As filed with the Securities and Exchange Commission on June 9, 2008
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-3802
LEHMAN BROTHERS INCOME FUNDS
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices – Zip Code)
Registrant's telephone number, including area code: (212) 476-8800
Peter E. Sundman, Chairman of the Board and Chief Executive Officer
Lehman Brothers Income Funds
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur Delibert, Esq.
Kirkpatrick & Lockhart Preston Gates Ellis LLP
1601 K Street, N.W.
Washington, D.C. 20006-1600
(Names and Addresses of agents for service)
Date of fiscal year end: March 31, 2008
Date of reporting period: March 31, 2008
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Shareholders
Neuberger Berman Government Money Fund
Lehman Brothers
Tax-Free Money Fund
Lehman Brothers National Municipal Money Fund
Annual Report
March 31, 2008
Contents
@2008 Lehman Brothers Asset Management LLC. All rights reserved.
Chairman’s Letter
Dear Shareholder,
I am pleased to present to you this annual report for the Neuberger Berman Government Money Fund, the Lehman Brothers Tax-Free Money Fund and the Lehman Brothers National Municipal Money Fund for the fiscal year ended March 31, 2008. The report includes portfolio commentaries, a listing of the Portfolios’ investments, and their audited financial statements for the reporting period.
The fiscal period was marked by extreme volatility, initially related to the housing decline, which spilled over into the fixed income markets in the form of significant issues with subprime mortgage securities, before broadening to other securities. During the fiscal year, the Federal Reserve cut the Fed Funds rate by a total of 300 basis points, taking an array of increasingly aggressive steps to infuse the markets with liquidity. Still, employment and other metrics appeared weak at period’s end, with many observers suggesting that the economy was in recession.
Throughout the turmoil, the Funds performed admirably. Our investment strategy combines a distinct process for interest rate risk management with dedicated credit research to build a portfolio of high-quality securities that seeks to respond quickly to changes in interest rates without sacrificing yield.
As always, we intend to proceed with caution to protect our clients’ principal and maintain daily liquidity and diversification.
Sincerely,
PETER SUNDMAN
CHAIRMANOFTHE BOARD
LEHMAN BROTHERS INCOME FUNDS
1
| | |
| Neuberger Berman Government Money Fund Commentary | | Investor Class: NBGXX |
The Neuberger Berman Government Money Fund Investor Class delivered positive returns and outperformed its benchmark, the iMoneyNet Money Fund Report Government & Agencies Retail Average during the fiscal year ended March 31, 2008.
The Federal Reserve’s interest rate policy was on hold for the first four months of the 12-month period, with the target Fed Funds rate at 5.25%. In April, a demand and supply imbalance drove the yield on the three-month U.S. Treasury bill to its lowest level since October 2006, and the yield dropped lower still in June as prices increased. Worries about reports of large losses at hedge funds in the subprime and collateralized debt space led to a flight-to-quality bid for Treasuries and a slight widening of risk premiums in the market.
Beginning in July, investors in the credit markets became increasingly concerned about contagion to the broader market from the shakeout in subprime mortgages, leading to more investors taking refuge in Treasuries. Premiums for lending increased dramatically, as the excesses of a prolonged period of liquidity began to be removed from the market. After leaving rates unchanged at the August meeting, the release in September of the August payroll figures, which were negative for the first time in four years, coupled with a deteriorating housing market, prompted the Fed to reduce the Fed Funds rate by 50-basis points at its September meeting, marking its first rate reduction since 2003. The move to 4.75% was only the second time in the last 20 years that an easing cycle had commenced with a 50-basis-point Fed reduction.
This move was followed by two further 25-basis-point rate cuts in October and December, as the Fed attempted to “forestall some of the adverse effects on the broader economy that might otherwise arise from disruptions in the financial markets.”
In January, in a move that appeared to catch the market by surprise, the Fed acted in aggressive fashion to take rates lower, with a 75-basis-point cut one week prior to its scheduled meeting, and an additional 50-basis-point cut at month-end. This temporarily silenced criticism of Fed Chairman Ben Bernanke and the Fed that they were behind the curve in dealing with liquidity issues. The intermeeting cut was the first since 2001 and was the largest in nearly 25 years. The rate reductions seemed to be confirmation that the Fed believed that the liquidity crisis had advanced into an economic crisis, and that the U.S. economy was teetering on the brink of recession.
Volatility continued in February, as “deleveraging” continued to be the operative word and the market struggled to absorb the overwhelming supply of debt securities. Traditional valuation methods and market pricing on certain types of assets suffered an extreme disconnect, with prices declining precipitously, driven by the supply-demand imbalance and the uncertainty generated by markets entering uncharted territory.
March brought further actions by the Fed, which included lowering the Fed Funds rate by an additional 75 basis points (despite two dissenting votes) and opened a new lending program to investment firms serving as “primary dealers.”
At the time of this writing, supply continues to hit the credit markets faster than demand can absorb it. Amid continued jobs losses, higher mortgage delinquency rates and falling home prices, consumer balance sheets are on precarious ground. We believe that the Fed will very likely continue this easing cycle, perhaps taking rates below 2.00% as “insurance” against a more pronounced slowdown.
Neuberger Berman Government Money Fund is overweighted in floating rate notes, which reset according to one-month Libor, three-month Libor, and the Prime Rate. In addition, the Fund is also heavily weighted in overnight repurchase agreements backed by 102% U.S. government securities. As of the end of the period, the weighted average maturity of the portfolio was 49.1 days.
2
Performance and Yield Information1,3
For the fiscal year ended March 31, 2008, Neuberger Berman Government Money Fund Investor Class returned 4.39% compared to the iMoneyNet Money Fund Report Government & Agencies Retail Average’s 4.02%. The Fund closed the period with a 2.54% seven-day current yield and a 2.57% seven-day effective yield; this more closely reflects current earnings than the one-year figures.
Sincerely,
JOHN C. DONOHUEAND SCOTT F. RIECKE
PORTFOLIO CO-MANAGERS
Maturity Diversification (% by Maturity)
| | | |
| 1 - 7 Days | | 47.8 | % |
| 8 - 30 Days | | 19.4 | |
| 31 - 90 Days | | 18.4 | |
| 91 - 180 Days | | 5.9 | |
| 181+ Days | | 8.5 | |
Performance data quoted represent past performance, which is no guarantee of future results. The investment return on an investment in a money market fund will fluctuate. Current performance may be lower or higher than the performance data quoted. For performance data current to the most recent month-end visit www.nb.com/performance. The composition, industries and holdings of each Fund are subject to change.
An investment in a Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although each Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a Fund.
3
| | |
| Lehman Brothers Tax-Free Money Fund Commentary | | Reserve Class: LBTXX |
We are pleased to report that Lehman Brothers Tax-Free Money Fund Reserve Class delivered positive returns and outperformed the iMoneyNet Money Fund Report Tax-Free National Institutional Average for the five months ended March 31, 2008.
The Federal Reserve’s interest rate policy was on hold for the first four months of the 12-month period ended March 31, 2008, with the target Fed Funds rate at 5.25%. In April, a demand and supply imbalance drove the yield on the three-month U.S. Treasury bill to its lowest level since October 2006, and the yield dropped lower still in June as prices increased. Worries about reports of large losses at hedge funds in the subprime and collateralized debt space led to a flight-to-quality bid for Treasuries and a slight widening of risk premiums in the market.
Beginning in July, investors in the credit markets became increasingly concerned about contagion to the broader market from the shakeout in subprime mortgages, leading to more investors taking refuge in Treasuries. Premiums for lending increased dramatically, as the excesses of a prolonged period of liquidity began to be removed from the market. After leaving rates unchanged at the August meeting, the release in September of the August payroll figures, which were negative for the first time in four years, coupled with a deteriorating housing market, prompted the Fed to reduce the Fed Funds rate by 50 basis points at its September meeting, marking its first rate reduction since 2003. The move to 4.75% was only the second time in the last 20 years that an easing cycle had commenced with a 50-basis-point Fed reduction.
This move was followed by two further 25-basis-point rate cuts in October and December, as the Fed attempted to “forestall some of the adverse effects on the broader economy that might otherwise arise from disruptions in the financial markets.”
In January, in a move that appeared to catch the market by surprise, the Fed acted in aggressive fashion to take rates lower, with a 75-basis-point cut one week prior to its scheduled meeting, and an additional 50-basis-point cut at month-end. This temporarily silenced criticism of Fed Chairman Ben Bernanke and the Fed that they were behind the curve in dealing with liquidity issues. The intermeeting cut was the first since 2001 and was the largest in nearly 25 years. The rate reductions seemed to be confirmation that the Fed believed that the liquidity crisis had advanced into an economic crisis, and that the U.S. economy was teetering on the brink of recession.
Volatility continued in February, as “deleveraging” continued to be the operative word and the market struggled to absorb the overwhelming supply of debt securities. Traditional valuation methods and market pricing on certain types of assets suffered an extreme disconnect, with prices declining precipitously, driven by the supply-demand imbalance and the uncertainty generated by markets entering uncharted territory.
March brought further actions by the Fed, which included lowering the Fed Funds rate by an additional 75 basis points (despite two dissenting votes) and opened a new lending program to investment firms serving as “primary dealers.”
At the time of this writing, supply continues to hit the credit markets faster than demand can absorb it. Amid continued jobs losses, higher mortgage delinquency rates and falling home prices, consumer balance sheets are on precarious ground. We believe that the Fed will very likely continue this easing cycle, perhaps taking rates below 2.00% as “insurance” against a more pronounced slowdown.
The most significant impact to the municipal money fund arena with regard to the ongoing credit crisis involved the downgrades of several mono-line insurers over the past six months. To avoid ineligibility under Rule 2a-7 of the Investment Company Act of 1940, most tax-exempt money funds were forced to sell their weaker insured holdings. As part of our conservative investment approach, we continued to monitor each of our insured issues and proactively disposed of any securities that we believed might not meet Rule 2a-7 credit eligibility requirements. In addition, we continue to monitor each of the securities in our portfolios to ensure their creditworthiness. With the U.S. economy facing a severe credit crisis and the threat of a recession becoming more likely, money fund yields plummeted over the past six months. The SIFMA Municipal Swap Index rate, a proxy for tax-free weekly resets, averaged 3.74% for the first half of the year but only 2.97% in the second half, registering an 77-basis-point decline. The weighted average maturity of the Portfolio at the end of the fiscal year was 43.3 days, and the portfolio remained heavily invested in variable rate demand notes throughout the period.
4
Performance and Yield Information2,3
For the five months ended March 31, 2008, the Fund returned 1.21%, compared to the iMoneyNet Money Fund Report Tax-Free National Institutional Average’s 1.13%. The Fund closed the reporting period with a 2.28% seven-day current yield and a 2.31% seven-day effective yield; as well as a 3.51% seven-day tax-equivalent current yield and a 3.57% tax-equivalent effective yield; these more closely reflect current earnings than the one-year figures.
Sincerely,
WILLIAM J. FURRERAND KRISTIAN LIND
PORTFOLIO CO-MANAGERS
Maturity Diversification (% by Maturity)
| | | |
| 1 - 7 Days | | 83.4 | % |
| 8 - 30 Days | | 1.1 | |
| 31 - 90 Days | | 3.5 | |
| 91 - 180 Days | | 4.7 | |
| 181+ Days | | 7.3 | |
Performance data quoted represent past performance, which is no guarantee of future results. The investment return on an investment in a money market fund will fluctuate. Current performance may be lower or higher than the performance data quoted. For performance data current to the most recent month-end visit www.lehmanam.com/publiccp/LAM/americas/cash_mgmt.html. The composition, industries and holdings of each Fund are subject to change.
An investment in a Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although each Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a Fund.
5
| | |
| Lehman Brothers National Municipal Money Fund Commentary | | Reserve Class: LBMXX |
We are pleased to report that Lehman Brothers National Municipal Money Fund Reserve Class delivered positive returns and outperformed the iMoneyNet Money Fund Report Tax-Free National Institutional Average for the five months ended March 31, 2008.
The Federal Reserve’s interest rate policy was on hold for the first four months of the 12-month period ended March 31, 2008, with the target Fed Funds rate at 5.25%. In April, a demand and supply imbalance drove the yield on the three-month U.S. Treasury bill to its lowest level since October 2006, and the yield dropped lower still in June as prices increased. Worries about reports of large losses at hedge funds in the subprime and collateralized debt space led to a flight-to-quality bid for Treasuries and a slight widening of risk premiums in the market.
Beginning in July, investors in the credit markets became increasingly concerned about contagion to the broader market from the shakeout in subprime mortgages, leading to more investors taking refuge in Treasuries. Premiums for lending increased dramatically, as the excesses of a prolonged period of liquidity began to be removed from the market. After leaving rates unchanged at the August meeting, the release in September of the August payroll figures, which were negative for the first time in four years, coupled with a deteriorating housing market, prompted the Fed to reduce the Fed Funds rate by 50 basis points at its September meeting, marking its first rate reduction since 2003. The move to 4.75% was only the second time in the last 20 years that an easing cycle had commenced with a 50-basis-point Fed reduction.
This move was followed by two further 25-basis-point rate cuts in October and December, as the Fed attempted to “forestall some of the adverse effects on the broader economy that might otherwise arise from disruptions in the financial markets.”
In January, in a move that appeared to catch the market by surprise, the Fed acted in aggressive fashion to take rates lower, with a 75-basis-point cut one week prior to its scheduled meeting, and an additional 50-basis-point cut at month-end. This temporarily silenced criticism of Fed Chairman Ben Bernanke and the Fed that they were behind the curve in dealing with liquidity issues. The intermeeting cut was the first since 2001 and was the largest in nearly 25 years. The rate reductions seemed to be confirmation that the Fed believed that the liquidity crisis had advanced into an economic crisis, and that the U.S. economy was teetering on the brink of recession.
Volatility continued in February, as “deleveraging” continued to be the operative word and the market struggled to absorb the overwhelming supply of debt securities. Traditional valuation methods and market pricing on certain types of assets suffered an extreme disconnect, with prices declining precipitously, driven by the supply-demand imbalance and the uncertainty generated by markets entering uncharted territory.
March brought further actions by the Fed, which included lowering the Fed Funds rate by an additional 75 basis points (despite two dissenting votes) and opened a new lending program to investment firms serving as “primary dealers.”
At the time of this writing, supply continues to hit the credit markets faster than demand can absorb it. Amid continued jobs losses, higher mortgage delinquency rates and falling home prices, consumer balance sheets are on precarious ground. We believe that the Fed will very likely continue this easing cycle, perhaps taking rates below 2.00% as “insurance” against a more pronounced slowdown.
The most significant impact to the municipal money fund arena with regard to the ongoing credit crisis involved the downgrades of several mono-line insurers over the past six months. To avoid ineligibility under Rule 2a-7 of the Investment Company Act of 1940, most tax-exempt money funds were forced to sell their weaker insured holdings. As part of our conservative investment approach, we continued to monitor each of our insured issues and proactively disposed of any securities that we believed might not meet Rule 2a-7 credit eligibility requirements. In addition, we continue to monitor each of the securities in our portfolios to ensure their creditworthiness. With the U.S. economy facing a severe credit crisis and the threat of a recession becoming more likely, money fund yields plummeted over the past six months. The SIFMA Municipal Swap Index rate, a proxy for tax-free weekly resets, averaged 3.74% for the first half of the year but only 2.97% in the second half, registering an 77 basis point drop. The weighted average maturity of the Portfolio at the end of the fiscal year was 30.6 days, and the portfolio remained heavily invested in variable rate demand notes throughout the period.
6
Performance and Yield Information2,3,4
For the five months ended March 31, 2008, the Fund returned 1.26%, compared to the iMoneyNet Money Fund Report Tax-Free National Institutional Average’s 1.13%. The Fund closed the reporting period with a 2.52% seven-day current yield and a 2.55% seven-day effective yield; as well as a 3.88% seven-day tax-equivalent current yield and a 3.95% tax-equivalent effective yield; this more closely reflects current earnings than the one-year figures.
Sincerely,
WILLIAM J. FURRERAND KRISTIAN LIND
PORTFOLIO CO-MANAGERS
Maturity Diversification (% by Maturity)
| | | |
| 1 - 7 Days | | 82.7 | % |
| 8 - 30 Days | | 1.1 | |
| 31 - 90 Days | | 4.0 | |
| 91 - 180 Days | | 7.4 | |
| 181+ Days | | 4.8 | |
Performance data quoted represent past performance, which is no guarantee of future results. The investment return on an investment in a money market fund will fluctuate. Current performance may be lower or higher than the performance data quoted. For performance data current to the most recent month-end visit www.lehmanam.com/publiccp/LAM/americas/cash_mgmt.html. The composition, industries and holdings of each Fund are subject to change.
An investment in a Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although each Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a Fund.
7
Endnotes
| 1 | Neuberger Berman Management Inc. has contractually agreed to forgo current payment of fees and/or reimburse certain expenses of the Investor Class of Neuberger Berman Government Money Fund through 10/31/2010, so that the total annual operating expenses of that class are limited to 0.45% of average net assets. The Fund has contractually undertaken to reimburse Management for the excess expenses paid by Management, provided the reimbursements do not cause operating expenses (exclusive of taxes, interest, brokerage commissions, and extraordinary expenses) to exceed the above-stated expense limitation and the reimbursements are made within three years after the year that Management incurred the expense. For the period ended March 31, 2008, there was no reimbursement of expenses by Management to the Fund. |
| 2 | Neuberger Berman Management Inc. has voluntarily agreed to reimburse or waive certain expenses of the Reserve Class of Lehman Brothers Tax-Free Money Fund and Lehman Brothers National Municipal Money Fund so that the total annual operating expenses of the Reserve Class of each Fund (exclusive of taxes, interest, brokerage commissions and extraordinary expenses) are limited to 0.20% and 0.17% of average daily net assets, respectively. Absent such reimbursements or waivers, each Fund’s yield would have been less. Management expects that, in the future, it may voluntarily reimburse or waive certain expenses of each Fund so that the total annual operating expenses exclusive of taxes, interest, brokerage commissions and extraordinary expenses are limited to 0.23% of average daily net assets. Management may, at its sole discretion, modify or terminate these voluntary commitments with notice to a Fund. |
| 3 | “Current yield” of a money market fund refers to the income generated by an investment in a Fund over a recent 7-day period. This income is then “annualized.” The “effective yield” is calculated similarly but, when annualized, the income earned by an investment in the Fund is assumed to be reinvested. The “effective yield” will be slightly higher than the “current yield” because of the compounding effect of this assumed reinvestment. Yields of a money market fund will fluctuate and past performance is not a guarantee of future results. Tax-equivalent effective yield is the taxable effective yield that an investor would have had to receive in order to realize the same level of yield after federal income taxes at the highest federal tax rate, currently 35%, assuming that all of a Fund’s income is exempt from federal income taxes. |
| 4 | A portion of the income of Lehman Brothers National Municipal Money Fund may be a tax preference item for purposes of the federal alternative minimum tax for certain investors. |
8
Glossary of Indices
iMoneyNet Money Fund Report Government & Agencies Retail Average: | Measures the performance of retail money market mutual funds which invest in obligations of the U.S. Treasury (T-Bills), repurchase agreements, or U.S. Government Agency securities. |
iMoneyNet Money Fund Report Tax-Free National Institutional Average: | Measures all national tax-free and municipal institutional funds. Portfolio holdings of tax-free funds include Rated and Unrated Demand Notes, Rated and Unrated General Market Notes, Commercial Paper, Put Bonds—6 months or less, Put Bonds—over 6 months, AMT Paper, and Other Tax-Free holdings. |
SIFMA Municipal Swap Index: | The Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Index, produced by Municipal Market Data (MMD), is a 7-day high-grade market index comprised of tax-exempt VRDOs (Variable Rate Demand Obligations) from MMD’s extensive database. In order for an issue to qualify for inclusion in the index it must: be a weekly reset, effective on Wednesday (no lag resets considered); NOT be subject to Alternative Minimum Tax; have an outstanding amount of $10 million or more; have the highest short-term rating [VMIG1 by Moody’s or A-1+ by S&P]; and pay interest on a monthly basis, calculated on an actual/actual basis. In addition, only one quote per obligor per remarketing agent will be included in the index. Issues from all states are eligible for inclusion. The index is calculated on a weekly basis. The index was formerly known as The Bond Market Association (BMA)/PSA Municipal Swap Index. |
Please note that indices do not take into account any fees and expenses or any tax consequences of investing in the individual securities that it tracks and that individuals cannot invest directly in any index. Data about the performance of these indices are prepared or obtained by Neuberger Berman Management Inc. and include reinvestment of all dividends and capital gain distributions. The Fund may invest in securities not included in the above-described indices.
9
Information About Your Fund’s Expenses
These tables are designed to provide information regarding costs related to your investments. All mutual funds incur operating expenses, which include each fund’s proportionate share of expenses of its corresponding master series, administrative service fees and other expenses. The following examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period. The tables illustrate each fund’s costs in two ways:
Actual Expenses and Performance: | The first section of the tables provide information about actual account values and actual expenses in dollars, based on the fund’s actual performance during the period. You may use the information in this line, together with the amount you invested, to estimate the expenses you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section of the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid over the period. |
Hypothetical Example for Comparison Purposes: | The second section of the tables provide information about hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed rate of return at 5% per year before expenses. This return is not the fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in these funds versus other funds. To do so, compare the expenses shown in this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. |
10
Expense Information As of 3/31/08 (Unaudited)
NEUBERGER BERMAN GOVERNMENT MONEY FUND
| | | | | | | | |
| Actual | | Beginning Account
Value
10/01/07 | | Ending Account
Value
3/31/08 | | Expenses Paid During
the Period*
10/01/07 - 3/31/08 | | Expense
Ratio |
| Investor Class | | $1,000.00 | | $1,019.20 | | $2.07 | | .41% |
| | |
| Hypothetical (5% annual return before expenses)*** | | | | |
| Investor Class | | $1,000.00 | | $1,022.95 | | $2.07 | | .41% |
LEHMAN BROTHERS TAX-FREE MONEY FUND
| | | | | | | | |
| Actual | | Beginning Account
Value
11/1/07 | | Ending Account
Value
3/31/08 | | Expenses Paid
During the Period**
11/1/07 - 3/31/08 | | Expense
Ratio |
| Reserve Class | | $1,000.00 | | $1,012.10 | | $0.79 | | .19% |
| | |
| Hypothetical (5% annual return before expenses)*** | | | | |
| Reserve Class | | $1,000.00 | | $1,019.98 | | $0.80 | | .19% |
LEHMAN BROTHERS NATIONAL MUNICIPAL MONEY FUND
| | | | | | | | |
| Actual | | Beginning Account
Value
11/1/07 | | Ending Account
Value
3/31/08 | | Expenses Paid
During the Period**
11/1/07 - 3/31/08 | | Expense
Ratio |
| Reserve Class | | $1,000.00 | | $1,012.60 | | $0.71 | | .17% |
|
| Hypothetical (5% annual return before expenses)*** |
| Reserve Class | | $1,000.00 | | $1,020.06 | | $0.71 | | .17% |
| * | Expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown). The fund’s expense ratio includes its proportionate share of the expenses of its corresponding master series. |
| ** | Expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 152/366 (to reflect the period shown of November 1, 2007 to March 31, 2008). Each fund’s expense ratio includes its proportionate share of the expenses of its corresponding master series. |
| *** | Hypothetical 5% annual return before expenses is calculated by multiplying the number of days in the most recent period divided by 366. |
11
Statements of Assets and Liabilities
Lehman Brothers Income Funds
(000’s omitted except per share amounts)
| | | | | | | | |
| | | GOVERNMENT
MONEY FUND | | TAX-FREE
MONEY FUND | | | NATIONAL MUNICIPAL
MONEY FUND | |
| | | March 31, 2008 | | March 31, 2008 | | | March 31, 2008 | |
| Assets | | | | | | | | |
| Investment in corresponding Master Series, at value (Note A) | | $463,683 | | $2,035,554 | | | $360,633 | |
| Interest receivable | | — | | 52 | | | 31 | |
| Receivable for Fund shares sold | | 15 | | 8 | | | — | |
| Receivable from administrator-net (Note B) | | — | | — | | | 5 | |
| Prepaid expenses and other assets | | 4 | | 12 | | | — | |
| | | | | | | | | |
| Total Assets | | 463,702 | | 2,035,626 | | | 360,669 | |
| | | | | | | | | |
| | | |
| Liabilities | | | | | | | | |
| Distributions payable | | 1,072 | | 1,286 | | | — | |
| Payable for Fund shares redeemed | | 156 | | — | | | — | |
| Payable to administrator (Note B) | | 131 | | 165 | | | — | |
| Accrued expenses and other payables | | 76 | | — | | | 73 | |
| | | | | | | | | |
| Total Liabilities | | 1,435 | | 1,451 | | | 73 | |
| | | | | | | | | |
| Net Assets at value | | $462,267 | | $2,034,175 | | | $360,596 | |
| | | | | | | | | |
| | | |
| Net Assets consist of: | | | | | | | | |
| Paid-in capital | | $462,196 | | $2,033,462 | | | $360,528 | |
| Distributions in excess of net investment income | | — | | (1 | ) | | (1 | ) |
| Accumulated net realized gains (losses) on investments | | 71 | | 714 | | | 69 | |
| | | | | | | | | |
| Net Assets at value | | $462,267 | | $2,034,175 | | | $360,596 | |
| | | | | | | | | |
| | | |
| Net Assets | | | | | | | | |
| Investor Class | | $462,267 | | $— | | | $— | |
| Reserve Class | | — | | 2,034,175 | | | 360,596 | |
| | | |
| Shares Outstanding ($.001 par value; unlimited shares authorized) | | | | | | | | |
| Investor Class | | 462,196 | | — | | | — | |
| Reserve Class | | — | | 2,033,462 | | | 360,528 | |
| | | |
| Net Asset Value, offering and redemption price per share | | | | | | | | |
| Investor Class | | $1.00 | | $— | | | $— | |
| Reserve Class | | — | | 1.00 | | | 1.00 | |
See Notes to Financial Statements
12
Statements of Operations
Lehman Brothers Income Funds
(000’s omitted)
| | | |
| | | GOVERNMENT MONEY
FUND | |
| | |
For the Year Ended
March 31, 2008 | |
| Investment Income | | | |
| Income (Note A): | | | |
| Investment income from corresponding Master Series | | $17,908 | |
| Expenses from corresponding Master Series (Note B) | | (391 | ) |
| | | | |
| Net investment income from corresponding Master Series | | 17,517 | |
| Interest income—unaffiliated issuers | | — | |
| | | | |
| Total income | | $17,517 | |
| | | | |
| |
| Expenses: | | | |
| Investment management fees (Note B) | | — | |
| Administration fees (Note B) | | 1,072 | |
| Shareholder servicing agent fees: | | | |
Investor Class | | 40 | |
Reserve Class | | — | |
| Audit fees | | 18 | |
| Custodian fees (Note B) | | 3 | |
| Insurance expense | | — | |
| Legal fees | | 67 | |
| Registration and filing fees | | 39 | |
| Shareholder reports | | 28 | |
| Trustees’ fees and expenses | | 6 | |
| Miscellaneous | | 1 | |
| | | | |
| Total expenses | | 1,274 | |
| Investment management fees waived (Notes A & B) | | — | |
| Expenses reduced by custodian fee expense offset arrangement (Note B) | | — | |
| | | | |
| Total net expenses | | 1,274 | |
| | | | |
| Net investment income (loss) | | $16,243 | |
| | | | |
| |
| Realized and Unrealized Gain (Loss) on Investments (Note A) | | | |
| Net realized gain (loss) on: | | | |
| Sales of investment securities of unaffiliated issuers | | — | |
| Investments from corresponding Master Series | | 105 | |
| | | | |
| Net gain (loss) on investments | | 105 | |
| | | | |
| Net increase (decrease) in net assets resulting from operations | | $16,348 | |
| | | | |
See Notes to Financial Statements
13
| | | | | | | | | | |
| |
| TAX-FREE MONEY FUND | | | NATIONAL MUNICIPAL MONEY FUND | |
Period from
November 1, 2007
to March 31, 2008 | | | For the Year Ended
October 31, 2007 | | | Period from
November 1, 2007
to March 31, 2008 | | | For the Year Ended
October 31, 2007 | |
| | | | | | | | | | |
| | | | | | | | | | |
| $30,861 | | | $10,215 | | | $7,344 | | | $2,873 | |
| (926 | ) | | (186 | ) | | (260 | ) | | (81 | ) |
| | | | | | | | | | | |
| 29,935 | | | 10,029 | | | 7,084 | | | 2,792 | |
| — | | | 42,477 | | | — | | | 11,440 | |
| | |
| $29,935 | | | $52,506 | | | $7,084 | | | $14,232 | |
| | |
| | | |
| | | | | | | | | | |
| — | | | 2,633 | | | — | | | 759 | |
| 814 | | | 1,146 | | | 184 | | | 304 | |
| | | | | | | | | | |
| — | | | — | | | — | | | — | |
| 18 | | | 28 | | | 7 | | | 26 | |
| 6 | | | 15 | | | 18 | | | 11 | |
| — | | | 181 | | | — | | | 83 | |
| 7 | | | 30 | | | 3 | | | 8 | |
| 19 | | | 36 | | | 26 | | | 39 | |
| 85 | | | 160 | | | 38 | | | 138 | |
| 23 | | | 56 | | | 6 | | | 12 | |
| 3 | | | 24 | | | 3 | | | 23 | |
| — | | | 52 | | | 4 | | | 16 | |
| | |
| 975 | | | 4,361 | | | 289 | | | 1,419 | |
| — | | | (1,869 | ) | | (158 | ) | | (874 | ) |
| — | | | (222 | ) | | — | | | (40 | ) |
| | |
| 975 | | | 2,270 | | | 131 | | | 505 | |
| | |
| $28,960 | | | $50,236 | | | $6,953 | | | $13,727 | |
| | |
| | | |
| | | | | | | | | | |
| | | | | | | | | | |
| — | | | 23 | | | — | | | (20 | ) |
| 714 | | | 6 | | | 84 | | | 5 | |
| | |
| 714 | | | 29 | | | 84 | | | (15 | ) |
| | |
| $29,674 | | | $50,265 | | | $7,037 | | | $13,712 | |
| | |
14
Statements of Changes in Net Assets
Lehman Brothers Income Funds
(000’s omitted)
| | | | | | | | | |
| | | GOVERNMENT MONEY FUND | |
| | | Year Ended
March 31, 2008 | | |
Period from
November 1, 2006
to March 31, 2007 | | | Year Ended
October 31, 2006 | |
| Increase (Decrease) in Net Assets: | | | | | | | | | |
| From Operations: | | | | | | | | | |
| Net investment income (loss) | | $16,243 | | | $5,865 | | | $15,524 | |
