Neuberger Berman
Alternative and Multi-Asset Class Funds
Institutional Class Shares
Class A Shares
Class C Shares
Absolute Return Multi-Manager Fund
Semi-Annual Report
April 30, 2013
Contents
PRESIDENT'S LETTER | 1 | ||||||
PORTFOLIO COMMENTARY | 2 | ||||||
FUND EXPENSE INFORMATION | 7 | ||||||
SCHEDULE OF INVESTMENTS/TOP TEN EQUITY HOLDINGS | 9 | ||||||
FINANCIAL STATEMENTS | 24 | ||||||
FINANCIAL HIGHLIGHTS/PER SHARE DATA | 39 | ||||||
Directory | 42 | ||||||
Proxy Voting Policies and Procedures | 43 | ||||||
Quarterly Portfolio Schedule | 43 | ||||||
Board Consideration of the Management and Sub-Advisory Agreements | 44 |
The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman Group LLC. "Neuberger Berman Management LLC" and the individual Fund name in this piece are either service marks or registered service marks of Neuberger Berman Management LLC. ©2013 Neuberger Berman Management LLC. All rights reserved.
President's Letter
Dear Shareholder,
I am pleased to present this semi-annual shareholder report for Neuberger Berman Absolute Return Multi-Manager Fund. The report includes a portfolio commentary, a listing of the Fund's investments and its unaudited financial statements for the six months ended April 30, 2013. The Fund seeks capital appreciation with an emphasis on absolute returns by investing in a diversified portfolio of assets subadvised by seasoned hedge fund managers across multiple strategies that target low volatility and low beta to broader markets.
Investors encountered a number of uncertainties during the reporting period, including moderating global growth, the impact of the U.S. fiscal cliff and sequestration, and the ongoing European sovereign debt crisis. However, we believe these issues were trumped by continued monetary policy accommodation by the Federal Reserve and other central banks globally. Against this backdrop, risk assets generated strong results during the reporting period. U.S. equities reached record highs, whereas the overall fixed income market was relatively flat. Market volatility was relatively modest overall and hedge fund managers, as reflected by the HFRX Absolute Return Index, returned 2.00% during the reporting period.
Looking ahead, given the equity market's sharp rally in the first part of 2013, our long/short subadvisers appear conservatively positioned. In particular, they are maintaining low net exposures in an attempt to protect their respective portfolios should the market experience a setback. That said, the reduction in intra-market security correlation has provided what we believe is a more conducive trading environment for our long/short subadvisers. From a strategy perspective, merger and acquisition activity has picked up and our subadvisors feel this will accelerate going forward. Therefore, we anticipate maintaining our large allocation to event driven and merger arbitrage dedicated strategies. Within credit, our subadvisers continue to favor bank loans over high yield bonds given the tight yield spreads that exist. We anticipate maintaining a sizable allocation to credit strategies.
Thank you for your continued support and trust. We look forward to continue serving your investment needs in the years to come.
Sincerely,
ROBERT CONTI
PRESIDENT AND CEO
NEUBERGER BERMAN MUTUAL FUNDS
1
Absolute Return Multi-Manager Fund Commentary
Neuberger Berman Absolute Return Multi-Manager Fund Institutional Class generated a 4.97% total return for the six months ended April 30, 2013 and outperformed its primary benchmark, the HFRX Absolute Return Index, which posted a 2.00% return. (Performance for all share classes is provided in the table following this letter.)
Risk assets generated strong results during the reporting period. In our opinion, investor sentiment was buoyed by a resolution to the U.S. fiscal cliff and concerns regarding the impact of the sequestration appeared short lived. Demand for risk assets was also fueled by continued aggressive monetary policy accommodation by the Federal Reserve and the central banks of other developed countries. There were several spikes in market volatility during the period, most notably leading up to the fiscal cliff and sequestration. However, market volatility overall was relatively benign and U.S. equity indices reached all-time highs. All told, the S&P 500 Index returned 14.42% and the Barclays U.S. Aggregate Bond Index rose 0.90% during the past fiscal six months.
Seven of the portfolio's eight subadvisers generated positive absolute returns for the period. Long/short equity was the most material positive contributor, with two of the Fund's three subadvisers in the space posting positive performance. With correlations among stocks declining, it was a positive environment for stock picking. In particular, long positions in the Health Care sector were beneficial to performance. These and other long positions largely offset the negative impact of short positions amid the market's sharp ascent.
Credit long/short strategies were the next most material positive contributor for the period, as both subadvisers in the space generated gains. The spread between bank loans and high yield bonds remained near historical tights, making bank loans attractive as they appear to offer a greater degree of protection against a potential rise in interest rates and have seniority in the capital structure. Against this backdrop, our subadvisers increased their allocation to bank loans relative to high yield bonds.
Event driven equity strategies also performed well during the period, with all three of the portfolio's subadvisers within this category generating positive performance. Merger and acquisition ("M&A") activity increased during the period, driven by several large deal announcements in February, some of which were the largest in terms of dollar amounts since 2008. Outside of M&A, trades involving companies undergoing other forms of corporate activity, such as real estate investment trust (REIT) or master limited partnership (MLP) conversions, spin-offs, or asset sales, were also additive to the Fund's performance.
During the reporting period, the subadvisers' use of futures, options and equity swaps did not contribute materially to the Fund's results.
Market dynamics and broad themes driving security prices can have positive or negative effects on the Fund's returns. Whereas the market was primarily driven by macro fears and decisions by policymakers in the U.S. and Europe over much of 2012, we have started to see a shift toward fundamentals and valuations during the reporting period. Given that our subadvisers are focused primarily on long-term fundamentals, we anticipate their performance could benefit from this change.
With the market's strong performance in the first part of 2013, our long/short subadvisers have maintained their conservative profile, with low gross and net exposures as they remain focused on hedging against the possibility of a market correction in the near term.
Our credit strategy subadvisers continue to favor bank loans over high yield bonds given continued tight spreads. In addition, our subadvisers are beginning to see what they consider are attractive opportunities in middle market high yield companies that lack easy access to the public financing markets. As we remain positive in the credit space given the opportunity set we see, we anticipate that we will maintain a large allocation to credit strategies and plan to opportunistically add to the allocation.
2
In terms of M&A, we believe companies are becoming more comfortable with the state of the macro economy and are deploying their record high cash balances and taking advantage of the attractive financing environment by engaging in transactions to increase shareholder value. Our subadvisers continue to have confidence that the deal environment, whether that be in mergers, divestitures, spin-offs or tax-enhancing strategies, will accelerate. We plan to maintain our large allocation to event driven and merger arbitrage dedicated strategies.
Sincerely,
ERIC WEINSTEIN, JEFF MAJIT, FRED INGHAM, DAVID KUPPERMAN AND IAN HAAS
PORTFOLIO CO-MANAGERS
Information about the principal risks of investing in the Fund is set forth in the prospectus and statement of additional information.
The portfolio composition, industries and holdings of the Fund are subject to change.
The opinions expressed are those of the Fund's portfolio managers. The opinions are as of the date of this report and are subject to change without notice.
3
Absolute Return Multi-Manager Fund
TICKER SYMBOLS
Institutional Class | NABIX | ||||||
Class A | NABAX | ||||||
Class C | NABCX |
PORTFOLIO BY TYPE OF SECURITY
(as a % of Total Net Assets)
Long | Short | ||||||||||
Common Stocks | 57.5 | % | (16.8 | )% | |||||||
Bank Loan Obligations | 10.8 | — | |||||||||
Corporate Debt Securities | 2.9 | (0.1 | ) | ||||||||
Purchased Options | 0.2 | — | |||||||||
Exchange Traded Funds | 0.6 | (4.6 | ) | ||||||||
Investment Companies | 3.4 | — | |||||||||
Rights | 0.0 | — | |||||||||
U.S. Treasury Securities | 0.1 | (0.2 | ) | ||||||||
Warrants | 0.2 | — | |||||||||
Short-Term Investments | 32.9 | — | |||||||||
Cash, receivables and other assets, less liabilities | 13.1 | — | |||||||||
Total | 121.7 | % | (21.7 | )% |
PERFORMANCE HIGHLIGHTS
Inception Date | Six Month Period Ended 04/30/2013 | Cumulative Total Return Ended 04/30/2013 Life of Fund | |||||||||||||
At NAV | |||||||||||||||
Institutional Class | 05/15/2012 | 4.97 | % | 4.97 | % | ||||||||||
Class A | 05/15/2012 | 4.68 | % | 4.58 | % | ||||||||||
Class C | 05/15/2012 | 4.40 | % | 3.88 | % | ||||||||||
With Sales Charge | |||||||||||||||
Class A | –1.34 | % | –1.43 | % | |||||||||||
Class C | 3.40 | % | 2.88 | % | |||||||||||
Index | |||||||||||||||
HFRX Absolute Return Index1,2 | 2.00 | % | 1.66 | % | |||||||||||
S&P 500 Index1,2 | 14.42 | % | 21.94 | % | |||||||||||
Barclays U.S. Aggregate Bond Index1,2 | 0.90 | % | 3.21 | % |
The performance data quoted represent past performance and do not indicate future results. Current performance may be lower or higher than the performance data quoted. For more current performance data, please visit www.nb.com/performance.
The results shown in the table reflect the reinvestment of income dividends and other distributions, if any. The results do not reflect the effect of taxes a shareholder would pay on Fund distributions or on the redemption of Fund shares.
The investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost.
Returns would have been lower if Neuberger Berman Management LLC ("Management") had not reimbursed certain expenses and/or waived a portion of the investment management fees during certain of the periods shown. Repayment by a class (of expenses previously reimbursed and/or fees previously waived by Management) will decrease the class's returns. Please see Note B in the Notes to Financial Statements for specific information regarding expense reimbursement and/or fee waiver arrangements.
Returns shown with a sales charge reflect the deduction of the current maximum initial sales charge of 5.75% for Class A shares and the applicable contingent deferred sales charges (CDSC) for Class C shares. The maximum CDSC for Class C shares is 1%, which is reduced to 0% after 1 year. The performance of the Fund's share classes will differ primarily due to different sales charge structures and class expenses. Please see the prospectus for more information about sales charge structures, if any, and class expenses for your share class.
4
Endnotes
1 Please see "Glossary of Indices" on page 6 for a description of indices. Please note that the S&P 500 and the Barclays U.S. Aggregate Bond indices do not take into account any fees, expenses or tax consequences of investing in the individual securities that they track, and that individuals cannot invest directly in any index. The HFRX Index does take into account fees and expenses of investing since it is based on the underlying hedge funds' net returns. Data about the performance of an index is prepared or obtained by Neuberger Berman Management LLC ("Management") and reflects the reinvestment of income dividends and other distributions, if any. The Fund may invest in securities not included in a described index and may not invest in all securities included in a described index.
2 The date used to calculate Life of Fund performance for the index is the inception date of the oldest share class.
For more complete information on any of the Neuberger Berman Alternative and Multi-Asset Class Funds, call Management at (800) 877-9700, or visit our website at www.nb.com.
5
Glossary of Indices
HFRX Absolute Return Index: | Designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. As a component of the optimization process, the index selects constituents which characteristically exhibit lower volatilities and lower correlations to standard directional benchmarks of equity market and hedge fund industry performance. Fund weights are determined by the optimization process. Constituent funds are selected from an eligible pool of the more than 6,800 funds that report performance to the Hedge Fund Research (HFR) database on a voluntary basis, and rebalanced quarterly. Funds included in the index must meet all of the following criteria: report monthly returns net of all fees; be denominated in USD; be active and accepting new investments; have a minimum 24 months track record; and the Fund's manager must have at least $50 million in assets under management. The index is available daily, with finalized month-end performance available two to three business days after the last business day of the month. | ||||||
Barclays U.S. Aggregate Bond Index: | An unmanaged index that represents the U.S. domestic investment grade bond market. It is comprised of the Barclays Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index, including securities that are of investment-grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $250 million. Asset backed securities must have at least $500 million deal size and $25 million tranche size. For commercial mortgage-backed securities, the original transaction must have a minimum deal size of $500 million, and a minimum tranche size of $25 million; the current outstanding transaction size must be at least $300 million to remain in the index. | ||||||
S&P 500 Index: | Widely regarded as the standard for measuring the performance of large-cap stocks traded on U.S. markets and includes a representative sample of leading companies in leading industries. |
6
Information About Your Fund's Expenses (Unaudited)
As a Fund shareholder, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds (if applicable); and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees (if applicable); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and compare these costs with the ongoing costs of investing in other mutual funds.
This table is designed to provide information regarding costs related to your investments. The following examples are based on an investment of $1,000 made at the beginning of the six months ended April 30, 2013 and held for the entire period. The table illustrates the Fund's costs in two ways:
Actual Expenses and Performance: | The first section of the table provides information about actual account values and actual expenses in dollars, based on the Fund's actual performance during the period. You may use the information in this line, together with the amount you invested, to estimate the expenses you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section of the table under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid over the period. | ||||||
Hypothetical Example for Comparison Purposes: | The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return at 5% per year before expenses. This return is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in this Fund versus other funds. To do so, compare the expenses shown in this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. |
Please note that the expenses in the table are meant to highlight your ongoing costs only and do not include any transaction costs, such as sales charges (loads) (if applicable). Therefore, the information under the heading "Hypothetical (5% annual return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
7
Expense Information as of 4/30/13 (Unaudited)
Neuberger Berman Alternative Funds | |||||||||||||||||||||||||||||||||||
ACTUAL | HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES)(2) | ||||||||||||||||||||||||||||||||||
Beginning Account Value 11/01/2012 | Ending Account Value 4/30/2013 | Expenses Paid During the Period(1) 11/01/2012 - 4/30/2013 | Expense Ratio | Beginning Account Value 11/01/2012 | Ending Account Value 4/30/2013 | Expenses Paid During the Period(1) 11/01/2012 - 4/30/2013 | Expense Ratio | ||||||||||||||||||||||||||||
Neuberger Berman Absolute Return Multi-Manager Fund | |||||||||||||||||||||||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 1,049.70 | $ | 12.50 | 2.46 | % | $ | 1,000.00 | $ | 1,012.60 | $ | 12.28 | 2.46 | % | |||||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,046.80 | $ | 13.91 | 2.74 | % | $ | 1,000.00 | $ | 1,011.21 | $ | 13.66 | 2.74 | % | |||||||||||||||||||
Class C | $ | 1,000.00 | $ | 1,044.00 | $ | 17.84 | 3.52 | % | $ | 1,000.00 | $ | 1,007.34 | $ | 17.52 | 3.52 | % |
(1) For each class, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown).
(2) Hypothetical 5% annual return before expenses is calculated by multiplying the number of days in the most recent period divided by 365.
8
Schedule of Investments Absolute Return Multi-Manager Fund (Unaudited)
TOP TEN EQUITY HOLDINGS LONG POSITIONS (as a % of Net Assets)
Country | Industry | ||||||||||||||||||
1 | HJ Heinz Co. | United States | Food Products | 2.3 | % | ||||||||||||||
2 | Virgin Media, Inc. | United States | Media | 2.2 | % | ||||||||||||||
3 | Life Technologies Corp. | United States | Life Sciences Tools & Services | 1.7 | % | ||||||||||||||
4 | Plains Exploration & Production Co. | United States | Oil, Gas & Consumable Fuels | 1.3 | % | ||||||||||||||
5 | NYSE Euronext | United States | Diversified Financial Services | 1.1 | % | ||||||||||||||
6 | Pfizer, Inc. | United States | Pharmaceuticals | 1.0 | % | ||||||||||||||
7 | BMC Software, Inc. | United States | Software | 0.9 | % | ||||||||||||||
8 | Dover Corp. | United States | Machinery | 0.8 | % | ||||||||||||||
9 | Tyco International Ltd. | Switzerland | Commercial Services & Supplies | 0.7 | % | ||||||||||||||
10 | Roche Holding AG ADR | Liechtenstein | Pharmaceuticals | 0.7 | % |
TOP TEN EQUITY HOLDINGS SHORT POSITIONS (as a % of Net Assets)
Country | Industry | ||||||||||||||||||
1 | Liberty Global, Inc. Class A | United States | Media | (0.8 | )% | ||||||||||||||
2 | IntercontinentalExchange, Inc. | United States | Diversified Financial Services | (0.8 | )% | ||||||||||||||
3 | Freeport-McMoRan Copper & Gold, Inc. | United States | Metals & Mining | (0.5 | )% | ||||||||||||||
4 | Comcast Corp. Class A | United States | Media | (0.4 | )% | ||||||||||||||
5 | The Sherwin-Williams Co. | United States | Chemicals | (0.4 | )% | ||||||||||||||
6 | DENTSPLY International, Inc. | United States | Health Care Equipment & Supplies | (0.3 | )% | ||||||||||||||
7 | Lennar Corp. Class A | United States | Household Durables | (0.3 | )% | ||||||||||||||
8 | LinnCo LLC | United States | Oil, Gas & Consumable Fuels | (0.3 | )% | ||||||||||||||
9 | WhiteWave Foods Co. Class A | United States | Food Products | (0.3 | )% | ||||||||||||||
10 | Liberty Global, Inc. Series C | United States | Media | (0.3 | )% |
Number of Shares | Value† | ||||||||||
Long Positions (108.6%) | |||||||||||
Common Stocks (57.5%) | |||||||||||
Aerospace & Defense (0.4%) | |||||||||||
DigitalGlobe, Inc. | 7,050 | $ | 205,790 | *Ø | |||||||
Triumph Group, Inc. | 410 | 32,759 | |||||||||
238,549 | |||||||||||
Auto Components (0.2%) | |||||||||||
Visteon Corp. | 2,000 | 117,580 | * | ||||||||
Automobiles (0.3%) | |||||||||||
Fiat SpA | 1,458 | 8,721 | * | ||||||||
Harley-Davidson, Inc. | 3,400 | 185,810 | Ø | ||||||||
194,531 | |||||||||||
Beverages (0.6%) | |||||||||||
Constellation Brands, Inc. Class A | 5,178 | 255,534 | *Ø | ||||||||
Grupo Modelo SAB de CV Series C | 10,000 | 90,988 | |||||||||
346,522 | |||||||||||
Biotechnology (3.1%) | |||||||||||
3SBio, Inc. ADR | 500 | 8,255 | * | ||||||||
ACADIA Pharmaceuticals, Inc. | 8,260 | 106,471 | * |
Number of Shares | Value† | ||||||||||
Aegerion Pharmaceuticals, Inc. | 1,000 | $ | 42,040 | * | |||||||
Alkermes PLC | 940 | 28,773 | * | ||||||||
Alnylam Pharmaceuticals, Inc. | 960 | 22,992 | * | ||||||||
Biogen Idec, Inc. | 720 | 157,630 | * | ||||||||
BioMarin Pharmaceutical, Inc. | 4,550 | 298,480 | * | ||||||||
Cepheid, Inc. | 3,190 | 121,635 | * | ||||||||
Cubist Pharmaceuticals, Inc. | 4,600 | 211,232 | *Ø | ||||||||
Elan Corp. PLC ADR | 7,110 | 83,187 | * | ||||||||
Gilead Sciences, Inc. | 3,840 | 194,458 | * | ||||||||
InterMune, Inc. | 4,770 | 44,504 | * | ||||||||
Neurocrine Biosciences, Inc. | 14,090 | 162,599 | * | ||||||||
NPS Pharmaceuticals, Inc. | 14,180 | 190,437 | * | ||||||||
Onyx Pharmaceuticals, Inc. | 450 | 42,660 | * | ||||||||
QLT, Inc. | 6,520 | 52,356 | * | ||||||||
Sarepta Therapeutics, Inc. | 1,130 | 32,815 | * | ||||||||
Synageva BioPharma Corp. | 1,460 | 75,467 | *Ø |
Number of Shares | Value† | ||||||||||
ThromboGenics NV | 1,060 | $ | 51,776 | * | |||||||
1,927,767 | |||||||||||
Capital Markets (0.4%) | |||||||||||
American Capital Ltd. | 388 | 5,871 | * | ||||||||
Evercore Partners, Inc. Class A | 6,400 | 241,600 | Ø | ||||||||
247,471 | |||||||||||
Chemicals (1.5%) | |||||||||||
Flotek Industries, Inc. | 4,540 | 72,822 | * | ||||||||
FMC Corp. | 3,825 | 232,177 | |||||||||
Huntsman Corp. | 4,900 | 92,414 | |||||||||
LyondellBasell Industries NV Class A | 256 | 15,539 | |||||||||
Rockwood Holdings, Inc. | 385 | 24,983 | |||||||||
The Mosaic Co. | 4,841 | 298,157 | |||||||||
The Sherwin- Williams Co. | 1,200 | 219,732 | Ø | ||||||||
955,824 | |||||||||||
Commercial Banks (0.3%) | |||||||||||
CIT Group, Inc. | 511 | 21,722 | * | ||||||||
Investors Bancorp, Inc. | 11 | 218 | |||||||||
PrivateBancorp, Inc. | 2,400 | 46,032 | |||||||||
Prosperity Bancshares, Inc. | 1,450 | 66,613 |
See Notes to Schedule of Investments
9
Number of Shares | Value† | ||||||||||
Sterling Bancorp. | 5,000 | $ | 56,400 | ||||||||
190,985 | |||||||||||
Commercial Services & Supplies (0.9%) | |||||||||||
Copart, Inc. | 3,200 | 112,800 | * | ||||||||
Tyco International Ltd. | 14,125 | 453,695 | |||||||||
566,495 | |||||||||||
Communications Equipment (1.0%) | |||||||||||
Cisco Systems, Inc. | 12,000 | 251,040 | Ø | ||||||||
F5 Networks, Inc. | 670 | 51,208 | * | ||||||||
Loral Space & Communications, Inc. | 1,500 | 92,280 | |||||||||
RADWARE Ltd. | 3,720 | 55,763 | * | ||||||||
Telular Corp. | 12,000 | 153,240 | |||||||||
603,531 | |||||||||||
Computers & Peripherals (1.1%) | |||||||||||
Dell, Inc. | 25,077 | 336,032 | Ø | ||||||||
EMC Corp. | 5,480 | 122,916 | * | ||||||||
Intermec, Inc. | 26,500 | 260,760 | *Ø | ||||||||
719,708 | |||||||||||
Construction & Engineering (0.3%) | |||||||||||
EMCOR Group, Inc. | 1,160 | 43,384 | |||||||||
Foster Wheeler AG | 2,940 | 62,034 | * | ||||||||
Jacobs Engineering Group, Inc. | 1,820 | 91,874 | * | ||||||||
197,292 | |||||||||||
Consumer Finance (0.0%) | |||||||||||
Netspend Holdings, Inc. | 200 | 3,192 | * | ||||||||
Distributors (0.1%) | |||||||||||
LKQ Corp. | 3,230 | 77,778 | * | ||||||||
Diversified Consumer Services (0.5%) | |||||||||||
H&R Block, Inc. | 3,046 | 84,496 | |||||||||
Regis Corp. | 13,500 | 253,125 | Ø | ||||||||
337,621 | |||||||||||
Diversified Financial Services (1.1%) | |||||||||||
NYSE Euronext | 17,248 | 669,395 | Ø | ||||||||
Diversified Telecommunication Services (0.2%) | |||||||||||
Fairpoint Communications, Inc. | 5,645 | 45,950 | * | ||||||||
Intelsat SA | 1,560 | 31,434 | * | ||||||||
Ziggo NV | 500 | 17,921 | |||||||||
95,305 | |||||||||||
Electrical Equipment (0.9%) | |||||||||||
AMETEK, Inc. | 2,040 | 83,048 | |||||||||
Capstone Turbine Corp. | 108,235 | 95,258 | * | ||||||||
Eaton Corp. PLC | 4,400 | 270,204 |
Number of Shares | Value† | ||||||||||
Roper Industries, Inc. | 960 | $ | 114,864 | ||||||||
563,374 | |||||||||||
Electronic Equipment, Instruments & Components (0.2%) | |||||||||||
OSI Systems, Inc. | 1,680 | 96,264 | *Ø | ||||||||
Power-One, Inc. | 1,500 | 9,480 | * | ||||||||
Softchoice Corp. | 1,000 | 19,862 | |||||||||
125,606 | |||||||||||
Energy Equipment & Services (1.1%) | |||||||||||
Cameron International Corp. | 1,040 | 64,012 | * | ||||||||
Dresser-Rand Group, Inc. | 1,120 | 62,283 | * | ||||||||
Exterran Holdings, Inc. | 2,440 | 64,465 | * | ||||||||
Heckmann Corp. | 6,512 | 24,029 | *Ø | ||||||||
Lufkin Industries, Inc. | 3,500 | 309,015 | |||||||||
Noble Corp. | 2,556 | 95,850 | |||||||||
Transocean Ltd. | 1,870 | 96,249 | * | ||||||||
715,903 | |||||||||||
Food & Staples Retailing (0.5%) | |||||||||||
Harris Teeter Supermarkets, Inc. | 1,610 | 67,282 | |||||||||
United Natural Foods, Inc. | 1,330 | 66,420 | * | ||||||||
Walgreen Co. | 2,120 | 104,961 | |||||||||
Whole Foods Market, Inc. | 890 | 78,605 | |||||||||
317,268 | |||||||||||
Food Products (3.8%) | |||||||||||
Boulder Brands, Inc. | 5,720 | 51,537 | * | ||||||||
Copeinca ASA | 10,000 | 104,916 | |||||||||
DE Master Blenders 1753 NV | 12,300 | 195,030 | * | ||||||||
Dean Foods Co. | 15,264 | 292,153 | *Ø | ||||||||
GrainCorp Ltd. Class A | 1,000 | 13,290 | |||||||||
HJ Heinz Co. | 20,187 | 1,461,943 | Ø | ||||||||
Rieber & Son AS | 7,000 | 81,332 | * | ||||||||
Smithfield Foods, Inc. | 5,927 | 151,731 | * | ||||||||
2,351,932 | |||||||||||
Health Care Equipment & Supplies (2.6%) | |||||||||||
Analogic Corp. | 3,590 | 285,333 | Ø | ||||||||
ArthroCare Corp. | 2,070 | 71,725 | * | ||||||||
Baxter International, Inc. | 3,720 | 259,916 | Ø | ||||||||
Conceptus, Inc. | 4,000 | 124,040 | * | ||||||||
CONMED Corp. | 3,360 | 105,269 | |||||||||
Covidien PLC | 3,600 | 229,824 | ± | ||||||||
Cynosure, Inc. Class A | 3,680 | 95,165 | * | ||||||||
Hologic, Inc. | 4,424 | 90,117 | * |
Number of Shares | Value† | ||||||||||
Insulet Corp. | 3,150 | $ | 79,506 | * | |||||||
Palomar Medical Technologies, Inc. | 1,000 | 13,550 | * | ||||||||
Teleflex, Inc. | 1,490 | 116,414 | |||||||||
The Cooper Cos., Inc. | 680 | 75,072 | Ø | ||||||||
Wright Medical Group, Inc. | 2,516 | 58,975 | *± | ||||||||
1,604,906 | |||||||||||
Health Care Providers & Services (4.1%) | |||||||||||
Accretive Health, Inc. | 4,861 | 51,235 | *Ø | ||||||||
Air Methods Corp. | 5,880 | 215,149 | |||||||||
AmerisourceBergen Corp. | 1,440 | 77,933 | |||||||||
Assisted Living Concepts, Inc. Class A | 4,000 | 47,680 | |||||||||
Cardinal Health, Inc. | 5,430 | 240,114 | |||||||||
Catamaran Corp. | 3,090 | 178,386 | *Ø | ||||||||
Community Health Systems, Inc. | 4,790 | 218,280 | Ø | ||||||||
Coventry Health Care, Inc. | 6,118 | 303,147 | Ø | ||||||||
Emeritus Corp. | 1,030 | 26,471 | * | ||||||||
HCA Holdings, Inc. | 4,080 | 162,751 | Ø | ||||||||
Health Net, Inc. | 2,330 | 68,502 | * | ||||||||
McKesson Corp. | 1,990 | 210,582 | |||||||||
Patterson Cos., Inc. | 5,330 | 202,273 | |||||||||
Quest Diagnostics, Inc. | 2,990 | 168,427 | |||||||||
Team Health Holdings, Inc. | 5,770 | 215,106 | * | ||||||||
Universal Health Services, Inc. Class B | 2,220 | 147,830 | |||||||||
WellCare Health Plans, Inc. | 1,120 | 65,307 | *Ø | ||||||||
2,599,173 | |||||||||||
Hotels, Restaurants & Leisure (0.8%) | |||||||||||
7 Days Group Holdings Ltd. ADR | 200 | 2,718 | * | ||||||||
Ameristar Casinos, Inc. | 5,477 | 144,538 | Ø | ||||||||
International Game Technology | 1,686 | 28,578 | |||||||||
Orient-Express Hotels Ltd. Class A | 3,000 | 30,300 | * | ||||||||
SeaWorld Entertainment, Inc. | 3,200 | 107,520 | * | ||||||||
SHFL Entertainment, Inc. | 4,160 | 65,728 | * | ||||||||
WMS Industries, Inc. | 4,201 | 106,621 | * | ||||||||
486,003 |
See Notes to Schedule of Investments
10
Number of Shares | Value† | ||||||||||
Household Durables (0.5%) | |||||||||||
American Greetings Corp. Class A | 300 | $ | 5,532 | ||||||||
Blyth, Inc. | 3,538 | 58,306 | |||||||||
Ethan Allen Interiors, Inc. | 2,350 | 68,808 | |||||||||
Lennar Corp. Class B | 4,816 | 157,050 | Ø | ||||||||
289,696 | |||||||||||
Insurance (1.6%) | |||||||||||
American International Group, Inc. | 3,693 | 152,964 | *± | ||||||||
Fidelity National Financial, Inc. Class A | 3,020 | 81,087 | |||||||||
Hartford Financial Services Group, Inc. | 15,420 | 433,148 | |||||||||
National Financial Partners Corp. | 12,684 | 321,412 | * | ||||||||
988,611 | |||||||||||
Internet Software & Services (0.8%) | |||||||||||
Akamai Technologies, Inc. | 2,310 | 101,432 | *Ø | ||||||||
Brightcove, Inc. | 3,720 | 22,394 | * | ||||||||
Millennial Media, Inc. | 3,060 | 21,206 | * | ||||||||
Monster Worldwide, Inc. | 15,325 | 67,124 | * | ||||||||
Rackspace Hosting, Inc. | 1,570 | 75,674 | * | ||||||||
Yahoo!, Inc. | 9,741 | 240,895 | * | ||||||||
528,725 | |||||||||||
IT Services (0.9%) | |||||||||||
Automatic Data Processing, Inc. | 2,275 | 153,198 | |||||||||
MAXIMUS, Inc. | 2,810 | 223,929 | |||||||||
Teradata Corp. | 3,100 | 158,317 | * | ||||||||
535,444 | |||||||||||
