<PAGE>
Neuberger&Berman Management Inc.-R-
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.
ANNUAL REPORT
October 31, 1996
Neuberger&Berman Income Trust-R-
Neuberger&Berman
ULTRA SHORT BOND TRUST
Neuberger&Berman
LIMITED MATURITY BOND TRUST
printed on recycled paper
[RECYCLE LOGO]
NBITAR001096
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE TRUSTS
PRESIDENT'S LETTER 4
GROWTH OF A DOLLAR
CHARTS
COMPARISON OF A
$10,000 INVESTMENT
Ultra Short Bond Trust 9
Limited Maturity Bond
Trust 10
FINANCIAL STATEMENTS 12
FINANCIAL HIGHLIGHTS
PER SHARE DATA
Ultra Short Bond Trust 19
Limited Maturity Bond
Trust 20
REPORT OF
INDEPENDENT AUDITORS 22
THE PORTFOLIOS
SCHEDULE OF
INVESTMENTS
Ultra Short Bond
Portfolio 24
Limited Maturity Bond
Portfolio 28
FINANCIAL STATEMENTS 35
FINANCIAL HIGHLIGHTS 42
REPORT OF
INDEPENDENT AUDITORS 43
DIRECTORY 45
OFFICERS AND
TRUSTEES 46
</TABLE>
3
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PRESIDENT'S LETTER* December 13, 1996
Dear Shareholder,
At the time of your fund's October 1995 Annual Report, bond prices were in the
midst of a strong rally, with tepid economic growth and benign inflation
fostering a positive environment for fixed-income securities. After weathering a
significant inflation scare this spring and summer, bonds were benefiting from
similarly favorable economic conditions as the current fiscal year ended.
The twelve months through October 31, 1996, were an unstable time for interest
rates. The Federal Reserve Board (the "Fed") made adjustments to monetary
policy, reducing the Federal funds rate from 5.75% to 5.25%, and lowering the
Discount Rate by a quarter percentage point to 5%. The Fed's steady approach
kept shorter-maturity securities in a narrow range, with three-month Treasury
bills, for example, trading between about 4.9% and 5.6% over the fiscal year.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS ON U.S. TREASURY
SECURITIES
<S> <C> <C>
3-year Treasury Notes 30-year Treasury Bonds
Nov-95 1.15% 3.15%
Dec-95 2.06035% 6.048515%
Jan-96 3.029923% 5.634926%
Feb-96 2.174775% -0.565844%
Mar-96 1.725206% -2.604244%
Apr-96 1.42003% -5.058618%
May-96 1.47074% -5.514335%
Jun-96 2.36383% -3.870286%
Jul-96 2.670774% -4.225966%
Aug-96 2.670774% -5.825392%
Sep-96 4.11083% -2.971901%
Oct-96 5.703726% 1.112982%
Source: Salomon Brothers
</TABLE>
The intermediate- and long-term sectors of the bond market, however, were
destabilized by conflicting signals on growth and inflation. At first, most
signs pointed toward a continuation of relatively slow but steady economic
growth. The correspondingly sanguine outlook for inflation nurtured steadily
lower rates, with the yield on the long Treasury bond (which is the benchmark
30-year Treasury) falling from 6.34% in November to 5.95% in January. But the
market's tranquility
4
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was shattered with the news that 624,000 non-farm jobs were added to the
nation's payrolls in February. Further signs of above-average economic growth
appeared in the form of rising commodity prices, strong consumer confidence, a
4.8% increase in second-quarter gross domestic product, and hints of labor-cost
pressures. At the peak of concerns about economic overheating in July, the yield
on the Treasury's 30-year bond climbed to 7.19%.
Since August, commodity prices and the pace of economic growth have declined,
and labor costs increased by just 0.6% in the third quarter. By your fund's
fiscal year end, yields on the long Treasury bond had fallen back to 6.64%, or
only 0.30% above their yield in November 1995.
Since bond prices move inversely to interest rates, the Fed's stable monetary
policy and the sometimes worrisome inflation data helped short-term Treasuries
outperform long-term Treasuries over the fiscal year. The stronger-than-expected
economy also helped corporate issues beat Treasury debt with similar maturities,
while upward pressure on long-term rates allowed mortgage-backed securities to
outperform both Treasury debt and most corporate bonds. Treasury securities
usually underperform corporate bonds during periods of economic growth. Your
Neuberger&Berman Income Trusts were in a position to benefit from these trends.
We strive to merit your continued confidence and remain committed to seeking
consistent returns in all types of market environments. A discussion of each
portfolio's strategy during the 12-month period covered by the Annual Report
follows.
ULTRA SHORT BOND TRUST Fixed income bulls overwhelmed their predominantly
bearish brethren in the final moments of the third quarter of 1996. Most market
pundits, predicting a rate hike by the Fed, were caught by surprise as the Fed
held rates steady, and key economic statistics indicated no rate rise was
imminent. Buyers overwhelmed sellers, driving interest rates lower across the
board. Yields on short-term securities fell about 30 basis points in the closing
days of September as renewed confidence was established, returning us to the
positive market environment which began the fiscal year.
*Statistical sources: Federal Reserve Board; Press reports, Bloomberg Financial
Markets, Labor Department, Commerce Department, Bureau of Labor Statistics.
5
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As a result of the bond market's encouraging performance, we have gradually
extended the weighted average portfolio duration (a measure of the Portfolio's
exposure to interest rate risk) to 1.5 years by the close of the fiscal year, as
opposed to the more defensive stance we had taken from February through
September. As we reduced our commitment to less volatile money market issues, we
looked for value in longer-term securities, locking in higher interest rates.
During fiscal 1996, the spread of interest rates between 6-month and 2-year
securities changed from a relatively narrow difference of 5 basis points to a
wider difference of 47 basis points. At the end of the fiscal year, 75% of the
portfolio was invested in securities maturing in more than one year. The U.S.
inflation rate appears to be benign and our portfolio offers an above-market
return to the majority of money market funds and, we believe, is particularly
attractive in inflation-adjusted terms.
At fiscal year-end, the portfolio shows a significant commitment to U.S.
Treasuries, AAA-rated asset-backed securities, and U.S. Government agency
mortgage-backed securities. U.S. Treasuries with maturities greater than one
year participated in the recent market price appreciation and have been a sector
of value for our portfolio, which had 24% invested in Treasuries greater than
one year at October 31, 1996. Also, we have committed 19% of the portfolio to
the asset-backed sector. These AAA-rated securities have increased the total
return of the portfolio with minimal credit risk. As always, our constant
internal analysis of credit trends and their effect on issuers continues to
indicate the presence of strong cash flows and strong balance sheets. Finally,
we have increased the portfolio's commitment to the mortgage-backed sector to
18%, as the attractive return of these securities has been passed over by a
market concerned by prepayment fears. Our selection process has focused on those
issues which, we believe, should be unaffected by increased prepayments, giving
us an opportunity to add incremental yield to the portfolio.
