<PAGE>
SEMI-ANNUAL REPORT
------------------------------------------------------
April 30, 1998
NEUBERGER&BERMAN
MUNICIPAL FUNDS-Registered Trademark-
Neuberger&Berman
MUNICIPAL MONEY FUND
Neuberger&Berman
MUNICIPAL SECURITIES TRUST
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE FUNDS
PRESIDENT'S LETTER A-4
PERFORMANCE HIGHLIGHTS B-1
FINANCIAL STATEMENTS B-2
FINANCIAL HIGHLIGHTS
PER SHARE DATA
Municipal Money Fund B-8
Municipal Securities Trust B-9
THE PORTFOLIOS
SCHEDULE OF INVESTMENTS
Municipal Money Portfolio B-11
Municipal Securities Portfolio B-22
FINANCIAL STATEMENTS B-26
FINANCIAL HIGHLIGHTS
Municipal Money Portfolio B-32
Municipal Securities Portfolio B-33
DIRECTORY C-1
OFFICERS AND TRUSTEES C-2
</TABLE>
A-3
<PAGE>
PRESIDENT'S LETTER June 16, 1998
Dear Shareholder,
As you may remember, we turned very positive on the intermediate-term
prospects for the bond market in late 1996. Our bullish posture was rewarded by
excellent 1997 returns. We still believe the political and economic backdrop for
bonds is quite favorable. However, we think current investor expectations are so
high that even modest disappointments may unsettle the market.
In our opinion, there are some short-term economic crosscurrents that may take
investors by surprise. The economy is surprisingly strong and may remain so over
the next several quarters. We have seen rather rapid money supply growth and the
dollar may suffer as it competes with the Euro (the currency of soon to be
economically unified Europe). These three factors along with Federal Reserve
Chairman Alan Greenspan's stated concern about inflation in financial
assets -- the runaway stock market -- may prompt the Fed to bump up short-term
interest rates. With yields of longer-term bonds only marginally higher than
short-term securities, an increase in the Fed Funds Rate would probably result
in an uptick in rates along the yield curve (yields along the maturity
spectrum). Consequently, we have become somewhat more cautious and have been
shortening weighted average maturities/durations in most of our portfolios. As
always, we are favoring those sectors of the bond market that in our opinion
offer the best value and individual securities we believe have the best
risk-adjusted return potential.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
30-YR. 12-22 YR. MUNICIPAL BOND
3-MONTH T-BILL TREASURY INDEX
11/28/97 5.23% 6.04% 5.13%
12/5/97 5.25% 6.08% 5.11%
<S> <C> <C> <C>
12/12/97 5.19% 5.93% 5.01%
12/19/97 5.44% 5.91% 4.97%
12/26/97 5.34% 5.91% 4.97%
1/2/98 5.32% 5.85% 5.02%
1/9/98 5.05% 5.71% 4.88%
1/16/98 5.13% 5.82% 4.84%
1/23/98 5.16% 5.96% 4.96%
1/30/98 5.17% 5.81% 4.91%
2/6/98 5.15% 5.91% 4.93%
2/13/98 5.25% 5.85% 4.90%
2/20/98 5.26% 5.86% 4.90%
2/27/98 5.35% 5.92% 4.97%
3/6/98 5.20% 6.02% 5.09%
3/13/98 5.18% 5.89% 5.04%
3/20/98 5.21% 5.89% 5.00%
3/27/98 5.20% 5.95% 5.01%
4/3/98 5.08% 5.78% 4.98%
4/9/98 5.05% 5.88% 5.04%
4/17/98 5.09% 5.88% 5.07%
4/24/98 5.04% 5.94% 5.14%
5/1/98 5.01% 5.94% 5.17%
</TABLE>
SOURCE: BLOOMBERG FINANCIAL MARKETS 30-YEAR TREASURY BOND &
TREASURY BILLS
MERRILL LYNCH 12-22 YEAR MUNICIPAL BOND INDEX
A-4
<PAGE>
I want to emphasize that despite our short-term concerns, we believe the
longer-term outlook for bonds remains quite positive. The government appears
finally to have its fiscal house in order and we are likely to have a federal
budget surplus this year. Corporate cash flows are strong and balance sheets
have improved as debt has been refinanced at lower rates. Also, bonds may begin
to get a "tailwind" from investors concerned by high equity valuations. Some of
our institutional clients have been re-balancing their portfolios -- taking some
profits in the equity market and buying more bonds. They understand and
appreciate that boosting bond allocations is a good way to reduce overall
portfolio risk. We think mutual fund investors may come to the same conclusion
in the year ahead.
To summarize, while we may see a somewhat more choppy bond market over the
next several months, we believe bonds still offer value. Irrespective of what
the bond market holds in store for us, bonds provide yield and relative safety
of principal: two timeless and priceless elements in a prudent investment
program.
MUNICIPAL MONEY FUND As you know, it is our policy to invest exclusively in
high quality credits. We depend on our trend following maturity management and
have confidence in our ability to select securities with the best risk/reward
characteristics to maximize potential returns. During the six months ended April
30, 1998, the portfolio's weighted average maturity ranged from 48.6 to 74.0
days, finishing at the low end of this range as we reduced weighted average
maturity in response to rising interest rates in late April.
About 52% of the portfolio is in short maturity variable rate demand notes
(VRDNs). This allocation is considerably higher than that of a year ago because
municipal issuers have been taking advantage of this extended period of low
interest rates to "bond out" (meet financing needs by issuing more long-term
paper). The limited supply of short-term obligations has resulted in a flat
yield curve (little difference in yields of bonds from zero to one year in
maturity). Since there has been little or no yield advantage in longer-term
paper, there has been no reason to assume more interest rate risk by owning
municipal money market instruments with longer maturities.
A-5
<PAGE>
The current and effective (compounded) 7-day yields for the Fund as of April
30, 1998, were 3.05% and 3.10%, respectively. For an investor in the highest
federal income tax bracket, this translates into tax-equivalent current and
effective yields of 5.05% and 5.18%.+
MUNICIPAL SECURITIES TRUST During the six months ended April 30, 1998, the
portfolio's weighted average duration varied from 5.8 to 6.3 years, closing at
the top of this range.
The big story in the municipal bond market has been a surge in supply.
Issuance was up 62% over the last year in response to declining interest rates.
At the same time, the supply of Treasury securities was shrinking -- the result
of the declining federal budget deficit. Consequently, municipal bonds
materially under-performed Treasuries. This may continue a little while longer.
On May 13, the Long Island Power Authority issued $3.4 billion in municipal
paper to finance its acquisition of the Long Island Lighting Company (LILCO).
This is the single largest municipal bond issue ever. Once this enormous new
issue is absorbed, we expect to see more balanced supply and demand in the
market, resulting in municipal securities performance that is more competitive
with Treasuries. Relative to Treasuries, municipal bonds are now as cheap as
they have been since the flat tax furor early in election year 1996. We believe
that will change for the better in the year ahead.
The major shift in our portfolio has been a modest reduction in our allocation
to revenue bonds -- now 54.0% of the portfolio versus 56.7% at the beginning of
this reporting period -- and a substantial increase in our allocation to general
obligation bonds (bonds backed by the full faith and credit of the government
issuer) -- now 40.4% of the portfolio compared to 35.9%. Revenue bond yields are
generally materially higher than GO (General Obligation) yields, because they
usually have one dedicated revenue source, whereas GOs are backed by the broader
taxation power of the government issuers. However, due to the surge in issuance
over the last twelve months (up around 50%), GOs have been priced to
move -- offering yields nearly as high as revenue bonds. We have been taking
advantage of this anomaly in the marketplace.
As of April 30, 1998, the 30-day SEC yield for the Fund was 3.95%. This can be
translated into a tax-equivalent yield of 6.54%, for an investor in the highest
federal income tax bracket.
In closing, I want to emphasize that we believe bonds will continue to benefit
from favorable long-term political and economic trends.
A-6
<PAGE>
There are some short-term economic crosscurrents that might cause a somewhat
bumpy ride over the next several months. The most important thing for all
investors to remember is bonds provide yield and relative safety of
principal -- two critical elements for preserving and enhancing assets.
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
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.
Neuberger&Berman Management Inc.-Registered Trademark- currently absorbs
certain operating expenses of Municipal Securities Trust. Absent this
arrangement, which is subject to change, the 30-day SEC yield of Municipal
Securities Trust would have been 3.42% and the tax-equivalent yield would have
been 6.54%.
