36) $(7,324) $ 2,317 $(1,158)
Market appreciation (depreciation).. 1,123 6,136 (3,001) 2,229
------- ------- ------- -------
Total increase (decrease)........... $ 1,087 $(1,188) $ (684) $ 1,071
======= ======= ======= =======

--------
(1) As of March 31, 2001, Private Asset Management includes $49 million of
assets invested in EMM's Fund of Funds product.
(2) Mutual Fund and Sub-Advised Accounts includes $79 million and $88 million
of client assets invested in the Fund Advisory Service wrap mutual fund
program with third party funds as of March 31, 2001 and December 31, 2000,
respectively.
(3) Segment assets under management and related market flows for prior periods
have been reclassified to reflect presentation consistent with current
period segment reporting.

Three Months Ended March 31, 2001 Compared with Three Months Ended March 31,
2000

We reported net income before taxes of $59.1 million for the first quarter
ended March 31, 2001, representing a decrease of $1.2 million or 1.9%, compared
to $60.2 million for the first quarter ended March 31, 2000. Our net revenues
after interest expense were $154.8 million for the first quarter of 2001, a
decrease of $0.6 million or 0.4% compared to the same period in 2000. Our first
quarter results for 2001 reflect an increase in net revenues after interest
expense in Private Asset Management, offset by decreases in Mutual Fund and
Institutional and Professional Securities Services. Net asset additions of $1.4
billion in Private Asset Management, which includes approximately $1.0 billion
from three experienced money management teams that joined us during the
quarter, were partially offset by market depreciation of $1.1 billion during
the quarter, while Mutual Fund and Institutional's net asset additions of $0.9
billion, which included approximately $500 million of institutional equity
separate account assets related to the addition of a money management team and
$192 million related to the acquisition of the assets of Fasciano Company,
Inc., were more than offset by $1.9 billion of market depreciation.

Private Asset Management. Our revenues after interest expense from the
Private Asset Management segment increased 3.1% to $75.9 million for the first
quarter of 2001, from $73.5 million for the first quarter of 2000. Our
investment advisory fees increased 10.1% to $51.1 million for the first quarter
of 2001, from $46.5 million for the same period in 2000, due to increases in
quarterly billable assets under management, as well as fees charged to new
clients as a result of attracting new money management teams and the successful
efforts of the national sales force. Our commissions decreased 9.1% to $23.3
million in the first quarter of 2001, from $25.6 million in the first quarter
of 2000, resulting from a decrease in transaction volume. Our net interest
income decreased 9.8% to $1.3 million in the first quarter of 2001, from $1.4
million in the first quarter of 2000, due to lower client margin balances.

Mutual Fund and Institutional. Our Mutual Fund and Institutional net
revenues after interest expense decreased 0.4% to $55.2 million for the first
quarter of 2001, from $55.4 million for the first quarter of 2000. Our
investment advisory and administrative fees increased 2.8% to $51.5 million for
the first quarter of 2001, from $50.1 million for the same period in 2000, due
primarily to an increase in average daily assets under management. Our
commissions decreased 28.7% to $3.7 million in the first quarter of 2001, from
$5.2 million in 2000, as a result of a decrease in transaction volume.

Professional Securities Services. Our Professional Securities Services net
revenues after interest expense decreased 3.8% to $25.7 million in the first
quarter of 2001, from $26.7 million in the first quarter of 2000. Our
commissions increased 7.6% to $9.7 million in the first quarter of 2001, from
$9.0 million in the first quarter of 2000, as a result of increased transaction
volume. Our principal transactions in securities decreased 63.7% to $1.6
million in the first quarter of 2001, from $4.5 million in the same period of
2000, primarily due to market making activity. Our net interest income
increased 13.1% to $9.5 million in the first quarter of 2001, from $8.4 million
in the first quarter of 2000, primarily due to firm investments in municipal
bonds and money markets.

Corporate. Our net loss after interest expense increased to $1.9 million in
the first quarter of 2001, from $0.2 million in the first quarter of 2000,
primarily as a result of a decrease in value of the corporate investment in our
mutual funds.

Operating Expenses. Our total operating expenses were $95.8 million for the
first quarter ended March 31, 2001, an increase of $0.6 million or 0.6%
compared to $95.2 million for the first quarter ended March 31, 2000. Employee
compensation and benefits decreased slightly to $65.6 million in the first
quarter of 2001, from $65.9 million in the first quarter of 2000. This was
primarily due to increases in salaries and benefits and production
compensation, offset by a decrease in incentive

compensation. Our rent and occupancy costs increased to $4.6 million in the
first quarter of 2001, up $0.5 million or 11.1% from $4.2 million in the same
period of 2000, primarily due to additional costs associated with certain
escalations and increased staffing levels. Our professional fees decreased to
$2.0 million for the quarter ended March 31, 2001, down $0.3 million or 13.7%
from $2.3 million for the quarter ended March 31, 2000, primarily due to a
decrease in consulting fees for various information technology initiatives,
partially offset by an increase in fees related to the outsourcing of mutual
fund administration. Depreciation and amortization increased to $2.8 million in
the first quarter of 2001, up $0.3 million or 12.6% from $2.5 million for the
same period in 2000, primarily due to amortization of new leasehold
improvements and goodwill, as well as depreciation resulting from expenditures
on technology related equipment.

Taxes. Our taxes increased to $24.8 million for the first quarter ended
March 31, 2001, up $4.8 million from $20.0 million for the same period in 2000.
The 2000 provision for income taxes included federal, state, and local taxes at
an effective tax rate as a corporation of approximately 43%, less a financial
statement tax benefit of $6.1 million related to the change in the price of our
common stock from December 31, 1999 to March 31, 2000, in connection with our
Employee Defined Contribution Stock Incentive Plan (the "Stock Incentive
Plan"). In March 2000, the Financial Accounting Standards Board (the "FASB")
issued FASB Interpretation No. 44 "Accounting for Certain Transactions
Involving Stock Compensation," an interpretation of APB Opinion No. 25 ("FIN
44"). We adjusted, based upon the price of our common stock at the close of
business on March 31, 2000, the carrying value of the deferred tax asset that
related to unvested shares in our Stock Incentive Plan. FIN 44 became effective
on July 1, 2000, and requires that the deferred tax asset be determined by the
compensation expense recognized for financial reporting purposes. Accordingly,
at June 30, 2000, we fixed the carrying value of our deferred tax asset for
unvested shares in our Stock Incentive Plan, based upon the price of our common
stock at the close of business that day.

2000 Compared with 1999

We reported net income before taxes of $246.9 million for the year ended
December 31, 2000, representing a decrease of $26.5 million or 9.7%, compared
to $273.4 million (as adjusted for the $150.1 million of Reorganization and IPO
Charges) for the year ended December 31, 1999. Our net revenues after interest
expense were $616.3 million for 2000, an increase of $43.4 million or 7.6%,
compared to 1999. Our operating results for 2000 reflect overall increases in
net revenues after interest expense in Private Asset Management and
Professional Securities Services, offset by a decrease in Mutual Fund and
Institutional. The net asset additions in Private Asset Management were offset
by the net withdrawals in our Mutual Fund and Institutional segment, virtually
all of which were in the lower fee institutional fixed-income area, while the
market depreciation in Private Asset Management was outweighed by market
appreciation in our Mutual Fund and Institutional segment.

Private Asset Management. Our net revenues after interest expense from the
Private Asset Management segment increased 11.8% to $290.7 million for 2000,
from $260.1 million for 1999. Our investment advisory fees increased 15.0% to
$191.4 million for 2000, from $166.5 million for 1999, due to increases in
average quarterly billable assets under management from $19.5 billion in 1999
to $22.0 billion in 2000. Our commissions increased 4.3% to $94.0 million for
2000, from $90.1 million for 1999, due to the increased volume of equity
securities transactions. Our net interest income increased 44.1% to $5.0
million for 2000, from $3.5 million in 1999, due primarily to higher client
margin balances.

Mutual Fund and Institutional. Our Mutual Fund and Institutional net
revenues after interest expense decreased 3.6% to $226.1 million for 2000, from
$234.6 million for 1999. Our investment advisory and administrative fees
decreased 2.3% to $207.0 million for 2000, from $211.8 million for 1999, due
primarily to a lower average asset base in the first six months of 2000
relative to the

comparable period in 1999. Commissions decreased 21.3% or $4.6 million as a
result of a decrease in transaction volume, while net interest income increased
by $1.2 million as a result of higher cash balances.

Professional Securities Services. Our Professional Securities Services net
revenues after interest expense increased 31.0% to $100.3 million for 2000,
from $76.6 million for 1999. Our commission income increased 17.3% or $5.3
million as a result of increased transaction volume. Principal transactions in
securities increased 34.7% to $10.7 million for 2000, from $7.9 million for
1999, primarily due to market making activity. Clearance fees increased 22.1%
to $13.5 million for 2000, from $11.1 million for 1999, due to increased
transaction volume from new and existing clients, while net interest income
increased 50.0% or $11.5 million, primarily due to higher margin balances.

Corporate. Our Corporate net revenues after interest expense decreased
152.4% to a net loss of $0.9 million in 2000, from net revenue of $1.6 million
in 1999, primarily as a result of a decrease in value of the corporate
investment in our mutual funds.

Operating Expenses. Our total operating expenses were $369.4 million in
2000, an increase of $69.9 million or 23.4%, compared to $299.5 million (as
adjusted for the $150.1 million of Reorganization and IPO Charges) in 1999.
Employee compensation and benefits increased to $245.4 million for 2000, up
$60.0 million or 32.4% from $185.4 million (as adjusted for the $139.9 million
of compensation expenses included in the Reorganization and IPO Charges) for
the same period in 1999. As a result of the Exchange, principals who previously
received distributions of capital began receiving compensation as employees.
Compensation that was not previously reported as such for employees who were
principals was $45.6 million for the year ended December 31, 2000. In addition,
salary and benefits and incentive compensation increased in 2000. Our
information technology expenses increased to $22.9 million for 2000, up $3.8
million or 19.6% from $19.2 million in 1999, due primarily to increases in
third party processing fees from increased securities transactions, as well as
increases in communication services and software licenses. We have committed
resources to launch a new website in 2001 to enhance clients' and prospects'
experience with us. Our rent and occupancy costs increased to $17.8 million for
2000, up $2.5 million or 16.2% from $15.3 million in 1999, primarily due to the
rental of additional space in the head office as well as the opening of three
new branch offices in 2000, coupled with the full year of rent expense for the
branch offices opened during 1999. Our professional fees increased to $11.2
million for 2000, up $1.9 million or 20.8% from $9.3 million in 1999, primarily
due to the impact of outsourcing mutual fund administration coupled with an
increase in employment agency fees. Other expenses increased to $22.7 million
for 2000, up $1.7 million or 8.3% from $20.9 million (as adjusted for the $10.1
million of other expenses included in the Reorganization and IPO Charges) in
1999, due primarily to increases in travel and entertainment and office
expenses.

Taxes. Our taxes increased to $96.6 million for the year ended December 31,
2000, up $56.9 million from $39.7 million (as adjusted for the $51.9 million
tax benefit resulting from the Reorganization and IPO Charges) for the same
period in 1999. Prior to the Exchange, Neuberger Berman, LLC did not pay United
States federal and state taxes because, as a limited liability company, it was
treated as a partnership for tax purposes, and our principals were taxed on
their proportionate share of Neuberger Berman, LLC's taxable income or loss.
Neuberger Berman Management Inc., as an S-Corporation, also did not pay United
States federal taxes prior to the Exchange, but was subject to certain state
and local taxes, and its shareholders were responsible for their own federal
income taxes. Effective with the Exchange, we became subject to federal, state
and local income taxes and we file a consolidated federal income tax return.
The 2000 provision for income taxes includes federal, state and local taxes at
our effective tax rate as a corporation of approximately 43%, less a financial
statement tax benefit of $9.8 million related to the change in the price of our
common stock from December 31, 1999 to June 30, 2000, in connection with our
Stock Incentive Plan. In March 2000, the

FASB issued FIN 44. We adjusted, based upon the price of our common stock at
the close of business on June 30, 2000, the carrying value of the deferred tax
asset that related to unvested shares in the Stock Incentive Plan. FIN 44
became effective on July 1, 2000, and now requires that the deferred tax asset
be determined by the compensation expense recognized for financial reporting
purposes. Accordingly, at June 30, 2000, we fixed the carrying value of our
deferred tax asset for unvested shares in our Stock Incentive Plan, based upon
the price of our common stock at the close of business that day.

1999 Compared with 1998

We reported net income before taxes of $273.4 million (as adjusted for the
$150.1 million of Reorganization and IPO Charges) for the year ended December
31, 1999, representing a decrease of $21.0 million or 7.1%, compared to the
year ended December 31, 1998. Our net revenues after interest expense were
$572.9 million for 1999, a decrease of $9.2 million or 1.6%, compared to 1998.
Our operating results for 1999 reflected overall increases in net revenues
after interest expense in Private Asset Management and Professional Securities
Services offset by a larger decrease in Mutual Fund and Institutional. The net
additions of assets under management and asset appreciation in the Private
Asset Management segment were more than offset by net asset withdrawals in our
Mutual Fund and Institutional segment.

Private Asset Management. Our Private Asset Management net revenues after
interest expense increased 9.3% to $260.1 million for 1999, from $237.9 million
for 1998. Our investment advisory fees increased 14.3% to $166.5 million for
1999, from $145.6 million in 1998, due to increased average assets under
management. Our commissions increased 0.5% to $90.1 million for 1999, from
$89.7 million during 1998. Net interest income increased 35.6% to $3.5 million
for 1999, from $2.6 million in 1998, due primarily to higher client margin
balances.

Mutual Fund and Institutional. Our Mutual Fund and Institutional net
revenues after interest expense decreased 12.7% to $234.6 million for 1999,
from $268.7 million for 1998. Our investment advisory and administrative fees
decreased 12.5% to $211.8 million for 1999, from $242.2 million in 1998, due to
a reduction in average assets under management resulting from net asset
withdrawals. Our commissions decreased $3.8 million or 15.0%, primarily due to
decreased share volume in the mutual fund business.

Professional Securities Services. The net revenues after interest expense
in our Professional Securities Services segment increased 2.4% to $76.6 million
for 1999, from $74.8 million for 1998. Principal transactions in securities
increased 43.9% to $7.9 million for 1999, from $5.5 million in 1998, as a
result of strong market maker trading. Our clearance fees increased 21.2% to
$11.1 million for 1999, from $9.1 million during 1998, due to increased market
activity. Our net interest income decreased 8.0% to $23.0 million for 1999,
primarily due to a combination of lower client margin balances and higher
interest charges associated with our subordinated liabilities, which were
outstanding twelve months in 1999, versus four months in 1998. The reduction in
net interest income was partially offset by decreased financing costs in the
fourth quarter of 1999, related to available proceeds from the IPO.

Corporate. Our corporate net revenues after interest expense increased
155.4% to $1.6 million for 1999, from $0.6 million for 1998, primarily as a
result of an increase in value of the corporate investment in our mutual funds.

Operating Expenses. Our total operating expenses were $299.5 million (as
adjusted for the $150.1 million of Reorganization and IPO Charges) in 1999, an
increase of $11.8 million or 4.1%, compared to 1998. Our employee compensation
and benefits increased to $185.4 million (as adjusted

for the $139.9 million of compensation expenses included in the Reorganization
and IPO Charges) for 1999, up $12.0 million or 6.9%, from $173.4 million for
1998. As a result of the Exchange, principals who previously received
distributions of capital began receiving compensation as employees. This
resulted in a $14.8 million increase in employee compensation and benefits in
the fourth quarter of 1999. Additionally, the number of employees in our
information services, marketing and trust services groups increased. These
increases were partially offset by a decrease in mutual fund portfolio manager
compensation, which was consistent with the trend of decreased investment
advisory and administrative fees. Our expenses for information technology
increased to $19.2 million for 1999, up $3.5 million or 22.6%, from $15.6
million for 1998, due primarily to increases in software licenses and
maintenance agreements, telecommunication and market data services. Our rent
and occupancy costs increased to $15.3 million for 1999, up $3.1 million or
25.7%, from $12.2 million for 1998, primarily due to additional leased office
space necessary to accommodate increased staffing levels. Our advertising and
sales promotion costs decreased to $9.3 million in 1999, down $5.4 million or
37.0%, from $14.7 million for 1998. This was primarily due to reduced
expenditures on media advertising and other promotional activities of $7.8
million in Mutual Fund and Institutional, partially offset by a new $1.5
million print campaign for Private Asset Management which was designed to
increase name recognition. Our distribution and fund administration costs
decreased to $19.4 million in 1999, down $3.4 million or 14.9%, from $22.8
million for 1998, due to a reduction of average mutual fund assets under
management, which have a direct effect on payments to third parties. Our
professional fees decreased to $9.3 million for 1999, down $2.3 million or
19.7%, from $11.6 million for 1998, due primarily to a net decrease in legal
and professional fees incurred in conjunction with the proposed IPO in 1998,
which was partially offset by increased consulting expenses for various
technology initiatives. Depreciation and amortization increased to $10.5
million for 1999, up $1.8 million or 20.8%, from $8.7 million for 1998, due
primarily to leasehold and information technology write-offs and increased
depreciation resulting from new capital expenditures on telecommunication and
technology related equipment. Other expenses increased to $20.9 million (as
adjusted for the $10.1 million of other expenses included in the Reorganization
and IPO Charges) for 1999, up $2.5 million or 13.6%, from $18.4 million for
1998, due primarily to increases in office expenses and travel and
entertainment.

Taxes. Our taxes increased to $39.7 million (as adjusted for the $51.9
million tax benefit resulting from the Reorganization and IPO Charges) in 1999,
up $30.2 million compared to 1998. Prior to the Exchange, Neuberger Berman, LLC
did not pay United States federal and state taxes because, as a limited
liability company, it was treated as a partnership for tax purposes, and our
principals were taxed on their proportionate share of Neuberger Berman, LLC's
taxable income or loss. Neuberger Berman Management Inc., as an S-Corporation,
also did not pay United States federal taxes prior to the Exchange, but was
subject to certain state and local taxes, and its shareholders were responsible
for their own federal income taxes. Effective with the Exchange, we became
subject to federal, state and local income taxes and we file a consolidated
federal income tax return. Our effective tax rate after the IPO was
approximately 43%.

Liquidity and Capital Resources

Our investment advisory business does not require us to maintain
significant capital balances. However, as a result of our broker-dealer
activities, our statements of financial condition include higher levels of
assets and liabilities than is typical for an investment adviser of our size.
Our broker-dealer activities provide financing, trade execution, clearing and
custody services for clients of the Private Asset Management, Mutual Fund and
Institutional and Professional Securities Services segments.

Our financial condition is highly liquid with the significant majority of
our assets readily convertible to cash. Our receivables from and payables to
brokers, dealers and clearing organizations represent either current open
transactions that settle within a few days or the activity of securities
lending that is collateralized and normally can be closed out within a few
days. Our receivables from and payables to

clients arise in the normal course of business in connection with cash and
margin securities transactions. These client receivables are secured by
securities held as collateral.

Our cash flows provided by operating activities totaled $65.3 million for
the quarter ended March 31, 2001, compared to cash flows used in operating
activities of $25.1 million for the same period in 2000. The change from the
first quarter of 2000 to the same period in 2001 was primarily attributable to
client activity in professional investor clearing services, a business
conducted within our Professional Securities Services segment. Our cash flows
provided by operating activities totaled $81.3 million, $252.2 million and
$255.7 million for the years ended December 31, 2000, 1999 and 1998,
respectively. The change from 1999 to 2000 was primarily attributable to a net
increase in receivables from brokers and dealers resulting from stock lending
activities. We expect that cash flows provided by operating activities will
continue to serve as the principal source of working capital in our near
future.

Our cash flows used in investing activities totaled $18.9 million for the
quarter ended March 31, 2001, compared to $7.4 million for the same period in
2000. The increase in the first quarter of 2001 was primarily due to the
acquisitions of Executive Monetary Management, Inc. and Fasciano Company, Inc.
Our cash flows used in investing activities totaled $29.4 million, $17.5
million and $11.9 million for the years ended December 31, 2000, 1999 and 1998,
respectively. The increase in 2000 was due to the acquisition of the private
asset management business of Delta Capital Management LLC and an increase in
capital expenditures for furniture, equipment and leasehold improvements.

Our cash flows used in financing activities totaled $10.4 million for the
quarter ended March 31, 2001, compared to $14.4 million for the same period in
2000. The decrease from the first quarter of 2000 was primarily attributable to
the issuance of common stock and lower treasury stock repurchases in the same
period in 2001. Our cash flows used in financing activities totaled $54.9
million, $194.0 million and $296.9 million for the years ended December 31,
2000, 1999 and 1998, respectively. The decrease in 2000 was primarily
attributable to the net effect from capital distributions and common stock
issuance in 1999 related to the IPO.

On May 4, 2001, in a transaction exempt from registration under the
Securities Act of 1933, as amended, we issued $175 million principal amount at
maturity of zero-coupon convertible senior notes due 2021, resulting in gross
proceeds of approximately $151 million. The net proceeds to us from the zero
coupon senior convertible note offering, after deducting commissions, discounts
and estimated expenses, were approximately $147 million. The issue price
represents a yield to maturity of 0.75% per year with an initial conversion
premium of 30%. Each $1,000 principal amount at maturity of the zero coupon
senior convertible notes is convertible into 9.2586 shares of our common stock
upon the occurrence of any of the following events:

. the closing prices of our stock on the NYSE exceed specified levels;

. we elect to redeem the convertible securities;

. we take certain corporate actions, such as the declaration of an
extraordinary dividend; and

. the credit rating of the zero coupon senior convertible notes by Standard
and Poor's is below investment grade.

We may redeem the convertible securities for cash on or after May 4, 2006, at
their accreted value. We may be required to repurchase the convertible
securities at the accreted value thereof, at the option of the holders on May 4
of 2002, 2004, 2006, 2011 and 2016. We may choose to pay for such repurchases
in cash or shares of our common stock. We will use the proceeds of the zero
coupon senior convertible note offering for general corporate purposes,
including share repurchases. We intend to use a portion of these proceeds to
repurchase shares from a limited number of our former principals as discussed
more fully above under "Prospectus Summary--The Concurrent Repurchase." In
connection with the convertible offering, we received a BBB+ rating from
Standard and Poor's. This credit rating enables us opportunistically to access
the capital markets for additional liquidity should the need arise.

It is our policy to monitor and evaluate continuously the adequacy of our
capital. We have consistently maintained net capital in excess of the
regulatory requirements for broker-dealers prescribed by the SEC and other
regulatory authorities. At March 31, 2001, our regulatory net capital exceeded
the minimum requirement by approximately $170 million. At December 31, 2000,
our regulatory net capital exceeded the minimum requirement by approximately
$179 million. Rule 15c3-1 imposes certain requirements that may have the effect
of prohibiting a broker-dealer from distributing or withdrawing capital and
requiring prior notice to the SEC for certain withdrawals of capital. In
addition, the debt covenants related to Neuberger Berman, LLC's outstanding $35
million subordinated note include certain covenants that limit the percentage
by which the aggregate unpaid principal amount of that subsidiary's
subordinated liabilities exceed its total regulatory capital and impose a
dollar amount below which its total ownership equity cannot fall. We believe
that our cash flow from operations, existing committed and uncommitted lines of
credit and the net proceeds from our recently completed zero coupon senior
convertible note offering will be more than adequate to meet our anticipated
capital requirements and debt and other obligations as they come due.

