Neuberger Berman Annual Report 2016

FY2016 Annual Report · Neuberger Berman

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| 2016 ANNUAL REPORT |

COVER IMAGE
OUR NEW GLOBAL HEADQUARTERS—
1290 AVENUE OF THE AMERICAS

In the culmination of a multiyear, multifaceted
effort, in late 2016 we began to relocate personnel
into our new global headquarters at 1290 Avenue
of the Americas in New York City. With work areas
designed with input from employees themselves,
the new space reflects the firm’s independent,
entrepreneurial spirit and better facilitates the
collaboration that fuels our investment-driven culture.

This is an exciting next step in the history of
Neuberger Berman. We look forward to sharing
the new space with you.

TABLE OF CONTENTS

A MESSAGE FROM OUR CEO
EQUITY
PERSPECTIVES: ESG
FIXED INCOME
PERSPECTIVES: CULTURE
ALTERNATIVES
PERSPECTIVES: RISK MANAGEMENT
QUANTITATIVE AND MULTI-ASSET CLASS

PERSPECTIVES: CLIENT ENGAGEMENT
PRIVATE CLIENT
PERSPECTIVES: CORPORATE SOCIAL RESPONSIBILITY
CLIENT COVERAGE
PERSPECTIVES: FINANCIAL RISK MANAGEMENT
FINANCIAL HIGHLIGHTS
LEADERSHIP

36
37
42
43
49
49
50

3
15
20
21
26
27
32
33

NEUBERGER BERMAN
OUR MISSION IS TO PARTNER WITH CLIENTS TO ACHIEVE
THEIR UNIQUE INVESTMENT OBJECTIVES

Neuberger Berman was founded in 1939 to do one thing: deliver compelling investment results for our clients
over the long term. This remains our singular purpose today, driven by a culture rooted in deep fundamental
research, the pursuit of investment insight, and continuous innovation on behalf of clients, and facilitated by
the free exchange of ideas across the organization.

As a private, independent, employee-owned investment manager, Neuberger Berman is structurally aligned
with the long-term interests of our clients. We have no external parent or public shareholders to serve, nor
other lines of business to distract us from our core mission. And with our employees and their families invested
alongside our clients—plus 100% of employee deferred cash compensation directly linked to team and firm
strategies—we are truly in this together.

From offices in 28 cities across the globe, Neuberger Berman manages a range of equity, fixed income,
private equity and hedge fund strategies on behalf of institutions, advisors and individual investors worldwide.
With more than 500 investment professionals and over 1,900 employees in total, Neuberger Berman has
built a diverse team of individuals united in their commitment to client outcomes and investment excellence.
Our culture has afforded us enviable retention rates among our senior investment staff and has earned us a
citation as the top-ranked firm (among those with 1,000 or more employees) in the Pensions & Investments
2016 Best Places to Work in Money Management survey, after we had finished in the top three from 2013 – 2015.

CLIENT ALIGNMENT

EXPERIENCE AND STABILITY

100%

Deferred cash compensation directly
linked to team and firm strategies

96%

Annualized retention rate of senior investment
professionals* since becoming an independent
company in 2009

PARTNERSHIP AND INNOVATION

BREADTH OF PERSPECTIVES

75+

Years of collaborating with our clients to
overcome their challenges

500+

Investment professionals offering different
viewpoints on markets, economics and strategies

*Senior Vice Presidents and Managing Directors

2016 ANNUAL REPORT NEUBERGER BERMAN | 1

| INVESTMENT PLATFORM |

BREADTH OF INDEPENDENT PERSPECTIVES ACROSS ASSET CLASSES

EQUITY

FIXED INCOME

ALTERNATIVES

AUM $255BN1

INVESTMENT
PROFESSIONALS

$95bn
230

FUNDAMENTAL

Global/EAFE
U.S. Value/Core/Growth
Emerging Markets
Regional EM, China
Socially Responsive Investing
Income Strategies:

– MLP
– REITs

$114bn
145

Global Investment Grade
Global Non-Investment Grade
Emerging Markets
Opportunistic/Unconstrained
Municipals
Specialty Strategies:

– CLO Mezzanine
– Currency
– Corporate Hybrids

QUANTITATIVE

Global
U.S.
Emerging Markets
Custom Beta

AUM and Committed Capital

$55bn
116

Private Equity:

Hedge Funds:

– Primaries
– Co-Investments
– Secondaries
– Specialty Strategies
– Minority Stakes in

– Multi-Manager
– Equity Long/Short
– Credit Long/Short
– Event Driven

Alternative Firms/Dyal

Alternative Credit:

– Private Credit
– Residential Loans
– Special Situations

Risk Premia
Options
Global Macro
Commodities

MULTI-ASSET CLASS SOLUTIONS AND STRATEGIC PARTNERSHIPS

FUNDAMENTAL

Global Relative and Absolute Return
Income Focused
Inflation Management
Liability Aware

QUANTITATIVE

Risk Parity

Global Tactical Asset Allocation

1 As of December 31, 2016. Firm assets under management (AUM) includes $95.1 billion in Equity assets, $114.2 billion in Fixed Income assets and $45.9 billion in Alternatives assets under management.
Alternatives AUM includes AUM & Committed Capital since inception, which reflects contractual commitments to fund investments advised by NB Alternatives Advisers LLC, including those still in documentation,
since inception (the oldest mandate of which was founded in 1981) (“Committed Capital”).

2 | NEUBERGER BERMAN ANNUAL REPORT 2016

GEORGE H. WALKER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

A MESSAGE FROM OUR CEO

2016 was a year of great change—in geopolitics, in economic policy and expectations, and in financial markets. We witnessed
a strain of nationalistic populism migrate from the fringes of political discourse to the mainstream and in the process inspire
the emergence of a new investment paradigm. Risk assets of all stripes and geographies finished an up-and-down year over-
whelmingly up, some quite impressively. Bond markets also generated gains for many investors, though I believe we have seen
the beginning of the end of their 30-year bull run.

As a firm, Neuberger Berman entered 2017 buoyed by strong invest-
ment performance consistent with our singular focus on delivering
compelling long-term results on behalf of our clients. In the U.S.,
Barron’s recognized us as a top-10 fund family for 2016 amongst a
long list of competitors we admire. During the year clients entrusted
us with an additional $1.4 billion of their irreplaceable assets, which—
together with solid investment performance—raised firm assets under
management to a record-high $255 billion.

Diversity of viewpoints, unity of intent. Our portfolio managers
are critical, independent thinkers who benefit from being part of
a global, diverse investment organization composed of more than
500 investors with different perspectives on markets, economies and
strategies—equity and credit, public and private, long and short, large
and small. That breadth of perspective helps bolster conviction and
often results in portfolios with high active share and the potential for
meaningful alpha generation.

Our operating philosophy remains fundamental to our success:

Investing for clients and with clients. Neuberger Berman is a
private, independent, employee-owned investment manager, a structure
we believe best aligns us—both as an organization and as individuals—
with the long-term interests of our clients. With no external parent or
public shareholders to serve, we are empowered to run our business
with a lasting, client-centric perspective. With no proprietary trading
or market-making operations, we are able to concentrate our efforts
solely on our core activity of investment management. And with
our employees and their families having significant personal capital
invested alongside that of our clients—plus 100% of employee
deferred cash compensation directly linked to team and firm strategies—
we are truly in this together.

Yesterday, today and tomorrow. Neuberger Berman by design
attracts individuals who share a passion for investing and who thrive
in an environment of rigorous analysis, challenging dialogue, and
professional and personal respect. In a testament to the strength of
the culture we have built—honed by more than 75 years of markets
and countless “once-in-a-lifetime” events—these professionals have
tended to stay with the firm, stability that over time drives results and
consistency of process. 2016 was another extraordinary year in this
regard, with no portfolio managers departing for a competitor yet again.

2016 ANNUAL REPORT NEUBERGER BERMAN | 3

ASSETS UNDER MANAGEMENT
$255 BILLION
AS OF DECEMBER 31, 2016

BY ASSET CLASS

EQUITY
$95 Billion

32% U.S. VALUE
28% U.S. CORE
16% GLOBAL / INTERNATIONAL
10% INCOME
6% U.S. GROWTH
5% SOCIALLY REPONSIVE
3% QUANTITATIVE

FIXED INCOME
$114 Billion

44% INVESTMENT GRADE
32% NON-INVESTMENT GRADE
8% MUNICIPALS
8% EMERGING MARKETS DEBT
8% OPPORTUNISTIC / UNCONSTRAINED

ALTERNATIVES
$55 Billion

29% PRIMARIES
16% MINORITY STAKES IN ALTERNATIVE
FIRMS / DYAL
16% SECONDARIES
15% CO-INVESTMENTS
15% HEDGE FUNDS / OPTIONS
5% ALTERNATIVE CREDIT
4% SPECIALTY STRATEGIES

Alignment between clients and employees is fundamental. In that
spirit we are proud to note that Neuberger Berman recently was
named the #1 firm (amongst those with 1,000 or more employees)
in the Pensions & Investments 2016 “Best Places to Work in Money
Management” survey after ranking in the top five in each of the prior
three years. Attracting and retaining the best employees is fundamental
to our ability to deliver compelling long-term investment results for
clients, and we continue to invest in our team and our culture.

2016 IN REVIEW: A BUMPY RIDE HIGHER
As 2016 began against a backdrop of falling markets and eroding in-
vestor sentiment, we encouraged clients to look beyond the noise and
instead focus on the fundamentals. To quote from my letter introducing
our last Annual Report, “At the risk of grossly oversimplifying, in rough
seas we believe ‘staying the course’ is a better approach than ‘trust
your gut’ when waves grow.” We noted that the previous five years
had delivered annualized market returns of 10.2% (as measured by the
S&P 500)—though investors had to withstand intra-year drawdowns
averaging 11.0% in order to achieve them.

This trend extended into 2016. Fears of a slowing China and weak oil
prices early in the year were followed by the summer Brexit surprise
and the U.S. election in the fall. Big waves indeed. But the recoveries
that followed were even more impressive. The S&P 500 Index, for ex-
ample, posted a total return of nearly 12% for 2016 after being down
more than 10% at its 2016 trough. History repeats.

AUM BY CLIENT REGION

AUM BY CLIENT TYPE

72% AMERICAS

65% PENSION FUNDS, SOVEREIGN WEALTH FUNDS AND OTHER INSTITUTIONS

17% EUROPE/MIDDLE EAST

18% FINANCIAL INSTITUTIONS, RIAs AND ADVISORS

11% ASIA PACIFIC

17% PRIVATE CLIENTS

4 | NEUBERGER BERMAN ANNUAL REPORT 2016

Neuberger Berman

Neuberger Berman Group

MARKETS REBOUNDED SHARPLY FROM INTRA-YEAR LOWS

BROAD PREDICTIONS FOR 2016

✓ GOT IT RIGHT

✗ GOT IT WRONG

Total Return: Full Year 2016

Total Return: January 1 Through 2016 Trough

20%

15%

10%

-5%

-10%

-15%

S&P 500 Index

MSCI EAFE Index

BofA Merrill Lynch
U.S. High Yield Master II
Constrained Index

Source: Bloomberg.

As shown to the right, our broad predictions for 2016, delivered each
December as part of our Solving series, were largely confirmed, though
our caution in emerging markets and portions of the commodities
complex proved incorrect.

Ultimately, as you can see on page 6, investors who stayed the course
in 2016 were able to participate in mostly rising markets, aside from
China’s A-share equity market and certain currencies. Within fixed
income you’ll notice the spike in U.S. high yield bonds. With rebounding
oil prices and renewed expectations for economic growth, high yield
bonds had an outstanding 2016; the BofA Merrill Lynch U.S. High
Yield Master II Constrained Index gained more than 17% for the year.
Tom O’Reilly, who heads up our non-investment grade bond team,
continues to believe the high yield market is compensating investors
for default risk and that defaults likely will remain below the historical
average given stable U.S. economic growth.

Total Return Full Year

Total Return Through Trough 2/11/2016

ECONOMY
✓ Low-to-moderate global economic growth
✓ Low interest rates as central banks, overall, remain accommodative
✓ Low inflation
✓ Probability of near-term global recession remains low

EQUITIES
✓ U.S. stock market reflects reasonable valuations: muted outlook for

2016 earnings

✓ European equities remain supported by ECB stimulus as business

conditions improve

✓ Japan stocks benefit from weak yen and reallocation of pension fund
assets, but are threatened by slowing China and weak sentiment
✗ Emerging market equities facing headwinds including a slowing

China, a strong U.S. dollar and low commodity prices

FIXED INCOME
✓ Corporate spreads attractive across quality spectrum
✓ Underweight view on most developed market government securities,

as low yields do not compensate for risk of higher rates

✗ Cautious on emerging market debt, with bias toward hard-currency

sovereigns

ALTERNATIVES
✗ Neutral view on commodities due to recent significant selloff
✓ Hedge funds: Directional and absolute return strategies may benefit
from increased volatility and a rising U.S. interest rate environment
✓ Private markets: Seek to capture illiquidity premium in private debt;

high cash flow; short J-curve

2016 ANNUAL REPORT NEUBERGER BERMAN | 5

THE TREND ACROSS MARKETS WAS BROADLY HIGHER IN 2016
Total Return in U.S. Dollars

EQUITY

FIXED INCOME

CURRENCY

COMMODITIES

60%

50%

40%

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2017: “SEA CHANGE” BRINGS MORE GROWTH,
MORE RISK
When considering the investment environment moving forward, we
must recognize that:

• Market prices appear expensive based on historical norms as a
result of years of extraordinary central bank policies globally.

• The global economy is stronger than widely perceived and is

improving, albeit with dispersion among countries.

• The U.S. election set the stage for pro-growth economic policy while

also ushering in remarkable uncertainty.

The performance of equity markets over the intermediate term has
been stunning. As of March 31, 2017, the S&P 500 Index, for example,
stands about 3.5 times higher than it did eight years ago when
economies and markets were careening into the abyss of the Great
Recession. Perhaps more impressive is the equity market’s level relative
to previous cyclical peaks; the S&P 500 is more than 50% above its

highs in October 2007 and March 2000. In contrast, U.S. home prices
remain 6% below their 2006 top. And while the equity bull market has
been impressive in length and magnitude, the 30-year run in the bond
market was even more extraordinary, though I believe it ended in July
2016 when the 10-year Treasury rate hit 1.36%.

As a result of this nearly eight-year run, equity market valuations in the
U.S. have moved to the high end of their historical range; the S&P 500
now trades at around 18 times forward earnings, a level not seen since
2004. These levels imply caution but certainly not alarm given the low
rate environment, modest inflation, our upbeat earnings expectations
and the potential emergence of a more business-friendly landscape
that features lower taxes, reduced regulatory burdens and robust
fiscal spending programs. Of course, the path to that benign business
landscape runs through a dysfunctional Congress and an unpredictable
White House. Expect setbacks, delays and confusion, all of which will
likely lead to market volatility. Broad market selloffs are to be expected
and—if economic fundamentals remain intact—should represent
buying opportunities.

6 | NEUBERGER BERMAN ANNUAL REPORT 2016

Stocks in the euro zone, on the other hand, remain below pre-recession
highs, and the region‘s forward P/E ratio—just shy of 15—is more
attractive given improving fundamentals and the European Central
Bank’s accommodative stance. Volatility is likely here, too, as near-term
headlines will be dominated by a daunting political calendar and the
beginnings of Britain’s divorce proceedings from the European Union.

After struggling for much of 2016, Japanese stocks spiked following
the U.S. elections, driven in part by the prospect of U.S. growth and a
weaker yen benefitting Japanese exporters; the Nikkei 225 rose more
than 17% in local-currency terms between Election Day and year-end to
reclaim pre-recession highs. Japanese corporations continue to improve
governance, and regulators there are among the most balanced
globally. We think the trends toward corporate and regulatory reform
in Japan are real in select cases, and they have enabled us to find more
quality firms on the margin than we have historically despite continued
tepid economic growth in the country. Recently, Benjamin Segal, senior
portfolio manager for global equities, has added to the International
Equity Fund Japanese names such as Kao, a consumer product company
that continues to improve.

Trade vagaries and the prospects of a stronger dollar weighed on
emerging markets in the immediate aftermath of the U.S. election, and
the MSCI EM Index’s failure to participate in the broad November/
December rally took some of the shine off what otherwise was a very
successful year. We expect investors to look past these exogenous
issues in 2017 and increasingly focus on the fundamental improvements
these economies have been delivering of late.

Conditions in the global economy, meanwhile, aren’t nearly as dire
as political discourse may suggest. The U.S. looks to be in pretty good
shape as it continues to expand from the depths of 2009, and we
believe the current probability of recession in the near term is remote.
Reflation has picked up; 2017 GDP likely will materially exceed the 1.6%
expansion of full-year 2016. Europe and Japan are facing political and
trade challenges as monetary stimulus ebbs, though recent economic
data have been above trend. With GDP growth of 1.7% in 2016, the
euro zone last year outpaced the U.S. for the first time since 2008.
Inflation in the region, meanwhile, rose 1.8% year-over-year in January,
a four-year high. Though the improvement in data has stirred calls for
a reduction in European Central Bank support, policymakers are taking
a cautious approach; meanwhile, a stacked political calendar looms.

Japan, too, looks better than it has in years, expanding in all four
quarters of 2016 for annual growth of 1%.

As for the emerging markets, fundamentals have continued to improve
even as the uncertain magnitude and timing of anti-trade action
looms large, as does the impact of rising rates and a strong U.S. dollar.
Real GDP growth in these economies has been stable, while debt
as a percentage of GDP is roughly half that exhibited by developed
economies. This is an environment in which our emerging market debt
managers continue to distinguish themselves. The team’s efforts—led
by Rob Drijkoningen and Gorky Urquieta—were recently recognized
by Professional Pensions, which named Neuberger Berman the 2016
Emerging Market Debt Manager of the Year. The rally in risk assets
following the U.S. elections has reflected the anticipation of more
expansionary policies from the United States. However, Rob and Gorky
believe the strong domestic growth momentum has been even more
important. The uptick in global and Chinese growth and stronger
commodity prices have benefited emerging market hard-currency
spreads, while the lack of U.S. dollar strength has supported foreign
exchange. The team currently has an overweight bias on hard-currency
sovereigns versus corporates, primarily due to relative valuations.
Local-currency bonds are underweight given their vulnerability to
reflation dynamics in the United States and within parts of Asia.

Also constructive on growth in emerging economies is Conrad Saldanha,
who manages our emerging markets equity strategy. He currently
maintains a domestic growth bias, targeting, for example, a diverse set of
consumer staples and technology-related companies that cater to local
markets. Dispersion among emerging equity markets has been rising of
late, belying their reputation as a homogenous asset class.

Unfortunately, economic improvements in recent years mask a growing
wealth inequality; as nations as a whole prosper, too many individuals
are being left behind, and the implications are profound. A recent study
by the Brookings Institution shows that the longevity gap between the
wealthiest 10% and poorest 10% of Americans has more than doubled
since the 1970s. Another disconcerting trend—and one that seemed
to go mostly unnoticed during the U.S. election—is that the population
as a whole is massively unprepared for retirement. According to the
National Institute on Retirement Savings, people aged 40 to 55 have
an average retirement balance of $14,500, which represents only
5 – 10% of what they will need to maintain their standard of living

2016 ANNUAL REPORT NEUBERGER BERMAN | 7

in retirement; 45% of households have no retirement savings at all.
Without action, the number of retirees living in or near poverty will
explode, with enormous political and social consequences—as well as
economic risk. Around the world models exist to address this crisis, but
political will is lacking.

The fallout from widening inequality could be seen throughout the
developed world in 2016, as the disenfranchised middle and lower
classes—feeling squeezed by existential issues like sovereignty, trade,
globalization, immigration and even life expectancy—expressed their
displeasure with the status quo at the voting booth. While Brexit in
the summer and Donald Trump’s victory in the fall were the biggest
examples of this geopolitical trend, its impact also could be seen to
various degrees in Europe, Asia and Latin America. With major elections
coming up in Europe during 2017—and with anti-establishment
candidates making noise in all of them—it’s safe to say that this story
hasn’t yet fully played out, although we do anticipate it decelerating in
2017 as electorates and victors grapple with the consequences of their
decisions and the challenges of governing versus campaigning.