| Net realized gain (loss) on investments | | 105 | | | (7 | ) | | (10 | ) |
| Net increase (decrease) in net assets resulting from operations | | 16,348 | | | 5,858 | | | 15,514 | |
| | | |
| Distributions to Shareholders From (Note A): | | | | | | | | | |
| | | |
| Net investment income: | | | | | | | | | |
| Investor Class | | (16,243 | ) | | (5,865 | ) | | (15,524 | ) |
| Reserve Class | | — | | | — | | | — | |
| | | |
| Net realized gain on investments | | | | | | | | | |
| Investor Class | | — | | | — | | | — | |
| Reserve Class | | — | | | — | | | — | |
| Total distributions to shareholders | | (16,243 | ) | | (5,865 | ) | | (15,524 | ) |
| | | |
| From Fund Share Transactions (Note D): | | | | | | | | | |
| | | |
| Proceeds from shares sold: | | | | | | | | | |
| Investor Class | | 1,207,629 | | | 334,335 | | | 740,009 | |
| Reserve Class | | — | | | — | | | — | |
| | | |
| Proceeds from reinvestment of dividends and distributions: | | | | | | | | | |
| Investor Class | | 2,668 | | | 1,131 | | | 2,441 | |
| Reserve Class | | — | | | — | | | — | |
| | | |
| Payment for shares redeemed: | | | | | | | | | |
| Investor Class | | (1,012,990 | ) | | (366,508 | ) | | (855,804 | ) |
| Reserve Class | | — | | | — | | | — | |
| Net increase (decrease) from Fund share transactions | | 197,307 | | | (31,042 | ) | | (113,354 | ) |
| Net Increase (Decrease) in Net Assets | | 197,412 | | | (31,049 | ) | | (113,364 | ) |
| | | |
| Net Assets: | | | | | | | | | |
| Beginning of period | | 264,855 | | | 295,904 | | | 409,268 | |
| End of period | | $462,267 | | | $264,855 | | | $295,904 | |
| Distributions in excess of net investment income at end of period | | $— | | | $— | | | $— | |
See Notes to Financial Statements
15
| | | | | | | | | | |
TAX-FREE MONEY FUND | | NATIONAL MUNICIPAL MONEY FUND |
Period from
November 1, 2007
to March 31, 2008 | | Year Ended
October 31, 2007 | | Period from
December 19, 2005
(Commencement of
Operations) to
October 31, 2006 | | Period from
November 1, 2007
to March 31, 2008 | | Year Ended
October 31, 2007 | | Period from
December 19, 2005
(Commencement of
Operations) to
October 31, 2006 |
| | | | | | | | | | |
| | | | | | | | | | |
| $28,960 | | $50,236 | | $17,837 | | $6,953 | | $13,727 | | $4,618 |
| 714 | | 29 | | 52 | | 84 | | (15) | | 16 |
| 29,674 | | 50,265 | | 17,889 | | 7,037 | | 13,712 | | 4,634 |
| | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | |
| — | | — | | — | | — | | — | | — |
| (28,954) | | (50,243) | | (17,837) | | (6,954) | | (13,727) | | (4,618) |
| | | | | |
| | | | | | | | | | |
| — | | — | | — | | — | | — | | — |
| (29) | | (52) | | — | | — | | (16) | | — |
| (28,983) | | (50,295) | | (17,837) | | (6,954) | | (13,743) | | (4,618) |
| | | | | |
| | | | | | | | | | |
| | | | | |
| | | | | | | | | | |
| — | | — | | — | | — | | — | | — |
| 8,910,551 | | 14,020,213 | | 7,375,109 | | 3,122,392 | | 5,085,798 | | 1,805,891 |
| | | | | |
| | | | | | | | | | |
| — | | — | | — | | — | | — | | — |
| 20,475 | | 39,270 | | 14,793 | | 6,015 | | 13,225 | | 3,040 |
| | | | | |
| | | | | | | | | | |
| — | | — | | — | | — | | — | | — |
| (8,650,838) | | (13,471,278) | | (6,224,833) | | (3,247,025) | | (4,790,405) | | (1,638,403) |
| 280,188 | | 588,205 | | 1,165,069 | | (118,618) | | 308,618 | | 170,528 |
| 280,879 | | 588,175 | | 1,165,121 | | (118,535) | | 308,587 | | 170,544 |
| | | | | |
| | | | | | | | | | |
| 1,753,296 | | 1,165,121 | | — | | 479,131 | | 170,544 | | — |
| $2,034,175 | | $1,753,296 | | $1,165,121 | | $360,596 | | $479,131 | | $170,544 |
$(1) | | $(7) | | $— | | $(1) | | $— | | $— |
16
Notes to Financial Statements Income Funds
Note A—Summary of Significant Accounting Policies:
| 1 | General: Neuberger Berman Government Money Fund (“Government Money”), Lehman Brothers Tax-Free Money Fund (“Tax-Free Money”) and Lehman Brothers National Municipal Money Fund (“National Municipal Money”) (individually a “Fund”, collectively, the “Funds”) are separate operating series of Lehman Brothers Income Funds (the “Trust”), a Delaware statutory trust organized pursuant to a Trust Instrument dated December 23, 1992. The Trust is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and its shares are registered under the Securities Act of 1933, as amended (the “1933 Act”). The Government Money Fund offers Investor Class shares and Tax-Free Money and National Municipal Money offer Reserve Class shares. The Board of Trustees of the Trust (the “Board”) may establish additional series or classes of shares without the approval of shareholders. |
| | On February 28, 2007, Government Money and on September 10, 2007, Tax-Free Money and National Municipal Money converted from a single-fund structure to a “master-feeder” structure. Under the master-feeder structure, rather than investing directly in securities, each Fund is a “feeder fund,” meaning that it invests in a corresponding “master series.” The master series in turn invests in securities, using the strategies as described in the Funds’ prospectus. |
| | Each Fund seeks to achieve its investment objective by investing all of its net investable assets in a Master Series of Institutional Liquidity Trust (each a “Master Series,” collectively, the “Master Series”) that has an investment objective identical to, and a name similar to, that of each respective Fund. Government Money invests in Government Master Series (commencement of operations December 18, 2006). Tax-Free Money invests in Tax-Exempt Master Series (commencement of operations September 10, 2007). National Municipal Money invests in Municipal Master Series (commencement of operations September 10, 2007). The value of each Fund’s investment in its corresponding Master Series reflects the Fund’s proportionate interest in the net assets of its corresponding Master Series (20.25% for Government Money, 82.38% for Tax-Free Money and 91.38% for National Municipal Money, at March 31, 2008). The performance of each Fund is directly affected by the performance of its corresponding Master Series. The financial statements of the Master Series, including the Schedules of Investments, are included elsewhere in this report and should be read in conjunction with the Funds’ financial statements. |
| | The assets of each Fund belong only to that Fund, and the liabilities of each Fund are borne solely by that Fund and no other series of the Trust. |
| | It is the policy of the Funds to maintain a continuous net asset value per share of $1.00; each of the Funds has adopted certain investment, valuation, and dividend and distribution policies, which conform to general industry practice, to enable it to do so. However, there is no assurance the Funds will be able to maintain a stable net asset value per share. Each of these Funds complies with Rule 2a-7 of the 1940 Act. |
| | The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires Neuberger Berman Management Inc. (“Management”) to make estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. |
| 2 | Fund valuation: Each Fund records its investment in its corresponding Master Series at value. Investment securities held by the corresponding Master Series are valued as indicated in the notes following the Master Series’ Schedule of Investments. Prior to September 10, 2007, investments in securities were valued at amortized cost, which approximated U.S. federal income tax cost for Tax-Free Money and National Municipal Money. |
| 3 | Securities transactions and investment income: Prior to September 10, 2007, Tax-Free Money and National Municipal Money recorded securities transactions on trade date for financial reporting purposes. Interest income, including accretion of discount (adjusted for original issue discount, where applicable) and amortization of |
17
| | premium, where applicable, was recorded on the accrual basis. Realized gains and losses from securities transactions were recorded on the basis of identified cost and stated separately in the Statements of Operations. |
| 4 | Income tax information: Each Fund is treated as a separate entity for U.S. federal income tax purposes. It is the policy of each Fund to continue to qualify as a regulated investment company by complying with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its earnings to its shareholders. Therefore, no federal income or excise tax provision is required. |
| | In accordance with Securities and Exchange Commission guidance, Government Money implemented the provisions of Financial Accounting Standards Board Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, on September 30, 2007. Tax-Free Money and National Municipal Money implemented FIN 48 on March 31, 2008. The Funds have reviewed the tax positions for the open tax years as of March 31, 2008 and have determined that the implementation of FIN 48 did not have a material impact on the Funds’ financial statements. |
| | Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by each Master Series, timing differences and differing characterization of distributions made by each Fund as a whole. |
| | As determined on March 31, 2008, there were no permanent differences resulting from different book and tax accounting. |
| | The tax character of distributions paid during the year ended March 31, 2008, the period ended March 31, 2007, and the year ended October 31, 2006 were as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Distributions Paid From: | |
| | | Taxable Income | | | Tax-Exempt Income | | | Total | |
| | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | | | 2008 | | | 2007 | | | 2006 | |
| Government Money | | $16,242,800 | | | $5,864,940 | (2) | | $15,523,659 | | | $— | | | $— | (2) | | $— | | | $16,242,800 | | | $5,864,940 | (2) | | $15,523,659 | |
| Tax-Free Money | | 29,080 | (1) | | 51,582 | (3) | | — | (4) | | 28,953,860 | (1) | | 50,242,930 | (3) | | 17,837,465 | (4) | | 28,982,940 | (1) | | 50,294,512 | (3) | | 17,837,465 | (4) |
| National Municipal Money | | — | (1) | | 16,762 | (3) | | — | (4) | | 6,953,523 | (1) | | 13,726,404 | (3) | | 4,617,630 | (4) | | 6,953,523 | (1) | | 13,743,166 | (3) | | 4,617,630 | (4) |
| (1) | Period from November 1, 2007 to March 31, 2008. |
| (2) | Period from November 1, 2006 to March 31, 2007. |
| (3) | The year ended October 31, 2007 for Tax-Free Money and National Municipal Money. |
| (4) | Period from December 19, 2005 (Commencement of Operations) to October 31, 2006. |
| | As of March 31, 2008, the components of distributable earnings (accumulated losses) on a U.S. federal income tax basis were as follows: |
| | | | | | | | | | |
| | | Undistributed
Ordinary
Income | | Undistributed
Tax-Exempt
Income | | Undistributed
Long-Term
Gain | | Loss
Carryforwards
and Deferrals | | Total |
| Government Money | | $1,142,106 | | $— | | $— | | $— | | $1,142,106 |
| Tax-Free Money | | 668,101 | | 1,305,395 | | 45,495 | | — | | 2,018,991 |
| National Municipal Money | | 69,356 | | 18,760 | | — | | — | | 88,116 |
| | The difference between book basis and tax basis distributable earnings is attributable primarily to timing differences of distribution payments and organization expenses. |
18
| | To the extent each Fund’s net realized capital gains, if any, can be offset by capital loss carryforwards, it is the policy of each Fund not to distribute such gains. As determined on March 31, 2008, the Funds did not have unused capital loss carryforwards available for federal income tax purposes to offset net realized capital gains. During the year ended March 31, 2008, Government Money and National Municipal Money utilized capital loss carryforwards of $33,787 and $14,295, respectively. |
| 5 | Distributions to shareholders: Each Fund earns income, net of expenses, daily on its investment in the Master Series. It is the policy of each Fund to declare distributions from net investment income on each business day; such distributions are paid or reinvested monthly. Distributions from net realized capital gains, if any, will be made annually. Income distributions and capital gain distributions to shareholders are recorded on the ex-date. |
| 6 | Expense allocation: Certain expenses are applicable to multiple funds. Expenses directly attributable to a Fund are charged to that Fund. Expenses of the Trust that are not directly attributed to a Fund are allocated among the series of the Trust, on the basis of relative net assets, except where a more appropriate allocation of expenses to each of the series can otherwise be made fairly. Expenses borne by the complex of related investment companies, which includes open-end and closed-end investment companies for which Management serves as investment manager, that are not directly attributed to a Fund or the Trust, are allocated among the Funds and the other investment companies in the complex or series thereof, on the basis of relative net assets, except where a more appropriate allocation of expenses to each investment company in the complex or series thereof can otherwise be made fairly. |
| | Each Fund bears its proportionate share of its corresponding Master Series’ expenses. |
| 7 | Other: All net investment income and realized and unrealized capital gains and losses of a Master Series are allocated pro rata among its respective Fund and any other investors in the Master Series (including any other investment companies), if any. |
| 8 | Indemnifications: Like many other companies, the Trust’s organizational documents provide that its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, both in some of its principal service contracts and in the normal course of its business, the Trust enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Trust’s maximum exposure under these arrangements is unknown as this could involve future claims against the Trust. |
Note B—Management Fees, Administration Fees, Distribution Arrangements, and Other Transactions with Affiliates:
| | Each Fund retains Management as its administrator under an Administration Agreement. The Investor Class of Government Money pays Management an administration fee at the annual rate of 0.27% of its average daily net assets under this agreement. The Reserve Class of Tax-Free Money and National Municipal Money pays Management an administration fee at the annual rate of 0.08% of its average daily net assets under this agreement. Additionally, Management retains State Street Bank and Trust Company (“State Street”) as its sub-administrator under a Sub-Administration Agreement. Management pays State Street a fee for all services received under the agreement. |
| | Government Money indirectly pays for investment management services through its investment in the Master Series at the annual rate of 0.08% of the average daily net assets (see Note B of Notes to Financial Statements of the Master Series). |
| | Prior to September 10, 2007, Tax-Free Money and National Municipal Money directly retained Management as its investment manager under a Management Agreement. For such investment management services, Tax-Free Money and National Municipal Money paid Management a fee at the annual rate of 0.25% of the first $500 million of its average daily net assets, 0.225% of the next $500 million, 0.20% of the next $500 million, 0.175% of the next |
19
| | $500 million, and 0.15% of average daily net assets in excess of $2 billion. Effective September 11, 2007, Tax-Free Money and National Municipal Money indirectly pay for investment management services through its investment in the corresponding Master Series at the same annual rate of its average daily net assets (see Note B of Notes to Financial Statements of the Institutional Liquidity Trust). As a result of a waiver at the Master Series level, Tax-Free Money and National Municipal Money indirectly received a management fee waiver limiting the management fee to 0.08% of its average daily net assets from November 1, 2007 to March 31, 2008. The waiver resulted in a reduction of expenses borne by Tax-Free Money and National Municipal Money from its corresponding Master Series of $1,172,820 for Tax-Free Money and $379,165 for National Municipal Money (See Note B of Notes to Financial Statements of the Master Series). |
| | Prior to September 10, 2007, Lehman Brothers Asset Management, LLC (“LBAM”), as sub-adviser to Tax-Free Money and National Municipal Money, received a monthly fee paid by Management. Tax-Free Money and National Municipal Money did not pay a fee directly to LBAM for such services. During that time, LBAM was retained by Management to provide day-to-day investment management services. As investment manager, Management was responsible for overseeing the investment activities of LBAM. |
| | Management has contractually undertaken to forgo current payment of fees and/or reimburse Government Money for its operating expenses plus its pro rata portion of its corresponding Master Series’ operating expenses (including the fees payable to Management but excluding interest, taxes, brokerage commissions and extraordinary expenses) (“Operating Expenses”) which exceed the expense limitation as detailed in the following table: |
| | | | | | | |
| | | Contractual
Expense
Limitation(1) | | | Expiration | | Contractual Reimbursement/
Waiver of Fees from Management
for the Year Ended
March 31, 2008 |
| Government Money Investor Class | | 0.45 | % | | 10/31/10 | | $— |
| (1) | Expense limitation per annum of the class’ average daily net assets. |
| | Government Money has agreed to repay Management for fees and expenses forgone and/or its excess Operating Expenses previously reimbursed by Management, pursuant to a contractual expense limitation, so long as its annual Operating Expenses during that period do not exceed its expense limitation and the repayments are made within three years after the year in which Management issued the reimbursement or waived fees. |
| | During the year ended March 31, 2008, there was no repayment to Management under this agreement. At March 31, 2008, there were no contingent liabilities to Management under the agreement. |
| | Management has voluntarily undertaken to reimburse and/or waive operating expenses (including fees payable to Management but excluding Operating Expenses which exceed the expense limitation as detailed in the following table: |
| | | | | | | |
| Class | | Voluntary
Expense
Limitation(1) | | | Administration Fees
Waived for the Period
Ended March 31, 2008 | | Voluntary
Reimbursement from
Management for the
Period Ended
March 31, 2008 |
| Tax-Free Money Reserve Class | | 0.20 | %(2) | | $— | | $— |
| National Municipal Money Reserve Class | | 0.17 | %(2) | | 157,823 | | — |
| (1) | Expense limitation per annum of the class’ average daily net assets. Management may, at its sole discretion, terminate this agreement with notice to each Fund. |
| (2) | Management expects that, in the future, it may voluntarily reimburse or waive certain expenses of each Fund so that the total annual Operating Expenses of each Fund are limited to 0.23% of average net assets. |
20
| | Management and LBAM, sub-adviser to the Master Series, are wholly-owned subsidiaries of Lehman Brothers Holdings Inc., a publicly-owned holding company. Several individuals who are officers and/or trustees of the Trust are also employees of LBAM and/or Management. |
| | Each Fund also has a distribution agreement with Management. Management receives no compensation under it and no commissions for sales or redemptions of shares of beneficial interest of the Funds. |
| | The Master Series has an expense offset arrangement in connection with its custodian contract. For the year ended March 31, 2008, the impact of this arrangement was a reduction of expenses of $4,870, $117,667 and $62,588 for Government Money, Tax-Free Money and National Municipal Money, respectively. |
Note C—Investment Transactions:
| | During the period ended March 31, 2008, contributions and withdrawals in the Fund’s investment in its corresponding Master Series were as follows: |
| | | | |
| (000’s omitted) | | Contributions | | Withdrawals |
| Government Money | | $1,138,848 | | $958,694 |
| Tax-Free Money | | 3,305,971 | | 3,055,284 |
| National Municipal Money | | 1,481,015 | | 1,606,703 |
Note D—Fund Share Transactions:
| | Share activity at $1.00 per share for the year ended March 31, 2008, the period ended March 31, 2007 and the year ended October 31, 2006 was as follows: |
| | | | | | | | | | | | | | | | | | | |
| | | For the Year Ended March 31, 2008 | | For the Period Ended March 31, 2007 | |
| (000’s omitted) | | Shares
Sold | | Shares Issued on
Reinvestment of Dividends and
Distributions | | Shares
Redeemed | | | Total | | Shares Sold | | Shares Issued on
Reinvestment
of Dividends
and
Distributions | | Shares
Redeemed | | | Total | |
| Government Money: | | | | | | | | | | | | | | | | | | | |
| Investor Class | | 1,207,629 | | 2,668 | | (1,012,990 | ) | | 197,307 | | 334,335 | | 1,131 | | (366,508 | ) | | (31,042 | ) |
| | | | | | | | | | |
| | | For the Year Ended October 31, 2006 | |
| (000’s omitted) | | Shares
Sold | | Shares Issued on
Reinvestment of Dividends and
Distributions | | Shares
Redeemed | | | Total | |
| Government Money: | | | | | | | | | | |
| Investor Class | | 740,009 | | 2,441 | | (855,804 | ) | | (113,354 | ) |
21
| | Share activity at $1.00 per share for the period ended March 31, 2008, the year ended October 31, 2007 and the period ended October 31, 2006 was as follows: |
| | | | | | | | | | | | | | | | | | | |
| | | For the Period Ended March 31, 2008 | | | For the Year Ended October 31, 2007 |
| (000’s omitted) | | Shares
Sold | | Shares Issued on
Reinvestment of Dividends and
Distributions | | Shares
Redeemed | | | Total | | | Shares
Sold | | Shares Issued on
Reinvestment of Dividends and
Distributions | | Shares
Redeemed | | | Total |
| Tax-Free Money: | | | | | | | | | | | | | | | | | | | |
| Reserve Class | | 8,910,551 | | 20,475 | | (8,650,838 | ) | | 280,188 | | | 14,020,213 | | 39,270 | | (13,471,278 | ) | | 588,205 |
| National Municipal Money: | | | | | | | | | | | | | | | | | | | |
| Reserve Class | | 3,122,392 | | 6,015 | | (3,247,025 | ) | | (118,618 | ) | | 5,085,798 | | 13,225 | | (4,790,405 | ) | | 308,618 |
| | | | | | | | | | |
| | | For the Period Ended October 31, 2006(1) |
| (000’s omitted) | | Shares
Sold | | | Shares Issued on
Reinvestment of Dividends and
Distributions | | Shares
Redeemed | | | Total |
| Tax-Free Money: | | | | | | | | | | |
| Reserve Class | | 7,375,109 | (2) | | 14,793 | | (6,224,833 | ) | | 1,165,069 |
| National Municipal Money: | | | | | | | | | | |
| Reserve Class | | 1,805,891 | (2) | | 3,040 | | (1,638,403 | ) | | 170,528 |
| (1) | Period from December 19, 2005 (Commencement of operations) to October 31, 2006. |
| (2) | Includes initial capitalization of $10 on December 19, 2005. |
Note E—Recent Accounting Pronouncement:
| | In September 2006, Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 157, “Fair Value Measurement” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management believes the adoption of SFAS 157 will not have a material impact on the Funds’ financial position or results of operations. |
Note F—Change in Year End:
| | The Board of Trustees adopted a change in the fiscal year end dates of Tax-Free Money and National Municipal Money to March 31. This change is effective beginning with the current fiscal period, which ran from November 1, 2007 to March 31, 2008. Prior to March 31, 2008, the fiscal year end of Tax-Free Money and National Municipal Money was October 31. |
22
Financial Highlights
Neuberger Berman Government Money Fund†
The following table includes selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. It should be read in conjunction with its corresponding Master Series’ Financial Statements and notes thereto.
Investor Class
| | | | | | | | | | | | | | | |
| | | Year Ended
March 31, | | Period from
November 1, 2006^^
to March 31, | | | Year Ended October 31, | |
| | | 2008 | | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
| Net Asset Value, Beginning of Period | | $1.0000 | | | $1.0000 | | | $1.0000 | | | $1.0000 | | | $1.0000 | | | $1.0000 | |
| Income From Investment Operations: | | | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss) | | .0430 | | | .0200 | | | .0429 | | | .0230 | | | .0060 | | | .0078 | |
| Net Gains or Losses on Securities | | .0002 | | | (.0000 | ) | | (.0000 | ) | | (.0000 | ) | | .0000 | | | .0000 | |
| Total From Investment Operations | | .0432 | | | .0200 | | | .0429 | | | .0230 | | | .0060 | | | .0078 | |
| | | | | | |
| Less Distributions From: | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | (.0430 | ) | | (.0200 | ) | | (.0429 | ) | | (.0230 | ) | | (.0060 | ) | | (.0078 | ) |
| Net Capital Gains | | — | | | — | | | — | | | — | | | (.0000 | ) | | (.0000 | ) |
| Total Distributions | | (.0430 | ) | | (.0200 | ) | | (.0429 | ) | | (.0230 | ) | | (.0060 | ) | | (.0078 | ) |
| Net Asset Value, End of Period | | $1.0002 | | | $1.0000 | | | $1.0000 | | | $1.0000 | | | $1.0000 | | | $1.0000 | |
| Total Return†† | | +4.39 | % | | +2.01 | %**@ | | +4.38 | %@ | | +2.33 | %@ | | +.61 | %@ | | +.78 | %@ |
| | | | | | |
| Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | |
| Net Assets, End of Period (in millions) | | $462.3 | | | $264.9 | | | $295.9 | | | $409.3 | | | $454.7 | | | $1,078.3 | |
| Ratio of Gross Expenses to Average Net Assets# | | .42 | % | | .47 | %* | | .46 | % | | .48 | % | | .49 | % | | .45 | % |
| Ratio of Net Expenses to Average Net Assets | | .42 | % | | .47 | %*‡ | | .45 | %‡ | | .47 | %‡ | | .49 | %‡ | | .45 | %‡ |
| Ratio of Net Investment Income (Loss) to Average Net Assets | | 4.09 | % | | 4.78 | %* | | 4.26 | % | | 2.25 | % | | .57 | % | | .78 | % |
See Notes to Financial Highlights
23
Financial Highlights
Lehman Brothers Tax-Free Money Fund†
The following table includes selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. It should be read in conjunction with its corresponding Master Series’ Financial Statements and notes thereto.
Reserve Class
| | | | | | | | | |
| | | Period from
November 1, 2007^^
to March 31,
2008 | | | Year Ended
October 31,
2007 | | | Period from
December 19, 2005^
to October 31,
2006 | |
| Net Asset Value, Beginning of Period | | $1.0000 | | | $1.0000 | | | $1.0000 | |
| Income From Investment Operations: | | | | | | | | | |
| Net Investment Income (Loss) | | .0120 | | | .0350 | | | .0282 | |
| Net Gains or Losses on Securities | | .0004 | | | .0000 | | | .0000 | |
| Total From Investment Operations | | .0124 | | | .0350 | | | .0282 | |
| | | |
| Less Distributions From: | | | | | | | | | |
| Net Investment Income | | (.0120) | | | (.0350 | ) | | (.0282 | ) |
| Net Capital Gains | | (.0000) | | | (.0000 | ) | | — | |
| Total Distributions | | (.0120) | | | (.0350 | ) | | (.0282 | ) |
| Net Asset Value, End of Period | | $1.0004 | | | $1.0000 | | | $1.0000 | |
| Total Return††@ | | +1.21%** | | | +3.56 | % | | +2.86 | %** |
| | | |
| Ratios/Supplemental Data | | | | | | | | | |
| Net Assets, End of Period (in millions) | | $2,034.2 | | | $1,753.3 | | | $1,165.1 | |
| Ratio of Gross Expenses to Average Net Assets# | | .19%* | | | .19 | % | | .19 | %* |
| Ratio of Net Expenses to Average Net Assets‡ | | .19%* | | | .18 | % | | .17 | %* |
| Ratio of Net Investment Income (Loss) to Average Net Assets | | 2.84%* | | | 3.51 | % | | 3.30 | %* |
|
| | | | | | | | | |
See Notes to Financial Highlights
24
Financial Highlights
Lehman Brothers National Municipal Money Fund†
The following table includes selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. It should be read in conjunction with its corresponding Master Series’ Financial Statements and notes thereto.
Reserve Class
| | | | | | | | | |
| | | Period from
November 1, 2007^^
to March 31,
2008 | | | Year Ended
October 31,
2007 | | | Period from
December 19, 2005^
to October 31,
2006 | |
| Net Asset Value, Beginning of Period | | $1.0000 | | | $1.0001 | | | $1.0000 | |
| Income From Investment Operations: | | | | | | | | | |
| Net Investment Income (Loss) | | .0125 | | | .0361 | | | .0287 | |
| Net Gains or Losses on Securities | | .0002 | | | (.0000 | ) | | .0001 | |
| Total From Investment Operations | | .0127 | | | .0361 | | | .0288 | |
| | | |
| Less Distributions From: | | | | | | | | | |
| Net Investment Income | | (.0125) | | | (.0361 | ) | | (.0287 | ) |
| Net Capital Gains | | — | | | (.0001 | ) | | — | |
| Total Distributions | | (.0125) | | | (.0362 | ) | | (.0287 | ) |
| Net Asset Value, End of Period | | $1.0002 | | | $1.0000 | | | $1.0001 | |
| Total Return††@ | | +1.26%** | | | +3.68 | % | | +2.90 | %** |
| | | |
| Ratios/Supplemental Data | | | | | | | | | |
| Net Assets, End of Period (in millions) | | $360.6 | | | $479.1 | | | $170.5 | |
| Ratio of Gross Expenses to Average Net Assets# | | .17%* | | | .17 | % | | .17 | %* |
| Ratio of Net Expenses to Average Net Assets‡ | | .17%* | | | .16 | % | | .16 | %* |
| Ratio of Net Investment Income (Loss) to Average Net Assets | | 3.01%* | | | 3.61 | % | | 3.28 | %* |
| | | | | | | | | |
|
See Notes to Financial Highlights
25
Notes to Financial Highlights Income Funds
† | The per share amounts and ratios which are shown reflect income and expenses, including the Fund’s proportionate share of its corresponding Master Series’ income and expenses (except for the period from November 1, 2001 to February 28, 2007 when Government Money was organized in a single-fund structure and for the period from December 19, 2005 to September 10, 2007 when Tax-Free Money and National Municipal Money were organized in a single-fund structure). |
†† | Total return based on per share net asset value reflects the effects of changes in net asset value on the performance of each Fund during each fiscal period and assumes dividends and other distributions, if any, were reinvested. Results represent past performance and do not guarantee future results. Current returns may be lower or higher than the performance data quoted. Investment returns and principal may fluctuate and shares when redeemed may be worth more or less than original cost. |
‡ | After reimbursement and/or waiver of a portion of certain expenses by Management (see Note B of Notes to Financial Statements of Income Funds). Had Management not undertaken such actions, the annualized ratios of net expenses to average daily net assets would have been: |
| | | | | | | | | | | | | | | |
| | | Period from
November 1, 2006
to March 31, | | | Year Ended October 31, | |
| | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2003 | |
| Government Money Fund Investor Class | .48% | | | .47 | % | | .49 | % | | .58 | % | | .57 | % |
| | | | | | | | | |
| | | Period from
November 1, 2007
to March 31, | | | Year Ended October 31, | | | Period from
December 19, 2005
(Commencement
of Operations) to
October 31, | |
| | | 2008 | | | 2007 | | | 2006 | |
| Tax-Free Money Fund Reserve Class | .30% | | | .33 | % | | .36 | % |
| National Municipal Money Fund Reserve Class | .40% | | | .42 | % | | .53 | % |
| # | The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. |
^^ | The Fund’s year end changed from October 31 to March 31. |
| @ | Total return would have been lower if Management had not reimbursed and/or waived certain expenses (see Note B of Notes to Financial Statements of Income Funds). |
^ | The date investment operations commenced. |
26
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Lehman Brothers Income Funds and Shareholders of Neuberger Berman Government Money Fund and Lehman Brothers National Municipal Money Fund:
We have audited the accompanying statements of assets and liabilities of Neuberger Berman Government Money Fund (Government Money) and Lehman Brothers National Municipal Money Fund (Municipal Money) (two of the series constituting Lehman Brothers Income Funds) (collectively the “Funds”), as of March 31, 2008, and the related statements of operations for the year then ended for Government Money and the period from November 1, 2007 to March 31, 2008 and for the year ended October 31, 2007 for Municipal Money, and the statements of changes in net assets and the financial highlights for each of periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2008, by correspondence with the custodian and brokers. 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 Neuberger Berman Government Money Fund and Lehman Brothers National Municipal Money Fund, two of the series of Lehman Brothers Income Funds, at March 31, 2008, the results of their operations for the year then ended for Government Money and the period from November 1, 2007 to March 31, 2008 and for the year ended October 31, 2007 for Municipal Money, and the changes in their net assets and the financial highlights for each of periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
May 14, 2008
27
Report of Independent Registered Public Accounting Firm
To the Board of Trustees
Lehman Brothers Income Funds and
Shareholders of Lehman Brothers Tax-Free Money Fund
We have audited the accompanying statement of assets and liabilities of the Lehman Brothers Tax-Free Money Fund (formerly, Tax-Free Money Fund), a series of the Lehman Brothers Income Funds (the “Trust”), as of March 31, 2008, and the related statements of operations for the period from November 1, 2007 to March 31, 2008 and for the year ended October 31, 2007, and the statements of changes in net assets and the financial highlights for the period from November 1, 2007 to March 31, 2008, and for the year ended October 31, 2007, and for the period December 19, 2005 to October 31, 2006. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Lehman Brothers Tax-Free Money Fund, as of March 31, 2008, and the results of its operations, the changes in its net assets, and the financial highlights for the periods indicated above, in conformity with accounting principles generally accepted in the United States of America.