LIMITED MATURITY BOND TRUST The fiscal period November 1, 1995 to October 31,
1996 ended on an upbeat note for the bond market in general, and the Limited
Maturity Bond Trust in particular, as yields across all maturities fell during
September and October. Yields in the 1- to 5-year maturity range ended the
period only modestly higher
6
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(10 to 25 basis points) than at the start of the fiscal year. In between,
however, the bond market was on a roller coaster ride, with interest rates
falling early in the period, then rising extremely rapidly, and finally
declining once again for the final rally. Managing our weighted average
portfolio duration (a measure of the Portfolio's exposure to interest rate risk)
during this period of volatility remained consistent with our trend-following
style. For example, in the early portion of the year our duration was a
relatively long 3 years on average as we took advantage of falling interest
rates. When the trend reversed in February and March as a result of signs of
increased economic growth, higher inflation expectations, and comments by Fed
Chairman Alan Greenspan, we shortened duration several times including a low for
the year of 2.2 years which was reached in June. By September, the market seemed
to have overreacted to the economic signals, and from a technical and
fundamental standpoint appeared undervalued. We lengthened the weighted average
portfolio duration to just over 2.5 years at the close of our fiscal period.
Yields fell from September through the end of the fiscal year, which benefited
the portfolio due to its longer duration.
Corporate bonds remained the largest sector in the portfolio as we continued
to find value through our bottom-up bond selection process (looking at
individual bonds rather than average sector prices) despite a generally
expensive (i.e., relatively small incremental yields compared to comparable
duration Treasury securities) corporate bond market. The below-investment grade
segment of our holdings outperformed all other sectors, due to the healthy
market conditions in high yield bonds as well as effective individual security
selection. Our research staff identified several bonds during the period that
appeared underpriced relative to their credit fundamentals and which we added to
the portfolio. These included Tenet Healthcare, a leading hospital firm, which
was put on watch for a potential upgrade during the period by S&P. This
potential upgrade resulted in the market pricing these bonds at a tighter spread
(yield differentials) to Treasuries, which resulted in their significant
outperformance of the market. The below-investment grade portion was 9% of the
portfolio at the end of the fiscal year. Investment grade bonds also performed
well, with restructuring at firms such as Tenneco Inc. and Alco Capital
Resource, Inc. resulting in higher prices for their bonds, relative to
comparable duration Treasuries.
7
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Investments in mortgage-backed and asset-backed securities accounted for the
majority of the remainder of the portfolio. The asset-backed securities are all
rated "AAA" and are backed by pools of credit card receivables, auto loans and
leases, or equipment loans. While the increase in consumer delinquencies on
credit cards has received a lot of media attention, the asset-backed securities
in our portfolio are of the highest quality. The bonds in our portfolio have
outperformed comparable duration Treasury securities as the collateral backing
these securities has performed within the bond market's and the rating
agencies' expectations. The mortgage market performed well throughout the second
half of the year, and our investment in 7-year and
15-year agency pass-through mortgage-backed securities added to the Trust's
return.
Sincerely,
/s/ Theodore P. Giuliano
Theodore P. Giuliano
President and Trustee
Neuberger&Berman Income Trust
The composition and holdings of the Portfolios are subject to change.
8
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COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman October 31, 1996
- ----------------------------------------------------------------------
Ultra Short Bond Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return 1
Ultra Short 6-Month Salomon
Bond Trust Treasury Bill Index 2
1 Year +5.24% +5.42%
5 Year +4.26% +4.58%
Life of Fund +5.82% +5.91%
Ultra Short 6-Month Salomon
Bond Trust Treasury Bill Index
11/7/86 $10,000 $10,000
10/31/87 $10,518 $10,599
1988 $11,271 $11,312
1989 $12,291 $12,298
1990 $13,272 $13,308
1991 $14,286 $14,186
1992 $14,920 $14,797
1993 $15,460 $15,281
1994 $15,756 $15,886
1995 $16,726 $16,836
1996 $17,602 $17,750
</TABLE>
The performance information for Neuberger&Berman Ultra Short Bond Trust is as
of October 31, 1996. 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 which commenced operations on November 7, 1986.
Neuberger&Berman Management Inc. has voluntarily undertaken to reimburse Ultra
Short Bond Trust for its operating expenses and its pro rata share of its
Portfolio's operating expenses which, in the aggregate, exceed .75% per annum of
Ultra Short Bond Trust's average daily net assets. This arrangement can be
terminated upon 60 days' notice. Absent such arrangement, the average annual
total returns would have been less. The total returns for periods prior to the
Trust's commencement of operations would have been lower had they reflected the
higher expense ratios of the Trust as compared to those of Neuberger&Berman
Ultra Short Bond Fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Trust 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 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. Data about the performance of this index are prepared or
obtained by Neuberger&Berman Management Inc. and include reinvestment of all
dividends and capital gain distributions. The Portfolio invests in many
securities not included in the above-described index.
9
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COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman October 31, 1996
- ----------------------------------------------------------------------
Limited Maturity Bond Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Limited
Maturity Merrill Lynch 1-3
Bond Trust Year Treasury Index
10/31/86 $10,000 $10,000
1987 $10,328 $10,530
1988 $11,179 $11,328
1989 $12,248 $12,394
1990 $13,210 $13,478
1991 $14,649 $14,998
1992 $15,801 $16,227
1993 $16,946 $17,172
1994 $16,944 $17,375
1995 $18,361 $18,930
1996 $19,333 $20,049
Average Annual Total Return 1
Limited Maturity Merrill Lynch 1-3
Bond Trust Year Treasury Index 2
1 Year +5.29% +5.91%
5 Year +5.71% +5.98%
10 Year +6.81% +7.20%
</TABLE>
The performance information for Neuberger&Berman Limited Maturity Bond Trust
is as of October 31, 1996. 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. Neuberger& Berman Management Inc. has
voluntarily undertaken to reimburse Limited Maturity Bond Trust for its
operating expenses and its pro rata share of its Portfolio's operating expenses
which, in the aggregate, exceed .80% per annum of Limited Maturity Bond Trust's
average daily net assets. This arrangement can be terminated upon 60 days'
notice. Absent such arrangement, the average annual total returns would have
been less. The total returns for periods prior to the Trust's commencement of
operations would have been lower had they reflected the higher expense ratios of
the Trust as compared to those of Neuberger&Berman Limited Maturity Bond Fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Trust and the return on the
investment both will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
2. The Merrill Lynch 1-3 Year Treasury Index is an unmanaged total return market
value index consisting of all coupon-bearing U.S. Treasury publicly placed debt
securities with maturities between 1 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. Data about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
10
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(This page has been left blank intentionally.)
