<PAGE>
ANNUAL REPORT
- -------------------------------------------
October 31, 1996
Neuberger&Berman
MUNICIPAL FUNDS -RM-
Neuberger&Berman
MUNICIPAL MONEY FUND
Neuberger&Berman
MUNICIPAL SECURITIES TRUST
Neuberger&Berman
NEW YORK INSURED INTERMEDIATE FUND
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE FUNDS
PRESIDENT'S LETTER 4
GROWTH OF A DOLLAR
CHARTS
COMPARISON OF A
$10,000 INVESTMENT
Municipal Securities
Trust 8
New York Insured
Intermediate Fund 9
FINANCIAL STATEMENTS 10
FINANCIAL HIGHLIGHTS
PER SHARE DATA
Municipal Money Fund 19
Municipal Securities
Trust 20
New York Insured
Intermediate Fund 21
REPORT OF
INDEPENDENT AUDITORS 24
THE PORTFOLIOS
SCHEDULE OF
INVESTMENTS
Municipal Money
Portfolio 25
Municipal Securities
Portfolio 36
New York Insured
Intermediate Portfolio 40
FINANCIAL STATEMENTS 44
FINANCIAL HIGHLIGHTS 51
REPORT OF
INDEPENDENT AUDITORS 53
OTHER INFORMATION
Directory/Officers and
Trustees 54
</TABLE>
3
<PAGE>
PRESIDENT'S LETTER* December 13, 1996
Dear Shareholder,
At the time of your Fund's October 1995 Annual Report, bond prices were in the
midst of a strong rally, with tepid economic growth and benign inflation
fostering a positive environment for fixed-income securities. After weathering a
significant inflation scare this spring and summer, bonds were benefiting from
similarly favorable economic conditions as the current fiscal year ended.
The twelve months through October 31, 1996, were an unstable time for interest
rates. The Federal Reserve Board (the "Fed") made adjustments to monetary
policy, reducing the Federal funds rate from 5.75% to 5.25%, and lowering the
Discount Rate by a quarter percentage point to 5%. The Fed's steady approach
kept shorter-maturity securities in a narrow range, with three-month Treasury
bills, for example, trading between about 4.9% and 5.6% over the fiscal year.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS ON U.S. TREASURY
SECURITIES
3-YEAR TREASURY 30-YEAR TREASURY
NOTES BONDS
<S> <C> <C>
Nov-95 1.15% 3.15%
Dec-95 2.06035% 6.048515%
Jan-96 3.029923% 5.634926%
Feb-96 2.174775% -0.565844%
Mar-96 1.725206% -2.604244%
Apr-96 1.42003% -5.058618%
May-96 1.47074% -5.514336%
Jun-96 2.36383% -3.870286%
Jul-96 2.670774% -4.225966%
Aug-96 2.670774% -5.825392%
Sep-96 4.11083% -2.971901%
Oct-96 5.703726% 1.112982%
Source: Salomon Brothers
</TABLE>
The intermediate- and long-term sectors of the bond market, however, were
destabilized by conflicting signals on growth and inflation. At first, most
signs pointed toward a continuation of relatively slow but steady economic
growth. The correspondingly sanguine outlook for inflation nurtured steadily
lower rates, with the yield on the long Treasury bond (which is the benchmark
30-year Treasury) falling from 6.34% in November to 5.95% in January. But the
market's tranquility
4
<PAGE>
was shattered with the news that 624,000 non-farm jobs were added to the
nation's payrolls in February. Further signs of above-average economic growth
appeared in the form of rising commodity prices, strong consumer confidence, a
4.8% increase in second-quarter gross domestic product, and hints of labor-cost
pressures. At the peak of concerns about economic overheating in July, the yield
on the Treasury's 30-year bond climbed to 7.19%.
Since August, commodity prices and the pace of economic growth have declined,
and labor costs increased by just 0.6% in the third quarter. By your Fund's
fiscal year end, yields on the long Treasury bond had fallen back to 6.64%, or
only 0.30% above their yield in November 1995.
Since bond prices move inversely to interest rates, the Fed's stable monetary
policy and the sometimes worrisome inflation data helped short-term Treasuries
outperform long-term Treasuries over the fiscal year. The stronger-than-expected
economy also helped corporate issues beat Treasury debt with similar maturities,
while upward pressure on long-term rates allowed mortgage-backed securities to
outperform both Treasury debt and most corporate bonds. Treasury securities
usually underperform corporate bonds during periods of economic growth. Your
Neuberger&Berman Income Funds were in a position to benefit from these trends.
We strive to merit your continued confidence and remain committed to seeking
consistent returns in all types of market environments. A discussion of each
portfolio's strategy during the 12-month period covered by the Annual Report
follows.
MUNICIPAL MONEY FUND Throughout the past fiscal year ended October 1996,
short-term tax-exempt rates remained steady in the face of a more volatile
market environment in the Treasury and Municipal Bond sectors. These fixed
income markets had reacted negatively at the start of this year to stronger
economic fundamentals which fueled inflation fears. However, the forthcoming
data ultimately failed to show any signs of inflationary evidence, thereby
eliminating any need for restrictive actions by the Fed. Municipal note issuance
was moderate
*Statistical sources: Federal Reserve Board; Press reports, Bloomberg Financial
Markets, Labor Department, Commerce Department, Bureau of Labor Statistics.
5
<PAGE>
and investor demand remained constant over this time frame. We look for
continued interest rate stability in the tax-exempt money market area for the
rest of the calendar year.
During the six-month period ended October 31, 1996, the weighted average
portfolio maturity for Municipal Money ranged from a high of 70 days to a low of
44 days. The current and effective (compounded) yields for the Fund as of
October 31, 1996 were 2.84% and 2.88%, respectively. This can be translated into
tax-equivalent current and effective yields of 4.70% and 4.81%, respectively,
for an investor in the highest federal income tax bracket.**
MUNICIPAL SECURITIES TRUST The last 12 months have proved to be a lackluster
but volatile period for the fixed income markets, although Municipal Securities
Trust outperformed Treasury issues on a relative basis. Stronger economic
conditions with their inflationary concerns in the first part of the year
created a difficult environment for bonds. Tax-exempt securities performed more
favorably during this time, due to an increase in investor demand in the absence
of event risk such as negative tax reform proposals and unpleasant credit
developments. However, in this uncertain environment, our investment strategy
was to maintain the weighted average portfolio maturity at a relatively steady
rate. At October 31, 1996, the weighted average portfolio maturity was 6.5
years. The tax-exempt market held up well as taxable interest rates rose and
municipal supply showed no signs of increasing, which should favor future
stability. Recently, as inflationary pressures have failed to surface in the
face of a growing economy, the markets have started to improve and the duration
(a measure of the Portfolio's exposure to interest rate risk) will be adjusted
in anticipation of a move to lower interest rates.
NEW YORK INSURED INTERMEDIATE FUND Over the past year, high-quality
tax-exempt securities demonstrated stability, lower volatility and favorable
relative value in a difficult time for fixed income products. New York Insured
Intermediate maintained the highest credit standards for 65% of its portfolio
and moderate duration targets during this fiscal period.
New York municipal issues continued to perform well relative to their taxable
counterparts. In spite of slightly higher taxable interest rates, the difference
in yields between higher quality and lower quality issues narrowed and municipal
rates remained stable. Weighted average
6
<PAGE>
portfolio duration (a measure of the Portfolio's exposure to interest rate risk)
has been lengthened during the second half of the fiscal year (six months ended
October 31, 1996), due to a more favorable outlook for the fixed-income markets
going forward.
Sincerely,
/s/ Theodore P. Giuliano
Theodore P. Giuliano
President and Trustee
Neuberger&Berman Income Funds
**Tax-equivalent yield is the taxable yield that an investor would have had to
receive in order to realize the same level after federal taxes at the highest
federal tax rate, 39.6%, assuming that all of the Fund's income is exempt from
federal income taxes.
There is no assurance that Municipal Money Fund will be able to maintain a
stable net asset value of $1.00 per share. The value of the Fund's shares,
like the share values of all other mutual funds, is neither insured nor
guaranteed by the U.S. Government. The return on an investment in Municipal
Money Fund will fluctuate. Results represent past performance and do not
indicate future results.
The composition and holdings of the Portfolios are subject to change.
7
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman October 31, 1996
- ----------------------------------------------------------------------
Municipal Securities Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Municipal Lehman 7-Year
Securities Trust GO Index
07/09/87 $10,000.00 $10,000.00
10/31/87 $9,884.76 $9,810.80
1988 $10,860.89 $10,847.78
1989 $11,572.20 $11,531.63
1990 $12,381.33 $12,420.57
1991 $13,422.20 $13,774.55
1992 $14,324.58 $14,872.18
1993 $15,942.88 $16,641.39
1994 $15,533.92 $16,303.44
1995 $17,140.65 $18,371.61
1996 $17,813.16 $19,245.38
Average Annual Total Return 1
Municipal Lehman 7-Year
Securities Trust GO Index 2
1 Year +3.92% +4.76%
5 Year +5.82% +6.92%
Life of Fund +6.39% +7.28%
</TABLE>
The inception date of Neuberger&Berman Municipal Securities Trust is 7/9/87.
The tax equivalent annualized yield for Municipal Securities Trust is 6.85%
for the thirty days ended 10/31/96 (based on an annualized yield of 4.14% and
assuming a federal tax rate of 39.6%). A portion of the income of Municipal
Securities Trust may be subject to the federal alternative minimum tax for
certain investors.
Neuberger&Berman Management Inc. has voluntarily undertaken to reimburse
Municipal Securities Trust for its operating expenses and its pro rata share of
its Portfolio's operating expenses which, in the aggregate, exceed .65% per
annum of Municipal Securities Trust's average daily net assets. This arrangement
can be terminated upon 60 days' notice. Absent such arrangement, the annualized
and tax equivalent yields for the thirty days ended 10/31/96 would have been
3.77% and 6.24%, respectively. Absent such arrangement, the average annual total
returns for the one year ended 10/31/96, for the five years ended 10/31/96, and
for the period 7/9/87 to 10/31/96 would have been +3.52%, +5.43%, and +5.32%,
respectively.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The Lehman 7-Year General Obligation Index is an unmanaged total return
performance benchmark for the intermediate-term, 7-year, investment grade
General Obligations (State and Local) tax-exempt bond market. Please note that
indices do not take into account any fees and expenses of investing in the
individual securities that they track, and that individuals cannot invest
directly in any index. Data about the performance of this index are prepared or
obtained by Neuberger&Berman Management Inc. and include reinvestment of all
dividends and capital gain distributions. The Portfolio invests in many
securities not included in the above-described index.
8
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman October 31, 1996
- ----------------------------------------------------------------------
New York Insured Intermediate Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
New York Lehman 7-Year
Insured Intermediate Fund GO Index
2/1/94 $10,000.00 $10,000.00
10/31/94 $9,536.34 $9,577.08
1995 $10,764.56 $10,791.97
1996 $11,150.30 $11,305.25
Average Annual Total Return 1
New York Lehman 7-Year
Insured Intermediate Fund GO Index 2
1 Year +3.58% +4.76%
Life of Fund +4.04% +4.56%
</TABLE>
The inception date of Neuberger&Berman New York Insured Intermediate Fund is
2/1/94.