Life Sciences Tools & Services (1.7%) | |||||||||||
Life Technologies Corp. | 14,414 | 1,062,168 | *±Ø | ||||||||
Machinery (2.4%) | |||||||||||
Dover Corp. | 7,550 | 520,799 | Ø | ||||||||
Gardner Denver, Inc. | 5,051 | 379,280 | |||||||||
Ingersoll-Rand PLC | 1,816 | 97,701 | |||||||||
Pentair Ltd. | 5,589 | 303,762 | Ø | ||||||||
Stanley Black & Decker, Inc. | 1,735 | 129,795 | Ø | ||||||||
Wabash National Corp. | 5,954 | 56,146 | * | ||||||||
Xerium Technologies, Inc. | 2,358 | 22,378 | * | ||||||||
1,509,861 |
Number of Shares | Value† | ||||||||||
Media (5.4%) | |||||||||||
Arbitron, Inc. | 3,664 | $ | 171,072 | Ø | |||||||
CBS Corp. Class B | 3,900 | 178,542 | |||||||||
Clear Channel Outdoor Holdings, Inc. Class A | 2,170 | 15,689 | * | ||||||||
Comcast Corp. Class A | 7,147 | 280,806 | Ø | ||||||||
DreamWorks Animation SKG, Inc. Class A | 5,130 | 98,906 | *Ø | ||||||||
Gray Television, Inc. | 18,073 | 114,764 | * | ||||||||
Journal Communications, Inc. Class A | 2,000 | 13,620 | * | ||||||||
Lamar Advertising Co. Class A | 5,000 | 234,100 | *± | ||||||||
Liberty Global, Inc. Series C | 1,307 | 88,419 | * | ||||||||
Liberty Media Corp. Class A | 1,288 | 147,965 | *Ø | ||||||||
Lions Gate Entertainment Corp. | 3,410 | 84,602 | * | ||||||||
Nexstar Broadcasting Group, Inc. Class A | 1,499 | 36,501 | |||||||||
Tribune Co. | 6,512 | 369,556 | *Ø | ||||||||
Tribune Co. Class 1C Litigation | 300,000 | 1,650 | * | ||||||||
Viacom, Inc. Class B | 2,850 | 182,371 | |||||||||
Virgin Media, Inc. | 27,872 | 1,359,596 | Ø | ||||||||
3,378,159 | |||||||||||
Metals & Mining (0.8%) | |||||||||||
AuRico Gold, Inc. | 7,000 | 36,190 | |||||||||
Aurizon Mines Ltd. | 10,000 | 42,880 | * | ||||||||
First Quantum Minerals Ltd. | 2,000 | 34,920 | |||||||||
Gold Fields Ltd. ADR | 29,763 | 222,032 | |||||||||
Hoganas AB Class B | 1,000 | 47,755 | |||||||||
Sibanye Gold Ltd. ADR | 4,414 | 16,994 | * | ||||||||
SunCoke Energy, Inc. | 7,748 | 117,227 | *Ø | ||||||||
517,998 | |||||||||||
Multi-Utilities (0.2%) | |||||||||||
CH Energy Group, Inc. | 2,000 | 129,940 | Ø | ||||||||
Oil, Gas & Consumable Fuels (4.1%) | |||||||||||
Berry Petroleum Co. Class A | 4,255 | 203,857 | Ø | ||||||||
Cameco Corp. | 15,420 | 300,844 | Ø |
Number of Shares | Value† | ||||||||||
Copano Energy LLC | 1,000 | $ | 40,190 | ||||||||
EQT Corp. | 970 | 72,866 | |||||||||
Hess Corp. | 2,205 | 159,157 | Ø | ||||||||
Kelt Exploration Ltd. | 1,000 | 7,296 | * | ||||||||
McMoRan Exploration Co. | 21,066 | 348,642 | *Ø | ||||||||
Occidental Petroleum Corp. | 3,706 | 330,797 | |||||||||
Peabody Energy Corp. | 3,584 | 71,895 | |||||||||
Plains Exploration & Production Co. | 17,683 | 799,272 | *Ø | ||||||||
QEP Resources, Inc. | 5,267 | 151,216 | |||||||||
Tesoro Corp. | 1,772 | 94,625 | |||||||||
Uranium One, Inc. | 1,000 | 2,779 | * | ||||||||
2,583,436 | |||||||||||
Paper & Forest Products (0.6%) | |||||||||||
Buckeye Technologies, Inc. | 10,615 | 399,018 | |||||||||
Personal Products (0.3%) | |||||||||||
The Estee Lauder Cos., Inc. Class A | 2,800 | 194,180 | Ø | ||||||||
Pharmaceuticals (5.0%) | |||||||||||
AbbVie, Inc. | 8,480 | 390,504 | |||||||||
Actavis, Inc. | 800 | 84,584 | * | ||||||||
Aspen Pharmacare Holdings Ltd. | 2,260 | 49,086 | * | ||||||||
AstraZeneca PLC ADR | 3,710 | 192,623 | |||||||||
Auxilium Pharmaceuticals, Inc. | 1,880 | 28,069 | *Ø | ||||||||
Bristol-Myers Squibb Co. | 3,210 | 127,501 | |||||||||
Cadence Pharmaceuticals, Inc. | 1,240 | 8,779 | * | ||||||||
Dr. Reddy's Laboratories Ltd. ADR | 810 | 30,683 | |||||||||
Impax Laboratories, Inc. | 5,460 | 95,550 | * | ||||||||
Jazz Pharmaceuticals PLC | 1,160 | 67,686 | * | ||||||||
Ono Pharmaceutical Co. Ltd. | 2,830 | 186,373 | |||||||||
Pfizer, Inc. | 21,280 | 618,610 | Ø | ||||||||
Roche Holding AG ADR | 7,110 | 443,806 | |||||||||
Sanofi ADR | 3,160 | 168,586 | |||||||||
SHIRE PLC ADR | 1,420 | 132,969 | |||||||||
Takeda Pharmaceutical Co. Ltd. | 2,770 | 152,018 | |||||||||
Taro Pharmaceutical Industries Ltd. | 500 | 30,305 | * | ||||||||
ViroPharma, Inc. | 8,940 | 243,615 | *Ø |
See Notes to Schedule of Investments
11
Number of Shares | Value† | ||||||||||
Warner Chilcott PLC Class A | 3,750 | $ | 53,925 | ||||||||
XenoPort, Inc. | 2,480 | 15,401 | * | ||||||||
3,120,673 | |||||||||||
Professional Services (0.5%) | |||||||||||
The Corporate Executive Board Co. | 1,660 | 93,558 | |||||||||
The Dun & Bradstreet Corp. | 1,925 | 170,266 | |||||||||
TrueBlue, Inc. | 3,140 | 65,061 | * | ||||||||
328,885 | |||||||||||
Real Estate Investment Trusts (1.8%) | |||||||||||
BRE Properties, Inc. | 5,681 | 286,777 | |||||||||
Newcastle Investment Corp. | 8,900 | 100,837 | |||||||||
Ryman Hospitality Properties | 3,331 | 148,097 | Ø | ||||||||
Spirit Realty Capital, Inc. | 8,491 | 182,811 | |||||||||
The Geo Group, Inc. | 10,609 | 397,307 | Ø | ||||||||
1,115,829 | |||||||||||
Semiconductors & Semiconductor Equipment (0.5%) | |||||||||||
Analog Devices, Inc. | 1,000 | 43,990 | |||||||||
Applied Materials, Inc. | 3,330 | 48,318 | |||||||||
Entegris, Inc. | 4,570 | 43,324 | * | ||||||||
Lam Research Corp. | 1,070 | 49,455 | * | ||||||||
Photronics, Inc. | 10,400 | 82,056 | * | ||||||||
Silicon Image, Inc. | 13,870 | 68,379 | * | ||||||||
335,522 | |||||||||||
Software (2.4%) | |||||||||||
AVG Technologies NV | 4,430 | 72,298 | * | ||||||||
BMC Software, Inc. | 12,386 | 563,315 | *±Ø | ||||||||
Citrix Systems, Inc. | 1,050 | 65,278 | * | ||||||||
Compuware Corp. | 6,618 | 79,416 | * | ||||||||
Electronic Arts, Inc. | 3,950 | 69,560 | * | ||||||||
Jive Software, Inc. | 4,270 | 58,029 | *Ø | ||||||||
Nuance Communications, Inc. | 6,100 | 116,144 | *± | ||||||||
PTC, Inc. | 5,390 | 129,414 | * | ||||||||
Symantec Corp. | 7,400 | 179,820 | *Ø | ||||||||
Synopsys, Inc. | 1,940 | 69,006 | * | ||||||||
TiVo, Inc. | 9,082 | 106,441 | * | ||||||||
1,508,721 | |||||||||||
Specialty Retail (0.6%) | |||||||||||
Best Buy Co., Inc. | 130 | 3,379 | |||||||||
Francesca's Holdings Corp. | 2,420 | 69,115 | * | ||||||||
GNC Holdings, Inc. Class A | 1,860 | 84,314 | Ø |
Number of Shares | Value† | ||||||||||
Hot Topic, Inc. | 2,000 | $ | 27,900 | ||||||||
Office Depot, Inc. | 8,116 | 31,328 | * | ||||||||
The Children's Place Retail Stores, Inc. | 3,175 | 155,321 | * | ||||||||
371,357 | |||||||||||
Textiles, Apparel & Luxury Goods (0.0%) | |||||||||||
Fifth & Pacific Cos., Inc. | 713 | 14,702 | * | ||||||||
Thrifts & Mortgage Finance (0.3%) | |||||||||||
Federal National Mortgage Association, Preference Shares Series S | 2,590 | 11,862 | *µ | ||||||||
Hudson City Bancorp., Inc. | 6,500 | 54,015 | Ø | ||||||||
Ocwen Financial Corp. | 1,235 | 45,177 | * | ||||||||
TFS Financial Corp. | 7,806 | 84,851 | * | ||||||||
195,905 | |||||||||||
Transportation Infrastructure (0.1%) | |||||||||||
Macquarie Infrastructure Co., LLC | 1,308 | 76,230 | |||||||||
Wireless Telecommunication Services (1.0%) | |||||||||||
MetroPCS Communications, Inc. | 10,000 | 118,400 | * | ||||||||
Sprint Nextel Corp. | 20,417 | 143,940 | *± | ||||||||
Vodafone Group PLC ADR | 12,603 | 385,526 | |||||||||
647,866 | |||||||||||
Total Common Stocks (Cost $34,396,360) | 36,086,637 | ||||||||||
Exchange Traded Funds (0.6%) | |||||||||||
PowerShares DB U.S. Dollar Index Bullish Fund (Cost $386,153) | 17,250 | 382,950 | * | ||||||||
Investment Companies (3.4%) | |||||||||||
Mutual Funds (3.4%) | |||||||||||
MainStay Unconstrained Bond Fund (Cost $2,080,276) | 222,225 | 2,102,249 |
Number of Rights | Value† | ||||||||||
Rights (0.0%) | |||||||||||
Health Care Equipment & Supplies (0.0%) | |||||||||||
Wright Medical Group, Inc. (Cost $—) | 8,529 | $ | 22,175 | *± | |||||||
Number of Warrants | |||||||||||
Warrants (0.2%) | |||||||||||
Building Products (0.0%) | |||||||||||
Owens Corning | 3,193 | 7,644 | * | ||||||||
Machinery (0.0%) | |||||||||||
Xerium Technologies, Inc. | 1,902 | 1,521 | * | ||||||||
Media (0.2%) | |||||||||||
Tribune Co. | 1,877 | 106,426 | * | ||||||||
Total Warrants (Cost $91,900) | 115,591 | ||||||||||
Principal Amount | |||||||||||
U.S. Treasury Securities-Backed by the Full Faith and Credit of the U.S. Government (0.1%) | |||||||||||
U.S. Treasury Bonds, 2.75%, due 8/15/42 (Cost $32,136) | $ | 32,000 | 31,075 | ||||||||
Corporate Debt Securities (2.9%) | |||||||||||
Aerospace & Defense (0.0%) | |||||||||||
Erickson Air-Crane, Inc., 8.25%, due 5/1/20 | 27,000 | 27,810 | Ñ | ||||||||
Beverages (0.1%) | |||||||||||
Constellation Brands, Inc., 3.75%, due 5/1/21 | 12,000 | 12,180 | |||||||||
Constellation Brands, Inc., 4.25%, due 5/1/23 | 21,000 | 21,394 | |||||||||
33,574 | |||||||||||
Chemicals (0.3%) | |||||||||||
Montell Finance Co. BV, 8.10%, due 3/15/27 | 127,000 | 174,942 | ñ | ||||||||
Commercial Services & Supplies (0.0%) | |||||||||||
NES Rentals Holdings, Inc., 7.88%, due 5/1/18 | 27,000 | 27,810 | Ñ |
See Notes to Schedule of Investments
12
Principal Amount | Value† | ||||||||||
Communications Equipment (0.6%) | |||||||||||
Nortel Networks Ltd., 5.34%, due 7/15/11 | $ | 200,000 | $ | 206,500 | ≠ | ||||||
Sorenson Communications, Inc., 10.50%, due 2/1/15 | 165,000 | 153,450 | Ñ | ||||||||
359,950 | |||||||||||
Diversified Financial Services (0.4%) | |||||||||||
Lehman Brothers Holdings, Inc., 6.88%, due 5/2/18 | 1,000,000 | 241,250 | ≠ | ||||||||
Independent Power Producers & Energy Traders (0.0%) | |||||||||||
AES Corp., 4.88%, due 5/15/23 | 27,000 | 27,540 | |||||||||
Insurance (0.2%) | |||||||||||
Ambac Assurance Corp., 5.10%, due 6/7/20 | 145,000 | 126,875 | Ñ≠ | ||||||||
Leisure Equipment & Products (0.1%) | |||||||||||
Eastman Kodak Co., 9.75%, due 3/1/18 | 59,000 | 52,141 | Ñ≠ | ||||||||
Media (0.2%) | |||||||||||
COX Communications, Inc., 2.95%, due 6/30/23 | 55,000 | 54,878 | Ñ | ||||||||
COX Communications, Inc., 4.50%, due 6/30/43 | 55,000 | 54,976 | Ñ | ||||||||
DISH DBS Corp., 5.88%, due 7/15/22 | 40,000 | 40,800 | |||||||||
150,654 | |||||||||||
Multiline Retail (0.1%) | |||||||||||
Dollar General Corp., 3.25%, due 4/15/23 | 28,000 | 28,081 | |||||||||
Paper & Forest Products (0.3%) | |||||||||||
Resolute Forest Products, 5.88%, due 5/15/23 | 165,000 | 162,938 | Ñ | ||||||||
Wireless Telecommunication Services (0.6%) | |||||||||||
Intelsat Luxembourg SA, 11.25%, due 2/4/17 | 219,000 | 233,235 | |||||||||
Intelsat Luxembourg SA, 7.75%, due 6/1/21 | 80,000 | 84,400 | ñ |
Principal Amount | Value† | ||||||||||
Intelsat Luxembourg SA, 8.13%, due 6/1/23 | $ | 80,000 | $ | 85,200 | ñ | ||||||
402,835 | |||||||||||
Total Corporate Debt Securities (Cost $1,691,099) | 1,816,400 | ||||||||||
Bank Loan Obligationsµ (10.8%) | |||||||||||
Aerospace & Defense (0.4%) | |||||||||||
Consolidated Precision Products Corp., due 12/20/19 | 250,000 | 250,937 | ¢^^Ña | ||||||||
Commercial Services & Supplies (0.5%) | |||||||||||
Sourcehov LLC, 2nd Lien Term Loan, due 4/30/19 | 37,000 | 37,648 | ¢^^Ña | ||||||||
Truven Health Analytics, Inc., Term Loan, due 5/25/19 | 250,000 | 252,970 | |||||||||
290,618 | |||||||||||
Communications Equipment (0.4%) | |||||||||||
Securus Technologies Holdings, Inc., 2nd Lien Term Loan, due 4/2/21 | 59,000 | 58,926 | ¢^^ | ||||||||
Securus Technologies Holdings, Inc., First Lien Term Loan, due 3/28/20 | 65,000 | 65,122 | ¢^^ | ||||||||
Sorenson Communications, Inc., Term Loan, due 10/31/14 | 106,000 | 107,666 | ¢^^ | ||||||||
231,714 | |||||||||||
Diversified Consumer Services (0.3%) | |||||||||||
TriNet HR Corp., Term Loan, due 10/24/18 | 165,000 | 166,031 | ¢^^ | ||||||||
Diversified Financial Services (1.4%) | |||||||||||
Tomkins Air Distribution Technologies, 2nd Lien Term Loan, 9.25%, due 10/31/20 | 600,000 | 615,000 | Ña |
Principal Amount | Value† | ||||||||||
Walter Investment Management Corp., Term Loan, 5.75%, due 11/28/17 | $ | 243,750 | $ | 247,762 | |||||||
862,762 | |||||||||||
Diversified Telecommunication Services (0.5%) | |||||||||||
Fairpoint Communications Inc., Term Loan B, 7.50%, due 2/14/19 | 333,000 | 327,819 | ¢^^ | ||||||||
Energy Equipment & Services (0.1%) | |||||||||||
Texas Competitive Holdings LLC, Extended Term Loan, due 10/10/17 | 106,000 | 77,927 | ¢^^ | ||||||||
Food & Staples Retailing (0.4%) | |||||||||||
Sprouts Farmers Market LLC, Term Loan, due 4/23/20 | 267,000 | 267,668 | ¢^^ | ||||||||
Food Products (0.4%) | |||||||||||
Dole Food Co. Inc., Term Loan G, due 4/24/19 | 250,000 | 251,562 | ¢^^ | ||||||||
Health Care Providers & Services (1.1%) | |||||||||||
Genesis HealthCare LLC, Term Loan, 10.00%, due 10/2/17 | 188,301 | 187,360 | Ña | ||||||||
HCA, Inc., Term Loan B5, due 3/31/17 | 500,000 | 501,665 | |||||||||
689,025 | |||||||||||
Health Care Technology (0.8%) | |||||||||||
The TriZetto Group Inc., 2nd Lien Term Loan, 8.50%, due 3/27/19 | 500,000 | 511,250 | Ña | ||||||||
IT Services (0.9%) | |||||||||||
EVERTEC Group LLC, Term Loan, due 4/17/20 | 54,000 | 53,865 | ¢^^ | ||||||||
Virtu Financial LLC, Term Loan, due 7/15/16 | 500,000 | 505,625 | |||||||||
559,490 |
See Notes to Schedule of Investments
13
Principal Amount | Value† | ||||||||||
Leisure Equipment & Products (0.1%) | |||||||||||
Eastman Kodak Co., Term Loan, due 9/30/13 | $ | 59,000 | $ | 59,914 | |||||||
Media (1.1%) | |||||||||||
Charter Communications Operating LLC, Term Loan F, due 1/31/21 | 88,000 | 87,890 | ¢^^ | ||||||||
Gatehouse Media Operating Inc., Term Loan B, 2.20%, due 8/24/14 | 359,827 | 131,448 | ¢^^ | ||||||||
Gatehouse Media Operating Inc., Term Loan C, due 8/24/14 | 61,879 | 22,605 | ¢^^ | ||||||||
Gatehouse Media Operating Inc., Term Loan L, 2.20%, due 8/24/14 | 114,560 | 41,850 | ¢^^ | ||||||||
McGraw Hill Global Education Holdings LLC, Term Loan B, 9.00%, due 3/15/19 | 250,000 | 249,895 | |||||||||
UPC Broadband Holding BV, Term Loan AH, due 6/30/21 | 165,000 | 164,753 | ¢^^ | ||||||||
698,441 | |||||||||||
Oil, Gas & Consumable Fuels (0.8%) | |||||||||||
NFR Energy LLC, 2nd Lien Term Loan, 8.75%, due 12/31/18 | 500,000 | 513,125 | Ña | ||||||||
Paper & Forest Products (0.1%) | |||||||||||
Osmose Holdings, Inc., Term Loan, due 11/26/18 | 83,000 | 83,779 | ¢^^ | ||||||||
Software (0.5%) | |||||||||||
RedPrairie Corp., 1st Lien Term Loan, 6.75%, due 12/14/18 | 299,250 | 305,609 | |||||||||
Specialty Retail (0.6%) | |||||||||||
Pilot Travel Centers LLC, Term Loan B2, due 8/6/19 | 350,000 | 346,209 | ¢^^ |
Principal Amount | Value† | ||||||||||
Transportation Infrastructure (0.2%) | |||||||||||
Livingston International, Inc., 2nd Lien Term Loan, due 4/18/20 | $ | 131,000 | $ | 133,947 | ¢^^Ña | ||||||
Wireless Telecommunication Services (0.2%) | |||||||||||
LightSquared, Inc., Term Loan B, due 10/1/14 | 160,000 | 154,133 | ¢^^ | ||||||||
Total Bank Loan Obligations (Cost $6,648,645) | 6,781,960 | ||||||||||
Number of Contracts | |||||||||||
Purchased Options (0.2%) | |||||||||||
Call Options (0.1%) | |||||||||||
Baxter International, Inc., Call, May 2013 @ 72.5 | 4 | 460 | |||||||||
McMoRan Exploration Co., Call, June 2013 @ 16 | 121 | 8,470 | |||||||||
McMoRan Exploration Co., Call, May 2013 @ 15 | 88 | 13,904 | |||||||||
Newcastle Investment Corp., Call, May 2013 @ 12.5 | 78 | 390 | |||||||||
Quest Diagnostics, Inc., Call, May 2013 @ 60 | 8 | 80 | |||||||||
Sprint Nextel Corp., Call, Aug 2013 @ 7 | 164 | 6,232 | ± | ||||||||
Sprint Nextel Corp., Call, Jan 2014 @ 7 | 61 | 2,684 | ± | ||||||||
Verizon Communications, Inc., Call, July 2013 @ 55 | 31 | 3,317 | |||||||||
35,537 |
Number of Contracts | Value† | ||||||||||
Put Options (0.1%) | |||||||||||
Actavis, Inc., Put, Aug 2013 @ 105 | 8 | $ | 4,960 | ||||||||
American International Group, Inc., Put, May 2013 @ 30 | 20 | 60 | ± | ||||||||
BMC Software, Inc., Put, May 2013 @ 40 | 38 | 950 | ± | ||||||||
BMC Software, Inc., Put, May 2013 @ 41 | 21 | 525 | ± | ||||||||
Constellation Brands, Inc., Put, May 2013 @ 40 | 10 | 50 | |||||||||
Covidien PLC, Put, Jan 2014 @ 60 | 36 | 11,916 | ± | ||||||||
iShares Russell 2000 Index Fund, Put, Aug 2013 @ 88 | 66 | 12,540 | ± | ||||||||
Lamar Advertising Co., Put, May 2013 @ 40 | 50 | 1,400 | ± | ||||||||
Life Technologies Corp., Put, May 2013 @ 60 | 38 | 190 | ± | ||||||||
Nuance Communications, Inc., Put, Oct 2013 @ 21 | 61 | 18,971 | ± | ||||||||
SPDR S&P 500 ETF Trust, Put, May 2013 @ 156 | 10 | 620 | ± | ||||||||
The Mosaic Co., Put, Jan 2014 @ 55 | 44 | 14,300 | |||||||||
Wright Medical Group, Inc., Put, June 2013 @ 7 | 89 | — | ± | ||||||||
66,482 | |||||||||||
Total Purchased Options (Cost $146,151) | 102,019 |
See Notes to Schedule of Investments
14
Number of Shares | Value† | ||||||||||
Short-Term Investment (32.9%) | |||||||||||
Dreyfus Treasury Prime Cash Management (Cost $20,661,021) | 20,661,021 | $ | 20,661,021 | Ø | |||||||
Total Long Positions (108.6%) (Cost $66,133,741) | 68,102,077 | ## | |||||||||
Cash, receivables and other assets, less liabilities (13.1%) | 8,227,788 | ±Ø | |||||||||
Short Positions (see summary below) ((21.7)%) | (13,622,612 | ) | |||||||||
Total Net Assets (100.0%) | $ | 62,707,253 | |||||||||
Short Positions ((21.7)%) | |||||||||||
Common Stocks Sold Short (16.8%)ØØ£ | |||||||||||
Aerospace & Defense (0.2%) | |||||||||||
Northrop Grumman Corp. | (680 | ) | (51,503 | ) | |||||||
Raytheon Co. | (770 | ) | (47,263 | ) | |||||||
(98,766 | ) | ||||||||||
Air Freight & Logistics (0.1%) | |||||||||||
Expeditors International of Washington, Inc. | (1,790 | ) | (64,315 | ) | |||||||
Biotechnology (0.6%) | |||||||||||
Alnylam Pharmaceuticals, Inc. | (1,580 | ) | (37,841 | )* | |||||||
Amgen, Inc. | (470 | ) | (48,979 | ) | |||||||
Arena Pharmaceuticals, Inc. | (8,180 | ) | (67,403 | )* | |||||||
Isis Pharmaceuticals, Inc. | (3,990 | ) | (89,336 | )* | |||||||
Medivation, Inc. | (1,260 | ) | (66,414 | )* | |||||||
ThromboGenics NV | (1,725 | ) | (84,259 | )* | |||||||
(394,232 | ) | ||||||||||
Building Products (0.2%) | |||||||||||
AO Smith Corp. | (1,750 | ) | (132,002 | ) | |||||||
Capital Markets (0.4%) | |||||||||||
Greenhill & Co., Inc. | (2,575 | ) | (118,939 | ) | |||||||
Stifel Financial Corp. | (2,020 | ) | (65,085 | )* | |||||||
The Bank of New York Mellon Corp. | (2,450 | ) | (69,139 | ) | |||||||
(253,163 | ) |
Number of Shares | Value† | ||||||||||
Chemicals (1.0%) | |||||||||||
Air Products & Chemicals, Inc. | (1,425 | ) | $ | (123,918 | ) | ||||||
Albemarle Corp. | (1,850 | ) | (113,312 | ) | |||||||
Cabot Corp. | (1,900 | ) | (71,364 | ) | |||||||
Koppers Holdings, Inc. | (1,650 | ) | (72,451 | ) | |||||||
Kraton Performance Polymers, Inc. | (1,850 | ) | (42,014 | )* | |||||||
The Sherwin- Williams Co. | (1,200 | ) | (219,732 | ) | |||||||
(642,791 | ) | ||||||||||
Commercial Banks (0.2%) | |||||||||||
East West Bancorp, Inc. | (4,375 | ) | (106,444 | ) | |||||||
Commercial Services & Supplies (0.3%) | |||||||||||
Healthcare Services Group, Inc. | (3,720 | ) | (82,919 | ) | |||||||
Rollins, Inc. | (3,540 | ) | (86,093 | ) | |||||||
Team, Inc. | (1,200 | ) | (46,512 | )* | |||||||
(215,524 | ) | ||||||||||
Diversified Consumer Services (0.1%) | |||||||||||
H&R Block, Inc. | (3,046 | ) | (84,496 | ) | |||||||
Diversified Financial Services (0.8%) | |||||||||||
IntercontinentalExchange, Inc. | (2,925 | ) | (476,570 | )* | |||||||
Diversified Telecommunication Services (0.3%) | |||||||||||
Verizon Communications, Inc. | (3,067 | ) | (165,342 | ) | |||||||
Electrical Equipment (0.3%) | |||||||||||
Emerson Electric Co. | (1,625 | ) | (90,204 | ) | |||||||
Rockwell Automation, Inc. | (875 | ) | (74,182 | ) | |||||||
Sensata Technologies Holding NV | (1,325 | ) | (44,321 | )* | |||||||
(208,707 | ) | ||||||||||
Electronic Equipment, Instruments & Components (0.3%) | |||||||||||
Dolby Laboratories, Inc. Class A | (2,075 | ) | (68,164 | ) | |||||||
FARO Technologies, Inc. | (1,240 | ) | (48,099 | )* | |||||||
Rogers Corp. | (2,100 | ) | (89,544 | )* | |||||||
(205,807 | ) | ||||||||||
Energy Equipment & Services (0.2%) | |||||||||||
Newpark Resources, Inc. | (9,840 | ) | (103,320 | )* |
Number of Shares | Value† | ||||||||||
Food & Staples Retailing (0.3%) | |||||||||||
The Fresh Market, Inc. | (1,020 | ) | $ | (41,749 | )* | ||||||
Wal-Mart Stores, Inc. | (1,750 | ) | (136,010 | ) | |||||||
(177,759 | ) | ||||||||||
Food Products (0.6%) | |||||||||||
Annie's, Inc. | (1,320 | ) | (49,883 | )* | |||||||
Campbell Soup Co. | (1,150 | ) | (53,372 | ) | |||||||
Hormel Foods Corp. | (1,820 | ) | (75,111 | ) | |||||||
WhiteWave Foods Co. Class A | (10,907 | ) | (184,437 | )* | |||||||
(362,803 | ) | ||||||||||
Health Care Equipment & Supplies (1.4%) | |||||||||||
Alere, Inc. | (1,690 | ) | (43,399 | )* | |||||||
Boston Scientific Corp. | (11,840 | ) | (88,682 | )* | |||||||
CR Bard, Inc. | (1,120 | ) | (111,283 | ) | |||||||
DENTSPLY International, Inc. | (4,945 | ) | (209,421 | ) | |||||||
IDEXX Laboratories, Inc. | (1,790 | ) | (157,449 | )* | |||||||
Medtronic, Inc. | (1,550 | ) | (72,354 | ) | |||||||
Neogen Corp. | (1,380 | ) | (70,145 | )* | |||||||
St. Jude Medical, Inc. | (2,120 | ) | (87,386 | ) | |||||||
Stryker Corp. | (1,110 | ) | (72,794 | ) | |||||||
(912,913 | ) | ||||||||||
Health Care Providers & Services (0.9%) | |||||||||||
Aetna, Inc. | (1,368 | ) | (78,578 | ) | |||||||
Chemed Corp. | (520 | ) | (42,442 | ) | |||||||
Fresenius Medical Care AG & Co. ADR | (2,410 | ) | (82,567 | ) | |||||||
Henry Schein, Inc. | (340 | ) | (30,736 | )* | |||||||
Kindred Healthcare, Inc. | (3,240 | ) | (33,988 | )* | |||||||
LifePoint Hospitals, Inc. | (1,610 | ) | (77,280 | )* | |||||||
Owens & Minor, Inc. | (2,160 | ) | (70,351 | ) | |||||||
Select Medical Holdings Corp. | (4,420 | ) | (36,465 | ) | |||||||
UnitedHealth Group, Inc. | (1,470 | ) | (88,097 | ) | |||||||
(540,504 | ) | ||||||||||
Health Care Technology (0.2%) | |||||||||||
Greenway Medical Technologies | (2,940 | ) | (39,602 | )* | |||||||
HMS Holdings Corp. | (1,890 | ) | (47,647 | )* |
See Notes to Schedule of Investments
15
Number of Shares | Value† | ||||||||||
Vocera Communications, Inc. | (2,150 | ) | $ | (42,570 | )* | ||||||
(129,819 | ) | ||||||||||
Household Durables (0.3%) | |||||||||||
Lennar Corp. Class A | (4,816 | ) | (198,515 | ) | |||||||
Household Products (0.3%) | |||||||||||
Church & Dwight Co., Inc. | (2,525 | ) | (161,322 | ) | |||||||
Industrial Conglomerates (0.1%) | |||||||||||
3M Co. | (425 | ) | (44,502 | ) | |||||||
Insurance (0.5%) | |||||||||||
ACE Ltd. | (83 | ) | (7,399 | ) | |||||||
Assurant, Inc. | (2,545 | ) | (120,989 | ) | |||||||
Lincoln National Corp. | (233 | ) | (7,924 | ) | |||||||
MetLife, Inc. | (320 | ) | (12,477 | ) | |||||||
Principal Financial Group, Inc. | (4,323 | ) | (156,060 | ) | |||||||
Prudential Financial, Inc. | (122 | ) | (7,371 | ) | |||||||
The Allstate Corp. | (153 | ) | (7,537 | ) | |||||||
The Chubb Corp. | (84 | ) | (7,398 | ) | |||||||
The Travelers Cos., Inc. | (87 | ) | (7,431 | ) | |||||||
XL Group PLC | (244 | ) | (7,598 | ) | |||||||
(342,184 | ) | ||||||||||
Internet & Catalog Retail (0.1%) | |||||||||||
Nutrisystem, Inc. | (8,250 | ) | (66,825 | ) | |||||||
Internet Software & Services (0.1%) | |||||||||||
OpenTable, Inc. | (720 | ) | (39,881 | )* | |||||||
IT Services (0.2%) | |||||||||||
Booz Allen Hamilton Holding Corp. | (3,460 | ) | (52,557 | ) | |||||||
CACI International, Inc. Class A | (840 | ) | (49,132 | )* | |||||||
ManTech International Corp. Class A | (1,790 | ) | (47,775 | ) | |||||||
(149,464 | ) | ||||||||||
Machinery (0.8%) | |||||||||||
Atlas Copco AB Class A | (2,100 | ) | (55,278 | ) | |||||||
CNH Global NV | (2,625 | ) | (107,966 | ) | |||||||
Donaldson Co., Inc. | (1,740 | ) | (63,301 | ) | |||||||
Illinois Tool Works, Inc. | (1,300 | ) | (83,928 | ) | |||||||
Ingersoll- Rand PLC | (1,200 | ) | (64,560 | ) | |||||||
Tennant Co. | (1,440 | ) | (68,861 | ) | |||||||
Xylem, Inc. | (1,600 | ) | (44,400 | ) | |||||||
(488,294 | ) |
Number of Shares | Value† | ||||||||||
Media (1.7%) | |||||||||||
Comcast Corp. Class A | (6,813 | ) | $ | (281,377 | ) | ||||||
Liberty Global, Inc. Class A | (6,801 | ) | (492,189 | )* | |||||||
Liberty Global, Inc. Series C | (2,631 | ) | (177,987 | )* | |||||||
Sirius XM Radio, Inc. | (33,261 | ) | (108,098 | ) | |||||||
(1,059,651 | ) | ||||||||||
Metals & Mining (0.8%) | |||||||||||
Freeport- McMoRan Copper & Gold, Inc. | (9,607 | ) | (292,341 | ) | |||||||
Globe Specialty Metals, Inc. | (6,625 | ) | (86,522 | ) | |||||||
Materion Corp. | (2,300 | ) | (60,927 | ) | |||||||
Schnitzer Steel Industries, Inc. Class A | (1,500 | ) | (36,795 | ) | |||||||
(476,585 | ) | ||||||||||
Office Electronics (0.1%) | |||||||||||
Zebra Technologies Corp. Class A | (1,525 | ) | (71,141 | )* | |||||||
Oil, Gas & Consumable Fuels (0.6%) | |||||||||||
HollyFrontier Corp. | (341 | ) | (16,862 | ) | |||||||
LinnCo LLC | (4,568 | ) | (195,191 | ) | |||||||
Marathon Petroleum Corp. | (216 | ) | (16,926 | ) | |||||||
McMoRan Exploration Co. | (6,703 | ) | (110,935 | )* | |||||||
Phillips 66 | (289 | ) | (17,615 | ) | |||||||
Valero Energy Corp. | (460 | ) | (17,061 | )* | |||||||
Western Refining, Inc. | (564 | ) | (17,433 | ) | |||||||
(392,023 | ) | ||||||||||
Pharmaceuticals (1.3%) | |||||||||||
Eisai Co. Ltd. | (3,370 | ) | (153,661 | ) | |||||||
Eli Lilly & Co. | (1,680 | ) | (93,038 | ) | |||||||
Forest Laboratories, Inc. | (2,600 | ) | (97,266 | )* | |||||||
Hospira, Inc. | (1,120 | ) | (37,095 | )* | |||||||
Johnson & Johnson | (1,470 | ) | (125,288 | ) | |||||||
Novartis AG ADR | (1,660 | ) | (122,442 | ) | |||||||
Pacira Pharmaceuticals, Inc. | (3,275 | ) | (94,549 | )* | |||||||
Perrigo Co. | (810 | ) | (96,722 | ) | |||||||
(820,061 | ) | ||||||||||
Professional Services (0.1%) | |||||||||||
IHS, Inc. Class A | (700 | ) | (68,201 | )* |
Number of Shares | Value† | ||||||||||
Real Estate Investment Trusts (0.2%) | |||||||||||
AvalonBay Communities, Inc. | (204 | ) | $ | (27,140 | ) | ||||||
Equity Residential | (464 | ) | (26,940 | ) | |||||||
Essex Property Trust, Inc. | (350 | ) | (54,967 | ) | |||||||
(109,047 | ) | ||||||||||
Software (0.4%) | |||||||||||
CA, Inc. | (2,340 | ) | (63,110 | ) | |||||||
FactSet Research Systems, Inc. | (930 | ) | (87,485 | ) | |||||||
MicroStrategy, Inc. Class A | (520 | ) | (46,899 | )* | |||||||
Netscout Systems, Inc. | (2,790 | ) | (63,640 | )* | |||||||
(261,134 | ) | ||||||||||
Specialty Retail (0.3%) | |||||||||||
DSW, Inc. Class A | (990 | ) | (65,459 | ) | |||||||
Five Below, Inc. | (1,800 | ) | (64,782 | )* | |||||||
Sally Beauty Holdings, Inc. | (2,300 | ) | (69,138 | )* | |||||||
(199,379 | ) | ||||||||||
Textiles, Apparel & Luxury Goods (0.4%) | |||||||||||
Columbia Sportswear Co. | (1,260 | ) | (73,836 | ) | |||||||
Fossil, Inc. | (500 | ) | (49,060 | )* | |||||||
Hugo Boss AG | (810 | ) | (94,256 | ) | |||||||
Movado Group, Inc. | (1,300 | ) | (39,312 | ) | |||||||
(256,464 | ) | ||||||||||
Trading Companies & Distributors (0.1%) | |||||||||||
Kaman Corp. | (1,240 | ) | (41,900 | ) | |||||||
Total Common Stocks Sold Short (Proceeds $(10,043,976)) | (10,521,850 | ) | |||||||||
Exchange Traded Funds Sold Short (4.6%)ØØ£ | |||||||||||
CurrencyShares Euro Trust | (2,210 | ) | (288,471 | )* | |||||||
Energy Select Sector SPDR Fund | (3,348 | ) | (262,048 | ) | |||||||
Financial Select Sector SPDR Fund | (397 | ) | (7,424 | ) | |||||||
Health Care Select Sector SPDR Fund | (10,900 | ) | (515,897 | ) | |||||||
iShares Dow Jones U.S. Real Estate Index Fund | (1,495 | ) | (109,823 | ) | |||||||
iShares Nasdaq Biotechnology Index Fund | (1,910 | ) | (329,017 | ) | |||||||
Market Vectors Biotech ETF | (3,260 | ) | (227,581 | ) | |||||||
Market Vectors Oil Service ETF | (8,895 | ) | (380,439 | ) |
See Notes to Schedule of Investments
16
Number of Shares | Value† | ||||||||||
SPDR S&P 500 ETF Trust | (3,448 | ) | $ | (550,577 | ) | ||||||
SPDR S&P Oil & Gas Exploration & Production ETF | (1,648 | ) | (94,546 | ) | |||||||
Vanguard REIT ETF | (2,169 | ) | (163,282 | ) | |||||||
Total Exchange Traded Funds Sold Short (Proceeds $(2,757,630)) | (2,929,105 | ) | |||||||||
Principal Amount | |||||||||||
U.S. Treasury Securities-Backed by the Full Faith and Credit of the U.S. Government Sold Short (0.2%)ØØ£ | |||||||||||
U.S. Treasury Bonds, 2.75%, due 11/15/42 | $ | (47,000 | ) | (45,590 | ) | ||||||
U.S. Treasury Notes, 2.00%, due 2/15/23 | (77,000 | ) | (79,250 | ) | |||||||
Total U.S. Treasury Securities-Backed by the Full Faith and Credit of the U.S. Government Sold Short (Proceeds $(124,557)) | (124,840 | ) | |||||||||
Corporate Debt Securities Sold Short (0.1%)ØØ£ | |||||||||||
Metals & Mining (0.1%) | |||||||||||
Cliffs Natural Resources, Inc., 6.25%, due 10/1/40 (Proceeds $(47,455)) | (48,000 | ) | (46,817 | ) | |||||||
Total Short Positions (Proceeds $(12,973,618)) | (13,622,612 | ) |
See Notes to Schedule of Investments
17
Notes to Schedule of Investments (Unaudited)
† In accordance with Accounting Standards Codification ("ASC") 820 "Fair Value Measurements and Disclosures" ("ASC 820"), all investments held by Neuberger Berman Absolute Return Multi-Manager Fund (the "Fund") are carried at the value that Neuberger Berman Management LLC ("Management") believes the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment under current market conditions. Various inputs, including the volume and level of activity for the asset or liability in the market, are considered in valuing the Fund's investments, some of which are discussed below. Significant management judgment may be necessary to value investments in accordance with ASC 820.
