<PAGE>
NEUBERGER BERMAN
Neuberger Berman
Income Funds -Registered Trademark-
----------------------------------------------------------
GOVERNMENT MONEY FUND
CASH RESERVES ANNUAL REPORT
LIMITED MATURITY BOND FUND OCTOBER 31, 1999
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-1
High Yield Bond Fund B-2
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 C-1
Cash Reserves Portfolio C-2
Limited Maturity Bond
Portfolio C-5
High Yield Bond Portfolio C-12
FINANCIAL STATEMENTS C-20
FINANCIAL HIGHLIGHTS
Government Money Portfolio C-30
Cash Reserves Portfolio C-31
Limited Maturity Bond
Portfolio C-32
High Yield Bond Portfolio C-33
REPORT OF INDEPENDENT
AUDITORS C-34
DIRECTORY D-1
OFFICERS AND TRUSTEES D-2
</TABLE>
The "Neuberger Berman" name and logo are service
marks of Neuberger Berman, LLC. "Neuberger Berman
Management Inc." and the individual fund names in
this report are either service marks or registered
trademarks of Neuberger Berman Management Inc.
-C-1999
A-3
<PAGE>
PRESIDENT'S LETTER December 20, 1999
Dear Shareholder,
Fiscal 1999 was a challenging year for fixed income investors. Although
inflation remained modest, market interest rates trended higher and the Federal
Reserve took steps to head off any potential inflationary threat. The bond
market also had a slight case of the Y2K jitters, which we expect to pass as we
enter the new millennium. Finally, bonds suffered from supply/demand imbalances
in the market resulting from issuers attempting to take maximum advantage of low
interest rates at the beginning of this reporting period. All these factors
combined put pressure on bond prices. Of course, one of the great advantages of
bonds is that yield can compensate for price declines. We are pleased to report
that all of our taxable fixed income funds were able to post positive total
returns in a declining market.
Over the long term, markets are quite rational. Over the short term, however,
investor emotion drives markets to extremes. Remarkably, just a little more than
a year ago, bond investors were giddy over consensus forecasts for moderate
economic growth and subdued inflation -- a "best of all possible worlds" for
bonds. Then, with Asia recovering faster than anticipated, European economies
regaining momentum, and the U.S. economy picking up steam, the consensus
shifted. The surprisingly strong global economy reignited inflationary concerns,
excessive optimism gave way to extreme pessimism, and bonds started to retreat.
At Neuberger Berman, we don't get carried away by emotion. A year ago, we
believed bond investors were overconfident. Today, we feel they are unduly
depressed. We believe inflationary concerns are already well discounted in the
market, as are any reasonably foreseeable Y2K-oriented problems. There is plenty
of liquidity in most sectors of the fixed income market and reduced new issuance
is helping correct supply/demand imbalances. We can't predict what the Fed will
do over the next six months, or the precise impact Fed policy will have on the
bond market. However, with attractive nominal and real yields (yield in excess
of the prevailing rate of inflation), we believe bonds offer great longer-term
value.
This is not to say that the bond market will reverse course in the immediate
future. Right now, investors can't seem to see the forest -- very attractive
bond yields -- through all the trees -- the government's
A-4
<PAGE>
latest monthly economic reports and Fed Chairman Greenspan's every utterance.
This short-term focus may continue to restrain bond prices. However, from our
perspective as long-term investors, we think it is a wonderful opportunity to
buy bonds at very attractive valuations.
What will we be doing to add value to the fixed income investment process in
the year ahead? The same things we always do -- seeking to identify undervalued
securities in the most fundamentally attractive sectors, and to effectively
manage interest rate risk. We are confident this remains the single best method
of preserving and enhancing the assets you have entrusted to us.
NEUBERGER BERMAN GOVERNMENT MONEY FUND AND CASH RESERVES When the stock and
bond markets are healthy, cash (government money and money market funds) is said
to be trash. In fiscal 1999, trash turned into treasure. Rising interest rates
had a negative impact on intermediate and longer-term bond prices and restrained
bond fund total returns throughout most of this reporting period. In the summer
and early fall, rising rates sparked a significant stock market correction.
Through it all, the Neuberger Berman Government Money and Cash Reserves
portfolios fulfilled their "port in the storm" role by protecting capital and
providing respectable real rates of return. As of October 31, 1999, Government
Money had current and effective yields of 4.25% and 4.34% respectively and Cash
Reserves had current and effective yields of 4.80% and 4.91% respectively.*
Fiscal 1999 saw substantial changes in the money markets. Following the
financial crises of last summer/early fall, we began the year with an inverted
yield curve. Ninety-day Treasuries yielded 4.25% versus 4.17% for 1-year
Treasuries, and 30-day commercial paper yielded 5.15% compared to 4.72% for
270-day commercial paper. As confidence was restored in the markets, the yield
curve returned to normal. At the close of fiscal 1999, 90-day Treasuries yielded
4.88% versus 1-year Treasuries yields of 5.44%, and 30-day commercial paper
yielded 5.32% compared to 270-day paper yields of 6.06%. In short, investors
once again demanded higher yields from longer maturity instruments.
The only distortion in this mirror image yield curve was Y2K related. Early in
the year, investors were willing to give up yield on Treasuries maturing past
the perceived Y2K danger period, while they demanded a yield premium on
commercial paper with comparable maturities. This anomaly was corrected in the
Treasury market, when
A-5
<PAGE>
the Federal Reserve made it clear it would provide the marketplace with whatever
liquidity was necessary to protect from any Y2K-related distortions.
We steadily reduced both portfolios' weighted average maturity (WAM) as
interest rates trended higher. By reducing WAM when interest rates were
advancing, we were able to roll over shorter maturity securities into higher
yielding instruments more quickly. As interest rates stabilized, we extended WAM
to enhance portfolio yields.
At the end of June, we began significantly increasing Cash Reserves'
allocation to U.S. Government Agencies and reducing exposure to commercial
paper. This was a hedging strategy against the potential for any last minute
liquidity squeeze in relation to Y2K. We did not have to give up much yield in
exchange for the downside protection offered by more liquid U.S. Agencies,
because Agency debt was in such heavy supply that the rates were very
competitive. Over the full fiscal year, we also increased our exposure to
variable rate securities (variable rate demand notes, funding agreements, and
floating rate notes) in response to rising interest rates.
Looking ahead to fiscal 2000, we can't predict what the stock and bond markets
will do. We are confident the Government Money and Cash Reserves portfolios can
continue to fulfill their role of providing secure and productive vehicles to
preserve and enhance a portion of your assets.
NEUBERGER BERMAN LIMITED MATURITY BOND FUND During fiscal 1999, we employed
several strategies to preserve and enhance assets in a declining bond market. We
maintained a relatively short portfolio duration through the end of June to
diminish interest rate sensitivity as market interest rates trended higher.
Following the Federal Reserve's first rate hike, we gradually extended duration.
With interest rates stabilizing during the last three months of this reporting
period, performance ultimately benefited from the higher yields achieved by
extending portfolio duration.
We also made changes in sector allocation, most notably substantially
increasing our exposure to mortgage-backed securities -- primarily Government
National Mortgage Association "Ginnie Mae" bonds. Ginnie Mae's are backed by the
full faith and credit of the U.S. Government, but provide a large yield
advantage over Treasuries. We began building up our positions in early 1999, and
in July, added to our
A-6
<PAGE>
positions when Ginnie Mae's were yielding, in some cases, as much as 200 basis
points (2%) more than comparable maturity Treasury Bonds. Mortgage securities
generally don't respond well to interest rate volatility. When rates are falling
rapidly, increased prepayment risk restrains mortgage bond prices. When rates
are rising rapidly, mortgage securities prices are depressed by slower
pre-payments, which stretch out the average life of a mortgage security and
increase interest rate sensitivity. However, when interest rates remain in a
relatively narrow trading range -- as they did in the last several months of
fiscal 1999 -- mortgage securities have generally performed quite well. By the
end of July, mortgage securities comprised approximately 25% of portfolio
assets. The stellar performance of this sector in the last two months of fiscal
1999 made a substantial contribution to the portfolio's total return.
In May, we reduced our allocation to corporate bonds, which we believed would
underperform if and when the Fed hiked rates. In July, we increased our
allocation to Treasuries. Following the Fed's first rate hike in June,
Treasuries outperformed equal duration corporates for the balance of the
reporting period.
Looking ahead to fiscal 2000, we expect to see a better environment for bonds.
We can't be sure of what the Federal Reserve will do over the next six months,
but we think the potential for an additional rate hike is already fully
discounted in the market. Our sense is that interest rates are close to a peak.
Regardless of the short-term outlook for interest rates, nominal yields are now
quite attractive and real yields (yield above inflation) are in a range that has
historically signaled a good long term buying opportunity.
NEUBERGER BERMAN HIGH YIELD BOND FUND High-yield bonds performed relatively
well through the first eight months of fiscal 1999, but declined sharply from
July through late October, before regaining equilibrium in the last week of this
reporting period. The high-yield sector's materially higher yields compensated
for price erosion and the portfolio was able to post a modest total return for
the full fiscal year.
A heavy new issue calendar resulted in excess supply in the high yield market
in the second half of fiscal 1999. New issue inventory was priced to move,
putting an additional strain on high-yield bond prices as interest rates trended
higher in the summer and early fall. At the same time, liquidity diminished.
High-yield mutual funds suffered net redemptions and had little cash to spend.
Lower issuance of Collateralized
A-7
<PAGE>
Bond Obligations (private pools of institutional capital designed to take
advantage of the credit scales in the high-yield sector), further reduced
liquidity. Also, high-yield dealers responded to the weak market by decreasing
trading positions. Finally, the high-yield market was rattled by sharp declines
in the bonds of marginal issuers reporting disappointing operating results.
As high-yield bond prices declined, yields increased. We believe these higher
yields are beginning to attract money back into the high-yield sector. The soft
high-yield market has also eliminated excesses. New issue calendars are now
thinner, helping rebalance supply and demand. Also, issues coming to market are
of better quality. This should help restore confidence in high-yield securities.