The tax equivalent annualized yield for New York Insured Intermediate Fund is
7.83% for the thirty days ended 10/31/96 (based on an annualized yield of 4.16%
and assuming a combined federal, New York State, and New York City tax rate of
46.9%). A portion of the income of New York Insured Intermediate Fund may be
subject to the federal alternative minimum tax for certain investors.
Neuberger&Berman Management Inc. has voluntarily undertaken to reimburse New
York Insured Intermediate Fund for its operating expenses and its pro rata share
of its Portfolio's operating expenses which, in the aggregate, exceed .65% per
annum of New York Insured Intermediate Fund's average daily net assets. This
arrangement can be terminated upon 60 days' notice. Absent such arrangement, the
annualized and tax equivalent yields for the thirty days ended 10/31/96 would
have been 3.10% and 5.84%, respectively. Absent such arrangement, the average
annual total returns for the one year ended 10/31/96 and for the period 2/1/94
to 10/31/96 would have been +2.26% and +2.92%, respectively.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The Lehman 7-Year General Obligation Index is an unmanaged total return
performance benchmark for the intermediate-term, 7-year, investment grade
General Obligations (State and Local) tax-exempt bond market. Please note that
indices do not take into account any fees and expenses of investing in the
individual securities that they track, and that individuals cannot invest
directly in any index. Data about the performance of this index are prepared or
obtained by Neuberger&Berman Management Inc. and include reinvestment of all
dividends and capital gain distributions. The Portfolio invests in many
securities not included in the above-described index.
9
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Neuberger&Berman October 31, 1996
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
NEW YORK
MUNICIPAL MUNICIPAL INSURED
MONEY SECURITIES INTERMEDIATE
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) FUND TRUST FUND
-------------------------------------
<S> <C> <C> <C>
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $132,723 $38,962 $9,648
Deferred organization costs (Note A) -- -- 18
Receivable for Trust shares sold 8 40 --
Receivable from administrator -- net (Note
B) -- 2 10
-------------------------------------
132,731 39,004 9,676
-------------------------------------
LIABILITIES
Dividends payable 4 44 12
Payable for Trust shares redeemed 49 -- --
Payable to administrator (Note B) 31 -- --
Accrued expenses 48 39 29
-------------------------------------
132 83 41
-------------------------------------
NET ASSETS at value $132,599 $38,921 $9,635
-------------------------------------
NET ASSETS consist of:
Par value $ 133 $ 4 $ 1
Paid-in capital in excess of par value 132,565 39,374 9,999
Accumulated net realized losses on
investment (99) (883) (373)
Net unrealized appreciation in value of
investment -- 426 8
-------------------------------------
NET ASSETS at value $132,599 $38,921 $9,635
-------------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 132,698 3,609 967
-------------------------------------
NET ASSET VALUE, offering and redemption price per
share $1.00 $10.78 $9.96
-------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
STATEMENTS OF OPERATIONS
Neuberger&Berman For the Year Ended October 31, 1996
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
NEW YORK
MUNICIPAL MUNICIPAL INSURED
MONEY SECURITIES INTERMEDIATE
(000'S OMITTED) FUND TRUST FUND
-------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $5,723 $2,054 $475
-------------------------------------
Expenses:
Administration fee (Note B) 432 112 27
Amortization of deferred organization and
initial offering expenses (Note A) -- -- 8
Auditing fees 8 8 8
Custodian fees 10 10 10
Legal fees 22 19 22
Registration and filing fees 26 23 --
Shareholder reports 33 26 20
Shareholder servicing agent fees (Note B) 22 28 4
Trustees' fees and expenses 15 7 6
Miscellaneous 2 2 1
Expenses from corresponding Portfolio (Notes
A & B) 584 194 94
-------------------------------------
Total expenses 1,154 429 200
Deduct -- expenses reimbursed by
administrator (Note B) -- (160) (133)
-------------------------------------
Total net expenses 1,154 269 67
-------------------------------------
Net investment income 4,569 1,785 408
-------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized gain (loss) on investment
securities 2 278 (27)
Net realized loss on financial futures
contracts -- (51) --
Change in net unrealized appreciation of
investment securities -- (357) (40)
Net unrealized depreciation of financial
futures contracts -- (75) --
-------------------------------------
Net gain (loss) on investments from
corresponding Portfolio (Note A) 2 (205) (67)
-------------------------------------
Net increase in net assets resulting from
operations $4,571 $1,580 $341
-------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Neuberger&Berman
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
MUNICIPAL
MONEY
FUND
Year
Ended
October 31,
(000'S OMITTED) 1996 1995
--------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 4,569 $ 4,904
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) 2 (25)
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) -- --
--------------------------
Net increase in net assets resulting
from operations 4,571 4,879
--------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (4,569) (4,904)
--------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 240,030 219,086
Proceeds from reinvestment of
dividends 4,508 4,853
Payments for shares redeemed (272,748) (213,408)
--------------------------
Net increase (decrease) from Trust
share transactions (28,210) 10,531
--------------------------
NET INCREASE (DECREASE) IN NET ASSETS (28,208) 10,506
NET ASSETS:
Beginning of year 160,807 150,301
--------------------------
End of year $ 132,599 $ 160,807
--------------------------
NUMBER OF TRUST SHARES:
Sold 240,030 219,086
Issued on reinvestment of dividends 4,508 4,853
Redeemed (272,748) (213,408)
--------------------------
Net increase (decrease) in shares
outstanding (28,210) 10,531
--------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
NEW YORK
MUNICIPAL INSURED
SECURITIES INTERMEDIATE
TRUST FUND
Year Year
Ended Ended
October 31, October 31,
1996 1995 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 1,785 $ 1,962 $ 408 $ 486
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) 227 (677) (27) (95)
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) (432) 2,886 (40) 938
------------------------------------------------------
Net increase in net assets resulting
from operations 1,580 4,171 341 1,329
------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,785) (1,962) (408) (486)
------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 6,414 9,877 2,594 4,195
Proceeds from reinvestment of
dividends 1,202 1,227 236 190
Payments for shares redeemed (12,810) (20,106) (4,623) (8,459)
------------------------------------------------------
Net increase (decrease) from Trust
share transactions (5,194) (9,002) (1,793) (4,074)
------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (5,399) (6,793) (1,860) (3,231)
NET ASSETS:
Beginning of year 44,320 51,113 11,495 14,726
------------------------------------------------------
End of year $ 38,921 $ 44,320 $ 9,635 $ 11,495
------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 595 947 261 437
Issued on reinvestment of dividends 111 117 24 20
Redeemed (1,189) (1,956) (467) (900)
------------------------------------------------------
Net increase (decrease) in shares
outstanding (483) (892) (182) (443)
------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger&Berman October 31, 1996
- ----------------------------------------------------------------------
Income Funds
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger&Berman Municipal Money Fund ("Municipal Money"),
Neuberger&Berman Municipal Securities Trust ("Municipal Securities Trust"),
and Neuberger&Berman New York Insured Intermediate Fund ("New York Insured
Intermediate") (collectively, the "Funds") are separate operating series of
Neuberger&Berman Income Funds (the "Trust"), a Delaware business trust
organized pursuant to a Trust Instrument dated December 23, 1992. The Trust
is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended, and its shares are registered
under the Securities Act of 1933, as amended. The trustees of the Trust may
establish additional series or classes of shares without the approval of
shareholders.
The assets of each series belong only to that series, and the liabilities
of each series are borne solely by that series and no other.
Each Fund seeks to achieve its investment objective by investing all of
its net investable assets in its corresponding Portfolio of Income Managers
Trust (each a "Portfolio") having the same investment objective and policies
as the Fund. The value of each Fund's investment in its corresponding
Portfolio reflects that Fund's proportionate interest in the net assets of
that Portfolio (100% for each Fund at October 31, 1996). The performance of
each Fund is directly affected by the performance of its corresponding
Portfolio. The financial statements of each Portfolio, including the Schedule
of Investments, are included elsewhere in this report and should be read in
conjunction with the corresponding Fund's financial statements.
It is the policy of Municipal Money to maintain a continuous net asset
value per share of $1.00; the Fund has adopted certain investment, valuation,
and dividend and distribution policies, which conform to general industry
practice, to enable it to do so. However, there is no assurance the Fund will
be able to maintain a stable net asset value per share.
2) PORTFOLIO VALUATION: Each Fund records its investment in its corresponding
Portfolio at value. Investment securities held by each Portfolio are valued
by Income Managers Trust as indicated in the notes following the Portfolios'
Schedule of Investments.
3) FEDERAL INCOME TAXES: Each series of the Trust is treated as a separate
entity for Federal income tax purposes. It is the policy of each Fund of the
Trust to continue to qualify as a regulated investment company by complying
with the provisions available to certain investment companies, as defined in
applicable sections of the
14
<PAGE>
Internal Revenue Code, and to make distributions of investment company
taxable income and net capital gains (after reduction for any amounts
available for Federal income tax purposes as capital loss carryforwards)
sufficient to relieve it from all, or substantially all, Federal income
taxes. Accordingly, each Fund paid no Federal income taxes and no provision
for Federal income taxes was required.
4) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Each Fund earns income, net
of Portfolio expenses, daily on its investment in its corresponding
Portfolio. It is the policy of each Fund to declare dividends from net
investment income on each business day; such dividends are paid monthly.
Distributions from net realized capital gains, if any, are normally
distributed in December. To the extent each Fund's net realized capital
gains, if any, can be offset by capital loss carryforwards ($73,760 and
$25,578 expiring in 1997 and 2003, respectively, for Municipal Money,
$281,419 and $676,750 expiring in 2002 and 2003, respectively, for Municipal
Securities Trust, and $240,090, $94,248, and $38,402 expiring in 2002, 2003,
and 2004, respectively, for New York Insured Intermediate, determined as of
October 31, 1996), it is the policy of each Fund not to distribute such
gains.
Each Fund distinguishes between dividends on a tax basis and a financial
reporting basis and only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
dividends in excess of net investment income or accumulated net realized
gains.
5) ORGANIZATION EXPENSES: Expenses incurred by New York Insured
Intermediate in connection with its organization are being amortized on a
straight-line basis over a five-year period. At October 31, 1996, the
unamortized balance of such expenses amounted to $17,909.
6) EXPENSE ALLOCATION: Each Fund bears all costs of its operations. Expenses
incurred by the Trust with respect to any two or more Funds are allocated in
proportion to the net assets of such Funds, except where a more appropriate
allocation of expenses to each Fund can otherwise be made fairly. Expenses
directly attributable to a Fund are charged to that Fund.
7) OTHER: All net investment income and realized and unrealized capital gains
and losses of each Portfolio are allocated pro rata among its respective
Funds and any other investors in the Portfolio.
NOTE B -- ADMINISTRATION FEES, DISTRIBUTION ARRANGEMENTS, AND OTHER TRANSACTIONS
WITH AFFILIATES:
Each Fund retains Neuberger&Berman Management Incorporated ("Management") as
its administrator under an Administration Agreement ("Agreement") dated as of
May 1, 1995. Pursuant to this Agreement each Fund pays Management an
15
<PAGE>
administration fee at the annual rate of .27% (.25% prior to May 1, 1995) of
that Fund's average daily net assets and indirectly pays for investment
management services through its investment in its corresponding Portfolio (see
Note B of Notes to Financial Statements of the Portfolios). The Agreement
provides if, with respect to any fiscal year of each Fund, its total operating
expenses plus its pro rata portion of its corresponding Portfolio's operating
expenses (including the fees payable to Management but excluding interest,
taxes, brokerage commissions, and extraordinary expenses) ("Operating Expenses")
exceed the most restrictive of the expense limitations imposed by securities
laws of the states in which such Fund's shares are qualified for sale, the
administration fees for that fiscal year will be reduced by the amount of such
excess, provided that Management has no obligation to reimburse the Fund for any
such expenses that exceed the administration fee. The most restrictive expense
limitation applicable during the year ended October 31, 1996, to which Municipal
Money and Municipal Securities Trust were subject, was 2 1/2% of the first $30
million of average daily net assets, 2% of the next $70 million of average daily
net assets, and 1 1/2% of any additional average daily net assets. No reduction
in the administration fee as a result of any state expense limitation was
required for the year ended October 31, 1996. In the future, there will be no
state expense limitations applicable to any Fund.
