<PAGE>
NEUBERGER BERMAN
Neuberger Berman
Income Trust -Registered Trademark-
----------------------------------------------------------
LIMITED MATURITY BOND TRUST ANNUAL REPORT
OCTOBER 31, 1999
<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-2
FINANCIAL HIGHLIGHTS
PER SHARE DATA B-8
REPORT OF INDEPENDENT AUDITORS B-10
THE PORTFOLIO
SCHEDULE OF INVESTMENTS C-1
FINANCIAL STATEMENTS C-9
FINANCIAL HIGHLIGHTS C-16
REPORT OF INDEPENDENT AUDITORS C-17
DIRECTORY D-1
OFFICERS AND TRUSTEES D-2
</TABLE>
The "Neuberger Berman" name and logo are service marks of Neuberger Berman, LLC.
"Neuberger Berman Management Inc." and the individual fund name in this report
are either service marks or registered trademarks of Neuberger Berman Management
Inc. -C-1999.
A-3
<PAGE>
PRESIDENT'S LETTER December 20, 1999
Dear Shareholder,
Fiscal 1999 was a challenging year for fixed income investors. Although
inflation remained modest, market interest rates trended higher and the Federal
Reserve took steps to head off any potential inflationary threat. The bond
market also had a slight case of the Y2K jitters, which we expect to pass as we
enter the new millennium. Finally, bonds suffered from supply/demand imbalances
in the market resulting from issuers attempting to take maximum advantage of low
interest rates at the beginning of this reporting period. All these factors
combined put pressure on bond prices. Of course, one of the great advantages of
bonds is that yield can compensate for price declines. We are pleased to report
that all of our taxable fixed income funds were able to post positive total
returns in a declining market.
Over the long term, markets are quite rational. Over the short term, however,
investor emotion drives markets to extremes. Remarkably, just a little more than
a year ago, bond investors were giddy over consensus forecasts for moderate
economic growth and subdued inflation--a "best of all possible worlds" for
bonds. Then, with Asia recovering faster than anticipated, European economies
regaining momentum, and the U.S. economy picking up steam, the consensus
shifted. The surprisingly strong global economy reignited inflationary concerns,
excessive optimism gave way to extreme pessimism, and bonds started to retreat.
At Neuberger Berman, we don't get carried away by emotion. A year ago, we
believed bond investors were overconfident. Today, we feel they are unduly
depressed. We believe inflationary concerns are already well discounted in the
market, as are any reasonably foreseeable Y2K-oriented problems. There is plenty
of liquidity in most sectors of the fixed income market and reduced new issuance
is helping correct supply/demand imbalances. We can't predict what the Fed will
do over the next six months, or the precise impact Fed policy will have on the
bond market. However, with attractive nominal and real yields (yield in excess
of the prevailing rate of inflation), we believe bonds offer great longer-term
value.
This is not to say that the bond market will reverse course in the immediate
future. Right now, investors can't seem to see the forest--very attractive bond
yields--through all the trees--the government's latest monthly economic reports
and Fed Chairman Greenspan's every
A-4
<PAGE>
utterance. This short-term focus may continue to restrain bond prices. However,
from our perspective as long-term investors, we think it is a wonderful
opportunity to buy bonds at very attractive valuations.
What will we be doing to add value to the fixed income investment process in
the year ahead? The same things we always do--seeking to identify undervalued
securities in the most fundamentally attractive sectors, and to effectively
manage interest rate risk. We are confident this remains the single best method
of preserving and enhancing the assets you have entrusted to us.
NEUBERGER BERMAN LIMITED MATURITY BOND TRUST During fiscal 1999, we employed
several strategies to preserve and enhance assets in a declining bond market. We
maintained a relatively short portfolio duration through the end of June to
diminish interest rate sensitivity as market interest rates trended higher.
Following the Federal Reserve's first rate hike, we gradually extended duration.
With interest rates stabilizing during the last three months of this reporting
period, performance ultimately benefited from the higher yields achieved by
extending portfolio duration.
We also made changes in sector allocation, most notably substantially
increasing our exposure to mortgage-backed securities--primarily Government
National Mortgage Association "Ginnie Mae" bonds. Ginnie Mae's are backed by the
full faith and credit of the U.S. Government, but provide a large yield
advantage over Treasuries. We began building up our positions in early 1999, and
in July, added to our positions when Ginnie Mae's were yielding, in some cases,
as much as 200 basis points (2%) more than comparable maturity Treasury Bonds.
Mortgage securities generally don't respond well to interest rate volatility.
When rates are falling rapidly, increased prepayment risk restrains mortgage
bond prices. When rates are rising rapidly, mortgage securities prices are
depressed by slower prepayments, which stretch out the average life of a
mortgage security and increase interest rate sensitivity. However, when interest
rates remain in a relatively narrow trading range--as they did in the last
several months of fiscal 1999--mortgage securities have generally performed
quite well. By the end of July, mortgage securities comprised approximately 25%
of portfolio assets. The stellar performance of this sector in the last two
months of fiscal 1999 made a substantial contribution to the portfolio's total
return.
