<PAGE>
NEUBERGER BERMAN
Neuberger Berman
Municipal Funds -Registered Trademark-
----------------------------------------------------------
MUNICIPAL MONEY FUND
MUNICIPAL SECURITIES TRUST ANNUAL REPORT
OCTOBER 31, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE FUNDS
CHAIRMAN'S LETTER A-4
GROWTH OF A DOLLAR CHART
COMPARISON OF A $10,000 INVESTMENT
Municipal Securities Trust A-8
FINANCIAL STATEMENTS B-1
FINANCIAL HIGHLIGHTS
PER SHARE DATA
Municipal Money Fund B-7
Municipal Securities Trust B-8
REPORT OF INDEPENDENT AUDITORS B-10
THE PORTFOLIOS
SCHEDULE OF INVESTMENTS
Municipal Money Portfolio C-1
Municipal Securities Portfolio C-15
FINANCIAL STATEMENTS C-20
FINANCIAL HIGHLIGHTS
Municipal Money Portfolio C-25
Municipal Securities Portfolio C-26
REPORT OF INDEPENDENT AUDITORS C-27
OTHER INFORMATION
Directory/Officers and Trustees D-1
</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-2000 Neuberger Berman Management Inc.
A-3
<PAGE>
CHAIRMAN'S LETTER December 20, 2000
Dear Shareholder,
In fiscal 2000, fixed-income markets constituted something of a tale of two
cities. For the first six months, the great majority of investors continued to
sell bonds and buy equities. Investors seemed to view fixed income of all
classes as an afterthought, as they chased the high returns of equities, and
more specifically the stocks of the so-called new economy. But by the end of the
period, investors were beginning to see the benefits of cash and bond funds, as
they looked for vehicles offering relative safety in a storm. We are pleased to
report that all of our tax-free fixed-income categories reported positive total
returns for the year.
The fixed-income markets for the year were dominated by the U.S. Government
buyback of Treasury securities. These gigantic purchases created a relative
scarcity of Treasuries, causing their prices to soar while the rest of the bond
market languished. The yield difference between Treasuries and most other
sectors of the market widened to 10-year highs. Because of these dislocations,
prices in the municipal market remained very attractive all year and we were
able to deliver strong returns with high quality securities, delivering very
rewarding tax-exempt returns to our investors.
Other sectors of the bond market saw prices driven down for other reasons,
including trends that we believe could spill into the municipal market. The U.S.
Government Agency bond market was fraught with concern that proposed legislation
would end government guarantees. The corporate market was affected by high oil
prices, a weak Euro and increasing earnings and credit problems that caused more
credit downgrades than upgrades -- and much market volatility.
At Neuberger Berman, we have taken pride in our contrarian approach. During
the fiscal year, we saw negative investor sentiment as an opportunity to buy
weaker sectors with higher yields, while selling into the strength of U.S.
Treasury bonds. High-quality bonds in many sectors now yield between 6.0% and
7.5%. From our perspective as long-term investors, we believe that the scheduled
return of principal that comes with the yields now available from high-quality
bonds make the bond market overall a wonderful investment opportunity.
A-4
<PAGE>
In the year ahead, we will continue to add value to the fixed-income
investment process. We still consider the municipal market an attractive place
to invest as supply shrinks, overall credit quality remains high and the market
continues to offer robust values.
As always, we seek to identify undervalued securities in the most
fundamentally attractive sectors, while carefully managing risk. We are
confident that these remain the best tools to enhance the income from the
capital you have entrusted to us.
MUNICIPAL MONEY FUND This fiscal year, the Municipal Money Fund offered
investors excellent returns. As volatility in the stock market caused investors
to seek safer arenas, demand increased for short-term securities, depressing
yields both in the market and in the fund.
Increased demand for short-term securities, in addition to four Federal
Reserve Board rate increases, allowed us in the early part of the year to buy
longer-term six-month and one-year paper for attractive prices with relatively
minimal risk. We also picked up yield from variable-rate demand notes. At the
end of the first quarter, mindful of marketplace demand spikes each January, we
took care to invest in securities with later maturities, thus avoiding peak
prices. However, at the end of this reporting period, our weighted average
maturity fell to 42.3 days, down from 62.7 days, as the advantage of owning
longer-term paper evaporated. We remained heavily invested in variable-rate
demand notes and in higher yielding tax-exempt commercial paper.
During the period we remained vigilant about maintaining the highest credit
quality profile in the portfolio. All of this combined to enhance the portfolio
yield. The current and effective (compounded) yields for the Fund as of
October 31, 2000 were 3.73% and 3.80% respectively. This can be translated into
tax-equivalent current and effective yields of 6.18% and 6.37% respectively for
an investor in the highest federal income tax bracket.* We feel that short term
municipals, with Federal Reserve Board action apparently on hold, still offer
very compelling values. We will continue to strive to balance your need for
income with a well-diversified high-quality portfolio.
MUNICIPAL SECURITIES TRUST We are pleased to report that the total return for
the Municipal Securities Trust for the fiscal year was 6.46%. In a year when
equity markets stumbled, the portfolio achieved its goal of delivering good,
high-quality tax-exempt returns. During fiscal 2000, the municipal bond market
was affected by the inversion of
A-5
<PAGE>
the U.S. Treasury yield curve. The municipal market yield curve did not itself
invert, but flattened considerably; the Treasury inversion helped buoy the
values of longer-term municipal bonds. As the rates of long-term bonds rose, new
issue supply declined significantly. The strong condition of state and local
municipality finances further lowered their need for new bond issues. The number
of bonds being called also fell, however, as most bonds that could have been
called and refunded had been called in previous periods.
As the Federal Reserve Board came to the apparent end of its string of rate
increases, municipal bonds became more attractive to many individual investors.
Buyers were attracted by the yield of highly rated general obligation bonds
versus those available in corporate and Treasury markets, on an after-tax
equivalent basis. In many issues, participants would have needed to turn to
BBB-rated corporate debt to get a taxable yield equivalent to that available on
AA-rated municipal bonds. Despite this demand, yields in longer-term municipal
bonds were still about 85% to 90% of those of comparable Treasuries, with the
result that even non-traditional municipal bond buyers, such as corporations and
property and casualty insurance companies, appeared in the market.
Our portfolio co-managers opened the period with relatively long durations. As
it became apparent that the economy was moderating, the co-managers extended
durations further. The portfolio closed the period with an average weighted
duration of 6.6 years.
As bonds rallied through the period, the co-managers sold into market
strength, attempting to upgrade the overall portfolio's credit strength. The
co-managers increased the portfolio's holdings of AAA credits in anticipation of
market uneasiness regarding issues with all but the strongest ratings. In
addition, the portfolio co-managers sought bonds on the basis of strong relative
value, always searching for the best quality general obligation and revenue
bonds.
As mentioned, the total return for the fiscal year was 6.46%. The 30-day SEC
Yield for the fund as of October 31, 2000 was 4.23%. This can be translated into
a tax-equivalent yield of 7.00% for an investor in the highest federal income
tax bracket.*
Looking ahead, we believe we are likely to witness some increased volatility
in the municipal bond markets in fiscal 2001. We believe that strong and weak
credits will be widely differentiated in the market in the coming years. We have
therefore increased our defensive posture,
A-6
<PAGE>
upgrading the credit ratings of the portfolio's holdings overall. Nevertheless,
we believe that the municipal bond market continues to offer excellent long-term
values.
Sincerely,
/s/ Peter Sundman
Peter Sundman
Chairman of the Board,
Chief Executive Officer and Trustee
Neuberger Berman Income Funds
*An investment in Municipal Money Fund, like all other mutual funds, is neither
insured nor guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Although the fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
fund. The return on investment in Municipal Money Fund will fluctuate and past
performance is no guarantee of future results.
"Current yield" of a money market fund refers to the income generated by an
investment in the fund over a 7-day period. The income is then "annualized."
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the 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.
Tax-equivalent yield is the taxable current or effective yield that an investor
would have had to receive in order to realize that same level of yield after
federal taxes at 39.6%, assuming that all of the Funds' income is exempt from
Federal income taxes. A portion of the income may be subject to the federal
alternative minimum tax for certain investors.
Neuberger Berman Management Inc.-Registered Trademark- currently absorbs
certain operating expenses of Municipal Securities Trust. Absent this
arrangement, which is subject to change, the 30-day SEC yield of Municipal
Securities Trust would have been 3.87% and the tax-equivalent yield would have
been 6.41%.
The composition, industries and holdings of the funds are subject to change.
Investment return will fluctuate. Share value of Municipal Securities Trust
will also fluctuate, and your shares, when redeemed, may be worth more or less
than you paid for them. Past performance is no guarantee of future results.