The composition and holdings of the portfolios are subject to change. Results
represent past performance and do not indicate future results.
A-7
<PAGE>
(This page has been left blank intentionally.)
A-8
<PAGE>
PERFORMANCE HIGHLIGHTS
TOTAL RETURN ILLUSTRATION
<TABLE>
<CAPTION>
SIX MONTH AVERAGE ANNUAL
PERIOD TOTAL RETURNS(1)
NEUBERGER&BERMAN INCEPTION ENDED --------------------
INCOME FUNDS DATE 4/30/98(1) 1 YR(1) 5 YR 10 YR
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL SECURITIES TRUST(2) 7/9/87 +2.01% +7.54% +4.93% +6.32%
</TABLE>
YIELD ILLUSTRATION
FOR THE 7 DAYS ENDED 4/30/98
<TABLE>
<CAPTION>
TAX-EQUIVALENT
CURRENT EFFECTIVE EFFECTIVE
YIELD(3) YIELD(3) YIELD(4)
- ------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL MONEY FUND(5) 3.05% 3.10% 5.18%
</TABLE>
1) One-year and average annual total returns are for periods ended April 30,
1998. Results are shown on a "total return" basis and include reinvestment of
all dividends and other distributions. Performance data quoted represents
past performance, which is no guarantee of future results. The investment
return and principal value of an investment will fluctuate so that the
shares, when redeemed, may be worth more or less than their original cost.
2) Neuberger&Berman Management Inc. voluntarily bears certain operating expenses
in excess of 0.65% of the average daily net assets per annum of
Neuberger&Berman Municipal Securities Trust-Registered Trademark- ("Municipal
Securities Trust"). This arrangement can be terminated upon 60 days' prior
written notice. Absent such reimbursement, the total returns for the above
stated periods would have been less.
3) "Current yield" refers to the income generated by an investment in the Fund
over a 7-day period. This income is then "annualized." The "effective yield"
is calculated similarly but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The "effective yield"
will be slightly higher than the "current yield" because of the compounding
effect of this assumed reinvestment. Yields of a money market fund will
fluctuate and past performance is no guarantee of future results.
4) Tax-equivalent effective yield is the taxable effective yield that an
investor would have had to receive in order to realize the same level of
yield 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.
5) An investment in a money market fund, like all other mutual funds, is neither
insured nor guaranteed by the U.S. Government. There can be no assurance that
a money market fund will be able to maintain a stable net asset value of
$1.00 per share. The return on an investment in Neuberger&Berman Municipal
Money Fund-Registered Trademark- ("Municipal Money") will fluctuate.
A portion of the income of Municipal Money and Municipal Securities Trust may be
subject to the Federal alternative minimum tax for certain investors.
B-1
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Neuberger&Berman April 30, 1998 (Unaudited)
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
MUNICIPAL MUNICIPAL
MONEY SECURITIES
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) FUND TRUST
----------------------
<S> <C> <C>
ASSETS
Investment in corresponding Portfolio, at value (Note A) $168,372 $33,234
Receivable for Trust shares sold 63 5
Receivable from administrator -- net (Note B) -- 3
----------------------
168,435 33,242
----------------------
LIABILITIES
Dividends payable 5 39
Payable for Trust shares redeemed 54 3
Payable to administrator (Note B) 40 --
Accrued expenses 29 34
----------------------
128 76
----------------------
NET ASSETS at value $168,307 $33,166
----------------------
NET ASSETS consist of:
Par value $ 168 $ 3
Paid-in capital in excess of par value 168,197 33,001
Accumulated net realized losses on investment (58) (594)
Net unrealized appreciation in value of investment -- 756
----------------------
NET ASSETS at value $168,307 $33,166
----------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares authorized) 168,438 3,012
----------------------
NET ASSET VALUE, offering and redemption price per share $1.00 $11.01
----------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-2
<PAGE>
STATEMENTS OF OPERATIONS
Neuberger&Berman For the Six Months Ended April 30, 1998 (Unaudited)
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
MUNICIPAL MUNICIPAL
MONEY SECURITIES
(000'S OMITTED) FUND TRUST
----------------------
<S> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio (Note A) $3,187 $797
----------------------
Expenses:
Administration fee (Note B) 236 44
Auditing fees 4 4
Custodian fees 5 5
Legal fees 5 5
Registration and filing fees 23 16
Shareholder reports 22 21
Shareholder servicing agent fees (Note B) 12 12
Trustees' fees and expenses 6 4
Miscellaneous 2 1
Expenses from corresponding Portfolio (Notes A & B) 326 86
----------------------
Total expenses 641 198
Expenses reimbursed by administrator and/or reduced by custodian fee and
shareholder servicing expense offset arrangements (Note B) (9) (91)
----------------------
Total net expenses 632 107
----------------------
Net investment income 2,555 690
----------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM CORRESPONDING PORTFOLIO
(NOTE A)
Net realized gain (loss) on investment securities (32) 62
Net realized gain on financial futures contracts -- 17
Change in net unrealized appreciation of investment securities -- (132)
----------------------
Net loss on investments from corresponding Portfolio (Note A) (32) (53)
----------------------
Net increase in net assets resulting from operations $2,523 $637
----------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-3
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Neuberger&Berman
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
MUNICIPAL MUNICIPAL
MONEY SECURITIES
FUND TRUST
Six Months Six Months
Ended Year Ended Year
April 30, Ended April 30, Ended
1998 October 31, 1998 October 31,
(000'S OMITTED) (UNAUDITED) 1997 (UNAUDITED) 1997
-----------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 2,555 $ 4,192 $ 690 $ 1,418
Net realized gain (loss) on investments from corresponding Portfolio
(Note A) (32) -- 79 210
Change in net unrealized appreciation of investments from
corresponding Portfolio (Note A) -- -- (132) 462
-----------------------------------------------------
Net increase in net assets resulting from operations 2,523 4,192 637 2,090
-----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,555) (4,192) (690) (1,418)
-----------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 140,396 228,579 7,450 5,776
Proceeds from reinvestment of dividends 2,513 4,121 438 907
Payments for shares redeemed (130,891) (208,978) (6,296) (14,649)
-----------------------------------------------------
Net increase (decrease) from Trust share transactions 12,018 23,722 1,592 (7,966)
-----------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 11,986 23,722 1,539 (7,294)
NET ASSETS:
Beginning of period 156,321 132,599 31,627 38,921
-----------------------------------------------------
End of period $168,307 $156,321 $33,166 $31,627
-----------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 140,396 228,579 669 531
Issued on reinvestment of dividends 2,513 4,121 39 83
Redeemed (130,891) (208,978) (565) (1,354)
-----------------------------------------------------
Net increase (decrease) in shares outstanding 12,018 23,722 143 (740)
-----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger&Berman April 30, 1998 (Unaudited)
- ----------------------------------------------------------------------
Income Funds
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger&Berman Municipal Money Fund ("Municipal Money") and
Neuberger&Berman Municipal Securities Trust ("Municipal Securities Trust")
(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 a diversified, 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 April 30, 1998). 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 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 Internal Revenue Code, and to make distributions
of investment company taxable income
B-5
<PAGE>
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 ($25,578 expiring in 2003 for Municipal Money and
$673,009 expiring in 2003 for Municipal Securities Trust determined as of
October 31, 1997), it is the policy of each Fund not to distribute such
gains. During the year ended October 31, 1997, $73,750 was reclassified from
accumulated net realized losses on investment to paid-in-capital for
Municipal Money due to the expiration of a capital loss carryforward. This
change had no effect on the net assets or net asset value per share.
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
distributions in excess of net investment income or accumulated net realized
gains.
5) 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.
6) 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 ("N&B Management")
as its administrator under an Administration Agreement ("Agreement") dated as of
May 1, 1995. Pursuant to this Agreement each Fund pays N&B Management an
administration fee at the annual rate of 0.27% of that Fund's average daily net
assets. Each Fund indirectly pays for investment management services through its
investment in its corresponding Portfolio (see Note B of Notes to Financial
Statements of the Portfolios).
B-6
<PAGE>
N&B Management has voluntarily undertaken to reimburse Municipal Securities
Trust for its operating expenses plus its pro rata portion of its corresponding
Portfolio's operating expenses (including the fees payable to N&B Management but
excluding interest, taxes, brokerage commissions, and extraordinary expenses)
which exceed, in the aggregate, 0.65% per annum of its average daily net assets.