We likely will be making some subtle changes in the portfolio in response to
changing market conditions. We are focusing our attention on larger, more liquid
issues whose prices should remain more stable during periods when market
liquidity is constrained. We may also increase our exposure to value oriented
opportunities in growth industries like technology and telecommunications.
Let us give you an example of the kind of high-yield security we find
attractive. Recently, we took a position in high-yield bonds issued by Williams
Communications Group, Inc (2.1% of total net assets as of 10/31/99). Williams
Communications owns and operates a national fiber optic telecommunications
network. We believe Williams Communications' business fundamentals will remain
quite strong, providing more than adequate support for the bonds. We were able
to buy this new issue at a modest discount to par value, providing an 11% yield.
It traded up quickly to a premium to par value, a 3.5% capital appreciation
boost. Currently, demand for these bonds remains firm, giving us some confidence
that they have additional value.
In fiscal 2000, we look for a more rewarding high-yield market. Barring a
recession -- and we think the Fed will be very careful not to jeopardize
economic expansion by overly aggressive monetary policy -- we expect corporate
cash flows to remain strong enough to support high-yield interest payments. We
believe market interest rates
A-8
<PAGE>
will stabilize around current levels, and perhaps, trend down if and when we see
more evidence of economic deceleration. This would provide a capital
appreciation tailwind for high-yield portfolios.
Sincerely,
/s/ Theodore P. Giuliano
Theodore P. Giuliano
President and Trustee
Neuberger Berman Income Funds
*An investment in either Government Money Fund or Cash Reserves, like all other
mutual funds, is neither insured nor guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the funds seek
to preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the funds. 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 funds
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 funds 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-9
<PAGE>
(This page has been left blank intentionally.)
A-10
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman October 31, 1999
- ----------------------------------------------------------------------
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 +1.98% +2.99%
5 Year +5.50% +6.39%
10 Year +6.10% +6.69%
Life of Fund +6.44% +7.03%
Limited Maturity Merrill Lynch 1-3
Bond Fund Year Treasury Index(2)
1989 $10,000 $10,000
1990 $10,785 $10,875
1991 $11,960 $12,101
1992 $12,901 $13,092
1993 $13,816 $13,854
1994 $13,833 $14,019
1995 $14,984 $15,273
1996 $15,799 $16,176
1997 $16,899 $17,225
1998 $17,730 $18,552
1999 $18,082 $19,107
</TABLE>
Neuberger Berman Limited Maturity Bond Fund commenced operations on 6/9/86.
Neuberger Berman Management Inc. ("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 (excluding taxes, interest,
brokerage commissions and extraordinary 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
arrangement, the average annual total returns would have been less.
1. "Total Return" includes reinvestment of all dividends and 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 may invest in many securities not included in the
above-described index.
B-1
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman October 31, 1999
- ----------------------------------------------------------------------
High Yield Bond Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
High Yield Lehman Brothers High
Bond Fund Yield Bond Index(2)
1 Year +1.86% +4.34%
Life of Fund +0.08% -0.27%
Lehman Brothers
High Yield
High Yield Bond Fund Bond Index
3/3/98 $10,000 $10,000
10/31/98 $9,831 $9,541
1999 $10,014 $9,956
</TABLE>
Neuberger Berman High Yield Bond Fund 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 (excluding taxes, interest, brokerage
commissions and extraordinary 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 arrangement, the
average annual total returns would have been less.
1. "Total Return" includes reinvestment of all dividends and 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 may invest in many
securities not included in the above-described index.
B-2
<PAGE>
(This page has been left blank intentionally.)
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) $ 653,867
Deferred organization costs (Note A) --
Receivable for Trust shares sold 377
-------------
654,244
-------------
LIABILITIES
Dividends payable 12
Payable for Trust shares redeemed 616
Payable to administrator -- net (Note B) 156
Accrued expenses 83
-------------
867
-------------
NET ASSETS at value $ 653,377
-------------
NET ASSETS consist of:
Par value $ 653
Paid-in capital in excess of par value 652,724
Dividends in excess of net investment income --
Accumulated net realized losses on
investment --
Net unrealized depreciation in value of
investment --
-------------
NET ASSETS at value $ 653,377
-------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 653,377
-------------
NET ASSET VALUE, offering and redemption price per
share $1.00
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-4
<PAGE>
October 31, 1999
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
CASH LIMITED MATURITY HIGH YIELD
RESERVES BOND FUND BOND FUND
<S> <C> <C> <C>
----------------------------------------------
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $ 1,105,633 $ 228,422 $ 24,022
Deferred organization costs (Note A) -- -- 48
Receivable for Trust shares sold 1,069 26 1
----------------------------------------------
1,106,702 228,448 24,071
----------------------------------------------
LIABILITIES
Dividends payable 30 244 77
Payable for Trust shares redeemed 2,051 1,006 165
Payable to administrator -- net (Note B) 262 62 7
Accrued expenses 194 95 16
----------------------------------------------
2,537 1,407 265
----------------------------------------------
NET ASSETS at value $ 1,104,165 $ 227,041 $ 23,806
----------------------------------------------
NET ASSETS consist of:
Par value $ 1,104 $ 24 $ 3
Paid-in capital in excess of par value 1,103,087 252,925 27,495
Dividends in excess of net investment income -- (105) --
Accumulated net realized losses on
investment (26) (20,369) (1,248)
Net unrealized depreciation in value of
investment -- (5,434) (2,444)
----------------------------------------------
NET ASSETS at value $ 1,104,165 $ 227,041 $ 23,806
----------------------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 1,104,191 23,872 2,744
----------------------------------------------
NET ASSET VALUE, offering and redemption price per
share $1.00 $9.51 $8.68
----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-5
<PAGE>
STATEMENTS OF OPERATIONS
Neuberger Berman
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
GOVERNMENT
(000'S OMITTED) MONEY FUND
<S> <C>
-----------
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 28,027
-----------
Expenses:
Administration fee (Note B) 1,621
Amortization of deferred organization and
initial offering expenses (Note A) --
Auditing fees 9
Custodian fees 10
Legal fees 14
Registration and filing fees 34
Shareholder reports 39
Shareholder servicing agent fees 96
Trustees' fees and expenses 33
Miscellaneous 30
Expenses from corresponding Portfolio
(Notes A & B) 1,703
-----------
Total expenses 3,589
Expenses reimbursed by administrator and/or
reduced by custodian fee expense offset
arrangement (Note B) --
-----------
Total net expenses 3,589
-----------
Net investment income 24,438
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized loss on investment securities --
Net realized loss on financial futures
contracts --
Net realized gain 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 loss on investments from corresponding
Portfolio (Note A) --
-----------
Net increase in net assets resulting from
operations $ 24,438
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-6
<PAGE>
For the Year Ended October 31, 1999
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
CASH LIMITED MATURITY HIGH YIELD
RESERVES BOND FUND BOND FUND
<S> <C> <C> <C>
-------------------------------------------
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 54,196 $ 17,357 $ 2,658
-------------------------------------------
Expenses:
Administration fee (Note B) 2,845 703 71
Amortization of deferred organization and
initial offering expenses (Note A) -- -- 14
Auditing fees 9 4 5
Custodian fees 10 10 10
Legal fees 16 16 18
Registration and filing fees 74 29 23
Shareholder reports 98 49 11
Shareholder servicing agent fees 384 224 22
Trustees' fees and expenses 52 16 6
Miscellaneous 48 14 2
Expenses from corresponding Portfolio
(Notes A & B) 2,835 818 192
-------------------------------------------
Total expenses 6,371 1,883 374
Expenses reimbursed by administrator and/or
reduced by custodian fee expense offset
arrangement (Note B) -- (58) (112)
-------------------------------------------
Total net expenses 6,371 1,825 262
-------------------------------------------
Net investment income 47,825 15,532 2,396
-------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized loss on investment securities (4) (3,201) (1,200)
Net realized loss on financial futures
contracts -- (195) (6)
Net realized gain on foreign currency
transactions -- 74 --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, translation of
assets and liabilities in foreign
currencies, and foreign currency contracts -- (6,966) (783)
-------------------------------------------
Net loss on investments from corresponding
Portfolio (Note A) (4) (10,288) (1,989)
-------------------------------------------
Net increase in net assets resulting from
operations $ 47,821 $ 5,244 $ 407
-------------------------------------------
</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) 1999 1998
<S> <C> <C>
--------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 24,438 $ 16,612
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) -- 31
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) -- --
--------------------------
Net increase (decrease) in net
assets resulting from operations 24,438 16,643
--------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (24,438) (16,612)
Net realized gain on investments (22) --
--------------------------
Total distributions to shareholders (24,460) (16,612)
--------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 1,208,139 924,226
Proceeds received in connection with
merger (Note D) -- --
Proceeds from reinvestment of
dividends and distributions 24,307 16,433
Payments for shares redeemed (946,644) (881,250)
--------------------------
Net increase (decrease) from Trust
share transactions 285,802 59,409
--------------------------
NET INCREASE (DECREASE) IN NET ASSETS 285,780 59,440
NET ASSETS:
Beginning of year 367,597 308,157
--------------------------
End of year $ 653,377 $ 367,597
--------------------------
NUMBER OF TRUST SHARES:
Sold 1,208,139 924,226
Issued in connection with merger
(Note D) -- --
Issued on reinvestment of dividends
and distributions 24,307 16,433
Redeemed (946,644) (881,250)
--------------------------
Net increase (decrease) in shares
outstanding 285,802 59,409
--------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-8
<PAGE>
- ----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
CASH LIMITED MATURITY HIGH YIELD
RESERVES BOND FUND BOND FUND
Period from
March 3, 1998
Year Year Year (Commencement
Ended Ended Ended of Operations) to
October 31, October 31, October 31, October 31,
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 47,825 $ 39,567 $ 15,532 $ 17,005 $ 2,396 $ 895
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) (4) (4) (3,322) (3,885) (1,206) (42)
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) -- -- (6,966) 186 (783) (1,661)
---------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 47,821 39,563 5,244 13,306 407 (808)
---------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (47,825) (39,567) (15,781) (16,966) (2,396) (895)
Net realized gain on investments -- -- -- -- -- --
---------------------------------------------------------------------------------------
Total distributions to shareholders (47,825) (39,567) (15,781) (16,966) (2,396) (895)
---------------------------------------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 1,564,077 1,612,173 83,283 108,089 18,400 28,413
Proceeds received in connection with
merger (Note D) -- -- -- 44,974 -- --
Proceeds from reinvestment of
dividends and distributions 46,947 39,064 12,908 14,489 1,316 460
Payments for shares redeemed (1,531,409) (1,290,742) (153,837) (124,074) (16,511) (4,580)
---------------------------------------------------------------------------------------
Net increase (decrease) from Trust
share transactions 79,615 360,495 (57,646) 43,478 3,205 24,293
---------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 79,611 360,491 (68,183) 39,818 1,216 22,590
NET ASSETS:
Beginning of year 1,024,554 664,063 295,224 255,406 22,590 --
---------------------------------------------------------------------------------------
End of year $ 1,104,165 $ 1,024,554 $ 227,041 $ 295,224 $ 23,806 $ 22,590
---------------------------------------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 1,564,077 1,612,173 8,570 10,819 1,956 2,844
Issued in connection with merger
(Note D) -- -- -- 4,493 -- --
Issued on reinvestment of dividends
and distributions 46,947 39,064 1,331 1,451 142 47
Redeemed (1,531,409) (1,290,742) (15,831) (12,422) (1,772) (473)
---------------------------------------------------------------------------------------
Net increase (decrease) in shares
outstanding 79,615 360,495 (5,930) 4,341 326 2,418
---------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger Berman October 31, 1999
- ----------------------------------------------------------------------
Income Funds
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Government Money Fund ("Government Money"),
Neuberger Berman Cash Reserves ("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. 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. 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 trustees of the Trust may
establish additional series or classes of shares without the approval of
shareholders.