A-7
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman October 31, 2000
----------------------------------------------------------------------
Municipal Securities Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AVERAGE ANNUAL TOTAL RETURN (1)
<TABLE>
<CAPTION>
MUNICIPAL SECURITIES TRUST LEHMAN BROTHERS 7-YEAR GO INDEX (2)
<S> <C> <C>
1 YEAR +6.46% +6.76%
5 YEAR +4.61% +5.29%
10 YEAR +5.66% +6.70%
LIFE OF FUND +5.90% +6.71%
</TABLE>
<TABLE>
<CAPTION>
Municipal Securities Trust Lehman Brothers 7-Year GO Index
<S> <C> <C>
1990 $10,000 $10,000
1991 $10,841 $11,090
1992 $11,570 $11,974
1993 $12,877 $13,398
1994 $12,546 $13,126
1995 $13,844 $14,791
1996 $14,387 $15,495
1997 $15,353 $16,670
1998 $16,462 $17,910
1999 $16,292 $17,924
2000 $17,345 $19,135
</TABLE>
Neuberger Berman Municipal Securities Trust ("Municipal Securities Trust")
commenced operations on 7/9/87.
The tax equivalent annualized yield for Municipal Securities Trust is 7.00%
for the thirty days ended 10/31/00 (based on an annualized yield of 4.23% and
assuming a federal tax rate of 39.6%). A portion of the income of Municipal
Securities Trust may be subject to the federal alternative minimum tax for
certain investors.
Neuberger Berman Management Inc. ("Management") has voluntarily undertaken to
reimburse Municipal Securities Trust for its operating expenses and its pro rata
share of its Portfolio's operating expenses (excluding interest, taxes,
brokerage commissions and extraordinary expenses) which, in the aggregate,
exceed .65% per annum of Municipal Securities Trust's average daily net assets.
This arrangement can be terminated upon 60 days' prior written notice. Absent
such arrangement, the annualized and tax equivalent yields for the thirty days
ended 10/31/00 would have been 3.87% and 6.41%, respectively. 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 7-Year General Obligation Index is an unmanaged total
return performance benchmark for the intermediate-term, 7-year, investment grade
General Obligations (State and Local) tax-exempt bond market. Please note that
indices do not take into account any fees and expenses of investing in the
individual securities that they track, and that individuals cannot invest
directly in any index. Data about the performance of this index are prepared or
obtained by 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.
A-8
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Neuberger Berman October 31, 2000
----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
MUNICIPAL MUNICIPAL
MONEY SECURITIES
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) FUND TRUST
<S> <C> <C>
----------------------------
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $ 257,745 $ 29,169
Receivable for Trust shares sold 7 --
Receivable from administrator -- net
(Note B) -- 4
----------------------------
257,752 29,173
----------------------------
LIABILITIES
Dividends payable 10 18
Payable for Trust shares redeemed 2,088 422
Payable to administrator (Note B) 58 --
Accrued expenses 96 48
----------------------------
2,252 488
----------------------------
NET ASSETS at value $ 255,500 $ 28,685
----------------------------
NET ASSETS consist of:
Par value $ 256 $ 3
Paid-in capital in excess of par value 255,251 28,787
Accumulated net realized losses on
investment (7) (308)
Net unrealized appreciation in value of
investment -- 203
----------------------------
NET ASSETS at value $ 255,500 $ 28,685
----------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 255,580 2,609
----------------------------
NET ASSET VALUE, offering and redemption price per
share $1.00 $11.00
----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-1
<PAGE>
STATEMENTS OF OPERATIONS
Neuberger Berman For the Year Ended October 31, 2000
----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
MUNICIPAL MUNICIPAL
MONEY SECURITIES
(000'S OMITTED) FUND TRUST
<S> <C> <C>
------------------------
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 10,967 $ 1,519
------------------------
Expenses:
Administration fee (Note B) 738 84
Auditing fees 9 8
Custodian fees 10 10
Legal fees 14 17
Registration and filing fees 44 31
Shareholder reports 46 30
Shareholder servicing agent fees 27 25
Trustees' fees and expenses 18 8
Miscellaneous 50 4
Expenses from corresponding Portfolio
(Notes A & B) 909 168
------------------------
Total expenses 1,865 385
Expenses reimbursed by administrator and/or
reduced by custodian fee expense offset
arrangement (Note B) (19) (183)
------------------------
Total net expenses 1,846 202
------------------------
Net investment income 9,121 1,317
------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized loss on investment securities (7) (183)
Change in net unrealized appreciation
(depreciation) of investment securities -- 781
------------------------
Net gain (loss) on investments from
corresponding Portfolio (Note A) (7) 598
------------------------
Net increase in net assets resulting from
operations $ 9,114 $ 1,915
------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-2
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Neuberger Berman
----------------------------------------------------------------------
Income Funds
<TABLE>
<CAPTION>
MUNICIPAL MUNICIPAL
MONEY SECURITIES
FUND TRUST
Year Year
Ended Ended
October 31, October 31,
(000's omitted) 2000 1999 2000 1999
<S> <C> <C> <C> <C>
------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 9,121 $ 5,759 $ 1,317 $ 1,532
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) (7) 1 (183) 122
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) -- -- 781 (2,049)
------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 9,114 5,760 1,915 (395)
------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (9,121) (5,759) (1,317) (1,532)
Net realized gain on investments (1) -- -- --
------------------------------------------------------
Total distributions to shareholders (9,122) (5,759) (1,317) (1,532)
------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 359,433 322,654 8,505 9,140
Proceeds from reinvestment of
dividends and distributions 9,033 5,709 968 972
Payments for shares redeemed (406,732) (256,071) (16,343) (13,376)
------------------------------------------------------
Net increase (decrease) from Trust
share transactions (38,266) 72,292 (6,870) (3,264)
------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (38,274) 72,293 (6,272) (5,191)
NET ASSETS:
Beginning of year 293,774 221,481 34,957 40,148
------------------------------------------------------
End of year $ 255,500 $ 293,774 $ 28,685 $ 34,957
------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 359,433 322,654 793 816
Issued on reinvestment of dividends
and distributions 9,033 5,709 90 88
Redeemed (406,732) (256,071) (1,518) (1,199)
------------------------------------------------------
Net increase (decrease) in shares
outstanding (38,266) 72,292 (635) (295)
------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-3
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger Berman October 31, 2000
----------------------------------------------------------------------
Income Funds
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Municipal Money Fund ("Municipal Money") and
Neuberger Berman Municipal Securities Trust ("Municipal Securities Trust")
(collectively, the "Funds") are separate operating series of Neuberger Berman
Income Funds (the "Trust"), a Delaware business trust organized pursuant to a
Trust Instrument dated December 23, 1992. The Trust is registered as a
diversified, open-end management investment company under the Investment
Company Act of 1940, as amended, and its shares are registered under the
Securities Act of 1933, as amended. The trustees of the Trust may establish
additional series or classes of shares without the approval of shareholders.
The assets of each 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% for each Fund at October 31, 2000). The performance of
each Fund is directly affected by the performance of its corresponding
Portfolio. The financial statements of each Portfolio, including the Schedule
of Investments, are included elsewhere in this report and should be read in
conjunction with the corresponding Fund's financial statements.
It is the policy of Municipal Money to maintain a continuous net asset
value per share of $1.00; the Fund has adopted certain investment, valuation,
and dividend and distribution policies, which conform to general industry
practice, to enable it to do so. However, there is no assurance the Fund will
be able to maintain a stable net asset value per share.
2) PORTFOLIO VALUATION: Each Fund records its investment in its corresponding
Portfolio at value. Investment securities held by each Portfolio are valued
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 a regulated
investment company by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of investment company taxable income
and net capital gains (after reduction for any amounts available for U.S.
Federal income tax
B-4
<PAGE>
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 ($6,744 expiring in 2008 for Municipal Money; and
$124,792 and $183,083 expiring in 2003 and 2008, respectively, for Municipal
Securities Trust, determined as of October 31, 2000), it is the policy of
each Fund not to distribute such gains.
Each Fund distinguishes between dividends on a tax basis and a financial
reporting basis and only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains.
5) EXPENSE ALLOCATION: Each Fund bears all costs of its operations. Expenses
incurred by the Trust with respect to any two or more funds are allocated in
proportion to the net assets of such funds, except where a more appropriate
allocation of expenses to each fund can otherwise be made fairly. Expenses
directly attributable to a fund are charged to that fund.
6) OTHER: All net investment income and realized and unrealized capital gains
and losses of each Portfolio are allocated pro rata among its respective
Funds and any other investors in the Portfolio.
NOTE B -- ADMINISTRATION FEES, DISTRIBUTION ARRANGEMENTS, AND OTHER TRANSACTIONS
WITH AFFILIATES:
Each Fund retains Neuberger Berman Management 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 Municipal Securities Trust
for its operating expenses plus its pro rata portion of its corresponding
Portfolio's operating expenses (including the fees payable to Management, but
excluding interest, taxes, brokerage commissions, and extraordinary expenses)
which exceed, in the aggregate, 0.65% per annum of its average daily net assets.
This undertaking is subject
B-5
<PAGE>
to termination by Management upon at least 60 days' prior written notice to the
Fund. For the year ended October 31, 2000, such excess expenses amounted to
$179,807 for Municipal Securities Trust.
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 under the caption Expenses from corresponding Portfolio, was a
reduction of $18,662 and $2,870, for Municipal Money and Municipal Securities
Trust, respectively.