This undertaking is subject to termination by N&B Management upon at least 60
days' prior written notice to the Fund. For the six months ended April 30, 1998,
such excess expenses amounted to $88,697 for Municipal Securities Trust.
All of the capital stock of N&B 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 N&B Management.
Each Fund also has a distribution agreement with N&B Management. N&B
Management receives no compensation therefor and no commissions for sales or
redemptions of shares of beneficial interest of each Fund.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statements
of Operations under the caption Expenses from corresponding Portfolio, was a
reduction of $4,955 and $955, for Municipal Money and Municipal Securities
Trust, respectively.
Each Fund has an expense offset arrangement in connection with its
shareholder servicing agent contract. The impact of this arrangement, reflected
in the Statements of Operations under the caption Shareholder servicing agent
fees, was a reduction of $3,691 and $721, for Municipal Money and Municipal
Securities Trust, respectively.
NOTE C -- INVESTMENT TRANSACTIONS:
During the six months ended April 30, 1998, additions and reductions in each
Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL MONEY $ 120,695,250 $ 111,643,597
MUNICIPAL SECURITIES TRUST 6,128,465 5,265,016
</TABLE>
NOTE D -- UNAUDITED FINANCIAL INFORMATION:
The financial information included in this interim report is taken from the
records of each Fund without audit by independent auditors. Annual reports
contain audited financial statements.
B-7
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Money Fund(1)
The following table includes selected data for a share outstanding throughout
each period 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>
Six Months Ended
April 30,
1998 Year Ended October 31,
(UNAUDITED) 1997 1996 1995 1994 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $.9994 $.9993 $.9994 $.9995 $.9996 $.9995
-------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .0144 .0296 .0285 .0324 .0204 .0184
Net Gains or Losses on Securities (.0002) .0001 (.0001) (.0001) (.0001) .0001
-------------------------------------------------------------------
Total From Investment Operations .0142 .0297 .0284 .0323 .0203 .0185
-------------------------------------------------------------------
Less Distributions
Dividends (from net investment income) (.0144) (.0296) (.0285) (.0324) (.0204) (.0184)
-------------------------------------------------------------------
Net Asset Value, End of Period $.9992 $.9994 $.9993 $.9994 $.9995 $.9996
-------------------------------------------------------------------
Total Return(2) +1.45%(3) +3.00% +2.89% +3.29% +2.06% +1.86%
-------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $168.3 $156.3 $132.6 $160.9 $150.3 $181.6
-------------------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(4) .73%(5) .73% .73% .71% -- --
-------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets .72%(5) .72% .72% .71% .73% .74%
-------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets 2.93%(5) 2.95% 2.86% 3.24% 2.02% 1.85%
-------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-8
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Securities Trust(1)
The following table includes selected data for a share outstanding throughout
each period 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>
Six Months Ended
April 30,
1998 Year Ended October 31,
(UNAUDITED) 1997 1996 1995 1994 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.02 $10.78 $10.83 $10.26 $11.12 $10.53
-------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .23 .47 .47 .47 .46 .48
Net Gains or Losses on Securities (both realized and
unrealized) (.01) .24 (.05) .57 (.73) .68
-------------------------------------------------------------------
Total From Investment Operations .22 .71 .42 1.04 (.27) 1.16
-------------------------------------------------------------------
Less Distributions
Dividends (from net investment income) (.23) (.47) (.47) (.47) (.46) (.48)
Distributions (from net capital gains) -- -- -- -- (.12) (.09)
Distributions (in excess of net capital gains) -- -- -- -- (.01) --
-------------------------------------------------------------------
Total Distributions (.23) (.47) (.47) (.47) (.59) (.57)
-------------------------------------------------------------------
Net Asset Value, End of Period $11.01 $11.02 $10.78 $10.83 $10.26 $11.12
-------------------------------------------------------------------
Total Return(2) +2.01%(3) +6.71% +3.92% +10.35% -2.57% +11.30%
-------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $ 33.2 $ 31.6 $ 38.9 $ 44.3 $ 51.1 $105.2
-------------------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(4) .67%(5) .66% .66% .66% -- --
-------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets(6) .66%(5) .65% .65% .65% .65% .62%
-------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets(6) 4.21%(5) 4.30% 4.32% 4.45% 4.24% 4.33%
-------------------------------------------------------------------
Portfolio Turnover Rate(7) -- -- -- -- -- 35%
-------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-9
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger&Berman April 30, 1998 (Unaudited)
- ----------------------------------------------------------------------
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 fiscal
period and assumes dividends and other 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, total return would have been lower if N&B Management had
not reimbursed certain expenses.
3) Not annualized.
4) For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
5) Annualized.
6) After reimbursement of expenses by N&B Management as described in Note B of
Notes to Financial Statements. Had N&B Management not undertaken such action
the annualized ratios of net expenses and net investment income to average
daily net assets would have been:
<TABLE>
<CAPTION>
Six Months Ended
April 30, Year Ended October 31,
1998 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Expenses 1.20% 1.05% 1.04% .98% .82% 1.04%
------------------------------------------------------------------------
Net Investment Income 3.67% 3.90% 3.93% 4.12% 4.07% 3.91%
------------------------------------------------------------------------
</TABLE>
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 in the
Financial Highlights of Neuberger& Berman Municipal Securities Portfolio,
which appear elsewhere in this report.
B-10
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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 (4.5%)
$1,800 Illinois G.O., Ser. 1988, 7.75%, due 6/1/11 P/R 6/1/98 $ 1,842
1,000 Maryland St. & Local Fac. Loan G.O., Ser. 1988-2, 6.625%, due
10/15/00 P/R 10/15/98 1,019
2,500 New York State Med. Care Fac. Fin. Agcy. Hosp. & Nursing Home
FHA-Insured Mtge. Rev.,
Ser. 1989 A, 7.25%, due 2/15/24 P/R 2/15/99 2,618
1,000 Tarrant Co. (TX) Fort Worth Independent Sch. Dist. Sch. Bldg.
Unlimited Tax G.O., Ser. 1989, 7.00%, due 2/15/01 P/R 2/15/99 1,025
1,000 Wisconsin G.O., Ser. 1990 G, 6.75%, due 5/1/09 P/R 5/1/99 1,039
---------------
7,543
---------------
TAX-EXEMPT SECURITIES -- ESCROWED IN U.S. GOVERNMENT SECURITIES
(0.7%)
1,175 Austin (TX) Combined Util. Sys. Rev., Ser. 1986 A, 7.50%, due
11/15/98 1,199
---------------
MUNICIPAL NOTES (16.6%)
4,000 California Comm. College Fin. Au. TRANS, Ser. 1997 B, 4.50%, due
9/30/98 SP-1+ 4,012
2,000 California RANS, Ser. 1997, 4.50%, due 6/30/98 MIG 1 SP-1+ 2,003
2,000 California Statewide Comm. Dev. Au. TRANS, Ser. 1997 A, 4.50%, due
6/30/98 MIG 1 SP-1+ 2,002
2,000 Colorado Gen. Fund TRANS, Ser. 1997 A, 4.50%, due 6/26/98 SP-1+ 2,002
2,000 Houston (TX) TRANS, Ser. 1997, 4.50%, due 6/30/98 MIG 1 SP-1+ 2,002
1,000 Idaho TANS, Ser. 1997, 4.625%, due 6/30/98 MIG 1 SP-1+ 1,001
2,000 Los Angeles Co. (CA) TRANS, Ser. A, 4.50%, due 6/30/98 MIG 1 SP-1+ 2,002
2,000 Manatee Co. (FL) Port Au. BANS, Ser. 1997, 4.25%, due 7/1/98 MIG 1 2,001
2,000 Michigan Muni. Bond Au. Rev. Notes, Ser. 1997 B, 4.50%, due 7/2/98 SP-1+ 2,002
</TABLE>
B-11
<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>
$1,000 New Mexico TRANS, Ser. 1997, 4.50%, due 6/30/98 MIG 1 SP-1+ $ 1,001
3,000 Santa Cruz Co. (CA) Office of Ed. TRANS, Ser. 1997, 4.50%, due
7/30/98 SP-1+ 3,005
1,000 Summit Co. (OH) Var. Purp. Ltd. Tax G.O. BANS, Ser. 1997 A, 4.50%,
due 6/4/98 MIG 1 SP-1+ 1,000
4,000 Texas TRANS, Ser. 1997 A, 4.75%, due 8/31/98 MIG 1 SP-1+ 4,014
---------------
28,047
---------------
TAX-EXEMPT SECURITIES -- BACKED BY LETTERS OF CREDIT (1.5%)
SLM HOLDING CORP.