In addition, Management has voluntarily undertaken to reimburse Municipal
Securities Trust and New York Insured Intermediate for their respective
Operating Expenses which exceed, in the aggregate, .65% per annum of their
respective average daily net assets. Each undertaking is subject to termination
by Management upon at least 60 days' prior written notice to the appropriate
Fund. For the year ended October 31, 1996, such excess expenses amounted to
$160,411 and $133,004 for Municipal Securities Trust and New York Insured
Intermediate, respectively.
All of the capital stock of Management is owned by individuals who are also
principals of Neuberger&Berman, LLC ("Neuberger"), a member firm of The New York
Stock Exchange and sub-adviser to each Portfolio. Several individuals who are
officers and/or trustees of the Trust are also principals of Neuberger and/or
officers and/or directors of Management.
Under a service agreement, which was in effect through April 30, 1995, each
Fund had retained Management to provide certain shareholder, shareholder-related
and other services not furnished by the shareholder servicing agent. Pursuant to
the service agreement, each Fund paid Management a monthly fee at the annual
rate of .02% of the average daily net assets of the Fund as compensation for
such services. As of May 1, 1995, the service agreement and the administration
agreement, then in effect, were combined into a single agreement with a fee of
.27%.
Each Fund also has a distribution agreement with Management. Management
receives no compensation therefor and no commissions for sales or redemptions of
shares of beneficial interest of each Fund.
16
<PAGE>
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statement
of Operations under the caption Expenses from corresponding Portfolio, is less
than .01% of Municipal Money and Municipal Securities Trust's average daily net
assets and $2,275, which is less than .03% of New York Insured Intermediate's
average daily net assets.
Each Fund has an expense offset arrangement in connection with its
shareholder servicing agent contract. The impact of this arrangement, reflected
in the Statement of Operations, is less than .01% of each Fund's average daily
net assets.
NOTE C -- INVESTMENT TRANSACTIONS:
During the year ended October 31, 1996, additions and reductions in each
Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
- -------------------------------------------------------------
<S> <C> <C>
MUNICIPAL MONEY $213,754,326 $247,265,595
MUNICIPAL SECURITIES TRUST 3,715,270 10,828,776
NEW YORK INSURED INTERMEDIATE 2,148,355 4,330,977
</TABLE>
17
<PAGE>
(This page has been left blank intentionally.)
18
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Money Fund
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Year Ended October 31,
1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988 1987
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $.9994 $.9995 $.9996 $.9995 $.9989 $.9989 $.9989 $.9993 $.9995 $1.0000
---------------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .0285 .0324 .0204 .0184 .0263 .0432 .0539 .0591 .0478 .0388
Net Gains or Losses on Securities (.0001) (.0001) (.0001) .0001 .0006 -- -- (.0004) (.0002) (.0005)
---------------------------------------------------------------------------------------
Total From Investment Operations .0284 .0323 .0203 .0185 .0269 .0432 .0539 .0587 .0476 .0383
---------------------------------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.0285) (.0324) (.0204) (.0184) (.0263) (.0432) (.0539) (.0591) (.0478) (.0388)
---------------------------------------------------------------------------------------
Net Asset Value, End of Year $.9993 $.9994 $.9995 $.9996 $.9995 $.9989 $.9989 $.9989 $.9993 $ .9995
---------------------------------------------------------------------------------------
Total Return(2) +2.89% +3.29% +2.06% +1.86% +2.66% +4.40% +5.53% +6.07% +4.89% +3.95%
---------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $132.6 $160.9 $150.3 $181.6 $195.6 $173.9 $190.6 $204.8 $184.5 $ 226.1
---------------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets .72% .71% .73% .74% .67% .66% .67% .74% .69% .71%
---------------------------------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 2.86% 3.24% 2.02% 1.85% 2.63% 4.34% 5.41% 5.91% 4.76% 3.90%
---------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
19
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Securities Trust
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
July 9,
1987(3)
Year Ended October 31, to October 31,
1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988 1987
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $10.83 $10.26 $11.12 $10.53 $10.39 $10.14 $10.09 $10.08 $ 9.73 $10.00
----------------------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .47 .47 .46 .48 .54 .58 .64 .63 .59 .15
Net Gains or Losses on
Securities (both realized and
unrealized) (.05) .57 (.73) .68 .14 .25 .05 .01 .35 (.27)
----------------------------------------------------------------------------------------------
Total From Investment
Operations .42 1.04 (.27) 1.16 .68 .83 .69 .64 .94 (.12)
----------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.47) (.47) (.46) (.48) (.54) (.58) (.64) (.63) (.59) (.15)
Distributions (from capital
gains) -- -- (.12) (.09) -- -- -- -- -- --
Distributions (in excess of
capital gains) -- -- (.01) -- -- -- -- -- -- --
----------------------------------------------------------------------------------------------
Total Distributions (.47) (.47) (.59) (.57) (.54) (.58) (.64) (.63) (.59) (.15)
----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.78 $10.83 $10.26 $11.12 $10.53 $10.39 $10.14 $10.09 $10.08 $ 9.73
----------------------------------------------------------------------------------------------
Total Return(2) +3.92% +10.35% -2.57% +11.30% +6.72% +8.41% +6.99% +6.55% +9.88% -1.15%(4)
----------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 38.9 $ 44.3 $ 51.1 $105.2 $ 37.0 $ 25.5 $ 14.1 $ 10.5 $ 9.8 $ 6.7
----------------------------------------------------------------------------------------------
Ratio of Expenses to Average
Net Assets(5) .65% .65% .65% .62% .50% .50% .50% .50% .50% .50%(6)
----------------------------------------------------------------------------------------------
Ratio of Net Investment Income
to Average Net Assets(5) 4.32% 4.45% 4.24% 4.33% 5.16% 5.61% 6.28% 6.26% 5.90% 5.29%(6)
----------------------------------------------------------------------------------------------
Portfolio Turnover Rate(7) -- -- -- 35% 46% 10% 42% 17% 23% 0%
----------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
20
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
New York Insured Intermediate Fund
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
Year Ended February 1, 1994(3)
October 31, to October 31,
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $10.01 $ 9.25 $10.00
-----------------------------------
Income From Investment Operations
Net Investment Income .40 .41 .29
Net Gains or Losses on Securities (both
realized and unrealized) (.05) .76 (.75)
-----------------------------------
Total From Investment Operations .35 1.17 (.46)
-----------------------------------
Less Distributions
Dividends (from net investment income) (.40) (.41) (.29)
-----------------------------------
Net Asset Value, End of Year $ 9.96 $10.01 $ 9.25
-----------------------------------
Total Return(2) +3.58% +12.88% -4.63%(4)
-----------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 9.6 $ 11.5 $ 14.7
-----------------------------------
Ratio of Expenses to Average Net
Assets(5) .66% .66% .65%(6)
-----------------------------------
Ratio of Net Investment Income to
Average Net Assets(5) 4.03% 4.24% 4.10%(6)
-----------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
21
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger&Berman October 31, 1996
- ----------------------------------------------------------------------
Income Funds
1)The per share amounts and ratios which are shown reflect income and expenses,
including each Fund's proportionate share of its corresponding Portfolio's
income and expenses.
2)Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each year
and assumes dividends and capital gain distributions, if any, were reinvested.
Results represent past performance and do not guarantee future results.
Investment returns and principal may fluctuate and shares when redeemed may be
worth more or less than original cost. For Municipal Securities Trust and New
York Insured Intermediate, total return would have been lower if Management
had not reimbursed certain expenses.
3)The date investment operations commenced.
4)Not annualized.
5)After reimbursement of expenses by Management as described in Note B of
Notes to Financial Statements. Had Management not undertaken such action the
annualized ratios to average daily net assets would have been:
<TABLE>
<CAPTION>
Period from
July 9, 1987 to
Year Ended October 31, October 31,
MUNICIPAL SECURITIES TRUST 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses 1.04% .98% .82% 1.04% 1.16% 1.38% 1.67% 2.50% 2.00% 1.50%
------------------------------------------------------------------------------
Net Investment Income 3.93% 4.12% 4.07% 3.91% 4.50% 4.73% 5.11% 4.26% 4.40% 4.29%
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period from
Year Ended February 1, 1994
NEW YORK INSURED October 31, to October 31,
INTERMEDIATE 1996 1995 1994
- ----------------------------------------------------------
<S> <C> <C> <C>
Expenses 1.97% 1.83% 1.53%
------------------------------
Net Investment Income 2.72% 3.07% 3.22%
------------------------------
</TABLE>
6)Annualized.
22
<PAGE>
7)The Fund transferred all of its investment securities into Neuberger&Berman
Municipal Securities Portfolio on July 2, 1993. After that date the Fund
invested only in Neuberger&Berman Municipal Securities Portfolio, and that
Portfolio, rather than the Fund, engaged in securities transactions.
Therefore, after that date the Fund had no portfolio turnover rate. Portfolio
turnover rates for periods ending after July 2, 1993, are included elsewhere
in Neuberger&Berman Municipal Securities Portfolio's Financial Highlights.
23
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Neuberger&Berman Income Funds and
Shareholders of
Neuberger&Berman Municipal Money Fund
Neuberger&Berman Municipal Securities Trust and
Neuberger&Berman New York Insured Intermediate Fund
We have audited the accompanying Statements of Assets and Liabilities of the
Neuberger&Berman Municipal Money Fund, Neuberger&Berman Municipal Securities
Trust, and Neuberger&Berman New York Insured Intermediate Fund, three of the
series comprising Neuberger&Berman Income Funds (the "Trust"), as of October 31,
1996, and the related Statements of Operations for the year then ended, the
Statements of Changes in Net Assets for each of the two years in the period then
ended, and the Financial Highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. 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 financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of Neuberger&Berman Income Funds at October 31,
1996, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 2, 1996
24
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1996
- --------------------------------------------------------------------------------
Municipal Money Portfolio
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(3)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
---------------- ------------------------------ -------- ----- ----------------
<C> <S> <C> <C> <C>
TAX-EXEMPT
SECURITIES -- PRE-REFUNDED
BACKED BY U.S. GOVERNMENT
SECURITIES (2.3%)
$2,000 Snohomish Co. (WA) Pub. Util.
Dist. No. 1 Generation Sys.
Ref. Rev., Ser. 1986 A,
7.375%, due 1/1/19 P/R 1/1/97 Aaa AAA $ 2,023
1,000 Virginia Pub. Sch. Au. Spec.