Philadelphia, Pennsylvania
May 15, 2008
28
Schedule of Investments Government Master Series
| | | | | | | | | |
| PRINCIPAL AMOUNT | | RATING§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| | | |
| U.S. Government Agency Securities (65.7%) | | | | | | | |
| $10,000 | | Fannie Mae, Notes, 3.38%, due 1/23/09 | | AGY | | AGY | | $10,000 | |
| 15,000 | | Fannie Mae, Bonds, 3.13%, due 3/16/09 | | AGY | | AGY | | 15,079 | |
| 81,115 | | Fannie Mae, Disc. Notes, 2.35% - 5.02%, due 4/9/08 - 1/30/09 | | AGY | | AGY | | 80,729 | |
| 100,000 | | Fannie Mae, Floating Rate Notes, 2.31% - 2.35%, due 4/1/08 | | AGY | | AGY | | 99,991 | µ |
| 44,849 | | Fannie Mae, Notes, 3.25% - 5.25%, due 6/15/08 - 4/29/09 | | AGY | | AGY | | 44,781 | |
| 27,500 | | Federal Farm Credit Bank, Bonds,
2.88% & 3.60%, due 1/14/09 & 2/12/09 | | AGY | | AGY | | 27,555 | |
| 135,400 | | Federal Farm Credit Bank, Floating Rate Bonds,
2.29% - 2.65%, due 4/1/08 - 4/29/08 | | AGY | | AGY | | 135,386 | µ |
| 172,730 | | Federal Home Loan Bank, Bonds,
2.19% - 5.80%, due 4/18/08 - 3/17/09 | | AGY | | AGY | | 173,345 | |
| 238,933 | | Federal Home Loan Bank, Disc. Notes,
2.34% - 4.96%, due 4/9/08 - 2/20/09 | | AGY | | AGY | | 237,866 | |
| 589,000 | | Federal Home Loan Bank, Floating Rate Bonds,
2.28% - 4.51%, due 4/1/08 - 6/24/08 | | AGY | | AGY | | 588,969 | µ |
| 34,917 | | Freddie Mac, Disc. Notes, 2.12% - 5.03%, due 4/4/08 - 2/2/09 | | AGY | | AGY | | 34,513 | |
| 20,000 | | Freddie Mac, Floating Rate Bonds, 2.45%, due 6/22/08 | | AGY | | AGY | | 19,997 | µ |
| 35,980 | | Freddie Mac, Notes, 2.85% - 4.70%, due 4/25/08 - 1/16/09 | | AGY | | AGY | | 35,977 | |
| | Total U.S. Government Agency Securities | | | | | | 1,504,188 | |
| | | |
| Repurchase Agreements (34.0%) | | | | | | | |
| 469,800 | | Bank of America Repurchase Agreement, 2.40%, due 4/1/08,
dated 3/31/08, Maturity Value $469,831,320, Collateralized by $630,574,412, Freddie Mac, 5.00%, due 7/1/35 (Collateral Value $479,196,001) | | | | | | 469,800 | |
| 200,000 | | Barclays Capital Repurchase Agreement, 2.45%, due 4/1/08,
dated 3/31/08, Maturity Value $200,013,611, Collateralized by $179,173,724, Fannie Mae, 5.50% - 6.50%, due 6/1/22 - 3/31/38 and $40,782,825, Freddie Mac, 5.72% & 6.50%, due 6/1/37& 2/1/38 (Collateral Value $204,000,000) | | | | | | 200,000 | |
| 110,000 | | Goldman Sachs Repurchase Agreement, 2.75%, due 4/1/08,
dated 3/31/08, Maturity Value $110,008,403, Collateralized by $202,663,274, Fannie Mae, 5.50% - 6.50%, due 11/1/22 - 7/1/37 (Collateral Value $112,200,001) | | | | | | 110,000 | |
| | Total Repurchase Agreements | | | | | | 779,800 | |
| | | | |
| | Total Investments (99.7%) | | | | | | 2,283,988 | |
| | Cash, receivables and other assets, less liabilities (0.3%) | | | | | | 5,929 | |
| | Total Net Assets (100.0%) | | | | | | $2,289,917 | |
See Notes to Schedule of Investments
29
Schedule of Investments Tax-Exempt Master Series
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| | | |
| Alabama (0.8%) | | | | | | | |
| $4,255 | | Alabama St. Pub. Sch. & College Au., Ser. 2008-11310, (LOC: Citibank, N.A.), 2.26%, due 4/3/08 | | | | A-1+ | | $4,255 | µ |
| 4,580 | | Birmingham Med. Ctr. East Spec. Care Fac. Fin. Au. Rev. (Floaters), Ser. 2004-016, (MBIA Insured), 2.23%, due 4/3/08 | | | | | | 4,580 | µy |
| 1,090 | | Deutsche Bank Spears/Lifers Trust Var. St. Rev. (Huntsville),
Ser. 2008-564, (MBIA Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 1,090 | µk |
| 1,600 | | Gulf Shores Med. Clinic Board Rev. (Colonial Pinnacle MOB Proj.), Ser. 2007, (LOC: Regions Bank), 2.31%, due 4/3/08 | | P-1 | | | | 1,600 | µß |
| 7,500 | | Huntsville-Randolph Sch. Ed. Bldg. Au. Lease Rev. (Randolph Sch. Proj.), Ser. 2008, (LOC: Compass Bank), 2.32%, due 4/3/08 | | VMIG1 | | | | 7,500 | µ |
| 1,145 | | Lee Co. Ind. Dev. Au. Rev. (Lifesouth Comm. Blood Ctr.), Ser. 2001, (LOC: SunTrust Bank), 2.14%, due 4/2/08 | | VMIG1 | | | | 1,145 | µß |
| | | | | | | | 20,170 | |
| | | |
| Alaska (0.4%) | | | | | | | |
| 1,750 | | Alaska Ind. Dev. & Export Au. Rev., Ser. 2007-10311, (FSA Insured), 2.34%, due 4/3/08 | | | | A-1+ | | 1,750 | µi |
| 8,040 | | Deutsche Bank Spears/Lifers Trust Var. St. (Alaska Hsg. Fin. Co.), Ser. 2008-532, (MBIA Insured), 2.27%, due 4/3/08 | | | | | | 8,040 | µk |
| | | | | | | | 9,790 | |
| | | |
| Arizona (1.3%) | | | | | | | |
| 5,800 | | ABN Amro Munitops Cert. Trust Rev., Ser. 2005-49, (MBIA Insured), 3.01%, due 4/3/08 | | VMIG1 | | | | 5,800 | µcØØ |
| 10,300 | | Phoenix Ind. Dev. Au. Multi-Family Hsg. Rev. (Rancho Ladera Proj.), Ser. 2005, (LOC: Natixis, NY), 2.28%, due 4/3/08 | | | | A-1+ | | 10,300 | µß |
| 6,705 | | Phoenix Ind. Dev. Au. Std. Hsg. Rev. (Floaters), Ser. 2007-2079, (AMBAC Insured), 2.31%, due 4/3/08 | | VMIG1 | | A-1+ | | 6,705 | µx |
| 10,000 | | Scottsdale Ind. Dev. Au. Hosp. Rev., Ser. 2006-578CE, (LOC: Citigroup Global Markets), 2.27%, due 4/3/08 | | VMIG1 | | A-1+ | | 10,000 | µØØ |
| | | | | | | | 32,805 | |
| | | |
| Arkansas (0.3%) | | | | | | | |
| 6,285 | | North Little Rock Residential Hsg. Fac. Board Multi-Family Rev. (Floaters), Ser. 2004-PA1254, (LOC: Government National Mortgage Association), 2.33%, due 4/3/08 | | VMIG1 | | | | 6,285 | µr |
| | | |
| California (6.3%) | | | | | | | |
| 9,940 | | ABN Amro Munitops Cert. Trust Rev., Ser. 2002-13, (PSF Insured), 2.23%, due 4/3/08 | | VMIG1 | | | | 9,940 | ñµc |
| 9,950 | | ABN Amro Munitops Cert. Trust Rev., Ser. 2004-12, (MBIA Insured), 2.26%, due 4/3/08 | | VMIG1 | | | | 9,950 | ñµc |
| 4,375 | | ABN Amro Munitops Cert. Trust Rev., Ser. 2005-38, (MBIA Insured), 2.26%, due 4/3/08 | | VMIG1 | | | | 4,375 | ñµc |
| 350 | | Arcadia Unified Sch. Dist. (Putters), Ser. 2007-1716, (FSA Insured), 2.29%, due 4/3/08 | | VMIG1 | | | | 350 | µo |
See Notes to Schedule of Investments
30
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $2,200 | | Arvin Unified Sch. Dist. Cert. Participation (Sch. Fac. Bridge Funding Prog.), Ser. 2006, (FSA Insured), 2.15%, due 4/3/08 | | VMIG1 | | | | $2,200 | µl |
| 4,200 | | Austin Trust St. Cert., Ser. 2007-315, (LOC: State Street Bank & Trust Co.), 2.27%, due 4/3/08 | | VMIG1 | | | | 4,200 | µc |
| 11,185 | | BB&T Muni. Trust Var. St. (Floaters), Ser. 2007-2048, (LOC: Branch Banking & Trust Co.), 2.21%, due 4/3/08 | | VMIG1 | | | | 11,185 | µ |
| 2,240 | | Buckeye Unified Sch. Dist. (Floaters), Ser. 2008-2382, (FSA Insured), 2.18%, due 4/3/08 | | | | A-1+ | | 2,240 | µs |
| 25,685 | | California St. Dept. Wtr. Res. Pwr. Supply Rev. (Putters),
Ser. 2007-1784B, (LOC: JP Morgan Chase), 2.46%, due 4/3/08 | | VMIG1 | | | | 25,685 | µ |
| 8,740 | | California St. G.O. (Floaters), Ser. 2000-1257, (LOC: Merrill Lynch Capital Markets), 2.20%, due 4/3/08 | | | | A-1 | | 8,740 | µ |
| 4,425 | | California St. G.O. (Floaters), Ser. 2005-2831, (AMBAC Insured), 2.26%, due 4/3/08 | | | | A-1+ | | 4,425 | µl |
| 1,965 | | California Statewide CDA Rev. (Floaters), Ser. 2007-2089, (LOC: Wells Fargo Bank & Trust Co.), 2.31%, due 4/3/08 | | VMIG1 | | | | 1,965 | µ |
| 3,635 | | Deutsche Bank Spears/Lifers Trust Var. St. (Alamo), Ser.2008-539, (MBIA Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 3,635 | µk |
| 1,910 | | Deutsche Bank Spears/Lifers Trust Var. St. (Azusa), Ser. 2008-561, (FSA Insured), 3.19%, due 4/3/08 | | | | A-1+ | | 1,910 | µk |
| 6,025 | | Deutsche Bank Spears/Lifers Trust Var. St. (CA Zero), Ser. 2008-477, (FSA Insured), 2.29%, due 4/3/08 | | | | | | 6,025 | µk |
| 2,720 | | Deutsche Bank Spears/Lifers Trust Var. St. (Chino Basin Reg.), Ser. 2008-500, (AMBAC Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 2,720 | µk |
| 1,020 | | Deutsche Bank Spears/Lifers Trust Var. St. (Elk Grove), Ser. 2008-575, (AMBAC Insured), 2.24%, due 4/3/08 | | | | A-1+ | | 1,020 | µk |
| 1,300 | | Deutsche Bank Spears/Lifers Trust Var. St. (Kings Canyon),
Ser. 2008-537, (MBIA Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 1,300 | µk |
| 1,455 | | Eclipse Funding Trust (Solar Eclipse-Los Angeles Co. Sanitation Dist.), Ser. 2006-0055, (FGIC Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 1,455 | µu |
| 4,355 | | Hacienda La Puente Unified Sch. Dist. (Floaters), Ser. 2005-2877, (FGIC Insured), 2.20%, due 4/3/08 | | | | | | 4,355 | µl |
| 4,660 | | JP Morgan Chase & Co. (Putters), Ser. 2007-2382P, (LOC: JP Morgan Chase), 2.51%, due 4/3/08 | | | | | | 4,660 | µ |
| 3,080 | | Northern California Gas Au. Number 1 Gas Proj. Rev. (Floaters), Ser. 2007-55, (LOC: Goldman Sachs), 2.27%, due 4/3/08 | | | | A-1+ | | 3,080 | µ |
| 5,345 | | Puttable Floating Option Tax Exempt Receipts (Floaters),
Ser. 2007-4107, (FSA Insured), 2.20%, due 4/3/08 | | | | | | 5,345 | µr |
| 1,755 | | Puttable Floating Option Tax Exempt Receipts (Floaters), Ser. 2006-EC001, (LOC: Merrill Lynch Capital Markets), 2.41%, due 4/3/08 | | | | | | 1,755 | µ |
| 3,895 | | Puttable Floating Option Tax Exempt Receipts (Floaters)
(Sacramento Co. Sanitation Dist.), Ser. 2007-3934, (FGIC Insured),
2.20%, due 4/3/08 | | | | | | 3,895 | µl |
| 2,600 | | Rowland Unified Sch. Dist., Ser. 2008-9201, (FSA Insured),
2.27%, due 4/3/08 | | | | A-1+ | | 2,600 | µi |
| 4,450 | | Sacramento Co. Wtr. Fin. Au. Rev. (Floaters), Ser. 2003-1176, (AMBAC Insured), 2.28%, due 4/3/08 | | | | A-1 | | 4,450 | µr |
| 2,304 | | San Francisco City & Co. Multi-Family Hsg. Rev. (Floaters),
Ser. 2007-124G, (LOC: Goldman Sachs), 2.24%, due 4/3/08 | | | | | | 2,304 | µ |
See Notes to Schedule of Investments
31
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $1,200 | | San Francisco City & Co. Unified Sch. Dist. (Merlots), Ser. 2008-D24, (FSA Insured), 2.25%, due 4/2/08 | | | | A-1+ | | $1,200 | µv |
| 13,035 | | San Francisco City. & Co. Cert. Participation (Floaters),
Ser. 2007-1883, (FGIC Insured), 2.31%, due 4/3/08 | | VMIG1 | | A-1+ | | 13,035 | µx |
| 4,930 | | Southern California Pub. Pwr. Au. Pwr. Proj. Rev. (Floaters), Ser. 2003-1172, (AMBAC Insured), 2.28%, due 4/3/08 | | | | A-1 | | 4,930 | µr |
| 1,800 | | Union City Multi-Family Rev. (Floaters), Ser. 2007-122G, (LOC: Goldman Sachs), 2.24%, due 4/3/08 | | | | | | 1,800 | µ |
| | | | | | | | 156,729 | |
| | | |
| Colorado (2.1%) | | | | | | | |
| 8,960 | | Arkansas River Pwr. Au. Pwr. Rev. (Floaters), Ser. 2006-3575, (XLCA Insured), 2.24%, due 4/3/08 | | | | | | 8,960 | µl |
| 9,650 | | Arkansas River Pwr. Au. Pwr. Rev. (Floaters), Ser. 2006-3550, (XLCA Insured), 2.24%, due 4/3/08 | | | | | | 9,650 | µl |
| 1,500 | | Central Platte Valley Metro. Dist., Ser. 2006, (LOC: BNP Paribas), 3.50%, due 12/1/08 Putable 12/1/08 | | | | A-1+ | | 1,500 | µ |
| 6,625 | | Colorado Ed. & Cultural Fac. Au. Rev. (Colorado Christian Univ. Proj.), Ser. 2004, (LOC: Evangelical Christian Credit Union),
2.36%, due 4/3/08 | | | | A-1+ | | 6,625 | µßw |
| 3,625 | | Colorado Ed. & Cultural Fac. Au. Rev. (Emmanuel Sch. Religion Proj.), Ser. 2006, (LOC: AmSouth Bank), 2.26%, due 4/3/08 | | VMIG1 | | | | 3,625 | µß |
| 2,950 | | Colorado Hlth. Fac. Au. Rev. (Volunteers), Ser. 1998-A,
5.88%, due 7/1/28 Pre-Refunded 7/1/08 | | | | | | 3,046 | ß |
| 5,350 | | Commerce City Northern Infrastructure Gen. Imp. Dist. G.O., Ser. 2006, (LOC: U.S. Bank), 2.26%, due 4/3/08 | | | | A-1+ | | 5,350 | µ |
| 1,700 | | Deutsche Bank Spears/Lifers Trust Var. St. (Denver City),
Ser. 2008-535, (AMBAC Insured), 2.27%, due 4/3/08 | | | | | | 1,700 | µk |
| 4,865 | | Northern Colorado Wtr. Conservancy Dist. Cert. Participation, Ser. 2002-1395, (MBIA Insured), 5.07%, due 4/3/08 | | | | A-1 | | 4,865 | µr |
| 5,615 | | Solaris Metro. Dist. Number 1 Prop. Tax Rev., Ser. 2008, (LOC: KeyBank), 2.26%, due 4/2/08 | | | | A-1 | | 5,615 | µ |
| | | | | | | | 50,936 | |
| | | |
| Connecticut (0.2%) | | | | | | | |
| 5,805 | | Connecticut Dev. Au. Arpt. Hotel Rev. (Bradley Arpt. Hotel Proj.), Ser. 2006, (LOC: TD Banknorth N.A.), 2.24%, due 4/3/08 | | VMIG1 | | | | 5,805 | µß |
| | | |
| Delaware (1.8%) | | | | | | | |
| 32,915 | | BB&T Muni. Trust Var. St. (Floaters), Ser. 2008-1007, (LOC: Branch Banking & Trust Co.), 2.33%, due 4/3/08 | | VMIG1 | | | | 32,915 | µØØ |
| 12,585 | | New Castle Co. Std. Hsg. Rev. (University Courtyard Apts.), Ser. 2005, (LOC: Bank of New York), 2.31%, due 4/3/08 | | VMIG1 | | | | 12,585 | µß |
| | | | | | | | 45,500 | |
| | | |
| District of Columbia (1.3%) | | | | | | | |
| 5,825 | | Deutsche Bank Spears/Lifers Trust Var. St. (Washington),
Ser. 2008-524, (AMBAC Insured), 2.27%, due 4/3/08 | | | | | | 5,825 | µk |
| 2,075 | | District of Columbia G.O. (Merlots), Ser. 2001-A127, (MBIA Insured), 3.25%, due 4/2/08 | | | | A-1+ | | 2,075 | µv |
See Notes to Schedule of Investments
32
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $2,235 | | District of Columbia Rev. (Maret Sch., Inc.), Ser. 2003, (LOC: SunTrust Bank), 2.09%, due 4/2/08 | | VMIG1 | | | | $2,235 | µß |
| 1,435 | | District of Columbia Wtr. & Swr. Au. Pub. Utils. Rev. (Floaters), Ser. 2006-3494, (FSA Insured), 2.23%, due 4/3/08 | | | | | | 1,435 | µl |
| 20,095 | | Washington Convention Ctr. Au. Dedicated Tax Rev. (Floaters), Ser. 2001-539, (AMBAC Insured), 2.21%, due 4/3/08 | | VMIG1 | | | | 20,095 | µs |
| | | | | | | | 31,665 | |
| | | |
| Florida (8.3%) | | | | | | | |
| 2,400 | | Alachua Co. Hlth. Fac. Au. Continuing Care Rev. (Oak Hammock Univ. Proj.), Ser. 2002 A, (LOC: BNP Paribas), 1.30%, due 4/1/08 | | VMIG1 | | | | 2,400 | µß |
| 9,045 | | Alachua Co. Sch. Board Cert. Participation, Ser. 2004, (AMBAC Insured), 4.75%, due 4/3/08 | | VMIG1 | | A-1+ | | 9,045 | µd |
| 2,265 | | Deutsche Bank Spears/Lifers Trust Var. St. (Miami-Dade Co.), Ser. 2008-538, (AMBAC Insured), 2.27%, due 4/3/08 | | | | | | 2,265 | µk |
| 1,720 | | Deutsche Bank Spears/Lifers Trust Var. St. (Orange Co.),
Ser. 2008-553, (FGIC Insured), 2.27%, due 4/3/08 | | | | | | 1,720 | µk |
| 2,155 | | Deutsche Bank Spears/Lifers Trust Var. St. (Palm Coast),
Ser. 2008-579, (MBIA Insured), 2.27%, due 4/3/08 | | | | | | 2,155 | µk |
| 8,980 | | Deutsche Bank Spears/Lifers Trust Var. St. (St. John Co.),
Ser. 2008-486, (AMBAC Insured), 2.29%, due 4/3/08 | | | | | | 8,980 | µk |
| 2,810 | | Deutsche Bank Spears/Lifers Trust Var. St. (Sunrise Utils.),
Ser. 2008-518, (AMBAC Insured), 2.27%, due 4/3/08 | | | | | | 2,810 | µk |
| 3,755 | | Deutsche Bank Spears/Lifers Trust Var. St. (West Palm Beach), Ser. 2008-547, (MBIA Insured), 2.27%, due 4/3/08 | | | | | | 3,755 | µk |
| 7,700 | | Deutsche Bank Spears/Lifers Trust Var. St. (Manatee Co.),
Ser. 2007-243, (MBIA Insured), 2.24%, due 4/3/08 | | | | A-1+ | | 7,700 | µk |
| 10,260 | | Deutsche Bank Spears/Lifers Trust Var. St. (Miami-Dade Co.), Ser. 2008-530, (FGIC Insured), 2.27%, due 4/3/08 | | | | | | 10,260 | µk |
| 2,670 | | Eclipse Funding Trust (Solar Eclipse-Miami-Dade Co. Sch. Board), Ser. 2007-0041, (FGIC Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 2,670 | µu |
| 2,750 | | Eclipse Funding Trust (Solar Eclipse-Palm Bay Sales), Ser. 2006-0136, (FSA Insured), 2.20%, due 4/3/08 | | | | A-1+ | | 2,750 | µu |
| 8,960 | | Eclipse Funding Trust (Solar Eclipse-Winter Haven Utils. Sys.), Ser. 2006-0054, (MBIA Insured), 2.26%, due 4/3/08 | | | | A-1+ | | 8,960 | ñµuØØ |
| 14,365 | | Enhanced Return Puttable Floating Option Tax Exempt Receipts (Floaters), Ser. 2007-1025, (AMBAC Insured), 3.75%, due 4/3/08 | | | | | | 14,365 | µr |
| 7,000 | | Florida Higher Ed. Fac. Fin. Au. Rev. (Jacksonville Univ. Proj.), Ser. 2006, (Radian Insured), 2.10%, due 4/3/08 | | VMIG1 | | | | 7,000 | µßz |
| 2,690 | | Florida St. Board of Ed. Muni. Sec. Trust Receipts, Ser. 2003-SGA138, (MBIA Insured), 2.25%, due 4/2/08 | | | | A-1+ | | 2,690 | µt |
| 4,400 | | Lee Co. Hosp. Board of Directors Hosp. Rev. (Mem. Hlth. Sys.), Ser. 1997 B, (LOC: SunTrust Bank), 1.38%, due 4/1/08 | | VMIG1 | | A-1 | | 4,400 | µß |
| 8,000 | | Leesburg Hosp. Rev. (The Villages Reg. Hosp. Proj.), Ser. 2006, (LOC: Scotiabank), 2.25%, due 4/3/08 | | VMIG1 | | A-1+ | | 8,000 | µß |
| 6,800 | | Martin Co. PCR (Florida Pwr. & Lt. Co. Proj.), Ser. 2000,
1.45%, due 4/1/08 | | VMIG1 | | A-1 | | 6,800 | µß |
| 5,310 | | Miami-Dade Co. Wtr. & Swr. Rev. (Floaters), Ser. 2008-2319, (FSA Insured), 2.21%, due 4/3/08 | | | | A-1+ | | 5,310 | µs |
See Notes to Schedule of Investments
33
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $7,900 | | Miami-Dade Co. Sch. Board Cert. Participation, Ser. 2007-12042, (FSA Insured), 2.33%, due 4/3/08 | | VMIG1 | | A-1+ | | $7,900 | µi |
| 200 | | Miami-Dade Co. Sch. Board Cert. Participation (Putters),
Ser. 2006-1317, (AMBAC Insured), 4.00%, due 4/3/08 | | | | A-1+ | | 200 | µo |
| 9,030 | | Orlando Utils. Commission Wtr. & Elec. Rev. (Floaters),
Ser. 2006-3791, (LOC: Dexia Credit Locale de France),
2.23%, due 4/3/08 | | | | | | 9,030 | µ |
| 4,000 | | Polk Co. Ind. Dev. Au. IDR (Winter Haven Hosp. Proj.), Ser. 2005 A, (LOC: SunTrust Bank), 1.25%, due 4/1/08 | | | | A-1+ | | 4,000 | µß |
| 3,650 | | Polk Co. Ind. Dev. Au. IDR (Winter Haven Hosp. Proj.), Ser. 2005 B, (LOC: SunTrust Bank), 1.25%, due 4/1/08 | | | | A-1+ | | 3,650 | µß |
| 12,815 | | Puttable Floating Option Tax Exempt Receipts (Floaters),
Ser. 2007-1497, (LOC: Merrill Lynch Capital Markets),
2.36%, due 4/3/08 | | | | A-1 | | 12,815 | µ |
| 15,355 | | Puttable Floating Option Tax Exempt Receipts (Floaters) (South Miami Hlth. Fac. Au.), Ser. 2007-1498, (LOC: Merrill Lynch Capital Markets), 2.36%, due 4/3/08 | | | | A-1 | | 15,355 | µ |
| 7,635 | | Reset Option Cert. Trust II-R Var. St. (Tampa Bay Wtr.),
Ser. 2006-4084, (FGIC Insured), 4.04%, due 4/3/08 | | VMIG1 | | | | 7,635 | µi |
| 8,840 | | Sarasota Co. Continuing Care Retirement Comm. Rev. (Glenridge Palmer Proj.), Ser. 2006, (LOC: Bank of Scotland), 1.30%, due 4/1/08 | | VMIG1 | | | | 8,840 | µß |
| 21,000 | | Sarasota Co. Pub. Hosp. Dist. Rev. (Sarasota Mem. Hosp. Proj.), Ser. 2007 A, (MBIA Insured), 1.40%, due 4/1/08 | | VMIG1 | | | | 21,000 | µv |
| | | | | | | | 204,460 | |
| | | |
| Georgia (2.6%) | | | | | | | |
| 7,555 | | Athens Area Fac. Corp. Cert. Participation, Ser. 2007-R11107, (LOC: Citibank, N.A.), 2.25%, due 4/3/08 | | VMIG1 | | | | 7,555 | µ |
| 8,000 | | Burke Co. Dev. Au. PCR (Vogtle Proj.), Ser. 1995, 1.25%, due 4/1/08 | | P-1 | | A-1 | | 8,000 | µß |
| 3,135 | | De Kalb Co. Wtr. & Swr. Rev., Ser. 2006-567, (LOC: Citibank, N.A.), 2.24%, due 4/3/08 | | VMIG1 | | | | 3,135 | µ |
| 400 | | Gwinnett Co. Dev. Au. Rev. (Greater Atlanta Christian), Ser. 1998, (LOC: SunTrust Bank), 2.09%, due 4/2/08 | | | | | | 400 | µß |
| 2,500 | | Marietta Hsg. Au. Multi-Family Rev. (Franklin Walk Apts. Proj.), Ser. 1990, (LOC: Freddie Mac), 2.23%, due 4/3/08 | | VMIG1 | | | | 2,500 | µß |
| 27,005 | | Muni. Elec. Au. Rev. (Proj. One), Ser. 2000 E, (MBIA Insured),
2.50%, due 4/2/08 | | VMIG1 | | A-1+ | | 27,005 | µ |
| 4,700 | | Muni. Elec. Au. Spec. Oblig., Ser. 1994-SGA1, (MBIA Insured), 3.25%, due 4/2/08 | | | | A-1+ | | 4,700 | µt |
| 11,480 | | Richmond Co. Dev. Au. Rev., Ser. 2007-10025Z, (LOC: Citigroup Global Markets), 2.25%, due 4/3/08 | | | | A-1+ | | 11,480 | µ |
| | | | | | | | 64,775 | |
| | | |
| Illinois (8.9%) | | | | | | | |
| 8,045 | | Chicago Board Ed. G.O. (Floaters), Ser. 2006-3620, (AMBAC Insured), 2.24%, due 4/3/08 | | | | | | 8,045 | µl |
| 13,165 | | Chicago G.O., Ser. 2007-9192, (MBIA Insured), 2.29%, due 4/3/08 | | | | A-1+ | | 13,165 | µi |
| 15,520 | | Chicago O’Hare Int’l Arpt. Rev. (Floaters), Ser. 2006-1284, (FGIC Insured), 2.31%, due 4/3/08 | | | | A-1+ | | 15,520 | µs |
See Notes to Schedule of Investments
34
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $10,145 | | Chicago O’Hare Int’l Arpt. Rev. (Floaters), Ser. 2007-1933, (FGIC Insured), 2.31%, due 4/3/08 | | VMIG1 | | A-1+ | | $10,145 | µs |
| 6,640 | | Deutsche Bank Spears/Lifers Trust Var. St., Ser. 2007-346, (FGIC Insured), 2.34%, due 4/3/08 | | | | | | 6,640 | µk |
| 14,180 | | Deutsche Bank Spears/Lifers Trust Var. St. (Chicago Illinois Board), Ser. 2007-316, (FGIC Insured), 2.24%, due 4/3/08 | | | | | | 14,180 | µk |
| 1,625 | | Deutsche Bank Spears/Lifers Trust Var. St. (De Witt Ford Etc.), Ser. 2008-555, (FSA Insured), 2.27%, due 4/3/08 | | VMIG1 | | | | 1,625 | µk |
| 15,560 | | Deutsche Bank Spears/Lifers Trust Var. St. (Chicago O’Hare), Ser. 2008-502, (FSA Insured), 2.27%, due 4/3/08 | | | | | | 15,560 | µk |
| 2,285 | | Deutsche Bank Spears/Lifers Trust Var. St. (Chicago O’Hare), Ser. 2008-534, (AMBAC Insured), 2.27%, due 4/3/08 | | | | | | 2,285 | µk |
| 3,370 | | Deutsche Bank Spears/Lifers Trust Var. St. (Northern Illinois Muni.), Ser. 2008-517, (MBIA Insured), 2.27%, due 4/3/08 | | | | | | 3,370 | µk |
| 14,290 | | Illinois Dev. Fin. Au. (Putters), Ser. 2007-2359, (LOC: JP Morgan Chase), 2.29%, due 4/3/08 | | | | A-1+ | | 14,290 | µ |
| 8,000 | | Illinois Fin. Au. Rev. (Clare Oaks), Ser. 2006 D, (LOC: Sovereign Bank), 2.08%, due 4/3/08 | | | | | | 8,000 | µßb |
| 1,900 | | Illinois Fin. Au. Rev. (IIT Research Institute), Ser. 2004, (LOC: Fifth Third Bank), 2.25%, due 4/3/08 | | VMIG1 | | | | 1,900 | µß |
| 1,850 | | Illinois Fin. Au. Rev. (Lawrence Hall Youth Svcs.), Ser. 2006, (LOC: Fifth Third Bank), 2.25%, due 4/4/08 | | VMIG1 | | | | 1,850 | µß |
| 2,400 | | Illinois Hlth. Fac. Au. Rev. (Mem. Hlth. Sys.), Ser. 2003, (LOC: Bank One), 1.33%, due 4/1/08 | | VMIG1 | | | | 2,400 | µß |
| 7,065 | | Illinois Hlth. Fac. Au. Rev. (Univ. Chicago Hosp.), Ser. 1998, (MBIA Insured), 2.05%, due 4/1/08 | | VMIG1 | | A-1+ | | 7,065 | µßo |
| 7,840 | | Kane & Dekalb Co. Comm. Unit Sch. Dist. Number 302 (Putters), Ser. 2002-283Z, (FGIC Insured), 2.21%, due 4/3/08 | | VMIG1 | | | | 7,840 | µo |
| 5,000 | | Lake Co. Sch. Dist. Number 109 Deerfield Rev., Ser. 2006, (LOC: JP Morgan Chase), 2.20%, due 4/2/08 | | VMIG1 | | | | 5,000 | µ |
| 3,985 | | Metro. Pier & Expo. Au. Hospitality Fac. Rev. (Floaters),
Ser. 2006-3554, (LOC: Dexia Credit Locale de France),
2.23%, due 4/3/08 | | | | | | 3,985 | µ |
| 26,700 | | Puttable Floating Option Tax Exempt Receipts (Floaters),
Ser. 2007-4247, (FSA Insured), 2.24%, due 4/3/08 | | | | | | 26,700 | µr |
| 2,640 | | Quad Cities Reg. Econ. Dev. Au. Rev. (Two Rivers YMCA Proj.), Ser. 2002, (LOC: U.S. Bank), 1.33%, due 4/1/08 | | | | A-1+ | | 2,640 | µß |
| 5,890 | | Reg. Trans. Au. (Floaters), Ser. 2006-3735, (MBIA Insured),
2.24%, due 4/3/08 | | | | | | 5,890 | µl |
| 38,195 | | Reg. Trans. Au. G.O. (Merlots), Ser. 2002-A24, (MBIA Insured),
2.30%, due 4/2/08 | | VMIG1 | | | | 38,195 | µd |
| 3,365 | | Southwestern Dev. Au. Rev. (Floaters), Ser. 2008-2359, (FSA Insured), 2.21%, due 4/3/08 | | | | A-1+ | | 3,365 | µs |
| | | | | | | | 219,655 | |
| | | |
| Indiana (4.8%) | | | | | | | |
| 10,440 | | Aurora Sch. Bldg. Corp. (Putters), Ser. 2008-2455, (FGIC Insured), 3.50%, due 4/3/08 | | | | A-1+ | | 10,440 | µo |
| 5,070 | | Carmel Clay Ind. Parks Bldg. Corp. (Putters), Ser. 2004-539, (MBIA Insured), 2.41%, due 4/3/08 | | | | A-1+ | | 5,070 | µo |
See Notes to Schedule of Investments
35
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $13,885 | | Carmel Redev. Au. Lease Rental Rev. (Floaters), Ser. 2006-1275, (LOC: Morgan Stanley), 2.16%, due 4/3/08 | | | | A-1+ | | $13,885 | µ |
| 2,065 | | Carmel Redev. Au. Lease Rental Rev. (Putters), Ser. 2006-1503, (LOC: JP Morgan Chase), 2.29%, due 4/3/08 | | | | A-1+ | | 2,065 | µ |
| 2,765 | | Deutsche Bank Spears/Lifers Trust Var. St. (Franklin), Ser. 2008-550, (FGIC Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 2,765 | µk |
| 2,040 | | Deutsche Bank Spears/Lifers Trust Var. St. (Indiana Bond Bank), Ser. 2008-565, (FSA Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 2,040 | µk |