1,000 Greater East Texas Higher Ed. Au., Inc. Std. Loan Ref. Rev., Ser.
1995 A, 4.10%, due 5/1/11 Putable 5/1/98 VMIG 1 A-1+ 1,000
1,500 Greater Texas Std. Loan Corp. Ref. Rev.,
Ser. 1996 A, 3.60%, due 4/1/05 Putable 3/1/99 VMIG 1 A-1+ 1,500
---------------
2,500
---------------
TAX-EXEMPT SECURITIES -- BACKED BY INSURANCE (4.0%)
AMERICAN MUNICIPAL BOND ASSURANCE CORP.
1,650 Atlanta (GA) Arpt. Fac. Ref. Rev., Ser. 1996, 5.25%, due 1/1/99 VMIG 1 A-1+ 1,668
1,015 Cleveland (OH) Var. Purp. G.O., Ser. 1996, 5.00%, due 9/1/98 VMIG 1 A-1+ 1,020
1,000 New York Dorm. Au. Ed. Fac. Rev. (State Univ.), Ser. 1989 B, 7.00%,
due 5/15/98 VMIG 1 A-1+ 1,001
FINANCIAL GUARANTY INSURANCE CO.
1,020 Atlanta (GA) Wtr. & Swr. Rev., Ser. 1997, 5.00%, due 1/1/99 VMIG 1 A-1+ 1,029
1,000 Connecticut Spec. Assessment Unemployment Comp. Adv. Fund Rev., Ser.
1993 C, 3.90%, due 11/15/01 Putable 7/1/98 VMIG 1 A-1+ 1,000
1,000 Rutherford Co. (TN) Cons. Util. Dist. Waterworks Ref. Rev., Ser.
1997 B, 4.25%, due 2/1/99 VMIG 1 A-1+ 1,005
---------------
6,723
---------------
</TABLE>
B-12
<PAGE>
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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 SECURITIES -- OTHER (5.3%)
$2,300 Harford Co. (MD) Cons. Pub. Imp. G.O., Ser. 1997, 5.00%, due 12/1/98 $ 2,316
2,000 Houston (TX) Independent Sch. Dist. Pub. Prop. Fin. Contractual
Oblig., Ser. 1996, 5.00%, due 7/15/98 2,005
1,185 Milwaukee Co. (WI) Corp. Purp. G.O.,
Ser. 1995 C, 4.75%, due 6/15/98 1,186
1,360 Oregon State Board of Higher Ed. Baccalaureate G.O., Ser. 1998 A,
4.50%, due 8/1/98 1,363
2,000 Washington Var. Purp. G.O., Ser. 1997 E, 5.00%, due 7/1/98 2,004
---------------
8,874
---------------
TAX-EXEMPT CASH EQUIVALENT SECURITIES (8.4%)
1,500 Carlton (WI) PCR (Wisconsin Pwr. & Lt. Co. Proj.), Ser. 1988, 4.20%,
VRDN due 8/1/15 VMIG 1 1,500(4)
1,400 Louisiana Pub. Fac. Au. SCH Hlth. Care Sys. Ref. Rev. (Sisters of
Charity of the Incarnate Word, Houston, Texas), Ser. 1997 D, 3.625%,
TECP due 7/14/98 VMIG 1 A-1+ 1,400
800 Minneapolis (MN) Comm. Dev. Agcy. Ref. PCR (No. States Pwr. Co.
Proj.), Ser. 1985, 4.25%, VRDN due 3/1/11 P-1 A-1+ 800(4)
1,000 Navajo Co. (AZ) IDA (Citizens Util. Co. Proj.), Ser. 1997, 4.10%,
VRDN due 5/1/32 A-1+ 1,000
2,000 New Jersey TRANS, Ser. 1998 A, 3.60%, TECP due 6/15/98 P-1 A-1+ 2,000
2,000 Nueces Co. (TX) Port of Corpus Christi Au. Solid Waste Disp. Ref.
Rev. (Koch Refining Co., L.P. Proj.), Ser. 1996, 4.20%, VRDN due
5/1/26 VMIG 1 A-1+ 2,000(4)
1,000 Orlando (FL) Cap. Imp. G.O., Ser. 1994 A, 3.20%, TECP due 5/7/98 P-1 A-1+ 1,000
200 Parish of St. Charles (LA) PCR (Shell Oil Co. Norco Proj.), Ser.
1993, 4.35%, VRDN due 9/1/23 VMIG 1 A-1+ 200(4)
</TABLE>
B-13
<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>
$ 900 San Antonio (TX) Higher Ed. Au., Inc. Ref. Rev. (Trinity Univ.
Proj.), Ser. 1993, 4.05%, VRDN due 4/1/04 A-1+ $ 900
2,400 Texas Ref. G.O. (Veterans' Hsg. Assist. Prog., Fund I), Ser. 1995,
4.00%, VRDN due 12/1/16 VMIG 1 A-1+ 2,400
1,000 Winston-Salem (NC) Wtr. & Swr. Sys. Rev., Ser. 1988, 3.50%, TECP due
6/10/98 VMIG 1 A-1+ 1,000
---------------
14,200
---------------
TAX-EXEMPT CASH EQUIVALENT SECURITIES -- BACKED BY LETTERS OF CREDIT
(51.6%)
ABN AMRO BANK NV
200 Ohio Air Quality Dev. Au. Ref. Rev. (Cincinnati Gas & Elec. Co.
Proj.), Ser. 1995 A, 4.10%, VRDN due 9/1/30 VMIG 1 A-1+ 200
4,000 Phenix City (AL) IDB Env. Imp. Rev. (Mead Coated Board Proj.), Ser.
1988, 3.70%, TECP due 5/27/98 P-1 4,000
BANK OF AMERICA
1,200 Calhoun Co. (TX) Navigation IDA Port Rev. (Formosa Plastics Corp.,
Texas Proj.), Ser. 1994, 4.15%, VRDN due 11/1/15 VMIG 1 1,200
BANK OF NOVA SCOTIA
100 Port of Portland (OR) Ref. PCR (Reynolds Metals Co. Proj.), Ser.
1985, 4.25%, VRDN due 12/1/09 P-1 100
BARCLAYS BANK INT'L., LTD.
2,000 Beaver Co. (PA) IDA Ref. PCR (Duquesne Lt. Co. Beaver Valley Proj.),
Ser. 1990 C, 3.60%, TECP due 5/12/98 P-1 A-1+ 2,000
BAYERISCHE LANDESBANK GIROZENTRALE
2,000 Denver (CO) City & Co. Arpt. Rev., Ser. 1997 A, 3.45%, TECP due
5/6/98 P-1 A-1+ 2,000
CANADIAN IMPERIAL BANK OF COMMERCE
2,800 Louisa Co. (IA) Customized Purchase Ref. PCR (Iowa-Illinois Gas &
Elec. Co. Proj.), Ser. 1987, 4.20%, VRDN due 3/1/17 A-1 2,800
1,000 St. Louis (MO) Ind. Dev. Au. IDR (Svc. Merchandise Co., Inc. Proj.),
3.80%, VRDN due 9/15/98 A-1+ 1,000
</TABLE>
B-14
<PAGE>
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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>
CHASE MANHATTAN BANK, N.A.
$2,000 Douglas Co. (GA) Dev. Au. IDR (Whirlwind Steel Bldg., Inc. Proj.),
Ser. 1997, 4.25%, VRDN due 12/1/12 VMIG 1 A-1 $ 2,000
985 Virginia Small Bus. Fin. Au. IDR (Coral Graphic Svc., Inc. Proj.),
Ser. 1998, 4.25%, VRDN due 1/1/13 VMIG 1 A-1 985
CITIBANK, N.A.
1,100 Austin Co. (TX) Ind. Dev. Corp. IDR (Justin Ind., Inc. Proj.), Ser.
1984, 4.05%, VRDN due 12/1/14 P-1 1,100
COMMERZBANK AG
1,100 Houston (TX) Arpt. Sys. Rev., Ser. A, 3.45%, TECP due 5/7/98 P-1 A-1+ 1,100
COMMONWEALTH BANK OF AUSTRALIA
4,400 Pendleton Co. (KY) Multi-County Lease Rev. (Kentucky Assoc. of Cos.
