<PAGE>
NEUBERGER BERMAN
Neuberger Berman
Income Trust -Registered Trademark-
----------------------------------------------------------
LIMITED MATURITY BOND TRUST ANNUAL REPORT
OCTOBER 31, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE TRUST
PRESIDENT'S LETTER A-4
GROWTH OF A DOLLAR CHART
COMPARISON OF A $10,000 INVESTMENT B-1
FINANCIAL STATEMENTS B-3
FINANCIAL HIGHLIGHTS
PER SHARE DATA B-9
REPORT OF INDEPENDENT AUDITORS B-11
THE PORTFOLIO
SCHEDULE OF INVESTMENTS B-12
FINANCIAL STATEMENTS B-21
FINANCIAL HIGHLIGHTS B-28
REPORT OF INDEPENDENT AUDITORS B-29
DIRECTORY C-1
OFFICERS AND TRUSTEES C-2
</TABLE>
A-3
<PAGE>
PRESIDENT'S LETTER December 18, 1998
Dear Shareholder,
Bonds enjoyed another good year in fiscal 1998. U.S. Treasuries were the
biggest winners as investors responded to global economic and stock market
instability by seeking the safety of one of the world's most secure credits.
Government bonds of larger European countries also benefited substantially from
the international "flight to quality." Although August and September were not
stellar months, returns on corporate bonds were positive. However, corporate
bond returns declined in October as investors began focusing on the potentially
negative impact of slowing global economies on corporate cash flows and
earnings. Likewise, mortgage securities also delivered positive returns in
August and September, but lost momentum late in the year with declining interest
rates sparking another refinancing boom. High-yield securities closed the fiscal
year relatively flat, as growing economic uncertainty caused investors to seek
higher credit-quality ground.
During August and early September, when economic events in faraway places like
Russia, Japan and Hong Kong began having more of an impact on our markets than
local economic conditions, the Neuberger Berman fixed income investment team
worked around the clock monitoring our portfolios. This dedication, along with
our focus on quality and disciplined securities selection, helped our funds post
competitive returns in fiscal 1998.
Looking ahead, we continue to be relatively bullish on the intermediate-term
prospects for the fixed income markets. We believe, in the near term, European
government bonds could outpace U.S. Treasuries for two reasons. First, the
dollar is likely to remain somewhat weak relative to most developed world
currencies. Second, we believe there will be widespread acceptance of the new
Euro.
In the domestic market, we believe the best opportunities may be in those
sectors that lagged Treasuries in fiscal 1998. As of this writing, triple
B-rated corporate bonds (as rated by Standard & Poor's and Moody's) yielded
111-197 basis points (1.11%-1.97%) more than Treasuries -- a yield advantage
that we believe sufficiently compensates investors for the additional risk posed
by a slowing U.S. economy.+ Despite the refinancing boom, we continue to
maintain a favorable outlook for selected mortgage securities. In particular,
the Limited Maturity Bond Portfolio is, as of this writing, concentrated in
lower
A-4
<PAGE>
coupon mortgage securities (mortgage pools with average coupons closest to
prevailing mortgage rates), which have lower prepayment risk. We have also built
positions in prepayment-protected government agency mortgage securities.
Going forward, we may continue to see volatility in the high-yield bond
market, which often mirrors stock market trends. However, yields relative to
Treasuries are now at the highest level since the aftermath of the 1990-91
recession. In our opinion, this indicates that the risk of a mild recession in
1999 is already reflected in current prices. As always, securities selection is
critical in the high-yield sector and we believe our research-intensive,
"laser-like" approach will help us identify potentially rewarding investments.
We have always believed that stocks help investors eat well, but bonds help
them sleep well. In the second half of fiscal 1998, investors with rich,
equity-only diets suffered severe heartburn and bouts of insomnia. Those with
healthy portions of carefully selected bonds on their investment plates
experienced some mild indigestion, but slept quite peacefully despite the loud
racket produced by international economic turmoil. We won't make any predictions
regarding the future health of the stock market but, as good investment
nutritionists, we continue to recommend a balanced diet featuring bonds as well
as stocks.
LIMITED MATURITY BOND TRUST In response to falling interest rates, we extended
the portfolio's average duration to approximately two years at the end of this
reporting period. We anticipate extending this duration even further if the
Federal Reserve cuts rates again in the coming months, which is, in our view, a
likely prospect considering the slowing domestic economy and the Fed's seemingly
new role as global economic firefighter.
The portfolio's asset allocation has not changed substantially over the last
six months. We maintained our exposure to corporate bonds at approximately 64%
of the portfolio as their yield advantage over Treasuries expanded both in the
investment-grade and high-yield sectors. Asset-backed and mortgage securities
allocations remained approximately 13.6% and 4.8%, respectively. Another 2.0% of
assets was invested in foreign government securities while the remaining balance
was in Treasuries and Agency Securities.
In fiscal 1998, the big story in the fixed income markets has been the
exceptional performance of Treasuries versus all other sectors. We
A-5
<PAGE>
believe tomorrow's headlines will be about the superior relative performance of
these lagging credit sectors, which in our opinion are now quite cheap. We also
believe that investment-grade and high-yield corporates are now priced as if a
1999 recession and materially higher default rates are guaranteed. While we
can't predict the future, we think Federal Reserve easing will result in a "soft
landing" for the economy as it did in 1995. Even if the economy does contract
briefly, we doubt we will see the kind of troublesome default rates that are
reflected in current prices. If we are right, investment-grade and high-yield
corporate bonds could perform quite well in the year ahead.
Mortgage securities have been under pressure due to a refinancing boom that
has increased prepayment risk and, therefore, lowered the prospect for yields on
mortgage pools. We believe we have largely insulated the portfolio from
prepayment risk by concentrating in lower-coupon, shorter-maturity mortgage
pools, which are least likely to be depleted by refinancing.
In closing, we believe bonds performed their job in fiscal 1998 -- preserving
and enhancing assets in the midst of global economic and stock market distress.
We are pleased to have helped see our shareholders through these troubled times.
Going forward, we trust investors will have a greater appreciation for the
valuable role bonds play in a truly diversified investment program.