NOTE C -- INVESTMENT TRANSACTIONS:
During the year ended October 31, 2000, additions and reductions in each
Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
-----------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL MONEY $322,206,000 $368,523,000
MUNICIPAL SECURITIES TRUST 8,937,000 16,707,000
</TABLE>
NOTE D -- REORGANIZATION:
On June 6, 2000, the Trustees of the Trust approved a plan of reorganization
under which the respective Funds of the Trust will each receive from the
corresponding Portfolios the entire portfolio of market securities and other
assets and each Portfolio will dissolve. Thus, the Funds will no longer invest
all of their net investable assets in the Portfolios. Instead, each Fund will
own directly the securities formerly held in its corresponding Portfolio. The
effective date of the proposed conversion is February 9, 2001.
B-6
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
--------------------------------------------------------------------------------
Municipal 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,
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
----------------------------------------------
Net Asset Value, Beginning of Year $.9998 $.9997 $.9994 $.9993 $.9994
----------------------------------------------
Income From Investment Operations
Net Investment Income .0336 .0256 .0288 .0296 .0285
Net Gains or Losses on Securities -- .0001 .0003 .0001 (.0001)
----------------------------------------------
Total From Investment Operations .0336 .0257 .0291 .0297 .0284
----------------------------------------------
Less Distributions
Dividends (from net investment
income) (.0336) (.0256) (.0288) (.0296) (.0285)
Distributions (from net capital
gains) (.0001) -- -- -- --
----------------------------------------------
Total Distributions (.0337) (.0256) (.0288) (.0296) (.0285)
----------------------------------------------
Net Asset Value, End of Year $.9997 $.9998 $.9997 $.9994 $.9993
----------------------------------------------
Total Return(2) +3.41% +2.59% +2.92% +3.00% +2.89%
----------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $255.5 $293.8 $221.5 $156.3 $132.6
----------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(3) .68% .68% .72% .73% .73%
----------------------------------------------
Ratio of Net Expenses to Average Net
Assets .67% .67% .71% .72% .72%
----------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 3.33% 2.58% 2.88% 2.95% 2.86%
----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-7
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
--------------------------------------------------------------------------------
Municipal Securities Trust(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,
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
----------------------------------------------
Net Asset Value, Beginning of Year $10.78 $11.34 $11.02 $10.78 $10.83
----------------------------------------------
Income From Investment Operations
Net Investment Income .46 .45 .46 .47 .47
Net Gains or Losses on Securities
(both realized and unrealized) .22 (.56) .32 .24 (.05)
----------------------------------------------
Total From Investment Operations .68 (.11) .78 .71 .42
----------------------------------------------
Less Distributions
Dividends (from net investment
income) (.46) (.45) (.46) (.47) (.47)
----------------------------------------------
Net Asset Value, End of Year $11.00 $10.78 $11.34 $11.02 $10.78
----------------------------------------------
Total Return(2) +6.46% -1.03% +7.22% +6.71% +3.92%
----------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 28.7 $ 35.0 $ 40.1 $ 31.6 $ 38.9
----------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(3) .66% .66% .66% .66% .66%
----------------------------------------------
Ratio of Net Expenses to Average Net
Assets(4) .65% .65% .65% .65% .65%
----------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 4.22% 4.03% 4.13% 4.30% 4.32%
----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-8
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger Berman October 31, 2000
----------------------------------------------------------------------
Income Funds
1) The per share amounts and ratios which are shown reflect income and expenses,
including each Fund's proportionate share of its corresponding Portfolio's
income and expenses.
2) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each fiscal
period and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. For Municipal
Securities Trust, total return would have been lower if 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,
MUNICIPAL SECURITIES TRUST 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Expenses 1.22% 1.07% 1.11% 1.05% 1.04%
-----------------------------------------
</TABLE>
B-9
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Neuberger Berman Income Funds and
Shareholders of:
Neuberger Berman Municipal Money Fund and
Neuberger Berman Municipal Securities Trust
We have audited the accompanying statements of assets and liabilities of the
Neuberger Berman Municipal Money Fund and Neuberger Berman Municipal Securities
Trust, two of the series constituting the Neuberger Berman Income Funds (the
"Trust"), as of October 31, 2000, and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
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,
2000, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 4, 2000
B-10
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 2000
--------------------------------------------------------------------------------
Municipal Money Portfolio
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
TAX-EXEMPT
SECURITIES -- PRE-REFUNDED
BACKED BY U.S. GOVERNMENT
SECURITIES (11.7%)
$1,000 Anchorage (AK) Ref. G.O.,
Ser. 1991, 6.75%, due 7/1/05
P/R 7/1/01 $ 1,013
1,000 Central Arizona Wtr.
Conservation Dist. Rev.,
Ser. 1990 A, 7.50%,
due 11/1/05 P/R 11/1/00 1,020
1,100 Clark Co. (NV) Ltd. Tax Rev.,
Ser. 1991, 6.90%, due 6/1/09
P/R 6/1/01 1,113
2,500 Illinois St. Sales Tax Rev.,
Ser. 1991, 6.00%, due 6/15/18
P/R 6/15/01 2,524
1,000 Lower Colorado River (TX) Au.
Priority Ref. Rev., Ser. 1991
B, 7.00%, due 1/1/11 P/R
1/1/01 1,024
1,000 Minnesota Pub. Fac. Au. Wtr.
PCR, Ser. 1991 A, 6.95%,
due 3/1/13 P/R 3/1/01 1,027
1,785 Nashville (TN) Metro. Au.
Arpt. Imp. Rev., Ser. 1991 B,
7.75%, due 7/1/07 P/R 7/1/01 1,854
1,500 Nevada Cap. Imp. G.O.,
Ser. 1991 A, 6.50%,
due 5/1/08 P/R 5/1/01 1,531
3,690 New Mexico St. Severance Tax
Rev., Ser. 1996 A, 5.13%,
due 7/1/06 P/R 2/1/01 3,705
1,500 New York St. Pwr. Au. Gen.
Purp. Rev.,
Ser. 1991 Y, 6.25%,
due 1/1/07 P/R 1/1/01 1,535
3,575 Purdue (IN) Univ. Rev. (Purdue
Univ. Dorm Sys.), Ser. 1991 B,
6.90%, due 7/1/06 P/R 7/1/01 3,695
3,400 Roanoke Co. (VA) Wtr. Sys.
Rev., Ser. 1991, 6.50%,
due 6/1/21 P/R 6/1/01 3,500
2,400 Seattle (WA) Muni. Metro. Swr.
Rev., Ser. 1992 U, 6.60%,
due 1/1/32 P/R 1/1/01 2,457
4,030 South Carolina Pub. Svc. Au.
Rev., Ser. 1991 B, 6.50%,
due 7/1/26 P/R 7/1/01 4,155
--------
30,153
--------
</TABLE>
C-1
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
TAX-EXEMPT
SECURITIES -- ESCROWED IN U.S.
GOVERNMENT SECURITIES (0.5%)
$1,250 Northeast Ohio Reg. Swr. Dist.
Waste Wtr. Imp. Rev.,
Ser. 1991, 6.20%,
due 11/15/00 $ 1,251
--------
MUNICIPAL NOTES (4.8%)
2,000 Bayonne (NJ) BANS, 5.00%,
due 7/12/01 MIG 1 2,007
1,600 Iowa Sch. Corp. Warrant
Certificates, Ser. B, 4.75%,
due 2/1/01 MIG 1 SP-1+ 1,603
3,770 Oklahoma Rural Dev. Fin. Corp.
Pub. Proj. Construction Notes,
Ser. 1999, 5.00%, due 6/1/01 MIG 1 3,775
5,000 Texas TRANS, Ser. 2000, 5.25%,
due 8/31/01 MIG 1 SP-1+ 5,039
--------
12,424
--------
TAX-EXEMPT SECURITIES --BACKED
BY LETTERS OF CREDIT (0.4%)
STATE STREET BANK AND TRUST COMPANY
1,000 Rhode Island Std. Loan Au.
Prog. Rev., Ser. 1996-1,
4.80%, due 6/1/26 Putable
6/1/01 A-1+ 1,000
--------
TAX-EXEMPT SECURITIES --BACKED
BY INSURANCE (0.4%)
AMERICAN MUNICIPAL BOND ASSURANCE CORP.
1,150 Salt Lake City (UT) Wtr. &
Swr. Ref. Rev., Ser. 1996,
6.00%, due 2/1/01 1,155
--------
TAX-EXEMPT
SECURITIES -- OTHER (1.6%)
2,000 Cook Co. (IL) Metro. Wtr.
Reclamation Dist. of Greater
Chicago Cap. Imp. G.O.,
Ser. 1991, 7.00%, due 1/1/01 2,009
1,000 Dekalb Co. (GA) Ref. G.O.,
Ser. 1992, 5.20%, due 1/1/01 1,002
1,115 Milwaukee (WI) Area Technical
College Dist. G.O. Promissory
Notes, Ser. 1999-00A, 4.75%,
due 6/1/01 1,115
--------
4,126
--------
</TABLE>
C-2
<PAGE>
October 31, 2000
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
TAX-EXEMPT CASH EQUIVALENT
SECURITIES (10.8%)
$1,800 Berkeley Co. (SC) IDR (Nucor
Corp. Proj.), Ser. 1995,
4.40%, VRDN due 9/1/28 VMIG 1 A-1+ $ 1,800(5)
1,000 Berkeley Co. (SC) IDR (Nucor
Corp. Proj.), Ser. 1997,
4.40%, VRDN due 4/1/30 VMIG 1 A-1+ 1,000(5)
1,100 Berkeley Co. (SC) IDR (Nucor
Corp. Proj.), Ser. 1998,
4.40%, VRDN due 4/1/31 VMIG 1 A-1+ 1,100(5)
700 Berkeley Co. (SC) Ref. PCR
(Amoco Chemical Co. Proj.),
Ser. 1994, 4.60%, VRDN
due 7/1/12 VMIG 1 A-1+ 700(5)
1,000 Calhoun Co. (TX) West Side
Navigation Dist. Env. Fac.
