<PAGE>
NEUBERGER BERMAN
Neuberger Berman
Income Funds-Registered Trademark-
----------------------------------------------------------
Government Money Fund
Cash Reserves Annual Report
Limited Maturity Bond Fund October 31, 1998
High Yield Bond Fund
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE FUNDS
PRESIDENT'S LETTER A-4
GROWTH OF A DOLLAR CHARTS
COMPARISON OF A $10,000 INVESTMENT
Limited Maturity Bond Fund B-2
High Yield Bond Fund B-3
FINANCIAL STATEMENTS B-4
FINANCIAL HIGHLIGHTS
PER SHARE DATA
Government Money Fund B-14
Cash Reserves B-15
Limited Maturity Bond Fund B-16
High Yield Bond Fund B-17
REPORT OF INDEPENDENT
AUDITORS B-19
THE PORTFOLIOS
SCHEDULE OF INVESTMENTS
Government Money Portfolio B-20
Cash Reserves Portfolio B-21
Limited Maturity Bond
Portfolio B-25
High Yield Bond Portfolio B-33
FINANCIAL STATEMENTS B-40
FINANCIAL HIGHLIGHTS
Government Money Portfolio B-51
Cash Reserves Portfolio B-52
Limited Maturity Bond
Portfolio B-53
High Yield Bond Portfolio B-54
REPORT OF INDEPENDENT
AUDITORS B-55
DIRECTORY C-1
OFFICERS AND TRUSTEES C-2
</TABLE>
A-3
<PAGE>
PRESIDENT'S LETTER December 18, 1998
Dear Shareholder,
Bonds enjoyed another good year in fiscal 1998. U.S. Treasuries were the
biggest winners as investors responded to global economic and stock market
instability by seeking the safety of one of the world's most secure credits.
Government bonds of larger European countries also benefited substantially from
the international "flight to quality." Although August and September were not
stellar months, returns on corporate bonds were positive. However, corporate
bond returns declined in October as investors began focusing on the potentially
negative impact of slowing global economies on corporate cash flows and
earnings. Likewise, mortgage securities also delivered positive returns in
August and September, but lost momentum late in the year with declining interest
rates sparking another refinancing boom. High-yield securities closed the fiscal
year relatively flat, as growing economic uncertainty caused investors to seek
higher credit-quality ground.
During August and early September, when economic events in faraway places like
Russia, Japan and Hong Kong began having more of an impact on our markets than
local economic conditions, the Neuberger Berman fixed income investment team
worked around the clock monitoring our portfolios. This dedication, along with
our focus on quality and disciplined securities selection, helped our funds post
competitive returns in fiscal 1998.
Looking ahead, we continue to be relatively bullish on the intermediate-term
prospects for the fixed income markets. We believe, in the near term, European
government bonds could outpace U.S. Treasuries for two reasons. First, the
dollar is likely to remain somewhat weak relative to most developed world
currencies. Second, we believe there will be widespread acceptance of the new
Euro.
In the domestic market, we believe the best opportunities may be in those
sectors that lagged Treasuries in fiscal 1998. As of this writing, triple
B-rated corporate bonds (as rated by Standard & Poor's and Moody's) yielded
111-197 basis points (1.11%-1.97%) more than Treasuries -- a yield advantage
that we believe sufficiently compensates investors for the additional risk posed
by a slowing U.S. economy.+ Despite the refinancing boom, we continue to
maintain a favorable outlook for selected mortgage securities. In particular,
the Limited Maturity Bond Portfolio is, as of this writing, concentrated in
lower coupon mortgage securities (mortgage pools with average coupons
A-4
<PAGE>
closest to prevailing mortgage rates), which have lower prepayment risk. We have
also built positions in prepayment-protected government agency mortgage
securities.
Going forward, we may continue to see volatility in the high-yield bond
market, which often mirrors stock market trends. However, yields relative to
Treasuries are now at the highest level since the aftermath of the 1990-91
recession. In our opinion, this indicates that the risk of a mild recession in
1999 is already reflected in current prices. As always, securities selection is
critical in the high-yield sector and we believe our research-intensive,
"laser-like" approach will help us identify potentially rewarding investments.
We have always believed that stocks help investors eat well, but bonds help
them sleep well. In the second half of fiscal 1998, investors with rich,
equity-only diets suffered severe heartburn and bouts of insomnia. Those with
healthy portions of carefully selected bonds on their investment plates
experienced some mild indigestion, but slept quite peacefully despite the loud
racket produced by international economic turmoil. We won't make any predictions
regarding the future health of the stock market but, as good investment
nutritionists, we continue to recommend a balanced diet featuring bonds as well
as stocks.
GOVERNMENT MONEY FUND AND CASH RESERVES The Government Money Fund's weighted
average maturity changed very little over the last six months, beginning this
reporting period at 86.1 days and ending at 84.2 days -- very near its allowable
90-day maximum. Two Federal Reserve rate cuts totaling 50 basis points (0.5%)
and the possibility of further Fed easing in the face of a slowing domestic
economy and ongoing international economic distress have served to keep average
maturity at the very high end of the money fund maturity spectrum.
The 90-day Treasury Bill yield began the period at around 5%. As investors
worldwide sought safety from economic turmoil and falling stock markets, the
T-Bill yield declined to 3.6% at the mid-October low, before bouncing back along
with global equities markets following the surprise October 15th rate cut, and
closing at 4.25%.
The big story in the Treasury Bill market continues to be strong demand and
declining supply resulting from the budget surplus and the government's reduced
borrowing. We don't see this changing in the foreseeable future. As of October
31, 1998, the Government Money Fund had a 7-day yield of 4.26% and an effective
(compounded) yield of 4.35%.*
In Cash Reserves, weighted average maturity began this six-month reporting
period at 49.9 days and closed at 72.5 days. This substantial increase reflects
Fed rate cuts and the possibility of more to follow. After
A-5
<PAGE>
shrinking from the end of April through July, spreads between Treasury Bills and
investment-grade commercial paper have since widened, and now approximate 89
basis points (0.89%). This indicates to us that the market is factoring in the
potential impact of slower economic growth on corporate cash flows and earnings.
As of October 31, 1998, commercial paper's material yield advantage over
Treasuries has motivated us to eliminate T-Bills entirely from the portfolio. At
the end of this reporting period, commercial paper comprised 67.8% of Portfolio
assets. The balance of 32.2% is allocated as 28.2% in bank and other debt and
4.0% in Agency Securities, with yields approximating that of commercial paper.
Cash Reserves experienced strong cash inflows in the second half of fiscal
1998, with assets growing from approximately $750 million to more than $1
billion as troubled equity investors parked cash in a safer place. With the
stock market rallying in late October, we may see outflows over the next several
months. As of October 31, 1998, Cash Reserves had a 7-day yield of 4.74% and an
effective (compounded) yield of 4.85%.*
LIMITED MATURITY BOND FUND In response to falling interest rates, we extended
the portfolio's average duration to approximately two years at the end of this
reporting period. We anticipate extending this duration even further if the
Federal Reserve cuts rates again in the coming months, which is, in our view, a
likely prospect considering the slowing domestic economy and the Fed's seemingly
new role as global economic firefighter.
The portfolio's asset allocation has not changed substantially over the last
six months. We maintained our exposure to corporate bonds at approximately 64%
of the portfolio as their yield advantage over Treasuries expanded both in the
investment-grade and high-yield sectors. Asset-backed and mortgage securities
allocations remained approximately 13.6% and 4.8%, respectively. Another 2.0% of
assets was invested in foreign government securities while the remaining balance
was in Treasuries and Agency Securities.
In fiscal 1998, the big story in the fixed income markets has been the
exceptional performance of Treasuries versus all other sectors. We believe
tomorrow's headlines will be about the superior relative performance of these
lagging credit sectors, which in our opinion are now quite cheap. We also
believe that investment-grade and high-yield corporates are now priced as if a
1999 recession and materially higher default rates are guaranteed. While we
can't predict the future, we think Federal Reserve easing will result in a "soft
landing" for the economy as it did in 1995. Even if the economy does contract
briefly, we doubt we
A-6
<PAGE>
will see the kind of troublesome default rates that are reflected in current
prices. If we are right, investment-grade and high-yield corporate bonds could
perform quite well in the year ahead.
Mortgage securities have been under pressure due to a refinancing boom that
has increased prepayment risk and, therefore, lowered the prospect for yields on
mortgage pools. We believe we have largely insulated the portfolio from
prepayment risk by concentrating in lower-coupon, shorter-maturity mortgage
pools, which are least likely to be depleted by refinancing.
HIGH YIELD BOND FUND Despite closing fiscal 1998 with a modest -1.69% decline,
we are quite pleased with the fund's performance in what has been a very
difficult high-yield bond market.
In August and September, global economic turmoil, the near collapse of some
highly leveraged hedge funds, and the expectation of a slowing domestic economy
significantly impacted the high-yield market. During these two months, investors
who grew increasingly averse to risk stampeded to Treasury securities. The
result is that at the close of this reporting period, high-yield securities
enjoyed a 600 plus basis point (6%+) yield advantage over Treasuries. The last
time we experienced such a large spread was at the beginning of 1991, in the
midst of a recession and following a year that saw the collapse of leading high-
yield underwriter Drexel Burnham, and the savings and loan crisis, which forced
massive liquidation of high-yield bonds.
We don't believe circumstances are nearly as dire today. Although we could see
additional selling pressure from leveraged hedge funds continuing to unwind
high-yield bond positions, we are optimistic that the worst is over on this
front. We believe the domestic economy will stabilize on a slow growth path and
that high-yield default rates will remain well below the 10% rate reached in
1991 and the 7-8% rate inferred by the current credit spread versus Treasuries.
Since our 9.0% weighting in "crossover" bonds (split-rated or just below fully
investment-grade rated securities) deserves a lot of credit for preserving
portfolio assets during the last six months, let's detail one of our crossover
holdings. Protection One is one of the nation's largest providers of home
security services -- installing security systems and monitoring them for a
monthly fee. This can be an annuity-like business with relatively stable cash
flows. Cash flow/debt service coverage is 3.9 and the company's bonds are
split-rated -- investment-grade by Standard & Poor's and just below
investment-grade by Moody's. In the last year, Protection One's now 84%
owner -- the large utility Western Resources -- invested more than $1 billion in
the company. We think this will help Protection One's bonds to gain a full
investment-grade rating and result in a nice move in the bond's price.
A-7
<PAGE>
Another one of our holdings was DeCrane Aircraft, a leading producer of
aircraft seating, avionics equipment, and in-flight entertainment systems.
DeCrane was one of only a few companies able to bring new high-yield debt to
market this fall. As one might expect in this difficult environment, the
company's bond issue was priced to move, yielding 12%. New order rates from
DeCrane's leading customers -- Boeing and Airbus -- are trending lower due to
global economic weakness, but backlogs remain high. The airline refurbishing
business is still relatively strong. We believe DeCrane's cash flow will
continue to grow and cash flow/debt service coverage remain stable or increase
from its current level of 1.8. We are content realizing a 12% annual yield on
what we believe to be a secure credit, and may receive a capital appreciation
bonus if the bond price advances with a recovery in the high-yield market.
In closing, we believe bonds performed their job in fiscal 1998 -- preserving
and enhancing assets in the midst of global economic and stock market distress.
We are pleased to have helped see our shareholders through these troubled times.
Going forward, we trust investors will have a greater appreciation for the
valuable role bonds play in a truly diversified investment program.
Sincerely,
/s/ Theodore P. Giuliano
Theodore P. Giuliano
President and Trustee
Neuberger Berman Income Funds
+Bloomberg L.P. 11/18/98
*An investment in either Government Money Fund or Cash Reserves, like all other
mutual funds, is neither insured nor guaranteed by the U.S. Government and
there can be no assurance that either fund will be able to maintain a stable
net asset value of $1.00 per share. The return on investment in Government
Money Fund and Cash Reserves will fluctuate and past performance is no
guarantee of future results.
"Current yield" refers to the income generated by an investment in the Fund
over a 7-day period. The 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.
A-8
<PAGE>
(This page has been left blank intentionally.)