Sincerely,
/s/ Theodore P. Giuliano
Theodore P. Giuliano
President and Trustee
Neuberger Berman Income Trust
+Bloomberg L.P. 11/18/98
A-6
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman October 31, 1998
- ----------------------------------------------------------------------
Limited Maturity Bond Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN(1)
MERRILL LYNCH
LIMITED MATURITY 1-3 YEAR
BOND TRUST TREASURY INDEX(2)
1 YEAR +4.79% +7.70%
5 YEAR +5.03% +6.01%
10 YEAR +6.83% +7.34%
Merrill Lynch
Limited Maturity 1-3 Year
Bond Trust Treasury Index
1988 $10,000 $10,000
1989 $10,956 $10,941
1990 $11,816 $11,898
1991 $13,103 $13,240
1992 $14,134 $14,325
1993 $15,158 $15,159
1994 $15,156 $15,339
1995 $16,424 $16,711
1996 $17,293 $17,699
1997 $18,483 $18,847
1998 $19,370 $20,298
</TABLE>
The performance information for Neuberger Berman Limited Maturity Bond
Trust-Registered Trademark- ("Limited Maturity Bond Trust") is as of October 31,
1998. Limited Maturity Bond Trust commenced operations on August 30, 1993. It
has identical investment objectives and policies, and invests in the same
Portfolio as Neuberger Berman Limited Maturity Bond Fund-Registered Trademark-
("Sister Fund"), which is also managed by Neuberger Berman Management
Inc-Registered Trademark-. 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, subject to termination upon 60
days' prior written notice. Absent such reimbursement, the average annual total
returns of the Trust 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 its
Sister 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 to 3 years.
B-1
<PAGE>
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.
B-2
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
Neuberger Berman
- ----------------------------------------------------------------------
Limited Maturity Bond Trust
<TABLE>
<CAPTION>
October 31,
(000'S OMITTED EXCEPT PER SHARE AMOUNT) 1998
--------------
<S> <C>
ASSETS
Investment in Portfolio, at value (Note A) $ 60,759
Receivable for Trust shares sold 96
-------
60,855
-------
LIABILITIES
Payable for Trust shares redeemed 317
Accrued expenses 92
Payable to administrator -- net (Note B) 25
-------
434
-------
NET ASSETS at value $ 60,421
-------
NET ASSETS consist of:
Par value $ 6
Paid-in capital in excess of par value 60,988
Accumulated net realized losses on
investment (828)
Net unrealized appreciation in value of
investment 255
-------
NET ASSETS at value $ 60,421
-------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 6,395
-------
NET ASSET VALUE, offering and redemption price per
share $9.45
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-3
<PAGE>
STATEMENT OF OPERATIONS
Neuberger Berman
- ----------------------------------------------------------------------
Limited Maturity Bond Trust
<TABLE>
<CAPTION>
For the
Year Ended
October 31,
(000'S OMITTED) 1998
------------
<S> <C>
INVESTMENT INCOME
Investment income from Portfolio (Note A) $ 3,335
------
Expenses:
Administration fee (Note B) 248
Shareholder reports 78
Registration and filing fees 43
Shareholder servicing agent fees 18
Amortization of deferred organization and
initial offering expenses (Note A) 15
Legal fees 11
Auditing fees 11
Custodian fees 10
Trustees' fees and expenses 4
Miscellaneous 1
Expenses from Portfolio (Notes A & B) 165
------
Total expenses 604
Expenses reimbursed by administrator and
reduced by custodian fee expense offset
arrangement (Note B) (207)
------
Total net expenses 397
------
Net investment income 2,938
------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS FROM
PORTFOLIO (NOTE A)
Net realized loss on investment securities (43)
Net realized loss on financial futures
contracts (550)
Net realized loss on foreign currency
transactions (86)
Change in net unrealized appreciation of
investment securities, financial futures
contracts, translation of assets and
liabilities in foreign currencies, and
foreign currency contracts (6)
------
Net loss on investments from Portfolio
(Note A) (685)
------
Net increase in net assets resulting from
operations $ 2,253
------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-4
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Neuberger Berman
- ----------------------------------------------------------------------
Limited Maturity Bond Trust
<TABLE>
<CAPTION>
Year Ended
October 31,
(000'S OMITTED) 1998 1997
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 2,938 $ 2,051
Net realized loss on investments
from Portfolio (Note A) (679) (40)
Change in net unrealized
appreciation of investments from
Portfolio (Note A) (6) 163
-----------------------------
Net increase in net assets resulting
from operations 2,253 2,174
-----------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,948) (2,053)
-----------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 32,828 29,132
Proceeds received in connection with
merger (Note D) 7,929 --
Proceeds from reinvestment of
dividends 2,944 2,050
Payments for shares redeemed (19,981) (15,135)
-----------------------------
Net increase from Trust share
transactions 23,720 16,047
-----------------------------
NET INCREASE IN NET ASSETS 23,025 16,168
NET ASSETS:
Beginning of year 37,396 21,228
-----------------------------
End of year $ 60,421 $ 37,396
-----------------------------
NUMBER OF TRUST SHARES:
Sold 3,447 3,052
Issued in connection with merger
(Note D) 830 --
Issued on reinvestment of dividends 309 215
Redeemed (2,098) (1,587)
-----------------------------
Net increase in shares outstanding 2,488 1,680
-----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger Berman October 31, 1998
- ----------------------------------------------------------------------
Income Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Limited Maturity Bond Trust (the "Fund") is a
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 shareholders.
If additional series of the Trust are established, the assets of each
series would belong only to that series, and the liabilities of each series
would be borne solely by that series and no other.
The Fund seeks to achieve its investment objective by investing all of its
net investable assets in Neuberger Berman Limited Maturity Bond Portfolio of
Income Managers Trust (the "Portfolio") having the same investment objective
and policies as the Fund. The value of the Fund's investment in the Portfolio
reflects the Fund's proportionate interest in the net assets of the Portfolio
(17.04% at October 31, 1998). The performance of the Fund is directly
affected by the performance of the Portfolio. The financial statements of the
Portfolio, including the Schedule of Investments, are included elsewhere in
this report and should be read in conjunction with the Fund's financial
statements.
2) PORTFOLIO VALUATION: The Fund records its investment in the Portfolio at
value. Investment securities held by the Portfolio are valued as indicated in
the notes following the Portfolio's Schedule of Investments.
3) FEDERAL INCOME TAXES: The Fund is treated as a separate entity for Federal
income tax purposes. It is the policy of the Fund to continue to qualify as a
regulated investment company by complying with the provisions available to
certain investment companies, as defined in applicable sections of the
Internal Revenue Code, and to make distributions of investment company
taxable income and net capital gains (after reduction for any amounts
available for Federal income tax purposes as capital loss carryforwards)
sufficient to relieve it from all, or substantially all, Federal income
taxes. Accordingly, the Fund paid no Federal income taxes and no provision
for Federal income taxes was required.
4) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund earns income, net of
Portfolio expenses, daily on its investment in the Portfolio. It is the
policy of the Fund to declare dividends from net investment income on each
business day; such
B-6
<PAGE>
dividends are paid monthly. Distributions from net realized capital gains, if
any, are normally distributed in December. To the extent the Fund's net
realized capital gains, if any, can be offset by capital loss carryforwards
($86, $11,896, $24,346, $97,541, $48,668, and $580,400 expiring in 2001,
2002, 2003, 2004, 2005, and 2006, respectively, determined as of October 31,
1998), it is the policy of the Fund not to distribute such gains. The capital
loss carryforwards shown above for the Fund include $26,716 expiring in 2004,
which was acquired on February 27, 1998, in the merger with Neuberger Berman
Ultra Short Bond Trust-Registered Trademark- ("Ultra Short"). The use of
these losses to offset future gains may be limited in a given year.
The 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: Organization expenses incurred by the Fund were fully
amortized as of October 31, 1998.
6) EXPENSE ALLOCATION: The Fund bears all costs of its operations. Expenses
incurred by the Trust with respect to any two or more funds are allocated in
proportion to the net assets of such funds, except where a more appropriate
allocation of expenses to each fund can otherwise be made fairly. Expenses
directly attributable to a fund are charged to that fund.
7) OTHER: All net investment income and realized and unrealized capital gains
and losses of the 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:
The Fund retains Neuberger Berman Management Incorporated ("Management") as
its administrator under an Administration Agreement ("Agreement"). Pursuant to
this Agreement the Fund pays Management an administration fee at the annual rate
of 0.50% of the Fund's average daily net assets. The Fund indirectly pays for
investment management services through its investment in the Portfolio (see Note
B of Notes to Financial Statements of the Portfolio).
Management has voluntarily undertaken to reimburse the Fund for its operating
expenses plus its pro rata portion of the Portfolio's operating expenses
(including the fees payable to Management but excluding interest, taxes,
brokerage commissions, and extraordinary expenses) which exceed, in the
aggregate, 0.80% per annum of the
B-7
<PAGE>
Fund's average daily net assets. This undertaking is subject to termination by
Management upon at least 60 days' prior written notice to the Fund. For the year
ended October 31, 1998, such excess expenses amounted to $206,630.
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 the 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.
The 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 the Fund.
The 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 Portfolio, was a reduction of $76.
NOTE C -- INVESTMENT TRANSACTIONS:
During the year ended October 31, 1998, additions and reductions in the
Fund's investment in the Portfolio amounted to $26,175,000 and $14,369,000,
respectively.
NOTE D -- MERGER:
On February 27, 1998, the Fund acquired all of the net assets of Ultra Short
pursuant to a plan of reorganization approved by the Board of Trustees on
September 24, 1997. The merger was accomplished by a tax-free exchange of
830,305 shares of the Fund (valued at $7,929,412) for the 804,681 shares of
Ultra Short outstanding on February 27, 1998. Ultra Short's net assets at that
date ($7,929,412), including $49,314 of unrealized appreciation, were combined
with those of the Fund. The aggregate net assets of the Fund and Ultra Short
immediately before the merger were $44,233,863 and $7,929,412, respectively,
resulting in aggregate net assets of $52,163,275 immediately after the merger.
B-8
<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 the Portfolio's income and
expenses. It should be read in conjunction with the Portfolio's Financial
Statements and notes thereto.
<TABLE>
<CAPTION>
Year Ended October 31,
1998 1997 1996 1995 1994
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 9.57 $ 9.53 $ 9.61 $ 9.43 $ 9.97
------------------------------------------------------------
Income From Investment Operations
Net Investment Income .57 .60 .57 .58 .54
Net Gains or Losses on Securities
(both realized and unrealized) (.12) .04 (.08) .18 (.54)
------------------------------------------------------------
Total From Investment Operations .45 .64 .49 .76 --
------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.57) (.60) (.57) (.58) (.54)
------------------------------------------------------------
Net Asset Value, End of Year $ 9.45 $ 9.57 $ 9.53 $ 9.61 $ 9.43
------------------------------------------------------------
Total Return(1) +4.79% +6.88% +5.29% +8.36% -0.01%
------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 60.4 $ 37.4 $ 21.2 $ 11.9 $ 6.7
------------------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(2) .80% .80% .81% .77% --
------------------------------------------------------------
Ratio of Net Expenses to Average Net
Assets(3) .80% .80% .80% .77% .70%
------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 5.94% 6.25% 6.06% 6.16% 5.72%
------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-9
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger Berman October 31, 1998
- ----------------------------------------------------------------------
Limited Maturity Bond Trust
1) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of the Fund during each fiscal
period and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. Total return would
have been lower if Management had not reimbursed certain expenses.
2) For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
3) After reimbursement of expenses by Management as described in Note B of Notes
to Financial Statements. Had Management not undertaken such action the
annualized ratios of net expenses to average daily net assets would have
been:
<TABLE>
<CAPTION>
Year Ended October 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Expenses 1.22% 1.24% 1.91% 2.18% 2.50%
</TABLE>
B-10
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Neuberger Berman Income Trust and
Shareholders of:
Neuberger Berman Limited Maturity Bond Trust
We have audited the accompanying statement of assets and liabilities of the
Neuberger Berman Limited Maturity Bond Trust, the only series of Neuberger
Berman Income Trust (the "Trust"), as of October 31, 1998, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with 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 the
above mentioned series of the Neuberger Berman Income Trust at October 31, 1998,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 4, 1998
B-11
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
Principal
Amount Value(2)
(000's Rating(1) (000's
omitted) Moody's S&P omitted)
- ------------- --------- --------- -------------
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES
(3.9%)
$ 1,785 U.S. Treasury Notes, 5.875%,
due 2/15/00 TSY TSY $ 1,820
2,220 U.S. Treasury Notes, 6.75%,
due 4/30/00 TSY TSY 2,297
7,980 U.S. Treasury Notes, 5.75%,
due 11/15/00 TSY TSY 8,203
1,640 U.S. Treasury
Inflation-Indexed Notes,
3.375%, due 1/15/07 TSY TSY 1,613
-------------
TOTAL U.S. TREASURY SECURITIES
(COST $13,677) 13,933
-------------
U.S. GOVERNMENT AGENCY
SECURITIES (10.7%)
20,000 Federal Home Loan Bank,
Discount Notes, 5.09%, due
11/6/98 AGY AGY 19,989
10,000 Freddie Mac, Discount Notes,
4.77%, due 11/12/98 AGY AGY 9,987
8,338 Federal Farm Credit Bank,
Discount Notes, 4.90%, due
11/20/98 AGY AGY 8,334
-------------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES
(COST $38,282) 38,310
-------------
MORTGAGE-BACKED SECURITIES
(4.8%)