| 9,550 | | Eclipse Funding Trust (Solar Eclipse), Ser. 2007-0098, (MBIA Insured), 2.26%, due 4/3/08 | | | | A-1+ | | 9,550 | µu |
| 1,530 | | Eclipse Funding Trust (Solar Eclipse-Hamilton Southeastern Indiana), Ser. 2007-0006, (FSA Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 1,530 | µu |
| 7,000 | | Eclipse Funding Trust (Solar Eclipse-IPS Multi-Sch. Bldg. Corp. Ltd.), Ser. 2007-0026, (MBIA Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 7,000 | µu |
| 3,975 | | Eclipse Funding Trust (Solar Eclipse-Wayne Township Marion), Ser. 2006-0015, (FGIC Insured), 2.26%, due 4/3/08 | | | | A-1+ | | 3,975 | ñµu |
| 16,065 | | Greater Clark Co. Sch. Temporary Loan Warrants, Ser. 2008,
2.45%, due 12/31/08 | | | | | | 16,089 | |
| 5,000 | | Indiana Hlth. & Ed. Fac. Fin. Au. Hosp. Rev. (Schneck Mem. Hosp. Proj.), Ser. 2006 B, (LOC: Fifth Third Bank), 1.30%, due 4/1/08 | | | | A-1+ | | 5,000 | µß |
| 500 | | Indiana Hlth. Fac. Fin. Au. Rev. (Margaret Mary Comm. Hosp.), Ser. 2004 A, (LOC: Fifth Third Bank), 1.30%, due 4/1/08 | | | | A-1+ | | 500 | µß |
| 10,000 | | Indiana Trans. Fin. Au. Hwy. Rev., Ser. 2006-3610, (FGIC Insured), 2.24%, due 4/3/08 | | | | | | 10,000 | µl |
| 10,255 | | Indiana Trans. Fin. Au. Hwy. Rev., Ser. 2004-114, (FGIC Insured), 2.34%, due 4/3/08 | | | | A-1+ | | 10,255 | µk |
| 5,000 | | Indianapolis Loc. Pub. Imp. Bond Bank Ltd. Recourse Notes, Ser. 2007-E, 4.25%, due 10/2/08 | | | | SP-1+ | | 5,013 | |
| 3,750 | | Indianapolis Loc. Pub. Imp. Bond Bank Ltd. Recourse Notes, Ser. 2007 F, 4.00%, due 1/12/09 | | | | SP-1+ | | 3,774 | |
| 5,715 | | Univ. Southern Indiana Rev., Ser. 2004-2117, (AMBAC Insured), 4.29%, due 4/3/08 | | VMIG1 | | | | 5,715 | µi |
| 5,160 | | Wayne Township Marion Co. Sch. Bldg. Corp. (Floaters),
Ser. 2003-2016, (FGIC Insured), 2.33%, due 4/3/08 | | | | A-1 | | 5,160 | µr |
| | | | | | | | 119,826 | |
| | | |
| Iowa (1.7%) | | | | | | | |
| 6,840 | | Ankeny G.O. BANS, Ser. 2006 A, 4.10%, due 6/1/08 | | MIG1 | | | | 6,840 | |
| 3,050 | | Austin Trust Var. Sts. Cert. (Iowa Din Au.), Ser. 2007-1011,
(LOC: Bank of America), 2.24%, due 4/3/08 | | | | A-1+ | | 3,050 | µ |
| 3,905 | | Iowa Fin. Au. Private College Rev. (Morningside College Proj.), Ser. 2007, (LOC: U.S. Bank), 1.33%, due 4/1/08 | | | | A-1+ | | 3,905 | µß |
| 3,500 | | Iowa Fin. Au. Private College Rev. (Morningside College Proj.), Ser. 2006, (LOC: U.S. Bank), 1.33%, due 4/1/08 | | | | A-1+ | | 3,500 | µß |
| 430 | | Iowa Fin. Au. Rev. Private Sch. Fac. Rev. (Kuemper Proj.), Ser. 1998, (LOC: Allied Irish Bank), 1.33%, due 4/1/08 | | | | | | 430 | µß |
| 1,000 | | Iowa Higher Ed. Loan Au. Rev. (Ed. Loan Private College Fac.), Ser. 1985, (MBIA Insured), 2.30%, due 4/2/08 | | VMIG1 | | A-1+ | | 1,000 | µg |
| 1,340 | | Iowa Higher Ed. Loan Au. Rev. (Private College Des Moines Proj.), Ser. 2004, (LOC: Allied Irish Bank), 1.33%, due 4/1/08 | | VMIG1 | | A-1+ | | 1,340 | µß |
See Notes to Schedule of Investments
36
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $285 | | Iowa Higher Ed. Loan Au. Rev. (Private College Des Moines), Ser. 2003, (LOC: Allied Irish Bank), 1.33%, due 4/1/08 | | VMIG1 | | | | $285 | µß |
| 3,890 | | Iowa Higher Ed. Loan Au. Rev. (Private College DuBuque Proj.), Ser. 2004, (LOC: Northern Trust Co.), 1.33%, due 4/1/08 | | | | A-1+ | | 3,890 | µß |
| 2,850 | | Iowa Higher Ed. Loan Au. Rev. (Private College Fac.), Ser. 2002, (LOC: LaSalle National Bank), 1.30%, due 4/1/08 | | | | A-1+ | | 2,850 | µß |
| 5,425 | | Iowa Higher Ed. Loan Au. Rev. (Private College Fac. Wartburg Fac. Proj.), Ser. 2000, 1.33%, due 4/1/08 | | VMIG1 | | | | 5,425 | µß |
| 855 | | Iowa Higher Ed. Loan Au. Rev. (Private College-Univ. DuBuque), Ser. 2007, (LOC: Northern Trust Co.), 1.30%, due 4/1/08 | | | | A-1+ | | 855 | µß |
| 3,535 | | Iowa Higher Ed. Loan Au. Rev. (Univ. of DuBuque), Ser. 2007 C, 4.50%, due 5/20/08 | | | | SP-1 | | 3,538 | ß |
| 1,860 | | Iowa Higher Ed. Loan Au. Rev. RANS, Ser. 2007 B,
4.91%, due 5/20/08 | | | | SP-1 | | 1,863 | ß |
| 4,125 | | Mason City IDR (SUPERVALU, Inc. Proj.), Ser. 1994, (LOC: Wachovia Bank & Trust Co.), 2.30%, due 4/2/08 | | | | | | 4,125 | µß |
| | | | | | | | 42,896 | |
| | | |
| Kansas (1.9%) | | | | | | | |
| 6,145 | | Junction City G.O. Temporary Notes, Ser. 2007 C,
5.00%, due 6/1/08 | | | | | | 6,155 | |
| 1,185 | | Kansas St. Dev. Fin. Au. Lease Rev. (Kansas Dept. Admin.), Ser. 2002 J-1, 1.30%, due 4/1/08 | | | | A-1+ | | 1,185 | µ |
| 3,865 | | Shawnee Co. Temporary Notes, Ser. 2007-2, 3.70%, due 10/1/08 | | MIG1 | | | | 3,866 | |
| 1,300 | | Univ. of Kansas Hosp. Au. Rev. (KU Hlth. Sys.), Ser. 2004, (LOC: Harris Trust & Savings Bank), 1.30%, due 4/1/08 | | | | A-1 | | 1,300 | µß |
| 13,135 | | Wyandotte Co. Kansas City Unified G.O. Gov’t Muni. Temporary Notes, Ser. 2007-III, 3.55%, due 4/1/08 | | MIG1 | | | | 13,135 | |
| 20,200 | | Wyandotte Co. Kansas City Unified G.O. Gov’t Muni. Temporary Notes, Ser. 2007-V, 3.55%, due 11/1/08 | | MIG1 | | | | 20,200 | |
| | | | | | | | 45,841 | |
| | | |
| Kentucky (0.5%) | | | | | | | |
| 8,460 | | Kentucky Rural Wtr. Fin. Corp. Pub. Proj. Rev. (Construction Notes), Ser. 2007A-1, 3.65%, due 4/1/09 Putable 4/1/08 | | MIG1 | | | | 8,460 | µ |
| 5,030 | | Simpson Co. Hosp. Rev. (Med. Ctr. Franklin, Inc.), Ser. 2006, (LOC: Branch Banking & Trust Co.), 2.28%, due 4/3/08 | | | | | | 5,030 | µß |
| | | | | | | | 13,490 | |
| | | |
| Louisiana (0.6%) | | | | | | | |
| 1,265 | | Deutsche Bank Spears/Lifers Trust Var. St. (Jefferson), Ser. 2008-576, (AMBAC Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 1,265 | µk |
| 2,575 | | Deutsche Bank Spears/Lifers Trust Var. St. (Jefferson), Ser. 2008-577, (AMBAC Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 2,575 | µk |
| 7,350 | | Lafayette Econ. Dev. Au. Gulf Opportunity Zone Rev. (Stirling Lafayette LLC Proj.), Ser. 2008, (LOC: Regions Bank),
2.21%, due 4/3/08 | | VMIG1 | | | | 7,350 | µß |
| 3,530 | | Louisiana Pub. Fac. Au. Hosp. Rev. (Pendleton Mem. Methodist), Ser. 1998, 5.25%, due 6/1/28 Pre-Refunded 6/1/08 | | | | | | 3,595 | ß |
| | | | | | | | 14,785 | |
See Notes to Schedule of Investments
37
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| | | |
| Maine (0.3%) | | | | | | | |
| $3,395 | | Eclipse Funding Trust (Solar-Eclipse), Ser. 2007-0104, (FGIC Insured), 2.27%, due 4/3/08 | | | | A-1+ | | $3,395 | µu |
| 5,000 | | Maine Hlth. & Higher Ed. Fac. Au. Rev. (Piper Shores), Ser. 1999 A, 7.55%, due 1/1/29 Pre-Refunded 1/1/09 | | | | | | 5,187 | ß |
| | | | | | | | 8,582 | |
| | | |
| Maryland (0.4%) | | | | | | | |
| 7,595 | | Maryland St. Hlth. & Higher Ed. Fac. Au. Rev. (Floaters),
Ser. 2008-2402, (FGIC Insured), 2.31%, due 4/3/08 | | VMIG1 | | | | 7,595 | µs |
| 1,300 | | Washington Suburban Sanitation Dist. BANS, Ser. 2003 A, (LOC: Landesbank Hessen-Thveringen Girozentrale),
1.95%, due 4/2/08 | | VMIG1 | | | | 1,300 | µ |
| | | | | | | | 8,895 | |
| | | |
| Massachusetts (2.4%) | | | | | | | |
| 5,350 | | Deutsche Bank Spears/Lifers Trust Var. St. (Massachusetts St.), Ser. 2008-528, (XLCA Insured), 2.26%, due 4/3/08 | | | | | | 5,350 | µk |
| 10,000 | | Massachusetts Bay Trans. Au. Sales Tax Rev. (Floaters),
Ser. 2006-3526, (LOC: Dexia Credit Locale de France),
2.21%, due 4/3/08 | | | | A-1+ | | 10,000 | µ |
| 145 | | Massachusetts St. G.O. (Central Artery), Ser. 2000 A, (LOC: Landesbank Hessen-Thveringen Girozentrale),
1.25%, due 4/1/08 | | VMIG1 | | A-1+ | | 145 | µ |
| 6,500 | | Massachusetts St. Hlth. & Ed. Fac. Au. Rev. (Floaters),
Ser. 2008-2405, (FGIC Insured), 2.31%, due 4/3/08 | | | | A-1+ | | 6,500 | µs |
| 14,620 | | Massachusetts St. Hlth. & Ed. Fac. Au. Rev. (Floaters), Ser. 2004-937, (MBIA Insured), 2.30%, due 4/3/08 | | | | | | 14,620 | µy |
| 4,850 | | Massachusetts St. Port Au. Rev. (Floaters), Ser. 1999-599, (FGIC Insured), 2.28%, due 4/3/08 | | | | A-1 | | 4,850 | µr |
| 8,000 | | Massachusetts St. Turnpike Au. Metro. Hwy. Sys. Rev. (Floaters), Ser. 2000-334, (MBIA Insured), 6.00%, due 4/3/08 | | VMIG1 | | | | 8,000 | µs |
| 4,300 | | Reset Option Cert. Trust II, Ser. 2006-680, (AMBAC Insured),
2.38%, due 4/3/08 | | VMIG1 | | | | 4,300 | µh |
| 6,300 | | Worcester Reg. Trans. Au. RANS, Ser. 2007, 4.00%, due 6/27/08 | | | | | | 6,301 | |
| | | | | | | | 60,066 | |
| | | |
| Michigan (2.0%) | | | | | | | |
| 10,000 | | ABN Amro Munitops Cert. Trust Rev., Ser. 2002-35, (FSA Insured),
2.23%, due 4/3/08 | | VMIG1 | | | | 10,000 | µc |
| 1,925 | | De Witt Pub. Sch. (Putters), Ser. 2008-2532, (MBIA Insured),
2.41%, due 4/3/08 | | VMIG1 | | | | 1,925 | µo |
| 5,370 | | Detroit Wtr. Supply Sys. (Putters), Ser. 2001-200Z, (FGIC Insured),
2.21%, due 4/3/08 | | | | A-1+ | | 5,370 | µo |
| 3,775 | | Grand Rapids Hsg. Corp. Rev. (Floaters), Ser. 2005-3152, (FHA Insured), 2.29%, due 4/3/08 | | | | A-1 | | 3,775 | µ |
| 1,840 | | Hartland Cons. Sch. Dist. G.O. (Floaters), Ser. 2005-1204, (LOC: Morgan Stanley), 2.16%, due 4/3/08 | | VMIG1 | | | | 1,840 | µ |
| 11,150 | | Jackson Co. Hosp. Fin. Au. Hosp. Ref. Rev. (W.A. Foote Mem. Hosp.), Ser. 2006 B, (LOC: Bank of Nova Scotia), 2.23%, due 4/3/08 | | | | A-1+ | | 11,150 | µß |
See Notes to Schedule of Investments
38
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $15,000 | | Michigan St. Hsg. Dev. Au. Rental Hsg. Rev., Ser. 2002 B, (MBIA Insured), 4.00%, due 4/3/08 | | | | A-1+ | | $15,000 | µp |
| | | | | | | | 49,060 | |
| | | |
| Minnesota (1.6%) | | | | | | | |
| 6,532 | | Arden Hills Hsg. & Hlth. Care Fac. Rev. (Presbyterian Homes), Ser. 1999 A, (LOC: U.S. Bank), 1.33%, due 4/1/08 | | | | A-1+ | | 6,532 | µß |
| 1,000 | | Mankato Multi-Family Hsg. Rev. (Highland), Ser. 1997, (LOC: LaSalle National Bank), 1.33%, due 4/1/08 | | | | A-1+ | | 1,000 | µß |
| 3,150 | | Mankato Rev. (Bethany Lutheran College), Ser. 2000 B, (LOC: Wells Fargo Bank & Trust Co.), 1.30%, due 4/1/08 | | | | A-1+ | | 3,150 | µß |
| 5,635 | | Minneapolis & St. Paul Hsg. & Redev. Au. Hlth. Care Sys. (Allina Hlth. Sys.), Ser. 2007 B2, (MBIA Insured), 2.40%, due 4/1/08 | | VMIG1 | | | | 5,635 | µßd |
| 5,000 | | Minneapolis & St. Paul Hsg. & Redev. Au. Hlth. Care Sys. (Children’s Hosp. Clinics), Ser. 2007 A, (FSA Insured), 1.33%, due 4/1/08 | | | | A-1+ | | 5,000 | µßu |
| 8,225 | | Minnesota Agricultural & Econ. Dev. Board Rev. (Hlth. Care Fac.-Essentia), Ser. 2008 C4, (LOC: KBC Bank), 1.30%, due 4/1/08 | | | | A-1+ | | 8,225 | µß |
| 935 | | Roseville Private Sch. Fac. Rev. (Northwestern College Proj.), Ser. 2002, (LOC: Marshall & Ilsley), 1.33%, due 4/1/08 | | VMIG1 | | | | 935 | µß |
| 5,305 | | St. Cloud Hlth. Care Rev. (Centracare Hlth. Sys.), Ser. 2008 B, (LOC: Bank of Nova Scotia), 2.07%, due 4/3/08 | | VMIG1 | | | | 5,305 | µß |
| 5,000 | | St. Cloud Hlth. Care Rev. (Centracare Hlth. Sys.), Ser. 2008 C, (LOC: Royal Bank of Canada), 2.20%, due 4/3/08 | | VMIG1 | | | | 5,000 | µß |
| | | | | | | | 40,782 | |
| | | |
| Mississippi (0.5%) | | | | | | | |
| 2,900 | | Mississippi Bus. Fin. Corp. Rev. (Hattiesburg Clinic), Ser. 2006, (LOC: AmSouth Bank), 2.27%, due 4/3/08 | | VMIG1 | | | | 2,900 | µß |
| 8,500 | | Mississippi St. G.O. (Merlots), Ser. 2007-BR02, (MBIA Insured), 2.30%, due 4/2/08 | | | | A-1+ | | 8,500 | µv |
| | | | | | | | 11,400 | |
| | | |
| Missouri (3.6%) | | | | | | | |
| 100 | | Chesterfield Ind. Dev. Au. Ed. Fac. Rev. (Gateway Academy Proj.), Ser. 2003, (LOC: U.S. Bank), 1.33%, due 4/1/08 | | | | A-1+ | | 100 | µß |
| 7,450 | | Howard Bend Levee Dist. (Floaters), Ser. 2005-3338, (XLCA Insured),
2.33%, due 4/3/08 | | | | | | 7,450 | µl |
| 20,690 | | Missouri Joint Muni. Elec. Utils. Commission Pwr. Proj. Rev., Ser. 2007-11265, (AMBAC Insured), 2.27%, due 4/3/08 | | VMIG1 | | | | 20,690 | µh |
| 2,440 | | Missouri St. Dev. Fin. Board Infrastructure Fac. Rev. (St. Louis Convention Ctr.), Ser. 2000 C, (LOC: U.S. Bank), 1.33%, due 4/1/08 | | | | A-1+ | | 2,440 | µ |
| 12,050 | | Missouri St. Hlth. & Ed. Fac. Au. Ed. Fac. Rev. (Christian Brothers), Ser. 2002 A, (LOC: Commerce Bank N.A.), 1.33%, due 4/1/08 | | | | A-1 | | 12,050 | µß |
| 5,015 | | Missouri St. Hlth. & Ed. Fac. Au. Ed. Fac. Rev. (Drury College), Ser. 1999, (LOC: Bank of America), 1.33%, due 4/1/08 | | VMIG1 | | | | 5,015 | µß |
| 185 | | Missouri St. Hlth. & Ed. Fac. Au. Ed. Fac. Rev. (Drury Univ.), Ser. 2003, (LOC: Bank of America), 1.33%, due 4/1/08 | | VMIG1 | | | | 185 | µß |
| 5,500 | | Missouri St. Hlth. & Ed. Fac. Au. Ed. Fac. Rev. (Kansas City Art Institute), Ser. 2005, (LOC: Commerce Bank N.A.),
1.33%, due 4/1/08 | | | | A-1 | | 5,500 | µß |
See Notes to Schedule of Investments
39
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $3,000 | | Missouri St. Hlth. & Ed. Fac. Au. Ed. Fac. Rev. (Rockhurst Univ.), Ser. 2002, (LOC: Bank of America), 1.30%, due 4/1/08 | | | | A-1+ | | $3,000 | µß |
| 2,570 | | Missouri St. Hlth. & Ed. Fac. Au. Ed. Fac. Rev. (St. Louis Univ.), Ser. 1999 B, (LOC: Bank of America), 1.33%, due 4/1/08 | | VMIG1 | | A-1+ | | 2,570 | µß |
| 3,430 | | Missouri St. Hlth. & Ed. Fac. Au. Ed. Fac. Rev. (St. Louis Univ.), Ser. 2002, (LOC: U.S. Bank), 1.33%, due 4/1/08 | | VMIG1 | | | | 3,430 | µß |
| 125 | | Missouri St. Hlth. & Ed. Fac. Au. Hlth. Fac. Rev. (Bethesda Hlth. Group, Inc.), Ser. 2004, (LOC: U.S. Bank), 1.33%, due 4/1/08 | | VMIG1 | | | | 125 | µß |
| 875 | | Missouri St. Hlth. & Ed. Fac. Au. Hlth. Fac. Rev. (Lutheran Sr. Svcs.), Ser. 2000, (LOC: U.S. Bank), 2.10%, due 4/2/08 | | VMIG1 | | | | 875 | µß |
| 1,400 | | Missouri St. Hlth. & Ed. Fac. Au. Hlth. Fac. Rev. (St. Francis Med. Ctr.), Ser. 1996 A, (LOC: Bank of America), 1.30%, due 4/1/08 | | | | A-1+ | | 1,400 | µß |
| 3,980 | | Missouri St. Hlth. & Ed. Fac. Au. Rev. RANS (Rockhurst Univ.-Private Ed. Loan), Ser. 2007 B, 4.50%, due 4/24/08 | | | | SP-1 | | 3,983 | ß |
| 2,075 | | Missouri St. Pub. Utils. Commission Rev. Construction Notes (Floaters), Ser. 2007, 4.75%, due 9/1/08 | | MIG1 | | | | 2,083 | |
| 11,125 | | O Fallon Cert. Participation (Floaters), Ser. 2002-1396, (MBIA Insured), 3.75%, due 4/3/08 | | VMIG1 | | | | 11,125 | µr |
| 4,020 | | St. Louis Co. Rockwood Sch. Dist. Number R-6 G.O., Ser. 2008 A,
5.00%, due 2/1/09 | | | | | | 4,111 | |
| 3,950 | | St. Louis Ind. Dev. Au. Ind. Rev. (Schnuck Markets, Inc.), Ser. 1985, (LOC: U.S. Bank), 2.22%, due 4/3/08 | | P-1 | | | | 3,950 | µß |
| | | | | | | | 90,082 | |
| | | |
| Nebraska (2.1%) | | | | | | | |
| 5,215 | | Central Plains Energy Proj. Rev. (Nebgas Proj.) (Merlots),
Ser. 2007-E09, (LOC: Wachovia Bank & Trust Co.),
2.25%, due 4/2/08 | | | | A-1+ | | 5,215 | µ |
| 2,040 | | Deutsche Bank Spears/Lifers Trust Var. St. (Omaha Spec. Oblig.), Ser. 2008-543, (LOC: Deutsche Bank), 2.27%, due 4/3/08 | | | | A-1+ | | 2,040 | µ |
| 38,935 | | Nebhelp Inc. Rev. (Multi-Mode), Ser. 1985 E, (MBIA Insured),
3.60%, due 4/2/08 | | VMIG1 | | A-1+ | | 38,935 | µq |
| 5,955 | | Nebraska Ed. Fin. Au. Rev. (Creighton Univ. Proj.), Ser. 2005 B, (LOC: JP Morgan Chase), 1.33%, due 4/1/08 | | VMIG1 | | | | 5,955 | µß |
| | | | | | | | 52,145 | |
| | | |
| Nevada (2.3%) | | | | | | | |
| 9,800 | | ABN Amro Munitops Cert. Trust Rev., Ser. 2006-47, (MBIA Insured),
3.01%, due 4/3/08 | | VMIG1 | | | | 9,800 | ñµc |
| 9,985 | | Eclipse Funding Trust Var. St. (Solar Eclipse-Truckee Meadows Wtr.), Ser. 2007-0015, (XLCA Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 9,985 | µu |
| 10,000 | | Henderson Hlth. Care Fac. Rev., Ser. 2007-887CE, (LOC: Citibank, N.A.), 2.27%, due 4/3/08 | | VMIG1 | | | | 10,000 | µ |
| 8,795 | | Nevada St. G.O. (Floaters), Ser. 2000-344, (FGIC Insured),
2.21%, due 4/3/08 | | VMIG1 | | | | 8,795 | µs |
| 4,265 | | Nevada Sys. Higher Ed. Univ. Rev. (Floaters), Ser. 2005-1240, (AMBAC Insured), 2.71%, due 4/3/08 | | | | A-1+ | | 4,265 | µs |
| 4,365 | | Reset Option Cert. Trust II-R Var. St. (Clark Co.), Ser. 2006-3048, (AMBAC Insured), 2.40%, due 4/3/08 | | VMIG1 | | | | 4,365 | µi |
See Notes to Schedule of Investments
40
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $8,535 | | Truckee Meadows Wtr. Au. Wtr. Rev. (Floaters), Ser. 2007-2111, (XLCA Insured), 2.31%, due 4/3/08 | | VMIG1 | | A-1+ | | $8,535 | µs |
| | | | | | | | 55,745 | |
| | | |
| New Hampshire (2.4%) | | | | | | | |
| 8,000 | | Cheshire Co. G.O. TANS, Ser. 2008, 2.50%, due 12/31/08 | | | | | | 8,014 | |
| 13,220 | | Merrimack Co. G.O. TANS, Ser. 2008, 2.75%, due 12/30/08 | | | | | | 13,278 | |
| 800 | | New Hampshire Hlth. & Ed. Fac. Au. Rev. (Seacoast Hospice), Ser. 2006, (LOC: Citizens Bank), 2.35%, due 4/3/08 | | | | | | 800 | µ |
| 5,000 | | New Hampshire St. Bus. Fin. Au. Rev. (Huggins Hosp.), Ser. 2007, (LOC: TD Banknorth N.A.), 1.28%, due 4/1/08 | | | | A-1+ | | 5,000 | µß |
| 5,900 | | New Hampshire St. Bus. Fin. Au. Rev. (Littleton Reg. Hosp.), Ser. 2007, (LOC: TD Banknorth N.A.), 2.26%, due 4/3/08 | | | | A-1+ | | 5,900 | µß |
| 4,000 | | New Hampshire St. Bus. Fin. Au. Rev. (Monadnock Comm. Hosp.), Ser. 2007, (LOC: TD Banknorth N.A.), 1.28%, due 4/1/08 | | | | A-1+ | | 4,000 | µß |
| 4,200 | | New Hampshire St. Bus. Fin. Au. Rev. (Taylor Home), Ser. 2005 B, (LOC: TD Banknorth N.A.), 2.24%, due 4/3/08 | | VMIG1 | | | | 4,200 | µß |
| 18,000 | | Strafford Co. G.O. TANS, Ser. 2008 A, 3.00%, due 12/31/08 | | | | | | 18,080 | |
| | | | | | | | 59,272 | |
| | | |
| New Jersey (2.1%) | | | | | | | |
| 2,600 | | Deutsche Bank Spears/Lifers Trust Var. St. (New Jersey Trans. Trust Au.), Ser. 2007-DB452, (FSA Insured), 2.28%, due 4/3/08 | | | | | | 2,600 | µk |
| 1,255 | | Deutsche Bank Spears/Lifers Trust Var. St. (Newark Hsg.),
Ser. 2008-557, (MBIA Insured), 2.26%, due 4/3/08 | | | | A-1+ | | 1,255 | µk |
| 4,400 | | Deutsche Bank Spears/Lifers Trust Var. St. (Newark Hsg.),
Ser. 2008-511, (MBIA Insured), 2.26%, due 4/3/08 | | | | | | 4,400 | µk |
| 19,200 | | Hamilton Township Mercer Co. G.O. TANS, Ser. 2008,
3.50%, due 10/24/08 | | | | | | 19,274 | |
| 14,200 | | Hoboken G.O. BANS, Ser. 2007, 3.90%, due 9/12/08 | | | | | | 14,206 | |
| 4,840 | | New Jersey Econ. Dev. Au. Econ. Dev. Rev. (Comm. Options, Inc. Proj.), Ser. 2007, (LOC: Wachovia Bank & Trust Co.),
2.13%, due 4/3/08 | | | | | | 4,840 | µß |
| 4,685 | | New Jersey St. Trans. Corp. Cert., Ser. 2000-785, (AMBAC Insured),
2.28%, due 4/3/08 | | | | A-1 | | 4,685 | µr |
| | | | | | | | 51,260 | |
| | | |
| New Mexico (0.1%) | | | | | | | |
| 2,800 | | ABN Amro Munitops Cert. Trust Rev., Ser. 2005-42, (AMBAC Insured), 2.31%, due 4/3/08 | | | | | | 2,800 | ñµc |
| | | |
| New York (2.9%) | | | | | | | |
| 34,395 | | Metro. Trans. Au. Commuter Fac. Rev. (Merlots), Ser. 1997 P, (FGIC Insured), 4.00%, due 4/2/08 | | | | | | 34,395 | µv |
| 23,800 | | Metro. Trans. Au. Transit Fac. Rev. (Merlots), Ser. 2000 F, (FGIC Insured), 4.00%, due 4/2/08 | | | | | | 23,800 | µv |
| 4,970 | | New York City Transitional Fin. Au. Rev., Ser. 2002-2A, (LOC: Dexia Credit Locale de France), 1.15%, due 4/1/08 | | VMIG1 | | A-1+ | | 4,970 | µ |
| 4,330 | | New York G.O., Ser. 2004 H1, (LOC: Bank of New York),
1.15%, due 4/1/08 | | VMIG1 | | A-1+ | | 4,330 | µ |
See Notes to Schedule of Investments
41
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $4,000 | | Onondaga Co. IDA Civic Fac. Rev. (Crouse Hlth. Hosp.), Ser. 2007 A, (LOC: Key Bank), 2.22%, due 4/2/08 | | VMIG1 | | | | $4,000 | µß |
| | | | | | | | 71,495 | |
| | | |
| North Carolina (1.0%) | | | | | | | |
| 2,485 | | Eclipse Funding Trust (Solar Eclipse-Union Co.), Ser. 2006-0155, (AMBAC Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 2,485 | µu |
| 3,500 | | North Carolina Med. Care Commission Hlth. Care Fac. Rev. (Lower Cape Fear Hospice), Ser. 2007, (LOC: Branch Banking & Trust Co.), 2.28%, due 4/3/08 | | VMIG1 | | | | 3,500 | µ |
| 3,600 | | North Carolina Med. Care Commission Hlth. Care Fac. Rev. (Sisters of Mercy Svcs. Corp. Proj.), Ser. 2007, (LOC: Branch Banking & Trust Co.), 2.28%, due 4/3/08 | | VMIG1 | | | | 3,600 | µß |
| 14,665 | | Puttable Floating Option Tax Exempt Receipts (Floaters),
Ser. 2007-4112, (FGIC Insured), 2.24%, due 4/3/08 | | | | | | 14,665 | µl |
| | | | | | | | 24,250 | |
| | | |
| North Dakota (0.3%) | | | | | | | |
| 6,550 | | Cass Co. Hlth. Fac. Rev. (Hlth. Care-Essentia), Ser. 2008 A-2, (LOC: U.S. Bank), 2.25%, due 4/3/08 | | | | A-1+ | | 6,550 | µß |
| | | |
| Ohio (4.6%) | | | | | | | |
| 40,000 | | American Muni. Pwr. BANS (Prairie St. Proj.), Ser. 2008,
3.50%, due 4/1/09 | | MIG1 | | SP-1+ | | 40,350 | Ø |
| 8,000 | | Cincinnati Econ. Dev. Rev. BANS (Baldwin 300 Proj.), Ser. 2008,
3.05%, due 7/10/08 | | | | | | 8,000 | |
| 1,630 | | Clermont Co. Econ. Dev. Rev. (John Q Hammons Proj.), Ser. 1989, (LOC: Fifth Third Bank), 3.80%, due 5/1/08 | | | | | | 1,630 | µß |
| 3,385 | | Cleveland-Cuyahoga Co. Port Au. Ed. Fac. Rev. (Laurel Sch. Proj.), Ser. 2004, (LOC: Key Bank), 2.29%, due 4/3/08 | | | | | | 3,385 | µß |
| 2,000 | | Deutsche Bank Spears/Lifers Trust Var. St. (Cleveland),
Ser. 2008-570, (FSA Insured), 2.27%, due 4/3/08 | | | | | | 2,000 | µk |
| 1,305 | | Eclipse Funding Trust Var. St. (Solar-Eclipse-Ohio St. Higher Ed.), Ser. 2006-0107, (FGIC Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 1,305 | µu |
| 3,855 | | Hamilton Co. Hlth. Care Fac. Rev. (Sisters of Charity Sr. Care), Ser. 2002, (LOC: Fifth Third Bank), 2.17%, due 4/3/08 | | | | | | 3,855 | µß |
| 4,750 | | Hamilton G.O. BANS, Ser. 2007, 4.00%, due 9/11/08 | | | | | | 4,755 | |
| 1,100 | | Licking Co. Career & Technology Ed. Ctrs. G.O. BANS (Sch. Fac. Construction), Ser. 2007, 4.50%, due 9/10/08 | | | | | | 1,103 | |
| 3,500 | | Lucas Co. G.O. Purp. Imp. Notes, Ser. 2007-1, 4.00%, due 9/18/08 | | MIG1 | | SP-1+ | | 3,505 | |
| 4,660 | | Marysville G.O. BANS, Ser. 2007, 4.13%, due 6/5/08 | | MIG1 | | | | 4,664 | |
| 3,500 | | Marysville Tax Increment Fin. Rev. (Coleman’s Crossing Rd.), Ser. 2007, (LOC: Fifth Third Bank), 4.25%, due 9/11/08 | | | | | | 3,508 | |
| 2,820 | | Ohio St. G.O., Ser. 2005-7508, (LOC: Citibank, N.A.),
2.24%, due 4/3/08 | | VMIG1 | | | | 2,820 | µ |
| 4,850 | | Stark Co. Port Au. Econ. Dev. Rev. (Vision FC LLC Proj.), Ser. 2007, (LOC: Fifth Third Bank), 2.27%, due 4/4/08 | | | | | | 4,850 | µ |
| 19,500 | | Union Township Tax Increment Rev. BANS, Ser. 2007,
4.25%, due 9/17/08 | | MIG1 | | | | 19,556 | |
See Notes to Schedule of Investments
42
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $7,300 | | Univ. of Toledo Gen. Receipts Bonds, Ser. 2001-SGA125, (FGIC Insured), 2.12%, due 4/2/08 | | | | A-1+ | | $7,300 | µt |
| | | | | | | | 112,586 | |
| | | |
| Oklahoma (1.4%) | | | | | | | |
| 6,995 | | Hulbert Econ. Dev. Au. Econ. Dev. Rev., Ser. 2007-301, (LOC: Bank of America), 2.25%, due 4/3/08 | | VMIG1 | | | | 6,995 | µ |
| 27,350 | | Tulsa Co. Ind. Au. Cap. Imp. Rev., Ser. 2003 A, (LOC: Bank of America), 3.45%, due 5/15/17 Putable 5/15/08 | | | | A-1+ | | 27,350 | µ |
| | | | | | | | 34,345 | |
| | | |
| Oregon (0.5%) | | | | | | | |
| 1,795 | | Multnomah Co. Higher Ed. Rev. (Concordia Univ. Portland Proj.), Ser. 1999, (LOC: Key Bank), 1.33%, due 4/1/08 | | VMIG1 | | | | 1,795 | µß |
| 6,315 | | Oregon Sch. Boards Assoc. Short-Term Borrowing Prog. Cert. Participation, Ser. 2007 A, 3.80%, due 5/30/08 | | | | | | 6,315 | |
| 3,145 | | Oregon St. Homeowner Rev. (Floaters), Ser. 2006-229, (LOC: Lloyd’s Bank), 2.23%, due 4/3/08 | | VMIG1 | | | | 3,145 | µr |
| | | | | | | | 11,255 | |
| | | |
| Pennsylvania (1.5%) | | | | | | | |
| 8,000 | | Adams Co. Ind. Dev. Au. Rev. (Brethren Home Comm. Proj.), Ser. 2007, (LOC: PNC Bank), 2.28%, due 4/3/08 | | | | A-1+ | | 8,000 | µß |
| 14,125 | | Butler Co. Gen. Au. Rev. (Hampton Township Sch. Dist. Proj.), Ser. 2007, (FSA Insured), 2.11%, due 4/3/08 | | | | | | 14,125 | µv |
