<PAGE>
<PAGE>
ANNUAL REPORT
- --------------------------------------------
October 31, 1995
NEUBERGER&BERMAN
INCOME TRUST -SM-
NEUBERGER&BERMAN
ULTRA SHORT BOND TRUST
NEUBERGER&BERMAN
LIMITED MATURITY BOND TRUST
NEUBERGER&BERMAN
GOVERNMENT INCOME TRUST
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE TRUSTS
PRESIDENT'S LETTER 4
RATINGS SUMMARY 8
GROWTH OF A DOLLAR
CHARTS
COMPARISON OF A
$10,000 INVESTMENT
Ultra Short Bond Trust 10
Limited Maturity Bond
Trust 11
Government Income Trust 12
REPORT OF
INDEPENDENT AUDITORS 13
FINANCIAL STATEMENTS 14
FINANCIAL HIGHLIGHTS
PER SHARE DATA
Ultra Short Bond Trust 22
Limited Maturity Bond
Trust 23
Government Income Trust 24
THE PORTFOLIOS
REPORT OF
INDEPENDENT AUDITORS 26
SCHEDULE OF
INVESTMENTS
Ultra Short Bond
Portfolio 27
Limited Maturity Bond
Portfolio 31
Government Income
Portfolio 35
FINANCIAL STATEMENTS 38
FINANCIAL HIGHLIGHTS 45
OTHER INFORMATION
Directory/Officers and
Trustees 46
</TABLE>
3
<PAGE>
PRESIDENT'S LETTER December 18, 1995
Dear Shareholders,
Shortly after our October 1994 Annual Report, the bond market sprang back
after 12 months of sustained capital losses. It's been on an upward tack ever
since November 1994, causing one of the strongest bond rallies in over a decade.
The Federal Reserve Board (the "Fed") crafted the current fixed income
environment carefully. The Fed, led by Chairman Alan Greenspan, effectively
voted the bond market out of the high interest-rate quagmire of 1994. This was
the beginning of a succession of well-calculated decisions not to raise rates
that set the bond market back on a positive trend. Then in July the Fed cut the
discount rate by 0.25% (the first cut in about two years). Not only did the
easing of interest rates lay the groundwork for a dual bull market for bonds and
stocks, but they also served your Neuberger&Berman fixed income funds well.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
YIELDS ON U.S. TREASURY BONDS
<S> <C> <C>
Plotted Weekly
30-year bonds 3-year bonds
10/28/94 7.958% 7.033%
11/04 8.159% 7.310%
11/11 8.149% 7.387%
11/18 8.131% 7.523%
11/25 7.931% 7.427%
12/02 7.906% 7.571%
12/09 7.859% 7.663%
12/16 7.854% 7.694%
12/23 7.827% 7.801%
12/30 7.881% 7.784%
1/6/95 7.860% 7.773%
01/13 7.792% 7.506%
01/20 7.891% 7.664%
01/27 7.730% 7.375%
02/03 7.626% 7.286%
02/10 7.669% 7.445%
02/17 7.586% 7.190%
02/24 7.528% 6.971%
03/03 7.541% 7.016%
03/10 7.462% 6.930%
03/17 7.368% 6.790%
03/24 7.364% 6.727%
03/31 7.431% 6.892%
04/07 7.390% 6.744%
04/14 7.335% 6.606%
04/21 7.333% 6.535%
04/28 7.336% 6.696%
05/05 7.018% 6.279%
05/12 6.989% 6.299%
05/19 6.917% 6.288%
05/26 6.748% 6.036%
06/02 6.529% 5.634%
06/09 6.726% 6.070%
06/16 6.616% 5.821%
06/23 6.501% 5.676%
06/30 6.618% 5.858%
07/07 6.524% 5.611%
07/14 6.604% 5.782%
07/21 6.962% 6.090%
07/28 6.900% 6.053%
08/04 6.909% 6.034%
08/11 6.990% 6.199%
08/18 6.897% 6.218%
08/25 6.704% 5.968%
09/01 6.616% 5.891%
09/08 6.587% 5.903%
09/15 6.480% 5.808%
09/22 6.584% 5.920%
09/29 6.501% 5.920%
10/06 6.420% 5.787%
10/13 6.304% 5.714%
10/20 6.361% 5.780%
10/27 6.356% 5.706%
</TABLE>
SOURCE: BLOOMBERG FINANCIAL MARKETS
By your Funds' fiscal year-end of October 31, 1995, the economy remained
tempered by a host of moderate indicators: Gross Domestic Product (GDP) grew
4.0% over the 12-month period, inflation hovered in check near 3% for the year
(dipping to 2.8% by October), unemployment averaged a low 5.6%, and consumer
confidence remained high. These figures highlighted the U.S. economy's ability
to stifle inflation without choking off economic growth.
4
<PAGE>
The rate at which yields on the benchmark 30-year Treasury bond has been
falling has generally decreased since summer. After falling dramatically from a
high of 8.2% in the fourth quarter of 1994 to 6.6% by June 30, 1995, it dropped
to around 6.3% by October's end. Due to a moderate level of economic expansion
through July, the Fed halted rate cuts from August through October. During the
hiatus on rate cuts, long-term bond yields crept up to about 7% in early August,
then drifted back down as signs of economic weakness surfaced again. This
classic "push-pull" scenario of gently rising and falling rates was consistent
with the slow growth, low inflation "soft landing" the Fed had planned for the
U.S. economy all along.
The bond sectors have turned in a mixed performance heading into autumn.
Mortgage-backed security prices have backed off slightly from late summer
(prices decreased, yields increased) due to prepayment fears; adjustable rate
mortgages (ARMs) were showing minor losses in October, with only slightly
positive performance in Government Mortgages and GNMAs.* Homeowners typically
begin a wave of mortgage refinancing as interest rates come down. Foreign bonds
have begun to cool due to a sharply rising U.S. dollar. Government and corporate
debt obligations, however, continued to increase in value as your Funds' fiscal
year came to a close. With inflation under control, the real yield on bonds (the
nominal stated yield minus the current rate of inflation) continued to offer an
attractive return.
We strive to merit your confidence, and remain committed to providing
consistent performance. A discussion of each Portfolio's strategy over the
12-month period of the Annual Report follows.
ULTRA SHORT BOND TRUST** The greatest benefit in the fixed income markets has
been received in the longer end of the maturity spectrum as the yield on
Treasury Bonds with 30 year maturities declined from 7.97% at the end of October
1994 to 6.33% at the end of October 1995. The yield on 5-year Treasury Notes
declined from 7.48% to 5.81% but 6-month Treasury Bills declined only 10 basis
points from 5.66% to 5.56%. As yields on long-term securities fell further than
those with shorter maturities, which caused the difference in yield between
short-term and longer-term bond funds to narrow, the yield on our Ultra Short
Bond Fund has become even more attractive.
*Source: IBC Bond Fund Report for November 3, 1995, reflecting bond prices and
performance through 10/31/95.
5
<PAGE>
We have been extending the weighted average portfolio maturity throughout this
time, and have focused our attention on capturing additional yield by purchasing
AAA-rated asset-backed securities of high quality issuers collateralized by
autos or similar hard assets. We have also purchased U.S. Government Agency and
Agency mortgage-backed securities with short final maturities as well as high
quality short-term corporate notes.
LIMITED MATURITY BOND TRUST** In response to the positive trend in the bond
market we gradually increased the portfolio's dollar weighted average maturity
to 2.7 years from 1.9 years at the beginning of the fiscal year. This benefited
the Portfolio's performance as the market rally continued all the way through
October 1995. The magnitude of the rally is illustrated by two-year Treasury
note yields which declined from nearly 7.70% at calendar year end 1994 to 5.61%
on October 31, 1995. (When yields decrease, bond prices increase). While the
market has come a long way already, we remain optimistic that the positive trend
will continue, bolstered by low inflation and further possible interest rate
reductions by the Federal Reserve.
Corporate bonds remained expensive throughout the period with historically
narrow spreads relative to comparable Treasury bonds. Corporate bonds are
measured by their spreads (yield differentials) to Treasury securities. When
spreads are wide it pays to invest in corporate bonds. But if the difference in
the yield between corporate bonds and Treasury securities is small and then
widens or increases, corporate bonds have historically underperformed comparable
maturity Treasury securities. These tight spreads have been supported by strong,
and for the most part improving credit quality, moderate supply, voracious
investor appetite for new issues and a long track record of outperforming
Treasuries. We believe that as corporate earnings momentum slows, investors will
demand a higher premium for credit risk. We think this had just begun to happen
as the fiscal year ended and we will look to add to our corporate bond position
at more attractive prices.
GOVERNMENT INCOME TRUST** The 1995 bond market rally had a dramatic impact on
all sectors of the fixed income markets. Our strategy early in the year was to
invest heavily in the mortgage sector in response to slowing prepayment speeds
and attractive yield spreads over comparable maturity Treasuries. As interest
rates dropped during the year and
6
<PAGE>
prepayment speeds accelerated, we reduced our exposure to high-coupon
mortgage-backed securities in favor of longer-term U.S. Treasuries. As a result
the dollar-weighted average portfolio maturity rose from 6.6 years to 8.7 years
over the fiscal year.
While we successfully managed the Fund through a difficult year for the
mortgage bond market, our significant commitment in this sector still had a
negative impact on performance due to the conditions of the mortgage security
market mentioned earlier. However, our management of the Portfolio's average
maturity and credit risk exposure helped offset the difficulties in the mortgage
bond market.