ASC 820 established a three-tier hierarchy of inputs to create a classification of value measurements for disclosure purposes. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• Level 1 – quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, amortized cost, etc.)
• Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing an investment are not necessarily an indication of the risk associated with investing in those securities.
The value of the Fund's investments (long and short positions) in equity securities, exchange traded funds, purchased option contracts, written option contracts, rights and warrants, for which market quotations are readily available, is generally determined by Management by obtaining valuations from an independent pricing service based on the latest sale price quoted on a principal exchange or market for that security (Level 1 inputs). Securities traded primarily on the NASDAQ Stock Market are normally valued by a Fund at the NASDAQ Official Closing Price ("NOCP") provided by NASDAQ each business day. The NOCP is the most recently reported price as of 4:00:02 p.m., Eastern time, unless that price is outside the range of the "inside" bid and asked prices (i.e., the bid and asked prices that dealers quote to each other when trading for their own accounts); in that case, NASDAQ will adjust the price to equal the inside bid or asked price, whichever is closer. Because of delays in reporting trades, the NOCP may not be based on the price of the last trade to occur before the market closes. If there is no reported sale of a security on a particular day, the independent pricing service may value the security based on reported market quotations.
The value of the Fund's investments in debt securities (long and short positions) is determined by Management primarily by obtaining valuations from independent pricing services based on readily available bid quotations, or if quotations are not available, by methods which include various considerations based on security type (generally Level 2 inputs). In addition to the consideration of yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions, the following is a description of other Level 2 inputs and related valuation techniques used by an independent pricing service to value certain types of debt securities of the Fund:
U.S. Treasury Securities. Inputs used to value U.S. Treasury securities generally include quotes from several inter-dealer brokers and Other Market Information.
Corporate Debt Securities. Inputs used to value corporate debt securities generally include relative credit information, observed market movements, sector news, spread to the U.S. Treasury market, and other market information which may include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids, offers, and reference data, such as market research publications, when available.
See Notes to Financial Statements
18
Notes to Schedule of Investments (Unaudited) (cont'd)
Bank Loans. The value of bank loan securities is determined by Management primarily by obtaining valuations from independent pricing services based on broker quotes (generally Level 2 or Level 3 inputs depending on the number of quotes available).
The value of financial futures contracts is determined by obtaining valuations from independent pricing services at the settlement price at the market close (Level 1 inputs).
The value of equity swaps is determined by obtaining valuations from an independent pricing service using the underlying security and stated LIBOR ("London Interbank Offered Rate") rate or Federal Funds floating rate (Level 2 inputs).
Management has developed a process to periodically review information provided by independent pricing services for all types of securities.
Investments in investment companies are valued using the respective fund's daily calculated net asset value per share (Level 2 inputs).
If a valuation is not available from an independent pricing service, or if Management has reason to believe that the valuation received does not represent the amount the Fund might reasonably expect to receive on a current sale in an orderly transaction, the Fund seeks to obtain quotations from principal market makers (generally considered Level 3 inputs). If such quotations are not readily available, the security is valued using methods the Neuberger Berman Alternative Funds' Board of Trustees (the "Board") has approved on the belief that they reflect fair value. Numerous factors may be considered when determining the fair value of a security based on Level 2 or 3 inputs, including available analyst, media or other reports, trading in futures or ADRs and whether the issuer of the security being fair valued has other securities outstanding.
The value of the Fund's investments in foreign securities is generally determined using the same valuation methods and inputs as other Fund investments, as discussed above. Foreign security prices expressed in local currency values are translated from the local currency into U.S. dollars using the exchange rate as of 4:00 p.m., Eastern time. The Board has approved the use of Interactive Data Pricing and Reference Data, Inc. ("Interactive") to assist in determining the fair value of foreign equity securities when changes in the value of a certain index suggest that the closing prices on the foreign exchanges may no longer represent the amount that the Fund could expect to receive for those securities or on days when foreign markets are closed and U.S. markets are open. In each of these events, Interactive will provide adjusted prices for certain foreign equity securities using a statistical analysis of historical correlations of multiple factors (Level 2 inputs). In the absence of precise information about the market values of these foreign securities as of the close of the New York Stock Exchange, the Board has determined on the basis of available data that prices adjusted in this way are likely to be closer to the prices the Fund could realize on a current sale than are the prices of those securities established at the close of the foreign markets in which the securities primarily trade.
Fair value prices are necessarily estimates, and there is no assurance that such a price will be at or close to the price at which the security is next quoted or next trades.
The following is a summary, categorized by Level, of inputs used to value the Fund's investments as of April 30, 2013:
Asset Valuation Inputs | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Investments: | |||||||||||||||||||
Common Stocks | |||||||||||||||||||
Food Products | $ | 2,270,600 | $ | 81,332 | $ | — | $ | 2,351,932 | |||||||||||
Media | 3,376,509 | 1,650 | — | 3,378,159 | |||||||||||||||
Other Common Stocks | 30,356,546 | — | — | 30,356,546 |
See Notes to Financial Statements
19
Notes to Schedule of Investments (Unaudited) (cont'd)
Total Common Stocks | $ | 36,003,655 | $ | 82,982 | $ | — | $ | 36,086,637 | |||||||||||
Exchange Traded Funds | 382,950 | — | — | 382,950 | |||||||||||||||
Investment Companies | — | 2,102,249 | — | 2,102,249 | |||||||||||||||
Rights^ | 22,175 | — | — | 22,175 | |||||||||||||||
Warrants^ | 9,165 | 106,426 | — | 115,591 | |||||||||||||||
U.S. Treasury Securities-Backed by the Full Faith and Credit of the U.S. Government | — | 31,075 | — | 31,075 | |||||||||||||||
Corporate Debt Securities^ | — | 1,816,400 | — | 1,816,400 | |||||||||||||||
Bank Loan Obligations | |||||||||||||||||||
Aerospace & Defense | — | — | 250,937 | 250,937 | |||||||||||||||
Commercial Services & Supplies | — | 252,970 | 37,648 | 290,618 | |||||||||||||||
Communications Equipment | — | 231,714 | — | 231,714 | |||||||||||||||
Diversified Consumer Services | — | 166,031 | — | 166,031 | |||||||||||||||
Diversified Financial Services | — | 247,762 | 615,000 | 862,762 | |||||||||||||||
Diversified Telecommunication Services | — | 327,819 | — | 327,819 | |||||||||||||||
Energy Equipment & Services | — | 77,927 | — | 77,927 | |||||||||||||||
Food & Staples Retailing | — | 267,668 | — | 267,668 | |||||||||||||||
Food Products | — | 251,562 | — | 251,562 | |||||||||||||||
Health Care Providers & Services | — | 501,665 | 187,360 | 689,025 | |||||||||||||||
Health Care Technology | — | — | 511,250 | 511,250 | |||||||||||||||
IT Services | — | 559,490 | — | 559,490 | |||||||||||||||
Leisure Equipment & Products | — | 59,914 | — | 59,914 | |||||||||||||||
Media | — | 698,441 | — | 698,441 | |||||||||||||||
Oil, Gas & Consumable Fuels | — | — | 513,125 | 513,125 | |||||||||||||||
Paper & Forest Products | — | 83,779 | — | 83,779 | |||||||||||||||
Software | — | 305,609 | — | 305,609 | |||||||||||||||
Specialty Retail | — | 346,209 | — | 346,209 | |||||||||||||||
Transportation Infrastructure | — | — | 133,947 | 133,947 | |||||||||||||||
Wireless Telecommunication Services | — | 154,133 | — | 154,133 | |||||||||||||||
Total Bank Loan Obligations | — | 4,532,693 | 2,249,267 | 6,781,960 | |||||||||||||||
Purchased Options | 101,719 | 300 | — | 102,019 | |||||||||||||||
Short-Term Investment | — | 20,661,021 | — | 20,661,021 | |||||||||||||||
Total Investments | 36,519,664 | 29,333,146 | 2,249,267 | 68,102,077 |
See Notes to Financial Statements
20
Notes to Schedule of Investments (Unaudited) (cont'd)
Liability Valuation Inputs | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Investments: | |||||||||||||||||||
Total Common Stocks Sold Short | $ | (10,521,850) | $ | — | $ | — | $ | (10,521,850) | |||||||||||
Exchange Traded Funds Sold Short | (2,929,105) | — | — | (2,929,105) | |||||||||||||||
U.S. Treasury Securities-Backed by the Full Faith and Credit of the U.S. Government Sold Short | — | (124,840) | — | (124,840) | |||||||||||||||
Corporate Debt Securities Sold Short^ | — | (46,817) | — | (46,817) | |||||||||||||||
Total Investments | (13,450,955) | (171,657) | — | (13,622,612) |
^ The Schedule of Investments provides information on the industry categorization for the portfolio.
§ The following is a reconciliation between the beginning and ending balances of investments in which significant unobservable inputs (Level 3) were used in determining value:
Beginning balance as of 11/01/12 | Accrued discounts/ (premiums) | Realized gain/loss and change in unrealized appreciation/ (depreciation) | Purchases | Sales | Transfers in to Level 3 | Transfers out of Level 3 | Balance as of 04/30/13 | Net change in unrealized appreciation/ (depreciation) from investments still held as of 04/30/13 | |||||||||||||||||||||||||||||||
Investments in Securities: | |||||||||||||||||||||||||||||||||||||||
Bank Loan Obligations | |||||||||||||||||||||||||||||||||||||||
Aerospace & Defense | $ | — | $ | — | $ | 3,437 | $ | 247,500 | $ | — | $ | — | $ | — | $ | 250,937 | $ | 3,437 | |||||||||||||||||||||
Commercial Services & Supplies | — | — | 1,018 | 36,630 | — | — | — | 37,648 | 1,018 | ||||||||||||||||||||||||||||||
Diversified Financial Services | — | 415 | 23,585 | 591,000 | — | — | — | 615,000 | 23,585 | ||||||||||||||||||||||||||||||
Health Care Providers & Services | — | 635 | 8,424 | — | (61,699 | ) | 240,000 | — | 187,360 | 4,728 | |||||||||||||||||||||||||||||
Health Care Technology | — | 580 | 14,630 | — | — | 496,040 | — | 511,250 | 14,630 | ||||||||||||||||||||||||||||||
Insurance | 600,000 | 7 | 2,243 | — | (602,250 | ) | — | — | — | — | |||||||||||||||||||||||||||||
Machinery | 101,000 | — | — | — | — | — | (101,000 | ) | — | — | |||||||||||||||||||||||||||||
Oil, Gas & Consumable Fuels | — | 129 | 17,996 | 495,000 | — | — | — | 513,125 | 17,996 | ||||||||||||||||||||||||||||||
Transportation Infrastructure | — | — | 5,567 | 128,380 | — | — | — | 133,947 | 5,567 | ||||||||||||||||||||||||||||||
Total | $ | 701,000 | $ | 1,766 | $ | 76,900 | $ | 1,498,510 | $ | (663,949 | ) | $ | 736,040 | $ | (101,000 | ) | $ | 2,249,267 | $ | 70,961 |
The Fund had no transfers between Levels 1 and 2 during the six months ended April 30, 2013. As of April 30, 2013, two securities in the fund transferred from Level 2 to Level 3 as a result of a decrease in the number of observable quotations that were readily available to the independent pricing service.
See Notes to Financial Statements
21
Notes to Schedule of Investments (Unaudited) (cont'd)
The following is a summary, categorized by Level, of inputs used to value the Fund's derivatives as of April 30, 2013
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Futures | $ | (15,207 | ) | $ | — | $ | — | $ | (15,207 | ) | |||||||||
Options written | (47,477 | ) | (190 | ) | — | (47,667 | ) | ||||||||||||
Equity swaps | — | (8,834 | ) | — | (8,834 | ) | |||||||||||||
Total | $ | (62,684 | ) | $ | (9,024 | ) | $ | — | $ | (71,708 | ) |
## At April 30, 2013, selected fund information on a U.S. federal income tax basis was as follows:
Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||
Absolute Return Multi-Manager | $ | 66,133,741 | $ | 2,470,095 | $ | 501,759 | $ | 1,968,336 |
* Security did not produce income during the last twelve months.
± At April 30, 2013, the Fund had outstanding call and put options written as follows:
Name of Issuer | Contracts | Exercise Price | Expiration Date | Market Value of Options | |||||||||||||||
American International Group, Inc., Call | 20 | $ | 40 | August 2013 | $ | (6,400 | ) | ||||||||||||
American International Group, Inc., Put | 20 | 40 | August 2013 | (3,440 | ) | ||||||||||||||
BMC Software, Inc., Call | 17 | 52.5 | May 2013 | — | |||||||||||||||
Covidien PLC, Put | 36 | 50 | January 2014 | (3,060 | ) | ||||||||||||||
iShares Russell 2000 Index Fund, Put | 66 | 75 | August 2013 | (2,442 | ) | ||||||||||||||
Lamar Advertising Co., Call | 19 | 49 | May 2013 | (1,615 | ) | ||||||||||||||
Lamar Advertising Co., Call | 31 | 48 | May 2013 | (3,875 | ) | ||||||||||||||
Life Technologies Corp., Put | 38 | 55 | May 2013 | (190 | ) | ||||||||||||||
Nuance Communications, Inc., Call | 61 | 25 | October 2013 | (2,745 | ) | ||||||||||||||
SPDR S&P 500 ETF Trust, Put | 10 | 150 | May 2013 | (160 | ) | ||||||||||||||
Sprint Nextel Corp., Call | 164 | 8 | August 2013 | (1,640 | ) | ||||||||||||||
Wright Medical Group, Inc., Call | 85 | 7 | June 2013 | (22,100 | ) | ||||||||||||||
Total | $ | (47,667 | ) |
£ At April 30, 2013, the Fund had pledged securities in the amount of $1,794,380 to cover collateral requirements for borrowing in connection with securities sold short and option contracts written.
ñ Securities were purchased under Rule 144A of the Securities Act of 1933 or are private placements and, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. These securities have been deemed by the investment manager to be liquid. At April 30, 2013, these securities amounted to approximately $344,542 or 0.55% of net assets for the Fund.
Ø All or a portion of this security or cash is segregated in connection with obligations for securities sold short and/or delayed delivery purchase commitments and/or call and put options written and/or futures and/or equity swaps.
ØØ At April 30, 2013, the Fund had deposited $13,250,184 in one or more accounts to satisfy collateral requirements for borrowing in connection with securities sold short.
See Notes to Financial Statements
22
Notes to Schedule of Investments (Unaudited) (cont'd)
µ Floating rate securities are securities whose yields vary with a designated market index or market rate. These securities are shown at their current rates as of April 30, 2013 and their final maturities.
¢ All or a portion of this security was purchased on a delayed delivery basis.
^^ All or a portion of this security has not settled as of April 30, 2013 and thus does not have an interest rate in effect. Interest rates do not take effect until settlement.
≠ Security had an event of default.
a Value of the security was determined using methods the Board has approved on the belief they reflect fair value.
Ñ These securities have been deemed by management to be illiquid. At April 30, 2013, these securities amounted to approximately $2,910,145 or 4.64% of net assets for the Fund.
See Notes to Financial Statements
23
Statement of Assets and Liabilities (Unaudited)
Neuberger Berman Alternative Funds | |||||||
ABSOLUTE RETURN MULTI-MANAGER FUND | |||||||
April 30, 2013 | |||||||
Assets | |||||||
Investments in securities, at value* (Note A)—see Schedule of Investments: | |||||||
Unaffiliated issuers | $ | 68,102,077 | |||||
Foreign currency* | 296,695 | ||||||
Deposits with broker for short sales (Note A-10) | 13,250,184 | ||||||
Deposit with broker for futures contracts (Note A-12) | 28,000 | ||||||
Dividends and interest receivable | 44,936 | ||||||
Foreign tax reclaims | 1,184 | ||||||
Receivable for securities sold | 2,569,715 | ||||||
Receivable for Fund shares sold | 141,326 | ||||||
Receivable from administrator—net (Note B) | 62,337 | ||||||
Prepaid expenses and other assets | 48,373 | ||||||
Total Assets | 84,544,827 | ||||||
Liabilities | |||||||
Investments sold short, at value (Note A) (proceeds $12,973,618) | 13,622,612 | ||||||
Written Options, at value (Note A) (proceeds $55,387) | 47,667 | ||||||
Due to Custodian | 169,448 | ||||||
Dividends and interest payable for short sales | 11,648 | ||||||
Payable to investment manager—net (Note B) | 83,787 | ||||||
Payable for securities purchased | 7,698,771 | ||||||
Payable for variation margin (Note A-12) | 7,490 | ||||||
Payable for Fund shares redeemed | 44,676 | ||||||
Equity swaps, at value (Note A-12) | 8,834 | ||||||
Accrued expenses and other payables | 142,641 | ||||||
Total Liabilities | 21,837,574 | ||||||
Net Assets | $ | 62,707,253 | |||||
Net Assets consist of: | |||||||
Paid-in capital | $ | 60,837,812 | |||||
Undistributed net investment income (loss) | (271,906) | ||||||
Accumulated net realized gains (losses) on investments | 837,656 | ||||||
Net unrealized appreciation (depreciation) in value of investments | 1,303,691 | ||||||
Net Assets | $ | 62,707,253 |
See Notes to Financial Statements
24
Statement of Assets and Liabilities (Unaudited) (cont'd)
Neuberger Berman Alternative Funds (cont'd) | |||||||
ABSOLUTE RETURN MULTI-MANAGER FUND | |||||||
April 30, 2013 | |||||||
Net Assets | |||||||
Institutional Class | $ | 51,077,257 | |||||
Class A | 10,611,134 | ||||||
Class C | 1,018,862 | ||||||
Shares Outstanding ($.001 par value; unlimited shares authorized) | |||||||
Institutional Class | 4,891,840 | ||||||
Class A | 1,017,929 | ||||||
Class C | 98,437 | ||||||
Net Asset Value, offering and redemption price per share | |||||||
Institutional Class | $ | 10.44 | |||||
Net Asset Value and redemption price per share | |||||||
Class A | $ | 10.42 | |||||
Offering Price per share | |||||||
Class A‡ | $ | 11.06 | |||||
Net Asset Value and offering price per share | |||||||
Class C^ | $ | 10.35 | |||||
*Cost of Investments: | |||||||
Unaffiliated issuers | $ | 66,133,741 | |||||
Total cost of foreign currency | $ | 295,966 |
‡ On single retail sales of less than $50,000. On sales of $50,000 or more or in certain other circumstances described in the Fund's prospectus, offering price is reduced.
^ Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See Notes to Financial Statements
25
Statement of Operations (Unaudited)
Neuberger Berman Alternative Funds | |||||||
ABSOLUTE RETURN MULTI-MANAGER FUND | |||||||
For the Six Months Ended April 30, 2013 | |||||||
Investment Income: | |||||||
Income (Note A): | |||||||
Dividend income—unaffiliated issuers | $ | 339,265 | |||||
Interest income—unaffiliated issuers | 154,226 | ||||||
Foreign taxes withheld | (3,201) | ||||||
Total income | $ | 490,290 | |||||
Expenses: | |||||||
Investment management fees (Note B) | 422,548 | ||||||
Administration fees (Note B) | 13,541 | ||||||
Administration fees (Note B): | |||||||
Institutional Class | 17,311 | ||||||
Class A | 5,995 | ||||||
Class C | 674 | ||||||
Distribution fees (Note B): | |||||||
Class A | 7,494 | ||||||
Class C | 3,368 | ||||||
Shareholder servicing agent fees: | |||||||
Institutional Class | 2,534 | ||||||
Class A | 303 | ||||||
Class C | 66 | ||||||
Audit fees | 24,832 | ||||||
Custodian fees (Note A) | 92,527 | ||||||
Legal fees | 132,344 | ||||||
Registration and filing fees | 39,541 | ||||||
Shareholder reports | 7,439 | ||||||
Trustees' fees and expenses | 20,186 | ||||||
Short sales expense (Note A-10) | 98,122 | ||||||
Miscellaneous | 7,452 | ||||||
Total expenses | 896,277 | ||||||
Expenses reimbursed by Management (Note B) | (322,488) | ||||||
Expenses reduced by custodian fee expense offset arrangement (Note A) | (6,242) | ||||||
Total net expenses | 567,547 | ||||||
Net investment income (loss) | $ | (77,257) | |||||
Realized and Unrealized Gain (Loss) on Investments (Note A): | |||||||
Net realized gain (loss) on: | |||||||
Sales of investment securities of unaffiliated issuers | 1,729,108 | ||||||
Sales of investment securities of unaffiliated issuers sold short | (675,546) | ||||||
Foreign currency | (4,067) | ||||||
Financial futures contracts | (55,708) | ||||||
Options written | 49,202 | ||||||
Equity swaps | 8,549 | ||||||
Change in net unrealized appreciation (depreciation) in value of: | |||||||
Unaffiliated investment securities | 1,877,686 | ||||||
Unaffiliated investment securities sold short | (694,213) | ||||||
Foreign currency | (880) | ||||||
Financial futures contracts | (18,002) | ||||||
Options written | (1,495) | ||||||
Equity swaps | (8,709) | ||||||
Net gain (loss) on investments | 2,205,925 | ||||||
Net increase (decrease) in net assets resulting from operations | $ | 2,128,668 |
See Notes to Financial Statements
26
Statements of Changes in Net Assets
Neuberger Berman Alternative Funds | |||||||||||
ABSOLUTE RETURN MULTI-MANAGER FUND | |||||||||||
Six Months Ended April 30, 2013 (Unaudited) | Period from May 15, 2012 (Commencement of Operations) to October 31, 2012 | ||||||||||
Increase (Decrease) in Net Assets: | |||||||||||
From Operations (Note A): | |||||||||||
Net investment income (loss) | $ | (77,257) | $ | (193,650) | |||||||
Net realized gain (loss) on investments | 1,051,538 | (22,204) | |||||||||
Change in net unrealized appreciation (depreciation) of investments | 1,154,387 | 149,304 | |||||||||
Net increase (decrease) in net assets resulting from operations | 2,128,668 | (66,550) | |||||||||
Distributions to Shareholders From (Note A): | |||||||||||
Net investment income: | |||||||||||
Institutional Class | (58,599) | — | |||||||||
Net realized gain on investments: | |||||||||||
Institutional Class | (119,803) | — | |||||||||
Class A | (12,381) | — | |||||||||
Class C | (2,073) | — | |||||||||
Total distributions to shareholders | (192,856 | ) | — | ||||||||
From Fund Share Transactions (Note D): | |||||||||||
Proceeds from shares sold: | |||||||||||
Institutional Class | 20,752,818 | 33,591,736 | |||||||||
Class A | 9,042,759 | 1,760,497 | |||||||||
Class C | 788,366 | 230,214 | |||||||||
Proceeds from reinvestment of dividends and distributions: | |||||||||||
Institutional Class | 172,922 | — | |||||||||
Class A | 9,064 | — | |||||||||
Class C | 1,988 | — | |||||||||
Payments for shares redeemed: | |||||||||||
Institutional Class | (4,729,569) | (305,020) | |||||||||
Class A | (449,706) | (804) | |||||||||
Class C | (27,274 | ) | — | ||||||||
Net increase (decrease) from Fund share transactions | 25,561,368 | 35,276,623 | |||||||||
Net Increase (Decrease) in Net Assets | 27,497,180 | 35,210,073 | |||||||||
Net Assets: | |||||||||||
Beginning of period | 35,210,073 | — | |||||||||
End of period | $ | 62,707,253 | $ | 35,210,073 | |||||||
Undistributed net investment income (loss) at end of period | (271,906) | (136,050) |
See Notes to Financial Statements
27
Notes to Financial Statements Absolute Return
Multi-Manager Fund (Unaudited)
Note A—Summary of Significant Accounting Policies:
1 General: Neuberger Berman Alternative Funds (the "Trust") is a Delaware statutory trust organized pursuant to an Amended and Restated Trust Instrument dated October 14, 2010. The Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and its shares are registered under the Securities Act of 1933, as amended (the "1933 Act"). Absolute Return Multi-Manager Fund (the "Fund") had no operations until May 15, 2012, other than matters relating to its organization and registration of shares under the 1933 Act. The Fund is a separate operating series of the Trust and is non-diversified. The Fund offers Institutional Class shares, Class A shares and Class C shares. The Board may establish additional series or classes of shares without the approval of shareholders.
The assets of the Fund belong only to the Fund, and the liabilities of the Fund are borne solely by the Fund and no other.
The preparation of financial statements in accordance with U.S. generally accepted accounting principles ("GAAP") requires Management to make estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates.
2 Portfolio valuation: Investment securities are valued as indicated in the notes following the Fund's Schedule of Investments.
3 Foreign currency translation: The accounting records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars using the exchange rate as of 4:00 p.m., Eastern time, to determine the value of investments, other assets and liabilities. Purchase and sale prices of securities, and income and expenses, are translated into U.S. dollars at the prevailing rate of exchange on the respective dates of such transactions. Net unrealized foreign currency gain (loss), if any, arises from changes in the value of assets and liabilities, other than investments in securities, as a result of changes in exchange rates and is stated separately in the Statement of Operations.
4 Securities transactions and investment income: Securities transactions are recorded on trade date for financial reporting purposes. Dividend income is recorded on the ex-dividend date or, for certain foreign dividends, as soon as the Fund becomes aware of the dividends. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, including accretion of discount (adjusted for original issue discount, where applicable) and amortization of premium, where applicable, is recorded on the accrual basis. Realized gains and losses from securities transactions and foreign currency transactions, if any, are recorded on the basis of identified cost and stated separately in the Statement of Operations.
5 Income tax information: The Fund is treated as a separate entity for U.S. federal income tax purposes. It is the policy of the Fund to continue to qualify for treatment as a regulated investment company by complying with the requirements of the U.S. Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its net investment income and net realized capital gains to its shareholders. To the extent the Fund distributes substantially all of its net investment income and net realized capital gains to shareholders, no federal income or excise tax provision is required.
The Fund has adopted the provisions of ASC 740 "Income Taxes" ("ASC 740"). ASC 740 sets forth a minimum threshold for financial statement recognition of a tax position taken, or expected to be taken, in a tax return. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as an income tax expense in the Statement of Operations. As of April 30, 2013, the Fund did not have any unrecognized tax positions.
Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments of income and gains on
28
various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund.
As determined on October 31, 2012, permanent differences resulting primarily from different book and tax accounting were reclassified at year end. Such differences may be attributed to one or more of the following: netting of net ordinary losses with short-term capital gains, non-deductible stock issuance costs, the tax treatment of foreign currency gains and losses, payments in lieu of dividends on short sales and gains from passive foreign investment companies. These reclassifications had no effect on net income, net asset value ("NAV") or NAV per share of the Fund.
As of October 31, 2012, the components of distributable earnings (accumulated losses) on a U.S. federal income tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Gain | Unrealized Appreciation (Depreciation) | Loss Carryforwards and Deferrals | Total | |||||||||||||||
$ | 131,611 | $ | 2,402 | $ | (47,468 | ) | $ | — | $ | 86,545 |
The difference between book basis and tax basis distributable earnings is attributable primarily to wash sale loss deferrals, amortization of organizational costs, unsettled wash sale loss deferrals, straddle loss deferrals, mark-to-market adjustments on passive foreign investment companies, constructive sales gains and delayed settlement compensation on bank loans.
To the extent the Fund's net realized capital gains, if any, can be offset by capital loss carryforwards, if any, it is the policy of the Fund not to distribute such gains.
6 Foreign taxes: Foreign taxes withheld represent amounts withheld, if any, by foreign tax authorities, net of refunds recoverable.
7 Distributions to shareholders: The Fund may earn income, net of expenses, daily on its investments. Distributions from net investment income and net realized capital gains, if any, generally are distributed once a year (usually in December) and are recorded on the ex-date.
8 Expense allocation: Certain expenses are applicable to multiple funds. Expenses directly attributable to the Fund are charged to the Fund. Expenses of the Trust that are not directly attributable to a particular series of the Trust (e.g., a Fund) are allocated among the series of the Trust, on the basis of relative net assets, except where a more appropriate allocation of expenses to each of the series can otherwise be made fairly. Expenses borne by the complex of related investment companies, which includes open-end and closed-end investment companies for which Management serves as investment manager, that are not directly attributable to a particular investment company in the complex (e.g., the Trust) or series thereof are allocated among the investment companies in the complex or series thereof, on the basis of relative net assets, except where a more appropriate allocation of expenses to each of the investment companies in the complex or series thereof can otherwise be made fairly. The Fund's expenses (other than those specific to each class) are allocated proportionally each day among the classes based upon the relative net assets of each class.
9 Investments in foreign securities: Investing in foreign securities may involve certain sovereign and other risks, in addition to the credit and market risks normally associated with domestic securities. These additional risks include the possibility of adverse political and economic developments (including political instability, nationalization, expropriation, or confiscatory taxation) and the potentially adverse effects of unavailability of public information regarding issuers, less governmental supervision and regulation of financial markets, reduced liquidity of certain financial markets, and the lack of uniform accounting, auditing, and financial reporting standards or the application of standards that are different or less stringent than those applied in the United States. Foreign securities also may experience greater price volatility, higher rates of inflation, and delays in settlement.
29
10 Securities sold short: The Fund may engage in short sales, which are sales of securities which have been borrowed from a third party on the expectation that the market price will decline. If the price of the securities decreases, the Fund will make a profit by purchasing the securities in the open market at a price lower than the one at which it sold the securities. If the price of the securities increases, the Fund may have to cover its short positions at a price higher than the short sale price, resulting in a loss. Gains are limited to the price at which the Fund sold the security short, while losses are potentially unlimited in size. The Fund pledges securities and/or other assets, to the lender as collateral. Proceeds received from short sales may be maintained by the lender as collateral. Proceeds maintained by the lender are included in the "Deposit with brokers for short sales" on the Statement of Assets and Liabilities. The Fund is required to segregate an amount of cash, cash equivalents or other appropriate liquid marketable securities with the custodian in at least an amount equal to the current market value of the securities sold short (less any additional collateral held by the lender). The Fund is contractually responsible to the lender for any dividends payable and interest accrued on securities while those securities are in a short position. These dividends and interest are recorded as an expense of the Fund. As of April 30, 2013, the Fund had pledged cash in the amount of $13,250,184 to JP Morgan Chase Bank, N.A. ("JPM"), as collateral for short sales. At April 30, 2013, the Fund had pledged securities in the amount of $1,794,380 to cover collateral requirements for borrowing in connection with securities sold short.
11 Investment company securities and exchange-traded funds: The Fund may invest in shares of other registered investment companies, including exchange-traded funds ("ETFs"), within the limitations prescribed by the 1940 Act. Some ETFs seek to track the performance of a particular market index. These indices include both broad-based market indices and more narrowly-based indices, including those relating to particular sectors, markets, regions or industries. However, some ETFs have actively-managed investment objectives. ETF shares are traded like traditional equity securities on a national securities exchange or NASDAQ. The Fund will indirectly bear its proportionate share of any management fees and other expenses paid by such other investment companies, which will decrease returns.
12 Derivative instruments: During the six months ended April 30, 2013, the Fund's use of derivatives, as described below, was limited to equity swaps, financial futures contracts, written option transactions and purchased option transactions. The Fund has adopted the provisions of ASC 815 "Derivatives and Hedging" ("ASC 815"). The disclosure requirements of ASC 815 distinguish between derivatives that qualify for hedge accounting and those that do not. Because investment companies value their derivatives at fair value and recognize changes in fair value through the Statement of Operations, they do not qualify for hedge accounting. Accordingly, even though the Fund's investments in derivatives may represent economic hedges, they are considered non-hedge transactions for purposes of this disclosure.
Equity swaps: The Fund used equity swaps to provide investment exposure to certain foreign investments. Equity swaps are two-party contracts that generally obligate one party to pay the positive return and the other party to pay the negative return on a specified reference security, basket of securities, security index or index component during the period of the swap. Equity swap contracts are marked to market daily based on the value of the underlying reference entity and the change, if any, is recorded as an unrealized gain or loss. Equity swaps normally do not involve the delivery of securities or other underlying assets. If the other party to an equity swap defaults, a Fund's risk of loss consists of the net amount of payments that such Fund is contractually entitled to receive, if any. Equity swaps are derivatives and their value can be very volatile. To the extent that the Adviser or Sub-Adviser, as applicable, do not accurately analyze and predict future market trends, the values of assets or economic factors, a Fund may suffer a loss, which may exceed the related amounts shown in the Statement of Assets and Liabilities. Periodic payments received or paid by the Fund is recorded as realized gains or losses.
30
At April 30, 2013, the outstanding equity swaps* for the Fund were as follows:
Counterparty | Description | Value | |||||||||
JPMorgan Chase Bank, N.A. | The Fund receives or pays the total return on a portfolio of long and short positions and pays or receives a specified LIBOR or Federal Funds floating rate, which is denominated in various foreign currencies based on the local currencies of the positions within the portfolio. | $ | (8,834) |
* The following table represents the individual positions and related values within the equity swaps as of April 30, 2013.
Reference Entity | Shares | Notional(a) Value | Net Unrealized Appreciation (Depreciation) | ||||||||||||
Long Positions | |||||||||||||||
Hong Kong | |||||||||||||||
Guoco Group Limited | 15,059 | 185,805 | $ | (6,013 | ) | ||||||||||
Netherlands | |||||||||||||||
DE Master Blenders 1753 NV | 22,812 | 364,405 | (2,696 | ) | |||||||||||
Total Long Positions of Portfolio Swap | (8,709 | ) | |||||||||||||
Net Cash and Other Receivables(b) | (125 | ) | |||||||||||||
Swap, at Value | $ | (8,834) |
(a) Notional value represents the market value (including any fees or commissions) of the long positions when they are established.
(b) Cash and other receivables includes the gains (or losses) realized within the swap when the swap resets. Gains (or losses) will be realized on the swap, and reflected on the Statement of Operations, when cash is settled with the counterparty.
Financial futures contracts: During the six months ended April 30, 2013, the Fund entered into financial futures contracts in an effort to enhance returns and to manage or adjust the risk profile and the investment exposure of the Fund to certain asset classes, countries and regions. The Fund also utilized financial futures contracts to provide investment exposure to certain indices other than the benchmarks.
At the time the Fund enters into a financial futures contract, it is required to deposit with the futures commission merchant a specified amount of cash or liquid securities, known as "initial margin," which is a percentage of the value of the financial futures contract being traded that is set by the exchange upon which the futures contract is traded. Each day, the futures contract is valued at the official settlement price of the board of trade or U.S. commodity exchange on which such futures contract is traded. Subsequent payments, known as "variation margin," to and from the broker are made on a daily basis as the market price of the financial futures contract fluctuates. Daily variation margin adjustments, arising from this "mark to market," are recorded by the Fund as unrealized gains or losses.