Concurrent with this has been an inflection point in global central
bank policy in which central banks going forward likely will be less
impactful on financial markets than they have been in recent years.
Since the Great Recession, central banks have relied on the use of low
to negative interest rates in order to fuel consumption and combat
deflation. The economic results have been underwhelming, and as a
consequence of these efforts central banks have artificially removed
risk from the economy and thus incentivized greater risk-taking by
market participants.

Rates, while still low by historical standards, already have begun to
moderate, with $16 trillion worth of negative yields as of August 31,
2016, shrinking to $9 trillion by the end of the year on expectations
of greater inflation and higher economic growth. We believe the U.S.
Federal Reserve likely will hike rates three times in 2017; however,
low interest rates globally—particularly in Europe and Japan, where
central banks have driven bond yields below zero in their attempts to
combat deflationary fears—will continue to exert a gravitational pull
on the U.S. rate structure.

YIELDS GLOBALLY HAVE TRENDED HIGHER POST-ELECTION

Global Bond Yields as of 8/31/16

Global Bond Yields as of 12/30/16

APPROX. $16 TRILLION WITH NEGATIVE YIELDS

APPROX. $9 TRILLION WITH NEGATIVE YIELDS

1yr

2yr

3yr

4yr

5yr

6yr

7yr

8yr

9yr

10yr

15yr

20yr

30yr

1yr

2yr

3yr

4yr

5yr

6yr

7yr

8yr

9yr

10yr

15yr

20yr

30yr

Switzerland
Germany
Netherlands
Sweden
Finland
Slovakia
Austria
Denmark
France
Belgium
Latvia
Ireland
Italy
Lithuania
Slovenia
Spain
Portugal
Greece
UK
Japan
Australia
US

< -0.8%

-0.40%

-0.20%

0.2%

0.4%

0.6%

0.8%

1.6%

< 3.2%

Source: Bloomberg.

8 | NEUBERGER BERMAN ANNUAL REPORT 2016

Donald Trump’s election in the U.S. and the pro-growth, pro-inflation
policies he and a Republican legislature are expected to enact represent
a “sea change” for both the global economy and the financial markets.
As investors, there is much to like in the broad strokes of President
Trump’s policy agenda. The repatriation of foreign profits—to the tune
of $2.4 trillion—should lead to an increase in corporate buybacks; our
expectation would be for a spike of about 30%, similar to what we saw
from S&P 500 companies in the two years following the 2004 repatri-
ation tax holiday. A reduction in regulatory burdens is another Trump
proposal that could help fuel another leg higher in U.S. equity markets;
reasonable estimates are that federal agencies have added annual costs
of $112 billion to businesses over the past eight years. Financial services
should be a primary beneficiary. There’s also fiscal stimulus, which is
purported to be massive in scale—infrastructure spending alone has
been floated at $1 trillion—but remains undefined.

Tax reform has gotten perhaps the most attention in the months
immediately following the election, and the changes currently
proposed would have broad implications across countries and
industries, influencing relative economic activity, profitability of

companies, future issuance trends and demand across sectors. At
39%, the U.S. today has the highest statutory corporate tax rate in the
developed world, surpassing even that of France (though the average
effective tax rate for U.S. companies is closer to 27%). Among the tax
reform proposals that have been discussed publicly by the Trump ad-
ministration is one that would slash the statutory rate to 15%, moving
the United States to second-lowest among major countries, behind
only Ireland. The more realistic House proposal, at 20%, puts the U.S.
closer to the international norm. The tax savings from these proposals
would add $8–11 of earnings per share to the S&P 500.

The proposed corporate tax changes are positive overall for businesses
and U.S. economic growth, though the impact will vary greatly across
sectors and individual securities, as depicted in Figure 4. (The border-
adjustment tax is most likely to be altered from its current form.)
Active investment managers have the opportunity to take advantage,
dissecting the potential impacts of different proposals and modeling
them to specific markets, sectors and issues. Notably, the path toward
the passage of any tax reform legislation will be longer and less
straightforward than markets currently anticipate.

IMPACT OF TAX REFORM WILL VARY ACROSS SECTORS
Estimated Impact of House Tax Proposal if Implemented as Written

Reported
Domestic
Revenue

Lower U.S.
Corporate
Tax Rate

Move to
Territorial
Taxation

Border-
Adjustment Tax*

Capex Expensing
Instead of Depreciation

Lost Deductability of
Interest Expense

Impact of:

Financials

Telecom

Health Care

Technology

Industrials

Materials

Consumer Discretionary

Consumer Staples

Energy

S&P 500 Index

78%

100%

82%

42%

63%

51%

76%

73%

58%

71%

▲▲▲

▲▲

▲

▲▲

▲

▲▲▲

▲▲

▲

▲▲

▲

▲▲

▲

▲▲

▲

▼▼

▼

▼▼

▼

▼▼▼

▼▼

▲▲

▲

▲▲

▲

NM**

▼▼

▼

* Assumes 75% pass-through of border-adjustment tax, though certain companies (refiners, for example) may be able to pass through a greater percentage.
** House “blueprint” mentions separate rules for financial services interest expense; our assumption is that financials retain interest deduction.

Net
Impact on
EPS

17.9%

13.9%

6.2%

6.1%

4.9%

1.6%

0.0%

-3.3%

-4.0%

6.0%

2016 ANNUAL REPORT NEUBERGER BERMAN | 9

Unaccounted for in any of the above analysis is the unleashing of
so-called “animal spirits,” that hard-to-measure Keynesian sense of
optimism that can drive economic activity. Anecdotally, we feel these
spirits as we meet with company management teams daily; while the
improved mood is palpable, optimism must translate into confidence
and investment for it to be meaningful. Richard Nackenson—who runs
our Multi-Cap Opportunities Fund, an unconstrained, high-conviction
all-cap equity portfolio—believes Symantec, the bellwether cybersecurity
company with special situation characteristics and free cash flow, is
an example of a company that may thrive in this new environment,
benefitting from strong industry growth, transformative acquisitions,
management change and significant capital return.

The risks posed by the new administration and its expected policies
are significant: growing federal deficits, inflation that may lead to more
aggressive Fed rate hikes, a strong dollar that stifles trade and global
growth—potentially exacerbated by economic nationalist trends
we’re seeing worldwide. While the risk here is high, it is certainly less
dangerous than the potential for conflict with any of Russia, China,
Iran or North Korea, with the last today perhaps posing the greatest
threat to global stability as it works to project its nuclear capabilities.
China’s constructive engagement on this front will be critical.

THE DISTRIBUTION OF RETURN EXPECTATIONS HAS SHIFTED

Normal Distribution

New Regime

Source: Neuberger Berman.

10 | NEUBERGER BERMAN ANNUAL REPORT 2016

Net net, the abovementioned factors suggest a non-normal distribution
of potential economic growth and market outcomes; while the most
likely economic outcome has improved from these policy choices, the
left tail (downside) risk has also increased substantially, reflecting a
higher probability of a substantial correction.

ASSET MANAGEMENT: THE SEEDS OF AN ACTIVE
REBOUND
The environment in the asset management industry remains
challenging, as evinced by the valuations of our publicly traded peers.
Despite record-level equity markets, to which investment managers
are implicitly leveraged, our competitors today are valued 15 – 20%
below where they started 2014. The reasons for this are myriad,
from regulatory modifications to changing distribution economics to
a swing in asset mix to bonds from equities. The primary source of
the industry’s challenges, however, is the relentless shift, particularly
among retail investors, from active to passive strategies and the
substantial fee pressures that have accompanied it.

Over the past decade, $2 trillion of net assets has flowed into passive
equity funds while $1.5 trillion has flowed out of active equity funds;
passive now approaches 40% of the market, according to Morningstar,
and its share is growing with remarkable consistency at just under 2%
per annum. The biggest reason for the migration to passive is, of course,
performance. Simply put, most managers haven’t earned their fees.

In fairness, market conditions have been difficult for those looking to
generate alpha; one factor weighing on active managers has been
the suppression of dispersion as a result of extraordinary central bank
intervention. Wide differences between the best and worst performing
stocks afford a greater opportunity to distinguish winners from losers.
Unprecedented levels of liquidity injected by central banks into the global
financial system coming out of the financial crisis drove down interest
rates and the cost of borrowing; benefitting most from this were those
companies with the worst capital structures and most marginal operating
profits—investments we seek to avoid. Bob D’Alelio and Judy Vale, who
for nearly two decades have managed our Genesis Fund, are quick to
note the prevalence of such poor-quality companies within the small-cap
space; 32% of the companies in the Russell 2000 Index were losing
money as of year-end 2016, and only 9% of the index by market cap
carries an investment grade rating. Throughout their tenures, Bob and
Judy have remained committed to high-quality equities, an approach that
over time has delivered attractive results.

Average manager alpha has been tightly linked to average annual
dispersion over the past 25 years; with dispersion running below
historical levels since 2009, active managers have struggled. However,
we’ve been here before—four times over the past 50 years or so, in
fact, with particularly tough periods in the mid-1970s and late 1990s.
The percentage of funds outperforming the market has varied over
time, demonstrating periods of both extreme outperformance and
extreme underperformance, neither of which has tended to persist. In the
near term this may be helped along by the increase in dispersion that is
likely to accompany the slow normalization of central bank policy.

As a market participant, I find the active/passive debate somewhat
exasperating given the religious fervor with which some proselytize.
The truth, as per usual, is more complex. While there is a large role
for passive investments, it’s not a panacea. Arguments and strat-
egies applicable to the U.S. mega-cap equity market, for example,
do not apply universally, but the distinctions are poorly understood.
Leaving aside the cyclical nature of alpha, structurally markets vary
massively: in their constituents, stability, liquidity characteristics, role
of new issuance, retail/institutional investor composition, presence of
“non-economic actors” (like central banks), dispersion characteristics,
etc. Passive ETFs will undoubtedly see growth as long-term investment
vehicles in places where it is least attractive to be a free rider and/
or where index replication is most challenging, such as high yield or
emerging market debt. Investors need advice. And active managers
ultimately need to deliver outperformance—and should expect clients
to vote with their irreplaceable assets if we don’t.

ALPHA GENERATION HAS TRACKED INTEREST RATES HIGHER

d
e
Y
y
r
u
s
a
e
r
T
r
a
e
Y
-
0
1

10%

-2%

-4%

-6%

a
h
p
A
r
e
g
a
n
a
M
n
a
d
e
M

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12'

'13

'14

'15

'16

10-Year Treasury Yield

Median Manager Alpha

Source: Bloomberg.

WE’VE BEEN HERE BEFORE…
Percentage of Funds and Fund Assets Outperforming S&P 500 on a Five-Year Basis

Percentage of Funds Outperforming

Percentage of Fund Assets Outperforming

100%

80%

60%

40%

20%

0.0%

‘70

‘72

‘74

‘76

‘78

‘80

‘82

‘84

‘86

‘88

‘90

‘92

‘94

‘96

‘98

‘00

‘02

‘04

‘06

‘08

‘10

‘12

‘14

‘16

Source: Nomura/Instinet Quantitative Investment Strategy, Joseph Mezrich.

CLIENT PARTNERSHIP AT NEUBERGER BERMAN
Active managers need to evolve, to improve, to do more for our clients.
Neuberger Berman has long prided itself on evolution with a purpose;
not merely innovation for its own sake, but rather the development
of transformative concepts rooted in practical client applications.
Since 1939 we have been on the forefront of a number of industry
trends now considered commonplace—from the launch of one of
the first no-load funds to the early adoption of socially responsive
investment techniques—as we looked to collaborate with clients to
overcome a variety of challenges, and that spirit of focused innovation
continues today.

Capitalizing on data. 90% of the data in existence today has been
created in the past two years alone; there is opportunity in this trove—
which is expanding at 2.5 quintillion bytes per day—and we must do
more to leverage it on behalf of our clients. To this end, we recently
hired Michael Recce as our Chief Data Scientist, a first for the organiza-
tion. Charged with integrating “big data” into our investment research
process, Michael joins us after leading these efforts at both one of the
largest hedge funds as well as sovereign wealth funds, giving him a
range of perspectives and horizons.

2016 ANNUAL REPORT NEUBERGER BERMAN | 11

extreme cases, we may engage in shareholder activism, as was the case
with long-time technology holding Ultratech. Frustrated by the company’s
refusal to address its long history of stock and operational underperfor-
mance, as well as excessive executive compensation and other gover-
nance failures, Ben Nahum, portfolio manager of our Intrinsic Value Fund,
launched a proxy contest seeking to replace two directors with more
suitable candidates. These candidates were elected to the board, and
the firm was subsequently sold—a positive outcome for shareholders,
including our clients.

Finding new opportunities. Hedge funds play an important role
in client portfolios but haven’t delivered in recent years. In 2016 we
launched our alternative risk premia strategy, managed by Wai Lee
and Ajay Jain. In an environment with low return outlooks and thus a
greater focus on fees and other expenses, alternative risk premia can
provide exposure to characteristics that are similar to hedge funds—
such as absolute return and low correlation to traditional betas—in
a cost-effective, transparent and more liquid structure. We partnered
with clients to develop and launch this strategy, just as we partnered
with independent firms in 2012 to deliver low-fee multi-manager
capabilities under the leadership of David Kupperman and Jeff Majit.

Elevated equity market valuations and low fixed income yields have
led many investors to consider new ways of pursuing returns and
mitigating market volatility, driving interest in our options strategy.
Led by Derek Devens, our Option Group harvests premiums from
selling puts on equity indexes in combination with the income potential
generated by a conservatively managed collateral portfolio. In doing
so, the strategy offers investors lower-volatility exposure relative to
the broader equity markets while promoting return consistency in
disparate market environments. Investors have expressed strong
interest in the concept; introduced in early 2016, our options strategy
grew to more than $1.3 billion in assets under management by
the end of the year. And I suspect this year we’ll see solid activity in
put-writing strategies.

Investing in ESG. The inclusion of environmental, social and gov-
ernance factors in investing decisions has been a part of Neuberger
Berman since the early 1940s. Most visibly today, Ingrid Dyott and
our Socially Responsive Investing team (profiled on page 16) have
made a clarion call that companies with proactive ESG leadership strat-
egies are more likely to outperform. Our commitment to ESG extends
well beyond that team. Notably, our emerging markets debt portfolio
managers Rob Drijkoningen and Gorky Urquieta integrate ESG factors
into their fundamental research process and have been doing so since
the 1990s, as has our Global Non-Investment Grade Credit team under
the leadership of Tom O’Reilly. In addition, we recently hired Jonathan
Bailey as Head of ESG Investing. Jonathan previously served as director
of research for Focusing Capital on the Long Term, a not-for-profit think
tank he helped launch while at McKinsey & Company, where he also
advised pension funds, sovereign wealth funds and asset managers on
a range of topics. Jonathan will lead our ESG effort across investment
teams and work closely with research on our proprietary approach to
ESG integration.

Partnering with leading alternatives managers. In 2016 we
closed on a new Dyal fund, which seeks to acquire minority equity
interests in established alternative asset managers; Dyal owns a piece
of the management company rather than investing as a client/limited
partner. Dyal Capital Partners III raised $5.3 billion and is focused on
private equity firms; as of year-end 2016, the fund was over 60%
committed and generating meaningful cash flow through its investment
in a number of leading players, including EnCap Investments, H.I.G.
Capital, KPS Capital Partners, Silver Lake Technology Management
and Starwood Capital Group. In turn, many Dyal clients have become
important limited partners of these managers, who in our judgment
are some of the finest in the industry.

Pursuing corporate engagement. Related to our focus on corporate
governance is an increased engagement with the management teams of
the companies in which we invest. We search for companies with great
management teams and engage through standard channels like proxy
voting and regular meetings with company managements. On occasions
when these methods fail to produce acceptable results, we take more
significant action. Typically, this is done behind the scenes. In more

12 | NEUBERGER BERMAN ANNUAL REPORT 2016

Expanding the opportunity set. We continue to expand our private
equity and credit capabilities, where today we manage over $45 billion
of commitments.1 Constraints on financial institution balance sheets
have expanded the investment opportunity set for investors like us, for
example in secondary private equity and private credit. While easing
regulatory policy under the Trump administration may re-open the door
for certain bank competitors, we expect the supply of opportunities in
these areas to remain ample.

Over time, the private equity universe has grown, presenting us oppor-
tunities to look beyond public market equities for attractive deals.
Our Alternatives team has relationships with hundreds of private
equity general partners and over the past three years has committed
an average of $5 billion annually across primaries, secondaries,
co-investments, private credit and our specialty strategies. We are a
limited partner in more than 400 funds and sit on 120 advisory boards,
a real competitive advantage for our platform.

Our broad base of relationships enabled our co-investment team to
generate approximately 190 investment opportunities during 2016,
a volume necessary to uncover a few gems in a tough environment
marked by elevated valuations and high leverage. As an example,
we invested in Duff & Phelps in partnership with Carlyle Global
Financial Services Partners and management.

Our secondary team also saw robust deal flow, reviewing over 200
opportunities over the course of the year. We maintained our focus
on privately negotiated small- to mid-sized transactions, avoiding the
hypercompetitive large auctions, an approach that translated into
33 transactions with a median size under $20 million.

Our private credit team seeks to capitalize on inefficiencies that
arise from illiquidity, complexity and volatile markets, again taking
advantage of the connectivity of our private equity platform. One
example is TFS, a leading national provider of facilities services of
material handling equipment owned by CI Capital, a general partner
with whom we have worked on a primary, co-investment and debt
basis. Our private credit team led the $78.5 million second lien
loan priced at L+10.5%, 1% floor, supporting acquisitions by the
company over the last two years.

Renaissance, our Italian mid-market team, partnered with our
co-investment team and Apax Partners to take private Engineering
Ingegneria Informatica S.p.A., Italy’s largest information technology
consulting company, which operates across system integration,
outsourcing and software applications.

We continued to bring to market innovative capabilities to our clients.
On the intermediary side, we joined with a select group of distribution
partners to launch our first registered ‘40 Act private equity fund.
This fund enables participation by a broader set of investors who had
previously been precluded from exposure to private equity because
of investment minimums and/or net-worth limitations. I believe the
“democratization” of alternatives will be an area of significant focus
in the decade ahead.

During the course of 2016 we also augmented our offerings in more
traditional asset classes. We launched an international small-cap
capability as an extension of our Global Equity platform.

Enhancing the engagement model. Engagement, of course,
entails more than just new products; it also means providing the
infrastructure—people, facilities, systems, etc.—necessary to support
our client base. Our Asia Pacific business continues to grow at an
impressive pace bolstered by additional leadership hires, including Jovi
Chen as General Manager of Taiwan and Patrick Liu as Head of our
China Business. East Asia, too, remains a growth engine for the
organization, and we continue to be focused on the needs of these
clients, enhancing our regional product development, client reporting
and client portfolio management functions along with the Japan
desks in New York and Chicago.

To meet the needs of insurance companies worldwide, we significantly
expanded our Insurance Solutions group under the leadership of Matt
Malloy. In 2016 alone we added to the team three senior professionals
who joined us from Goldman Sachs, BlackRock and JPMorgan.

1 As of January 2017. Includes commitments since inception.

2016 ANNUAL REPORT NEUBERGER BERMAN | 13

We also took steps to sharpen our business focus during the year,
selling our only non-investment management business unit—our
private equity fund administration business Capital Analytics—
to MUFG Investor Services. We admire MUFG, an industry leader,
and we believe this is a great home for Capital Analytics, its people
and its clients.

Celebrating milestones. Sometimes staying the course can be
just as fruitful as creating something new and different. A powerful
byproduct of our long-tenured stable of investors and lengthy
organizational history is the product milestones we reach each year.
The Neuberger Berman Equity Income Fund, managed by Sandy Pomeroy
and Rich Levine, marked its 10-year anniversary in November, while
the Neuberger Berman Long Short Fund, managed by Charles Kantor,
reached its five-year anniversary in December. Across their histories
these strategies and their investment teams have shown a deep
commitment to delivering on client expectations.