FANNIE MAE
33 Balloon Pass-Through
Certificates, 8.50%, due
11/1/98 AGY AGY 35
1,364 Balloon Pass-Through
Certificates, 7.00%, due
8/1/03 AGY AGY 1,391
140 REMIC Floating Rate CMO, Ser.
1992-59F, 5.68125%, due
8/25/06 AGY AGY 140
5,996 Pass-Through Certificates,
7.00%, due 9/1/03 & 6/1/11 AGY AGY 6,153
5,993 Pass-Through Certificates,
6.50%, due 4/1/13 AGY AGY 6,079
FREDDIE MAC
85 Gold Balloon Mortgage
Participation Certificates,
6.50%, due 9/1/99 AGY AGY 86
64 Mortgage Participation
Certificates, 10.50%, due
10/1/00 & 12/1/00 AGY AGY 67
</TABLE>
B-12
<PAGE>
October 31, 1998
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value(2)
(000's Rating(1) (000's
omitted) Moody's S&P omitted)
- ------------- --------- --------- -------------
<C> <S> <C> <C> <C>
$ 256 Mortgage Participation
Certificates, 8.50%, due
10/1/01 AGY AGY $ 263
156 ARM Certificates, 7.00%, due
1/1/17 AGY AGY 156
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
739 Pass-Through Certificates,
7.50%, due 10/15/09-10/15/10 AGY AGY 762
1,818 Pass-Through Certificates,
7.00%, due 4/15/11 AGY AGY 1,865
133 Pass-Through Certificates,
12.00%, due 5/15/12-3/15/15 AGY AGY 153
-------------
TOTAL MORTGAGE-BACKED
SECURITIES
(COST $16,785) 17,150
-------------
ASSET-BACKED SECURITIES
(13.6%)
118 Chase Manhattan Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1997-A,
Class A-2, 5.95%, due 10/15/99 Aaa AAA 118
4,223 PNC Student Loan Trust I, Ser.
1997-2, Class A-2, 6.138%, due
1/25/00 Aaa AAA 4,326
87 Premier Auto Trust, Ser.
1997-1, Class A-2, 5.90%, due
4/6/00 Aaa AAA 88
3,045 Money Store Auto Grantor
Trust, Ser. 1997-2, Class A-1,
6.17%, due 3/20/01 Aaa AAA 3,088
458 Chase Manhattan Grantor Trust,
Automobile Loan Pass-Through
Certificates, Ser. 1995-A,
6.00%, due 9/17/01 Aaa AAA 458
6,500 Ford Credit Auto Loan Master
Trust, Auto Loan Certificates,
Ser. 1996-1, 5.50%, due
2/15/03 Aaa AAA 6,604
254 Honda Auto Receivables Grantor
Trust, Ser. 1997-A, Class A,
5.85%, due 2/15/03 Aaa AAA 256
5,600 Chase Credit Card Master
Trust, Ser. 1997-2, Class A,
6.30%, due 4/15/03 Aaa AAA 5,730
1,792 Navistar Financial Owner
Trust, Ser. 1996-B, Class A-3,
6.33%, due 4/21/03 Aaa AAA 1,814
</TABLE>
B-13
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value(2)
(000's Rating(1) (000's
omitted) Moody's S&P omitted)
- ------------- --------- --------- -------------
<C> <S> <C> <C> <C>
$ 4,720 Chemical Master Credit Card
Trust 1, Ser. 1995-2, Class A,
6.23%, due 6/15/03 Aaa AAA $ 4,833
5,315 World Omni Automobile Lease
Securitization Trust, Ser.
1997-A, Class A-3, 6.85%, due
6/25/03 Aaa AAA 5,488
2,245 Chevy Chase Auto Receivables
Trust, Ser. 1996-2, Class A,
5.90%, due 7/15/03 Aaa AAA 2,247
5,000 Standard Credit Card Master
Trust I, Credit Card
Participation Certificates,
Ser. 1994-4, Class A, 8.25%,
due 11/7/03 Aaa AAA 5,385
4,354 ContiMortgage Net Interest
Margin Notes, Ser. 1998-A,
Class A, 7.92%, due 3/16/28 BBB(3) 4,316 (4)
3,770 IMC Excess Cashflow Trust,
Ser. 1997-A, 7.41%, due
11/26/28 BBB(3) 3,590 (4)
-------------
TOTAL ASSET-BACKED SECURITIES
(COST $48,036) 48,341
-------------
BANKS & FINANCIAL INSTITUTIONS
(25.1%)
2,500 Merrill Lynch & Co., Inc.,
Medium-Term Notes, Ser. B,
6.64%, due 4/9/99 Aa3 AA- 2,509
5,240 Merrill Lynch & Co., Inc.,
Medium-Term Notes, Ser. B,
6.28%, due 6/25/99 Aa3 AA- 5,257
4,850 Chase Manhattan Bank USA,
Senior Global Bank Notes,
5.875%, due 8/4/99 Aa2 AA- 4,886
2,500 Associates Corp. of North
America, Senior Notes, 6.375%,
due 8/15/99 Aa3 AA- 2,529
5,180 CIT Group Holdings, Inc.,
Medium-Term Notes, 6.25%, due
10/25/99 Aa3 A+ 5,243
3,940 First National Bank of
Commerce, Senior Bank Notes,
6.50%, due 1/14/00 Aa2 AA- 4,013
3,980 HomeSide Lending, Inc., Notes,
6.875%, due 5/15/00 A1 A+ 4,077
5,000 Salomon Smith Barney Holdings
Inc., Notes, 7.00%, due
5/15/00 Aa3 A 5,124
1,300 Lehman Brothers Holdings Inc.,
Medium-Term Notes, Ser. E,
7.08%, due 5/22/00 Baa1 A 1,305
</TABLE>
B-14
<PAGE>
October 31, 1998
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value(2)
(000's Rating(1) (000's
omitted) Moody's S&P omitted)
- ------------- --------- --------- -------------
<C> <S> <C> <C> <C>
$ 1,800 International Lease Finance
Corp., Notes, 6.625%, due
6/1/00 A1 A+ $ 1,836
5,400 Comdisco, Inc., Notes, 6.50%,
due 6/15/00 Baa1 BBB+ 5,523
3,150 Countrywide Funding Corp.,
Medium-Term Notes, Ser. A,
7.31%, due 8/28/00 A3 A 3,226