Leasing Trust Prog.), Ser. 1989, 3.40% & 3.50%, TECP due 6/9/98 &
6/10/98 A-1+ 4,400
CREDIT COMMERCIAL DE FRANCE
300 Elkhart Co. (IN) Econ. Dev. Rev. (Pace Amer. Inc. Proj.), 4.45%,
VRDN due 1/1/13 VMIG 1 300
115 Indiana Emp. Dev. Comm. Econ. Dev. Rev. (Triangle Ventures Proj.),
Ser. 1988, 4.45%, VRDN due 1/1/14 VMIG 1 115
100 South Carolina Jobs Econ. Dev. Au. Rev. (Brown Packing Co., Inc.),
Ser. 1988 B, 4.65%, VRDN due 4/1/99 VMIG 1 100
2,950 South Carolina Jobs Econ. Dev. Au. Rev. (Florence RHF Hsg., Inc.
Proj.), Ser. 1987 A, 4.35%, VRDN due 11/7/07 P-1 2,950
75 South Carolina Jobs Econ. Dev. Au. Rev. (Kent Mfg. Co. Proj.), Ser.
1988 A, 4.55%, VRDN due 4/7/99 VMIG 1 75
50 South Carolina Jobs Econ. Dev. Au. Rev. (Mar-Mac Mfg. Co., Inc.
Proj.), Ser. 1988 A, 4.65%, VRDN due 4/7/99 VMIG 1 50
</TABLE>
B-15
<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>
$ 530 South Carolina Jobs Econ. Dev. Au. Rev. (Osmose Wood Preserving),
Ser. B, 4.55%, VRDN due 12/1/04 P-1 $ 530
100 South Carolina Jobs Econ. Dev. Au. Rev. (Sudan & Delta Prop.), Ser.
A, 4.65%, VRDN due 1/1/04 VMIG 1 100
CREDIT LOCAL DE FRANCE
1,100 South Carolina Jobs Econ. Dev. Au. Hosp. Rev. (Baptist Healthcare
Sys. of South Carolina, Inc.), Ser. 1995, 4.00%, VRDN due 8/1/17 VMIG 1 A-1+ 1,100
CREDIT SUISSE
1,200 Hubbard Co. (MN) Solid Waste Disp. Rev. (Potlatch Corp. Proj.), Ser.
1990, 4.25%, VRDN due 8/1/14 A-1+ 1,200
300 Montgomery Co. (TX) Ind. Dev. Corp. IDR (Dal-Tile Corp. Proj.), Ser.
1986 B, 4.20%, VRDN due 12/1/03 A-1+ 300
1,000 Texas Capital Hlth. Fac. Dev. Corp. (Island on Lake Travis Ltd.
Proj.), 4.10%, 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, 4.10%, VRDN due 5/1/15 A-1+ 1,000
600 Warren (AR) Solid Waste Disp. Rev. (Potlatch Corp. Proj.), Ser.
1993, 4.25%, VRDN due 4/1/12 A-1+ 600
DEUTSCHE BANK AG
2,200 Florence Co. (SC) Solid Waste Disp. & Wastewater Treatment Fac. Rev.
(Roche Carolina Inc. Proj.), Ser. 1998, 4.40%, VRDN due 4/1/28 A-1+ 2,200
300 Hapeville (GA) Dev. Au. IDR (Hapeville Hotel L.P. Proj.), Ser. 1985,
4.25%, VRDN due 11/1/15 P-1 300
1,000 New Hampshire Ind. Dev. Au. PCR (Connecticut Lt. & Pwr. Co. Proj.),
Ser. 1986, 4.10%, VRDN due 11/1/16 VMIG 1 1,000
FIRST NATIONAL BANK OF CHICAGO
1,400 Indiana Hlth. Fac. Fin. Au. Hosp. Rev. (Deaconess Hosp., Inc.), Ser.
1992, 4.05%, VRDN due 1/1/22 VMIG 1 1,400
</TABLE>
B-16
<PAGE>
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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>
FIRST UNION NATIONAL BANK
$2,000 Washington Co. (PA) Au. Lease Rev. (Higher Ed. Pooled Equip. Leasing
Prog.), Ser. 1985 A, 4.10%, VRDN due 11/1/05 VMIG 1 $ 2,000
FLEET BANK, N.A.
2,000 New York State Hsg. Fin. Agcy. Rev. (250 West 50th Street), Ser.
1997 A, 4.00%, VRDN due 5/1/30 VMIG 1 2,000
GENERAL ELECTRIC CAPITAL CORP.
800 New Hampshire Hsg. Fin. Au. Multi-Family Hsg. Rev. (Countryside L.P.
Proj.), Ser. 1994, 4.15%, VRDN due 7/1/24 VMIG 1 800
HARRIS TRUST AND SAVINGS BANK
700 Illinois Dev. Fin. Au. IDR (Grayhill, Inc. Proj.), Ser. 1995 C,
4.25%, VRDN due 2/1/05 A-1+ 700
1,000 Illinois Dev. Fin. Au. IDR (Overton Gear & Tool Corp. Proj.), Ser.
1994, 4.25%, VRDN due 10/1/08 A-1+ 1,000
KREDIETBANK, NV
1,600 Emmaus (PA) Gen. Au. Local Gov't. Rev. (Bond Pool Prog.), Ser. 1989
B-16, 4.15%, VRDN due 3/1/24 A-1+ 1,600
MELLON BANK, N.A.
200 Pennsylvania Higher Ed. Fac. Au. Rev. (Allegheny College Proj.),
Ser. 1996, 4.05%, VRDN due 11/1/26 A-1 200
MORGAN GUARANTY TRUST CO.
100 Grapevine (TX) IDC Rev. (Amer. Airlines, Inc. Proj.), Ser. 1984 B-1,
4.25%, VRDN due 12/1/24 P-1 100
1,000 New York State Energy Research & Dev. Au. PCR (Niagara Mohawk Pwr.
Corp. Proj.), Ser. 1987 B, 4.30%, VRDN due 7/1/27 A-1+ 1,000
100 New York State Energy Research & Dev. Au. PCR (Niagara Mohawk Pwr.
Corp. Proj.), Ser. 1988 A, 4.30%, VRDN due 12/1/23 A-1+ 100
</TABLE>
B-17
<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
$1,200 Hillsborough Co. (FL) Aviation Au. Rev. (Tampa Int'l. Arpt.), 3.60%,
TECP due 8/12/98 P-1 A-1+ $ 1,200
300 Marion Co. (WV) Comm. Solid Waste Disp. Fac. Rev. (Grant Town
Cogeneration Proj.), Ser. 1990 A, 4.20%, VRDN due 10/1/17 VMIG 1 A-1+ 300
1,400 Marion Co. (WV) Comm. Solid Waste Disp. Fac. Rev. (Grant Town
Cogeneration Proj.), Ser. 1990 B, 4.20%, VRDN due 10/1/17 VMIG 1 A-1+ 1,400
300 Marion Co. (WV) Comm. Solid Waste Disp. Fac. Rev. (Grant Town
Cogeneration Proj.), Ser. 1990 D, 4.20%, VRDN due 10/1/17 VMIG 1 A-1+ 300
1,000 Rhode Island Std. Loan Au. Prog. Rev., Ser. 1995-1, 4.10%, VRDN due
7/1/19 A-1+ 1,000
3,000 Rhode Island Std. Loan Au. Prog. Rev., Ser. 1996-3, 4.10%, VRDN due
6/1/26 A-1+ 3,000
NBD BANK, N.A.
100 Indiana Emp. Dev. Comm. Econ. Dev. Rev. (K & F Ind., Inc. Proj.),
4.45%, VRDN due 1/1/14 VMIG 1 100
NORWEST BANK
800 New Ulm (MN) Hosp. Ref. Rev. (Hlth. Central Sys. Proj.), Ser. 1985,
4.10%, 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, 4.30%, VRDN due 12/1/11 P-1 A-1 400
1,000 Rockport (IN) Rev. (AK Steel Corp. Proj.), Ser. 1997 A, 4.20%, VRDN
due 12/1/27 P-1 A-1 1,000
RABOBANK NEDERLAND
1,500 Henderson Co. (KY) Solid Waste Disp. Rev. (Hudson Foods, Inc.