Rev. (BP Chemicals Inc.
Proj.), Ser. 2000, 4.75%,
VRDN due 10/1/30 VMIG 1 A-1+ 1,000(5)
1,500 Carlton (WI) PCR (Wisconsin
Pwr. & Lt. Co. Proj.),
Ser. 1988, 4.50%, VRDN
due 8/1/15 VMIG 1 1,500(5)
600 Decatur (AL) IDB Solid Waste
Disp. Rev. (Amoco Chemical Co.
Proj.), Ser. 1995, 4.75%, VRDN
due 5/1/25 VMIG 1 600(5)
3,750 Grove City (OH) Multi-Family
Hsg. Rev. (Regency Arms
Apts.), Ser. 2000, 4.45%, VRDN
due 6/15/30 A-1+ 3,750
1,400 Gulf Coast (TX) IDA Marine
Term. Rev. (Amoco Oil Co.
Proj.), Ser. 1993, 4.75%, VRDN
due 4/1/28 VMIG 1 A-1+ 1,400(5)
1,200 Gulf Coast (TX) Waste Disp.
Au. Env. Fac. Rev. (Amoco Oil
Co. Proj.), 4.75%, VRDN
due 1/1/26 VMIG 1 A-1+ 1,200(5)
100 Gulf Coast (TX) Waste Disp.
Au. PCR (Amoco Oil Co. Proj.),
Ser. 1994, 4.75%, VRDN
due 6/1/24 VMIG 1 A-1+ 100(5)
1,300 Gulf Coast (TX) Waste Disp.
Au. Ref. PCR (Exxon Proj.),
Ser. 1995, 4.60%, VRDN
due 6/1/20 VMIG 1 A-1+ 1,300(5)
100 Jackson Co. (MS) Port Fac.
Ref. Rev. (Chevron U.S.A.
Inc., Proj.), Ser. 1993,
4.60%, VRDN due 6/1/23 P-1 100(5)
1,000 Lincoln Co. (WY) PCR (Exxon
Proj.), Ser. 1987 A, 4.65%,
VRDN due 7/1/17 P-1 A-1+ 1,000(5)
</TABLE>
C-3
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
$1,200 Louisville & Jefferson Co.
(KY) Reg. Arpt. Au. Spec. Fac.
Rev. (UPS Worldwide
Forwarding, Inc. Proj.),
Ser. 1999 C, 4.65%, VRDN
due 1/1/29 A-1+ $ 1,200(5)
700 Madison Co. (IL) Env. Imp.
Rev. (Shell Wood River
Refining Co. Proj.),
Ser. 1997 A, 4.75%, VRDN
due 3/1/33 VMIG 1 A-1+ 700(5)
200 Parish of St. Charles (LA) PCR
(Shell Oil Co. Norco Proj.),
Ser. 1991, 4.75%, VRDN
due 11/1/21 VMIG 1 A-1+ 200(5)
2,000 Port of Anacortes (WA) IDC
Ref. Rev. (Texaco Proj.),
Ser. 1985, 4.25%, TECP
due 12/6/00 P-1 A-1 2,000(5)
2,400 Schaumberg (IL) Multi-Family
Hsg. Ref. Rev. (Treehouse II
Apts. Proj.), Ser. 1999,
4.25%, VRDN due 12/15/29 A-1+ 2,400
100 Southwestern (IL) Dev. Au.
Solid Waste Disp. Rev. (Shell
Oil Co. Wood River Proj.),
Ser. 1992, 4.75%, VRDN
due 4/1/22 VMIG 1 A-1+ 100(5)
2,200 Stanton Co. (NE) IDR (Nucor
Corp. Proj.), 4.40%, VRDN
due 11/1/26 VMIG 1 A-1+ 2,200(5)
1,000 University of Texas Board of
Regents Permanent Univ. Fund,
Ser. 2000 A, 4.10%, TECP
due 11/13/00 VMIG 1 A-1+ 1,000
1,000 Whiting (IN) Swr. & Solid
Waste Disp. Ref. Rev. (Amoco
Oil Co. Proj.), Ser. 1999,
4.75%, VRDN due 1/1/26 VMIG 1 A-1+ 1,000(5)
400 Will Co. (IL) Env. Fac. Rev.
(ExxonMobil Oil Corp. Proj.),
Ser. 2000, 4.70%, VRDN
due 4/1/33 VMIG 1 A-1+ 400(5)
--------
27,750
--------
</TABLE>
C-4
<PAGE>
October 31, 2000
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- BACKED BY
LETTERS OF CREDIT (58.6%)
ABN AMRO BANK NV
$4,200 Oregon St. Econ. Dev. Comm.
Econ. & IDR (Eagle-Pitcher
Ind.), Ser. 1984, 4.35%, VRDN
due 12/1/04 P-1 $ 4,200
2,500 Phenix City (AL) IDB Env. Imp.
Rev. (Mead Coated Board
Proj.), Ser. 1988, 4.30%, TECP
due 1/11/01 P-1 2,500
BANK OF AMERICA
1,200 Calhoun Co. (TX) Navigation
IDA Port Rev. (Formosa
Plastics Corp., Texas Proj.),
Ser. 1994, 4.40%, VRDN
due 11/1/15 VMIG 1 1,200
2,400 Florida Hsg. Fin. Corp. Rev.
(The Club at Vero Arpt.
Proj.), Ser. 1998 E, 4.55%,
VRDN due 6/1/17 A-1+ 2,400
2,800 Nashville & Davidson Co. (TN)
Metro Gov't. IDB Multi-Family
Hsg. Rev., Ser. 1996 A, 4.40%,
VRDN due 9/1/06 VMIG 1 2,800
BANK OF MONTREAL
1,700 Port of Portland (OR) Spec.
Oblig. Rev. (Horizon Air Ind.,
Inc. Proj.), Ser. 1997, 4.75%,
VRDN due 6/15/27 A-1+ 1,700
BANK OF NOVA SCOTIA
300 Delta Co. (MI) Econ. Dev.
Corp. Env. Imp. Ref. Rev.
(Mead Escanaba Paper Co.),
Ser. 1984 C, 4.55%, VRDN
due 12/1/23 P-1 300
BANK ONE
2,000 Colorado Hlth. Fac. Au. Hosp.
Rev. (Boulder Comm. Hosp.
Proj.), Ser. 2000, 4.35%, VRDN
due 10/1/30 VMIG 1 A-1 2,000
2,000 Marion (IN) Econ. Dev. Rev.
(Indiana Wesleyan Univ.
Proj.), Ser. 2000, 4.35%, VRDN
due 6/1/30 VMIG 1 2,000
</TABLE>
C-5
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
$4,000 Midlothian (TX) IDC Env. Fac.
Rev. (Holnam TX L.P. Proj.),
Ser. 1999, 4.60%, VRDN
due 9/1/31 A-1 $ 4,000
1,000 Montgomery Co. (PA) IDA (Peco
Energy), Ser. 1994 A, 4.20%,
TECP due 12/5/00 P-1 A-1+ 1,000
2,300 Stevenson (AL) IDB Env. Imp.
Rev. (Mead Corp. Proj.),
Ser. 1998 B, 4.70%, VRDN
due 4/1/33 A-1+ 2,300
BARCLAYS BANK INT'L., LTD.
7,235 Michigan St. Strategic Fund
Solid Waste Disp. Rev.
(Grayling Generating Proj.),
Ser. 1990, 4.35%, VRDN
due 1/1/14 VMIG 1 7,235
BAYERISCHE LANDESBANK GIROZENTRALE
8,000 Denver (CO) City & Co. Arpt.
Sys. Sub. Rev., Ser. 1997 A,
4.15%-4.30%, TECP
due 11/9/00-1/17/01 P-1 A-1+ 8,000(6)
100 Grapevine (TX) IDC Rev.
(American Airlines, Inc.
Proj.), Ser. 1984 B3, 4.65%,
VRDN due 12/1/24 P-1 100
BAYERISCHE VEREINSBANK AG
1,600 Phenix City (AL) IDB Env. Imp.
Rev. (Mead Coated Board
Proj.), Ser. 1996, 4.75%, VRDN
due 3/1/31 VMIG 1 1,600
CHASE MANHATTAN BANK, N.A.
2,000 Anne Arundel Co. (MD) Econ.
Dev. Rev. (Baltimore Gas &
Elec. Co. Proj.), Ser. 1998,
4.15%, TECP due 11/9/00 VMIG 1 A-1+ 2,000(7)
2,000 Brazoria Co. (TX) Hlth. Fac.
Dev. Corp. Hosp. Rev.