In May, we reduced our allocation to corporate bonds, which we believed would
underperform if and when the Fed hiked rates. In July,
A-5
<PAGE>
we increased our allocation to Treasuries. Following the Fed's first rate hike
in June, Treasuries outperformed equal duration corporates for the balance of
the reporting period.
Looking ahead to fiscal 2000, we expect to see a better environment for bonds.
We can't be sure of what the Federal Reserve will do over the next six months,
but we think the potential for an additional rate hike is already fully
discounted in the market. Our sense is that interest rates are close to a peak.
Regardless of the short-term outlook for interest rates, nominal yields are now
quite attractive and real yields (yield above inflation) are in a range that has
historically signaled a good long term buying opportunity.
Sincerely,
/s/ Theodore P. Giuliano
Theodore P. Giuliano
President and Trustee
Neuberger Berman Income Trust
A-6
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman October 31, 1999
- ----------------------------------------------------------------------
Limited Maturity Bond Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1)
<S> <C> <C>
MERRILL LYNCH
LIMITED MATURITY 1-3 YEAR
BOND TRUST TREASURY INDEX(2)
1 YEAR +1.86% +2.99%
5 YEAR +5.42% +6.39%
10 YEAR +6.06% +6.69%
Merrill Lynch
Limited Maturity 1-3 Year
Bond Trust Treasury Index(2)
1989 $10,000 $10,000
1990 $10,785 $10,875
1991 $11,960 $12,101
1992 $12,901 $13,092
1993 $13,836 $13,854
1994 $13,834 $14,019
1995 $14,991 $15,273
1996 $15,785 $16,176
1997 $16,871 $17,225
1998 $17,680 $18,552
1999 $18,009 $19,107
</TABLE>
The performance information for Neuberger Berman Limited Maturity Bond Trust
("Limited Maturity Bond Trust") is as of October 31, 1999. 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 ("Sister Fund"), which is also managed by Neuberger
Berman Management Inc. ("Management"). The performance information shown in the
above chart for the period before August 30, 1993, is for the Sister Fund.
Management has voluntarily undertaken to reimburse Limited Maturity Bond Trust
for its operating expenses and its pro rata share of its Portfolio's operating
expenses (excluding taxes, interest, brokerage commissions and extraordinary
expenses) which, in the aggregate, exceed .80% per annum of Limited Maturity
Bond Trust's average daily net assets. This arrangement can be terminated upon
60 days' prior written notice. Absent such arrangement, 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 dividends and 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. Please note that indices do not
take into account any fees and expenses of investing in the individual
securities that they track, and that individuals cannot invest directly in any
index. Data about the performance of this index are prepared or obtained by
Management and include reinvestment of all dividends and capital gain
distributions. The Portfolio may invest in many securities not included in the
above-described index.
B-1
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
Neuberger Berman
- ----------------------------------------------------------------------
Limited Maturity Bond Trust
<TABLE>
<CAPTION>
OCTOBER 31,
(000'S OMITTED EXCEPT PER SHARE AMOUNT) 1999
<S> <C>
-------------
ASSETS
Investment in Portfolio, at value (Note A) $ 41,705
Receivable for Trust shares sold 45
-------------
41,750
-------------
LIABILITIES
Payable for Trust shares redeemed 103
Accrued expenses 76
Payable to administrator -- net (Note B) 21
Dividends payable 1
-------------
201
-------------
NET ASSETS at value $ 41,549
-------------
NET ASSETS consist of:
Par value $ 5
Paid-in capital in excess of par value 44,408
Dividends in excess of net investment income (1)
Accumulated net realized losses on
investment (1,584)
Net unrealized depreciation in value of
investment (1,279)
-------------
NET ASSETS at value $ 41,549
-------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 4,584
-------------
NET ASSET VALUE, offering and redemption price per
share $9.06
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-2
<PAGE>
STATEMENT OF OPERATIONS
Neuberger Berman
- ----------------------------------------------------------------------
Limited Maturity Bond Trust
<TABLE>
<CAPTION>
For the
Year
Ended
OCTOBER 31,
(000'S OMITTED) 1999
<S> <C>
-----------
INVESTMENT INCOME
Investment income from Portfolio (Note A) $ 3,685
-----------
Expenses:
Administration fee (Note B) 277
Shareholder reports 70
Registration and filing fees 40
Legal fees 22
Shareholder servicing agent fees 20
Custodian fees 10
Trustees' fees and expenses 3
Auditing fees 1
Miscellaneous 2
Expenses from Portfolio (Notes A & B) 174
-----------
Total expenses 619
Expenses reimbursed by administrator and
reduced by custodian fee expense offset
arrangement (Note B) (175)
-----------
Total net expenses 444
-----------
Net investment income 3,241
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM PORTFOLIO (NOTE A)
Net realized loss on investment securities (712)
Net realized loss on financial futures
contracts (37)
Net realized gain on foreign currency
transactions 39
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, translation of
assets and liabilities in foreign
currencies, and foreign currency contracts (1,534)
-----------
Net loss on investments from Portfolio
(Note A) (2,244)
-----------
Net increase in net assets resulting from
operations $ 997
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Neuberger Berman
- ----------------------------------------------------------------------