At the end of the day, those investment management firms best able to
deliver for clients will have great people doing rigorous work together
over extended periods of time in a supportive environment and with
aligned incentives. They will innovate and evolve. We work hard on
each element of this framework: attracting and retaining, engaging
and enabling, learning and improving. We must always strive to do
better. We will—by staying true to our mission and culture, investing in
continuous improvement and building stronger partnerships both with
our clients and within the firm.

On the pages that follow you’ll hear from a broad cross-section of
the professionals here at Neuberger Berman. I hope you find this
information useful. And I hope that some of the passion and dedication
that I have the privilege of experiencing every day comes across in print.

As always, thank you for your support.

14 | NEUBERGER BERMAN ANNUAL REPORT 2016

| BUSINESS REVIEW: EQUITY |

JOSEPH V. AMATO
PRESIDENT AND CHIEF INVESTMENT OFFICER—EQUITIES

A TALE OF TWO HALVES

While equity markets in general moved higher in 2016, the broadly positive returns do not tell the full story. Last year truly
was a tale of two halves; while the first half of 2016 saw a continuation of the performance trends that have dominated
markets over the past few years, the second half delivered a significant shift toward assets that had fallen out of favor. Significant
fundamental issues in early 2016—from plummeting oil prices to signs of weakness in China—had investors concerned
about the prospects for the global economy, sending equity markets sharply lower. As the year progressed, however, events
like Brexit and ultimately the U.S. elections changed the attitude of market participants, ushering in what we believe to be a
paradigm shift characterized by a bias toward economic risk-taking, fiscal stimulus, inflation and higher interest rates.

The net of this shift is a more constructive mindset toward the equity
asset class, though we expect 2017 to be a transitional year and thus a
choppy one for equity markets, especially in the U.S. While expectations
are high given the pro-business stance of the Trump administration
and the Republican-controlled Congress, campaign promises will take
time to enact. Moreover, meaningfully higher market volatility is likely
given the unpredictable nature of the new president and persistent
geopolitical risks, especially with regard to trade.

Meanwhile, the equity market and its persistently low volatility have
continued to present challenges for active investment managers. The
most significant driver of this, in our view, is the distortions in asset
prices caused by the unprecedented bond-buying and interest rate
suppression from essentially all major central banks. In this environ-
ment, companies that in the past would tend to lose market share due
to competitive dynamics—and therefore fail to attract new capital
(thus, companies we would typically avoid investing in)—are now
better positioned to sustain themselves due to their cost of capital
being essentially zero. The slow pullback of the Fed’s quantitative easing
policies and the return to some semblance of rate normalization bodes
well, in our view, for active manager returns. In fact, we’ve already

seen evidence of a nascent rebound in active management beginning
in the second half of 2016 as the dispersion of stock returns picked up.

There are several other trends we expect to impact the dynamics of the
asset management industry in the coming years, and we are focused on
positioning our platform to harness their benefits on behalf of our clients.
To deliver lower-cost solutions we have introduced a select number of
“factor investing” or “smart beta” strategies. In addition, strategies that
incorporate environmental, social and governance (ESG) considerations
into their investment process represent an opportunity for active investors
to further differentiate themselves from passive solutions. Finally, data
proliferation—both in terms of volume and the emergence of new
types of quantifiable information—presents significant opportunity for
managers who can leverage this “big data” in conjunction with their
fundamental investment process (a so-called “quantamental” approach)
to deliver attractive active returns.

Our equity investment capabilities are broad and are meant to capture
the wide range of alpha sources for our clients. Depending on one’s risk
tolerance and time horizon, we believe our firm is well positioned to
deliver value to our clients and to thrive in this dynamic environment.

2016 ANNUAL REPORT NEUBERGER BERMAN | 15

“ The slow pullback of the Fed’s quantitative easing policies and the return to some semblance of rate normalization bodes well, in our view, for active manager returns.”| EQUITY |

INTERNATIONAL EQUITY

EMERGING MARKETS EQUITY

Benjamin E. Segal, CFA

Our International Equity team seeks to identify
best-of-breed non-U.S. companies across
sectors, countries and market caps. Despite
headwinds from political events, we remained
steadfast in our bottom-up investment
approach. For example, in the aftermath of
the U.K.’s Brexit vote in June, we maintained
positions in 15 of our 17 U.K.-based holdings, as we believe our
longer-term investment theses remained intact and the initial selloff
in stocks and sterling looked overdone. Our portfolio positioning
was relatively conservative as we entered 2017, and we were not
tempted to add exposure to cyclical names that had performed
strongly over the previous few months. We continue to focus on
companies that can perform in an uncertain geopolitical and mac-
roeconomic environment, and remain of the view that companies
with attractive end markets, a differentiated offering to customers
and a proven management team can offer investors an attractive
risk/return profile.

Our Emerging Markets Equity team emphasizes
companies that stand to benefit from domestic
growth and seeks these opportunities up and
down the market-cap spectrum. As of year-end
2016, we maintained a 27% allocation to small/
mid-cap names, versus 17% in the MSCI Emerg-
ing Markets Index. We believe many of these

Conrad A. Saldanha, CFA

companies are under-researched and offer the potential for attractive
returns, diversification and domestic growth exposure. Therefore,
our investment process begins with a universe of more than 12,000
companies compared to only 831 in the index, which is predominantly
large-cap focused. For 2016, emerging markets experienced a rebound,
delivering double-digit returns on the heels of a rally in commodities,
which are typically driven by global supply and demand forces. Despite
this run-up, we believe domestically driven names have the potential
to deliver strong risk-adjusted returns going forward and maintain our
focus in this area.

SRI

MULTI-CAP OPPORTUNITIES: THE NACKENSON GROUP

Ingrid S. Dyott

The SRI strategy, which we launched in 1989,
incorporates business, financial and environ-
mental, social and governance (ESG) factors to
identify 30–40 high-quality companies that we
believe have the potential to deliver attractive
returns over a three- to five-year period. Volatility
during 2016 gave us multiple opportunities to
add best-in-class companies that meet our
quality criteria while exiting certain positions,
generally based on valuation considerations.
We look at a wide range of ESG factors in
the businesses we own and track their aggre-
gate impact on our portfolio; as one example,
as of September 30, 2016, our portfolio is 55%
less carbon-intensive than the S&P 500. Responsibility continues to
be a hallmark of quality, and we believe that in a slow-growth world
the operating characteristics inherent in the businesses we currently
own can translate top-line growth in the low- to mid-single digits
into stronger, advantaged bottom-line growth.

Sajjad S. Ladiwala, CFA

16 | NEUBERGER BERMAN ANNUAL REPORT 2016

The Nackenson Group manages the Multi-Cap
Opportunities strategy, which is designed to serve as
a core equity portfolio for clients. We invest across
market capitalizations, sectors and styles with an
emphasis on free cash flow generation and capital
allocation. Our portfolio consists of 30 to 40 core
holdings across three distinct categories of stocks—

Richard S. Nackenson

Special Situation, Opportunistic and Classic investments—that provide
unique sources of alpha. When company specific drivers are in focus, high-
conviction active managers have the potential to add value for their clients
through stock selection. We captured this opportunity in 2016, as correla-
tions declined significantly within the U.S. equity market. We believe the
current environment remains attractive for free cash flow oriented investing.
Company balance sheets are healthy, and free cash flow generation
remains strong. As a result, management teams have a significant opportu-
nity to create value for shareholders by allocating capital effectively.
Dividend increases, share repurchase programs, cash accumulation,
debt retirement, organic growth initiatives, selective and highly accretive
acquisitions—all can accrue to the benefit of equity holders. We believe
deep fundamental analysis centered on free cash flow and capital structure
efficiency may be an important driver of performance going forward.

EQUITY INCOME: THE MESSINGER GROUP

LARGE CAP VALUE

Richard S. Levine

Sandy M. Pomeroy

The Messinger Group has been serving clients’
unique needs for nearly four decades, delivering
customized investment solutions for individuals,
families and institutions based on well-defined
goals spanning multiple generations. Being
an investment manager means understanding
transitions such as retirement, the sale of
a business, divorce, death of a spouse or
even a new addition to a family. The broader
Messinger Group embraces a flexible approach
when constructing strategies for our clients
and offers solutions ranging from income-
generation to growth-oriented equity portfolios.
In retrospect, 2016 was favorable for our
“value” style of investing, focused on bottom-up,
fundamental research, and we feel this can
continue over the upcoming business cycle.
The group’s rigorous discounted free cash flow
analysis is designed to identify companies we
believe are attractively priced and poised to
benefit from significant and underappreciated
secular trends. While many defensive corners of the market lagged
in the second half of 2016, exposure to cyclicals—namely financials,
technology and industrials—drove returns, offsetting securities
impacted by rising interest rates. Early in 2017 there remain pockets
of value across markets, especially for long-term investors seeking
to arbitrage time horizons. As always, we remain dedicated in our
search for companies we believe exhibit attractive business models
in both strong and weak economic environments.

David S. Portny

Eli M. Salzmann

The Large Cap Value team utilizes a value invest-
ing discipline with a patient, conviction-based
approach, conducting independent, bottom-up
fundamental and quantitative research to
identify nuances of each company that cannot
be captured solely by financial characteristics.
The top 10 contributors to the strategy’s 2016
returns accounted for a 37.6% average portfolio
weighting, while the Russell 1000 Value Index
had a 7.5% average weighting to the same
stocks, demonstrating the potential benefits
of this active approach. For 2017 we believe a
continuation of accommodative monetary policy
in areas such as Europe and Japan could lend
some degree of support to equities going forward. We will continue
evaluating all market dislocations for investment opportunities.

David Levine, CFA

SMALL CAP VALUE

Robert W. D’Alelio

The Small Cap Value team seeks high-quality
businesses with above-average, sustainable growth
prospects selling at below-average valuations. We
focus on less volatile, less economically sensitive
businesses and avoid speculative names that
are dependent on economic growth and require
healthy capital markets. Our 2016 performance
was in line with our expectation for participating in
the up markets and mitigating market downturns.
We captured over 85% of the Russell 2000 Index’s
rally for the year, as speculative and economically
sensitive companies outperformed. Over $28
billion flowed into small-cap ETFs during the year,
in turn boosting the performance of micro caps
and lower-quality names, areas we typically avoid. Looking ahead, we
believe there are a number of uncertainties that could impact the market
and lead to increased volatility. Against this backdrop, we believe our
high-quality bias has the potential to be rewarded in 2017. In addition,
we believe our companies with below-average leverage or net cash
balance sheets could be relative winners in a rising-rate environment.

Judith M. Vale, CFA

2016 ANNUAL REPORT NEUBERGER BERMAN | 17

| EQUITY |

SMALL CAP INTRINSIC VALUE

MID CAP INTRINSIC VALUE

The Small Cap Intrinsic Value strategy seeks to
invest in companies that trade at a meaningful
discount to the team’s estimate of intrinsic value
where a strategic event can potentially unlock
value. As a testament to our team’s research
capabilities, nine portfolio companies were acquired
in 2016. While relative performance was challeng-
ing this year, we believe that many stocks in the
portfolio are well positioned to benefit from the
priorities of the Trump administration. As of
December 31, 2016, over 12% of the portfolio was
positioned to benefit from an increase in defense
spending, 9% was levered toward infrastructure
spending and industrial growth, and 9% was
invested in regional banks, which can benefit most
from lower taxes and regulatory reform. In our
view, the issue for investors in 2017 is how much of
the new administration’s legislative agenda will be
enacted and what will be the specific details. This
is where investor optimism may collide with reality,
which could result in a turbulent year.

The Mid Cap Intrinsic Value strategy seeks to invest
in high-quality companies that trade at a meaningful
discount to the team’s estimate of intrinsic value
and where a strategic event could potentially unlock
value. In 2016 a healthy level of company-specific
events enhanced portfolio returns—12 holdings
were acquired, disposed of significant assets or

Michael C. Greene

made large acquisitions. The portfolio also benefitted from its holdings
in the energy sector as oil prices rebounded from very depressed levels.
Post-election, many of the portfolio’s technology names came under
pressure due to large foreign exposures. In anticipation of the adoption
of the new administration’s economic policies, we began to reposition the
portfolio toward the end of the year. We are especially concerned about a
potential border tax; hence, we started to reduce or eliminate a number
of our holdings in the retail sector. In 2017 we anticipate additional
opportunities to arise in the health care sector, as many of these stocks
have come under unrelenting selling pressure due to uncertainty about
the future of the Affordable Care Act. While relative performance
was challenging in 2016, we believe that 2017 should become more
conducive to stock picking, as a reduction in monetary stimulus could
lead to lower stock market correlations.

Benjamin H. Nahum

Amit Solomon, PhD

James F. McAree

SMALL AND MID CAP GROWTH

MASTER LIMITED PARTNERSHIPS: THE RACHLIN GROUP

Kenneth J. Turek, CFA

Our team seeks to identify small- and mid-cap com-
panies trading at what we believe are compelling
prices based on a strong competitive position, a
healthy financial state and an identifiable—and
ideally unappreciated—catalyst for growth. Both
of our strategies actively challenge their bench-
marks and peer groups through high conviction
out-of-index positions and reasonable over- and under-weight alloca-
tions at both the sector and industry levels, while still maintaining the
appropriate aggregate-level style and market capitalization expectations
for mid-cap and small-cap growth mandates. We have the flexibility to
undertake upward of one-third out-of-index exposure as we look to
identify under-owned and under-followed companies offering potentially
underappreciated catalysts. In what could be an increasingly unpredict-
able investment environment ahead, that flexibility to pursue intriguing
opportunities could prove to be key.

18 | NEUBERGER BERMAN ANNUAL REPORT 2016

The Rachlin Group manages income-oriented equity
strategies focused on master limited partnerships
(MLPs) that have the potential to generate attractive
dividend yields with a growth component. The
group seeks investments with strong, recurring cash
flows anchored by long-term fee-based contracts.
Only certain MLPs meet the team’s criteria for
long-term appreciation potential; the companies
identified have favorable debt metrics and generate
sustainable cash flow that enables each company
to maintain and grow distributions through market
cycles. After falling 25% within the first six weeks of
the year, the Alerian MLP Index recovered to finish
2016 up 18%. Once crude oil prices bottomed,

Douglas A. Rachlin

Yves C. Siegel, CFA

MLP unit prices began to recover and decouple from commodity prices.
The market dislocation for MLPs brought on by the steep fall in energy
prices enabled the group to selectively increase and/or add new names
with strong balance sheets, competitively positioned assets and greater
potential for future growth.

| INSIGHTS |

U.S. AND GLOBAL REITs

Anton Kwang, CFA

Steve S. Shigekawa

The Global REITs team seeks
total return through investment
in real estate securities, empha-
sizing both income and capital
appreciation. Throughout 2016
the team maintained our quality
bias, investing in companies
with high-quality assets, strong
balance sheets, lower leverage
than other REITs and lower,
but sustainable and growing,
dividend yields. We adjusted
our portfolio toward the end of
2016, increasing exposure to
property sectors and geographic regions we found attractively valued
and likely to prosper post-election. For instance, we increased our
exposure to Washington, DC, office space, as DC has been out of favor
for several years and fundamentals appear to be bottoming there. We
like the prospects for DC post-election, as potential fiscal stimulus for
infrastructure and defense spending could be positives for growth and for
real estate investments in that region. We remain focused on companies
with management teams that can capitalize on pricing differences
between the public and private real estate markets.

Brian C. Jones, CFA

Gillian Tiltman

EQUITY RESEARCH

The Equity Research team is an autonomous group
of research professionals singularly focused on
uncovering investment opportunities in support of
Neuberger Berman’s portfolio management teams
and, thus, in pursuit of our clients’ goals. Driven by
a strong culture of accountability and teamwork,
our 40-member research department subjects

Timothy F. Creedon, CFA

companies to rigorous, disciplined analysis to generate stock recommen-
dations with a long-term perspective. We now cover more than 1,000
companies, representing 95% of the Russell 1000 Index by market cap
and approximately 70% of the MSCI ACWI by market cap. We share our
knowledge on stocks and sectors across the organization in a spirit of
true collaboration. In addition, our analysts’ best ideas are aggregated
in the Research Opportunity strategy, a portfolio consisting of all buy-
rated names in research weighted by conviction and a key driver of
analyst compensation.

CIO WEEKLY PERSPECTIVES

Each week, our CIO Weekly Perspectives blog
delivers timely insights from the leaders of our
Equity, Fixed Income and Multi-Asset Class
platforms. Offering interpretation of the factors
driving financial markets in an approachable
format, CIO Weekly Perspectives seeks to prepare
investors for the risks and opportunities that
lie ahead.

To subscribe to CIO Weekly Perspectives, please
contact us at CIOweekly@nb.com.

2016 ANNUAL REPORT NEUBERGER BERMAN | 19

| PERSPECTIVES |

“ We take seriously our
engagement across
economic and ESG
matters with the
companies whose
securities we own.”

INGRID S. DYOTT
PORTFOLIO MANAGER/CO-HEAD, SRI TEAM

CÉLINE S. DUFÉTEL
HEAD OF MARKETING AND CLIENT SERVICE

OUR COMMITMENT TO ESG

Since our first application of “avoidance screens” in the 1940s to the launch
of our Socially Responsive Investment team, Neuberger Berman has long
been on the forefront of integrating environmental, social and governance
(ESG) criteria into the investment process. We have continued to build upon
this legacy, driven by our belief that companies with proactive leadership
strategies in place to manage ESG-related risks and opportunities have the
potential to be industry leaders with sustainable competitive advantages
and thus offer the potential for long-term investment performance. As of
December 31, 2016, more than 30% of our assets under management have
explicit ESG criteria.

To drive continued improvement in the ESG space, in 2012 we became signatories
to the UN-sponsored Principles for Responsible Investment and also established an
in-house ESG Committee. The committee is responsible for setting goals, measuring
our performance and furthering our ESG expertise. We take seriously our engagement
across economic and ESG matters, be it in direct meetings with management,
engagement with boards of directors or as part of the proxy-voting process with
the companies whose securities we own.

In early 2017 we hired Jonathan Bailey as Head of ESG Investing. Formerly director
of research for Focusing Capital on the Long Term, a not-for-profit think tank he
helped launch while at McKinsey & Company, Jonathan will lead our ESG effort across
investment teams and work closely with research on our proprietary approach to
ESG integration.

20 | NEUBERGER BERMAN ANNUAL REPORT 2016

| BUSINESS REVIEW: FIXED INCOME |

“ Despite the changes underway
in markets, the desire for income—
and its relative scarcity—persists,
suggesting an ongoing need to be
tactical around market opportunities
and to capture additional sources of
return as they emerge.”

BRAD C. TANK
CHIEF INVESTMENT OFFICER—FIXED INCOME

THE END OF AN ERA

Though most fixed income markets delivered positive returns in 2016, it was a turbulent year, with investors battered periodi-
cally by a variety of macroeconomic and geopolitical concerns, from China and the energy complex to Brexit and the U.S.
elections. After drifting lower in the first half of 2016, yield on the 10-year Treasury changed direction midyear and accelerated
its ascent following the U.S. elections, a move that coincided with a much more optimistic re-pricing of risk assets in the U.S.,
namely stocks and credit spreads. We believe this reflects a dramatic shift in the markets’ views with respect to growth and
inflation, and an end to the era of zero interest rate policy in the U.S. For a long-term investor who has spent years struggling
to find real income in the higher-quality bond markets, this era is ending none too soon.

Thus we find ourselves in the early stages of a new investment
paradigm in which we believe investment performance across asset
classes will likely be driven more by self-sustaining economic growth
supported by structural reform and aggressive fiscal policy and less
by extraordinary levels of central bank accommodation. Despite these
changes underway in markets, however, the desire for income—and
its relative scarcity—persists, suggesting an ongoing need to be
tactical around market opportunities and to capture additional sources
of return as they emerge.