Oblig. Sch. Fin. Rev. (Henrico
Co.), Ser. 1988, 6.90%, due
12/1/99 P/R 12/1/96 Aaa AAA 1,010
--------
3,033
--------
MUNICIPAL NOTES (8.4%)
2,500 Indiana Bond Bank Adv. Funding
Notes, Ser. A-2, 4.25%, due
1/9/97 MIG 1 SP-1+ 2,503
1,700 Indianapolis (IN) Local Pub.
Imp. Bank Notes, Ser. B,
4.25%, due 1/9/97 SP-1+ 1,701
1,000 University of Cincinnati (OH)
Gen. Receipts BANS, Ser. K1,
3.75%, due 3/20/97 MIG 1 SP-1+ 1,002
3,000 Tennessee Local Dev. Au. St.
Loan Prog. BANS, Ser. 1996 A,
4.00%, due 5/29/97 MIG 1 SP-1+ 3,006
3,000 Texas TRANS, 4.75%, due
8/29/97 MIG 1 SP-1+ 3,019
--------
11,231
--------
TAX-EXEMPT
SECURITIES -- BACKED BY
INSURANCE (3.3%)
AMERICAN MUNICIPAL BOND ASSURANCE CORP.
1,400 Port of Seattle (WA) Ref.
Rev., Ser. 1995 A, 5.50%, due
2/1/97 Aaa AAA 1,406
FINANCIAL GUARANTY INSURANCE CO.
2,000 Connecticut Spec. Assessment
Unemployment Comp. Adv. Fund
Rev., Ser. 1993 C, 3.90%, due
11/15/01 Putable 7/1/97 VMIG 1 A-1+ 2,000
</TABLE>
25
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(3)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
---------------- ------------------------------ -------- ----- ----------------
<C> <S> <C> <C> <C>
MUNICIPAL BOND INVESTORS ASSURANCE CORP.
$1,000 Cook Co. (IL) G.O., Ser. 1988,
6.45%, due 11/1/96 Aaa AAA $ 1,000
--------
4,406
--------
TAX-EXEMPT SECURITIES -- OTHER
(9.3%)
250 Connecticut Hsg. Fin. Au.
Mtge. Fin. Prog. Rev., Ser.
1996 A-4, 3.65%, due 11/15/22
Putable 4/10/97 VMIG 1 A-1+ 250
1,500 Greater Chicago (IL) Metro.
Wtr. Reclamation Dist. Ref.
G.O., Ser. 1992, 4.50%, due
12/1/96 Aa AA 1,501
2,000 King Co. (WA) Ltd. Tax Ref.
G.O., Ser. 1996 A, 5.00%, due
1/1/97 Aa1 AA+ 2,004
1,000 Maricopa Co. (AZ) Phoenix
Union High Sch. Dist. No. 210
Sch. Imp. G.O., Ser. 1995 A,
5.75%, due 7/1/97 Aa AA 1,013
2,010 Milwaukee (WI) Corp. Purp.
G.O., Ser. E, 5.00%, due
6/15/97 Aa1 AA+ 2,023
2,000 Montgomery Co. (MD) Hsg.
Opportunities Comm.
Multifamily Hsg. Rev., Ser.
1995 B, 3.90%, due 11/14/96 MIG 1 2,000
1,500 Nashville & Davidson Co. (TN)
Metro. Gov't. Elec. Sys. Rev.,
Ser. 1992 B, 4.60%, due
5/15/97 Aa AA 1,507
2,000 Tennessee Hsg. Dev. Agcy.
Homeownership Prog., Ser. Z-2,
4.00%, due 7/1/28 Putable
8/21/97 VMIG 1 1,999
--------
12,297
--------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES (11.5%)
2,000 Becker (MN) PCR (No. States
Pwr. Co.-Sherburne Co.
Generating Sta. Unit 3 Proj.),
Ser. 1993 B, 3.60%, TECP due
2/25/97 VMIG 1 A-1+ 2,000
1,500 Carlton (WI) PCR (Wisconsin
Pwr. & Lt. Co. Proj.), Ser.
1988, 3.65%, VRDN due 8/1/15 VMIG 1 1,500
</TABLE>
26
<PAGE>
October 31, 1996
- --------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(3)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
---------------- ------------------------------ -------- ----- ----------------
<C> <S> <C> <C> <C>
$1,800 Gulf Coast (TX) Waste Disp.
Au. Solid Waste Disp. Rev.
(Amoco Oil Co. Proj.), Ser.
1995, 3.70%, VRDN due 7/1/27 VMIG 1 A-1+ $ 1,800
1,100 Lincoln Co. (WY) PCR (Exxon
Proj.), Ser. 1987 B, 3.65%,
VRDN due 7/1/17 P-1 A-1+ 1,100
800 Minneapolis (MN) Comm. Dev.
Agcy. Ref. PCR (No. States
Pwr. Co. Proj.), Ser. 1985,
3.65%, VRDN due 3/1/11 P-1 A-1+ 800
3,000 Montgomery (AL) IDB Poll.
Ctrl. & Solid Waste Disp. Ref.
Rev. (Gen. Elec. Co. Proj.),
Ser. 1990, 3.60%, TECP due
12/13/96 P-1 A-1+ 3,000
2,100 Oak Creek (WI) PCR (Wisconsin
Elec. Pwr. Co. Proj.), Ser.
1986, 3.65%, VRDN due 8/1/16 P-1 2,100
1,000 Parish of St. Charles (LA) PCR
(Shell Oil Co. Proj.), Ser.
1992 A, 3.70%, VRDN due
10/1/22 VMIG 1 A-1+ 1,000
2,000 Texas Pub. Fin. Au. G.O.,
3.65%, TECP due 2/27/97 P-1 A-1+ 2,000
--------
15,300
--------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- BACKED BY
LETTERS OF CREDIT (63.1%)
ABN AMRO BANK N.V.
2,000 Georgia Muni. Elec. Au. Proj.
One Sub. Rev., Ser. 1994 E,
3.65%, TECP due 2/14/97 VMIG 1 A-1+ 2,000
4,000 Phenix City (AL) IDB Env. Imp.
Rev. (Mead Coated Board
Proj.), Ser. 1988, 3.60%, TECP
due 2/12/97 P-1 4,000
900 Prince George's Co. (MD) Ref.
Rev. (Frank Parsons Paper Co.,
Inc. Fac.), Ser. 1987, 3.50%,
VRDN due 1/1/13 P-1 A-1+ 900
</TABLE>
27
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(3)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
---------------- ------------------------------ -------- ----- ----------------
<C> <S> <C> <C> <C>
BANK OF AMERICA
$ 500 California Hlth. Fac. Au.
Hosp. Rev. (N.T. Enloe Mem.
Hosp.), Ser. 1985 A, 3.25%,
VRDN due 1/1/16 A-1+ $ 500
2,500 Utah Intermountain Pwr. Agcy.
Ref. Rev., Ser. 1985 E, 3.60%,
TECP due 11/14/96 VMIG 1 A-1 2,500
BANK OF NOVA SCOTIA
1,500 Peninsula Ports (VA) Au. Port
Fac. Ref. Rev. (CSX Trans.,
Inc. Proj.), Ser. 1992, 3.60%,
TECP due 11/12/96 VMIG 1 A-1+ 1,500
BANQUE INDOSUEZ-FRANCE
300 Brunswick & Glynn Co. (GA)
Dev. Au. Rev. (Jekyll Dev.
Assoc., L.P. Proj.), Ser.
1985, 3.65%, VRDN due 12/1/15 VMIG 1 A-1 300
BAYERISCHE LANDESBANK GIROZENTRALE
1,100 Nashville (TN) Metro. Arpt.
Au. Spec. Fac. Ref. Rev.
(Amer. Airlines, Inc. Proj.),
Ser. 1995 B, 3.65%, VRDN due
10/1/12 A-1+ 1,100
CANADIAN IMPERIAL BANK OF COMMERCE
2,895 Memphis-Shelby Co. (TN) Arpt.
Au. Rev. (Memphis Int'l.
Arpt.), 3.70% & 3.75%, TECP
due 12/9/96 & 1/29/97 P-1 A-1+ 2,895
1,925 Rhode Island Port Au. & Econ.
Dev. Corp. Elec. Energy Fac.
Ref. Rev. (Newport Elec. Corp.
Proj.), Ser. 1994, 3.55%, VRDN
due 9/1/11 VMIG 1 A-1+ 1,925
1,000 St. Louis (MO) Ind. Dev. Au.
IDR (Svc. Merchandise Co.,
Inc. Proj.), 3.65%, VRDN due
9/15/98 A-1+ 1,000
CHASE MANHATTAN N.A.
900 South Carolina Jobs Econ. Dev.
Au. Rev. (St. Francis Hosp.
Proj.), Ser. 1990, 3.65%, VRDN
due 7/1/22 VMIG 1 900
</TABLE>
28
<PAGE>
October 31, 1996
- --------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(3)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
---------------- ------------------------------ -------- ----- ----------------
<C> <S> <C> <C> <C>
CITIBANK, N.A.
$1,100 Austin Co. (TX) Ind. Dev.
Corp. IDR (Justin Ind., Inc.
Proj.), Ser. 1984, 3.60%, VRDN
due 12/1/14 P-1 $ 1,100
COMMERZBANK AG
1,100 Houston (TX) Arpt. Sys. Rev.,
Ser. A, 3.60%, TECP due
2/12/97 P-1 A-1+ 1,100
COMMONWEALTH BANK OF AUSTRALIA
2,000 Pendleton Co. (KY)
Multi-County Lease Rev.
(Kentucky Assoc. of Cos.
Leasing Trust Prog.), Ser.
1989, 3.65%, TECP due 2/10/97 A-1+ 2,000
CREDIT COMMERCIAL DE FRANCE
400 Elkhart Co. (IN) Econ. Dev.
Rev. (Pace Amer. Inc. Proj.),
3.90%, VRDN due 1/1/13 VMIG 1 400
250 Indiana Emp. Dev. Comm. Econ.
Dev. Rev. (Metal Svc. & Supply
Inc.), 3.90%, VRDN due 1/1/13 VMIG 1 250
400 Indiana Emp. Dev. Comm. Econ.
Dev. Rev. (Mobel Proj.), Ser.
1988, 3.90%, VRDN due 1/1/14 VMIG 1 400
150 Indiana Emp. Dev. Comm. Econ.
Dev. Rev. (Triangle Ventures
Proj.), Ser. 1988, 3.90%, VRDN
due 1/1/14 VMIG 1 150
200 South Carolina Jobs Econ. Dev.
Au. Rev. (Brown Packing Co.,
Inc.), Ser. 1988 B, 3.90%,
VRDN due 4/1/99 VMIG 1 200
200 South Carolina Jobs Econ. Dev.
Au. Rev. (Kent Mfg. Co.
Proj.), Ser. 1988 A, 3.85%,
VRDN due 4/7/99 VMIG 1 200
50 South Carolina Jobs Econ. Dev.
Au. Rev. (Mar-Mac Mfg. Co.,
Inc. Proj.), Ser. 1988 A,
3.90%, VRDN due 4/7/99 VMIG 1 50
</TABLE>
29
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(3)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
---------------- ------------------------------ -------- ----- ----------------
<C> <S> <C> <C> <C>
$ 300 South Carolina Jobs Econ. Dev.
Au. Rev. (Regal-Beloit Corp.