Limited Maturity Bond Trust
<TABLE>
<CAPTION>
Year
Ended
OCTOBER 31,
(000'S OMITTED) 1999 1998
<S> <C> <C>
--------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 3,241 $ 2,938
Net realized loss on investments
from Portfolio (Note A) (710) (679)
Change in net unrealized
appreciation (depreciation) of
investments from Portfolio
(Note A) (1,534) (6)
--------------------------
Net increase in net assets resulting
from operations 997 2,253
--------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,241) (2,948)
Excess of net investment income (73) --
--------------------------
Total distributions to shareholders (3,314) (2,948)
--------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 20,223 32,828
Proceeds received in connection with
merger (Note D) -- 7,929
Proceeds from reinvestment of
dividends 3,226 2,944
Payments for shares redeemed (40,004) (19,981)
--------------------------
Net increase (decrease) from Trust
share transactions (16,555) 23,720
--------------------------
NET INCREASE (DECREASE) IN NET ASSETS (18,872) 23,025
NET ASSETS:
Beginning of year 60,421 37,396
--------------------------
End of year $ 41,549 $ 60,421
--------------------------
NUMBER OF TRUST SHARES:
Sold 2,175 3,447
Issued in connection with merger
(Note D) -- 830
Issued on reinvestment of dividends 349 309
Redeemed (4,335) (2,098)
--------------------------
Net increase (decrease) in shares
outstanding (1,811) 2,488
--------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger Berman October 31, 1999
- ----------------------------------------------------------------------
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 Fund
would belong only to that Fund, and the liabilities of each Fund would be
borne solely by that Fund 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
(15.44% at October 31, 1999). 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) TAXES: The Fund is treated as a separate entity for U.S. 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 U.S.
Federal income tax purposes as capital loss carryforwards) sufficient to
relieve it from all, or substantially all, U.S. Federal income taxes.
Accordingly, the Fund paid no U.S. Federal income taxes and no provision for
U.S. Federal income taxes was required.
4) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: 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-5
<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, $51,062, $70,825, $48,668, $580,400, and $806,750 expiring in
2001, 2002, 2003, 2004, 2005, 2006, and 2007, respectively, determined as of
October 31, 1999), 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 2003, which was acquired on February 27, 1998, in the merger with
Neuberger Berman Ultra Short Bond Trust ("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) 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.
6) 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 Inc. ("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 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, 1999, such excess
expenses amounted to $174,589.
B-6
<PAGE>
Management and Neuberger Berman, LLC ("Neuberger"), a member firm of The New
York Stock Exchange and sub-adviser to the Portfolio, are wholly owned
subsidiaries of Neuberger Berman Inc., a publicly held company. Several
individuals who are officers and/or trustees of the Trust are also employees of
Neuberger and/or Management.
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
$912.
NOTE C -- INVESTMENT TRANSACTIONS:
During the year ended October 31, 1999, additions and reductions in the
Fund's investment in the Portfolio amounted to $9,442,000 and $29,763,000
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-7
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Trust(1)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Year Ended October 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
-----------------------------------------
Net Asset Value, Beginning of Year $9.45 $9.57 $9.53 $9.61 $9.43
-----------------------------------------
Income From Investment Operations
Net Investment Income .56 .57 .60 .57 .58
Net Gains or Losses on Securities
(both realized and unrealized) (.39) (.12) .04 (.08) .18
-----------------------------------------
Total From Investment Operations .17 .45 .64 .49 .76
-----------------------------------------
Less Distributions
Dividends (from net investment
income) (.55) (.57) (.60) (.57) (.58)
Distributions (from excess of net
investment income) (.01) -- -- -- --
-----------------------------------------
Total Distributions (.56) (.57) (.60) (.57) (.58)
-----------------------------------------
Net Asset Value, End of Year $9.06 $9.45 $9.57 $9.53 $9.61
-----------------------------------------
Total Return(2) +1.86% +4.79% +6.88% +5.29% +8.36%
-----------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $41.5 $60.4 $37.4 $21.2 $11.9
-----------------------------------------
Ratio of Gross Expenses to Average
Net Assets(3) .81% .80% .80% .81% .77%
-----------------------------------------
Ratio of Net Expenses to Average Net
Assets(4) .80% .80% .80% .80% .77%
-----------------------------------------
Ratio of Net Investment Income to
Average Net Assets 5.87% 5.94% 6.25% 6.06% 6.16%
-----------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-8
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger Berman October 31, 1999
- ----------------------------------------------------------------------
Limited Maturity Bond Trust
1) 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.
2) 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.
3) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
4) After reimbursement of expenses by Management as described in Note B of Notes
to Financial Statements. Had Management not undertaken such action the
annualized ratios of net expenses to average daily net assets would have
been:
<TABLE>
<CAPTION>
Year Ended October 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
---------------------------------------------
Net Expenses 1.12% 1.22% 1.24% 1.91% 2.18%
---------------------------------------------
</TABLE>
B-9
<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, 1999, 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 Neuberger Berman Income Trust at October 31, 1999, 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 3, 1999
B-10
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1999
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
Principal
Amount Rating(1) Value(2)
(000's omitted) Moody's S&P (000's omitted)
- --------------------- --------- --------- ---------------
<C> <S> <C> <C> <C>
U.S. TREASURY SECURITIES
(7.6%)
$ 7,750 U.S. Treasury Notes, 5.25%,
due 5/15/04 TSY TSY $ 7,526
8,700 U.S. Treasury Notes, 6.50%,
due 10/15/06 TSY TSY 8,850
4,371 U.S. Treasury
Inflation-Indexed Notes,
3.375%, due 1/15/07 TSY TSY 4,167
--------
TOTAL U.S. TREASURY SECURITIES
(COST $20,678) 20,543
--------
U.S. GOVERNMENT AGENCY
SECURITIES (1.5%)
4,175 Freddie Mac, Discount Notes,
5.16%, due 11/1/99 (COST
$4,174) AGY AGY 4,174
--------
MORTGAGE-BACKED SECURITIES
(30.1%)
1,480 GE Capital Mortgage Services,
Inc., REMIC Pass-Through
Certificates, Ser. 1998-25,
Class B3, 6.25%, due 12/25/28 BB(3) 974(4)
1,588 PNC Mortgage Securities Corp.,
Pass-Through Certificates,
Ser. 1999-1, Class 1B4, 6.25%,
due 2/25/29 BB(3) 1,034(4)
946 Norwest Asset Securities
Corp., Mortgage Pass-Through
Certificates, Ser. 1999-13,
6.75%, due 5/25/29 BB(3) 652(4)
1,110 GE Capital Mortgage Services,
Inc., REMIC Pass-Through
Certificates, Ser. 1999-11,
Class B3, 6.50%, due 7/25/29 BB(3) 751(4)
965 Morgan Stanley Capital I Inc.,
Commercial Mortgage
Pass-Through Certificates,
Ser. 1998-HF2, 6.01%,
due 11/15/30 BB(3) 653(4)
FANNIE MAE
4,305 Pass-Through Certificates,
7.00%, due 9/1/03 & 6/1/11 AGY AGY 4,329
5,136 Pass-Through Certificates,
6.50%, due 5/1/13 AGY AGY 5,046
</TABLE>
C-1
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(1) Value(2)
(000's omitted) Moody's S&P (000's omitted)
- --------------------- --------- --------- ---------------
<C> <S> <C> <C> <C>
FREDDIE MAC
$ 25 Mortgage Participation
Certificates, 10.50%,
due 10/1/00 & 12/1/00 AGY AGY $ 26
135 Mortgage Participation
Certificates, 8.50%,
due 10/1/01 AGY AGY 138
122 ARM Certificates, 6.00%,
due 1/1/17 AGY AGY 122
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
69 Pass-Through Certificates,
7.50%, due 10/15/09-9/15/10 AGY AGY 70
113 Pass-Through Certificates,
12.00%, due 5/15/12-3/15/15 AGY AGY 128
22,191 Pass-Through Certificates,
6.50%, due 12/15/28 AGY AGY 21,223
34,921 Pass-Through Certificates,
7.00%, due 4/15/11-1/15/29 AGY AGY 34,314
2,960 Pass-Through Certificates,
8.00%, due 11/15/26-7/15/29 AGY AGY 3,022
8,700 Pass-Through Certificates,
8.00%, TBA, 30 Year Maturity AGY AGY 8,890
--------
TOTAL MORTGAGE-BACKED
SECURITIES
(COST $84,272) 81,372
--------
ASSET-BACKED SECURITIES (7.0%)
6,500 Ford Credit Auto Loan Master
Trust, Auto Loan Certificates,
Ser. 1996-1, 5.50%,
due 2/15/03 Aaa AAA 6,455
111 Honda Auto Receivables Grantor
Trust, Ser. 1997-A, Class A,
5.85%, due 2/15/03 Aaa AAA 110
5,600 Chase Credit Card Master
Trust, Ser. 1997-2, Class A,
6.30%, due 4/15/03 Aaa AAA 5,618
792 Navistar Financial Owner
Trust, Ser. 1996-B,
Class A-3, 6.33%, due 4/21/03 Aaa AAA 794
</TABLE>
C-2
<PAGE>
October 31, 1999
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(1) Value(2)
(000's omitted) Moody's S&P (000's omitted)
- --------------------- --------- --------- ---------------
<C> <S> <C> <C> <C>