(Brazosport Mem. Hosp.),
Ser. 1999, 4.45%, VRDN
due 7/1/13 VMIG 1 2,000
1,870 Douglas Co. (GA) Dev. Au. IDR
(Whirlwind Steel Bldg., Inc.
Proj.), Ser. 1997, 4.55%, VRDN
due 12/1/12 VMIG 1 A-1 1,870
750 Virginia Small Bus. Fin. Au.
IDR (Coral Graphic Svc., Inc.
Proj.), Ser. 1998, 4.55%, VRDN
due 1/1/13 VMIG 1 A-1 750
</TABLE>
C-6
<PAGE>
October 31, 2000
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
CITIBANK, N.A.
$1,100 Austin Co. (TX) Ind. Dev.
Corp. IDR (Justin Ind., Inc.
Proj.), Ser. 1984, 4.30%, VRDN
due 12/1/14 P-1 $ 1,100
COMMERZBANK AG
2,600 Clayton Co. (GA) Dev. Au.
(Delta Airlines, Inc. Proj.),
Ser. 2000, 4.35%, VRDN
due 5/1/35 VMIG 1 A-1+ 2,600
4,500 New Jersey TRANS, Ser. 2001 A,
4.15%, TECP due 11/6/00 P-1 A-1+ 4,500(8)
5,075 Trinity (TX) River Au.
Collateralized PCR (Texas
Util. Elec. Co. Proj.),
Ser. 2000 A, 4.40%, VRDN
due 5/1/28 VMIG 1 A-1+ 5,075
CREDIT COMMERCIAL DE FRANCE
150 Elkhart Co. (IN) Econ. Dev.
Rev. (Pace Amer. Inc. Proj.),
4.70%, VRDN due 1/1/13 VMIG 1 150
2,450 South Carolina Jobs Econ. Dev.
Au. Rev. (Florence RHF Hsg.,
Inc. Proj.), Ser. 1987 A,
4.50%, VRDN due 11/7/07 P-1 2,450
345 South Carolina Jobs Econ. Dev.
Au. Rev. (Osmose Wood
Preserving), Ser. 1989 B,
4.60%, VRDN due 12/1/04 P-1 345
50 South Carolina Jobs Econ. Dev.
Au. Rev. (Su-Dan Co. & Delta
Prop.), Ser. 1989 A, 4.70%,
VRDN due 1/1/04 VMIG 1 50
CREDIT SUISSE
3,000 Emery Co. (UT) Ref. PCR
(PacifiCorp Proj.),
Ser. 1991, 4.30%, VRDN
due 7/1/15 VMIG 1 A-1+ 3,000
200 Montgomery Co. (TX) Ind. Dev.
Corp. IDR (Dal-Tile Corp.
Proj.), Ser. 1986 B, 4.55%,
VRDN due 12/1/03 A-1+ 200
1,000 Texas Capital Hlth. Fac. Dev.
Corp. (Island on Lake Travis
Ltd. Proj.), Ser. 1986, 4.35%,
VRDN due 12/1/16 A-1+ 1,000
</TABLE>
C-7
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
FIRST NATIONAL BANK OF CHICAGO
$1,400 Indiana Hlth. Fac. Fin. Au.
Hosp. Rev. (Deaconess Hosp.,
Inc.), Ser. 1992, 4.30%, VRDN
due 1/1/22 VMIG 1 $ 1,400
2,600 Maryland St. Hlth. & Higher
Ed. Fac. Au. Rev. (Pooled Loan
Prog.), Ser. 1985 B, 4.25%,
VRDN due 4/1/35 VMIG 1 2,600
3,215 Wisconsin St. Hlth. & Ed. Fac.
Au. Rev. (Felician Hlth. Care,
Inc. Proj.), Ser. 1994, 4.40%,
VRDN due 1/1/19 VMIG 1 A-1 3,215
FIRST UNION NATIONAL BANK
300 Jackson-Union Cos. (IL) Reg.
Port Dist. Port Fac. Ref. Rev.
(Enron Trans. Svc., L.P.
Proj.), Ser. 1994, 4.50%,
VRDN due 4/1/24 VMIG 1 A-1 300
3,100 Washington Co. (PA) Au. Lease
Rev. (Higher Ed. Pooled Equip.
Leasing Prog.), Ser. 1985 A,
4.45%, VRDN due 11/1/05 VMIG 1 3,100
GENERAL ELECTRIC CAPITAL CORP.
1,000 Delaware Co. (PA) IDA Res.
Rec. Fac. Ref. Rev. (Gen.
Elec. Cap. Corp.), Ser. 1997
G, 4.20%, VRDN due 12/1/31 P-1 A-1+ 1,000
4,700 Maine St. Hsg. Au.
Multi-Family Rev. (Park
Village Apts. Proj.),
Ser. 1997, 4.40%, VRDN
due 10/28/32 VMIG 1 4,700
3,700 New Hampshire St. Hsg. Fin.
Au. Multi-Family Hsg. Rev.
(Greenways L.P. - Fairways
Proj.), Ser. 1994 1, 4.50%,
VRDN due 1/1/24 VMIG 1 3,700
HARRIS TRUST AND SAVINGS BANK
500 Illinois Dev. Fin. Au. IDR
(Grayhill, Inc. Proj.),
Ser. 1995 C, 4.50%, VRDN
due 2/1/05 A-1+ 500
400 Illinois Dev. Fin. Au. IDR
(Overton Gear & Tool Corp.
Proj.), Ser. 1994, 4.50%, VRDN
due 10/1/08 A-1+ 400
LANDESBANK HESSEN-THUERINGEN GIROZENTRALE
7,100 Rhode Island & Providence
Plantations G.O., 4.25%, VRDN
due 6/1/18 VMIG 1 A-1+ 7,100
</TABLE>
C-8
<PAGE>
October 31, 2000
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
LASALLE NATIONAL BANK
$ 100 Grand Forks (ND) Health Care
Fac. Rev. (United Hosp. Oblig.
Group Proj.), Ser. 1992,
4.65%, VRDN due 12/1/16 VMIG 1 $ 100
MORGAN GUARANTY TRUST CO.
2,700 Illinois Dev. Fin. Au. PCR
(Illinois Pwr. Co. Proj.),
Ser. 1987 D, 4.60%, VRDN
due 3/1/17 A-1+ 2,700
NATIONAL WESTMINSTER BANK PLC
300 Marion Co. (WV) Comm. Solid
Waste Disp. Fac. Rev. (Grant
Town Cogeneration Proj.),
Ser. 1990 A, 4.40%, VRDN
due 10/1/17 VMIG 1 A-1+ 300
300 Marion Co. (WV) Comm. Solid
Waste Disp. Fac. Rev. (Grant
Town Cogeneration Proj.),
Ser. 1990 D, 4.40%, VRDN
due 10/1/17 VMIG 1 A-1+ 300
1,500 Venango (PA) IDA Res. Rec.
Rev. (Scrubgrass Proj.),
Ser. 1990, 4.35%, TECP
due 11/15/00 P-1 A-1+ 1,500
NATIONSBANK N.A.
1,600 Gulf Coast (TX) IDA Solid
Waste Disp. Rev. (Citgo
Petroleum Corp. Proj.),
Ser. 1995, 4.80%, VRDN
due 5/1/25 VMIG 1 A-1+ 1,600
1,000 Midlothian (TX) IDC Exempt
Fac. Rev. (Texas Ind., Inc.
Proj.), Ser. 1999, 4.80%, VRDN
due 5/1/29 VMIG 1 A-1+ 1,000
700 San Antonio (TX) Higher Ed.
Au. Inc. Ref. Rev. (Trinity
Univ. Proj.), Ser. 1993,
4.30%, VRDN due 4/1/04 A-1+ 700
NBD BANK, N.A.
100 Indiana Emp. Dev. Comm. Econ.
Dev. Rev. (K & F Ind., Inc.
Proj.), Ser. 1988, 4.70%, VRDN
due 1/1/14 VMIG 1 100
NORWEST BANK
800 New Ulm (MN) Hosp. Ref. Rev.
(Hlth. Central Sys. Proj.),
Ser. 1985, 4.35%, VRDN
due 8/1/14 A-1+ 800
</TABLE>
C-9
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
PNC BANK N.A.
$1,000 Rockport (IN) Rev. (AK Steel
Corp. Proj.), Ser. 1997 A,
4.40%, VRDN due 12/1/27 P-1 A-1 $ 1,000
RABOBANK NEDERLAND
1,500 Henderson Co. (KY) Solid Waste
Disp. Rev. (Hudson Foods, Inc.
Proj.), Ser. 1995, 4.40%, VRDN
due 3/1/15 VMIG 1 1,500
ROYAL BANK OF CANADA
600 Lone Star (TX) Arpt. Imp. Au.
Inc. Rev. (Amer. Airlines,
Inc. Proj.), Ser. 1984 B-5,
4.65%, VRDN due 12/1/14 VMIG 1 600
SLM HOLDING CORP.