B-1
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman October 31, 1998
- ----------------------------------------------------------------------
Limited Maturity Bond Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
Merrill Lynch
Limited Maturity 1-3 Year
Bond Fund Treasury Index(2)
1 Year 4.92% 7.70%
5 Year 5.12% 6.01%
10 Year 6.86% 7.34%
Life of Fund 6.81% 7.37%
Limited Maturity Merrill Lynch 1-3
Bond Fund Year Treasury Index
1988 10,000 10,000
1989 10,956 10,941
1990 11,816 11,898
1991 13,103 13,240
1992 14,134 14,325
1993 15,136 15,159
1994 15,155 15,339
1995 16,416 16,711
1996 17,309 17,699
1997 18,514 18,847
1998 19,425 20,298
</TABLE>
Neuberger Berman Limited Maturity Bond Fund-Registered Trademark-commenced
operations on 6/9/86.
Neuberger Berman Management Inc.-Registered Trademark- ("Management") has
voluntarily undertaken to reimburse Limited Maturity Bond Fund for its operating
expenses and its pro rata share of its Portfolio's operating expenses which, in
the aggregate, exceed .70% per annum of Limited Maturity Bond Fund's average
daily net assets, subject to termination upon 60 days' prior written notice.
Absent such reimbursement, the average annual total returns would have been
less.
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 Merrill Lynch 1-3 Year Treasury Index is an unmanaged total return market
value index consisting of all coupon-bearing U.S. Treasury publicly placed debt
securities with maturities between 1 to 3 years. 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
Management and include reinvestment of all dividends and capital gain
distributions. The Portfolio invests in many securities not included in the
above-described index.
B-2
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman October 31, 1998
- ----------------------------------------------------------------------
High Yield Bond Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Aggregate Total Return(1)
High Yield Lehman Brothers High
Bond Fund Yield Bond Index(2)
Life of Fund 1.69% 4.59%
Lehman Brothers
High Yield
High Yield Bond Fund Bond Index
3/3/98 $10,000 $10,000
10/31/98 $9,831 $9,541
</TABLE>
Neuberger Berman High Yield Bond Fund-SM- commenced operations on 3/3/98.
Neuberger Berman Management Inc. ("Management") has voluntarily undertaken to
reimburse High Yield Bond Fund for its operating expenses and its pro rata share
of its Portfolio's operating expenses which, in the aggregate, exceed 1.00% per
annum of High Yield Bond Fund's average daily net assets, subject to termination
upon 60 days' prior written notice. Absent such reimbursement, the aggregate
total return would have been less.
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 Brothers High Yield Bond Index is an unmanaged index considered to
be representative of the fixed rate, publicly issued, non-investment grade debt
registered with the SEC. 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 Management and include reinvestment of
all dividends and capital gain distributions. The Portfolio invests in many
securities not included in the above-described index.
B-3
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Neuberger Berman
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
GOVERNMENT
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) MONEY FUND
--------------
<S> <C>
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $ 367,766
Deferred organization costs (Note A) --
Receivable for Trust shares sold 53
--------------
367,819
--------------
LIABILITIES
Dividends payable 19
Payable for Trust shares redeemed 49
Payable to administrator -- net (Note B) 85
Accrued expenses 69
--------------
222
--------------
NET ASSETS at value $ 367,597
--------------
NET ASSETS consist of:
Par value $ 368
Paid-in capital in excess of par value 367,207
Accumulated net realized gains (losses) on
investment 22
Net unrealized appreciation (depreciation)
in value of investment --
--------------
NET ASSETS at value $ 367,597
--------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 367,575
--------------
NET ASSET VALUE, offering and redemption price per
share $1.00
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-4
<PAGE>
October 31, 1998
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
LIMITED
CASH MATURITY HIGH YIELD
RESERVES BOND FUND BOND FUND
------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $ 1,028,759 $ 295,897 $ 22,638
Deferred organization costs (Note A) -- -- 62
Receivable for Trust shares sold 299 7 6
------------------------------------------------
1,029,058 295,904 22,706
------------------------------------------------
LIABILITIES
Dividends payable 18 239 73
Payable for Trust shares redeemed 4,055 302 6
Payable to administrator -- net (Note B) 245 60 12
Accrued expenses 186 79 25
------------------------------------------------
4,504 680 116
------------------------------------------------
NET ASSETS at value $ 1,024,554 $ 295,224 $ 22,590
------------------------------------------------
NET ASSETS consist of:
Par value $ 1,025 $ 30 $ 2
Paid-in capital in excess of par value 1,023,551 311,335 24,291
Accumulated net realized gains (losses) on
investment (22) (17,673) (42)
Net unrealized appreciation (depreciation)
in value of investment -- 1,532 (1,661)
------------------------------------------------
NET ASSETS at value $ 1,024,554 $ 295,224 $ 22,590
------------------------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 1,024,576 29,802 2,418
------------------------------------------------
NET ASSET VALUE, offering and redemption price per
share $1.00 $9.91 $9.34
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-5
<PAGE>
STATEMENTS OF OPERATIONS
Neuberger Berman
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
GOVERNMENT
MONEY FUND
For the
Year
Ended
October 31,
(000'S OMITTED) 1998
------------
<S> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 18,897
------------
Expenses:
Administration fee (Note B) 975
Amortization of deferred organization and
initial
offering expenses (Note A) --
Auditing fees 9
Custodian fees 10
Legal fees 6
Registration and filing fees 44
Shareholder reports 35
Shareholder servicing agent fees (Note B) 92
Trustees' fees and expenses 23
Miscellaneous 3
Expenses from corresponding Portfolio (Notes
A & B) 1,103
------------
Total expenses 2,300
Expenses reimbursed by administrator and/or
reduced by custodian fee and shareholder
servicing expense offset arrangements
(Note B) (15)
------------
Total net expenses 2,285
------------
Net investment income 16,612
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized gain (loss) on investment
securities 31
Net realized loss on financial futures
contracts --
Net realized loss on foreign currency
transactions --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, translation of
assets and liabilities in foreign
currencies, and foreign currency contracts --
------------
Net gain (loss) on investments from
corresponding Portfolio (Note A) 31
------------
Net increase (decrease) in net assets
resulting from operations $ 16,643
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-6
<PAGE>
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
HIGH YIELD
BOND FUND
CASH LIMITED MATURITY
RESERVES BOND FUND For the
Period from
For the For the March 3, 1998
Year Year (Commencement
Ended Ended of Operations) to
October 31, October 31, October 31,
1998 1998 1998
----------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 44,562 $ 18,984 $ 1,007
----------------------------------------------------
Expenses:
Administration fee (Note B) 2,142 763 30
Amortization of deferred organization and
initial
offering expenses (Note A) -- -- 9
Auditing fees 8 19 5
Custodian fees 10 10 7
Legal fees 10 49 3
Registration and filing fees 155 35 8
Shareholder reports 64 43 10
Shareholder servicing agent fees (Note B) 307 250 7
Trustees' fees and expenses 45 19 5
Miscellaneous 4 3 --
Expenses from corresponding Portfolio (Notes
A & B) 2,281 942 100
----------------------------------------------------
Total expenses 5,026 2,133 184
Expenses reimbursed by administrator and/or
reduced by custodian fee and shareholder
servicing expense offset arrangements
(Note B) (31) (154) (72)
----------------------------------------------------
Total net expenses 4,995 1,979 112
----------------------------------------------------
Net investment income 39,567 17,005 895
----------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized gain (loss) on investment
securities (4) (218) (42)
Net realized loss on financial futures
contracts -- (3,107) --
Net realized loss on foreign currency
transactions -- (560) --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, translation of
assets and liabilities in foreign
currencies, and foreign currency contracts -- 186 (1,661)
----------------------------------------------------
Net gain (loss) on investments from
corresponding Portfolio (Note A) (4) (3,699) (1,703)
----------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 39,563 $ 13,306 $ (808)
----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-7
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Neuberger Berman
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
GOVERNMENT
MONEY FUND
Year
Ended
October 31,
(000'S OMITTED) 1998 1997
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 16,612 $ 15,288
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) 31 (3)
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) -- --
-----------------------------
Net increase (decrease) in net
assets resulting from operations 16,643 15,285
-----------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (16,612) (15,288)
-----------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 924,226 959,168
Proceeds received in connection with
merger (Note D) -- --
Proceeds from reinvestment of
dividends 16,433 15,110
Payments for shares redeemed (881,250) (1,029,506)
-----------------------------
Net increase (decrease) from Trust
share transactions 59,409 (55,228)
-----------------------------
NET INCREASE (DECREASE) IN NET ASSETS 59,440 (55,231)
NET ASSETS:
Beginning of year 308,157 363,388
-----------------------------
End of year $ 367,597 $ 308,157
-----------------------------
NUMBER OF TRUST SHARES:
Sold 924,226 959,168
Issued in connection with merger
(Note D) -- --
Issued on reinvestment of dividends 16,433 15,110
Redeemed (881,250) (1,029,506)
-----------------------------
Net increase (decrease) in shares
outstanding 59,409 (55,228)
-----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-8
<PAGE>
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
HIGH YIELD
BOND FUND
CASH LIMITED MATURITY
RESERVES BOND FUND Period from
March 3, 1998
Year Year (Commencement
Ended Ended of Operations) to
October 31, October 31, October 31,
1998 1997 1998 1997 1998
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 39,567 $ 30,697 $ 17,005 $ 15,544 $ 895
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) (4) (7) (3,885) (950) (42)
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) -- -- 186 2,103 (1,661)
---------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 39,563 30,690 13,306 16,697 (808)
---------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (39,567) (30,697) (16,966) (15,559) (895)
---------------------------------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 1,612,173 1,398,237 108,089 87,972 28,413
Proceeds received in connection with
merger (Note D) -- -- 44,974 -- --
Proceeds from reinvestment of
dividends 39,064 30,194 14,489 12,926 460
Payments for shares redeemed (1,290,742) (1,246,359) (124,074) (92,319) (4,580)
---------------------------------------------------------------------------------
Net increase (decrease) from Trust
share transactions 360,495 182,072 43,478 8,579 24,293
---------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 360,491 182,065 39,818 9,717 22,590
NET ASSETS:
Beginning of year 664,063 481,998 255,406 245,689 --
---------------------------------------------------------------------------------
End of year $ 1,024,554 $ 664,063 $ 295,224 $ 255,406 $ 22,590
---------------------------------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 1,612,173 1,398,237 10,819 8,817 2,844
Issued in connection with merger
(Note D) -- -- 4,493 -- --
Issued on reinvestment of dividends 39,064 30,194 1,451 1,294 47
Redeemed (1,290,742) (1,246,359) (12,422) (9,247) (473)
---------------------------------------------------------------------------------
Net increase (decrease) in shares
outstanding 360,495 182,072 4,341 864 2,418
---------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger Berman October 31, 1998
- ----------------------------------------------------------------------
Income Funds
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Government Money Fund-Registered Trademark-
("Government Money"), Neuberger Berman Cash Reserves-Registered Trademark-
("Cash Reserves"), Neuberger Berman Limited Maturity Bond Fund ("Limited
Maturity"), and Neuberger Berman High Yield Bond Fund ("High Yield")
(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. High Yield had no operations until
March 3, 1998, other than matters relating to its organization and
registration as a series of the Trust. 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 (100.00%, 100.00%, 82.96%, and 100.00%, for Government Money,
Cash Reserves, Limited Maturity, and High Yield, respectively, at October 31,
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 Government Money and Cash Reserves to maintain a
continuous net asset value per share of $1.00; each 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 either 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
as indicated in the notes following the Portfolios' Schedule of Investments.
B-10
<PAGE>
3) FEDERAL INCOME TAXES: The Funds are treated as separate entities for Federal
income tax purposes. It is the policy of Government Money, Cash Reserves, and
Limited Maturity to continue, and the intention of High Yield, to qualify as
regulated investment companies 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 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 ($7,878, $2,998, $6,904, and $4,112 expiring in
2002, 2003, 2005, and 2006, respectively, for Cash Reserves; $774,663,
$533,438, $6,076,188, $4,086,330, $2,160,210, $517,222, and $3,229,127
expiring in 2000, 2001, 2002, 2003, 2004, 2005, and 2006, respectively, for
Limited Maturity; and $42,133 expiring in 2006 for High Yield, determined as
of October 31, 1998), it is the policy of each Fund not to distribute such
gains. The capital loss carryforwards shown above for Limited Maturity
include $774,663, $533,438, $1,362,347, $329,262, and $552,290 expiring in
2000, 2001, 2002, 2003, and 2004, respectively, which were acquired on
February 27, 1998 in the merger with Neuberger Berman Ultra Short Bond
Fund-Registered Trademark- ("Ultra Short"). The use of these losses to offset
future gains may be limited in a given year.