11
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STATEMENTS OF ASSETS AND LIABILITIES
Neuberger&Berman October 31, 1996
- ----------------------------------------------------------------------
Income Trust
<TABLE>
<CAPTION>
LIMITED
ULTRA SHORT MATURITY
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) BOND TRUST BOND TRUST
----------------------------
<S> <C> <C>
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $ 6,637 $ 21,253
Deferred organization costs (Note A) 20 19
Receivable for Trust shares sold -- 27
Receivable from administrator -- net (Note
B) 7 2
----------------------------
6,664 21,301
----------------------------
LIABILITIES
Dividends payable -- 2
Payable for Trust shares redeemed -- 37
Accrued expenses 31 34
----------------------------
31 73
----------------------------
NET ASSETS at value $ 6,633 $ 21,228
----------------------------
NET ASSETS consist of:
Par value $ 1 $ 2
Paid-in capital in excess of par value 6,658 21,224
Accumulated net realized losses on
investment (48 ) (47 )
Net unrealized appreciation in value of
investment 22 49
----------------------------
NET ASSETS at value $ 6,633 $ 21,228
----------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 676 2,227
----------------------------
NET ASSET VALUE, offering and redemption price per
share $9.82 $9.53
----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
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STATEMENTS OF OPERATIONS
Neuberger&Berman For the Year Ended October 31, 1996
- ----------------------------------------------------------------------
Income Trust
<TABLE>
<CAPTION>
LIMITED
ULTRA SHORT MATURITY
(000'S OMITTED) BOND TRUST BOND TRUST
------------------------
<S> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 383 $1,046
------------------------
Expenses:
Administration fee (Note B) 31 76
Amortization of deferred organization and
initial offering expenses (Note A) 11 11
Auditing fees 5 5
Custodian fees 10 10
Legal fees 25 25
Registration and filing fees 28 36
Shareholder reports 36 56
Shareholder servicing agent fees 18 20
Trustees' fees and expenses 1 1
Miscellaneous 1 1
Expenses from corresponding Portfolio (Notes
A & B) 25 51
------------------------
Total expenses 191 292
Deduct -- expenses reimbursed by
administrator (Note B) (144 ) (169 )
------------------------
Total net expenses 47 123
------------------------
Net investment income 336 923
------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized loss on investment securities (42 ) (6 )
Net realized loss on financial futures
contracts -- (1 )
Net realized loss on foreign currency
transactions -- (3 )
Change in net unrealized appreciation of
investment securities, translation of assets
and liabilities in foreign currencies, and
foreign currency contracts 19 2
Net unrealized depreciation of financial
futures contracts -- (60 )
------------------------
Net loss on investments from corresponding
Portfolio (Note A) (23 ) (68 )
------------------------
Net increase in net assets resulting from
operations $ 313 $ 855
------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
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STATEMENTS OF CHANGES IN NET ASSETS
Neuberger&Berman
- ----------------------------------------------------------------------
Income Trust
<TABLE>
<CAPTION>
ULTRA SHORT LIMITED MATURITY
BOND TRUST BOND TRUST
Year Year
Ended Ended
October 31, October 31,
(000'S OMITTED) 1996 1995 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 336 $ 81 $ 923 $ 537
Net realized loss on investments
from corresponding Portfolio (Note
A) (42) (1) (10) (13)
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) 19 9 (58) 181
------------------------------------------------------
Net increase in net assets resulting
from operations 313 89 855 705
------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (336) (81) (922) (537)
------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 8,353 1,795 15,484 6,602
Proceeds from reinvestment of
dividends 335 80 906 530
Payments for shares redeemed (3,772) (1,379) (7,010) (2,093)
------------------------------------------------------
Net increase from Trust share
transactions 4,916 496 9,380 5,039
------------------------------------------------------
NET INCREASE IN NET ASSETS 4,893 504 9,313 5,207
NET ASSETS:
Beginning of year 1,740 1,236 11,915 6,708
------------------------------------------------------
End of year $ 6,633 $ 1,740 $ 21,228 $ 11,915
------------------------------------------------------
Accumulated undistributed foreign
currency gains $ -- $ -- $ -- $ 3
------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 849 182 1,629 694
Issued on reinvestment of dividends 34 8 95 56
Redeemed (384) (140) (737) (221)
------------------------------------------------------
Net increase in shares outstanding 499 50 987 529
------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
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NOTES TO FINANCIAL STATEMENTS
Neuberger&Berman October 31, 1996
- ----------------------------------------------------------------------
Income Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger&Berman Ultra Short Bond Trust ("Ultra Short") and
Neuberger&Berman Limited Maturity Bond Trust ("Limited Maturity")
(collectively, the "Funds") are separate operating 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 the shareholders.
The assets of each series belong only to that series, and the liabilities
of each series are borne solely by that series and no other.
Each Fund seeks to achieve its investment objective by investing all of
its net investable assets in its corresponding Portfolio of Income Managers
Trust (each a "Portfolio") having the same investment objective and policies
as the Fund. The value of each Fund's investment in its corresponding
Portfolio reflects that Fund's proportionate interest in the net assets of
that Portfolio (6.91% and 7.95% for Ultra Short and Limited Maturity,
respectively, at October 31, 1996). 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.
2) PORTFOLIO VALUATION: Each Fund records its investment in its corresponding
Portfolio at value. Investment securities held by each Portfolio are valued
by Income Managers Trust as indicated in the notes following the Portfolios'
Schedule of Investments.
3) FEDERAL INCOME TAXES: Each series of the Trust is treated as a separate
entity for Federal income tax purposes. It is the policy of each Fund 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 investment company taxable income and net capital gains (after reduction
for any amounts available for Federal income tax purposes as capital loss
carryforwards) sufficient to relieve it from all, or substantially all,
Federal income taxes. Accordingly, each Fund paid no Federal income taxes and
no provision for Federal income taxes was required.
15
<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, are normally distributed in December. To the
extent each Fund's net realized capital gains, if any, can be offset by
capital loss carryforwards ($29, $6,430, $1,909, and $39,554 expiring in
2001, 2002, 2003, and 2004, respectively, for Ultra Short and $86, $11,896,
$24,346, and $70,825 expiring in 2001, 2002, 2003, and 2004, respectively,
for Limited Maturity, determined as of October 31, 1996), 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
dividends 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, 1996, the unamortized balance of such
expenses amounted to $20,286 and $19,287 for Ultra Short and Limited
Maturity, respectively.
6) EXPENSE ALLOCATION: Each Fund bears all costs of its operations. Expenses
incurred by the Trust with respect to both Funds are allocated in proportion
to the net assets of the Funds, except where a more appropriate allocation of
expenses to each Fund can otherwise be made fairly. Expenses directly
attributable to a Fund are charged to that Fund.
7) OTHER: All net investment income and realized and unrealized capital gains
and losses of each Portfolio are allocated pro rata among its respective
Funds and any other investors in the Portfolio.
NOTE B -- ADMINISTRATION FEES, DISTRIBUTION ARRANGEMENTS, AND OTHER TRANSACTIONS
WITH AFFILIATES:
Each Fund retains Neuberger&Berman Management Incorporated ("Management") as
its administrator under an Administration Agreement ("Agreement") 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 if, with respect to 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,
16
<PAGE>
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 applicable during the year ended October 31, 1996, to which each Fund
was subject, was 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, 1996. Reduction pursuant to the state expense limitation would have been
required for Ultra Short had Management not voluntarily undertaken to reimburse
the Fund for certain expenses, as described below. In the future, there will be
no state expense limitations applicable to any fund.