Our Board of Directors has authorized repurchases of up to $125 million of
our common stock from time to time in open market and/or private purchases. The
acquired shares may be used for corporate purposes, including stock option
awards and shares issued to employees under our employee stock purchase plans.
As of May 31, 2001, we had repurchased 1,378,158 shares of common stock since
the inception of the program for an aggregate of approximately $51 million. We
used cash flows from operations to fund the purchases of these shares. In the
future, we may also use a portion of the net proceeds from our zero coupon
senior convertible note offering to fund additional repurchases under the
program.

Looking Ahead

During the year ending December 31, 2001, we intend to carry on our
strategic plan to grow our asset management business. We plan to continue to
take advantage of the growth opportunities in the high net worth market by
utilizing our expanded national sales force and by aggressively pursuing
additional investment management teams. In addition to adding investment
management teams, we will continue to evaluate, where appropriate, strategic
acquisitions of, or joint ventures with, companies that would add new product
and services offerings, investment capabilities or distribution channels.

Quantitative and Qualitative Disclosures About Market Risk

Our risk management policies and procedures have been established to
identify, monitor and manage risk continuously. The major types of risk that we
face include credit risk and market risk.

Credit risk is the potential for loss due to a client or counterparty
failing to perform its contractual obligations. In order to mitigate risk, our
policy is to monitor the credit standing of our clients and maintain collateral
to support margin loans to our clients.

A significant portion of our revenues is based upon the market value of
assets under management. Accordingly, a decline in the prices of securities
generally, or client withdrawals of assets under management, may cause our
revenues and income to decline.

Interest rate risk is the possibility of a loss in the value of financial
instruments from changes in interest rates. Our primary exposure to interest
rate risk arises from our interest earning assets (mainly securities purchased
under agreements to resell and receivables from brokers, dealers and clearing
organizations) and funding sources (bank loans, subordinated liabilities and
payables to brokers, dealers and clearing organizations).

Equity price risk generally means the risk of loss that may result from the
potential change in the value of a financial instrument as a result of absolute
and relative price movements, price volatility or changes in liquidity, over
which we have no control. Our market making activities expose our capital to
potential equity price risk. To mitigate this risk, we impose strict investment
limits on both the trading desk and individual traders. Moreover, our monthly
average net long position for our market making activities was $1.3 million
during the quarter ended March 31, 2001 and $2.1 million during the quarter
ended March 31, 2000. Our monthly average net long position for our market
making activities was $1.4 million during the year ended December 31, 2000 and
$2.0 million during the year ended December 31, 1999.

BUSINESS

Overview

Neuberger Berman, with its subsidiaries, is an investment advisory firm
with $59.2 billion in assets under management as of May 31, 2001. For more than
60 years, the firm and its predecessor companies have provided clients with a
wide array of investment products, services and strategies. We conduct our
business through our subsidiaries, including Neuberger Berman, LLC and
Neuberger Berman Management Inc., both of which are registered investment
advisers and broker-dealers. Neuberger Berman, LLC is also a member of the
NYSE. As of June 5, 2001, we conducted our business from 18 offices in 16
cities.

We were founded in 1939 to be a premier provider of investment products and
services to high net worth individuals. We have built upon the qualities that
have made us successful in the high net worth market to establish a strong
presence in the mutual fund and institutional marketplaces, and to provide
estate planning and trust services through several trust company subsidiaries.
Our clients include individuals, institutions, corporations, pension funds,
foundations and endowments.

In October 1999, we completed an IPO of our common stock. As of May 31,
2001, our former principals and their affiliates and our employees held
approximately 84% of our common stock. After giving effect to this offering and
our concurrent repurchase of shares of our common stock described below, they
would have held approximately 76% of our outstanding common stock as of that
date (74% assuming the exercise in full of the underwriters' over-allotment
option).

Recent Developments

In December 2000, we completed the acquisition of the private asset
management business of Delta Capital Management LLC, which added approximately
$536 million to our assets under management as of December 31, 2000.

During 2000, we opened three new sales offices in Houston, Philadelphia and
Tampa; and in June of 2001, we opened a sales office in Washington, D.C. We
increased our national sales force of Client Consultants, from 28 professionals
at the end of 1999 to 38 as of December 31, 2000. This national sales force
generated $807 million in new assets under management in 2000 and $400 million
in new assets under management in the first quarter of 2001.

During the first quarter of 2001, we added three experienced money
management teams from other institutions, which added approximately $1.5
billion in assets under management as of March 31, 2001.

We completed the acquisition of Executive Monetary Management, Inc.
("EMM"), a wealth management firm for high net worth individuals, in the first
quarter of 2001, at which time EMM became a wholly owned subsidiary of
Neuberger Berman Inc. As of March 31, 2001, clients for whom EMM performs
various services had in the aggregate approximately $1.7 billion of investable
assets. EMM has a strong following among senior executives and leaders within
the entertainment, finance and legal communities. We expect our resources to
allow EMM to expand its products and services, as well as its client base. In
turn, we believe EMM will strengthen our presence in the highly specialized
market of upper echelon wealth.

In January 2001, we received a national bank charter and opened the
Neuberger Berman National Trust Company, headquartered in Seattle, Washington.
We believe that the combination of our trust capabilities, our clearing
capabilities and information systems, and our money management expertise will
enhance our ability to attract new clients, retain existing clients' assets and
cross-sell products and services.

Additionally, we continue the ongoing program of diversification in our
mutual fund business. In March 2001, we acquired the assets of Fasciano
Company, Inc., an investment manager which, through Michael Fasciano, managed
the Fasciano Fund, a small-cap blend mutual fund. As of March 31, 2001, the
Fasciano Fund had $192 million in assets.

Asset Management and Investor-Related Trends

Managing wealth is one of the fastest growing segments of the financial
services industry. According to the Merrill Lynch/Gemini Consulting World
Wealth Report 2001, the high net worth market in North America, defined as
individuals with more than $1 million in liquid financial assets, totaled $8.8
trillion in 2000 and is expected to grow at an annual compound growth rate of
8.1% through 2005, reaching $13.0 trillion.

We believe the following factors impacting investor behavior will be key
drivers of this growth:

. Current market volatility has led self-directed individuals to an
increased appreciation of the value of professional investment advice.

. High net worth clients are expanding their requirements of financial
service firms to provide comprehensive wealth management services
including objective investment policy design, manager selection and
oversight, and family office administration in addition to investment
advice.

. As affluent baby boomers age, they have an increasing awareness of the
need to manage and preserve wealth, as well as to provide for the future
through appropriate estate planning for the transfer of wealth across
generations.

. The public has become increasingly sophisticated due to the vast amount
of investment-related information that is now available through the media
and the Internet. As investors become more adept at employing new
information technologies, they are requiring financial service providers
to create value added services such as user friendly tools that
facilitate an efficient and organized window to this wealth of
information as well as real-time access to their personal account
information.

In addition to these investor-related trends, we have observed the
following changes affecting the general profile of the financial services
industry in the United States:

. The industry is refocusing its distribution strategies from a
transactional orientation to one of cultivating client relationships
built around fee-based products and services.

. Recently enacted tax legislation, which allows for increased
contributions to retirement accounts, will accelerate the growth of
retirement savings. In addition, investing these assets will emphasize
the need for a wide range of money management products to be distributed
through broad and varied distribution channels.

. As a result of increased access to information once generally limited to
the financial professional, clients now demand portfolio diversification
and asset allocation, which until recently were considered an option, not
an imperative. This has led many firms to embrace open architecture
structures such as wrap products that allow diversification through

customized asset allocation models that are then realized through "best
of breed" products. Moreover, both individual and institutional investors
are no longer satisfied with research with an underlying bias. We believe
that they want objective research that is not compromised by other
institutional relationships.

. Technology and the increasingly global outlook of world economies have
created opportunities to both transact business and form strategic
alliances across borders with growing ease. As this globalization
evolves, more clients are embracing the advice of investment
professionals to include global and international investments as part of
a sound diversified portfolio.

We believe we are well positioned to meet investor expectations and deliver
the products and services that will differentiate us in the marketplace and
enable us to capitalize on the potential growth in assets under management
these trends may yield.

Our Strategy

Capitalize on Opportunities in the Growing High Net Worth Market. With our
brand name, the broad spectrum of our investment styles and our commitment to
personalized service, we believe that we are well positioned to take advantage
of growth in the high net worth market. Our principal initiatives to generate
growth are:

. Grow Assets Under Management Through Expanded National Sales Force.
Having expanded our national sales force to 38 professionals and
increased the number of our regional offices to 13, we seek to continue
to grow assets under management through this experienced and larger sales
force. In 1999 and 2000, our national sales force generated $640 million
and $807 million, respectively, of assets under management. For the first
quarter of 2001, our sales force added $400 million in new assets under
management.

. Selectively Continue to Add Experienced Money Management Teams Through
Direct Hiring and Acquisitions. In the first quarter of 2001, three
experienced money management teams joined our firm. They have added
approximately $1.0 billion of assets under management to our Private
Asset Management segment and approximately $500 million of institutional
equity separate account assets to our Mutual Fund and Institutional
segment. In December 2000, we completed the acquisition of the private
asset management business of Delta Capital Management. By continuing to
add experienced money management teams, we believe we will expand our
investment capabilities and continue to increase our assets under
management.

. Build Our Wealth Management Business. We seek to promote asset retention
from generation to generation through our trust companies and to provide
related products and services in the highly specialized market of upper
echelon wealth. In the first quarter of 2001, we received a national bank
charter and established our national trust company, and also acquired
EMM.

. Defined Contribution Plan Administrators. We seek to establish new
relationships with defined contribution plan administrators. With
Congress' passage of the new tax bill, which

provides for increased contributions to retirement accounts, we would
expect growth from our existing relationships. As of March 31, 2001, we
had strategic alliances with 84 administrators of defined contribution
plans.

. Further Diversify Product and Service Offerings. We continue to seek to
complement our existing product offerings through the internal
development or acquisition of new investment capabilities. In the past,
we have relied primarily on our domestic equity products. Currently we
offer equity, international equity, balanced, domestic and international
fixed income and money market products. Historically, we have primarily
followed the value style of investing, but we now have portfolio managers
who follow growth or blended styles of investing. In March 2001, we
completed the acquisition of the assets of Fasciano Company, Inc., which
was the investment advisor for the Fasciano Fund. In a related
transaction, that fund reorganized into the Neuberger Berman Fasciano
Fund, a small-cap blend fund, which at closing had approximately $186
million in assets under management. We believe a broader array of
products will increase our ability to obtain additional assets under
management by attracting new clients and through cross-selling to
existing clients.

Continue to Grow Professional Securities Services. Using our
infrastructure, net revenues after interest expense of our Professional
Securities Services segment have grown by 34% from year-end 1998 to year-end
2000. We seek to continue to leverage our asset management infrastructure to
provide services to the professional investment community without a
commensurate increase in expenses.

. Increase the Number of Correspondent Clearing and Prime Brokerage
Clients. We view the Correspondent Clearing and Prime Brokerage Client
business as an incremental revenue opportunity, and will continue using
our advanced systems to provide correspondent clearing and prime
brokerage services to the professional investment community. Our
dedicated Marketing Group continues to target high quality, established,
registered investment advisors and hedge funds, as well as broker-dealers
with similar clientele to ours.

. Increase Sales of Research. Our dedicated Research Group continues to
provide its independent research reports to our Private Asset Management
and Mutual Fund and Institutional businesses, and makes these reports
available to third-party investment managers, who generally place trades
through us if they decide to buy or sell securities based upon our
research. Because we are not an investment bank, we believe that our
analysts' reports are unbiased.

Pursue Strategic Acquisition and Joint Venture Opportunities. In addition
to adding investment teams, we will evaluate strategic acquisitions of, or
joint ventures with, companies that would add new products and services,
investment capabilities or distribution channels for our clients. It is our
intent that transactions that we consummate be both strategic and accretive to
earnings.

Business Segments

Our principal businesses include:

. Private Asset Management

. Mutual Fund and Institutional

. Professional Securities Services

A fourth segment, "Corporate", was introduced during the fourth quarter of
2000, to reflect certain corporate results that were previously allocated
primarily to our Professional Securities Services segment.

We derive our revenues primarily from investment advisory and
administrative fees, which are based on assets under management. Our fee
revenue is supplemented by commissions and by income from our Professional
Securities Services segment. We believe our business has attractive margins for
several reasons:

. the majority of our assets under management are held in equity accounts,
which carry higher fees than fixed-income accounts;

. 58.2% of our pre-tax earnings in 2000 and 61.3% of our pre-tax earnings
in the first quarter of 2001 were derived from our higher-margin Private
Asset Management segment; and

. we have effectively leveraged our franchise and infrastructure to enhance
profitability by developing complementary businesses such as
correspondent clearing and prime brokerage services.

Private Asset Management

Our Private Asset Management segment provides customized investment
management services for high net worth individuals, families and smaller
institutions. It represented 58.2% of net income before taxes in 2000 and 61.3%
of net income before taxes in the first quarter of 2001.

Assets under management in this segment were $22.8 billion as of March 31,
2001, including assets managed for clients of the Trust Companies. In the first
quarter of 2001, we experienced net cash inflows of $1.4 billion for our
Private Asset Management segment, which includes approximately $1.0 billion
from three experienced money management teams that joined us during the
quarter, and increased sales by our sales force. These net cash inflows were
partially offset by $1.1 billion of market depreciation during the quarter. Net
revenues after interest expense for 2000 were $290.7 million. This included
$94.0 million in commission revenue, derived principally from listed equity
trades executed as broker, on behalf of clients. Net revenues after interest
expense for the first quarter of 2001 were $75.9 million, including $23.3
million in commission revenue. In this segment, we managed approximately 14,500
accounts, with an average relationship size of $3.8 million, as of March 31,
2001.

Private Asset Management includes three areas:

. Money Management

. Advisory Services

. Trust and Wealth Management Services

Money Management. Since our founding, we have specialized in personalized
money management for high net worth investors. Our mission is to provide our
clients with the highest caliber investment expertise, supported by outstanding
personal service. Unlike many investment firms, we do

not assign clients to a model portfolio. We tailor each client's portfolio
individually, based on investment objectives, planning needs, and risk
tolerance. We believe this strategy is best for clients, and it also increases
our ability to attract experienced, talented money managers. Our money managers
have, on average, more than 25 years of investment experience, and each is free
to pursue his or her investment style, subject to compliance oversight. The
Private Asset Management segment has enjoyed long-term client loyalty,
sometimes spanning several generations.

Our money managers use a broad spectrum of investment styles, including
growth and value for equities, fixed-income and international. They accommodate
clients with broadly different objectives or special needs, such as investment
restrictions or large holdings of stock options. As of March 31, 2001, we had
66 money managers in our Private Asset Management segment working in 30 teams.

We vigorously seek to expand our assets under management through internal
growth and new clients, as well as through the hiring of experienced money
management teams and acquisitions of money management firms. We believe that
the acquisition of the private asset management business of Delta Capital
Management LLC and the acquisition of EMM, plus the introduction of Neuberger
Berman National Trust Company, will increase our ability to expand assets under
management. We have hired three teams of senior money managers in the first
quarter of 2001. We intend to continue to seek to hire senior money managers
and to pursue acquisitions, where appropriate.

In 2000, we launched an Internet account access feature for Private Asset
Management clients. This secure, password-protected site allows clients to view
their account statements online, and to make this information available to
accountants or other trusted advisors. We believe a robust Internet site is an
increasingly important part of our customer service strategy. Accordingly, we
are redesigning and upgrading our website, and expect to launch the new site in
2001.

Advisory Services. We have a national sales force, which is composed of
Client Consultants. It is dedicated to growing and supporting our Private Asset
Management segment, including our money managers and Trust Companies. Our
Client Consultants attract new clients and work with existing clients as
liaisons to our money managers. In 2000, we significantly increased the number
of our Client Consultants, as well as their geographic penetration. Our Private
Asset Management Advisory Services group currently includes 38 professionals
supported by 41 client service administrators, working in New York and regional
offices in Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami,
Philadelphia, San Francisco, Tampa, Washington, D.C. and West Palm Beach.

Our Client Consultants are highly trained professionals and their average
industry experience is 16 years. They work closely with our clients to develop
customized asset allocation, trust services, estate and tax planning
strategies. Our Client Consultants also frequently work with our clients'
accountants and attorneys as part of a financial advisory team, and they
cultivate relationships with these professional advisors. New assets generated
by our national sales force grew from $640 million in 1999 to $807 million in
2000. For the first quarter of 2001, our sales force added $400 million in new
assets under management.

Trust and Wealth Management Services. The Private Asset Management segment
also includes Neuberger Berman National Trust Company, for which we received a
national bank charter in January 2001, as well as trust companies in New York,
Delaware and Florida. Our trust companies integrate our investment management
expertise with a wide variety of services for high net worth individuals,
wealthy families and family offices. These services include:

. Retirement, Gift and Estate Tax Planning

. Trust Administration

. Investment Policy Design, Manager Selection and Oversight

. Executor Services

. Charitable Gift Planning

. Retirement Plans and IRA Administration

Our Trust Companies provide multi-jurisdictional trust, partnership and
estate administration services. They oversee and monitor investments by
affiliated and non-affiliated portfolio managers. Our Trust Companies deliver a
broad range of trustee services for employee benefit plans of corporations and
other for-profit institutions. Through our Trust Companies we also provide
investment and administration services for charities' planned giving programs.

In connection with the establishment of our National Trust Company, we have
hired several senior executives. In cooperation with our expanded national
sales force, we intend to market our trust capabilities more aggressively in
2001.

Mutual Fund and Institutional

Our Mutual Fund and Institutional segment generated net revenues after
interest expense of $226.1 million, which represented 36.7% of our net revenues
after interest expense in 2000. For the first quarter of 2001, this segment
generated net revenues after interest expense of $55.2 million, which
represented 35.6% of our net revenues after interest expense for the quarter.

Despite volatility in the securities markets in 2000, our assets under
management in this segment increased by $116 million from December 31, 1999 to
$33.0 billion as of December 31, 2000. We experienced net cash outflows for our
Mutual Fund and Institutional segment of $1.2 billion in 2000. The outflows
occurred almost entirely in the first quarter, with most of it coming from one
sector, the traditionally lower margin institutional fixed-income separate
accounts business. Cash flows from our Mutual Fund and Sub-advised Account
business were positive by $546 million for 2000.

Assets under management in this segment were $32.0 billion as of March 31,
2001. During the first quarter of 2001, we experienced net cash inflows of $905
million for our Mutual Fund and Institutional segment, which included
approximately $500 million of institutional equity separate account assets
related to the addition of a money management team and $192 million related to
the acquisition of the assets of Fasciano Company, Inc. These net cash inflows
were more than offset by approximately $1.9 billion of market depreciation in
the first quarter of 2001, primarily in our mutual fund and sub-advised account
business.

The mutual funds and portfolios in this segment cover a large range of
asset types, investment styles and market capitalization ranges. These include
large-cap, mid-cap and small-cap equity products, incorporating value, growth
and blend investment styles as well as international and socially responsive
products. Also in this business segment we offer balanced, fixed-income and
money market products. We make our funds available directly to investors,
without a sales load, and through third parties and sub-advisory relationships.

Mutual Fund and Institutional includes three areas:

. Mutual Fund and Sub-advised Accounts

. Institutional Separate Accounts (Equity and Fixed-Income)

. Consultant Services Group (Wrap accounts)

Mutual Fund and Sub-Advised Accounts. As of March 31, 2001, we managed a
total of $18.3 billion in assets in Mutual Funds and Sub-advised Accounts. We
currently manage 27 mutual funds (the "Funds") as both adviser and sub-adviser
based on 27 investment portfolios that span the range of our investment
strategies. We also acted as sub-adviser for 17 additional mutual funds for
non-affiliated financial services companies. Net revenues after interest
expense for our Mutual Fund and Sub-advised Account business were approximately
$158.0 million in 2000 and approximately $39.0 in the first quarter of 2001,
consisting primarily of investment advisory and administrative fees and
commissions. In addition to advisory and sub-advisory fees, we also derive
revenues from administrative and service fees for accounting services, general
mutual fund administration (such as coordinating board meetings, compliance
programs and prospectuses, annual and semi-annual reports) and shareholder
services. Approximately 52% of the commissions paid by the Funds in 2000 were
paid to Neuberger Berman, LLC for executing listed equity trades as broker.

In 1999 and 2000, we introduced new mutual funds and portfolio products.
Building upon our goal to diversify the types of mutual funds that we offer, we
launched the Neuberger Berman Technology Fund in 2000, which is managed by our
Boston-based Growth Equity Group. In 1999, we launched the Century Fund, a
large-cap growth fund, and the Regency Fund, a mid-cap value fund. We launched
the Neuberger Berman Fasciano Fund, a small-cap blend mutual fund, at the end
of the first quarter of 2001.

We offer 19 of our Funds directly to the public with no sales charge. These
include growth, value and blend investment styles across all capitalization
ranges, as well as international, socially responsive and fixed-income
portfolios. We managed assets in direct-sold no load mutual funds that totaled
$9.7 billion as of March 31, 2001.

We also make our Funds available through mutual fund supermarkets,
broker-dealers, banks and most recently through our Internet site, where mutual
fund investors can access account information and buy, sell and exchange Fund
shares. The site also has Fund prospectuses and applications, daily share
prices and performance, as well as articles and educational materials. We
believe a dynamic Internet site is an increasingly important part of our
customer service strategy. We are redesigning and upgrading our website, and
anticipate launching the new site in 2001.

Strategic alliances are an increasingly important distribution channel. As
of March 31, 2001, we had alliances with 84 administrators of defined
contribution plans (such as 401(k), 403(b) and nonqualified deferred
compensation plans). These alliances allow us, as investment adviser, and these
administrators, as record-keepers and plan participant service providers, to
perform the task each of us is best suited to carry out. Defined contribution
plan assets under management in our Funds were $4.0 billion as of March 31,
2001.

We also had relationships with 41 insurance companies that offer variable
annuity and variable life insurance products that may be invested, at the
direction of policy holders, in certain of our Funds. As of March 31, 2001,
assets under management in our Mutual Fund and Sub-advised Account business
included $2.2 billion in assets related to these insurance products.

During 2000, the operational structure of most of our Funds was reorganized
to realize certain efficiencies and cost savings. The multi-class structure our
Funds adopted is common in the mutual

fund industry. This reorganization did not alter any of the Funds' investment
programs. The remainder of our Funds reorganized in February 2001.

In addition, assets under management in sub-advised funds for
non-affiliated financial services companies grew from $1.7 billion at December
31, 1999 to $2.4 billion at March 31, 2001. Our continuing efforts to expand
this business have been successful, and we have established relationships with
some of the leading financial services companies.

In July 1999, we launched the Fund Advisory Service, which is designed for
the relatively affluent investor and the retirement market. This discretionary
investment advisory program offers professional portfolio management and
consolidated record-keeping to mutual fund investors seeking to build and
monitor a customized portfolio of mutual funds from well-known fund groups,
including our own Funds and mutual funds managed by third parties.