300 Nebhelp Inc. (NE) Std. Loan
Prog. Rev., Ser. 1986 A,
4.40%, VRDN due 12/1/16 A-1+ 300
2,200 Panhandle-Plains (TX) Higher
Ed. Au. Inc. Std. Loan Rev.,
Ser. 1991 A, 4.35%, VRDN
due 6/1/21 VMIG 1 2,200
1,600 Panhandle-Plains (TX) Higher
Ed. Au. Inc. Std. Loan Rev.,
Ser. 1995 A, 4.35%, VRDN
due 6/1/25 VMIG 1 1,600
2,000 Panhandle-Plains (TX) Higher
Ed. Au. Inc. Std. Loan Rev.,
Ser. 1998 A, 4.35%, VRDN
due 10/1/02 VMIG 1 2,000
SOCIETE GENERALE
1,900 Chicago (IL) O'Hare Int'l.
Arpt. Spec. Fac. Rev.
(Compagnie Nationale Air
France Proj.), Ser. 1990,
4.45%, VRDN due 5/1/18 A-1+ 1,900
300 Los Angeles (CA) Reg. Arpt.
Imp. Corp. Fac. Sublease Rev.
(Los Angeles Int'l. Arpt.),
Ser. 1985, 4.65%, VRDN
due 12/1/25 A-1+ 300
1,500 Los Angeles (CA) Reg. Arpt.
Imp. Corp. Term. Fac.
Completion Rev. (Los Angeles
Int'l. Arpt.), Ser. 1989,
4.75%, VRDN due 12/1/25 A-1+ 1,500
3,500 Ohio St. Air Quality Dev. Au.
Rev. (JMG Funding L.P. Proj.),
Ser. 1994 B, 4.30%, VRDN
due 4/1/28 VMIG 1 A-1+ 3,500
</TABLE>
C-10
<PAGE>
October 31, 2000
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
$2,900 Ohio St. Air Quality Dev. Au.
Rev. (JMG Funding L.P. Proj.),
Ser. 1995 A, 4.55%, VRDN
due 4/1/29 A-1+ $ 2,900
STATE STREET BANK AND TRUST COMPANY
2,000 Rhode Island Std. Loan Au.
Prog. Rev., Ser. 1996-3,
4.40%, VRDN due 6/1/26 A-1+ 2,000
SUNTRUST BANK
1,600 Clark Co. (AR) Solid Waste
Disp. Rev. (Reynolds Metals
Co. Proj.), Ser. 1992, 4.60%,
VRDN due 8/1/22 P-1 A-1+ 1,600
600 DeKalb (GA) Private Hosp. Au.
Antic. Cert. Rev. (Egleston
Children's Hosp.), Ser. 1994
A, 4.30%, VRDN due 3/1/24 VMIG 1 A-1+ 600
700 Mayfield (KY) IDR (Seaboard
Farms of Kentucky, Inc.
Proj.), Ser. 1989, 4.50%, VRDN
due 8/1/19 VMIG 1 700
TORONTO DOMINION BANK
1,275 Cleveland (OH) Arpt. Sys.
Rev., Ser. D, 4.35%, VRDN
due 1/1/27 VMIG 1 A-1+ 1,275
2,500 Indiana Muni. Pwr. Agcy. Pwr.
Supply Sys. Ref. Rev.,
Ser. 1998 A, 4.30%, VRDN
due 1/1/18 VMIG 1 A-1+ 2,500
100 New York St. Energy Research &
Dev. Au. PCR (Niagra Mohawk
Pwr. Co. Proj.), Ser. 1986 A,
4.65%, VRDN due 12/1/26 P-1 100
1,600 Phenix City (AL) IDB Env. Imp.
Rev. (Mead Coated Board
Proj.), Ser. 1993 A, 4.75%,
VRDN due 6/1/28 A-1+ 1,600
120 Wisconsin Hlth. Fac. Au. Rev.
(Franciscan Hlth. Care,
Inc.-Sys. Fin.), Ser. 1985
A-2, 4.40%, VRDN due 1/1/16 VMIG 1 A-1+ 120
</TABLE>
C-11
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
UNION BANK OF SWITZERLAND
$1,000 Alaska Ind. Dev. & Export Au.
Fac. Rev. (Fairbanks Gold
Mining, Inc. Proj.),
Ser. 1997, 4.60%, VRDN
due 5/1/09 VMIG 1 A-1+ $ 1,000
3,400 Babylon (NY) IDA Res. Rec.
Rev. (OFS Equity of Babylon,
Inc. Proj.), Ser. 1989, 4.70%,
VRDN due 12/1/24 A-1+ 3,400
400 Clark Co. (NV) Arpt. Sys. Sub.
Lien Rev.,
Ser. 1995 A-2, 4.60%, VRDN
due 7/1/25 VMIG 1 A-1+ 400
300 Delta Co. (MI) Econ. Dev.
Corp. Env. Imp. Rev.
(Mead-Escanaba Paper Co.
Proj.), 4.70%, VRDN
due 12/1/23 A-1+ 300
975 Pennsylvania Energy Dev. Au.
Rev. (B & W Ebensburg Proj.),
Ser. 1986, 4.35%, VRDN
due 12/1/11 VMIG 1 975
WACHOVIA BANK & TRUST CO.
1,000 Crossett (AR) PCR
(Georgia-Pacific Corp. Proj.),
Ser. 1984, 4.35%, VRDN
due 10/1/07 P-1 1,000
100 Los Angeles (CA) Reg. Arpt.
Imp. Corp. Fac. Sublease Rev.
(American Airlines-Los Angeles
Int'l. Arpt.), Ser. 1984 C,
4.65%, VRDN due 12/1/24 P-1 100
500 Morgan Co. (UT) Solid Waste
Disp. Rev. (Holnam Inc.
Proj.), Ser. 1996, 4.60%, VRDN
due 8/1/31 VMIG 1 A-1+ 500
300 North Carolina Ed. Fac. Fin.
Agcy. Updates Rev. (Bowman
Gray Sch. of Medicine Proj.),
Ser. 1996, 4.35%, VRDN
due 9/1/26 VMIG 1 300
</TABLE>
C-12
<PAGE>
October 31, 2000
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
WESTDEUTSCHE LANDESBANK GIROZENTRALE
$1,825 Clark Co. (NV) Arpt. Sys. Sub.
Lien Rev.,
Ser. 1995 A-1, 4.25%, VRDN
due 7/1/25 VMIG 1 A-1+ $ 1,825
2,000 Indianapolis (IN) Adjustable
Tender Res. Rec. Rev. (Ogden
Martin Sys. of Indianapolis,
Inc. Proj.), Ser. 1987, 4.65%,
VRDN due 12/1/16 A-1+ 2,000
2,000 Nueces Co. (TX) Port of Corpus
Christi Au. Marine Term. Rev.
(Reynolds Metal Co.),
Ser. 1984, 4.35%, VRDN
due 9/1/14 A-1+ 2,000
--------
151,135
--------
TAX-EXEMPT CASH EQUIVALENT
SECURITIES -- BACKED BY
INSURANCE (10.5%)
AMERICAN MUNICIPAL BOND ASSURANCE CORP.
300 Brazos (TX) River Au. PCR Ref.
Rev. (Texas Util. Elec. Co.
Proj.), Ser. 1996 A, 4.75%,
VRDN due 3/1/26 VMIG 1 A-1+ 300
1,500 Coastal Bend (TX) Hlth. Fac.
Dev. Corp. Rev. (Incarnate
Word Hlth. Sys.), Ser. 1998 B,
4.40%, VRDN due 8/15/28 VMIG 1 1,500
1,400 Illinois Hlth. Fac. Au. Rev.
(Swedish Covenant Hosp.
Proj.), Ser. 1995, 4.40%, VRDN
due 8/1/25 VMIG 1 A-1 1,400
2,600 Indiana Secondary Mkt. for Ed.
Loans Inc. Rev., Ser. 1988 B,
4.40%, VRDN due 12/1/13 VMIG 1 A-1+ 2,600
100 Rockport (IN) Ref. PCR (AEP
Generating Co. Proj.),
Ser. 1995 B, 4.65%, VRDN
due 7/1/25 A-1+ 100
100 Sabine (TX) River Au.
Collateralized PCR (Texas
Util. Elec. Co. Proj.),
Ser. 1996 B, 4.70%, VRDN
due 3/1/26 VMIG 1 A-1+ 100
400 Sayre (PA) Hlth. Care Fac. Au.
Hosp. Rev. (VHA of PA, Inc.
Cap. Asset Fin. Prog.),
Ser. 1985 A, 4.35%, VRDN
due 12/1/20 A-1+ 400
4,400 Utah State Board of Regents
Std. Loan Rev., Ser. 1988 B,
4.30%, VRDN due 11/1/00 VMIG 1 A-1+ 4,400
</TABLE>
C-13
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 2000
--------------------------------------------------------------------------------
Municipal Money Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2)(3) Value(4)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------------- ----------- -------- --------- ---------------
<C> <S> <C> <C> <C>
FINANCIAL GUARANTY INSURANCE CO.
$3,300 Arizona Hlth. Fac. Au. Rev.
(Pooled Loan Prog.),
Ser. 1985, 4.40%, VRDN
due 10/1/15 VMIG 1 A-1 $ 3,300
MUNICIPAL BOND INVESTORS ASSURANCE CORP.
1,690 Charlotte (NC) Arpt. Ref.