Although some financial futures contracts by their terms call for actual delivery or acquisition of the underlying securities or currency, in most cases the contracts are closed out prior to delivery by offsetting purchases or sales of matching financial futures contracts. When the contracts are closed, the Fund recognizes a gain or loss. Risks of entering into futures contracts include the possibility there may be an illiquid market, possibly at a time of rapidly declining prices, and/or a change in the value of the contract may not correlate with changes in the value of the underlying securities. Futures executed on regulated futures exchanges have minimal counterparty risk to a fund because the exchange's clearinghouse assumes the position of the counterparty in each transaction. Thus, the Fund is exposed to risk only in connection with the clearinghouse and not in connection with the original counterparty to the transaction.
31
For U.S. federal income tax purposes, the futures transactions undertaken by the Fund may cause the Fund to recognize gains or losses from marking contracts to market even though its positions have not been sold or terminated, may affect the character of the gains or losses recognized as long-term or short-term, and may affect the timing of some capital gains and losses realized by the Fund. Also, the Fund's losses on transactions involving futures contracts may be deferred rather than being taken into account currently in calculating the Fund's taxable income.
At April 30, 2013, open positions in financial futures contracts were:
Expiration | Open Contracts | Position | Unrealized Appreciation (Depreciation) | ||||||||||||
June 2013 | 7 S&P Mid 400 EMini Index | Short | $ | (15,207) |
During the six months ended April 30, 2013, the average notional value of financial futures contracts was $479,382 for short positions.
The notional value of futures contracts at April 30, 2013 was $(810,390) for short positions.
At April 30, 2013, the Fund had deposited $20,510 in a segregated account to cover margin requirements on open futures contracts.
Options: Premiums received by the Fund upon writing a covered call option or a put option are recorded in the liability section of the Statement of Assets and Liabilities and are subsequently adjusted to the current market value. When an option is exercised, closed, or expired, the Fund realizes a gain or loss and the liability is eliminated.
When writing a covered call option, the Fund, in return for the premium, gives up the opportunity for profit from a price increase in the underlying security above the exercise price, but conversely retains the risk of loss should the price of the security decline. When writing a put option, the Fund, in return for the premium, takes the risk that it must purchase the underlying security at a price that may be higher than the current market price of the security. If a put option that the Fund has written expires unexercised, the Fund will realize a gain in the amount of the premium. All securities covering outstanding options are held in escrow by the custodian bank.
Written option transactions were used in an attempt to generate incremental returns for the Fund for the six months ended April 30, 2013. Written option transactions for the Fund for the six months ended April 30, 2013 were:
Number of Contracts | Premiums | ||||||||||
Outstanding at October 31, 2012 | 254 | $ | 31,242 | ||||||||
Options written | 1,366 | 145,714 | |||||||||
Options terminated in closing purchase transactions | (604 | ) | (74,440 | ) | |||||||
Options exercised | (62 | ) | (18,247 | ) | |||||||
Options expired | (387 | ) | (28,882 | ) | |||||||
Outstanding at April 30, 2013 | 567 | $ | 55,387 |
Premiums paid by the Fund upon purchasing a covered call option are recorded in the asset section of the Fund's Statement of Assets and Liabilities and are subsequently adjusted to the current market value. When an option is exercised, closed, or expired, the Fund realizes a gain or loss and the asset is eliminated.
For purchased call options, the Fund's loss is limited to the amount of the option premium paid.
32
Purchased option transactions were used in an attempt to manage or adjust the risk profile and the investment exposure of the Fund to certain securities for the Fund and enhance returns for the six months ended April 30, 2013. Purchased option transactions for the Fund for the six months ended April 30, 2013 were:
Number of Contracts | Premiums | ||||||||||
Outstanding at October 31, 2012 | 794 | $ | 116,525 | ||||||||
Options purchased | 3,017 | 385,672 | |||||||||
Options terminated in closing sale transactions | (773 | ) | (139,885 | ) | |||||||
Options exercised | (225 | ) | (45,219 | ) | |||||||
Options expired | (1,767 | ) | (170,942 | ) | |||||||
Outstanding at April 30, 2013 | 1,046 | $ | 146,151 |
For the six months ended April 30, 2013, the Fund had an average market value of $100,779 and $38,184 in purchased options and written options, respectively.
At April 30, 2013, the Fund had the following derivatives (which did not qualify as hedging instruments under ASC 815), grouped by primary risk exposure:
Asset Derivatives | |||||||||||||||
Derivative Type | Statement of Assets and Liabilities Location | Equity Risk | Total | ||||||||||||
Purchased options | Investments in securities, at value | $ | 102,019 | $ | 102,019 | ||||||||||
Total Value—Assets | $ | 102,019 | $ | 102,019 | |||||||||||
Liability Derivatives | |||||||||||||||
Derivative Type | Statement of Assets and Liabilities Location | Equity Risk | Total | ||||||||||||
Equity swaps | Equity swaps, at value | $ | (8,834) | $ | (8,834 | ) | |||||||||
Futures contracts | Receivable/Payable for variation margin(1) | (15,207) | (15,207) | ||||||||||||
Option contracts written | Written options, at value | (47,667) | (47,667) | ||||||||||||
Total Value—Liabilities | $ | (71,708) | $ | (71,708) |
(1) "Futures contracts" reflects the cumulative appreciation (depreciation) of futures contracts as of April 30, 2013, which is reflected in the Statement of Assets and Liabilities under the caption "Net unrealized appreciation (depreciation) in value of investments." The outstanding variation margin as of April 30, 2013, if any, is reflected in the Statement of Assets and Liabilities under the caption "Receivable/Payable for variation margin."
33
The impact of the use of these derivative instruments on the Statement of Operations during the six months ended April 30, 2013, was as follows:
Realized Gain (Loss) | |||||||||||||||
Derivative Type | Statement of Operations Location | Equity Risk | Total | ||||||||||||
Equity swaps | Net realized gain (loss) on: equity swaps | $ | 8,549 | $ | 8,549 | ||||||||||
Futures contracts | Net realized gain (loss) on: financial futures contracts | (55,708) | (55,708) | ||||||||||||
Option contracts written | Net realized gain (loss) on: options written | 49,202 | 49,202 | ||||||||||||
Option contracts purchased | Net realized gain (loss) on: sales of investment securities of unaffiliated issuers | (175,212) | (175,212) | ||||||||||||
Total Realized Gain (Loss) | $ | (173,169) | $ | (173,169) | |||||||||||
Change in Appreciation (Depreciation) | |||||||||||||||
Derivative Type | Statement of Operations Location | Equity Risk | Total | ||||||||||||
Equity swaps | Change in net unrealized appreciation (depreciation) in value of: equity swaps | $ | (8,709) | $ | (8,709) | ||||||||||
Futures contracts | Change in net unrealized appreciation (depreciation) in value of: financial futures contracts | (18,002) | (18,002) | ||||||||||||
Option contracts written | Change in net unrealized appreciation (depreciation) in value of: options written | (1,495) | (1,495) | ||||||||||||
Option contracts purchased | Change in net unrealized appreciation (depreciation) in value of: unaffiliated investment securities | (40,754) | (40,754) | ||||||||||||
Total Change in Appreciation (Depreciation) | $ | (68,960) | $ | (68,960) |
13 Indemnifications: Like many other companies, the Trust's organizational documents provide that its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, both in some of its principal service contracts and in the normal course of its business, the Trust enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Trust's maximum exposure under these arrangements is unknown as this could involve future claims against the Trust.
14 Expense offset arrangement: The Fund has an expense offset arrangement in connection with its custodian contract. For the six months ended April 30, 2013, the impact of this arrangement was a reduction of expenses of $6,242.
34
15 Other: All net investment income and realized and unrealized capital gains and losses of the Fund are allocated, on the basis of relative net assets, pro rata among its respective classes.
Note B—Management Fees, Administration Fees, Distribution Arrangements, and Other Transactions with Affiliates:
The Fund retains Management as its investment manager under a Management Agreement. For such investment management services, the Fund pays Management a fee at the annual rate of 1.700% of the first $250 million of the Fund's average daily net assets, 1.675% of the next $250 million, 1.650% of the next $250 million, 1.625% of the next $250 million, 1.600% of the next $500 million, 1.575% of the next $2.5 billion, and 1.550% of average daily net assets in excess of $4 billion. Prior to February 28, 2013, the Fund paid Management a fee at the annual rate of 2.000% of the first $250 million of the Fund's average daily net assets, 1.975% of the next $250 million, 1.950% of the next $250 million, 1.925% of the next $250 million, 1.900% of the next $500 million, 1.875% of the next $2.5 billion, and 1.850% of average daily net assets in excess of $4 billion. Accordingly, for the six months ended April 30, 2013, the fee pursuant to the Management Agreement was equivalent to an annual effective rate of 1.870% of the Fund's average daily net assets.
The Fund retains Management as its administrator under an Administration Agreement. The Fund pays Management an administration fee at the annual rate of 0.06% of its average daily net assets under this agreement. In addition, the Fund's Institutional Class pays Management an administration fee at the annual rate of 0.09% of its average daily net assets under this agreement and the Fund's Class A and Class C pays Management an administration fee at the annual rate of 0.20% of its average daily net assets under this agreement. Additionally, Management retains JPM as its sub-administrator under a Sub-Administration Agreement. Management pays JPM a fee for all services received under the agreement.
Management has contractually agreed to waive current payment of fees and/or reimburse certain expenses of the Institutional Class, Class A and Class C of the Fund so that the total annual operating expenses of those classes do not exceed the expense limitations as detailed in the following table. These undertakings apply to the Fund's direct expenses and exclude interest, taxes, brokerage commissions, acquired fund fees and expenses, extraordinary expenses, and dividend and interest expense on short sales, if any; consequently, net expenses may exceed the contractual expense limitations. The Fund has agreed that each of its respective classes will repay Management for fees and expenses waived or reimbursed for that class provided that repayment does not cause that class' annual operating expenses to exceed its contractual expense limitation in place at the time the fees and expenses were forgone or reimbursed. Any such repayment must be made within three years after the year in which Management incurred the expense.
During the six months ended April 30, 2013, there was no reimbursement to Management under this agreement.
At April 30, 2013, contingent liabilities to Management under the contractual expense limitation were as follows:
Expenses Reimbursed in Fiscal Period Ending, October 31, | |||||||||||||||||||
2012 | 2013 | ||||||||||||||||||
Contractual Expense | Subject to Repayment until October 31, | ||||||||||||||||||
Limitation(1)(2) | Expiration | 2015 | 2016 | ||||||||||||||||
Institutional Class | 1.97 | % | 10/31/16 | $ | 816,372 | $ | 248,570 | ||||||||||||
Class A | 2.33 | % | 10/31/16 | 24,960 | 36,893 | ||||||||||||||
Class C | 3.08 | % | 10/31/16 | 4,503 | 4,228 |
(1) Expense limitation per annum of the respective class' average daily net assets.
(2) Prior to February 28, 2013, the contractual expense limitations were 2.45%, 2.81% and 3.56% for the Institutional Class, Class A and Class C shares, respectively. In addition, from January 2, 2013 to February 28, 2013, Management had voluntarily undertaken to waive current payment of fees and/or reimburse certain expenses of
35
Institutional Class, Class A and Class C shares so that their Operating Expenses were limited to 1.97%, 2.33% and 3.08%, respectively, per annum of their average daily net assets. For the six months ended April 30, 2013, voluntary reimbursements for Institutional Class, Class A and Class C amounted to $27,734, $4,524 and $539, respectively. These amounts are not subject to recovery by Management.
NB Alternative Investment Management LLC ("NBAIM"), as the sub-adviser to the Fund, is retained by Management to provide day-to-day investment management services and receives a monthly fee paid by Management. As investment manager, Management is responsible for overseeing the investment activities of NBAIM. Several individuals who are officers and/or Trustees of the Trust are also employees of NBAIM and/or Management.
Management and NBAIM are indirect subsidiaries of Neuberger Berman Group LLC (("NBG") and together with its consolidated subsidiaries ("NB Group")). NBSH Acquisition, LLC ("NBSH" and together with NBG, the "NB Parties"), which is owned by portfolio managers, members of the NB Group management team and certain of NB Group's key employees, senior professionals, and certain of their permitted transferees, owns, as of March 14, 2013, approximately 72% of NBG's common units, and Lehman Brothers Holdings Inc. ("LBHI") and certain of its subsidiaries (collectively the "LBHI Parties") own the remaining 28% of such common units. Pursuant to agreements among the NB Parties and the LBHI Parties, as well as the issuance of NBSH common equity to employees with respect to their previously made equity elections relating to 2013 compensation, it is expected that NBSH will own 81% of NBG's common units as of January 1, 2014. NBG has the opportunity to continue to redeem the remaining NBG Class A common units from the LBHI Parties through a process that is expected to end in 2016 (and if necessary, 2017).
Management and NBAIM engage The Boston Company Asset Management, LLC, Cramer Rosenthal McGlynn, LLC, GAMCO Asset Management, Inc., Levin Capital Strategies, L.P., MacKay Shields LLC, Sound Point Capital Management, L.P., Turner Investments, L.P., and Visium Asset Management, L.P. as subadvisers to provide investment management services. Management compensates the subadvisers out of the investment advisory fees it receives from the Fund. Exposure to MacKay Shields LLC ("MacKay Shields") is comprised of the Fund's investment in a mutual fund that is subadvised by Mackay Shields, which is unaffiliated with the Fund or Neuberger Berman. The Fund's portfolio managers currently intend to begin allocating assets to be managed directly by Mackay Shields when the Fund's assets are approximately $125 million. At that time, the portfolio managers expect to redeem the Fund's investment in the unaffiliated mutual fund subadvised by Mackay Shields.
The Fund also has a distribution agreement with Management with respect to each class of shares. Management acts as agent in arranging for the sale of class shares without sales commission or other compensation, except as described below for Class A and Class C shares, and bears advertising and promotion expenses.
However, Management receives fees from Class A and Class C under their distribution plans (each a "Plan", collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act. The Plans provide that, as compensation for administrative and other services provided to these classes, Management's activities and expenses related to the sale and distribution of these classes, and ongoing services provided to investors in these classes, Management receives from each of these respective classes a fee at the annual rate of 0.25% of Class A's and 1.00% of Class C's average daily net assets. Management receives this amount to provide distribution and shareholder servicing for these classes and pays a portion of it to institutions that provide such services. Those institutions may use the payments for, among other purposes, compensating employees engaged in sales and/or shareholder servicing. The amount of fees paid by each class during any year may be more or less than the cost of distribution and other services provided to that class. FINRA rules limit the amount of annual distribution fees that may be paid by a mutual fund and impose a ceiling on the cumulative distribution fees paid. The Trust's Plans comply with those rules.
Class A shares of the Fund are generally sold with an initial sales charge of up to 5.75% and no contingent deferred sales charge ("CDSC"), except that a CDSC of 1.00% applies to certain redemptions made within 18 months following purchases of $1 million or more without an initial sales charge. Class C shares of the Fund are sold with no initial sales charge and a 1.00% CDSC if shares are sold within one year after purchase.
36
For the six months ended April 30, 2013, Management, acting as underwriter and broker-dealer, received net initial sales charges from the purchase of Class A shares and CDSCs from the redemption of Class A and Class C shares as follows:
Underwriter | Broker-Dealer | ||||||||||||||||||
Net Initial Sales Charges | CDSC | Net Initial Sales Charges | CDSC | ||||||||||||||||
Class A | $ | 5,230 | $ | — | $ | — | $ | — | |||||||||||
Class C | — | 90 | — | — |
Note C—Securities Transactions:
During the six months ended April 30, 2013, there were purchase and sale transactions of long-term securities (excluding equity swaps, financial futures contracts and option contracts) as follows:
Purchases | Securities Sold Short | Sales | Covers on Securities Sold Short | ||||||||||||
$ | 79,147,016 | $ | 23,873,915 | $ | 58,037,991 | $ | 18,849,968 |
During the six months ended April 30, 2013, no brokerage commissions on securities transactions were paid to affiliated brokers.
Note D—Fund Share Transactions:
Share activity for the six months ended April 30, 2013 and for the period ended October 31, 2012 was as follows:
For the Six Months Ended April 30, 2013 | For the Period Ended October 31, 2012 | ||||||||||||||||||||||||||||||||||
Shares Sold | Shares Issued on Reinvestment of Dividends and Distributions | Shares Redeemed | Total | Shares Sold | Shares Issued on Reinvestment of Dividends and Distributions | Shares Redeemed | Total | ||||||||||||||||||||||||||||
Institutional Class | 2,016,057 | 17,121 | (463,428 | ) | 1,569,750 | 3,352,383 | — | (30,293 | ) | 3,322,090 | (1) | ||||||||||||||||||||||||
Class A | 885,352 | 898 | (43,734 | ) | 842,516 | 175,493 | — | (80 | ) | 175,413 | (1) | ||||||||||||||||||||||||
Class C | 77,990 | 198 | (2,688 | ) | 75,500 | 22,937 | — | — | 22,937 | (1) |
(1) Period from May 15, 2012 (Commencement of Operations) to October 31, 2012.
Note E—Recent Accounting Pronouncement:
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11 Disclosures about Offsetting Assets and Liabilities ("ASU 2011-11"). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. At this time, Management is evaluating the implications of ASU 2011-11 and its impact on the financial statements.
Note F—Unaudited Financial Information:
The financial information included in this interim report is taken from the records of the Fund without audit by an independent registered public accounting firm. Annual reports contain audited financial statements.
37
Note G—Subsequent Event:
Effective May 1, 2013, NB Management engaged Good Hill Partners LP ("Good Hill") as a new subadviser for the Fund. In connection with the addition of Good Hill, a portion of the Fund's assets may be allocated to an investment strategy that focuses on asset-backed securities. In addition, effective June 12, 2013, NB Management engaged Lazard Asset Management LLC as a new subadviser for the Fund to employ a strategy of investing primarily in long and short positions in equity securities. Separately, as of May 10, 2013, The Boston Company Asset Management, LLC ceased to act as a subadviser to the Fund.
38
Financial Highlights
The following table includes selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. Per share amounts that round to less than $0.01 or $(0.01) per share are presented as $0.00 or $(0.00), respectively. Net Asset amounts with a zero balance may reflect actual amounts rounding to less than $0.1 million.
Net Asset Value, Beginning of Period | Net Investment Income (Loss)@ | Net Gains or Losses on Securities (both realized and unrealized) | Total From Investment Operations | Dividends from Net Investment Income | Distributions from Net Realized Capital Gains | Tax Return of Capital | Total Distributions | Net Asset Value, End of Period | |||||||||||||||||||||||||||||||
Absolute Return Multi-Manager Fund | |||||||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||||||
04/30/2013 (Unaudited) | $ | 10.00 | $ | (0.01 | ) | $ | 0.51 | $ | 0.50 | $ | (0.02 | ) | $ | (0.04 | ) | $ | — | $ | (0.06 | ) | $ | 10.44 | |||||||||||||||||
Period from 5/15/2012^ to 10/31/2012 | $ | 10.00 | $ | (0.08 | ) | $ | 0.08 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 10.00 | ||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||||||
04/30/2013 (Unaudited) | $ | 9.99 | $ | (0.04 | ) | $ | 0.51 | $ | 0.47 | $ | — | $ | (0.04 | ) | $ | — | $ | (0.04 | ) | $ | 10.42 | ||||||||||||||||||
Period from 5/15/2012^ to 10/31/2012 | $ | 10.00 | $ | (0.09 | ) | $ | 0.08 | $ | (0.01 | ) | $ | — | $ | — | $ | — | $ | — | $ | 9.99 | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||||||
04/30/2013 (Unaudited) | $ | 9.95 | $ | (0.08 | ) | $ | 0.52 | $ | 0.44 | $ | — | $ | (0.04 | ) | $ | — | $ | (0.04 | ) | $ | 10.35 | ||||||||||||||||||
Period from 5/15/2012^ to 10/31/2012 | $ | 10.00 | $ | (0.13 | ) | $ | 0.08 | $ | (0.05 | ) | $ | — | $ | — | $ | — | $ | — | $ | 9.95 |
See Notes to Financial Highlights
39
Total Return†† | Net Assets, End of Period (in millions) | Ratio of Gross Expenses to Average Net Assets# | Ratio of Gross Expenses to Average Net Assets (excluding expenses on securities sold short) | Ratio of Net Expenses to Average Net Assets | Ratio of Net Expenses to Average Net Assets (excluding expenses on securities sold short) | Ratio of Net Investment Income/ (Loss) to Average Net Assets | Portfolio Turnover Rate (including securities sold short)** | Portfolio Turnover Rate (excluding securities sold short)** | |||||||||||||||||||||||||||||||
Absolute Return Multi-Manager Fund | |||||||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||||||
04/30/2013 (Unaudited) | 4.97 | %** | $ | 51.1 | 3.92 | %* | 3.57 | %* | 2.46 | %*‡‡ | 2.11 | %*‡‡ | (0.24 | %)* | 196 | % | 181 | % | |||||||||||||||||||||
Period from 5/15/2012^ to 10/31/2012 | 0.00 | %** | $ | 33.2 | 7.86 | %‡* | 7.50 | %‡* | 2.81 | %‡* | 2.45 | %‡* | (1.81 | %)‡* | 270 | % | 213 | % | |||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||||||
04/30/2013 (Unaudited) | 4.68 | %** | $ | 10.6 | 4.14 | %* | 3.81 | %* | 2.74 | %*‡‡ | 2.40 | %*‡‡ | (0.84 | %)* | 196 | % | 181 | % | |||||||||||||||||||||
Period from 5/15/2012^ to 10/31/2012 | (0.10 | %)** | $ | 1.8 | 8.67 | %‡* | 8.26 | %‡* | 3.22 | %‡* | 2.81 | %‡* | (2.02 | %)‡* | 270 | % | 213 | % | |||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||||||
04/30/2013 (Unaudited) | 4.40 | %** | $ | 1.0 | 4.96 | %* | 4.62 | %* | 3.52 | %*‡‡ | 3.18 | %*‡‡ | (1.52 | %)* | 196 | % | 181 | % | |||||||||||||||||||||
Period from 5/15/2012^ to 10/31/2012 | (0.50 | %)** | $ | 0.2 | 13.12 | %‡* | 12.74 | %‡* | 3.94 | %‡* | 3.56 | %‡* | (2.86 | %)‡* | 270 | % | 213 | % |
40
Notes to Financial Highlights (Unaudited)
@ Calculated based on the average number of shares outstanding during the fiscal period.
†† Total return based on per share NAV reflects the effects of changes in NAV on the performance of the Fund during the fiscal period and assumes income dividends and other distributions, if any, were reinvested but does not reflect the effect of sales charges. Results represent past performance and do not indicate future results. Current returns may be lower or higher than the performance data quoted. Investment returns and principal may fluctuate and shares when redeemed may be worth more or less than original cost. Total return would have been lower if Management had not reimbursed and/or waived certain expenses.
# Represents the annualized ratios of net expenses to average daily net assets if Management had not reimbursed certain expenses and/or waived a portion of the investment management fee.
‡ Organization expense, which is a non-recurring expense, is included in these ratios on a non-annualized basis.
^ The date investment operations commenced.
** Not annualized.
* Annualized.
‡‡ After reimbursement of expenses and/or waiver of a portion of the investment management fee by Management. The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. Had the Fund not received expense reductions related to expense offset arrangements, the annualized ratios of net expenses to average daily net assets would have been:
Including Expenses on Securities Sold Short | Excluding Expenses on Securities Sold Short | ||||||||||
Six Months Ended April 30, 2013 | |||||||||||
Absolute Return Multi-Manager Fund Institutional Class | 2.49 | % | 2.14 | % | |||||||
Absolute Return Multi-Manager Fund Class A | 2.76 | % | 2.43 | % | |||||||
Absolute Return Multi-Manager Fund Class C | 3.55 | % | 3.21 | % |
41
Directory
Investment Manager, Administrator and Distributor
Neuberger Berman Management LLC
605 Third Avenue, 2nd Floor
New York, NY 10158-0180
800.877.9700 or 212.476.8800
Intermediary Client Services 800.366.6264
Sub-Advisers
NB Alternative Investment Management LLC
605 Third Avenue, 22nd Floor
New York, NY 10158
Cramer Rosenthal McGlynn, LLC
520 Madison Avenue, 20th Floor
New York, NY 10022
GAMCO Asset Management, Inc.
One Corporate Center
Rye, NY 10580
Good Hill Partners, LP
1599 Post Road East
Westport, CT 06880
Lazard Asset Management, LLC
30 Rockefeller Plaza
New York, NY 10112
Levin Capital Strategies, LP
595 Madison Avenue, 17th Floor
New York, NY 10022
MacKay Shields, LLC
9 West 57th Street, 33rd Floor
New York, NY 10019
Sound Point Capital Management, L.P.
1185 Avenue of the Americas, 36th Floor
New York, NY 10036
Turner Investments, L.P.
1205 Westlakes Drive
Suite 100
Berwyn, PA 19312
Visium Asset Management, L.P.
888 Seventh Avenue, 22nd Floor
New York, NY 10019
Custodian
JPMorgan Chase & Co.
14201 Dallas Parkway
Dallas, TX 75254
Shareholder Servicing Agent
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, MA 02111
For Institutional Class Shareholders
Address correspondence to:
Neuberger Berman Management LLC
605 Third Avenue, Mail Drop 2-7
New York, NY 10158-0180
Attn: Intermediary Client Services
800.366.6264
For Class A and Class C Shareholders:
Please contact your investment provider
Legal Counsel
K&L Gates LLP
1601 K Street, NW
Washington, DC 20006
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
42
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to portfolio securities is available, without charge, by calling 800-877-9700 (toll-free) and on the website of the Securities and Exchange Commission, at www.sec.gov. Information regarding how the Trust voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is also available, without charge, by calling 800-877-9700 (toll-free), on the website of the Securities and Exchange Commission at www.sec.gov, and on Management's website at www.nb.com.
Quarterly Portfolio Schedule
The Trust files a complete schedule of portfolio holdings for the Fund with the Securities and Exchange Commission for the first and third quarters of the fiscal year on Form N-Q. The Trust's Forms N-Q are available on the Securities and Exchange Commission's website at www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. The information on Form N-Q is available upon request, without charge, by calling 800-877-9700 (toll-free).
43
Board Consideration of the Management and Sub-Advisory Agreements
At meetings held on February 27, 2013, March 21, 2013, and April 23-24, 2013, the Board of Trustees of Neuberger Berman Alternative Funds ("Board"), including the Trustees who are not "interested persons" of Neuberger Berman Management LLC ("Management") (including its affiliates) or Neuberger Berman Alternative Funds ("Independent Fund Trustees"), considered and approved the separate sub-advisory agreements among Management, NB Alternative Investment Management LLC ("NBAIM") and each of the following subadvisers (each a "Subadviser"): Good Hill Partners LP and Lazard Asset Management LLC (each, a "Sub-Advisory Agreement"), each of which would be responsible for managing a portion of the assets of Neuberger Berman Absolute Return Multi-Manager Fund ("Fund").
In evaluating the Sub-Advisory Agreements, the Board, including the Independent Fund Trustees, reviewed materials furnished by each Subadviser. In addition, the Board, including the Independent Fund Trustees, met with senior representatives of each Subadviser regarding their personnel and operations. The Independent Fund Trustees were advised by counsel that is experienced in Investment Company Act of 1940 matters and that is independent of Management and NBAIM.
The Board noted that Management and NBAIM, together with the Fund, had received an order from the Securities and Exchange Commission ("SEC") that permits Management to add or replace subadvisers to the Fund without a shareholder vote, provided the Independent Fund Trustees approve the new subadviser and certain other steps are taken. In this context, the Board considered Management's and NBAIM's responsibilities for designing an overall investment program for the Fund and then identifying the Subadvisers who will carry out the different portions of that program based on NBAIM's due diligence of those Subadvisers. The Board further noted that Management and NBAIM pursuant to their agreements with the Fund and related subadviser oversight policies and procedures approved by the Board are responsible for overseeing the Subadvisers.
The Board evaluated the terms of the Sub-Advisory Agreements, the overall fairness of the Agreements to the Fund and whether the Agreements were in the best interests of the Fund and its shareholders. The Board considered the following factors, among others, in connection with its approval of the Agreements: (1) the nature, extent, and quality of the services to be provided by each Subadviser; and (2) the expected costs of the services to be provided. In their deliberations, the Board members did not identify any particular information that was all-important or controlling, and each Trustee may have attributed different weights to the various factors.
The Board received and considered information regarding the nature, extent and quality of services to be provided to the Fund by each Subadviser under the Sub-Advisory Agreements. The Board considered the experience and staffing of the portfolio management and investment research personnel of each Subadviser who would perform services for the Fund, as well as the resources available to each. With respect to each Subadviser, the Board reviewed the performance for accounts managed by the Subadviser that were substantially similar in strategy to the strategy the Subadviser will use for the Fund, noting that the accounts may not be subject to the same 1940 Act restrictions as the Fund. The Board considered the policies and practices regarding brokerage and allocation of portfolio transactions of each of the Subadvisers and noted that Management and NBAIM would monitor the quality of the execution services provided by each Subadviser.
The Board also reviewed whether the Subadvisers would use brokers to execute Fund transactions that provide research and other services to the Subadviser, and the types of benefits potentially derived from such services by the Subadviser, the Fund and other clients of the Subadviser. The Board also considered the compliance programs and compliance history of each Subadviser, including the Fund's Chief Compliance Officer's and NBAIM's assessment of the compliance programs of the Subadvisers. The Board also considered whether there were any pending lawsuits, enforcement proceedings or regulatory investigations involving a Subadviser, and reviewed information regarding their financial condition, history of operations and any conflicts of interests in managing the Fund.
With respect to the overall fairness of the Sub-Advisory Agreements, the Board had previously considered the Fund's fee structure as compared to a peer group of comparable funds and any fall-out benefits likely to accrue to Management or its affiliates. In addition, the Board at its February 27 meeting considered and approved a reduction in the Fund's
44
management and administration fees. Management indicated that similar comparative information was not available with respect to the amount paid to each Subadviser. The Board did, however, consider an estimate of the costs of the services to be provided and estimated profits or losses that would be realized by each Sub-Adviser, as well as the fees each Subadviser charges for similar products. The Board noted, however, that Management, and not the Fund, pays the fee to the Subadvisers and therefore the fees charged by the Subadvisers will not change the overall expenses of the Fund. The Board also considered whether there are other business arrangements between Management or NBAIM and any Subadviser that could give rise to potential conflicts. It considered whether the Sub-Advisory Agreements will or should provide for breakpoints in the fees and, as a general matter, the way in which any such breakpoints should factor into the fees paid by the Fund.
Conclusions
In approving the Sub-Advisory Agreements, the Board concluded that the terms of each Sub-Advisory Agreement are fair and reasonable and that approval of the Agreements is in the best interests of the Fund and its shareholders. In reaching this determination, the Board considered that each Subadviser could be expected to provide a high level of service to the Fund; that each Subadviser's fees appeared to the Board to be reasonable given the nature and quality of services expected to be provided; and that the expected benefits accruing to each Subadviser and its affiliates and Management and its affiliates by virtue of their relationship to the Fund were reasonable in comparison with the expected costs of providing the sub-advisory services and the expected benefits accruing to the Fund.
45
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Neuberger Berman Management LLC
605 Third Avenue 2nd Floor
New York, NY 10158–0180
Shareholder Services
800.877.9700
Institutional Services
800.366.6264
www.nb.com
Statistics and projections in this report are derived from sources deemed to be reliable but cannot be regarded as a representation of future results of the Fund. This report is prepared for the general information of shareholders and is not an offer of shares of the Fund. Shares are sold only through the currently effective prospectus, which must precede or accompany this report.
N0087 06/13
Neuberger Berman
Alternative and Multi-Asset Class Funds
Institutional Class Shares
Class A Shares
Class C Shares
Dynamic Real Return Fund
Global Allocation Fund
Long Short Fund
Semi-Annual Report
April 30, 2013
Contents
THE FUNDS | |||||||
President's Letter | 1 | ||||||
PORTFOLIO COMMENTARY | |||||||
Dynamic Real Return Fund | 2 | ||||||
Global Allocation Fund | 5 | ||||||
Long Short Fund | 8 | ||||||
FUND EXPENSE INFORMATION | 13 | ||||||
SCHEDULE OF INVESTMENTS/TOP TEN EQUITY HOLDINGS | |||||||
Dynamic Real Return Fund | 15 | ||||||
Global Allocation Fund | 18 | ||||||
Positions by Industry | 21 | ||||||
Long Short Fund | 22 | ||||||
FINANCIAL STATEMENTS | 33 | ||||||
FINANCIAL HIGHLIGHTS (ALL CLASSES)/ PER SHARE DATA | |||||||
Dynamic Real Return Fund | 55 | ||||||
Global Allocation Fund | 55 | ||||||
Long Short Fund | 57 | ||||||
Directory | 60 | ||||||
Proxy Voting Policies and Procedures | 61 | ||||||
Quarterly Portfolio Schedule | 61 | ||||||
Board Consideration of the Management and Sub-Advisory Agreements | 62 |
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. ©2013 Neuberger Berman Management LLC. All rights reserved.
President's Letter
Dear Shareholder,
I am pleased to present this semi-annual shareholder report for the Neuberger Berman Alternative and Multi-Asset Class Funds: Neuberger Berman Global Allocation Fund and Neuberger Berman Long Short Fund. This report also includes the new Neuberger Berman Dynamic Real Return Fund, which was launched on December 19, 2012. The Fund seeks to provide long-term attractive risk-adjusted real returns in stable to rising inflationary environments, with a secondary objective to preserve investor capital. To pursue its goal, the Fund currently diversifies its assets primarily among the following general asset classes: inflation-linked debt securities, debt securities rated below investment grade, master limited partnerships, real estate investment trusts, commodities and equity securities. All three Funds utilize hedge fund-like strategies, which we believe can add valuable diversification and supplement traditional equity and fixed income investments.
Turning our attention to the global financial markets, they were impacted by a number of issues during the reporting period, including moderating global growth, aggressive monetary policy accommodation by a number of central banks, uncertainties related to the U.S. fiscal cliff and the European sovereign debt crisis. This led to several occasions during the period when investors flocked to the safety of U.S. Treasury securities. However, these flights to quality were generally temporary in nature and investors who took on greater risk were generally rewarded over the six months ended April 30, 2013.
U.S. equities rallied sharply during the period and several indices reached new record highs. International developed market equities also performed well, while emerging market equities posted less robust returns. With global growth weakening, inflation remained tame and commodity prices largely declined. Looking at the fixed income market, non-Treasuries generally produced modest gains. One notable exception was high yield corporate bonds, as they outperformed given solid investor demand. Elsewhere, the currency markets were volatile at times given actions by the Bank of Japan to spur its economy and a reemergence of issues in Europe.
Looking ahead, there continues to be a number of uncertainties that could impact investor sentiment in the coming months. In addition to macroeconomic and geopolitical issues, the longer-term impact of monetary policy accommodation remains in question. As a result, the markets could experience periods of increased volatility. However, as we experienced during the reporting period, flights to quality may be trumped by investors' search for higher returns amid the low interest rate environment. In our view, this could lead to generally solid demand for equities and non-Treasury securities.