Proj.), Ser. 1995, 4.20%, VRDN due 3/1/15 VMIG 1 1,500
SLM HOLDING CORP.
200 Colorado Std. Oblig. Bond Au. Std. Loan Rev., Ser. 1993 A, 4.00%,
VRDN due 7/1/99 VMIG 1 A-1+ 200
300 Nebhelp Inc. (NE) Std. Loan Prog. Rev.,
Ser. 1986 A, 4.20%, VRDN due 12/1/16 A-1+ 300
</TABLE>
B-18
<PAGE>
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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>
$2,200 Panhandle-Plains (TX) Higher Ed. Au., Inc. Std. Loan Rev., Ser. 1991
A, 4.10%, VRDN due 6/1/21 VMIG 1 $ 2,200
1,600 Panhandle-Plains (TX) Higher Ed. Au., Inc. Std. Loan Rev., Ser. 1995
A, 4.10%, VRDN due 6/1/25 VMIG 1 1,600
SOCIETE GENERALE
1,600 Chicago (IL) O'Hare Int'l. Arpt. Gen. Arpt. 2nd Lien Rev., Ser. 1984
A, 4.10%, VRDN due 1/1/15 VMIG 1 A-1+ 1,600
2,800 Chicago (IL) O'Hare Int'l. Arpt. Gen. Arpt. 2nd Lien Rev., Ser. 1984
B, 4.10%, VRDN due 1/1/15 VMIG 1 A-1+ 2,800
1,900 Chicago (IL) O'Hare Int'l. Arpt. Spec. Fac. Rev. (Compagnie
Nationale Air France Proj.), Ser. 1990, 4.15%, VRDN due 5/1/18 A-1+ 1,900
100 Indianapolis (IN) Multi-Family Hsg. Ref. Rev. (Canal Square Proj.),
Ser. 1989, 4.15%, VRDN due 12/1/15 VMIG 1 100
200 Los Angeles (CA) Reg. Arpt. Imp. Corp. Fac. Sublease Rev. (Los
Angeles Int'l. Arpt.), Ser. 1985, 4.25%, VRDN due 12/1/25 A-1+ 200
SUNTRUST BANK
1,600 Clark Co. (AR) Solid Waste Disp. Rev. (Reynolds Metals Co. Proj.),
Ser. 1992, 4.20%, VRDN due 8/1/22 P-1 A-1+ 1,600
3,600 Mayfield (KY) IDR (Seaboard Farms of Kentucky Proj.), 4.35%, VRDN
due 8/1/19 P-1 3,600
SWISS BANK CORP.
1,100 Pennsylvania Energy Dev. Au. Rev. (B & W Ebensburg Proj.), Ser.
1986, 4.10%, VRDN due 12/1/11 VMIG 1 1,100
TORONTO DOMINION BANK
1,000 Crossett (AR) PCR (Georgia-Pacific Corp. Proj.), Ser. 1984, 4.10%,
VRDN due 10/1/07 P-1 1,000
2,500 Indiana Muni. Pwr. Agcy. Pwr. Supply Sys. Ref. Rev., Ser. 1998 A,
4.05%, VRDN due 1/1/18 VMIG 1 A-1+ 2,500
120 Wisconsin Hlth. Fac. Au. Rev. (Franciscan Hlth. Care, Inc.-Sys.
Fin.), Ser. 1985 A-2, 4.10%, VRDN due 1/1/16 VMIG 1 A-1+ 120
</TABLE>
B-19
<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>
UNION BANK OF SWITZERLAND
$1,000 Alaska Ind. Dev. & Export Au. Fac. Rev. (Fairbanks Gold Mining, Inc.
Proj.), Ser. 1997, 4.20%, VRDN due 5/1/09 VMIG 1 A-1+ $ 1,000
1,900 Clark Co. (NV) Arpt. Sys. Sub. Lien Rev., Ser. 1995 A-1, 4.00%, VRDN
due 7/1/25 VMIG 1 A-1+ 1,900
100 Sabine (TX) River Au. Ref. PCR (Texas Util. Elec. Co. Proj.), Ser.
1995 B, 4.30%, VRDN due 6/1/30 VMIG 1 A-1+ 100
WACHOVIA BANK & TRUST CO.
200 Los Angeles (CA) Reg. Arpt. Imp. Corp. Fac. Sublease Rev. (Amer.
Airlines-Los Angeles Int'l. Arpt.), Ser. 1984 A, 4.25%, VRDN due
12/1/24 P-1 200
WELLS FARGO & CO.
1,200 Orange Co. (CA) Apt. Dev. Ref. Rev. (Aliso Creek Proj.), Ser. 1992
B, 4.30%, VRDN due 11/1/05 VMIG 1 1,200
WESTDEUTSCHE LANDESBANK GIROZENTRALE
2,000 Massachusetts Bay Trans. Au. Rev., Ser. 1995 C, 3.65%, TECP due
6/10/98 P-1 A-1+ 2,000
2,000 Mesa (AZ) Muni. Dev. Corp. Spec. Tax UPDATES, Ser. 1996 B, 3.65%,
TECP due 5/26/98 VMIG 1 A-1+ 2,000
---------------
86,925
---------------
TAX-EXEMPT CASH EQUIVALENT SECURITIES -- BACKED BY INSURANCE (6.1%)
AMERICAN MUNICIPAL BOND ASSURANCE CORP.
2,600 Indiana Secondary Mkt. for Ed. Loans, Inc. Rev., Ser. 1988 B, 4.20%,
VRDN due 12/1/13 VMIG 1 A-1+ 2,600
400 Sayre (PA) Hlth. Care Fac. Au. Hosp. Rev. (VHA of PA, Inc. Cap.
Asset Fin. Prog.), Ser. 1985 A, 4.10%, VRDN due 12/1/20 A-1 400
FINANCIAL GUARANTY INSURANCE CO.
1,400 Burke Co. (GA) Dev. Au. PCR (Oglethorpe Pwr. Corp. Vogtle Proj.),
Ser. 1993 A, 4.00%, VRDN due 1/1/16 VMIG 1 A-1+ 1,400
</TABLE>
B-20
<PAGE>
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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.
$1,900 Charlotte (NC) Arpt. Ref. Rev., Ser. 1997 A, 4.10%, VRDN due 7/1/17 VMIG 1 A-1+ $ 1,900
2,100 Lower Colorado (TX) River Au. Jr. Lien Ref. Rev., 3rd Ser., 4.00%,
VRDN due 1/1/13 VMIG 1 A-1+ 2,100
900 Polk Co. (IA) Hosp. Equip. & Imp. Rev., Ser. 1985, 4.05%, VRDN due
12/1/05 VMIG 1 A-1+ 900
900 Reno (NV) Hosp. Rev. (St. Mary's Reg. Med. Ctr.), Ser. 1998 B,
4.25%, VRDN due 5/15/23 VMIG 1 A-1+ 900
---------------
10,200
---------------
TOTAL INVESTMENTS (98.7%) 166,211
Cash, receivables and other assets, less liabilities (1.3%) 2,161
---------------
TOTAL NET ASSETS (100.0%) $168,372
---------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-21
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Securities Portfolio
<TABLE>
<CAPTION>
Principal
Amount Rating Value(5)
(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 (1.7%)
$ 500 Massachusetts Wtr. Res. Au. Gen. Rev., Ser. 1992 A, 6.50%, due 7/15/21
P/R 7/15/02 Aaa AAA $ 550
-------
TAX-EXEMPT SECURITIES -- BACKED BY INSURANCE (52.4%)
AMERICAN MUNICIPAL BOND ASSURANCE CORP.
1,175 Anchorage (AK) Sr. Lien Elec. Rev. (Muni. Lt. & Pwr.), Ser. 1996 C,
6.00%, due 12/1/04 Aaa AAA 1,274
1,000 Atlanta (GA) Arpt. Fac. Ref. Rev., Ser. 1996, 6.50%, due 1/1/06 Aaa AAA 1,119
500 Florida Dept. of Trans. Tpke. Rev., Ser. 1995 A, 5.50%, due 7/1/03 Aaa AAA 526
1,000 New York City (NY) Muni. Assist. Corp. Rev., Ser. D, 5.25%, due 7/1/02 Aaa AAA 1,034
1,000 Pittsburgh (PA) G.O., Ser. 1997 A, 5.00%, due 9/1/06 Aaa AAA 1,022
FINANCIAL GUARANTY INSURANCE CO.