When third parties make our products available to their clients, we
generally pay the third parties for record-keeping, sub-accounting or other
services that they perform with respect to assets that are invested, either
directly or indirectly, in the Funds.

Institutional Separate Accounts (Equity and Fixed-Income). As of March 31,
2001, we managed $11.7 billion of institutional separate account assets. We
manage over 380 institutional domestic, international and global equity,
balanced, fixed-income and cash management separate account portfolios. Net
revenues after interest expense for the institutional separate account business
were $60.4 million in 2000 and $14.4 million in the first quarter of 2001,
consisting primarily of investment advisory fees and commissions. Assets under
management in the separate accounts business dropped significantly in 2000, but
the loss was almost entirely accounted for by fixed-income accounts. We
attribute the decline to intense competition in this area and the decision by a
small number of our larger clients to shift to different fixed-income
strategies offered by other managers. Assets under management in the separate
accounts business increased slightly in the first quarter of 2001, evenly
distributed between fixed-income and equity accounts.

Some of our institutional separate account clients include: defined benefit
and defined contribution plans for corporations and municipalities,
Taft-Hartley plans, insurance companies, endowments and foundations, mutual
funds sponsored by third parties and hospital and health care organizations.

We offer 13 different equity investment styles to institutional investors,
including small-, small/mid-, mid- and large-capitalization value and growth
strategies. Additionally, we offer socially responsive, technology,
international, global and emerging market equity portfolios.

In fixed-income separate accounts, we offer 14 different investment
strategies for clients, including varieties of cash management, limited
maturity, high yield, municipal, broad investment grade, opportunistic core and
international. As bond managers, we are value oriented and use sector rotation
and security selection to earn incremental yield. We use active duration
management and volatility analysis to control risk, and, depending on market
conditions, to protect principal or add capital appreciation.

Consultant Services Group (Wrap Accounts). As of March 31, 2001, we managed
$2.0 billion of wrap account assets. We act as investment adviser to more than
5,600 accounts through 10 wrap account programs sponsored by third party banks
and brokerage firms. Net revenues after interest expense for the wrap account
business were $7.7 million in 2000 and $1.8 million for the first quarter of
2001, consisting primarily of investment advisory fees. Although assets under
management remained constant, the number of accounts and our revenues in this
business declined in 2000. We

believe the reduction in our fee revenue was due to the distribution leverage
of third party banks and brokerage firms. During the first quarter of 2001,
wrap accounts had net cash inflows of $205 million and for the first time
reached $2 billion in assets under management.

Wrap account programs, which are designed to meet the needs of individuals
and smaller institutions, offer comprehensive investment management services
under a single fee structure covering all charges, including investment
management, brokerage, custody, record-keeping and reporting.

We have relationships with three of the four largest sponsors of wrap
account programs. The sponsors offer mutual fund wrap programs as well as
separate account wrap programs. We provide portfolio management for both types
of programs, in a variety of investment styles, including value, growth and
international, in small-, mid- and large-capitalization stocks. We formed some
new relationships with sponsors in 2000, and intend to keep seeking new
relationships, as well as to increase the variety of investment styles that we
offer through this channel.

Professional Securities Services

Our Professional Securities Services segment leverages our asset management
infrastructure to provide services to the professional investment community.
Our Professional Securities Services segment represented 14.9% of net income
before taxes in 2000 and 14.4% of net income before taxes in the first quarter
of 2001.

Our Professional Securities Service clients call upon us for trade
execution, clearing, custody, margin financing, portfolio reporting and trust
services, as well as consulting advice. We act as market maker for
approximately 150 securities traded primarily on the Nasdaq National Market
System. We also provide our research to about 200 outside investment managers.
Because these services are based upon the capabilities and resources developed
for our asset management businesses, we generally can provide these services at
a modest incremental cost. Net revenues after interest expense for Professional
Securities Services significantly increased to $100.3 million in 2000 from
$76.6 million in 1999. Net revenues after interest expense for Professional
Securities Services segment were $25.7 million in the first quarter of 2001.

Professional Securities Services includes three areas:

. Professional Investor Clearing Services

. Research Sales

. Other Activities

Professional Investor Clearing Services. As of March 31, 2001, we provided
prime brokerage services to 62 private investment partnerships, registered
investment advisers and family offices. We provided correspondent clearing
services to 13 introducing brokers. These services include trade execution,
custody, clearance and settlement, margin financing and the borrowing of
securities to meet short sale obligations, portfolio reporting and consulting
advice regarding communications and information technology required to operate
a small financial concern. In some instances, we provide our clients with the
use of a fully equipped office facility. A dedicated sales team markets these
services directly and through advertising in trade publications. We also seek
to cross-sell our other services to these clients, including research sales and
trust and custody services.

Professional Investor Clearing Services net revenues after interest expense
were $45.0 million for the year ended December 31, 2000 and $13.0 million for
the first quarter of 2001. These net revenues consisted primarily of
commissions, clearance fees and net interest income.

Research Sales. Our centralized research department regularly prepares and
updates research reports for our Private Asset Management and Mutual Fund and
Institutional businesses. Nine sales professionals in the research sales group
also make these research reports available to approximately 200 third-party
investment managers. If these third-party managers decide to buy or sell
securities based on this research, they usually place their trades through us,
although they have no obligation to do so. The research sales group also
includes eight traders who execute these brokerage transactions. Through our
corporate relationships, we participate as part of selling groups in public
offerings of securities (we do not participate in such offerings, however, for
our advisory clients). Research Sales net revenues after interest expense were
$19.3 million for the year ended December 31, 2000 and $4.5 million for the
first quarter of 2001. These net revenues consist primarily of commissions.

Other Activities. Professional Securities Services also includes market
making activities, custody and record keeping services and treasury management.
We act as market maker for approximately 150 securities traded primarily on the
Nasdaq National Market System, buying or selling such securities as principal.
We impose strict limits on the trading desk and the individual traders to
control our risk. We provide custody and record keeping services to clients of
our trust companies. We also generate net interest income by managing cash
available as a result of our broker-dealer activities. Net revenues after
interest expense for these activities were $36.0 million for the year ended
December 31, 2000 and $8.2 million for the first quarter of 2001. These net
revenues consist primarily of principal transactions in securities, net
interest income and custody income. In the first quarter of 2001, we hired a
team of seven individuals to help expand our global securities lending business
in order to better support the activities of our professional investor clearing
services clients.

Investment Process and Research

Our portfolio managers generally base their decisions on fundamental
research, attempting to make knowledgeable judgments about the investment
merits of industry groups and specific companies. Our centralized research
department supports all of our investment professionals. Organized primarily by
industry, our securities analysts are responsible for understanding
developments within the companies and industries they follow. To do this, they
meet with senior management of companies they follow and interview customers
and competitors of those companies. In some cases, they employ specialized
consultants and develop earnings and cash flow estimates. At March 31, 2001,
there were 14 analysts in the research department, supported by 19 associate
analysts. They follow more than 500 companies.

In addition to our centralized research department, many of our investment
groups employ dedicated analysts who focus on securities of particular interest
to their specific investment approach. Their research is augmented by an
established program of on-site visits between our portfolio managers and
analysts and the senior managements of corporations. Hundreds of such meetings
occurred in 2000. They provide the portfolio managers and analysts with
valuable insight and perspective into a company's business, management strategy
and financial prospects. We believe that our long-standing dedication to
unbiased, fundamental research distinguishes us from many of our competitors.
Ultimately, each money manager is responsible for stock selection, tax
sensitivity and the timing of purchases and sales of securities. This permits
the manager to adhere to his or her investment style and to respond quickly to
market opportunities or risks. This flexibility allows our money managers to do
what they believe is best for our clients, without the administrative delays of
a system where an investment committee dictates security selection.

Technology Initiatives

Technology is critical to our mission of superior investment performance
and excellent customer service. We invest in information systems and have also
launched a major Internet initiative, in each

case, to enhance clients' and prospects' experience with us. As part of this
initiative, we expect to launch a new website in 2001. The site's architecture
is based on a highly dynamic database of information that provides a different
experience for every user. Whether the user is a mutual fund investor or a high
net worth client or an institutional investor, the new website is designed to
present information appropriate to the user's needs, including account access,
investment information and new products or services that we provide. The site
will target existing clients and prospects for all of our core businesses. It
will also have content targeted to the financial advisors who work with our
clients' accounts. Each user will be invited to personalize the site to provide
the most relevant information. The unifying theme of the site will be our
commitment to personalized investing and excellent customer service. We have
committed resources to the creation of this website because we believe it will
keep us at the forefront of today's rapidly changing investment marketplace.

MANAGEMENT

Set forth below is information concerning our directors and executive
officers as of May 31, 2001.

Name Age Position
---- -- --------

Lawrence Zicklin.. 65 Chairman of the Board of Directors
Richard A. Cantor. 68 Vice Chairman of the Board of Directors
Marvin C. Schwartz 59 Vice Chairman of the Board of Directors
Jeffrey B. Lane... 58 President, Chief Executive Officer and Director
Nathan Gantcher... 60 Director
David W. Glenn.... 57 Director
Michael M. Kassen. 48 Executive Vice President, Chief Investment
Officer and Director
Arthur Levitt, Jr. 70 Director
Jon C. Madonna.... 58 Director
Robert Matza...... 44 Executive Vice President, Chief Operating
Officer and Director
Jack H. Nusbaum... 60 Director
Heidi L. Schneider 47 Executive Vice President and Director
Matthew S. Stadler 46 Senior Vice President and Chief Financial
Officer
Peter E. Sundman.. 41 Executive Vice President and Director

All directors are elected annually to serve until our next meeting of
stockholders and thereafter until their successors are elected and qualified.
Executive officers are appointed by and serve at the pleasure of our Board of
Directors. A brief biography of each director and executive officer follows.

Lawrence Zicklin has been the non-executive Chairman of the Board of
Directors of Neuberger Berman Inc. since October 1999. Mr. Zicklin served as
the Managing Principal and Chief Executive Officer of Neuberger Berman, LLC
from 1996 through October 1999, and Managing Partner of its predecessor from
1975 through 1996. He was a Director of Neuberger Berman Management Inc. from
1974 through February 2001. He joined our organization in 1969. Mr. Zicklin is
Chairman of the Board of Baruch College Fund and Chairman of the Board of
UJA/Federation of New York. He is also a Director of BZL Biologies, Inc. and
Liquidnet Inc.

Richard A. Cantor has been a non-executive Vice Chairman of the Board of
Directors of Neuberger Berman Inc. since October 1999. Mr. Cantor oversaw our
mutual fund and institutional business from 1991 through October 1999 and
served as Executive Principal of Neuberger Berman, LLC from 1996 through
October 1999. He was a Director of Neuberger Berman Management Inc. from 1988
through February 2001, and its Chairman from 1991 through May 2000. He joined
our organization in 1973.

Marvin C. Schwartz has been a Vice Chairman of the Board of Directors of
Neuberger Berman Inc. since October 1999. Mr. Schwartz joined our organization
in January 1961 and has been a senior portfolio manager in the Private Asset
Management business since 1967. Mr. Schwartz was a Director of Neuberger Berman
Management Inc. from December 1990 to April 1996.

Jeffrey B. Lane has been President and Chief Executive Officer of Neuberger
Berman Inc. and Neuberger Berman, LLC, and a Director of Neuberger Berman Inc.
since October 1999. He has been a Director of Neuberger Berman Management Inc.
since February 2001. Mr. Lane served as Chief Administrative Officer of
Neuberger Berman, LLC from July 1998 through October 1999. Mr. Lane was a
Director of Neuberger Berman Trust Company from June 1999 through November
2000. He was previously employed by Primerica Corp. (subsequently known as
Travelers Group Inc.) from February 1990 until July 1998, where he served in
several capacities, including President of Primerica Holdings

from February 1990 to February 1991, Vice Chairman of Smith Barney Inc. (then a
subsidiary of Primerica) from February 1991 through December 1995, and Vice
Chairman of Travelers Group from January 1996 to July 1998.

Nathan Gantcher has been a Director of Neuberger Berman Inc. since January
2001. Mr. Gantcher has been a private investor since October 1999. From 1997 to
September 1999, Mr. Gantcher served as Vice Chairman of CIBC World Markets.
From 1983 to 1997, Mr. Gantcher was employed by Oppenheimer & Co., Inc. where
he served in several capacities, including President, Chief Operating Officer
and Co-Chief Executive Officer. Mr. Gantcher is also a Director of
ClickSoftware, Inc. and Mack-Cali Realty, L.P.

David W. Glenn has been a Director of Neuberger Berman Inc. since December
1999. Mr. Glenn is currently Vice Chairman, President and Chief Operating
Officer of the Federal Home Loan Mortgage Corporation. He has been Vice
Chairman of the Federal Home Loan Mortgage Corporation since June 2000,
President since 1990 and Chief Operating Officer since November 1989. Mr. Glenn
has also been a Director of the Federal Home Loan Mortgage Corporation since
1990.

Michael M. Kassen is an Executive Vice President and the Chief Investment
Officer of Neuberger Berman Inc. and Neuberger Berman, LLC as well as a
Director of Neuberger Berman Inc., and has held those positions since October
1999. Mr. Kassen joined our organization in June 1990 as a portfolio manager.
He was a partner of Neuberger Berman, LLC from 1993 through 1996, when he
became a principal. In addition, he has been a Director of Neuberger Berman
Management Inc. since April 1996, and Chairman of that company in May 2000. Mr.
Kassen was Executive Vice President and Chief Investment Officer of Neuberger
Berman Management Inc. from November 1999 until May 2000, and held the office
of Vice President of that company from June 1990 until November 1999.

Arthur Levitt, Jr. has been a Director of Neuberger Berman Inc. since May
2001. Mr. Levitt is currently Senior Advisor to the Carlyle Group. From July
1993 to February 2001, Mr. Levitt was Chairman of the Securities and Exchange
Commission. Before joining the Securities and Exchange Commission, Mr. Levitt
owned Roll Call, a Washington D.C. newspaper that covers Capitol Hill. From
1989 to 1993, he served as the Chairman of the New York City Economic
Development Corporation, and from 1978 to 1989 he was the Chairman of the
American Stock Exchange. Prior to joining the AMEX, Mr. Levitt worked for 16
years on Wall Street. Mr. Levitt is also a Director of Bloomberg Ltd.

Jon C. Madonna has been a Director of Neuberger Berman Inc. since December
1999. Mr. Madonna is currently President of DigitalThink, Inc. as well as a
Director. He has been President of DigitalThink, Inc. since 2001 and a Director
since January 2000. From 1998 to December 2000, Mr. Madonna was President and
Chief Executive Officer of Carlson Wagonlit Travel. From 1997 to 1998, Mr.
Madonna was Vice Chairman of Travelers Group Inc. and Vice Chairman of
Travelers Property and Casualty. Mr. Madonna also served as Chairman and Chief
Executive Officer of KPMG Peat Marwick, USA from 1990 to 1996 and Chairman of
KPMG International from 1995 to 1997. Mr. Madonna is also a Director of
Tidewater, Inc.

Robert Matza has been an Executive Vice President and a Director of
Neuberger Berman Inc. and Neuberger Berman, LLC since October 1999. He has held
the position of Chief Operating Officer of both companies since January 2001,
and was Chief Administrative Officer of both companies from October 1999 until
January 2001. Mr. Matza has been the head of our Professional Securities
Services business since October 1999. Prior to joining our organization as an
Operations Principal in April 1999, Mr. Matza was Vice President and Deputy
Treasurer of Citigroup Inc. (formerly known as Travelers Group Inc.) from
October 1998 to April 1999, and Vice President and Treasurer of Travelers Group
Inc. from July 1996 to October 1998. Mr. Matza was previously employed by
Lehman Brothers Inc. and Lehman Brothers Holdings Inc. where he served in
several capacities, including Chief Financial Officer

and Member of the Corporate Management Committee of Lehman Brothers Holdings
Inc. from January 1994 to July 1996, Chief Financial Officer and a Director of
Lehman Brothers Inc. from January 1994 to July 1996, and Managing Director of
Lehman Brothers Inc. from 1992 to July 1996.

Jack H. Nusbaum has been a Director of Neuberger Berman Inc. since December
1999. Mr. Nusbaum is Chairman of the law firm Willkie Farr & Gallagher, where
he has been a Partner for more than 30 years. Mr. Nusbaum is also a Director of
W.R. Berkley Corporation, Pioneer Companies, Inc., Prime Hospitality Corp.,
Strategic Distribution, Inc., Hirschl & Adler Galleries, Inc. and The Topps
Company, Inc.

Heidi L. Schneider has been an Executive Vice President of Neuberger Berman
Inc. and Neuberger Berman, LLC, as well as a Director of Neuberger Berman Inc.
since October 1999, at which time she also became the head of our Private Asset
Management business. Mrs. Schneider has been Chairman of the Board of Directors
of Neuberger Berman National Trust Company since January 2001, Chairman of the
Board of Directors of Neuberger Berman Trust Company of Delaware since February
2000, and a Director of Neuberger Berman Trust Company, of which she was
Chairman of the Board of Directors from September 1999 until January 2001,
since September 1999. She joined our organization in January 1986 and, since
then, has directed our Private Asset Management national sales and client
service force.

Matthew S. Stadler has been a Senior Vice President and the Chief Financial
Officer of Neuberger Berman Inc., Neuberger Berman, LLC and Neuberger Berman
Management Inc., since August 2000. From November 1999 to August 2000, Mr.
Stadler served as Controller of Neuberger Berman, LLC. Mr. Stadler was
previously employed by National Discount Brokers Group from May 1999 until
October 1999, where he served as Senior Vice President and Chief Financial
Officer. From August 1994 to April 1999, Mr. Stadler was Senior Vice President
and Chief Financial Officer of Santander Investment Securities Inc.

Peter E. Sundman has been an Executive Vice President of Neuberger Berman
Inc. and Neuberger Berman, LLC, as well as a Director of Neuberger Berman Inc.
and Neuberger Berman Management Inc., and President of the latter entity since
October 1999. Mr. Sundman also has been head of the Mutual Fund and
Institutional business since October 1999. He was a Senior Vice President of
Neuberger Berman Management Inc. from January 1996 through October 1999. Mr.
Sundman joined our organization in February 1988, as Director of Institutional
Services, a position he held until January 1996.

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth as of May 31, 2001:

. the name of each director, executive officer, other 5% stockholder and
other selling stockholder;

. the number of shares and the percentage of common stock beneficially
owned by each such person before the offering and the concurrent
repurchase, if more than one percent;

. the number of shares of common stock being offered in this offering by
each such person and to be repurchased by us promptly following this
offering; and

. the number of shares and the percentage of common stock to be
beneficially owned by each such person after the completion of the
offering and the concurrent repurchase, if more than one percent.

For purposes of this table, we have assumed that 48,973,084 shares of
common stock are outstanding prior to the completion of this offering and the
concurrent repurchase and that 47,372,484 shares of common stock will be
outstanding after completion of this offering and the concurrent repurchase. In
determining the number of shares beneficially owned by each selling stockholder
after this offering and the concurrent repurchase, we have assumed that the
underwriters' option to purchase additional shares of common stock in this
offering is not exercised.

For purposes of this table, "beneficial ownership" is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, pursuant
to which a person or group is deemed to have "beneficial ownership" of any
shares of common stock that such person has the right to acquire within 60 days
after the date of this prospectus. For purposes of computing the percentage of
outstanding shares of common stock held by each person or group of persons
named below, any shares which such person or persons has the right to acquire
within 60 days after the date of this prospectus are deemed to be outstanding
but are not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.

The individuals who sell their shares of common stock to us in the
concurrent repurchase will not participate in this offering. The table below
does not include certain former principals of Neuberger Berman and their
affiliates and Neuberger Berman employees that are not either a director,
executive officer, other 5% stockholder or selling stockholder.