The assets of each Fund belong only to that Fund, and the liabilities of
each Fund are borne solely by that Fund 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%, 84.56%, and 100.00%, for Government Money,
Cash Reserves, Limited Maturity, and High Yield, respectively, at
October 31, 1999). 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 of these Funds 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.
3) TAXES: The Funds are treated as separate entities for U.S. Federal income tax
purposes. It is the policy of each Fund to continue to qualify as regulated
B-10
<PAGE>
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 U.S.
Federal income tax purposes as capital loss carryforwards) sufficient to
relieve it from all, or substantially all, U.S. Federal income taxes.
Accordingly, each Fund paid no U.S. Federal income taxes and no provision for
U.S. 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, $4,112, and $3,565
expiring in 2002, 2003, 2005, 2006, and 2007, respectively, for Cash
Reserves; $533,438, $1,362,347, $5,043,103, $4,309,358, $1,607,920, $517,222,
$3,229,127, and $3,698,620 expiring in 2000, 2001, 2002, 2003, 2004, 2005,
2006, and 2007, respectively, for Limited Maturity; and $42,133 and
$1,206,076 expiring in 2006 and 2007, respectively, for High Yield,
determined as of October 31, 1999), it is the policy of each Fund not to
distribute such gains. The capital loss carryforwards shown above for Limited
Maturity include $533,438, $1,362,347, $329,262, and $552,290 expiring in
2000, 2001, 2002, and 2003, respectively, which were acquired on
February 27, 1998 in the merger with Neuberger Berman Ultra Short Bond Fund
("Ultra Short"). The use of these losses to offset future gains may be
limited in a given year. During the year ended October 31, 1999, $774,663 was
reclassified from accumulated net realized losses on investment to paid-in
capital for Limited Maturity due to the expiration of a capital loss
carryforward. This change had no effect on the net assets or net asset value
per share.
Each Fund distinguishes between dividends on a tax basis and a financial
reporting basis and only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains.
5) 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, 1999, the unamortized balance of such expenses
amounted to $48,104.
B-11
<PAGE>
6) EXPENSE ALLOCATION: Each Fund bears all costs of its operations. Expenses
incurred by the Trust with respect to any two or more funds are allocated in
proportion to the net assets of such funds, except where a more appropriate
allocation of expenses to each fund can otherwise be made fairly. Expenses
directly attributable to a fund are charged to that fund.
7) OTHER: All net investment income and realized and unrealized capital gains
and losses of each Portfolio are allocated pro rata among its respective
Funds and any other investors in the Portfolio.
NOTE B -- ADMINISTRATION FEES, DISTRIBUTION ARRANGEMENTS, AND OTHER TRANSACTIONS
WITH AFFILIATES:
Each Fund retains Neuberger Berman Management Inc. ("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 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%, 0.70%, and 1.00%, respectively, per annum of their average
daily net assets (each an "Expense Limitation"). 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, 1999, such excess expenses
amounted to $53,915 and $111,347, for Limited Maturity and High Yield,
respectively. For the year ended October 31, 1999, 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. For the year ended
October 31, 1999, High Yield has not reimbursed Management.
Management and Neuberger Berman, LLC ("Neuberger"), a member firm of The New
York Stock Exchange and sub-adviser to each Portfolio, are wholly owned
subsidiaries of Neuberger Berman Inc., a publicly held company. Several
individuals who are officers and/or trustees of the Trust are also employees of
Neuberger and/or 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
$227, $230, $4,292, and $479, for Government Money, Cash Reserves, Limited
Maturity, and High Yield, respectively.
NOTE C -- INVESTMENT TRANSACTIONS:
During the year ended October 31, 1999, additions and reductions in each
Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
- ---------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT MONEY $1,124,520,000 $ 864,743,000
CASH RESERVES 1,035,872,000 1,010,355,000
LIMITED MATURITY 35,168,000 108,899,000
HIGH YIELD 13,190,000 12,284,000
</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,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
---------------------------------------------------
Net Asset Value, Beginning of Year $1.0001 $1.0000 $1.0000 $1.0000 $1.0000
---------------------------------------------------
Income From Investment Operations
Net Investment Income .0406 .0459 .0468 .0464 .0499
Net Gains or Losses on Securities -- .0001 -- -- --
---------------------------------------------------
Total From Investment Operations .0406 .0460 .0468 .0464 .0499
---------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.0406) (.0459) (.0468) (.0464) (.0499)
Distributions (from net capital
gains) (.0001) -- -- -- --
---------------------------------------------------
Total Distributions (.0407) (.0459) (.0468) (.0464) (.0499)
---------------------------------------------------
Net Asset Value, End of Year $1.0000 $1.0001 $1.0000 $1.0000 $1.0000
---------------------------------------------------
Total Return(2) +4.14% +4.69% +4.78% +4.74% +5.10%
---------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 653.4 $ 367.6 $ 308.2 $ 363.4 $ 308.3
---------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(3) .60% .64% .64% .67% .65%
---------------------------------------------------
Ratio of Net Expenses to Average Net
Assets .60% .63% .63% .67% .65%
---------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 4.08% 4.61% 4.65% 4.65% 5.00%
---------------------------------------------------
</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,
1999 1998 1997 1996 1995
<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 .0453 .0499 .0499 .0486 .0529
Net Gains or Losses on Securities -- -- -- -- --
-----------------------------------------------------
Total From Investment Operations .0453 .0499 .0499 .0486 .0529
-----------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.0453) (.0499) (.0499) (.0486) (.0529)
-----------------------------------------------------
Net Asset Value, End of Year $ 1.0000 $ 1.0000 $1.0000 $1.0000 $1.0000
-----------------------------------------------------
Total Return(2) +4.63% +5.10% +5.11% +4.97% +5.42%
-----------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $1,104.2 $1,024.6 $ 664.1 $ 482.0 $ 408.9
-----------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(3) .61% .64% .63% .66% .65%
-----------------------------------------------------
Ratio of Net Expenses to Average Net
Assets(4) .61% .63% .63% .65% .65%
-----------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 4.55% 5.00% 4.98% 4.86% 5.30%
-----------------------------------------------------
</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,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
----------------------------------------------
Net Asset Value, Beginning of Year $ 9.91 $10.03 $ 9.99 $10.06 $ 9.88
----------------------------------------------
Income From Investment Operations
Net Investment Income .59 .60 .63 .60 .62
Net Gains or Losses on Securities
(both realized and unrealized) (.40) (.12) .04 (.07) .18
----------------------------------------------
Total From Investment Operations .19 .48 .67 .53 .80
----------------------------------------------
Less Distributions
Dividends (from net investment
income) (.59) (.60) (.63) (.60) (.62)
----------------------------------------------
Net Asset Value, End of Year $ 9.51 $ 9.91 $10.03 $ 9.99 $10.06
----------------------------------------------
Total Return(2) +1.98% +4.92% +6.97% +5.44% +8.32%
----------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $227.0 $295.2 $255.4 $245.7 $307.4
----------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(3) .70% .71% .70% .71% .70%
----------------------------------------------
Ratio of Net Expenses to Average Net
Assets(4) .70% .70% .70% .70% .70%
----------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 5.98% 6.03% 6.34% 6.10% 6.21%
----------------------------------------------
</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
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
March 3, 1998(5) to
Year Ended October 31, October 31,
1999 1998
<S> <C> <C>
---------------------------------------------
Net Asset Value, Beginning of Year $9.34 $10.00
---------------------------------------------
Income From Investment Operations
Net Investment Income .85 .51
Net Gains or Losses on Securities
(both realized and unrealized) (.66) (.66)
---------------------------------------------
Total From Investment Operations .19 (.15)
---------------------------------------------
Less Distributions
Dividends (from net investment
income) (.85) (.51)
---------------------------------------------
Net Asset Value, End of Year $8.68 $ 9.34
---------------------------------------------
Total Return(2) +1.86% -1.69%(6)
---------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $23.8 $ 22.6
---------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(3) 1.01% 1.00%(7)
---------------------------------------------
Ratio of Net Expenses to Average Net
Assets(4) 1.01% 1.00%(7)
---------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 9.20% 8.03%(7)
---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-17
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger Berman October 31, 1999
- ----------------------------------------------------------------------
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) 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
- -------------------------------------------------------------
<S> <C> <C>
Net Expenses .67% .68%
------------
</TABLE>
For the years ended October 31, 1999, 1998, and 1997, there was no
reimbursement of expenses by Management for Cash Reserves.