Sincerely,
/s/ Theresa A. Havell
Theresa A. Havell
President and Trustee
Neuberger&Berman Income Funds
**Ultra Short Bond Trust, Limited Maturity Bond Trust and Government Income
Trust started operating on September 7, 1993, August 30, 1993 and September
13, 1993, respectively. Each Trust has identical investment objectives and
policies, a similar expense ratio and invests in the same portfolio as funds
("Sister Funds") which are also managed by Neuberger&Berman Management
Incorporated. The performance information for the Trusts prior to their
commencement of operations is for the Sister Funds and their predecessors.
7
<PAGE>
RATINGS SUMMARY
The following table shows the ratings distribution and dollar-weighted
average portfolio maturity for each Portfolio as of October 31, 1995. Ratings
distribution and average maturity may change in the future.
<TABLE>
<CAPTION>
DOLLAR-WEIGHTED
AVERAGE
MOODY'S PERCENT OF TOTAL PORTFOLIO
NEUBERGER&BERMAN RATINGS INVESTMENTS MATURITY
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Ultra Short Bond Treasury 2.9% 0.8 years
Portfolio Agency 37.2
Aaa 23.3
Aa2, Aa3 9.5
P-1 27.1
----
100.0%
Limited Maturity Bond Treasury 36.7% 2.7 years
Portfolio Agency 15.4
Aaa 11.9
Aa2, Aa3 4.8
A1, A2, A3 20.2
Baa2, Baa3 11.0
----
100.0%
Government Income Treasury 53.5% 8.7 years
Portfolio Agency 44.5
Not Rated 2.0
----
100.0%
</TABLE>
Treasury - Securities issued by the U.S. Treasury. These securities are not
rated by Moody's.
Agency - U.S. Government Agency Securities. These securities are not rated by
Moody's. Some agency securities are not backed by the full faith and credit of
the U.S. Government.
MOODY'S INVESTORS SERVICE, INC. (MOODY'S) CORPORATE BOND RATINGS:
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or exceptionally stable margin, and
principal is secure. Although the various protective elements are likely to
change, the changes that can be visualized are most unlikely to impair the
fundamentally strong position of the issue.
Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as "high-grade
bonds." They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa-rated securities, fluctuation of protective
elements may be of greater amplitude, or there may be other elements present
that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes and are
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment some time in the future.
Baa - Bonds rated Baa are considered medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
These bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
8
<PAGE>
MOODY'S SHORT-TERM DEBT RATINGS:
Issuers rated PRIME-1 (P-1), or related supporting institutions, have a superior
capacity for repayment of short-term promissory obligations. PRIME-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternative liquidity.
NOTE: Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through Baa in its corporate bond ratings system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
9
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman October 31, 1995
- ----------------------------------------------------------------------
Ultra Short Bond Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Average Annual Total Return*
<TABLE>
<CAPTION>
Ultra Short Bond Trust 6-Month T-Bill Index
<S> <C> <C>
1 Year +6.15% +5.98%
5 Year +4.73% +4.82%
Life of Fund +5.89% +5.97%
</TABLE>
Average Annual Total Return*
<TABLE>
<CAPTION>
Ultra Short Bond Trust 6-Month T-Bill Index
<S> <C> <C>
11/07/86 10000 10000
10/31/87 10518 10600
1988 11271 11310
1989 12291 12300
1990 13272 13310
199 14286 14190
1992 14920 14800
1993 15460 15280
1994 15756 15890
1995 16726 16840
</TABLE>
Life of Ultra Short Bond Fund is from 11/7/86.
The performance information for Neuberger&Berman Ultra Short Bond Trust is as
of October 31, 1995. Neuberger&Berman Ultra Short Bond Trust started operating
on September 7, 1993. It has identical investment objectives and policies, and
invests in the same Portfolio as Neuberger&Berman Ultra Short Bond Fund ("Sister
Fund"), which is also managed by Neuberger&Berman Management Inc. The
performance information shown in the above chart for the period before September
7, 1993, is for the Sister Fund and its predecessor.
Neuberger&Berman Management Inc. voluntarily bears certain operating expenses of
the Trust in excess of .75% per annum of average daily net assets (.65% prior to
March 1, 1995) and has also borne certain operating expenses of Neuberger&Berman
Ultra Short Bond Fund since its inception. These arrangements can be terminated
upon 60 days' notice. Please see the Trust's Financial Highlights for each
year's expense ratios. Returns would have been lower had Neuberger&Berman
Management Inc. not reimbursed these expenses.
*"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Trust and the return
on the investment both will fluctuate, and redemption proceeds may be higher or
lower than an investor's original cost.
The 6-Month Salomon Treasury Bill Index is an unmanaged index of the 6 most
recent 6-month Treasury bill securities. This index consists of a moving 6-month
average yield (not total return) of the 6-month Treasury bills. 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. These data are derived by Neuberger&Berman Management
Inc. and include reinvestment of all dividends and capital gain distributions.
10
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman October 31, 1995
- ----------------------------------------------------------------------
Limited Maturity Bond Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Average Annual Total Return*
<TABLE>
<CAPTION>
Limited Maturity Bond Trust Merrill Lynch Index
<S> <C> <C>
1 Year +8.36% +8.93%
5 Year +6.81% +7.02%
Life of Fund +7.16% +7.58%
</TABLE>
Average Annual Total Return*
<TABLE>
<CAPTION>
Limited Maturity Bond Trust Merrill Lynch Index
<S> <C> <C>
06/09/86 10000 10000
10/31/86 10425 10500
1987 10767 11060
1988 11655 11900
1989 12769 13020
1990 13772 14160
1991 15272 15750
1992 16473 17040
1993 17671 18030
1994 17669 18250
1995 19147 19880
</TABLE>
Life of Limited Maturity Bond Fund is from 6/9/86.
The performance information for Neuberger&Berman Limited Maturity Bond Trust
is as of October 31, 1995. Neuberger&Berman Limited Maturity Bond Trust started
operating on August 30, 1993. It has identical investment objectives and
policies, and invests in the same Portfolio as Neuberger&Berman Limited Maturity
Bond Fund ("Sister Fund"), which is also managed by Neuberger&Berman Management
Inc. The performance information shown in the above chart for the period before
August 30, 1993, is for the Sister Fund and its predecessor.
Neuberger&Berman Management Inc. voluntarily bears certain operating expenses of
the Trust in excess of .80% per annum of average daily net assets (.70% from May
1, 1994 to February 28, 1995) and has also borne certain operating expenses of
Neuberger&Berman Limited Maturity Bond Fund since its inception. These
arrangements can be terminated upon 60 days' notice. Please see the Trust's
Financial Highlights for each year's expense ratios. Returns would have been
lower had Neuberger&Berman Management Inc. not reimbursed these expenses.
*"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Trust and the return
on the investment both will fluctuate, and redemption proceeds may be higher or
lower than an investor's original cost.
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 and 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. These data are derived by Neuberger&Berman Management Inc. and include
reinvestment of all dividends and capital gain distributions.
11
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman October 31, 1995
- ----------------------------------------------------------------------
Government Income Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Average Annual Total Return*
<TABLE>
<CAPTION>
Government Income Trust Salomon Brothers
Mortgage Index
<S> <C> <C>
1 Year +10.61% +14.51%
Life of Fund +4.68% +5.97%
</TABLE>
Average Annual Total Return*
<TABLE>
<CAPTION>
Government Income Trust Salomon Brothers
Mortgage Index
<S> <C> <C>
07/06/93 10,000 10,000
10/31/93 10,275 10,120
1994 10,053 9,990
1995 11,119 11,440
</TABLE>
Life of Government Income Fund is from 7/6/93.
The performance information for Neuberger&Berman Government Income Trust is
as of October 31, 1995. Neuberger&Berman Government Income Trust started
operating on September 13, 1993. It has identical investment objectives and
policies, and invests in the same Portfolio as Neuberger&Berman Government
Income Fund ("Sister Fund"), which is also managed by Neuberger&Berman
Management Inc. The performance information for Neuberger&Berman Government
Income Trust before September 13, 1993, is for the Sister Fund.
Neuberger&Berman Management Inc. voluntarily bears certain operating expenses of
the Trust in excess of .85% per annum of average daily net assets (.75% prior to
March 1, 1995) and has also borne certain operating expenses of Neuberger&Berman
Government Income Fund since its inception. These arrangements can be terminated
upon 60 days' notice. Please see the Trust's Financial Highlights for each
year's expense ratios. Absent such reimbursement, the average annual total
returns of Government Income Trust for the period from 7/6/93 to 10/31/95 and
for the one year ended 10/31/95 would have been +2.97% and +8.94%, respectively.
*"Total Return" is calculated including reinvestment of all income dividends and
capital gain distributions. Results represent past performance and do not
indicate future results. The value of an investment in the Trust and the return
on the investment both will fluctuate, and redemption proceeds may be higher or
lower than an investor's original cost.
The Salomon Brothers Mortgage Index is an unmanaged total return index
consisting of all Agency pass-throughs, GNMA, FNMA, and FHLMC securities and
75-day, 30- and 15-year securities, and FHA and GNMA project loans. 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. These data are derived by Neuberger&Berman Management
Inc. and include reinvestment of all dividends and capital gain distributions.