$ 4,720 Chemical Master Credit Card
Trust 1, Ser. 1995-2,
Class A, 6.23%, due 6/15/03 Aaa AAA $ 4,727
1,112 Chevy Chase Auto Receivables
Trust, Ser. 1996-2, Class A,
5.90%, due 7/15/03 Aaa AAA 1,110
--------
TOTAL ASSET-BACKED SECURITIES
(COST $18,905) 18,814
--------
BANKS & FINANCIAL INSTITUTIONS
(16.9%)
1,300 Lehman Brothers Holdings Inc.,
Medium-Term Notes, Ser. E,
7.08%, due 5/22/00 A3 A 1,307
1,800 International Lease Finance
Corp., Notes, 6.625%,
due 6/1/00 A1 A+ 1,806
3,150 Countrywide Funding Corp.,
Medium-Term Notes, Ser. A,
7.31%, due 8/28/00 A3 A 3,174
7,090 Associates Pass-Through Asset
Trust, Ser. 1997-1, 6.45%,
due 9/15/00 Aa3 AA- 7,138(4)
5,000 Lehman Brothers Holdings Inc.,
Medium-Term Notes, Ser. E,
6.89%, due 10/10/00 A3 A 5,032
3,600 Countrywide Home Loans, Inc.,
Notes, 5.62%, due 10/16/00 A3 A 3,571
1,725 Lehman Brothers Holdings Inc.,
Medium-Term Notes, Ser. E,
6.65%, due 11/8/00 A3 A 1,733
2,000 NationsBank Corp., Senior
Medium-Term Notes, Ser. E,
5.70%, due 2/9/01 Aa2 A+ 1,982
6,600 Capital One Bank, Bank Notes,
5.95%, due 2/15/01 Baa2 BBB- 6,512
4,430 Morgan Stanley, Dean Witter, &
Co., Global Medium-Term Notes,
Ser. C, 6.09%, due 3/9/01 Aa3 A+ 4,401
6,660 Household Finance Corp.,
Senior Medium-Term Notes,
6.06%, due 5/14/01 A2 A 6,585
1,500 Dime Bancorp, Inc., Notes,
7.00%, due 7/25/01 Ba1 BBB- 1,494
1,000 Bank United Corp., Medium-Term
Notes, Ser. A, 8.00%,
due 3/15/09 Ba2 BBB- 950
--------
TOTAL BANKS & FINANCIAL
INSTITUTIONS
(COST $45,950) 45,685
--------
</TABLE>
C-3
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(1) Value(2)
(000's omitted) Moody's S&P (000's omitted)
- --------------------- --------- --------- ---------------
<C> <S> <C> <C> <C>
CORPORATE DEBT SECURITIES
(32.6%)
$ 4,800 Norfolk Southern Corp., Notes,
6.70%, due 5/1/00 Baa1 BBB+ $ 4,814
2,000 American General Finance
Corp., Senior Notes, 6.125%,
due 9/15/00 A2 A+ 2,002
2,510 Chesapeake Corp., Notes,
10.375%, due 10/1/00 Ba1 BBB 2,595
1,730 BHP Finance (USA) Ltd.,
Guaranteed Notes, 5.625%,
due 11/1/00 A3 A- 1,711
2,577 Safeway Inc., Notes, 5.75%,
due 11/15/00 Baa2 BBB 2,554
2,300 General Electric Capital
Corp., Global Medium-Term
Notes, Ser. A, 5.52%,
due 1/15/01 Aaa AAA 2,280
3,325 AT&T Capital Corp., Notes,
6.875%, due 1/16/01 A1 BBB 3,333
2,320 Fort James Corp., Notes,
6.234%, due 3/15/01 Baa2 BBB 2,309
1,780 CMS Energy Corp., Senior
Notes, 8.00%, due 7/1/01 Ba3 BB 1,775
3,300 Telecom Argentina Stet-France
SA, Medium-Term Notes, 9.75%,
due 7/12/01 B1 BBB- 3,292(4)
2,290 Colonial Realty Limited
Partnership, Senior Notes,
7.50%, due 7/15/01 Baa3 BBB- 2,253
1,220 USA Waste Services, Inc.,
Senior Notes, 6.125%,
due 7/15/01 Ba1 BBB 1,164
1,325 Cox Communications, Inc.,
Notes, 7.00%, due 8/15/01 Baa2 BBB+ 1,326
3,300 Texas Utilities Co., Notes,
5.94%, due 10/15/01 Baa3 BBB 3,243
2,080 Tyco International Ltd.,
Notes, 6.50%, due 11/1/01 A3 A- 2,059
1,923 Marlin Water Trust, Senior
Secured Notes, 7.09%,
due 12/15/01 Baa2 BBB 1,896(4)
2,965 ICI Wilmington Inc.,
Guaranteed Notes, 7.50%,
due 1/15/02 Baa1 A- 2,992
2,835 Black & Decker Corp.,
Medium-Term Notes, Ser. A,
8.90%, due 1/21/02 Baa2 BBB 2,956
945 Century Communications Corp.,
Senior Notes, 9.75%,
due 2/15/02 B1 BB- 958
900 Ford Motor Credit Co., Global
Bonds, 6.50%, due 2/28/02 A1 A 896
</TABLE>
C-4
<PAGE>
October 31, 1999
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(1) Value(2)
(000's omitted) Moody's S&P (000's omitted)
- --------------------- --------- --------- ---------------
<C> <S> <C> <C> <C>
$ 900 Comdisco, Senior Notes, 7.25%,
due 9/1/02 Baa1 BBB+ $ 894
3,195 Crown Cork & Seal Co., Inc.,
Notes, 7.125%, due 9/1/02 Baa2 BBB 3,171
2,280 Fort James Corp., Senior
Notes, 6.50%, due 9/15/02 Baa2 BBB 2,247
2,460 Conseco Inc., Notes, 8.50%,
due 10/15/02 Ba1 BBB+ 2,468
1,375 American Standard Inc., Senior
Notes, 7.125%, due 2/15/03 Ba3 BB- 1,303
1,000 Safeway Inc., Medium-Term