Shares Beneficially Shares Beneficially
Owned Before Owned After
Offering and Offering and
Concurrent Concurrent
Repurchase(1)(2) Number of Number of Repurchase(1)(2)
------------------ Shares Shares to be -----------------
Name Number Percent Offered Repurchased Number Percent
---- ---------- ------- ------- ----------- ------ -------

Directors and Executive
Officers
Lawrence Zicklin(3)(4).... 1,592,207 3.3% -- 377,587 1,214,620 2.6%
Richard A. Cantor(3)(5)... 1,476,589 3.0% -- 368,683 1,107,906 2.3%
Marvin C. Schwartz(3)(6).. 4,937,411 10.1% 572,321 -- 4,365,090 9.2%
Jeffrey B. Lane(3)(7)..... 576,031 1.2% 41,608 -- 534,423 1.1%
Nathan Gantcher(8)........ 314 * -- -- 314 *
David W. Glenn(9)......... 4,253 * -- -- 4,253 *
Michael M. Kassen(3)(10).. 1,209,131 2.5% -- 299,587 909,544 1.9%
Arthur Levitt, Jr.(8)..... 340 * -- -- 340 *
Jon C. Madonna(9)......... 4,253 * -- -- 4,253 *
Robert Matza(3)(11)....... 351,394 * 24,965 -- 326,429 *
Jack H. Nusbaum(9)........ 13,253 * -- -- 13,253 *
Heidi L. Schneider(3)(12). 625,712 1.3% 126,901 -- 498,811 1.1%
Peter E. Sundman(3)(13)... 349,707 * 62,413 -- 287,294 *
All Executive Officers and
Directors as a Group(14) 11,140,595 22.7% 828,208 1,045,857 9,266,530 19.6%
Other 5% Stockholders
Neuberger Berman
Employee Defined
Contribution Stock
Incentive Plan Trust(15) 4,264,344 8.7% 1,009,089 -- 3,026,828 6.4%
Other Selling
Stockholders(16)
Robert J. Appel........... 1,663,138 3.4% 199,720 -- 1,463,418 3.1%
Jeffrey Bolton(17)........ 515,033 1.1% 62,413 -- 452,620 *
Lawrence J. Cohn(18)...... 190,862 * 21,651 -- 169,211 *
Robert W. D'Alelio(19).... 378,173 * -- 52,145 326,028 *
Salvatore D'Elia(20)...... 171,918 * 19,693 -- 152,225 *
Michael N. Emmerman....... 228,096 * 21,636 -- 206,460 *
Gregory P. Francfort(21).. 728,562 1.5% 82,385 -- 646,177 1.4%
Howard L. Ganek(22)....... 975,265 2.0% 113,048 -- 862,217 1.8%
Robert I. Gendelman....... 506,233 1.0% 58,680 -- 447,553 *
Theodore P. Giuliano(23).. 380,451 * -- 52,994 327,457 *
Lee H. Idleman............ 213,658 * 14,022 -- 199,636 *
Alan L. Jacobs............ 333,992 * 34,951 -- 299,041 *
Kenneth M. Kahn........... 185,153 * 13,315 -- 171,838 *
Michael W. Kamen(24)...... 370,859 * -- 49,659 321,200 *
Mark P. Kleiman........... 728,843 1.5% 84,483 -- 644,360 1.4%
Lee P. Klingenstein(25)... 147,342 * 2,754 -- 144,588 *
Irwin Lainoff(26)......... 876,641 1.8% 108,289 -- 768,352 1.6%
Joseph R. Lasser(27)...... 222,082 * 25,742 -- 196,340 *
Richard S. Levine......... 437,638 * -- 58,000 379,638 *
Robert R. McComsey........ 426,882 * -- 242,344 184,538 *
Martin McKerrow(28)....... 269,185 * 30,857 -- 238,328 *
Martin E. Messinger(29)... 867,324 1.8% 100,536 -- 766,788 1.6%
Beth W. Nelson............ 782,762 1.6% 90,734 -- 692,028 1.5%

Shares Beneficially Shares Beneficially
Owned Before Owned After
Offering and Offering and
Concurrent Concurrent
Repurchase(1)(2) Number of Number of Repurchase(1)(2)
------------------ Shares Shares to be ------------------
Name Number Percent Offered Repurchased Number Percent
---- ---------- ------- ------- ----------- ------ -------

Harold J. Newman(30)...... 298,942 * 30,790 -- 268,152 *
Daniel P. Paduano(31)..... 680,085 1.4% 70,847 -- 609,238 1.3%
Leslie M. Pollack(32)..... 515,344 1.1% 63,659 -- 451,685 *
Janet W. Prindle.......... 787,369 1.6% 74,895 -- 712,474 1.5%
Kevin L. Risen(33)........ 324,001 * 37,365 -- 286,636 *
Daniel H. Rosenblatt(34).. 284,992 * 32,765 -- 252,227 *
Jennifer K. Silver(35).... 359,088 * 42,178 -- 316,910 *
Kent C. Simons............ 672,343 1.4% 22,512 -- 649,831 1.4%
R. Edward Spilka(36)...... 480,493 * 52,427 -- 428,066 *
Gloria H. Spivak.......... 188,357 * 21,220 -- 167,137 *
Fred Stein................ 279,237 * 32,368 -- 246,869 *
Eleanor Moore Sterne...... 309,390 * 33,287 -- 276,103 *
Stephanie J. Stiefel(37).. 282,345 * -- 46,750 235,595 *
The Strauss 1998 Trust(38) 227,249 * 33,916 -- 193,333 *
Richard J. Sweetnam Jr.... 379,419 * -- 52,851 326,568 *
Judith M. Vale(39)........ 779,975 1.6% 95,585 -- 684,390 1.4%
David I. Weiner(40)....... 546,686 1.1% 63,370 -- 483,316 1.0%
Dietrich Weismann(41)..... 2,019,016 4.1% 249,403 -- 1,769,613 3.7%
Leslie J. Werkstell....... 187,161 * 21,695 -- 165,466 *
Allan R. White III(42).... 325,102 * 37,478 -- 287,624 *
---------- ---- --------- --------- ---------- ----
Total.................. 36,931,625 75.4% 3,937,966 1,600,600 31,164,632 65.8%
========== ==== ========= ========= ========== ====

--------
* Less than 1%.
(1) Except as otherwise indicated, the people shown in this table have sole
voting and investment power with respect to all shares of our common stock
shown as beneficially owned by them, subject to community property laws
where applicable. Only one individual listed in this table has the right
to acquire shares of our common stock within 60 days through the exercise
of options.
(2) Certain of the Directors and Executive Officers hold shares of stock under
the Neuberger Berman Employee Defined Contribution Stock Incentive Plan
Trust. The Trust holds these shares for participants, which include
employees of Neuberger Berman and Directors of Neuberger Berman who are
not our employees or employees of our affiliates, in our Employee Defined
Contribution Stock Incentive Plan. The Trustee votes the shares of the
Trust in accordance with the instructions of the participants to whom
shares have been allocated. The right of a participant to receive shares
allocated to his or her account generally becomes vested, and the shares
become distributable to the participant, in three equal installments on
the second, third and fourth anniversaries of the allocation to the
participant, subject to the satisfaction of certain conditions.
(3) Each individual indicated is a former principal and is a party to the
Stockholders Agreement with Neuberger Berman. Under the Stockholders
Agreement, each former principal continuing in Neuberger Berman's employ
and his or her affiliates have agreed to vote his, her or its shares in
accordance with a majority of the shares held by all former principals and
affiliates who are subject to that agreement voting in a preliminary vote.
Mr. Cantor and Mr. Zicklin are not employed by us and are not subject to
the voting requirements of the Stockholders Agreement, but are subject to
all other provisions of the Stockholders Agreement.
(4) Includes (a) prior to the concurrent repurchase 768,525 shares held by
Zicklin Associates, L.P., with respect to which Mr. Zicklin has sole
voting and investment control as the sole stockholder of its sole general
partner, as to which he disclaims beneficial ownership, (b) 377,587 shares
to be sold by Zicklin Associates, L.P. in the concurrent repurchase, (c)
after the concurrent repurchase,

390,938 shares held by Zicklin Associates, L.P. and (d) 1,858 shares
awarded to all non-employee Directors in January 2000, held through our
Employee Defined Contribution Stock Incentive Plan Trust which vest in
three equal installments commencing October 8, 2001.
(5) Includes (a) prior to the concurrent repurchase 1,187,756 shares held by
Cantor Associates, L.P., with respect to which Mr. Cantor has sole voting
and investment control as the sole stockholder of its sole general
partner, as to which he disclaims beneficial ownership (b) 294,946 shares
to be sold by Cantor Associates, L.P. in the concurrent repurchase, (c)
after the concurrent repurchase, 892,810 shares held by Cantor Associates,
L.P. and (d) 1,858 shares awarded to all non-employee Directors in January
2000, held through our Employee Defined Contribution Stock Incentive Plan
Trust which vest in three equal installments commencing October 8, 2001.
(6) Includes (a) prior to the offering 1,917,397 shares held by Schwartz CS
Associates, L.P., and 1,917,397 shares held by Schwartz ES Associates,
L.P., in each case, with respect to which Mr. Schwartz has sole voting and
investment control as the sole general partner, (b) 286,160 shares and
286,161 shares offered by Schwartz CS Associates, L.P. and Schwartz ES
Associates, L.P., respectively in the offering, and (c) after the
offering, 1,631,237 shares and 1,631,236 shares held by Schwartz CS
Associates, L.P. and Schwartz ES Associates, L.P.
(7) Includes (a) 8,430 shares acquired under our Long-Term Incentive Plan in
lieu of a portion of a cash bonus, all of which shares are forfeitable and
restricted from transfer and sale until January 30, 2004 and (b) 31,394
shares acquired through the exercise of options awarded under our
Long-Term Incentive Plan, of which 26,089 shares are restricted from
transfer and sale until March 27, 2003.
(8) Shares issued in lieu of cash compensation with respect to Director's
fees, held through our Employee Defined Contribution Stock Incentive Plan
Trust which vest in three equal installments commencing January 18, 2003.
(9) Includes (a) 1,858 shares awarded to all non-employee Directors in January
2000, held through our Employee Defined Contribution Stock Incentive Plan
Trust which vest in three equal installments commencing October 8, 2001,
(b) 318 shares issued in lieu of cash compensation with respect to 2001
Director's fees, held through our Employee Defined Contribution Stock
Incentive Plan Trust which vest in three equal installments commencing
January 18, 2003, and (c) 1,077 shares acquired through the exercise of
options awarded under our Directors Stock Incentive Plan, of which 538
shares are restricted from transfer and sale until March 27, 2003.
(10) Includes (a) prior to the concurrent repurchase, 337,804 shares held by
Kassen Associates, L.P., with respect to which Mr. Kassen has sole voting
and investment control as the sole stockholder of its sole general
partner, (b) 52,000 shares to be sold by Kassen Associates, L.P. in the
concurrent repurchase, (c) after the concurrent repurchase, 285,804 shares
held by Kassen Associates, L.P., (d) 3,983 shares acquired under our
Long-Term Incentive Plan in lieu of a portion of a cash bonus, all of
which shares are forfeitable and restricted from transfer and sale until
January 30, 2004 and (e) 6,701 shares acquired through the exercise of
options awarded under our Long-Term Incentive Plan, of which 5,639 shares
are restricted from transfer and sale until March 27, 2003.
(11) Includes (a) 4,721 shares acquired under our Long-Term Incentive Plan in
lieu of a portion of a cash bonus, all of which shares are forfeitable and
are restricted from transfer and sale until January 30, 2004 and (b)
20,109 shares acquired through the exercise of options awarded under our
Long-Term Incentive Plan, of which 16,926 shares are restricted from
transfer and sale until March 27, 2003.
(12) Includes (a) 65,340 shares held by Steiger Associates, L.P., with respect
to which Mrs. Schneider has sole voting and investment control as the sole
stockholder of its sole general partner, (b) 1,896 shares acquired under
our Long-Term Incentive Plan in lieu of a portion of a cash bonus, all of
which shares are forfeitable and restricted from transfer and sale until
January 30, 2004, (c) 13,405 shares acquired through the exercise of
options awarded under our Long-Term Incentive Plan, of which 11,282 shares
are restricted from transfer and sale until March 27, 2003 and (d) 334
shares acquired through the Employee Stock Purchase Plan, which are
restricted from transfer and sale for one year from the date of
acquisition.

(13) Includes (a) prior to the offering, 130,788 shares held by Sundman
Associates, L.P., with respect to which Mr. Sundman has sole voting and
investment control as the sole stockholder of its sole general partner,
(b) 2,497 shares offered by Sundman Associates, L.P. in the offering, (c)
after the offering, 128,291 shares held by Sundman Associates, L.P., (d)
4,721 shares held through the our Long-Term Incentive Plan acquired in
lieu of a portion of a cash bonus, which are forfeitable and restricted
from transfer and sale until January 30, 2004 and (e) 20,109 shares
acquired through the exercise of options awarded under our Long-Term
Incentive Plan, of which 16,926 shares are restricted from transfer and
sale until March 27, 2003.
(14) Includes (a) prior to the offering, 20,273 shares held through our
Employee Defined Contribution Stock Incentive Plan Trust, (b) after the
offering, 17,148 shares held through the Employee Defined Contribution
Stock Incentive Plan Trust, (c) 3,321 shares held through the Directors
Stock Incentive Plan, (d) 168,766 shares held through our Long-Term
Incentive Plan, and (e) 334 shares held through the Employee Stock
Purchase Plan.
(15) The Neuberger Berman Employee Defined Contribution Stock Incentive Plan
Trust will sell 1,009,089 shares of our common stock in this offering on
behalf of 777 employees in accordance with such employees' instructions to
the Trust. The net proceeds from the sale of such shares shall be
distributed to the plan participants and/or applied to pay applicable
withholding taxes. A total of 1,237,516 shares held by the Trust were
scheduled to vest and become distributable to plan participants in October
2001. We will accelerate the vesting date of these shares to the date on
which this offering is completed. Of these 1,237,516 shares, the Trust is
selling 1,009,089 shares in this offering, with the remaining 228,427
shares being eligible for sale by plan participants following the
completion of this offering. However, we have provided that plan
participants may not transfer those shares during the 90-day period from
the date of this prospectus.
(16) These selling stockholders are former principals of Neuberger Berman and
their affiliates. Each individual listed below is a party to the
Stockholders Agreement with Neuberger Berman. Under the Stockholders
Agreement, each such former principal continuing in Neuberger Berman's
employ and his or her affiliates have agreed to vote his, her or its
shares in accordance with a majority of the shares held by all former
principals and affiliates who are subject to the Stockholders Agreement
voting in a preliminary vote.
(17) Includes (a) prior to the offering, 117,775 shares held by Bolton
Associates, L.P., with respect to which Mr. Bolton has sole voting and
investment control as the sole stockholder of its sole general partner,
(b) 15,603 shares offered by Bolton Associates, L.P. in the offering, and
(c) after the offering, 102,172 shares held by Bolton Associates, L.P.
(18) Includes (a) 2,360 shares acquired under our Wealth Accumulation Plan, in
lieu of a portion of a cash bonus, all of which shares are forfeitable and
restricted from sale and transfer until January 30, 2004, (b) 1,416
shares, acquired through the exercise of options awarded under our
Long-Term Incentive Plan, of which 1,191 shares are restricted from
transfer and sale until March 27, 2003, and 301 shares acquired through
our Employee Stock Purchase Plan which are restricted from transfer and
sale for one year from the date of acquisition.
(19) Includes 3,818 shares held through our Employee Defined Contribution Stock
Incentive Plan Trust which vest in three equal installments commencing
October 8, 2002.
(20) Includes 2,023 shares acquired under our Wealth Accumulation Plan, in lieu
of a cash bonus, all of which shares are forfeitable and restricted from
transfer and sale until January 30, 2004.
(21) Includes (a) prior to the offering, 151,465 shares held by Francfort 1998
Grantor Retained Annuity Trust, with respect to which Mr. Francfort, as
trustee, has sole voting control and shares investment control with
Patricia Francfort and Neuberger Berman Trust Company of Delaware, (b)
66,574 shares offered by Francfort 1998 Grantor Retained Annuity Trust in
the offering and (c) after the offering, 84,891 shares held by Francfort
1998 Grantor Retained Annuity Trust.
(22) Includes (a) prior to the offering, 53,959 shares held by Ganek
Associates, L.P., with respect to which Mr. Ganek has sole voting and
investment control as the sole stockholder of its sole general partner,
(b) 4,959 shares offered by Ganek Associates, L.P. in the offering and (c)
after the offering, 49,000 shares held by Ganek Associates, L.P.
(23) Includes 70,989 shares held by Giuliano Associates, L.P., with respect to
which Mr. Giuliano has sole voting and investment control as the sole
stockholder of its sole general partner.

(24) Includes (a) prior to the offering, 68,556 shares held by Kamen
Associates, L.P., with respect to which Mr. Kamen has sole voting and
investment control as the sole stockholder of its sole general partner,
(b) 9,356 shares offered by Kamen Associates, L.P. in the offering, and
(c) after the offering, 59,200 shares held by Kamen Associates, L.P.
(25) Includes (a) prior to the offering, 109,971 shares held by Klingenstein
Associates, L.P., with respect to which Mr. Klingenstein has sole voting
and investment control as the sole stockholder of its sole general
partner, (b) 2,754 shares offered by Klingenstein Associates, L.P. in the
offering and (c) after the offering, 107,217 shares held by Klingenstein
Associates, L.P.
(26) Includes (a) prior to the offering, 139,962 shares held by Lainoff
Associates, L.P., with respect to which Mr. Lainoff has sole voting and
investment control as the sole stockholder of its sole general partner,
(b) 108,289 shares offered by Lainoff Associates, L.P. in the offering and
(c) after the offering, 31,673 shares held by Lainoff Associates, L.P.
(27) Includes (a) prior to the offering, 205,187 shares held by Lasser
Associates, L.P., with respect to which Mr. Lasser has sole voting and
investment control as the sole stockholder of its sole general partner,
11,683 shares offered by Lasser Associates, L.P. in the offering, and (c)
after the offering, 193,504 shares held by Lasser Associates, L.P.
(28) Includes (a) prior to the offering, 55,360 shares held by McKerrow
Associates, L.P., with respect to which Mr. McKerrow has sole voting and
investment control as the sole stockholder of its sole general partner,
(b) 12,483 shares offered by McKerrow Associates, L.P. in the offering and
(c) after the offering, 42,877 shares held by McKerrow Associates, L.P.,
(d) 1,686 shares acquired under our Wealth Accumulation Plan in lieu of a
portion of a cash bonus, all of which shares are forfeitable and
restricted from transfer and sale until January 30, 2004, and (e) 1,300
shares held through our Employee Defined Contribution Stock Incentive
Plan, which are forfeitable, and vest in three equal installments
commencing October 8, 2002.
(29) Includes (a) prior to the offering, 446,845 shares held by Messinger
Associates, L.P., with respect to which Mr. Messinger has sole voting and
investment control as the sole stockholder of its sole general partner,
(b) 100,536 shares offered by Messinger Associates, L.P. in the offering,
and (c) after the offering, 346,309 shares held by Messinger Associates,
L.P.
(30) Includes (a) prior to the offering, 137,037 shares held by Newman
Associates, L.P., with respect to which Mr. Newman has sole voting and
investment control as the sole stockholder of its sole general partner,
(b) 24,965 shares offered by Newman Associates, L.P. in the offering and
(c) after the offering, 112,072 shares held by Newman Associates, L.P.
(31) Includes (a) prior to the offering, 592,285 shares held by Paduano
Associates, L.P., with respect to which Mr. Paduano has sole voting and
investment control as the sole stockholder of its sole general partner,
(b) 70,847 shares offered by Paduano Associates, L.P. in the offering, (c)
after the offering, 521,438 shares held by Paduano Associates, L.P. and,
(d) 390 shares (none of which are offered in the offering) owned by
Paduano Associates, Inc., of which Mr. Paduano is the sole stockholder.
(32) Includes (a) prior to the offering, 236,538 shares held by Pollack 1998
Grantor Retained Annuity Trust, with respect to which Mr. Pollack, as
trustee, has sole voting control and shares investment control with Yvonne
S. Pollack and Neuberger Berman Trust Company of Delaware, (b) 63,659
shares offered by Pollack 1998 Grantor Retained Annuity Trust in the
offering and (c) after the offering, 172,879 shares held by Pollack 1998
Grantor Retained Annuity Trust.
(33) Includes 1,990 shares acquired through the exercise of options awarded
under our Long-Term Incentive Plan, of which 1,653 shares are restricted
from transfer and sale until March 27, 2003.
(34) Includes 2,322 shares acquired through the exercise of options awarded
under our Long-Term Incentive Plan, of which 1,929 shares are restricted
from transfer and sale until March 27, 2003.
(35) Includes (a) 1,340 shares acquired under our Wealth Accumulation Plan in
lieu of a portion of a cash bonus, all of which shares are restricted from
transfer and sale until January 30, 2004, (b) 16,000 options awarded under
our Long-Term Incentive Plan which are exercisable within 60 days, and (c)
299 shares acquired under our Employee Stock Purchase Plan, which are
restricted from transfer and sale until one year from the date of
acquisition.

(36) Includes 83,588 shares held by Robert Edward Spilka 1998 Grantor Retained
Annuity Trust, with respect to which Mr. Spilka, as trustee, has sole
voting control and shares investment control with Linda Galarza Spilka and
Neuberger Berman Trust Company of Delaware.
(37) Includes (a) 22,658 shares held by Stiefel Associates, L.P., with respect
to which Ms. Stiefel has sole voting and investment control as the sole
stockholder of its general partner, (b) 2,845 shares acquired under our
Wealth Accumulation Plan in lieu of a portion of a cash bonus, all of
which shares are forfeitable and restricted from transfer and sale until
January 30, 2004, and (c) 1,762 shares acquired through the exercise of
options awarded under our Long-Term Incentive Plan, of which 1,483 shares
are restricted from transfer and sale until March 27, 2003.
(38) Includes (a) prior to the offering, 227,249 shares held by The Strauss
1998 Trust, with respect to which voting and investment control are shared
by Barbara Strauss and Neuberger Berman Trust Company of Delaware, as
trustees, (b) 33,916 shares offered by The Strauss 1998 Trust, in the
offering, and (c) after the offering, 193,333 shares held by The Strauss
1998 Trust.
(39) Includes 6,181 shares held through our Employee Defined Contribution Stock
Incentive Plan Trust, which vest in three equal installments commencing
October 8, 2002.
(40) Includes (a) prior to the offering, 50,660 shares held by Weiner 1998
Grantor Retained Annuity Trust, with respect to which Mr. Weiner, as
trustee, has sole voting control and shares investment control with Laurie
L. Weiner, Bintoar Palar and Neuberger Berman Trust Company of Delaware,
(b)20,804 shares offered by Weiner 1998 Grantor Retained Annuity Trust in
the offering and (c) after the offering, 29,856 shares held by Weiner 1998
Grantor Retained Annuity Trust.
(41) Includes (a) prior to the offering, 834,393 shares held by Weismann
Associates, L.P., with respect to which Mr. Weismann has sole voting and
investment control as the sole stockholder of its sole general partner,
(b) 53,496 shares offered by Weismann Associates, L.P. in the offering and
(c) after the offering, 780,897 shares held by Weismann Associates, L.P.
(42) Includes 2,125 shares acquired through the exercise of options awarded
under our Long-Term Incentive Plan, of which 1,788 shares are restricted
from transfer and sale until March 27, 2003.

DESCRIPTION OF CAPITAL STOCK

The following description of our capital stock does not purport to be
complete and is qualified in its entirety by reference to applicable Delaware
law and to the provisions of our certificate of incorporation and by-laws.
Copies of the forms of certificate of incorporation and by-laws have been
incorporated by reference as exhibits to our Annual Report on Form 10-K for the
calendar year ended December 31, 2000.

Our authorized capital stock consists of 255,000,000 shares, each with a
par value of $.01 per share, of which:

. 250,000,000 are designated as common stock; and

. 5,000,000 are designated as preferred stock.

Common Stock

As of May 31, 2001, there were 48,973,084 shares of common stock
outstanding.

Voting Rights

Each holder of common stock is entitled to one vote per share on all
matters to be voted on by stockholders. Holders of common stock are not
entitled to any cumulative voting rights.

Dividend Rights

Subject to the preferential rights of any holders of any outstanding series
of preferred stock and restrictions set forth in our credit facilities and
restrictions, if any, imposed by other indebtedness outstanding from time to
time, the holders of common stock will be entitled to such dividends and
distributions, whether payable in cash or otherwise, as may be declared from
time to time by our Board of Directors from legally available funds. See "Price
Range of our Common Stock and Dividends."

Other Rights

Upon our liquidation, dissolution or winding up, the holders of shares of
common stock would be entitled to share pro rata in the distribution of all of
our assets remaining available for distribution after satisfaction of all of
our liabilities and the payment of the liquidation preference of any
outstanding preferred stock. The holders of common stock have no preemptive or
other subscription rights to purchase shares of common stock, nor are they
entitled to the benefits of any sinking fund provisions. No share of common
stock issued in connection with or outstanding prior to the offerings is
subject to any further call or assessment.

Preferred Stock

Our certificate of incorporation authorizes 5,000,000 shares of preferred
stock, none of which are issued. Our Board of Directors has the authority to
issue shares of preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any
unissued shares of preferred stock and to fix the number of shares constituting
any series and the designations of such series, without any further vote or
action by the stockholders. We have no present plans to issue any of the
preferred stock.

Certain Effects of Authorized But Unissued Stock

We believe that the ability of our Board of Directors to issue one or more
series of preferred stock will provide us with flexibility in structuring
possible future acquisitions and in meeting other corporate needs that might
arise. Our Board of Directors, without stockholder approval, can issue
preferred stock with voting and conversion rights which could adversely affect
the voting power of the holders of common stock. Although our Board of
Directors has no current intention of doing so, it could issue one or more
series of preferred stock that could, depending on the terms of such series,
impede the completion of a merger, tender offer or other takeover attempt. Our
Board of Directors will make any determination to issue such shares based on
its judgment as to the best interests of Neuberger Berman and its stockholders.
Our Board of Directors, in so acting, could issue preferred stock having terms
that could discourage a potential acquiror from making, without first
negotiating with our Board of Directors, an acquisition attempt through which
such acquiror may be able to change the composition of our Board of Directors,
including a tender offer or other transaction that some, or a majority, of our
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then current
market price.