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) ORGANIZATION EXPENSES: Expenses incurred by High Yield in connection with its
organization are being amortized on a straight-line basis over a five-year
period. At October 31, 1998, the unamortized balance of such expenses
amounted to $62,457.
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
B-11
<PAGE>
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"). Pursuant to
this Agreement each Fund pays 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).
Management has voluntarily undertaken to reimburse Cash Reserves, Limited
Maturity, and High Yield for their respective operating expenses plus their pro
rata portion of their corresponding Portfolio's operating expenses (including
the fees payable to Management but excluding interest, taxes, brokerage
commissions, and extraordinary expenses) ("Operating Expenses") which exceed, in
the aggregate, 0.65% per annum for Cash Reserves, 0.70% per annum for Limited
Maturity, and 1.00% per annum for High Yield, 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, 1998, such excess expenses amounted to $143,344 and $71,712, for
Limited Maturity and High Yield, respectively. For the year ended October 31,
1998, there was no reimbursement of expenses by Management for Cash Reserves.
High Yield has agreed to repay Management through December 31, 1999, for its
excess Operating Expenses previously reimbursed by Management, so long as its
annual Operating Expenses during that period do not exceed its expense
limitation.
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.
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.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statements
of Operations
B-12
<PAGE>
under the caption Expenses from corresponding Portfolio, was a reduction of
$166, $1,395, $434, and $81, for Government Money, Cash Reserves, Limited
Maturity, and High Yield, 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 $14,950, $30,028, $9,830, and $0, for Government Money,
Cash Reserves, Limited Maturity, and High Yield, respectively.
NOTE C -- INVESTMENT TRANSACTIONS:
During the year ended October 31, 1998, additions and reductions in each
Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
- ----------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT MONEY $ 829,488,000 $ 787,491,000
CASH RESERVES 1,091,774,000 771,057,000
LIMITED MATURITY 44,851,000 63,869,000
HIGH YIELD 25,827,000 2,392,000
</TABLE>
NOTE D -- MERGER:
On February 27, 1998, Limited Maturity acquired all of the net assets of
Ultra Short pursuant to a plan of reorganization approved by the Board of
Trustees on September 24, 1997. The merger was accomplished by a tax-free
exchange of 4,492,869 shares of Limited Maturity (valued at $44,973,622) for the
4,723,570 shares of Ultra Short outstanding on February 27, 1998. Ultra Short's
net assets at that date ($44,973,622), including $289,235 of unrealized
appreciation, were combined with those of Limited Maturity. The aggregate net
assets of Limited Maturity and Ultra Short immediately before the merger were
$251,846,857 and $44,973,622, respectively, resulting in aggregate net assets of
$296,820,479 immediately after the merger.
B-13
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Government Money Fund(1)
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,
1998 1997 1996 1995 1994
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
------------------------------------------------------------
Income From Investment Operations
Net Investment Income .0459 .0468 .0464 .0499 .0302
Net Gains or Losses on Securities .0001 -- -- -- --
------------------------------------------------------------
Total From Investment Operations .0460 .0468 .0464 .0499 .0302
------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.0459) (.0468) (.0464) (.0499) (.0302)
------------------------------------------------------------
Net Asset Value, End of Year $ 1.0001 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
------------------------------------------------------------
Total Return(2) +4.69% +4.78% +4.74% +5.10% +3.07%
------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 367.6 $ 308.2 $ 363.4 $ 308.3 $ 251.5
------------------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(3) .64% .64% .67% .65% --
------------------------------------------------------------
Ratio of Net Expenses to Average Net
Assets .63% .63% .67% .65% .72%
------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 4.61% 4.65% 4.65% 5.00% 3.00%
------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-14
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Cash Reserves(1)
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,
1998 1997 1996 1995 1994
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0001
------------------------------------------------------------
Income From Investment Operations
Net Investment Income .0499 .0499 .0486 .0529 .0327
Net Gains or Losses on Securities -- -- -- -- --
------------------------------------------------------------
Total From Investment Operations .0499 .0499 .0486 .0529 .0327
------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.0499) (.0499) (.0486) (.0529) (.0327)
Distributions (from net capital
gains) -- -- -- -- (.0001)
------------------------------------------------------------
Total Distributions (.0499) (.0499) (.0486) (.0529) (.0328)
------------------------------------------------------------
Net Asset Value, End of Year $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
------------------------------------------------------------
Total Return(2) +5.10% +5.11% +4.97% +5.42% +3.33%
------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $1,024.6 $ 664.1 $ 482.0 $ 408.9 $ 311.9
------------------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(3) .64% .63% .66% .65% --
------------------------------------------------------------
Ratio of Net Expenses to Average Net
Assets(4) .63% .63% .65% .65% .65%
------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 5.00% 4.98% 4.86% 5.30% 3.31%
------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-15
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Fund(1)
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,
1998 1997 1996 1995 1994
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 10.03 $ 9.99 $ 10.06 $ 9.88 $ 10.49
------------------------------------------------------------
Income From Investment Operations
Net Investment Income .60 .63 .60 .62 .56
Net Gains or Losses on Securities
(both realized and unrealized) (.12) .04 (.07) .18 (.55)
------------------------------------------------------------
Total From Investment Operations .48 .67 .53 .80 .01
------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.60) (.63) (.60) (.62) (.56)
Distributions (from net capital
gains) -- -- -- -- (.05)
Distributions (in excess of net
capital gains) -- -- -- -- (.01)
------------------------------------------------------------
Total Distributions (.60) (.63) (.60) (.62) (.62)
------------------------------------------------------------
Net Asset Value, End of Year $ 9.91 $ 10.03 $ 9.99 $ 10.06 $ 9.88
------------------------------------------------------------
Total Return(2) +4.92% +6.97% +5.44% +8.32% +0.13%
------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 295.2 $ 255.4 $ 245.7 $ 307.4 $ 308.6
------------------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(3) .71% .70% .71% .70% --
------------------------------------------------------------
Ratio of Net Expenses to Average Net
Assets(4) .70% .70% .70% .70% .69%
------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 6.03% 6.34% 6.10% 6.21% 5.53%
------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-16
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
High Yield Bond Fund(1)
The following table includes selected data for a share outstanding throughout
the 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>
Period from
March 3, 1998(5)
to
October 31,
1998
----------------
<S> <C>
Net Asset Value, Beginning of Period $ 10.00
------
Income From Investment Operations
Net Investment Income .51
Net Gains or Losses on Securities (both realized and
unrealized) (.66)
------
Total From Investment Operations (.15)
------
Less Distributions
Dividends (from net investment income) (.51)
------
Net Asset Value, End of Period $ 9.34
------
Total Return(2)(6) -1.69%
------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $ 22.6
------
Ratio of Gross Expenses to Average Net Assets(3)(7) 1.00%
------
Ratio of Net Expenses to Average Net Assets(4)(7) 1.00%
------
Ratio of Net Investment Income to Average Net Assets(7) 8.03%
------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-17
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger Berman October 31, 1998
- ----------------------------------------------------------------------
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 each Fund
(excluding Government Money), total return would have been lower if
Management had not reimbursed certain expenses.
3) 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.
4) 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 of net expenses to average daily net assets would have
been:
<TABLE>
<CAPTION>
Year Ended October 31,
CASH RESERVES 1996 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses .67% .68% .71%
-------------------------
</TABLE>
For the years ended October 31, 1997 and October 31, 1998, there was no
reimbursement of expenses by Management for Cash Reserves.
<TABLE>
<CAPTION>
Year Ended October 31,
LIMITED MATURITY 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Expenses .75% .71% .71% .71% .71%
---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period from
March 3, 1998
to October 31,
HIGH YIELD 1998
- --------------------------------------------------------------------
<S> <C>
Net Expenses 1.65%
-----
</TABLE>
5) The date investment operations commenced.
6) Not annualized.
7) Annualized.
B-18
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees
Neuberger Berman Income Funds and
Shareholders of:
Neuberger Berman Government Money Fund
Neuberger Berman Cash Reserves
Neuberger Berman Limited Maturity Bond Fund and
Neuberger Berman High Yield Bond Fund
We have audited the accompanying statements of assets and liabilities of the
Neuberger Berman Government Money Fund, Neuberger Berman Cash Reserves,
Neuberger Berman Limited Maturity Bond Fund, and Neuberger Berman High Yield
Bond Fund, four of the series constituting the Neuberger Berman Income Funds
(the "Trust"), as of October 31, 1998, and the related statements of operations,
the statements of changes in net assets, and 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 the Neuberger Berman Income Funds at October
31, 1998, the results of their operations, the changes in their net assets, and
their financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
[SIGNATURE]
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 4, 1998
B-19
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1998
- --------------------------------------------------------------------------------
Government Money Portfolio
<TABLE>
<CAPTION>
Principal Annualized
Amount Yield at Value(1)