Thank you for your continued support and trust. We look forward to continue serving your investment needs in the years to come.
Sincerely,
ROBERT CONTI
PRESIDENT AND CEO
NEUBERGER BERMAN MUTUAL FUNDS
1
Dynamic Real Return Fund Commentary
Neuberger Berman Dynamic Real Return Fund, which was launched on December 19, 2012, seeks to provide long-term attractive risk-adjusted real returns in stable to rising inflationary environments. Capital preservation is a secondary objective. To pursue its goal, the Fund currently allocates its assets primarily among the following general asset classes: inflation-linked debt securities, debt securities rated below investment grade, master limited partnerships ("MLPs"), real estate investment trusts ("REITs"), commodities and equity securities.
Neuberger Berman Dynamic Real Return Fund Institutional Class generated a 4.20% total return from its inception on December 19, 2012 through April 30, 2013. During this same time period, its benchmark, the Barclays 1-10 Year U.S. TIPS Index, provided a 0.46% return while CPI was 1.28%.1 (Performance for all share classes is provided in the table immediately following this letter.)
The global financial markets generated mixed results during the reporting period (since the Fund's launch), as a host of macro factors and continued central bank intervention impacted investor sentiment and asset valuations. In the U.S., fiscal cliff-related tax hikes were not as onerous as previously feared and sequestration was introduced with relatively minimal fanfare. Overseas, inconclusive elections in Italy and a banking crisis in Cyprus reminded investors that issues in Europe can quickly move to the front burner. Against this backdrop, the markets were volatile at times, as investor risk appetite was replaced with risk aversion and vice versa. The currency markets fluctuated during the period given the ongoing issues in Europe. In Japan, Prime Minister Abe's nomination of Haruhiko Kuroda as Governor of the Bank of Japan reinforced investors' expectations of large scale expansion of monetary policy and further weakness in the yen.
Among the sectors in which the Fund invests, its allocation to MLPs produced the largest absolute returns. After generating weak results at the end of 2012 amid unfounded concerns that the favorable tax treatment of MLPs could be curtailed as part of the fiscal cliff tax hikes, MLPs produced a double-digit return during the remainder of the fiscal period. The Fund's REITs were also a strong performer. REITs in general rallied as fundamentals further improved and demand was solid as investors looked to generate incremental yield. Other contributors to absolute performance were equities within emerging markets, as well as in the Materials and Energy sectors, along with high yield corporate bonds and global Treasury Inflation-Protected Securities ("TIPS"). On the downside, the Fund's commodities were the largest detractors from results. They performed poorly given continued signs of moderating global growth and weak supply/demand technicals.
In aggregate, the Fund's dynamic overlay was a modest negative for performance. Inflation signals, such as equity and commodity prices, yield curve and investor sentiment, were mixed during the reporting period. Against this backdrop, on several occasions during the period the Fund had a short position in Treasury futures.
While the threat of sharply higher inflation is not imminent, we feel the foundation is in place for rising prices in the future. Following anemic growth in the U.S. at the end of 2012, we believe there are some signs of improvement, most notably in the housing market. The manufacturing sector has been in an expansionary mode and, despite the recent payroll tax hike, consumer spending has been resilient. Overseas, China's economy looks to us like it will avoid a hard landing. We continue to believe that positive growth trends in the U.S. and China will more than offset weakness in Europe. However, we do acknowledge that potential changes in the U.S. tax code could still negatively affect some industries of significance to the Fund.
Despite a number of positive economic indicators in the U.S., the Federal Reserve appears likely to maintain its highly accommodative monetary policy for the foreseeable future given ongoing slack in the labor market. Elsewhere, Japan's central bank has vowed to increase its monetary base by as much as $730 billion per year until its 2% inflation goal is met. In Europe, there is the anticipation that the European Central Bank will need to take additional actions should the region's economy continue to falter.
2
While the technicals in the commodity market could be strained given global economic uncertainties, we are seeing some signs that consumption in the U.S. from both consumers and businesses is on the rise. In addition, the rising stock market and rebound in housing has boosted the wealth effect. Against this setting, breakeven inflation has trended higher over the last 21 months. We continue to believe that the Fund is well positioned, as we have the flexibility to allocate its portfolio in a diversified array of inflation-sensitive asset classes.
Sincerely,
ANDREW JOHNSON, THANOS BARDAS, AND THOMAS MARTHALER
PORTFOLIO CO-MANAGERS
Information about the principal risks of investing in the Fund is set forth in the prospectus and statement of additional information.
The portfolio composition, industries and holdings of the Fund are subject to change.
The opinions expressed are those of the Fund's portfolio managers. The opinions are as of the date of this report and are subject to change without notice.
1 Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation. The CPI is available monthly, so the value shown is from December 31, 2012 through April 30, 2013; not seasonally adjusted.
3
Dynamic Real Return Fund
TICKER SYMBOLS
Institutional Class | NDRIX | ||||||
Class A | NDRAX | ||||||
Class C | NDRCX |
PORTFOLIO BY TYPE OF SECURITY
(as a % of Total Investments)
Bank Loans | 9.3 | % | |||||
Commodities | 10.1 | ||||||
Emerging Markets | 7.6 | ||||||
Global Treasury Inflation Protected Securities | 25.2 | ||||||
High Yield Securities | 9.2 | ||||||
Master Limited Partnerships | 9.3 | ||||||
Real Estate Investment Trusts | 10.0 | ||||||
S&P Energy | 9.0 | ||||||
S&P Materials | 8.7 | ||||||
Short-Term Investments | 1.6 | ||||||
Total | 100.0 | % |
PERFORMANCE HIGHLIGHTS
Inception Date | Cumulative Total Return Ended 04/30/2013 Life of Fund | ||||||||||
At NAV | |||||||||||
Institutional Class | 12/19/2012 | 4.20 | % | ||||||||
Class A | 12/19/2012 | 4.10 | % | ||||||||
Class C | 12/19/2012 | 3.80 | % | ||||||||
With Sales Charge | |||||||||||
Class A | -1.89 | % | |||||||||
Class C | 2.80 | % | |||||||||
Index | |||||||||||
Barclays1-10 Year U.S. TIPS Index1,2 | 0.46 | % |
The performance data quoted represent past performance and do not indicate future results. Current performance may be lower or higher than the performance data quoted. For more current performance data, please visit www.nb.com/performance.
The results shown in the table reflect the reinvestment of income dividends and other distributions, if any. The results do not reflect the effect of taxes a shareholder would pay on Fund distributions or on the redemption of Fund shares.
The investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost.
Returns would have been lower if Neuberger Berman Management LLC ("Management") had not reimbursed certain expenses and/or waived a portion of the investment management fees during certain of the periods shown. Repayment by a class (of expenses previously reimbursed and/or fees previously waived by Management) will decrease the class's returns. Please see Note B in the Notes to Financial Statements for specific information regarding expense reimbursement and/or fee waiver arrangements.
Returns shown with a sales charge reflect the deduction of the current maximum initial sales charge of 5.75% for Class A shares and the applicable contingent deferred sales charges (CDSC) for Class C shares. The maximum CDSC for Class C shares is 1%, which is reduced to 0% after 1 year. The performance of the Fund's share classes will differ primarily due to different sales charge structures and class expenses. Please see the prospectus for more information about sales charge structures, if any, and class expenses for your share class.
4
Global Allocation Fund Commentary
Neuberger Berman Global Allocation Fund Institutional Class generated a 10.52% total return for the six months ended April 30, 2013 and outperformed its custom benchmark, a 50/50 combination of the MSCI World Index and the J.P. Morgan Global Government Bond Index, which provided a 5.71% return for the period. (Performance for all share classes is provided in the table immediately following this letter.)
The global financial markets generated mixed results during the reporting period, as a host of macro factors and continued central bank intervention impacted investor sentiment. In the U.S., fiscal cliff related tax hikes and sequestration were core issues, while overseas, inconclusive elections in Italy and the banking crisis in Cyprus quickly moved to the front burner. Despite these headwinds, several U.S. stock market indices reached all-time record highs during the period. International developed market equities also rose sharply, whereas emerging market equities produced more moderate gains. Within the developed fixed income market, government bonds on average produced modest gains. Elsewhere, the currency markets fluctuated given the situation in Europe and the Bank of Japan's aggressive actions to stimulate growth and end its deflationary cycle.
From an asset allocation perspective, the Fund benefited from generally maintaining an overweight to equities relative to the benchmark. Our fixed income exposure was also beneficial to results, whereas our currency exposure detracted from performance. The Fund's macro positioning in fixed income securities was implemented primarily through derivatives, such as total return swaps, futures contracts on government bonds and broad-based fixed income indices. The Fund's positioning in equity securities and its currency exposure were obtained through a combination of exchange traded funds (ETFs) and derivatives such as futures, forwards and swaps.
In equities, the Fund generally had an overweight position relative to its benchmark, with the exception of February 2013, when the Fund shifted to an underweight position during that month. The Fund was generally overweighted in most regions during the period, but maintained an underweighting in the Australian equity market. Overall, our equity positions contributed positively to performance during the period. Our positioning in the Japanese equity market was the largest contributor to overall Fund performance, while most other regions, including Hong Kong and emerging markets, detracted value.
In fixed income markets, our overall positioning added value. The Fund moved to an underweight position relative to its benchmark in February and maintained that position in March, but to a lesser extent. In April, the Fund moved back to an overweight position in the fixed income markets. For the period, our positioning in UK gilts was the most beneficial, followed by our Australian and U.S. government bond exposures. These gains were partially offset by our Canadian and Japanese bond exposures.
In terms of the Fund's currency exposure, we generally had a bias against the U.S. dollar. The Fund was overweighted relative to its benchmark in the yen, Australian dollar and Swiss franc for most of the period, and was generally underweighted in the British pound, while being more tactical in our euro and Canadian dollar positioning. The largest detractor from performance was our allocation to the euro, which declined sharply. Weakness in the yen was also detrimental to the Fund's performance, as was our positioning in the Canadian dollar. These losses were somewhat offset by our allocation to the UK pound.
Elsewhere, our security selection strategy was a significant driver of positive performance during the period. Geographically, most of the contributions to returns within the strategy came from successful long/short positioning in Europe.
Much of the Fund's investment exposure is accomplished through the use of derivatives, including total return swaps, futures and forwards, which may not require the Fund to deposit the full notional amount of its investments with counterparties. The Fund's resulting cash balances are invested in money market mutual funds.
5
Looking ahead, there continues to be uncertainty surrounding not only macroeconomic trends, but also the actions of policymakers globally. While investors will continue to keep a close eye on these considerations, we still believe there is support in the underlying market fundamentals for further market appreciation. The Fund's positioning in risk assets reflects this view, as we have slightly increased our overweight to equities. However, caution remains a prudent strategy given present uncertainties, and we have hedged some of the Fund's equity exposure with regional overweights to certain sovereign fixed income markets. Finally, in currencies, we have reversed our negative view on the U.S. dollar, positioning the Fund to be slightly bullish on the greenback.
Sincerely,
WAI LEE, BOBBY T. PORNROJNANGKOOL, ALEXANDRE DA SILVA, PING ZHOU,
JOSEPH V. AMATO AND BRADLEY TANK
PORTFOLIO CO-MANAGERS
Information about the principal risks of investing in the Fund is set forth in the prospectus and statement of additional information.
The portfolio composition, industries and holdings of the Fund are subject to change.
The opinions expressed are those of the Fund's portfolio managers. The opinions are as of the date of this report and are subject to change without notice.
6
Global Allocation Fund
TICKER SYMBOLS
Institutional Class | NGLIX | ||||||
Class A | NGLAX | ||||||
Class C | NGLCX |
PERFORMANCE HIGHLIGHTS3
Six Month | Average Annual Total Return Ended 04/30/2013 | ||||||||||||||||||
Inception Date | Period Ended 04/30/2013 | 1 Year | Life of Fund | ||||||||||||||||
At NAV | |||||||||||||||||||
Institutional Class | 12/29/2010 | 10.52 | % | 12.38 | % | 9.92 | % | ||||||||||||
Class A | 12/29/2010 | 10.30 | % | 12.05 | % | 9.53 | % | ||||||||||||
Class C | 12/29/2010 | 9.93 | % | 11.14 | % | 8.72 | % | ||||||||||||
With Sales Charge | |||||||||||||||||||
Class A | 3.91 | % | 5.56 | % | 6.80 | % | |||||||||||||
Class C | 8.93 | % | 10.14 | % | 8.72 | % | |||||||||||||
Index | |||||||||||||||||||
50% MSCI World Index and 50% J.P. Morgan Global Government Bond Index1,2 | 5.71 | % | 7.92 | % | 6.74 | % | |||||||||||||
MSCI World Index1,2 | 15.02 | % | 17.40 | % | 9.52 | % |
The performance data quoted represent past performance and do not indicate future results. Current performance may be lower or higher than the performance data quoted. For more current performance data, please visit www.nb.com/performance.
The results shown in the table reflect the reinvestment of income dividends and other distributions, if any. The results do not reflect the effect of taxes a shareholder would pay on Fund distributions or on the redemption of Fund shares.
The investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost.
Returns would have been lower if Neuberger Berman Management LLC ("Management") had not reimbursed certain expenses and/or waived a portion of the investment management fees during certain of the periods shown. Repayment by a class (of expenses previously reimbursed and/or fees previously waived by Management) will decrease the class's returns. Please see Note B in the Notes to Financial Statements for specific information regarding expense reimbursement and/or fee waiver arrangements.
Returns shown with a sales charge reflect the deduction of the current maximum initial sales charge of 5.75% for Class A shares and the applicable contingent deferred sales charges (CDSC) for Class C shares. The maximum CDSC for Class C shares is 1%, which is reduced to 0% after 1 year. The performance of the Fund's share classes will differ primarily due to different sales charge structures and class expenses. Please see the prospectus for more information about sales charge structures, if any, and class expenses for your share class.
7
Long Short Fund Commentary
Neuberger Berman Long Short Fund Institutional Class generated a 7.56% total return for the six months ended April 30, 2013, but underperformed its primary benchmark, the S&P 500 Index, which provided a 14.42% return for the period. (Performance for all share classes is provided in the table immediately following this letter.) The Fund's underperformance was due largely to its hedged nature, with its net exposure running at approximately 50%–60% net long during most of the period. However, the Fund outperformed the HFRX Equity Hedge Index which returned 6.72% for the period. (The index tracks the performance of strategies that maintain positions both long and short in primarily equity and equity derivative securities.)
Investors faced a number of uncertainties entering the reporting period, including the potential impact of the fiscal cliff and the raising of the debt ceiling. As the period progressed, investor sentiment was challenged at times due to the sequestration, a reemergence of issues in Europe and some mixed economic data. Despite these challenges and periodic flights to quality, the S&P 500 Index rose sharply and reached an all-time high during the period. Supporting the market were overall solid demand and continued Federal Reserve monetary policy accommodation. Within the fixed income market, lower-rated securities produced the strongest returns as investors looked to generate incremental yield in the low interest rate environment.
We continued to have a positive outlook on risk assets such as equities and high yield bonds, which was reflected in the long side of the portfolio. Within our equity holdings, which represented the bulk of our long exposure, the largest contribution came from our holdings in the Consumer Discretionary sector. In particular, we emphasized those companies that we believe have sustainable business models, disciplined capital allocation strategies and significant growth opportunities. We had an underweight in the Information Technology (IT) sector. Our IT holdings tend to be "non-traditional" technology companies that we think have unique growth opportunities in the offshore business process outsourcing and payment processing industries.
We categorize our investments on the long side into three groups: Capital Growth, Total Return and Opportunistic. Capital Growth investments demonstrate what we believe are attractive industry fundamentals, strong competitive positions, growing revenues and attractive re-investment opportunities. Total Return investments demonstrate what we believe are sustainable and/or growing streams of income that are underpinned by asset value and which can result in growing cash returns to shareholders. The Total Return category includes our fixed income holdings, which consisted mainly of high yield securities during the reporting period. Opportunistic investments are those where we find identifiable catalysts. This may include companies with management changes, company reorganizations, merger and acquisition activity and other market dislocations that have the potential to unlock intrinsic value.1
In favorable macro environments, the exposure to Capital Growth and Opportunistic fundamental longs historically tended to increase relative to the Total Return category. During the reporting period, the Capital Growth category represented the largest exposure in our long portfolio and was the largest contributor to the Fund's performance.
The short exposure within the portfolio is broken into "Fundamental" shorts and "Market" shorts. During the reporting period, our Market shorts consisted primarily of exchange traded funds and short futures positions on the S&P 500 Index. Given low market volatility during much of the period, we reduced our weighting to Fundamental shorts versus Market shorts. However, given the market's sharp rally during the reporting period, our Market shorts—used in an effort to hedge the portfolio and manage overall exposure levels—detracted the most from the Fund's performance. The majority of our derivatives exposure fell under our aforementioned Market short categorization.
Looking ahead, we feel that risk assets, namely equities and high yield bonds, offer the best risk-adjusted return potential. We believe U.S. economic data continues to point to an expansion as the recovery in the housing market appears to be offsetting the headwinds from the fiscal cliff and sequestration. A number of forward looking indicators appear to reflect that financial conditions remain very accommodative, despite ongoing worries related to the European sovereign debt crisis.
8
Our positive view on risk assets is not without potential risks, however. We believe the massive global liquidity measures by developed country central banks, while positive for risk assets globally, may have severe unintended consequences over the long term. In our opinion, greater risks exist in the emerging market complex than in the U.S. economy. In particular, the Chinese economy continues to decelerate due to excess capacity. Notwithstanding slowing emerging market economies, the greatest risks to the global economy, in our view, are still those that are currently unknown, whether they are financial or geopolitical in nature.
Ultimately, we continue to take a longer-term view and believe that in times of uncertainty, higher risk assets such as equities and high yield bonds can present attractive risk-adjusted returns. Our belief is partly based on our view that equity valuations remain attractive, with modest market expectations for earnings growth and still relatively high equity risk premiums. In our view, the structural issues plaguing the U.S. economy will correct themselves over time. We continue to believe that market participants will once again focus on management ingenuity and the innovation capabilities, dynamism and global nature of U.S. corporations.
Sincerely,
CHARLES KANTOR
PORTFOLIO MANAGER
Information about the principal risks of investing in the Fund is set forth in the prospectus and statement of additional information.
The portfolio composition, industries and holdings of the Fund are subject to change.
The opinions expressed are those of the Fund's portfolio manager. The opinions are as of the date of this report and are subject to change without notice.
1 Intrinsic value reflects the portfolio manager's analysis and estimates of a company's value. There is no guarantee that any intrinsic values will be realized; security prices may decrease regardless of intrinsic value.
9
Long Short Fund
TICKER SYMBOLS
Institutional Class | NLSIX | ||||||
Class A | NLSAX | ||||||
Class C | NLSCX |
PORTFOLIO BY TYPE OF SECURITY
(as a % of Total Investments)
Long | Short | ||||||||||
Common Stocks | 73.4 | % | (7.4 | )% | |||||||
Preferred Stocks | 0.5 | — | |||||||||
Corporate Debt Securities | 16.6 | — | |||||||||
Exchange Traded Funds | — | (8.6 | ) | ||||||||
Short-Term Investments | 25.5 | — | |||||||||
Total | 116.0 | % | (16.0 | )% |
PERFORMANCE HIGHLIGHTS
Six Month | Average Annual Total Return Ended 04/30/2013 | ||||||||||||||||||
Inception Date | Period Ended 04/30/2013 | 1 Year | Life of Fund | ||||||||||||||||
At NAV | |||||||||||||||||||
Institutional Class | 12/29/2011 | 7.56 | % | 12.11 | % | 14.07 | % | ||||||||||||
Class A | 12/29/2011 | 7.34 | % | 11.78 | % | 13.66 | % | ||||||||||||
Class C | 12/29/2011 | 6.92 | % | 10.86 | % | 12.80 | % | ||||||||||||
With Sales Charge | |||||||||||||||||||
Class A | 1.21 | % | 5.34 | % | 8.75 | % | |||||||||||||
Class C | 5.92 | % | 9.86 | % | 12.80 | % | |||||||||||||
Index | |||||||||||||||||||
S&P 500 Index1,2 | 14.42 | % | 16.89 | % | 22.76 | % | |||||||||||||
HFRX Equity Hedge Index1,2 | 6.72 | % | 6.72 | % | 8.17 | % |
The performance data quoted represent past performance and do not indicate future results. Current performance may be lower or higher than the performance data quoted. For more current performance data, please visit www.nb.com/performance.
The results shown in the table reflect the reinvestment of income dividends and other distributions, if any. The results do not reflect the effect of taxes a shareholder would pay on Fund distributions or on the redemption of Fund shares.
The investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost.
Returns would have been lower if Neuberger Berman Management LLC ("Management") had not reimbursed certain expenses and/or waived a portion of the investment management fees during certain of the periods shown. Repayment by a class (of expenses previously reimbursed and/or fees previously waived by Management) will decrease the class's returns. Please see Note B in the Notes to Financial Statements for specific information regarding expense reimbursement and/or fee waiver arrangements.
Returns shown with a sales charge reflect the deduction of the current maximum initial sales charge of 5.75% for Class A shares and the applicable contingent deferred sales charges (CDSC) for Class C shares. The maximum CDSC for Class C shares is 1%, which is reduced to 0% after 1 year. The performance of the Fund's share classes will differ primarily due to different sales charge structures and class expenses. Please see the prospectus for more information about sales charge structures, if any, and class expenses for your share class.
10
Endnotes
1 Please see "Glossary of Indices" on page 12 for a description of indices. The HFRX Index does take into account fees and expenses of investing since it is based on the underlying hedge funds' net returns. Please note that all other indices listed in this report do not take into account any fees, expenses or tax consequences of investing in the individual securities that they track, and that individuals cannot invest directly in any index. Data about the performance of an index is prepared or obtained by Neuberger Berman Management LLC ("Management") and reflects the reinvestment of income dividends and other distributions, if any. The Fund may invest in securities not included in a described index and may not invest in all securities included in a described index.
2 The date used to calculate Life of Fund performance for the index is the inception date of the oldest share class.
3 During the period from December 29, 2010 through April 30, 2011, the Fund had only one shareholder and the Fund was relatively small, which could have impacted Fund performance. The same techniques used to produce returns in a small fund may not work to produce similar returns in a larger fund.
For more complete information on any of the Neuberger Berman Alternative and Multi-Asset Class Funds, call Management at (800) 877-9700, or visit our website at www.nb.com.
11
Glossary of Indices
MSCI World Index: | A free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index consists of the following 24 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. | ||||||
50% MSCI World Index and 50% J.P. Morgan Global Government Bond Index: | A blended index combining the performance of two separate indexes, the MSCI World Index and the J.P. Morgan Global Government Bond Index. The blended index tracks the performance of the two indexes at a 50%/50% weight, and is rebalanced monthly. The J.P. Morgan Global Government Bond Index (GBI) provides a comprehensive measure for the performance of market-weighted local currency denominated fixed rate government debt of large developed government bond markets. This index covers 13 countries: Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, the United Kingdom, and the United States. The index measures returns in USD terms with no currency hedging and is rebalanced monthly. All government debt issues with at least 13 months remaining to maturity and meeting liquidity requirements are included in the index. | ||||||
S&P 500 Index: | Widely regarded as the standard for measuring the performance of large-cap stocks traded on U.S. markets and includes a representative sample of leading companies in leading industries. | ||||||
Barclays 1-10 Year U.S. TIPS Index: | An unmanaged index market comprised of U.S. Treasury Inflation Protected securities having a maturity of at least 1 year and less than 10 years. | ||||||
HFRX Equity Hedge Index: | The HFRX Equity Hedge Index is designed to reflect the performance of strategies that maintain positions both long and short in primarily equity and equity derivative securities. A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques; strategies can be broadly diversified or narrowly focused on specific sectors and can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations and valuation ranges of typical portfolios. Equity Hedge managers would typically maintain at least 50%, and may in some cases be substantially entirely invested in equities, both long and short. Fund weights are determined by the optimization process. Constituent funds are selected from an eligible pool of the more than 6,800 funds that report performance to the Hedge Fund Research (HFR) database on a voluntary basis, and rebalanced quarterly. Funds included in the index must meet all of the following criteria: report monthly returns net of all fees; be denominated in USD; be active and accepting new investments; have a minimum 24 months track record; and the Fund's manager must have at least $50 million in assets under management. The index is available daily, with finalized month-end performance available two to three business days after the last business day of the month. |
12
Information About Your Fund's Expenses (Unaudited)
As a Fund shareholder, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds (if applicable); and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees (if applicable), and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and compare these costs with the ongoing costs of investing in other mutual funds.
This table is designed to provide information regarding costs related to your investments. The following examples are based on an investment of $1,000 made at the beginning of the six month period ended April 30, 2013 and held for the entire period. The table illustrates each Fund's costs in two ways:
Actual Expenses and Performance: | The first section of the table provides information about actual account values and actual expenses in dollars, based on the Fund's actual performance during the period when the Fund was operational. You may use the information in this line, together with the amount you invested, to estimate the expenses you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section of the table under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid over the period. | ||||||
Hypothetical Example for Comparison Purposes: | The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return at 5% per year before expenses. This return is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund versus other funds. To do so, compare the expenses shown in this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. |
Please note that the expenses in the table are meant to highlight your ongoing costs only and do not include any transaction costs, such as sales charges (loads)(if applicable). Therefore, the information under the heading "Hypothetical (5% annual return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
13
Expense Information as of 4/30/13 (Unaudited)
Neuberger Berman Alternative Funds | |||||||||||||||||||||||||||||||||||
ACTUAL | HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES)(3) | ||||||||||||||||||||||||||||||||||
Beginning Account Value 11/1/12 | Ending Account Value 4/30/13 | Expenses Paid During the Period(1) 11/1/12 - 4/30/13 | Expense Ratio | Beginning Account Value 11/1/12 | Ending Account Value 4/30/13 | Expenses Paid During the Period(1) 11/1/12 - 4/30/13 | Expense Ratio | ||||||||||||||||||||||||||||
Dynamic Real Return Fund | |||||||||||||||||||||||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 1,042.00 | $ | 2.49 | (2) | 0.67 | % | $ | 1,000.00 | $ | 1,021.47 | $ | 3.36 | 0.67 | % | ||||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,041.00 | $ | 3.83 | (2) | 1.03 | % | $ | 1,000.00 | $ | 1,019.69 | $ | 5.16 | 1.03 | % | ||||||||||||||||||
Class C | $ | 1,000.00 | $ | 1,038.00 | $ | 6.61 | (2) | 1.78 | % | $ | 1,000.00 | $ | 1,015.97 | $ | 8.90 | 1.78 | % | ||||||||||||||||||
Global Allocation Fund | |||||||||||||||||||||||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 1,105.20 | $ | 8.30 | 1.59 | % | $ | 1,000.00 | $ | 1,016.91 | $ | 7.95 | 1.59 | % | |||||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,103.00 | $ | 10.22 | 1.96 | % | $ | 1,000.00 | $ | 1,015.08 | $ | 9.79 | 1.96 | % | |||||||||||||||||||
Class C | $ | 1,000.00 | $ | 1,099.30 | $ | 14.05 | 2.70 | % | $ | 1,000.00 | $ | 1,011.41 | $ | 13.47 | 2.70 | % | |||||||||||||||||||
Long Short Fund | |||||||||||||||||||||||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 1,075.60 | $ | 9.31 | 1.81 | % | $ | 1,000.00 | $ | 1,015.82 | $ | 9.05 | 1.81 | % | |||||||||||||||||||
Class A | $ | 1,000.00 | $ | 1,073.40 | $ | 11.16 | 2.17 | % | $ | 1,000.00 | $ | 1,014.03 | $ | 10.84 | 2.17 | % | |||||||||||||||||||
Class C | $ | 1,000.00 | $ | 1,069.20 | $ | 14.93 | 2.91 | % | $ | 1,000.00 | $ | 1,010.36 | $ | 14.51 | 2.91 | % |
(1) For each class, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown), unless otherwise indicated.
(2) For each class, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 133/365 (to reflect the period shown of December 19, 2012 to April 30, 2013).
(3) Hypothetical 5% annual return before expenses is calculated by multiplying the number of days in the most recent period divided by 365.