In addition, Management has voluntarily undertaken to reimburse each Fund for
its respective Operating Expenses which exceed, in the aggregate, .75% per annum
for Ultra Short (.65% prior to March 1, 1995) and .80% per annum for Limited
Maturity (.70% prior to March 1, 1995) of their respective average daily net
assets. Each undertaking is subject to termination by Management upon at least
60 days' prior written notice to the appropriate Fund. For the year ended
October 31, 1996, such excess expenses amounted to $143,959 and $168,733 for
Ultra Short and Limited Maturity, respectively.
All of the capital stock of Management is owned by individuals who are also
principals of Neuberger&Berman, LLC ("Neuberger"), a member firm of The New York
Stock Exchange and sub-adviser to each Portfolio. Several individuals who are
officers and/or trustees of the Trust are also principals of Neuberger and/or
officers and/or directors of Management.
Each Fund also has a distribution agreement with Management. Management
receives no compensation therefor and no commissions for sales or redemptions of
shares of beneficial interest of each Fund.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statement
of Operations under the caption Expenses from corresponding Portfolio, is less
than .01% of each Fund's average daily net assets.
NOTE C -- INVESTMENT TRANSACTIONS:
During the year ended October 31, 1996, additions and reductions in each
Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
- -----------------------------------------------------------------------------
<S> <C> <C>
ULTRA SHORT $ 8,150,124 $3,586,852
LIMITED MATURITY 13,700,440 5,108,313
</TABLE>
17
<PAGE>
(This page has been left blank intentionally.)
18
<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>
Year Ended October 31,
1996 1995 1994
-------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $ 9.85 $ 9.79 $ 9.97
-------------------------------
Income From Investment Operations
Net Investment Income .53 .53 .37
Net Gains or Losses on Securities (both realized and unrealized) (.03) .06 (.18)
-------------------------------
Total From Investment Operations .50 .59 .19
-------------------------------
Less Distributions
Dividends (from net investment income) (.53) (.53) (.37)
-------------------------------
Net Asset Value, End of Year $ 9.82 $ 9.85 $ 9.79
-------------------------------
Total Return(2) +5.24% +6.15% +1.92%
-------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 6.6 $ 1.7 $ 1.2
-------------------------------
Ratio of Expenses to Average Net Assets(4) .76% .72% .65%
-------------------------------
Ratio of Net Investment Income to Average Net Assets(4) 5.43% 5.42% 3.86%
-------------------------------
<CAPTION>
Period from
September 7,
1993(1)
to October 31,
1993
<S> <C>
Net Asset Value, Beginning of Year $ 10.00
Income From Investment Operations
Net Investment Income .05
Net Gains or Losses on Securities (both realized and unrealized) (.03)
Total From Investment Operations .02
Less Distributions
Dividends (from net investment income) (.05)
Net Asset Value, End of Year $ 9.97
Total Return(2) +0.17%(3)
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 0.2
Ratio of Expenses to Average Net Assets(4) .65%(5)
Ratio of Net Investment Income to Average Net Assets(4) 2.98%(5)
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
19
<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>
Year Ended October 31,
1996 1995 1994
-------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $ 9.61 $ 9.43 $ 9.97
-------------------------------
Income From Investment Operations
Net Investment Income .57 .58 .54
Net Gains or Losses on Securities (both realized and unrealized) (.08) .18 (.54)
-------------------------------
Total From Investment Operations .49 .76 --
-------------------------------
Less Distributions
Dividends (from net investment income) (.57) (.58) (.54)
-------------------------------
Net Asset Value, End of Year $ 9.53 $ 9.61 $ 9.43
-------------------------------
Total Return(2) +5.29% +8.36% -0.01%
-------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 21.2 $ 11.9 $ 6.7
-------------------------------
Ratio of Expenses to Average Net Assets(4) .80% .77% .70%
-------------------------------
Ratio of Net Investment Income to Average Net Assets(4) 6.06% 6.16% 5.72%
-------------------------------
<CAPTION>
Period from
August 30,
1993(1)
to October 31,
1993
<S> <C>
Net Asset Value, Beginning of Year $ 10.00
Income From Investment Operations
Net Investment Income .08
Net Gains or Losses on Securities (both realized and unrealized) (.03)
Total From Investment Operations .05
Less Distributions
Dividends (from net investment income) (.08)
Net Asset Value, End of Year $ 9.97
Total Return(2) +0.55%(3)
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 0.1
Ratio of Expenses to Average Net Assets(4) .65%(5)
Ratio of Net Investment Income to Average Net Assets(4) 4.99%(5)
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
20
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger&Berman October 31, 1996
- ----------------------------------------------------------------------
Income Trust
1) The date investment operations commenced.
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 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.
3) Not annualized.
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 to average daily net assets would have been:
<TABLE>
<CAPTION>
Period from
September 7,
1993
Year Ended October 31, to October 31,
ULTRA SHORT 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses 2.50% 2.50% 2.50% 2.50%
Net Investment Income 3.69% 3.64% 2.01% 1.13%
</TABLE>
<TABLE>
<CAPTION>
Period from
August 30, 1993
Year Ended October 31, to October 31,
LIMITED MATURITY 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses 1.91% 2.18% 2.50% 2.50%
Net Investment Income 4.95% 4.75% 3.92% 3.14%
</TABLE>
5) Annualized.
21
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Neuberger&Berman Income Trust and
Shareholders of
Neuberger&Berman Ultra Short Bond Trust and
Neuberger&Berman Limited Maturity Bond Trust
We have audited the accompanying Statements of Assets and Liabilities of the
Neuberger&Berman Ultra Short Bond Trust and Neuberger&Berman Limited Maturity
Bond Trust, two of the series comprising Neuberger&Berman Income Trust (the
"Trust"), as of October 31, 1996, 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
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of Neuberger&Berman Income Trust at October 31,
1996, 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 the
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
[SIGNATURE]
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 2, 1996
22
<PAGE>
(This page has been left blank intentionally.)
23
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Ultra Short Bond Portfolio
<TABLE>
<CAPTION>
PRINCIPAL VALUE(2)
AMOUNT RATING(1) (000'S
(000'S OMITTED) MOODY'S S&P OMITTED)
- --------------- ----------- --------- -------------
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES
(27.7%)
$ 3,800 U.S. Treasury Notes, 6.875%,
due 3/31/97 TSY TSY $ 3,824
5,000 U.S. Treasury Notes, 6.25%,
due 7/31/98 TSY TSY 5,044
5,000 U.S. Treasury Notes, 6.125%,
due 8/31/98 TSY TSY 5,033
5,000 U.S. Treasury Notes, 6.00%,
due 9/30/98 TSY TSY 5,024
1,500 U.S. Treasury Notes, 6.00%,
due 8/15/99 TSY TSY 1,504
6,000 U.S. Treasury Notes, 6.875%,
due 8/31/99 TSY TSY 6,148
-------------
TOTAL U.S. TREASURY SECURITIES
(COST $26,352) 26,577
-------------
U.S. GOVERNMENT AGENCY
SECURITIES (9.4%)
2,000 Federal Home Loan Bank,
Discount Notes, 5.53%, due
11/1/96 AGY AGY 2,000
1,000 Federal Farm Credit Bank,
Bonds, 5.40%, due 12/2/96 AGY AGY 1,000
1,300 Federal Home Loan Mortgage
Corp., Notes, 7.555%, due
2/10/97 AGY AGY 1,308
250 Federal Home Loan Bank,
Variable Rate Notes, 4.639%,
due 1/29/98 AGY AGY 245
500 Federal Home Loan Bank,
Variable Rate Notes, 4.664%,
due 2/25/98 AGY AGY 490
4,000 Federal National Mortgage
Association, Medium-Term
Notes, 6.50%, due 6/26/98 AGY AGY 4,013
-------------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES (COST $9,061) 9,056
-------------
MORTGAGE-BACKED SECURITIES
(17.5%)
FEDERAL HOME LOAN MORTGAGE CORP.