Proj.), Ser. 1987 A, 3.85%,
VRDN due 5/7/01 P-1 $ 300
100 South Carolina Jobs Econ. Dev.
Au. Rev. (Sudan & Delta
Prop.), Ser. A, 3.90%, VRDN
due 1/1/04 VMIG 1 100
400 South Carolina Jobs Econ. Dev.
Au. Rev. (Phoenix Finishing
Co.), Ser. B, 3.90%, VRDN due
4/1/04 VMIG 1 400
650 South Carolina Jobs Econ. Dev.
Au. Rev. (Osmose Wood
Preserving), Ser. B, 3.85%,
VRDN due 12/1/04 P-1 650
350 South Carolina Jobs Econ. Dev.
Au. Rev. (Edens 321
Partnership Proj.), Ser. 1987
A, 3.90%, VRDN due 11/7/07 P-1 350
600 South Carolina Jobs Econ. Dev.
Au. Rev. (Florence RHF Hsg.,
Inc. Proj.), Ser. 1987 A,
3.75%, VRDN due 11/7/07 P-1 600
CREDIT SUISSE
1,200 Hubbard Co. (MN) Solid Waste
Disp. Rev. (Potlatch Corp.
Proj.), Ser. 1990, 3.65%, VRDN
due 8/1/14 A-1+ 1,200
500 Montgomery Co. (TX) Ind. Dev.
Corp. IDR (Dal-Tile Corp.),
Ser. 1986 B, 3.75%, VRDN due
12/1/03 A-1+ 500
700 Salt Lake City (UT) Sub. Arpt.
Rev., Ser. 1994 A, 3.60%, VRDN
due 6/1/98 VMIG 1 A-1+ 700
1,000 Texas Capital Hlth. Fac. Dev.
Corp. (Island on Lake Travis
Ltd. Proj.), 3.60%, VRDN due
12/1/16 A-1+ 1,000
1,000 Wake Co. (NC) Ind. Fac. &
Poll. Ctrl. Fin. Au. PCR
(Carolina Pwr. & Lt. Co.
Proj.), Ser. 1985 A, 3.50%,
VRDN due 5/1/15 A-1+ 1,000
</TABLE>
30
<PAGE>
October 31, 1996
- --------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(3)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
---------------- ------------------------------ -------- ----- ----------------
<C> <S> <C> <C> <C>
$ 600 Warren (AR) Solid Waste Disp.
Rev. (Potlatch Corp. Proj.),
Ser. 1993, 3.65%, VRDN due
4/1/12 A-1+ $ 600
DEUTSCHE BANK AG
1,000 Converse Co. (WY) Ref. PCR
(PacifiCorp Proj.), Ser. 1988,
3.45%, TECP due 12/6/96 P-1 A-1+ 1,000
1,000 New Hampshire Ind. Dev. Au.
PCR (Connecticut Lt. & Pwr.
Co. Proj.), Ser. 1986, 3.60%,
VRDN due 11/1/16 VMIG 1 1,000
DRESDNER BANK AG
2,200 Allegheny (PA) Ind. Dev. Au.
PCR, 3.60%, TECP due 2/6/97 P-1 A-1+ 2,200
HARRIS TRUST & SAVINGS BANK
900 Illinois Dev. Fin. Au. IDR
(Grayhill, Inc. Proj.), Ser.
1995 C, 3.70%, VRDN due 2/1/05 A-1+ 900
1,000 Illinois Dev. Fin. Au. IDR
(Overton Gear & Tool Corp.
Proj.), Ser. 1994, 3.70%, VRDN
due 10/1/08 A-1+ 1,000
MORGAN GUARANTY TRUST CO.
800 Grapevine (TX) IDC Rev. (Amer.
Airlines, Inc. Proj.), Ser.
1984 B-2, 3.65%, VRDN due
12/1/24 P-1 800
3,000 North Carolina Muni. Pwr.
Agcy. No. 1 Catawba Elec.
Rev., Ser. A, 3.55%, TECP due
12/11/96 P-1 A-1+ 3,000(6)
900 Port of Kalama (WA) Pub. Corp.
Port Fac. Rev. (ConAgra, Inc.
Proj.), 3.45%, VRDN due 1/1/04 A-1+ 900
1,575 Sunshine St. (FL) Gov't. Fin.
Comm. Rev., Ser. 1986, 3.60%,
TECP due 1/28/97 VMIG 1 1,575
</TABLE>
31
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(3)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
---------------- ------------------------------ -------- ----- ----------------
<C> <S> <C> <C> <C>
NATIONAL WESTMINSTER BANK PLC
$2,000 Carbon Co. (PA) IDA Res. Rec.
Rev. (Panther Creek Partners
Proj.), Ser. 1990 B, 3.65%,
TECP due 1/28/97 P-1 A-1+ $ 2,000
3,200 Marion Co. (WV) Comm. Solid
Waste Disp. Fac. Rev. (Grant
Town Cogeneration Proj.), Ser.
1990 A-D, 3.60% & 3.65%, VRDN
due 10/1/17 VMIG 1 A-1+ 3,200
1,000 Rhode Island Std. Loan Au.
Prog. Rev., 1st Ser. 1995,
3.65%, VRDN due 7/1/19 A-1+ 1,000
NORTHERN TRUST CO.
4,000 Illinois Hlth. Fac. Au. Rev.
(Rush-Presbyterian-St. Luke's
Med. Ctr. Oblig. Group),
3.60%, TECP due 2/20/97 VMIG 1 A-1+ 4,000
NORWEST BANK
800 New Ulm (MN) Hosp. Ref. Rev.
(Hlth. Central Sys. Proj.),
Ser. 1985, 3.60%, VRDN due
8/1/14 A-1+ 800
PNC BANK N.A.
400 Florida HFA Multi-Family Hsg.
Rev. (Falls of Venice Proj.),
Ser. 1987 E, 3.75%, VRDN due
12/1/11 P-1 A-1 400
ROYAL BANK OF CANADA
300 Lone Star (TX) Arpt. Imp. Au.
Rev. (Amer. Airlines, Inc.
Proj.), Ser. 1984 A-2 & A-3,
3.65%, VRDN due 12/1/14 VMIG 1 300
SOCIETE GENERALE
1,000 Burlington (KS) Ref. & Imp.
PCR (Kansas City Pwr. & Lt.
Co. Proj.), Ser. 1985 B,
3.65%, TECP due 11/6/96 P-1 1,000
1,900 Chicago (IL) O'Hare Int'l.
Arpt. Spec. Fac. Rev.
(Compagnie Nationale Air
France Proj.), Ser. 1990,
3.60%, VRDN due 5/1/18 A-1+ 1,900
2,000 Harris Co. (TX) Hlth. Fac.
Dev. Corp. Hosp. Rev. (Mem.
Hosp. Sys. Proj.), Ser. 1994
B, 3.65%, TECP due 1/14/97 VMIG 1 2,000
</TABLE>
32
<PAGE>
October 31, 1996
- --------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(3)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
---------------- ------------------------------ -------- ----- ----------------
<C> <S> <C> <C> <C>
$1,000 Illinois Toll Hwy. Au. Ref.
Rev., Ser. 1993 B, 3.50%, VRDN
due 1/1/10 VMIG 1 A-1+ $ 1,000
100 Indianapolis (IN) Multi-Family
Hsg. Ref. Rev. (Canal Square
Proj.), Ser. 1989, 3.50%, VRDN
due 12/1/15 VMIG 1 100
STUDENT LOAN MARKETING ASSOC.
200 Colorado Std. Oblig. Bond Au.
Std. Loan Rev., Ser. 1993 A,
3.50%, VRDN due 7/1/99 VMIG 1 A-1+ 200
300 Nebraska Higher Ed. Loan
Prog., Inc. Std. Loan Prog.
Rev., Ser. 1985 A, 3.65%, VRDN
due 12/1/16 A-1+ 300
SWISS BANK CORP.
1,000 Beaver Co. (PA) Ind. Dev. Au.
PCR (Duquesne Lt. Co. Proj.),
3.55%, TECP due 11/20/96 VMIG 1 A-1+ 1,000
1,200 Pennsylvania Energy Dev. Au.
Rev. (B & W Ebensburg Proj.),
Ser. 1986, 3.60%, VRDN due
12/1/11 VMIG 1 1,200
3,800 Port of Port Arthur (TX)
Navigation Dist. of Jefferson
Co. PCR (Star Enterprise
Proj.), Ser. 1994, 3.60%, VRDN
due 4/1/14 A-1+ 3,800
1,000 West Virginia Pub. Energy Au.
Rev. (Morgantown Energy Assoc.
Proj.), Ser. 1989 A, 3.70%,
TECP due 12/9/96 A-1+ 1,000
TORONTO DOMINION BANK
1,000 Burlington (KS) Ref. & Imp.
PCR (Kansas City Pwr. & Lt.
Co. Proj.), Ser. 1985 A,
3.60%, TECP due 11/12/96 A-1+ 1,000
1,000 Crossett (AR) PCR
(Georgia-Pacific Corp. Proj.),
Ser. 1984, 3.50%, VRDN due
10/1/07 P-1 1,000
600 Langhorne (PA) St. Mary Hosp.
Au. Rev. (Franciscan Hlth.
Sys. Pooled Fin. Prog.), Ser.
1985 C, 3.60%, VRDN due
12/1/24 VMIG 1 A-1+ 600
</TABLE>
33
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(3)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
---------------- ------------------------------ -------- ----- ----------------
<C> <S> <C> <C> <C>
$2,000 Ohio Air Quality Dev. Au. PCR
(Duquesne Lt. Co. Proj.), Ser.
1988, 3.65%, TECP due 12/11/96 A-1+ $ 2,000
1,000 Ohio Wtr. Dev. Au. PCR
(Duquesne Lt. Co. Proj.), Ser.
1988, 3.65%, TECP due 12/11/96 A-1+ 1,000
1,100 Phenix City (AL) IDB Env. Imp.
Rev. (Mead Coated Board
Proj.), Ser. 1993 A, 3.70%,
VRDN due 6/1/28 A-1+ 1,100
120 Wisconsin Hlth. Fac. Au. Rev.
(Franciscan Hlth. Care, Inc. -
Sys. Fin.), Ser. 1985 A-2,
3.45%, VRDN due 1/1/16 VMIG 1 A-1+ 120
UNION BANK OF SWITZERLAND
2,000 Brazos (TX) River Au.
Collateralized Ref. PCR (Texas
Util. Elec. Co. Proj.), Ser.
1995 B, 3.70%, VRDN due 6/1/30 VMIG 1 A-1+ 2,000
1,705 Des Moines (IA) Commercial
Dev. Rev. (Capitol Ctr. III
Proj.), Ser. 1985, 3.55%, VRDN
due 12/1/15 VMIG 1 1,705
150 Indiana Emp. Dev. Comm. Econ.
Dev. Rev. (K & F Ind., Inc.
Proj.), 3.90%, VRDN due 1/1/14 VMIG 1 150
400 New Hampshire Ind. Dev. Au.
PCR (Connecticut Lt. & Pwr.
Co. Proj.), Ser. 1988, 3.60%,
VRDN due 8/1/18 A-1+ 400
300 Sabine (TX) River Au. Ref. PCR
(Texas Util. Elec. Co.), Ser.
B, 3.65%, VRDN due 6/1/30 VMIG 1 A-1+ 300
WACHOVIA BANK & TRUST CO.
2,000 Los Angeles (CA) Reg. Arpt.
Imp. Corp. Lease Rev.