7,090 Associates Pass-Through Asset
Trust, Ser. 1997-1, 6.45%, due
9/15/00 Aa3 AA- 7,227(4)
5,000 Lehman Brothers Holdings Inc.,
Medium-Term Notes, Ser. E,
6.89%, due 10/10/00 Baa1 A 5,003
3,600 Countrywide Home Loans, Inc.,
Notes, 5.62%, due 10/16/00 A3 A 3,584
1,725 Lehman Brothers Holdings Inc.,
Medium-Term Notes, Ser. E,
6.65%, due 11/8/00 Baa1 A 1,718
2,000 NationsBank Corp., Senior
Medium-Term Notes, Ser. E,
5.70%, due 2/9/01 Aa2 A+ 2,029
6,600 Capital One Bank, Bank Notes,
5.95%, due 2/15/01 Baa3 BBB- 6,640
4,430 Morgan Stanley, Dean Witter,
Discover & Co., Global
Medium-Term Notes, Ser. C,
6.09%, due 3/9/01 A1 A+ 4,501
6,660 Household Finance Corp.,
Senior Medium-Term Notes,
6.06%, due 5/14/01 A2 A 6,742
3,610 Riggs National Corp.,
Subordinated Notes, 8.50%, due
2/1/06 Ba1(5) BB-(5) 3,772
2,400 Riggs National Corp.,
Subordinated Debentures,
9.65%, due 6/15/09 Ba1(5) BB-(5) 2,685
-------------
TOTAL BANKS & FINANCIAL
INSTITUTIONS
(COST $88,737) 89,429
-------------
CORPORATE DEBT SECURITIES
(36.6%)
2,000 AT&T Capital Corp.,
Medium-Term Notes, Ser.
1997-4, 6.92%, due 4/29/99 Baa3 BBB 2,010
7,000 Lockheed Martin Corp., Notes,
6.55%, due 5/15/99 A3 BBB+ 7,050
5,200 Williams Holdings of Delaware,
Inc., Medium-Term Notes, Ser.
A, 6.40%, due 6/17/99 Baa2 BBB- 5,237
</TABLE>
B-15
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value(2)
(000's Rating(1) (000's
omitted) Moody's S&P omitted)
- ------------- --------- --------- -------------
<C> <S> <C> <C> <C>
$ 2,710 Arkla, Inc., Notes, 8.875%,
due 7/15/99 Baa1 BBB $ 2,777
4,680 Time Warner Pass-Through Asset
Trust, Ser. 1997-2, 4.90%, due
7/29/99 Baa3 BBB- 4,667(4)
1,000 General Motors Acceptance
Corp., Medium-Term Notes,
6.15%, due 9/20/99 A2 A 1,009
3,655 Commonwealth Edison Co., First
Mortgage Bonds, Ser. 90,
6.50%, due 4/15/00 Baa2 BBB 3,737
4,800 Norfolk Southern Corp., Notes,
6.70%, due 5/1/00 Baa1 BBB+ 4,912
5,490 Sears Roebuck Acceptance
Corp., Medium-Term Notes, Ser.
IV, 6.23%, due 7/12/00 A2 A- 5,580
2,000 Ford Motor Credit Co.,
Medium-Term Notes, 6.84%, due
8/16/00 A1 A 2,055
3,220 MedPartners, Inc., Senior
Subordinated Notes, 6.875%,
due 9/1/00 B3 B 2,604
2,000 American General Finance
Corp., Senior Notes, 6.125%,
due 9/15/00 A2 A+ 2,026
2,510 Chesapeake Corp., Notes,
10.375%, due 10/1/00 Baa3 BBB 2,749
1,730 BHP Finance (USA) Ltd.,
Guaranteed Notes, 5.625%, due
11/1/00 A3 A 1,718
2,300 General Electric Capital
Corp., Global Medium-Term
Notes, Ser. A, 5.52%, due
1/15/01 Aaa AAA 2,328
2,320 Fort James Corp., Notes,
6.234%, due 3/15/01 Baa2 BBB- 2,336
2,510 Revlon Worldwide Corp., Senior
Secured Notes, Ser. B,
Zero-Coupon, Yielding 10.75% &
10.959%, due 3/15/01 B3 B- 1,481
2,290 Colonial Realty Limited
Partnership, Senior Notes,
7.50%, due 7/15/01 Baa3 BBB- 2,421
1,220 USA Waste Services, Inc.,
Senior Notes, 6.125%, due
7/15/01 Baa3 BBB+ 1,225
3,300 Texas Utilities Co., Notes,
5.94%, due 10/15/01 Baa3 BBB 3,300
4,160 Tyco International Ltd.,
Notes, 6.50%, due 11/1/01 A3 A- 4,290
2,965 ICI Wilmington Inc.,
Guaranteed Notes, 7.50%, due
1/15/02 Baa1 A- 3,176
</TABLE>
B-16
<PAGE>
October 31, 1998
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value(2)
(000's Rating(1) (000's
omitted) Moody's S&P omitted)
- ------------- --------- --------- -------------
<C> <S> <C> <C> <C>
$ 2,835 Black & Decker Corp.,
Medium-Term Notes, Ser. A,
8.90%, due 1/21/02 Baa2 BBB- $ 3,145
900 Ford Motor Credit Co., Global
Bonds, 6.50%, due 2/28/02 A1 A 924
2,280 Fort James Corp., Senior
Notes, 6.50%, due 9/15/02 Baa2 BBB- 2,368
1,000 Safeway Inc., Medium-Term
Notes, 8.57%, due 4/1/03 Baa2 BBB 1,117
3,360 Stewart Enterprises, Inc.,
Notes, 6.40%, due 5/1/03 Baa3 BBB 3,503
60 Core-Mark International, Inc.,
Senior Subordinated Notes,
11.375%, due 9/15/03 B3 B 59
705 Loomis Fargo & Co., Senior
Subordinated Notes, 10.00%,
due 1/15/04 B3 B 668
660 EOP Operating Limited
Partnership, Notes, 6.625%,
due 2/15/05 Baa1 BBB 642
495 Earle M. Jorgensen Co., Senior
Notes, Ser. B, 9.50%, due
4/1/05 B3 B- 456
1,750 Protection One, Inc., Senior
Notes, 7.375%, due 8/15/05 Ba1 BBB- 1,739(4)
1,300 Burlington Industries, Inc.,
Notes, 7.25%, due 9/15/05 Baa3 BBB- 1,374
4,200 Heritage Media Corp., Senior
Subordinated Notes, 8.75%, due
2/15/06 B1 BB+ 4,473
4,320 Mark IV Industries, Inc.,
Senior Subordinated Notes,
7.75%, due 4/1/06 Ba2(6) BB+(6) 4,136