| 8,000 | | Chester Co. Ind. Dev. Au. Std. Hsg. Rev. (Univ. Std. Hsg. LLC), Ser. 2008 A, (LOC: Citizens Bank), 2.15%, due 4/3/08 | | VMIG1 | | | | 8,000 | µ |
| 1,615 | | Deutsche Bank Spears/Lifers Trust Var. St. (Philadelphia),
Ser. 2008-554, (FGIC Insured), 2.27%, due 4/3/08 | | | | | | 1,615 | µk |
| 2,085 | | Lawrence Co. Ind. Dev. Au. Rev. (Villa Maria Proj.), Ser. 2003, (LOC: Allied Irish Bank), 2.25%, due 4/3/08 | | VMIG1 | | | | 2,085 | µßØØ |
| 2,600 | | Norwin Sch. Dist. (Merlots), Ser. 2008-D25, (FSA Insured),
2.25%, due 4/2/08 | | VMIG1 | | | | 2,600 | µv |
| | | | | | | | 36,425 | |
| | | |
| Puerto Rico (0.7%) | | | | | | | |
| 10,000 | | Puerto Rico Pub. Bldg. Au. Rev. Gtd. (Floaters), Ser. 2008-2562D, (CIFG Insured), 2.28%, due 4/3/08 | | | | A-1+ | | 10,000 | µs |
| 5,115 | | Puerto Rico Pub. Fin. Corp. (Floaters), Ser. 1999-502, (AMBAC Insured), 2.26%, due 4/3/08 | | | | A-1 | | 5,115 | µr |
| 3,250 | | Puerto Rico Sales Tax Fin. Corp. Sales Tax Rev. (Floaters),
Ser. 2007-2019, (LOC: Morgan Stanley), 2.27%, due 4/3/08 | | | | A-1+ | | 3,250 | µ |
| | | | | | | | 18,365 | |
| | | |
| South Carolina (1.6%) | | | | | | | |
| 3,700 | | Charleston Ed. Excellence Fin. Corp. Rev., Ser. 2006-515, (AGC Insured), 2.27%, due 4/3/08 | | | | | | 3,700 | µh |
| 4,505 | | Jasper Co. Rev. BANS, Ser. 2007, 3.85%, due 7/1/08 | | | | | | 4,505 | |
| 9,800 | | Lexington Wtr. & Swr. Sys. Rev. BANS, Ser. 2007,
3.15%, due 12/15/08 | | MIG1 | | | | 9,803 | |
See Notes to Schedule of Investments
43
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $1,300 | | Macon Trust Var. St., Ser. 2007-303, (LOC: Bank of America), 2.25%, due 4/3/08 | | VMIG1 | | | | $1,300 | µ |
| 10,385 | | Scago Ed. Fac. Corp. Pickens Sch. Dist. (Putters), Ser. 2007-1907, (FSA Insured), 2.29%, due 4/3/08 | | VMIG1 | | | | 10,385 | µo |
| 9,345 | | Western Carolina Reg. Swr. Au. Swr. Sys. Rev., Ser. 2007-11123, (FSA Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 9,345 | µh |
| | | | | | | | 39,038 | |
| | | |
| South Dakota (0.7%) | | | | | | | |
| 14,300 | | South Dakota St. Hlth. & Ed. Fac. Au. Rev. (Rapid City Reg. Hosp.), Ser. 2003, (MBIA Insured), 6.00%, due 4/1/08 | | VMIG1 | | | | 14,300 | µßu |
| 3,600 | | Watertown IDR (SUPERVALU, Inc. Proj.), Ser. 1994, (LOC: Wachovia Bank & Trust Co.), 2.30%, due 4/2/08 | | | | | | 3,600 | µß |
| | | | | | | | 17,900 | |
| | | |
| Tennessee (0.5%) | | | | | | | |
| 1,400 | | Memphis-Shelby Co. IDB Rev. (Medical Group, Inc.), Ser. 1999, (LOC: SunTrust Bank), 2.23%, due 4/3/08 | | P-1 | | | | 1,400 | µß |
| 8,050 | | Metro. Gov’t Nashville & Davidson Co. IDB Multi-Family Hsg. Rev. (Spinnaker), Ser. 2002, (LOC: Fannie Mae), 2.23%, due 4/2/08 | | | | A-1+ | | 8,050 | µß |
| 3,250 | | Sevier Co. Pub. Bldg. Au. (Pub. Construction Notes Proj.), Ser. 2007-A6, 3.80%, due 4/1/10 Putable 4/1/08 | | MIG1 | | | | 3,250 | µ |
| | | | | | | | 12,700 | |
| | | |
| Texas (12.1%) | | | | | | | |
| 7,780 | | ABN Amro Munitops Cert. Trust Rev., Ser. 2006-30, (PSF Insured),
2.23%, due 4/3/08 | | VMIG1 | | | | 7,780 | ñµc |
| 6,630 | | ABN Amro Munitops Cert. Trust Rev., Ser. 2000-10, (MBIA Insured),
2.26%, due 4/3/08 | | VMIG1 | | | | 6,630 | ñµc |
| 1,255 | | ABN Amro Munitops Cert. Trust Rev., Ser. 2006-7, (MBIA Insured),
3.01%, due 4/3/08 | | VMIG1 | | | | 1,255 | ñµc |
| 7,945 | | Austin Hsg. Fin. Corp. Multi-Family Hsg. Rev. (Merlots),
Ser. 2007-G02, (LOC: Bank of New York), 2.25%, due 4/2/08 | | | | A-1+ | | 7,945 | µ |
| 4,610 | | Austin Wtr. & Wastewater Sys. Rev. (Merlots), Ser. 2006-D10, (FSA Insured), 2.30%, due 4/2/08 | | | | A-1+ | | 4,610 | µv |
| 4,005 | | BB&T Muni. Trust Var. St. (Floaters), Ser. 2007-2036, (LOC: Branch Banking & Trust Co.), 2.26%, due 4/3/08 | | VMIG1 | | | | 4,005 | µ |
| 10,540 | | BB&T Muni. Trust Var. St. (Floaters), Ser. 2007-2010, (LOC: Branch Banking & Trust Co.), 2.27%, due 4/3/08 | | VMIG1 | | | | 10,540 | µ |
| 5,235 | | Dallas Area Rapid Transit Sales Tax Rev. (Floaters), Ser. 2003-1195, (FGIC Insured), 2.34%, due 4/3/08 | | | | A-1 | | 5,235 | µr |
| 5,140 | | Deutsche Bank Spears/Lifers Trust Var. St. (Austin), Ser. 2007-366, (AMBAC Insured), 2.33%, due 4/3/08 | | | | A-1+ | | 5,140 | µk |
| 1,300 | | Deutsche Bank Spears/Lifers Trust Var. St. (Austin), Ser. 2008-548, (FGIC Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 1,300 | µk |
| 1,905 | | Deutsche Bank Spears/Lifers Trust Var. St. (Brownsville),
Ser. 2008-533, (AMBAC Insured), 2.27%, due 4/3/08 | | | | | | 1,905 | µk |
| 1,430 | | Deutsche Bank Spears/Lifers Trust Var. St. (Corpus Christi),
Ser. 2008-540, (FSA Insured), 2.27%, due 4/3/08 | | | | | | 1,430 | µk |
See Notes to Schedule of Investments
44
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $1,890 | | Deutsche Bank Spears/Lifers Trust Var. St. (Dickinson Independent Sch. Dist.), Ser. 2008-541, (PSF Insured), 2.27%, due 4/3/08 | | | | A-1+ | | $1,890 | µk |
| 1,120 | | Deutsche Bank Spears/Lifers Trust Var. St. (Fort Bend Co.),
Ser. 2008-556, (MBIA Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 1,120 | µk |
| 4,600 | | Deutsche Bank Spears/Lifers Trust Var. St. (Houston Utils.),
Ser. 2008-551, (FGIC Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 4,600 | µk |
| 7,485 | | Deutsche Bank Spears/Lifers Trust Var. St. (Lovejoy Independent Sch. Dist.), Ser. 2008-514, (PSF Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 7,485 | µk |
| 4,250 | | Deutsche Bank Spears/Lifers Trust Var. St. (Seminole), Ser. 2008-559, (PSF Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 4,250 | µk |
| 1,500 | | Deutsche Bank Spears/Lifers Trust Var. St. (Southwest),
Ser. 2008-569, (PSF Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 1,500 | µk |
| 1,390 | | Deutsche Bank Spears/Lifers Trust Var. St. (Temple Independent Sch. Dist.), Ser. 2008-560, (PSF Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 1,390 | µk |
| 6,785 | | Dickinson Independent Sch. Dist. (Putters), Ser. 2007-1518B, (PSF Insured), 2.29%, due 4/3/08 | | VMIG1 | | | | 6,785 | µo |
| 2,965 | | Dickinson Independent Sch. Dist. (Putters), Ser. 2007-1517B, (PSF Insured), 2.29%, due 4/3/08 | | VMIG1 | | | | 2,965 | µo |
| 4,690 | | Eclipse Funding Trust (Solar Eclipse-Houston Independent Sch.), Ser. 2006-0019, (FSA Insured), 2.26%, due 4/3/08 | | VMIG1 | | | | 4,690 | ñµu |
| 14,200 | | Harris Co. Flood Ctrl. Dist., Ser. 2008 B, (LOC: Dexia Credit Locale de France), 2.15%, due 4/3/08 | | VMIG1 | | A-1+ | | 14,200 | µ |
| 6,480 | | Harris Co. Hlth. Fac. Dev. Corp. Rev. (Putters), Ser. 2005-1018, (LOC: JP Morgan Chase), 2.29%, due 4/3/08 | | VMIG1 | | A-1+ | | 6,480 | µ |
| 3,925 | | Houston G.O., Ser. 2007-11289, (MBIA Insured), 2.30%, due 4/3/08 | | | | A-1+ | | 3,925 | µh |
| 7,695 | | Houston Utils. Sys. Rev. (Floaters), Ser. 2008-2343, (MBIA Insured),
2.31%, due 4/3/08 | | | | A-1+ | | 7,695 | µs |
| 8,170 | | JP Morgan Chase & Co. (Putters), Ser. 2007-2383P, (LOC: JP Morgan Chase), 2.51%, due 4/3/08 | | | | | | 8,170 | µ |
| 5,900 | | Kendall Co. Hlth. Fac. Dev. Corp. Hlth. Care Rev. (Morningside Ministries), Ser. 2008 A, (LOC: Allied Irish Bank), 2.12%, due 4/3/08 | | VMIG1 | | | | 5,900 | µß |
| 9,935 | | McKinney Independent Sch. Dist. (Floaters), Ser. 2006-26TP, (PSF Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 9,935 | µx |
| 19,740 | | Munitops II Trust, Ser. 2007-63, (PSF Insured), 2.24%, due 4/3/08 | | | | | | 19,740 | µc |
| 6,155 | | Pflugerville Independent Sch. Dist. (Merlots), Ser. 2008 D-41, (PSF Insured), 2.25%, due 4/2/08 | | | | A-1+ | | 6,155 | µv |
| 5,740 | | Puttable Floating Option Tax Exempt Receipts, Ser. 2007, (MBIA Insured), 3.75%, due 4/3/08 | | | | | | 5,740 | µr |
| 8,190 | | Puttable Floating Option Tax Exempt Receipts (Floaters) (Lampasasa), Ser. 2007-4309, (PSF Insured), 2.24%, due 4/3/08 | | | | | | 8,190 | µr |
| 7,355 | | Red River Ed. Fin. Rev. (Parish Day Sch. Proj.), Ser. 2001 A, (LOC: Allied Irish Bank), 2.25%, due 4/2/08 | | VMIG1 | | | | 7,355 | µß |
| 68,570 | | Texas Muni. Gas Acquisition & Supply Corp. I Gas Supply Rev. (Floaters), Ser. 2007-2132, (LOC: Morgan Stanley),
2.38%, due 4/3/08 | | | | A-1+ | | 68,570 | µ |
| 20,525 | | Texas Muni. Gas Acquisition & Supply Corp. II Gas Supply Rev., Ser. 2007-10014, (LOC: Dexia Credit Locale de France),
2.31%, due 4/3/08 | | VMIG1 | | A-1+ | | 20,525 | µ |
| 2,000 | | Texas St. Pub. Fin. Au. Rev. (Stephen F. Austin-Financing Sys.), Ser. 2008, (FSA insured), 4.00%, due 4/15/08 | | | | | | 2,001 | ß |
See Notes to Schedule of Investments
45
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $6,260 | | Tyler Hlth. Fac. Dev. Corp. Hosp. Rev. (East Texas Med. Ctr.), Ser. 1997 D, (FSA Insured), 5.38%, due 11/1/27 Pre-Refunded 2/16/09 | | | | | | $6,558 | |
| 3,515 | | Univ. of Texas Univ. Rev., Ser. 2007-1080, (LOC: Citigroup Global Markets), 2.24%, due 4/3/08 | | VMIG1 | | | | 3,515 | µ |
| | | | | | | | 299,104 | |
| | | |
| Utah (0.8%) | | | | | | | |
| 2,950 | | Lehi Elec. Utils. Rev., Ser. 2005, (FSA Insured), 2.35%, due 4/2/08 | | | | | | 2,950 | µl |
| 12,000 | | Riverton Hosp. Rev. (Putters), Ser. 2007-1762, (LOC: JP Morgan Chase), 2.29%, due 4/3/08 | | VMIG1 | | | | 12,000 | µ |
| 5,500 | | Salt Lake Valley Fire Svc. Area TRANS, Ser. 2008,
3.75%, due 12/30/08 | | | | | | 5,530 | |
| | | | | | | | 20,480 | |
| | | |
| Vermont (0.0%) | | | | | | | |
| 195 | | Vermont Ed. & Hlth. Bldg. Fin. Agcy. Rev. (Northeastern Hosp.), Ser. 2004 A, (LOC: TD Banknorth N.A.), 1.20%, due 4/1/08 | | VMIG1 | | | | 195 | µß |
| | | |
| Virginia (0.7%) | | | | | | | |
| 7,500 | | ABN Amro Munitops. Cert. Trust Rev., Ser. 2005-48, (LOC: Bank of America), 2.23%, due 4/3/08 | | VMIG1 | | | | 7,500 | ñµ |
| 9,070 | | Norfolk Parking Sys. Rev., Ser. 2007-10261, (AMBAC Insured), 2.53%, due 4/3/08 | | VMIG1 | | A-1 | | 9,070 | µp |
| | | | | | | | 16,570 | |
| | | |
| Washington (3.3%) | | | | | | | |
| 3,750 | | DFA Muni Trust Var. St. (Floaters), Ser. 2007-3003, (FSA Insured),
2.28%, due 4/3/08 | | | | | | 3,750 | µj |
| 10,920 | | Eclipse Funding Trust (Solar Eclipse-Port-Seattle), Ser. 2006-0063, (MBIA Insured), 2.24%, due 4/3/08 | | | | A-1+ | | 10,920 | µu |
| 3,395 | | Eclipse Funding Trust Var. St. (Solar Eclipse), Ser. 2007-0106, (MBIA Insured), 2.27%, due 4/3/08 | | | | A-1+ | | 3,395 | µu |
| 3,700 | | Everett Pub. Fac. Dist. Proj. Rev., Ser. 2007, (LOC: Dexia Credit Locale de France), 1.33%, due 4/1/08 | | | | A-1+ | | 3,700 | µ |
| 4,622 | | King Co. Swr. Rev. (Floaters), Ser. 2005-1091, (FSA Insured),
2.21%, due 4/3/08 | | | | | | 4,622 | µs |
| 29,525 | | King Co. Swr. Rev. (Merlots), Ser. 2000 E, (FGIC Insured),
4.00%, due 4/2/08 | | | | | | 29,525 | µv |
| 2,900 | | Washington St. G.O., Ser. 2008-11308, (LOC: Citibank N.A.),
2.26%, due 4/3/08 | | | | A-1 | | 2,900 | µ |
| 17,000 | | Washington St. Hlth. Care Fac. Au. Rev. (Swedish Hlth. Svcs.), Ser. 2006, (LOC: Citibank, N.A.), 2.18%, due 4/2/08 | | VMIG1 | | A-1+ | | 17,000 | µß |
| 2,920 | | Washington St. Hsg. Fin. Commission Non-Profit Rev. (Annie Wright School), Ser. 2002, (LOC: Bank of America), 1.30%, due 4/1/08 | | VMIG1 | | | | 2,920 | µß |
| 1,000 | | Washington St. Hsg. Fin. Commission Non-Profit Rev. (St. Vincent de Paul Proj.), Ser. 2000 A, (LOC: Wells Fargo Bank & Trust Co.),
2.19%, due 4/3/08 | | | | A-1+ | | 1,000 | µß |
| 1,900 | | Washington St. Hsg. Fin. Commission Non-Profit Rev. (Tacoma Art Museum Proj.), Ser. 2002, (LOC: Northern Trust Co.),
1.33%, due 4/1/08 | | VMIG1 | | | | 1,900 | µß |
| | | | | | | | 81,632 | |
See Notes to Schedule of Investments
46
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| | | |
| West Virginia (0.4%) | | | | | | | |
| $9,295 | | Eclipse Funding Trust Var. St. (Solar Eclipse-West Virginia St. Wtr.), Ser. 2006-0127, (FSA Insured), 2.23%, due 4/3/08 | | | | A-1+ | | $9,295 | µu |
| | | |
| Wisconsin (4.7%) | | | | | | | |
| 19,310 | | Eclipse Funding Trust Var. St. (Solar Eclipse-Wisconsin St.), Ser. 2007-0004, (FSA Insured), 2.25%, due 4/3/08 | | | | A-1+ | | 19,310 | µu |
| 1,095 | | New Richmond Sch. Dist. BANS, Ser. 2007, 4.13%, due 6/6/08 | | MIG1 | | | | 1,095 | |
| 7,900 | | Puttable Floating Option Tax Exempt Receipts (Floaters),
Ser. 2007-545, (MBIA Insured), 2.24%, due 4/3/08 | | | | | | 7,900 | µr |
| 15,980 | | Puttable Floating Option Tax Exempt Receipts (Floaters),
Ser. 2007-4391, (LOC: Dexia Credit Locale de France),
2.36%, due 4/3/08 | | VMIG1 | | | | 15,980 | µ |
| 7,500 | | Walworth Co. Metro. Swr. Dist., Ser. 2008, 2.65%, due 4/1/09 | | | | SP-1+ | | 7,515 | Ø |
| 10,000 | | Wisconsin St. Hlth. & Ed. Fac. Au. Rev. (Bay Area Med. Ctr., Inc.), Ser. 2008, (LOC: Marshall & Ilsley), 1.33%, due 4/1/08 | | | | A-1 | | 10,000 | µß |
| 500 | | Wisconsin St. Hlth. & Ed. Fac. Au. Rev. (Alverno College Proj.), Ser. 1997, (LOC: Allied Irish Bank), 1.33%, due 4/1/08 | | VMIG1 | | | | 500 | µß |
| 11,000 | | Wisconsin St. Hlth. & Ed. Fac. Au. Rev. (Aurora Hlth. Care), Ser. 2006 C, (LOC: Marshall & Ilsley), 1.30%, due 4/1/08 | | | | A-1 | | 11,000 | µß |
| 4,125 | | Wisconsin St. Hlth. & Ed. Fac. Au. Rev. (Blood Ctr.), Ser. 1994 A, (LOC: Marshall & Ilsley), 2.13%, due 4/2/08 | | | | A-1 | | 4,125 | µß |
| 3,145 | | Wisconsin St. Hlth. & Ed. Fac. Au. Rev. (Concordia Univ. of Wisconsin, Inc. Proj.), Ser. 2006, (LOC: Marshall & Ilsley),
2.40%, due 4/3/08 | | | | | | 3,145 | µß |
| 3,145 | | Wisconsin St. Hlth. & Ed. Fac. Au. Rev. (Edgewood College), Ser. 2006, (LOC: U.S. Bank), 1.33%, due 4/1/08 | | | | A-1+ | | 3,145 | µß |
| 13,205 | | Wisconsin St. Hlth. & Ed. Fac. Au. Rev. (Floaters), Ser. 2003-858, (MBIA Insured), 5.15%, due 4/3/08 | | | | | | 13,205 | µp |
| 860 | | Wisconsin St. Hlth. & Ed. Fac. Au. Rev. (Gundersen Lutheran), Ser. 2000 A, (FSA Insured), 1.33%, due 4/1/08 | | | | A-1+ | | 860 | µßl |
| 7,770 | | Wisconsin St. Hlth. & Ed. Fac. Au. Rev. (Gundersen Lutheran), Ser. 2000 B, (FSA Insured), 1.33%, due 4/1/08 | | | | A-1+ | | 7,770 | µßl |
| 1,400 | | Wisconsin St. Hlth. & Ed. Fac. Au. Rev. (Lutheran College Proj.), Ser. 2003, (LOC: U.S. Bank), 1.33%, due 4/1/08 | | | | A-1+ | | 1,400 | µß |
| 935 | | Wisconsin St. Hlth. & Ed. Fac. Au. Rev. (Riverview Hosp. Assoc.), Ser. 2001, (LOC: U.S. Bank), 1.33%, due 4/1/08 | | | | A-1+ | | 935 | µß |
| 7,495 | | Wisconsin St. Hsg. & Econ. Dev. Au. Hsg. Rev., Ser. 2007 B, (LOC: Bank of America), 1.95%, due 4/3/08 | | VMIG1 | | A-1+ | | 7,495 | µ |
| | | | | | | | 115,380 | |
| | | | |
| | Total Investments (101.3%) | | | | | | 2,503,067 | |
| | Liabilities, less cash, receivables and other assets [(1.3%)] | | | | | | (32,216 | ) |
| | Total Net Assets (100.0%) | | | | | | $2,470,851 | |
See Notes to Schedule of Investments
47
Schedule of Investments Municipal Master Series
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| | | |
| Alabama (0.2%) | | | | | | | |
| $988 | | Birmingham Pub. Park & Rec. Board Rev., Ser. 1997, (LOC: Regions Bank), 2.36%, due 4/3/08 | | | | | | $988 | µß |
| | | |
| Arizona (0.3%) | | | | | | | |
| 1,365 | | Coconino Co. Ind. Dev. Au. IDR. (Scuff Steel Proj.), Ser. 2007,
(LOC: Wells Fargo Bank & Trust Co.), 2.31%, due 4/3/08 | | | | A-1+ | | 1,365 | µß |
| | | |
| California (4.4%) | | | | | | | |
| 4,000 | | California Statewide CDA Multi-Family Hsg. Rev., Ser. 2007-836 CE, (LOC: Citigroup Global Markets), 2.38%, due 4/3/08 | | VMIG1 | | | | 4,000 | µØØ |
| 1,260 | | California Statewide Comm. Dev. Corp. Rev. (RL Group LLC),
Ser. 1998 C, (LOC: Mellon 1st Business Bank), 2.25%, due 4/2/08 | | | | | | 1,260 | µß |
| 9,000 | | Contra Costa Co. Multi-Family Hsg. Rev. (Pleasant Hill BART Transit), Ser. 2006 A, (LOC: Calyon Bank),
3.65%, due 4/15/46 Putable 8/1/2008 | | | | | | 9,000 | ß |
| 1,205 | | Puttable Floating Option Tax Exempt Receipts (Floaters),
Ser. 2006-EC001, (LOC: Merrill Lynch Capital Markets),
2.41%, due 4/3/08 | | | | | | 1,205 | µ |
| 1,900 | | Riverside Co. Ind. Dev. Au. IDR (Rockwin Corp. Proj.),
Ser. 1987 II, (LOC: Royal Bank of Canada), 2.32%, due 4/2/08 | | | | | | 1,900 | µ |
| | | | | | | | 17,365 | |
| | | |
| Colorado (1.3%) | | | | | | | |
| 1,000 | | Central Platte Valley Metro. Dist., Ser. 2006, (LOC: BNP Paribas), 3.50%, due 12/1/36 Putable 12/1/08 | | | | A-1+ | | 1,000 | |
| 2,225 | | Colorado Hsg. & Fin. Au. Econ. Dev. Rev. (Kapteyn-Murnane Labs, Inc.), Ser. 2007, (LOC: Wells Fargo Bank & Trust Co.),
2.46%, due 4/3/08 | | | | | | 2,225 | µß |
| 1,990 | | El Paso Co. Single Family Mtge. Rev. (Merlots), Ser. 2007-C44, (LOC: Government National Mortgage Association), 2.35%, due 4/2/08 | | VMIG1 | | | | 1,990 | µd |
| | | | | | | | 5,215 | |
| | | |
| Delaware (0.1%) | | | | | | | |
| 450 | | Delaware St. Econ. Dev. Au. Multi-Family Rev. (Sch. House Proj.),
Ser. 1985, (LOC: HSBC Bank N.A.), 2.40%, due 4/2/08 | | VMIG1 | | | | 450 | µ |
| | | |
| Florida (7.0%) | | | | | | | |
| 5,700 | | Brooks of Bonita Springs II Comm. Dev. Dist. Cap. Imp. Rev.,
Ser. 2000 A, 7.00%, due 5/1/31 Pre-Refunded 5/1/08 | | | | | | 5,843 | |
| 3,250 | | Florida Dev. Fin. Corp. IDR (4504 30th Street West LLC Proj.),
Ser. 2007, (LOC: Branch Banking & Trust Co.), 2.38%, due 4/3/08 | | | | | | 3,250 | µß |
| 1 | | Miami-Dade Co. Aviation Rev., Ser. 2007 E, (FSA Insured),
2.33%, due 4/3/08 | | VMIG1 | | | | 1 | µd |
| 2,095 | | Miami-Dade Co. Expressway Au. Toll Sys. Rev. (Putters),
Ser. 2000-160Z, (FGIC Insured), 2.21%, due 4/3/08 | | VMIG2 | | A-1+ | | 2,095 | µo |
| 910 | | Ocean Hwy. & Port Au. Rev., Ser. 1990, (LOC: Wachovia Bank & Trust Co.), 2.35%, due 4/2/08 | | VMIG1 | | A-1+ | | 910 | µ |
See Notes to Schedule of Investments
48
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $690 | | Orange Co. Hsg. Fin. Au. Multi-Family Rev., Ser. 2000 E,
(LOC: Bank of America), 2.37%, due 4/2/08 | | VMIG1 | | | | $690 | µßØØ |
| 1,090 | | Orange Co. Hsg. Fin. Au. Multi-Family Rev. (Putters), Ser. 2005-1179, (LOC: JP Morgan Chase), 2.39%, due 4/3/08 | | VMIG1 | | | | 1,090 | µ |
| 3,200 | | Pinellas Co. Ind. Dev. Au. Rev. (DGT Mgmt/Work Tools), Ser. 2007, (LOC: RBC Centura Bank), 2.35%, due 4/2/08 | | | | A-1 | | 3,200 | µß |
| 10,480 | | RBC Muni. Prod., Inc. Trust Var. Sts. Ser. 2008-E2, (LOC: Royal Bank of Canada), 2.36%, due 4/3/08 | | | | A-1+ | | 10,480 | µß |
| | | | | | | | 27,559 | |
| | | |
| Georgia (3.9%) | | | | | | | |
| 640 | | Atlanta Arpt. Rev. (Merlots), Ser. 2004 C14, (FSA Insured),
2.35%, due 4/2/08 | | VMIG1 | | | | 640 | µv |
| 1,800 | | Atlanta Urban Residential Fin. Au. Multi-Family Hsg. Rev. (Capitol Gateway Apts.), Ser. 2005, (LOC: Bank of America),
2.31%, due 4/3/08 | | | | A-1+ | | 1,800 | µß |
| 790 | | Canton Hsg. Au. Multi-Family Rev. (Canton Mill Lofts Proj.),
Ser. 1999, (LOC: Branch Banking & Trust Co.), 2.38%, due 4/3/08 | | | | A-1+ | | 790 | µß |
| 5,660 | | Carroll Co. Dev. Au. Rev. (Royal Metal Prod., Inc. Proj.), Ser. 2007, (LOC: Branch Banking & Trust Co.), 2.38%, due 4/3/08 | | VMIG1 | | | | 5,660 | µß |
| 850 | | Douglas Co. Dev. Au. IDR (Whirlwind Steel Bldgs.), Ser. 1997,
(LOC: JP Morgan Chase), 4.00%, due 4/3/08 | | | | | | 850 | µß |
| 2,405 | | Gordon Co. Dev. Au. IDR (Nance Carpet & Rug, Inc. Proj.), Ser. 2006, (LOC: Branch Banking & Trust Co.), 2.38%, due 4/3/08 | | | | | | 2,405 | µß |
| 1,035 | | Gwinnett Co. Dev. Au. IDR (Color Image, Inc. Proj.), Ser. 1999,
(LOC: SouthTrust Bank), 2.38%, due 4/3/08 | | | | | | 1,035 | µß |
| 2,250 | | Jasper Co. Dev. Au. IDR (PermaTherm, Inc. Proj.), Ser. 2007,
(LOC: Branch Banking & Trust Co.), 2.38%, due 4/3/08 | | | | | | 2,250 | µß |
| | | | | | | | 15,430 | |
| | | |
| Hawaii (1.5%) | | | | | | | |
| 5,795 | | Hawaii St. Pub. Sch. Imp. Rev., Ser. 2004-6035, (MBIA Insured), 2.29%, due 4/3/08 | | VMIG1 | | | | 5,795 | µi |
| | | |
| Idaho (0.6%) | | | | | | | |
| 2,440 | | Idaho Hsg. & Fin. Assoc. Single Family Mtge. Rev., Ser. 2007-11192, (LOC: Citibank, N.A.), 2.32%, due 4/3/08 | | VMIG1 | | | | 2,440 | µ |
| | | |
| Illinois (9.3%) | | | | | | | |
| 2,900 | | Aurora Single Family Mtge. Rev. (Merlots), Ser. 2007-C55,
(LOC: Government National Mortgage Association),
2.30%, due 4/2/08 | | | | A-1+ | | 2,900 | µd |
| 4,500 | | Chicago Enterprise Zone Rev. (J & A LLC Proj.), Ser. 2002,
(LOC: Charter One Bank), 2.42%, due 4/3/08 | | | | | | 4,500 | µ |
| 3,435 | | Chicago IDR (Evans Food Prod. Co. Proj.), Ser. 1998, (LOC: LaSalle National Bank), 2.20%, due 4/3/08 | | | | A-1+ | | 3,435 | µ |
| 1,160 | | Chicago Multi-Family Hsg. Rev. (Churchview Supportive Living Fac.), Ser. 2003, (LOC: Harris Trust & Savings Bank), 2.35%, due 4/3/08 | | VMIG1 | | | | 1,160 | µß |
| 1,900 | | Chicago Single Family Mtge. Rev., Ser. 2007-10218,
(LOC: Government National Mortgage Association),
2.32%, due 4/3/08 | | VMIG1 | | | | 1,900 | µi |
See Notes to Schedule of Investments
49
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $1,400 | | Elgin IDR (Bailey Dev. LLC Proj.), Ser. 1996 A, (LOC: LaSalle National Bank), 2.20%, due 4/3/08 | | | | A-1+ | | $1,400 | µß |
| 1,400 | | Elmhurst IDR (Randall Mfg. Prod. Proj.), Ser. 2002, (LOC: LaSalle National Bank), 2.41%, due 4/3/08 | | | | A-1+ | | 1,400 | µß |
| 700 | | Illinois Dev. Fin. Au. IDR (Florence Corp. Proj.), Ser. 1997, (LOC: Bank One), 3.60%, due 4/3/08 | | | | | | 700 | µß |
| 830 | | Illinois Dev. Fin. Au. IDR (JVM LLC Proj.), Ser. 2001, (LOC: Fifth Third Bank), 2.34%, due 4/3/08 | | | | | | 830 | µß |
| 4,570 | | Illinois Dev. Fin. Au. IDR (Trim-Rite Food Corp. Proj.), Ser. 2000,
(LOC: Fifth Third Bank), 2.34%, due 4/4/08 | | | | | | 4,570 | µß |
| 700 | | Illinois Dev. Fin. Au. Rev. (American Academy), Ser. 2001, (LOC: Bank One), 2.95%, due 4/3/08 | | | | | | 700 | µßØØ |
| 500 | | Illinois Fin. Au. IDR (E Kinast Proj.), Ser. 2005 A, (LOC: JP Morgan Chase), 3.50%, due 4/3/08 | | | | | | 500 | µß |
| 3,400 | | Illinois Fin. Au. IDR (Injection Plastic Corp.), Ser. 2006 A,
(LOC: Wachovia Bank & Trust Co.), 2.25%, due 4/2/08 | | | | | | 3,400 | µß |
| 1,000 | | Illinois Fin. Au. IDR (Meyer Ind. LLC Proj.), Ser. 2006, (LOC: Fifth Third Bank), 2.34%, due 4/3/08 | | | | | | 1,000 | µß |
| 930 | | Illinois Fin. Au. IDR (Transparent Container Proj.), Ser. 2004,
(LOC: Bank One), 3.60%, due 4/3/08 | | VMIG1 | | | | 930 | µß |
| 4,300 | | Orland Park IDR (Panduit Corp. Proj.), Ser. 1996, (LOC: Fifth Third Bank), 2.27%, due 4/2/08 | | | | A-1+ | | 4,300 | µß |
| 3,000 | | Southwestern Illinois Dev. Au. Rev. (Arizon Co., Inc. Proj.), Ser. 2007, (LOC: Marshall & Ilsley), 2.40%, due 4/3/08 | | | | A-1 | | 3,000 | µß |
| | | | | | | | 36,625 | |
| | | |
| Indiana (4.9%) | | | | | | | |
| 500 | | Hammond Econ. Dev. Rev. (A.M. Castle & Co. Proj.), Ser. 1994,
(LOC: Bank of America), 3.60%, due 4/3/08 | | | | | | 500 | µß |
| 5,225 | | Indianapolis Local Pub. Imp. Bond Bank, Ser. 2003 A,
(AMBAC Insured), 2.26%, due 4/3/08 | | | | | | 5,225 | µl |
| 4,515 | | Jeffersonville Econ. Dev. Rev. (Eagle Steel Prods., Inc. Proj.),
Ser. 2007, (LOC: Fifth Third Bank), 2.34%, due 4/4/08 | | | | | | 4,515 | µß |
| 890 | | Kendallville Econ. Dev. Rev. (Metal Shred Ind. Proj.), Ser. 2006,
(LOC: Fifth Third Bank), 2.34%, due 4/4/08 | | | | | | 890 | µß |
| 2,265 | | Kokomo Econ. Dev. Rev. (Village Comm. Partners IV Proj.), Ser. 1995, (LOC: Federal Home Loan Bank), 2.40%, due 4/3/08 | | VMIG1 | | | | 2,265 | µß |
| 2,600 | | La Porte Co. Econ. Dev. Rev. (Van Air Proj.), Ser. 2007, (LOC: LaSalle National Bank), 2.25%, due 4/3/08 | | | | | | 2,600 | µß |
| 1,087 | | Noblesville Econ. Dev. Rev. (Princeton Lakes Apts. Proj.), Ser. 2003 B, (LOC: Federal Home Loan Bank), 2.20%, due 4/3/08 | | | | A-1+ | | 1,087 | µß |
| 1,105 | | North Vernon Econ. Dev. Rev. (Oak Meadows Apt. Proj.), Ser. 1995, (LOC: Federal Home Loan Bank), 2.10%, due 4/2/08 | | | | A-1+ | | 1,105 | µ�� |
