M A N AG E R CO M M EN T A R Y

Neuberger Berman High Income Bond Fund

FIRST QUARTER 2013

Portfolio Co-Managers: Ann H. Benjamin, Thomas P. OReilly and Russell Covode

Performance Highlights

Neuberger Berman High Income Bond Fund posted a positive return in the first quarter of 2013, but underperformed its 1 benchmark, the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index.

Market Overview

The high yield market generated solid results during the first quarter, as it rose during all three months of the period and outperformed equal-duration Treasuries. Supporting the overall market was generally robust investor risk appetite, coupled with economic data and fourth quarter profits that generally exceeded expectations. Against this backdrop, JPMorgan reported that new high yield issuance for the quarter was $118.8 billion. This represented an all-time high, surpassing the previous record of $107.1 billion during the first quarter of 2012. The par-weighted high yield default rate was 1.24% at the end of March, which remains well below its historical average. All told, the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index (the index) returned 2.90% during the first quarter. Option adjusted high yield spreads narrowed 52 basis points during the quarter, moving from 534 basis points to 486 basis points. Lowerquality securities outperformed their higher-quality counterparts for the quarter, with CCC- and BB-rated bonds in the 2 index returning 5.39% and 1.92%, respectively.

Portfolio Strategy

From a sector perspective, security selection in energy, health care and diversified financial services detracted the most from performance. In contrast, the largest contributors to performance were security selection in printing and publishing, gaming and chemicals.

Outlook

We maintain our overall positive outlook for the high yield market. The economy appears to have strengthened in recent months, following anemic growth during the fourth quarter of 2012. Furthermore, high yield fundamentals continue to be solid, with corporate balance sheets that are typically cash rich. We also expect high yield defaults to remain relatively low, as many issuers have extended their maturities given ultra-low rates. Finally, while macro issues may trigger periods of heighted risk aversion, overall we believe that demand will be strong.

High-yield bonds, also known as junk bonds, are considered speculative and carry a greater risk of default than investment-grade bonds. Their market value tends to be more volatile than investment-grade bonds. Please read the prospectus for a more complete discussion of these risks. Shares in the Fund may fluctuate based on interest rates, market condition, credit quality and other factors. In a rising interest rate environment, the value of an income fund is likely to fall.

of America Merrill Lynch US High Yield Master II Constrained Index (HUC0): This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market, including 144a issues. Yankee bonds (debt of foreign issuers issued in the US domestic market) are included in the index provided the issuer is domiciled in a country having an investment grade foreign currency longterm debt rating (based on a composite of Moodys and S&P). Qualifying bonds must have at least one year remaining to maturity, a fixed coupon schedule and a minimum amount outstanding of $100 million. Qualifying bonds are capitalization-weighted provided the total allocation to an individual issuer (defined by Bloomberg tickers) does not exceed 2%. Issuers that exceed the limit are reduced to 2% and the face value of each of their bonds is adjusted on a pro-rata basis. Similarly, the face value of bonds of all other issuers that fall below the 2% cap are increased on a prorata basis.
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All returns cited represent return within the Merrill Lynch US High Yield Master II Constrained Index. Bonds rated BB, B, and CCC are regarded as having significant speculative characteristics with BB indicating the least degree of speculation.

The bond ratings noted above represent segments of the Barclays Capital U.S. Corporate High Yield 2% Issuer Cap Index, which are determined based on the averaging ratings (the historical average default rates) issued by Standard & Poors, Moodys and Fitch. CCC-rated bonds are considered more speculative than BB-rated bonds. This material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are as of the date herein and are subject to change without notice. This material is not intended to be a formal research report and should not be construed as an offer to sell or the solicitation of an offer to buy any security. The Funds yield and share price will fluctuate in response to changes in interest rates. The value of the Funds investments can decline when interest rates rise. In general, the longer the maturity of a security, the greater the effect a change in interest rates could have on the securitys price. Performance quoted represents past performance, which is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investors shares, when redeemed, may be worth more or less than their original cost.

An investor should consider Neuberger Berman High Income Bond Funds investment objectives, risks and fees and expenses carefully before investing. This and other important information can be found in the Funds 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.
The Neuberger Berman name and logo are registered service marks of Neuberger Berman Group LLC. Neuberger Berman Management LLC and the individual Fund names in this piece are either service marks or registered service marks of Neuberger Berman Management LLC. Neuberger Berman Management LLC, distributor. 2013 Neuberger Berman Management LLC. All rights reserved. 4/13