885 Federal-Mogul Corp., Notes,
7.75%, due 7/1/06 Ba2(6) BB+(6) 895
400 Printpack, Inc., Senior
Subordinated Notes, Ser. B,
10.625%, due 8/15/06 B3 B+ 396
2,825 Time Warner Inc., Notes,
8.11%, due 8/15/06 Baa3 BBB- 3,188
400 Commonwealth Aluminum Corp.,
Senior Subordinated Notes,
10.75%, due 10/1/06 B2 B- 395
680 Newport News Shipbuilding
Inc., Senior Subordinated
Notes, 9.25%, due 12/1/06 B1 B+ 714
660 Safelite Glass Corp., Senior
Subordinated Notes, 9.875%,
due 12/15/06 B3 B 640 (4)
</TABLE>
B-17
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value(2)
(000's Rating(1) (000's
omitted) Moody's S&P omitted)
- ------------- --------- --------- -------------
<C> <S> <C> <C> <C>
$ 1,275 Pen-Tab Industries, Inc.,
Senior Subordinated Notes,
Ser. B, 10.875%, due 2/1/07 B3 B- $ 1,222
1,050 Fonda Group, Inc., Senior
Subordinated Notes, Ser. B,
9.50%, due 3/1/07 B3 B- 869
1,250 GFSI Inc., Senior Subordinated
Notes, 9.625%, due 3/1/07 B3 B- 1,178
300 French Fragrances, Inc.,
Senior Notes, Ser. B, 10.375%,
due 5/15/07 B2 B+ 310
2,410 Owens-Illinois, Inc., Senior
Debentures, 8.10%, due 5/15/07 Ba1(7) BB+(7) 2,529
405 AmeriServe Food Distribution,
Inc., Senior Subordinated
Notes, 10.125%, due 7/15/07 B3 B- 332
250 Safety Components
International, Inc., Senior
Subordinated Notes, 10.125%,
due 7/15/07 B3 B- 241
880 HydroChem Industrial Services,
Inc., Senior Subordinated
Notes, Ser. B, 10.375%, due
8/1/07 B3 B- 872
4,960 Interpool, Inc., Notes, 7.20%,
due 8/1/07 Ba1 BBB- 5,122
190 Insilco Corp., Senior
Subordinated Notes, 10.25%,
due 8/15/07 B3 B- 191
520 NBTY, Inc., Senior
Subordinated Notes, Ser. B,
8.625%, due 9/15/07 B1 B+ 510
2,360 UPM-Kymmene Corp., Notes,
6.875%, due 11/26/07 Baa1 BBB+ 2,333 (4)
2,490 IDEX Corp., Senior Notes,
6.875%, due 2/15/08 Ba1 BBB- 2,585
1,585 Central Maine Power & Co.,
General and Refunding Mortgage
Bonds, Ser. Q, 7.05%, due
3/1/08 Baa3 BBB+ 1,630
1,000 Thiokol Corp., Senior Notes,
6.625%, due 3/1/08 Baa3 BBB 1,049
3,410 Beckman Coulter, Inc., Senior
Notes, 7.45%, due 3/4/08 Ba1(7) BB+(7) 3,387
160 APCOA, Inc., Senior
Subordinated Notes, 9.25%, due
3/15/08 Caa1 B- 152
610 IMPAC Group, Inc., Senior
Subordinated Notes, 10.125%,
due 3/15/08 B3 B- 590 (4)
</TABLE>
B-18
<PAGE>
October 31, 1998
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Value(2)
(000's Rating(1) (000's
omitted) Moody's S&P omitted)
- ------------- --------- --------- -------------
<C> <S> <C> <C> <C>
$ 470 Trans-Resources, Inc., Senior
Notes, Ser. B, 10.75%, due
3/15/08 B3 B- $ 461
300 Columbus McKinnon Corp.,
Senior Subordinated Notes,
8.50%, due 4/1/08 B2 B 279
160 Great Central Mines Ltd.,
Senior Notes, 8.875%, due
4/1/08 Ba2 BB 154
450 Home Products International,
Inc., Senior Subordinated
Notes, 9.625%, due 5/15/08 B3 B 393
1,555 Owens-Illinois, Inc., Senior
Notes, 7.35%, due 5/15/08 Ba1(7) BB+(7) 1,558
1,500 CSC Holdings, Inc., Senior
Notes, 7.25%, due 7/15/08 Ba2 BB+ 1,459
1,085 Tenet Healthcare Corp., Senior
Subordinated Notes, 8.125%,
due 12/1/08 Ba3 BB- 1,072 (4)
520 KinderCare Learning Centers,
Inc., Senior Subordinated
Notes, Ser. B, 9.50%, due
2/15/09 B3 B- 489
-------------
TOTAL CORPORATE DEBT
SECURITIES (COST $130,792) 130,487
-------------
FOREIGN GOVERNMENT
SECURITIES(8) (2.0%)
SEK 53,100 Kingdom of Sweden, 5.50%, due
4/12/02
(COST $7,007) Aa1 AA+ 7,089
-------------
CORPORATE COMMERCIAL PAPER
(2.0%)
7,000 Nestle Capital Corp., 4.75%,
due 11/2/98
(COST $6,998) P-1 A-1+ 6,998 (9)
-------------
TOTAL INVESTMENTS (98.6%)
(COST $350,314) 351,737 (10)
Cash, receivables and other
assets, less liabilities
(1.4%) 4,919
-------------
TOTAL NET ASSETS (100.0%) $ 356,656
-------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-19
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1998
- ----------------------------------------------------------------------
Limited Maturity Bond Portfolio
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.
Foreign security prices are furnished by independent quotation services
expressed in local currency values. Foreign security prices are translated
from the local currency into U.S. dollars using current exchange rates.
Short-term debt securities with less than 60 days until maturity may be
valued at cost which, when combined with interest earned, approximates
market value.
3) Not rated by Moody's; the rating shown is from Fitch Investors Services,
Inc.