The fixed income markets have had a rolling top in place for the past
few years, and the broad bull market that has characterized the space
for the past 30 years is largely over. With fixed income markets some-
what out of phase, the lack of synchronization among its components
should provide an opportunity for investors able to diversify effectively
across the spectrum. In this environment, we have more clients coming
to us for multi-asset class solutions in fixed income, and we expect
to continue to partner with them in mandates that provide flexibility
across markets globally.

As always, we looked to be strategic with our resources in 2016. We
added headcount to work with financial institutions, specifically banks
and insurance companies, and we continued to build out our credit
research staff, as corporate credit remains central to what we do here
at Neuberger Berman.

We’ve clearly entered a new investment environment, with the year
ahead holding the potential for a variety of pro-growth initiatives—
from tax reform to eased regulations across industries—and a fair
bit of risk. Moreover, we find ourselves in a situation in which the
signal-to-noise ratio is skewed heavily to the latter, making it all the
more crucial—and challenging—to distinguish between important,
impactful information and useless speculation.

2016 ANNUAL REPORT NEUBERGER BERMAN | 21

| FIXED INCOME |

GLOBAL INVESTMENT GRADE FIXED INCOME

INTEREST RATES AND INFLATION

The 44-person Global Investment Grade Fixed Income team manages more
than $56 billion in assets for clients worldwide as of December 31, 2016. The
team’s investment platform is structured to navigate the broad global fixed
income universe, utilizing a proprietary multi-sector framework (State-Space
Analysis) to evaluate investment opportunities across sectors including credit,
global sovereigns, securitized, emerging markets debt and multiple others.

Andrew A. Johnson

With global rates falling sharply and corporate spreads deteriorating at the
beginning of 2016, we saw an opportunity to underweight sovereign debt and overweight those
spread sectors impacted beyond what fundamentals would imply. Due to repressively low interest
rates across the developed world, we were underweight rates in the U.S., Germany and Japan.
Rates began to trend higher midyear, but it was not until after the November U.S. elections and a
sharp selloff in U.S. Treasuries that we moved to neutral interest rate exposure in the U.S. Though
global rates followed, we remained underweight interest rate exposure in Germany and Japan. We
retained an exposure to New Zealand and Australia bonds throughout the year.

Within investment grade credit, portfolios benefitted from strong security selection as well as
the team’s decision to overweight sectors offering higher yields, like BBB-rated industrial issuers.
Underweights in underperforming sectors such as non-corporates and European banks also were
beneficial to portfolios.

Investors for the last few years have had little concern for inflation; in fact, the risk of deflation
has been a focus for central banks. While core inflation in the U.S. had been running over target,
headline inflation dipped under 1% with the help of early-year declines in oil prices. The market’s
inflation expectations for the next 10 years fell to 1.2% before rising to close out the year at 2%,
benefitting our exposure to U.S. Treasury inflation-protected securities.

Currencies fluctuated significantly in 2016, as the search for yield early in the year was overwhelmed
by politics, including the U.K.’s referendum to leave the European Union and the U.S. presidential
election. While the dollar weakened early in the year, that trend reversed strongly throughout the
second half; notably, the British pound declined nearly 16% versus the dollar in 2016. Currencies of
commodity-centric economies like Canada, Australia, Norway and New Zealand all strengthened.

Turning to securitized assets, we began the year with a neutral position in U.S. agency MBS relative
to the benchmark. During the course of the year we increased our weighting to higher-coupon
mortgages within the sector in the belief that prepayment fears were overdone. We were a bit
early but were rewarded as rates sold off following the U.S. elections. Exposure to non-agency
MBS benefitted portfolios, as deleveraging consumers, stable housing prices and attractive
supply-demand dynamics helped the sector.

We anticipate 2017 will be an eventful year, as the focus shifts from central bank policy to fiscal and
political influences. As the market determines policy paths and the impact across sectors, countries
and industries, having a broad tool kit and the ability to navigate tactically should be quite useful.

Thanos Bardas, PhD

CORPORATE CREDIT

David M. Brown, CFA

Julian H. Marks, CFA

GLOBAL AND CURRENCY

Jon B. Jonsson

Ugo Lancioni

STRUCTURED PRODUCTS

Terrence J. Glomski

Thomas A. Sontag

MULTI-SECTOR

22 | NEUBERGER BERMAN ANNUAL REPORT 2016

Ronit M. Walny, CFA

Thomas J. Marthaler, CFA

GLOBAL NON-INVESTMENT GRADE CREDIT

SENIOR FLOATING RATE LOANS

Thomas P. O’Reilly, CFA

Vivek Bommi, CFA

Russ Covode

Stephen J. Casey, CFA

Joseph P. Lynch

Martin J. Rotheram

Pim M. van Schie

Daniel J. Doyle, CFA

Patrick H. Flynn, CFA

Andrew Wilmont, CFA

Driven by our 40-plus person dedicated global credit
research team, our Global Non-Investment Grade Credit
platform employs a disciplined process that seeks downside
risk mitigation with upside potential. We began 2016
with an underweight to commodity-related sectors, which
represented approximately 15% of the high yield market,
as we were plagued by two years of falling oil prices and
a number of headline defaults. The prolonged selloff in
commodities provided investment opportunities in fallen
angels and other higher-quality names, and we rotated into
these sectors during the first quarter as oil prices doubled.
This rotation enabled our portfolios to participate in the
returns subsequently delivered by the commodity-related
sectors, which led the high yield market to double-digit
performance for 2016. We maintain our belief that the U.S.
high yield market is compensating investors for default
risk and that defaults are likely to remain below historical
averages (approximately 3.5%) in 2017 as U.S. economic
growth improves. Volatility could increase as the year
progresses, possibly driven by uncertainties regarding future
fiscal and monetary policy, global economic growth and
geopolitical issues. Within European high yield we expect
coupon-driven returns after a strong performance in 2016
driven by capital appreciation. Despite political uncer-
tainties, we view the health of European corporate bonds
favorably and envision stable income-driven returns.

Our Senior Floating Rate Loan team seeks attractive risk-adjusted returns
through the disciplined management of credit quality and industry analysis.
Our approach typically leads to a portfolio of larger and more liquid loans
from issuers with stronger fundamentals than the market as a whole. At
year-end 2016, more than 90% of the loans in our portfolio were from
issuances greater than $500 million and were rated B or higher. In 2016,
distressed and lower-quality loans significantly outperformed the BB and B
parts of the senior floating rate loan market, as investors added risk to their
portfolios by overweighting these portions of the market. Across our U.S. and
global loan portfolios we maintained our focus on quality, underweighting
stressed industries such as energy and metals and mining. This negatively
impacted 2016 performance, but we believe it has the potential to provide
investors with better risk-adjusted returns in 2017, as the majority of the
leveraged loan market enters the year trading at or near par and total
returns during the year should be driven mostly by coupons. The market
today is pricing in approximately a 2.7% implied default rate, which is
slightly higher than our 2017 expectations of 1.5 – 2.0%. We believe that
moderate U.S. economic growth will likely lead to several interest rate hikes
this year, which should be constructive for senior floating rate loans. The
CLO market should provide a steady underlying bid for loans as many
managers have raised equity capital to address the new risk-retention rules.
In addition, we believe CLO debt tranches remain attractive given their
floating rate coupon and our expectation for low loan defaults.

2016 ANNUAL REPORT NEUBERGER BERMAN | 23

| FIXED INCOME |

EMERGING MARKETS DEBT

Rob J. Drijkoningen

Our multisite Emerging Markets Debt team offers clients a full range of EMD capabilities with 28 dedicated
specialists focused on hard currency, local currency and corporate investment strategies, all of which
incorporate environmental, social and governance factors as part of the fundamental research process.
The past year saw a meaningful turnaround in both performance and flows into the asset class. Strategic
investors continued to invest even when EMD was under pressure over the past few years, but the real
turnaround for the asset class has been from retail mutual fund investors, who came back significantly
after withdrawing money for some years. J.P. Morgan reports that nearly $43 billion flowed into the asset
class in 2016. Total returns were 10.2% for hard currency sovereigns, 9.9% for local currency sovereigns and 10.4% for hard-currency corporate
bonds (as represented by the J.P. Morgan EMBI Global Diversified, GBI-EM Global Diversified and CEMBI Diversified indexes, respectively). Our
Emerging Markets Debt strategies reached their three-year anniversaries this year as the team topped $10 billion in assets under management.
Our near-term outlook for the asset class is clouded by the themes of a stronger dollar, rising Fed hike expectations and potential negative trade
developments. However, we believe the adverse global environment likely will be balanced by stronger fundamentals, amid higher commodity
prices and the sharp EM FX depreciation of the past years having resulted in improved current account balances in EM countries.

Gorky R. Urquieta

SPECIAL SITUATIONS

MUNICIPAL FIXED INCOME

Michael J. Holmberg

Brendan McDermott, CPA

Ravi K. Soni

James L. Iselin

S. Blake Miller, CFA

James A. Lyman

The Special Situations team invests in companies and assets affected
by a lack of liquidity in their sectors. We provide liquidity to unnatural
holders or forced sellers by purchasing debt or assets from them that
we believe are intrinsically undervalued. We target hard assets to miti-
gate downside risk and avoid asset-light holdings such as those found
in the service and technology sectors. In 2016 we took advantage of
volatile markets and a general lack of market liquidity for distressed
assets to selectively add exposure in the automotive, energy, metals,
real estate and shipping sectors, where we felt certain assets were
intrinsically undervalued. The team will actively engage in a holding’s
restructuring process when necessary to maximize value. For example,
in 2016 we completed a debt-for-equity swap on a Chicago infrastruc-
ture asset. We stabilized the asset’s operations and invested in deferred
capital expenditures while placing on its board an industry expert with
strong local government relationships.

Our 16-person Municipal Fixed Income team comprises 10 portfolio
managers and six research analysts who work collaboratively to
manage more than $10 billion in municipal assets. Bottom-up
fundamental analysis is the cornerstone of our investment process.
Our deeply experienced analysts perform extensive research across
our investable universe, backed by our proprietary state-of-the-art
research system. Security selection and our somewhat barbelled yield
curve positioning was additive to returns in 2016 and helped us to
deliver a preservation of capital outcome in volatile market condi-
tions. In addition, having ample liquidity in portfolios was helpful
in the fourth quarter, as we were able to execute beneficial tax-loss
swaps in many client portfolios. Looking ahead, we believe that the
debate around President Trump’s fiscal and tax proposals may lead
to renewed volatility. We will continue to maintain a high degree of
issuer diversification and ample liquidity in our municipal strategies,
thereby providing us with the ability to take advantage of potential
attractive investment opportunities.

24 | NEUBERGER BERMAN ANNUAL REPORT 2016

FIXED INCOME RESEARCH

Stephen J. Flaherty, CFA

Christopher J. Kocinski, CFA

Jennifer R. Gorgoll, CFA

Nish V. Popat

With experienced analysts
across investment grade,
non-investment grade and
emerging markets, our
Fixed Income Research
teams share the belief
that market mispricings
provide opportunities
to add value for those
with unique insights and
conviction if extracted
without exposing portfolios
to undue risk. We have the
ability to wed these notions
thanks to the fundamental

research—comprising economic analysis, sector and issuer spread
relationships, cash flow analysis and credit assessment—of analysts
within each sector, who interact daily with our portfolio managers
to ensure we make well-informed decisions for clients. In 2016 our
fixed income research resources—119 portfolio managers, research
analysts and economists/strategists—conducted approximately 1,000
management meetings worldwide, a reflection of our commitment
to proactive, bottom-up research. In addition, we continued to host
research training programs for personnel from key institutional clients
so they could better understand our process.

| INSIGHTS |

FIXED INCOME
FIXED INCOME
INVESTMENT OUTLOOK
INVESTMENT OUTLOOK
Neuberger Berman Fixed Income Investment Strategy Committee

Neuberger Berman Fixed Income Investment Strategy Committee

1Q2017

As part of our commitment to providing clients with current investment insights, this is the inaugural

TAX REFORM IS A GAME CHANGER

TAX REFORM IS A GAME CHANGER
As part of our commitment to providing clients with current investment insights, this is the inaugural
quarterly report from the Neuberger Berman Fixed Income Investment Strategy Committee. Consisting
of senior portfolio managers from across our fixed income platform, the Committee meets monthly to
share investment views within each sector for the coming 12 months, and to explore research topics
that are likely to impact investment returns. With a backdrop of change in Washington, DC, and across
the investment landscape, this issue of the Fixed Income Investment Outlook examines the impact of

share investment views within each sector for the coming 12 months, and to explore research topics

of senior portfolio managers from across our fixed income platform, the Committee meets monthly to

quarterly report from the Neuberger Berman Fixed Income Investment Strategy Committee. Consisting

that are likely to impact investment returns. With a backdrop of change in Washington, DC, and across

the investment landscape, this issue of the Fixed Income Investment Outlook examines the impact of

potential U.S. tax reforms.

FIXED INCOME
INVESTMENT OUTLOOK

The Fixed Income Investment Strategy Committee,
comprising senior portfolio managers from across
our Fixed Income platform, meets monthly to
share opinions and insights and thus shape the
asset allocation of our multi-sector strategies. The
committee publishes a quarterly report detailing
its market outlook and analyzing in depth the
topics driving financial markets today.

To subscribe to Fixed Income Investment Outlook,
please contact us at FIoutlook@nb.com.

2016 ANNUAL REPORT NEUBERGER BERMAN | 25

| PERSPECTIVES |

“ We start with a need
for data, and we
combine that with
a workforce who
feels respected
and heard; the end
result is that we
make well-informed
decisions that
benefit our clients.”

HEATHER P. ZUCKERMAN
CHIEF ADMINISTRATIVE OFFICER

OUR COMMITMENT TO OUR CULTURE
My co-workers are good people who care about doing the right thing. There is a
legitimate ‘client first’ culture that makes me proud.

The freedom to be creative in the role, while maintaining the same goals, is what
I consider a large facet of success.

This is how a couple of our colleagues described our firm in the Pensions & Investments
2016 Best Places to Work in Money Management survey. Why should our clients, counter-
parties and potential new hires care?

These cultural traits meaningfully translate into higher retention rates for senior investment
professionals, stronger client alignment and resourcing, and, finally, employees who feel
comfortable weighing in about how we can continue to be a best place to work.

We are often asked how we achieved these results, especially because—reflecting the
diversity of views we so highly cherish—each employee assigns a different value to our
firm’s attributes and initiatives. While it would be impressive to say that we had a multi-year
strategic plan, it was far more basic than that. This award is about our people—and their
passion and commitment to our clients.

We ask a lot of questions, knowing it helps us make better decisions. We share our feedback
on everything, from workplace design to strategic direction. We believe deeply in account-
ability and transparency; in fact, to reinforce our “open door” philosophy, our senior leader-
ship team in our New York headquarters is on the same floor as our cafeteria (aptly named
“The Exchange”—an acknowledgment of markets, but also a reflection of the ideas and
feedback exchanged in the space). We start with a need for data, and we combine that with
a workforce who feels respected; the end result is that we make well-informed decisions
that benefit our clients.

To make those well-informed decisions, our people care deeply about being clients. Our
retirement benefits and Employee Investment Solutions program helps our employees, at all
levels, think like clients—they asset allocate, they benchmark performance, and they expect
best-in-class service. This alignment serves all of us well.

Importantly, we always seek to improve and do better. This year, our custom-designed
employee survey will elicit even more honest, constructive feedback, and we look forward
to seeing the next set of innovative ideas from our people.

26 | NEUBERGER BERMAN ANNUAL REPORT 2016

| BUSINESS REVIEW: ALTERNATIVES |

“ We believe that 2017 will
bring increased opportunity
for alternatives, building on the
momentum from last year.”

ANTHONY D. TUTRONE
GLOBAL HEAD OF ALTERNATIVES

A CONTINUED SOURCE OF COMPELLING OPPORTUNITIES

The alternatives market continued to be robust in 2016, as investors sought differentiated and uncorrelated returns to public
markets through private investment structures. We believe that 2017 will bring increased opportunity for alternatives, building
on the momentum from last year, when alternatives overall provided compelling investment opportunities and generated
attractive returns (as evidenced by the performance of the HFRI and the Cambridge Associates indexes) despite the volatility
in public markets and the highly charged political environment with Brexit and the U.S. elections.

For the upcoming year, we expect corporate fundamentals to be the
key driver of stock prices once again, providing hedge fund managers
the opportunity to generate alpha on both the long and short side.
Within the hedge fund space, we also favor directional hedged strategies
like CTAs and macro hedge funds that stand to benefit from potential
increases in commodity prices and interest rates. In addition, we
also believe that rising interest rates in the U.S. will make for a more
challenging environment for highly leveraged, lower-quality companies.
This, in turn, should create opportunities for hedge fund and private
equity distressed debt managers.

We remain bullish on private credit, which, like other areas of private
equity, captures alternative sources of risk premia, in this case illiquidity
and complexity. In addition, private credit is somewhat insulated
from high valuations and can provide an attractive cash yield. While
the Volcker Rule limiting banks’ proprietary trading activities could
be repealed, we believe it is very unlikely that banks will be able to
rebuild their presence in this market over the next 12 months, if at all.
Increased M&A activity, should the new administration take a less in-
terventionist approach to deals, will likely bolster this supply of private
debt as well.

We remain bullish on private equity relative to other asset classes. We
think that private equity will benefit from robust financing markets and
reduced regulations. However, like most asset classes, valuations are
high, so investors should be cautious of private equity strategies that
rely on buying cheap or exiting at higher valuation multiples. Instead,
we believe investors would be better served focusing on private equity
strategies predicated on making significant strategic and operational
improvements in companies that will accelerate earnings growth.

Throughout 2016, Neuberger Berman Alternatives continued to be an
active investor and innovator in alternatives investments. The team
launched its ‘40 Act-registered private equity business and also a
strategy focused on capitalizing on dislocations in the credit market by
investing in less liquid, misunderstood and mispriced debt of private
equity-backed companies. Furthermore, we increased activity in our
existing businesses, holding final closes for our latest funds across
diversified private equity, secondaries, private debt and private equity
minority stakes businesses.

2016 ANNUAL REPORT NEUBERGER BERMAN | 27

| ALTERNATIVES |

PRIVATE INVESTMENT PORTFOLIOS

SECONDARY INVESTMENTS

Peter J. von Lehe

Jonathan D. Shofet

John P. Buser

Brian G. Talbot

Tristram C. Perkins

Ethan A. Falkove

Benjamin B. Perl

Our Secondary investment team is focused on acquiring high-quality private
equity assets from all types of sellers, including traditional limited partnership
interests as well as opportunistically direct co-investments from investors
seeking early liquidity, pursuing portfolios of directs or “synthetic secondaries,”
and investing in structured secondary solutions, royalties, hedge fund side
pockets and credit-related opportunities. The team was particularly active in
2016, having reviewed approximately 200 opportunities. Looking to 2017,
we are optimistic that attractive opportunities will again present themselves
as the growth drivers of recent years—the expanding universe of sellers,
changing regulations, more active portfolio management and the growth
in private equity generally—are, in our opinion, sustainable long-term trends.
Finally, we note that a secondary strategy can benefit from broader market
volatility in terms of increased deal flow and more favorable pricing. In addition,
we have seen general partners begin to embrace the secondary market as
a way to solve complex issues and help generate liquidity for their existing
limited partners, a trend that we expect to continue.

RENAISSANCE PARTNERS

Fabio C. Cane

Marco Cerrina Feroni

Stefano Bontempelli

Renaissance Partners focuses on private equity investments in Italian companies across
industries and capitalizations, with an emphasis on leading growth-oriented, export-
driven multinationals. Our outlook for 2017 continues to be positive. As the fourth-largest
economy and the second-largest producer and exporter of industrial goods in Europe,
Italy provides an abundant supply of family-owned mid-cap companies, which are in
large part affected by family succession issues and the need of capital to grow in the
international markets. Furthermore, Italian private and public market valuations have
been trading at a discount compared to the rest of Europe and the U.S., further increasing
the attractiveness of the opportunity set for the Renaissance team.