(000's Date (000's
omitted) of Purchase omitted)
- ------------- ----------- -------------
<C> <S> <C> <C>
U.S. TREASURY SECURITIES -- BACKED BY THE FULL
FAITH AND CREDIT OF THE U.S. GOVERNMENT (99.1%)
$ 530 U.S. Treasury Bills, due 11/5/98 5.10% $ 530
29,495 U.S. Treasury Bills, due 11/12/98 5.08-5.18% 29,454
32,630 U.S. Treasury Bills, due 11/19/98 5.04-5.27% 32,552
24,880 U.S. Treasury Notes, 5.625%, due 11/30/98 5.24-5.31% 24,886
34,050 U.S. Treasury Notes, 5.125%, due 11/30/98 5.20-5.48% 34,045
17,820 U.S. Treasury Bills, due 12/10/98 4.71-5.36% 17,726
5,000 U.S. Treasury Bills, due 12/17/98 5.34% 4,968
50 U.S. Treasury Bills, due 12/31/98 4.12% 50
310 U.S. Treasury Bills, due 1/14/99 3.73% 308
60,830 U.S. Treasury Notes, 6.375%, due 1/15/99 5.19-5.42% 60,952
155 U.S. Treasury Bills, due 1/21/99 4.51% 153
25,180 U.S. Treasury Bills, due 1/28/99 4.06-4.27% 24,927
11,335 U.S. Treasury Bills, due 2/4/99 4.16-4.35% 11,210
1,080 U.S. Treasury Bills, due 2/18/99 5.11% 1,064
13,660 U.S. Treasury Bills, due 3/4/99 4.22-4.25% 13,469
25,000 U.S. Treasury Bills, due 3/18/99 4.20-4.94% 24,564
23,410 U.S. Treasury Notes, 6.25%, due 3/31/99 4.49-5.28% 23,508
8,850 U.S. Treasury Notes, 5.875%, due 3/31/99 4.41-4.90% 8,897
10,745 U.S. Treasury Bills, due 4/1/99 4.46-4.60% 10,548
15,600 U.S. Treasury Bills, due 4/8/99 4.33% 15,316
25,000 U.S. Treasury Notes, 6.50%, due 4/30/99 4.40% 25,253
-------------
TOTAL U.S. TREASURY SECURITIES 364,380
Cash, receivables and other assets, less
liabilities (0.9%) 3,386
-------------
TOTAL NET ASSETS (100.0%) $ 367,766
-------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-20
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1998
- --------------------------------------------------------------------------------
Cash Reserves Portfolio
<TABLE>
<CAPTION>
Principal
Amount Value(1)
(000's Rating(2) (000's
omitted) Moody's S&P omitted)
- ------------- ----------- --------- ------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES (4.0%)
$ 15,000 Fannie Mae, Discount Notes, 4.80%, due 3/18/99 AGY AGY $ 14,728
23,510 Freddie Mac, Discount Notes, 4.79% & 5.13%, due
11/12/98 & 4/1/99 AGY AGY 23,106
3,000 Federal Home Loan Bank, Bonds, 5.54%, due 4/7/99 AGY AGY 3,002
------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES 40,836
------------
CORPORATE COMMERCIAL PAPER (67.8%)
3,000 BP America, Inc., 5.60%, due 11/2/98 P-1 A-1+ 3,000
15,000 Sara Lee Corp., 4.96%, due 11/4/98 P-1 A-1+ 14,996
10,000 General Re Corp., 5.50%, due 11/6/98 P-1 A-1+ 9,994
10,000 MetLife Funding, Inc., 5.30%, due 11/6/98 P-1 A-1+ 9,994
10,000 Gannett Co., Inc., 5.02%, due 11/10/98 P-1 A-1+ 9,989
10,000 Goldman Sachs Group, L.P., 5.48%, due 11/10/98 P-1 A-1+ 9,988
10,000 Times Mirror Co., 5.43%, due 11/13/98 P-1 A-1 9,983
21,000 BellSouth Telecommunications, Inc., 5.00%-5.05%, due
11/3/98-11/17/98 P-1 A-1+ 20,984
29,545 SBC Communications Inc., 5.45% & 5.48%, due 11/6/98 &
11/17/98 P-1 A-1+ 29,511
10,000 Novartis Finance Corp., 5.05%, due 11/20/98 P-1 A-1+ 9,975
14,745 Minnesota Mining & Manufacturing Co., 5.45%, due
11/24/98 P-1 A-1+ 14,696
6,970 Illinois Tool Works, Inc., 5.17%, due 11/25/98 P-1 A-1+ 6,947
4,000 Emerson Electric Co., 5.45%, due 11/30/98 P-1 A-1+ 3,983
20,000 Ameritech Capital Funding Corp., 5.18%, due 12/3/98 P-1 A-1+ 19,911
21,025 Campbell Soup Co., 5.45%, due 12/4/98 P-1 A-1+ 20,923
10,000 Caisse d'Amortissement de la Dette Sociale, 5.37%, due
12/7/98 P-1 A-1+ 9,948
5,000 Kingdom of Sweden, 5.43%, due 12/9/98 P-1 A-1+ 4,972
15,000 du Pont (E.I.) de Nemours & Co., 5.37%, due 12/22/98 P-1 A-1+ 14,888
25,500 Bayer Corp., 5.13%, due 1/4/99 P-1 A-1+ 25,271
8,000 Electricite de France, 5.43%, due 1/8/99 P-1 A-1+ 7,919
</TABLE>
B-21
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Cash Reserves Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value(1)
(000's Rating(2) (000's
omitted) Moody's S&P omitted)
- ------------- ----------- --------- ------------
<C> <S> <C> <C> <C>
$ 10,000 Westpac Capital Corp., 5.47%, due 1/13/99 P-1 A-1+ $ 9,891
34,500 National Australia Funding Delaware Inc., 5.17%-5.45%,
due 12/1/98-1/19/99 P-1 A-1+ 34,186
10,000 BellSouth Capital Funding Corp., 5.42%, due 1/22/99 P-1 A-1+ 9,878
18,800 Coca-Cola Co., 5.03%, due 1/22/99 P-1 A-1+ 18,587
16,800 Daimler-Benz North America Corp., 5.07% & 5.48%, due
11/9/98 & 1/22/99 P-1 A-1 16,679
4,000 Amoco Co., 5.38%, due 1/26/99 P-1 A-1+ 3,949
32,915 Motorola Credit Corp., 5.10%-5.47%, due 11/5/98-1/26/99 P-1 A-1+ 32,702
15,000 Procter & Gamble Co., 5.45%, due 1/27/99 P-1 A-1+ 14,805
24,630 USAA Capital Corp., 5.13%, due 1/28/99 P-1 A-1+ 24,325
25,000 Toyota Motor Credit Corp., 5.07%, due 2/1/99 P-1 A-1+ 24,680
35,000 Ford Motor Credit Co., 5.11%-5.47%, due 1/20/99-2/2/99 P-1 A-1 34,554
23,775 Province of British Columbia, Canada, 4.96% & 5.02%,
due 12/21/98 & 2/2/99 P-1 A-1+ 23,534
10,000 Washington Post Co., 5.35%, due 2/12/99 P-1 A-1+ 9,848
25,000 Swedish Export Credit Corp., 4.97%-5.44%, due
1/19/99-3/1/99 P-1 A-1+ 24,636
33,898 Merrill Lynch & Co., Inc., 4.95%-5.50%, due
11/20/98-3/8/99 P-1 A-1+ 33,449
43,000 General Electric Capital Corp., 4.95%-5.47%, due
12/1/98-3/9/99 P-1 A-1+ 42,435
15,000 Warner-Lambert Co., 5.30%, due 3/30/99 P-1 A-1+ 14,673
28,000 Prudential Funding Corp., 5.25%-5.45%, due
11/20/98-5/26/99 P-1 A-1 27,515
40,000 American Express Credit Corp., 4.75%-5.21%, due
2/5/99-6/7/99 P-1 A-1 39,138
------------
TOTAL CORPORATE COMMERCIAL PAPER 697,336
------------
</TABLE>
B-22
<PAGE>
October 31, 1998
- --------------------------------------------------------------------------------
Cash Reserves Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value(1)
(000's Rating(2) (000's
omitted) Moody's S&P omitted)
- ------------- ----------- --------- ------------
<C> <S> <C> <C> <C>
TAXABLE REVENUE BONDS (1.1%)
$ 11,700 Health Institute of Indiana, Inc., Loan Program Notes,
Ser. A, 5.17%, VRDN due 10/1/28 P-1 A-1 $ 11,700
------------
CERTIFICATES OF DEPOSIT (19.2%)
20,000 Nordeutsche Landesbank Girozentrale, Eurodollar C.D.,
5.66%, due 11/16/98 P-1 A-1+ 20,000
10,000 ABN AMRO Bank NV, Eurodollar C.D., 5.61%, due 12/21/98 P-1 A-1+ 10,000
5,000 Australia & New Zealand Banking Group, Ltd., Yankee
C.D., 5.61%, due 12/28/98 P-1 A-1+ 5,000
5,000 Rabobank Nederland, Eurodollar C.D., 5.64%, due 1/4/99 P-1 A-1+ 5,002
10,000 Toronto Dominion Bank, Yankee C.D., 5.63%, due 1/4/99 P-1 A-1+ 10,000
20,000 Abbey National Treasury Services PLC, Eurodollar C.D.,
5.13% & 5.60%, due 12/29/98 & 1/29/99 P-1 A-1+ 20,000
24,500 Banque Nationale de Paris, Yankee C.D., 5.55%-5.67%,
due 12/28/98-3/1/99 P-1 A-1 24,503
20,000 Westdeutsche Landesbank Girozentrale, Yankee C.D.,
5.05% & 5.44%, due 1/19/99 & 3/2/99 P-1 A-1+ 20,000
10,000 Commerzbank AG, Yankee C.D., 5.67%, due 3/5/99 P-1 A-1+ 10,002
23,500 Rabobank Nederland, Yankee C.D., 5.69%-5.74%, due
4/16/99-4/28/99 P-1 A-1+ 23,493
10,730 Creditanstalt-Bankverein, Yankee C.D., 5.76%, due
5/7/99 P-1 A-1 10,728
30,000 National Westminster Bank PLC, Yankee C.D., 5.45% &
5.7375%, due 12/11/98 & 5/7/99 P-1 A-1+ 30,000
9,300 Chase Manhattan Bank, Domestic C.D., 5.745%, due
5/10/99 P-1 A-1+ 9,297
------------
TOTAL CERTIFICATES OF DEPOSIT 198,025
------------
CORPORATE DEBT SECURITIES (0.1%)
600 Morgan Stanley Dean Witter, Senior Variable Rate
Medium-Term Notes, Ser. C, 5.2933%, due 1/15/99 P-1 A-1 600
------------
</TABLE>
B-23
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1998
- --------------------------------------------------------------------------------
Cash Reserves Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value(1)
(000's Rating(2) (000's
omitted) Moody's S&P omitted)
- ------------- ----------- --------- ------------
<C> <S> <C> <C> <C>
TIME DEPOSITS (0.6%)
$ 6,155 Den Danske Bank, 5.5625%, due 11/2/98 P-1 A-1 $ 6,155
------------
FUNDING AGREEMENTS (6.8%)
30,000 John Hancock Mutual Life Insurance Co., Non-Expiring
Variable Rate Funding Agreement, 5.3538% P-1 A-1+ 30,000
40,000 Travelers Insurance Co., Variable Rate Funding
Agreement, 5.2395% & 5.3638%,
expiring 3/16/99 & 10/29/99 P-1 A-1+ 40,000
------------
TOTAL FUNDING AGREEMENTS 70,000
------------
TOTAL INVESTMENTS (99.6%) 1,024,652
Cash, receivables and other assets, less liabilities
(0.4%) 4,107
------------
TOTAL NET ASSETS (100.0%) $1,028,759
------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-24
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1998
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
Principal
Amount
(000's Rating(2) Value(3)
omitted) Moody's S&P (000's omitted)
- ------------- --------- --------- ----------------
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES (3.9%)
$ 1,785 U.S. Treasury Notes, 5.875%, due 2/15/00 TSY TSY $ 1,820
2,220 U.S. Treasury Notes, 6.75%, due 4/30/00 TSY TSY 2,297
7,980 U.S. Treasury Notes, 5.75%, due 11/15/00 TSY TSY 8,203
1,640 U.S. Treasury Inflation-Indexed Notes, 3.375%, due 1/15/07 TSY TSY 1,613
--------
TOTAL U.S. TREASURY SECURITIES (COST $13,677) 13,933
--------
U.S. GOVERNMENT AGENCY SECURITIES (10.7%)
20,000 Federal Home Loan Bank, Discount Notes, 5.09%, due 11/6/98 AGY AGY 19,989
10,000 Freddie Mac, Discount Notes, 4.77%, due 11/12/98 AGY AGY 9,987
8,338 Federal Farm Credit Bank, Discount Notes, 4.90%, due 11/20/98 AGY AGY 8,334
--------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES
(COST $38,282) 38,310
--------
MORTGAGE-BACKED SECURITIES (4.8%)
FANNIE MAE
33 Balloon Pass-Through Certificates, 8.50%, due 11/1/98 AGY AGY 35
1,364 Balloon Pass-Through Certificates, 7.00%, due 8/1/03 AGY AGY 1,391
140 REMIC Floating Rate CMO, Ser. 1992-59F, 5.68125%, due 8/25/06 AGY AGY 140
5,996 Pass-Through Certificates, 7.00%, due 9/1/03 & 6/1/11 AGY AGY 6,153
5,993 Pass-Through Certificates, 6.50%, due 4/1/13 AGY AGY 6,079
FREDDIE MAC
85 Gold Balloon Mortgage Participation Certificates, 6.50%, due
9/1/99 AGY AGY 86
64 Mortgage Participation Certificates, 10.50%, due 10/1/00 &
12/1/00 AGY AGY 67
</TABLE>
B-25
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount
(000's Rating(2) Value(3)
omitted) Moody's S&P (000's omitted)
- ------------- --------- --------- ----------------
<C> <S> <C> <C> <C>
$ 256 Mortgage Participation Certificates, 8.50%, due 10/1/01 AGY AGY $ 263
156 ARM Certificates, 7.00%, due 1/1/17 AGY AGY 156
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
739 Pass-Through Certificates, 7.50%, due 10/15/09-10/15/10 AGY AGY 762
1,818 Pass-Through Certificates, 7.00%, due 4/15/11 AGY AGY 1,865
133 Pass-Through Certificates, 12.00%, due 5/15/12-3/15/15 AGY AGY 153
--------
TOTAL MORTGAGE-BACKED SECURITIES
(COST $16,785) 17,150
--------
ASSET-BACKED SECURITIES (13.6%)
118 Chase Manhattan Grantor Trust, Automobile Loan Pass-Through
Certificates, Ser. 1997-A, Class A-2, 5.95%, due 10/15/99 Aaa AAA 118
4,223 PNC Student Loan Trust I, Ser. 1997-2, Class A-2, 6.138%, due
1/25/00 Aaa AAA 4,326
87 Premier Auto Trust, Ser. 1997-1, Class A-2, 5.90%, due 4/6/00 Aaa AAA 88
3,045 Money Store Auto Grantor Trust, Ser. 1997-2, Class A-1, 6.17%,
due 3/20/01 Aaa AAA 3,088
458 Chase Manhattan Grantor Trust, Automobile Loan Pass-Through
Certificates, Ser. 1995-A, 6.00%, due 9/17/01 Aaa AAA 458
6,500 Ford Credit Auto Loan Master Trust, Auto Loan Certificates, Ser.