12
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Neuberger&Berman Income Trust and
Shareholders of:
Neuberger&Berman Ultra Short Bond Trust
Neuberger&Berman Limited Maturity Bond Trust and
Neuberger&Berman Government Income Trust
We have audited the accompanying statements of assets and liabilities of the
Neuberger&Berman Ultra Short Bond Trust, Neuberger&Berman Limited Maturity Bond
Trust, and Neuberger&Berman Government Income Trust, three of the series
comprising Neuberger&Berman Income Trust (the "Trust"), as of October 31, 1995,
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
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. 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 Trust at October 31,
1995, 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
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
[SIGNATURE]
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 1, 1995
13
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Neuberger&Berman October 31, 1995
- ----------------------------------------------------------------------
Income Trust
<TABLE>
<CAPTION>
LIMITED
ULTRA SHORT MATURITY GOVERNMENT
BOND TRUST BOND TRUST INCOME TRUST
------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $ 1,737,580 $ 11,734,461 $ 58,418
Deferred organization costs (Note A) 31,238 29,827 30,114
Receivable for Trust shares sold 242 175,564 --
Receivable from administrator -- net (Note
B) 199,555 1,358 187,141
------------------------------------------------
1,968,615 11,941,210 275,673
------------------------------------------------
LIABILITIES
Dividends payable 23 1,113 1
Payable for Fund expenses (Note B) 149,122 -- 139,821
Payable for Trust shares redeemed 20 441 --
Accrued organization costs (Note A) 54,796 -- 52,471
Accrued expenses 25,108 24,645 23,886
------------------------------------------------
229,069 26,199 216,179
------------------------------------------------
NET ASSETS at value $ 1,739,546 $ 11,915,011 $ 59,494
------------------------------------------------
NET ASSETS consist of:
Par value $ 177 $ 1,240 $ 6
Paid-in capital in excess of par value 1,744,569 11,840,447 61,233
Accumulated undistributed foreign currency
gains -- 3,069 --
Accumulated net realized losses on
investment (8,368) (36,328) (1,963)
Net unrealized appreciation in value of
investment 3,168 106,583 218
------------------------------------------------
NET ASSETS at value $ 1,739,546 $ 11,915,011 $ 59,494
------------------------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 176,579 1,240,244 6,319
------------------------------------------------
NET ASSET VALUE, offering and
redemption price per share $9.85 $9.61 $9.42
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
STATEMENTS OF OPERATIONS
Neuberger&Berman For the Year Ended October 31, 1995
- ----------------------------------------------------------------------
Income Trust
<TABLE>
<CAPTION>
LIMITED
ULTRA SHORT MATURITY GOVERNMENT
BOND TRUST BOND TRUST INCOME TRUST
------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 91,365 $ 604,325 $ 4,689
------------------------------------------
Expenses:
Administration fee (Note B) 7,441 43,624 305
Amortization of deferred organization and
initial offering expenses (Note A) 10,984 10,801 10,487
Auditing fees 5,000 5,000 5,000
Custodian fees 10,000 10,000 10,000
Legal fees 4,482 4,557 4,761
Registration and filing fees 28,598 41,725 25,615
Shareholder reports 23,858 25,897 24,232
Shareholder servicing agent fees 17,476 17,833 16,797
Trustees' fees and expenses 270 877 33
Miscellaneous 779 996 733
Expenses from corresponding Portfolio (Note
A) 5,986 29,170 627
------------------------------------------
Total expenses 114,874 190,480 98,590
Deduct -- expenses reimbursed by
administrator (Note B) (104,135) (123,568) (98,088)
------------------------------------------
Total net expenses 10,739 66,912 502
------------------------------------------
Net investment income 80,626 537,413 4,187
------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FINANCIAL FUTURES CONTRACTS, AND
FOREIGN CURRENCY TRANSACTIONS FROM CORRESPONDING
PORTFOLIO (NOTE A)
Net realized gain (loss) on investments (1,458) (15,849) 442
Net realized loss on financial futures
contracts -- -- (11)
Net realized gain (loss) on foreign currency
transactions -- 3,069 (624)
Change in net unrealized appreciation
(depreciation) of investments and
translation of assets and liabilities in
foreign currencies 9,096 181,185 2,426
Change in net unrealized depreciation of
financial futures contracts -- -- 5
------------------------------------------
Net gain on investments, financial futures
contracts, and foreign currency
transactions from corresponding
Portfolio (Note A) 7,638 168,405 2,238
------------------------------------------
Net increase in net assets resulting from
operations $ 88,264 $ 705,818 $ 6,425
------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Neuberger&Berman
- ----------------------------------------------------------------------
Income Trust
<TABLE>
<CAPTION>
ULTRA SHORT
BOND TRUST
Year
Ended
October 31,
1995 1994
--------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 80,626 $ 29,787
Net realized loss on investments
sold, financial futures contracts,
and foreign currency transactions
from corresponding Portfolio (Note
A) (1,458) (5,520)
Change in net unrealized
appreciation (depreciation) of
investments, financial futures
contracts, and translation of
assets and liabilities in foreign
currencies from corresponding
Portfolio (Note A) 9,096 (5,579)
--------------------------
Net increase (decrease) in net
assets resulting from operations 88,264 18,688
--------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (80,626) (29,787)
Tax return of capital -- --
--------------------------
Total distributions to shareholders (80,626) (29,787)
--------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 1,794,939 1,891,357
Proceeds from reinvestment of
dividends 80,508 29,618
Payments for shares redeemed (1,379,144) (848,423)
--------------------------
Net increase (decrease) from Trust
share transactions 496,303 1,072,552
--------------------------
NET INCREASE (DECREASE) IN NET ASSETS 503,941 1,061,453
NET ASSETS:
Beginning of year 1,235,605 174,152
--------------------------
End of year $ 1,739,546 $ 1,235,605
--------------------------
Accumulated undistributed foreign
currency gains $ -- $ --
--------------------------
NUMBER OF TRUST SHARES:
Sold 182,660 191,992
Issued on reinvestment of dividends 8,194 3,015
Redeemed (140,450) (86,301)
--------------------------
Net increase (decrease) in shares
outstanding 50,404 108,706
--------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
- ----------------------------------------------------------------------
Income Trust
<TABLE>
<CAPTION>
LIMITED MATURITY GOVERNMENT
BOND TRUST INCOME TRUST
Year Year
Ended Ended
October 31, October 31,
1995 1994 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 537,413 $ 142,663 $ 4,187 $ 3,448
Net realized loss on investments
sold, financial futures contracts,
and foreign currency transactions
from corresponding Portfolio (Note
A) (12,780) (13,498) (193) (2,469)
Change in net unrealized
appreciation (depreciation) of
investments, financial futures
contracts, and translation of
assets and liabilities in foreign
currencies from corresponding
Portfolio (Note A) 181,185 (74,280) 2,431 (2,091)
------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 705,818 54,885 6,425 (1,112)
------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (537,413) (142,663) (3,563) (3,252)
Tax return of capital -- -- (624) (196)
------------------------------------------------------
Total distributions to shareholders (537,413) (142,663) (4,187) (3,448)
------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 6,601,996 7,455,164 32,260 5,544
Proceeds from reinvestment of
dividends 529,643 142,832 4,171 3,455
Payments for shares redeemed (2,093,216) (902,302) (31,299) (27,493)
------------------------------------------------------
Net increase (decrease) from Trust
share transactions 5,038,423 6,695,694 5,132 (18,494)
------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 5,206,828 6,607,916 7,370 (23,054)
NET ASSETS:
Beginning of year 6,708,183 100,267 52,124 75,178
------------------------------------------------------
End of year $ 11,915,011 $ 6,708,183 $ 59,494 $ 52,124
------------------------------------------------------
Accumulated undistributed foreign
currency gains $ 3,069 $ -- $ -- $ --
------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 693,849 780,411 3,496 581
Issued on reinvestment of dividends 55,762 14,942 452 363
Redeemed (220,455) (94,326) (3,347) (2,778)
------------------------------------------------------
Net increase (decrease) in shares
outstanding 529,156 701,027 601 (1,834)
------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger&Berman October 31, 1995
- ----------------------------------------------------------------------
Income Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger&Berman Ultra Short Bond Trust ("Ultra Short"),
Neuberger&Berman Limited Maturity Bond Trust ("Limited Maturity"), and
Neuberger&Berman Government Income Trust ("Government Income") (collectively,
the "Funds") are separate series of Neuberger&Berman Income Trust (the
"Trust"), a Delaware business trust organized pursuant to a Trust Instrument
dated May 6, 1993. The Trust is registered as a diversified, open-end
management investment company under the Investment Company Act of 1940, as
amended, and its shares are registered under the Securities Act of 1933, as
amended. The trustees of the Trust may establish additional series or classes
of shares without the approval of shareholders.
The assets of each series belong only to that series, and the liabilities
of each series are borne solely by that series and no other.
Each Fund seeks to achieve its investment objective by investing all of
its net investable assets in its corresponding Portfolio of Income Managers
Trust (the "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 (1.70%, 3.67%, and .49%, for Ultra Short, Limited Maturity, and
Government Income, respectively, at October 31, 1995). 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 each Fund's financial statements.
2) PORTFOLIO VALUATION: Investments in each Portfolio of Income Managers Trust
are valued by Income Managers Trust as indicated in the notes following the
Portfolios' schedule of investments.
3) FEDERAL INCOME TAXES: Each series of the Trust is treated as a separate
entity for Federal income tax purposes. It is the policy of each Fund of the
Trust to continue to qualify as a regulated investment company by complying
with the provisions available to certain investment companies, as defined in
applicable sections of the Internal Revenue Code, and to make distributions
of taxable income (after reduction for any amounts available for Federal
income tax purposes as capital loss carryforwards) sufficient to relieve it
from all, or substantially all, Federal income taxes. Accordingly, each Fund
paid no Federal income taxes and no provision for Federal income taxes was
required.