(American Airlines-Los Angeles
Int'l. Arpt.), Ser. D & F,
3.65%, VRDN due 12/1/24 P-1 2,000
--------
83,720
--------
</TABLE>
34
<PAGE>
October 31, 1996
- --------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(3)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
---------------- ------------------------------ -------- ----- ----------------
<C> <S> <C> <C> <C>
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- BACKED BY
INSURANCE (1.3%)
AMERICAN MUNICIPAL BOND ASSURANCE CORP.
$ 400 Sayre (PA) Hlth. Care Fac. Au.
Hosp. Rev. (VHA of PA, Inc.
Cap. Asset Fin. Prog.), Ser.
1985 A, 3.50%, VRDN due
12/1/20 Aaa A-1 $ 400
FINANCIAL GUARANTY INSURANCE CO.
1,100 New York City (NY) G.O., Ser.
1993 B, 3.65%, VRDN due
10/1/22 VMIG 1 A-1+ 1,100
MUNICIPAL BOND INVESTORS ASSURANCE CORP.
188 Clermont Co. (OH) Hosp. Fac.
Rev. (Mercy Hlth. Care Sys.,
Province of Cincinnati), Ser.
1985 B, 3.50%, VRDN due
12/1/15 VMIG 1 A-1+ 188
--------
1,688
--------
TOTAL INVESTMENTS (99.2%) 131,675
Cash, receivables and other
assets, less liabilities
(0.8%) 1,048
--------
TOTAL NET ASSETS (100.0%) $132,723
--------
</TABLE>
35
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Securities Portfolio
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(4)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
------------------ ------------------------------ -------- ---- ---------------
<C> <S> <C> <C> <C>
TAX-EXEMPT
SECURITIES -- PRE-REFUNDED
BACKED BY U.S. GOVERNMENT
SECURITIES (5.7%)
$1,000 Harris Co. (TX) Toll Road
Unlimited Tax & Sub. Lien Ref.
Rev., Ser. 1992 A, 6.50%, due
8/15/17 P/R 8/15/02 Aaa AAA $ 1,113
1,000 Massachusetts Wtr. Res. Au.
Gen. Rev., Ser. 1992 A, 6.50%,
due 7/15/21 P/R 7/15/02 Aaa AAA 1,112
-------
2,225
-------
TAX-EXEMPT
SECURITIES -- BACKED BY
INSURANCE (26.4%)
AMERICAN MUNICIPAL BOND ASSURANCE CORP.
1,000 Atlanta (GA) Arpt. Fac. Ref.
Rev., Ser. 1996, 6.50%, due
1/1/06 Aaa AAA 1,112
1,000 Florida Dept. of Env.
Protection Preservation 2000
Rev., Ser. 1995 A, 5.50%, due
7/1/07 Aaa AAA 1,030
1,000 Harris Co. (TX) Toll Road Sr.
Lien Ref. Rev., Ser. 1994,
4.30%, due 8/15/00 Aaa AAA 995
1,000 New York City (NY) Muni.
Assist. Corp. Rev., Ser. D,
5.25%, due 7/1/02 Aaa AAA 1,032
FINANCIAL GUARANTY INSURANCE CO.
1,000 Dade Co. (FL) Wtr. & Swr. Sys.
Rev., Ser. 1995, 6.25%, due
10/1/06 Aaa AAA 1,105
750 New York Dorm. Au. Rev. (State
Univ. Ed. Fac.), Ser. 1993 B,
5.20%, due 5/15/03 Aaa AAA 773
MUNICIPAL BOND INVESTORS ASSURANCE CORP.
1,000 Commonwealth of Pennsylvania
G.O. (Ref. & Proj.), 2nd Ser.
1994, 5.20%, due 6/15/04 Aaa AAA 1,025
1,000 Connecticut Spec. Tax Oblig.
Ref. Rev. (Trans.
Infrastructure Purp.), Ser.
1993 A, 5.40%, due 9/1/09 Aaa AAA 1,002
</TABLE>
36
<PAGE>
October 31, 1996
- --------------------------------------------------------------------------------
Municipal Securities Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(4)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
------------------ ------------------------------ -------- ---- ---------------
<C> <S> <C> <C> <C>
$1,000 Nebraska Inv. Fin. Au. Hosp.
Rev. (Nebraska Methodist Hlth.
Sys., Inc.), Ser. 1991, 7.00%,
due 3/1/06 Aaa AAA $ 1,104
1,000 Puerto Rico Elec. Pwr. Au.
Ref. Rev., Ser. W, 6.50%, due
7/1/05 Aaa AAA 1,124
-------
10,302
-------
TAX-EXEMPT SECURITIES -- OTHER
(62.7%)
1,000 Baltimore Co. (MD) Metro.
Dist. G.O., 64th Issue, 4.25%,
due 8/1/02 Aaa AAA 978
1,060 Brownwood (TX) Independent
Sch. Dist. Unlimited Tax Sch.
Bldg. & Ref. G.O. (Brown Co.,
Texas), Ser. 1994, Zero
Coupon, Yielding 5.90% &
6.10%, due 2/15/02 & 2/15/04 Aaa 776
1,000 California Ed. Fac. Au. Rev.
(Univ. of So. Cal. Proj.),
Ser. 1989 B, 6.80%, due
10/1/99 Aa3 AA 1,073
750 Cincinnati (OH) Std. Loan
Funding Corp. Ref. Rev., Ser.
1992 C, 6.10%, due 7/1/02 Aaa 793
1,000 Commonwealth of Massachusetts
Ref. G.O., Ser. 1995 A, 6.25%,
due 7/1/04 A1 A+ 1,087
2,000 Georgia G.O., Ser. 1994 D &
1995 C, 6.80% & 7.25%, due
8/1/00 & 7/1/04 Aaa AA+ 2,246
1,970 Honolulu (HI) City & Co. G.O.,
Ser. 74, Zero Coupon, Yielding
5.95%, due 1/1/13 Aa 782
1,500 Maryland Comm. Dev. Admin.
Dept. of Hsg. & Comm. Dev.
Rev. (Single Family Prog.),
3rd Ser. 1993, 5.15%, due
4/1/08 Aa 1,504
1,000 Maryland St. & Local Fac. Loan
G.O., 2nd Ser. 1989 T, 6.40%,
due 7/15/98 Aaa AAA 1,042
1,300 Maryland Wtr. Quality Fin.
Admin. Ref. Rev. (Revolving
Loan Fund), Ser. 1995 A,
5.50%, due 9/1/11 Aa AA 1,309
1,000 Mecklenburg Co. (NC) Pub. Imp.
G.O., Ser. 1994, 5.50%, due
4/1/12 Aaa AAA 1,013
</TABLE>
37
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Securities Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(4)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
------------------ ------------------------------ -------- ---- ---------------
<C> <S> <C> <C> <C>
$1,000 Minnesota Ref. G.O., 5.20%,
due 8/1/00 Aaa AA+ $ 1,030
205 Mississippi Higher Ed. Assist.
Corp. Std. Loan Sub. Rev.,
Ser. 1993 C, 6.05%, due 9/1/07 A 209
500 New Jersey Bldg. Au. St. Bldg.
Rev., Ser. 1994, 5.00%, due
6/15/11 Aa AA- 474
750 New York City (NY) IDA Spec.
Fac. Rev. (Term. One Group
Assoc., L.P. Proj.), Ser.
1994, 6.00%, due 1/1/15 A A 747
1,000 New York Dorm. Au. Rev.
(Columbia Univ.), Ser. 1994 A,
4.00%, due 7/1/00 Aaa AA+ 984
1,000 Omaha (NE) Pub. Pwr. Dist.
Elec. Sys. Rev., Ser. 1993 E,
4.60%, due 2/1/06 Aa AA 970
500 Omaha (NE) Var. Purp. G.O.,
Ser. 1990, 7.00%, due 5/1/99 Aaa AAA 534
500 Phoenix (AZ) Wtr. Sys. Ref.
Rev., Ser. 1993, 4.95%, due
7/1/03 Aa AA 506
1,000 Platte River (CO) Pwr. Au.
Rev., Ser. AA, 6.60%, due
6/1/02 Aa A+ 1,035
1,000 Port of Portland (OR) Ref.
G.O., Ser. 1993 A, 4.50%, due
3/1/05 Aa AA+ 966
1,000 Seattle (WA) Muni. Lt. & Pwr.
Ref. Rev., Ser. 1993, 4.90%,
due 11/1/03 Aa AA 1,006
2,000 South Carolina Cap. Imp.
Unlimited Tax G.O., Ser. 1995
A, 5.00%, due 3/1/02 Aaa AAA 2,049
230 Utah Hsg. Fin. Agcy. Single
Family Mtge. Purchase Ref.
Rev., Ser. 1993 A, 5.40%, due
7/1/03 Aaa 235
1,000 Washington Motor Vehicle Fuel
Tax G.O., Ser. 1995 D, 6.50%,
due 9/1/01 Aa AA 1,085
-------
24,433
-------
</TABLE>
38
<PAGE>
October 31, 1996
- --------------------------------------------------------------------------------
Municipal Securities Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT RATING(2) VALUE(4)
(000'S OMITTED) SECURITY(1) MOODY'S S&P (000'S OMITTED)
------------------ ------------------------------ -------- ---- ---------------
<C> <S> <C> <C> <C>
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- BACKED BY
LETTERS OF CREDIT (3.9%)
CHASE MANHATTAN N.A.
$ 300 South Carolina Jobs Econ. Dev.
Au. Rev. (St. Francis Hosp.
Proj.), Ser. 1990, 3.65%, VRDN
due 7/1/22 VMIG 1 $ 300
ROYAL BANK OF CANADA
100 Lone Star (TX) Arpt. Imp. Au.
Rev. (Amer. Airlines, Inc.
Proj.), Ser. 1984 B-1, 3.65%,
VRDN due 12/1/14 VMIG 1 100
SOCIETE GENERALE
1,100 Los Angeles (CA) Reg. Arpt.
Imp. Corp. Term. Fac. Rev.
(Los Angeles Int'l. Arpt.),
3.70%, VRDN due 12/1/25 A-1+ 1,100
-------
1,500
-------
TOTAL INVESTMENTS (98.7%)
(COST $37,959) 38,460(5)
Cash, receivables and other
assets, less liabilities
(1.3%) 502
-------
TOTAL NET ASSETS (100.0%) $38,962
-------
</TABLE>
39
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
New York Insured Intermediate Portfolio
<TABLE>
<CAPTION>
PRINCIPAL VALUE(4)
AMOUNT RATING(2) (000'S
(000'S OMITTED) SECURITY(1) MOODY'S S&P OMITTED)
- ---------------- ------------------------------ ------- ---- --------------
<C> <S> <C> <C> <C>
TAX-EXEMPT
SECURITIES -- PRE-REFUNDED
BACKED BY U.S. GOVERNMENT
SECURITIES (2.2%)
$185 New York Local Gov't. Assist.
Corp., Ser. 1991 A, 7.00%, due
4/1/16 P/R 4/1/01 Aaa AAA $ 207
------
TAX-EXEMPT
SECURITIES -- BACKED BY
INSURANCE (74.3%)
AMERICAN MUNICIPAL BOND ASSURANCE CORP.