<TABLE>
<CAPTION>
Year Ended October 31,
LIMITED MATURITY 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Expenses .72% .75% .71% .71% .71%
------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period from
Year Ended March 3, 1998 to
October 31, October 31,
HIGH YIELD 1999 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net Expenses 1.43% 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, 1999, and the related statements of operations,
the statements of changes in net assets, and the financial highlights for each
of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of Neuberger Berman Income Funds at October 31,
1999, 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.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 3, 1999
B-19
<PAGE>
(This page has been left blank intentionally.)
B-20
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1999
- --------------------------------------------------------------------------------
Government Money Portfolio
<TABLE>
<CAPTION>
Principal Annualized
Amount Yield at Date Value(1)
(000's omitted) of Purchase (000's omitted)
- --------------------- ------------- ---------------
<C> <S> <C> <C>
U.S. TREASURY
SECURITIES -- BACKED BY THE
FULL FAITH AND CREDIT OF THE
U.S. GOVERNMENT (99.3%)
$ 1,455 U.S. Treasury Bills,
due 11/4/99 4.55-4.77% $ 1,455
82,330 U.S. Treasury Bills,
due 11/12/99 4.60-4.92% 82,212
5,000 U.S. Treasury Notes, 7.875%,
due 11/15/99 4.85% 5,006
82,815 U.S. Treasury Bills,
due 11/18/99 4.60-4.80% 82,634
15,880 U.S. Treasury Bills,
due 11/26/99 4.92-4.95% 15,827
53,670 U.S. Treasury Notes, 7.75%,
due 11/30/99 4.68-4.96% 53,790
5,925 U.S. Treasury Bills,
due 12/2/99 4.84% 5,901
62,715 U.S. Treasury Bills,
due 12/9/99 4.74% 62,409
28,620 U.S. Treasury Bills,
due 12/16/99 4.78% 28,453
21,080 U.S. Treasury Bills,
due 12/23/99 4.69-4.79% 20,938
50,000 U.S. Treasury Bills,
due 12/30/99 4.82-4.85% 49,614
32,225 U.S. Treasury Bills,
due 1/6/00 4.78-5.03% 31,938
10,955 U.S. Treasury Bills,
due 1/13/00 5.00-5.08% 10,846
80,325 U.S. Treasury Notes, 7.75%,
due 1/31/00 5.02-5.21% 80,825
11,360 U.S. Treasury Bills,
due 2/10/00 5.04-5.11% 11,204
16,500 U.S. Treasury Notes, 5.875%,
due 2/15/00 5.15-5.17% 16,533
10,000 U.S. Treasury Notes, 7.125%,
due 2/29/00 5.13% 10,063
69,000 U.S. Treasury Notes, 5.50%,
due 2/29/00 5.18-5.21% 69,069
10,000 U.S. Treasury Notes, 6.875%,
due 3/31/00 5.09% 10,071
745 U.S. Treasury Bills,
due 4/20/00 5.29% 727
--------
TOTAL U.S. TREASURY SECURITIES 649,515
Cash, receivables and other
assets, less liabilities
(0.7%) 4,352
--------
TOTAL NET ASSETS (100.0%) $653,867
--------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-1
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Cash Reserves Portfolio
<TABLE>
<CAPTION>
Principal
Amount Rating(2) Value(1)
(000's omitted) Moody's S&P (000's omitted)
- --------------------- --------- --------- ---------------
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES
(1.8%)
$ 5,000 U.S. Treasury Bills, 4.335%,
due 11/12/99 TSY TSY $ 4,994
15,000 U.S. Treasury Notes, 5.50%,
due 2/29/00 TSY TSY 15,014
----------
TOTAL U.S. TREASURY SECURITIES 20,008
----------
U.S. GOVERNMENT AGENCY
SECURITIES (12.0%)
113,795 Freddie Mac, Discount Notes,
5.13%-5.20%,
due 11/12/99-1/27/00 AGY AGY 112,839
20,100 Federal Home Loan Bank, Bonds,
4.97%, due 2/16/00 AGY AGY 20,100
----------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES 132,939
----------
ASSET-BACKED COMMERCIAL PAPER
(2.7%)
29,500 Asset Securitization
Cooperative Corp., 6.0988%,
due 3/28/00 P-1 A-1+ 29,500
----------
CORPORATE COMMERCIAL PAPER
(63.1%)
22,700 Grainger (W.W.) Inc., 5.25%,
due 11/1/99 P-1 A-1+ 22,700
8,080 Kellogg Co., 5.28%,
due 11/1/99 P-1 A-1+ 8,080
25,000 National Australia Funding
Delaware Inc., 5.31%,
due 11/1/99 P-1 A-1+ 25,000
17,562 Northern Illinois Gas Co.,
5.22%, due 11/1/99 P-1 A-1+ 17,562
15,800 Bell Atlantic Network Funding
Corp., 5.29%, due 11/3/99 P-1 A-1+ 15,795
15,200 Colonial Pipeline Co., 5.30%,
due 11/3/99 P-1 A-1+ 15,196
19,825 BellSouth Telecommunications,
Inc., 5.30%, due 11/4/99 P-1 A-1+ 19,816
30,000 Motorola, Inc., 5.29%,
due 11/8/99 P-1 A-1 29,969
13,720 Halliburton Co., 5.28%,
due 11/9/99 P-1 A-1+ 13,704
14,600 Campbell Soup Co., 5.26%,
due 11/10/99 P-1 A-1+ 14,581
30,000 MetLife Funding, Inc., 5.30%,
due 11/2/99 & 11/10/99 P-1 A-1+ 29,972
25,000 Prudential Funding Corp.,
5.20%, due 11/10/99 P-1 A-1 24,967
35,090 Toyota Motor Credit Corp.,
5.22%-5.28%,
due 11/1/99-11/10/99 P-1 A-1+ 35,051
</TABLE>
C-2
<PAGE>
October 31, 1999
- --------------------------------------------------------------------------------
Cash Reserves Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2) Value(1)
(000's omitted) Moody's S&P (000's omitted)
- --------------------- --------- --------- ---------------
<C> <S> <C> <C> <C>
$ 20,000 Sara Lee Corp., 5.30%,
due 11/12/99 P-1 A-1+ $ 19,968
25,000 Deutsche Bank Financial Inc.,
5.29%, due 11/15/99 P-1 A-1+ 24,949
22,200 New York Life Capital Corp.,
5.24%, due 11/15/99 P-1 A-1+ 22,155
6,000 Illinois Tool Works, Inc.,
5.30%, due 11/16/99 P-1 A-1+ 5,987
30,000 Merrill Lynch & Co., Inc.,
5.23% & 5.30%, due 11/4/99 &
11/16/99 P-1 A-1+ 29,951
30,000 Ford Motor Credit Co., 5.26%,
due 11/17/99 P-1 A-1 29,930
40,000 General Electric Capital
Corp., 4.82% & 5.26%,
due 11/16/99 & 11/17/99 P-1 A-1+ 39,913
35,000 Abbott Laboratories, 5.25%,
due 11/18/99 P-1 A-1+ 34,913
20,000 ANZ (Delaware) Inc., 5.295%,
due 11/22/99 P-1 A-1+ 19,938
20,000 Swedish Export Credit Corp.,
5.25%, due 1/18/00 P-1 A-1+ 19,772
45,000 du Pont (E.I.) de Nemours &
Co., 5.29% & 5.67%,
due 11/5/99 & 2/10/00 P-1 A-1+ 44,591
31,345 Merck & Co., Inc., 5.25% &
5.30%, due 11/1/99 & 2/11/00 P-1 A-1+ 30,894
10,000 Canadian Wheat Board, Canada,
5.68%, due 2/14/00 P-1 A-1+ 9,834
20,000 Coca-Cola Co., 5.55%,
due 2/15/00 P-1 A-1+ 19,673
20,000 BellSouth Capital Funding
Corp., 5.32%, due 2/16/00 P-1 A-1+ 19,684
15,000 British Telecommunications
PLC, 5.70%, due 2/22/00 P-1 A-1+ 14,732
39,155 Morgan Stanley Dean Witter,
5.98%, due 2/25/00 P-1 A-1 38,401
----------
TOTAL CORPORATE COMMERCIAL
PAPER 697,678
----------
TAXABLE REVENUE BONDS (2.0%)
11,000 Florida Housing Finance Corp.,
Revenue Bonds, Ser. 1999 A,
6.00%, due 3/2/00 MIG-1 A-1+ 11,000
11,585 Health Institute of Indiana,
Inc., Loan Program Notes,
Ser. A, 5.38%, VRDN
due 10/1/28 P-1 A-1 11,585
----------
TOTAL TAXABLE REVENUE BONDS 22,585
----------
</TABLE>
C-3
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1999
- --------------------------------------------------------------------------------
Cash Reserves Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2) Value(1)
(000's omitted) Moody's S&P (000's omitted)
- --------------------- --------- --------- ---------------
<C> <S> <C> <C> <C>
CERTIFICATES OF DEPOSIT (9.4%)
$ 15,000 Commerzbank AG, Yankee C.D.,
5.085%, due 2/16/00 P-1 A-1+ $ 14,998
30,000 UBS AG Stamford CT, Yankee
C.D., 5.29%, due 3/7/00 P-1 A-1+ 30,014
3,500 Canadian Imperial Bank of
Commerce, Yankee C.D., 5.18%,