1996-1, 5.50%, due 2/15/03 Aaa AAA 6,604
254 Honda Auto Receivables Grantor Trust, Ser. 1997-A, Class A,
5.85%, due 2/15/03 Aaa AAA 256
5,600 Chase Credit Card Master Trust, Ser. 1997-2, Class A, 6.30%, due
4/15/03 Aaa AAA 5,730
1,792 Navistar Financial Owner Trust, Ser. 1996-B, Class A-3, 6.33%,
due 4/21/03 Aaa AAA 1,814
</TABLE>
B-26
<PAGE>
October 31, 1998
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount
(000's Rating(2) Value(3)
omitted) Moody's S&P (000's omitted)
- ------------- --------- --------- ----------------
<C> <S> <C> <C> <C>
$ 4,720 Chemical Master Credit Card Trust 1, Ser. 1995-2, Class A, 6.23%,
due 6/15/03 Aaa AAA $ 4,833
5,315 World Omni Automobile Lease Securitization Trust, Ser. 1997-A,
Class A-3, 6.85%, due 6/25/03 Aaa AAA 5,488
2,245 Chevy Chase Auto Receivables Trust, Ser. 1996-2, Class A, 5.90%,
due 7/15/03 Aaa AAA 2,247
5,000 Standard Credit Card Master Trust I, Credit Card Participation
Certificates, Ser. 1994-4, Class A, 8.25%, due 11/7/03 Aaa AAA 5,385
4,354 ContiMortgage Net Interest Margin Notes, Ser. 1998-A, Class A,
7.92%, due 3/16/28 BBB(4) 4,316(5)
3,770 IMC Excess Cashflow Trust, Ser. 1997-A, 7.41%, due 11/26/28 BBB(4) 3,590(5)
--------
TOTAL ASSET-BACKED SECURITIES (COST $48,036) 48,341
--------
BANKS & FINANCIAL INSTITUTIONS (25.1%)
2,500 Merrill Lynch & Co., Inc., Medium-Term Notes, Ser. B, 6.64%, due
4/9/99 Aa3 AA- 2,509
5,240 Merrill Lynch & Co., Inc., Medium-Term Notes, Ser. B, 6.28%, due
6/25/99 Aa3 AA- 5,257
4,850 Chase Manhattan Bank USA, Senior Global Bank Notes, 5.875%, due
8/4/99 Aa2 AA- 4,886
2,500 Associates Corp. of North America, Senior Notes, 6.375%, due
8/15/99 Aa3 AA- 2,529
5,180 CIT Group Holdings, Inc., Medium-Term Notes, 6.25%, due 10/25/99 Aa3 A+ 5,243
3,940 First National Bank of Commerce, Senior Bank Notes, 6.50%, due
1/14/00 Aa2 AA- 4,013
3,980 HomeSide Lending, Inc., Notes, 6.875%, due 5/15/00 A1 A+ 4,077
5,000 Salomon Smith Barney Holdings Inc., Notes, 7.00%, due 5/15/00 Aa3 A 5,124
1,300 Lehman Brothers Holdings Inc., Medium-Term Notes, Ser. E, 7.08%,
due 5/22/00 Baa1 A 1,305
</TABLE>
B-27
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount
(000's Rating(2) Value(3)
omitted) Moody's S&P (000's omitted)
- ------------- --------- --------- ----------------
<C> <S> <C> <C> <C>
$ 1,800 International Lease Finance Corp., Notes, 6.625%, due 6/1/00 A1 A+ $ 1,836
5,400 Comdisco, Inc., Notes, 6.50%, due 6/15/00 Baa1 BBB+ 5,523
3,150 Countrywide Funding Corp., Medium-Term Notes, Ser. A, 7.31%, due
8/28/00 A3 A 3,226
7,090 Associates Pass-Through Asset Trust, Ser. 1997-1, 6.45%, due
9/15/00 Aa3 AA- 7,227(5)
5,000 Lehman Brothers Holdings Inc., Medium-Term Notes, Ser. E, 6.89%,
due 10/10/00 Baa1 A 5,003
3,600 Countrywide Home Loans, Inc., Notes, 5.62%, due 10/16/00 A3 A 3,584
1,725 Lehman Brothers Holdings Inc., Medium-Term Notes, Ser. E, 6.65%,
due 11/8/00 Baa1 A 1,718
2,000 NationsBank Corp., Senior Medium-Term Notes, Ser. E, 5.70%, due
2/9/01 Aa2 A+ 2,029
6,600 Capital One Bank, Bank Notes, 5.95%, due 2/15/01 Baa3 BBB- 6,640
4,430 Morgan Stanley, Dean Witter, Discover & Co., Global Medium-Term
Notes, Ser. C, 6.09%, due 3/9/01 A1 A+ 4,501
6,660 Household Finance Corp., Senior Medium-Term Notes, 6.06%, due
5/14/01 A2 A 6,742
3,610 Riggs National Corp., Subordinated Notes, 8.50%, due 2/1/06 Ba1(6) BB-(6) 3,772
2,400 Riggs National Corp., Subordinated Debentures, 9.65%, due 6/15/09 Ba1(6) BB-(6) 2,685
--------
TOTAL BANKS & FINANCIAL INSTITUTIONS
(COST $88,737) 89,429
--------
CORPORATE DEBT SECURITIES (36.6%)
2,000 AT&T Capital Corp., Medium-Term Notes, Ser. 1997-4, 6.92%, due
4/29/99 Baa3 BBB 2,010
7,000 Lockheed Martin Corp., Notes, 6.55%, due 5/15/99 A3 BBB+ 7,050
5,200 Williams Holdings of Delaware, Inc., Medium-Term Notes, Ser. A,
6.40%, due 6/17/99 Baa2 BBB- 5,237
</TABLE>
B-28
<PAGE>
October 31, 1998
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount
(000's Rating(2) Value(3)
omitted) Moody's S&P (000's omitted)
- ------------- --------- --------- ----------------
<C> <S> <C> <C> <C>
$ 2,710 Arkla, Inc., Notes, 8.875%, due 7/15/99 Baa1 BBB $ 2,777
4,680 Time Warner Pass-Through Asset Trust, Ser. 1997-2, 4.90%, due
7/29/99 Baa3 BBB- 4,667(5)
1,000 General Motors Acceptance Corp., Medium-Term Notes, 6.15%, due
9/20/99 A2 A 1,009
3,655 Commonwealth Edison Co., First Mortgage Bonds, Ser. 90, 6.50%,
due 4/15/00 Baa2 BBB 3,737
4,800 Norfolk Southern Corp., Notes, 6.70%, due 5/1/00 Baa1 BBB+ 4,912
5,490 Sears Roebuck Acceptance Corp., Medium-Term Notes, Ser. IV,
6.23%, due 7/12/00 A2 A- 5,580
2,000 Ford Motor Credit Co., Medium-Term Notes, 6.84%, due 8/16/00 A1 A 2,055
3,220 MedPartners, Inc., Senior Subordinated Notes, 6.875%, due 9/1/00 B3 B 2,604
2,000 American General Finance Corp., Senior Notes, 6.125%, due 9/15/00 A2 A+ 2,026
2,510 Chesapeake Corp., Notes, 10.375%, due 10/1/00 Baa3 BBB 2,749
1,730 BHP Finance (USA) Ltd., Guaranteed Notes, 5.625%, due 11/1/00 A3 A 1,718
2,300 General Electric Capital Corp., Global Medium-Term Notes, Ser. A,
5.52%, due 1/15/01 Aaa AAA 2,328
2,320 Fort James Corp., Notes, 6.234%, due 3/15/01 Baa2 BBB- 2,336
2,510 Revlon Worldwide Corp., Senior Secured Notes, Ser. B,
Zero-Coupon, Yielding 10.75% & 10.959%, due 3/15/01 B3 B- 1,481
2,290 Colonial Realty Limited Partnership, Senior Notes, 7.50%, due
7/15/01 Baa3 BBB- 2,421
1,220 USA Waste Services, Inc., Senior Notes, 6.125%, due 7/15/01 Baa3 BBB+ 1,225
3,300 Texas Utilities Co., Notes, 5.94%, due 10/15/01 Baa3 BBB 3,300
4,160 Tyco International Ltd., Notes, 6.50%, due 11/1/01 A3 A- 4,290
2,965 ICI Wilmington Inc., Guaranteed Notes, 7.50%, due 1/15/02 Baa1 A- 3,176
</TABLE>
B-29
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount
(000's Rating(2) Value(3)
omitted) Moody's S&P (000's omitted)
- ------------- --------- --------- ----------------
<C> <S> <C> <C> <C>
$ 2,835 Black & Decker Corp., Medium-Term Notes, Ser. A, 8.90%, due
1/21/02 Baa2 BBB- $ 3,145
900 Ford Motor Credit Co., Global Bonds, 6.50%, due 2/28/02 A1 A 924
2,280 Fort James Corp., Senior Notes, 6.50%, due 9/15/02 Baa2 BBB- 2,368
1,000 Safeway Inc., Medium-Term Notes, 8.57%, due 4/1/03 Baa2 BBB 1,117
3,360 Stewart Enterprises, Inc., Notes, 6.40%, due 5/1/03 Baa3 BBB 3,503
60 Core-Mark International, Inc., Senior Subordinated Notes,
11.375%, due 9/15/03 B3 B 59
705 Loomis Fargo & Co., Senior Subordinated Notes, 10.00%, due
1/15/04 B3 B 668
660 EOP Operating Limited Partnership, Notes, 6.625%, due 2/15/05 Baa1 BBB 642
495 Earle M. Jorgensen Co., Senior Notes, Ser. B, 9.50%, due 4/1/05 B3 B- 456
1,750 Protection One, Inc., Senior Notes, 7.375%, due 8/15/05 Ba1 BBB- 1,739(5)
1,300 Burlington Industries, Inc., Notes, 7.25%, due 9/15/05 Baa3 BBB- 1,374
4,200 Heritage Media Corp., Senior Subordinated Notes, 8.75%, due
2/15/06 B1 BB+ 4,473
4,320 Mark IV Industries, Inc., Senior Subordinated Notes, 7.75%, due
4/1/06 Ba2(7) BB+(7) 4,136
885 Federal-Mogul Corp., Notes, 7.75%, due 7/1/06 Ba2(7) BB+(7) 895
400 Printpack, Inc., Senior Subordinated Notes, Ser. B, 10.625%, due
8/15/06 B3 B+ 396
2,825 Time Warner Inc., Notes, 8.11%, due 8/15/06 Baa3 BBB- 3,188
400 Commonwealth Aluminum Corp., Senior Subordinated Notes, 10.75%,
due 10/1/06 B2 B- 395
680 Newport News Shipbuilding Inc., Senior Subordinated Notes, 9.25%,
due 12/1/06 B1 B+ 714
660 Safelite Glass Corp., Senior Subordinated Notes, 9.875%, due
12/15/06 B3 B 640(5)
</TABLE>
B-30
<PAGE>
October 31, 1998
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount
(000's Rating(2) Value(3)
omitted) Moody's S&P (000's omitted)
- ------------- --------- --------- ----------------
<C> <S> <C> <C> <C>
$ 1,275 Pen-Tab Industries, Inc., Senior Subordinated Notes, Ser. B,
10.875%, due 2/1/07 B3 B- $ 1,222
1,050 Fonda Group, Inc., Senior Subordinated Notes, Ser. B, 9.50%, due
3/1/07 B3 B- 869
1,250 GFSI Inc., Senior Subordinated Notes, 9.625%, due 3/1/07 B3 B- 1,178
300 French Fragrances, Inc., Senior Notes, Ser. B, 10.375%, due
5/15/07 B2 B+ 310
2,410 Owens-Illinois, Inc., Senior Debentures, 8.10%, due 5/15/07 Ba1(8) BB+(8) 2,529
405 AmeriServe Food Distribution, Inc., Senior Subordinated Notes,
10.125%, due 7/15/07 B3 B- 332
250 Safety Components International, Inc., Senior Subordinated Notes,
10.125%, due 7/15/07 B3 B- 241
880 HydroChem Industrial Services, Inc., Senior Subordinated Notes,
Ser. B, 10.375%, due 8/1/07 B3 B- 872
4,960 Interpool, Inc., Notes, 7.20%, due 8/1/07 Ba1 BBB- 5,122
190 Insilco Corp., Senior Subordinated Notes, 10.25%, due 8/15/07 B3 B- 191
520 NBTY, Inc., Senior Subordinated Notes, Ser. B, 8.625%, due
9/15/07 B1 B+ 510
2,360 UPM-Kymmene Corp., Notes, 6.875%, due 11/26/07 Baa1 BBB+ 2,333(5)
2,490 IDEX Corp., Senior Notes, 6.875%, due 2/15/08 Ba1 BBB- 2,585
1,585 Central Maine Power & Co., General and Refunding Mortgage Bonds,
Ser. Q, 7.05%, due 3/1/08 Baa3 BBB+ 1,630
1,000 Thiokol Corp., Senior Notes, 6.625%, due 3/1/08 Baa3 BBB 1,049
3,410 Beckman Coulter, Inc., Senior Notes, 7.45%, due 3/4/08 Ba1(8) BB+(8) 3,387
160 APCOA, Inc., Senior Subordinated Notes, 9.25%, due 3/15/08 Caa1 B- 152
610 IMPAC Group, Inc., Senior Subordinated Notes, 10.125%, due
3/15/08 B3 B- 590(5)
</TABLE>
B-31
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1998
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount
(000's Rating(2) Value(3)
omitted) Moody's S&P (000's omitted)
- ------------- --------- --------- ----------------
<C> <S> <C> <C> <C>
$ 470 Trans-Resources, Inc., Senior Notes, Ser. B, 10.75%, due 3/15/08 B3 B- $ 461
300 Columbus McKinnon Corp., Senior Subordinated Notes, 8.50%, due
4/1/08 B2 B 279
160 Great Central Mines Ltd., Senior Notes, 8.875%, due 4/1/08 Ba2 BB 154
450 Home Products International, Inc., Senior Subordinated Notes,
9.625%, due 5/15/08 B3 B 393
1,555 Owens-Illinois, Inc., Senior Notes, 7.35%, due 5/15/08 Ba1(8) BB+(8) 1,558
1,500 CSC Holdings, Inc., Senior Notes, 7.25%, due 7/15/08 Ba2 BB+ 1,459
1,085 Tenet Healthcare Corp., Senior Subordinated Notes, 8.125%, due
12/1/08 Ba3 BB- 1,072(5)
520 KinderCare Learning Centers, Inc., Senior Subordinated Notes,
Ser. B, 9.50%, due 2/15/09 B3 B- 489
--------
TOTAL CORPORATE DEBT SECURITIES (COST $130,792) 130,487
--------
FOREIGN GOVERNMENT SECURITIES(9) (2.0%)
SEK 53,100 Kingdom of Sweden, 5.50%, due 4/12/02
(COST $7,007) Aa1 AA+ 7,089
--------
CORPORATE COMMERCIAL PAPER (2.0%)
7,000 Nestle Capital Corp., 4.75%, due 11/2/98
(COST $6,998) P-1 A-1+ 6,998(10)
--------
TOTAL INVESTMENTS (98.6%) (COST $350,314) 351,737(11)
Cash, receivables and other assets, less liabilities (1.4%) 4,919
--------
TOTAL NET ASSETS (100.0%) $ 356,656
--------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-32