Brien P. Smith

Patricia Miller Zollar

Paul D.S. Daggett

Our Private Investment Portfolios team constructs diver-
sified private equity portfolios investing in primary and
secondary fund commitments and direct co-investments
in private equity backed companies across asset classes,
industries and geographies. The team reviewed over 640
opportunities in 2016 seeking out the best value-creation
opportunities, resulting in an overweight to small- and
mid-cap buyout, operational turnarounds and growth
equity investments compared to the private equity market.
In 2017, with public and private equity markets fully (or
nearly fully) priced, we expect private equity sponsors to
continue the trend of the past several years of aggres-
sively seeking realizations in their portfolios. Even in a
slow-growth economy, private equity has the potential
to produce strong returns by identifying established
but under-managed companies and implementing
improvements in strategy and operations. For private
equity investors, as in all asset classes, risks abound
around the globe and investors will face difficult decisions
in identifying and measuring risks and potential upsides.

28 | NEUBERGER BERMAN ANNUAL REPORT 2016

CO-INVESTMENTS

DYAL CAPITAL

David S. Stonberg

David H. Morse

Michael S. Kramer

Jacquelyn A. Wang

Joana Rocha Scaff

Michael D. Rees

Sean J. Ward

2016 was a busy year for our Co-Investment team, which reviewed approximately 190
investment opportunities. Our team seeks to select the best deals available from high-quality
private equity firms in their core areas of expertise. The team navigated the 2016 market of
elevated valuations and high leverage by sourcing “off-market” opportunities, which presented
relatively more attractive pricing and offered greater protection of the downside while also
retaining significant upside. As an example, we were able to invest in Duff & Phelps in partner-
ship with Carlyle Global Financial Services Partners and management. We expect to continue
this strategy in 2017.

MARQUEE BRANDS

Samuel N. Porat

Zachary P. Sigel

Marquee Brands acquires, licenses and develops
high-quality consumer brands across various segments
with the goal of expanding their reach across channels,
geographies and product categories. In 2016, we
continued to see a divergent trend in growth between
traditional brick-and-mortar stores and e-commerce.
While the brick-and-mortar retail environment is

challenged, it has created a significant opportunity to acquire strong brand names that have
traditionally been thought of as retailers and has caused traditional retailers to need to further
differentiate themselves by offering the customer a unique brand experience. We feel that we
can take advantage of this dislocation and believe we are well positioned to continue to build
our portfolio as distressed operating companies with strong brands become available.

Dyal Capital seeks to acquire minority
equity interests in institutional alternative
asset management firms. In 2016, the
Dyal team completed five transactions,
acquiring minority stakes in four private
equity funds and one hedge fund. The
year ended on a high note for both private
equity and hedge funds, as performance
proved resilient through a variety of
significant and unexpected market events,
including Brexit and Donald Trump’s
election as president of the United States.
We anticipate that increased asset price
volatility will provide significant opportu-
nities for managers whose fund structures
allow them to take the long view and, for
hedge funds, to invest both long and short.
For 2017, we expect our segment of the
alternative asset management space to
remain attractive as managers’ demand
for permanent capital to facilitate platform
development, generational transfer, new
product launches and other strategic
initiatives continues to grow.

2016 ANNUAL REPORT NEUBERGER BERMAN | 29

| ALTERNATIVES |

PRIVATE CREDIT

GLOBAL LONG SHORT CREDIT

Our Private Credit team invests in
the debt of private equity-owned
companies, seeking to capitalize
on inefficiencies arising from
illiquidity and complexity. Over
the last several years, volatility
has become the “new normal,”

Susan B. Kasser, CFA

David J. Lyon

driven by technical imbalances, regulatory uncertainty, and macroeconomic
and geopolitical instability. We believe that continued volatility may present
compelling investment opportunities in both primary and secondary markets,
as issuers seek greater flexibility and certainty with trusted partners, and as
certain credit market participants are forced to sell down exposures in the
face of unexpected liquidity shocks. Recently, expectations of rising interest
rates and the perception of a pro-business macroeconomic backdrop have
led to strong loan inflows and a borrower-friendly environment, generally
characterized by higher leverage and lower pricing. Structural imbalances
in the second-lien market, highlighted by increased fund flows, increase the
likelihood of future market volatility. We believe that any reversal of investor
sentiment will drive significant opportunities in private credit. In 2016
alone, the team reviewed approximately 170 investment opportunities,
and we expect deal flow to continue to be robust.

LONG SHORT EQUITY

With the ability to invest
long and short as well as in
fixed income, our Long Short
Equity strategy seeks capital
appreciation with a second-
ary objective of principal
preservation. During 2016,

Charles C. Kantor

Marc A. Regenbaum

which marked the five-year anniversary for our ‘40 Act mutual
fund, we maintained our net long-bias holding portfolio exposure
between 40% and 55% net long. At the end of 2016 we remain
positioned for a modest recovery driven by solid recent economic
data and a regime change from monetary to fiscal policy in the
U.S. The timing as well as the actual policies enacted will have a
divergent effect on the various sectors and sub-sectors of the market,
creating opportunities on both the long and the short side. Thus
the policy details will matter a great deal in 2017 and beyond.

30 | NEUBERGER BERMAN ANNUAL REPORT 2016

Norman Milner

D. Richard Dowdle

Our Global Long Short Credit
strategy seeks to offer an
approach to credit investing
that serves as a complement
to “long only” traditional
fixed income management,
delivering a return profile
unavailable in an index. We
construct a balanced, nimble
portfolio of long and short
holdings across a wide array
of corporate and sovereign
debt. During 2016 the high
yield market recovered and
posted double-digit returns, and we saw a powerful rally in cyclical
material and energy credits. We were able to take advantage of this
rally and benefit from significant selloffs in investment grade and
emerging markets debt. We expect to see similar opportunities in
2017, on both the long as well as the short side.

Darren L. Carter

Itai Baron

PRINCIPAL STRATEGIES GROUP

Joseph Rotter

Judd M. Arnold

The Principal Strategies Group
employs a market-neutral,
style factor minimized approach
to event-driven investing.
We employ two principal
sub-strategies: risk arbitrage
and market-neutral catalyst.
Our team seeks to generate
absolute returns with minimal
correlation to market indexes.
We began managing
investor assets in fourth
quarter 2016. We see a robust
opportunity set in 2017 driven
by industry consolidation, regulatory and political change, and potential
disruption from changes in monetary policy. Our team’s process-driven
approach and market-neutral hedging construct are well suited for the
current environment.

Sean M. Badcock

Gabe Cahill

HEDGE FUND SOLUTIONS GROUP

Driven by focused and
disciplined due diligence and
decision-making processes,
the Hedge Fund Solutions
team seeks investment
opportunities with an
emphasis on absolute

David G. Kupperman, PhD

Jeff A. Majit, CFA

returns, low volatility and low sensitivity to broader market move-
ments. Over the course of the last 12 months, we believe we
have seen the emergence of an increasingly attractive environment
for many hedge fund strategies. More specifically, intra-stock
correlations have dropped to pre-crisis levels, volatility has picked
up across many markets and interest rates have begun to rise in
the U.S. As such, we believe it may be an optimal time to be invest-
ing in hedge fund strategies following a tough period, driven largely
by quantitative easing. With easing seemingly over in the U.S., we
believe the wind is now at the back of many strategies. As rates
tick up, shorting both equity and credit should become easier, as
companies whose problems have been masked by the ability to
borrow cheaply become more exposed. Similarly, deregulation is
leading to significant sector dispersion and presenting both long and
short opportunities. This is particularly true in the health care, energy,
and financial sectors. For macro and CTA strategies, the trends we
have seen emerging in currencies, fixed income and commodities
have made for a plethora of opportunities. Furthermore, as rates go
up, we anticipate defaults increasing, which should make for a more
fertile field for credit/distressed managers.

| INSIGHTS |

HEDGE FUND
PERSPECTIVES 2017
HEDGE FUND
Neuberger Berman Alternative Investment Management
PERSPECTIVES 2017
Markets appear to be at an inflection point, driven by the potential transition to a period of rising
U.S. interest rates and higher volatility, as well as anticipated deregulation and fiscal stimulus in the
U.S. We believe hedge funds can thrive in this new environment, as the potential for greater and
more frequent dislocations could lead to opportunities. In this publication, we examine how certain
strategies may be impacted by the evolving investment landscape.

Neuberger Berman Alternative Investment Management

Markets appear to be at an inflection point, driven by the potential transition to a period of rising

U.S. interest rates and higher volatility, as well as anticipated deregulation and fiscal stimulus in the

U.S. We believe hedge funds can thrive in this new environment, as the potential for greater and

more frequent dislocations could lead to opportunities. In this publication, we examine how certain

strategies may be impacted by the evolving investment landscape.

HEDGE FUND PERSPECTIVES

The hedge fund marketplace comprises a diverse
array of strategies in which both the dispersion
of performance and degree of opportunity
are sizable. Our Hedge Fund Solutions Group
publishes its annual Hedge Fund Perspectives
to explore this dynamic landscape, analyzing
the trends and themes that may hold potential
moving forward.

To subscribe to Hedge Fund Perspectives, please
contact us at HFperspectives@nb.com.

2016 ANNUAL REPORT NEUBERGER BERMAN | 31

| PERSPECTIVES |

ALAN H. DORSEY
CHIEF RISK OFFICER

“ A focus on collabora-
tion across Neuberger
Berman fosters an
environment of open
discussion and problem
solving, and it promotes
an alignment of our
investment platform
with the best interests
of clients.”

OUR COMMITMENT TO RISK MANAGEMENT

Risk management is central to Neuberger Berman’s culture. As an employee-
owned manager, Neuberger Berman is devoted to identifying and managing
risk—risk to our clients, risk to our portfolios, risk to our reputation.

We believe that fostering an environment of strong internal controls is vital.
To this end, we have established a rigorous risk management framework
that features dedicated investment and operational risk teams who work to
protect client assets and our enterprise as a whole.

Internal risk guidelines are just a starting point. Our risk professionals—many of
whom have backgrounds in investment research and portfolio management—
act as an independent oversight for each portfolio management team’s invest-
ment exposures and process, supporting risk reviews with our chief investment
officers and portfolio managers. Risk personnel also act in collaboration with
other control units of the firm, such as legal and compliance, asset management
guideline oversight and internal audit. A focus on collaboration across Neuberger
Berman fosters an environment of open discussion and problem solving, and it
promotes an alignment of our investment platform with the best interests of
clients. With a direct reporting line to Neuberger Berman’s Chief Executive Officer,
our risk management structure is enhanced by an ability to escalate issues as
necessary to firm leadership as well as to our commingled fund boards and board
of directors.

Throughout 2016, we improved our capabilities on both the investment and
operational risk fronts, from the introduction of enhanced oversight and review
processes to the establishment of new factor and stress tests. We expect more
of the same in 2017, as we continuously evolve in order to manage risks to our
clients and franchise.

32 | NEUBERGER BERMAN ANNUAL REPORT 2016

| BUSINESS REVIEW: QUANTITATIVE AND MULTI-ASSET CLASS |

“ Investors are seeking solutions
that provide not only the potential
for attractive returns but also
with better transparency into
the underlying return drivers and
daily liquidity.”

ERIK L. KNUTZEN, CFA, CAIA
CHIEF INVESTMENT OFFICER—
MULTI-ASSET CLASS INVESTMENTS

J. DOUGLAS KRAMER
CO-HEAD OF QUANTITATIVE AND
MULTI-ASSET CLASS INVESTMENTS

DELIVERING TAILORED SOLUTIONS

Investors continue to be laser-focused on improved outcomes in an environment of lower return outlooks and more complex
risks. The Quantitative and Multi-Asset Class (QMAC) team seeks to address these needs by delivering solutions tailored to
specific investment objectives and strategies that seek to capture compensated factor exposures transparently, efficiently and
with a high degree of liquidity. In fact, QMAC has had these themes as guiding principles since its launch more than 12 years
ago and since then has steadily built a platform dedicated to meeting client needs across a variety of these capabilities.

The team’s Multi-Asset Class (MAC) capabilities include both bespoke
and commingled solutions for a wide range of investors, from some
of the world’s largest institutions to individuals and families. Spanning
both strategic and tactical asset allocation, these solutions incorporate
a blend of fundamental and quantitative insights leveraging the
broader Neuberger Berman investment platform. One theme that
has been particularly prominent with investors has been the need
for consistent income, and to that end we have developed income-
oriented commingled offerings for investors, including both UCITS
and U.S. mutual funds.

Another key area of focus has been factor investing, which has been
in the spotlight of late given heightened investor awareness of the
separation of alpha and beta and a greater focus on the systematic
drivers of portfolio return. From long-only “smart beta” to long/short
absolute return-oriented alternative risk premia strategies, investors
are seeking solutions that provide not only the potential for attractive
returns but also with better transparency into the underlying return
drivers and daily liquidity.

Our team’s capabilities, built upon more than a decade of research
and practical experience in these areas, expanded in 2016 with
new offerings that package familiar sources of return. For example,
we were awarded a $1 billion-plus mandate in a customized emerging
equity portfolio by an Australian superannuation fund to systemati-
cally harvest non-market risk premia, including value and quality. In
alternatives, we saw a variety of institutional investors move into our
alternative risk premia strategies as a way to improve the efficiency
and cost-effectiveness of their absolute return allocations. Finally, our
Option Group—which joined the firm in early 2016—continued to
expand its footprint with both institutional and individual investors,
delivering solutions that provide equity exposure with less volatility.
A large U.S. public pension hired us to manage a $400 million put-write
strategy, and we also made the strategy available to individual investors
through the launch of a U.S. mutual fund and a UCITS fund.

We expect these themes to remain prominent into 2017 and beyond.
We are excited to build our capabilities further in these areas while
continuing to deliver solid investment results.

2016 ANNUAL REPORT NEUBERGER BERMAN | 33

| QUANTITATIVE AND MULTI-ASSET CLASS |

MULTI-ASSET CLASS

OPTIONS

Leveraging insights and expertise from across
Neuberger Berman, our Multi-Asset Class team
offers a range of portfolio solutions tailored
to the unique needs of clients. Whether the
objective is to generate absolute returns or
produce a steady income stream, our multi-
asset class solutions team will work to design
the most efficiently constructed portfolio to
pursue the client’s objectives. 2016 was a
challenging year for investing, as macro
events—such as China-driven growth concerns
early in the year, followed by the Brexit vote in
the summer and the unexpected outcome of
the U.S. election in the fall—caused significant
volatility. To address this shifting environment,
the MAC team carefully managed portfolio
risk levels, adding to beaten-down risky assets
such as high yield bonds and emerging mar-
kets stocks early in the year, reducing risk in
advance of both the Brexit referendum and the
U.S. election, and then adding risk to portfolios
soon after these events. In this challenging

Erik L. Knutzen, CFA, CAIA

Lori L. Holland

Tokufumi Kato, PhD

environment, the team sought to take advantage of strategies po-
sitioned to earn positive returns with less correlation to traditional
stock and bond markets, including long/short, alternative risk premia
and options-writing strategies.

QUANTITATIVE EQUITY

Derek R. Devens, CFA

Rory Ewing

Eric Zhou

Our Option Group builds portfolios that seek long-term profits by
consistently collecting option premiums in a liquid, risk-managed
framework. Through customizable solutions that monetize equity
market volatility and generate income in a cost-effective manner,
our collateralized option strategies offer investors a source of
differentiated return distributions that may serve as lower-volatility
equity investment solutions, a source of diversifying income and/or
a supplement to more expensive hedge fund exposures. In 2016,
equity market volatility generally trended lower with the exception of
a few noteworthy spikes. In this environment our put-write strategies
performed in line with expectations, achieving attractive risk-adjusted
returns relative to both the underlying indices on which options are
written and their corresponding CBOE put-write benchmarks.

Our Quantitative Equity strategies use systematic processes to construct portfolios
that provide investors exposure to factors that historically have provided attractive
long-term returns. Our flagship systematic strategies employ a combination of
three main styles—value, momentum and quality—and have delivered attractive
returns since inception, and we also build customized factor portfolios that provide
exposure to one or more of these or other factors as dictated by client-specific
needs. Investor interest in factor-based investment strategies continued to expand

Wai Lee, PhD

Alexandre Da Silva

Ping Zhou, PhD

in 2016. This is likely due to the challenging environment that calls for rigorous risk management and time-tested approaches to portfolio
construction, as well as the realization that many traditional active investment strategies can be replicated through lower-cost systematic
investment processes. We anticipate this trend will gain further momentum in the coming year.

34 | NEUBERGER BERMAN ANNUAL REPORT 2016

ALTERNATIVE RISK PREMIA

Ajay Singh Jain, CFA, FCCA

Natalia Groysberg

Hakan Kaya, PhD

David Wan

The Alternative Risk Premia
team uses a systematic
process to build portfolios
offering exposure to return
sources that compensate
investors for bearing risks
that are different from
“traditional” investment
risks. Using long/short
investment strategies, these
alternative risk premia are
extracted from multiple
asset classes and from such
factors as value, momentum,
carry and others in pursuit

of absolute return in varied market conditions. Our Multi-Asset
Risk Premia approach is also now reflected in an index that Credit
Suisse began publishing in 2016 after extensive collaboration
with us, enhancing both the transparency and accessibility of our
approach. We also designed a customized risk premia portfolio for
a large corporate defined benefit plan. We anticipate continued
interest in this growing area of investor focus.

| INSIGHTS |

SOLVING FOR 2017

NEUBERGER BERMAN

ASSET ALLOCATION
COMMITTEE
ASSET ALLOCATION
OUTLOOK 1Q2017
COMMITTEE
OUTLOOK 1Q2017
POST-ELECTION, MARKETS CAST THEIR VOTE
The Asset Allocation Committee gathered off-cycle in November to discuss the U.S. elections and the impact
of Donald Trump’s assumed reflationary policy on our investment outlook, deciding at the time to shift our
bias toward U.S. equities and away from non-U.S. assets. Since then, U.S. stock indexes have continued to
surge, with some establishing new all-time highs.
With the benefit of a month of post-election clarity, we have reassessed our stance in light of recent market
activity to determine our First Quarter 2017 Outlook. Have certain markets gotten ahead of themselves?
Perhaps. But it’s hard not to remain constructive on U.S. equities and pockets of the commodity complex
given the new pro-growth, pro-inflation impulse coursing through markets and poised to continue next
year as the Trump administration takes office and begins to execute its policy agenda.

POST-ELECTION, MARKETS CAST THEIR VOTE

surge, with some establishing new all-time highs.

of Donald Trump’s assumed reflationary policy on our investment outlook, deciding at the time to shift our

bias toward U.S. equities and away from non-U.S. assets. Since then, U.S. stock indexes have continued to

activity to determine our First Quarter 2017 Outlook. Have certain markets gotten ahead of themselves?

With the benefit of a month of post-election clarity, we have reassessed our stance in light of recent market

The Asset Allocation Committee gathered off-cycle in November to discuss the U.S. elections and the impact

Perhaps. But it’s hard not to remain constructive on U.S. equities and pockets of the commodity complex

given the new pro-growth, pro-inflation impulse coursing through markets and poised to continue next

year as the Trump administration takes office and begins to execute its policy agenda.

ASSET ALLOCATION
COMMITTEE OUTLOOK

Composed of senior investment professionals
across platforms, our Asset Allocation Committee
assembles each quarter to establish its 12-month
views for an array of asset classes, refined through
vigorous debate and discussion. The quarterly
Asset Allocation Committee Outlook captures
these views and the market, macroeconomic and
geopolitical context driving them.

To subscribe to Asset Allocation Committee Outlook,
please contact us at AACoutlook@nb.com.

2016 ANNUAL REPORT NEUBERGER BERMAN | 35

| PERSPECTIVES |

KENNETH G. RENDE
HEAD OF WEALTH MANAGEMENT

OUR COMMITMENT TO CLIENT ENGAGEMENT

Neuberger Berman’s ability to deliver for clients is based not only on the expertise and experience of our portfolio
managers, but also on the depth, breadth and quality of our engagement with clients. Over our more than 75-year
history, we have worked with many of the same families across generations to achieve their goals.