Anti-Takeover Provisions of the Certificate of Incorporation and By-Laws

Some provisions of our certificate of incorporation and by-laws, applicable
law and the Stockholders Agreement could make the acquisition of Neuberger
Berman by means of a tender offer, a proxy contest or otherwise more difficult.
As described above, our certificate of incorporation authorizes our Board of
Directors to designate and issue preferred stock. Other provisions in the
certificate of incorporation and in our by-laws impose procedural and other
requirements that may be deemed to have anti-takeover effects. These provisions
include the inability of our stockholders to take any action without a meeting
or to call special meetings of stockholders, certain advance notice procedures
for nominating candidates for election as directors and for submitting
proposals for consideration at stockholders' meetings, and limitations on the
ability to remove directors. Further, our stockholders can amend our by-laws
and certain provisions of our certificate of incorporation only with a
two-thirds majority vote. Additionally, the Stockholders Agreement requires all
former Neuberger Berman principals and their family affiliates to vote their
shares in accordance with a preliminary vote conducted solely among these
stockholders.

Section 203 of the Delaware General Corporation Law

We are subject to section 203 of the Delaware General Corporation Law,
which prohibits a public Delaware corporation from engaging in a "business
combination" with a stockholder that is an "interested stockholder" for a
period of three years after the date of the transaction in which the
stockholder became an interested stockholder unless:

. prior to such date, our Board of Directors approved either the business
combination or the transaction which resulted in the stockholder becoming
an interested stockholder; or

. upon becoming an interested stockholder, the stockholder then owned at
least 85% of the voting stock, as defined in section 203; or

. subsequent to the date on which the stockholder became an interested
stockholder, the business combination is approved by both our Board of
Directors and by holders of at least 66 2/3% of our outstanding voting
stock, excluding shares owned by the interested stockholder.

For these purposes, the term "business combination" includes mergers, asset
sales and other similar transactions with an "interested stockholder". An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or, within the prior three years, did own) 15% or more of the
corporation's voting stock.

Stockholders Agreement

The individuals who were principals of Neuberger Berman, LLC, their family
affiliates and Neuberger Berman have entered into a Stockholders Agreement that
governs transfers and voting of the shares of common stock received by the
principals and family affiliates in the Exchange. We refer to these shares of
common stock as the "Founder Shares".

Transfer Restrictions

The Stockholders Agreement prohibits any transfers of Founder Shares by the
individuals who were principals or their family affiliates prior to January 1,
2002 except in limited circumstances noted below. Thereafter, they may transfer
their Founder Shares only as follows:

(a) (1) In each calendar year beginning on January 1, 2002, they may
transfer in the aggregate up to 10% of the aggregate number of Founder
Shares initially received by them in the Exchange (plus, in 2002, a number
of Founder Shares equal to the amount, if any, by which 15% of the
aggregate number of Founder Shares initially received by them in the
Exchange exceeds the aggregate number of Founder Shares sold by them in our
IPO).

(2) Founder Shares eligible to be transferred in any calendar year but
not transferred may be transferred at any time thereafter without
restriction.

(3) Notwithstanding (1) and (2) above, during the three years following
the date on which a former principal's employment with Neuberger Berman
terminates (the "Employment Termination Date"), that former principal and
his or her family affiliates may not transfer any Founder Shares other than
their Founder Shares that were eligible to be transferred but were not
transferred before the Employment Termination Date.

(b) Notwithstanding paragraph (a) above, each former principal and his
or her family affiliates must at all times continue to hold at least 30% of
the aggregate number of Founder Shares initially received by them in the
Exchange until the third anniversary of the former principal's Employment
Termination Date.

Notwithstanding paragraphs (a) and (b) above, if a former principal's
Employment Termination Date occurs prior to January 1, 2003 for any reason
other than death, disability or termination by the firm without cause, that
principal and his or her family affiliates may not transfer any Founder Shares
prior to January 1, 2007. On and after January 1, 2007, that former principal
and his or her family affiliates may in any calendar year transfer in the
aggregate a maximum of 20% of the aggregate amount of Founder Shares held by
them on the principal's Employment Termination Date. The number of Founder
Shares eligible for transfer in any one calendar year but not transferred may
be added to the number otherwise eligible to be transferred in any future year.

Notwithstanding the foregoing, if a former principal's employment with the
firm terminates due to disability or death, the principal (or his or her
estate) and his or her family affiliates may transfer their Founder Shares
without restriction.

In addition, our Board of Directors (or a body designated by the Board of
Directors) has the authority to make exceptions to any or all of the transfer
restrictions contained in the Stockholders Agreement and may permit or cause
other persons to become party to the agreement.

Our Board of Directors has agreed to waive certain transfer restrictions
under the Stockholders Agreement in order to permit the former principals of
Neuberger Berman and their affiliates to sell up to 3,519,572 shares of common
stock in this offering (including 590,695 shares of common stock subject to the
underwriters' over-allotment option) and 1,600,600 shares of common stock in
the concurrent repurchase. This represents approximately 12% of the total
shares of common stock beneficially owned by the former principals of Neuberger
Berman and their affiliates (14% assuming the exercise in full of the
underwriters' over-allotment option). Any amounts sold by a participating
former principal in this offering or the concurrent repurchase will reduce the
number of Founder Shares that such participating former principal would
otherwise be able to sell under the Stockholders Agreement beginning on January
1, 2002. After giving effect to this offering and the concurrent repurchase and
without giving effect to any further waivers to permit additional transfers
before January 1, 2002, the former principals will be able to sell an aggregate
of 1,109,778 shares of common stock under the Stockholders Agreement beginning
on January 1, 2002 or an aggregate of 519,083 shares if the underwriters'
over-allotment option is exercised in full. However, we currently anticipate
that we will permit our former principals to make charitable contributions in
December 2001 of Founder Shares that would otherwise not be eligible for
transfer under the Stockholders Agreement until January 1, 2002.

Voting

Prior to any vote of our stockholders, the Stockholders Agreement provides
for a separate, preliminary vote of the former principals and their family
affiliates (and any additional stockholders who have agreed to vote their
shares of common stock in accordance with the Stockholders Agreement) on each
matter upon which a vote of the stockholders is proposed to be taken. In this
preliminary vote, the participating stockholders may vote all of the shares
currently owned by them in such manner as each may determine in his, her or its
sole discretion. Each must then vote all of their Founder Shares in accordance
with the vote of the majority of the shares of common stock present (in person
or by proxy) and voting in such preliminary vote. Each former principal and
family affiliate has granted the Secretary of Neuberger Berman (or other
officer designated by the Secretary) an irrevocable proxy to vote his, her or
its Founder Shares in order to give effect to the voting provisions. Former
principals and their family affiliates are no longer required to vote in
accordance with a preliminary vote under the Stockholders Agreement after the
former principals' Employment Termination Date.

Call Right

The Stockholders Agreement provides that we may repurchase the Founder
Shares of a former principal and his or her family affiliates if the principal
engages in "Harmful Activity" at any time during his or her employment or
during the first three years after leaving. "Harmful Activity" includes:

. soliciting or accepting business from any financial intermediary (or any
employee of a financial intermediary) with which the principal had
business contact during the year prior to his or her departure (or, in
the case of an action taken during employment, during the prior year);

. employing or soliciting for employment employees or consultants of the
firm;

. using (other than in seeking new employment) the investment performance
record of any mutual fund or client account with which the principal was
associated during his or her employment;

. using or disclosing confidential information of the firm; and

. publicly disparaging the firm or its former principals.

If our Board of Directors (or a body designated by the Board of Directors)
determines in good faith that a former principal has engaged in Harmful
Activity, we may purchase from that principal the excess of the number of
Founder Shares received by the former principal and his or her family
affiliates in the Exchange over the number of Founder Shares that the principal
and his or her family affiliates could have transferred prior to the date on
which the principal initially engaged in Harmful Activity. If a former
principal does not hold sufficient Founder Shares, we may purchase Founder
Shares from his or her family affiliates pro rata in accordance with their then
current holdings. The purchase price of any Founder Shares the Company
purchases in this manner will be $2.00 per share.

Transfer Administration and Distributions

The certificates representing the Founder Shares beneficially owned by each
former principal and family affiliate are registered in the name of the firm or
its nominee and held in the firm's custody at its principal office. During any
period in which we are in dispute with any former principal regarding his or
her obligations under the Stockholders Agreement or certain other agreements,
we will not release for transfer any Founder Shares of that principal or his or
her family affiliates or distribute to them any dividends or distributions
received in respect of their Founder Shares.

Amendments and Term

The Stockholders Agreement may be amended by our Board of Directors (or a
body designated by the Board of Directors), provided that any amendment that
materially adversely affects the former principals or family affiliates (or any
group of former principals or family affiliates) (other than any amendment to
cure any ambiguity in the agreement) must be approved by the former principals
and family affiliates holding a majority of the Founder Shares then subject to
the agreement. The agreement will terminate on the earlier to occur of (i) the
first date on which there are no former principals or family affiliates who
remain bound by its terms and (ii) the date on which we agree with former
principals and family affiliates who are then bound by its terms to terminate
the agreement.

Listing

The common stock is listed on the New York Stock Exchange under the symbol
NEU.

Transfer Agent and Registrar

American Stock Transfer & Trust Company has been appointed as the transfer
agent and registrar for the shares of common stock.

UNDERWRITING

The selling stockholders and the underwriters for the offering (the
"Underwriters") named below have entered into an underwriting agreement with
respect to the shares being offered. Subject to certain conditions, each
Underwriter has severally agreed to purchase the number of shares indicated in
the following table. Goldman, Sachs & Co., Bear, Stearns & Co. Inc., J.P.
Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Salomon Smith Barney Inc. are the representatives of the Underwriters.

Underwriters Number of Shares
------------ ---------

Goldman, Sachs & Co.................. 1,378,289
Bear, Stearns & Co. Inc.............. 1,378,289
J.P. Morgan Securities Inc........... 393,796
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................. 393,796
Salomon Smith Barney Inc............. 393,796
---------
Total............................. 3,937,966
=========

If the Underwriters sell more shares than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional 590,695
shares from the selling stockholders other than the Neuberger Berman Employee
Defined Contribution Stock Incentive Plan Trust solely to cover such sales.
They may exercise that option for 30 days. If any common shares are purchased
pursuant to this option, the Underwriters will severally purchase common shares
in approximately the same proportion as set forth in the table above.

The following table shows the per share and total underwriting discounts
and commissions to be paid to the Underwriters by the selling stockholders.
Such amounts are shown assuming both no exercise and full exercise of the
Underwriters' option to purchase 590,695 additional shares.

Paid by the Selling Stockholders No Exercise Full Exercise
-------------------------------- -------------------- --------------------

Per share....................... $3.40 $3.40
Total (millions)................ $ 13,389,084.40 $ 15,397,447.40

Shares sold by the Underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus. Any
shares sold by the Underwriters to securities dealers may be sold at a discount
of up to $ 2.04 per share from the initial price to public. Any such securities
dealers may resell any shares purchased from the Underwriters to certain other
brokers or dealers at a discount of up to $0.10 per share from the initial
price to public. If all the shares are not sold at the initial price to public,
the representatives may change the offering price and the other selling terms.

Neuberger Berman, the executive officers and directors of Neuberger Berman,
the selling stockholders (other than the Employee Trust and the employees who
are participants in our Employee Defined Contribution Stock Incentive Plan) and
the individuals participating in the concurrent repurchase have agreed with the
Underwriters not to dispose of or hedge any of their common stock or securities
convertible into or exchangeable for shares of common stock during the period
from the date of this prospectus continuing through the date 90 days after the
date of this prospectus, except with the prior written consent of the
representatives of the Underwriters.

However, the restrictions set forth in the prior paragraph will not apply
to (A) the shares of common stock to be sold in this offering, (B) common stock
issued by Neuberger Berman to individuals in connection with their being hired
as employees of Neuberger Berman or a subsidiary, (C) any shares of common
stock issued by Neuberger Berman upon the exercise of an option or warrant or
upon the conversion of a security outstanding on the date hereof, a list of
which is attached to the underwriting agreement, (D) any shares of common stock
issued or options to purchase common stock granted pursuant to existing
employee benefit plans or director compensation plans of Neuberger Berman, (E)
agreements to sell, or issuances of, securities to strategic investors or in
connection with acquisitions, joint ventures and other strategic business
objectives, so long as those persons to whom Neuberger Berman issues such
securities agree not to sell them for the then remaining portion of the 90-day
lock-up period, (F) the filing of a registration statement and any amendments
thereto relating to Neuberger Berman's $175 million aggregate principal amount
at maturity of zero coupon senior convertible notes and the shares of common
stock issuable upon conversion of the zero coupon senior convertible notes and
sales of securities thereunder, and (G) the issuance of the shares of common
stock issuable upon conversion of the zero coupon senior convertible notes.

In connection with the offering, the Underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the Underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offering is in progress.

Each Underwriter has also represented and agreed that (i) it has not
offered or sold and prior to the date six months after the date of issue of the
shares of common stock will not offer or sell any shares of common stock to
persons in the United Kingdom, except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances that have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied, and will comply with, all
applicable provisions of the Financial Services Act 1986 of Great Britain with
respect to anything done by it in relation to the shares of common stock in,
from or otherwise involving the United Kingdom; and (iii) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issuance of the International shares to a
person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) of
Great Britain or is a person to whom the document may otherwise lawfully be
issued or passed on.

The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives of the Underwriters have
repurchased shares sold by or for the account of such Underwriter in
stabilizing or short covering transactions.

These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, the Underwriters may
discontinue them at any time. These transactions may be effected on the NYSE,
in the over-the-counter market or otherwise.

The selling stockholders estimate that the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$1,350,000. Such expenses will be borne by the selling stockholders.

Neuberger Berman and the selling stockholders have agreed to indemnify the
several Underwriters against specified liabilities, including liabilities under
the Securities Act of 1933.

Certain of the Underwriters have from time to time performed various
investment banking services for Neuberger Berman in the past, and they may from
time to time in the future perform investment banking services for which they
have received and will receive customary fees.

LEGAL MATTERS

Certain legal matters with respect to the validity of the offered
securities will be passed upon for us by Willkie Farr & Gallagher, New York,
New York and for the underwriters by Cleary, Gottlieb, Steen & Hamilton, New
York, New York. Mr. Jack H. Nusbaum is chairman of the law firm of Willkie Farr
& Gallagher, and a Director of Neuberger Berman. As of May 31, 2001, Mr.
Nusbaum beneficially owned 13,253 shares of the common stock of Neuberger
Berman.

EXPERTS

The audited consolidated statements of financial condition of Neuberger
Berman as of December 31, 2000 and 1999, and the related audited consolidated
statements of income, changes in stockholders' equity and cash flows for each
of the three years in the period ended December 31, 2000, included and
incorporated by reference in this prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as stated in their report
included and incorporated by reference in this prospectus, and are included and
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

Neuberger Berman files annual, quarterly and current reports, proxy
statements and other information with the Securities Exchange Commission. You
may read and copy any documents filed by us at the SEC's public reference room
at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our
filings with the SEC are also available to the public through the SEC's
Internet site at http://www.sec.gov and through the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005, on which our common stock is
listed.

We have filed a registration statement on Form S-3 with the SEC relating to
the shares of common stock covered by this prospectus. This prospectus is a
part of the registration statement and does not contain all of the information
in the registration statement. Whenever a reference is made in this prospectus
to a contract or other document of Neuberger Berman, please be aware that the
reference is only a summary and that you should refer to the exhibits that are
a part of the registration statement for a copy of the contract or other
document. You may review a copy of the registration statement at the SEC's
public reference room in Washington, D.C., as well as through the SEC's
Internet site.

We are "incorporating by reference" information into this prospectus. This
means that we can disclose important information to you by referring you to
another document. Any information referred to in this way is considered part of
this prospectus from the date we file that document. Any reports filed by us
with the SEC after the date of this prospectus and before the date that the
offering of the shares of common stock offered through this prospectus is
terminated will automatically update and, where applicable, supersede any
information contained in this prospectus or incorporated by reference in this
prospectus.

Neuberger Berman incorporates by reference into this prospectus the
following documents or information filed by Neuberger Berman with the SEC (File
No. 001-15361):

. Annual Report on Form 10-K for the fiscal year ended December 31, 2000;

. Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;

. Current Report on Form 8-K, dated January 26, 2001 (other than with
respect to the information reported under Item 9 of that report);

. Current Report on Form 8-K, dated February 2, 2001;

. Current Report on Form 8-K, dated March 7, 2001;

. Current Report on Form 8-K, dated April 5, 2001;

. Current Report on Form 8-K, dated April 24, 2001;

. Current Report on Form 8-K, dated May 2, 2001 (other than with respect to
the information reported under Item 9 of that report);

. Current Report on Form 8-K, dated June 6, 2001 (other than with respect
to the information reported under Item 9 of that report);

. The description of common stock contained in the Registration Statement
on Form 8-A, dated October 4, 1999, of Neuberger Berman, filed with the
SEC under Section 12(b) of the Securities Exchange Act of 1934; and

. All documents filed by Neuberger Berman under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 after the time of filing
of the initial registration statement and before effectiveness of the
registration statement, and after the date of this prospectus and before
the termination of this offering.

We will provide without charge to each person, including any beneficial
owner, to whom this prospectus is delivered, upon his or her written or oral
request, a copy of any or all documents referred to above which have been or
may be incorporated by reference into this prospectus, excluding exhibits to
those documents unless they are specifically incorporated by reference into
those documents. You can request those documents from our Director of Investor
Relations, 605 Third Avenue, New York, New York 10158-3698, telephone (212)
476-9000.

Neuberger Berman Inc. and Subsidiaries

Index to Consolidated Financial Statements

Page
----

Report of Independent Public Accountants.................................................. F-2
Consolidated Statements of Financial Condition as of December 31, 2000 and 1999........... F-3
Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998.... F-4
Consolidated Statements of Changes in Principals' Capital and Stockholders' Equity for the
Years Ended December 31, 1998, 1999 and 2000............................................ F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and
1998.................................................................................... F-6
Notes to Consolidated Financial Statements................................................ F-8
Schedule I--Condensed Financial Statements of the Registrant Parent....................... F-21
Statements of Financial Condition as of December 31, 2000 and 1999....................... F-21
Statements of Operations for the Year Ended December 31, 2000 and the Period October 8,
1999 through December 31, 1999......................................................... F-22
Statements of Cash Flows for the Year Ended December 31, 2000 and the Period October 8,
1999 through December 31, 1999......................................................... F-23
Notes to Condensed Financial Statements.................................................. F-25
Condensed Consolidated Statements of Financial Condition as of March 31, 2001 (Unaudited)
and December 31, 2000................................................................... F-26
Condensed Consolidated Statements of Income (Unaudited) for the Three Months Ended
March 31, 2001 and 2000................................................................. F-27
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) for the
Three Months Ended March 31, 2001....................................................... F-28
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended
March 31, 2001 and 2000................................................................. F-29
Notes to Condensed Consolidated Financial Statements (Unaudited).......................... F-31

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Neuberger Berman Inc.:

We have audited the accompanying consolidated statements of financial
condition of Neuberger Berman Inc. (a Delaware corporation) and subsidiaries as
of December 31, 2000 and 1999, and the related consolidated statements of
income, changes in principals' capital and stockholders' equity and cash flows
for each of the three years in the period ended December 31, 2000. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audits.

We conducted our audits 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 audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Neuberger
Berman Inc. and subsidiaries as of December 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.

Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The condensed financial statements
of the registrant parent and notes contained in Schedule I are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not a required part of the basic financial statements. This information has
been subjected to the auditing procedures applied in our audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

New York, New York
February 16, 2001

F-2

NEUBERGER BERMAN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share data)

December 31,
-----------------------
2000 1999
---------- ----------

ASSETS
Cash and cash equivalents............................................ $ 88,117 $ 91,010
Cash and securities segregated for the exclusive benefit of clients.. 911,182 777,341
Cash and securities deposited with clearing organizations............ 5,973 3,910
Securities purchased under agreements to resell...................... 282,720 530,300
Receivable from brokers, dealers and clearing organizations.......... 2,466,102 1,873,259
Receivable from clients.............................................. 456,691 432,814
Securities owned, at market value.................................... 67,688 20,266
Fees receivable...................................................... 23,012 23,149
Furniture, equipment and leasehold improvements, at cost, net of
accumulated depreciation and amortization of $26,797 and $16,195 at
December 31, 2000 and 1999, respectively........................... 43,089 32,192
Other assets......................................................... 77,189 63,367
---------- ----------
Total assets.................................................... $4,421,763 $3,847,608
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Bank loans.......................................................... $ 3,000 $ --
Securities sold under agreements to repurchase...................... 234,972 531,762
Payable to brokers, dealers and clearing organizations.............. 1,461,267 1,017,483
Payable to clients.................................................. 2,199,169 1,871,323
Securities sold but not yet purchased, at market value.............. 9,522 34,172
Other liabilities and accrued expenses.............................. 128,694 109,066
---------- ----------
4,036,624 3,563,806
---------- ----------
Subordinated liability.............................................. 35,000 35,000
---------- ----------
Commitments and contingencies

Stockholders' equity:
Preferred stock, $.01 par value;
5,000,000 shares authorized; none issued at December 31, 2000
and 1999.......................................................... -- --
Common stock, $.01 par value;
250,000,000 shares authorized; 50,021,920 shares issued;
48,803,006 and 49,716,220 shares outstanding at December 31,
2000 and 1999, respectively....................................... 500 500
Paid-in capital..................................................... 332,870 331,077
Retained (deficit) earnings......................................... 60,971 (74,701)
---------- ----------
394,341 256,876
Less: Treasury stock, at cost, 1,218,914 and 305,700 shares at
December 31, 2000 and 1999, respectively......................... (41,904) (8,074)
Unearned compensation............................................ (2,298) --
---------- ----------
Total stockholders' equity...................................... 350,139 248,802
---------- ----------
Total liabilities and stockholders' equity...................... $4,421,763 $3,847,608
========== ==========

The accompanying notes are an integral part of the consolidated financial
statements.

F-3

NEUBERGER BERMAN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)

For The Years Ended December 31,
---------------------------
2000 1999 1998
-------- -------- --------

REVENUES:
Investment advisory and administrative fees........ $399,907 $379,434 $389,238
Commissions........................................ 146,589 142,082 145,969
Interest........................................... 223,709 160,022 164,782
Principal transactions in securities............... 9,623 10,003 6,324
Clearance fees..................................... 13,532 11,081 9,146
Other income....................................... 6,428 4,059 4,004
-------- -------- --------
Gross revenues................................. 799,788 706,681 719,463
Interest expense.................................... 183,441 133,769 137,329
-------- -------- --------
Net revenues after interest expense............ 616,347 572,912 582,134
-------- -------- --------
OPERATING EXPENSES:
Employee compensation and benefits................. 245,445 325,310 173,379
Information technology............................. 22,925 19,172 15,634
Rent and occupancy................................. 17,796 15,313 12,182
Brokerage, clearing and exchange fees.............. 10,514 10,164 10,245
Advertising and sales promotion.................... 9,251 9,259 14,707
Distribution and fund administration............... 18,977 19,437 22,832
Professional fees.................................. 11,205 9,276 11,550
Depreciation and amortization...................... 10,638 10,532 8,716
Other expenses..................................... 22,675 31,077 18,432
-------- -------- --------
Total operating expenses....................... 369,426 449,540 287,677
-------- -------- --------
Net income before taxes........................ 246,921 123,372 294,457
Tax (benefit) expense............................... 96,565 (12,195) 9,506
-------- -------- --------
Net income..................................... $150,356 $135,567 $284,951
======== ======== ========
Net income per common share
Net income per share--Basic........................ $ 3.06 $ 3.05 $ 6.68
======== ======== ========
Net income per share--Diluted...................... $ 3.03 $ 3.05 $ 6.68
======== ======== ========
Weighted average common shares outstanding--Basic.. 49,099 44,410 42,663
======== ======== ========
Weighted average common shares outstanding--Diluted 49,595 44,410 42,663
======== ======== ========

The accompanying notes are an integral part of the consolidated financial
statements.