18
<PAGE>
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, will be declared and
paid annually after the end of the fiscal year. To the extent that each
Fund's net realized capital gains, if any, can be offset by capital loss
carryforwards ($29, $6,430, and $1,909 expiring in 2001, 2002, and 2003,
respectively, for Ultra Short, $86, $11,896, and $24,346 expiring in 2001,
2002, and 2003, respectively, for Limited Maturity, and $1,964 expiring in
2002 for Government Income, determined as of October 31, 1995), 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) ORGANIZATION EXPENSES: Expenses incurred by each Fund in connection with
its organization are being amortized by each Fund on a straight-line basis
over a five-year period. At October 31, 1995, the unamortized balance of such
expenses amounted to $31,238, $29,827, and $30,114, for Ultra Short, Limited
Maturity, and Government Income, respectively. The accrued organization costs
for Ultra Short and Government Income are payable to Neuberger&Berman
Management Incorporated ("Management"), the administrator to each Fund.
6) EXPENSE ALLOCATION: The Funds bear all costs of 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 another 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 AND DISTRIBUTION FEES AND OTHER TRANSACTIONS
WITH AFFILIATES:
Each Fund retains Management as its administrator under an Administration
Agreement ("Agreement") dated as of July 12, 1993. Pursuant to this Agreement
each Fund pays Management an administration fee at the annual rate of .50% of
that Fund's average daily net assets and indirectly pays for investment
management services through its investment in its corresponding Portfolio. (See
Note B of Notes to Financial Statements of the Portfolios.) The Agreement
provides that if with respect to
19
<PAGE>
any fiscal year of each Fund, its total operating expenses plus its pro rata
portion of its corresponding Portfolio's operating expenses (including the fees
payable to Management but excluding interest, taxes, brokerage commissions, and
extraordinary expenses) ("Operating Expenses") exceed the most restrictive of
the expense limitations imposed by securities laws of the states in which such
Fund's shares are qualified for sale, the administration fees for that fiscal
year will be reduced by the amount of such excess, provided that Management has
no obligation to reimburse the Fund for any such expenses that exceed the
administration fee. The most restrictive expense limitation to which each Fund
is currently subject is 2 1/2% of the first $30 million of average daily net
assets, 2% of the next $70 million of average daily net assets, and 1 1/2% of
any additional average daily net assets. No reduction in the administration fee
as a result of any state expense limitation was required for the year ended
October 31, 1995. Reduction pursuant to the state expense limitation would have
been required for Ultra Short and Government Income had Management not
voluntarily undertaken to reimburse the Funds for certain expenses, as described
below.
In addition, Management has voluntarily undertaken to reimburse each Fund for
its Operating Expenses which exceed, in the aggregate, .75% per annum for Ultra
Short (.65% prior to March 1, 1995), .80% per annum for Limited Maturity (.70%
from May 1, 1994 to February 28, 1995), and .85% per annum for Government Income
(.75% prior to March 1, 1995) of their average daily net assets. Each
undertaking is subject to termination by Management upon at least sixty (60)
days' prior written notice to the Fund. For the year ended October 31, 1995,
such excess expenses amounted to $104,135, $123,568, and $98,088, for Ultra
Short, Limited Maturity, and Government Income, respectively.
Since inception of the Funds, Management has voluntarily undertaken to pay
certain expenses of Ultra Short and Government Income as an advance. Those
expenses will be repaid by the Funds to Management in the future, and are
included under the caption Payable for Fund expenses in the Statements of Assets
and Liabilities.
All of the capital stock of Management is owned by individuals who are also
general partners of Neuberger&Berman, L.P. ("Neuberger"), a member firm of The
New York Stock Exchange and the sub-adviser to each Portfolio. Several
individuals who are officers and/or trustees of the Trust are also partners of
Neuberger and/or officers and/or directors of Management.
Each Fund also has a distribution agreement with Management, which receives
no compensation therefor and no commissions for sales or redemptions of shares
of beneficial interest of each Fund.
20
<PAGE>
NOTE C -- INVESTMENT TRANSACTIONS:
During the year ended October 31, 1995, additions and reductions in each
Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
- ------------------------------------------------------------------------------
<S> <C> <C>
ULTRA SHORT $1,641,146 $1,235,573
LIMITED MATURITY 5,956,517 1,683,590
GOVERNMENT INCOME 40,220 40,004
</TABLE>
21
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Ultra Short Bond Trust
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
PERIOD
FROM
SEPTEMBER
YEAR ENDED OCTOBER 7, 1993(1)
31, TO OCTOBER
1995 1994 31, 1993
----------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $ 9.79 $ 9.97 $10.00
----------------------------------
Income From Investment Operations
Net Investment Income .53 .37 .05
Net Gains or Losses on Securities
(both realized and unrealized) .06 (.18) (.03)
----------------------------------
Total From Investment Operations .59 .19 .02
----------------------------------
Less Distributions
Dividends (from net investment
income) (.53) (.37) (.05)
----------------------------------
Net Asset Value, End of Year $ 9.85 $ 9.79 $ 9.97
----------------------------------
Total Return+ +6.15% +1.92% +0.17%(2)
----------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 1.7 $ 1.2 $ 0.2
----------------------------------
Ratio of Expenses to Average Net
Assets(3) .72% .65% .65%(4)
----------------------------------
Ratio of Net Investment Income to
Average Net Assets(3) 5.42% 3.86% 2.98%(4)
----------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
22
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Trust
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
PERIOD
FROM
AUGUST 30,
YEAR ENDED OCTOBER 1993(1)
31, TO OCTOBER
1995 1994 31, 1993
----------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $ 9.43 $ 9.97 $10.00
----------------------------------
Income From Investment Operations
Net Investment Income .58 .54 .08
Net Gains or Losses on Securities
(both realized and unrealized) .18 (.54) (.03)
----------------------------------
Total From Investment Operations .76 -- .05
----------------------------------
Less Distributions
Dividends (from net investment
income) (.58) (.54) (.08)
----------------------------------
Net Asset Value, End of Year $ 9.61 $ 9.43 $ 9.97
----------------------------------
Total Return+ +8.36% -0.01% +0.55%(2)
----------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 11.9 $ 6.7 $ 0.1
----------------------------------
Ratio of Expenses to Average Net
Assets(3) .77% .70% .65%(4)
----------------------------------
Ratio of Net Investment Income to
Average Net Assets(3) 6.16% 5.72% 4.99%(4)
----------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
23
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Government Income Trust
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
PERIOD
FROM
SEPTEMBER
13,
YEAR ENDED 1993(1)
OCTOBER 31, TO OCTOBER
1995 1994 31, 1993
----------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $ 9.12 $ 9.95 $10.00
----------------------------------
Income From Investment Operations
Net Investment Income .63 .62 .08
Net Gains or Losses on Securities
(both realized and unrealized) .30 (.83) (.05)
----------------------------------
Total From Investment Operations .93 (.21) .03
----------------------------------
Less Distributions
Dividends (from net investment
income) (.53) (.58) (.08)
Tax return of capital (.10) (.04) --
----------------------------------
Total Distributions (.63) (.62) (.08)
----------------------------------
Net Asset Value, End of Year $ 9.42 $ 9.12 $ 9.95
----------------------------------
Total Return+ +10.61% -2.16% +0.28%(2)
----------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 0.1 $ 0.1 $ 0.1
----------------------------------
Ratio of Expenses to Average Net
Assets(3) .82% .75% .75%(4)
----------------------------------
Ratio of Net Investment Income to
Average Net Assets(3) 6.85% 6.46% 6.02%(4)
----------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
24
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger&Berman October 31, 1995
- ----------------------------------------------------------------------
Income Trust
1)The date investment operations commenced.
2)Not annualized.
3)After reimbursement of expenses by the administrator as described in Note B of
Notes to Financial Statements. Had the administrator not undertaken such
action the annualized ratios to average daily net assets would have been:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, PERIOD FROM
SEPTEMBER 7, 1993
ULTRA SHORT 1995 1994 TO OCTOBER 31, 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses 2.50% 2.50% 2.50%
-------------------------------------------------------------------------------
Net Investment Income 3.64% 2.01% 1.13%
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, PERIOD FROM AUGUST
30, 1993 TO OCTOBER
LIMITED MATURITY 1995 1994 31, 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses 2.18% 2.50% 2.50%
-------------------------------------------------------------------------------
Net Investment Income 4.75% 3.92% 3.14%
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, PERIOD FROM
SEPTEMBER 13, 1993
GOVERNMENT INCOME 1995 1994 TO OCTOBER 31, 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses 2.50% 2.50% 2.50%
-------------------------------------------------------------------------------
Net Investment Income 5.17% 4.71% 4.27%
-------------------------------------------------------------------------------
</TABLE>
4)Annualized.
+ Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each year
and assumes dividends and capital gain distributions, if any, were reinvested.
Results represent past performance and do not guarantee future results.
Investment returns and principal may fluctuate and shares when redeemed may be
worth more or less than original cost. Total return would have been lower if
Management had not reimbursed certain expenses.