Our investment teams and wealth advisors work closely
with each client to design customized portfolios in a
tax-sensitive framework that reflects income needs, growth
targets and risk tolerance, accessing a full platform of
tailored, multifaceted investment solutions managed by
Neuberger Berman portfolio managers and complemented
by the Neuberger Berman Trust Company, Investment
Strategy Group (ISG) and financial planning analysis team.

The Neuberger Berman Trust Company offers comprehensive
and personalized fiduciary and investment services for
individuals and institutions, taking a holistic approach that
integrates the unique needs of each client with appropriate
investment solutions. With $12 billion in assets under
management and administration, the Trust Company offers
services nationwide and also is able to provide access to
the favorable trust laws of the state of Delaware. The Trust
Company can help review, construct or execute a gift or
estate plan, as well as provide discretionary asset manage-
ment services and solutions.

ISG provides a wealth of global investment insights,
research and analysis, and helps design customized asset
allocations and portfolio manager proposals across all asset
classes to create tailored investment solutions for clients.
ISG leverages the quarterly tactical views of the firm’s Asset
Allocation Committee as well as its own strategic analysis
and manager research. The group works closely with our
wealth advisors, portfolio managers and clients to gain a
deep understanding of each client’s situation and goals in
designing investment solutions.

As a complement to ISG and the Trust Company, our
financial planning analysis team considers the entirety of
a client’s financial resources to assess progress toward
personal goals and to explore ways that can help improve
upon existing approaches. This task extends across
disciplines, including cash flow management and taxation
planning, and explores many challenges faced by individuals,
including retirement, long-term care needs, education fund-
ing for family members and more.

36 | NEUBERGER BERMAN ANNUAL REPORT 2016

| BUSINESS REVIEW: PRIVATE CLIENT |

“ Private clients can count on a
true partnership with Neuberger
Berman, one that leverages the
full range of the firm’s resources.”

JOSEPH V. AMATO
PRESIDENT AND CHIEF INVESTMENT OFFICER—EQUITIES

A REFLECTION OF OUR HERITAGE

An integral component of Neuberger Berman since our founding in 1939, our private client investment managers deliver
unique, tailored solutions to individuals, families and their related organizations, with an emphasis on customization and
commitment to service that has fostered deep, longstanding relationships, often spanning generations. The qualities that
have long defined our firm—tailored solutions, personalized service and a passion for investing—continue to resonate
with our clients today.

Private clients can count on a true partnership with Neuberger
Berman, one that leverages the full range of the firm’s resources.
Our portfolio managers are seasoned investors, with teams that
have worked together across market cycles and through a variety
of investment environments. Our teams’ focus has always been
and will always be on delivering attractive, risk-adjusted long-term
returns. This experience could be key in 2017, as expectations of
increased market volatility as well as increased dispersion among
the performance of individual securities may call for nimble
practitioners able to capture opportunities as they arise.

Our private client business reflects our heritage and affirms our
commitment to provide solutions to our clients’ needs. To reflect
the dynamic investment environment, we continue to expand our
platform, our services and the ways in which we engage with our
clients. In recent years the firm has added a range of investment
solutions and augmented our internal research capabilities as
investors continued to look beyond traditional equity and fixed
income investments to incorporate a broader range of risk and
return opportunities. We will continue to add resources as appropriate
to meet the evolving needs of our clients.

2016 ANNUAL REPORT NEUBERGER BERMAN | 37

| PRIVATE CLIENT |

THE GREENE GROUP

THE KAMEN GROUP

Michael C. Greene

Benjamin H. Nahum

Stanley G. Lee

Michael W. Kamen, CFA

Lee J. Tawil, CFA

Stuart J. Pollak

The Greene Group manages small-cap, mid-cap and all-cap strategies
using a private equity-style, research-driven approach to identify
out-of-favor companies trading at a significant discount to their intrinsic
value with an identifiable catalyst to help that narrow the price gap
over time. The team looks for disconnects between reality and market
perception—something that occurs regularly in particular types of
companies, such as those with complex corporate structures. Heading
into 2017 we believe that technology and health care companies have
the most attractive risk/reward profiles in the current market environ-
ment. Many of these stocks lagged in 2016; however, we see excellent
value and long-term growth potential in technology companies and
expect more ideas to emerge from the health care sector as uncertainty
about the future of the Affordable Care Act will create short-term
disruptions for many service providers. We will endeavor to use market
uncertainty to our benefit when shares of well-managed and competi-
tively advantaged companies are priced at attractive levels.

THE STRAUS GROUP

The Kamen Group seeks to deliver solid long-term investment
performance through a disciplined investment process focused
equally on the quality of companies and the price that is paid for
them. The team favors businesses characterized by sustainable
competitive advantages, strong management, high returns on
capital and superior balance sheets. With elevated valuation
levels in the overall equity market and a subdued macroeconomic
environment, we have targeted companies that can provide
sustained above-average organic growth. One such example in our
portfolio is a mid-sized manufacturer of medical devices whose
launch of multiple new, innovative products has the potential to
accelerate top-line growth while also improving profit margins. In
an economy with only moderate growth, we believe companies
like these can provide differentiated performance.

Marvin C. Schwartz

Richard J. Glasebrook, CFA

David I. Weiner

Henry Ramallo

Stephanie J. Stiefel, CPA Charlie W. Schwartz

Taylor L. Glasebrook

The Straus Group is a team of active portfolio managers dedicated to building client wealth through investments in undervalued mid- and large-cap
U.S. equities capable of compounding capital over the medium and longer term in a tax-friendly manner. An example in 2016 was a domestic oil and
gas producer with outsized land ownership purchased decades ago (i.e., not at today’s prices) in the Permian Basin in Texas. We believe the entity
can grow production at 15–20% per year for at least five years while earning a return on incremental capital in excess of 15% after tax. The company
has an investment-grade balance sheet. In 2017, we are cautiously optimistic on the domestic growth outlook and remain focused on enhancing our
portfolios, replacing investments with subdued potential with new opportunities.

38 | NEUBERGER BERMAN ANNUAL REPORT 2016

TEAM KAMINSKY

THE FRAENKEL GROUP

Gerald P. Kaminsky

Michael J. Kaminsky

Richard M. Werman

Francis L. Fraenkel

Robert H. Pearlman

David M. Ross

Mindy Schwartzapfel

David G. Mizrachi

James J. Gartland

Kenneth Y. Amano, CFA

Ann Marie Foss, CFA

Lida Greenberg, CFA

Team Kaminsky creates quality-focused, custom portfolios for individuals,
families and institutions, utilizing both growth and income styles. Managers
of “core” equity, balanced and fixed income portfolios, the team leverages
their broad expertise and deep understanding of businesses to invest
across the capital structure in order to meet individual client needs. The
team’s mission—to add value in all asset categories, give highly person-
alized service and to do so in a highly efficient manner—underscores
this vision. 2016 was a positive year, led by our domestic-centric exposure
to financials and technology stocks as well as by having “dry powder”
to take advantage of dislocations such as Brexit and the volatility
immediately after the presidential election. Our portfolios were positioned
conservatively heading into 2017, as we believe the marketplace could
be increasingly volatile as the year progresses and interest rates trend
higher. We will continue to strive for strong risk-adjusted returns.

THE LARGE CAP DISCIPLINED GROWTH GROUP

The Fraenkel Group seeks to provide its clients with solid, long-term
performance utilizing a portfolio strategy that emphasizes sound
judgment and conservative growth. We invest in core growth companies
that are characterized by exceptional management teams, industry
leadership and stable growth models. Moreover, we look for oppor-
tunistic growth companies with catalysts that could lead to enhanced
growth, as well as companies that distribute above-average dividends
and provide organic growth. This disciplined low-turnover investment
approach has the potential to produce solid performance while
maintaining a lower risk profile than the overall market. Prior to the
election, we believed that a new president would enact policies that
differed from the previous eight years, benefitting some industries
and companies while impairing others. In this environment, we found
several companies we believe possess the flexibility to prosper under a
new administration.

The Large Cap Disciplined Growth Group leads with acceleration of operating performance
as the stock selection metric of transcendent relevance. Our process includes factoring in
multiple additional inputs, including free cash flow generation, quality of management,
identifiable catalysts and optionality. The use of acceleration as the key metric enables
a differentiated definition of “growth,” yielding a broader pool of large-cap ideas.
Indeed, in 2016 technological innovation and leadership enabled earnings acceleration
for certain portfolio holdings, such as a semiconductor company that benefitted from

John J. Barker

Richard N. Bradt

Jason Tauber, CFA

the global growth of PC gaming while simultaneously positioning itself to take advantage of huge opportunities within the artificial intelligence
space. We will continue to apply our discipline as we enter 2017, and we look to capitalize on individual opportunities regardless of the market or
economic backdrop.

2016 ANNUAL REPORT NEUBERGER BERMAN | 39

| PRIVATE CLIENT |

THE PADUANO GROUP

THE KSE VALUE GROUP

Daniel P. Paduano, CFA

Sherrell J. Aston

Jason H. Vintiadis

Michael N. Emmerman

Michelle B. Stein

The Paduano Group believes major long-term demographic, societal,
technological and political developments around the world create a
robust array of investment opportunities. The team follows a disciplined
and consistent research process in an effort to translate these secular
global themes into compelling, multiyear investments, agnostic to cor-
porate size and geography. 2016 was a productive year, with a healthy
contribution from a number of our themes, notably Alternatives,
Renewables and Conservation, The Rising Value of Water, and Smart
Systems. Most encouraging were early signs of a more normal cor-
relation between price performance and business fundamentals—
a dynamic that in our opinion has been lacking for quite some time. As
highlighted by many market observers, growth and incremental profits
are increasingly difficult to achieve. It is this exact environment in which
our themes can serve us particularly well as we direct our investments
to businesses out in front of secular growth and improving profitability.

The KSE Value Group is a
classic value investor, using
a time-tested investment
process rooted in rigorous
research to identify
undervalued companies
across the capitalization
spectrum that are poised
for significant positive
change thanks to a clearly
defined catalyst. These
catalysts can be internal
(such as management
changes or shifts in the
company strategy) or

Brooke Johnson

Richard Wesolowski

external (such as regulatory, political or macro-economic trends).
Once we initiate a position, our investment horizon is two to four
years. We believe that company-specific catalysts will be a key
driver of performance in 2017, as they have been in previous years.

THE KOPLIN LLOYD GROUP

THE SCHUPF GROUP

THE ANDERSON GROUP

Cary A. Koplin

Melinda L. Lloyd

H. Axel Schupf

Marshall W. Jaffe

Elisabeth S. Lonsdale

Bradley M. Anderson

John E. Terzis, CFA

40 | NEUBERGER BERMAN ANNUAL REPORT 2016

THE BOLTON GROUP

David R. Pedowitz

F. Christian Reynolds, CFA Darren M. Fogel

John D. DeStefano

James C. Baker, CFA

Maria D. Pappas

Linda J. Ludwig

[NOT PICTURED: Leo D. Bretter; Mark Daniel Sullivan, CPA; Brian Case, CFA; Miles Price; John A. Kauffmann]

The Bolton Group is an experienced steward to high-net-worth individuals, families and tax-exempt entities, partnering with our clients
and their trusted advisors to create customized, multidimensional investment solutions. Our team utilizes a variety of equity and fixed
income disciplines to craft solutions for various client objectives, including capital appreciation in the context of risk tolerance as
well as current income when requested. We seek to add value by investigating and analyzing uncertainties—financial complexities,
cyclical challenges, operating disappointments, management changes, acquisitions and divestitures—that cause high-quality, otherwise
attractive companies to trade at opportunistically low prices. Our team utilizes primary research with disciplined fundamental and
financial analyses to estimate risk and reward. A sharp focus on free and discretionary cash flows contributes to an analytical
consistency that permits us to compare investment opportunities and risks in our portfolio construction. Performance in 2016 was
led by consumer staples and information technology investments, offset by macro and other challenges for our health care sector
investments. Given outstanding demographics, the environment for most health care stocks may improve in 2017 and boost returns.
We continue to identify and invest in leading companies across several attractive industries while gathering insights and seeking
opportunities as they arise out of political and economic shifts in the U.S. and elsewhere.

THE EISMAN GROUP

THE SLOATE GROUP

THE CAPITAL GROUP

Elliott H. Eisman

Lillian Eisman

Michael E. Cohen

Dana Eisman Cohen

Steven Eisman

Laura J. Sloate, CFA

Yolanda R. Turocy

2016 ANNUAL REPORT NEUBERGER BERMAN | 41

| PERSPECTIVES |

ELIZABETH R. CRIBBS, CPA
HEAD OF CORPORATE SOCIAL RESPONSIBILITY

OUR COMMITMENT TO
CORPORATE SOCIAL RESPONSIBILITY

“ We believe our impact
is greatest at the
intersection of leader-
ship, expertise, funding
and engagement.”

Coordinated by our Corporate Social Responsibility team, Neuberger Berman
seeks to positively affect our community, employees and clients. Community
engagement is embedded in the culture here at Neuberger Berman, a
culture that earned us the top ranking (among firms with 1,000 or more
employees) in the Pensions & Investments 2016 “Best Places to Work in
Money Management” survey.

We believe our impact is greatest at the intersection of leadership, expertise,
funding and engagement. Driven and led by our employees, our philanthropic
efforts leverage a broad range of the firm’s resources, from the financial
(including the Neuberger Berman Foundation and corporate grants) to the
personal (employee expertise, volunteerism and nonprofit board service).
In 2016, more than 85% of Neuberger Berman Foundation grants were made
to organizations recommended by employees, and we volunteer with over 80%
of these organizations annually. Employees in 2016 contributed more than
5,500 hours in service to the community through 160-plus volunteer projects in
17 cities and 10 countries around the world; 62% of our employees participated
in our corporate volunteer programs last year—well above most of our peers.

Our volunteer efforts culminate annually in May with our “Celebration With
Service.” In honor of our reemergence as an independent company we embark
upon a week of volunteer projects in which we use our individual talents to
benefit our communities worldwide, from Los Angeles to London, Hong Kong to
Houston. Activities range from tutoring children to freshening up public parks
to preparing and delivering meals to people in need. Over the past seven years,
more than 6,000 volunteers—employees, their family members and friends—
have participated in these projects.

42 | NEUBERGER BERMAN ANNUAL REPORT 2016

| BUSINESS REVIEW: CLIENT COVERAGE |

“ Our culture is a durable draw
within the asset management
industry, enabling us to hire and
retain professionals naturally
biased toward collaboration in
support of client objectives.”

ANDREW S. KOMAROFF
CHIEF OPERATING OFFICER AND HEAD OF GLOBAL CLIENT COVERAGE

PROVIDING PERSONALIZED SERVICE FOR AN ARRAY OF CLIENTS

At Neuberger Berman we seek to develop strong, lasting relationships with our clients and platform partners that position
us to deliver solutions tailored to their specific goals and requirements, and to share new, innovative ideas that can make
a difference in long-term investment results. While our mission is relatively straightforward, its success is predicated on
meticulous execution and coordination across functions throughout the firm, from the portfolio management teams
responsible for investing client assets to the multidisciplinary groups that provide personalized service to our clients.

Our culture is a durable draw within the asset management industry,
enabling us to hire and retain professionals naturally biased toward
collaboration in support of client objectives. In 2016 we continued to
attract talent to our 500-plus person global Client Coverage team.
The team includes those focused on relationship management, client
service, marketing, analytics, developing strategic insights and promoting
innovation. Last year, we made the decision to bring together our North
American Institutional business under the leadership of Matt Malloy
and our North American Intermediary business under Scott Kilgallen.
We made this adjustment in order to more effectively share insights and
respond to client issues that are common within each of those segments.

We added 85 new institutional relationships worldwide in 2016,
bringing our total to nearly 1,100, up more than 50% from end-2012.
Equally important, our clients are entrusting us with their capital across
a broader range of capabilities—the number of clients invested in
multiple Neuberger Berman strategies has more than doubled since
2012, a trend we expect to continue as a natural byproduct of our
consultative approach to relationships. Similarly, we are pleased with
our progress in developing partnerships with intermediary platforms;
we now have significant relationships with about 50 firms globally,
which provides a strong foundation both for introducing new strategies
as well as extending relationships across a broader range of capabilities.

Within our wealth management business serving individuals, families
and their related foundations (primarily in the U.S.), we remained
focused on tailoring portfolios to meet the unique needs of each
client while navigating the dynamic markets experienced last year.
We are pleased to see that more of our wealth management clients
are incorporating private equity into their portfolios.

We continued to innovate within our investment platform during the
year, maintaining a disciplined approach to strategy introductions that
focuses on the intersection of client needs and our ability to add value.
In 2016, these included fixed income opportunities in both private and
public markets, a small-cap EAFE strategy, an event-driven hedge fund,
multi-asset portfolios, an options-writing strategy and a registered
private equity fund—all of which we believe are well suited for the
current environment.

At the end of the day, we manage our business according to the drivers
of client demand. While these drivers naturally diverge across channels
and geographies, a number of common themes have emerged from
our discussions with clients, many of whom have been looking for
guidance on how to navigate the investment landscape given signifi-
cant uncertainty around interest rates, trade policy, divergent growth
prospects and general geopolitical anxiety.

2016 ANNUAL REPORT NEUBERGER BERMAN | 43

| CLIENT COVERAGE |

THE HAGUE

ZURICH

FRANKFURT

PARIS

LONDON

MADRID

BOGOTA

BUENOS AIRES

MILAN

DUBAI

DIK VAN LOMWEL
HEAD OF EMEA AND LATIN AMERICA

EMEA AND LATIN AMERICA

2016 was an eventful year on many levels. If the market roller coaster early
in the year was not challenging enough, a summer Brexit followed by the
autumn U.S. presidential election brought new distractions to our industry as
it continued to address significant ongoing regulatory change and uncertainty.

In 2016 we welcomed Vivek Bommi, who joined us from our Chicago office,
as Senior Portfolio Manager in Global and European High Yield. In addition, a
credit portfolio manager and two analysts have joined the local fixed income
teams, and three professionals joined our private equity group.

Despite this, our footprint across the EMEALA region continued to grow, driven
largely by demand for higher-yielding and private market strategies. As clients
faced the challenges of a continued low-growth/low-returns environment,
we saw particular traction across our emerging markets debt platform, while
institutional appetite for alternative credit strategies remained high. Many
pension fund clients initiated or increased allocations to private equity, which
was reflected in successful capital raises for our secondaries and Dyal strategies
as well as a growing number of client partnerships in the asset class. We were
pleased to see a positive client response to our corporate hybrids capabilities,
as well as to new strategies from our Multi-Asset Class platform.

Teamwork across all functions plays a key role in ensuring our continued
success, and we are delighted that several experienced professionals have
joined the team this year to help drive the business forward, including David
Rowe as Head of Marketing—EMEA, Nicholas Styman as Chief Compliance
Officer—EMEA, and James Harvey as Head of Finance—EMEA.

As we look forward to 2017, we are excited about the innovative products
we are making available to clients, providing access to more of our expertise
in areas such as options investing, risk premia and risk parity, multi-asset
class solutions and liquid alternatives.

Tom W. Douie
EMEA INTERMEDIARIES
(LONDON)

Edward J.M. Jones
U.K. INSTITUTIONAL
(LONDON)

Cas A.H. Peters
BENELUX
(THE HAGUE)

Mark Oestergaard
SCANDINAVIA
(LONDON)

Christian Puschmann
GERMANY AND AUSTRIA
(FRANKFURT)

Fabio L. Castrovillari
SWITZERLAND
(ZURICH)

Charles Soullard
FRANCE
(PARIS)

Javier Nunez
de Villavicencio
IBERIA (MADRID)

Marco Avanzo-Barbieri
ITALY
(MILAN)

Jahangir Aka
MIDDLE EAST & AFRICA
(DUBAI)

Maximiliano Rohm
LATIN AMERICA
(BUENOS AIRES)

Jenna Lawrence
EMEA CLIENT SERVICE
(LONDON)

44 | NEUBERGER BERMAN ANNUAL REPORT 2016

RYO OHIRA
HEAD OF EAST ASIA

EAST ASIA

In 2016 assets under management in the East Asia region grew by more
than 50% for the third consecutive year, as we continued to expand our
organization and capabilities, and further deepen our relationships with
clients both in Japan and Korea.