Notes, 8.57%, due 4/1/03 Baa2 BBB 1,038
3,360 Stewart Enterprises, Inc.,
Notes, 6.40%, due 5/1/03 Baa3 BBB 3,306
60 Core-Mark International, Inc.,
Senior Subordinated Notes,
11.375%, due 9/15/03 B3 B 58
2,555 Akzo Nobel Inc., Guaranteed
Notes, 6.00%, due 11/15/03 A2 A 2,438(4)
705 Loomis Fargo & Co., Senior
Subordinated Notes, 10.00%,
due 1/15/04 B3 B 689
1,740 PDVSA Finance Ltd., Notes,
8.75%, due 2/15/04 A3 1,701(4)
660 EOP Operating Limited
Partnership, Notes, 6.625%,
due 2/15/05 Baa1 BBB+ 625
975 WestPoint Stevens Inc., Senior
Notes, 7.875%, due 6/15/05 Ba3 BB 914
4,200 Heritage Media Corp., Senior
Subordinated Notes, 8.75%,
due 2/15/06 B1 BB+ 4,273
735 Calpine Corp., Senior Notes,
7.625%, due 4/15/06 Ba1 BB+ 689
325 Jones Apparel Group, Senior
Notes, 7.875%, due 6/15/06 Baa2 BBB- 321(4)
400 Printpack, Inc., Senior
Subordinated Notes, Ser. B,
10.625%, due 8/15/06 Caa1 B 374
2,825 Time Warner Inc., Notes,
8.11%, due 8/15/06 Baa3 BBB 2,935
680 Newport News Shipbuilding
Inc., Senior Subordinated
Notes, 9.25%, due 12/1/06 B1 B+ 699
910 GFSI Inc., Senior Subordinated
Notes, 9.625%, due 3/1/07 B3 B- 689
</TABLE>
C-5
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(1) Value(2)
(000's omitted) Moody's S&P (000's omitted)
- --------------------- --------- --------- ---------------
<C> <S> <C> <C> <C>
$ 300 French Fragrances, Inc.,
Senior Notes, Ser. B,
10.375%, due 5/15/07 B2 B+ $ 269
1,685 Owens-Illinois, Inc., Senior
Debentures, 8.10%,
due 5/15/07 Ba1(5) BB+(5) 1,616
250 Safety Components
International, Inc., Senior
Subordinated Notes, 10.125%,
due 7/15/07 B3 B- 163
880 HydroChem Industrial Services,
Inc., Senior Subordinated
Notes, Ser. B, 10.375%,
due 8/1/07 Caa1 B- 767
2,000 Interpool, Inc., Notes, 7.20%,
due 8/1/07 Ba1(6) BB+(6) 1,703
400 NBTY, Inc., Senior
Subordinated Notes, Ser. B,
8.625%, due 9/15/07 B1 B+ 334
1,000 Thiokol Corp., Senior Notes,
6.625%, due 3/1/08 Baa3 BBB 921
160 APCOA, Inc., Senior
Subordinated Notes, 9.25%,
due 3/15/08 Caa1 B- 148
610 IMPAC Group, Inc., Senior
Subordinated Notes, 10.125%,
due 3/15/08 B3 B- 546
470 Trans-Resources, Inc., Senior
Notes, Ser. B, 10.75%,
due 3/15/08 B3 B- 422
300 Columbus McKinnon Corp.,
Senior Subordinated Notes,
8.50%, due 4/1/08 B2 B 272
160 Great Central Mines Ltd.,
Senior Notes, 8.875%,
due 4/1/08 Ba2 BB 142
1,000 Global Crossing Holdings Ltd.,
Senior Notes, 9.625%,
due 5/15/08 Ba2(5) BB(5) 1,010
450 Home Products International,
Inc., Senior Subordinated
Notes, 9.625%, due 5/15/08 B3 B 399
205 KinderCare Learning Centers,
Inc., Senior Subordinated
Notes, Ser. B, 9.50%,
due 2/15/09 B3 B- 193
1,500 Liberty Media Group, Notes,
7.875%, due 7/15/09 Baa3 BBB- 1,506(4)
500 Garden State Newspapers, Inc.,
Senior Subordinated Notes,
Ser. B, 8.625%, due 7/1/11 B1 B+ 450
--------
TOTAL CORPORATE DEBT
SECURITIES (COST $90,976) 88,101
--------
</TABLE>
C-6
<PAGE>
October 31, 1999
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio (Cont'd)
<TABLE>
<CAPTION>
Principal
Amount Rating(1) Value(2)
(000's omitted) Moody's S&P (000's omitted)
- --------------------- --------- --------- ---------------
<C> <S> <C> <C> <C>
FOREIGN SECURITIES(7) (5.8%)
CAD 5,665 Canadian Government, 5.00%,
due 12/1/00 Aaa AAA $ 3,823
SEK 41,100 Kingdom of Sweden, 13.00%,
due 6/15/01 Aaa AAA 5,637
AUD 10,100 Asian Development Bank,
5.375%, due 9/15/03 Aaa AAA 6,140
--------
TOTAL FOREIGN SECURITIES (COST
$16,055) 15,600
--------
TOTAL INVESTMENTS (101.5%)
(COST $281,010) 274,289(8)
Liabilities, less cash,
receivables and other assets
[(1.5%)] (4,162)
--------
TOTAL NET ASSETS (100.0%) $270,127
--------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-7
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
Neuberger Berman October 31, 1999
- ----------------------------------------------------------------------
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, 1999, these
securities amounted to $22,356,000 or 8.3% of net assets.