1,000 Chicago (IL) Equip. G.O., Ser. 1998, 5.00%, due 1/1/07 Aaa AAA 1,022
1,000 Dade Co. (FL) Wtr. & Swr. Sys. Rev., Ser. 1995, 6.25%, due 10/1/06 Aaa AAA 1,115
750 New York Dorm. Au. Rev. (State Univ. Ed. Fac.), Ser. 1993 B, 5.20%,
due 5/15/03 Aaa AAA 775
1,000 North Chicago (IL) Ref. G.O., Ser. 1996, 5.75%, due 1/1/10 Aaa AAA 1,074
FINANCIAL SECURITY ASSURANCE INC.
1,000 Maine Muni. Bond Bank Ref. Rev., Ser. 1998 A, 5.00%, due 11/1/05 Aaa AAA 1,027
MUNICIPAL BOND INVESTORS ASSURANCE CORP.
1,000 Clark Co. (NV) Sch. Dist. Imp. G.O., Ser. 1995 A, 5.60%, due 6/15/08 Aaa AAA 1,055
1,000 Commonwealth of Pennsylvania G.O. (Ref. & Proj.), 2nd Ser. 1994,
5.20%, due 6/15/04 Aaa AAA 1,040
1,000 Connecticut Spec. Tax Oblig. Ref. Rev. (Trans. Infrastructure Purp.),
Ser. 1993 A, 5.40%, due 9/1/09 Aaa AAA 1,039
</TABLE>
B-22
<PAGE>
April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Municipal Securities Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating Value(5)
(000's omitted) Security(1) Moody's S&P (000's omitted)
- --------------- ---------------------------------------------------------------------- ------- ------- ---------------
<C> <S> <C> <C> <C>
$1,000 Harris Co. (TX) Hlth. Fac. Dev. Corp. Hosp. Rev. (Mem. Hosp. Sys.
Proj.), Ser. A, 5.00%, due 6/1/06 Aaa AAA $ 1,015
1,000 Nebraska Inv. Fin. Au. Hosp. Rev. (Nebraska Methodist Hlth. Sys.,
Inc.), Ser. 1991, 7.00%, due 3/1/06 Aaa AAA 1,091
1,000 New York Dorm. Au. Rev. (Univ. of Rochester), Ser. 1997 A, 5.50%, due
7/1/06 Aaa AAA 1,058
1,000 Puerto Rico Elec. Pwr. Au. Ref. Rev., Ser. W, 6.50%, due 7/1/05 Aaa AAA 1,121
-------
17,407
-------
TAX-EXEMPT SECURITIES -- OTHER (42.0%)
500 Brownwood (TX) Independent Sch. Dist. Unlimited Tax Sch. Bldg. & Ref.
G.O. (Brown Co., Texas), Ser. 1994, Zero Coupon, Yielding 5.90%, due
2/15/02 Aaa 421(4)
560 Brownwood (TX) Independent Sch. Dist. Unlimited Tax Sch. Bldg. & Ref.
G.O. (Brown Co., Texas), Ser. 1994, Zero Coupon, Yielding 6.10%, due
2/15/04 Aaa 429(4)
670 Cincinnati (OH) Std. Loan Funding Corp. Ref. Rev., Ser. 1992 C, 6.10%,
due 7/1/02 Aaa 705
1,000 Commonwealth of Massachusetts Ref. G.O., Ser. 1995 A, 6.25%, due
7/1/04 Aa3 AA- 1,096
1,000 Georgia G.O., Ser. 1995 C, 7.25%, due 7/1/04 Aaa AAA 1,154
1,970 Honolulu (HI) City & Co. G.O., Ser. 74, Zero Coupon, Yielding 5.95%,
due 1/1/13 Aa2 911
1,000 Lake Co. (IL) Forest Preserve Dist. Ref. G.O., Ser. 1997, 5.50%, due
2/1/09 Aa2 AA+ 1,062
1,500 Maryland Comm. Dev. Admin. Dept. of Hsg. & Comm. Dev. Rev. (Single
Family Prog.), 3rd Ser. 1993, 5.15%, due 4/1/08 Aa2 1,534
1,000 Maryland Wtr. Quality Fin. Admin. Ref. Rev. (Revolving Loan Fund),
Ser. 1995 A, 5.50%, due 9/1/11 Aa2 AA 1,036
</TABLE>
B-23
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman April 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Municipal Securities Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating Value(5)
(000's omitted) Security(1) Moody's S&P (000's omitted)
- --------------- ---------------------------------------------------------------------- ------- ------- ---------------
<C> <S> <C> <C> <C>
$1,000 Mecklenburg Co. (NC) Pub. Imp. G.O., Ser. 1994, 5.50%, due 4/1/12 Aaa AAA $ 1,043
190 Mississippi Higher Ed. Assist. Corp. Std. Loan Sub. Rev., Ser. 1993 C,
6.05%, due 9/1/07 A 199
1,000 Nevada Ref. Limited Tax G.O., Ser. 1997 A-2, 6.00%, due 5/15/06 Aa2 AA 1,092
500 New Jersey Bldg. Au. St. Bldg. Rev., Ser. 1994, 5.00%, due 6/15/11 Aa2 AA- 500
750 New York City (NY) IDA Spec. Fac. Rev. (Term. One Group Assoc., L.P.
Proj.), Ser. 1994, 6.00%, due 1/1/15 A3 A 784
1,000 Omaha (NE) Pub. Pwr. Dist. Elec. Sys. Rev., Ser. 1993 E, 4.60%, due
2/1/06 Aa2 AA 1,001
1,000 Port of Portland (OR) Ref. G.O., Ser. 1993 A, 4.50%, due 3/1/05 Aa AA+ 999
-------
13,966
-------
TAX-EXEMPT CASH EQUIVALENT SECURITIES (1.5%)
500 Gulf Coast (TX) Waste Disp. Au. PCR (Amoco Oil Co. Proj.), Ser. 1993,
4.35%, VRDN due 5/1/23 VMIG-1 A-1+ 500(4)
-------
TAX-EXEMPT CASH EQUIVALENT SECURITIES -- BACKED BY LETTERS OF CREDIT
(0.9%)
BANK OF NOVA SCOTIA
200 North Alabama Env. Imp. Au. Ref. PCR (Reynolds Metals Co. Proj.), Ser.
1985, 4.25%, VRDN due 12/1/00 P-1 200
MORGAN GUARANTY TRUST CO.
100 Grapevine (TX) IDC Rev. (Amer. Airlines, Inc. Proj.), Ser. 1984 A-4,
4.25%, VRDN due 12/1/24 P-1 100
-------
300
-------
TOTAL INVESTMENTS (98.5%) (COST $31,967) 32,723(6)
Cash, receivables and other assets, less liabilities (1.5%) 511
-------
TOTAL NET ASSETS (100.0%) $33,234
-------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-24
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
April 30, 1998 (Unaudited)
- ----------------------------------------------------------------------
Income Managers Trust
1) Municipal securities held by Neuberger&Berman Municipal Money Portfolio
("Municipal Money") and Neuberger&Berman Municipal Securities Portfolio
("Municipal Securities") are within the two and four highest rating
categories, respectively, assigned by a nationally recognized statistical
rating organization ("NRSRO") such as 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 72% and 60% of the
municipal securities held by Municipal Money and Municipal Securities,
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) Where no rating appears from any NRSRO, the security is deemed unrated for
purposes of Rule 2a-7 under the Investment Company Act of 1940, as amended.
Each of these securities is an eligible security based on a comparable
quality analysis performed by the Portfolio's investment manager within the
guidelines approved by the trustees of Income Managers Trust.
3) Investment securities of the Portfolio are valued at amortized cost, which
approximates Federal income tax cost.
4) Security is guaranteed by the corporate obligor.
5) 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.
6) At April 30, 1998, the cost of investments for Federal income tax purposes
was $31,967,000. Gross unrealized appreciation of investments was $809,000
and gross unrealized depreciation of investments was $53,000, resulting in
net unrealized appreciation of $756,000, based on cost for Federal income tax
purposes.