F-4

NEUBERGER BERMAN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN PRINCIPALS' CAPITAL
AND STOCKHOLDERS' EQUITY
(in thousands)

For the Years Ended December 31, 1998, 1999 and 2000
------------------------------------------------------------------------
Retained
Principals' Common Paid-in (Deficit) Treasury Unearned
Capital Stock Capital Earnings Stock Compensation Total
--------- ---- -------- -------- --------- -------- ---------

BEGINNING BALANCE, December 31,
1997.................................. $ 150,000 $ -- $ 2,742 $ 6,289 $ -- $ -- $ 159,031
Capital contributions................ 12,660 -- -- -- -- -- 12,660
Capital withdrawals.................. (62,660) -- -- -- -- -- (62,660)
Capital distributions................ (247,509) -- -- -- -- -- (247,509)
Issuance of common stock-Neuberger
Berman Management Inc............... -- -- 134 -- -- -- 134
Dividends-Neuberger Berman
Management Inc...................... -- -- -- (37,408) -- -- (37,408)
Net income........................... 247,509 -- -- 37,442 -- -- 284,951
--------- ---- -------- -------- --------- -------- ---------
ENDING BALANCE, December 31,
1998.................................. 100,000 -- 2,876 6,323 -- -- 109,199
Capital contributions................ 525 -- -- -- -- -- 525
Capital withdrawals.................. (525) -- -- -- -- -- (525)
Capital distributions................ (182,375) -- -- -- -- -- (182,375)
Dividends-Neuberger Berman
Management Inc...................... -- -- -- (22,679) -- -- (22,679)
Acquisition of treasury stock-
Neuberger Berman Management
Inc................................. -- -- -- -- (134) -- (134)
Net income (1/1/99-10/7/99).......... 182,375 -- -- 22,931 -- -- 205,306
--------- ---- -------- -------- --------- -------- ---------
Total before reorganization.......... 100,000 -- 2,876 6,575 (134) -- 109,317
Exchange of principal interests for
common stock of Neuberger
Berman Inc.......................... (100,000) 427 99,573 -- -- -- --
Exchange of corporate interests for
common stock of Neuberger
Berman Inc.......................... -- -- 6,441 (6,575) 134 -- --
--------- ---- -------- -------- --------- -------- ---------
Total after reorganization (10/8/99). -- 427 108,890 -- -- -- 109,317
Issuance of common stock to public... -- 30 87,903 -- -- -- 87,933
Issuance of common stock to defined
contribution stock incentive plan... -- 43 134,284 -- -- -- 134,327
Dividends............................ -- -- -- (4,962) -- -- (4,962)
Acquisition of treasury stock........ -- -- -- -- (8,074) -- (8,074)
Net loss (10/8/99-12/31/99).......... -- -- -- (69,739) -- -- (69,739)
--------- ---- -------- -------- --------- -------- ---------
ENDING BALANCE, December 31,
1999.................................. -- 500 331,077 (74,701) (8,074) -- 248,802
Dividends............................ -- -- -- (14,684) -- -- (14,684)
Acquisition of treasury stock........ -- -- -- -- (35,210) -- (35,210)
Issuance of common stock............. -- -- 1,793 -- 1,380 (2,298) 875
Net income........................... -- -- -- 150,356 -- -- 150,356
--------- ---- -------- -------- --------- -------- ---------
ENDING BALANCE, December 31,
2000.................................. $ -- $500 $332,870 $ 60,971 $(41,904) $(2,298) $ 350,139
========= ==== ======== ======== ========= ======== =========

The accompanying notes are an integral part of the consolidated financial
statements.

F-5

NEUBERGER BERMAN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share data)

For The Years Ended December 31,
----------------------------------
2000 1999 1998
--------- --------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................................... $ 150,356 $ 135,567 $ 284,951
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization.................................................. 10,638 10,532 8,716
Contribution to defined contribution stock incentive plan...................... -- 134,327 --
Deferred tax benefit........................................................... (9,750) (48,427) --
(Increase) decrease in operating assets-
Cash and securities segregated for the exclusive benefit of clients............ (133,841) (120,063) (437,216)
Cash and securities deposited with clearing organizations...................... (2,063) (319) 37
Securities purchased under agreements to resell................................ 247,580 (33,531) (212,334)
Receivable from brokers, dealers and clearing organizations.................... (592,843) 350,611 (1,038,151)
Receivable from clients........................................................ (23,877) (106,579) 213,392
Securities owned, at market value.............................................. (47,422) (8,077) (2,087)
Fees receivable................................................................ 137 3,661 3,041
Other assets................................................................... 4,649 (7,825) 4,204
Increase (decrease) in operating liabilities-
Bank loans..................................................................... 3,000 (25,000) 15,000
Securities sold under agreements to repurchase................................. (296,790) 43,603 198,743
Payable to brokers, dealers and clearing organizations......................... 443,784 (351,488) 786,576
Payable to clients............................................................. 327,846 246,429 406,145
Securities sold but not yet purchased, at market value......................... (24,650) (16,238) 12,314
Other liabilities and accrued expenses......................................... 24,590 44,967 12,382
--------- --------- -----------
Net cash provided by operating activities.................................... 81,344 252,150 255,713
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of furniture, equipment and leasehold improvements...... (21,499) (17,530) (11,887)
Cash paid for acquisition...................................................... (7,882) -- --
--------- --------- -----------
Cash used in investing activities............................................ (29,381) (17,530) (11,887)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of subordinated liability............................................ -- (50,000) --
Proceeds from subordinated liabilities......................................... -- 35,000 50,000
Proceeds from capital contributions............................................ -- 525 12,660
Payments for capital withdrawals............................................... -- (525) (62,660)
Payments for capital distributions............................................. -- (236,039) (246,099)
Issuance of common stock-Neuberger Berman Management Inc....................... -- -- 134
Issuance of common stock-Neuberger Berman Inc.................................. -- 87,933 --
Payments for dividends-Neuberger Berman Management Inc......................... -- (22,679) (50,924)
Purchase of treasury stock-Neuberger Berman Management Inc..................... -- (134) --
Payments for dividends-Neuberger Berman Inc.................................... (19,646) -- --
Purchase of treasury stock-Neuberger Berman Inc................................ (35,210) (8,074) --
--------- --------- -----------
Net cash used in financing activities........................................ (54,856) (193,993) (296,889)
--------- --------- -----------
Net (decrease) increase in cash and cash equivalents......................... (2,893) 40,627 (53,063)

CASH AND CASH EQUIVALENTS, beginning of year..................................... 91,010 50,383 103,446
--------- --------- -----------
CASH AND CASH EQUIVALENTS, end of year........................................... $ 88,117 $ 91,010 $ 50,383
========= ========= ===========

The accompanying notes are an integral part of the consolidated financial
statements.

F-6

NEUBERGER BERMAN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in thousands, except share data)

Supplemental disclosures of cash flow information:

Interest payments totaled $181,075, $132,842 and $137,499 during the years
ended December 31, 2000, 1999 and 1998, respectively.

Tax payments totaled $117,670, $7,621 and $3,450 during the years ended
December 31, 2000, 1999 and 1998, respectively.

Supplemental disclosures of non-cash operating, investing and financing
activities:

On October 7, 1999, the principals of Neuberger Berman, LLC and the
shareholders of Neuberger Berman Management Inc. exchanged their ownership
interests for common stock of Neuberger Berman Inc. with a carrying value of
$109,317.

In connection with Neuberger Berman Inc.'s initial public offering, an
initial, irrevocable non-cash contribution of 4,264,344 shares of its common
stock was made to an employee defined contribution stock incentive plan. The
non-cash expense associated with the contribution totaled $134,327 and was
recognized on the date it was funded, in accordance with Statement of Financial
Accounting Standards No. 87. Neuberger Berman Inc. recorded a deferred tax
benefit of $46,262 related to the contribution.

On November 23, 1999, Neuberger Berman Inc. declared an initial quarterly
cash dividend on its common stock in the amount of $0.10 per share. The
dividend was paid on January 25, 2000, to stockholders of record at the close
of business on January 11, 2000.

On December 27, 1999, Neuberger Berman Inc. made a cash contribution of
$10,000 to the Neuberger Berman Foundation. In connection with the cash
contribution, Neuberger Berman Inc. recorded a deferred tax benefit of $2,165.

During the first six months of 2000, Neuberger Berman Inc. increased, based
upon the price of its common stock at the close of business on June 30, 2000,
the carrying value of the deferred tax asset resulting from its initial,
irrevocable non-cash contribution of 4,264,344 shares referred to above, by
$9,750.

As part of the purchase price for the private asset management business of
Delta Capital Management LLC, on December 15, 2000, Neuberger Berman Inc.
issued 10,973 shares of common stock from treasury with a market value of $875.

In connection with an employee stock ownership plan, Neuberger Berman Inc.
issued 29,171 shares of common stock, with a market value of $2,298, from
treasury. This purchase of shares was recorded as a credit to capital stock
with a corresponding debit to unearned compensation.

The accompanying notes are an integral part of the consolidated financial
statements.

F-7

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Neuberger Berman Inc. ("NBI") was organized as a Delaware corporation on
August 13, 1998. NBI was formed to be the holding company for Neuberger Berman,
LLC ("NB, LLC") and Neuberger Berman Management Inc. ("NBMI"), and to allow for
the issuance of common stock to the public. On October 7, 1999, the principals
of NB, LLC and the shareholders of NBMI exchanged their ownership interests in
the respective entities for shares of NBI (the "Exchange"), and on October 13,
1999, NBI completed its initial public offering (the "IPO"). Accordingly, these
entities have been consolidated pursuant to reorganization accounting. In
connection with the Exchange and the IPO, NBI incurred pre-tax charges totaling
approximately $150,054,000 (the "Reorganization and IPO Charges"). The
Reorganization and IPO Charges are primarily comprised of an initial,
irrevocable non-cash contribution of common stock to an employee defined
contribution stock incentive plan, a cash contribution to the Neuberger Berman
Foundation and severance and other payments.

The consolidated financial statements include the accounts of NBI and its
subsidiaries. NBI's wholly owned subsidiaries are NB, LLC, a Delaware limited
liability company, and its subsidiaries, and NBMI, a New York corporation
(collectively, the "Company"). NB, LLC's wholly owned subsidiaries are
Neuberger Berman Trust Company, a non-depository trust company chartered under
the New York Banking Law, Neuberger Berman Trust Company of Delaware, a
non-depository limited purpose trust company chartered under the Delaware
Banking Code, Neuberger Berman Trust Company of Florida, a Florida corporation
authorized to engage in trust business chartered under the Florida Banking Law,
and Neuberger & Berman Agency Inc., a New York corporation. Material
intercompany transactions and balances have been eliminated in consolidation.

The Company is a registered investment adviser providing investment
management services to high net worth clients, mutual funds, and institutional
clients. As a registered investment adviser, the Company manages equity, fixed
income, balanced, socially responsive, and international portfolios for
individuals, families, endowments, foundations, trusts and employee benefit
plans. In addition, the Company advises the Neuberger Berman family of funds.
As a registered broker-dealer, the Company executes securities transactions for
its clients and others and provides prime brokerage and correspondent clearing
services to other firms.

2. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are prepared in accordance with
generally accepted accounting principles. The preparation of the financial
statements requires management to make estimates and assumptions that affect
the reported amounts in the financial statements. Management does not believe
that actual results will differ materially from these estimates.

Securities owned and securities sold but not yet purchased are valued at
market. Principal transactions in securities and the related revenues and
expenses are recorded on a trade date basis. During the year ended December 31,
2000, the Company began recording its commission income and related expenses on
a trade date basis. There was no material impact resulting from this change.

For purposes of the consolidated statements of financial condition, the
Company considers all investments in money market funds to be cash equivalents.

The majority of investment advisory fees earned from high net worth and
institutional clients are charged or billed to accounts quarterly based upon
the account's net asset value at the beginning of a

F-8

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

quarter. Investment advisory and administrative fees earned from the Company's
mutual fund business (the "Funds") are charged monthly to the Funds based upon
average daily net assets under management.

Furniture and equipment are depreciated using the straight-line method over
their estimated useful lives. Leasehold improvements are amortized using the
straight-line method over the lesser of the economic life of the improvement or
the life of the lease.

In September of 2000, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities--a replacement of FASB Statement No. 125". SFAS 140 amends the
recognition and reclassification of collateral and disclosures related to
securitization transactions and collateral. These changes are effective for
fiscal years ending after December 15, 2000. SFAS 140 also amends the
accounting for transfers and servicing of financial assets and extinguishments
of liabilities occurring after March 31, 2001. The impact of the SFAS 140
provisions effective subsequent to March 31, 2001, is not anticipated to have a
material impact on the Company's consolidated financial statements.

Basic earnings per common share is calculated by dividing net income by the
weighted average common shares outstanding. Diluted earnings per common share
is calculated by dividing net income by the total weighted average number of
shares of common stock outstanding and common stock equivalents. Common stock
equivalents are comprised of dilutive potential shares from stock options and
certain restricted stock awards. Common stock equivalents are excluded from the
computation if their effect is anti-dilutive. Diluted earnings per share is
computed using the treasury stock method. For purposes of determining weighted
average common shares outstanding for the periods prior to the Exchange, the
outstanding shares were determined based upon the conversion ratio to effect
the exchange of principals' capital and stockholders' equity for NBI common
stock. Pro rata distributions of earnings and capital to the principals were
not considered to effect outstanding shares.

On December 15, 2000, the Company completed its acquisition of the private
asset management business of Delta Capital Management LLC for common stock and
cash. The allocation of purchase price has yet to be finalized.

Certain prior year amounts have been reclassified to conform with the
December 31, 2000, presentation.

3. SECURITIES PURCHASED AND SOLD UNDER AGREEMENTS TO RESELL AND REPURCHASE

Securities purchased and sold under agreements to resell and repurchase are
accounted for as collateralized financing transactions and are carried at
contract value plus accrued interest. It is the policy of the Company to obtain
possession of collateral, comprised of market value and cash, equal to or in
excess of principal amounts received and pledged under resale and repurchase
agreements, respectively. Collateral is valued daily, and the Company may
require counterparties to deposit additional collateral when appropriate. As of
December 31, 2000, the Company had received and pledged securities with market
values of approximately $1,209 million and $234 million, respectively, related
to these resale and repurchase agreements.

As of December 31, 2000, the Company repledged $1,209 million of the
securities it had received under its resale agreements.

F-9

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. RECEIVABLE FROM AND PAYABLE TO CLIENTS

Receivable from and payable to clients represent amounts due from or to
clients of the Company in connection with cash and margin securities
transactions. Amounts receivable are collateralized by clients' securities held
by NB, LLC and by others for delivery to NB, LLC, the value of which is not
reflected in the accompanying consolidated financial statements.

In the normal course of business, the Company is permitted to use client
margin securities to finance customer securities transactions subject to
certain regulatory guidelines.

5. RECEIVABLE FROM AND PAYABLE TO BROKERS, DEALERS AND CLEARING ORGANIZATIONS

As of December 31, 2000 and 1999, amounts receivable from and payable to
brokers, dealers and clearing organizations included approximately $2,454
million and $1,855 million of securities borrowed and approximately $1,427
million and $987 million of securities loaned, respectively.

Securities borrowed and securities loaned transactions are reported as
collateralized financing transactions. Securities borrowed transactions require
the Company to deposit cash with the lender. With respect to securities loaned,
the Company receives collateral in the form of cash in an amount generally in
excess of the market value of securities loaned. The Company monitors the
market value of securities borrowed and loaned on a daily basis, with
additional collateral obtained or refunded as necessary. As of December 31,
2000, the Company had received securities with a market value of approximately
$2,300 million related to its securities borrowed transactions. As of December
31, 2000, the Company had pledged securities with a market value of
approximately $1,342 million related to its securities loaned transactions.

As of December 31, 2000, the Company repledged $2,300 million of the
securities it had received under its securities borrowed transactions.

6. BANK LOANS

Bank loans represent unsecured short-term borrowings payable to commercial
banks. For the years ended December 31, 2000, 1999 and 1998, interest expense
incurred on these borrowings was approximately $5,076,000, $2,287,000 and
$4,142,000 based upon weighted average interest rates of 6.53%, 5.13% and
5.76%, respectively.

7. SUBORDINATED LIABILITIES

During 1998, the principals of NB, LLC withdrew $50 million of capital and
invested it in a newly formed entity, NB Associates, LLC ("Associates").
Concurrently, Associates loaned the $50 million to NB, LLC in the form of a
subordinated liability. The subordinated liability bore interest at 6.75% per
annum and was approved by the New York Stock Exchange, Inc. ("NYSE") as capital
for the purpose of computing net capital under Rule 15c3-1 (the "Rule") of the
Securities and Exchange Commission ("SEC"). For the years ended December 31,
1999 and 1998, interest expense incurred on the subordinated liability was
approximately $2,411,000 and $1,137,000, respectively. On October 29, 1999, the
subordinated liability was fully repaid.

On September 1, 1999, The Travelers Insurance Company loaned NB, LLC $35
million pursuant to a subordinated promissory note (the "Note"). This amount is
payable on September 1, 2004. Interest accrues on the unpaid principal amount
of the Note at a floating rate adjusted quarterly, based on the

F-10

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. SUBORDINATED LIABILITIES (Continued)

three month LIBOR rate plus 75 basis points and is payable quarterly. The Note
was approved by the NYSE and the unpaid principal amount is available to NB,
LLC in computing net capital under the Rule. The Note contains certain
covenants that limit the percentage by which the aggregate unpaid principal
amount of subordinated liabilities exceed total regulatory capital and impose a
dollar amount below which total ownership equity cannot fall. In the opinion of
management, the Company is in compliance with its debt covenants. For the years
ended December 31, 2000 and 1999, interest expense incurred on the Note was
approximately $2,588,000 and $747,000, respectively.

8. STOCK OPTIONS

On March 27, 2000, 2,760,000 of non-qualified stock options (reload
options) were granted to certain employees of the Company under the 1999 Plan,
15,000 of which were subsequently forfeited. In addition, on December 15, 2000,
30,000 of non-qualified stock options (reload options) were granted under the
1999 Plan in connection with the acquisition of the private asset management
business of Delta Capital Management LLC. On March 27, 2000, 30,000 of
non-qualified stock options (reload options) were granted to certain directors
of NBI under the 1999 Directors Plan. Options granted under the 1999 Plan and
the 1999 Directors Plan provide for annual vesting ratably over five years,
commencing on the first anniversary of the date of issuance. All options
granted have exercise prices equal to or greater than the fair market value of
NBI's common stock on the date of the grant and have a ten-year term.

At December 31, 2000, 7,225,000 and 170,000 shares were available for
future grant under the 1999 Plan and the 1999 Directors Plan, respectively. The
following table summarizes transactions in stock options granted under the
Plans:

Optioned Shares
---------------------------
Weighted Average
Number of Exercise Price
Shares Per Share
--------- -----------

Balance at December 31, 1999..................... -- $ --
Options granted............................... 2,820,000 29.62
Options forfeited............................. (15,000) (28.13)
---------
Balance at December 31, 2000..................... 2,805,000 29.63
=========

The following table summarizes information about stock options outstanding
at December 31, 2000:

Options Outstanding
----------------------------
Number Remaining
Exercise Prices Outstanding Contractual Life
--------------- ----------- ----------------

$28.13........ 2,075,000 9.2 years
32.00........ 700,000 9.2 years
78.59........ 30,000 9.9 years
---------
2,805,000
=========

F-11

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. STOCK OPTIONS (Continued)

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants under the option plans for the year ended December
31, 2000:

For The Year Ended
Assumptions December 31, 2000
----------- -----------

Dividend Yield.................. 1.30%
Expected volatility............. 30.20%
Risk-free interest rate......... 6.40%
Expected lives.................. 5

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because NBI's stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

Had the Company accounted for its stock-based compensation plans based on
the fair value awards at grant date in a manner consistent with the methodology
of SFAS 123, the Company's net income and net income per common share would
have decreased as indicated in the table below. For purposes of pro forma
disclosures, the estimated fair value of the Plans is amortized to expense over
the vesting period and is representative of the charge for the year ended
December 31, 2000.

For The Year Ended
December 31, 2000
----------
(In Thousands, Except
Per Share Data)

Net income:
As reported........................................... $150,356
SFAS 123 fair value adjustment--net................... (2,241)
----------

Pro Forma............................................. $148,115
==========

Basic Diluted
------ ------

Net income per common share:
As reported......................... $ 3.06 $ 3.03
SFAS 123 fair value adjustment--net. (0.05) (0.05)
------ ------

Pro Forma........................... $ 3.01 $ 2.98
====== ======

The effects of applying SFAS 123 for providing pro forma disclosures may
not be representative of the effects on reported net income for future years.

F-12

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted
earnings per share for the year ended December 31, 2000:

2000
----------
(In Thousands,
Except Per
Share Data)
----------

Net Income...................................................................... $150,356
----------

Basic weighted average shares outstanding....................................... 49,099
Dilutive potential shares from stock options and certain restricted stock awards 496
----------

Dilutive weighted average shares outstanding.................................... 49,595
----------

Basic earnings per share........................................................ $ 3.06
==========

Diluted earnings per share...................................................... $ 3.03
==========

Options on 30,000 shares have been excluded from the earnings per share
computation above due to their anti-dilutive effect.

10. NET CAPITAL

NB, LLC and NBMI, as registered broker-dealers and member firms of the NYSE
and the National Association of Securities Dealers, Inc., respectively, are
subject to the Rule, which requires that broker-dealers maintain a minimum
level of net capital, as defined. As of December 31, 2000, NB, LLC and NBMI had
net capital of approximately $184,675,000 and $22,624,000, respectively, which
exceeded their requirements by approximately $156,772,000 and $22,374,000,
respectively.

The Rule also provides that equity capital may not be withdrawn or cash
dividends paid if the resulting net capital of a broker-dealer would be less
than the amount required under the Rule. Accordingly, at December 31, 2000, the
payments of dividends and advances to NBI by NB, LLC and NBMI is limited to
$114,918,000 and $22,324,000, respectively, under the most restrictive of these
requirements.