Rev., Ser. 1997 A, 4.35%, VRDN
due 7/1/17 VMIG 1 A-1 1,690
400 Clark Co. (NV) Arpt. Sub. Lien
Rev., Ser. 1998 B, 4.60%, VRDN
due 7/1/28 VMIG 1 A-1+ 400
900 Kentucky Higher Ed. Std. Loan
Corp. Rev., Ser. 1996 A,
4.35%, VRDN due 6/1/26 VMIG 1 A-1+ 900
5,500 Missouri-Illinois Metro. Dist.
Bi-State Dev. Agcy. Rev. (St.
Clair Co. Metrolink
Extension),
Ser. 1998 B, 4.40%, VRDN
due 7/1/28 A-1+ 5,500
340 Polk Co. (IA) Hosp. Equip. &
Imp. Rev., Ser. 1985, 4.50%,
VRDN due 12/1/05 VMIG 1 A-1 340
2,000 South Texas Higher Ed. Au.
Inc. Std. Loan Rev.,
Ser. 1998, 4.35%, VRDN
due 12/1/03 VMIG 1 2,000
2,000 Wisconsin Hlth. & Ed. Fac. Au.
Rev. (Sisters of St. Mary
Hlth. Care), Ser. 1998, 4.20%,
TECP due 12/5/00 A-1 2,000
--------
26,930
--------
TOTAL INVESTMENTS (99.3%) 255,924
Cash, receivables and other
assets, less liabilities
(0.7%) 1,821
--------
TOTAL NET ASSETS (100.0%) $257,745
--------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-14
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 2000
--------------------------------------------------------------------------------
Municipal Securities Portfolio
<TABLE>
<CAPTION>
Principal
Amount Rating(2) Value(9)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------- ----------- ------- --------- ---------------
<C> <S> <C> <C> <C>
TAX-EXEMPT SECURITIES -- PRE-REFUNDED BACKED BY U.S.
GOVERNMENT SECURITIES (3.6%)
$1,000 Clark Co. (NV) Sch. Dist. Imp. G.O., Ser. 1995 A, 5.60%,
due 6/15/08 P/R 6/15/05 Aaa AAA $ 1,050
--------
TAX-EXEMPT SECURITIES -- BACKED BY INSURANCE (38.3%)
AMERICAN MUNICIPAL BOND ASSURANCE CORP.
1,000 Atlanta (GA) Arpt. Fac. Ref. Rev., Ser. 1996, 6.50%,
due 1/1/06 Aaa AAA 1,084
1,000 Larimer Co. (CO) Sales & Use Tax Rev., 5.75%, due 12/15/15 Aaa AAA 1,049
1,000 Puerto Rico Hwy. & Trans. Au. Rev., Ser. A, 5.50%,
due 7/1/09 Aaa AAA 1,071
FINANCIAL GUARANTY INSURANCE CO.
1,000 Dade Co. (FL) Wtr. & Swr. Sys. Rev., Ser. 1995, 6.25%,
due 10/1/06 Aaa AAA 1,085
1,000 Grapevine (TX) Combination Tax & Tax Increment Reinvestment
Zone G.O., Ser. 2000, 5.625%, due 8/15/15 Aaa AAA 1,028
1,000 Phoenix (AZ) Civic Imp. Corp. Jr. Lien Wastewater Sys. Rev.,
Ser. 2000, 6.00%, due 7/1/12 Aaa AAA 1,091
1,000 Tampa Bay (FL) Wtr. Util. Sys. Rev., Ser. 1998 B, 5.125%,
due 10/1/09 Aaa AAA 1,030
FINANCIAL SECURITY ASSURANCE INC.
1,000 Illinois Dev. Fin. Au. Cap. Appreciation Cons. Sch. Dist.
#304 Rev., Zero Coupon, Yielding 4.80%, due 1/1/09 Aaa 657
MUNICIPAL BOND INVESTORS ASSURANCE CORP.
1,000 Mississippi Dev. Bank Spec. Oblig. Rev. (Muni. Gas Au.
Natural Gas Supply Proj.), Ser. 1998, 5.00%, due 1/1/08 Aaa AAA 964
1,000 New York Local Government Assist. Corp. Ref. Rev.,
Ser. 1997 B, 5.25%, due 4/1/04 Aaa AAA 1,025
1,000 Puerto Rico Elec. Pwr. Au. Ref. Rev., Ser. W, 6.50%,
due 7/1/05 Aaa AAA 1,090
--------
11,174
--------
</TABLE>
C-15
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
--------------------------------------------------------------------------------
Municipal Securities Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2) Value(9)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------- ----------- ------- --------- ---------------
<C> <S> <C> <C> <C>
TAX-EXEMPT SECURITIES -- OTHER (55.7%)
$1,000 Board of Regents of the Texas A&M Univ. Sys. Perm. Univ.
Fund Rev., Ser. 1998, 5.00%, due 7/1/08 Aaa AAA $ 1,016
1,000 Columbus (OH) Var. Purp. Ltd. Tax G.O., Ser. 1998-1, 5.00%,
due 6/15/08 Aaa AAA 1,023
500 Florida St. Board of Ed. Cap. Outlay Ref. G.O., Ser. 1998 B,
5.25%, due 6/1/09 Aa2 AA+ 519
1,000 Georgia G.O., Ser. 1995 C, 7.25%, due 7/1/04 Aaa AAA 1,091
1,000 Lake Co. (IL) Forest Preserve Dist. Ref. G.O., Ser. 1997,
5.50%, due 2/1/09 Aa1 AA+ 1,047
1,000 Mecklenburg Co. (NC) Pub. Imp. G.O., Ser. 1994, 5.50%,
due 4/1/12 Aaa AAA 1,036
110 Mississippi Higher Ed. Assist. Corp. Std. Loan Sub. Rev.,
Ser. 1993 C, 6.05%, due 9/1/07 A 112
1,000 Nevada Ref. Ltd. Tax G.O., Ser. 1997 A-2, 6.00%,
due 5/15/06 Aa2 AA 1,063
500 New Jersey Bldg. Au. St. Bldg. Rev., Ser. 1994, 5.00%,
due 6/15/11 Aa2 AA 502
750 New York City (NY) IDA Spec. Fac. Rev. (Term. One Group
Assoc., L.P. Proj.), Ser. 1994, 6.00%, due 1/1/15 A3 A 768
1,000 New York City (NY) Muni. Assist. Corp. Rev., Ser. M, 5.50%,
due 7/1/08 Aa2 AA 1,052
1,000 New York St. Env. Fac. Corp. Rev., Ser. 1999 B, 5.00%,
due 10/15/09 Aaa AAA 1,022
1,000 New York Triborough Bridge & Tunnel Au. Gen. Purp. Rev.,
Ser. 1994 A, 6.00%, due 1/1/11 Aa3 A+ 1,093
1,000 North Carolina Cap. Imp. G.O., Ser. 1994 A, 4.70%,
due 2/1/06 Aaa AAA 1,007
1,000 Orange Co. (NY) Var. Purp. Ref. G.O., Ser. 1997, 6.00%,
due 11/15/10 Aa1 1,101
735 Ramsey Co. (MN) Cap. Imp. Plan G.O., Ser. 2000 A, 5.80%,
due 2/1/16 Aaa AA+ 762
1,000 San Antonio (TX) Elec. & Gas Sys. Ref. Rev., Ser. 1998 A,
5.00%, due 2/1/05 Aa1 AA 1,015
1,000 Texas Pub. Fin. Au. Ref. G.O., Ser. 1998 B, 5.125%,
due 10/1/09 Aa1 AA 1,023
--------
16,252
--------
</TABLE>
C-16
<PAGE>
October 31, 2000
--------------------------------------------------------------------------------
Municipal Securities Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(2) Value(9)
(000's omitted) Security(1) Moody's S&P (000's omitted)
--------------- ----------- ------- --------- ---------------
<C> <S> <C> <C> <C>
TAX-EXEMPT CASH EQUIVALENT SECURITIES -- BACKED BY LETTERS
OF CREDIT (0.7%)
SOCIETE GENERALE
$ 200 Los Angeles (CA) Reg. Arpt. Imp. Corp. Fac. Sublease Rev.
(Los Angeles Int'l. Arpt.), Ser. 1985, 4.65%, VRDN
due 12/1/25 A-1+ $ 200
--------
TOTAL INVESTMENTS (98.3%) (COST $28,473) 28,676(10)
Cash, receivables and other assets, less liabilities (1.7%) 493
--------
TOTAL NET ASSETS (100.0%) $ 29,169
--------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-17
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
October 31, 2000
----------------------------------------------------------------------
Income Managers Trust
1) Municipal securities held by Neuberger Berman Municipal Money Portfolio
("Municipal Money") and Neuberger Berman Municipal Securities Portfolio
("Municipal Securities") are within the two and four highest rating
categories, respectively, assigned by a nationally recognized statistical
rating organization ("NRSRO") such as Moody's Investors Service, Inc. or
Standard & Poor's or, where not rated, are determined by the Portfolio's
investment manager to be of comparable quality. Approximately 91% and 43% of
the municipal securities held by Municipal Money and Municipal Securities,
respectively, have credit enhancement features backing them, which the
Portfolios may rely on, such as letters of credit, insurance, or guarantees.