SEE NOTES TO FINANCIAL STATEMENTS
B-25
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 1998 (Unaudited)
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
MUNICIPAL MUNICIPAL
MONEY SECURITIES
(000'S OMITTED) PORTFOLIO PORTFOLIO
----------------------
<S> <C> <C>
ASSETS
Investments in securities, at value*
(Note A) -- see Schedule of Investments $166,211 $32,723
Cash 85 24
Deferred organization costs (Note A) 1 --
Interest receivable 2,012 475
Prepaid expenses and other assets 2 1
Receivable for securities sold 134 --
Receivable for variation margin (Note A) -- 36
----------------------
168,445 33,259
----------------------
LIABILITIES
Payable to investment manager (Note B) 37 7
Accrued expenses 36 18
----------------------
73 25
----------------------
NET ASSETS Applicable to Investors' Beneficial Interests $168,372 $33,234
----------------------
NET ASSETS consist of:
Paid-in capital $168,372 $32,478
Net unrealized appreciation in value of investment securities -- 756
----------------------
NET ASSETS $168,372 $33,234
----------------------
*Cost of investments $166,211 $31,967
----------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-26
<PAGE>
STATEMENTS OF OPERATIONS
For the Six Months Ended April 30, 1998 (Unaudited)
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
MUNICIPAL MUNICIPAL
MONEY SECURITIES
(000'S OMITTED) PORTFOLIO PORTFOLIO
----------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income $3,187 $797
----------------------
Expenses:
Investment management fee (Note B) 219 41
Accounting fees 5 5
Amortization of deferred organization and initial offering expenses (Note
A) 1 1
Auditing fees 16 12
Custodian fees (Note B) 60 16
Insurance expense 1 --
Legal fees 17 8
Trustees' fees and expenses 7 3
----------------------
Total expenses 326 86
Expenses reduced by custodian fee expense offset arrangement (Note B) (5) (1)
----------------------
Total net expenses 321 85
----------------------
Net investment income 2,866 712
----------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investment securities sold (32) 62
Net realized gain on financial futures contracts (Note A) -- 17
Change in net unrealized appreciation of investment securities -- (132)
----------------------
Net loss on investments (32) (53)
----------------------
Net increase in net assets resulting from operations $2,834 $659
----------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-27
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
MUNICIPAL MUNICIPAL
MONEY SECURITIES
PORTFOLIO PORTFOLIO
Six Months Six Months
Ended Year Ended Year
April 30, Ended April 30, Ended
1998 October 31, 1998 October 31,
(000'S OMITTED) (UNAUDITED) 1997 (UNAUDITED) 1997
-----------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 2,866 $ 4,685 $ 712 $ 1,467
Net realized gain (loss) on investments (32) -- 79 210
Change in net unrealized appreciation of investments -- -- (132) 462
-----------------------------------------------------------
Net increase in net assets resulting
from operations 2,834 4,685 659 2,139
-----------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Additions 120,695 203,054 6,128 3,829
Reductions (111,644) (183,975) (5,265) (13,218)
-----------------------------------------------------------
Net increase (decrease) in net assets resulting from
transactions in investors' beneficial interests 9,051 19,079 863 (9,389)
-----------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 11,885 23,764 1,522 (7,250)
NET ASSETS:
Beginning of period 156,487 132,723 31,712 38,962
-----------------------------------------------------------
End of period $168,372 $156,487 $33,234 $31,712
-----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1998 (Unaudited)
- ----------------------------------------------------------------------
Income Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger&Berman Municipal Money Portfolio ("Municipal Money") and
Neuberger&Berman Municipal Securities Portfolio ("Municipal Securities")
(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 a diversified, open-end
management investment company under the Investment Company Act of 1940, as
amended. Other regulated investment companies sponsored by Neuberger& Berman
Management Incorporated ("N&B 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. 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 April 30, 1998, the unamortized balance of
such expenses amounted to $529 and $182, for Municipal Money and Municipal
Securities, 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.
B-29
<PAGE>
7) FINANCIAL FUTURES CONTRACTS: Municipal Securities may buy and sell financial
futures contracts to hedge against changes in securities prices resulting
from changes in prevailing interest rates. At the time the Portfolio enters
into a financial futures contract, it is required to deposit with its
custodian a specified amount of cash or liquid securities, 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, the 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
the Portfolio may cause the 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, the Portfolio's losses on transactions
involving futures contracts may be deferred rather than being taken into
account currently in calculating the Portfolio's taxable income.
During the six months ended April 30, 1998, Municipal Securities entered
into financial futures contracts. There were no open positions in financial
futures contracts at April 30, 1998.
NOTE B -- MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
Each Portfolio retains N&B Management as its investment manager under a
Management Agreement. For such investment management services, each Portfolio
pays N&B Management a fee at the annual rate of 0.25% of the first $500 million
of that Portfolio's average daily net assets, 0.225% of the next $500 million,
0.20% of the next $500 million, 0.175% of the next $500 million, and 0.15% of
average daily net assets in excess of $2 billion.
All of the capital stock of N&B 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
B-30
<PAGE>
N&B Management to furnish it with investment recommendations and research
information without added 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 N&B Management.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statements
of Operations under the caption Custodian fees, was a reduction of $4,955 and
$955, for Municipal Money and Municipal Securities, respectively.
NOTE C -- SECURITIES TRANSACTIONS:
During the six months ended April 30, 1998, there were purchase and sale
transactions (excluding short-term securities and financial futures contracts)
of $5,234,650 and $3,404,633, respectively, for Municipal Securities. All
securities transactions for Municipal Money were short-term.
NOTE D -- UNAUDITED FINANCIAL INFORMATION:
The financial information included in this interim report is taken from the
records of each Portfolio without audit by independent auditors. Annual reports
contain audited financial statements.
B-31
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Money Portfolio
<TABLE>
<CAPTION>
Six Months Period from
Ended July 2,
April 30, 1993(1)
1998 Year Ended October 31, to October 31,
(UNAUDITED) 1997 1996 1995 1994 1993
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(2) .37%(3) .38% .37% .37% -- --
----------------------------------------------------------------------
Net Expenses .37%(3) .37% .36% .36% .36% .36%(3)
----------------------------------------------------------------------
Net Investment Income 3.28%(3) 3.29% 3.21% 3.57% 2.38% 2.20%(3)
----------------------------------------------------------------------
Net Assets, End of Period (in millions) $168.4 $156.5 $132.7 $161.1 $150.5 $181.8
----------------------------------------------------------------------
</TABLE>
1) The date investment operations commenced.
2) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
3) Annualized.
B-32
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Municipal Securities Portfolio
<TABLE>
<CAPTION>
Six Months Period from
Ended July 2,
April 30, 1993(1)
1998 Year Ended October 31, to October 31,
(UNAUDITED) 1997 1996 1995 1994 1993
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(2) .52%(3) .51% .47% .47% -- --
------------------------------------------------------------------
Net Expenses .52%(3) .50% .47% .46% .40% .42%(3)
------------------------------------------------------------------
Net Investment Income 4.33%(3) 4.44% 4.49% 4.63% 4.47% 4.21%(3)
------------------------------------------------------------------
Portfolio Turnover Rate 11% 22% 3% 66% 127% 25%
------------------------------------------------------------------
Net Assets, End of Period (in millions) $33.2 $31.7 $39.0 $44.4 $51.4 $104.3
------------------------------------------------------------------
</TABLE>
1) The date investment operations commenced.
2) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
3) Annualized.
B-33
<PAGE>
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700
Institutional Services 800-366-6264
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger&Berman Funds
Boston Service Center
P.O. Box 8403
Boston, MA 02266-8403
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, DC 20036-1800
Neuberger&Berman Management Inc., Neuberger&Berman Municipal Money Fund, and
Neuberger&Berman Municipal Securities Trust are registered service marks of
Neuberger&Berman Management Inc.
- -C- 1998 Neuberger&Berman Management Inc.
C-1
<PAGE>
OFFICERS AND TRUSTEES
Stanley Egener
CHAIRMAN OF THE BOARD AND TRUSTEE
Theodore P. Giuliano
PRESIDENT AND TRUSTEE
John Cannon
TRUSTEE
Barry Hirsch
TRUSTEE
Robert A. Kavesh
TRUSTEE
William E. Rulon
TRUSTEE
Candace L. Straight
TRUSTEE
Daniel J. Sullivan
VICE PRESIDENT
Michael J. Weiner
VICE PRESIDENT
Richard Russell
TREASURER
Claudia A. Brandon
SECRETARY
Barbara DiGiorgio
ASSISTANT TREASURER
Celeste Wischerth
ASSISTANT TREASURER
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
C-2
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