| 770 | | Plymouth Econ. Dev. Rev. (Hillcrest Apts. Proj.), Ser. 1998 A,
(LOC: Federal Home Loan Bank), 2.43%, due 4/2/08 | | | | A-1+ | | 770 | µß |
| 500 | | Tippecanoe Co. Econ. Dev. Ref. Rev. (Lafayette Venetian Blind),
Ser. 2004, (LOC: PNC Bank), 2.28%, due 4/3/08 | | | | | | 500 | µß |
| | | | | | | | 19,457 | |
See Notes to Schedule of Investments
50
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| | | |
| Iowa (3.0%) | | | | | | | |
| $500 | | Mason City IDR (SUPERVALU, Inc. Proj.), Ser. 1994, (LOC: Wachovia Bank & Trust Co.), 2.30%, due 4/2/08 | | | | | | $500 | µß |
| 9,150 | | Puttable Floating Option Tax Exempt Receipts (Floaters), Ser. 2007, (FHA Insured), 2.26%, due 4/3/08 | | VMIG1 | | | | 9,150 | µr |
| 2,215 | | Sergeant Bluff IDR (Sioux City Brick & Tile Proj.), Ser.1996, (LOC: U.S. Bank), 3.60%, due 4/3/08 | | | | | | 2,215 | µß |
| | | | | | | | 11,865 | |
| | | |
| Kansas (1.0%) | | | | | | | |
| 3,925 | | Junction City G.O., Ser. 2007 A, 5.00%, due 6/1/08 | | | | | | 3,931 | |
| | | |
| Kentucky (2.5%) | | | | | | | |
| 200 | | Bardstown Ind. Rev. (JAV Invt. LLC Proj.), Ser. 2001, (LOC: Bank One Michigan), 3.60%, due 4/3/08 | | | | | | 200 | µß |
| 2,790 | | Boone Co. Ind. Bldg. Rev. (Benda-Lutz Corp. Proj.), Ser. 2005,
(LOC: Fifth Third Bank), 2.34%, due 4/4/08 | | | | | | 2,790 | µß |
| 2,665 | | Fort Mitchell Ind. Bldg. Rev. (Grandview/Hemmer Proj.), Ser. 1986, (LOC: PNC Bank), 3.75%, due 8/1/16 Putable 8/1/08 | | | | | | 2,665 | |
| 4,000 | | Fulton Co. Ind. Bldg. Rev. (Burke-Parsons-Bowlby Corp.), Ser. 2006, (LOC: Branch Banking & Trust Co.), 2.38%, due 4/3/08 | | | | | | 4,000 | µß |
| 315 | | Trimble Co. Econ. Dev. Rev. (Synthetic Materials Proj.), Ser. 2000, (LOC: Citizens Bank), 2.25%, due 4/3/08 | | | | | | 315 | µß |
| | | | | | | | 9,970 | |
| | | |
| Louisiana (2.5%) | | | | | | | |
| 1,000 | | Calcasieu Parish Pub. Trust Au. Gulf Opportunity Zone Rev. (Delta Equine Ctr. LLC Proj.), Ser. 2007, (LOC: Branch Banking & Trust Co.), 2.38%, due 4/3/08 | | | | | | 1,000 | µß |
| 6,969 | | Louisiana HFA Single Family Mtge. Rev. (Floaters), Ser. 2006-1566, (LOC: Depfa Bank PLC), 2.33%, due 4/3/08 | | | | A-1+ | | 6,969 | µs |
| 1,920 | | Louisiana Local Gov’t Env. Facs. & Comm. Dev. Rev. (SRL Holdings LLC Proj.), Ser. 2007, (LOC: Branch Banking & Trust Co.),
2.38%, due 4/3/08 | | | | | | 1,920 | µß |
| | | | | | | | 9,889 | |
| | | |
| Maine (2.5%) | | | | | | | |
| 9,500 | | Maine St. Hsg. Au. Mtge., Ser. 2007 F, 3.85%, due 11/15/34
Putable 9/22/08 | | VMIG1 | | A-1+ | | 9,521 | |
| 410 | | Westbrook Rev. (Corriveau-Routhier, Inc. Proj.), Ser. 1986,
(LOC: Fleet National Bank), 4.13%, due 12/15/08 | | | | | | 410 | µß |
| | | | | | | | 9,931 | |
| | | |
| Maryland (0.4%) | | | | | | | |
| 1,660 | | Howard Co. IDR (Preston CT Ltd. Partnership), Ser. 1986,
(LOC: SunTrust Bank), 2.75%, due 4/1/08 | | | | A-1+ | | 1,660 | µß |
| | | |
| Massachusetts (3.0%) | | | | | | | |
| 3,000 | | Cape Cod Reg. Transit Au. RANS, Ser. 2007, 4.00%, due 7/31/08 | | | | | | 3,001 | |
| 2,400 | | Greater Attleboro Taunton Reg. Transit Au. RANS, Ser. 2007,
4.00%, due 8/22/08 | | | | | | 2,401 | |
See Notes to Schedule of Investments
51
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $1,150 | | Massachusetts St. HFA, Ser. 2005 A, (FSA Insured),
3.85%, due 6/1/08 | | | | | | $1,150 | |
| 4,975 | | Massachusetts St. Ind. Fin. Agcy. Rev. (Sr. Living Fac.-Forge Hill Proj.), Ser. 1998, 6.75%, due 4/1/30 Pre-Refunded 4/1/08 | | | | | | 5,122 | ß |
| | | | | | | | 11,674 | |
| | | |
| Michigan (2.4%) | | | | | | | |
| 1,000 | | ABN Amro Munitops Cert. Trust Rev., Ser. 2004-2,
(LOC: Government National Mortgage Association),
2.27%, due 4/3/08 | | VMIG1 | | | | 1,000 | µc |
| 2,760 | | Genesee Co. Econ. Dev. Corp. Ltd. Oblig. Rev. (Cramer Inc. Proj.), Ser. 2000 (LOC: Fifth Third Bank), 2.51%, due 4/3/08 | | | | | | 2,760 | µß |
| 5,600 | | Michigan St. Hsg. Dev. Au. Ltd. Oblig. Multi-Family Hsg. Rev. (Benton Harbor Proj.), Ser. 2006, (LOC: Fifth Third Bank),
4.35%, due 6/1/41 Putable 7/1/08 | | VMIG1 | | | | 5,605 | ß |
| | | | | | | | 9,365 | |
| | | |
| Minnesota (1.5%) | | | | | | | |
| 845 | | Blaine IDR (SUPERVALU, Inc. Proj.), Ser. 1993, (LOC: Wachovia Bank & Trust Co.), 2.30%, due 4/2/08 | | | | | | 845 | µß |
| 2,415 | | Plymouth Multi-Family Hsg. Ref. Rev. (At the Lake Apts. Proj.), Ser. 2004, (LOC: Freddie Mac), 2.31%, due 4/3/08 | | VMIG1 | | | | 2,415 | µß |
| 280 | | Roseville Private Sch. Fac. Rev. (Northwestern College Proj.),
Ser. 2002, (LOC: Marshall & Ilsley), 1.33%, due 4/1/08 | | VMIG1 | | | | 280 | µß |
| 500 | | Rush City IDR (Plastech Corp. Proj.), Ser. 1999, (LOC: U.S. Bank), 2.49%, due 4/3/08 | | | | | | 500 | µ |
| 1,300 | | St. Paul Hsg. & Redev. Au. Rev. (Goodwill/Easter Seals Proj.),
Ser. 2000, (LOC: U.S. Bank), 2.40%, due 4/3/08 | | | | | | 1,300 | µß |
| 605 | | Stillwater IDR (SUPERVALU, Inc. Proj.), Ser. 1994, (LOC: Wachovia Bank & Trust Co.), 2.30%, due 4/2/08 | | | | | | 605 | µß |
| 100 | | Woodbury Private Sch. Fac. Rev. (St. Ambrose Proj.), Ser. 1999, (LOC: U.S. Bank), 2.35%, due 4/2/08 | | | | | | 100 | µß |
| | | | | | | | 6,045 | |
| | | |
| Missouri (6.8%) | | | | | | | |
| 5,300 | | Bridgeton Ind. Dev. Au. Ind. Rev. (Stolze Printing Proj.), Ser. 2006, (LOC: Marshall & Ilsley), 2.35%, due 4/3/08 | | | | A-1 | | 5,300 | µß |
| 1,000 | | Clayton Ind. Dev. Au. Ind. Ref. Rev. (Bailey Court Proj.), Ser. 1989, (LOC: Commerce Bank N.A.), 2.35%, due 4/3/08 | | | | A-1 | | 1,000 | µß |
| 300 | | Hannibal Ind. Dev. Au. Ind. Rev. (Buckhorn Rubber Prods. Proj.),
Ser. 1995, (LOC: JP Morgan Chase), 3.50%, due 4/3/08 | | | | | | 300 | µß |
| 100 | | Jefferson Co. Ind. Dev. Au. Ind. Rev. (GHF Holdings LLC Proj.),
Ser. 1994, (LOC: LaSalle National Bank), 4.00%, due 4/3/08 | | | | | | 100 | µß |
| 4,000 | | Missouri St. Env. Imp. & Energy Res. Au. Env. Imp. Rev. (UtiliCorp United, Inc. Proj.), Ser. 1993, (LOC: Citibank, N.A.),
3.55%, due 4/2/08 | | P-1 | | A-1+ | | 4,000 | µß |
| 5,340 | | St. Charles Co. Ind. Dev. Au. (Newco Enterprises Proj.), Ser. 2004 A (LOC: Marshall & Ilsley), 2.36%, due 4/3/08 | | | | A-1 | | 5,340 | µß |
| 6,815 | | St. Charles Co. Ind. Dev. Au. (Patriot Machine, Inc.), Ser. 2007,
(LOC: Marshall & Ilsley), 2.38%, due 4/3/08 | | | | A-1 | | 6,815 | µß |
See Notes to Schedule of Investments
52
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $4,100 | | St. Charles Co. Ind. Dev. Au. (Trinity Mfg. Proj.), Ser. 2006
(LOC: Marshall & Ilsley), 2.37%, due 4/3/08 | | | | A-1 | | $4,100 | µß |
| | | | | | | | 26,955 | |
| | | |
| Montana (0.5%) | | | | | | | |
| 2,100 | | Cascade Co. Montana IDR (Montana Milling, Inc. Proj.), Ser. 2007, (LOC: Wells Fargo Bank & Trust Co.), 2.46%, due 4/3/08 | | | | | | 2,100 | µß |
| | | |
| Nebraska (0.2%) | | | | | | | |
| 600 | | Norfolk IDR Ref. (SUPERVALU, Inc. Proj.), Ser. 1994, (LOC: Wachovia Bank & Trust Co.), 2.30%, due 4/2/08 | | | | | | 600 | µß |
| | | |
| Nevada (0.6%) | | | | | | | |
| 2,570 | | Deutsche Bank Spears/Lifers Trust Var. St. (Clark Co.),
Ser. 2008 DBE-562, (AMBAC Insured), 2.30%, due 4/3/08 | | | | | | 2,570 | µk |
| | | |
| New Hampshire (0.4%) | | | | | | | |
| 1,660 | | New Hampshire St. Hsg. Fin. Au. Multi-Family Rev. (Floaters),
Ser. 2006-3438, (LOC: Merrill Lynch Capital Markets),
2.38%, due 4/3/08 | | VMIG1 | | | | 1,660 | µ |
| | | |
| New Jersey (0.1%) | | | | | | | |
| 480 | | New Jersey Econ. Dev. Au. Econ. Dev. Rev. (Wearbest SIL-TEX Mills Proj.), Ser. 2000, (LOC: Bank of New York), 2.30%, due 4/2/08 | | | | | | 480 | µß |
| | | |
| New Mexico (0.1%) | | | | | | | |
| 225 | | Las Cruces IDR (Parkview Metal Prod. Proj.), Ser. 1997, (LOC: American National Bank & Trust Co.), 4.00%, due 4/3/08 | | | | | | 225 | µß |
| | | |
| North Carolina (3.0%) | | | | | | | |
| 935 | | Catawba Co. Ind. Fac. & Poll. Ctrl. Fin. Au. Rev. (HWS Co. Inc. Proj.), Ser. 1997, (LOC: Branch Banking & Trust Co.), 2.38%, due 4/3/08 | | | | | | 935 | µß |
| 1,320 | | Deutsche Bank Spears/Lifers Trust Var. St. (Raleigh-Durham),
Ser. 2008-DBE568, (FGIC Insured), 2.30%, due 4/3/08 | | | | | | 1,320 | µk |
| 1,450 | | Iredell Co. Ind. Fac. & Poll. Ctrl. Fin. Au. Ind. Rev. (Riley Technologies Proj.), Ser. 2006, (LOC: Branch Banking & Trust Co.),
2.38%, due 4/3/08 | | | | | | 1,450 | µß |
| 4,000 | | Lincoln Co. Ind. Fac. & Poll. Ctrl. Fin. Au. Rev. Ind. Dev. (Sabo USA, Inc. Proj.), Ser. 2007, (LOC: LaSalle National Bank), 2.38%, due 4/3/08 | | VMIG1 | | | | 4,000 | µß |
| 1,675 | | North Carolina HFA, Ser. 2002, (LOC: Citibank, N.A.),
2.32%, due 4/3/08 | | VMIG1 | | | | 1,675 | µ |
| 2,365 | | North Carolina St. Ports Au. Port Fac. Rev., Ser. 2006-A2, (LOC: Bank of America), 2.20%, due 4/2/08 | | VMIG1 | | | | 2,365 | µ |
| | | | | | | | 11,745 | |
| | | |
| North Dakota (0.4%) | | | | | | | |
| 1,500 | | Bismarck IDR Ref. (SUPERVALU, Inc. Proj.), Ser. 1995, (LOC: Wachovia Bank & Trust Co.), 2.30%, due 4/2/08 | | | | | | 1,500 | µß |
| | | |
| Ohio (2.8%) | | | | | | | |
| 1,750 | | American Muni. Pwr. BANS (Montpelier Proj.), Ser. 2007,
3.95%, due 7/3/08 | | | | | | 1,750 | |
See Notes to Schedule of Investments
53
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $5,000 | | American Muni. Pwr. BANS (Prairie St. Proj.), Ser. 2008,
3.50%, due 4/1/09 | | MIG1 | | A-1+ | | $5,044 | Ø |
| 1,475 | | Fairfield Co. Arpt. Impt. G.O. BANS, Ser. 2008, 3.75%, due 1/21/09 | | | | | | 1,483 | |
| 115 | | Trumbull Co. IDR (UTD Steel Svc., Inc. Proj.), Ser. 2000, (LOC: JP Morgan Chase), 3.60%, due 4/3/08 | | | | | | 115 | µß |
| 1,445 | | Vandalia Land Acquisition G.O. BANS, Ser. 2007,
3.88%, due 8/22/08 | | | | | | 1,445 | |
| 1,120 | | Warren Co. IDR (PAC Mfg. Proj.), Ser. 2000, (LOC: Bank of America), 1.40%, due 4/1/08 | | | | A-1+ | | 1,120 | µß |
| 14 | | Wood Co. IDR (Reclamation Technologies), Ser. 2006, (LOC: National City Bank), 2.55%, due 4/3/08 | | | | | | 14 | µß |
| | | | | | | | 10,971 | |
| | | |
| Oregon (0.2%) | | | | | | | |
| 705 | | Marion Co. Hsg. Au. Rev. (Residence at Marian), Ser. 1997,
(LOC: U.S. Bank), 2.45%, due 4/3/08 | | | | A-1+ | | 705 | µß |
| | | |
| Pennsylvania (3.1%) | | | | | | | |
| 1,255 | | Deutsche Bank Spears/Lifers Trust Var. St. (Philadelphia),
Ser. 2008-DB558, (FSA Insured), 2.30%, due 4/3/08 | | | | A-1+ | | 1,255 | µk |
| 3,200 | | Fayette Co. Ind. Dev. Au. IDR (Coastal Lumber Co. Proj.), Ser. 2006, (LOC: Branch Banking & Trust Co.), 2.38%, due 4/3/08 | | | | | | 3,200 | µß |
| 2,495 | | Lackawanna Co. Ind. Dev. Au. Rev. (Material Technology Proj.),
Ser. 2006, (LOC: Wachovia Bank & Trust Co.), 2.25%, due 4/3/08 | | | | | | 2,495 | µß |
| 5,125 | | Puttable Floating Option Tax Exempt Receipts, Ser. 2007-PT4304, (MBIA Insured), 2.27%, due 4/3/08 | | | | | | 5,125 | µl |
| | | | | | | | 12,075 | |
| | | |
| Rhode Island (0.2%) | | | | | | | |
| 985 | | Rhode Island St. Ind. Facs. Corp. IDR (Precision Turned Components Proj.), Ser. 2000, (LOC: Bank of America), 2.30%, due 4/2/08 | | | | A-1+ | | 985 | µß |
| | | |
| South Carolina (2.3%) | | | | | | | |
| 2,735 | | Jasper Co. BANS, Ser. 2008, 2.75%, due 2/12/09 | | | | | | 2,744 | |
| 3,000 | | South Carolina Jobs Econ. Dev. Au. Econ. Dev. Rev. (Advanced Composite Materials), Ser. 2007, (LOC: National Bank of South Carolina), 2.33%, due 4/3/08 | | | | | | 3,000 | µß |
| 1,000 | | South Carolina Jobs Econ. Dev. Au. Econ. Dev. Rev. (Blue Ridge Log Cabins LLC), Ser. 2007, (LOC: Branch Banking & Trust Co.),
2.38%, due 4/3/08 | | VMIG1 | | | | 1,000 | µß |
| 1,870 | | South Carolina Jobs Econ. Dev. Au. Econ. Dev. Rev. (DCS Diversified Coating), Ser. 2002, (LOC: Branch Banking & Trust Co.),
2.38%, due 4/3/08 | | VMIG1 | | | | 1,870 | µß |
| 355 | | South Carolina Jobs Econ. Dev. Au. Econ. Dev. Rev. (Mancor Ind., Inc. Proj.), Ser. 1999, (LOC: PNC Bank), 2.28%, due 4/3/08 | | | | | | 355 | µß |
| | | | | | | | 8,969 | |
| | | |
| South Dakota (0.1%) | | | | | | | |
| 125 | | Watertown IDR (SUPERVALU, Inc. Proj.), Ser. 1994, (LOC: Wachovia Bank & Trust Co.), 2.30%, due 4/2/08 | | | | | | 125 | µß |
See Notes to Schedule of Investments
54
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $210 | | Watertown IDR Ref. (Ramkota, Inc. Proj.), Ser. 1993, (LOC: U.S. Bank), 2.40%, due 4/3/08 | | | | | | $210 | µß |
| | | | | | | | 335 | |
| | | |
| Tennessee (2.6%) | | | | | | | |
| 3,785 | | Franklin Co. IDB IDR (Zanini Proj.), Ser. 2005 B, (LOC: Regions Bank), 2.46%, due 4/3/08 | | VMIG1 | | | | 3,785 | µß |
| 2,110 | | Rutherford Co. IDB IDR (Tenn. Farmers Coop. Proj.), Ser. 1999,
(LOC: AmSouth Bank), 2.36%, due 4/3/08 | | | | | | 2,110 | µß |
| 3,200 | | Shelby Co. Hlth., Ed. & Hsg. Fac. Board Multi-Family Hsg. Rev. (Lexington), Ser. 2005 A, (LOC: Fannie Mae), 2.45%, due 4/3/08 | | VMIG1 | | | | 3,200 | µ |
| 300 | | Stewart Co. IDB Rev. (Synthetic Materials Proj.), Ser. 1999 A,
(LOC: Citizens Bank), 2.25%, due 4/3/08 | | | | | | 300 | µß |
| 730 | | Stewart Co. IDB Rev. (Synthetic Materials Proj.), Ser. 1999 C,
(LOC: Citizens Bank), 2.25%, due 4/3/08 | | | | | | 730 | µß |
| | | | | | | | 10,125 | |
| | | |
| Texas (9.4%) | | | | | | | |
| 4,660 | | Alliance Arpt. Au. Inc. Spec. Fac. Rev. (Floaters), Ser. 2007-2088, (LOC: Wells Fargo Bank & Trust Co.), 2.31%, due 4/3/08 | | | | A-1+ | | 4,660 | µ |
| 315 | | Bell Co. Hlth. Fac. Dev. Corp. Rev. (Hlth. Fac. Baptist Care, Inc.),
Ser. 1998, (LOC: Broadway National Bank), 3.50%, due 4/3/08 | | VMIG1 | | | | 315 | µßg |
| 5,345 | | Bexar Co. Hsg. Fin. Corp. Multi-Family Hsg. Rev., Ser. 2007-749CE, (LOC: Citigroup Global Markets), 2.39%, due 4/3/08 | | VMIG1 | | | | 5,345 | µ |
| 3,000 | | Brazos River Harbor Navigation Dist. Brazoria Co. Rev. (BASF Corp. Proj.), Ser. 2001, 2.55%, due 4/2/08 | | | | A-1+ | | 3,000 | µß |
| 1,600 | | Haltom City Ind. Dev. Corp. Rev. (Molded Prod. Co. Proj.), Ser. 1995, (LOC: Bank of America), 2.20%, due 4/2/08 | | | | A-1+ | | 1,600 | µß |
| 4,200 | | McAllen Ind. Dev. Au. Rev. (Ridge Sharyland), Ser. 2000,
4.52%, due 4/3/08 | | | | | | 4,223 | µ |
| 5,455 | | Permian Basin Reg. Hsg. Fin. Corp. Single Family Mtge. Rev., Ser. 2006 A-2, (LOC: Government National Mortgage Association), 2.40%, due 1/1/38 Putable 8/1/08 | | VMIG1 | | | | 5,455 | |
| 4,500 | | South Plains Hsg. Fin. Corp. Single Family Rev. Notes, Ser. 2007,
(LOC: Government National Mortgage Association),
4.40%, due 7/1/08 | | VMIG1 | | | | 4,505 | µaa |
| 7,940 | | Victory St. Pub. Fac. Corp. Multi-Family Rev., Ser. 2007-832CE,
(LOC: Citigroup Global Markets), 2.39%, due 4/3/08 | | VMIG1 | | | | 7,940 | µ |
| | | | | | | | 37,043 | |
| | | |
| Vermont (2.6%) | | | | | | | |
| 6,000 | | Vermont HFA Multi. Purp. Notes, Ser. 2007 D, (LOC: Calyon Bank), 3.85%, due 9/25/08 | | | | | | 6,000 | |
| 4,430 | | Vermont HFA Single Family (Putters), Ser. 2006 1554, (FSA Insured), 2.39%, due 4/3/08 | | | | A-1+ | | 4,430 | µo |
| | | | | | | | 10,430 | |
| | | |
| Virginia (3.1%) | | | | | | | |
| 2,500 | | Amherst Co. Econ. Dev. Au. IDR (Englands Stove Works Proj.),
Ser. 2007, (LOC: Branch Banking & Trust Co.), 2.38%, due 4/3/08 | | | | | | 2,500 | µß |
See Notes to Schedule of Investments
55
| | | | | | | | | |
PRINCIPAL
AMOUNT | | SECURITY@@ | | RATING‡‡§ | | VALUE†† | |
| (000’s omitted) | | Moody’s | | S&P | | (000’s omitted) | |
| $2,210 | | Southampton Co. Ind. Dev. Au. Rev. (Feridies Proj.), Ser. 2006,
(LOC: Branch Banking & Trust Co.), 2.38%, due 4/3/08 | | | | | | $2,210 | µß |
| 3,000 | | Sussex Co. Ind. Dev. Au. IDR (McGill Env. Sys.), Ser. 2007,
(LOC: Branch Banking & Trust Co.), 2.38%, due 4/3/08 | | VMIG1 | | | | 3,000 | µß |
| 1,250 | | Virginia St. Hsg. Dev. Au. Commonwealth Mgte., Ser. 2006 D1, 4.00%, due 1/1/09 | | | | | | 1,255 | |
| 1,865 | | Virginia St. Hsg. Dev. Au. Commonwealth Mtge. (Merlots), Ser. 2006 C07, (LOC: Bank of New York), 2.30%, due 4/2/08 | | | | A-1+ | | 1,865 | µ |
| 1,280 | | Wythe Co. Ind. Dev. Au. Rev. (Klockner-Pentaplast of America),
Ser. 1989, (LOC: Landesbank Hessen-Thveringen Girozentrale), 2.29%, due 4/3/08 | | | | | | 1,280 | µß |
| | | | | | | | 12,110 | |
| | | |
| Washington (4.0%) | | | | | | | |
| 3,500 | | Port Vancouver Spec. Rev. (United Grain Corp. Proj.), Ser. 1992,
(LOC: Bank of America), 2.20%, due 4/2/08 | | | | A-1+ | | 3,500 | µß |
| 4,500 | | Seattle Hsg. Au. Rev. (High Point Proj. Phase II), Ser. 2007,
(LOC: KeyBank), 2.36%, due 4/3/08 | | | | A-1 | | 4,500 | µß |
| 7,395 | | Washington St. Hsg. Fin. Commission Multi-Family Hsg. Rev., Ser. 2007-10003CE, (LOC: Citigroup Global Markets),
2.39%, due 4/3/08 | | VMIG1 | | | | 7,395 | µ |
| 300 | | Washington St. Hsg. Fin. Commission Non-Profit Rev. (Tacoma Art Museum Proj.), Ser. 2002, (LOC: Northern Trust Co.),
1.33%, due 4/1/08 | | VMIG1 | | | | 300 | µß |
| | | | | | | | 15,695 | |
| | | |
| Wisconsin (1.1%) | | | | | | | |
| 2,000 | | Antigo Unified Sch. Dist. TRANS, Ser. 2007, 3.60%, due 10/30/08 | | | | | | 2,000 | |
| 425 | | Elkhorn IDR (Lanco Precision Plus Proj.), Ser. 1999, (LOC: Bank One), 3.50%, due 4/2/08 | | | | | | 425 | µß |
| 1,800 | | Superior IDR (Amsoil, Inc. Proj.), Ser. 2007, (LOC: Wells Fargo Bank & Trust Co.), 2.31%, due 4/3/08 | | | | A-1+ | | 1,800 | µß |
| 200 | | Wisconsin St. Hlth. & Ed. Fac. Au. Rev. (Meriter Hosp., Inc. Proj.),
Ser. 2002, (LOC: Marshall & Ilsley), 1.33%, due 4/1/08 | | | | A-1 | | 200 | µß |
| | | | | | | | 4,425 | |
| | | |
| Wyoming (1.3%) | | | | | | | |
| 4,980 | | Campbell Co. IDR, Ser. 2007, (LOC: Royal Bank of Canada),
3.65%, due 11/1/37 Puttable 11/28/08 | | | | A-1+ | | 4,980 | ß |
| | | | |
| | Total Investments (97.2%) | | | | | | 383,702 | |
| | Cash, receivables and other assets, less liabilities (2.8%) | | | | | | 10,967 | |
| | Total Net Assets (100.0%) | | | | | | $394,669 | |
See Notes to Schedule of Investments
56
Notes to Schedule of Investments Institutional Liquidity Trust
| †† | Investment securities are valued at amortized cost, which approximates U.S. federal income tax cost. |
| @@ | Municipal securities held by Tax-Exempt Master Series and Municipal Master Series are within the two highest rating categories assigned by a nationally recognized statistical rating organization (“NRSRO”) such as Moody’s Investors Service, Inc. or Standard & Poor’s or, where not rated, are determined by the master series’ investment manager to be of comparable quality. Approximately 88.4% and 88.4% of the municipal securities held by Tax-Exempt Master Series and Municipal Master Series, respectively, have credit enhancement features backing them, which the funds may rely on, such as letters of credit, insurance, or guarantees. Without these credit enhancement features the securities may or may not meet the quality standards of the fund. Pre-refunded bonds are supported by securities in escrow issued or guaranteed by the U.S. Government, its agencies, or instrumentalities. The amount escrowed is sufficient to pay the periodic interest due and the principal of these bonds. Putable bonds give the funds the right to sell back the issue on the date specified. |
| ‡‡ | Where no rating appears from any NRSRO, the security is deemed unrated for purposes of Rule 2a-7 under the Investment Company Act of 1940, as amended. Each of these securities is an eligible security based on a comparable quality analysis performed by the Master Series’ investment manager. |
| ñ | Restricted security subject to restrictions on resale under federal securities laws. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers under Rule 144A under the Securities Act of 1933, as amended, and have been deemed by the investment manager to be liquid. At March 31, 2008, these securities amounted to approximately $77,655,000 or 3.1% of net assets for Tax-Exempt Master Series. |
| ß | Security is guaranteed by the corporate or non-profit obligor. |
| Ø | All or a portion of this security was purchased on a when-issued basis. At March 31, 2008, these securities amounted to $47,865,000 for Tax-Exempt Master Series and $5,044,000 for Municipal Master Series. |
| ØØ | All or a portion of this security is segregated as collateral for when-issued purchase commitments. |
| µ | Floating rate securities are securities whose yields vary with a designated market index or market rate. These securities are shown at their current rates as of March 31, 2008. |
| § | Credit ratings are unaudited. |
| b | Security is subject to a guarantee provided by Banco Santander, backing 100% of the total principal. |
| c | Security is subject to a guarantee provided by Bank of America, backing 100% of the total principal. |
| d | Security is subject to a guarantee provided by Bank of New York, backing 100% of the total principal. |
| g | Security is subject to a guarantee provided by Chase Bank, backing 100% of the total principal. |
| h | Security is subject to a guarantee provided by Citibank, N.A., backing 100% of the total principal. |
| i | Security is subject to a guarantee provided by Citigroup Global Markets, backing 100% of the total principal. |
| j | Security is subject to a guarantee provided by Depfa Bank PLC, backing 100% of the total principal. |
| k | Security is subject to a guarantee provided by Deutsche Bank, backing 100% of the total principal. |
| l | Security is subject to a guarantee provided by Dexia Credit Locale de France, backing 100% of the total principal. |
| o | Security is subject to a guarantee provided by JP Morgan Chase, backing 100% of the total principal. |
| p | Security is subject to a guarantee provided by Landesbank Hessen-Thveringen Girozentrale, backing 100% of the total principal. |
See Notes to Financial Statements
57
Notes to Schedule of Investments (cont’d)
| q | Security is subject to a guarantee provided by Lloyd’s Bank, backing 100% of the total principal. |
| r | Security is subject to a guarantee provided by Merrill Lynch Capital Markets, backing 100% of the total principal. |
| s | Security is subject to a guarantee provided by Morgan Stanley, backing 100% of the total principal. |
| t | Security is subject to a guarantee provided by Societe Generale, backing 100% of the total principal. |
| u | Security is subject to a guarantee provided by U.S. Bank, backing 100% of the total principal. |
| v | Security is subject to a guarantee provided by Wachovia Bank & Trust Co., backing 100% of the total principal. |
| w | Security is subject to a guarantee provided by Wescorp Credit Union, backing 100% of the total principal. |
| x | Security is subject to a guarantee provided by Wells Fargo Bank & Trust Co., backing 100% of the total principal. |
| y | Security is subject to a guarantee provided by Svenska Hendelsbanken, backing 100% of the total principal. |
| z | Security is subject to a guarantee provided by Regions Bank, backing 100% of the total principal. |
| aa | Security is subject to a guarantee provided by Royal Bank of Canada, backing 100% of the total principal. |
See Notes to Financial Statements
58
Statements of Assets and Liabilities
Institutional Liquidity Trust
(000’s omitted)
| | | | | | |
| | | GOVERNMENT
MASTER SERIES | | TAX-EXEMPT
MASTER SERIES | | MUNICIPAL
MASTER SERIES |
| | | March 31, 2008 | | March 31, 2008 | | March 31, 2008 |
| Assets | | | | | | |
| Investments in securities, at value* (Note A)—see Schedule of Investments: | | | | | | |
| Unaffiliated issuers | | $1,504,188 | | $2,503,067 | | $383,702 |
| Repurchase agreements | | 779,800 | | — | | — |
| | | |
| | 2,283,988 | | 2,503,067 | | 383,702 |
| Cash | | 811 | | — | | 13,061 |
| Interest receivable | | 5,299 | | 16,744 | | 2,469 |