4) Security exempt from registration under the Securities Act of 1933. These
securities may be resold in transactions exempt from registration, normally
to qualified institutional buyers under Rule 144A. At October 31, 1998,
these securities amounted to $26,174,000 or 7.3% of net assets.
5) Rated BBB by Thomson BankWatch, Inc.
6) Rated BBB- by Fitch Investors Services, Inc.
7) Rated BBB- by Duff & Phelps Credit Rating Co.
8) Principal amount is stated in the currency in which the security is
denominated.
SEK -- Swedish Krona
9) At cost, which approximates market value.
10) At October 31, 1998, the cost of investments for Federal income tax purposes
was $350,314,000. Gross unrealized appreciation of investments was
$4,549,000 and gross unrealized depreciation of investments was $3,126,000,
resulting in net unrealized appreciation of $1,423,000, based on cost for
Federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
B-20
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
Neuberger Berman
- ----------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
October 31,
(000'S OMITTED) 1998
--------------
<S> <C>
ASSETS
Investments in securities, at market value*
(Note A) -- see Schedule of Investments $ 351,737
Cash 32
Interest receivable 4,874
Receivable for forward foreign currency
exchange contracts sold (Note C) 85
Receivable for securities sold 25
Receivable for variation margin (Note A) 19
Prepaid expenses and other assets 6
--------------
356,778
--------------
LIABILITIES
Payable to investment manager (Note B) 74
Accrued expenses 48
--------------
122
--------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 356,656
--------------
NET ASSETS consist of:
Paid-in capital $ 354,869
Net unrealized appreciation in value of
investment securities, financial futures
contracts, translation of assets and
liabilities in foreign currencies, and
foreign currency contracts 1,787
--------------
NET ASSETS $ 356,656
--------------
*Cost of investments $ 350,314
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-21
<PAGE>
STATEMENT OF OPERATIONS
Neuberger Berman
- ----------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
For the
Year Ended
October 31,
(000'S OMITTED) 1998
------------
<S> <C>
INVESTMENT INCOME
Interest income $ 22,319
------------
Expenses:
Investment management fee (Note B) 833
Custodian fees (Note B) 129
Legal fees 71
Auditing fees 30
Trustees' fees and expenses 23
Accounting fees 10
Insurance expense 5
Amortization of deferred organization and
initial offering expenses (Note A) 4
Miscellaneous 2
------------
Total expenses 1,107
Expenses reduced by custodian fee expense
offset arrangement (Note B) (1)
------------
Total net expenses 1,106
------------
Net investment income 21,213
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment securities
sold (261)
Net realized loss on financial futures
contracts (Note A) (3,657)
Net realized loss on foreign currency
transactions (Note A) (646)
Change in net unrealized appreciation of
investment securities, financial futures
contracts, translation of assets and
liabilities in foreign currencies, and
foreign currency contracts (Note A) 180
------------
Net loss on investments (4,384)
------------
Net increase in net assets resulting from
operations $ 16,829
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-22
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Neuberger Berman
- ----------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
Year Ended
October 31,
(000'S OMITTED) 1998 1997
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 21,213 $ 18,661
Net realized loss on investments (4,564) (990)
Change in net unrealized
appreciation (depreciation) of
investments 180 2,266
-----------------------------
Net increase in net assets resulting
from operations 16,829 19,937
-----------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 71,026 61,720
Additions related to reorganization
(Note D) 54,073 --
Reductions (78,238) (56,000)
-----------------------------
Net increase in net assets resulting
from transactions in investors'
beneficial interests 46,861 5,720
-----------------------------
NET INCREASE IN NET ASSETS 63,690 25,657
NET ASSETS:
Beginning of year 292,966 267,309
-----------------------------
End of year $ 356,656 $ 292,966
-----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
- ----------------------------------------------------------------------
Income Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Limited Maturity Bond Portfolio (the "Portfolio")
is a separate operating series of Income Managers Trust ("Managers Trust"), a
New York common law trust organized as of December 1, 1992. Managers Trust is
registered as a diversified, open-end management investment company under the
Investment Company Act of 1940, as amended. Other regulated investment
companies sponsored by Neuberger Berman Management Incorporated
("Management"), whose financial statements are not presented herein, also
invest in the Portfolio 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 Portfolio's Schedule of Investments.
3) FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolio 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: The Portfolio 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. 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 exchange rates supplied by an independent pricing service.
5) FINANCIAL FUTURES CONTRACTS: The Portfolio may buy and sell financial futures
contracts to hedge against changes in securities prices resulting from
changes in prevailing interest rates. At the time the Portfolio enters into a
financial futures
B-24
<PAGE>
contract, it is required to deposit with its custodian a specified amount of
cash or liquid securities, known as "initial margin," ranging upward from
1.1% of the value of the financial futures contract being traded. Each day,
the futures contract is valued at the official settlement price of the board
of trade or U.S. commodity exchange on which such futures contract is traded.
Subsequent payments, known as "variation margin," to and from the broker are
made on a daily basis as the market price of the financial futures contract
fluctuates. Daily variation margin adjustments, arising from this "mark to
market," are recorded by the 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 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
the Portfolio may cause the 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 transactions
involving futures contracts may be deferred rather than being taken into
account currently in calculating the Portfolio's taxable income.
At October 31, 1998, open positions in financial futures contracts were as
follows:
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
EXPIRATION OPEN CONTRACTS POSITION (DEPRECIATION)
-------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
December 1998 505 U.S. Treasury Notes, 2 Year Long $ 757,000
December 1998 65 U.S. Treasury Notes, 5 Year Short (82,000)
December 1998 250 U.S. Treasury Notes, 10 Year Short (398,000)
</TABLE>
At October 31, 1998, the Portfolio 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>
Fort James Corp., Senior Notes, 6.50%, due
$ 410,000 9/15/02
Chase Credit Card Master Trust, Ser. 1997-2,
1,480,000 Class A, 6.30%, due 4/15/03
</TABLE>
6) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Interest income, including accretion of
discount
B-25
<PAGE>
(adjusted for original issue discount, where applicable), is recorded on the
accrual basis. Realized gains and losses from securities transactions and
foreign currency transactions are recorded on the basis of identified cost.
7) FEDERAL INCOME TAXES: Managers Trust intends to comply with the requirements
of the Internal Revenue Code. Each Portfolio of Managers Trust also intends
to conduct its operations so that each of its investors will be able to
qualify as a regulated investment company. Each Portfolio will be treated as
a partnership for Federal income tax purposes and is therefore not subject to
Federal income tax.