due 3/15/00 P-1 A-1+ 3,500
30,000 National Westminster Bank PLC,
Yankee C.D., 5.05% & 5.10%,
due 2/9/00 & 4/7/00 P-1 A-1+ 30,000
10,000 Bank of Montreal, Yankee C.D.,
5.12%, due 4/10/00 P-1 A-1+ 9,999
5,000 Rabobank Nederland, Yankee
C.D., 5.205%, due 5/15/00 P-1 A-1+ 4,999
10,000 Bayerische Hypo-und
Vereinsbank AG, Yankee C.D.,
5.345%, due 5/24/00 P-1 A-1+ 9,997
----------
TOTAL CERTIFICATES OF DEPOSIT 103,507
----------
CORPORATE DEBT SECURITIES
(2.3%)
25,000 American Express Centurion
Bank, Variable Rate Notes,
5.50%, due 5/8/00 P-1 A-1 25,000
----------
FUNDING AGREEMENTS (6.3%)
30,000 Hartford Life Insurance Co.,
Variable Rate Funding
Agreement, 5.44%, expiring
7/31/00 P-1 A-1 30,000
40,000 Travelers Insurance Co.,
Variable Rate Funding
Agreement, 5.43% & 5.45%,
expiring 3/16/00 & 10/27/00 P-1 A-1+ 40,000
----------
TOTAL FUNDING AGREEMENTS 70,000
----------
TOTAL INVESTMENTS (99.6%) 1,101,217
Cash, receivables and other
assets, less liabilities
(0.4%) 4,416
----------
TOTAL NET ASSETS (100.0%) $1,105,633
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-4
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1999
- --------------------------------------------------------------------------------
Limited Maturity 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>
U.S. TREASURY SECURITIES
(7.6%)
$ 7,750 U.S. Treasury Notes, 5.25%,
due 5/15/04 TSY TSY $ 7,526
8,700 U.S. Treasury Notes, 6.50%,
due 10/15/06 TSY TSY 8,850
4,371 U.S. Treasury
Inflation-Indexed Notes,
3.375%, due 1/15/07 TSY TSY 4,167
--------
TOTAL U.S. TREASURY SECURITIES
(COST $20,678) 20,543
--------
U.S. GOVERNMENT AGENCY
SECURITIES (1.5%)
4,175 Freddie Mac, Discount Notes,
5.16%, due 11/1/99 (COST
$4,174) AGY AGY 4,174
--------
MORTGAGE-BACKED SECURITIES
(30.1%)
1,480 GE Capital Mortgage Services,
Inc., REMIC Pass-Through
Certificates, Ser. 1998-25,
Class B3, 6.25%, due 12/25/28 BB(4) 974(5)
1,588 PNC Mortgage Securities Corp.,
Pass-Through Certificates,
Ser. 1999-1, Class 1B4, 6.25%,
due 2/25/29 BB(4) 1,034(5)
946 Norwest Asset Securities
Corp., Mortgage Pass-Through
Certificates, Ser. 1999-13,
6.75%, due 5/25/29 BB(4) 652(5)
1,110 GE Capital Mortgage Services,
Inc., REMIC Pass-Through
Certificates, Ser. 1999-11,
Class B3, 6.50%, due 7/25/29 BB(4) 751(5)
965 Morgan Stanley Capital I Inc.,
Commercial Mortgage
Pass-Through Certificates,
Ser. 1998-HF2, 6.01%,
due 11/15/30 BB(4) 653(5)
FANNIE MAE
4,305 Pass-Through Certificates,
7.00%, due 9/1/03 & 6/1/11 AGY AGY 4,329
5,136 Pass-Through Certificates,
6.50%, due 5/1/13 AGY AGY 5,046
</TABLE>
C-5
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity 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>
FREDDIE MAC
$ 25 Mortgage Participation
Certificates, 10.50%,
due 10/1/00 & 12/1/00 AGY AGY $ 26
135 Mortgage Participation
Certificates, 8.50%,
due 10/1/01 AGY AGY 138
122 ARM Certificates, 6.00%,
due 1/1/17 AGY AGY 122
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
69 Pass-Through Certificates,
7.50%, due 10/15/09-9/15/10 AGY AGY 70
113 Pass-Through Certificates,
12.00%, due 5/15/12-3/15/15 AGY AGY 128
22,191 Pass-Through Certificates,
6.50%, due 12/15/28 AGY AGY 21,223
34,921 Pass-Through Certificates,
7.00%, due 4/15/11-1/15/29 AGY AGY 34,314
2,960 Pass-Through Certificates,
8.00%, due 11/15/26-7/15/29 AGY AGY 3,022
8,700 Pass-Through Certificates,
8.00%, TBA, 30 Year Maturity AGY AGY 8,890
--------
TOTAL MORTGAGE-BACKED
SECURITIES
(COST $84,272) 81,372
--------
ASSET-BACKED SECURITIES (7.0%)
6,500 Ford Credit Auto Loan Master
Trust, Auto Loan Certificates,
Ser. 1996-1, 5.50%,
due 2/15/03 Aaa AAA 6,455
111 Honda Auto Receivables Grantor
Trust, Ser. 1997-A, Class A,
5.85%, due 2/15/03 Aaa AAA 110
5,600 Chase Credit Card Master
Trust, Ser. 1997-2, Class A,
6.30%, due 4/15/03 Aaa AAA 5,618
792 Navistar Financial Owner
Trust, Ser. 1996-B,
Class A-3, 6.33%, due 4/21/03 Aaa AAA 794
</TABLE>
C-6
<PAGE>
October 31, 1999
- --------------------------------------------------------------------------------
Limited Maturity 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>
$ 4,720 Chemical Master Credit Card
Trust 1, Ser. 1995-2,
Class A, 6.23%, due 6/15/03 Aaa AAA $ 4,727
1,112 Chevy Chase Auto Receivables
Trust, Ser. 1996-2, Class A,
5.90%, due 7/15/03 Aaa AAA 1,110
--------
TOTAL ASSET-BACKED SECURITIES
(COST $18,905) 18,814
--------
BANKS & FINANCIAL INSTITUTIONS
(16.9%)
1,300 Lehman Brothers Holdings Inc.,
Medium-Term Notes, Ser. E,
7.08%, due 5/22/00 A3 A 1,307
1,800 International Lease Finance
Corp., Notes, 6.625%,
due 6/1/00 A1 A+ 1,806
3,150 Countrywide Funding Corp.,
Medium-Term Notes, Ser. A,
7.31%, due 8/28/00 A3 A 3,174
7,090 Associates Pass-Through Asset
Trust, Ser. 1997-1, 6.45%,
due 9/15/00 Aa3 AA- 7,138(5)
5,000 Lehman Brothers Holdings Inc.,
Medium-Term Notes, Ser. E,
6.89%, due 10/10/00 A3 A 5,032
3,600 Countrywide Home Loans, Inc.,
Notes, 5.62%, due 10/16/00 A3 A 3,571
1,725 Lehman Brothers Holdings Inc.,
Medium-Term Notes, Ser. E,
6.65%, due 11/8/00 A3 A 1,733
2,000 NationsBank Corp., Senior
Medium-Term Notes, Ser. E,
5.70%, due 2/9/01 Aa2 A+ 1,982
6,600 Capital One Bank, Bank Notes,
5.95%, due 2/15/01 Baa2 BBB- 6,512
4,430 Morgan Stanley, Dean Witter, &
Co., Global Medium-Term Notes,
Ser. C, 6.09%, due 3/9/01 Aa3 A+ 4,401
6,660 Household Finance Corp.,
Senior Medium-Term Notes,
6.06%, due 5/14/01 A2 A 6,585
1,500 Dime Bancorp, Inc., Notes,
7.00%, due 7/25/01 Ba1 BBB- 1,494
1,000 Bank United Corp., Medium-Term
Notes, Ser. A, 8.00%,
due 3/15/09 Ba2 BBB- 950
--------
TOTAL BANKS & FINANCIAL
INSTITUTIONS
(COST $45,950) 45,685
--------
</TABLE>
C-7
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity 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>
CORPORATE DEBT SECURITIES
(32.6%)
$ 4,800 Norfolk Southern Corp., Notes,
6.70%, due 5/1/00 Baa1 BBB+ $ 4,814
2,000 American General Finance
Corp., Senior Notes, 6.125%,
due 9/15/00 A2 A+ 2,002
2,510 Chesapeake Corp., Notes,
10.375%, due 10/1/00 Ba1 BBB 2,595
1,730 BHP Finance (USA) Ltd.,
Guaranteed Notes, 5.625%,
due 11/1/00 A3 A- 1,711
2,577 Safeway Inc., Notes, 5.75%,
due 11/15/00 Baa2 BBB 2,554
2,300 General Electric Capital
Corp., Global Medium-Term
Notes, Ser. A, 5.52%,
due 1/15/01 Aaa AAA 2,280
3,325 AT&T Capital Corp., Notes,
6.875%, due 1/16/01 A1 BBB 3,333
2,320 Fort James Corp., Notes,
6.234%, due 3/15/01 Baa2 BBB 2,309
1,780 CMS Energy Corp., Senior
Notes, 8.00%, due 7/1/01 Ba3 BB 1,775
3,300 Telecom Argentina Stet-France
SA, Medium-Term Notes, 9.75%,
due 7/12/01 B1 BBB- 3,292(5)
2,290 Colonial Realty Limited
Partnership, Senior Notes,
7.50%, due 7/15/01 Baa3 BBB- 2,253
1,220 USA Waste Services, Inc.,
Senior Notes, 6.125%,
due 7/15/01 Ba1 BBB 1,164
1,325 Cox Communications, Inc.,
Notes, 7.00%, due 8/15/01 Baa2 BBB+ 1,326
3,300 Texas Utilities Co., Notes,
5.94%, due 10/15/01 Baa3 BBB 3,243
2,080 Tyco International Ltd.,
Notes, 6.50%, due 11/1/01 A3 A- 2,059
1,923 Marlin Water Trust, Senior
Secured Notes, 7.09%,
due 12/15/01 Baa2 BBB 1,896(5)
2,965 ICI Wilmington Inc.,
Guaranteed Notes, 7.50%,
due 1/15/02 Baa1 A- 2,992