200 Battery Park City Au. (NY) Jr.
Rev., Ser. 1996 A, 5.20%, due
11/1/06 Aaa AAA 203
300 Canandaigua (NY) Sch. Dist.
Ref. G.O., 5.125%, due 6/1/06 Aaa AAA 304
200 New York City (NY) Jr. Sub.
Rev. (Ed. Construction Fund),
Ser. 1996, 5.10%, due 4/1/06 Aaa AAA 201
275 William Floyd (NY) Union Free
Sch. Dist. (The
Mastics-Moriches-Shirley),
Ser. 1993, 4.80%, due 12/1/03 Aaa AAA 276
FINANCIAL GUARANTY INSURANCE CO.
455 Babylon (NY) Waste Fac. G.O.,
Ser. 1993, 4.40%, due 8/1/03 Aaa AAA 445
150 Buffalo (NY) Swr. Au. Swr.
Sys. Rev., Ser. G, 5.00%, due
7/1/03 Aaa AAA 153
200 Chautauqua Co. (NY) Var. Purp.
G.O., Ser. 1991, 6.40%, due
9/15/04 Aaa AAA 222
250 Cheektowaga (NY) Central Sch.
Dist. G.O., 5.60%, due 6/1/03 Aaa AAA 263
250 Nassau Co. (NY) Gen. Imp.
G.O., Ser. R, 5.125%, due
11/1/05 Aaa AAA 254
300 New York City (NY) Muni.
Assist. Corp., Ser. 1991 A,
6.60%, due 7/1/01 Aaa AAA 326
100 North Hempstead (NY) Pub. Imp.
G.O., Ser. 1993 C, 4.90%, due
8/1/03 Aaa AAA 101
450 North Hempstead (NY) Ref.
G.O., Ser. 1992 B, 5.90%, due
4/1/04 Aaa AAA 482
</TABLE>
40
<PAGE>
October 31, 1996
- --------------------------------------------------------------------------------
New York Insured Intermediate Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL VALUE(4)
AMOUNT RATING(2) (000'S
(000'S OMITTED) SECURITY(1) MOODY'S S&P OMITTED)
- ---------------- ------------------------------ ------- ---- --------------
<C> <S> <C> <C> <C>
$470 Triborough Bridge & Tunnel Au.
(NY) Spec. Oblig. Rev., Ser.
1992, 5.80%, due 1/1/02 Aaa AAA $ 497
MUNICIPAL BOND INVESTORS ASSURANCE CORP.
100 Broome Co. (NY) Cert. of
Participation (Pub. Safety
Fac.), Ser. 1994, 4.50%, due
4/1/01 Aaa AAA 100
485 Buffalo (NY) Sch. G.O., Ser.
1994 B, 5.05%, due 2/1/04 &
2/1/05 Aaa AAA 491
390 Eldred (NY) Central Sch. Dist.
G.O., Ser. 1994, 4.50%, due
12/15/05 Aaa AAA 379
250 New York Cert. of
Participation (City Univ. of
NY, John Jay College of
Criminal Justice Ref. Proj.),
4.90%, due 8/15/07 Aaa AAA 243
200 New York City (NY) Cultural
Res. Rev. (New York Botanical
Garden), Ser. 1996, 6.00%, due
7/1/05 Aaa AAA 215
300 New York Dorm. Au. Rev. (Leake
& Watts Svcs., Inc.), Ser.
1994, 5.10%, due 7/1/02 Aaa AAA 308
200 New York Metro. Trans. Au.
Dedicated Tax Fund Rev., Ser.
A, 6.00%, due 4/1/05 Aaa AAA 216
300 New York Thruway Au. (Local
Hwy. & Bridge Svc. Contract),
Ser. 1995 A, 5.125%, due
1/1/06 Aaa AAA 302
415 Oyster Bay (NY) Pub. Imp. Ref.
G.O., Ser. 1993, 5.40%, due
2/15/03 Aaa AAA 432
270 Puerto Rico Elec. Pwr. Au.
Pwr. Ref. Rev., Ser. W, 5.00%,
due 7/1/04 Aaa AAA 275
190 Syracuse (NY) G.O., Ser. A,
6.10%, due 6/15/99 Aaa AAA 199
300 Warren Co. (NY) Pub. Imp.
G.O., Ser. 1993 A, 4.40%, due
11/15/07 Aaa AAA 280
------
7,167
------
</TABLE>
41
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1996
- --------------------------------------------------------------------------------
New York Insured Intermediate Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL VALUE(4)
AMOUNT RATING(2) (000'S
(000'S OMITTED) SECURITY(1) MOODY'S S&P OMITTED)
- ---------------- ------------------------------ ------- ---- --------------
<C> <S> <C> <C> <C>
TAX-EXEMPT SECURITIES -- OTHER
(19.0%)
$200 New York Dorm. Au. Rev.
(Vassar College), Ser. 1995,
4.875%, due 7/1/07 Aa AA $ 198
300 New York Pwr. Au. Gen. Purp.
Ref. Rev., Ser. W, 6.70%, due
1/1/04 Aa AA- 334
500 New York Thruway Au. (Local
Hwy. & Bridge Svc. Contract),
Ser. 1991, 7.00%, due 1/1/03 Baa1 BBB 539
500 New York Urban Dev. Corp.
Proj. Rev. (Columbia Univ.
Ctr. for Computers,
Microelectronics &
Telecommunications Grant),
Ser. 1994, 4.75% & 4.875%, due
1/1/02 & 1/1/03 Baa1 BBB 492
250 Puerto Rico Pub. Bldg. Au.
Ref. Rev., Ser. J, 6.50%, due
7/1/03 Baa1 A 273
------
1,836
------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- BACKED BY
LETTERS OF CREDIT (3.1%)
MORGAN GUARANTY TRUST CO.
200 New York City (NY) G.O., Ser.
1994 B, Subser. B-2 & B-3,
3.65%, VRDN due 8/15/17 &
8/15/19 VMIG 1 A-1+ 200
UNION BANK OF SWITZERLAND
100 Babylon (NY) IDA Res. Rec.
Rev., Ser. 1989, 3.65%, VRDN
due 12/1/24 A-1+ 100
------
300
------
TOTAL INVESTMENTS (98.6%)
(COST $9,502) 9,510(5)
Cash, receivables and other
assets, less liabilities
(1.4%) 138
------
TOTAL NET ASSETS (100.0%) $9,648
------
</TABLE>
42
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
October 31, 1996
- ----------------------------------------------------------------------
Income Managers Trust
1)Municipal securities held by Neuberger&Berman Municipal Money Portfolio,
Neuberger&Berman Municipal Securities Portfolio, and Neuberger&Berman New
York Insured Intermediate Portfolio are within the two, three, and four
highest rating categories, respectively, assigned by Moody's Investors
Service, Inc. or Standard & Poor's or, where not rated, are determined by the
Portfolio's investment manager to be of comparable quality within guidelines
approved by the trustees of Income Managers Trust. Approximately 71%, 38%, and
81% of the municipal securities held by Neuberger&Berman Municipal Money
Portfolio, Neuberger&Berman Municipal Securities Portfolio, and
Neuberger&Berman New York Insured Intermediate Portfolio, respectively, have
credit enhancement features backing them, which the Portfolios may rely on,
such as letters of credit, insurance, or guarantees. Without these credit
enhancement features the securities may or may not meet the quality standards
of the Portfolios. Pre-refunded bonds are supported by securities in escrow
issued or guaranteed by the U.S. Government, its agencies, or
instrumentalities. The amount escrowed is sufficient to pay the periodic
interest due and the principal of these bonds. Putable bonds give the
Portfolios the right to sell back the issue on the date specified.
2)Credit ratings are unaudited.
3)Investment securities of the Portfolio are valued at amortized cost, which
approximates Federal income tax cost.
4)Investment securities of the Portfolio are valued daily by obtaining bid price
quotations from an independent pricing service on all securities available in
the service's data base. For all other securities requiring daily quotations,
bid prices are obtained from principal market makers in those securities or,
if quotations are not available, by a method the trustees of Income Managers
Trust believe accurately reflects fair value.
5)At October 31, 1996, selected Portfolio information on a Federal income tax
basis was as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED NET UNREALIZED
NEUBERGER&BERMAN COST APPRECIATION DEPRECIATION APPRECIATION
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL SECURITIES PORTFOLIO $ 37,959,000 $ 595,000 $ 94,000 $ 501,000
NEW YORK INSURED INTERMEDIATE
PORTFOLIO 9,502,000 68,000 60,000 8,000
</TABLE>
6)Union Bank of Switzerland has also issued a letter of credit for this
security.
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1996
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
NEW YORK
MUNICIPAL MUNICIPAL INSURED
MONEY SECURITIES INTERMEDIATE
(000'S OMITTED) PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value* (Note
A) -- see Schedule of Investments $ 131,675 $ 38,460 $ 9,510
Cash 66 38 16
Deferred organization costs (Note A) 5 2 8
Interest receivable 952 508 143
Prepaid expenses and other assets 4 2 --
Receivable for securities sold 100 -- --
-------------------------------------------
132,802 39,010 9,677
-------------------------------------------
LIABILITIES
Payable for variation margin (Note A) -- 10 --
Payable to investment manager (Note B) 29 8 2
Accrued expenses 50 30 27
-------------------------------------------
79 48 29
-------------------------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 132,723 $ 38,962 $ 9,648
-------------------------------------------
NET ASSETS consist of:
Paid-in capital $ 132,723 $ 38,536 $ 9,640
Net unrealized appreciation in value of
investment securities and financial
futures contracts -- 426 8
-------------------------------------------
NET ASSETS $ 132,723 $ 38,962 $ 9,648
-------------------------------------------
*Cost of investments $ 131,675 $ 37,959 $ 9,502
-------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1996
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
NEW YORK
MUNICIPAL MUNICIPAL INSURED
MONEY SECURITIES INTERMEDIATE
(000'S OMITTED) PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income $5,723 $2,054 $475
-------------------------------------
Expenses:
Investment management fee (Note B) 400 104 25
Accounting fees 10 10 10
Amortization of deferred organization and
initial offering expenses (Note A) 3 1 3
Auditing fees 30 22 22
Custodian fees (Note B) 107 36 15
Insurance expense 4 1 --
Legal fees 15 12 13
Trustees' fees and expenses 15 8 6
-------------------------------------
Total expenses 584 194 94
-------------------------------------
Net investment income 5,139 1,860 381
-------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investment
securities sold 2 278 (27)
Net realized loss on financial futures
contracts (Note A) -- (51) --
Change in net unrealized appreciation of
investment securities -- (357) (40)
Net unrealized depreciation of financial
futures contracts (Note A) -- (75) --
-------------------------------------
Net gain (loss) on investments 2 (205) (67)
-------------------------------------
Net increase in net assets resulting from
operations $5,141 $1,655 $314
-------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
MUNICIPAL
MONEY
PORTFOLIO
Year
Ended
October 31,
(000'S OMITTED) 1996 1995
--------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 5,139 $ 5,418
Net realized gain (loss) on
investments 2 (25)
Change in net unrealized
appreciation (depreciation) of
investments -- --
--------------------------
Net increase in net assets resulting
from operations 5,141 5,393
--------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 213,754 195,151
Reductions (247,266) (189,913)
--------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (33,512) 5,238
--------------------------
NET INCREASE (DECREASE) IN NET ASSETS (28,371) 10,631
NET ASSETS:
Beginning of year 161,094 150,463
--------------------------
End of year $ 132,723 $ 161,094
--------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
NEW YORK
MUNICIPAL INSURED
SECURITIES INTERMEDIATE
PORTFOLIO PORTFOLIO
Year Year
Ended Ended
October 31, October 31,
1996 1995 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 1,860 $ 2,045 $ 381 $ 463
Net realized gain (loss) on
investments 227 (677) (27) (95)
Change in net unrealized
appreciation (depreciation) of
investments (432) 2,886 (40) 938
------------------------------------------------------
Net increase in net assets resulting
from operations 1,655 4,254 314 1,306
------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 3,715 6,875 2,148 3,851
Reductions (10,828) (18,071) (4,331) (8,400)
------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (7,113) (11,196) (2,183) (4,549)
------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (5,458) (6,942) (1,869) (3,243)
NET ASSETS:
Beginning of year 44,420 51,362 11,517 14,760
------------------------------------------------------
End of year $ 38,962 $ 44,420 $ 9,648 $ 11,517
------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
- ----------------------------------------------------------------------
Income Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger&Berman Municipal Money Portfolio ("Municipal Money"),
Neuberger&Berman Municipal Securities Portfolio ("Municipal Securities"), and
Neuberger&Berman New York Insured Intermediate Portfolio ("New York Insured
Intermediate") (collectively, the "Portfolios") are separate operating series
of Income Managers Trust ("Managers Trust"), a New York common law trust
organized as of December 1, 1992. Managers Trust is registered as an open-end
management investment company under the Investment Company Act of 1940, as
amended. Other regulated investment companies sponsored by Neuberger&Berman
Management Incorporated ("Management"), whose financial statements are not
presented herein, also invest in Managers Trust.