14
Schedule of Investments Dynamic Real Return Fund (Unaudited)
TOP TEN EQUITY HOLDINGS (as a % of Net Assets)
1 | Neuberger Berman Risk Balanced Commodity Strategy Fund Institutional Class | 10.1 | % | ||||||||
2 | Neuberger Berman Floating Rate Income Fund Institutional Class | 9.3 | % | ||||||||
3 | Neuberger Berman High Income Bond Fund Institutional Class | 9.2 | % | ||||||||
4 | Neuberger Berman Emerging Markets Equity Fund Institutional Class | 7.6 | % | ||||||||
5 | Exxon Mobil Corp. | 2.4 | % | ||||||||
6 | Chevron Corp. | 1.4 | % | ||||||||
7 | Monsanto Co. | 1.0 | % | ||||||||
8 | E.I. du Pont de Nemours & Co. | 0.9 | % | ||||||||
9 | Simon Property Group, Inc. | 0.9 | % | ||||||||
10 | Regency Energy Partners LP | 0.8 | % |
Number of Shares | Value† | ||||||||||
Common Stocks (36.8%) | |||||||||||
Chemicals (6.3%) | |||||||||||
Air Products & Chemicals, Inc. | 590 | $ | 51,306 | ||||||||
Airgas, Inc. | 193 | 18,653 | |||||||||
CF Industries Holdings, Inc. | 182 | 33,945 | |||||||||
Dow Chemical Co. | 3,317 | 112,479 | |||||||||
E. I. du Pont de Nemours & Co. | 2,582 | 140,745 | |||||||||
Eastman Chemical Co. | 423 | 28,193 | |||||||||
Ecolab, Inc. | 735 | 62,196 | |||||||||
FMC Corp. | 387 | 23,491 | |||||||||
International Flavors & Fragrances, Inc. | 227 | 17,522 | |||||||||
LyondellBasell Industries NV Class A | 1,025 | 62,218 | |||||||||
Monsanto Co. | 1,500 | 160,230 | |||||||||
Mosaic Co. | 770 | 47,424 | |||||||||
PPG Industries, Inc. | 398 | 58,562 | |||||||||
Praxair, Inc. | 837 | 95,669 | |||||||||
Sherwin-Williams Co. | 238 | 43,580 | |||||||||
Sigma-Aldrich Corp. | 340 | 26,755 | |||||||||
982,968 | |||||||||||
Construction Materials (0.1%) | |||||||||||
Vulcan Materials Co. | 370 | 18,456 | |||||||||
Containers & Packaging (0.4%) | |||||||||||
Ball Corp. | 429 | 18,928 | |||||||||
Bemis Co., Inc. | 286 | 11,254 | |||||||||
MeadWestvaco Corp. | 484 | 16,688 | |||||||||
Owens-Illinois, Inc. | 458 | 12,036 | * | ||||||||
Sealed Air Corp. | 549 | 12,144 | |||||||||
71,050 |
Number of Shares | Value† | ||||||||||
Energy Equipment & Services (1.5%) | |||||||||||
Baker Hughes, Inc. | 412 | $ | 18,701 | ||||||||
Cameron International Corp. | 230 | 14,156 | * | ||||||||
Diamond Offshore Drilling, Inc. | 65 | 4,491 | |||||||||
Ensco PLC Class A | 222 | 12,805 | |||||||||
FMC Technologies, Inc. | 219 | 11,892 | * | ||||||||
Halliburton Co. | 865 | 36,996 | |||||||||
Helmerich & Payne, Inc. | 97 | 5,686 | |||||||||
Nabors Industries Ltd. | 278 | 4,112 | |||||||||
National Oilwell Varco, Inc. | 408 | 26,610 | |||||||||
Noble Corp. | 236 | 8,850 | |||||||||
Rowan Cos. PLC Class A | 115 | 3,741 | * | ||||||||
Schlumberger Ltd. | 1,245 | 92,665 | |||||||||
240,705 | |||||||||||
Gas Utilities (0.9%) | |||||||||||
ONEOK, Inc. | 1,100 | 56,496 | |||||||||
Suburban Propane Partners LP | 1,700 | 84,575 | |||||||||
141,071 | |||||||||||
Hotels, Restaurants & Leisure (0.6%) | |||||||||||
Cedar Fair LP | 2,200 | 92,400 | |||||||||
Household Durables (0.3%) | |||||||||||
American Homes 4 Rent Class A | 800 | 14,280 | ñ* | ||||||||
TRI Pointe Homes, Inc. | 1,405 | 26,695 | * | ||||||||
40,975 | |||||||||||
Metals & Mining (1.4%) | |||||||||||
Alcoa, Inc. | 2,989 | 25,406 |
Number of Shares | Value† | ||||||||||
Allegheny Technologies, Inc. | 295 | $ | 7,959 | ||||||||
Cliffs Natural Resources, Inc. | 440 | 9,389 | |||||||||
Freeport- McMoRan Copper & Gold, Inc. | 2,823 | 85,904 | |||||||||
Newmont Mining Corp. | 1,490 | 48,276 | |||||||||
Nucor Corp. | 890 | 38,822 | |||||||||
United States Steel Corp. | 417 | 7,423 | |||||||||
223,179 | |||||||||||
Multi-Utilities (0.2%) | |||||||||||
CenterPoint Energy, Inc. | 1,250 | 30,850 | |||||||||
Oil, Gas & Consumable Fuels (15.0%) | |||||||||||
Alliance Holdings GP LP | 1,600 | 99,456 | |||||||||
Anadarko Petroleum Corp. | 458 | 38,820 | |||||||||
Apache Corp. | 371 | 27,409 | |||||||||
Boardwalk Pipeline Partners LP | 2,100 | 63,483 | |||||||||
Cabot Oil & Gas Corp. | 188 | 12,793 | |||||||||
Chesapeake Energy Corp. | 483 | 9,438 | |||||||||
Chevron Corp. | 1,790 | 218,398 | |||||||||
ConocoPhillips | 1,120 | 67,704 | |||||||||
CONSOL Energy, Inc. | 203 | 6,829 | |||||||||
DCP Midstream Partners LP | 950 | 46,664 | |||||||||
Denbury Resources, Inc. | 358 | 6,405 | * | ||||||||
Devon Energy Corp. | 348 | 19,161 | |||||||||
Energy Transfer Equity LP | 2,000 | 117,360 | |||||||||
Enterprise Products Partners | 1,850 | 112,203 |
See Notes to Schedule of Investments
15
Number of Shares | Value† | ||||||||||
EOG Resources, Inc. | 252 | $ | 30,532 | ||||||||
EQT Corp. | 139 | 10,442 | |||||||||
Exxon Mobil Corp. | 4,233 | 376,695 | |||||||||
Hess Corp. | 268 | 19,344 | |||||||||
Inergy LP | 5,250 | 115,447 | |||||||||
Inergy Midstream LP | 1,800 | 45,702 | |||||||||
Kinder Morgan, Inc. | 581 | 22,717 | |||||||||
Marathon Oil Corp. | 662 | 21,628 | |||||||||
Marathon Petroleum Corp. | 306 | 23,978 | |||||||||
Murphy Oil Corp. | 166 | 10,307 | |||||||||
Newfield Exploration Co. | 129 | 2,811 | * | ||||||||
Noble Energy, Inc. | 166 | 18,806 | |||||||||
NuStar GP Holdings LLC | 1,850 | 56,333 | |||||||||
Occidental Petroleum Corp. | 747 | 66,677 | |||||||||
Peabody Energy Corp. | 255 | 5,115 | |||||||||
Phillips 66 | 591 | 36,021 | |||||||||
Pioneer Natural Resources Co. | 119 | 14,545 | |||||||||
PVR Partners LP | 4,800 | 120,000 | |||||||||
QEP Resources, Inc. | 164 | 4,708 | |||||||||
Range Resources Corp. | 150 | 11,028 | |||||||||
Regency Energy Partners LP | 4,600 | 120,060 | |||||||||
Southcross Energy Partners LP | 1,600 | 34,608 | |||||||||
Southwestern Energy Co. | 323 | 12,087 | * | ||||||||
Spectra Energy Corp. | 1,707 | 53,822 | |||||||||
Spectra Energy Partners LP | 1,200 | 45,528 | |||||||||
Teekay LNG Partners LP | 750 | 31,268 | |||||||||
Teekay Offshore Partners LP | 1,500 | 45,570 | |||||||||
Tesoro Corp. | 130 | 6,942 | |||||||||
Valero Energy Corp. | 521 | 21,007 | |||||||||
Western Gas Partners LP | 600 | 36,276 | |||||||||
Williams Cos., Inc. | 2,317 | 88,347 | |||||||||
WPX Energy, Inc. | 181 | 2,829 | * | ||||||||
2,357,303 | |||||||||||
Paper & Forest Products (0.4%) | |||||||||||
International Paper Co. | 1,204 | 56,564 |
Number of Shares | Value† | ||||||||||
Real Estate Investment Trusts (9.5%) | |||||||||||
American Campus Communities, Inc. | 495 | $ | 22,097 | ||||||||
American Tower Corp. | 1,145 | 96,169 | |||||||||
AvalonBay Communities, Inc. | 530 | 70,511 | |||||||||
Boston Properties, Inc. | 600 | 65,658 | |||||||||
Camden Property Trust | 635 | 45,936 | |||||||||
Corporate Office Properties Trust | 855 | 24,786 | |||||||||
Digital Realty Trust, Inc. | 595 | 41,959 | |||||||||
Douglas Emmett, Inc. | 995 | 26,039 | |||||||||
DuPont Fabros Technology, Inc. | 710 | 17,849 | |||||||||
EastGroup Properties, Inc. | 530 | 33,427 | |||||||||
Equity Residential | 1,175 | 68,220 | |||||||||
Essex Property Trust, Inc. | 135 | 21,202 | |||||||||
Federal Realty Investment Trust | 310 | 36,273 | |||||||||
General Growth Properties, Inc. | 2,015 | 45,781 | |||||||||
Glimcher Realty Trust | 1,325 | 16,615 | |||||||||
HCP, Inc. | 1,325 | 70,622 | ØØ | ||||||||
Health Care REIT, Inc. | 570 | 42,733 | |||||||||
Healthcare Realty Trust, Inc. | 580 | 17,412 | |||||||||
Host Hotels & Resorts, Inc. | 2,035 | 37,179 | |||||||||
Kilroy Realty Corp. | 445 | 25,183 | |||||||||
Macerich Co. | 325 | 22,766 | |||||||||
Prologis, Inc. | 2,425 | 101,729 | |||||||||
PS Business Parks, Inc. | 150 | 11,970 | |||||||||
Public Storage | 545 | 89,925 | |||||||||
Rayonier, Inc. | 700 | 41,594 | |||||||||
Simon Property Group, Inc. | 765 | 136,224 | |||||||||
SL Green Realty Corp. | 415 | 37,640 | |||||||||
Sovran Self Storage, Inc. | 305 | 20,923 | |||||||||
Tanger Factory Outlet Centers | 465 | 17,261 | |||||||||
Taubman Centers, Inc. | 280 | 23,943 | |||||||||
Urstadt Biddle Properties, Inc. Class A | 860 | 19,152 |
Number of Shares | Value† | ||||||||||
Ventas, Inc. | 755 | $ | 60,121 | ||||||||
Vornado Realty Trust | 460 | 40,278 | |||||||||
Weyerhaeuser Co. | 1,425 | 43,477 | |||||||||
1,492,654 | |||||||||||
Real Estate Management & Development (0.2%) | |||||||||||
Brookfield Asset Management, Inc. Class A | 510 | 19,681 | |||||||||
Brookfield Property Partners LP | 29 | 640 | * | ||||||||
Forest City Enterprises, Inc. Class A | 840 | 15,683 | * | ||||||||
36,004 | |||||||||||
Total Common Stocks (Cost $5,436,265) | 5,784,179 | ||||||||||
Principal Amount | |||||||||||
Government Securities (14.0%) | |||||||||||
Sovereign (14.0%) | |||||||||||
Australia Government Bond, Senior Unsecured Notes, 1.25%, due 2/21/22 | AUD | 44,952 | 50,744 | a | |||||||
Australia Government Bond, Senior Unsecured Notes, 2.50%, due 9/20/30 | AUD | 215,000 | 300,062 | a | |||||||
Canadian Government Bond, Bonds, 1.50%, due 12/1/44 | CAD | 68,966 | 89,821 | a | |||||||
Canadian Government Bond, Bonds, 4.25%, due 12/1/21 | CAD | 73,819 | 103,270 | a | |||||||
Deutsche Bundesrepublik Inflation Linked Bond, Bonds, 0.10%, due 4/15/23 | EUR | 61,219 | 85,709 | a | |||||||
Deutsche Bundesrepublik Inflation Linked Bond, Bonds, 1.75%, due 4/15/20 | EUR | 37,783 | 58,993 | a |
See Notes to Schedule of Investments
16
Principal Amount | Value† | ||||||||||
France Government Bond OAT, Bonds, 1.10%, due 7/25/22 | EUR | 32,068 | $ | 46,990 | a | ||||||
France Government Bond OAT, Bonds, 1.80%, due 7/25/40 | EUR | 73,355 | 125,813 | a | |||||||
Italy Buoni Poliennali Del Tesoro, Bonds, 2.55%, due 9/15/41 | EUR | 37,472 | 44,528 | a | |||||||
Italy Buoni Poliennali Del Tesoro, Senior Unsecured Notes, 2.35%, due 9/15/35 | EUR | 117,798 | 141,556 | a | |||||||
Italy Buoni Poliennali Del Tesoro, Senior Unsecured Notes, 2.60%, due 9/15/23 | EUR | 326,253 | 429,392 | a | |||||||
Japanese Government Cpi Linked Bond, Senior Unsecured Notes, 1.40%, due 6/10/18 | JPY | 2,260,900 | 26,648 | a | |||||||
Sweden Government Bond, Bonds, 0.25%, due 6/1/22 | SEK | 965,000 | 153,273 | a | |||||||
Sweden Government Bond, Bonds, 0.50%, due 6/1/17 | SEK | 210,000 | 34,594 | a | |||||||
United Kingdom Gilt Inflation Linked Bonds, 0.13%, due 3/22/24 | GBP | 137,851 | 244,542 | a | |||||||
United Kingdom Gilt Inflation Linked Bonds, 0.13%, due 3/22/29 | GBP | 83,410 | 145,659 | a |
Principal Amount | Value† | ||||||||||
United Kingdom Gilt Inflation Linked Bonds, 0.63%, due 3/22/40 | GBP | 57,163 | $ | 112,555 | a | ||||||
Total Government Securities (Cost $2,122,397) | 2,194,149 | ||||||||||
U.S. Treasury Securities-Backed by the Full Faith and Credit of the U.S. Government (11.1%) | |||||||||||
U.S. Treasury Inflation Indexed Bonds, 1.75%, due 1/15/28 | $ | 121,870 | 157,422 | ||||||||
U.S. Treasury Inflation Indexed Bonds, 2.13%, due 2/15/40 | 32,216 | 46,862 | |||||||||
U.S. Treasury Inflation Indexed Bonds, 2.38%, due 1/15/25 | 172,388 | 231,902 | |||||||||
U.S. Treasury Inflation Indexed Bonds, 2.5%, due 1/15/29 | 183,780 | 260,939 | |||||||||
U.S. Treasury Inflation Indexed Bonds, 3.88%, due 4/15/29 | 134,129 | 221,291 | |||||||||
U.S. Treasury Inflation Indexed Notes, 0.13%, due 1/15/22 | 123,059 | 133,903 | |||||||||
U.S. Treasury Inflation Indexed Notes, 0.13%, due 1/15/23 | 341,887 | 368,837 | |||||||||
U.S. Treasury Inflation Indexed Notes, 1.13%, due 1/15/21 | 275,868 | 324,102 | |||||||||
Total U.S. Treasury Securities-Backed by the Full Faith and Credit of the U.S. Government (Cost $1,737,375) | 1,745,258 |
Number of Shares | Value† | ||||||||||
Mutual Funds (36.1%) | |||||||||||
Neuberger Berman Emerging Markets Equity Fund Institutional Class | 70,685 | $ | 1,195,934 | § | |||||||
Neuberger Berman Floating Rate Income Fund Institutional Class | 140,358 | 1,454,081 | § | ||||||||
Neuberger Berman High Income Bond Fund Institutional Class | 147,928 | 1,443,406 | § | ||||||||
Neuberger Berman Risk Balanced Commodity Strategy Fund Institutional Class | 171,487 | 1,580,087 | *§ | ||||||||
Total Mutual Funds (Cost $5,695,767) | 5,673,508 | ||||||||||
Short-Term Investments (1.6%) | |||||||||||
State Street Institutional Liquid Reserves Fund Institutional Class (Cost $256,727) | 256,727 | 256,727 | |||||||||
Total Investments (99.6%) (Cost $15,248,531) | 15,653,821 | ## | |||||||||
Cash, receivables and other assets, less liabilities (0.4%) | 60,666± | ||||||||||
Total Net Assets (100.0%) | $ | 15,714,487 |
See Notes to Schedule of Investments
17
Schedule of Investments Global Allocation Fund (Unaudited)
TOP TEN EQUITY HOLDINGS LONG POSITIONS (as a % of Net Assets)
1 | Republic Airways Holdings, Inc. | United States | Airlines | 1.4 | % | ||||||||||||||
2 | Hellenic Telecommunications Organization SA | Greece | Diversified Telecommunication Services | 1.2 | % | ||||||||||||||
3 | Quad/Graphics, Inc. | United States | Commercial Services & Supplies | 1.2 | % | ||||||||||||||
4 | easyJet PLC | United Kingdom | Airlines | 1.1 | % | ||||||||||||||
5 | Lincoln National Corp. | United States | Insurance | 0.9 | % | ||||||||||||||
6 | Horace Mann Educators Corp. | United States | Insurance | 0.9 | % | ||||||||||||||
7 | Harbinger Group, Inc. | United States | Household Products | 0.8 | % | ||||||||||||||
8 | Pace PLC | United Kingdom | Communications Equipment | 0.8 | % | ||||||||||||||
9 | Western Refining, Inc. | United States | Oil, Gas & Consumable Fuels | 0.8 | % | ||||||||||||||
10 | Public Power Corp. SA | Greece | Electric Utilities | 0.7 | % |
TOP TEN EQUITY HOLDINGS SHORT POSITIONS (as a % of Net Assets)
1 | Boston Properties, Inc. | United States | Real Estate Investment Trusts | (1.1 | )% | ||||||||||||||
2 | Broadcom Corp. | United States | Semiconductors & Semiconductor Equipment | (1.0 | )% | ||||||||||||||
3 | Aggreko PLC | United Kingdom | Commercial Services & Supplies | (1.0 | )% | ||||||||||||||
4 | CONSOL Energy, Inc. | United States | Oil, Gas & Consumable Fuels | (1.0 | )% | ||||||||||||||
5 | Digital Realty Trust, Inc. | United States | Real Estate Investment Trusts | (1.0 | )% | ||||||||||||||
6 | Peabody Energy Corp. | United States | Oil, Gas & Consumable Fuels | (0.9 | )% | ||||||||||||||
7 | Chart Industries, Inc. | United States | Machinery | (0.9 | )% | ||||||||||||||
8 | UDR, Inc. | United States | Real Estate Investment Trusts | (0.8 | )% | ||||||||||||||
9 | Cypress Semiconductor Corp. | United States | Semiconductors & Semiconductor Equipment | (0.8 | )% | ||||||||||||||
10 | Tullow Oil PLC | United Kingdom | Oil, Gas & Consumable Fuels | (0.8 | )% |
Number of Shares | Value† | ||||||||||
Long Positions (87.5%) | |||||||||||
Common Stocks (24.3%) | |||||||||||
Australia (0.3%) | |||||||||||
Arrium Ltd. | 92,712 | $ | 81,697 | ||||||||
Seven West Media Ltd. | 9,167 | 19,007 | |||||||||
100,704 | |||||||||||
Belgium (1.1%) | |||||||||||
Ageas | 1,775 | 65,032 | |||||||||
KBC Ancora | 8,425 | 159,883 | * | ||||||||
KBC Groep NV | 3,156 | 123,858 | |||||||||
348,773 | |||||||||||
Bermuda (1.6%) | |||||||||||
Argo Group International Holdings Ltd. | 4,740 | 196,473 | È | ||||||||
Assured Guaranty Ltd. | 5,857 | 120,830 | È | ||||||||
K Wah International Holdings Ltd. | 159,000 | 87,079 | |||||||||
Maiden Holdings Ltd. | 8,154 | 84,231 | |||||||||
488,613 |
Number of Shares | Value† | ||||||||||
Canada (0.9%) | |||||||||||
Alacer Gold Corp. | 18,071 | $ | 54,171 | ||||||||
Nevsun Resources Ltd. | 14,531 | 54,377 | |||||||||
Norbord, Inc. | 2,965 | 98,887 | * | ||||||||
Petrominerales Ltd. | 13,066 | 72,110 | |||||||||
279,545 | |||||||||||
France (0.2%) | |||||||||||
Boiron SA | 902 | 51,115 | |||||||||
Greece (2.2%) | |||||||||||
Hellenic Telecommunications Organization SA | 44,012 | 382,547 | * | ||||||||
JUMBO SA | 9,008 | 84,821 | * | ||||||||
Public Power Corp. SA | 22,958 | 222,526 | * | ||||||||
689,894 | |||||||||||
Italy (0.7%) | |||||||||||
ASTM SpA | 14,534 | 173,222 | * | ||||||||
Safilo Group SpA | 1,460 | 23,938 | * | ||||||||
Societa Cattolica di Assicurazioni SCRL | 1,484 | 29,140 | * | ||||||||
226,300 |
Number of Shares | Value† | ||||||||||
Japan (1.2%) | |||||||||||
Chiba Kogyo Bank Ltd. | 8,800 | $ | 79,799 | * | |||||||
Marusan Securities Co. Ltd. | 6,900 | 58,464 | |||||||||
Oita Bank Ltd. | 50,000 | 194,902 | |||||||||
Okasan Securities Group, Inc. | 3,000 | 37,606 | |||||||||
370,771 | |||||||||||
Switzerland (0.3%) | |||||||||||
Swiss Life Holding AG | 498 | 78,733 | * | ||||||||
United Kingdom (3.6%) | |||||||||||
Barratt Developments PLC | 13,364 | 64,602 | * | ||||||||
Bumi PLC | 55,146 | 222,119 | * | ||||||||
easyJet PLC | 19,031 | 330,205 | |||||||||
Northgate PLC | 40,753 | 214,599 | |||||||||
Pace PLC | 61,696 | 237,960 | |||||||||
Paragon Group of Cos. PLC | 4,193 | 20,347 | |||||||||
1,089,832 |
See Notes to Schedule of Investments
18
Number of Shares | Value† | ||||||||||
United States (12.2%) | |||||||||||
American Equity Investment Life Holding Co. | 3,878 | $ | 59,101 | È | |||||||
AMN Healthcare Services, Inc. | 7,279 | 99,941 | *È | ||||||||
Bridgepoint Education, Inc. | 1,560 | 16,817 | *È | ||||||||
CNO Financial Group, Inc. | 10,136 | 114,740 | |||||||||
CVR Energy, Inc. | 593 | 29,217 | |||||||||
Delek US Holdings, Inc. | 2,963 | 106,935 | |||||||||
Delta Air Lines, Inc. | 3,306 | 56,665 | * | ||||||||
Ferro Corp. | 17,327 | 121,982 | *È | ||||||||
Genworth Financial, Inc. Class A | 12,906 | 129,447 | *È | ||||||||
Greenbrier Cos., Inc. | 2,953 | 66,620 | * | ||||||||
Harbinger Group, Inc. | 28,031 | 253,400 | *È | ||||||||
Headwaters, Inc. | 15,925 | 172,945 | * | ||||||||
Horace Mann Educators Corp. | 11,732 | 264,557 | |||||||||
Lincoln National Corp. | 8,201 | 278,916 | È | ||||||||
National Interstate Corp. | 559 | 16,239 | |||||||||
Parker Drilling Co. | 11,404 | 46,984 | *È | ||||||||
Piper Jaffray Cos. | 6,166 | 208,164 | *È | ||||||||
Quad/Graphics, Inc. | 17,501 | 365,771 | È | ||||||||
Questcor Pharmaceuticals, Inc. | 1,573 | 48,354 | È | ||||||||
Republic Airways Holdings, Inc. | 37,590 | 420,632 | * | ||||||||
Sanmina Corp. | 10,504 | 132,560 | *È | ||||||||
SkyWest, Inc. | 13,864 | 198,394 | È | ||||||||
Tutor Perini Corp. | 12,190 | 200,404 | *È | ||||||||
Walker & Dunlop, Inc. | 5,750 | 102,407 | * | ||||||||
Western Refining, Inc. | 7,609 | 235,194 | È | ||||||||
3,746,386 | |||||||||||
Total Common Stocks (Cost $6,839,548) | 7,470,666 |
Number of Shares | Value† | ||||||||||
Short-Term Investments (63.2%) | |||||||||||
State Street Institutional Government Money Market Fund Institutional Class (Cost $19,403,331) | 19,403,331 | $ | 19,403,331 | ØØ | |||||||
Total Long Positions (87.5%) (Cost $26,242,879) | 26,873,997 | ## | |||||||||
Cash, receivables and other assets, less liabilities (36.0%) | 11,047,968± | ||||||||||
Short Positions (see summary below) ((23.5)%) | (7,207,701) | ||||||||||
Total Net Assets (100.0%) | $ | 30,714,264 | |||||||||
Short Positions ((23.5)%) | |||||||||||
Common Stocks Sold Short (23.5%)‡ | |||||||||||
Australia (0.5%) | |||||||||||
Echo Entertainment Group Ltd. | (3,274 | ) | (12,287 | ) | |||||||
Transurban Group | (14,540 | ) | (102,802 | ) | |||||||
Whitehaven Coal Ltd. | (10,394 | ) | (21,012 | ) | |||||||
(136,101 | ) | ||||||||||
Austria (0.1%) | |||||||||||
Telekom Austria AG | (6,052 | ) | (41,493 | ) | |||||||
Canada (1.0%) | |||||||||||
MEG Energy Corp. | (6,021 | ) | (172,242 | )* | |||||||
Bonavista Energy Corp. | (3,241 | ) | (51,312 | ) | |||||||
Detour Gold Corp. | (1,903 | ) | (22,894 | )* | |||||||
Turquoise Hill Resources Ltd. | (6,581 | ) | (46,379 | )* | |||||||
Ultra Petroleum Corp. | (736 | ) | (15,750 | )* | |||||||
(308,577 | ) | ||||||||||
China (0.2%) | |||||||||||
ASM Pacific Technology Ltd. | (6,400 | ) | (65,937 | ) | |||||||
Finland (1.3%) | |||||||||||
Nokian Renkaat Oyj | (4,455 | ) | (193,142 | ) | |||||||
Rautaruukki Oyj | (32,861 | ) | (211,362 | ) | |||||||
(404,504 | ) |
Number of Shares | Value† | ||||||||||
France (1.1%) | |||||||||||
Beneteau SA | (3,631 | ) | $ | (38,016 | )* | ||||||
Societe Immobiliere de Location pour l'Industrie et le Commerce | (833 | ) | (98,084 | ) | |||||||
Technip SA | (1,966 | ) | (211,014 | ) | |||||||
(347,114 | ) | ||||||||||
Germany (0.3%) | |||||||||||
ThyssenKrupp AG | (4,346 | ) | (78,612 | )* | |||||||
Ireland (0.6%) | |||||||||||
Elan Corp. PLC | (15,625 | ) | (180,155 | )* | |||||||
Japan (1.2%) | |||||||||||
Advantest Corp. | (8,000 | ) | (119,649 | ) | |||||||
Dainippon Screen Manufacturing Co. Ltd. | (21,000 | ) | (108,140 | )* | |||||||
Tokyo Electron Ltd. | (2,800 | ) | (143,324 | ) | |||||||
(371,113 | ) | ||||||||||
Netherlands (0.4%) | |||||||||||
Fugro NV | (1,864 | ) | (107,827 | ) | |||||||
Switzerland (0.3%) | |||||||||||
Kuehne + Nagel International AG | (718 | ) | (82,163 | ) | |||||||
United Kingdom (3.2%) | |||||||||||
Aggreko PLC | (11,103 | ) | (307,339 | ) | |||||||
Dialog Semiconductor PLC | (2,315 | ) | (27,499 | )* | |||||||
Imagination Technologies Group PLC | (27,987 | ) | (184,937 | )* | |||||||
Salamander Energy PLC | (79,843 | ) | (226,592 | )* | |||||||
Tullow Oil PLC | (15,777 | ) | (245,317 | ) | |||||||
(991,684 | ) | ||||||||||
United States (13.3%) | |||||||||||
Allied Nevada Gold Corp. | (5,972 | ) | (63,900 | )* | |||||||
Altera Corp. | (6,434 | ) | (205,952 | ) | |||||||
AvalonBay Communities, Inc. | (1,777 | ) | (236,412 | ) | |||||||
Boston Properties, Inc. | (3,049 | ) | (333,652 | ) | |||||||
Broadcom Corp. | (8,833 | ) | (317,988 | ) | |||||||
Chart Industries, Inc. | (3,089 | ) | (261,978 | )* | |||||||
Clean Harbors, Inc. | (684 | ) | (38,968 | )* | |||||||
CONSOL Energy, Inc. | (8,795 | ) | (295,864 | ) |
See Notes to Schedule of Investments
19
Number of Shares | Value† | ||||||||||
Cypress Semiconductor Corp. | (24,319 | ) | $ | (245,379 | )* | ||||||
Digital Realty Trust, Inc. | (4,149 | ) | (292,588 | ) | |||||||
Dollar Tree, Inc. | (1,886 | ) | (89,698 | )* | |||||||
Equity Residential | (1,433 | ) | (83,200 | ) | |||||||
Groupon, Inc. | (19,405 | ) | (118,371 | )* | |||||||
Halcon Resources Corp. | (23,007 | ) | (150,466 | )* | |||||||
Halozyme Therapeutics, Inc. | (13,953 | ) | (84,276 | )* | |||||||
Idenix Pharmaceuticals, Inc. | (11,112 | ) | (41,114 | )* | |||||||
InterMune, Inc. | (13,868 | ) | (129,388 | )* | |||||||
InvenSense, Inc. | (2,852 | ) | (26,581 | )* | |||||||
Magnum Hunter Resources Corp. | (51,848 | ) | (141,027 | )* | |||||||
MAKO Surgical Corp. | (6,703 | ) | (70,985 | )* | |||||||
McMoRan Exploration Co. | (2,419 | ) | (40,034 | )* | |||||||
Monster Beverage Corp. | (784 | ) | (44,218 | )* | |||||||
Netflix, Inc. | (489 | ) | (105,658 | )* | |||||||
Peabody Energy Corp. | (14,057 | ) | (281,983 | ) | |||||||
Tempur-Pedic International, Inc. | (1,272 | ) | (61,692 | )* | |||||||
UDR, Inc. | (10,598 | ) | (260,499 | ) | |||||||
Walter Energy, Inc. | (1,009 | ) | (18,081 | ) | |||||||
Zynga, Inc. Class A | (16,448 | ) | (52,469 | )* | |||||||
(4,092,421 | ) | ||||||||||
Total Short Positions (Proceeds $(7,356,294)) | (7,207,701) |
See Notes to Schedule of Investments
20
LONG POSITIONS BY INDUSTRY GLOBAL ALLOCATION FUND (UNAUDITED)
Industry | Investments at Value† | Percentage of Net Assets | |||||||||
Insurance | $ | 1,437,439 | 4.7 | % | |||||||
Airlines | 1,005,896 | 3.3 | % | ||||||||
Oil, Gas & Consumable Fuels | 665,575 | 2.2 | % | ||||||||
Commercial Banks | 398,559 | 1.3 | % | ||||||||
Diversified Telecommunication Services | 382,547 | 1.2 | % | ||||||||
Commercial Services & Supplies | 365,771 | 1.2 | % | ||||||||
Capital Markets | 304,234 | 1.0 | % | ||||||||
Household Products | 253,400 | 0.8 | % | ||||||||
Communications Equipment | 237,960 | 0.8 | % | ||||||||
Electric Utilities | 222,526 | 0.7 | % | ||||||||
Road & Rail | 214,599 | 0.7 | % | ||||||||
Construction & Engineering | 200,404 | 0.7 | % | ||||||||
Metals & Mining | 190,245 | 0.6 | % | ||||||||
Transportation Infrastructure | 173,222 | 0.6 | % | ||||||||
Construction Materials | 172,945 | 0.5 | % | ||||||||
Diversified Financial Services | 159,883 | 0.5 | % | ||||||||
Electronic Equipment, Instruments & Components | 132,560 | 0.4 | % | ||||||||
Thrifts & Mortgage Finance | 122,754 | 0.4 | % | ||||||||
Chemicals | 121,982 | 0.4 | % | ||||||||
Health Care Providers & Services | 99,941 | 0.3 | % | ||||||||
Pharmaceuticals | 99,469 | 0.3 | % | ||||||||
Paper & Forest Products | 98,887 | 0.3 | % | ||||||||
Real Estate Management & Development | 87,079 | 0.3 | % | ||||||||
Specialty Retail | 84,821 | 0.3 | % | ||||||||
Machinery | 66,620 | 0.2 | % | ||||||||
Household Durables | 64,602 | 0.2 | % | ||||||||
Energy Equipment & Services | 46,984 | 0.1 | % | ||||||||
Textiles, Apparel & Luxury Goods | 23,938 | 0.1 | % | ||||||||
Media | 19,007 | 0.1 | % | ||||||||
Diversified Consumer Services | 16,817 | 0.1 | % | ||||||||
Short-Term Investments and Other Assets—Net | 30,451,299 | 99.2 | % | ||||||||
Short Positions (see summary below) | (7,207,701) | (23.5 | )% | ||||||||
$ | 30,714,264 | 100.0 | % |
SHORT POSITIONS BY INDUSTRY GLOBAL ALLOCATION FUND (UNAUDITED)
Industry | Investments at Value† | Percentage of Net Assets | |||||||||
Oil, Gas & Consumable Fuels | $ | (1,641,599 | ) | (5.4 | )% | ||||||
Semiconductors & Semiconductor Equipment | (1,418,805 | ) | (4.6 | )% | |||||||
Real Estate Investment Trusts | (1,304,435 | ) | (4.3 | )% | |||||||
Metals & Mining | (441,228 | ) | (1.5 | )% | |||||||
Biotechnology | (434,933 | ) | (1.4 | )% | |||||||
Commercial Services & Supplies | (346,307 | ) | (1.1 | )% | |||||||
Energy Equipment & Services | (318,841 | ) | (1.0 | )% | |||||||
Machinery | (261,978 | ) | (0.9 | )% | |||||||
Internet & Catalog Retail | (224,029 | ) | (0.7 | )% | |||||||
Auto Components | (193,142 | ) | (0.6 | )% | |||||||
Transportation Infrastructure | (102,802 | ) | (0.3 | )% | |||||||
Multiline Retail | (89,698 | ) | (0.3 | )% | |||||||
Marine | (82,163 | ) | (0.3 | )% | |||||||
Health Care Equipment & Supplies | (70,985 | ) | (0.2 | )% | |||||||
Household Durables | (61,692 | ) | (0.2 | )% | |||||||
Software | (52,469 | ) | (0.2 | )% | |||||||
Beverages | (44,218 | ) | (0.2 | )% | |||||||
Diversified Telecommunication Services | (41,493 | ) | (0.1 | )% | |||||||
Leisure Equipment & Products | (38,016 | ) | (0.1 | )% | |||||||
Electronic Equipment, Instruments & Components | (26,581 | ) | (0.1 | )% | |||||||
Hotels, Restaurants & Leisure | (12,287 | ) | (0.0 | )% | |||||||
Total Common Stocks Sold Short | $ | (7,207,701) | (23.5 | )% |
See Notes to Schedule of Investments
21
Schedule of Investments Long Short Fund (Unaudited)
TOP TEN EQUITY HOLDINGS LONG POSITIONS (as a % of Net Assets)
1 | Brookfield Infrastructure Partners LP | 2.0 | % | ||||||||
2 | PetSmart, Inc. | 1.8 | % | ||||||||
3 | Dunkin' Brands Group, Inc. | 1.5 | % | ||||||||
4 | DaVita HealthCare Partners, Inc. | 1.5 | % | ||||||||
5 | Visa, Inc. Class A | 1.5 | % | ||||||||
6 | eBay, Inc. | 1.5 | % | ||||||||
7 | Genpact Ltd. | 1.5 | % | ||||||||
8 | Philip Morris International, Inc. | 1.4 | % | ||||||||
9 | Weyerhaeuser Co. | 1.3 | % | ||||||||
10 | Enbridge, Inc. | 1.3 | % |
TOP TEN EQUITY HOLDINGS SHORT POSITIONS (as a % of Net Assets)
1 | iShares Russell Midcap Index Fund | (3.1 | )% | ||||||||
2 | iShares Core S&P Small-Cap ETF | (1.2 | )% | ||||||||
3 | iShares Russell 2000 Index Fund | (1.2 | )% | ||||||||
4 | SPDR S&P Retail ETF | (0.8 | )% | ||||||||
5 | Lam Research Corp. | (0.6 | )% | ||||||||
6 | Fossil, Inc. | (0.4 | )% | ||||||||
7 | Halliburton Co. | (0.4 | )% | ||||||||
8 | Seagate Technology PLC | (0.4 | )% | ||||||||
9 | Market Vectors Semiconductor | (0.3 | )% | ||||||||
10 | Dun & Bradstreet Corp. | (0.3 | )% |
Number of Shares | Value† | ||||||||||
Long Positions (98.9%) | |||||||||||
Common Stocks (62.6%) | |||||||||||
Aerospace & Defense (1.3%) | |||||||||||
Boeing Co. | 32,000 | $ | 2,925,120 | ||||||||
Precision Castparts Corp. | 28,000 | 5,356,120 | |||||||||
8,281,240 | |||||||||||
Air Freight & Logistics (0.6%) | |||||||||||
United Parcel Service, Inc. Class B | 40,000 | 3,433,600 | |||||||||
Airlines (1.3%) | |||||||||||
Delta Air Lines, Inc. | 462,700 | 7,930,678 | * | ||||||||
Biotechnology (0.5%) | |||||||||||
Vertex Pharmaceuticals, Inc. | 40,400 | 3,103,528 | * | ||||||||
Capital Markets (0.4%) | |||||||||||
BlackRock, Inc. | 8,500 | 2,265,250 | |||||||||
Chemicals (1.4%) | |||||||||||
Ashland, Inc. | 67,800 | 5,777,238 | |||||||||
Taminco Corp. | 186,200 | 2,806,034 | * | ||||||||
8,583,272 | |||||||||||
Commercial Banks (1.3%) | |||||||||||
Fifth Third Bancorp | 170,800 | 2,908,724 |
Number of Shares | Value† | ||||||||||
U.S. Bancorp | 103,000 | $ | 3,427,840 | ||||||||
Wells Fargo & Co. | 38,600 | 1,466,028 | |||||||||
7,802,592 | |||||||||||
Communications Equipment (1.1%) | |||||||||||
Cisco Systems, Inc. | 231,500 | 4,842,980 | |||||||||
Juniper Networks, Inc. | 99,600 | 1,648,380 | * | ||||||||
6,491,360 | |||||||||||
Computers & Peripherals (1.3%) | |||||||||||
Apple, Inc. | 13,800 | 6,109,950 | |||||||||
SanDisk Corp. | 36,900 | 1,935,036 | * | ||||||||
8,044,986 | |||||||||||
Consumer Finance (0.2%) | |||||||||||
SLM Corp. | 62,000 | 1,280,300 | |||||||||
Diversified Consumer Services (0.6%) | |||||||||||
K12, Inc. | 133,100 | 3,390,057 | * | ||||||||
Diversified Financial Services (1.9%) | |||||||||||
Citigroup, Inc. | 90,800 | 4,236,728 | |||||||||
CME Group, Inc. | 75,300 | 4,582,758 | |||||||||
JPMorgan Chase & Co. | 64,000 | 3,136,640 | |||||||||
11,956,126 |
Number of Shares | Value† | ||||||||||
Electric Utilities (2.4%) | |||||||||||
Brookfield Infrastructure Partners LP | 319,499 | $ | 12,348,636 | ||||||||
Northeast Utilities | 52,000 | 2,357,160 | |||||||||
14,705,796 | |||||||||||
Electronic Equipment, Instruments & Components (0.3%) | |||||||||||
Amphenol Corp. Class A | 16,000 | 1,208,320 | |||||||||
FEI Co. | 11,820 | 755,061 | |||||||||
1,963,381 | |||||||||||
Food & Staples Retailing (0.7%) | |||||||||||
Walgreen Co. | 84,000 | 4,158,840 | |||||||||
Food Products (0.1%) | |||||||||||
WhiteWave Foods Co. Class A | 46,800 | 791,388 | * | ||||||||
Health Care Equipment & Supplies (0.6%) | |||||||||||
Sirona Dental Systems, Inc. | 54,000 | 3,971,160 | * | ||||||||
Health Care Providers & Services (1.9%) | |||||||||||
Accretive Health, Inc. | 244,800 | 2,580,192 | * |
See Notes to Schedule of Investments
22
Number of Shares | Value† | ||||||||||
DaVita HealthCare Partners, Inc. | 79,200 | $ | 9,397,080 | * | |||||||
11,977,272 | |||||||||||
Hotels, Restaurants & Leisure (3.3%) | |||||||||||
Arcos Dorados Holdings, Inc. Class A | 273,700 | 3,727,794 | |||||||||
Dunkin' Brands Group, Inc. | 246,400 | 9,562,784 | |||||||||
McDonald's Corp. | 42,000 | 4,289,880 | |||||||||
Wyndham Worldwide Corp. | 43,700 | 2,625,496 | |||||||||
20,205,954 | |||||||||||
Household Durables (1.3%) | |||||||||||
Lennar Corp. Class A | 111,600 | 4,600,152 | |||||||||
Newell Rubbermaid, Inc. | 140,000 | 3,687,600 | |||||||||
8,287,752 | |||||||||||
Household Products (0.8%) | |||||||||||
Procter & Gamble Co. | 68,200 | 5,235,714 | |||||||||
Independent Power Producers & Energy Traders (0.2%) | |||||||||||
Brookfield Renewable Energy Partners LP | 35,700 | 1,117,410 | |||||||||