11. COMMITMENTS AND CONTINGENCIES

The Company leases office space and equipment under lease agreements
expiring on various dates through 2013. Office space leases are subject to
escalation based on increases in costs incurred by the lessor. Minimum rentals,
excluding office space escalation, under these lease agreements are as follows:

Years Ending December 31, Amount
------------------------- -----------

2001..................... $15,692,000
2002..................... 15,866,000
2003..................... 15,150,000
2004..................... 14,416,000
2005..................... 13,650,000
Thereafter............... 45,666,000

Rent expense for premises and equipment for the years ended December 31,
2000, 1999 and 1998, was approximately $16,390,000, $13,483,000 and
$11,011,000, respectively.

F-13

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. COMMITMENTS AND CONTINGENCIES (Continued)

The Company has satisfied margin requirements with clearing organizations
by obtaining letters of credit in favor of the clearing organizations. Open
unsecured letters of credit as of December 31, 2000 and 1999, were
approximately $44,312,000 and $22,312,000, respectively. Unused committed lines
of credit were approximately $100,000,000 and $150,000,000 as of December 31,
2000 and 1999, respectively.

In the normal course of business, the Company is subject to various legal
proceedings. In the opinion of management, based on discussions with legal
counsel, the resolution of pending proceedings will not have a material adverse
effect on the consolidated financial condition, results of operations or
liquidity of the Company.

12. EMPLOYEE BENEFIT PLANS

The Company has defined contribution plans consisting of an employee
profit-sharing plan and a money purchase pension plan covering all full-time
employees and qualifying part-time employees who have completed one year of
continuous service, as defined. Contributions to the plans, which are at the
discretion of management, are determined annually but do not exceed the amount
permitted under the Internal Revenue Code as a deductible expense.
Contributions to the plans for the years ended December 31, 2000, 1999 and
1998, were approximately $5,437,000, $6,854,000 and $7,670,000, respectively.

The Company made an initial, irrevocable contribution of 4,264,344 shares
of its common stock to an employee defined contribution stock incentive plan
(the "Stock Incentive Plan") on behalf of its employees. Common stock that was
awarded to employees in conjunction with the IPO is restricted and vests in
three installments on October 8th of 2001, 2002 and 2003. Certain benefits of
ownership, including the payment of any dividends declared during the
restricted period, belong to the employees. Unvested common stock that becomes
forfeited upon an employee's termination of employment is reallocated in the
sole and absolute discretion of the compensation committee, including
determination of vesting periods. The common stock contributed may not revert
to the Company. Included in employee compensation and benefits for the year
ended December 31, 1999, is a non-cash charge of approximately $134,327,000,
related to the contribution of common stock.

On July 18, 2000, the Board adopted, upon the recommendation of its
compensation committee, two plans that will facilitate employee stock
ownership, an Employee Stock Purchase Plan (the "ESPP"), and the Wealth
Accumulation Plan (the "Plan").

The ESPP provides that employees may elect to acquire NBI common stock
through payroll deductions, on an after tax basis, at a 15% discount from
market value of such stock. Employees may not transfer the common stock
acquired through the ESPP for one year from purchase date. In accordance with
the terms and provisions of the ESPP, employees are precluded from acquiring,
on an annual basis, shares of common stock that have an aggregate purchase
price (as defined in the ESPP documentation) in excess of $10,000. The ESPP,
which has a term of ten years, became effective during September 2000, but must
be ratified by NBI's stockholders at its Annual Meeting for stockholders.
Subsequent to December 31, 2000, in connection with the initial acquisition of
shares pursuant to the ESPP, the Company issued from treasury 10,639 shares of
common stock, at a 15% discount, with an approximate value of $751,000.

The Plan provides that on an annual basis, employees who are eligible for a
bonus may elect to defer all or a portion of their bonus and employees who
receive commissions and other direct pay, may

F-14

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. EMPLOYEE BENEFIT PLANS (Continued)

elect to defer a portion of such compensation. In each case, up to 20% of total
compensation may be deferred with a maximum deferral of up to $500,000;
provided that employees who receive an annual bonus may, in any event, defer no
more than 100% of any bonus. Amounts deferred by employees are used to acquire,
on a pretax basis, NBI common stock at a 25% discount from the market value of
such stock. Any common stock so acquired is restricted with respect to transfer
or sale for a period of three years (during which time the employee is required
to render service to the Company) from the respective bonus payment or
commission payment date, as such terms are defined in the Plan. Certain
benefits of ownership, including the payment of any dividends declared during
the restricted period, belong to the employees. Unlike the ESPP, cash amounts
credited to a participant's deferral account and shares of common stock
acquired through the Plan are subject to forfeiture in certain events of
termination of employment. Unearned compensation associated with the restricted
stock represents the market value of NBI common stock at the date of issuance
and is recognized as compensation expense ratably over the vesting period. The
Plan, which has an unlimited term, became effective during September 2000. In
December 2000, the Company recorded a credit to capital stock and a
corresponding debit to unearned compensation for the issuance of 29,171 shares
of common stock with an approximate market value of $2,298,000 related to the
Plan. Subsequent to December 31, 2000, the Company issued from treasury, 71,264
shares of common stock with an approximate market value of $5,635,000 related
to the Plan.

13. INCOME TAXES

Prior to the Exchange in 1999, the Company primarily operated as two
different types of tax entities. These entities included a Limited Liability
Company (taxed as a Partnership) and S-Corporation and as such, the combined
entities income prior to October 7, 1999, was not subject to U.S. federal
income taxes. The principals of the Company's predecessor partnership were
taxed on their proportionate share of the partnership's taxable income or loss.

Effective with the Exchange, the Company became subject to U.S. federal,
state and local corporate income taxes and has elected to file a federal
consolidated income tax return.

The components of pre-tax earnings and income tax expense and benefits
reflected in the consolidated statements of income are set forth below (000's
omitted):

For The Years Ended December 31,
----------------------------
2000 1999 1998
-------- -------- --------

Net income before taxes.............. $246,921 $123,372 $294,457
======== ======== ========

Current taxes:
U.S. federal......................... $ 75,356 $ 14,982 $ --
State and local...................... 30,959 21,250 9,506
-------- -------- --------
106,315 36,232 9,506
-------- -------- --------

Deferred taxes:
U.S. federal......................... (6,922) (35,290) --
State and local...................... (2,828) (13,137) --
-------- -------- --------
(9,750) (48,427) --
-------- -------- --------
Tax (benefit) expense................ $ 96,565 $(12,195) $ 9,506
======== ======== ========

F-15

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. INCOME TAXES (Continued)

The Company accounts for taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes." Deferred income taxes reflect the net tax effects of
temporary differences between the financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and laws that will
be in effect when such differences are expected to reverse. Significant
components of the Company's net deferred tax assets as of December 31, 2000 and
1999, include deferred tax assets consisting of: compensation and benefits,
charitable contributions, depreciation and amortization. Deferred tax
liabilities consist of unrealized gains on marketable securities.

Management of the Company has not established a valuation allowance for its
net deferred tax asset because they conclude that it is more likely than not
the benefit will be realized.

A reconciliation of the statutory U.S. federal income tax rate of 35% to
the Company's effective income tax rate is set forth below:

For The Years Ended
December 31,
----------------------
2000 1999 1998
----- ------ ----

U.S. statutory rate............................................... 35.00% 35.00% --
Increase (decrease) related to:
State and local taxes, net of U.S. income tax effects............. 8.15% 8.17% 3.23%
Other............................................................. (.09)% 0.13% --
----- ------ ----
Rate before Reorganization and IPO Charges and effect from changes
in the value of the stock price................................. 43.06% 43.30% 3.23%
Rate benefit for partnership period............................... -- (63.02)% --
Adjustment in benefit related to movement in stock price.......... (3.95)% 9.84% --
----- ------ ----
Effective tax rate................................................ 39.11% (9.88)% 3.23%
===== ====== ====

The Company's effective tax rate in 1999 included a rate benefit
attributable to the Company generally not being subject to corporate taxes on
its earnings prior to its conversion to corporate form.

The value of the Company's deferred tax asset relating to the unvested
shares in the Stock Incentive Plan fluctuated with the price of the Company's
stock from December 31, 1999 to June 30, 2000. In March 2000, the FASB issued
FASB Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation," an interpretation of APB Opinion No. 25 ("FIN 44"). The Company
adjusted, based upon the price of its common stock at the close of business on
June 30, 2000, the carrying value of the deferred tax asset that relates to
unvested shares in the Stock Incentive Plan. FIN 44 became effective on July 1,
2000, and now requires that the deferred tax asset be determined by the
compensation expense recognized for financial reporting purposes. Accordingly,
at June 30, 2000, the Company fixed the carrying value of its deferred tax
asset for unvested shares in its Stock Incentive Plan, based upon the price of
NBI's common stock at the close of business that day.

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

Substantially all financial instruments carried at contract value, such as
receivable and payable to clients, brokers, dealers and clearing organizations,
repurchase agreements, fees receivable, bank loans and the Note, approximate
market value due to their relatively short-term nature or variable market rates
of interest.

F-16

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK

In the normal course of business, the Company enters into various debt and
equity transactions as principal or agent. The execution, settlement and
financing of these transactions can result in off-balance sheet risk or
concentrations of credit risk.

The Company has a high net worth and institutional client base. The Company
records client securities transactions on a settlement date basis, which is
generally three business days after trade date. The Company is exposed to
off-balance sheet risk of loss on unsettled transactions in the event clients
and other counterparties are unable to fulfill contractual obligations.

The Company's policy is to monitor continuously its exposure to market and
counterparty risk through the use of a variety of credit exposure, position and
financial reporting and control procedures. In addition, the Company has a
policy of reviewing the credit standing, where applicable, of each
broker-dealer, client and other counterparty with which it conducts business.
The Company monitors the market value of collateral and requests and receives
additional collateral when required.

For transactions in which the Company extends credit to clients, the
Company seeks to control the risks associated with these activities by
requiring clients to maintain margin collateral in compliance with various
regulatory and internal guidelines. The Company monitors required margin levels
daily and, pursuant to such guidelines, requests the deposit of additional
collateral, or reduces securities positions when necessary. The Company's
policy is to take possession of securities purchased under agreements to
resell.

As part of its prime brokerage business, the Company writes covered
over-the-counter put options on listed equity securities with certain of its
prime brokerage clients. Market risk is mitigated as the options are generally
deep in the money and covered by an equivalent number of securities sold but
not yet purchased. The fair value of such options was approximately $1,633,000
and $3,694,000, at December 31, 2000 and 1999, respectively.

16. SEGMENT INFORMATION

Under the provisions of SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," the Company has four reportable segments:
Private Asset Management, Mutual Fund and Institutional, Professional
Securities Services and Corporate. The Private Asset Management segment
provides customized investment management services for high net worth
individuals, families and smaller institutions. Its revenues are principally
investment advisory fees and commissions. The investment advisory and
administrative services that are provided through our Mutual Fund and
Institutional segment include: the management of the Neuberger Berman family of
mutual funds, investment management of institutional separate account products
and broker-advised products (wrap accounts). Its revenues are principally
investment advisory and administrative fees and commissions. The Professional
Securities Services segment provides trade execution, clearing, custody, margin
financing, portfolio reporting and trust services, as well as consulting
advice. The revenues derived by this segment are principally commissions, net
interest, trading revenues and clearance fees. A fourth segment, "Corporate",
has been introduced during the fourth quarter of 2000, to reflect certain
corporate results that were previously allocated primarily to the Professional
Securities Services segment. Prior periods have been revised to conform with
this presentation.

The Company does not record revenues from transactions between segments
(referred to as intersegment revenues).

F-17

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. SEGMENT INFORMATION (Continued)

The Company evaluates performance of its segments based on profit or loss
from operations before Reorganization and IPO Charges and taxes. No single
client accounted for more than 10% of the Company's combined revenues.
Information on statement of financial condition data by segment is not
disclosed because it is not used for evaluating segment performance and
deciding how to allocate resources to segments. Substantially all of the
Company's revenues and assets are attributable to or located in the United
States.

Summarized information for the Company's reportable segments is presented
in the following table (000's omitted):

Year Ended December 31, 2000
--------------------------------------------------------
Private Mutual Professional
Asset Fund and Securities
Management Institutional Services Corporate Total
-------- -------- -------- -------- --------

Investment advisory and administrative
fees................................ $191,438 $206,965 $ 1,504 $ -- $399,907
Commissions........................... 93,967 16,958 35,664 -- 146,589
Net interest income................... 5,041 1,229 34,544 (546) 40,268
Principal transactions in securities.. -- 72 10,670 (1,119) 9,623
Clearance fees........................ -- -- 13,532 -- 13,532
Other income.......................... 301 920 4,400 807 6,428
-------- -------- -------- -------- --------
Net revenues (loss) after interest
expense............................. 290,747 226,144 100,314 (858) 616,347
Operating expenses.................... 147,056 147,455 63,523 11,392 369,426
-------- -------- -------- -------- --------
Net income (loss) before taxes........ $143,691 $ 78,689 $ 36,791 $(12,250) $246,921
======== ======== ======== ======== ========

Year Ended December 31, 1999
--------------------------------------------------------
Private Mutual Professional
Asset Fund and Securities
Management Institutional Services Corporate Total
-------- -------- ------- ------- --------

Investment advisory and administrative
fees................................. $166,454 $211,839 $ 1,141 $ -- $379,434
Commissions............................ 90,132 21,544 30,406 -- 142,082
Net interest income.................... 3,498 30 23,025 (300) 26,253
Principal transactions in securities... -- 142 7,924 1,937 10,003
Clearance fees......................... -- -- 11,081 -- 11,081
Other income........................... 30 1,012 3,017 -- 4,059
-------- -------- ------- ------- --------
Net revenues after interest expense.... 260,114 234,567 76,594 1,637 572,912
Operating expenses excluding
Reorganization and IPO Charges....... 86,847 150,362 51,494 10,783 299,486
-------- -------- ------- ------- --------
Net income (loss) before Reorganization
and IPO Charges and taxes............ $173,267 $ 84,205 $25,100 $(9,146) $273,426
======== ======== ======= ======= ========

F-18

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. SEGMENT INFORMATION (Continued)

Year Ended December 31, 1998
--------------------------------------------------------
Private Mutual Professional
Asset Fund and Securities
Management Institutional Services Corporate Total
-------- -------- ------- -------- --------

Investment advisory and
administrative fees............... $145,578 $242,191 $ 1,469 $ -- $389,238
Commissions......................... 89,705 25,352 30,912 -- 145,969
Net interest income................. 2,580 13 25,026 (166) 27,453
Principal transactions in securities -- 9 5,508 807 6,324
Clearance fees...................... -- -- 9,146 -- 9,146
Other income........................ 70 1,178 2,756 -- 4,004
-------- -------- ------- -------- --------
Net revenues after interest expense. 237,933 268,743 74,817 641 582,134
Operating expenses.................. 67,252 162,642 43,458 14,325 287,677
-------- -------- ------- -------- --------
Net income (loss) before taxes...... $170,681 $106,101 $31,359 $(13,684) $294,457
======== ======== ======= ======== ========

The following table is a reconciliation of reportable segment net income,
before Reorganization and IPO Charges and taxes, to the Company's consolidated
totals.

Total
---------

For the Year Ended December 31, 2000
Net income before taxes................................... $ 246,921
Tax expense............................................... (96,565)
---------
Net income................................................ $ 150,356
=========
For the Year Ended December 31, 1999
Net income before Reorganization and IPO Charges and taxes $ 273,426
Reorganization and IPO Charges............................ (150,054)
Tax benefit............................................... 12,195
---------
Net income................................................ $ 135,567
=========
For the Year Ended December 31, 1998
Net income before taxes................................... $ 294,457
Tax expense............................................... (9,506)
---------
Net income................................................ $ 284,951
=========

17. RELATED PARTY TRANSACTIONS

During the years ended December 31, 2000, 1999 and 1998, the Company earned
approximately $13,028,000, $17,799,000 and $19,779,000, respectively, in
brokerage commissions from the Funds.

Certain employees of the Company are officers and/or trustees of the Funds.
The Company also reimbursed certain Funds for expenses during the years ended
December 31, 2000, 1999 and 1998, of approximately $1,770,000, $2,225,000 and
$1,502,000, respectively, to the extent that such Funds exceeded their
specified expense limitations.

Included in cash and cash equivalents is approximately $76,494,000 and
$78,038,000 related to investments in affiliated funds at December 31, 2000 and
1999, respectively.

F-19

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. QUARTERLY FINANCIAL INFORMATION (Unaudited)

2000
------------------------------------
First Second Third Fourth
-------- -------- -------- --------
(In Thousands, Except Per Share Data)

Net revenues after interest expense $155,412 $151,810 $151,650 $157,475
Operating expenses................. 95,194 90,206 89,672 94,354
-------- -------- -------- --------
Net income before taxes............ 60,218 61,604 61,978 63,121
Tax expense........................ 19,977 22,899 26,713 26,976
-------- -------- -------- --------
Net income......................... $ 40,241 $ 38,705 $ 35,265 $ 36,145
======== ======== ======== ========
Net income per common share:
Basic........................... $ 0.81 $ 0.79 $ 0.72 $ 0.74
======== ======== ======== ========
Diluted......................... $ 0.81 $ 0.78 $ 0.71 $ 0.73
======== ======== ======== ========

1999
------------------------------------
First Second Third Fourth
-------- -------- -------- --------
(In Thousands, Except Per Share Data)

Net revenues after interest expense $144,586 $143,602 $141,328 $143,396
Operating expenses................. 70,384 72,172 70,429 236,555
-------- -------- -------- --------
Net income (loss) before taxes..... 74,202 71,430 70,899 (93,159)
Tax expense (benefit).............. 2,421 2,131 10,492 (27,239)
-------- -------- -------- --------
Net income (loss).................. $ 71,781 $ 69,299 $ 60,407 $(65,920)
======== ======== ======== ========
Net income (loss) per common share:
Basic and diluted............... $ 1.68 $ 1.62 $ 1.42 $ (1.33)
======== ======== ======== ========

1998
-----------------------------------
First Second Third Fourth
-------- -------- -------- --------
(In Thousands, Except Per Share Data)

Net revenues after interest expense $138,446 $152,131 $147,558 $143,999
Operating expenses................. 65,018 71,049 73,800 77,810
-------- -------- -------- --------
Net income before taxes............ 73,428 81,082 73,758 66,189
Tax expense........................ 2,076 2,730 2,258 2,442
-------- -------- -------- --------
Net income......................... $ 71,352 $ 78,352 $ 71,500 $ 63,747
======== ======== ======== ========
Net income per common share:
Basic and diluted............... $ 1.67 $ 1.84 $ 1.68 $ 1.49
======== ======== ======== ========

19. SUBSEQUENT EVENT

On January 18, 2001, NBI declared a quarterly cash dividend on its common
stock in the amount of $0.10 per share. The dividend was paid on February 13,
2001, to stockholders of record at the close of business on February 1, 2001.

F-20

NEUBERGER BERMAN INC. AND SUBSIDIARIES

SCHEDULE I--CONDENSED FINANCIAL STATEMENTS OF THE REGISTRANT PARENT

STATEMENTS OF FINANCIAL CONDITION
(in thousands)

December 31, December 31,
2000 1999
-------- --------

ASSETS
Receivables from subsidiaries................................... $ 47,971 $ 49,575
Investment in subsidiaries...................................... 248,331 177,033
Tax asset-net................................................... 46,811 27,326
Furniture, equipment and leasehold improvements and other assets 7,660 --
-------- --------
Total assets............................................. $350,773 $253,934
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Dividend payable............................................. $ -- $ 4,962
Other liabilities and accrued expenses....................... 634 170
-------- --------
634 5,132
-------- --------
Stockholders' equity:
Common stock................................................. 500 500
Other equity................................................. 349,639 248,302
-------- --------
Total liabilities and stockholders' equity............... $350,773 $253,934
======== ========

The accompanying notes are an integral part of the condensed financial
statements.

F-21

NEUBERGER BERMAN INC. AND SUBSIDIARIES

SCHEDULE I--CONDENSED FINANCIAL STATEMENTS OF THE REGISTRANT PARENT (Continued)

STATEMENTS OF OPERATIONS
(in thousands)

For The Period
October 8,
For The Year 1999
Ended Through
December 31, December 31,
2000 1999
-------- ---------

REVENUES:
Other income.................................. $ 608 $ --
-------- ---------

OPERATING EXPENSES:
Employee compensation and benefits............ 126 137,273
Other expenses................................ 1,950 10,000
-------- ---------
Total operating expenses.................... 2,076 147,273
-------- ---------

Loss from operations before equity in income of
subsidiaries and taxes....................... (1,468) (147,273)
Equity in income of subsidiaries............... 141,384 26,845
-------- ---------
Net income (loss) before taxes.............. 139,916 (120,428)

Tax benefit.................................... (10,440) (50,689)
-------- ---------
Net income (loss)........................... $150,356 $ (69,739)
======== =========

The accompanying notes are an integral part of the condensed financial
statements.

F-22

NEUBERGER BERMAN INC. AND SUBSIDIARIES

SCHEDULE I--CONDENSED FINANCIAL STATEMENTS OF THE REGISTRANT PARENT (Continued)

STATEMENTS OF CASH FLOWS
(in thousands, except per share data)

For the Period
For The Year October 8, 1999
Ended Through
December 31, December 31,
2000 1999
--------- --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................. $ 150,356 $(69,739)
Adjustments to reconcile net income (loss) to net cash used in
operating activities-
Equity in income of subsidiaries............................. (141,384) (26,845)
Contribution to defined contribution stock incentive plan.... -- 134,327
Deferred tax benefit......................................... (9,750) (48,427)
Depreciation and amortization................................ 608 --
(Increase) decrease in operating assets-
Receivables from subsidiaries................................ 1,604 (49,575)
Tax asset-net................................................ (9,735) 21,101
Other assets................................................. (23) --
Increase (decrease) in operating liability-
Other liabilities and accrued expenses....................... 464 170
--------- --------
Net cash used in operating activities.................... (7,860) (38,988)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of furniture, equipment and
leasehold improvements..................................... (8,245) --
Cash received from subsidiaries.............................. 80,000 --
Cash paid for acquisition.................................... (7,882) --
Investment in subsidiaries................................... (1,157) (40,871)
--------- --------
Cash provided by (used in) investing activities.............. 62,716 (40,871)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock..................................... -- 87,933
Payments for dividends....................................... (19,646) --
Purchase of treasury stock................................... (35,210) (8,074)
--------- --------
Net cash (used in) provided by financing activities...... (54,856) 79,859
--------- --------
Net increase (decrease) in cash and cash equivalents..... -- --
CASH AND CASH EQUIVALENTS, beginning of period................ -- --
--------- --------
CASH AND CASH EQUIVALENTS, end of period...................... $ -- $ --
========= ========

The accompanying notes are an integral part of the condensed financial
statements.

F-23

NEUBERGER BERMAN INC. AND SUBSIDIARIES

SCHEDULE I--CONDENSED FINANCIAL STATEMENTS OF THE REGISTRANT PARENT (Continued)

STATEMENTS OF CASH FLOWS (Continued)
(in thousands, except share data)

Supplemental disclosures of cash flow information:

NBI made no interest payments for the year ended December 31, 2000, and for
the period October 8, 1999 through December 31, 1999.

Tax payments totaled $109,683 during the year ended December 31, 2000. NBI
made no tax payments for the period October 8, 1999 through December 31, 1999.