5) Rated BBB- by Duff & Phelps Credit Rating Co.
6) Rated BBB by Duff & Phelps Credit Rating Co.
7) Principal amount is stated in the currency in which the security is
denominated.
AUD -- Australian Dollar
CAD -- Canadian Dollar
SEK -- Swedish Krona
8) At October 31, 1999, the cost of investments for U.S. Federal income tax
purposes was $281,083,000. Gross unrealized appreciation of investments was
$378,000 and gross unrealized depreciation of investments was $7,172,000,
resulting in net unrealized depreciation of $6,794,000, based on cost for
U.S. Federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
C-8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
Neuberger Berman
- ----------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
OCTOBER 31,
(000'S OMITTED) 1999
<S> <C>
-------------
ASSETS
Investments in securities, at market value*
(Note A) -- see Schedule of Investments $ 274,289
Cash 5
Receivable for securities sold 12,287
Interest receivable 3,637
Receivable for variation margin (Note A) 128
Prepaid expenses and other assets 5
Receivable for forward foreign currency
exchange contracts sold (Note C) 1
-------------
290,352
-------------
LIABILITIES
Payable for securities purchased 20,122
Payable to investment manager (Note B) 54
Accrued expenses 49
-------------
20,225
-------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 270,127
-------------
NET ASSETS consist of:
Paid-in capital $ 276,840
Net unrealized depreciation in value of
investment securities, financial futures
contracts, translation of assets and
liabilities in foreign currencies, and
foreign currency contracts (6,713)
-------------
NET ASSETS $ 270,127
-------------
*Cost of investments $ 281,010
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-9
<PAGE>
STATEMENT OF OPERATIONS
Neuberger Berman
- ----------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
For the
Year
Ended
OCTOBER 31,
(000'S OMITTED) 1999
<S> <C>
-----------
INVESTMENT INCOME
Interest income $ 21,042
-----------
Expenses:
Investment management fee (Note B) 792
Custodian fees (Note B) 127
Auditing fees 23
Trustees' fees and expenses 20
Legal fees 16
Accounting fees 10
Insurance expense 4
-----------
Total expenses 992
Expenses reduced by custodian fee expense
offset arrangement (Note B) (5)
-----------
Total net expenses 987
-----------
Net investment income 20,055
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment securities
sold (3,913)
Net realized loss on financial futures
contracts (Note A) (232)
Net realized gain on foreign currency
transactions (Note A) 113
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, translation of
assets and liabilities in foreign
currencies, and foreign currency contracts
(Note A) (8,500)
-----------
Net loss on investments (12,532)
-----------
Net increase in net assets resulting from
operations $ 7,523
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Neuberger Berman
- ----------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
Year
Ended
OCTOBER 31,
(000'S OMITTED) 1999 1998
<S> <C> <C>
--------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 20,055 $ 21,213
Net realized loss on investments (4,032) (4,564)
Change in net unrealized
appreciation (depreciation) of
investments (8,500) 180
--------------------------
Net increase in net assets resulting
from operations 7,523 16,829
--------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 44,610 71,026
Additions related to reorganization
(Note D) -- 54,073
Reductions (138,662) (78,238)
--------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (94,052) 46,861
--------------------------
NET INCREASE (DECREASE) IN NET ASSETS (86,529) 63,690
NET ASSETS:
Beginning of year 356,656 292,966
--------------------------
End of year $ 270,127 $ 356,656
--------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
- ----------------------------------------------------------------------
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 Inc. ("Management"), whose
financial statements are not presented herein, also invest in the Portfolio
and other portfolios of Managers Trust.
The assets of each Portfolio belong only to that Portfolio, and the
liabilities of each Portfolio are borne solely by that Portfolio and no
other.
2) PORTFOLIO VALUATION: Investment securities are valued as indicated in the
notes following the 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) 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 and foreign currency transactions are recorded on the basis of
identified cost.
5) 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
C-12
<PAGE>
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.
6) TAXES: Managers Trust intends to comply with the requirements of the Internal
Revenue Code. Each Portfolio of Managers Trust also intends to conduct its
operations so that each of its investors will be able to qualify as a
regulated investment company. Each Portfolio will be treated as a partnership
for U.S. Federal income tax purposes and is therefore not subject to U.S.