633 REMIC Floating Rate CMO, Ser.
1270-F, 5.7875%, due 5/15/97 AGY AGY 633
41 Mortgage Participation
Certificates, 11.50%, due
2/1/00 & 5/1/00 AGY AGY 44
4,296 Gold Balloon Mortgage
Participation Certificates,
6.50%, due 3/1/97-11/1/00 AGY AGY 4,304
</TABLE>
24
<PAGE>
October 31, 1996
- --------------------------------------------------------------------------------
Ultra Short Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL VALUE(2)
AMOUNT RATING(1) (000'S
(000'S OMITTED) MOODY'S S&P OMITTED)
- --------------- ----------- --------- -------------
<C> <S> <C> <C> <C>
$ 93 Mortgage Participation
Certificates, 10.50%, due
6/1/00-11/1/00 AGY AGY $ 98
1,698 Gold Balloon Mortgage
Participation Certificates,
7.50%, due 11/1/01 AGY AGY 1,733
FEDERAL NATIONAL MORTGAGE ASSOCIATION
2,475 Balloon Pass-Through
Certificates, 7.00%, due
8/1/03 AGY AGY 2,494
2,431 Pass-Through Certificates,
7.50%, due 7/1/11 AGY AGY 2,470
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
2,549 Pass-Through Certificates,
7.50%, due 10/15/09-10/15/10 AGY AGY 2,600
2,457 Pass-Through Certificates,
7.00%, due 4/15/11 AGY AGY 2,468
-------------
TOTAL MORTGAGE-BACKED
SECURITIES (COST $16,784) 16,844
-------------
ASSET-BACKED SECURITIES
(19.2%)
43 General Motors Acceptance
Corp. Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1992-F,
Class A, 4.50%, due 9/15/97 Aaa AAA 43
1,000 Capita Equipment Receivables
Trust, Ser. 1996-1, Class A-2,
5.95%, due 7/15/98 Aaa AAA 1,001
427 Daimler-Benz Auto Grantor
Trust, Ser. 1993-A, Class A,
3.90%, due 10/15/98 Aaa AAA 427
87 USAA Auto Loan Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1993-1,
3.90%, due 3/15/99 Aaa AAA 87
3,000 Premier Auto Trust, Ser.
1995-3, Class A-4, 6.10%, due
7/6/99 Aaa AAA 3,012
1,549 Ford Credit Grantor Trust,
Ser. 1995-A, Class A, 5.90%,
due 5/15/00 Aaa AAA 1,552
2,272 Caterpillar Financial Asset
Trust, Ser. 1995-A, Class A-2,
6.10%, due 8/25/01 Aaa AAA 2,286
</TABLE>
25
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Ultra Short Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL VALUE(2)
AMOUNT RATING(1) (000'S
(000'S OMITTED) MOODY'S S&P OMITTED)
- --------------- ----------- --------- -------------
<C> <S> <C> <C> <C>
$ 2,324 Chase Manhattan Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1995-A,
6.00%, due 9/17/01 Aaa AAA $ 2,328
3,703 Banc One Auto Grantor Trust,
Ser. 1996-B, Class A, 6.55%,
due 2/15/03 Aaa AAA 3,730
4,000 Case Equipment Loan Trust,
Ser. 1996-B, Class A-2, 6.25%,
due 9/15/03 Aaa AAA 4,017
-------------
TOTAL ASSET-BACKED SECURITIES
(COST $18,392) 18,483
-------------
BANKS & FINANCIAL INSTITUTIONS
(15.1%)
4,000 Deutsche Bank AG, Yankee C.D.,
7.498%, due 1/21/97 Aaa AAA 4,015
4,000 Societe Generale, Yankee C.D.,
5.77%, due 5/15/97 P-1 A-1+ 4,005
3,000 J.P. Morgan & Co. Inc.,
Domestic C.D., 5.73%, due
8/12/97 P-1 A-1+ 3,003
3,500 Associates Corp. of North
America, Senior Notes, 6.375%,
due 8/15/99 Aa3 AA- 3,512
-------------
TOTAL BANKS & FINANCIAL
INSTITUTIONS (COST $14,517) 14,535
-------------
CORPORATE DEBT SECURITIES
(7.3%)
3,000 AT&T Captial Corp.,
Medium-Term Notes, Ser. A,
7.22%, due 11/5/96 Aa3 AA- 3,000
4,000 du Pont (E.I.) de Nemours and
Co., Medium-Term Notes, Ser.
F, 6.04%, due 12/16/97 Aa2 AA 4,012
-------------
TOTAL CORPORATE DEBT
SECURITIES (COST $7,042) 7,012
-------------
</TABLE>
26
<PAGE>
October 31, 1996
- --------------------------------------------------------------------------------
Ultra Short Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL VALUE(2)
AMOUNT RATING(1) (000'S
(000'S OMITTED) MOODY'S S&P OMITTED)
- --------------- ----------- --------- -------------
<C> <S> <C> <C> <C>
CORPORATE COMMERCIAL PAPER
(2.8%)
$ 2,635 American Express Credit Corp.,
5.70%, due 11/1/96 (COST
$2,635) P-1 A-1 $ 2,635(3)
-------------
TOTAL INVESTMENTS (99.0%)
(COST $94,783) 95,142(4)
Cash, receivables and other
assets, less liabilities
(1.0%) 921
-------------
TOTAL NET ASSETS (100.0%) $ 96,063
-------------
</TABLE>
27
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
PRINCIPAL VALUE(2)
AMOUNT RATING(1) (000'S
(000'S OMITTED) MOODY'S S&P OMITTED)
- --------------- ----------- --------- -------------
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES
(16.1%)
$ 35 U.S. Treasury Notes, 6.75%,
due 5/31/97 TSY TSY $ 35
40 U.S. Treasury Notes, 7.375%,
due 11/15/97 TSY TSY 41
17,035 U.S. Treasury Notes, 6.00%,
due 9/30/98 TSY TSY 17,116
1,130 U.S. Treasury Notes, 6.50%,
due 4/30/99 TSY TSY 1,147
3,790 U.S. Treasury Notes, 6.375%,
due 5/15/99 TSY TSY 3,834
18,815 U.S. Treasury Notes, 6.00%,
due 8/15/99 TSY TSY 18,861
1,000 U.S. Treasury Notes, 6.75%,
due 4/30/00 TSY TSY 1,023
1,070 U.S. Treasury Notes, 6.25%,
due 5/31/00 TSY TSY 1,079
-------------
TOTAL U.S. TREASURY SECURITIES
(COST $42,822) 43,136
-------------
MORTGAGE-BACKED SECURITIES
(9.4%)
FEDERAL HOME LOAN MORTGAGE CORP.