25
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Income Managers Trust and
Owners of Beneficial Interest of:
Neuberger&Berman Ultra Short Bond Portfolio
Neuberger&Berman Limited Maturity Bond Portfolio and
Neuberger&Berman Government Income Portfolio
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Neuberger&Berman Ultra Short Bond
Portfolio, Neuberger&Berman Limited Maturity Bond Portfolio, and
Neuberger&Berman Government Income Portfolio, three of the series comprising
Income Managers Trust (the "Trust"), as of October 31, 1995, 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 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. Our procedures included confirmation of securities owned as of
October 31, 1995, 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, 1995, 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 financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
[SIGNATURE]
Boston, Massachusetts /s/ ERNST & YOUNG LLP
December 1, 1995
26
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1995
- --------------------------------------------------------------------------------
Ultra Short Bond Portfolio
<TABLE>
<CAPTION>
PRINCIPAL RATING(1)
AMOUNT MOODY'S S&P VALUE(2)
- ----------- ----------- --------- -------------
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES
(3.0%)
$3,000,000 U.S. Treasury Notes, 7.50%,
due 1/31/97 (COST $3,014,956) TSY TSY $ 3,067,500
-------------
U.S. GOVERNMENT AGENCY
SECURITIES (27.2%)
2,000,000 Federal National Mortgage
Association, Medium-Term
Notes, 6.37%, due 11/14/95 AGY AGY 2,000,760
1,250,000 Chattanooga Valley Corp., TVA,
Zero Coupon First Mortgage
Bonds, due 1/1/96 AGY AGY 1,239,062
3,000,000 Federal Home Loan Mortgage
Corp., Debentures, 6.84%, due
2/28/96 AGY AGY 3,012,870
4,000,000 Student Loan Marketing
Association, Floating Rate
Notes, 6.08%, due 7/1/96 AGY AGY 4,004,800
2,000,000 Federal Home Loan Bank, Bonds,
Ser. CZ-1996, 5.10%, due
7/8/96 AGY AGY 1,995,040
1,300,000 Federal Home Loan Mortgage
Corp., Notes, 7.555%, due
2/10/97 AGY AGY 1,329,406
3,000,000 Federal National Mortgage
Association, Notes, 7.50%, due
2/12/97 AGY AGY 3,013,020
250,000 Federal Home Loan Bank,
Floating Rate Notes, 4.933%,
due 1/29/98 AGY AGY 244,063
500,000 Federal Home Loan Bank,
Floating Rate Notes, 4.958%,
due 2/25/98 AGY AGY 488,125
2,400,000 Federal Home Loan Mortgage
Corp., Debentures, 6.95%, due
5/25/98 AGY AGY 2,401,584
2,000,000 Federal Home Loan Mortgage
Corp., Debentures, 6.50%, due
9/7/98 AGY AGY 2,000,620
2,000,000 Federal Home Loan Bank, Bonds,
Ser. TL-1998, 6.64%, due
9/15/98 AGY AGY 2,010,120
2,000,000 Federal Home Loan Bank, Bonds,
Ser. IU-2000, 7.30%, due
8/10/00 AGY AGY 2,002,780
2,000,000 Federal Home Loan Mortgage
Corp., Debentures, 6.98%, due
9/13/00 AGY AGY 2,003,120
-------------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES (COST $27,687,148) 27,745,370
-------------
</TABLE>
27
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Ultra Short Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL RATING(1)
AMOUNT MOODY'S S&P VALUE(2)
- ----------- ----------- --------- -------------
<C> <S> <C> <C> <C>
MORTGAGE-BACKED SECURITIES
(11.1%)
FEDERAL HOME LOAN MORTGAGE CORP.
$ 76,526 REMIC CMO, Ser. 1078-GA,
6.50%, due 2/15/96 AGY AGY $ 76,402
695,814 REMIC ARM CMO, Ser. 1270-F,
6.2875%, due 5/15/97 AGY AGY 695,660
73,908 Mortgage Participation
Certificates, 11.50%, due
2/1/00 & 5/1/00 AGY AGY 78,384
3,794,329 Gold Balloon Payment
Certificates, 6.50%, due
3/1/97-10/1/00 AGY AGY 3,817,792
132,384 Mortgage Participation
Certificates, 10.50%, due
6/1/00-11/1/00 AGY AGY 138,846
2,006,901 Gold Balloon Payment
Certificates, 7.50%, due
11/1/01 AGY AGY 2,048,162
498,314 ARM Certificates, 6.875%, due
12/1/16 AGY AGY 500,494
653,136 ARM Certificates, 7.125%, due
3/1/17 AGY AGY 656,402
FEDERAL NATIONAL MORTGAGE ASSOCIATION
285,596 REMIC Trust, Ser. 1991-30,
Class 30-E, 8.50%, due 3/25/09 AGY AGY 284,628
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
3,000,000 MIDGET Pass-Through
Certificates, 7.50%, TBA, 15
Year Maturity AGY AGY 3,074,040
-------------
TOTAL MORTGAGE-BACKED
SECURITIES (COST $11,342,429) 11,370,810
-------------
ASSET-BACKED SECURITIES
(15.5%)
67,638 General Motors Acceptance
Corp. Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1991-C,
Class A, 5.70%, due 12/15/96 Aaa AAA 67,618
2,788,952 General Motors Acceptance
Corp. Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1992-D,
5.55%, due 5/15/97 Aaa AAA 2,786,442
</TABLE>
28
<PAGE>
October 31, 1995
- --------------------------------------------------------------------------------
Ultra Short Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL RATING(1)
AMOUNT MOODY'S S&P VALUE(2)
- ----------- ----------- --------- -------------
<C> <S> <C> <C> <C>
$ 227,719 General Motors Acceptance
Corp. Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1992-F,
Class A, 4.50%, due 9/15/97 Aaa AAA $ 225,852
1,220,575 Daimler-Benz Auto Grantor
Trust, Ser. 1993-A, 3.90%, due
10/15/98 Aaa AAA 1,203,853
284,419 USAA Auto Loan Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1993-1,
3.90%, due 3/15/99 Aaa AAA 280,949
2,226,578 General Motors Acceptance
Corp. Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1995-A,
7.15%, due 3/15/00 Aaa AAA 2,258,062
1,798,347 Ford Credit Grantor Trust,
Ser. 1995-A, Class A, 5.90%,
due 5/15/00 Aaa AAA 1,802,015
4,300,000 Caterpillar Financial Asset
Trust, Ser. 1995-A, Class A-2,
6.10%, due 8/25/01 Aaa AAA 4,306,450
2,901,142 Chase Manhattan Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1995-A,
6.00%, due 9/17/01 Aaa AAA 2,905,929
-------------
TOTAL ASSET-BACKED SECURITIES
(COST $15,788,759) 15,837,170
-------------
BANKS & FINANCIAL INSTITUTIONS
(11.9%)
2,000,000 Citibank Canada, Domestic
C.D., 7.62%, due 1/9/96 P-1 A-1 2,005,120
3,000,000 Westdeutsche Landesbank
Girozentrale, Medium-Term
Notes, 6.75%, due 3/13/96 Aa2 AA+ 3,009,690
3,000,000 Trust Company Bank, Atlanta,
Georgia, Medium-Term Bank
Notes, 6.50%, due 3/21/96 Aa2 AA 3,008,610
4,000,000 Deutsche Bank A.G., Yankee
C.D., 7.498%, due 1/21/97 Aaa AAA 4,065,480
-------------
TOTAL BANKS & FINANCIAL
INSTITUTIONS (COST
$12,038,032) 12,088,900
-------------
</TABLE>
29
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1995
- --------------------------------------------------------------------------------
Ultra Short Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL RATING(1)
AMOUNT MOODY'S S&P VALUE(2)
- ----------- ----------- --------- -------------
<C> <S> <C> <C> <C>
CORPORATE DEBT SECURITIES
(16.2%)
$4,000,000 Hanson Overseas B.V., Yankee
Guaranteed Senior Notes,
5.50%, due 1/15/96 P-1 A-1 $ 3,997,640
4,000,000 USAA Capital Corp.,
Medium-Term Notes, 4.70%, due
3/4/96 P-1 A-1+ 3,951,200
1,000,000 British Telecom Finance B.V.,
Guaranteed Bonds, 7.625%, due
9/30/96 Aaa AAA 1,015,040
3,600,000 Toyota Motor Credit Corp.,
Floating Rate Medium-Term
Notes, 5.62%, due 6/13/97 Aaa AAA 3,580,020
4,000,000 du Pont (E.I.), de Nemours &
Co., Medium-Term Notes, Ser.