The introduction of new investment ideas and fresh insights into the East
Asia market led to steady growth in both AUM and client coverage in the
region. We held approximately 50 seminars in 2016, both in and out of
our offices, and hosted numerous client meetings featuring our U.S.-based
portfolio managers traveling through the region.

In Korea, we won mandates from both institutional and retail clients, with
the biggest wins coming in private equity strategies, including Dyal, Athyrium
and our private debt fund. We also attracted inflows to our diversified asset
classes in Japan. Our overall fixed income presence expanded due to signifi-
cant growth in such strategies as global investment grade, bank loans, short
duration high yield, U.S. municipals and corporate hybrid securities. In the
private asset space, Japanese clients entrusted with us a record $1.2 billion
of capital in 2016 across Dyal, secondaries, private debt and private equity
separate accounts. In equity, we experienced positive flows into strategies
involving master limited partnerships in 2016, and we expect increasingly
strong demand for this asset class following the Trump election in the U.S.
and the recent decline of the REITs market.

We believe our flexibility and speed, our wide range of strategies and our
ability to customize will be of particular benefit to clients in the ongoing
volatile environment. For example, to meet the specific needs of Japanese
clients—such as containing rising hedging costs, thematic equity investment
ideas, ESG investing, knowledge transfer and others—we enhanced our
regional product development, client reporting and client portfolio manage-
ment functions as well as the Japan desks in New York and Chicago. We aim
to continue to provide such high-quality service throughout the East Asia
region, with “clients first” at the very heart of our team’s mindset.

TOKYO

SEOUL

Komei Asaba
INSTITUTIONAL &
INTERMEDIARIES (TOKYO)

Yutaro Nishihara
INSTITUTIONAL
(TOKYO)

Tomomi Hiratsuka
INTERMEDIARIES
(TOKYO)

Takashi Ikushima
CLIENT PORTFOLIO
MANAGEMENT (TOKYO)

Michi Suzuki
CLIENT PORTFOLIO
MANAGEMENT – FIXED
INCOME (TOKYO)

Mitsuhiro Shimura
CLIENT REPORTING
(TOKYO)

DaeYeon Kim
INSTITUTIONAL &
INTERMEDIARIES
(SEOUL)

YoungSun Na
INTERMEDIARIES
(SEOUL)

Yoshiyuki Yagisawa
PRIVATE EQUITY
(NEW YORK)

Hiroyasu Tamura
CLIENT SERVICE
(CHICAGO)

2016 ANNUAL REPORT NEUBERGER BERMAN | 45

| CLIENT COVERAGE |

NICK J. HOAR
HEAD OF ASIA PACIFIC

ASIA PACIFIC

In 2016, we continued to deepen our client engagement and expand our
local presence in the Asia Pacific region. Our business continued to grow
at an impressive pace last year, as we secured mandates from multiple
institutions in the major markets of China, Hong Kong, Taiwan, Singapore
and Australia. We continued to offer our clients tailored investment
solutions in a part of the world that demands customization. In Australia,
our smart beta emerging market equity strategy was the key contributor
to growth, with inflows coming from one of the largest superannuation
fund clients in that market. As clients continued to seek stable and
uncorrelated returns to public markets, we saw increasing demand for
our private equity strategies, especially in mainland China and Hong Kong.

For our intermediary distribution business we remained committed to
deepening client relationships and have launched important initiatives
to position the firm for future growth. For the private bank channel,
our UCITS products that focus on generating income and mitigating
interest-rate risk continued to gain traction. On the retail front, we
expanded our client franchise by signing new partnerships with some
of Asia Pacific’s largest consumer banks and insurance companies. In
Taiwan, we have successfully obtained a Securities Investment Trust
Enterprise (SITE) license, which will allow us to manage and distribute
onshore funds, a strategic move to building a competitive advantage
in this key market.

We continued to invest in our infrastructure and people. Key appointments in
2016 included Jovi Chen, who joined us as the General Manager of Taiwan,
and Patrick Liu, who joined us to be the head of our China Business. Given
the continued expansion of our business in the region, we moved to larger
offices in Taipei, opened up an office in Sydney and expanded our office
space in Hong Kong.

46 | NEUBERGER BERMAN ANNUAL REPORT 2016

SHANGHAI
HONG KONG

TAIPEI

SINGAPORE

MELBOURNE

Patrick Liu
COUNTRY HEAD, CHINA
(SHANGHAI)

Marco Tang
FINANCIAL INSTITUTIONS
(SHANGHAI)

William Hui
INSTITUTIONAL
(SHANGHAI)

Jovi Chen
COUNTRY HEAD, TAIWAN
(TAIPEI)

Tony Huang
FINANCIAL INSTITUTIONS
TAIWAN (TAIPEI)

Thomas Holzherr
INSTITUTIONAL
(SINGAPORE)

Vincent Lim
FINANCIAL INSTITUTIONS
(SINGAPORE)

Pauline Cheng
FINANCIAL INSTITUTIONS
(HONG KONG)

Paul D. O’Halloran
AUSTRALIA
(MELBOURNE)

Lucas J. Rooney
AUSTRALIA
(MELBOURNE)

Linda Lam
CLIENT SERVICE
(HONG KONG)

Angela Verco
CLIENT SERVICE
(MELBOURNE)

MATTHEW H. MALLOY
HEAD OF NORTH AMERICAN INSTITUTIONAL AND
GLOBAL HEAD OF INSURANCE SOLUTIONS

SCOTT E. KILGALLEN
HEAD OF NORTH AMERICAN INTERMEDIARY DISTRIBUTION

NORTH AMERICAN INSTITUTIONAL

NORTH AMERICAN INTERMEDIARY

Institutional client dynamics continue to evolve, driving divergence
across client types in terms of both asset allocation and the underlying
investment strategies used to execute it—whether it be corporate
defined benefit plans increasing their focus on risk-reduction measures
in the face of funding and regulatory changes, or public defined benefit
plans allocating more to alternatives in the face of funding shortfalls.
Union and multi-employer plans too are turning to more complex asset
allocation against similar funding shortfalls and high return targets,
while non-profit organizations turn to ESG to align their investment
goals and mission. These big industry changes also are accentuating the
role of consultants, who are increasingly required to provide capabilities
and insights beyond the traditional evaluation of investment managers.
Many are asked to expand their coverage to a broader range of traditional
and alternative asset classes, increase resources and enhance the
breadth of solutions they offer.

Amid such rapidly evolving client dynamics, our team of more than
40 professionals continues to develop a more focused and tailored
approach to how we engage with our 725 institutional clients. In
2016, we worked to deepen our understanding of institutional client
issues, strengthen our relationships with global, regional and boutique
consultants, and serve as a thought partner to all our clients, with
segment-specific insights as well as broad asset class and market
views. We will remain focused on these priorities in 2017, in particular
developing strategies and providing solutions specific to institutional
investors, and enhancing the quality of our interactions with clients
and consultants.

Challenging and uncertain market dynamics in recent years have
accentuated the value that can be brought to bear by skilled financial
advisors. Neuberger Berman seeks to partner with these professionals.
We offer a broad range of flexible, strategic investment solutions
across product types, fee structures and liquidity profiles. At year-end
2016, we had $55 billion of assets under management and admin-
istration in the Intermediary channel within North America and were
represented on more than 50 intermediary platforms.

Throughout the year we continued to focus on bringing to market new
and innovative solutions for intermediaries and their clients. For example,
we joined with a select group of distribution partners to launch our first
registered private equity fund, enabling participation in this attractive
asset class by a broader cross-section of investors. We also expanded
our collateralized put-write strategy offerings to include comingled fund
vehicles. The strategy is designed to provide individual investors with
exposure to equity market returns with less volatility.

Our deep commitment to providing clients with access to the best
thinking of the firm was apparent in 2016, as market-moving geopo-
litical events like the U.K. Brexit vote and the U.S. elections highlighted
the value of timely insights. Through our webcasts, blogs and other
thought leadership vehicles—not to mention a variety of investment
forums, due-diligence meetings, conference speaking engagements and
value-add training events—we were able to help guide thousands of
intermediaries through another turbulent year in the markets.

2016 ANNUAL REPORT NEUBERGER BERMAN | 47

| CLIENT COVERAGE |

“ We have been managing a range of traditional
and alternative assets on behalf of insurance
clients for more than 20 years.”

MATTHEW H. MALLOY
HEAD OF NORTH AMERICAN INSTITUTIONAL AND
GLOBAL HEAD OF INSURANCE SOLUTIONS

GLOBAL INSURANCE

Insurance companies, broadly speaking, remain well capitalized, with strong liquidity and capital positions and asset
leverage at or below historical levels. That said, challenges persist. The ever-changing regulatory landscape is always top
of mind for insurers, of course. Meanwhile, attractive investment opportunities remain difficult to source in a world of
still-low interest rates, challenging supply and liquidity dynamics in fixed income markets, and equity markets at or near
all-time highs amid expectations for increased volatility. These conditions have continued to drive insurers to diversify their
portfolios and evaluate new asset classes and markets. As long-term investors, insurers continue to focus on allocations
to risk assets—both traditional and alternatives such as non-investment grade fixed income and private equity—in an
effort to enhance yield profiles and return potential, partnering with third-party asset managers for guidance and support
when doing so. Given their longer investment horizons, many insurers are well suited to monetize liquidity and seek the
extended return potential offered by many private market strategies.

With approximately $25 billion of insurance assets under manage-
ment and committed capital as of December 31, 2016, Neuberger
Berman has been managing a range of traditional and alternative
assets on behalf of insurance clients for more than 20 years. In our
continuing efforts to enhance the services and solutions we provide
to insurers globally, in 2016 we added several new resources to the
effort. J.P. Sursock joined as a dedicated insurance Client Advisor
focusing on U.S. insurers. Jason Pratt joined the firm as a Portfolio
Manager and Head of Insurance Fixed Income; he partners closely

with our client coverage teams to deliver the firm’s broad fixed
income platform to insurance companies worldwide. In 2016,
Steve Smith also joined the firm as our Head of Insurance Analytics,
providing a range of analytical capabilities, advice and portfolio
solutions for insurers.

We expect change to remain a constant in 2017 for investors of
all types. We stand ready to help insurers address the challenges
these changes may present with creative investment solutions and
unparalleled client service.

48 | NEUBERGER BERMAN ANNUAL REPORT 2016

| PERSPECTIVES |

WILLIAM A. ARNOLD
CHIEF FINANCIAL OFFICER

OUR COMMITMENT TO FINANCIAL RISK MANAGEMENT

Consistent with our colleagues across the firm, a client-centric mindset
drives our approach to financial risk management. Protecting the firm
is one of our guiding principles. We take a long-term view, thinking in
years, not months—and purposely keep our balance sheet liquid and
our capital structure conservative with longer-dated maturities.

This dedication to stewardship, in turn, has enabled us to invest prudently
in our business, in our platform and in our people. We have broadened our
capabilities, increased our resources, improved technology and built a more
diversified and stable investment platform. More concretely for our clients,
we have introduced new strategies with existing investment teams, added
new investment teams and continued to invest in our global client coverage
franchise. We have made these investments not to improve our quarterly
results but because we believe it will drive greater long-term stability across
the firm and provide opportunities for deeper relationships with our clients.

Importantly, as we focus on protecting the firm and investing for the
future, we do so in close partnership with our colleagues across the
business. By understanding the objectives and long-term strategy of our
investment and client coverage teams, we are able to ensure we are
properly allocating our resources and capital to initiatives that will
ultimately serve our clients well.

SUMMARY FINANCIAL INFORMATION
($ in millions)

Dec 2016

Cash and Cash Equivalents

Investments

Receivables

Goodwill and Other Intangibles

Other Assets

Total Assets

Senior Notes Payable

Accrued Compensation and Benefits

Payables and Other Liabilities

Total Liabilities

Common Equity

Total Liabilities and Equity

740

380

227

583

201

2,131

763

482

359

1,604

527

2,131

Adjusted Net Revenues for 2016

$1,469

ASSETS UNDER MANAGEMENT ($ in billions)

255

240

250

242

2016

2015

2014

2013

2012

2011

2010

205

193

190

2016 ANNUAL REPORT NEUBERGER BERMAN | 49

| BOARD OF DIRECTORS |

GEORGE H. WALKER

JOSEPH V. AMATO

Chairman and Chief Executive
Officer, Neuberger Berman

President, Neuberger Berman;
Chief Investment Officer—
Equities

ROBERT W. D’ALELIO

STEVEN A. KANDARIAN

Portfolio Manager,
Small Cap Value

Chairman, President and CEO,
MetLife; Formerly CIO, MetLife

Formerly Executive Director,
Pension Benefit Guaranty
Corporation (PBGC)

RICHARD B. WORLEY

LAWRENCE ZICKLIN

Formerly CEO and CIO,
Morgan Stanley Investment
Management

Clinical Professor, New York
University Stern School of
Business

Formerly Chairman, Miller
Anderson and Sherrerd

Chairman, Rand Center for
Corporate Ethics and Governance

Formerly Managing Partner
and Chairman, Neuberger
Berman

OUR FOUNDER—ROY NEUBERGER
The Art of Investment

When Roy Neuberger started collecting art in 1939,
he bought pieces that spoke to him. “I buy because
I love the work,” he said. The fact that many of his
favorite artists—like Jackson Pollock, Edward Hopper
and especially Milton Avery—went on to become
household names is a testament to his unique insight.
In art, as in investment, Roy didn’t follow the market—
the market followed him.

At the firm he founded in that same year of 1939, we
try to live up to those principles. We value experience
but have an eye for innovation. Our culture is strong;
our teams are independent. Company fundamentals
and client objectives are what drive us, not the noise
of the markets. That is the art of investing, the art of
partnership, the art of service.

50 | NEUBERGER BERMAN ANNUAL REPORT 2016

| BOARD OF DIRECTORS |

| ‘40 ACT MUTUAL FUND BOARD |

JOSEPH V. AMATO

ROBERT J. CONTI

FAITH COLISH*

MICHAEL J. COSGROVE

MARC GARY

MARTHA C. GOSS

MICHAEL M. KNETTER

President, Neuberger Berman;
Chief Investment Officer—
Equities

President, Mutual Funds

Securities Regulatory
Attorney

Trustee of the Year
(2001, 2008), Mutual
Fund Industry Awards

President, Carragh
Consulting USA

Formerly Executive,
General Electric Company
and Trustee, GE’s
Pension and Benefits Plan

Formerly Executive
Vice President and
General Counsel,
Fidelity Investments

Formerly Corporate
Treasurer and Enterprise Risk
Officer, The Prudential
Insurance Company
of America

President and CEO,
University of Wisconsin
Foundation

Formerly Dean, School
of Business, University
of Wisconsin

DEBORAH C. McLEAN

GEORGE W. MORRISS

TOM D. SEIP

CANDACE L. STRAIGHT

JAMES G. STAVRIDIS

PETER P. TRAPP

Adjunct Professor,
Columbia University
School of International
and Public Affairs

Formerly Executive Vice
President and CFO, People’s
Bank, CT

Independent
Non-Executive Chairman
of the Board

Formerly Senior Executive,
The Charles Schwab
Corporation

Director, Montpelier Re

Formerly Principal,
Head and Partners

Dean, Fletcher School
of Law and Diplomacy,
Tufts University

Formerly Admiral,
United States Navy

Formerly Ford Motor
Company Executive

Formerly President, Sentry
Life Insurance Company

| UCITS FUND BOARD |

NOT PICTURED:

TOM FINLAY
Independent Non-Executive Director of the Board

Formerly Bank of Ireland Asset Management
(the Fund Management division of the Bank of Ireland Group)

Formerly a Barrister by profession

PAUL SULLIVAN
Independent Non-Executive Director of the Board

Formerly Executive Director, the Irish Sovereign Debt Management Office,
the National Treasury Management Agency

Formerly a Vice President, Chase Manhattan Bank (now JP Morgan)

GRAINNE ALEXANDER

MICHELLE S. GREEN

ANDY OLDING

General Counsel of EMEA
and Latin America,
Neuberger Berman

Head of EMEA Mutual Fund
Administration,
Neuberger Berman

Independent Non-Executive
Director of the Board

Formerly a European
partner, Mercer Investment
Consulting

Formerly Chief Executive,
F&C Management
(F&C Ireland)

*Member closed-end funds Board of Directors only. Retired from Board of open-end fund, effective 12/31/2016.