8) ORGANIZATION EXPENSES: Organization expenses incurred by the Portfolio were
fully amortized as of October 31, 1998.
9) EXPENSE ALLOCATION: The Portfolio bears all costs of its operations. Expenses
incurred by Managers Trust with respect to any two or more portfolios are
allocated in proportion to the net assets of such portfolios, except where a
more appropriate allocation of expenses to each portfolio can otherwise be
made fairly. Expenses directly attributable to a portfolio are charged to
that portfolio.
NOTE B -- MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
The Portfolio retains Management as its investment manager under a Management
Agreement. For such investment management services, the Portfolio pays
Management a fee at the annual rate of 0.25% of the first $500 million of the
Portfolio's average daily net assets, 0.225% of the next $500 million, 0.20% of
the next $500 million, 0.175% of the next $500 million, and 0.15% of average
daily net assets in excess of $2 billion.
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 the Portfolio. Neuberger is retained by
Management to furnish it with investment recommendations and research
information without added cost to the 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.
The 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 Custodian fees, was a reduction of $510.
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended October 31, 1998, there were purchase and sale
transactions (excluding short-term securities, financial futures contracts, and
forward foreign currency contracts) of $130,329,000 and $156,934,000,
respectively.
B-26
<PAGE>
During the year ended October 31, 1998, the Portfolio had entered into
various contracts to deliver currencies at specified future dates. At October
31, 1998, open contracts were as follows:
<TABLE>
<CAPTION>
CONTRACTS IN EXCHANGE SETTLEMENT
SALES TO DELIVER FOR DATE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GERMAN MARK 11,730,000 $7,173,000 11/19/98
<CAPTION>
NET
UNREALIZED
SALES VALUE APPRECIATION
- ---------------------------------------------
<S> <C> <C>
GERMAN MARK $ 7,088,000 $85,000
</TABLE>
NOTE D -- REORGANIZATION:
On February 27, 1998, the Portfolio acquired all of the net assets of
Neuberger Berman Ultra Short Bond Portfolio ("Ultra Short") pursuant to a plan
of reorganization approved by the Board of Trustees on September 24, 1997. This
was accomplished by Neuberger Berman Ultra Short Bond Fund and Neuberger Berman
Ultra Short Bond Trust withdrawing their assets from Ultra Short and reinvesting
those assets in the Portfolio. The reorganization was tax-free to investors.
Ultra Short's net assets as of February 27, 1998 ($54,072,964), including
$338,550 of unrealized appreciation, were combined with those of the Portfolio.
The aggregate net assets of the Portfolio and Ultra Short immediately before the
reorganization were $297,668,015 and $54,072,964, respectively, resulting in
aggregate net assets of $351,740,979 immediately after the reorganization.
B-27
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
Year Ended October 31,
1998 1997 1996 1995 1994
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .33% .33% .33% .33% --
-------------------------------------------------------
Net Expenses .33% .33% .33% .33% .34%
-------------------------------------------------------
Net Investment Income 6.38% 6.70% 6.45% 6.55% 5.86%
-------------------------------------------------------
Portfolio Turnover Rate 44% 89% 169% 88% 102%
-------------------------------------------------------
Net Assets, End of Year (in millions) $356.7 $293.0 $267.3 $319.6 $316.1
-------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
B-28
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Income Managers Trust and
Owners of Beneficial Interest of
Neuberger Berman Limited Maturity Bond Portfolio
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Neuberger Berman Limited Maturity
Bond Portfolio, a series of Income Managers Trust (the "Trust"), as of October
31, 1998, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1998, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
above mentioned series of Income Managers Trust at October 31, 1998, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended, in conformity with generally
accepted accounting principles.
[SIGNATURE]
Boston, Massachusetts /s/ ERNST & YOUNG LLP
December 4, 1998
B-29
<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 Limited Maturity Bond Trust,
and Neuberger Berman Income Trust are registered service marks of Neuberger
Berman Management Inc.
- -C- 1998 Neuberger Berman Management Inc.
C-1
<PAGE>
OFFICERS AND TRUSTEES
Stanley Egener
CHAIRMAN OF THE BOARD AND TRUSTEE
Theodore P. Giuliano
PRESIDENT AND TRUSTEE
John Cannon
TRUSTEE
Barry Hirsch
TRUSTEE
Robert A. Kavesh
TRUSTEE
William E. Rulon
TRUSTEE
Candace L. Straight
TRUSTEE
Daniel J. Sullivan
VICE PRESIDENT
Michael J. Weiner
VICE PRESIDENT
Richard Russell
TREASURER
Claudia A. Brandon
SECRETARY
Barbara DiGiorgio
ASSISTANT TREASURER
Celeste Wischerth
ASSISTANT TREASURER
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
C-2
<PAGE>
Notice to Shareholders (Unaudited)
Under most state tax laws, mutual fund dividends which are derived from
direct investments in U.S. Government obligations are not taxable, as long as a
Fund meets certain requirements. Some states require that a Fund must provide
shareholders with a written notice, within 60 days of the close of a Fund's
taxable year, designating the portion of the dividends which represents interest
which those states consider to have been earned on U.S. Government obligations.
The chart below shows the percentage of income derived from such investments for
the twelve months ended October 31, 1998, for Neuberger Berman Limited Maturity
Bond Trust. For Neuberger Berman Ultra Short Bond Trust, the percentage of
income shown is for the period from November 1, 1997 to February 27, 1998. This
information should not be used to complete your tax returns.
<TABLE>
<CAPTION>
CALIFORNIA,
CONNECTICUT, MAINE
AND AND ALL
NEW NEW OTHER
NEUBERGER BERMAN YORK HAMPSHIRE STATES
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
ULTRA SHORT BOND TRUST 0.0% 17.7% 18.9%
LIMITED MATURITY BOND TRUST 0.0 2.8 4.6
</TABLE>
In January 1999 you will receive information to be used in filing your 1998
tax returns, which will include a notice of the exact tax status of all
dividends paid to you by each Fund during calendar 1998. Please consult your own
tax advisor for details as to how this information should be reflected on your
tax returns.
C-3
<PAGE>
Statistics and projections in this report are derived from sources
deemed to be reliable but cannot be regarded as a representation of
future results of the Funds. This report is prepared for the
general information of shareholders and is not an offer of shares
of the Funds. Shares are sold only through the currently
effective prospectus, which must precede or accompany this report.
NEUBERGER BERMAN
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
INSTITUTIONAL SERVICES
800.366.6264
WWW.NBFUNDS.COM
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