F, 6.04%, due 12/16/97 Aa3 AA- 4,002,000
-------------
TOTAL CORPORATE DEBT
SECURITIES (COST $16,597,254) 16,545,900
-------------
CORPORATE COMMERCIAL PAPER
(18.2%)
4,500,000 Marsh & McLennan Cos., Inc.,
5.87%, due 11/1/95 P-1 A-1+ 4,500,000
3,270,000 Oklahoma Gas & Electric Co.,
5.85%, due 11/1/95 P-1 A-1+ 3,270,000
4,000,000 Ford Motor Credit Co., 5.73%,
due 11/2/95 P-1 A-1 3,999,364
3,000,000 Eksportfinans A/S, 5.75%, due
11/6/95 P-1 A-1+ 2,997,604
3,840,000 Cargill, Inc., 5.70%, due
11/20/95 P-1 A-1+ 3,828,448
-------------
TOTAL CORPORATE COMMERCIAL
PAPER (COST $18,595,416) 18,595,416(3)
-------------
TOTAL INVESTMENTS (103.1%)
(COST $105,063,994) 105,251,066(4)
Liabilities, less cash,
receivables and other assets
[(3.1%)] (3,185,460)
-------------
TOTAL NET ASSETS (100.0%) $ 102,065,606
-------------
</TABLE>
30
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1995
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
PRINCIPAL RATING(1)
AMOUNT MOODY'S S&P VALUE(2)
- ---------- ----------- --------- ------------
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES
(36.4%)
$1,500,000 U.S. Treasury Notes, 6.75%,
due 5/31/97 TSY TSY $ 1,524,555
1,820,000 U.S. Treasury Notes, 7.375%,
due 11/15/97 TSY TSY 1,879,587
11,660,000 U.S. Treasury Notes, 7.25%,
due 2/15/98 TSY TSY 12,046,296
36,835,000 U.S. Treasury Notes, 6.50%,
due 4/30/99 TSY TSY 37,698,780
15,865,000 U.S. Treasury Notes, 7.75%,
due 1/31/00 TSY TSY 17,003,314
3,500,000 U.S. Treasury Notes, 6.75%,
due 4/30/00 TSY TSY 3,626,350
41,660,000 U.S. Treasury Notes, 6.25%,
due 5/31/00 TSY TSY 42,376,552
------------
TOTAL U.S. TREASURY SECURITIES
(COST $114,072,254) 116,155,434
------------
U.S. GOVERNMENT AGENCY
SECURITIES (10.6%)
765,000 Federal Home Loan Mortgage
Corp., Discount Notes, 5.63%,
due 11/13/95 AGY AGY 763,447
17,545,000 Federal National Mortgage
Association, Discount Notes,
5.61%, due 11/17/95 AGY AGY 17,498,330
6,860,000 Federal Home Loan Mortgage
Corp., Discount Notes, 5.64%,
due 11/20/95 AGY AGY 6,838,528
6,685,000 Federal Farm Credit Bank,
Discount Notes, 5.58%, due
12/7/95 AGY AGY 6,646,561
2,210,000 Federal National Mortgage
Association, Discount Notes,
5.58%, due 12/7/95 AGY AGY 2,197,293
------------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES (COST $33,949,765) 33,944,159
------------
MORTGAGE-BACKED SECURITIES
(4.7%)
FEDERAL HOME LOAN MORTGAGE CORP.
267,284 Mortgage Participation
Certificates, 10.50%, due
10/1/00 & 12/1/00 AGY AGY 280,333
838,834 Mortgage Participation
Certificates, 8.50%, due
10/1/01 AGY AGY 861,692
302,559 ARM Certificates, 7.00%, due
1/1/17 AGY AGY 303,883
1,079,173 ARM Certificates, 7.125%, due
2/1/17 & 3/1/17 AGY AGY 1,084,439
467,213 ARM Certificates, 7.25%, due
10/1/17 AGY AGY 474,222
</TABLE>
31
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL RATING(1)
AMOUNT MOODY'S S&P VALUE(2)
- ---------- ----------- --------- ------------
<C> <S> <C> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
$ 393,211 Balloon Payment, Certificates,
9.00%, due 3/1/97-8/1/98 AGY AGY $ 404,886
426,843 Balloon Payment, Certificates,
8.50%, due 9/1/97-11/1/98 AGY AGY 438,581
1,289,858 Mortgage Participation
Certificates, 7.00%, due
9/1/03 AGY AGY 1,307,258
1,008,907 REMIC Floating Rate CMO, Ser.
1992-59F, 6.30625%, due
8/25/06 AGY AGY 1,010,259
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
246,557 Pass-Through Certificates,
12.00%, due 5/15/12-3/15/15 AGY AGY 281,075
6,028,694 Pass-Through Certificates,
10.00%, due 9/15/15-6/15/20 AGY AGY 6,584,479
1,749,174 Pass-Through Certificates,
9.50%, due 8/15/09-4/15/22 AGY AGY 1,869,429
------------
TOTAL MORTGAGE-BACKED
SECURITIES (COST $14,687,575) 14,900,536
------------
ASSET-BACKED SECURITIES
(10.8%)
336,509 General Motors Acceptance
Corp. Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1991-C,
Class A, 5.70%, due 12/15/96 Aaa AAA 336,408
298,635 General Motors Acceptance
Corp. Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1992-D,
5.55%, due 5/15/97 Aaa AAA 298,366
561,438 Nissan Auto Receivables
Grantor Trust, Automobile Loan
Pass-Through Certificates,
Ser. 1992-B, 4.30%, due
9/15/97 Aaa AAA 556,497
506,222 World Omni Financial Corp.
Grantor Trust, Automobile Loan
Pass-Through Certificates,
Ser. 1992-A, 4.75%, due
1/15/98 Aaa AAA 502,932
824,461 Volvo Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1992-A,
4.65%, due 6/15/98 Aaa AAA 817,453
2,441,151 Daimler-Benz Auto Grantor
Trust, Ser. 1993-A, 3.90%, due
10/15/98 Aaa AAA 2,407,707
</TABLE>
32
<PAGE>
October 31, 1995
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL RATING(1)
AMOUNT MOODY'S S&P VALUE(2)
- ---------- ----------- --------- ------------
<C> <S> <C> <C> <C>
$2,237,684 Premier Auto Trust, Ser.
1993-3, Class A-3, 4.90%, due
12/15/98 Aaa AAA $ 2,215,307
3,000,000 Ford Credit Master Trust,
Automobile Loan Certificates,
Ser. 1992-1, 6.875%, due
1/15/99 Aaa AAA 3,046,650
5,000,000 Ford Credit Auto Loan Master
Trust, Automobile Loan
Certificates, Ser. 1992-2,
7.375%, due 4/15/99 Aaa AAA 5,121,250
2,953,121 Case Equipment Loan Trust,
Ser. 1993-B, Class A-1, 4.30%,
due 5/15/99 Aaa AAA 2,930,973
5,711,365 Nissan Auto Receivables
Grantor Trust, Automobile Loan
Pass-Through Certificates,
Ser. 1994-A, Class A, 6.45%,
due 9/15/99 Aaa AAA 5,744,148
3,447,229 Case Equipment Loan Trust,
Ser. 1995-A, 7.30%, due
3/15/02 Aaa AAA 3,508,797
7,000,000 NationsBank Credit Card Master
Trust, Ser. 1995-1, Class A,
6.45%, due 4/15/03 Aaa AAA 7,095,340
------------
TOTAL ASSET-BACKED SECURITIES
(COST $34,382,356) 34,581,828
------------
BANKS & FINANCIAL INSTITUTIONS
(13.5%)
5,000,000 Union Bank of Finland Ltd.,
Global Notes, 5.25%, due
6/15/96 A2 BBB 4,976,950
5,000,000 State Bank of New South Wales,
Eurodollar Notes, 8.50%, due
7/1/96 Aa2 AA 5,078,100
10,000,000 Society National Bank, Bank
Notes, 6.875%, due 10/15/96 Aa3 A 10,089,200
5,000,000 BankAmerica Corp., Medium-Term
Notes, 6.875%, due 11/20/97 A2 A+ 5,078,100
10,000,000 Chemical Banking Corp.,
Corporate Notes, 6.625%, due
1/15/98 A2 A 10,098,200
8,000,000 First USA Bank, Medium-Term
Deposit Notes, 6.375%, due
10/23/00 Baa2 BBB- 7,947,840
------------
TOTAL BANKS & FINANCIAL
INSTITUTIONS (COST
$43,740,452) 43,268,390
------------
</TABLE>
33
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1995
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL RATING(1)
AMOUNT MOODY'S S&P VALUE(2)
- ---------- ----------- --------- ------------
<C> <S> <C> <C> <C>
CORPORATE DEBT SECURITIES
(23.0%)
$3,000,000 General Electric Capital
Corp., Medium-Term Notes,
8.67%, due 12/15/95 Aaa AAA $ 3,009,540
5,000,000 Hanson Overseas B.V., Yankee
Guaranteed Senior Notes,
5.50%, due 1/15/96 A2 A+ 4,997,050
10,000,000 Chrysler Financial Corp.,
Corporate Notes, 6.00%, due
4/15/96 A3 A- 9,998,300
8,000,000 Discover Credit Corp.,
Medium-Term Notes, 7.97%, due
5/7/97 A2 BBB 8,234,000
9,000,000 P.H. Glatfelter Co., Corporate
Notes, 5.875%, due 3/1/98 Baa2 BBB+ 8,861,220
3,000,000 Ford Motor Credit Co.,
Medium-Term Notes, 9.10%, due
5/4/98 A1 A+ 3,203,820
5,600,000 Tenneco Inc., Medium-Term
Notes, 10.00%, due 8/1/98 Baa2 BBB- 6,097,560
5,975,000 News America Holdings Inc.,
Senior Notes, 9.125%, due
10/15/99 Baa3 BBB 6,466,324
5,000,000 Xerox Credit Corp.,
Medium-Term Notes, 6.84%, due
6/1/00 A2 A 5,033,850
1,750,000 Sears Roebuck Acceptance
Corp., Medium-Term Notes, Ser.
I, 6.42%, due 10/10/00 A2 BBB 1,754,305
5,000,000 Sears Roebuck Acceptance
Corp., Medium-Term Notes, Ser.