Industrial Conglomerates (0.9%) | |||||||||||
3M Co. | 26,300 | 2,753,873 | |||||||||
General Electric Co. | 136,600 | 3,044,814 | |||||||||
5,798,687 | |||||||||||
Internet & Catalog Retail (1.0%) | |||||||||||
Vipshop Holdings Ltd. ADS | 208,648 | 6,424,272 | * | ||||||||
Internet Software & Services (3.1%) | |||||||||||
eBay, Inc. | 173,300 | 9,079,187 | * | ||||||||
Facebook, Inc. Class A | 89,100 | 2,473,416 | * | ||||||||
Google, Inc. Class A | 7,700 | 6,349,189 | * | ||||||||
Vantiv, Inc. Class A | 48,000 | 1,081,440 | * | ||||||||
18,983,232 | |||||||||||
IT Services (2.9%) | |||||||||||
Genpact Ltd. | 485,700 | 9,034,020 | * |
Number of Shares | Value† | ||||||||||
Visa, Inc. Class A | 54,000 | $ | 9,096,840 | ||||||||
18,130,860 | |||||||||||
Machinery (0.8%) | |||||||||||
Ingersoll- Rand PLC | 57,500 | 3,093,500 | |||||||||
Trinity Industries, Inc. | 42,600 | 1,798,146 | |||||||||
4,891,646 | |||||||||||
Media (0.2%) | |||||||||||
Regal Entertainment Group Class A | 72,000 | 1,291,680 | |||||||||
Metals & Mining (0.8%) | |||||||||||
Steel Dynamics, Inc. | 255,500 | 3,842,720 | |||||||||
Walter Energy, Inc. | 75,200 | 1,347,584 | |||||||||
5,190,304 | |||||||||||
Multi-Utilities (1.0%) | |||||||||||
NiSource, Inc. | 95,200 | 2,925,496 | |||||||||
Wisconsin Energy Corp. | 74,300 | 3,339,042 | |||||||||
6,264,538 | |||||||||||
Multiline Retail (1.2%) | |||||||||||
J.C. Penney Co., Inc. | 79,400 | 1,303,748 | * | ||||||||
Target Corp. | 87,000 | 6,138,720 | |||||||||
7,442,468 | |||||||||||
Oil, Gas & Consumable Fuels (6.2%) | |||||||||||
Alpha Natural Resources, Inc. | 628,000 | 4,659,760 | * | ||||||||
Cabot Oil & Gas Corp. | 45,500 | 3,096,275 | |||||||||
Enbridge, Inc. | 166,708 | 7,935,301 | |||||||||
Forest Oil Corp. | 464,500 | 1,946,255 | * | ||||||||
Inergy LP | 13,600 | 299,064 | |||||||||
Kinder Morgan, Inc. | 17,000 | 664,700 | |||||||||
MarkWest Energy Partners LP | 43,000 | 2,717,600 | |||||||||
Peabody Energy Corp. | 243,000 | 4,874,580 | |||||||||
Pioneer Natural Resources Co. | 28,900 | 3,532,447 | |||||||||
PVR Partners LP | 23,900 | 597,500 |
Number of Shares | Value† | ||||||||||
Regency Energy Partners LP | 53,300 | $ | 1,391,130 | ||||||||
Teekay Corp. | 194,861 | 6,937,051 | |||||||||
38,651,663 | |||||||||||
Paper & Forest Products (0.5%) | |||||||||||
International Paper Co. | 68,000 | 3,194,640 | |||||||||
Personal Products (0.9%) | |||||||||||
Estee Lauder Cos., Inc. Class A | 77,700 | 5,388,495 | |||||||||
Pharmaceuticals (1.5%) | |||||||||||
Bristol-Myers Squibb Co. | 136,600 | 5,425,752 | |||||||||
Pfizer, Inc. | 136,500 | 3,968,055 | |||||||||
9,393,807 | |||||||||||
Professional Services (1.6%) | |||||||||||
Nielsen Holdings NV | 160,265 | 5,548,375 | |||||||||
Verisk Analytics, Inc. Class A | 71,542 | 4,384,809 | * | ||||||||
9,933,184 | |||||||||||
Real Estate Investment Trusts (2.0%) | |||||||||||
General Growth Properties, Inc. | 190,000 | 4,316,800 | |||||||||
Weyerhaeuser Co. | 269,800 | 8,231,598 | |||||||||
12,548,398 | |||||||||||
Real Estate Management & Development (1.3%) | |||||||||||
Brookfield Asset Management, Inc. Class A | 157,000 | 6,058,630 | |||||||||
Brookfield Property Partners Ltd. | 34,011 | 750,963 | * | ||||||||
Forest City Enterprises, Inc. Class A | 52,000 | 970,840 | * | ||||||||
7,780,433 | |||||||||||
Road & Rail (0.8%) | |||||||||||
Canadian Pacific Railway Ltd. | 39,500 | 4,922,490 | |||||||||
Semiconductors & Semiconductor Equipment (1.0%) | |||||||||||
Altera Corp. | 187,500 | 6,001,875 | |||||||||
Software (0.7%) | |||||||||||
Activision Blizzard, Inc. | 118,000 | 1,764,100 |
See Notes to Schedule of Investments
23
Number of Shares | Value† | ||||||||||
Oracle Corp. | 68,400 | $ | 2,242,152 | ||||||||
4,006,252 | |||||||||||
Specialty Retail (5.2%) | |||||||||||
Asbury Automative Group, Inc. | 118,900 | 4,766,701 | * | ||||||||
Home Depot, Inc. | 80,600 | 5,912,010 | |||||||||
Monro Muffler Brake, Inc. | 63,700 | 2,634,632 | |||||||||
PetSmart, Inc. | 165,200 | 11,273,248 | |||||||||
Sally Beauty Holdings, Inc. | 105,000 | 3,156,300 | * | ||||||||
Tractor Supply Co. | 41,300 | 4,426,121 | |||||||||
32,169,012 | |||||||||||
Textiles, Apparel & Luxury Goods (1.2%) | |||||||||||
Michael Kors Holdings Ltd. | 69,100 | 3,934,554 | * | ||||||||
Wolverine World Wide, Inc. | 78,200 | 3,735,614 | |||||||||
7,670,168 | |||||||||||
Tobacco (2.1%) | |||||||||||
Lorillard, Inc. | 97,500 | 4,181,775 | |||||||||
Philip Morris International, Inc. | 92,000 | 8,794,280 | |||||||||
12,976,055 | |||||||||||
Water Utilities (1.0%) | |||||||||||
American Water Works Co., Inc. | 147,100 | 6,160,548 | |||||||||
Wireless Telecommunication Services (1.2%) | |||||||||||
SBA Communications Corp. Class A | 54,000 | 4,265,460 | * | ||||||||
Sprint Nextel Corp. | 455,000 | 3,207,750 | * | ||||||||
7,473,210 | |||||||||||
Total Common Stocks (Cost $361,473,932) | 387,665,573 | ||||||||||
Preferred Stocks (0.5%) | |||||||||||
Automobiles (0.1%) | |||||||||||
General Motors Co., Ser. B, 4.75% | 16,200 | 752,976 |
Number of Shares | Value† | ||||||||||
Banks (0.4%) | |||||||||||
GMAC Capital Trust I, Ser. 2, 8.13% | 79,000 | $ | 2,163,810 | ||||||||
Diversified Financial Services (0.0%) | |||||||||||
Citigroup Capital XIII, 7.88% | 2,600 | 73,424 | |||||||||
Total Preferred Stocks (Cost $2,723,021) | 2,990,210 | ||||||||||
Principal Amount | |||||||||||
Corporate Debt Securities (14.1%) | |||||||||||
Auto Manufacturers (0.9%) | |||||||||||
Chrysler Group LLC/CG Co-Issuer, Inc., Secured Notes, 8.25%, due 6/15/21 | $ | 4,810,000 | 5,519,475 | ||||||||
Auto Parts & Equipment (1.7%) | |||||||||||
American Axle & Manufacturing, Inc., Guaranteed Notes, 6.63%, due 10/15/22 | 5,080,000 | 5,429,250 | |||||||||
The Goodyear Tire & Rubber Co., Guaranteed Notes, 7.00%, due 5/15/22 | 3,475,000 | 3,757,344 | |||||||||
The Goodyear Tire & Rubber Co., Guaranteed Notes, 6.50%, due 3/1/21 | 1,600,000 | 1,674,000 | |||||||||
10,860,594 | |||||||||||
Building Materials (0.0%) | |||||||||||
Masco Corp., Senior Unsecured Notes, 5.95%, due 3/15/22 | 100,000 | 113,178 |
Principal Amount | Value† | ||||||||||
Coal (1.2%) | |||||||||||
Alpha Natural Resources, Inc., Guaranteed Notes, 9.75%, due 4/15/18 | $ | 755,000 | $ | 819,175 | |||||||
Arch Coal, Inc., Guaranteed Notes, 7.00%, due 6/15/19 | 6,276,000 | 5,820,990 | |||||||||
Arch Coal, Inc., Guaranteed Notes, 7.25%, due 10/1/20 | 650,000 | 598,000 | |||||||||
7,238,165 | |||||||||||
Computers (0.5%) | |||||||||||
Apple, Inc., Senior Unsecured Notes, 3.85%, due 5/4/43 | 3,000,000 | 2,982,540 | |||||||||
Diversified Financial Services (0.9%) | |||||||||||
E*TRADE Financial Corp., Senior Unsecured Notes, 6.38%, due 11/15/19 | 1,490,000 | 1,601,750 | |||||||||
E*TRADE Financial Corp., Senior Unsecured Notes, 6.75%, due 6/1/16 | 705,000 | 763,162 | |||||||||
SLM Corp., Senior Unsecured Medium Term Notes, 6.00%, due, 1/25/17 | 100,000 | 108,250 | |||||||||
SLM Corp., Senior Unsecured Notes, 5.50%, due 1/25/23 | 3,050,000 | 3,052,675 | |||||||||
5,525,837 |
See Notes to Schedule of Investments
24
Principal Amount | Value† | ||||||||||
Electric (1.0%) | |||||||||||
DPL, Inc., Senior Unsecured Notes, 7.25%, due 10/15/21 | $ | 5,630,000 | $ | 5,995,950 | |||||||
Entertainment (0.1%) | |||||||||||
Regal Entertainment Group, Guaranteed Notes, 9.13%, due 8/15/18 | 300,000 | 336,000 | |||||||||
Food (0.1%) | |||||||||||
Smithfield Foods, Inc., Senior Unsecured Notes, 6.63%, due 8/15/22 | 260,000 | 288,600 | |||||||||
SUPERVALU, Inc., Senior Unsecured Notes, 8.00%, due 5/1/16 | 500,000 | 547,500 | |||||||||
836,100 | |||||||||||
Healthcare-Services (0.5%) | |||||||||||
CHS/Community Health Systems, Inc., Guaranteed Notes, 7.13%, due 7/15/20 | 2,216,000 | 2,476,380 | |||||||||
DaVita, Inc., Guaranteed Notes, 5.75%, due 8/15/22 | 700,000 | 745,500 | |||||||||
HCA Holdings, Inc., Senior Unsecured Notes, 7.75%, due 5/15/21 | 100,000 | 113,375 | |||||||||
3,335,255 | |||||||||||
Iron—Steel (0.7%) | |||||||||||
AK Steel Corp., Guaranteed Notes, 7.63%, due 5/15/20 | 3,465,000 | 3,005,887 | |||||||||
United States Steel Corp., Senior Unsecured Notes, 7.38%, due 4/1/20 | 845,000 | 891,475 |
Principal Amount | Value† | ||||||||||
United States Steel Corp., Senior Unsecured Notes, 7.50%, due 3/15/22 | $ | 175,000 | $ | 184,188 | |||||||
4,081,550 | |||||||||||
Media (1.5%) | |||||||||||
Cablevision Systems Corp., Senior Unsecured Notes, 5.88%, due 9/15/22 | 5,339,000 | 5,405,737 | |||||||||
Cablevision Systems Corp., Senior Unsecured Notes, 7.75%, due 4/15/18 | 915,000 | 1,041,956 | |||||||||
CCO Holdings LLC, Guaranteed Notes, 6.63%, due 1/31/22 | 225,000 | 247,500 | |||||||||
Clear Channel Worldwide Holdings, Inc., Guaranteed Notes, Ser. B, 7.63%, due 3/15/20 | 2,325,000 | 2,505,188 | |||||||||
9,200,381 | |||||||||||
Oil & Gas (2.0%) | |||||||||||
Chesapeake Energy Corp., Guaranteed Notes, 6.13%, due 2/15/21 | 690,000 | 759,000 | |||||||||
Chesapeake Energy Corp., Guaranteed Notes, 6.78%, due 3/15/19 | 955,000 | 1,045,725 | |||||||||
EXCO Resources, Inc., Guaranteed Notes, 7.50%, due 9/15/18 | 3,135,000 | 3,103,650 | |||||||||
Forest Oil Corp., Guaranteed Notes, 7.25%, due 6/15/19 | 3,560,000 | 3,604,500 |
Principal Amount | Value† | ||||||||||
Plains Exploration & Production Co., Guaranteed Notes, 6.88%, due 2/15/23 | $ | 200,000 | $ | 227,750 | |||||||
SandRidge Energy, Inc., Guaranteed Notes, 7.50%, due 3/15/21 | 3,395,000 | 3,522,313 | |||||||||
SandRidge Energy, Inc., Guaranteed Notes, 8.75%, due 1/15/20 | 125,000 | 134,375 | |||||||||
12,397,313 | |||||||||||
Retail (0.8%) | |||||||||||
JC Penney Corp., Inc., Senior Unsecured Notes, 5.75%, due 2/15/18 | 735,000 | 662,419 | |||||||||
JC Penney Corp., Inc., Senior Unsecured Notes, 5.65%, due 6/1/20 | 4,930,000 | 4,233,637 | |||||||||
4,896,056 | |||||||||||
Semiconductors (0.6%) | |||||||||||
Advanced Micro Devices, Inc., Senior Unsecured Notes, 8.13%, due 12/15/17 | 3,695,000 | 3,861,275 | |||||||||
Telecommunications (1.4%) | |||||||||||
Frontier Communications Corp., Senior Unsecured Notes, 7.63%, due 4/15/24 | 1,700,000 | 1,772,250 | |||||||||
MetroPCS Wireless, Inc., Guaranteed Notes, 6.63%, due 11/15/20 | 4,560,000 | 4,936,200 | |||||||||
Sprint Nextel Corp., Senior Unsecured Notes, 6.00%, due 11/15/22 | 1,715,000 | 1,787,888 |
See Notes to Schedule of Investments
25
Principal Amount | Value† | ||||||||||
Sprint Nextel Corp., Senior Unsecured Notes, 8.38%, due 8/15/17 | $ | 325,000 | $ | 378,625 | |||||||
8,874,963 | |||||||||||
Transportation (0.2%) | |||||||||||
Swift Services Holdings, Inc., Secured Notes, 10.00%, due 11/15/18 | 1,335,000 | 1,528,575 | |||||||||
Total Corporate Debt Securities (Cost $84,918,391) | 87,583,207 | ||||||||||
Number of Shares | |||||||||||
Short-Term Investments (21.7%) | |||||||||||
State Street Institutional Government Money Market Fund Institutional Class (Cost $134,657,822) | 134,657,822 | 134,657,822 | ØØ | ||||||||
Total Long Positions (98.9%) (Cost $583,773,166) | 612,896,812 | ## | |||||||||
Cash, receivables and other assets, less liabilities (14.7%) | 91,132,419± | ||||||||||
Short Positions (see summary below) ((13.6)%) | (84,522,280) | ||||||||||
Total Net Assets (100.0%) | $ | 619,506,951 | |||||||||
Short Positions ((13.6)%) | |||||||||||
Common Stocks Sold Short (6.3%)‡ | |||||||||||
Airlines (0.1%) | |||||||||||
US Airways Group, Inc. | (50,000 | ) | (845,000 | )* | |||||||
Capital Markets (0.5%) | |||||||||||
Federated Investors, Inc., Class B | (32,000 | ) | (734,720 | ) | |||||||
Janus Capital Group, Inc. | (100,700 | ) | (898,244 | ) | |||||||
Legg Mason, Inc. | (46,400 | ) | (1,478,304 | ) | |||||||
(3,111,268 | ) | ||||||||||
Commercial Banks (0.3%) | |||||||||||
SVB Financial Group | (28,200 | ) | (2,005,302 | )* |
Number of Shares | Value† | ||||||||||
Communications Equipment (0.2%) | |||||||||||
F5 Networks, Inc. | (19,600 | ) | $ | (1,498,028 | )* | ||||||
Computers & Peripherals (0.6%) | |||||||||||
Lexmark International Group Class A | (48,900 | ) | (1,482,159 | ) | |||||||
Seagate Technology PLC | (58,500 | ) | (2,146,950 | ) | |||||||
(3,629,109 | ) | ||||||||||
Diversified Financial Services (0.3%) | |||||||||||
Bank of America Corp. | (146,000 | ) | (1,797,260 | ) | |||||||
Electronic Equipment, Instruments & Components (0.2%) | |||||||||||
Corning, Inc. | (102,125 | ) | (1,480,812 | ) | |||||||
Energy Equipment & Services (0.4%) | |||||||||||
Halliburton Co. | (60,500 | ) | (2,587,585 | ) | |||||||
Food Products (0.2%) | |||||||||||
Dean Foods Co. | (46,000 | ) | (880,440 | )* | |||||||
Health Care Equipment & Supplies (0.7%) | |||||||||||
Cochlear Ltd. | (10,000 | ) | (684,015 | ) | |||||||
Intuitive Surgical, Inc. | (3,300 | ) | (1,624,557 | )* | |||||||
Zimmer Holdings, Inc. | (24,500 | ) | (1,873,025 | ) | |||||||
(4,181,597 | ) | ||||||||||
Hotels, Restaurants & Leisure (0.4%) | |||||||||||
Brinker International, Inc. | (14,300 | ) | (556,270 | ) | |||||||
Chipotle Mexican Grill, Inc. | (1,800 | ) | (653,742 | )* | |||||||
Darden Restaurants, Inc. | (18,000 | ) | (929,340 | ) | |||||||
(2,139,352 | ) | ||||||||||
Multiline Retail (0.3%) | |||||||||||
Family Dollar Stores, Inc. | (31,175 | ) | (1,913,210 | ) | |||||||
Professional Services (0.3%) | |||||||||||
Dun & Bradstreet Corp. | (22,850 | ) | (2,021,083 | ) | |||||||
Semiconductors & Semiconductor Equipment (1.1%) | |||||||||||
Lam Research Corp. | (78,500 | ) | (3,628,270 | )* |
Number of Shares | Value† | ||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. ADR | (105,000 | ) | $ | (2,003,400 | ) | ||||||
Xilinx, Inc. | (28,600 | ) | (1,084,226 | ) | |||||||
(6,715,896 | ) | ||||||||||
Specialty Retail (0.3%) | |||||||||||
Sonic Automotive, Inc. Class A | (72,300 | ) | (1,589,877 | ) | |||||||
Textiles, Apparel & Luxury Goods (0.4%) | |||||||||||
Fossil, Inc. | (27,000 | ) | (2,649,240 | )* | |||||||
Total Common Stocks Sold Short (Proceeds $(36,933,620)) | (39,045,059) | ||||||||||
Exchange Traded Funds Sold Short (7.3%) | |||||||||||
Consumer Discretionary Select Sector SPDR Fund | (28,000 | ) | (1,529,080 | ) | |||||||
Financial Select Sector SPDR Fund | (27,000 | ) | (504,900 | ) | |||||||
Guggenheim S&P 500 Equal Weight ETF | (10,000 | ) | (606,500 | ) | |||||||
iShares Core S&P Small-Cap ETF | (87,000 | ) | (7,562,040 | ) | |||||||
iShares Dow Jones U.S. Real Estate Index Fund | (6,200 | ) | (455,452 | ) | |||||||
iShares MSCI Brazil Index Fund | (17,550 | ) | (967,882 | ) | |||||||
iShares Russell 2000 Index Fund | (78,500 | ) | (7,389,990 | ) | |||||||
iShares Russell Midcap Index Fund | (150,200 | ) | (19,371,294 | ) | |||||||
Market Vectors Semiconductor | (56,400 | ) | (2,089,620 | ) | |||||||
SPDR S&P Retail ETF | (65,000 | ) | (4,775,550 | ) | |||||||
Technology Select Sector SPDR Fund | (7,300 | ) | (224,913 | ) | |||||||
Total Exchange Traded Funds Sold Short (Proceeds $(43,274,428)) | (45,477,221 | ) | |||||||||
Total Short Positions (Proceeds $(80,208,048)) | (84,522,280 | ) |
See Notes to Schedule of Investments
26
Notes to Schedule of Investments (Unaudited)
† In accordance with Accounting Standards Codification ("ASC") 820 "Fair Value Measurements and Disclosures" ("ASC 820"), all investments held by each of Neuberger Berman Dynamic Real Return Fund ("Dynamic Real Return"), Neuberger Berman Global Allocation Fund ("Global Allocation") and Neuberger Berman Long Short Fund ("Long Short") (each individually a "Fund," and collectively, the "Funds") are carried at the value that Neuberger Berman Management LLC ("Management") believes a fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment under current market conditions. Various inputs, including the volume and level of activity for the asset or liability in the market, are considered in valuing the Funds' investments, some of which are discussed below. Significant management judgment may be necessary to value investments in accordance with ASC 820.
ASC 820 established a three-tier hierarchy of inputs to create a classification of value measurements for disclosure purposes. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• Level 1 – quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, amortized cost, etc.)
• Level 3 – significant unobservable inputs (including a Fund's own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing an investment are not necessarily an indication of the risk associated with investing in those securities.
The value of the Funds' investments (long and short positions) in equity securities, exchange traded funds, purchased option contracts and written option contracts, for which market quotations are readily available, is generally determined by Management by obtaining valuations from an independent pricing service based on the latest sale price quoted on a principal exchange or market for that security (Level 1 inputs). Securities traded primarily on the NASDAQ Stock Market are normally valued by a Fund at the NASDAQ Official Closing Price ("NOCP") provided by NASDAQ each business day. The NOCP is the most recently reported price as of 4:00:02 p.m., Eastern time, unless that price is outside the range of the "inside" bid and asked prices (i.e., the bid and asked prices that dealers quote to each other when trading for their own accounts); in that case, NASDAQ will adjust the price to equal the inside bid or asked price, whichever is closer. Because of delays in reporting trades, the NOCP may not be based on the price of the last trade to occur before the market closes. If there is no reported sale of a security on a particular day, the independent pricing service may value the security based on reported market quotations.
The value of the Funds' investments in debt securities is determined by Management primarily by obtaining valuations from independent pricing services based on readily available bid quotations, or if quotations are not available, by methods which include various considerations based on security type (generally Level 2 inputs). In addition to the consideration of yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions, the following is a description of other Level 2 inputs and related valuation techniques used by an independent pricing service to value certain types of debt securities of the Funds:
Corporate Debt Securities. Inputs used to value corporate debt securities generally include relative credit information, observed market movements, sector news, spread to the U.S. Treasury market, and other market information which may include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids, offers, and reference data, such as market research publications, when available ("Other Market Information").
U.S. Treasury Securities. Inputs used to value U.S. Treasury securities generally include quotes from several inter-dealer brokers and Other Market Information.
See Notes to Financial Statements
27
Notes to Schedule of Investments (Unaudited) (cont'd)
Sovereign Debt. Inputs used to value sovereign debt generally include dealer quotes, bond market activity, discounted cash flow models, and other relevant information such as credit spreads, benchmark curves and Other Market Information.
The value of financial futures contracts is determined by obtaining valuations from independent pricing services at the settlement price at the market close (Level 1 inputs).
The value of forward foreign currency contracts is determined by obtaining valuations from an independent pricing service based on actual traded currency rates on an independent pricing service's network, along with other traded and quoted currency rates provided to the pricing service by leading market participants (Level 2 inputs).
The value of total return swaps is determined by obtaining valuations from an independent pricing service using the underlying index and stated LIBOR ("London Interbank Offered Rate") rate (Level 2 inputs).
Management has developed a process to periodically review information provided by independent pricing services for all types of securities.
Investments in investment companies are valued using the fund's daily calculated net asset value per share (Level 2 inputs).
If a valuation is not available from an independent pricing service, or if Management has reason to believe that the valuation received does not represent the amount a Fund might reasonably expect to receive on a current sale in an orderly transaction, the applicable Fund seeks to obtain quotations from principal market makers (generally considered Level 3 inputs). If such quotations are not readily available, the security is valued using methods the Neuberger Berman Alternative Funds' Board of Trustees (the "Board") has approved on the belief that they reflect fair value. Numerous factors may be considered when determining the fair value of a security based on Level 2 or 3 inputs, including available analyst, media or other reports, trading in futures, or ADRs and whether the issuer of the security being fair valued has other securities outstanding.
The value of the Funds' investments in foreign securities is generally determined using the same valuation methods and inputs as other Fund investments, as discussed above. Foreign security prices expressed in local currency values are translated from the local currency into U.S. dollars using the exchange rate as of 4:00 p.m., Eastern time. The Board has approved the use of Interactive Data Pricing and Reference Data, Inc. ("Interactive") to assist in determining the fair value of foreign equity securities when changes in the value of a certain index suggest that the closing prices on the foreign exchanges may no longer represent the amount that a Fund could expect to receive for those securities or on days when foreign markets are closed and U.S. markets are open. In each of these events, Interactive will provide adjusted prices for certain foreign equity securities using a statistical analysis of historical correlations of multiple factors (Level 2 inputs). In the absence of precise information about the market values of these foreign securities as of the close of the New York Stock Exchange, the Board has determined on the basis of available data that prices adjusted in this way are likely to be closer to the prices a fund could realize on a current sale than are the prices of those securities established at the close of the foreign markets in which the securities primarily trade.
Fair value prices are necessarily estimates, and there is no assurance that such a price will be at or close to the price at which the security is next quoted or next trades.
See Notes to Financial Statements
28
Notes to Schedule of Investments (Unaudited) (cont'd)
The following is a summary, categorized by Level, of inputs used to value the Funds' investments as of April 30, 2013:
Asset Valuation Inputs | |||||||||||||||||||
Level 1 | Level 2 | Level 3§§ | Total | ||||||||||||||||
Dynamic Real Return | |||||||||||||||||||
Investments: | |||||||||||||||||||
Common Stocks | |||||||||||||||||||
Household Durables | $ | 26,695 | $ | — | $ | 14,280 | $ | 40,975 | |||||||||||
Other Common Stocks^ | 5,743,204 | — | — | 5,743,204 | |||||||||||||||
Total Common Stocks | 5,769,899 | — | 14,280 | 5,784,179 | |||||||||||||||
Government Securities^ | — | 2,194,149 | — | 2,194,149 | |||||||||||||||
U.S. Treasury Securities-Backed by the Full Faith and Credit of the U.S. Government | — | 1,745,258 | — | 1,745,258 | |||||||||||||||
Mutual Funds | — | 5,673,508 | — | 5,673,508 | |||||||||||||||
Short-Term Investments | — | 256,727 | — | 256,727 | |||||||||||||||
Total Investments | 5,769,899 | 9,869,642 | 14,280 | 15,653,821 | |||||||||||||||
Global Allocation | |||||||||||||||||||
Investments: | |||||||||||||||||||
Common Stocks^ | |||||||||||||||||||
United Kingdom | 867,713 | — | 222,119 | 1,089,832 | |||||||||||||||
Other Common Stocks | 6,380,834 | — | — | 6,380,834 | |||||||||||||||
Total Common Stocks | 7,248,547 | — | 222,119 | 7,470,666 | |||||||||||||||
Short-Term Investments | — | 19,403,331 | — | 19,403,331 | |||||||||||||||
Total Long Positions | 7,248,547 | 19,403,331 | 222,119 | 26,873,997 | |||||||||||||||
Long Short | |||||||||||||||||||
Investments: | |||||||||||||||||||
Common Stocks^ | 387,665,573 | — | — | 387,665,573 | |||||||||||||||
Preferred Stocks^ | 2,990,210 | — | — | 2,990,210 | |||||||||||||||
Corporate Debt Securities^ | — | 87,583,207 | — | 87,583,207 | |||||||||||||||
Short-Term Investments | — | 134,657,822 | — | 134,657,822 | |||||||||||||||
Total Long Positions | 390,655,783 | 222,241,029 | — | 612,896,812 |
^ The Schedule of Investments provides information on the industry and/or country categorization for the portfolio.
§§ The following is a reconciliation between the beginning and ending balances of investments in which significant unobservable inputs (Level 3) were used in determining value:
See Notes to Financial Statements
29
Notes to Schedule of Investments (Unaudited) (cont'd)
Beginning balance, as of 11/1/12 | Accrued discounts/ (premiums) | Realized gain/loss | Change in unrealized appreciation/ (depreciation) | Purchases | Sales | Transfers in to Level 3 | Transfers out of Level 3 | Balance, as of 4/30/13 | Net change in unrealized appreciation/ (depreciation) from investments still held as of 4/30/13 | ||||||||||||||||||||||||||||||||||
Investments in Securities: | |||||||||||||||||||||||||||||||||||||||||||
Dynamic Real Return | |||||||||||||||||||||||||||||||||||||||||||
Common Stocks | |||||||||||||||||||||||||||||||||||||||||||
Household Durables | $ | — | $ | — | $ | — | $ | 1,480 | $ | 12,800 | $ | — | $ | — | $ | — | $ | 14,280 | $ | 1,480 | |||||||||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | 1,480 | $ | 12,800 | $ | — | $ | — | $ | — | $ | 14,280 | $ | 1,480 | |||||||||||||||||||||||
Global Allocation | |||||||||||||||||||||||||||||||||||||||||||
Common Stocks | |||||||||||||||||||||||||||||||||||||||||||
United Kingdom | $ | — | $ | — | $ | — | $ | (20,463 | ) | $ | 157,308 | $ | — | $ | 85,274 | $ | — | $ | 222,119 | $ | (20,463 | ) | |||||||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | (20,463 | ) | $ | 157,308 | $ | — | $ | 85,274 | $ | — | $ | 222,119 | $ | (20,463 | ) |
The following is a summary, categorized by Level, of inputs used to value the Funds' derivatives as of April 30, 2013:
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Dynamic Real Return | |||||||||||||||||||
Futures contracts (unrealized appreciation) | $ | 8,096 | $ | — | $ | — | $ | 8,096 | |||||||||||
Total | $ | 8,096 | $ | — | $ | — | $ | 8,096 | |||||||||||
Global Allocation | |||||||||||||||||||
Forward contracts (unrealized appreciation) | $ | — | $ | 29,918 | $ | — | $ | 29,918 | |||||||||||
Futures contracts (unrealized appreciation) | 1,510,523 | — | — | 1,510,523 | |||||||||||||||
Total return swaps (unrealized appreciation) | — | 301,434 | — | 301,434 | |||||||||||||||
Total | $ | 1,510,523 | $ | 331,352 | $ | — | $ | 1,841,875 |
The following is a summary, categorized by Level, of inputs used to value the Funds' investments as of April 30, 2013:
Liability Valuation Inputs | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Global Allocation | |||||||||||||||||||
Common Stocks Sold Short^ | $ | (7,207,701) | $ | — | $ | — | $ | (7,207,701) | |||||||||||
Total | $ | (7,207,701) | $ | — | $ | — | $ | (7,207,701) | |||||||||||
Long Short | |||||||||||||||||||
Common Stocks Sold Short^ | $ | (39,045,059) | $ | — | $ | — | $ | (39,045,059) | |||||||||||
Exchange Traded Funds Sold Short | (45,477,221) | — | — | (45,477,221) | |||||||||||||||
Total | $ | (84,522,280) | $ | — | $ | — | $ | (84,522,280) |
^ The Schedule of Investments provides information on the industry and/or country categorization for the portfolio.
See Notes to Financial Statements
30
Notes to Schedule of Investments (Unaudited) (cont'd)
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Dynamic Real Return | |||||||||||||||||||
Futures contracts (unrealized depreciation) | $ | (3,229 | ) | $ | — | $ | — | $ | (3,229 | ) | |||||||||
Total | $ | (3,229 | ) | $ | — | $ | — | $ | (3,229 | ) | |||||||||
Global Allocation | |||||||||||||||||||
Forward contracts (unrealized depreciation) | $ | — | $ | (61,253 | ) | $ | — | $ | (61,253 | ) | |||||||||
Futures contracts (unrealized depreciation) | (382,348 | ) | — | — | (382,348 | ) | |||||||||||||
Total | $ | (382,348 | ) | $ | (61,253 | ) | $ | — | $ | (443,601 | ) | ||||||||
Long Short | |||||||||||||||||||
Futures contracts (unrealized depreciation) | $ | (1,859,704 | ) | $ | — | $ | — | $ | (1,859,704 | ) | |||||||||
Total | $ | (1,859,704 | ) | $ | — | $ | — | $ | (1,859,704 | ) |
The Funds had no transfers between Levels 1 and 2 during the six months ended April 30, 2013. As of April 30, 2013, one security in Global Allocation transferred from Level 1 to Level 3 as a result of a decrease in the number of observable quotations that were readily available to the independent pricing service.
## At April 30, 2013, selected fund information on a U.S. federal income tax basis was as follows:
Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||||||
Dynamic Real Return | $ | 15,248,531 | $ | 519,000 | $ | 113,710 | $ | 405,290 | |||||||||||
Global Allocation | 26,248,540 | 793,926 | 168,469 | 625,457 | |||||||||||||||
Long Short | 584,445,979 | 34,349,391 | 5,898,558 | 28,450,833 |
* Security did not produce income during the last twelve months.
ñ Securities were purchased under Rule 144A of the Securities Act of 1933, as amended (the "1933 Act"), or are private placements and, unless registered under the 1933 Act or exempted from registration, may only be sold to qualified institutional investors. These securities have been deemed by the investment manager to be liquid. At April 30, 2013, these securities amounted to $14,280 or 0.1% of net assets for Dynamic Real Return.
È All or a portion of this security is on loan.
ØØ All or a portion of this security is segregated in connection with obligations for common stocks sold short and/or forward foreign currency contracts and/or total return swap contracts and/or financial futures contracts.
§ Affiliated issuer.
‡ At April 30, 2013, Global Allocation had deposited $7,464,935 in a segregated account to cover collateral requirements for borrowing in connection with securities sold short. This collateral is made up of the proceeds from the securities sold short and collateral received from security lending activities. At April 30, 2013, Long Short had deposited $88,453,506 in a segregated account to cover collateral requirements for borrowing in connection with securities sold short.
See Notes to Financial Statements
31
Notes to Schedule of Investments (Unaudited) (cont'd)
a Principal amount is stated in the currency in which security is denominated.
AUD = Australian Dollar
CAD = Canadian Dollar
EUR = Euro
GBP = Pound Sterling
JPY = Japanese Yen
SEK = Swedish Krona
± See Note A-14 in the Notes to Financial Statements for the Funds' open positions in derivatives at April 30, 2013.