2,835 Black & Decker Corp.,
Medium-Term Notes, Ser. A,
8.90%, due 1/21/02 Baa2 BBB 2,956
945 Century Communications Corp.,
Senior Notes, 9.75%,
due 2/15/02 B1 BB- 958
900 Ford Motor Credit Co., Global
Bonds, 6.50%, due 2/28/02 A1 A 896
</TABLE>
C-8
<PAGE>
October 31, 1999
- --------------------------------------------------------------------------------
Limited Maturity 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>
$ 900 Comdisco, Senior Notes, 7.25%,
due 9/1/02 Baa1 BBB+ $ 894
3,195 Crown Cork & Seal Co., Inc.,
Notes, 7.125%, due 9/1/02 Baa2 BBB 3,171
2,280 Fort James Corp., Senior
Notes, 6.50%, due 9/15/02 Baa2 BBB 2,247
2,460 Conseco Inc., Notes, 8.50%,
due 10/15/02 Ba1 BBB+ 2,468
1,375 American Standard Inc., Senior
Notes, 7.125%, due 2/15/03 Ba3 BB- 1,303
1,000 Safeway Inc., Medium-Term
Notes, 8.57%, due 4/1/03 Baa2 BBB 1,038
3,360 Stewart Enterprises, Inc.,
Notes, 6.40%, due 5/1/03 Baa3 BBB 3,306
60 Core-Mark International, Inc.,
Senior Subordinated Notes,
11.375%, due 9/15/03 B3 B 58
2,555 Akzo Nobel Inc., Guaranteed
Notes, 6.00%, due 11/15/03 A2 A 2,438(5)
705 Loomis Fargo & Co., Senior
Subordinated Notes, 10.00%,
due 1/15/04 B3 B 689
1,740 PDVSA Finance Ltd., Notes,
8.75%, due 2/15/04 A3 1,701(5)
660 EOP Operating Limited
Partnership, Notes, 6.625%,
due 2/15/05 Baa1 BBB+ 625
975 WestPoint Stevens Inc., Senior
Notes, 7.875%, due 6/15/05 Ba3 BB 914
4,200 Heritage Media Corp., Senior
Subordinated Notes, 8.75%,
due 2/15/06 B1 BB+ 4,273
735 Calpine Corp., Senior Notes,
7.625%, due 4/15/06 Ba1 BB+ 689
325 Jones Apparel Group, Senior
Notes, 7.875%, due 6/15/06 Baa2 BBB- 321(5)
400 Printpack, Inc., Senior
Subordinated Notes, Ser. B,
10.625%, due 8/15/06 Caa1 B 374
2,825 Time Warner Inc., Notes,
8.11%, due 8/15/06 Baa3 BBB 2,935
680 Newport News Shipbuilding
Inc., Senior Subordinated
Notes, 9.25%, due 12/1/06 B1 B+ 699
910 GFSI Inc., Senior Subordinated
Notes, 9.625%, due 3/1/07 B3 B- 689
</TABLE>
C-9
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity 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>
$ 300 French Fragrances, Inc.,
Senior Notes, Ser. B,
10.375%, due 5/15/07 B2 B+ $ 269
1,685 Owens-Illinois, Inc., Senior
Debentures, 8.10%,
due 5/15/07 Ba1(6) BB+(6) 1,616
250 Safety Components
International, Inc., Senior
Subordinated Notes, 10.125%,
due 7/15/07 B3 B- 163
880 HydroChem Industrial Services,
Inc., Senior Subordinated
Notes, Ser. B, 10.375%,
due 8/1/07 Caa1 B- 767
2,000 Interpool, Inc., Notes, 7.20%,
due 8/1/07 Ba1(7) BB+(7) 1,703
400 NBTY, Inc., Senior
Subordinated Notes, Ser. B,
8.625%, due 9/15/07 B1 B+ 334
1,000 Thiokol Corp., Senior Notes,
6.625%, due 3/1/08 Baa3 BBB 921
160 APCOA, Inc., Senior
Subordinated Notes, 9.25%,
due 3/15/08 Caa1 B- 148
610 IMPAC Group, Inc., Senior
Subordinated Notes, 10.125%,
due 3/15/08 B3 B- 546
470 Trans-Resources, Inc., Senior
Notes, Ser. B, 10.75%,
due 3/15/08 B3 B- 422
300 Columbus McKinnon Corp.,
Senior Subordinated Notes,
8.50%, due 4/1/08 B2 B 272
160 Great Central Mines Ltd.,
Senior Notes, 8.875%,
due 4/1/08 Ba2 BB 142
1,000 Global Crossing Holdings Ltd.,
Senior Notes, 9.625%,
due 5/15/08 Ba2(6) BB(6) 1,010
450 Home Products International,
Inc., Senior Subordinated
Notes, 9.625%, due 5/15/08 B3 B 399
205 KinderCare Learning Centers,
Inc., Senior Subordinated
Notes, Ser. B, 9.50%,
due 2/15/09 B3 B- 193
1,500 Liberty Media Group, Notes,
7.875%, due 7/15/09 Baa3 BBB- 1,506(5)
500 Garden State Newspapers, Inc.,
Senior Subordinated Notes,
Ser. B, 8.625%, due 7/1/11 B1 B+ 450
--------
TOTAL CORPORATE DEBT
SECURITIES (COST $90,976) 88,101
--------
</TABLE>
C-10
<PAGE>
October 31, 1999
- --------------------------------------------------------------------------------
Limited Maturity 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>
FOREIGN SECURITIES(8) (5.8%)
CAD 5,665 Canadian Government, 5.00%,
due 12/1/00 Aaa AAA $ 3,823
SEK 41,100 Kingdom of Sweden, 13.00%,
due 6/15/01 Aaa AAA 5,637
AUD 10,100 Asian Development Bank,
5.375%, due 9/15/03 Aaa AAA 6,140
--------
TOTAL FOREIGN SECURITIES (COST
$16,055) 15,600
--------
TOTAL INVESTMENTS (101.5%)
(COST $281,010) 274,289(9)
Liabilities, less cash,
receivables and other assets
[(1.5%)] (4,162)
--------
TOTAL NET ASSETS (100.0%) $270,127
--------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-11
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
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>
U.S. GOVERNMENT AGENCY
SECURITIES (6.7%)
$1,590 Freddie Mac, Discount Notes,
5.16%, due 11/1/99 AGY AGY $ 1,589
25 Fannie Mae, Discount Notes,
5.21%, due 12/23/99 AGY AGY 25
-------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES
(COST $1,614) 1,614
-------
MORTGAGE-BACKED SECURITIES
(4.7%)
425 BA Mortgage Securities, Inc.,
Mortgage Pass-Through
Certificates, Ser. 1998-6,
6.25%, due 12/26/28 BB(4) 278(5)
498 GE Capital Mortgage Services,
Inc., REMIC Pass-Through
Certificates, Ser. 1999-11,
Class B3, 6.50%, due 7/25/29 BB(4) 337(5)
747 Morgan Stanley Capital I Inc.,
Commercial Mortgage
Pass-Through Certificates,
Ser. 1998-HF2, 6.01%,
due 11/15/30 BB(4) 505(5)
-------
TOTAL MORTGAGE-BACKED
SECURITIES (COST $1,147) 1,120
-------
CORPORATE DEBT SECURITIES
(86.0%)
500 Telecom Argentina Stet-France
SA, Medium-Term Notes, 9.75%,
due 7/12/01 B1 BBB- 499(5)
450 Stone Container Corp., Senior
Subordinated Debentures,
12.25%, due 4/1/02 B3 B- 451
60 Core-Mark International, Inc.,
Senior Subordinated Notes,
11.375%, due 9/15/03 B3 B 58
60 Loomis Fargo & Co., Senior
Subordinated Notes, 10.00%,
due 1/15/04 B3 B 59
250 MTS, INC., Senior Subordinated
Notes, 9.375%, due 5/1/05 B2 B 174
210 Lodestar Holdings, Inc.,
Senior Notes, 11.50%,
due 5/15/05 Caa2 B 162
300 Vintage Petroleum, Inc.,
Senior Subordinated Notes,
9.00%, due 12/15/05 B1 B+ 296
</TABLE>
C-12
<PAGE>
October 31, 1999
- --------------------------------------------------------------------------------
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 MTL Inc., Senior Subordinated
Notes, 10.00%, due 6/15/06 B3 B- $ 320
470 Printpack, Inc., Senior
Subordinated Notes, Ser. B,
10.625%, due 8/15/06 Caa1 B 439
540 Motors and Gears, Inc., Senior
Notes, Ser. B, 10.75%,
due 11/15/06 B3 B 531
500 Pen-Tab Industries, Inc.,
Senior Subordinated Notes,
Ser. B, 10.875%, due 2/1/07 B3 B- 422
430 Fonda Group, Inc., Senior
Subordinated Notes, Ser. B,
9.50%, due 3/1/07 B3 B- 369
60 GFSI Inc., Senior Subordinated
Notes, 9.625%, due 3/1/07 B3 B- 45
500 Lyondell Chemical Co., Senior
Secured Notes, Ser. B, 9.875%,
due 5/1/07 Ba3 BB 494
120 Doane Pet Care Co., Senior
Subordinated Notes, 9.75%,
due 5/15/07 B3 B- 115
500 French Fragrances, Inc.,
Senior Notes, Ser. B,
10.375%, due 5/15/07 B2 B+ 449
500 Hedstrom Corp., Senior
Subordinated Notes, 10.00%,
due 6/1/07 B3 B- 427
360 Venture Holdings Trust, Senior
Notes, 11.00%, due 6/1/07 B2 B 352(5)
350 Stena AB, Senior Notes, 8.75%,
due 6/15/07 Ba2 BB 309
150 Polymer Group, Inc., Senior
Subordinated Notes, 9.00%,
due 7/1/07 B2 B 143
520 Safety Components
International, Inc., Senior
Subordinated Notes, 10.125%,