Supplemental disclosures of non-cash operating, investing and financing
activities:

On October 7, 1999, the principals of NB, LLC and the shareholders of NBMI
exchanged their ownership interests for shares of NBI. As a result, NBI
recognized a non-cash increase of $109,317 in investment in subsidiaries.

In connection with NBI's initial public offering, an initial, irrevocable
non-cash contribution of 4,264,344 shares of its common stock was made to a
defined contribution stock incentive plan. The non-cash expense associated with
the contribution totaled $134,327 and was recognized on the date it was funded,
in accordance with SFAS No. 87. NBI recorded a deferred tax benefit of $46,262
related to the contribution.

On November 23, 1999, NBI declared an initial quarterly cash dividend on
its common stock in the amount of $0.10 per share. The dividend was paid on
January 25, 2000, to stockholders of record at the close of business on January
11, 2000.

On December 27, 1999, NBI made a cash contribution of $10,000 to the
Neuberger Berman Foundation. In connection with the cash contribution, NBI
recorded a deferred tax benefit of $2,165.

NBI increased, based upon the price of its common stock at the close of
business on June 30, 2000, the carrying value of the deferred tax asset
resulting from its initial, irrevocable non-cash contribution of 4,264,344
shares referred to above, by $9,750.

As part of the purchase price for the private asset management business of
Delta Capital Management LLC ("Delta"), on December 15, 2000, NBI issued 10,973
shares of common stock from treasury with a market value of $875. In addition,
NBI contributed its $8,757 investment in Delta to NB, LLC.

In connection with an employee stock ownership plan, NBI issued 29,171
shares of common stock, with a market value of $2,298, from treasury. This
purchase of shares was recorded as a credit to capital stock with a
corresponding debit to other equity.

The accompanying notes are an integral part of the condensed financial
statements.

F-24

NEUBERGER BERMAN INC. AND SUBSIDIARIES

SCHEDULE I--CONDENSED FINANCIAL STATEMENTS OF THE REGISTRANT PARENT (Continued)

Notes to Condensed Financial Statements

The condensed financial statements of the registrant should be read in
conjunction with the consolidated financial statements and notes to
consolidated financial statements which are included herein.

Investment in subsidiaries represents NBI's investment in its subsidiary
companies. Income and losses of the subsidiaries are recognized using equity
method accounting.

Receivables from subsidiaries include cash advances and amounts due under
intra-corporate tax sharing arrangements.

Dividends paid to NBI by its wholly owned subsidiaries, NB, LLC and NBMI,
were $55,000,000 and $25,000,000, respectively, for the year ended December 31,
2000. No dividends were paid to NBI for the period October 8, 1999 through
December 31, 1999.

Certain prior year amounts have been reclassified to conform with the
December 31, 2000, presentation.

F-25

Neuberger Berman Inc. and Subsidiaries

Condensed Consolidated Statements of Financial Condition
(in thousands, except share data)

March 31, December 31,
2001 2000
---------- ----------
(Unaudited)

ASSETS
Cash and cash equivalents............................................ $ 124,082 $ 88,117
Cash and securities segregated for the exclusive benefit of clients.. 675,514 911,182
Cash and securities deposited with clearing organizations............ 5,955 5,973
Securities purchased under agreements to resell...................... 163,255 282,720
Receivable from brokers, dealers and clearing organizations.......... 2,626,195 2,466,102
Receivable from clients.............................................. 611,298 456,691
Securities owned, at market value.................................... 55,075 67,688
Fees receivable...................................................... 27,674 23,012
Furniture, equipment and leasehold improvements, at cost, net of
accumulated depreciation and amortization of $29,411 and $26,797 at
March 31, 2001 and December 31, 2000, respectively................. 44,978 43,089
Other assets......................................................... 97,179 77,189
---------- ----------
Total assets...................................................... $4,431,205 $4,421,763
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Bank loans.......................................................... $ 160,000 $ 3,000
Securities sold under agreements to repurchase...................... 249,402 234,972
Payable to brokers, dealers and clearing organizations.............. 1,980,898 1,461,267
Payable to clients.................................................. 1,509,943 2,199,169
Securities sold but not yet purchased, at market value.............. 19,301 9,522
Other liabilities and accrued expenses.............................. 99,136 128,694
---------- ----------
4,018,680 4,036,624
---------- ----------
Subordinated liability.............................................. 35,000 35,000
---------- ----------

Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized; none
issued at March 31, 2001 and December 31, 2000.................... -- --
Common stock, $.01 par value; 250,000,000 shares authorized;
50,178,008 shares issued; 48,944,822 and 48,803,006 shares
outstanding at March 31, 2001 and December 31, 2000, respectively. 502 500
Paid-in capital..................................................... 339,923 332,870
Retained earnings................................................... 90,316 60,971
---------- ----------
430,741 394,341
Less: Treasury stock, at cost, of 1,233,186 and 1,218,914 shares at
March 31, 2001 and December 31, 2000, respectively............... (45,788) (41,904)
Unearned compensation............................................ (7,428) (2,298)
---------- ----------
Total stockholders' equity........................................ 377,525 350,139
---------- ----------
Total liabilities and stockholders' equity........................ $4,431,205 $4,421,763
========== ==========

The accompanying notes are an integral part of the condensed consolidated
financial statements.

F-26

Neuberger Berman Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)

For the Three Months
Ended March 31,
-----------------
2001 2000
-------- --------

REVENUES:
Investment advisory and administrative fees....... $103,292 $ 96,951
Commissions....................................... 36,693 39,828
Interest.......................................... 57,708 51,025
Principal transactions in securities.............. 559 5,076
Clearance fees.................................... 3,814 3,622
Other income...................................... 577 838
-------- --------
Gross revenues................................ 202,643 197,340
Interest expense................................... 47,811 41,928
-------- --------
Net revenues after interest expense........... 154,832 155,412
-------- --------
OPERATING EXPENSES:
Employee compensation and benefits................ 65,572 65,933
Information technology............................ 5,450 5,221
Rent and occupancy................................ 4,625 4,164
Brokerage, clearing and exchange fees............. 2,702 2,843
Advertising and sales promotion................... 2,546 2,452
Distribution and fund administration.............. 4,371 4,392
Professional fees................................. 1,964 2,277
Depreciation and amortization..................... 2,771 2,460
Other expenses.................................... 5,775 5,452
-------- --------
Total operating expenses...................... 95,776 95,194
-------- --------
Net income before taxes....................... 59,056 60,218
Provision for income taxes......................... 24,822 19,977
-------- --------
Net income.................................... $ 34,234 $ 40,241
======== ========
Net income per common share

Net income per share-Basic........................ $ 0.70 $ 0.81
======== ========

Net income per share-Diluted...................... $ 0.69 $ 0.81
======== ========

Weighted average common shares outstanding-Basic.. 48,778 49,476
======== ========

Weighted average common shares outstanding-Diluted 49,779 49,476
======== ========

The accompanying notes are an integral part of the condensed consolidated
financial statements.

F-27

Neuberger Berman Inc. and Subsidiaries

Condensed Consolidated Statement of Changes
in Stockholders' Equity (Unaudited)
(in thousands)

Common Paid-in Retained Treasury Unearned
Stock Capital Earnings Stock Compensation Total
---- -------- ------- -------- ------- --------

Beginning balance,
December 31, 2000...... $500 $332,870 $60,971 $(41,904) $(2,298) $350,139
Dividends............... -- -- (4,889) -- -- (4,889)
Acquisition of treasury
stock................. -- -- -- (7,613) -- (7,613)
Issuance of common
stock................. 2 7,053 -- 3,729 (5,635) 5,149
Amortization of unearned
compensation.......... -- -- -- -- 505 505
Net income.............. -- -- 34,234 -- -- 34,234
---- -------- ------- -------- ------- --------
Ending balance, March 31,
2001................... $502 $339,923 $90,316 $(45,788) $(7,428) $377,525
==== ======== ======= ======== ======= ========

The accompanying notes are an integral part of the condensed consolidated
financial statements.

F-28

Neuberger Berman Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

For the Three Months
Ended March 31,
---------------------
2001 2000
--------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................................................. $ 34,234 $ 40,241
Adjustments to reconcile net income to net cash provided by (used in)
operating activities--
Depreciation and amortization....................................... 2,771 2,460
Deferred tax benefit................................................ (1,077) (6,097)
Amortization of unearned compensation............................... 505 --
Net tax benefit on option exercise..................................... 570 --
(Increase) decrease in operating assets--
Cash and securities segregated for the exclusive benefit of clients. 235,668 225,112
Cash and securities deposited with clearing organizations........... 18 (90)
Securities purchased under agreements to resell..................... 119,465 (385,427)
Receivable from brokers, dealers and clearing organizations......... (160,093) (294,770)
Receivable from clients............................................. (154,607) (86,069)
Securities owned, at market value................................... 12,613 923
Fees receivable..................................................... (4,662) (1,032)
Other assets........................................................ (2,128) 5,936
Increase (decrease) in operating liabilities--
Bank loans.......................................................... 157,000 85,000
Securities sold under agreements to repurchase...................... 14,430 (138,998)
Payable to brokers, dealers and clearing organizations.............. 519,631 239,869
Payable to clients.................................................. (689,226) 258,053
Securities sold but not yet purchased, at market value.............. 9,779 26,644
Other liabilities and accrued expenses.............................. (29,558) 3,194
--------- ---------
Net cash provided by (used in) operating activities.......... 65,333 (25,051)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of furniture, equipment and leasehold
improvements...................................................... (4,503) (7,378)
Cash paid for acquisitions.......................................... (14,442) --
--------- ---------
Cash used in investing activities............................ (18,945) (7,378)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for dividends.............................................. (4,889) (4,961)
Issuance of common stock............................................ 2,079 --
Purchase of treasury stock.......................................... (7,613) (9,445)
--------- ---------

Net cash used in financing activities........................ (10,423) (14,406)
--------- ---------

Net increase (decrease) in cash and cash equivalents......... 35,965 (46,835)
CASH AND CASH EQUIVALENTS, beginning of period......................... 88,117 91,010
--------- ---------
CASH AND CASH EQUIVALENTS, end of period............................... $ 124,082 $ 44,175
========= =========

The accompanying notes are an integral part of the condensed consolidated
financial statements.

F-29

NEUBERGER BERMAN INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)

(in thousands, except share data)

Supplemental disclosures of cash flow information:

Interest payments totaled $46,885 and $39,722 for the three months ended
March 31, 2001 and 2000, respectively.

Tax payments totaled $7,393 and $23,710 for the three months ended March
31, 2001 and 2000, respectively.

Supplemental disclosures of non-cash operating, investing and financing
activities:

During the first three months of 2000, Neuberger Berman Inc. increased,
based upon the price of its common stock at the close of business on March 31,
2000, the carrying value of the deferred tax asset relating to unvested shares
in an employee defined contribution stock incentive plan by $6,097.

In connection with an employee stock ownership plan, Neuberger Berman Inc.
issued 71,264 shares of common stock, with a market value of $5,635, of which
$1,586 were issued from treasury. This purchase of shares was recorded as a
credit to capital stock with a corresponding debit to unearned compensation.

As part of the purchase price for Fasciano Company, Inc., on March 23,
2001, Neuberger Berman Inc. issued 38,197 shares of common stock from treasury
with a market value of $2,500.

The accompanying notes are an integral part of the condensed consolidated
financial statements.

F-30

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

The condensed consolidated financial statements include the accounts of NBI
and its subsidiaries. NBI's wholly owned subsidiaries are NB, LLC, a Delaware
limited liability company, and its subsidiaries, NBMI, a New York corporation,
and Neuberger Berman National Trust Company, which holds a national bank
charter under the laws of the United States (collectively, the "Company"). NB,
LLC's wholly owned subsidiaries are Neuberger Berman Trust Company, a
non-depository trust company chartered under the New York Banking Law,
Neuberger Berman Trust Company of Delaware, a non-depository limited purpose
trust company chartered under the Delaware Banking Code, Neuberger Berman Trust
Company of Florida, a Florida corporation authorized to engage in trust
business chartered under the Florida Banking Law, and Neuberger & Berman Agency
Inc., a New York corporation. Material intercompany transactions and balances
have been eliminated in consolidation.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements do
not include all of the information and notes required by generally accepted
accounting principles for complete
consolidated financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation of condensed
consolidated financial condition and results of operations for the periods
presented have been included. All adjustments are of a normal and recurring
nature. It is suggested that these condensed consolidated financial statements
be read in conjunction with the consolidated financial statements and the
related notes included herein. Certain prior period amounts have been
reclassified to conform to the three months ended March 31, 2001 presentation.

3. NET CAPITAL

NB, LLC and NBMI, as registered broker-dealers and member firms of the New
York Stock Exchange, Inc. and the National Association of Securities Dealers,
Inc., respectively, are subject to the Securities and Exchange Commission's
(the "SEC") Uniform Net Capital Rule 15c3-1 (the "Rule"), which requires that
broker-dealers maintain a minimum level of net capital, as defined. As of March
31, 2001, NB, LLC and NBMI had net capital of approximately $169,035,000 and
$23,504,000, respectively, which exceeded their requirements by approximately
$146,642,000 and $23,254,000, respectively.

F-31

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

3. NET CAPITAL (Continued)

The Rule also provides that equity capital may not be withdrawn or cash
dividends paid if the resulting net capital of a broker-dealer would be less
than the amount required under the Rule. Accordingly, at March 31, 2001, the
payments of dividends and advances to NBI by NB, LLC and NBMI is limited to
approximately $113,052,000 and $23,204,000, respectively, under the most
restrictive of these requirements.

4. EARNINGS PER SHARE

Basic earnings per common share are calculated by dividing net income by
the weighted average common shares outstanding. Diluted earnings per common
share are calculated by dividing net income by the total weighted average
number of shares of common stock outstanding and common stock equivalents.
Common stock equivalents are comprised of dilutive potential shares from stock
options and certain restricted stock awards. Common stock equivalents are
excluded from the computation if their effect is anti-dilutive. Diluted
earnings per share is computed using the treasury stock method.

The following table sets forth the computation of basic and diluted
earnings per share for the three months ended March 31, 2001 and 2000:

For the Three Months
Ended March 31,
---------------
2001 2000
------- -------
(In Thousands, Excep
Per Share Data)

Net Income...................................................................... $34,234 $40,241
======= =======
Basic weighted average shares outstanding....................................... 48,778 49,476
Dilutive potential shares from stock options and certain restricted stock awards 1,001 --
------- -------
Dilutive weighted average shares outstanding.................................... 49,779 49,476
======= =======
Basic earnings per share........................................................ $ 0.70 $ 0.81
======= =======
Diluted earnings per share...................................................... $ 0.69 $ 0.81
======= =======

Options on 664,557 and 2,790,000 shares for March 31, 2001 and 2000,
respectively, have been excluded from the earnings per share computation above
due to their anti-dilutive effect.

5. CONTINGENCIES

In the normal course of business, the Company is subject to various legal
proceedings. In the opinion of management, based on discussions with legal
counsel, the resolution of pending proceedings will not have a material adverse
effect on the condensed consolidated financial condition, results of operations
or liquidity of the Company.

6. INCOME TAXES

The Company accounts for taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred
income taxes reflect the net tax effects of temporary differences between the
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when such
differences are expected to reverse. Significant components of the Company's
net deferred tax asset as of March 31, 2001, include compensation and benefits,
depreciation and amortization and unrealized gains and

F-32

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

6. INCOME TAXES (Continued)

losses on marketable securities. Management of the Company has not established
a valuation allowance for the net deferred tax asset because they have
concluded that it is more likely than not the benefit will be realized.

The value of the Company's deferred tax asset relating to the unvested
shares in the Employee Defined Contribution Stock Incentive Plan (the "Stock
Incentive Plan") fluctuated with the price of the Company's stock from December
31, 1999 to March 31, 2000. In March 2000, the Financial Accounting Standards
Board ("FASB") issued FASB Interpretation No. 44 "Accounting for Certain
Transactions Involving Stock Compensation," an interpretation of APB Opinion
No. 25 ("FIN 44"). The Company adjusted, based upon the price of its common
stock at the close of business on March 31, 2000, the carrying value of the
deferred tax asset that relates to unvested shares in the Stock Incentive Plan.
FIN 44 became effective on July 1, 2000, and requires that the deferred tax
asset be determined by the compensation expense recognized for financial
reporting purposes. Accordingly, at June 30, 2000, the Company fixed the
carrying value of its deferred tax asset for unvested shares in its Stock
Incentive Plan, based upon the price of NBI's common stock at the close of
business that day.

The Company's effective tax rate for the period ended March 31, 2000,
includes a benefit related to the upward movement in the price of the common
stock for the respective measurement dates through the period ended March 31,
2000, as applied to the unvested shares in the Company's Stock Incentive Plan.
The final benefit will be determined when the restricted shares vest.

7. STOCK OPTIONS

On September 29, 1999, the Board of Directors of NBI (the "Board") approved
the 1999 Neuberger Berman Inc. Long-Term Incentive Plan (the "1999 Plan") and
reserved for issuance 10,000,000 shares of NBI's common stock. In addition, on
September 29, 1999, the Board approved the 1999 Neuberger Berman Inc. Directors
Stock Incentive Plan (the "1999 Directors Plan") and reserved for issuance
200,000 shares of NBI's common stock. On March 27, 2000, 2,760,000
non-qualified stock options ("reload options") were granted to certain
employees of NBI under the 1999 Plan, 15,000 of which were subsequently
forfeited. Also, on March 27, 2000, 30,000 non-qualified stock options ("reload
options") were granted to certain directors of NBI under the 1999 Directors
Plan. Reload options granted under the 1999 Plan and the 1999 Directors Plan
provide for annual vesting ratably over five years, commencing on the first
anniversary of the date of issuance.

In accordance with the provisions of the 1999 Plan and the 1999 Directors
Plan, on March 27, 2001, 20% of the reload options vested with certain amounts
being exercised. The following table summarizes awards of and transactions in
reload options under the Plans for the three months ended March 31, 2001:

Range of Exercise Prices
----------------------------------------------------
$28.13-$32.00 $61.00-$64.23 $76.19-$79.75 Total
--------- ------- ------- ---------

Balance at December 31, 2000.. 2,775,000 -- 30,000 2,805,000
Reload options-granted..... -- 222,326 415,000 637,326
Reload options-exercised... (353,258) -- -- (353,258)
--------- ------- ------- ---------
Balance at March 31, 2001..... 2,421,742 222,326 445,000 3,089,068
========= ======= ======= =========

F-33

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

8. SEGMENT INFORMATION

Under the provisions of SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," the Company has four reportable segments:
Private Asset Management, Mutual Fund and Institutional, Professional
Securities Services and Corporate. The Private Asset Management segment
provides customized investment management services for high net worth
individuals, families and smaller institutions. Its revenues are principally
investment advisory fees and commissions. The investment advisory and
administrative services that are provided through our Mutual Fund and
Institutional segment include: the management of the Neuberger Berman family of
mutual funds, investment management of institutional separate account products
and broker-advised products (wrap accounts). Its revenues are principally
investment advisory and administrative fees and commissions. The Professional
Securities Services segment provides trade execution, clearing, custody, margin
financing, portfolio reporting and trust services, as well as consulting
advice. The revenues derived by this segment are principally commissions, net
interest, trading revenues and clearance fees. The Corporate segment reflects
certain corporate results that were previously allocated primarily to the
Professional Securities Services segment. Prior periods have been revised to
conform with this presentation.

The Company does not record revenues from transactions between segments
(referred to as intersegment revenues).

The Company evaluates performance of its segments based on profit or loss
from operations before taxes. No single client accounted for more than 10% of
the Company's combined revenues. Information on statement of financial
condition data by segment is not disclosed because it is not used for
evaluating segment performance and deciding how to allocate resources to
segments. Substantially all of the Company's revenues and assets are
attributable to or located in the United States.

Summarized financial information for the Company's reportable segments is
presented in the following tables (in thousands):

For the Three Months
Ended March 31,
-------------------
2001 2000
-------- --------

PRIVATE ASSET MANAGEMENT
Net revenues after interest expense $ 75,850 $ 73,539
Net income before taxes............ $ 36,218 $ 36,685

MUTUAL FUND & INSTITUTIONAL
Net revenues after interest expense $ 55,165 $ 55,399
Net income before taxes............ $ 19,309 $ 16,952

PROFESSIONAL SECURITIES SERVICES
Net revenues after interest expense $ 25,681 $ 26,686
Net income before taxes............ $ 8,511 $ 10,085

CORPORATE
Net loss after interest expense.... $ (1,864) $ (212)
Net loss before taxes.............. $ (4,982) $ (3,504)

TOTAL
Net revenues after interest expense $154,832 $155,412
Net income before taxes............ $ 59,056 $ 60,218

F-34

NEUBERGER BERMAN INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

9. SUBSEQUENT EVENTS

On April 18, 2001, the Board of Directors of NBI declared a quarterly cash
dividend on its common stock in the amount of $0.10 per share. The dividend
will be payable on May 15, 2001, to stockholders of record at the close of
business on May 1, 2001.

On May 4, 2001, the Company issued $175 million principal amount at
maturity of zero-coupon convertible senior notes due 2021, resulting in gross
proceeds of approximately $151 million. The issue price represents a yield to
maturity of 0.75% per year with an initial conversion premium of 30%.

F-35

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

No dealer, salesperson or other person is authorized to give any information or
to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.

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

TABLE OF CONTENTS

Page
---

Prospectus Summary....................... 1
Risk Factors............................. 10
Forward Looking Statements............... 15
Use of Proceeds.......................... 17
Price Range of Our Common Stock and
Dividends.............................. 17
Capitalization........................... 19
Selected Consolidated Financial Data..... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 22
Business................................. 36
Management............................... 48
Principal and Selling Stockholders....... 51
Description of Capital Stock............. 58
Underwriting............................. 63
Legal Matters............................ 65
Experts.................................. 65
Where You Can Find Additional Information 65
Index to Financial Statements............ F-1

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

3,937,966 Shares

Neuberger Berman Inc.

Common Stock

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

[NEUBERGER BERMAN LOGO]

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

Goldman, Sachs & Co.

Bear, Stearns & Co. Inc.

JPMorgan

Merrill Lynch & Co.

Salomon Smith Barney

Representatives of the Underwriters

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

File Pursuant to Rule 424(b)(4)
SEC Registration No. 333-62350

[NEUBERGER BERMAN LOGO]

3,937,966 Shares

Neuberger Berman Inc.

Common Stock

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

The common stock is listed on the New York Stock Exchange under the symbol
"NEU". The last reported sale price of the common stock on June 28, 2001 was
$68.58 per share.

See "Risk Factors" on page 10 to read about factors you should consider
before buying the common stock.

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

Per Share Total
------ ------------

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

The underwriters, through their respective selling agents, expect to
deliver the shares against payment in New York, New York on July 5, 2001.

Goldman Sachs International Bear, Stearns International Limited

JPMorgan Merrill Lynch International Salomon Smith Barney

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

Prospectus dated June 28, 2001.

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

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

TABLE OF CONTENTS

Page
---

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

3,937,966 Shares

Neuberger Berman Inc.

Common Stock

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

[NEUBERGER BERMAN LOGO]

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

Goldman Sachs International

Bear, Stearns International Limited

JPMorgan

Merrill Lynch International

Salomon Smith Barney

Representatives of the Underwriters

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