178 Mortgage Participation
Certificates, 10.50%, due
10/1/00 & 12/1/00 AGY AGY 187
607 Mortgage Participation
Certificates, 8.50%, due
10/1/01 AGY AGY 624
259 ARM Certificates, 7.00%, due
1/1/17 AGY AGY 262
175 ARM Certificates, 6.875%, due
2/1/17 AGY AGY 177
726 ARM Certificates, 6.625%, due
3/1/17 AGY AGY 734
FEDERAL NATIONAL MORTGAGE ASSOCIATION
290 Balloon Pass-Through
Certificates, 9.00%, due
3/1/97-8/1/98 AGY AGY 298
345 Balloon Pass-Through
Certificates, 8.50%, due
9/1/97-11/1/98 AGY AGY 354
673 REMIC Floating Rate CMO, Ser.
1992-59F, 5.80625%, due
8/25/06 AGY AGY 673
9,011 Pass-Through Certificates,
7.00%, due 9/1/03 & 6/1/11 AGY AGY 9,089
6,014 Pass-Through Certificates,
7.50%, due 9/1/11 AGY AGY 6,112
</TABLE>
28
<PAGE>
October 31, 1996
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL VALUE(2)
AMOUNT RATING(1) (000'S
(000'S OMITTED) MOODY'S S&P OMITTED)
- --------------- ----------- --------- -------------
<C> <S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
$ 193 Pass-Through Certificates,
12.00%, due 5/15/12-3/15/15 AGY AGY $ 221
4,517 Pass-Through Certificates,
10.00%, due 9/15/15-6/15/20 AGY AGY 4,953
1,363 Pass-Through Certificates,
9.50%, due 8/15/09-4/15/22 AGY AGY 1,471
-------------
TOTAL MORTGAGE-BACKED
SECURITIES (COST $24,728) 25,155
-------------
ASSET-BACKED SECURITIES
(15.8%)
6,300 Capita Equipment Receivables
Trust, Ser. 1996-1, Class A-3,
6.11%, due 7/15/99 Aaa AAA 6,312
3,861 Chase Manhattan Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1995-B,
5.90%, due 11/15/01 Aaa AAA 3,865
4,220 Navistar Financial Owner
Trust, Ser. 1996-A, Class A-2,
6.35%, due 11/15/02 Aaa AAA 4,239
6,279 Banc One Auto Grantor Trust,
Ser. 1996-B, Class A, 6.55%,
due 2/15/03 Aaa AAA 6,325
6,500 Ford Credit Auto Loan Master
Trust, Auto Loan Certificates,
Ser. 1996-1, 5.50%, due
2/15/03 Aaa AAA 6,306
7,000 NationsBank Credit Card Master
Trust, Ser. 1995-1, Class A,
6.45%, due 4/15/03 Aaa AAA 7,055
2,590 Navistar Financial Owner
Trust, Ser. 1996-B, Class A-3,
6.33%, due 4/21/03 Aaa AAA 2,609
5,000 Standard Credit Card Master
Trust I, Credit Card
Participation Certificates,
Ser. 1994-4, Class A, 8.25%,
due 11/7/03 Aaa AAA 5,380
-------------
TOTAL ASSET-BACKED SECURITIES
(COST $42,217) 42,091
-------------
</TABLE>
29
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL VALUE(2)
AMOUNT RATING(1) (000'S
(000'S OMITTED) MOODY'S S&P OMITTED)
- --------------- ----------- --------- -------------
<C> <S> <C> <C> <C>
BANKS & FINANCIAL INSTITUTIONS
(17.6%)
$ 5,000 BankAmerica Corp., Medium-Term
Notes, 6.875%, due 11/20/97 A1 A+ $ 5,055
10,000 Chase Manhattan Corp., Senior
Notes, 6.625%, due 1/15/98 A1 A 10,078
6,400 Alco Capital Resource, Inc.,
Medium-Term Notes, Ser. B,
5.46%, due 2/22/99 A3 A- 6,290
5,180 CIT Group Holdings, Inc.,
Medium-Term Notes, 6.25%, due
10/25/99 Aa3 A+ 5,181
8,000 First USA Bank, Medium-Term
Deposit Notes, 6.375%, due
10/23/00 Baa2 BBB- 7,930
6,600 Capital One Bank, Bank Notes,
5.95%, due 2/15/01 Baa3 BBB- 6,373
1,105 First Nationwide Escrow Corp.,
Senior Subordinated Notes,
10.625%, due 10/1/03 Ba3 B 1,160(5)
5,150 Goldman Sachs Group, L.P.,
Global Notes, 6.75%, due
2/15/06 A1 A+ 5,045(5)
-------------
TOTAL BANKS & FINANCIAL
INSTITUTIONS (COST $47,702) 47,112
-------------
CORPORATE DEBT SECURITIES
(43.7%)
9,000 P. H. Glatfelter Co., Notes,
5.875%, due 3/1/98 Baa2 BBB+ 8,973
2,780 Colonial Gas Co., Medium-Term
Notes, Ser. A, 6.20%, due
3/18/98 Baa1 A- 2,787
3,000 Ford Motor Credit Co.,
Medium-Term Notes, 9.10%, due
5/4/98 A1 A+ 3,135
1,900 American Standard Inc., Senior
Notes, 10.875%, due 5/15/99 Ba3 BB- 2,016
7,000 Lockheed Martin Corp., Notes,
6.55%, due 5/15/99 A3 BBB+ 7,053
2,710 Arkla, Inc., Notes, 8.875%,
due 7/15/99 Baa3 BBB 2,875
700 Caterpillar Finance,
Medium-Term Notes, Ser. E,
6.11%, due 7/15/99 A2 A 698
</TABLE>
30
<PAGE>
October 31, 1996
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL VALUE(2)
AMOUNT RATING(1) (000'S
(000'S OMITTED) MOODY'S S&P OMITTED)
- --------------- ----------- --------- -------------
<C> <S> <C> <C> <C>
$ 990 Hoechst Celanese Corp., Notes,
9.625%, due 9/1/99 A2 A+ $ 1,019
4,460 Travelers/Aetna Property
Casualty Corp., Notes, 6.25%,
due 10/1/99 A2 A 4,454
5,000 Xerox Credit Corp.,
Medium-Term Notes, Ser. D,
6.84%, due 6/1/00 A2 A 4,993
2,000 Ford Motor Credit Co.,
Medium-Term Notes, 6.84%, due
8/16/00 A1 A+ 2,023
2,510 Chesapeake Corp., Notes,
10.375%, due 10/1/00 Baa3 BBB 2,828
1,750 Sears Roebuck Acceptance
Corp., Medium-Term Notes, Ser.
I, 6.42%, due 10/10/00 A2 A- 1,750
5,000 Sears Roebuck Acceptance
Corp., Medium-Term Notes, Ser.