Federal income tax.
7) 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.
8) 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 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 U.S. 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
C-13
<PAGE>
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, 1999, open positions in financial futures contracts were as
follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION APPRECIATION
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 1999 256 U.S. Treasury Notes, 5 Year Long $6,000
</TABLE>
At October 31, 1999, 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>
$ 1,325,000 AT&T Capital Corp., Notes, 6.875%, due 1/16/01
</TABLE>
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.
Management and Neuberger Berman, LLC ("Neuberger"), a member firm of The New
York Stock Exchange and sub-adviser to the Portfolio, are wholly owned
subsidiaries of Neuberger Berman Inc., a publicly held company. Neuberger is
retained by Management to furnish it with investment recommendations and
research information without added cost to the Portfolio. Several individuals
who are officers and/or trustees of Managers Trust are also employees of
Neuberger and/or 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 $5,204.
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended October 31, 1999, there were purchase and sale
transactions (excluding short-term securities, financial futures contracts, and
forward foreign currency contracts) of $305,425,000 and $329,249,000,
respectively.
C-14
<PAGE>
During the year ended October 31, 1999, the Portfolio had entered into
various contracts to deliver currencies at specified future dates. At
October 31, 1999, open contracts were as follows:
<TABLE>
<CAPTION>
NET
CONTRACTS IN EXCHANGE SETTLEMENT UNREALIZED
SALES TO DELIVER FOR DATE VALUE APPRECIATION
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Australian Dollar 2,700,000 $1,723,167 12/02/1999 $1,722,660 $507
</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.
C-15
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Limited Maturity Bond Portfolio
<TABLE>
<CAPTION>
Year Ended October 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .31% .33% .33% .33% .33%
---------------------------------------------------
Net Expenses .31% .33% .33% .33% .33%
---------------------------------------------------
Net Investment Income 6.35% 6.38% 6.70% 6.45% 6.55%
---------------------------------------------------
Portfolio Turnover Rate 102% 44% 89% 169% 88%
---------------------------------------------------
Net Assets, End of Year (in millions) $270.1 $356.7 $293.0 $267.3 $319.6
---------------------------------------------------
</TABLE>
1) The Portfolio is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
C-16
<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, 1999, 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, 1999, by correspondence with the custodian
and brokers or other appropriate auditing procedures where replies from brokers
were not received. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
above mentioned series of Income Managers Trust at October 31, 1999, 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 3, 1999
C-17
<PAGE>
(This page has been left blank intentionally.)
C-18
<PAGE>
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR
AND DISTRIBUTOR
Neuberger Berman Management Inc.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800.877.9700 or 212.476.8800
Institutional Services 800.366.6264
SUB-ADVISER
Neuberger Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger Berman Funds
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
D-1
<PAGE>
OFFICERS AND TRUSTEES
Stanley Egener
CHAIRMAN OF THE BOARD AND TRUSTEE
Theodore P. Giuliano
PRESIDENT AND TRUSTEE
John Cannon
TRUSTEE
Barry Hirsch
TRUSTEE
Robert A. Kavesh
TRUSTEE
William E. Rulon
TRUSTEE
Candace L. Straight
TRUSTEE
Daniel J. Sullivan
VICE PRESIDENT
Michael J. Weiner
VICE PRESIDENT
Richard Russell
TREASURER
Claudia A. Brandon
SECRETARY
Barbara DiGiorgio
ASSISTANT TREASURER
Celeste Wischerth
ASSISTANT TREASURER
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
D-2
<PAGE>
Notice to Shareholders (Unaudited)
Under most state tax laws, mutual fund dividends which are derived from
direct investments in U.S. Government obligations are not taxable, as long as a
Fund meets certain requirements. Some states require that a Fund must provide
shareholders with a written notice, within 60 days of the close of a Fund's
taxable year, designating the portion of the dividends which represents interest
which those states consider to have been earned on U.S. Government obligations.
The chart below shows the percentage of income derived from such investments for
the twelve months ended October 31, 1999. This information should not be used to
complete your tax returns.
<TABLE>
<CAPTION>
CALIFORNIA,
CONNECTICUT, AND MAINE AND ALL OTHER
NEUBERGER BERMAN NEW YORK NEW HAMPSHIRE STATES
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIMITED MATURITY BOND TRUST 0.0% 5.4% 6.4%
</TABLE>
In January 2000 you will receive information to be used in filing your 1999
tax returns, which will include a notice of the exact tax status of all
dividends paid to you by each Fund during calendar 1999. Please consult your own
tax advisor for details as to how this information should be reflected on your
tax returns.
<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 Fund. This report is prepared for the
general information of shareholders and is not an offer of shares
of the Fund. Shares are sold only through the currently
effective prospectus, which must precede or accompany this report.
NEUBERGER BERMAN
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
INSTITUTIONAL SERVICES
800.366.6264
www.nbfunds.com
[LOGO] PRINTED ON RECYCLED PAPER NMAAR0671299