I, 6.40%, due 10/11/00 A2 BBB 5,000,000
5,200,000 General Motors Acceptance
Corp., Medium-Term Notes,
8.125%, due 3/1/01 A3 A- 5,564,052
5,000,000 Rhone Poulenc S.A., Yankee
Bonds, 7.75%, due 1/15/02 Baa2 BBB+ 5,288,450
------------
TOTAL CORPORATE DEBT
SECURITIES (COST $74,705,527) 73,508,471
------------
TOTAL INVESTMENTS (99.0%)
(COST $315,537,929) 316,358,818(4)
Cash, receivables and other
assets, less liabilities
(1.0%) 3,287,063
------------
TOTAL NET ASSETS (100.0%) $319,645,881
------------
</TABLE>
34
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1995
- --------------------------------------------------------------------------------
Government Income Portfolio
<TABLE>
<CAPTION>
PRINCIPAL RATING(1)
AMOUNT MOODY'S S&P VALUE(2)
- ----------- --------- --------- -----------
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES
(57.4%)
$1,200,000 U.S. Treasury Notes, 5.625%,
due 8/31/97 TSY TSY $ 1,199,784
525,000 U.S. Treasury Notes, 6.75%,
due 6/30/99 TSY TSY 541,716
2,150,000 U.S. Treasury Notes, 6.25%,
due 8/31/00 TSY TSY 2,193,236
850,000 U.S. Treasury Notes, 6.375%,
due 8/15/02 TSY TSY 872,168
260,000 U.S. Treasury Notes, 6.50%,
due 5/15/05 TSY TSY 268,978
1,880,000 U.S. Treasury Bonds, 6.25%,
due 8/15/23 TSY TSY 1,837,418
-----------
TOTAL U.S. TREASURY SECURITIES
(COST $6,893,547) 6,913,300
-----------
U.S. GOVERNMENT AGENCY
SECURITIES (9.3%)
25,000 Federal National Mortgage
Association, Discount Notes,
5.57%, due 11/8/95 AGY AGY 24,969
100,000 Federal Home Loan Mortgage
Corp., Discount Notes, 5.55%,
due 11/9/95 AGY AGY 99,859
200,000 Federal Home Loan Mortgage
Corp., Discount Notes, 5.60%,
due 11/15/95 AGY AGY 199,532
700,000 Federal Home Loan Mortgage
Corp., Discount Notes, 5.63%,
due 11/20/95 AGY AGY 697,809
100,000 Federal National Mortgage
Association, Discount Notes,
5.62%, due 11/20/95 AGY AGY 99,687
-----------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES (COST $1,122,038) 1,121,856
-----------
MORTGAGE-BACKED SECURITIES
(40.7%)
250,000 Nomura Asset Securities Corp.
Pass-Through Certificates
REMIC CMO, Ser. 1995 MDIII,
Class A-4, 9.0143%, due 3/4/20 BBB(5) BBB 264,900
FEDERAL HOME LOAN MORTGAGE CORP.
35,440 Multiclass Mortgage
Participation Certificates
Inverse Floater, Ser. 1139S,
13.64%, due 9/15/96 AGY AGY 35,748
110,625 Multiclass Mortgage
Participation Certificates
Inverse Floater, Ser. 1549L,
6.3795%, due 7/15/08 AGY AGY 77,869
</TABLE>
35
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1995
- --------------------------------------------------------------------------------
Government Income Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL RATING(1)
AMOUNT MOODY'S S&P VALUE(2)
- ----------- --------- --------- -----------
<C> <S> <C> <C> <C>
$ 219,002 REMIC CMO, Ser. 1658, Class
AG, 10.00%, due 4/15/21 AGY AGY $ 238,565
562,985 Gold Mortgage Participation
Certificates, 8.50%, due
10/1/24 AGY AGY 583,591
FEDERAL NATIONAL MORTGAGE ASSOCIATION
3,603,141 REMIC CMO, Interest Only
Strip, Ser. 1994 M1, Yielding
7.00%, due 10/25/03 AGY AGY 168,987
422,327 Mortgage Participation
Certificates, 9.50%, due
7/1/12 AGY AGY 444,111
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
392,578 Pass-Through Certificates,
8.20%, due 1/15/19 AGY AGY 405,360
1,875,253 Pass-Through Certificates,
8.00%, due 2/15/23 AGY AGY 1,930,236
745,000 ARM Certificates, 6.00%, TBA,
30 Year Maturity AGY AGY 746,415
-----------
TOTAL MORTGAGE-BACKED
SECURITIES (COST $4,914,691) 4,895,782
-----------
TOTAL INVESTMENTS (107.4%)
(COST $12,930,276) 12,930,938(4)
Liabilities, less cash,
receivables and other assets
[(7.4%)] (892,220)
-----------
TOTAL NET ASSETS (100.0%) $12,038,718
-----------
</TABLE>
36
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
October 31, 1995
- ----------------------------------------------------------------------
Income Managers Trust
1)Credit ratings are unaudited.
2)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. Short-term investments with less than sixty days until maturity at
the time of purchase are valued at amortized cost which, when combined with
interest earned, approximates market value.
3)At cost, which approximates market value.
4)At October 31, 1995, selected Portfolio information on a Federal income tax
basis was as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED NET UNREALIZED
NEUBERGER&BERMAN COST APPRECIATION DEPRECIATION APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ULTRA SHORT BOND PORTFOLIO $ 105,063,994 $ 278,835 $ 91,763 $ 187,072
LIMITED MATURITY BOND PORTFOLIO 315,537,929 2,903,244 2,082,355 820,889
GOVERNMENT INCOME PORTFOLIO 12,930,276 62,840 62,178 662
</TABLE>
5)Not rated by Moody's; the rating shown is from Fitch Investors Services, Inc.
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1995
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
LIMITED
ULTRA SHORT MATURITY GOVERNMENT
BOND BOND INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at market value*
(Note A) -- see Schedule of Investments $105,251,066 $316,358,818 $ 12,930,938
Cash 3,022 3,646 30,025
Deferred organization costs (Note A) 5,111 14,130 8,344
Interest receivable 1,157,801 3,412,423 118,703
Prepaid expenses and other assets 3,915 18,330 2,285
Receivable for securities sold 29,782 70,695 1,825,392
-------------------------------------------
106,450,697 319,878,042 14,915,687
-------------------------------------------
LIABILITIES
Net payable for forward foreign currency
contracts purchased (Note C) -- 93,371 --
Payable for securities purchased 4,313,772 -- 2,840,455
Payable to investment manager (Note B) 22,823 68,732 3,690
Accrued expenses 48,496 70,058 32,824
-------------------------------------------
4,385,091 232,161 2,876,969
-------------------------------------------
NET ASSETS Applicable to Investors'
Beneficial Interests $102,065,606 $319,645,881 $ 12,038,718
-------------------------------------------
NET ASSETS consist of:
Paid-in capital $101,878,534 $318,918,363 $ 12,038,056
Net unrealized appreciation in value of
investments and translation of assets and
liabilities in foreign currencies 187,072 727,518 662
-------------------------------------------
NET ASSETS $102,065,606 $319,645,881 $ 12,038,718
-------------------------------------------
*Cost of investments $105,063,994 $315,537,929 $ 12,930,276
-------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1995
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
LIMITED
ULTRA SHORT MATURITY GOVERNMENT
BOND BOND INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest income $ 5,565,725 $21,191,050 $ 823,705
------------------------------------------
Expenses:
Investment management fee (Note B) 229,072 769,332 37,063
Accounting fees 10,000 10,000 10,000
Amortization of deferred organization and
initial offering expenses (Note A) 1,905 5,292 3,112
Auditing fees 22,700 24,200 21,200
Custodian fees 71,591 157,808 18,416
Insurance expense 4,806 14,614 480
Legal fees 13,291 13,476 14,721
Trustees' fees and expenses 12,434 31,913 5,688
Miscellaneous 111 382 14
------------------------------------------
Total expenses 365,910 1,027,017 110,694
------------------------------------------
Net investment income 5,199,815 20,164,033 713,011
------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, FINANCIAL FUTURES CONTRACTS, AND
FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investments sold (331,171) (3,720,375) (53,117)
Net realized loss on financial futures
contracts (Note A) -- -- (1,779)
Net realized gain (loss) on foreign currency
transactions (Note A) -- 94,670 (118,562)
Change in net unrealized appreciation
(depreciation) of investments and
translation of assets and liabilities in
foreign currencies 842,011 9,091,942 497,830
Change in net unrealized depreciation of
financial futures contracts (Note A) -- -- 1,187
------------------------------------------
Net gain on investments, financial futures
contracts, and foreign currency
transactions 510,840 5,466,237 325,559
------------------------------------------
Net increase in net assets resulting from
operations $ 5,710,655 $25,630,270 $ 1,038,570
------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
ULTRA SHORT
BOND PORTFOLIO
Year
Ended
October 31,
1995 1994
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 5,199,815 $ 4,274,305
Net realized loss on investments
sold, financial futures contracts,
and foreign currency transactions (331,171) (1,368,777)
Change in net unrealized
appreciation (depreciation) of
investments, financial futures
contracts, and translation of
assets and liabilities in foreign
currencies 842,011 (608,217)
-----------------------------
Net increase (decrease) in net
assets resulting from operations 5,710,655 2,297,311
-----------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 37,399,892 34,813,829
Reductions (43,020,643) (39,468,962)
-----------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (5,620,751) (4,655,133)
-----------------------------
NET INCREASE (DECREASE) IN NET ASSETS 89,904 (2,357,822)
NET ASSETS:
Beginning of year 101,975,702 104,333,524
-----------------------------
End of year $ 102,065,606 $ 101,975,702
-----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
LIMITED MATURITY GOVERNMENT
BOND PORTFOLIO INCOME PORTFOLIO
Year Year
Ended Ended
October 31, October 31,
1995 1994 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 20,164,033 $ 19,589,439 $ 713,011 $ 711,778
Net realized loss on investments
sold, financial futures contracts,
and foreign currency transactions (3,625,705) (4,909,960) (173,458) (528,076)
Change in net unrealized
appreciation (depreciation) of
investments, financial futures
contracts, and translation of
assets and liabilities in foreign
currencies 9,091,942 (13,672,095) 499,017 (494,021)
------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 25,630,270 1,007,384 1,038,570 (310,319)
------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 42,386,132 58,828,899 3,842,596 11,131,499
Reductions (64,495,000) (101,591,060) (3,955,940) (7,841,890)
------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (22,108,868) (42,762,161) (113,344) 3,289,609
------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 3,521,402 (41,754,777) 925,226 2,979,290
NET ASSETS:
Beginning of year 316,124,479 357,879,256 11,113,492 8,134,202
------------------------------------------------------
End of year $319,645,881 $316,124,479 $ 12,038,718 $ 11,113,492
------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
- ----------------------------------------------------------------------
Income Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger&Berman Ultra Short Bond Portfolio ("Ultra Short"),
Neuberger&Berman Limited Maturity Bond Portfolio ("Limited Maturity"), and
Neuberger&Berman Government Income Portfolio ("Government Income")
(collectively, the "Portfolios") are separate series of Income Managers Trust
("Managers Trust"), a New York common law trust organized as of December 1,
1992. Managers Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended. Other regulated
investment companies sponsored by Neuberger&Berman Management Incorporated
("Management"), whose financial statements are not presented herein, also
invest in these and other Portfolios of Managers Trust.