The assets of each series belong only to that series, and the liabilities
of each series are borne solely by that series and no other.
2) PORTFOLIO VALUATION: Investment securities are valued as indicated in the
notes following the Portfolios' Schedule of Investments.
3) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Interest income, including accretion of
discount (adjusted for original issue discount, where applicable) and
amortization of premium, is recorded on the accrual basis. Realized gains and
losses from securities transactions are recorded on the basis of identified
cost.
4) FEDERAL INCOME TAXES: Managers Trust intends to comply with the requirements
of the Internal Revenue Code of 1986, as amended. Each Portfolio of Managers
Trust also intends to conduct its operations so that each of its investors
will be able to qualify as a regulated investment company. Each Portfolio
will be treated as a partnership for Federal income tax purposes and is
therefore not subject to Federal income tax.
5) ORGANIZATION EXPENSES: Expenses incurred by each Portfolio in connection with
its organization are being amortized by each Portfolio on a straight-line
basis over a five-year period. At October 31, 1996, the unamortized balance
of such expenses amounted to $4,912, $1,736, and $7,630 for Municipal Money,
Municipal Securities, and New York Insured Intermediate, respectively.
6) EXPENSE ALLOCATION: Each Portfolio bears all costs of its operations.
Expenses incurred by Managers Trust with respect to any two or more
Portfolios are allocated in proportion to the net assets of such Portfolios,
except where a more appropriate allocation of expenses to each Portfolio can
otherwise be made fairly. Expenses directly attributable to a Portfolio are
charged to that Portfolio.
48
<PAGE>
7) FINANCIAL FUTURES CONTRACTS: Municipal Securities and New York Insured
Intermediate may buy and sell financial futures contracts to hedge against
the effects of fluctuations in interest rates. At the time a Portfolio enters
into a financial futures contract, it is required to deposit with its
custodian a specified amount of cash or liquid debt obligations, known as
"initial margin," ranging upward from 1.1% of the value of the financial
futures contract being traded. Each day, the futures contract is valued at
the official settlement price of the board of trade or U.S. commodity
exchange on which such futures contract is traded. Subsequent payments, known
as "variation margin," to and from the broker are made on a daily basis as
the market price of the financial futures contract fluctuates. Daily
variation margin adjustments, arising from this "mark to market," are
recorded by the Portfolio as unrealized gains or losses.
Although some financial futures contracts by their terms call for actual
delivery or acceptance of financial instruments, in most cases the contracts
are closed out prior to delivery by offsetting purchases or sales of matching
financial futures contracts. When the contracts are closed, a Portfolio
recognizes a gain or loss. Risks of entering into futures contracts include
the possibility there may be an illiquid market and/or a change in the value
of the contract may not correlate with changes in the value of the underlying
securities.
For Federal income tax purposes, the futures transactions undertaken by a
Portfolio may cause that Portfolio to recognize gains or losses from marking
to market even though its positions have not been sold or terminated, may
affect the character of the gains or losses recognized as long-term or
short-term, and may affect the timing of some capital gains and losses
realized by the Portfolio. Also, a Portfolio's losses on transactions
involving futures contracts may be deferred rather than being taken into
account currently in calculating such Portfolio's taxable income.
At October 31, 1996, open positions in financial futures contracts for
Municipal Securities were as follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION DEPRECIATION
- ---------------------------------------------------------------------
<S> <C> <C> <C>
December 1996 25 U.S. Treasury Bonds, 20 Year Short $ 75,000
</TABLE>
At October 31, 1996, Municipal Securities had deposited $75,000 par value of
Georgia G.O., Ser. 1995 C, 7.25%, due 7/1/04 in a segregated account to cover
margin requirements on open financial futures contracts.
NOTE B -- MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
Each Portfolio retains Management as its investment manager under a
Management Agreement. For such investment management services, each Portfolio
pays Management a fee at the annual rate of .25% of the first $500 million of
that Portfolio's
49
<PAGE>
average daily net assets, .225% of the next $500 million, .20% of the next $500
million, .175% of the next $500 million, and .15% of average daily net assets in
excess of $2 billion.
All of the capital stock of Management is owned by individuals who are also
principals of Neuberger&Berman, LLC ("Neuberger"), a member firm of The New York
Stock Exchange and sub-adviser to each Portfolio. Neuberger is retained by
Management to furnish it with investment recommendations and research
information without cost to each Portfolio. Several individuals who are officers
and/or trustees of Managers Trust are also principals of Neuberger and/or
officers and/or directors of Management.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statement
of Operations, is less than .01% of Municipal Money and Municipal Securities'
average daily net assets and $2,275, which is less than .03% of New York Insured
Intermediate's average daily net assets.
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended October 31, 1996, there were purchase and sale
transactions (excluding short-term securities and financial futures contracts)
as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- ---------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL SECURITIES $1,082,630 $9,209,455
NEW YORK INSURED INTERMEDIATE 4,505,373 4,279,616
</TABLE>
All securities transactions for Municipal Money were short-term.
50
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
MUNICIPAL
MONEY
PORTFOLIO
Period from
July 2, 1993
(Commencement
of Operations)
to
Year Ended October 31, October 31,
1996 1995 1994 1993
----------------------------------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Expenses .36% .36% .36% .36%(1)
----------------------------------------
Net Investment Income 3.21% 3.57% 2.38% 2.20%(1)
----------------------------------------
Portfolio Turnover Rate -- -- -- --
----------------------------------------
Net Assets, End of Year (in millions) $132.7 $161.1 $150.5 $181.8
----------------------------------------
</TABLE>
(1) Annualized.
51
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
NEW YORK
MUNICIPAL INSURED
SECURITIES INTERMEDIATE
PORTFOLIO PORTFOLIO
Period from
Period from February 1,
July 2, 1993 1994
(Commencement (Commencement
of Operations) of Operations)
Year Ended October to Year Ended to
31, October 31, October 31, October 31,
1996 1995 1994 1993 1996 1995 1994
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Expenses .47% .46% .40% .42%(1) .93% .85% .82%(1)
---------------------------------------------------------------------
Net Investment Income 4.49% 4.63% 4.47% 4.21%(1) 3.75% 4.05% 3.92%(1)
---------------------------------------------------------------------
Portfolio Turnover Rate 3% 66% 127% 25% 45% 17% 96%
---------------------------------------------------------------------
Net Assets, End of Year (in millions) $39.0 $44.4 $51.4 $104.3 $9.6 $11.5 $14.8
---------------------------------------------------------------------
</TABLE>
(1) Annualized.
52
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Income Managers Trust and
Owners of Beneficial Interest of
Neuberger&Berman Municipal Money Portfolio
Neuberger&Berman Municipal Securities Portfolio and
Neuberger&Berman New York Insured Intermediate Portfolio
We have audited the accompanying Statements of Assets and Liabilities,
including the Schedules of Investments, of the Neuberger&Berman Municipal Money
Portfolio, Neuberger&Berman Municipal Securities Portfolio, and Neuberger&Berman
New York Insured Intermediate Portfolio, three of the series comprising Income
Managers Trust (the "Trust"), as of October 31, 1996, and the related Statements
of Operations for the year then ended, the Statements of Changes in Net Assets
for each of the two years in the period then ended, and the Financial Highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1996, by correspondence with the custodian
and brokers or other appropriate auditing procedures where replies from brokers
were not received. 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 financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of Income Managers Trust at October 31, 1996, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
December 2, 1996
53
<PAGE>
OTHER INFORMATION
DIRECTORY OFFICERS AND TRUSTEES
INVESTMENT MANAGER, ADMINISTRATOR Stanley Egener
AND DISTRIBUTOR CHAIRMAN OF THE BOARD AND TRUSTEE
Neuberger&Berman Management Theodore P. Giuliano
Incorporated PRESIDENT AND TRUSTEE
605 Third Avenue 2nd Floor John Cannon
New York, NY 10158-0180 TRUSTEE
800-877-9700 Charles DeCarlo
Institutional Services 800-366-6264 TRUSTEE
SUB-ADVISER Barry Hirsch
Neuberger&Berman, LLC TRUSTEE
605 Third Avenue Robert A. Kavesh
New York, NY 10158-3698 TRUSTEE
CUSTODIAN AND SHAREHOLDER Harold R. Logan
SERVICING AGENT TRUSTEE
State Street Bank and Trust Company William E. Rulon
225 Franklin Street TRUSTEE
Boston, MA 02110 Candace L. Straight
ADDRESS CORRESPONDENCE TO: TRUSTEE
Neuberger&Berman Funds Daniel J. Sullivan
Boston Service Center VICE PRESIDENT
P.O. Box 8403 Michael J. Weiner
Boston, MA 02266-8403 VICE PRESIDENT
LEGAL COUNSEL Richard Russell
Kirkpatrick & Lockhart LLP TREASURER
1800 Massachusetts Avenue, NW Claudia A. Brandon
2nd Floor SECRETARY
Washington, DC 20036-1800 Barbara DiGiorgio
INDEPENDENT AUDITORS ASSISTANT TREASURER
Ernst & Young LLP Celeste Wischerth
200 Clarendon Street ASSISTANT TREASURER
Boston, MA 02116 Stacy Cooper-Shugrue
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
Neuberger&Berman Management Inc., Neuberger&Berman Municipal Money Fund,
Neuberger&Berman Municipal Securities Trust, and Neuberger&Berman New York
Insured Intermediate Fund are registered service marks of Neuberger&Berman
Management Inc.
- -C- 1996 Neuberger&Berman Management Inc.
54
<PAGE>
NEUBERGER&BERMAN MANAGEMENT INC.-R-
605 THIRD AVENUE 2ND FLOOR
NEW YORK, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
INSTITUTIONAL SERVICES
800.366.6264
Statistics and projections in this report are derived from sources
deemed to be reliable but cannot be regarded as a representation of
future results of the Funds. This report is prepared for the general
information of shareholders and is not an offer of shares of the Funds.
Shares are sold only through the currently effective prospectus, which
must precede or accompany this report.
[recycle PRINTED ON RECYCLED PAPER
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