I, 6.40%, due 10/11/00 A2 A- 4,996
1,730 BHP Finance (USA) Limited,
Guaranteed Notes, 5.625%, due
11/1/00 A2 A 1,682
5,200 General Motors Acceptance
Corp., Medium-Term Notes,
8.125%, due 3/1/01 A3 A- 5,498
2,290 Colonial Realty Limited
Partnership, Senior Notes,
7.50%, due 7/15/01 Baa3 BBB- 2,330
4,160 Tyco International Ltd.,
Notes, 6.50%, due 11/1/01 Baa2 BBB+ 4,151
2,835 Black & Decker Corp.,
Medium-Term Notes, Ser. A,
8.90%, due 1/21/02 Baa3 BBB- 3,099
3,780 Federated Department Stores,
Inc., Senior Notes, 8.125%,
due 10/15/02 Ba1 BB- 3,877
5,480 Viacom, Senior Notes, 6.75%,
due 1/15/03 Ba2(6) BB+(6) 5,210
1,000 Safeway Inc., Medium-Term
Notes, 8.57%, due 4/1/03 Baa3 BBB 1,041
2,700 ADT Operations, Inc., Senior
Subordinated Notes, 9.25%, due
8/1/03 Ba3 BB+ 2,795
4,920 Owens-Illinois, Inc., Senior
Debentures, 11.00%, due
12/1/03 Ba3(7) BB(7) 5,406
4,675 Duty Free International, Inc.,
Notes, 7.00%, due 1/15/04 Ba1 BBB- 4,400
</TABLE>
31
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman October 31, 1996
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
PRINCIPAL VALUE(2)
AMOUNT RATING(1) (000'S
(000'S OMITTED) MOODY'S S&P OMITTED)
- --------------- ----------- --------- -------------
<C> <S> <C> <C> <C>
$ 400 Container Corp. of America,
Senior Notes, Ser. A, 11.25%,
due 5/1/04 B1 B+ $ 425
1,000 K & F Industries, Inc., Senior
Subordinated Notes, 10.375%,
due 9/1/04 B2 B- 1,030
4,400 Tenet Healthcare Corp., Senior
Subordinated Notes, 10.125%,
due 3/1/05 Ba3 B+ 4,829
1,535 Mark IV Industries, Inc.,
Senior Subordinated Notes,
7.75%, due 4/1/06 Ba3 BB+ 1,445
350 Collins & Aikman Products Co.,
Senior Subordinated Notes,
11.50%, due 4/15/06 B3 B 366
400 Cablevision Systems Corp.,
Senior Subordinated Notes,
9.875%, due 5/15/06 B2 B 393
420 JCAC, Inc., Senior
Subordinated Notes, 10.125%,
due 6/15/06 B2 B 426
1,360 LIFESTYLE FURNISHINGS
INTERNATIONAL LTD., Senior
Subordinated Notes, 10.875%,
due 8/1/06 B1 B 1,414(5)
5,575 Time Warner Inc., Notes,
8.11%, due 8/15/06 Ba1 BBB- 5,746
400 Commonwealth Aluminum Corp.,
Senior Subordinated Notes,
10.75%, due 10/1/06 B2 B- 404(5)
1,100 International Home Foods,
Senior Subordinated Notes,
10.375%, due 11/1/06 B2 B- 1,108(5)
7,290 Tenneco Inc., Debentures,
10.00%, due 3/15/08 Baa2 BBB- 8,894
725 Buckeye Cellulose Corp.,
Senior Subordinated Notes,
9.25%, due 9/15/08 Ba3 BB- 732
500 Stone Container Corp., Rating
Adjustable Senior Notes,
11.875%, due 8/1/16 B1 B+ 522(5)
-------------
TOTAL CORPORATE DEBT
SECURITIES (COST $117,040) 116,823
-------------
TOTAL INVESTMENTS (102.6%)
(COST $274,509) 274,317(4)
Liabilities, less cash,
receivables and other assets
[(2.6%)] (7,008)
-------------
TOTAL NET ASSETS (100.0%) $ 267,309
-------------
</TABLE>
32
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
October 31, 1996
- ----------------------------------------------------------------------
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 or, if quotations are not available, by a method the
trustees of Income Managers Trust believe accurately reflects fair value.
Short-term investments with less than 60 days until maturity may be valued at
cost which, when combined with interest earned, approximates market value.
3) At cost, which approximates market value.
4) At October 31, 1996, selected Portfolio information on a Federal income tax
basis was as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
NEUBERGER&BERMAN COST APPRECIATION DEPRECIATION (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ULTRA SHORT BOND PORTFOLIO $ 94,783,000 $ 460,000 $ 101,000 $ 359,000
LIMITED MATURITY BOND PORTFOLIO 274,510,000 1,788,000 1,981,000 (193,000)
</TABLE>
5) Security exempt from registration under the Securities Act of 1933. These
securities may be resold in transactions exempt from registration, normally
to qualified institutional buyers under Rule 144A. At October 31, 1996, these
securities amounted to $9,654,127 or 3.6% of net assets.
6) Rated BBB- by Fitch Investors Services, Inc.
7) Rated BBB- by Duff & Phelps Credit Rating Co.
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
(This page has been left blank intentionally.)
34
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1996
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
LIMITED
ULTRA SHORT MATURITY
BOND BOND
(000'S OMITTED) PORTFOLIO PORTFOLIO
----------------------------
<S> <C> <C>
ASSETS
Investments in securities, at market value*
(Note A) - see Schedule of Investments $ 95,142 $274,317
Cash 3 --
Deferred organization costs (Note A) 3 9
Interest receivable 966 3,733
Prepaid expenses and other assets 4 16
Receivable for securities sold 4 38
----------------------------
96,122 278,113
----------------------------
LIABILITIES
Payable for securities purchased -- 10,637
Payable for variation margin (Note A) -- 59
Payable to investment manager (Note B) 20 57
Accrued expenses 39 51
----------------------------
59 10,804
----------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 96,063 $267,309
----------------------------
NET ASSETS consist of:
Paid-in capital $ 95,704 $268,307
Net unrealized appreciation (depreciation)
in value of investment securities and
financial futures contracts 359 (998 )
----------------------------
NET ASSETS $ 96,063 $267,309
----------------------------
*Cost of investments $ 94,783 $274,509
----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1996
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
LIMITED
ULTRA SHORT MATURITY
BOND BOND
(000'S OMITTED) PORTFOLIO PORTFOLIO
------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest income $ 6,215 $20,377
------------------------
Expenses:
Investment management fee (Note B) 252 751
Accounting fees 10 10
Amortization of deferred organization and
initial offering expenses (Note A) 2 5
Auditing fees 23 25
Custodian fees (Note B) 81 131
Insurance expense 2 8
Legal fees 16 36
Trustees' fees and expenses 12 24
Miscellaneous -- 1
------------------------
Total expenses 398 991
------------------------
Net investment income 5,817 19,386
------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment securities
sold (592 ) (1,007 )
Net realized gain on financial futures
contracts (Note A) -- 115
Net realized loss on foreign currency
transactions (Note A) -- (100 )
Change in net unrealized appreciation
(depreciation) of investment securities,
translation of assets and liabilities in
foreign currencies, and foreign currency
contracts 172 (920 )
Net unrealized depreciation of financial
futures contracts (Note A) -- (806 )
------------------------
Net loss on investments (420 ) (2,718 )
------------------------
Net increase in net assets resulting from
operations $ 5,397 $16,668
------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
ULTRA SHORT LIMITED MATURITY
BOND PORTFOLIO BOND PORTFOLIO
Year Year
Ended Ended
October 31, October 31,
(000'S OMITTED) 1996 1995 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 5,817 $ 5,200 $ 19,386 $ 20,164
Net realized loss on investments (592) (331) (992) (3,625)
Change in net unrealized
appreciation (depreciation) of
investments 172 842 (1,726) 9,092
------------------------------------------------------
Net increase in net assets resulting
from operations 5,397 5,711 16,668 25,631
------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 20,518 37,400 45,924 42,386
Reductions (31,918) (43,021) (114,929) (64,495)
------------------------------------------------------
Net decrease in net assets resulting
from transactions in investors'
beneficial interests (11,400) (5,621) (69,005) (22,109)
------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (6,003) 90 (52,337) 3,522
NET ASSETS:
Beginning of year 102,066 101,976 319,646 316,124
------------------------------------------------------
End of year $ 96,063 $ 102,066 $ 267,309 $ 319,646
------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
- ----------------------------------------------------------------------
Income Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger&Berman Ultra Short Bond Portfolio ("Ultra Short") and
Neuberger&Berman Limited Maturity Bond Portfolio ("Limited Maturity")
(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 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: Investment securities 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 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 its
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 Portfolio has no specific limitation on the percentage
of assets which may be committed to these types of contracts. The Portfolio
could be exposed to risks if a counterparty to a contract were unable to meet
the terms of its contract or if the value of the foreign currency changes
unfavorably. The U.S. dollar value of foreign currency underlying all
contractual commitments held by the Portfolio is determined using forward
foreign currency rates supplied by an independent pricing service.