The assets of each series belong only to that series, and the liabilities
of each series are borne solely by that series and no other.
2) PORTFOLIO VALUATION: Investments are valued as indicated in the notes
following the Portfolios' schedule of investments.
3) FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolios are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange of such currency against the U.S.
dollar to determine the value of investments, other assets and liabilities.
Purchase and sale prices of securities, and income and expenses are
translated into U.S. dollars at the prevailing rate of exchange on the
respective dates of such transactions.
4) FORWARD FOREIGN CURRENCY CONTRACTS: Limited Maturity and Government
Income may 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, or to
increase or decrease their exposure to a currency other than U.S. dollars.
The gain or loss arising from the difference between the original contract
price and the closing price of such contract is included in net realized
gains or losses on foreign currency transactions. Fluctuations in the value
of forward foreign currency contracts are recorded for financial reporting
purposes as unrealized gains or losses by the Portfolio. The Portfolios have
no 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 the contracts were unable to meet the terms of its contracts
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.
5) FINANCIAL FUTURES CONTRACTS: Ultra Short, Limited Maturity, and Government
Income may buy and sell financial futures contracts to hedge against the
effects of
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fluctuations in interest rates. At the time a Portfolio enters into a
financial futures contract, it is required to deposit with its custodian a
specified amount of cash or U.S. government securities, known as "initial
margin," ranging upward from 1.1% of the value of the financial futures
contract being traded. Each day, the futures contract is valued at the
official settlement price of the board of trade or U.S. commodity exchange on
which such futures contract is traded. Subsequent payments, known as
"variation margin," to and from the broker are made on a daily basis as the
market price of the financial futures contract fluctuates. Daily variation
margin adjustments, arising from this "mark to market," are recorded by the
Portfolio as unrealized gains or losses.
Although some financial futures contracts by their terms call for actual
delivery or acceptance of financial instruments, in most cases the contracts
are closed out prior to delivery by offsetting purchases or sales of matching
financial futures contracts. When the contracts are closed, the Portfolio
recognizes a gain or loss. Risks of entering into futures contracts include
the possibility that there may be an illiquid market and/or that a change in
the value of the contract may not correlate with changes in the value of the
underlying securities.
For Federal income tax purposes, the futures transactions undertaken by a
Portfolio may cause a Portfolio to recognize gains or losses from marking to
market even though its positions have not been sold or terminated, may affect
the character of the gains or losses recognized as long-term or short-term
and may affect the timing of some capital gains and losses realized by the
Portfolio. Also, the Portfolio's losses on its 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, 1995, Government Income entered into financial futures contracts. There
were no open positions in financial futures contracts at October 31, 1995.
6) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Interest income, including accretion of
discount (adjusted for original issue discount, where applicable), is
recorded on the accrual basis. Realized gains and losses from securities
transactions are recorded on the basis of identified cost.
7) FEDERAL INCOME TAXES: Managers Trust intends to comply with the
requirements of the Internal Revenue Code of 1986, as amended. Each Portfolio of
Managers Trust also intends to conduct its operations so that each of its
investors will be able to qualify as a regulated investment company. Each
Portfolio will be treated as a partnership for Federal income tax purposes
and is therefore not subject to Federal income tax.
8) ORGANIZATION EXPENSES: Expenses incurred by each Portfolio in connection
with its organization are being amortized by each Portfolio on a
straight-line basis over a five-year period. At October 31, 1995, the
unamortized balance of such expenses amounted to $5,111, $14,130, and $8,344
for Ultra Short, Limited Maturity, and Government Income, respectively.
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9) EXPENSE ALLOCATION: The Portfolios bear all costs of 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
another 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 dated as of July 2, 1993. For such investment management
services, each Portfolio (except Government Income) pays Management a fee at the
annual rate of .25% of the first $500 million of that Portfolio's average daily
net assets, .225% of the next $500 million, .20% of the next $500 million, .175%
of the next $500 million, and .15% of average daily net assets in excess of $2
billion. Government Income pays Management a fee for investment management
services at the annual rate of .35% of the first $500 million of that
Portfolio's average daily net assets, .325% of the next $500 million, .30% of
the next $500 million, .275% of the next $500 million, and .25% of average daily
net assets in excess of $2 billion.
All of the capital stock of Management is owned by individuals who are also
general partners of Neuberger&Berman, L.P. ("Neuberger"), a member firm of The
New York Stock Exchange and the sub-adviser to each Portfolio. Neuberger is
retained by Management to furnish it with investment recommendations and
research information without cost to each Portfolio. Several individuals who are
officers and/ or trustees of Managers Trust are also partners of Neuberger
and/or officers and/or directors of Management.
Each Portfolio has an expense offset arrangement included in its custodian
contract. The impact of this arrangement on each Portfolio's custodian expense,
reflected in the Statement of Operations, is less than .01% of the Portfolio's
average daily net assets.
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended October 31, 1995, 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>
ULTRA SHORT $96,063,202 $83,116,696
LIMITED MATURITY 247,265,437 246,364,411
GOVERNMENT INCOME 30,109,213 30,856,833
</TABLE>
During the year ended October 31, 1995, Limited Maturity entered into various
contracts to deliver currencies at specified future dates. At October 31, 1995,
Limited Maturity had the following open contract:
<TABLE>
<CAPTION>
NET
CONTRACTS IN EXCHANGE SETTLEMENT UNREALIZED
SALES TO DELIVER FOR DATE VALUE DEPRECIATION
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Canadian
Dollars 7,000,000 $5,105,949 11/15/95 $5,199,320 $ 93,371
</TABLE>
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
ULTRA SHORT LIMITED MATURITY GOVERNMENT
BOND PORTFOLIO BOND PORTFOLIO INCOME PORTFOLIO
Period from Period from Period from
July 2, July 2, July 6,
1993 1993 1993
(Commencement (Commencement (Commencement
of of of
Operations) Operations) Operations)
Year Ended to October Year Ended to October Year Ended to October
October 31, 31, October 31, 31, October 31, 31,
1995 1994 1993 1995 1994 1993 1995 1994 1993
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET
ASSETS:
Expenses .40% .38% .40%(1) .33% .34% .33%(1) 1.05% .93% 2.85%(1)
---------------------------------------------------------------------------------------------
Net Investment Income 5.67% 3.98% 4.00%(1) 6.55% 5.86% 5.53%(1) 6.73% 6.34% 3.98%(1)
---------------------------------------------------------------------------------------------
Portfolio Turnover Rate 148% 94% 46% 88% 102% 71% 288% 263% 119%
---------------------------------------------------------------------------------------------
Net Assets, End of Year
(in millions) $102.1 $102.0 $104.3 $319.6 $316.1 $357.9 $12.0 $11.1 $8.1
---------------------------------------------------------------------------------------------
</TABLE>
1) Annualized.
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OTHER INFORMATION
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700
Institutional Services 800-366-6264
SUB-ADVISER
Neuberger&Berman, L.P.
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
Institutional Services
605 Third Avenue 2nd Floor
New York, NY 10158-0180
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 M Street, NW
Washington, DC 20036-5891
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
OFFICERS AND TRUSTEES
Stanley Egener
CHAIRMAN OF THE BOARD AND TRUSTEE
Theresa A. Havell
PRESIDENT AND TRUSTEE
John Cannon
TRUSTEE
Charles DeCarlo
TRUSTEE
Barry Hirsch
TRUSTEE
Robert A. Kavesh
TRUSTEE
Harold R. Logan
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
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
Neuberger&Berman Management Inc., Neuberger&Berman Ultra Short Bond Trust,
Neuberger&Berman Limited Maturity Bond Trust, and Neuberger&Berman Government
Income Trust
are service marks of Neuberger&Berman Management Inc.
- -C- 1995 Neuberger&Berman Management Inc.
46
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NEUBERGER&BERMAN MANAGEMENT INC.
605 THIRD AVENUE 2ND FLOOR
NEW YORK, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
INSTITUTIONAL SERVICES
800.366.6264
Statistics and projections in this report are derived from sources
deemed to be reliable but cannot be regarded as a representation of
future results of the Funds. This report is prepared for the general
information of shareholders and is not an offer of shares of the Funds.
Shares are sold only through the currently effective prospectus, which
must precede or accompany this report.
PRINTED ON RECYCLED PAPER
[recycle logo]
WITH SOY BASED INKS NBITAR001095
<PAGE>