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1998
- --------------------------------------------------------------------------------
High Yield Bond Portfolio
<TABLE>
<CAPTION>
Principal
Amount Rating(2) Value(3)
(000's omitted) Moody's S&P (000's omitted)
- --------------- ----------- --------- ----------------
<C> <S> <C> <C> <C>
CORPORATE DEBT SECURITIES (86.1%)
$ 310 Revlon Worldwide Corp., Senior Secured Notes, Ser.
B, Zero-Coupon, Yielding 9.237%, due 3/15/01 B3 B- $ 183
150 Stone Container Corp., Senior Subordinated
Debentures, 12.25%, due 4/1/02 B3 B- 138
60 Core-Mark International, Inc., Senior Subordinated
Notes, 11.375%, due 9/15/03 B3 B 59
60 Loomis Fargo & Co., Senior Subordinated Notes,
10.00%, due 1/15/04 B3 B 57
150 Earle M. Jorgensen Co., Senior Notes, Ser. B,
9.50%, due 4/1/05 B3 B- 138
250 MTS, INC., Senior Subordinated Notes, 9.375%, due
5/1/05 B2 B 224
300 R.A.B. Enterprises, Inc., Senior Notes, 10.50%,
due 5/1/05 B3 B- 279(5)
440 Protection One, Inc., Senior Notes, 7.375%, due
8/15/05 Ba1 BBB- 437(5)
150 Burlington Industries, Inc., Notes, 7.25%, due
9/15/05 Baa3 BBB- 158
275 Mark IV Industries, Inc., Senior Subordinated
Notes, 7.75%, due 4/1/06 Ba2(7) BB+(7) 263
340 MTL Inc., Senior Subordinated Notes, 10.00%, due
6/15/06 B3 B- 332(5)
240 Federal-Mogul Corp., Notes, 7.75%, due 7/1/06 Ba2(7) BB+(7) 243
470 Printpack, Inc., Senior Subordinated Notes, Ser.
B, 10.625%, due 8/15/06 B3 B+ 465
70 Commonwealth Aluminum Corp., Senior Subordinated
Notes, 10.75%, due 10/1/06 B2 B- 69
540 Motors and Gears, Inc., Senior Notes, Ser. B,
10.75%, due 11/15/06 B3 B 532
150 Newport News Shipbuilding Inc., Senior
Subordinated Notes, 9.25%, due 12/1/06 B1 B+ 157
400 Safelite Glass Corp., Senior Subordinated Notes,
9.875%, due 12/15/06 B3 B 388(5)
</TABLE>
B-33
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
High Yield Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2) Value(3)
(000's omitted) Moody's S&P (000's omitted)
- --------------- ----------- --------- ----------------
<C> <S> <C> <C> <C>
$ 60 Pen-Tab Industries, Inc., Senior Subordinated
Notes, Ser. B, 10.875%, due 2/1/07 B3 B- $ 57
430 Fonda Group, Inc., Senior Subordinated Notes, Ser.
B, 9.50%, due 3/1/07 B3 B- 356
60 GFSI Inc., Senior Subordinated Notes, 9.625%, due
3/1/07 B3 B- 57
500 French Fragrances, Inc., Senior Notes, Ser. B,
10.375%, due 5/15/07 B2 B+ 516
120 Windy Hill Pet Food Co., Inc., Senior Subordinated
Notes, 9.75%, due 5/15/07 B3 B- 120
375 Hedstrom Corp., Senior Subordinated Notes, 10.00%,
due 6/1/07 B3 B- 344
150 Polymer Group, Inc., Senior Subordinated Notes,
9.00%, due 7/1/07 B2 B 141
60 AmeriServe Food Distribution, Inc., Senior
Subordinated Notes, 10.125%, due 7/15/07 B3 B- 49
60 Safety Components International, Inc., Senior
Subordinated Notes, 10.125%, due 7/15/07 B3 B- 58
60 HydroChem Industrial Services, Inc., Senior
Subordinated Notes, Ser. B, 10.375%, due 8/1/07 B3 B- 59
150 SC International Services, Inc., Senior
Subordinated Notes, Ser. B, 9.25%, due 9/1/07 B2 B 147
125 Southern Foods Group, L.P., Senior Subordinated
Notes, 9.875%, due 9/1/07 B2 B 126
560 NBTY, Inc., Senior Subordinated Notes, Ser. B,
8.625%, due 9/15/07 B1 B+ 549
85 K & F Industries, Inc., Senior Subordinated Notes,
9.25%, due 10/15/07 B3 B- 82
60 United Defense, L.P., Senior Subordinated Notes,
8.75%, due 11/15/07 B3 B- 60
125 Integrated Health Services, Inc., Senior
Subordinated Notes, Ser. A, 9.25%, due 1/15/08 B2 B- 113
540 Brand Scaffold Services, Inc., Senior Notes,
10.25%, due 2/15/08 B3 B- 530(5)
</TABLE>
B-34
<PAGE>
October 31, 1998
- --------------------------------------------------------------------------------
High Yield Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2) Value(3)
(000's omitted) Moody's S&P (000's omitted)
- --------------- ----------- --------- ----------------
<C> <S> <C> <C> <C>
$ 60 IDEX Corp., Senior Notes, 6.875%, due 2/15/08 Ba1 BBB- $ 62
185 Universal Compression, Inc., Senior Step Up Notes,
Yielding 9.929%, due 2/15/08 B2 B 107(5)
300 APCOA, Inc., Senior Subordinated Notes, 9.25%, due
3/15/08 Caa1 B- 286
70 IMPAC Group, Inc., Senior Subordinated Notes,
10.125%, due 3/15/08 B3 B- 68(5)
250 Musicland Group, Inc., Senior Subordinated Notes,
9.875%, due 3/15/08 Caa1 B- 227
70 Trans-Resources, Inc., Senior Notes, Ser. B,
10.75%, due 3/15/08 B3 B- 69
200 Columbus McKinnon Corp., Senior Subordinated
Notes, 8.50%, due 4/1/08 B2 B 186
300 Great Central Mines Ltd., Senior Notes, 8.875%,
due 4/1/08 Ba2 BB 289
150 Numatics, Inc., Senior Subordinated Notes, 9.625%,
due 4/1/08 B3 B- 141
200 Terex Corp., Senior Subordinated Notes, 8.875%,
due 4/1/08 B3 B- 182
250 Hudson Respiratory Care Inc., Senior Subordinated
Notes, 9.125%, due 4/15/08 B3 B- 182
250 Mediacom LLC, Senior Notes, Ser. B, 8.50%, due
4/15/08 B2 B+ 248
250 United Stationers Supply Co., Senior Subordinated
Notes, 8.375%, due 4/15/08 B1 B 239
300 Advanstar Communications Inc., Senior Subordinated
Notes, 9.25%, due 5/1/08 B2 B- 280(5)
300 Grove Worldwide LLC, Senior Subordinated Notes,
9.25%, due 5/1/08 B2 B 263(5)
340 Iron Age Corp., Senior Subordinated Notes, 9.875%,
due 5/1/08 B3 B- 298(5)
300 Level 3 Communications, Inc., Senior Notes,
9.125%, due 5/1/08 B3 B 283
</TABLE>
B-35
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
High Yield Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2) Value(3)
(000's omitted) Moody's S&P (000's omitted)
- --------------- ----------- --------- ----------------
<C> <S> <C> <C> <C>
$ 320 Sun Healthcare Group, Inc., Senior Subordinated
Notes, 9.375%, due 5/1/08 B2 CCC+ $ 238(5)
300 Ziff-Davis Inc., Senior Subordinated Notes, 8.50%,
due 5/1/08 B2 B+ 253
300 Boyds Collection, Ltd., Senior Subordinated Notes,
9.00%, due 5/15/08 B2 B- 277(5)
340 Derby Cycle Corp., Senior Notes, 10.00%, due
5/15/08 B3 B 313(5)
390 Home Products International, Inc., Senior
Subordinated Notes, 9.625%, due 5/15/08 B3 B 341
300 La Petite Academy, Inc., Senior Notes, 10.00%, due
5/15/08 B3 B- 289
300 Telecommunications Techniques Co., LLC, Senior
Subordinated Notes, 9.75%, due 5/15/08 B3 B- 248(5)
300 Corporate Express, Inc., Senior Subordinated
Notes, 9.625%, due 6/1/08 B2 B 283(5)
350 Coyne International Enterprises Corp., Senior
Subordinated Notes, 11.25%, due 6/1/08 B3 B- 319(5)
300 General Binding Corp., Senior Subordinated Notes,
9.375%, due 6/1/08 B2 B 301
300 Key Components, LLC, Senior Notes, 10.50%, due
6/1/08 B3 B- 288(5)
340 Schuff Steel Co., Senior Notes, 10.50%, due 6/1/08 B3 B+ 278
300 Steel Heddle Mfg. Co., Senior Subordinated Notes,
10.625%, due 6/1/08 B3 CCC+ 246(5)
725 WESCO International, Inc., Senior Step Up Notes,
Ser. B, Yielding 11.175%, due 6/1/08 B3 B 390
300 U.S. Office Products Co., Senior Subordinated
Notes, 9.75%, due 6/15/08 B3 CCC 233(5)
500 AKI, Inc., Senior Notes, 10.50%, due 7/1/08 B2 B+ 475(5)
300 Aqua-Chem, Inc., Senior Subordinated Notes,
11.25%, due 7/1/08 B3 B- 274(5)
250 Aurora Foods Inc., Senior Subordinated Notes,
8.75%, due 7/1/08 B1 B+ 254
</TABLE>
B-36
<PAGE>
October 31, 1998
- --------------------------------------------------------------------------------
High Yield Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2) Value(3)
(000's omitted) Moody's S&P (000's omitted)
- --------------- ----------- --------- ----------------
<C> <S> <C> <C> <C>
$ 340 Marsulex Inc., Senior Subordinated Notes, 9.625%,
due 7/1/08 B2 B+ $ 327(5)
350 Moll Industries, Inc., Senior Subordinated Notes,
10.50%, due 7/1/08 B3 B 320(5)
400 CSC Holdings, Inc., Senior Notes, 7.25%, due
7/15/08 Ba2 BB+ 389
435 GEO Specialty Chemicals, Inc., Senior Subordinated
Notes, 10.125%, due 8/1/08 B3 B- 404(5)
250 Loews Cineplex Entertainment Corp., Senior
Subordinated Notes, 8.875%, due 8/1/08 B3 B 242(5)
440 Albecca Inc., Senior Subordinated Notes, 10.75%,
due 8/15/08 B3 B- 416(5)
440 Bell Sports, Inc., Senior Subordinated Notes,
11.00%, due 8/15/08 B3 B- 427(5)
350 Tenet Healthcare Corp., Senior Subordinated Notes,
8.125%, due 12/1/08 Ba3 BB- 346(5)
200 KinderCare Learning Centers, Inc., Senior
Subordinated Notes, Ser. B, 9.50%, due 2/15/09 B3 B- 188
500 Diamond Brands Inc., Senior Step Up Debentures,
Yielding 12.875%, due 4/15/09 Caa1 CCC+ 242(5)
-------
TOTAL CORPORATE DEBT SECURITIES (COST $20,960) 19,497
-------
CORPORATE COMMERCIAL PAPER (7.6%)
1,724 Nestle Capital Corp., 4.75%, due 11/2/98
(COST $1,724) P-1 A-1+ 1,724(10)
-------
</TABLE>
B-37
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1998
- --------------------------------------------------------------------------------
High Yield Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Number Rating(2) Value(3)
of Units Moody's S&P (000's omitted)
- --------------- ----------- --------- ----------------
<C> <S> <C> <C> <C>
UNITS (3.7%)
250 AMSC Acquisition Co., Inc. (Each Unit consists of
$1,000 par value of Senior Notes, Ser. B, 12.25%,
due 4/1/08 and 1 American Mobile Satellite
Warrant) $ 122(12)
500 DeCrane Aircraft Holdings, Inc. (Each Unit
consists of $1,000 par value of Senior
Subordinated Notes, 12.00%, due 9/30/08 and 1
DeCrane Aircraft Holdings Warrant) Caa1 B- 485
500 MEDIQ Inc. (Each Unit consists of $1,000 par value
of Senior Step Up Debentures, Yielding 13.00%, due
6/1/09 and 1 MEDIQ Inc. Warrant) Caa1 B- 225(5)
-------
TOTAL UNITS (COST $1,030) 832
-------
TOTAL INVESTMENTS (97.4%) (COST $23,714) 22,053(11)
Cash, receivables and other assets, less
liabilities (2.6%) 586
-------
TOTAL NET ASSETS (100.0%) $ 22,639
-------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-38
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
October 31, 1998
- ----------------------------------------------------------------------
Income Managers Trust
1) Investment securities of the Portfolio are valued at amortized cost, which
approximates Federal income tax cost.
2) Credit ratings are unaudited.
3) Investment securities of the Portfolio are valued daily by obtaining bid
price quotations from independent pricing services on selected securities
available in each 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.
Foreign security prices are furnished by independent quotation services
expressed in local currency values. Foreign security prices are translated
from the local currency into U.S. dollars using current exchange rates.
Short-term debt securities with less than 60 days until maturity may be
valued at cost which, when combined with interest earned, approximates
market value.
4) Not rated by Moody's; the rating shown is from Fitch Investors Services,
Inc.
5) Security exempt from registration under the Securities Act of 1933. These