| Receivable for securities sold | | — | | 11,477 | | 495 |
| Prepaid expenses and other assets | | — | | 50 | | 18 |
| | | |
| Total Assets | | 2,290,098 | | 2,531,338 | | 399,745 |
| | | |
| | | |
| Liabilities | | | | | | |
| Due to custodian | | — | | 12,427 | | — |
| Payable for securities purchased | | — | | 47,864 | | 5,044 |
| Payable to investment manager-net (Note B) | | 181 | | 196 | | 32 |
| | | |
| Total Liabilities | | 181 | | 60,487 | | 5,076 |
| | | |
| Net Assets Applicable to investors’ beneficial interests | | $2,289,917 | | $2,470,851 | | $394,669 |
| | | |
| | | |
| Net Assets consist of: | | | | | | |
| Paid-in capital | | $2,289,917 | | $2,470,851 | | $394,669 |
| | | |
| | | |
| *Cost of investments: | | | | | | |
| Unaffiliated issuers | | $2,283,988 | | $2,503,067 | | $383,702 |
| | | |
See Notes to Financial Statements
59
Statements of Operations
Institutional Liquidity Trust
(000’s omitted)
| | | |
| | | GOVERNMENT
MASTER SERIES | |
| | |
For the Year Ended
March 31, 2008 | |
| Investment Income | | | |
| Income: | | | |
| Interest income—unaffiliated issuers (Note A) | | $58,487 | |
| | | | |
| |
| Expenses: | | | |
| Investment management fees (Note B) | | 1,081 | |
| Audit fees | | 32 | |
| Custodian fees (Note B) | | 128 | |
| Insurance expense | | 16 | |
| Legal fees | | 5 | |
| Rating agency fees | | 12 | |
| Shareholder reports | | 6 | |
| Trustees’ fees and expenses | | 25 | |
| Miscellaneous | | 17 | |
| | | | |
| Total expenses | | 1,322 | |
| Investment management fees waived (Note B) | | — | |
| Expenses reduced by custodian fee expense offset arrangement (Note B) | | (24 | ) |
| | | | |
| Total net expenses | | 1,298 | |
| | | | |
| Net investment income | | $57,189 | |
| | | | |
| |
| Realized and Unrealized Gain (Loss) on Investments (Note A) | | | |
| Net realized gain (loss) on: | | | |
| Sales of investment securities of unaffiliated issuers | | 457 | |
| | | | |
| Net increase (decrease) in net assets resulting from operations | | $57,646 | |
| | | | |
See Notes to Financial Statements
60
| | | | | | | | | | |
| |
| TAX-EXEMPT MASTER SERIES | | | MUNICIPAL MASTER SERIES | |
Period from
November 1, 2007
to March 31, 2008 | | | Period from
September 10, 2007
(Commencement
of Operations) to
October 31, 2007 | | | Period from
November 1, 2007
to March 31, 2008 | | | Period from
September 10, 2007
(Commencement
of Operations) to
October 31, 2007 | |
| | | | | | | | | | |
| | | | | | | | | | |
| $34,840 | | | $10,784 | | | $8,565 | | | $3,484 | |
| | | | | | | | | | | |
| | | |
| | | | | | | | | | |
| 2,245 | | | 618 | | | 656 | | | 228 | |
| 11 | | | 11 | | | 32 | | | 32 | |
| 225 | | | 54 | | | 72 | | | 30 | |
| — | | | — | | | — | | | — | |
| 10 | | | 1 | | | 10 | | | 1 | |
| 2 | | | 1 | | | 2 | | | 1 | |
| — | | | — | | | — | | | — | |
| 15 | | | 4 | | | 15 | | | 4 | |
| 16 | | | 3 | | | 3 | | | — | |
| | | | | | | | | | | |
| 2,524 | | | 692 | | | 790 | | | 296 | |
| (1,325 | ) | | (383 | ) | | (441 | ) | | (153 | ) |
| (143 | ) | | (111 | ) | | (68 | ) | | (45 | ) |
| | | | | | | | | | | |
| 1,056 | | | 198 | | | 281 | | | 98 | |
| | | | | | | | | | | |
| $33,784 | | | $10,586 | | | $8,284 | | | $3,386 | |
| | | | | | | | | | | |
| | | |
| | | | | | | | | | |
| | | | | | | | | | |
| 831 | | | 5 | | | 93 | | | 6 | |
| | | | | | | | | | | |
| $34,615 | | | $10,591 | | | $8,377 | | | $3,392 | |
| | | | | | | | | | | |
61
Statements of Changes in Net Assets
Institutional Liquidity Trust
(000’s omitted)
| | | | | | |
| | | GOVERNMENT MASTER SERIES | |
| | | Year Ended
March 31, 2008 | | | Period from
December 18, 2006
(Commencement of
Operations) to
March 31, 2007 | |
| Increase (Decrease) in Net Assets: | | | | | | |
| From Operations: | | | | | | |
| Net investment income (loss) | | $57,189 | | | $7,760 | |
| Net realized gain (loss) on investments | | 457 | | | — | |
| Net increase (decrease) in net assets resulting from operations | | 57,646 | | | 7,760 | |
| | |
| Transactions in Investors’ Beneficial Interest: | | | | | | |
| Contribution from initial capitalization | | — | | | 101 | |
| Contributions | | 7,608,924 | | | 1,008,073 | |
| Withdrawals | | (6,146,412 | ) | | (246,175 | ) |
| Net increase (decrease) from transactions in investors’ beneficial interest | | 1,462,512 | | | 761,999 | |
| Net Increase (Decrease) in Net Assets | | 1,520,158 | | | 769,759 | |
| | |
| Net Assets: | | | | | | |
| Beginning of period | | 769,759 | | | — | |
| End of period | | $2,289,917 | | | $769,759 | |
See Notes to Financial Statements
62
| | | | | | | | | | |
| TAX-EXEMPT MASTER SERIES | | | MUNICIPAL MASTER SERIES | |
Period from
November 1, 2007
to March 31, 2008 | | | Period from
September 10, 2007
(Commencement of
Operations) to
October 31, 2007 | | | Period from
November 1, 2007
to March 31, 2008 | | | Period from
September 10, 2007
(Commencement of
Operations) to
October 31, 2007 | |
| | | | | | | | | | |
| | | | | | | | | | |
| $33,784 | | | $10,586 | | | $8,284 | | | $3,386 | |
| 831 | | | 5 | | | 93 | | | 6 | |
| 34,615 | | | 10,591 | | | 8,377 | | | 3,392 | |
| | | |
| | | | | | | | | | |
| — | | | — | | | — | | | — | |
| 4,812,906 | | | 3,250,661 | | | 1,712,974 | | | 1,154,509 | |
| (4,274,828 | ) | | (1,363,094 | ) | | (1,944,242 | ) | | (540,341 | ) |
| 538,078 | | | 1,887,567 | | | (231,268 | ) | | 614,168 | |
| 572,693 | | | 1,898,158 | | | (222,891 | ) | | 617,560 | |
| | | |
| | | | | | | | | | |
| 1,898,158 | | | — | | | 617,560 | | | — | |
| $2,470,851 | | | $1,898,158 | | | $394,669 | | | $617,560 | |
63
Notes to Financial Statements Institutional Liquidity Trust
Note A—Summary of Significant Accounting Policies:
| 1 | General: Government Master Series, Tax-Exempt Master Series and Municipal Master Series (individually a “Master Series,” collectively, the “Master Series”) are separate operating series of Institutional Liquidity Trust (the “Trust”), a Delaware statutory trust organized pursuant to a Trust Instrument dated October 1, 2004. The Trust is registered as a diversified, open-end management investment company under the Investment Company Act of 1940, as amended. Government Master Series had no operations until December 18, 2006 other than matters relating to its organization and the contribution of beneficial interest from the Institutional Class of Government Portfolio and Neuberger Berman Management Inc., the Master Series’ investment manager, (“Management”) of $100,000 and $1,000, respectively, on December 4, 2006. Tax-Exempt Master Series and Municipal Master Series each had no operations until September 10, 2007 other than matters relating to its organization. |
| | Other investment companies sponsored by Management and Lehman Brothers Asset Management LLC (“LBAM”), the sub-adviser to the Master Series, whose financial statements are not presented herein, also invest in the Master Series. |
| | The assets of each Master Series belong only to that Master Series, and the liabilities of each Master Series are borne solely by that Master Series and no other series of the Trust. |
| | The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires Management to make estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. |
| 2 | Portfolio valuation: Investment securities are valued as indicated in the notes following the Master Series’ Schedules of Investments. |
| 3 | Securities transactions and investment income: Securities transactions are recorded on trade date for financial reporting purposes. Interest income, including accretion of discount (adjusted for original issue discount, where applicable), and amortization of premium, where applicable, is recorded on the accrual basis. Realized gains and losses from securities transactions are recorded on the basis of identified cost and stated separately in the Statements of Operations. |
| 4 | Income tax information: It is the policy of the Master Series to comply with the requirements of the Internal Revenue Code. It is also the policy of the Master Series to conduct their operations so that each of its investors that are regulated investment companies and invest substantially all of their net investable assets therein will continue to qualify as such. Each Master Series will be treated as a partnership for U.S. federal income tax purposes and is therefore not subject to U.S. federal income tax. |
| | In accordance with Securities and Exchange Commission guidance, the Master Series implemented the provisions of Financial Accounting Standards Board Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, on September 30, 2007. The Master Series have reviewed the tax positions for the open tax years as of March 31, 2008, and have determined that the implementation of FIN 48 did not have a material impact on the Master Series’ financial statements. |
| 5 | Expense allocation: Certain expenses are applicable to multiple funds. Expenses directly attributable to a Master Series are charged to that Master Series. Expenses of the Trust that are not directly attributed to a Master Series are allocated among the series of the Trust, on the basis of relative net assets, except where a more appropriate allocation of expenses to each of the series can otherwise be made fairly. Expenses borne by the complex of related investment companies, which includes open-end and closed-end investment companies for which Management serves as investment manager, that are not directly attributed to a Master Series or the Trust, are allocated among the Master Series and the other investment companies in the complex or series thereof, on the basis of relative net |
64
| | assets, except where a more appropriate allocation of expenses to each investment company in the complex or series thereof can otherwise be made fairly. |
| 6 | Repurchase agreements: Each Master Series may enter into repurchase agreements with institutions that Management has determined are creditworthy. Each repurchase agreement is recorded at cost. Each Master Series requires that the securities purchased in a repurchase agreement be transferred to the custodian in a manner sufficient to enable the Master Series to assert a perfected security interest in those securities in the event of a default under the repurchase agreement. Each Master Series monitors, on a daily basis, the value of the securities transferred to ensure that their value, including accrued interest, is greater than amounts owed to the Master Series under each such repurchase agreement. |
| 7 | Indemnifications: Like many other companies, the Trust’s organizational documents provide that its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, both in some of its principal service contracts and in the normal course of its business, the Trust enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Trust’s maximum exposure under these arrangements is unknown as this could involve future claims against the Trust. |
Note B—Management Fees and Other Transactions with Affiliates:
| | Each Master Series retains Management as its investment manager under a Management Agreement. For such investment management services, Government Master Series pays Management a fee at the annual rate of 0.08% of its average daily net assets. Tax-Exempt Master Series and Municipal Master Series pay Management a fee at the annual rate of 0.25% of the first $500 million of 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 contractually agreed to waive its management fee, limiting the management fee to 0.08% of its average daily net assets for Tax-Exempt Master Series and Municipal Master Series. For the year ended March 31, 2008, such waived fees amounted to $1,324,544 for Tax-Exempt Master Series and $441,421 for Municipal Master Series, respectively. |
| | Management and LBAM, the sub-adviser to the Master Series, are wholly-owned subsidiaries of Lehman Brothers Holdings Inc., a publicly-owned holding company. LBAM is retained by Management to provide day-to-day investment management services. LBAM, as sub-adviser to each Master Series, receives a monthly fee paid by Management, based on an annual rate of each Master Series’ average daily net assets. The Master Series do not pay a fee directly to LBAM for such services. As investment adviser, Management is responsible for overseeing the investment activities of LBAM. Several individuals who are officers and/or trustees of the Trust are also employees of LBAM and/or Management. |
| | Each Master Series has an expense offset arrangement in connection with its custodian contract. For the year ended March 31, 2008, the impact of this arrangement was a reduction of expenses of $24,053, $142,829 and $68,495 for Government Master Series, Tax-Exempt Master Series and Municipal Master Series, respectively. |
Note C—Securities Transactions:
| | All securities transactions for the Government Master Series, Tax-Exempt Master Series and Municipal Master Series were short-term. |
Note D—Lines of Credit:
| | On May 25, 2007 the Government Master Series and at commencement of operations, the Tax-Exempt Master Series and Municipal Master Series became participants in a single committed, unsecured $300,000,000 line of credit with the Bank of New York, as agent, to be used only for temporary or emergency purposes. Other |
65
| | investment companies managed by Management also participate in this line of credit on the same terms. Interest is charged on borrowings under this agreement at the overnight Federal Funds Rate plus 0.375% per annum. A commitment fee of 0.075% per annum of the unused available line of credit is charged, of which each Master Series has agreed to pay its pro rata share, based on the ratio of its individual net assets to the net assets of all participants at the time the fee is due and payable. The fee is paid quarterly in arrears. Because several investment companies participate, there is no assurance that an individual Master Series will have access to all or any part of the $300,000,000 at any particular time. |
| | On September 27, 2007 the Master Series became participants in a single uncommitted, unsecured $150,000,000 line of credit with State Street, as lender, to be used only for temporary or emergency purposes. Other investment companies managed by Management also participate in this line of credit on the same terms. Interest is charged on borrowings under this agreement at the overnight Federal Funds Rate plus 0.375% per annum. Because several investment companies participate, there is no assurance that an individual Master Series will have access to all or any part of the $150,000,000 at any particular time. |
| | The Master Series had no loans outstanding pursuant to either line of credit at March 31, 2008. During the year ended March 31, 2008, the Master Series did not utilize these lines of credit. |
Note E—Recent Accounting Pronouncement:
| | In September 2006, Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 157, “Fair Value Measurement” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management believes the adoption of SFAS 157 will not have a material impact on the Master Series’ financial position or results of operations. |
Note F—Change in Year End:
| | The Board of Trustees adopted a change in the fiscal year end date of Tax-Exempt Master Series and Municipal Master Series to March 31. This change is effective beginning with the current fiscal period, which ran from November 1, 2007 to March 31, 2008. Prior to March 31, 2008, the fiscal year end of Tax-Exempt Master Series and Municipal Master Series was October 31. |
66
Financial Highlights
Government Master Series
| | | | | | |
| | | Year Ended
March 31, 2008 | | | Period from
December 18, 2006^
to March 31, 2007 | |
| Ratios to Average Net Assets: | | | | | | |
| Gross Expenses# | | .10 | % | | .13 | %* |
| Net Expenses | | .10 | % | | .13 | %* |
| Net Investment Income (Loss) | | 4.23 | % | | 5.17 | %* |
| Total Return† | | +4.73 | % | | +1.49 | %** |
| Net Assets, End of Period (in millions) | | $2,289.9 | | | $769.8 | |
See Notes to Financial Highlights
67
Financial Highlights
Tax-Exempt Master Series
| | | | | | |
| | | Period from
November 1, 2007
to March 31, 2008 | | | Period from
September 10, 2007^
to October 31, 2007 | |
| Ratios to Average Net Assets: | | | | | | |
| Gross Expenses# | | .10 | %* | | .13 | %* |
| Net Expenses‡ | | .09 | %* | | .09 | %* |
| Net Investment Income (Loss) | | 2.93 | %* | | 3.61 | %* |
| Total Return†@ | | +1.25 | %** | | +.52 | %** |
| Net Assets, End of Period (in millions) | | $2,470.9 | | | $1,898.2 | |
See Notes to Financial Highlights
68
Financial Highlights
Municipal Master Series
| | | | | | |
| | | Period from
November 1, 2007
to March 31, 2008 | | | Period from
September 10, 2007^
to October 31, 2007 | |
| Ratios to Average Net Assets: | | | | | | |
| Gross Expenses# | | .13 | %* | | .18 | %* |
| Net Expenses‡ | | .10 | %* | | .13 | %* |
| Net Investment Income (Loss) | | 3.08 | %* | | 3.63 | %* |
| Total Return†@ | | +1.28 | %** | | +.52 | %** |
| Net Assets, End of Period (in millions) | | $394.7 | | | $617.6 | |
See Notes to Financial Highlights
69
Notes to Financial Highlights Institutional Liquidity Trust
| # | The Master Series is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. |
‡ | After waiver of a portion of the investment management fee by Management. Had Management not undertaken such action, the annualized ratios of net expenses to average daily net assets would have been: |
| | | | | | |
| | | Period from
November 1, 2007
to March 31,
2008 | | | Period Ended
October 31,
2007(1) | |
| Tax-Exempt Master Series | | .21 | % | | .22 | % |
| Municipal Master Series | | .27 | % | | .30 | % |
| | (1) | Period from September 10, 2007 (commencement of operations) to October 31, 2007. |
† | Total return for the Master Series has been calculated based on the total return for the feeder funds that invest all of their net investable assets in the Master Series. Total return assumes all distributions were reinvested and adjusted for the difference in expenses as set forth in the Notes to the Financial Statements of the feeder funds. Results represent past performance and do not guarantee future results. Current returns may be lower or higher than the performance data quoted. |
^ | The date investment operations commenced. |
| @ | Total return would have been lower had Management not waived a portion of the investment management fee. |
70
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Institutional Liquidity Trust
and Owners of Beneficial Interest of Government Master Series:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Government Master Series (one of the series constituting Institutional Liquidity Trust) (the “Master Series”), as of March 31, 2008, and the related statements of operation for the year then ended, and statement of changes in net assets, and the financial highlights for the year ended March 31, 2008 and the period from December 18, 2006 (commencement of operations) to March 31, 2007. These financial statements and financial highlights are the responsibility of the Master Series’ 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Master Series’ internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Master Series’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2008, by correspondence with the custodian and brokers. 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 Government Master Series, a series of Institutional Liquidity Trust, at March 31, 2008, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year ended March 31, 2008 and the period from December 18, 2006 (commencement of operations) to March 31, 2007, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
May 14, 2008
71
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of
Institutional Liquidity Trust and
Owners of Beneficial Interest of Tax-Exempt Master Series
We have audited the accompanying statement of assets and liabilities of Tax-Exempt Master Series (the “Portfolio”), a series of Institutional Liquidity Trust, including the schedule of investments, as of March 31, 2008, and the related statements of operations, the statements of changes in net assets, and the financial highlights for the period November 1, 2007 to March 31, 2008 and for the period from September 10, 2007 to October 31, 2007. These financial statements and financial highlights are the responsibility of the Portfolio’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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Portfolio is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2008, by correspondence with the custodian and brokers. 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 Tax-Exempt Master Series as of March 31, 2008, the results of its operations, the changes in its net assets, and the financial highlights for the period from November 1, 2007 to March 31, 2008 and for the period September 10, 2007 to October 31, 2007, in conformity with accounting principles generally accepted in the United States of America.
Philadelphia, Pennsylvania
May 15, 2008
72
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Institutional Liquidity Trust
and Owners of Beneficial Interest of Municipal Master Series:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Municipal Master Series (one of the series constituting Institutional Liquidity Trust) (the “Master Series”), as of March 31, 2008, and the related statements of operations, changes in net assets and the financial highlights for the period from November 1, 2007 to March 31, 2008 and the period from September 10, 2007 (commencement of operations) to October 31, 2007. These financial statements and financial highlights are the responsibility of the Master Series’ 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Master Series’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Master Series’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of March 31, 2008, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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 Municipal Master Series, a series of Institutional Liquidity Trust, at March 31, 2008, the results of its operations, changes in its net assets, and the financial highlights for the period from November 1, 2007 to March 31, 2008, and the period from September 10, 2007 (commencement of operations) to October 31, 2007, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
May 14, 2008
73
Directory
Investment Manager, Administrator and Distributor
Neuberger Berman Management Inc.
605 Third Avenue, 2nd Floor
New York, NY 10158–0180
888.556.9030
Sub-Adviser
Lehman Brothers Asset Management LLC
200 South Wacker Drive
Suite 2100
Chicago, IL 60601
Custodian and Shareholder Servicing Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Kirkpatrick & Lockhart Preston Gates Ellis LLP
1601 K Street, NW
Washington, DC 20006
Independent Registered Public Accounting Firms
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
Tait, Weller & Baker LLP
1818 Market Street
Suite 2400
Philadelphia, PA 19103
74
Trustees and Officers
The following tables set forth information concerning the trustees (“Trustees”) and officers (“Officers”) of Lehman Brothers Income Funds (the “Trust”). All persons named as Trustees and Officers also serve in similar capacities for other funds administered or managed by Neuberger Berman Management Inc. (“Management”) and Lehman Brothers Asset Management LLC (“LBAM”). The Statement of Additional Information includes additional information about the Trustees and Officers and is available upon request, without charge, by calling (800) 877-9700.