due 7/15/07 B3 B- 338
60 HydroChem Industrial Services,
Inc., Senior Subordinated
Notes, Ser. B, 10.375%,
due 8/1/07 Caa1 B- 52
125 Southern Foods Group, L.P.,
Senior Subordinated Notes,
9.875%, due 9/1/07 B2 B 131
310 NBTY, Inc., Senior
Subordinated Notes, Ser. B,
8.625%, due 9/15/07 B1 B+ 259
</TABLE>
C-13
<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>
$ 85 K & F Industries, Inc., Senior
Subordinated Notes, 9.25%,
due 10/15/07 B3 B- $ 83
290 Stellex Industries, Inc.,
Senior Subordinated Notes,
9.50%, due 11/1/07 Caa1 B- 211
60 United Defense, L.P., Senior
Subordinated Notes, 8.75%,
due 11/15/07 B2 B 57
290 Omnicare, Inc., Convertible
Subordinated Debentures,
5.00%, due 12/1/07 Ba3 BBB- 183
110 Amscan Holdings, Inc., Senior
Subordinated Notes, 9.875%,
due 12/15/07 B3 B- 88
250 Fisher Scientific
International Inc., Senior
Subordinated Notes, 9.00%,
due 2/1/08 B3 B- 236
540 Brand Scaffold Services, Inc.,
Senior Notes, 10.25%,
due 2/15/08 B3 B- 486
400 Nextel Communications, Inc.,
Senior Redeemable Step Up
Notes, Yielding 10.926%,
due 2/15/08 B1 B- 284
300 APCOA, Inc., Senior
Subordinated Notes, 9.25%,
due 3/15/08 Caa1 B- 277
70 IMPAC Group, Inc., Senior
Subordinated Notes, 10.125%,
due 3/15/08 B3 B- 63
250 Musicland Group, Inc., Senior
Subordinated Notes, 9.875%,
due 3/15/08 B3 B- 211
520 Trans-Resources, Inc., Senior
Notes, Ser. B, 10.75%,
due 3/15/08 B3 B- 467
250 AMSC Acquisition Co., Inc.,
Senior Notes, Ser. B, 12.25%,
due 4/1/08 157(10)
200 Columbus McKinnon Corp.,
Senior Subordinated Notes,
8.50%, due 4/1/08 B2 B 181
300 Great Central Mines Ltd.,
Senior Notes, 8.875%,
due 4/1/08 Ba2 BB 266
150 Numatics, Inc., Senior
Subordinated Notes, 9.625%,
due 4/1/08 B3 CCC+ 120
500 Riverwood International Corp.,
Senior Subordinated Notes,
10.875%, due 4/1/08 Caa1 CCC+ 484
</TABLE>
C-14
<PAGE>
October 31, 1999
- --------------------------------------------------------------------------------
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>
$ 200 Ultrapetrol (Bahamas) Ltd.,
First Preferred Ship Mortgage
Notes, 10.50%, due 4/1/08 B1 BB- $ 161
250 Hudson Respiratory Care Inc.,
Senior Subordinated Notes,
9.125%, due 4/15/08 B3 B- 219
500 Level 3 Communications, Inc.,
Senior Notes, 9.125%,
due 5/1/08 B3 B 462
320 Sun Healthcare Group, Inc.,
Senior Subordinated Notes,
9.375%, due 5/1/08 Ca 39(5)(11)
300 Ziff-Davis Inc., Senior
Subordinated Notes, 8.50%,
due 5/1/08 B2 B 287
250 Great Lakes Carbon Corp.,
Senior Subordinated Notes,
10.25%, due 5/15/08 B3 B- 231
390 Home Products International,
Inc., Senior Subordinated
Notes, 9.625%, due 5/15/08 B3 B 346
300 La Petite Academy, Inc.,
Senior Notes, 10.00%,
due 5/15/08 B3 B- 248
200 Millar Western Forest Products
Ltd., Senior Notes, 9.875%,
due 5/15/08 B3 B+ 195
300 Telecommunications Techniques
Co., LLC, Senior Subordinated
Notes, 9.75%, due 5/15/08 B3 B- 285
350 Coyne International
Enterprises Corp., Senior
Subordinated Notes, 11.25%,
due 6/1/08 B3 B- 312
300 General Binding Corp., Senior
Subordinated Notes, 9.375%,
due 6/1/08 B2 B 242
500 AKI, Inc., Senior Notes,
10.50%, due 7/1/08 B2 B+ 481
300 Aqua-Chem, Inc., Senior
Subordinated Notes, 11.25%,
due 7/1/08 B3 CCC+ 194
250 Aurora Foods Inc., Senior
Subordinated Notes, 8.75%,
due 7/1/08 B1 B+ 237
340 Marsulex Inc., Senior
Subordinated Notes, 9.625%,
due 7/1/08 B2 B+ 330
440 Bell Sports, Inc., Senior
Subordinated Notes, 11.00%,
due 8/15/08 B3 B- 441
</TABLE>
C-15
<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>
$ 500 DeCrane Aircraft Holdings,
Inc., Senior Subordinated
Notes, 12.00%, due 9/30/08 Caa1 B- $ 497
250 ICN Pharmaceuticals, Inc.,
Senior Notes, 8.75%,
due 11/15/08 Ba3 BB 231(5)
250 True Temper Sports, Inc.,
Senior Subordinated Notes,
Ser. B, 10.875%, due 12/1/08 B3 B- 234
250 Bulong Operations Ltd., Senior
Secured Notes, 12.50%,
due 12/15/08 B3 B 242
500 Willis Corroon Corp., Senior
Subordinated Notes, 9.00%,
due 2/1/09 Ba3 B+ 441
100 AK Steel Corp., Senior Notes,
7.875%, due 2/15/09 Ba2 BB 91
250 Panolam Industries, Senior
Subordinated Notes, 11.50%,
due 2/15/09 B3 B- 256(5)
500 Diamond Brands Inc., Senior
Step Up Debentures, Yielding
12.875%, due 4/15/09 Caa1 CCC+ 85
750 TeleCorp PCS, Inc., Senior
Subordinated Step Up Notes,
Yielding 11.625%, due 4/15/09 B3 460(5)
200 Avis Rent A Car, Inc., Senior
Subordinated Notes, 11.00%,
due 5/1/09 B2 BB- 207(5)
400 Dura Operating Corp., Senior
Subordinated Notes, 9.00%,
due 5/1/09 B2 B 371
500 MEDIQ Inc., Senior Step Up
Debentures, Yielding 13.00%,
due 6/1/09 Caa1 CCC+ 50
450 Falcon Products, Inc., Senior
Subordinated Notes, 11.375%,
due 6/15/09 B3 B 423
250 PSINet, Senior Notes, 11.00%,
due 8/1/09 B3 B- 256(5)
250 United Pan-Europe
Communications N.V., Senior
Notes, 10.875%, due 8/1/09 B2 B- 244(5)
500 Williams Communications Group,
Inc., Senior Notes, 10.875%,
due 10/1/09 B2 BB- 513
</TABLE>
C-16
<PAGE>
October 31, 1999
- --------------------------------------------------------------------------------
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>
$ 160 Del Webb Corp., Senior
Subordinated Debentures,
10.25%, due 2/15/10 B2 B- $ 147
760 Charter Communications
Holdings, LLC, Senior Step Up
Notes, Yielding 9.225%,
due 4/1/11 B2 B+ 453
-------
TOTAL CORPORATE DEBT
SECURITIES (COST $23,080) 20,659
-------
WARRANTS (0.0%)
500 DeCrane Aircraft Holdings,
Inc. --
250 American Mobile Satellite 4
500 MEDIQ Inc. --
-------
TOTAL WARRANTS (COST $0) 4
-------
TOTAL INVESTMENTS (97.4%)
(COST $25,841) 23,397(9)
Cash, receivables and other
assets, less liabilities
(2.6%) 626
-------
TOTAL NET ASSETS (100.0%) $24,023
-------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-17
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
October 31, 1999
- ----------------------------------------------------------------------
Income Managers Trust
1) Investment securities of the Portfolio are valued at amortized cost, which
approximates U.S. 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, 1999,
these securities amounted to $22,356,000 or 8.3% of net assets for Neuberger
Berman Limited Maturity Bond Portfolio and $3,664,000 or 15.3% of net assets
for Neuberger Berman High Yield Bond Portfolio.
6) Rated BBB- by Duff & Phelps Credit Rating Co.
7) Rated BBB by Duff & Phelps Credit Rating Co.
8) Principal amount is stated in the currency in which the security is
denominated.
AUD -- Australian Dollar
CAD -- Canadian Dollar
SEK -- Swedish Krona
9) At October 31, 1999, selected Portfolio information on a U.S. Federal income
tax basis was as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED NET UNREALIZED
NEUBERGER BERMAN COST APPRECIATION DEPRECIATION DEPRECIATION
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIMITED MATURITY BOND PORTFOLIO $281,083,000 $378,000 $7,172,000 $6,794,000
HIGH YIELD BOND PORTFOLIO 25,841,000 102,000 2,546,000 2,444,000
</TABLE>
10) Not rated by a nationally recognized statistical rating organization.
11) Non-income producing security -- in default.
SEE NOTES TO FINANCIAL STATEMENTS
C-18
<PAGE>
(This page has been left blank intentionally.)