Without these credit enhancement features the securities may or may not meet
the quality standards of the Portfolios. Pre-refunded bonds are supported by
securities in escrow issued or guaranteed by the U.S. Government, its
agencies, or instrumentalities. The amount escrowed is sufficient to pay the
periodic interest due and the principal of these bonds. Putable bonds give
the Portfolios the right to sell back the issue on the date specified.
2) Credit ratings are unaudited.
3) Where no rating appears from any NRSRO, the security is deemed unrated for
purposes of Rule 2a-7 under the Investment Company Act of 1940, as amended.
Each of these securities is an eligible security based on a comparable
quality analysis performed by the Portfolio's investment manager within the
guidelines approved by the trustees of Income Managers Trust.
4) Investment securities of the Portfolio are valued at amortized cost, which
approximates U.S. Federal income tax cost.
5) Security is guaranteed by the corporate obligor.
6) Security is subject to a fractional guarantee provided by Bayerische
Landesbank Girozentrale, Westdeutsche Landesbank Girozentrale, and State
Street Bank and Trust Company, each backing 33.3% of the total principal.
7) Security is subject to a fractional guarantee provided by Chase Manhattan
Bank, N.A. and Bank of New York Co., Inc., each backing 50% of the total
principal.
8) Security is subject to a fractional guarantee provided by Commerzbank AG,
Bank of Nova Scotia, and Toronto Dominion Bank, each backing 33.3% of the
total principal.
9) Investment securities of the Portfolio are valued daily by obtaining bid
price quotations from an independent pricing service on all securities
available in the service's data base. For all other securities requiring
daily quotations, bid prices are
C-18
<PAGE>
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.
10) At October 31, 2000, the cost of investments for U.S. Federal income tax
purposes was $28,473,000. Gross unrealized appreciation of investments was
$516,000 and gross unrealized depreciation of investments was $313,000,
resulting in net unrealized appreciation of $203,000, based on cost for U.S.
Federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
C-19
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 2000
----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
MUNICIPAL MUNICIPAL
MONEY SECURITIES
(000'S OMITTED) PORTFOLIO PORTFOLIO
<S> <C> <C>
----------------------------
ASSETS
Investments in securities, at value*
(Note A) -- see Schedule of Investments $ 255,924 $ 28,676
Cash 4 92
Interest receivable 1,923 440
Prepaid expenses and other assets 5 1
----------------------------
257,856 29,209
----------------------------
LIABILITIES
Payable to investment manager (Note B) 53 6
Accrued expenses 58 34
----------------------------
111 40
----------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 257,745 $ 29,169
----------------------------
NET ASSETS consist of:
Paid-in capital $ 257,745 $ 28,966
Net unrealized appreciation in value of
investment securities -- 203
----------------------------
NET ASSETS $ 257,745 $ 29,169
----------------------------
*Cost of investments $ 255,924 $ 28,473
----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-20
<PAGE>
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 2000
----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
MUNICIPAL MUNICIPAL
MONEY SECURITIES
(000'S OMITTED) PORTFOLIO PORTFOLIO
<S> <C> <C>
------------------------
INVESTMENT INCOME
Interest income $ 10,967 $ 1,519
------------------------
Expenses:
Investment management fee (Note B) 684 78
Accounting fees 10 10
Auditing fees 33 24
Custodian fees (Note B) 142 29
Insurance expense 3 1
Legal fees 18 18
Trustees' fees and expenses 19 8
------------------------
Total expenses 909 168
Expenses reduced by custodian fee expense
offset arrangement (Note B) (19) (3)
------------------------
Total net expenses 890 165
------------------------
Net investment income 10,077 1,354
------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment securities
sold (7) (183)
Change in net unrealized appreciation
(depreciation) of investment securities -- 781
------------------------
Net gain (loss) on investments (7) 598
------------------------
Net increase in net assets resulting from
operations $ 10,070 $ 1,952
------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-21
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
MUNICIPAL MUNICIPAL
MONEY SECURITIES
PORTFOLIO PORTFOLIO
Year Year
Ended Ended
October 31, October 31,
(000's omitted) 2000 1999 2000 1999
<S> <C> <C> <C> <C>
------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 10,077 $ 6,510 $ 1,354 $ 1,598
Net realized gain (loss) on
investments (7) 1 (183) 122
Change in net unrealized
appreciation (depreciation) of
investments -- -- 781 (2,049)
------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 10,070 6,511 1,952 (329)
------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 322,206 292,944 8,937 6,301
Reductions (368,523) (227,075) (16,707) (11,211)
------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (46,317) 65,869 (7,770) (4,910)
------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (36,247) 72,380 (5,818) (5,239)
NET ASSETS:
Beginning of year 293,992 221,612 34,987 40,226
------------------------------------------------------
End of year $ 257,745 $ 293,992 $ 29,169 $ 34,987
------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
----------------------------------------------------------------------
Income Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Municipal Money Portfolio ("Municipal Money") and
Neuberger Berman Municipal Securities Portfolio ("Municipal Securities")
(collectively, the "Portfolios") are separate operating series of Income
Managers Trust ("Managers Trust"), a New York common law trust organized as
of December 1, 1992. Managers Trust is registered as a diversified, open-end
management investment company under the Investment Company Act of 1940, as
amended. Other regulated investment companies sponsored by Neuberger Berman
Management Inc. ("Management"), whose financial statements are not presented
herein, also invest in 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) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Interest income, including accretion of
discount (adjusted for original issue discount, where applicable) and
amortization of premium, is recorded on the accrual basis. Realized gains and
losses from securities transactions are recorded on the basis of identified
cost.
4) 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.
5) 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.
NOTE B -- MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
Each Portfolio retains Management as its investment manager under a
Management Agreement. For such investment management services, each Portfolio
pays Management a fee at the annual rate of 0.25% of the first $500 million of
that
C-23
<PAGE>
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.
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 $18,662 and
$2,870, for Municipal Money and Municipal Securities, respectively.
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended October 31, 2000, there were purchase and sale
transactions (excluding short-term securities) of $11,030,000 and $16,986,000,
respectively, for Municipal Securities. All securities transactions for
Municipal Money were short-term.
NOTE D -- REORGANIZATION:
As currently structured, the Portfolios receive investments from Neuberger
Berman Municipal Money Fund and Neuberger Berman Municipal Securities Trust
(collectively, the "Funds"). On June 6, 2000, the Trustees of the Portfolios
approved a plan of reorganization whereby each Portfolio will distribute its
entire portfolio of market securities and other assets to the corresponding
Fund, and each Portfolio will dissolve. Thus, the Funds will no longer invest
all of their net investable assets in the Portfolios. Instead, each Fund will
own directly the securities formerly held in its corresponding Portfolio. The
effective date of the proposed conversion is February 9, 2001.
C-24
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
--------------------------------------------------------------------------------
Municipal Money Portfolio
<TABLE>
<CAPTION>
Year Ended October 31,
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .33% .34% .36% .38% .37%
---------------------------------------------------
Net Expenses .32% .34% .36% .37% .36%
---------------------------------------------------
Net Investment Income 3.67% 2.91% 3.22% 3.29% 3.21%
---------------------------------------------------
Net Assets, End of Year (in millions) $257.7 $294.0 $221.6 $156.5 $132.7
---------------------------------------------------
</TABLE>
1) The Portfolio is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
C-25
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
--------------------------------------------------------------------------------
Municipal Securities Portfolio
<TABLE>
<CAPTION>
Year Ended October 31,
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
----------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .53% .48% .51% .51% .47%
----------------------------------------------
Net Expenses .53% .48% .51% .50% .47%
----------------------------------------------
Net Investment Income 4.32% 4.20% 4.27% 4.44% 4.49%
----------------------------------------------
Portfolio Turnover Rate 37% 17% 24% 22% 3%
----------------------------------------------
Net Assets, End of Year (in millions) $29.2 $35.0 $40.2 $31.7 $39.0
----------------------------------------------
</TABLE>
1) The Portfolio is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
C-26
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Income Managers Trust and
Owners of Beneficial Interest of
Neuberger Berman Municipal Money Portfolio and
Neuberger Berman Municipal Securities Portfolio
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Neuberger Berman Municipal Money
Portfolio and Neuberger Berman Municipal Securities Portfolio, two of the series
constituting Income Managers Trust (the "Trust"), as of October 31, 2000, and
the related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
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, 2000, 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, 2000, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and their financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 4, 2000
C-27
<PAGE>
OTHER INFORMATION
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
OFFICERS AND TRUSTEES
Theodore P. Giuliano
CHAIRMAN OF THE BOARD AND TRUSTEE
John Cannon
TRUSTEE
Barry Hirsch
TRUSTEE
Robert A. Kavesh
TRUSTEE
William E. Rulon
TRUSTEE
Candace L. Straight
TRUSTEE
Peter E. Sundman
PRESIDENT
Daniel J. Sullivan
VICE PRESIDENT
Richard Russell
TREASURER
Claudia A. Brandon
SECRETARY
Barbara DiGiorgio
ASSISTANT TREASURER
Celeste Wischerth
ASSISTANT TREASURER
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
-C- 2000 Neuberger Berman Management Inc.
D-1
<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
[LOGO] A0105 12/00