Information about the Board of Trustees
| | | | | | | | |
| Name, Age, and Address(1) | | Position and
Length of
Time Served(2) | | Principal Occupation(s)(3) | | Number of
Funds in
Fund Complex
Overseen by
Trustee(4) | | Other Directorships Held
Outside Fund Complex by
Trustee |
| | | | |
| Independent Trustees | | | | | | | | |
| | | | |
| John Cannon (78) | | Trustee since 1994 | | Consultant; formerly, Chairman, CDC Investment Advisers (registered investment adviser), 1993 to January 1999; formerly, President and Chief Executive Officer, AMA Investment Advisors, an affiliate of the American Medical Association. | | 62 | | Independent Trustee or Director of three series of Oppenheimer Funds: Oppenheimer Limited Term New York Municipal Fund, Rochester Fund Municipals, and Oppenheimer Convertible Securities Fund since 1992. |
| | | | |
| Faith Colish (72) | | Trustee since 2000 | | Counsel, Carter Ledyard & Milburn LLP (law firm) since October 2002; formerly, Attorney-at-Law and President, Faith Colish, A Professional Corporation, 1980 to 2002. | | 62 | | Formerly, Director (1997 to 2003) and Advisory Director (2003 to 2006), ABA Retirement Funds (formerly, American Bar Retirement Association) (not-for-profit membership corporation). |
| | | | |
| Martha C. Goss (58) | | Trustee since 2007 | | President, Woodhill Enterprises Inc./Chase Hollow Associates LLC (personal investment vehicle), since 2006; Chief Operating and Financial Officer, Hopewell Holdings LLC/ Amwell Holdings, LLC (a holding company for a healthcare reinsurance company start-up), since 2003; formerly, Consultant, Resources Connection (temporary staffing), 2002 to 2006. | | 62 | | Director, Ocwen Financial Corporation (mortgage servicing), since 2005; Director, American Water (water utility), since 2003; Director, Channel Reinsurance (financial guaranty reinsurance), since 2006; Advisory Board Member, Attensity (software developer), since 2005; Director, Allianz Life of New York (insurance), since 2005; Director, Financial Women’s Association of New York (not for profit association), since 2003; Trustee Emerita, Brown University, since 1998. |
75
| | | | | | | | |
| Name, Age, and Address(1) | | Position and
Length of
Time Served(2) | | Principal Occupation(s)(3) | | Number of
Funds in
Fund Complex
Overseen by
Trustee(4) | | Other Directorships Held
Outside Fund Complex by
Trustee |
| | | | |
| C. Anne Harvey (70) | | Trustee since 2000 | | President, C.A. Harvey Associates, since October 2001; formerly, Director, AARP, 1978 to December 2001. | | 62 | | Formerly, President, Board of Associates to The National Rehabilitation Hospital’s Board of Directors, 2001 to 2002; formerly, Member, Individual Investors Advisory Committee to the New York Stock Exchange Board of Directors, 1998 to June 2002. |
| | | | |
| Robert A. Kavesh (80) | | Trustee since 1993 | | Marcus Nadler Professor Emeritus of Finance and Economics, New York University Stern School of Business; formerly, Executive Secretary—Treasurer, American Finance Association, 1961 to 1979. | | 62 | | Formerly, Director, The Caring Community (not-for-profit), 1997 to 2006; formerly, Director, DEL Laboratories, Inc. (cosmetics and pharmaceuticals), 1978 to 2004; formerly, Director, Apple Bank for Savings, 1979 to 1990; formerly, Director, Western Pacific Industries, Inc., 1972 to 1986 (public company). |
| | | | |
| Michael M. Knetter (48) | | Trustee since 2007 | | Dean, School of Business, University of Wisconsin—Madison; formerly, Professor of International Economics and Associate Dean, Amos Tuck School of Business—Dartmouth College, 1998 to 2002. | | 62 | | Trustee, Northwestern Mutual Series Fund, Inc., since February 2007; Director, Wausau Paper, since 2005; Director, Great Wolf Resorts, since 2004. |
| | | | |
| Howard A. Mileaf (71) | | Trustee since 2000 | | Retired; formerly, Vice President and General Counsel, WHX Corporation (holding company), 1993 to 2001. | | 62 | | Director, Webfinancial Corporation (holding company), since December 2002; formerly, Director WHX Corporation (holding company), January 2002 to June 2005; formerly, Director, State Theatre of New Jersey (not-for-profit theater), 2000 to 2005. |
76
| | | | | | | | |
| Name, Age, and Address(1) | | Position and
Length of
Time Served(2) | | Principal Occupation(s)(3) | | Number of
Funds in
Fund Complex
Overseen by
Trustee(4) | | Other Directorships Held
Outside Fund Complex by
Trustee |
| | | | |
| George W. Morriss (60) | | Trustee since 2007 | | Formerly, Executive Vice President and Chief Financial Officer, People’s Bank (a financial services company), 1991 to 2001. | | 62 | | Manager, Old Mutual 2100 fund complex (consisting of six funds) since October 2006 for four funds and since February 2007 for two funds. |
| | | | |
| Edward I. O’Brien (79) | | Trustee since 2000 | | Formerly, Member, Investment Policy Committee, Edward Jones, 1993 to 2001; President, Securities Industry Association (“SIA”) (securities industry’s representative in government relations and regulatory matters at the federal and state levels), 1974 to 1992; Adviser to SIA, November 1992 to November 1993. | | 62 | | Director, Legg Mason, Inc. (financial services holding company), since 1993; formerly, Director, Boston Financial Group (real estate and tax shelters), 1993 to 1999. |
| | | | |
| William E. Rulon (75) | | Trustee since 1993 | | Retired; formerly, Senior Vice President, Foodmaker, Inc. (operator and franchiser of restaurants), until January 1997. | | 62 | | Formerly, Director, Pro-Kids Golf and Learning Academy (teach golf and computer usage to “at risk” children), 1998 to 2006; formerly, Director, Prandium, Inc. (restaurants), March 2001 to July 2002. |
| | | | |
| Cornelius T. Ryan (76) | | Trustee since 2000 | | Founding General Partner, Oxford Partners and Oxford Bioscience Partners (venture capital investing) and President, Oxford Venture Corporation, since 1981. | | 62 | | None. |
77
| | | | | | | | |
| Name, Age, and Address(1) | | Position and
Length of
Time Served(2) | | Principal Occupation(s)(3) | | Number of
Funds in
Fund Complex
Overseen by
Trustee(4) | | Other Directorships Held
Outside Fund Complex by
Trustee |
| | | | |
| Tom D. Seip (58) | | Trustee since 2000; Lead Independent Trustee beginning 2006 | | General Partner, Seip Investments LP (a private investment partnership); formerly, President and CEO, Westaff, Inc. (temporary staffing), May 2001 to January 2002; formerly, Senior Executive at the Charles Schwab Corporation, 1983 to 1998, including Chief Executive Officer, Charles Schwab Investment Management, Inc., and Trustee, Schwab Family of Funds and Schwab Investments, 1997 to 1998, and Executive Vice President-Retail Brokerage, Charles Schwab & Co., Inc., 1994 to 1997. | | 62 | | Director, H&R Block, Inc. (financial services company), since May 2001; Chairman, Compensation Committee, H&R Block, Inc., since 2006; Director, America One Foundation, since 1998; formerly, Chairman, Governance and Nominating Committee, H&R Block, Inc., 2004 to 2006; formerly, Director, Forward Management, Inc. (asset management company), 1999 to 2006; formerly, Director, E-Bay Zoological Society, 1999 to 2003; formerly, Director, General Magic (voice recognition software), 2001 to 2002; formerly, Director, E-Finance Corporation (credit decisioning services), 1999 to 2003; formerly, Director, Save-Daily.com (micro investing services), 1999 to 2003. |
| | | | |
| Candace L. Straight (60) | | Trustee since 1993 | | Private investor and consultant specializing in the insurance industry; formerly, Advisory Director, Securitas Capital LLC (a global private equity investment firm dedicated to making investments in the insurance sector), 1998 to December 2003. | | 62 | | Director, Montpelier Re (reinsurance company), since 2006; Director, National Atlantic Holdings Corporation (property and casualty insurance company), since 2004; Director, The Proformance Insurance Company (property and casualty insurance company), since March 2004; formerly, Director, Providence Washington Insurance Company (property and casualty insurance company), December 1998 to March 2006; formerly, Director, Summit Global Partners (insurance brokerage firm), 2000 to 2005. |
78
| | | | | | | | |
| Name, Age, and Address(1) | | Position and
Length of
Time Served(2) | | Principal Occupation(s)(3) | | Number of
Funds in
Fund Complex
Overseen by
Trustee(4) | | Other Directorships Held
Outside Fund Complex by
Trustee |
| | | | |
| Peter P. Trapp (63) | | Trustee since 2000 | | Retired; formerly, Regional Manager for Mid-Southern Region, Ford Motor Credit Company, September 1997 to 2007; formerly, President, Ford Life Insurance Company, April 1995 to August 1997. | | 62 | | None. |
|
| Trustees who are “Interested Persons” |
| | | | |
| Jack L. Rivkin* (67) | | President and Trustee since 2002 | | Executive Vice President and Chief Investment Officer, Neuberger Berman Inc. (holding company), since 2002 and 2003, respectively; Managing Director and Chief Investment Officer, Neuberger Berman, LLC (“Neuberger”), since December 2005 and 2003, respectively; formerly, Executive Vice President, Neuberger, December 2002 to 2005; Director and Chairman, Management, since December 2002; formerly, Executive Vice President, Citigroup Investments, Inc., September 1995 to February 2002; formerly, Executive Vice President, Citigroup Inc., September 1995 to February 2002. | | 62 | | Director, Dale Carnegie and Associates, Inc. (private company), since 1998; Director, Solbright, Inc. (private company), since 1998. |
79
| | | | | | | | |
| Name, Age, and Address(1) | | Position and
Length of
Time Served(2) | | Principal Occupation(s)(3) | | Number of
Funds in
Fund Complex
Overseen by
Trustee(4) | | Other Directorships Held
Outside Fund Complex by
Trustee |
| | | | |
| Peter E. Sundman* (48) | | Chairman of the Board since 2000, Chief Executive Officer and Trustee since 1999; President from 1999 to 2000 | | Executive Vice President, Neuberger Berman Inc. (holding company), since 1999; Head of Neuberger Berman Inc.’s Mutual Funds Business (since 1999) and Institutional Business (1999 to October 2005); responsible for Managed Accounts Business and intermediary distribution since October 1999; President and Director, Management since 1999; Managing Director, Neuberger, since 2005; formerly, Executive Vice President, Neuberger, 1999 to December 2005; formerly, Principal, Neuberger, 1997 to 1999; formerly, Senior Vice President, Management, 1996 to 1999. | | 62 | | Director and Vice President, Neuberger & Berman Agency, Inc., since 2000; formerly, Director, Neuberger Berman Inc. (holding company), October 1999 to March 2003; Trustee, Frost Valley YMCA; Trustee, College of Wooster. |
| (1) | The business address of each listed person is 605 Third Avenue, New York, New York 10158. |
| (2) | Pursuant to the Trust’s Trust Instrument, each Trustee shall hold office for life or until his or her successor is elected or the Trust terminates; except that (a) any Trustee may resign by delivering a written resignation; (b) any Trustee may be removed with or without cause at any time by a written instrument signed by at least two-thirds of the other Trustees; (c) any Trustee who requests to be retired, or who has become unable to serve, may be retired by a written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any shareholder meeting by a vote of at least two-thirds of the outstanding shares. |
| (3) | Except as otherwise indicated, each individual has held the positions shown for at least the last five years. |
| (4) | For funds organized in a master-feeder structure, we count the master fund and its associated feeder funds as a single portfolio. |
| * | Indicates a Trustee who is an “interested person” within the meaning of the 1940 Act. Mr. Sundman and Mr. Rivkin are interested persons of the Trust by virtue of the fact that they are officers and/or directors of Management and/or LBAM. |
80
Information about the Officers of the Trust
| | | | |
| Name, Age, and Address(1) | | Position and
Length of Time
Served(2) | | Principal Occupation(s)(3) |
| | |
| Andrew B. Allard (46) | | Anti-Money Laundering Compliance Officer since 2002 | | Senior Vice President, Neuberger, since 2006; Deputy General Counsel, Neuberger, since 2004; formerly, Vice President, Neuberger, 2000 to 2005; formerly, Associate General Counsel, Neuberger, 1999 to 2004; Anti-Money Laundering Compliance Officer, fifteen registered investment companies for which Management acts as investment manager and administrator (six since 2002, two since 2003, four since 2004, one since 2005 and two since 2006). |
| | |
| Michael J. Bradler (38) | | Assistant Treasurer since 2005 | | Vice President, Neuberger, since 2006; Employee, Management, since 1997; Assistant Treasurer, fifteen registered investment companies for which Management acts as investment manager and administrator (thirteen since 2005 and two since 2006). |
| | |
| Claudia A. Brandon (51) | | Secretary since 1985 | | Senior Vice President, Neuberger, since 2007; Vice President-Mutual Fund Board Relations, Management, since 2000 and Assistant Secretary since 2004; formerly, Vice President, Neuberger, 2002 to 2006 and Employee since 1999; Secretary, fifteen registered investment companies for which Management acts as investment manager and administrator (three since 1985, three since 2002, two since 2003, four since 2004, one since 2005 and two since 2006). |
| | |
| Robert Conti (51) | | Vice President since 2000 | | Managing Director, Neuberger, since 2007; formerly, Senior Vice President, Neuberger, 2003 to 2006; formerly, Vice President, Neuberger, 1999 to 2003; Senior Vice President, Management, since 2000; Vice President, fifteen registered investment companies for which Management acts as investment manager and administrator (three since 2000, three since 2002, two since 2003, four since 2004, one since 2005 and two since 2006). |
| | |
| Brian J. Gaffney (54) | | Vice President since 2000 | | Managing Director, Neuberger, since 1999; Senior Vice President, Management, since 2000; Vice President, fifteen registered investment companies for which Management acts as investment manager and administrator (three since 2000, three since 2002, two since 2003, four since 2004, one since 2005 and two since 2006). |
| | |
| Maxine L. Gerson (57) | | Chief Legal Officer since 2005 (only for purposes of sections 307 and 406 of the Sarbanes-Oxley Act of 2002) | | Senior Vice President, Neuberger, since 2002; Deputy General Counsel and Assistant Secretary, Neuberger, since 2001; Senior Vice President, Management, since 2006; Secretary and General Counsel, Management, since 2004; Chief Legal Officer (only for purposes of sections 307 and 406 of the Sarbanes-Oxley Act of 2002), fifteen registered investment companies for which Management acts as investment manager and administrator (thirteen since 2005 and two since 2006). |
| | |
| Sheila R. James (42) | | Assistant Secretary since 2002 | | Vice President, Neuberger, since 2008 and Employee since 1999; formerly, Assistant Vice President, Neuberger, 2007; Assistant Secretary, fifteen registered investment companies for which Management acts as investment manager and administrator (six since 2002, two since 2003, four since 2004, one since 2005 and two since 2006). |
81
| | | | |
| Name, Age, and Address(1) | | Position and
Length of Time
Served(2) | | Principal Occupation(s)(3) |
| | |
| Kevin Lyons (52) | | Assistant Secretary since 2003 | | Assistant Vice President, Neuberger, since 2008 and Employee since 1999; Assistant Secretary, fifteen registered investment companies for which Management acts as investment manager and administrator (eight since 2003, four since 2004, one since 2005 and two since 2006). |
| | |
| John M. McGovern (38) | | Treasurer and Principal Financial and Accounting Officer since 2005; prior thereto, Assistant Treasurer since 2002 | | Senior Vice President, Neuberger, since 2007; formerly, Vice President, Neuberger, 2004 to 2006; Employee, Management, since 1993; Treasurer and Principal Financial and Accounting Officer, fifteen registered investment companies for which Management acts as investment manager and administrator (thirteen since 2005 and two since 2006); formerly, Assistant Treasurer, fourteen registered investment companies for which Management acts as investment manager and administrator, 2002 to 2005. |
| | |
| Frank Rosato (37) | | Assistant Treasurer since 2005 | | Vice President, Neuberger, since 2006; Employee, Management, since 1995; Assistant Treasurer, fifteen registered investment companies for which Management acts as investment manager and administrator (thirteen since 2005 and two since 2006). |
| | |
| Frederic B. Soule (62) | | Vice President since 2000 | | Senior Vice President, Neuberger, since 2003; formerly, Vice President, Neuberger, 1999 to 2002; Vice President, fifteen registered investment companies for which Management acts as investment manager and administrator (three since 2000, three since 2002, two since 2003, four since 2004, one since 2005 and two since 2006). |
| | |
| Chamaine Williams (37) | | Chief Compliance Officer since 2005 | | Senior Vice President, Neuberger, since 2007; Chief Compliance Officer, Management, since 2006; Senior Vice President, Lehman Brothers Inc., since 2007; formerly, Vice President, Lehman Brothers Inc., 2003 to 2006; Chief Compliance Officer, fifteen registered investment companies for which Management acts as investment manager and administrator (fourteen since 2005 and one since 2006); formerly, Chief Compliance Officer, Lehman Brothers Asset Management Inc., 2003 to 2007; formerly, Chief Compliance Officer, Lehman Brothers Alternative Investment Management LLC, 2003 to 2007; formerly, Vice President, UBS Global Asset Management (US) Inc. (formerly, Mitchell Hutchins Asset Management, a wholly-owned subsidiary of PaineWebber Inc.), 1997 to 2003. |
| (1) | The business address of each listed person is 605 Third Avenue, New York, New York 10158. |
| (2) | Pursuant to the By-Laws of the Trust, each officer elected by the Trustees shall hold office until his or her successor shall have been elected and qualified or until his or her earlier death, inability to serve, or resignation. Officers serve at the pleasure of the Trustees and may be removed at any time with or without cause. |
| (3) | Except as otherwise indicated, each individual has held the positions shown for at least the last five years. |
82
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to portfolio securities is available, without charge, by calling 1-888-556-9030 (toll-free) and on the website of the Securities and Exchange Commission, at www.sec.gov. Information regarding how the Trust voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is also be available, without charge, by calling 1-888-556-9030 (toll-free) and on the website of the Securities and Exchange Commission, at www.sec.gov.
Quarterly Portfolio Schedule
The Trust files a complete schedule of portfolio holdings for each Master Series with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Forms N-Q are available on the Securities and Exchange Commission’s website at www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The information on Form N-Q is available upon request, without charge, by calling 1-888-556-9030 (toll-free).
Notice to Shareholders (Unaudited)
For the fiscal period ended March 31, 2008, the percentages representing the portion of distributions from net investment income, which are exempt from federal tax, other than alternative minimum tax are as follows:
| | | |
| Tax-Free Money Fund | | 100 | % |
| National Municipal Money Fund | | 100 | % |
83
Investment manager: Neuberger Berman Management Inc.
Sub-adviser: Lehman Brothers Asset Management LLC
Neuberger Berman Management Inc.
605 Third Avenue, 2nd Floor
New York, NY 10158-0180
Neuberger Berman Government Money Fund
Retail Services: 800.877.9700
Broker/Dealer and Institutional Services: 800.366.6264
Web Site: www.nb.com
Lehman Brothers Tax-Free Money Fund
Lehman Brothers National Municipal Money Fund
Broker/Dealer and Institutional Support Services: 888.556.9030
Web Site: www.lehmanam.com
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.
I0162 05/08
Item 2. Code of Ethics
The Board of Trustees (“Board”) of Lehman Brothers Income Funds (“Registrant”) adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions (“Code of Ethics”). For the period covered by this Form N-CSR, there were no amendments to the Code of Ethics and there were no waivers from the Code of Ethics granted to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
A copy of the Code of Ethics was included as an exhibit to Registrant’s Form N-CSR filed on July 10, 2006. The Code of Ethics is also available, without charge, by calling 1-800-877-9700 (toll-free).
Item 3. Audit Committee Financial Expert
The Board has determined that the Registrant has three audit committee financial experts serving on its audit committee. The Registrant’s audit committee financial experts are Martha Goss, Howard Mileaf and George Morriss. Ms. Goss, Mr. Mileaf and Mr. Morriss are independent trustees as defined by Form N-CSR.
Item 4. Principal Accountant Fees and Services
The financial information provided below is that of the Registrant. The Board approved a change to Neuberger Berman Government Money Fund’s (“Government Money Fund”) fiscal year end from October 31 to March 31 in 2007. Accordingly, the fees charged by Ernst & Young, LLP (“E&Y”) and reported below for Government Money Fund are for the fiscal year ended October 31, 2006, the fiscal period of November 1, 2006 to March 31, 2007 and the fiscal year ended March 31, 2008.
The Board also approved a change to Lehman Brothers National Municipal Money Fund’s (“National Municipal Money Fund”) and Lehman Brothers Tax-Free Money Fund’s (“Tax-Free Money Fund”) fiscal year end from October 31 to March 31 in 2008. Accordingly, the fees charged by E&Y and Tait, Weller & Baker LLP (“TW&B”) and reported below for National Municipal Money Fund and Tax-Free Money Fund are for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007 and the fiscal period of November 1, 2007 to March 31, 2008.
This N-CSR relates only to Government Money Fund, National Municipal Money Fund and Tax-Free Money Fund (collectively, the “Funds”). However, the fees disclosed for the fiscal years ended October 31, 2006 and October 31, 2007 are the aggregate fees charged by E&Y and TW&B to the Registrant for those periods. E&Y serves as independent registered public accounting firm to Government Money Fund and National Municipal Money Fund. TW&B serves as independent registered public accounting firm to Tax-Free Money Fund.
(a) Audit Fees
The aggregate fees billed for professional services rendered by E&Y for the audit of the annual financial statements or services that are normally provided by E&Y in connection with statutory and regulatory filings or engagements were $225,000, $216,000, $15,000, $15,000 and $18,800 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007, the fiscal period of November 1, 2006 to March 31, 2007, the fiscal year ended March 31, 2008 and the fiscal period of November 1, 2007 to March 31, 2008, respectively.
The aggregate fees billed for professional services rendered by TW&B for the audit of the annual financial statements or services that are normally provided by TW&B in connection with statutory and regulatory filings or engagements were $44,900, $38,700 and $4,900 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007 and for the fiscal period of November 1, 2007 to March 31, 2008, respectively.
(b) Audit-Related Fees
The aggregate fees billed to the Registrant for assurance and related services by E&Y that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported above in Audit Fees were $0, $0, $0, $0 and $0 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007, the fiscal period of November 1, 2006 to March 31, 2007, the fiscal year ended March 31, 2008 and the fiscal period of November 1, 2007 to March 31, 2008, respectively.
The fees billed to other entities in the investment company complex for assurance and related services by E&Y that are reasonably related to the performance of the audit that the Audit Committee was required to approve because the engagement related directly to the operations and financial reporting of the Registrant were $0, $0, $0, $0 and $0 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007, the fiscal period of November 1, 2006 to March 31, 2007, the fiscal year ended March 31, 2008 and the fiscal period of November 1, 2007 to March 31, 2008, respectively.
The aggregate fees billed to the Registrant for assurance and related services by TW&B that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported above in Audit Fees were $0, $0 and $0 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007 and for the fiscal period of November 1, 2007 to March 31, 2008, respectively.
The fees billed to other entities in the investment company complex for assurance and related services by TW&B that are reasonably related to the performance of the audit that the Audit Committee was required to approve because the engagement related directly to the operations and financial reporting of the Registrant were $0, $0 and $0 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007 and for the fiscal period of November 1, 2007 to March 31, 2008, respectively.
(c) Tax Fees
The aggregate fees billed to the Registrant for professional services rendered by E&Y for tax compliance, tax advice, and tax planning were $71,000, $63,600, $3,000, $3,000 and $9,000 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007, the fiscal period of November 1, 2006 to March 31, 2007, the fiscal year ended March 31, 2008 and the fiscal period of November 1, 2007 to March 31, 2008, respectively. The nature of the services provided were tax compliance, tax advice, and tax planning. The Audit Committee approved 0%, 0%, 0%, 0% and 0% for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007, the fiscal period of November 1, 2006 to March 31, 2007, the fiscal year ended March 31, 2008 and the fiscal period of November 1, 2007 to March 31, 2008, respectively, of these services provided by E&Y pursuant to the waiver provisions of Rule 2-01(c) (7)(i)(C) of Regulation S-X.
The fees billed to other entities in the investment company complex for professional services rendered by E&Y for tax compliance, tax advice, and tax planning that the Audit Committee was required to approve because the engagement related directly to the operations and financial reporting of the Registrant were $0, $0, $7,000, $7,100 and $7,100 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007, the fiscal period of November 1, 2006 to March 31, 2007, the fiscal year ended March 31, 2008 and the fiscal period of November 1, 2007 to March 31, 2008, respectively. The nature of the services provided were tax compliance, tax advice, and tax planning. The Audit Committee approved 0%, 0%, 0%, 0% and 0% for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007, the fiscal period of November 1, 2006 to March 31, 2007, the fiscal year ended March 31, 2008 and the fiscal period of November 1, 2007 to March 31, 2008, respectively, of these services provided by E&Y pursuant to the waiver provisions of Rule 2-01(c)(7)(i)(C) of Regulation S-X.
The aggregate fees billed to the Registrant for professional services rendered by TW&B for tax compliance, tax advice, and tax planning were $6,600, $6,400 and $1,600 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007 and for the fiscal period of November 1, 2007 to March 31, 2008, respectively. The nature of the services provided were tax compliance, tax advice, and tax planning. The Audit Committee approved 0%, 0% and 0% for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007 and for the fiscal period of November 1, 2007 to March 31, 2008, respectively, of these services provided by TW&B pursuant to the waiver provisions of Rule 2-01(c)(7)(i)(C) of Regulation S-X.
The fees billed to other entities in the investment company complex for professional services rendered by TW&B for tax compliance, tax advice, and tax planning that the Audit Committee was required to approve because the engagement related directly to the operations and financial reporting of the Registrant were $0, $0 and $1,600 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007 and for the fiscal period of November 1, 2007 to March 31, 2008, respectively. The nature of the services provided were tax compliance, tax advice, and tax planning. The Audit Committee approved 0%, 0% and 0% for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007 and for the fiscal period of November 1, 2007 to March 31, 2008, respectively, of these services provided by TW&B pursuant to the waiver provisions of Rule 2-01(c)(7)(i)(C) of Regulation S-X.
(d) All Other Fees
The aggregate fees billed to the Registrant for products and services provided by E&Y, other than services reported in Audit Fees, Audit-Related Fees, and Tax Fees were $0, $0, $0, $0 and $0 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007, the fiscal period of November 1, 2006 to March 31, 2007, the fiscal year ended March 31, 2008 and the fiscal period of November 1, 2007 to March 31, 2008, respectively.
The fees billed to other entities in the investment company complex for products and services provided by E&Y, other than services reported in Audit Fees, Audit-Related Fees, and Tax Fees, that the Audit Committee was required to approve because the engagement related directly to the operations and financial reporting of the Registrant were $0, $0, $0, $0 and $0 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007, the fiscal period of November 1, 2006 to March 31, 2007, the fiscal year ended March 31, 2008 and the fiscal period of November 1, 2007 to March 31, 2008, respectively.
The aggregate fees billed to the Registrant for products and services provided by TW&B, other than services reported in Audit Fees, Audit-Related Fees, and Tax Fees were $0, $0 and $0 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007 and for the fiscal period of November 1, 2007 to March 31, 2008, respectively.
The fees billed to other entities in the investment company complex for products and services provided by TW&B, other than services reported in Audit Fees, Audit-Related Fees, and Tax Fees, that the Audit Committee was required to approve because the engagement related directly to the operations and financial reporting of the Registrant were $0, $0 and $0 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007 and for the fiscal period of November 1, 2007 to March 31, 2008, respectively.
(e) Audit Committee’s Pre-Approval Policies and Procedures
(1) The Audit Committee’s pre-approval policies and procedures for the Registrant to engage an accountant to render audit and non-audit services delegate to each member of the Committee the power to pre-approve services between meetings of the Committee.
(2) None of the services described in paragraphs (b) through (d) above were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Hours Attributed to Other Persons
Not applicable.
(g) Non-Audit Fees
Non-audit fees billed by E&Y for services rendered to the Registrant were $71,000, $63,600, $3,000, $3,000 and $9,000 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007, the fiscal period of November 1, 2006 to March 31, 2007, the fiscal year ended March 31, 2008 and the fiscal period of November 1, 2007 to March 31, 2008, respectively.
Non-audit fees billed by E&Y for services rendered to the Registrant’s investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant were $475,000, $425,000, $475,000, $466,800 and $460,800 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007, the fiscal period of November 1, 2006 to March 31, 2007, the fiscal year ended March 31, 2008 and the fiscal period of November 1, 2007 to March 31, 2008, respectively.
Non-audit fees billed by TW&B for services rendered to the Registrant were $6,600, $6,400 and $1,600 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007 and for the fiscal period of November 1, 2007 to March 31, 2008, respectively.
Non-audit fees billed by TW&B for services rendered to the Registrant’s investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant were $32,000, $44,100 and $48,900 for the fiscal year ended October 31, 2006, the fiscal year ended October 31, 2007 and for the fiscal period of November 1, 2007 to March 31, 2008, respectively.
(h) The Audit Committee of the Board considered whether the provision of non-audit services rendered to the Registrant’s investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant that were not pre-approved by the Audit Committee because the engagement did not relate directly to the operations and financial reporting of the Registrant is compatible with maintaining E&Y’s and TW&B’s independence.
Item 5. Audit Committee of Listed Registrants
Not applicable to the Registrant.
Item 6. Schedule of Investments
The complete schedule of investments for the Funds is disclosed in the Registrant’s Annual Report, which is included as Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable to the Registrant.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to the Registrant.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable to the Registrant.
Item 10. Submission of Matters to a Vote of Security Holders
There were no changes to the procedures by which shareholders may recommend nominees to the Board.
Item 11. Controls and Procedures
(a)
Based on an evaluation of the disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “Act”)) as of a date within 90 days of the filing date of this document, the Chief Executive Officer and Treasurer and Principal Financial and Accounting Officer of the Registrant have concluded that such disclosure controls and procedures are effectively designed to ensure that information required to be disclosed by the Registrant on Form N-CSR and Form N-Q is accumulated and communicated to the Registrant’s management to allow timely decisions regarding required disclosure.
(b)
There were no significant changes in the Registrant’s internal controls over financial reporting (as defined in rule 30a-3(d) under the Act) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Exhibits
(a)(1)
A copy of the Code of Ethics is incorporated by reference to the Registrant’s Form N-CSR, Investment Company Act file number 811-3802 (filed July 10, 2006).
(a)(2)
The certifications required by Rule 30a-2(a) of the Act and Section 302 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) are filed herewith.
(a)(3)
Not applicable.
(b)
The certifications required by Rule 30a-2(b) of the Act and Section 906 of the Sarbanes-Oxley Act are filed herewith.
The certifications provided pursuant to Rule 30a-2(b) of the Act and Section 906 of the Sarbanes-Oxley Act are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”), or otherwise subject to the liability of that section. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the Registrant specifically incorporates them by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LEHMAN BROTHERS INCOME FUNDS
By: /s/ Peter E. Sundman
Peter E. Sundman
Chief Executive Officer
Date: June 5, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Peter E. Sundman
Peter E. Sundman
Chief Executive Officer
Date: June 5, 2008
By: /s/ John M. McGovern
John M. McGovern
Treasurer and Principal Financial
and Accounting Officer
Date: June 5, 2008