38
<PAGE>
5) FINANCIAL FUTURES CONTRACTS: Ultra Short and Limited Maturity may buy and
sell financial futures contracts to hedge against the effects of 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 liquid debt obligations, 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, a Portfolio
recognizes a gain or loss. Risks of entering into futures contracts include
the possibility there may be an illiquid market and/or a change in the value
of the contract may not correlate with changes in the value of the underlying
securities.
For Federal income tax purposes, the futures transactions undertaken by a
Portfolio may cause that Portfolio to recognize gains or losses from marking
to market even though its positions have not been sold or terminated, may
affect the character of the gains or losses recognized as long-term or
short-term, and may affect the timing of some capital gains and losses
realized by the Portfolio. Also, a Portfolio's losses on transactions
involving futures contracts may be deferred rather than being taken into
account currently in calculating such Portfolio's taxable income.
At October 31, 1996, open positions in financial futures contracts for
Limited Maturity were as follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
EXPIRATION OPEN CONTRACTS POSITION (DEPRECIATION)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
December 1996 165 U.S. Treasury Notes, 2 Year Long $ 168,719
December 1996 145 U.S. Treasury Notes, 5 Year Short (194,953)
December 1996 297 U.S. Treasury Notes, 10 Year Short (779,625)
</TABLE>
39
<PAGE>
At October 31, 1996, Limited Maturity had the following securities deposited
in a segregated account to cover margin requirements on open financial futures
contracts:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY
-----------------------------------------------------------------
<C> <S>
$764,875 U.S. Treasury Notes, 6.375%, due 5/15/99
105,000 U.S. Treasury Notes, 6.75%, due 4/30/00
</TABLE>
6) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Interest income, including accretion of
discount (adjusted for original issue discount, where applicable), 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, 1996, the unamortized balance
of such expenses amounted to $3,181 and $8,828 for Ultra Short and Limited
Maturity, respectively.
9) EXPENSE ALLOCATION: Each Portfolio bears all costs of its operations.
Expenses incurred by Managers Trust with respect to both 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 .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.
All of the capital stock of Management is owned by individuals who are also
principals of Neuberger&Berman, LLC ("Neuberger"), a member firm of The New York
Stock Exchange and sub-adviser to each Portfolio. Neuberger is retained by
40
<PAGE>
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 principals of Neuberger and/or
officers and/or directors of Management.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statement
of Operations, is less than .01% of each Portfolio's average daily net assets.
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended October 31, 1996, 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 $ 125,385,989 $ 177,789,844
LIMITED MATURITY 463,858,235 470,201,323
</TABLE>
During the year ended October 31, 1996, Limited Maturity entered into various
contracts to deliver currencies at specified future dates. There were no open
positions in these contracts at October 31, 1996.
41
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Income Managers Trust
<TABLE>
<CAPTION>
ULTRA SHORT LIMITED MATURITY
BOND PORTFOLIO BOND PORTFOLIO
Period from
July 2, 1993
(Commencement
of Operations)
to Year Ended October
Year Ended October 31, October 31, 31,
1996 1995 1994 1993 1996 1995
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Expenses .39% .40% .38% .40%(1) .33% .33%
----------------------------------------------------------------------
Net Investment Income 5.77% 5.67% 3.98% 4.00%(1) 6.45% 6.55%
----------------------------------------------------------------------
Portfolio Turnover Rate 173% 148% 94% 46% 169% 88%
----------------------------------------------------------------------
Net Assets, End of Year (in millions) $96.1 $102.1 $102.0 $104.3 $267.3 $319.6
----------------------------------------------------------------------
<CAPTION>
Period from
July 2, 1993
(Commencement
of Operations)
to
October 31,
1994 1993
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Expenses .34% .33%(1)
Net Investment Income 5.86% 5.53%(1)
Portfolio Turnover Rate 102% 71%
Net Assets, End of Year (in millions) $316.1 $357.9
</TABLE>
1) Annualized.
42
<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 and
Neuberger&Berman Limited Maturity Bond Portfolio
We have audited the accompanying Statements of Assets and Liabilities,
including the Schedules of Investments, of the Neuberger&Berman Ultra Short Bond
Portfolio and Neuberger&Berman Limited Maturity Bond Portfolio, two of the
series comprising Income Managers Trust (the "Trust"), as of October 31, 1996,
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 periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1996, 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, 1996, 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 the financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
[SIGNATURE]
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 2, 1996
43
<PAGE>
(This page has been left blank intentionally.)
44
<PAGE>
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700
Institutional Services 800-366-6264
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger&Berman Funds
Institutional Services
605 Third Avenue 2nd Floor
New York, NY 10158-0180
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
Neuberger&Berman Management Inc., Neuberger&Berman Ultra Short Bond Trust,
and Neuberger&Berman Limited Maturity Bond Trust are registered service marks of
Neuberger&Berman Management Inc.
- -C- 1996 Neuberger&Berman Management Inc.
45
<PAGE>
OFFICERS AND TRUSTEES
Stanley Egener
CHAIRMAN OF THE BOARD AND TRUSTEE
Theodore P. Giuliano
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
Barbara DiGiorgio
ASSISTANT TREASURER
Celeste Wischerth
ASSISTANT TREASURER
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
46