securities may be resold in transactions exempt from registration, normally
to qualified institutional buyers under Rule 144A. At October 31, 1998,
these securities amounted to $26,174,000 or 7.3% of net assets for Neuberger
Berman Limited Maturity Bond Portfolio and $9,125,000 or 40.3% of net assets
for Neuberger Berman High Yield Bond Portfolio.
6) Rated BBB by Thomson BankWatch, Inc.
7) Rated BBB- by Fitch Investors Services, Inc.
8) Rated BBB- by Duff & Phelps Credit Rating Co.
9) Principal amount is stated in the currency in which the security is
denominated.
SEK -- Swedish Krona
10) At cost, which approximates market value.
11) At October 31, 1998, selected Portfolio information on a Federal income tax
basis was as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
NEUBERGER BERMAN COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIMITED MATURITY BOND PORTFOLIO $ 350,314,000 $ 4,549,000 $3,126,000 $ 1,423,000
HIGH YIELD BOND PORTFOLIO 23,714,000 70,000 1,731,000 (1,661,000 )
</TABLE>
12) Not rated by a nationally recognized statistical rating organization.
Security is an eligible security based on a comparable quality analysis
performed by the Portfolio's investment manager.
SEE NOTES TO FINANCIAL STATEMENTS
B-39
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
GOVERNMENT
MONEY
(000'S OMITTED) PORTFOLIO
--------------
<S> <C>
ASSETS
Investments in securities, at value*
(Note A) -- see Schedule of Investments $ 364,380
Cash 5
Deferred organization costs (Note A) --
Interest receivable 3,492
Receivable for forward foreign currency
exchange contracts sold (Note C) --
Prepaid expenses and other assets 7
Receivable for securities sold --
Receivable for variation margin (Note A) --
--------------
367,884
--------------
LIABILITIES
Payable to investment manager (Note B) 79
Accrued expenses 39
--------------
118
--------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 367,766
--------------
NET ASSETS consist of:
Paid-in capital $ 367,766
Net unrealized appreciation (depreciation)
in value of investment securities,
financial futures contracts, translation
of assets and liabilities in foreign
currencies, and foreign currency contracts --
--------------
NET ASSETS $ 367,766
--------------
*Cost of investments $ 364,380
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-40
<PAGE>
October 31, 1998
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
LIMITED
CASH MATURITY HIGH YIELD
RESERVES BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value*
(Note A) -- see Schedule of Investments $ 1,024,652 $ 351,737 $ 22,053
Cash 4 32 2
Deferred organization costs (Note A) -- -- 1
Interest receivable 4,360 4,874 609
Receivable for forward foreign currency exchange
contracts sold (Note C) -- 85 --
Prepaid expenses and other assets 13 6 --
Receivable for securities sold -- 25 --
Receivable for variation margin (Note A) -- 19 --
------------------------------------------------
1,029,029 356,778 22,665
------------------------------------------------
LIABILITIES
Payable to investment manager (Note B) 215 74 7
Accrued expenses 55 48 19
------------------------------------------------
270 122 26
------------------------------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 1,028,759 $ 356,656 $ 22,639
------------------------------------------------
NET ASSETS consist of:
Paid-in capital $ 1,028,759 $ 354,869 $ 24,300
Net unrealized appreciation (depreciation) in
value of investment securities, financial
futures contracts, translation of assets and
liabilities in foreign currencies, and foreign
currency contracts -- 1,787 (1,661)
------------------------------------------------
NET ASSETS $ 1,028,759 $ 356,656 $ 22,639
------------------------------------------------
*Cost of investments $ 1,024,652 $ 350,314 $ 23,714
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-41
<PAGE>
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
GOVERNMENT
MONEY
PORTFOLIO
For the
Year
Ended
October 31,
(000'S OMITTED) 1998
------------
<S> <C>
INVESTMENT INCOME
Interest income $ 18,897
------------
Expenses:
Investment management fee (Note B) 905
Accounting fees 10
Amortization of deferred organization and initial offering
expenses (Note A) 4
Auditing fees 25
Custodian fees (Note B) 107
Insurance expense 4
Legal fees 21
Trustees' fees and expenses 26
Miscellaneous 1
------------
Total expenses 1,103
Expenses reduced by custodian fee expense offset arrangement
(Note B) --
------------
Total net expenses 1,103
------------
Net investment income 17,794
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investment securities sold 31
Net realized loss on financial futures contracts (Note A) --
Net realized loss on foreign currency transactions (Note A) --
Change in net unrealized appreciation (depreciation) of investment
securities, financial futures contracts, translation of assets
and liabilities in foreign currencies, and foreign currency
contracts (Note A) --
------------
Net gain (loss) on investments 31
------------
Net increase (decrease) in net assets resulting from
operations $ 17,825
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-42
<PAGE>
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
HIGH YIELD
BOND
PORTFOLIO
CASH LIMITED MATURITY For the
RESERVES BOND Period from
PORTFOLIO PORTFOLIO March 3, 1998
(Commencement
For the For the of
Year Year Operations)
Ended Ended to
October 31, October 31, October 31,
1998 1998 1998
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income $ 44,562 $ 22,319 $ 1,007
------------------------------------------------
Expenses:
Investment management fee (Note B) 1,914 833 43
Accounting fees 10 10 7
Amortization of deferred organization and
initial offering expenses (Note A) 3 4 --
Auditing fees 27 30 15
Custodian fees (Note B) 223 129 19
Insurance expense 10 5 --
Legal fees 44 71 10
Trustees' fees and expenses 49 23 5
Miscellaneous 1 2 1
------------------------------------------------
Total expenses 2,281 1,107 100
Expenses reduced by custodian fee expense
offset arrangement (Note B) (1) (1) --
------------------------------------------------
Total net expenses 2,280 1,106 100
------------------------------------------------
Net investment income 42,282 21,213 907
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investment
securities sold (4) (261) (42)
Net realized loss on financial futures
contracts (Note A) -- (3,657) --
Net realized loss on foreign currency
transactions (Note A) -- (646) --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, translation of
assets and liabilities in foreign
currencies, and foreign currency contracts
(Note A) -- 180 (1,661)
------------------------------------------------
Net gain (loss) on investments (4) (4,384) (1,703)
------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 42,278 $ 16,829 $ (796)
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-43
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
GOVERNMENT
MONEY PORTFOLIO
Year
Ended
October 31,
(000'S OMITTED) 1998 1997
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 17,794 $ 16,368
Net realized gain (loss) on investments 31 (3)
Change in net unrealized appreciation (depreciation) of
investments -- --
-----------------------------
Net increase (decrease) in net assets resulting from
operations 17,825 16,365
-----------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Additions 829,488 872,761
Additions related to reorganization (Note D) -- --
Reductions (787,491) (943,664)
-----------------------------
Net increase (decrease) in net assets resulting from
transactions in investors' beneficial interests 41,997 (70,903)
-----------------------------
NET INCREASE (DECREASE) IN NET ASSETS 59,822 (54,538)
NET ASSETS:
Beginning of year 307,944 362,482
-----------------------------
End of year $ 367,766 $ 307,944
-----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-44
<PAGE>
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
HIGH YIELD
BOND PORTFOLIO
CASH RESERVES LIMITED MATURITY Period from
PORTFOLIO BOND PORTFOLIO March 3, 1998
(Commencement
Year Year of Operations)
Ended Ended to
October 31, October 31, October 31,
1998 1997 1998 1997 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 42,282 $ 32,775 $ 21,213 $ 18,661 $ 907
Net realized gain (loss) on
investments (4) (7) (4,564) (990) (42)
Change in net unrealized
appreciation (depreciation) of
investments -- -- 180 2,266 (1,661)
--------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 42,278 32,768 16,829 19,937 (796)
--------------------------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 1,091,774 994,311 71,026 61,720 25,827
Additions related to
reorganization (Note D) -- -- 54,073 -- --
Reductions (771,057) (845,290) (78,238) (56,000) (2,392)
--------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
transactions in investors'
beneficial interests 320,717 149,021 46,861 5,720 23,435
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 362,995 181,789 63,690 25,657 22,639
NET ASSETS:
Beginning of year 665,764 483,975 292,966 267,309 --
--------------------------------------------------------------------------------
End of year $ 1,028,759 $ 665,764 $ 356,656 $ 292,966 $ 22,639
--------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-45
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
- ----------------------------------------------------------------------
Income Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Government Money Portfolio ("Government Money"),
Neuberger Berman Cash Reserves Portfolio ("Cash Reserves"), Neuberger Berman
Limited Maturity Bond Portfolio ("Limited Maturity"), and Neuberger Berman
High Yield Bond Portfolio ("High Yield") (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. High Yield had no
operations until March 3, 1998, other than matters relating to its
organization and registration as a series of Managers Trust. 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
("Management"), whose financial statements are not presented herein, also
invest in these and other Portfolios of 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) FOREIGN CURRENCY TRANSLATION: Limited Maturity and High Yield may invest in
foreign securities denominated in foreign currency. The accounting records of
the Portfolios are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the current rate of exchange of such currency
against the U.S. dollar to determine the value of investments, other assets
and liabilities. Purchase and sale prices of securities, and income and
expenses are translated into U.S. dollars at the prevailing rate of exchange
on the respective dates of such transactions.