2016 ANNUAL REPORT NEUBERGER BERMAN | 51

| PARTNERSHIP COMMITTEE |

JOSEPH V. AMATO

WILLIAM A. ARNOLD

TIMOTHY F. CREEDON

ROBERT W. D’ALELIO

RICHARD J. GLASEBROOK

NICK J. HOAR

ANDREW A. JOHNSON

SCOTT E. KILGALLEN

ANDREW S. KOMAROFF

RICHARD S. NACKENSON

THOMAS P. O’REILLY

DAVID R. PEDOWITZ

CONRAD A. SALDANHA

MARVIN C. SCHWARTZ

BENJAMIN E. SEGAL

ANTHONY D. TUTRONE

JUDITH M. VALE

GEORGE H. WALKER

HEATHER P. ZUCKERMAN

52 | NEUBERGER BERMAN ANNUAL REPORT 2016

| OPERATING COMMITTEE |

JOSEPH V. AMATO

ROBERT J. ARANCIO

WILLIAM A. ARNOLD

WILLIAM A. BRAVERMAN

ROBERT J. CONTI

TIMOTHY F. CREEDON

ALISON B. DELGADO

ALAN H. DORSEY

CÉLINE S. DUFÉTEL

ROBERT L. EASON

MARGARET E. GATTUSO NICK J. HOAR

SCOTT E. KILGALLEN

LAWRENCE J. KOHN

ANDREW S. KOMAROFF

JACQUES G. LILLY

PATRICK C. LOMELO

MATTHEW H. MALLOY

RYO OHIRA

IAN D. PECKETT

MICHAEL D. REES

KENNETH G. RENDE

BRIEN P. SMITH

BRAD C. TANK

ANTHONY D. TUTRONE

DIK VAN LOMWEL

GEORGE H. WALKER

HEATHER P. ZUCKERMAN

2016 ANNUAL REPORT NEUBERGER BERMAN | 53

Takashi Ikushima

Fred R. Ingham

James L. Iselin

Corey A. Issing

Marshall W. Jaffe

Ajay Singh Jain

Andrew A. Johnson

Brian C. Jones

Edward J.M. Jones

Jon B. Jonsson

Michael W. Kamen

Gerald P. Kaminsky

Michael J. Kaminsky

| MANAGING DIRECTORS |

Jahangir Aka

Kenneth Y. Amano

Joseph V. Amato

Michael E. Cohen

Robert J. Conti

Russ Covode

Timothy F. Creedon

Bradley M. Anderson

Christopher M. Crevier

Robert J. Arancio

Judd M. Arnold

William A. Arnold

Komei Asaba

Sherrell J. Aston

Elizabeth R. Cribbs

Robert T. Croke

Robert W. D’Alelio

Paul D.S. Daggett

R. Ross David

Ethan A. Falkove

Seth J. Finkel

Stephen J. Flaherty

Patrick H. Flynn

Darren M. Fogel

Ann Marie Foss

Drew D. Fox

Francis L. Fraenkel

Gregory P. Francfort

Sean M. Badcock

Jacqueline E. de Sanctis

Jacob B. Gamerman

Luca Deantoni

Alison B. Delgado

Anthony M. DeSantis

John D. DeStefano

Derek R. Devens

James J. Gartland

Dmitry Gasinsky

Margaret E. Gattuso

Maxine L. Gerson

Amy S. Gilfenbaum

Sabrina Di Bartolomeo

Michelle A. Giordano-Valentine

Charles C. Kantor

Theodore P. Giuliano

Richard J. Glasebrook

Terrence J. Glomski

Carolyn S. Golub

Jennifer R. Gorgoll

Michelle S. Green

Alan I. Greene

Michael C. Greene

Virginia M. Guy

Brian E. Hahn

Aisha S. Haque

James C.F. Harvey

Todd E. Heltman

Susan B. Kasser

John A. Kauffmann

Judith Ann Kenney

Brian P. Kerrane

Clay R. Khan

David A. Kiefer

Scott E. Kilgallen

Erik L. Knutzen

Christopher J. Kocinski

Lawrence J. Kohn

Andrew S. Komaroff

Cary A. Koplin

J. Douglas Kramer

Michael S. Kramer

David G. Kupperman

Jason C.D. Henchman

Anton Kwang

Nick J. Hoar

Lori L. Holland

Michael J. Holmberg

Jonathan Bailey

James C. Baker

Thanos Bardas

John J. Barker

Itai Baron

Matthew F. Bird

Vivek Bommi

Stefano Bontempelli

Jim D. Bowden

Richard N. Bradt

William A. Braverman

Danielle B. Brown

David M. Brown

David Bunan

John P. Buser

Alan H. Dorsey

Tom W. Douie

D. Richard Dowdle

Daniel J. Doyle

Rob J. Drijkoningen

Céline S. Dufétel

John D. Dyment

Ingrid S. Dyott

Vasantha Butchibabu

Robert L. Eason

Elliott H. Eisman

Lillian Eisman

Steven Eisman

Michael N. Emmerman

Fabio C. Cane

Darren L. Carter

Brian M. Case

Stephen J. Casey

Fabio L. Castrovillari

Marco Cerrina Feroni

Brad E. Cetron

Kent Chen

Dana Eisman Cohen

54 | NEUBERGER BERMAN ANNUAL REPORT 2016

Sajjad S. Ladiwala

Ugo Lancioni

Andrew C. Laurino

Joseph W. Lawrence

Diane E. Lederman

Stanley G. Lee

Wai Lee

Richard S. Levine

Jacques G. Lilly

Vincent Lim

Kristian J. Lind

Maria C. Llerena

Melinda L. Lloyd

Patrick C. Lomelo

Elisabeth S. Lonsdale

Linda J. Ludwig

Raoul C. Luttik

James A. Lyman

Joseph P. Lynch

David J. Lyon

Jeff A. Majit

Matthew H. Malloy

Julian H. Marks

Thomas J. Marthaler

Martin E. Messinger

S. Blake Miller

Norman Milner

David H. Morse

Richard S. Nackenson

Benjamin H. Nahum

Christian Neira

Holly Newman Kroft

Kevin J. O’Friel

Paul D. O’Halloran

Thomas P. O’Reilly

Mark A. O’Sullivan

Ryo Ohira

Daniel P. Paduano

Maria D. Pappas

Robert H. Pearlman

Ian D. Peckett

David R. Pedowitz

Tristram C. Perkins

Benjamin B. Perl

Cas A.H. Peters

William J. Peterson

Stuart J. Pollak

Sandy M. Pomeroy

Nish V. Popat

Samuel N. Porat

David S. Portny

Brendan J. Potter

Jason L. Pratt

Christian Puschmann

Joseph F. Quirk

Douglas A. Rachlin

Henry Ramallo

Michelle L. Rappa

Elizabeth Reagan

Michael Recce

Lisa H. Reed

Matthew D. Rees

Michael D. Rees

Marc A. Regenbaum

Brett S. Reiner

Kenneth G. Rende

Carter P. Reynolds

Christian F. Reynolds

J. Blake Rice

Joana Rocha Scaff

Lucas J. Rooney

David J. Rosa

David M. Ross

Martin J. Rotheram

Joseph A. Rotter III

Patrick C. Ru

Conrad A. Saldanha

Eli M. Salzmann

Martin A. Sankey

Paul A. Sauer

H. Axel Schupf

Raymond A. Sullivan

Jean-Paul Sursock

Richard J. Szelc

Brian G. Talbot

Brad C. Tank

Lee J. Tawil

H. Tripp Taylor

Terri L. Towers

Kenneth J. Turek

Yolanda R. Turocy

Anthony D. Tutrone

Gorky R. Urquieta

Marvin C. Schwartz

Judith M. Vale

Mindy G. Schwartzapfel

Bart A. Van der Made

Benjamin E. Segal

Saurin D. Shah

Monica L. Sherer

Steve S. Shigekawa

Jonathan D. Shofet

Yves C. Siegel

Zachary P. Sigel

Ronald B. Silvestri

Prashant Singh

Laura J. Sloate

Brien P. Smith

Amit Solomon

Thomas A. Sontag

Gregory G. Spiegel

Dimitrios N. Stathopoulos

Matthew L. Steege

Michelle B. Stein

Stephanie J. Stiefel

David S. Stonberg

Dik van Lomwel

Pim M. van Schie

Peter J. von Lehe

George H. Walker

Ronit M. Walny

Jacquelyn A. Wang

Sean J. Ward

David I. Weiner

Eric D. Weinstein

Richard M. Werman

Obadiah J. Wilford

Andrew Wilmont

Patricia Miller Zollar

Heather P. Zuckerman

2016 ANNUAL REPORT NEUBERGER BERMAN | 55

This material is provided for informational purposes only and nothing herein con-
stitutes investment, legal, accounting or tax advice, or a recommendation to buy,
sell or hold a security. Information is obtained from sources deemed reliable, but
there is no representation or warranty as to its accuracy, completeness or reliability.
All information is current as of the date of this material (or as of the date indi-
cated) and is subject to change without notice. Any views or opinions expressed
may not reflect those of the firm as a whole. This material may include estimates,
outlooks, projections and other “forward-looking statements.” Due to a variety of
factors, actual events may differ significantly from those presented. Neuberger Ber-
man products and services may not be available in all jurisdictions or to all client
types. Investing entails risks, including possible loss of principal. Investments in
hedge funds and private equity are speculative and involve a higher degree of risk
than more traditional investments. Investments in hedge funds and private equity
are intended for sophisticated investors only. The use of tools cannot guarantee
performance. Diversification does not guarantee profit or protect against loss in
declining markets. Unless otherwise indicated returns shown reflect reinvestment of
dividends and distributions. Indexes are unmanaged and are not available for direct
investment. Past performance is no guarantee of future results.

Firm data, including employee and assets under management figures, reflect col-
lective data for the various affiliated investment advisers that are subsidiaries of
Neuberger Berman Group LLC (the “firm”). Firm history and timelines includes the
history and business expansions of all firm subsidiaries, including predecessor enti-
ties and acquisition entities. Investment professionals referenced include portfolio
managers, research analysts/associates, traders, and product specialists and team
dedicated economists/strategists.

Mutual funds are not available to investors outside of the U.S. Neu-
berger Berman BD LLC is the distributor of the Neuberger Berman mutual funds.
Member FINRA.

An investor should consider the investment objectives, risks and fees
and expenses of any fund carefully before investing. This and other
important information can be found in each fund’s prospectus, and
if available summary prospectus, which you can obtain by calling
877.628.2583. Please read the prospectus, and if available the summary
prospectus, carefully before making an investment.

Important Information about Risk
All stocks are subject to investment risk, including the risk that they may lose val-
ue. Small- and mid-capitalization stocks may have limited operating histories and
resources and may trade less frequently and in lower volume than larger company
stocks, which may make them more volatile and vulnerable to financial and other
risks. Compared with smaller companies, large-cap companies may be less respon-
sive to changes and opportunities and may lag other types of stock in performance.

Foreign securities involve risks in addition to those associated with comparable
U.S. securities. Additional risks include exposure to less developed or less efficient
trading markets; social, political or economic instability; fluctuations in foreign cur-
rencies or currency redenomination; potential for default on sovereign debt; na-
tionalization or expropriation of assets; settlement, custodial or other operational
risks; and less stringent auditing and legal standards. As a result, foreign securities
may fluctuate more widely in price, and may also be less liquid, than comparable
U.S. securities. World markets, or those in a particular region, may all react in similar
fashion to important economic or political developments. In addition, foreign mar-

56 | NEUBERGER BERMAN ANNUAL REPORT 2016

kets may perform differently than the U.S. market. Changes in currency exchange
rates could adversely impact investment gains or add to investment losses. Cur-
rency exchange rates can be affected unpredictably by intervention, or failure to
intervene, by U.S. or foreign governments or central banks or by currency controls
or political developments in the U.S. or abroad.

Value stocks may remain undervalued during a given period or may not ever re-
alize their full value. This may happen, among other reasons, because of a failure
to anticipate which stocks or industries would benefit from changing market or
economic conditions. Because the prices of most growth stocks are based on fu-
ture expectations, these stocks tend to be more sensitive than value stocks to bad
economic news and negative earnings surprises. Bad economic news or changing
investor perceptions may adversely affect growth stocks across several sectors and
industries simultaneously.

Additional Risk Information for International Equity Fund
Governments of emerging market countries may be more unstable and more likely
to impose capital controls, nationalize a company or an industry, place restrictions
on foreign ownership and on withdrawing sales proceeds of securities from the
country, and/or impose burdensome taxes that could adversely affect security pric-
es. These countries may also have less developed legal and accounting systems.
Securities issued in these countries may be more volatile and less liquid than se-
curities issued in foreign countries with more developed economies or markets.
From time to time, the Fund may hedge against some currency risks; however,
the hedging instruments may not always perform as the Fund expects and could
produce losses. Suitable hedging instruments may not be available for currencies of
emerging market countries.

The risks involved in seeking capital appreciation from investments primarily in
companies based outside the United States are set forth in the prospectus. From
time to time, based on market or economic conditions, the Fund may invest a signif-
icant portion of its assets in one country or geographic region. If the Fund does so,
there is a greater risk that economic, political, social and environmental conditions
in that particular country or geographic region may have a significant impact on the
Fund’s performance and that the Fund’s performance will be more volatile than the
performance of more geographically diversified funds.

Additional Risk Information for Long Short Fund
Short sales involve selling a security the Fund does not own in anticipation that the
security’s price will decline. Short sales may help hedge against general market risk
to the securities held in the portfolio but theoretically present unlimited risk on an
individual stock basis, since the Fund may be required to buy the security sold short
at a time when the security has appreciated in value. The Fund may not always be
able to close out a short position at a favorable time and price. If the Fund covers
its short sale at an unfavorable price, the cover transaction is likely to reduce or
eliminate any gain, or cause a loss to the Fund, as a result of the short sale.

Investing in foreign securities may involve greater risks than investing in securities
of U.S. issuers, such as currency fluctuations, potential social, political or economic
instability, restrictions on foreign investors, less stringent regulation and less
market liquidity.

Derivatives contracts on non-U.S. currencies are subject to exchange rate move-
ments. Derivatives may involve risks different from, or greater than, those associat-
ed with more traditional investments. Derivatives can be highly complex, can create

investment leverage and may be highly volatile, and the Fund could lose more than
the amount it invests. The Fund’s investments in the futures markets also introduce
the risk that its futures commission merchant (“FCM”) would default on an obliga-
tion set forth in an agreement between the Fund and the FCM, including the FCM’s
obligation to return margin posted in connection with the Fund’s futures contracts.
The use of options involves investment strategies and risks different from those
associated with ordinary portfolio securities transactions. If the Fund’s portfolio
manager applies a strategy at an inappropriate time or judges market conditions
or trends incorrectly, options may lower the Fund’s return. Derivative instruments
and short sales may also have an effect similar to that of leverage and can result
in losses to the Fund that exceed the amount originally invested in the derivative
instruments. Leverage may amplify changes in the Fund’s net asset value (“NAV”).
ETFs are subject to tracking error and may be unable to sell poorly performing
stocks that are included in their index. ETFs may trade in the secondary market at
prices below the value of their underlying portfolios and may not be liquid. Through
its investment in exchange traded funds, the Fund is subject to the risks of the ETF’s
investments, as well as to the ETF’s expenses. The Fund may engage in active and
frequent trading and may have a high portfolio turnover rate, which may increase
the Fund’s transaction costs and may adversely affect the Fund’s performance.

Additional Risk Information for Multi-Cap Opportunities Fund
From time to time, based on market or economic conditions, the Fund may have
significant positions in one or more sectors of the market. To the extent the Fund
invests more heavily in particular sectors, its performance will be especially sensitive
to developments that significantly affect those sectors. Individual sectors may be
more volatile, and may perform differently, than the broader market. The industries
that constitute a sector may all react in the same way to economic, political or
regulatory events.

Companies that are considered “special situations” include, among others: com-
panies that have unrecognized recovery prospects or new management teams;
companies involved in restructurings or spin-offs; companies emerging from, or
restructuring as a result of, bankruptcy; companies making initial public offerings
that trade below their initial offering prices; and companies with a break-up value
above their market price. Investing in special situations carries the risk that certain
of such situations may not happen as anticipated or the market may react different-
ly than expected to such situations. Certain special situations carry the additional
risks inherent in difficult corporate transitions and the securities of such companies
may be more likely to lose value than the securities of more stable companies.

Additional Risk Information for Equity Income Fund
There are greater credit risks associated with investments in high-yield bonds. A
bond’s value may fluctuate based on interest rates, market conditions, credit quality,
political events, currency devaluation and other factors. You may have a gain or a
loss if you sell your bonds prior to maturity. High Yield Bonds are not suitable for
all investors and the risks of these bonds should be weighed against the potential
rewards. The properties held by

REITs could fall in value for a variety of reasons, such as declines in rental income,
poor property management, environmental liabilities, uninsured damage, increased
competition, or changes in real estate tax laws. There is also a risk that REIT stock
prices overall will decline over short or even long periods because of rising interest
rates. Convertible bonds tend to offer a lower rate of return compared to other
bonds in exchange funds for the value of the option to convert the bond into stock.

The value of a convertible security typically increases or decreases with the price
of the underlying common stock. In general, a convertible security is subject to the
risks of stocks when the underlying stock’s price is high relative to the conversion
price and is subject to the risks of debt securities when the underlying stock’s
price is low relative to the conversion price. Many convertible securities have credit
ratings that are below investment grade and are subject to the same risks as an
investment in lower-rated debt securities (commonly known as “junk bonds”). To
the extent the Fund invests in convertible securities issued by small- or mid-cap
companies, it will be subject to the risks of investing in such companies.

There is no guarantee that the companies in which the Fund invests will declare
dividends in the future or that dividends, if declared, will remain at current levels
or increase over time.

Additional Risk Information for Intrinsic Value Fund
Investing in companies in anticipation of a catalyst carries the risk that the catalyst
may not happen as anticipated, possibly due to the actions of other market partici-
pants, or the market may react differently than expected to the catalyst. Certain cat-
alysts, such as companies emerging from, or restructuring as a result of, bankruptcy,
carry additional risks and the securities of such companies may be more likely to
lose value than the securities of more stable companies.

From time to time, based on market or economic conditions, the Fund may have
significant positions in one or more sectors of the market. To the extent the Fund
invests more heavily in particular sectors, its performance will be especially sensitive
to developments that significantly affect those sectors. Individual sectors may be
more volatile, and may perform differently, than the broader market. The industries
that constitute a sector may all react in the same way to economic, political or
regulatory events.

Barron’s “Best Fund Families of 2016” measures one year results of 61 fund families.
Neuberger Berman was not ranked in the 5- or 10-year category by Barron’s because
it previously did not have broad enough categories for this survey. To qualify for the
Barron’s/Lipper Fund Survey, a group must have at least (i) three funds in Lipper’s
general U.S. equity category; (ii) one in world equity, which combines global and
international funds; (iii) one mixed-equity fund, which holds stocks and bonds; (iv)
two taxable-bond funds; and (v) one-tax-exempt offering. Barron’s notes that their
goal is to measure manager skill, independent of expenses beyond annual manage-
ment fees. As a result, each fund’s returns are calculated before deduction of any
sales charge or 12b-1 fee. Each fund’s return is measured against those of all funds
in its Lipper category (e.g., small-cap value). That leads to a percentile ranking, with
100 being the highest and 1 the lowest, which is then weighted by asset size, relative
to the fund family’s other assets in its general classification. If a family’s biggest
funds do well, that boosts its overall ranking. Poor performance in a big fund has
a big effect on the ranking. Finally, the score is multiplied by the weighting of its
general classification, as determined by the entire Lipper universe of funds. Finally,
the score is multiplied by the weighting of its general classification, as determined
by the entire Lipper universe of funds. The category weightings for the one-year
results in 2016 were general equity, 39.6%; mixed asset, 17.4%; world equity,
17.2%; taxable bond, 22.3%; tax-exempt bond, 3.5%.

Information about Professional Pensions Investment Awards (PPIA) “Emerging
Market Debt Manager of the Year” award: The PPIA process is unique within the
industry - with the shortlist being drawn up in association with Aon Hewitt, high-
lighting those asset managers who have demonstrated excellent performance and

2016 ANNUAL REPORT NEUBERGER BERMAN | 57

relative growth in assets under management over the 12 months ending June 30,
2016 as well as strong performance over the past three years. Shortlisted en-
trants were then asked to complete a questionnaire detailing how they differentiate
themselves from their peers - detailing the product and client service innovations
they made over the 12 months ending June 30, 2016. The winners in each category
were decided by a distinguished panel of industry judges.

Awards, ratings or rankings referenced do not reflect the experiences of any Neu-
berger Berman client and should not be viewed as representative of any particular
client’s experience. It should not be assumed that any investor will have a similar
investment experience as any previous or existing client. Awards, ratings or rank-
ings are not indicative of the past or future performance of any Neuberger Berman
product or service.

CS Index Disclaimer: This disclaimer extends to Credit Suisse Securities (Europe)
Limited (“CS”), its affiliates or its designate in any of its capacities and relates
to the Credit Suisse Neuberger Berman Multi-Asset Risk Premia Index (the “In-
dex”). CS is described as “Index Sponsor” under the rules relating to the Index,
as prepared by CS (the “Index Rules”) and Credit Suisse International (“CSI”) is
described as the “Index Calculation Agent”. The Index may, in accordance with the
Index Rules, be subject to change at any time by the CS but subject to consultation
with the Index Committee (as described in the Index Rules). None of CS, CSI or
any of their respective affiliates makes any warranty or representation whatsoever,
express or implied, as to the results to be obtained from the use of the Index, or as
to the performance and/or the value thereof at any time (past, present or future).
CS as Index Sponsor does not warrant or guarantee the accuracy or timeliness of
calculations of Index Values or the availability of an Index Value on any particular

date or at any particular time. The Neuberger Berman Multi-Asset Risk Premia
strategy is not in any way sponsored, endorsed, sold or promoted by CS, CSI or
any of their respective affiliates. None of CS, CSI or any of their respective affiliates
have prepared, reviewed or approved this document. Neither CS, CSI nor any of
its affiliates shall have any responsibility to monitor whether Neuberger Berman
Europe Limited (“NBEL”) as the “Index Rebalancing Entity” in respect of the Index,
is acting in compliance with the rules relating to the Index. “Credit Suisse”, the
Credit Suisse logo and “Credit Suisse Actively Rebalanced Indices” are trademarks
or service marks or registered trademarks or registered trademarks or registered
service marks of Credit Suisse Group AG or one of its affiliates. The “Credit Suisse
Neuberger Berman Multi-Asset Risk Premia Index” contains trademarks or service
marks or registered trademarks or registered service marks of (i) Credit Suisse
Group AG or one of its affiliates and (ii) Neuberger Berman Europe Limited or one
of its affiliates. Copyright ©2017 CREDIT SUISSE GROUP AG and/or its affiliates.
All rights reserved.

This material is being issued on a limited basis through various global subsidiaries
and affiliates of Neuberger Berman Group LLC. Please visit www.nb.com/disclo-
sure-global-communications for the specific entities and jurisdictional limitations
and restrictions.

The “Neuberger Berman” name and logo and “Neuberger Berman Investment Ad-
visers LLC” name are registered service marks of Neuberger Berman Group LLC. The
individual fund names in this piece are either service marks or registered service
marks of Neuberger Berman Investment Advisers LLC, an affiliate of Neuberger
Berman BD LLC, distributor, member FINRA.

58 | NEUBERGER BERMAN ANNUAL REPORT 2016

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