C-19
<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 $ 649,515
Cash 1
Deferred organization costs (Note A) --
Interest receivable 4,538
Prepaid expenses and other assets 10
Receivable for forward foreign currency
exchange contracts sold (Note C) --
Receivable for securities sold --
Receivable for variation margin (Note A) --
-------------
654,064
-------------
LIABILITIES
Payable for securities purchased --
Payable to investment manager (Note B) 141
Accrued expenses 56
-------------
197
-------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 653,867
-------------
NET ASSETS consist of:
Paid-in capital $ 653,867
Net unrealized depreciation in value of
investment securities, financial futures
contracts, translation of assets and
liabilities in foreign currencies, and
foreign currency contracts --
-------------
NET ASSETS $ 653,867
-------------
*Cost of investments $ 649,515
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-20
<PAGE>
October 31, 1999
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
CASH LIMITED 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 $ 1,101,217 $ 274,289 $ 23,397
Cash 7 5 4
Deferred organization costs (Note A) -- -- 1
Interest receivable 4,692 3,637 652
Prepaid expenses and other assets 16 5 1
Receivable for forward foreign currency exchange
contracts sold (Note C) -- 1 --
Receivable for securities sold -- 12,287 1
Receivable for variation margin (Note A) -- 128 6
----------------------------------------------
1,105,932 290,352 24,062
----------------------------------------------
LIABILITIES
Payable for securities purchased -- 20,122 --
Payable to investment manager (Note B) 226 54 7
Accrued expenses 73 49 32
----------------------------------------------
299 20,225 39
----------------------------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 1,105,633 $ 270,127 $ 24,023
----------------------------------------------
NET ASSETS consist of:
Paid-in capital $ 1,105,633 $ 276,840 $ 26,467
Net unrealized depreciation in value of investment
securities, financial futures contracts,
translation of assets and liabilities in foreign
currencies, and foreign currency contracts -- (6,713) (2,444)
----------------------------------------------
NET ASSETS $ 1,105,633 $ 270,127 $ 24,023
----------------------------------------------
*Cost of investments $ 1,101,217 $ 281,010 $ 25,841
----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-21
<PAGE>
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
GOVERNMENT
MONEY
(000'S OMITTED) PORTFOLIO
<S> <C>
-----------
INVESTMENT INCOME
Interest income $ 28,027
-----------
Expenses:
Investment management fee (Note B) 1,479
Accounting fees 10
Auditing fees 26
Custodian fees (Note B) 136
Insurance expense 5
Legal fees 13
Trustees' fees and expenses 34
-----------
Total expenses 1,703
Expenses reduced by custodian fee expense
offset arrangement (Note B) --
-----------
Total net expenses 1,703
-----------
Net investment income 26,324
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment securities
sold --
Net realized loss on financial futures
contracts (Note A) --
Net realized gain 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 loss on investments --
-----------
Net increase in net assets resulting from
operations $ 26,324
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-22
<PAGE>
For the Year Ended October 31, 1999
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
CASH LIMITED MATURITY HIGH YIELD
RESERVES BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
-------------------------------------------
INVESTMENT INCOME
Interest income $ 54,196 $ 21,042 $ 2,658
-------------------------------------------
Expenses:
Investment management fee (Note B) 2,487 792 100
Accounting fees 10 10 10
Auditing fees 27 23 23
Custodian fees (Note B) 225 127 36
Insurance expense 9 4 --
Legal fees 23 16 17
Trustees' fees and expenses 54 20 6
-------------------------------------------
Total expenses 2,835 992 192
Expenses reduced by custodian fee expense
offset arrangement (Note B) -- (5) (1)
-------------------------------------------
Total net expenses 2,835 987 191
-------------------------------------------
Net investment income 51,361 20,055 2,467
-------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment securities
sold (4) (3,913) (1,200)
Net realized loss on financial futures
contracts (Note A) -- (232) (6)
Net realized gain on foreign currency
transactions (Note A) -- 113 --
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) -- (8,500) (783)
-------------------------------------------
Net loss on investments (4) (12,532) (1,989)
-------------------------------------------
Net increase in net assets resulting from
operations $ 51,357 $ 7,523 $ 478
-------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-23
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
GOVERNMENT
MONEY PORTFOLIO
Year
Ended
October 31,
(000'S OMITTED) 1999 1998
<S> <C> <C>
--------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 26,324 $ 17,794
Net realized gain (loss) on
investments -- 31
Change in net unrealized
appreciation (depreciation) of
investments -- --
--------------------------
Net increase (decrease) in net
assets resulting from operations 26,324 17,825
--------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 1,124,520 829,488
Additions related to reorganization
(Note D) -- --
Reductions (864,743) (787,491)
--------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests 259,777 41,997
--------------------------
NET INCREASE (DECREASE) IN NET ASSETS 286,101 59,822
NET ASSETS:
Beginning of year 367,766 307,944
--------------------------
End of year $ 653,867 $ 367,766
--------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-24
<PAGE>
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
CASH RESERVES LIMITED MATURITY HIGH YIELD
PORTFOLIO BOND PORTFOLIO BOND PORTFOLIO
Period from
March 3, 1998
Year Year Year (Commencement
Ended Ended Ended of Operations) to
October 31, October 31, October 31, October 31,
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 51,361 $ 42,282 $ 20,055 $ 21,213 $ 2,467 $ 907
Net realized gain (loss) on
investments (4) (4) (4,032) (4,564) (1,206) (42)
Change in net unrealized
appreciation (depreciation) of
investments -- -- (8,500) 180 (783) (1,661)
---------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 51,357 42,278 7,523 16,829 478 (796)
---------------------------------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 1,035,872 1,091,774 44,610 71,026 13,190 25,827
Additions related to reorganization
(Note D) -- -- -- 54,073 -- --
Reductions (1,010,355) (771,057) (138,662) (78,238) (12,284) (2,392)
---------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests 25,517 320,717 (94,052) 46,861 906 23,435
---------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 76,874 362,995 (86,529) 63,690 1,384 22,639
NET ASSETS:
Beginning of year 1,028,759 665,764 356,656 292,966 22,639 --
---------------------------------------------------------------------------------------
End of year $ 1,105,633 $ 1,028,759 $ 270,127 $ 356,656 $ 24,023 $ 22,639
---------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-25
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
- ----------------------------------------------------------------------
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. Managers Trust is
registered as a diversified, open-end management investment company under the
Investment Company Act of 1940, as amended. High Yield had no operations
until March 3, 1998, other than matters relating to its organization and
registration as a series of Managers Trust. Other regulated investment
companies sponsored by Neuberger Berman Management Inc. ("Management"), whose
financial statements are not presented herein, also invest in these and other
Portfolios of Managers Trust.
The assets of each Portfolio belong only to that Portfolio, and the
liabilities of each Portfolio are borne solely by that Portfolio 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) 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.
5) 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
C-26
<PAGE>
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 each Portfolio. Neither Portfolio has a specific limitation on
the percentage of assets which may be committed to these types of contracts.
The Portfolios could be 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 each Portfolio is determined
using forward foreign currency exchange rates supplied by an independent
pricing service.
6) 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 U.S. Federal income tax purposes and is therefore not subject to U.S.
Federal income tax.
7) 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, 1999, the unamortized balance of such expenses
amounted to $1,084.
8) 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.
9) 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
C-27
<PAGE>
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 U.S. 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 year ended October 31, 1999, High Yield had entered into
various financial futures contracts. At October 31, 1999, there were no open
positions.
At October 31, 1999, open positions in financial futures contracts for
Limited Maturity were as follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION APPRECIATION
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 1999 256 U.S. Treasury Notes, 5 Year Long $6,000
</TABLE>
At October 31, 1999, 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>
$1,325,000 AT&T Capital Corp., Notes, 6.875%, due 1/16/01
</TABLE>
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.
C-28
<PAGE>
Management and Neuberger Berman, LLC ("Neuberger"), a member firm of The New
York Stock Exchange and sub-adviser to each Portfolio, are wholly owned
subsidiaries of Neuberger Berman Inc., a publicly held company. Neuberger is
retained by Management to furnish it with investment recommendations and
research information without added cost to each Portfolio. Several individuals
who are officers and/or trustees of Managers Trust are also employees of
Neuberger and/or 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 $227, $230,
$5,204, and $479 for Government Money, Cash Reserves, Limited Maturity, and High
Yield, respectively.
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended October 31, 1999, 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 $305,425,000 $329,249,000
HIGH YIELD 19,013,000 15,840,000
</TABLE>
All securities transactions for Government Money and Cash Reserves were
short-term.
During the year ended October 31, 1999, Limited Maturity had entered into
various contracts to deliver currencies at specified future dates. At
October 31, 1999, 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>
Australian Dollar 2,700,000 $1,723,167 12/2/99 $1,722,660 $507
</TABLE>
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.
C-29
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Government Money Portfolio
<TABLE>
<CAPTION>
Year Ended October 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .28% .31% .30% .31% .31%
---------------------------------------------------
Net Expenses .28% .31% .30% .31% .31%
---------------------------------------------------
Net Investment Income 4.39% 4.93% 4.96% 4.99% 5.32%
---------------------------------------------------
Net Assets, End of Year (in millions) $653.9 $367.8 $307.9 $362.5 $308.5
---------------------------------------------------
</TABLE>
1) The Portfolio is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
C-30
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Cash Reserves Portfolio
<TABLE>
<CAPTION>
Year Ended October 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .27% .29% .29% .30% .31%
----------------------------------------------------
Net Expenses .27% .29% .29% .30% .31%
----------------------------------------------------
Net Investment Income 4.88% 5.33% 5.31% 5.20% 5.62%
----------------------------------------------------
Net Assets, End of Year (in millions) $1,105.6 $1,028.8 $665.8 $484.0 $409.2
----------------------------------------------------
</TABLE>
1) The Portfolio is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
C-31
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
Year Ended October 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .31% .33% .33% .33% .33%
---------------------------------------------------
Net Expenses .31% .33% .33% .33% .33%
---------------------------------------------------
Net Investment Income 6.35% 6.38% 6.70% 6.45% 6.55%
---------------------------------------------------
Portfolio Turnover Rate 102% 44% 89% 169% 88%
---------------------------------------------------
Net Assets, End of Year (in millions) $270.1 $356.7 $293.0 $267.3 $319.6
---------------------------------------------------
</TABLE>
1) The Portfolio is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
C-32
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
High Yield Bond Portfolio
<TABLE>
<CAPTION>
Period from
March 3, 1998(1) to
Year Ended October 31, October 31,
1999 1998
<S> <C> <C>
---------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(2) .73% .89%(3)
---------------------------------------------
Net Expenses .73% .89%(3)
---------------------------------------------
Net Investment Income 9.44% 8.13%(3)
---------------------------------------------
Portfolio Turnover Rate 66% 16%
---------------------------------------------
Net Assets, End of Year (in millions) $24.0 $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.
C-33
<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,
1999, and the related statements of operations, the statements of changes in net
assets, and the financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1999, by correspondence with the custodian
and brokers or other appropriate auditing procedures where replies from brokers
were not received. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of Income Managers Trust at October 31, 1999, 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.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 3, 1999
C-34
<PAGE>
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR
AND DISTRIBUTOR
Neuberger Berman Management Inc.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700 or 212-476-8800
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
D-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
D-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, 1999. This information should not be used to
complete your tax returns.
<TABLE>
<CAPTION>
CALIFORNIA,
CONNECTICUT, AND MAINE AND ALL OTHER
NEUBERGER BERMAN NEW YORK NEW HAMPSHIRE STATES
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GOVERNMENT MONEY FUND 100.0% 100.0% 100.0%
CASH RESERVES 0.0 0.6 2.8
LIMITED MATURITY BOND FUND 0.0 5.4 6.4
HIGH YIELD BOND FUND 0.0 0.0 2.1
</TABLE>
In January 2000 you will receive information to be used in filing your 1999
tax returns, which will include a notice of the exact tax status of all
dividends paid to you by each Fund during calendar 1999. Please consult your own
tax advisor for details as to how this information should be reflected on your
tax returns.
D-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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