4) FORWARD FOREIGN CURRENCY CONTRACTS: Limited Maturity and High Yield may each
enter into forward foreign currency contracts ("contracts") in connection
with planned purchases or sales of securities to hedge the U.S. dollar value
of portfolio securities denominated in a foreign currency. The gain or loss
arising from the difference between the original contract price and the
closing price of such contract is included in net realized gains or losses on
foreign currency transactions. Fluctuations in the value of forward foreign
currency contracts are recorded for financial reporting purposes as
unrealized gains or losses by the Portfolios. Neither Portfolio has a
specific limitation on the percentage of assets which may be committed to
these types of contracts. The Portfolios could be
B-46
<PAGE>
exposed to risks if a counterparty to a contract were unable to meet the
terms of its contract or if the value of the foreign currency changes
unfavorably. The U.S. dollar value of foreign currency underlying all
contractual commitments held by the Portfolios is determined using forward
foreign currency exchange rates supplied by an independent pricing service.
5) FINANCIAL FUTURES CONTRACTS: Limited Maturity and High Yield may each buy and
sell financial futures contracts to hedge against changes in securities
prices resulting from changes in prevailing 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 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 Portfolios 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 Portfolios. 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.
During the period from March 3, 1998 (Commencement of Operations) to
October 31, 1998, High Yield did not enter into any financial futures
contracts.
B-47
<PAGE>
At October 31, 1998, open positions in financial futures contracts for
Limited Maturity were as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
EXPIRATION OPEN CONTRACTS POSITION (DEPRECIATION)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 1998 505 U.S. Treasury Notes, 2 Year Long $ 757,000
December 1998 65 U.S. Treasury Notes, 5 Year Short (82,000)
December 1998 250 U.S. Treasury Notes, 10 Year Short (398,000)
</TABLE>
At October 31, 1998, Limited Maturity had the following securities
deposited in a segregated account to cover margin requirements on open
financial futures contracts:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY
- --------------------------------------------------------------------------------------
<C> <S>
$ 410,000 Fort James Corp., Senior Notes, 6.50%, due 9/15/02
1,480,000 Chase Credit Card Master Trust, Ser. 1997-2, Class A, 6.30%, due 4/15/03
</TABLE>
6) 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, where applicable, is recorded on the accrual basis.
Realized gains and losses from securities transactions and foreign currency
transactions are recorded on the basis of identified cost.
7) 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.
8) ORGANIZATION EXPENSES: Expenses incurred by High Yield in connection with its
organization are being amortized on a straight-line basis over a five-year
period. At October 31, 1998, the unamortized balance of such expenses
amounted to $1,407. Organization expenses incurred by Government Money, Cash
Reserves, and Limited Maturity were fully amortized as of October 31, 1998.
9) 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-48
<PAGE>
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
(except High Yield) pays 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. High
Yield pays Management a fee for investment management services at the annual
rate of 0.38% of the first $500 million of that Portfolio's average daily net
assets, 0.355% of the next $500 million, 0.33% of the next $500 million, 0.305%
of the next $500 million, and 0.28% of average daily net assets in excess of $2
billion.
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 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 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 $166, $1,395,
$510, and $81 for Government Money, Cash Reserves, Limited Maturity, and High
Yield, respectively.
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended October 31, 1998, there were purchase and sale
transactions (excluding short-term securities, financial futures contracts, and
forward foreign currency contracts) as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- -----------------------------------------------------------------------
<S> <C> <C>
LIMITED MATURITY $ 130,329,000 $ 156,934,000
HIGH YIELD 24,097,000 2,151,000
</TABLE>
All securities transactions for Government Money and Cash Reserves were
short-term.
During the year ended October 31, 1998, Limited Maturity had entered into
various contracts to deliver currencies at specified future dates. At October
31, 1998, open contracts were as follows:
<TABLE>
<CAPTION>
NET
CONTRACTS IN EXCHANGE SETTLEMENT UNREALIZED
SALES TO DELIVER FOR DATE VALUE APPRECIATION
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
German Mark 11,730,000 $7,173,000 11/19/98 $ 7,088,000 $85,000
</TABLE>
B-49
<PAGE>
NOTE D -- REORGANIZATION:
On February 27, 1998, Limited Maturity acquired all of the net assets of
Neuberger Berman Ultra Short Bond Portfolio ("Ultra Short") pursuant to a plan
of reorganization approved by the Board of Trustees on September 24, 1997. This
was accomplished by Neuberger Berman Ultra Short Bond Fund and Neuberger Berman
Ultra Short Bond Trust withdrawing their assets from Ultra Short and reinvesting
those assets in Limited Maturity. The reorganization was tax-free to investors.
Ultra Short's net assets as of February 27, 1998 ($54,072,964), including
$338,550 of unrealized appreciation, were combined with those of Limited
Maturity. The aggregate net assets of Limited Maturity and Ultra Short
immediately before the reorganization were $297,668,015 and $54,072,964,
respectively, resulting in aggregate net assets of $351,740,979 immediately
after the reorganization.
B-50
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Government Money Portfolio
<TABLE>
<CAPTION>
Year Ended October 31,
1998 1997 1996 1995 1994
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .31% .30% .31% .31% --
-------------------------------------------------------
Net Expenses .31% .30% .31% .31% .33%
-------------------------------------------------------
Net Investment Income 4.93% 4.96% 4.99% 5.32% 3.38%
-------------------------------------------------------
Net Assets, End of Year (in millions) $367.8 $307.9 $362.5 $308.5 $251.6
-------------------------------------------------------
</TABLE>
1) 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.
B-51
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Cash Reserves Portfolio
<TABLE>
<CAPTION>
Year Ended October 31,
1998 1997 1996 1995 1994
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .29% .29% .30% .31% --
---------------------------------------------------------
Net Expenses .29% .29% .30% .31% .32%
---------------------------------------------------------
Net Investment Income 5.33% 5.31% 5.20% 5.62% 3.63%
---------------------------------------------------------
Net Assets, End of Year (in millions) $1,028.8 $665.8 $484.0 $409.2 $312.0
---------------------------------------------------------
</TABLE>
1) 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.
B-52
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
Year Ended October 31,
1998 1997 1996 1995 1994
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .33% .33% .33% .33% --
-------------------------------------------------------
Net Expenses .33% .33% .33% .33% .34%
-------------------------------------------------------
Net Investment Income 6.38% 6.70% 6.45% 6.55% 5.86%
-------------------------------------------------------
Portfolio Turnover Rate 44% 89% 169% 88% 102%
-------------------------------------------------------
Net Assets, End of Year (in millions) $356.7 $293.0 $267.3 $319.6 $316.1
-------------------------------------------------------
</TABLE>
1) 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.
B-53
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
High Yield Bond Portfolio
<TABLE>
<CAPTION>
Period from
March 3, 1998(1)
to October 31,
1998
----------------
<S> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(2)(3) .89%
----------------
Net Expenses(3) .89%
----------------
Net Investment Income(3) 8.13%
----------------
Portfolio Turnover Rate 16%
----------------
Net Assets, End of Period (in millions) $22.6
----------------
</TABLE>
1) The date investment operations commenced.
2) The Portfolio is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
3) Annualized.
B-54
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Income Managers Trust and
Owners of Beneficial Interest of
Neuberger Berman Government Money Portfolio
Neuberger Berman Cash Reserves Portfolio
Neuberger Berman Limited Maturity Bond Portfolio and
Neuberger Berman High Yield Bond Portfolio
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Neuberger Berman Government Money
Portfolio, Neuberger Berman Cash Reserves Portfolio, Neuberger Berman Limited
Maturity Bond Portfolio, and Neuberger Berman High Yield Bond Portfolio, four of
the series constituting Income Managers Trust (the "Trust"), as of October 31,
1998, and the related statements of operations, the statements of changes in net
assets, and 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, 1998, by correspondence with the custodian.
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, 1998, the
results of their operations, the changes in their net assets, and their
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
[SIGNATURE]
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 4, 1998
B-55
<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, NW
2nd Floor
Washington, DC 20036-1800
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
Neuberger Berman Management Inc., Neuberger Berman Government Money Fund,
Neuberger Berman Cash Reserves, Neuberger Berman Limited Maturity Bond Fund,
Neuberger Berman High Yield Bond Fund, and Neuberger Berman Income Funds 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
<PAGE>
Notice to Shareholders (Unaudited)
Under most state tax laws, mutual fund dividends which are derived from
direct investments in U.S. Government obligations are not taxable, as long as a
Fund meets certain requirements. Some states require that a Fund must provide
shareholders with a written notice, within 60 days of the close of a Fund's
taxable year, designating the portion of the dividends which represents interest
which those states consider to have been earned on U.S. Government obligations.
The chart below shows the percentage of income derived from such investments for
the twelve months ended October 31, 1998 for Neuberger Berman Government Money
Fund, Neuberger Berman Cash Reserves, and Neuberger Berman Limited Maturity Bond
Fund. For Neuberger Berman Ultra Short Bond Fund, the percentage of income shown
is for the period from November 1, 1997 to February 27, 1998. For Neuberger
Berman High Yield Bond Fund, the percentage of income shown is for the period
from March 3, 1998 (Commencement of Operations) to October 31, 1998. This
information should not be used to complete your tax returns.
<TABLE>
<CAPTION>
CALIFORNIA,
CONNECTICUT, AND MAINE AND NEW ALL OTHER
NEUBERGER BERMAN NEW YORK HAMPSHIRE STATES
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
GOVERNMENT MONEY FUND 100.0% 100.0% 100.0%
CASH RESERVES 0.0 0.0 0.7
ULTRA SHORT BOND FUND 0.0 17.7 18.9
LIMITED MATURITY BOND FUND 0.0 2.8 4.6
HIGH YIELD BOND FUND 0.0 0.0 6.1
</TABLE>
In January 1999 you will receive information to be used in filing your 1998
tax returns, which will include a notice of the exact tax status of all
dividends paid to you by each Fund during calendar 1998. Please consult your own
tax advisor for details as to how this information should be reflected on your
tax returns.
C-3
<PAGE>
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.
NEUBERGER BERMAN
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
INSTITUTIONAL SERVICES
800.366.6264
WWW.NBFUNDS.COM
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