See Notes to Financial Statements
32
Statements of Assets and Liabilities (Unaudited)
Neuberger Berman Alternative Funds
DYNAMIC REAL RETURN FUND | GLOBAL ALLOCATION FUND | LONG SHORT FUND | |||||||||||||
April 30, 2013 | April 30, 2013 | April 30, 2013 | |||||||||||||
Assets | |||||||||||||||
Investments in securities, at value*† (Notes A & F)— see Schedule of Investments: | |||||||||||||||
Unaffiliated issuers | $ | 9,980,313 | $ | 26,873,997 | $ | 612,896,812 | |||||||||
Affiliated issuers | 5,673,508 | — | — | ||||||||||||
15,653,821 | 26,873,997 | 612,896,812 | |||||||||||||
Cash | — | — | 11,378 | ||||||||||||
Foreign currency | 22,978 | 176,931 | 743,843 | ||||||||||||
Deposits with brokers for short sales (Note A-11) | — | 7,247,455 | 88,453,506 | ||||||||||||
Deposits with brokers for futures contracts (Note A-14) | 3,888 | 1,974,430 | 3,220,777 | ||||||||||||
Dividends and interest receivable | 28,514 | 7,645 | 1,720,493 | ||||||||||||
Receivable for securities sold | — | — | 2,578,640 | ||||||||||||
Receivable for Fund shares sold | 40,056 | 1,439,277 | 19,193,818 | ||||||||||||
Receivable from Management—net (Note B) | 29,732 | 26,289 | — | ||||||||||||
Total return swaps, at value (Note A-14) | — | 301,434 | — | ||||||||||||
Cash collateral for securities loaned (Note A-12) | — | 217,491 | — | ||||||||||||
Receivable for variation margin (Note A-14) | 31 | 11,366 | 141,467 | ||||||||||||
Receivable for open forward foreign currency contracts (Note A-14) | — | 29,918 | — | ||||||||||||
Prepaid expenses and other assets | 4,919 | 33,092 | 58,917 | ||||||||||||
Total Assets | 15,783,939 | 38,339,325 | 729,019,651 | ||||||||||||
Liabilities | |||||||||||||||
Investments sold short, at value (Note A) (proceeds $7,356,294 and $80,208,048, respectively) | — | 7,207,701 | 84,522,280 | ||||||||||||
Dividends payable for short sales | — | 6,449 | 14,518 | ||||||||||||
Payable for collateral on securities loaned (Note A-12) | — | 217,491 | — | ||||||||||||
Payable to investment manager (Note B) | 4,922 | 14,573 | 526,429 | ||||||||||||
Payable for securities purchased | 11,534 | — | 20,106,176 | ||||||||||||
Payable for Fund shares redeemed | — | — | 3,998,386 | ||||||||||||
Payable to administrator—net (Note B) | — | — | 193,981 | ||||||||||||
Payable to trustees | 1,609 | 1,509 | 1,509 | ||||||||||||
Payable for open forward foreign currency contracts (Note A-14) | — | 61,253 | — | ||||||||||||
Accrued expenses and other payables | 51,387 | 116,085 | 149,421 | ||||||||||||
Total Liabilities | 69,452 | 7,625,061 | 109,512,700 | ||||||||||||
Net Assets | $ | 15,714,487 | $ | 30,714,264 | $ | 619,506,951 | |||||||||
Net Assets consist of: | |||||||||||||||
Paid-in capital | $ | 15,268,967 | $ | 28,934,699 | $ | 594,880,204 | |||||||||
Undistributed net investment income (loss) | 63,519 | — | 95,842 | ||||||||||||
Distributions in excess of net investment income | — | (21,141 | ) | — | |||||||||||
Accumulated net realized gains (losses) on investments | (28,284 | ) | (376,952 | ) | 1,579,177 | ||||||||||
Net unrealized appreciation (depreciation) in value of investments | 410,285 | 2,177,658 | 22,951,728 | ||||||||||||
Net Assets | $ | 15,714,487 | $ | 30,714,264 | $ | 619,506,951 | |||||||||
Net Assets | |||||||||||||||
Institutional Class | $ | 15,500,447 | $ | 15,952,312 | $ | 375,415,740 | |||||||||
Class A | 106,661 | 10,068,348 | 200,738,426 | ||||||||||||
Class C | 107,379 | 4,693,604 | 43,352,785 |
See Notes to Financial Statements
33
Statements of Assets and Liabilities (Unaudited) (cont'd)
Neuberger Berman Alternative Funds (cont'd)
DYNAMIC REAL RETURN FUND | GLOBAL ALLOCATION FUND | LONG SHORT FUND | |||||||||||||
April 30, 2013 | April 30, 2013 | April 30, 2013 | |||||||||||||
Shares Outstanding ($.001 par value; unlimited shares authorized) | |||||||||||||||
Institutional Class | 1,486,858 | 1,422,058 | 31,734,570 | ||||||||||||
Class A | 10,246 | 900,730 | 17,037,834 | ||||||||||||
Class C | 10,343 | 423,248 | 3,710,505 | ||||||||||||
Net Asset Value, offering and redemption price per share | |||||||||||||||
Institutional Class | $ | 10.42 | $ | 11.22 | $ | 11.83 | |||||||||
Net Asset Value and redemption price per share | |||||||||||||||
Class A | $ | 10.41 | $ | 11.18 | $ | 11.78 | |||||||||
Offering Price per share | |||||||||||||||
Class A‡ | $ | 11.05 | $ | 11.86 | $ | 12.50 | |||||||||
Net Asset Value and offering price per share | |||||||||||||||
Class C^ | $ | 10.38 | $ | 11.09 | $ | 11.68 | |||||||||
†Securities on loan, at value: | |||||||||||||||
Unaffiliated issuers | $ | — | $ | 211,131 | $ | — | |||||||||
*Cost of Investments | |||||||||||||||
Unaffiliated issuers | $ | 9,552,764 | $ | 26,242,879 | $ | 583,773,166 | |||||||||
Affiliated issuers | 5,695,767 | — | — | ||||||||||||
Total cost of investments | $ | 15,248,531 | $ | 26,242,879 | $ | 583,773,166 | |||||||||
Total cost of foreign currency | $ | 22,882 | $ | 177,093 | $ | 736,258 |
‡ On single retail sales of less than $50,000. On sales of $50,000 or more or in certain other circumstances described in the Fund's prospectus, offering price is reduced.
^ Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See Notes to Financial Statements
34
Statements of Operations (Unaudited)
Neuberger Berman Alternative Funds
DYNAMIC REAL RETURN FUND | GLOBAL ALLOCATION FUND | LONG SHORT FUND | |||||||||||||
Period from December 19, 2012 (Commencement of Operations) to April 30, 2013 | For the Six Months Ended April 30, 2013 | For the Six Months Ended April 30, 2013 | |||||||||||||
Investment Income: | |||||||||||||||
Income (Note A): | |||||||||||||||
Dividend income—unaffiliated issuers | $ | 28,001 | $ | 99,629 | $ | 1,704,907 | |||||||||
Dividend income—affiliated issuers (Note F) | 44,267 | — | — | ||||||||||||
Interest income—unaffiliated issuers | 13,153 | 1,322 | 1,736,807 | ||||||||||||
Income from securities loaned—net (Note A-12) | — | 1,322 | — | ||||||||||||
Foreign taxes withheld | (29 | ) | (2,012 | ) | (17,187 | ) | |||||||||
Total income | $ | 85,392 | $ | 100,261 | $ | 3,424,527 | |||||||||
Expenses: | |||||||||||||||
Investment management fees (Note B) | 20,622 | 83,460 | 1,808,579 | ||||||||||||
Administration fees (Note B) | 1,904 | 6,304 | 91,058 | ||||||||||||
Administration fees (Note B): | |||||||||||||||
Institutional Class | 2,788 | 5,182 | 85,928 | ||||||||||||
Class A | 75 | 6,240 | 95,849 | ||||||||||||
Class C | 76 | 3,256 | 16,728 | ||||||||||||
Distribution fees (Note B): | |||||||||||||||
Class A | 94 | 7,800 | 119,812 | ||||||||||||
Class C | 379 | 16,282 | 83,639 | ||||||||||||
Shareholder servicing agent fees: | |||||||||||||||
Institutional Class | 1,816 | 581 | 8,730 | ||||||||||||
Class A | 1,561 | 655 | 12,312 | ||||||||||||
Class C | 1,556 | 299 | 1,140 | ||||||||||||
Organization expense (Note A-8) | 212,980 | — | — | ||||||||||||
Audit fees | 17,621 | 34,349 | 15,912 | ||||||||||||
Custodian fees | 18,673 | 60,726 | 57,779 | ||||||||||||
Insurance expense | — | 1,107 | 842 | ||||||||||||
Legal fees | 34,616 | 88,453 | 46,574 | ||||||||||||
Registration and filing fees | 3,751 | 37,138 | 83,648 | ||||||||||||
Reimbursement of expenses previously assumed by Management (Note B) | — | — | 60,230 | ||||||||||||
Shareholder reports | 8,391 | 538 | 24,343 | ||||||||||||
Trustees' fees and expenses | 12,991 | 23,628 | 23,628 | ||||||||||||
Short sales expense (Note A-11) | — | 77,268 | 368,967 | ||||||||||||
Miscellaneous | 1,046 | 5,060 | 6,038 | ||||||||||||
Total expenses | 340,940 | 458,326 | 3,011,736 | ||||||||||||
Expenses reimbursed by Management (Note B) | (311,560 | ) | (261,833 | ) | — | ||||||||||
Investment management fees waived (Note A-16) | (7,507 | ) | — | — | |||||||||||
Expenses reduced by custodian fee expense offset arrangement (Note A-17) | — | (16 | ) | (48 | ) | ||||||||||
Total net expenses | 21,873 | 196,477 | 3,011,688 | ||||||||||||
Net investment income (loss) | $ | 63,519 | $ | (96,216 | ) | $ | 412,839 |
See Notes to Financial Statements
35
Statements of Operations (Unaudited) (cont'd)
Neuberger Berman Alternative Funds (cont'd)
DYNAMIC REAL RETURN FUND | GLOBAL ALLOCATION FUND | LONG SHORT FUND | |||||||||||||
Period from December 19, 2012 (Commencement of Operations) to April 30, 2013 | For the Six Months Ended April 30, 2013 | For the Six Months Ended April 30, 2013 | |||||||||||||
Realized and Unrealized Gain (Loss) on Investments (Note A): | |||||||||||||||
Net realized gain (loss) on: | |||||||||||||||
Sales of investment securities of unaffiliated issuers | 13,705 | 336,730 | 4,945,782 | ||||||||||||
Sales of investment securities of unaffiliated issuers sold short | — | (245,330 | ) | (916,593 | ) | ||||||||||
Forward foreign currency contracts | — | 28,737 | — | ||||||||||||
Foreign currency | (5,444 | ) | (1,195 | ) | (6,339 | ) | |||||||||
Financial futures contracts | (36,545 | ) | (915,532 | ) | (2,240,384 | ) | |||||||||
Total return swap contracts | — | 1,128,589 | — | ||||||||||||
Change in net unrealized appreciation (depreciation) in value of: | |||||||||||||||
Unaffiliated investment securities | 405,290 | 592,389 | 27,356,146 | ||||||||||||
Unaffiliated investment securities sold short | — | (34,563 | ) | (4,331,821 | ) | ||||||||||
Forward foreign currency contracts | — | (27,618 | ) | — | |||||||||||
Foreign currency | 128 | 348 | 2,004 | ||||||||||||
Financial futures contracts | 4,867 | 1,115,465 | (2,038,901 | ) | |||||||||||
Total return swap contracts | — | 386,466 | — | ||||||||||||
Net gain (loss) on investments | 382,001 | 2,364,486 | 22,769,894 | ||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | 445,520 | $ | 2,268,270 | $ | 23,182,733 |
See Notes to Financial Statements
36
Statements of Changes in Net Assets
Neuberger Berman Alternative Funds
DYNAMIC REAL RETURN FUND | GLOBAL ALLOCATION FUND | LONG SHORT FUND | |||||||||||||||||||||
Period from December 29, 2012 (Commencement of Operations) to April 30, 2013 | Six Months Ended April 30, 2013 (Unaudited) | Year Ended October 31, 2012 (Unaudited) | Six Months Ended April 30, 2013 | Period from December 29, 2011 (Commencement of Operations) to October 31, 2012 (Unaudited) | |||||||||||||||||||
Increase (Decrease) in Net Assets: | |||||||||||||||||||||||
From Operations (Note A): | |||||||||||||||||||||||
Net investment income (loss) | $ | 63,519 | $ | (96,216 | ) | $ | (189,871 | ) | $ | 412,839 | $ | 105,627 | |||||||||||
Net realized gain (loss) on investments | (28,284 | ) | 331,999 | 530,075 | 1,782,466 | 659,165 | |||||||||||||||||
Change in net unrealized appreciation (depreciation) of investments | 410,285 | 2,032,487 | (189,034 | ) | 20,987,428 | 1,964,300 | |||||||||||||||||
Net increase (decrease) in net assets resulting from operations | 445,520 | 2,268,270 | 151,170 | 23,182,733 | 2,729,092 | ||||||||||||||||||
Distributions to Shareholders From (Note A): | |||||||||||||||||||||||
Net investment income: | |||||||||||||||||||||||
Institutional Class | — | (158,784 | ) | (126,485 | ) | (314,298 | ) | — | |||||||||||||||
Class A | — | (62,020 | ) | (3,706 | ) | (105,289 | ) | — | |||||||||||||||
Class C | — | (11,158 | ) | (1,337 | ) | (3,759 | ) | — | |||||||||||||||
Net realized gain on investments: | |||||||||||||||||||||||
Institutional Class | — | — | (426,028 | ) | (580,685 | ) | — | ||||||||||||||||
Class A | — | — | (13,551 | ) | (246,351 | ) | — | ||||||||||||||||
Class C | — | — | (5,721 | ) | (35,045 | ) | — | ||||||||||||||||
Total distributions to shareholders | — | (231,962 | ) | (576,828 | ) | (1,285,427 | ) | — | |||||||||||||||
From Fund Share Transactions (Note D): | |||||||||||||||||||||||
Proceeds from shares sold: | |||||||||||||||||||||||
Institutional Class | 15,067,982 | 7,080,742 | 15,325,607 | 291,663,264 | 92,669,640 | ||||||||||||||||||
Class A | 102,500 | 6,781,458 | 9,666,922 | 176,218,196 | 26,973,514 | ||||||||||||||||||
Class C | 103,500 | 2,254,916 | 2,100,306 | 39,266,031 | 3,294,397 | ||||||||||||||||||
Proceeds from reinvestment of dividends and distributions: | |||||||||||||||||||||||
Institutional Class | — | 157,181 | 552,345 | 853,873 | — | ||||||||||||||||||
Class A | — | 51,292 | 17,256 | 293,006 | — | ||||||||||||||||||
Class C | — | 10,981 | 7,058 | 17,797 | — | ||||||||||||||||||
Payments for shares redeemed: | |||||||||||||||||||||||
Institutional Class | (5,015 | ) | (1,282,083 | ) | (12,348,482 | ) | (23,365,157 | ) | (2,540,314 | ) | |||||||||||||
Class A | — | (808,234 | ) | (6,391,944 | ) | (9,850,106 | ) | (161,483 | ) | ||||||||||||||
Class C | — | (55,372 | ) | (9,541 | ) | (452,105 | ) | — | |||||||||||||||
Net increase (decrease) from Fund share transactions | 15,268,967 | 14,190,881 | 8,919,527 | 474,644,799 | 120,235,754 | ||||||||||||||||||
Net Increase (Decrease) in Net Assets | 15,714,487 | 16,227,189 | 8,493,869 | 496,542,105 | 122,964,846 | ||||||||||||||||||
Net Assets: | |||||||||||||||||||||||
Beginning of period | — | 14,487,075 | 5,993,206 | 122,964,846 | — | ||||||||||||||||||
End of period | $ | 15,714,487 | $ | 30,714,264 | $ | 14,487,075 | $ | 619,506,951 | $ | 122,964,846 | |||||||||||||
Undistributed net investment income (loss) at end of period | $ | 63,519 | $ | — | $ | 307,037 | $ | 95,842 | $ | 106,349 | |||||||||||||
Distributions in excess of net investment income at end of period | $ | — | $ | (21,141 | ) | $ | — | $ | — | $ | — |
See Notes to Financial Statements
37
38
Notes to Financial Statements Alternative Funds (Unaudited)
Note A—Summary of Significant Accounting Policies:
1 General: Neuberger Berman Alternative Funds (the "Trust") is a Delaware statutory trust organized pursuant to an Amended and Restated Trust Instrument dated October 14, 2010. The Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and its shares are registered under the Securities Act of 1933, as amended (the "1933 Act"). Each Fund is a separate operating series of the Trust and is non-diversified. Long Short had no operations until December 29, 2011, other than matters relating to its organization and registration of shares under the 1933 Act. Dynamic Real Return had no operations until December 19, 2012, other than matters relating to its organization and registration of shares under the 1933 Act. Each Fund offers Institutional Class shares, Class A shares and Class C shares. The Board may establish additional series or classes of shares without the approval of shareholders.
The assets of each Fund belong only to that Fund, and the liabilities of each Fund are borne solely by that Fund and no other.
The preparation of financial statements in accordance with U.S. generally accepted accounting principles ("GAAP") requires Management to make estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates.
2 Portfolio valuation: Investment securities are valued as indicated in the notes following the Funds' Schedule of Investments.
3 Foreign currency translation: The accounting records of the Funds are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars using the exchange rate as of 4:00 p.m., Eastern time, to determine the value of investments, other assets and liabilities. Purchase and sale prices of securities, and income and expenses, are translated into U.S. dollars at the prevailing rate of exchange on the respective dates of such transactions. Net unrealized foreign currency gain (loss), if any, arises from changes in the value of assets and liabilities, other than investments in securities, as a result of changes in exchange rates and is stated separately in the Statements of Operations.
4 Securities transactions and investment income: Securities transactions are recorded on trade date for financial reporting purposes. Dividend income is recorded on the ex-dividend date or, for certain foreign dividends, as soon as the Fund becomes aware of the dividends. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, including accretion of discount on securities for Long Short, accretion of original issue discount, where applicable, and accretion of discount on short-term investments, if any, is recorded on the accrual basis. Realized gains and losses from securities transactions and foreign currency transactions, if any, are recorded on the basis of identified cost and stated separately in the Statements of Operations.
5 Income tax information: Each Fund is treated as a separate entity for U.S. federal income tax purposes. It is the policy of Global Allocation and Long Short to continue to, and the intention of Dynamic Real Return to, qualify for treatment as a regulated investment company by complying with the requirements of the U.S. Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its net investment income and net realized capital gains to its shareholders. To the extent a Fund distributes substantially all of its net investment income and net realized capital gains to shareholders, no federal income or excise tax provision is required.
The Funds have adopted the provisions of ASC 740 "Income Taxes" ("ASC 740"). ASC 740 sets forth a minimum threshold for financial statement recognition of a tax position taken, or expected to be taken, in a tax return. The Funds recognize interest and penalties, if any, related to unrecognized tax positions as an income tax expense in the Statements of Operations. As of April 30, 2013, the Funds did not have any unrecognized tax positions.
39
Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by each Fund, timing differences and differing characterization of distributions made by each Fund.
As determined on October 31, 2012, permanent differences resulting primarily from different book and tax accounting were reclassified at year end. Such differences may be attributed to one or more of the following: accounting for passive foreign investment companies gains and losses, §988 reclass on closed futures, foreign currency gains and losses, non-deductible Rule 12b-1 fees, the characterization of distributions from real estate investment trusts ("REITs"), short sale dividend expense reclass and income recognized on total return swaps. These reclassifications had no effect on net income, net asset value ("NAV") or NAV per share of each Fund. For the year ended October 31, 2012, the Funds recorded the following permanent reclassifications:
Paid-in Capital | Undistributed Net Investment Income (Loss) | Accumulated Net Realized Gains (Losses) on Investments | |||||||||||||
Global Allocation | $ | (1 | ) | $ | 758,346 | $ | (758,345 | ) | |||||||
Long Short | (349 | ) | 722 | (373 | ) |
For tax purposes, distributions of short-term gains are taxable to shareholders as ordinary income.
The tax character of distributions paid during the years ended October 31, 2012 and October 31, 2011 was as follows:
Distributions Paid From: | |||||||||||||||||||||||||||||||||||||||||||
Ordinary Income | Tax-Exempt Income | Long-Term Capital Gain | Return of Capital | Total | |||||||||||||||||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||
Global Allocation | $ | 561,328 | $ | — | (1) | $ | — | $ | — | (1) | $ | 15,500 | $ | — | (1) | $ | — | $ | — | (1) | $ | 576,828 | $ | — | (1) | ||||||||||||||||||
Long Short | — | (2) | — | — | (2) | — | — | (2) | — | — | (2) | — | — | (2) | — |
(1) Period from December 29, 2010 (Commencement of Operations) to October 31, 2011.
(2) Period from December 29, 2011 (Commencement of Operations) to October 31, 2012.
As of October 31, 2012, the components of distributable earnings (accumulated losses) on a U.S. federal income tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-Term Gain | Unrealized Appreciation (Depreciation) | Loss Carryforwards and Deferrals | Other Temporary Differences | Total | ||||||||||||||||||||||
Global Allocation | $ | 231,894 | $ | — | $ | 69,076 | $ | (634,843 | ) | $ | 77,130 | $ | (256,743 | ) | |||||||||||||
Long Short | 1,014,039 | — | 1,761,252 | — | (45,850 | ) | 2,729,441 |
The difference between book basis and tax basis distributable earnings are primarily due to: timing differences of wash sales, organization expenses, passive foreign investment companies, forward contracts mark to market, mark to market on certain futures contract transactions, mark to market on certain swap contract transactions, short sales settlement date loss deferral, current year straddle losses deferred and accrued swap income not recognized on total return swaps.
To the extent each Fund's net realized capital gains, if any, can be offset by capital loss carryforwards, it is the policy of each Fund not to distribute such gains. The Regulated Investment Company ("RIC") Modernization Act of 2010 (the "Act") became effective for Global Allocation on November 1, 2011, Long Short on December 29, 2011 and Dynamic Real Return on December 19, 2012 (Commencement of Operations). The Act modernizes several of the federal income and excise tax provisions related to RICs. Among the changes made are changes to the capital loss
40
carryforward rules allowing for RICs to carry forward capital losses indefinitely and to retain the character of capital loss carryforwards as short-term or long-term ("Post-Enactment"). Rules in effect previously limited the carryforward period to eight years and all carryforwards were considered short-term in character. As determined at October 31, 2012, Global Allocation had unused capital loss carryforwards available for federal income tax purposes to offset net realized capital gains, if any, as follows:
Post-Enactment (No Expiration Date) | |||||||||||
Long-Term | Short-Term | ||||||||||
Global Allocation | $ | — | $ | 634,843 |
6 Foreign taxes: Foreign taxes withheld represent amounts withheld by foreign tax authorities, net of refunds recoverable.
7 Distributions to shareholders: Each Fund may earn income, net of expenses, daily on its investments. Distributions from net investment income and net realized capital gains, if any, generally are distributed once a year (usually in December) and are recorded on the ex-date.
8 Organization expenses: Costs incurred by Dynamic Real Return in connection with its organization, which amounted to $212,980, have been expensed as incurred.
9 Expense allocation: Certain expenses are applicable to multiple funds. Expenses directly attributable to a Fund are charged to that Fund. Expenses of the Trust that are not directly attributable to a particular series of the Trust (e.g., a Fund) are allocated among the series of the Trust, on the basis of relative net assets, except where a more appropriate allocation of expenses to each of the series can otherwise be made fairly. Expenses borne by the complex of related investment companies, which includes open-end and closed-end investment companies for which Management serves as investment manager, that are not directly attributable to a particular investment company in the complex (e.g., the Trust) or series thereof are allocated among the investment companies in the complex or series thereof, on the basis of relative net assets, except where a more appropriate allocation of expenses to each of the investment companies in the complex or series thereof can otherwise be made fairly. Each Fund's expenses (other than those specific to each class) are allocated proportionally each day among the classes based upon the relative net assets of each class.
10 Investments in foreign securities: Investing in foreign securities may involve certain sovereign and other risks, in addition to the credit and market risks normally associated with domestic securities. These additional risks include the possibility of adverse political and economic developments (including political instability, nationalization, expropriation, or confiscatory taxation) and the potentially adverse effects of unavailability of public information regarding issuers, less governmental supervision and regulation of financial markets, reduced liquidity of certain financial markets, and the lack of uniform accounting, auditing, and financial reporting standards or the application of standards that are different or less stringent than those applied in the United States. Foreign securities also may experience greater price volatility, higher rates of inflation, and delays in settlement.
11 Securities sold short: Each Fund may engage in short sales, which are sales of securities which have been borrowed from a third party on the expectation that the market price will decline. If the price of the securities decreases, a Fund will make a profit by purchasing the securities in the open market at a price lower than the one at which it sold the securities. If the price of the securities increases, a Fund may have to cover its short positions at a price higher than the short sale price, resulting in a loss. Gains are limited to the price at which a Fund sold the security short, while losses are potentially unlimited in size. The Funds pledge securities and/or other assets, which may include cash collateral from securities lending activities, to the lender as collateral. Proceeds received from short sales may be maintained by the lender as collateral or may be released to the Funds and used to purchase additional securities or for any other purpose. Proceeds maintained by the lender are included in the "Deposit with brokers for short sales" on the Statements of Assets and Liabilities. The Funds are required to segregate an amount of cash, cash equivalents or other appropriate liquid marketable securities with the custodian in at least an amount equal to the current market value of the securities sold short (less any additional collateral held by the lender) and,
41
for Global Allocation, the amount of any securities lending cash collateral used to finance short sales until the Fund replaces a borrowed security. The Funds are contractually responsible to the lender for any dividends payable on securities while those securities are in a short position. These dividends are recorded as an expense of the Funds. As of April 30, 2013, Global Allocation had pledged cash in the amount of $7,247,455 to State Street Bank and Trust Company ("State Street"), as collateral for short sales, in addition to cash collateral received from securities lending activities for the Fund. In addition, State Street has a perfected security interest in these Global Allocation assets. At April 30, 2013, Long Short had pledged cash in the amount of $88,453,506 to State Street to cover collateral requirements for borrowing in connection with securities sold short.
12 Security lending: Each of Global Allocation and Long Short, using State Street as its lending agent, may loan securities to qualified brokers and dealers in exchange for negotiated lender's fees. These fees disclosed within the Statements of Operations under the caption, "Income from securities loaned-net" are net of expenses retained by State Street as compensation for its services as lending agent. For the six months ended April 30, 2013, Global Allocation received net income under the securities lending arrangement of $1,322. The Funds receive cash collateral at the beginning of each transaction equal to at least 102% of the prior day's market value of the loaned securities (105% in the case of international securities). Some or all of the cash collateral may be used to finance short sales. As of April 30, 2013, approximately 100% of the cash collateral received by Global Allocation was used to finance short sales.
As of April 30, 2013, Global Allocation had outstanding loans of securities to certain approved brokers for which it received collateral as follows:
Value of Loaned Securities | Value of Collateral | ||||||||||
Global Allocation | $ | 211,131 | $ | 217,491 |
13 Investment company securities and exchange-traded funds: The Funds invests in shares of other registered investment companies, including exchange-traded funds ("ETFs"), within the limitations prescribed by the 1940 Act. Some ETFs seek to track the performance of a particular market index. These indices include both broad-based market indices and more narrowly-based indices, including those relating to particular sectors, markets, regions or industries. However, some ETFs have an actively-managed investment objective. ETF shares are traded like traditional equity securities on a national securities exchange or NASDAQ. A Fund will indirectly bear its proportionate share of any management fees and other expenses paid by such other investment companies, which will increase expenses and decrease returns.
14 Derivative instruments: During the six months ended April 30, 2013, the Funds' use of derivatives, as described below for each Fund, was limited to total return swaps, financial futures contracts, forward foreign currency contracts, and purchased option transactions. The Funds have adopted the provisions of ASC 815 "Derivatives and Hedging" ("ASC 815"). The disclosure requirements of ASC 815 distinguish between derivatives that qualify for hedge accounting and those that do not. Because investment companies value their derivatives at fair value and recognize changes in fair value through the Statements of Operations, they do not qualify for hedge accounting. Accordingly, even though a Fund's investments in derivatives may represent economic hedges, they are considered non-hedge transactions for purposes of this disclosure.
Total return swap contracts: During the six months ended April 30, 2013, Global Allocation used total return swaps to provide investment exposure to the benchmark indices. Total return swaps involve commitments to pay fixed or floating rate interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the reference security or index underlying the total return swap exceeds or falls short of the offsetting interest rate obligation, a Fund will receive a payment or make a payment to the counterparty, respectively. Certain risks may arise when entering into swap transactions, including counterparty default, liquidity or unfavorable changes in the value of the underlying reference security or index. The value of the swap is adjusted daily and the change in value, if any, is recorded as unrealized appreciation or depreciation in the Statements of Assets and Liabilities. Payments received or made at the end of each measurement period are recorded as realized gain or loss in the Statements of Operations.
42
At April 30, 2013, the outstanding total return swap contracts for Global Allocation were as follows:
Rate Type | |||||||||||||||||||||||||||||||
Swap Counterparty | Notional Amount(1) | Termination Date | Variable-rate Payments Made/ (Received) by the Fund | Reference Entity | Accrued Net Interest Receivable (Payable) | Unrealized Appreciation (Depreciation) | Total Fair Value | ||||||||||||||||||||||||
J.P. Morgan | $ | 7,840,514 | January 7, 2014 | .790 | %(2) | J.P. Morgan Global Government Bond Total Return Index Unhedged | $ | (3,787 | ) | $ | 79,424 | $ | 75,637 | ||||||||||||||||||
J.P. Morgan | 12,460,716 | January 15, 2014 | .008 | %(3) | MSCI Daily Total Return Net World Index | (48 | ) | 225,845 | 225,797 | ||||||||||||||||||||||
Totals | $ | (3,835 | ) | $ | 305,269 | $ | 301,434 |
(1) The notional amount at period end is indicative of the volume throughout the period.
(2) 1 month LIBOR plus .59% at April 5, 2013.
(3) 1 month LIBOR minus .19% at April 11, 2013.
Financial futures contracts: During the period ended April 30, 2013, Dynamic Real Return entered into financial futures contracts for economic hedging purposes, including as a maturity or duration management device. During the six months ended April 30, 2013, Global Allocation entered into financial futures contracts in an effort to enhance returns and to manage or adjust the risk profile and the investment exposure of the Fund to certain asset classes, countries and regions, including adjusting the investment exposures provided by the Fund's total return swaps, described above, to the benchmark indices. In addition, Global Allocation utilized financial futures contracts to provide investment exposure to certain indices and markets other than the benchmark indices. During the six months ended April 30, 2013, Long Short entered into financial futures contracts on the broader market index and U.S. Treasuries in an effort either to enhance returns or to manage or adjust the risk profile and the investment exposure of the Fund.
At the time a Fund enters into a financial futures contract, it is required to deposit with the futures commission merchant a specified amount of cash or liquid securities, known as "initial margin," which is a percentage of the value of the financial futures contract being traded that is set by the exchange upon which the futures contract is traded. Each day, the futures contract is valued at the official settlement price of the board of trade or U.S. commodity exchange on which such futures contract is traded. Subsequent payments, known as "variation margin," to and from the broker are made on a daily basis as the market price of the financial futures contract fluctuates. Daily variation margin adjustments, arising from this "mark to market," are recorded by a Fund as unrealized gains or losses.
Although some financial futures contracts by their terms call for actual delivery or acquisition of the underlying securities or currency, in most cases the contracts are closed out prior to delivery by offsetting purchases or sales of matching financial futures contracts. When the contracts are closed, a Fund recognizes a gain or loss. Risks of entering into futures contracts include the possibility there may be an illiquid market, possibly at a time of rapidly declining prices, and/or a change in the value of the contract may not correlate with changes in the value of the underlying securities. Futures executed on regulated futures exchanges have minimal counterparty risk to a fund because the exchange's clearinghouse assumes the position of the counterparty in each transaction. Thus, a Fund is exposed to risk only in connection with the clearinghouse and not in connection with the original counterparty to the transaction.
For U.S. federal income tax purposes, the futures transactions undertaken by a Fund may cause that Fund to recognize gains or losses from marking contracts to market even though its positions have not been sold or
43
terminated, may affect the character of the gains or losses recognized as long-term or short-term, and may affect the timing of some capital gains and losses realized by the Fund. Also, a Fund's losses on transactions involving futures contracts may be deferred rather than being taken into account currently in calculating such Fund's taxable income.
At April 30, 2013, open positions in financial futures contracts were:
Fund | Expiration | Open Contracts | Position | Unrealized Appreciation (Depreciation) | |||||||||||||||
Dynamic Real Return | June 2013 | 1 Euro Currency | Short | $ | (3,229 | ) | |||||||||||||
Dynamic Real Return | June 2013 | 2 GBP Currency | Long | 6,122 | |||||||||||||||
Dynamic Real Return | June 2013 | 1 Canadian Currency | Long | 1,726 | |||||||||||||||
Dynamic Real Return | September 2014 | 1 Canada Bankers Accept, 3 month | Long | 248 | |||||||||||||||
Total | $ | 4,867 | |||||||||||||||||
Global Allocation | May 2013 | 8 Hang Seng Index Future | Short | $ | (9,568 | ) | |||||||||||||
Global Allocation | June 2013 | 48 Canadian Currency | Short | (42,637 | ) | ||||||||||||||
Global Allocation | June 2013 | 29 Euro Currency | Short | (102,197 | ) | ||||||||||||||
Global Allocation | June 2013 | 14 Euro STOXX 50 Index | Short | (4,407 | ) | ||||||||||||||
Global Allocation | June 2013 | 22 German Euro Bund | Short | (29,007 | ) | ||||||||||||||
Global Allocation | June 2013 | 59 Mini Japanese Government Bond, 10 Year | Short | 49,581 | |||||||||||||||
Global Allocation | June 2013 | 21 MSCI Emerging Market Muni | Short | (20,737 | ) | ||||||||||||||
Global Allocation | June 2013 | 49 Australian Dollar | Long | 40,807 | |||||||||||||||
Global Allocation | June 2013 | 64 Australian Treasury Bond, 10 Year | Long | 203,841 | |||||||||||||||
Global Allocation | June 2013 | 7 Government of Canada Bond, 10 Year | Long | 10,434 | |||||||||||||||
Global Allocation | June 2013 | 4 Canadian Currency | Long | 5,210 | |||||||||||||||
Global Allocation | June 2013 | 24 CHF Currency | Long | 59,241 | |||||||||||||||
Global Allocation | June 2013 | 10 Euro Currency | Long | 13,673 | |||||||||||||||
Global Allocation | June 2013 | 22 Euro STOXX 50 Index | Long | 9,623 | |||||||||||||||
Global Allocation | June 2013 | 55 FTSE 100 Index | Long | 690 | |||||||||||||||
Global Allocation | June 2013 | 17 GBP Currency | Long | 43,166 | |||||||||||||||
Global Allocation | June 2013 | 5 German Euro Bund | Long | 19,733 | |||||||||||||||
Global Allocation | June 2013 | 48 Japanese Yen | Long | (122,707 | ) | ||||||||||||||
Global Allocation | June 2013 | 8 Mini Japanese Government Bond, 10 Year | Long | (1,769 | ) | ||||||||||||||
Global Allocation | June 2013 | 12 S&P TSX 60 Index | Long | (49,319 | ) | ||||||||||||||
Global Allocation | June 2013 | 45 S&P 500 E-Mini Index | Long | 69,789 | |||||||||||||||
Global Allocation | June 2013 | 9 SPI 200 Index | Long | 38,723 | |||||||||||||||
Global Allocation | June 2013 | 28 Topix Index | Long | 490,473 | |||||||||||||||
Global Allocation | June 2013 | 53 UK Long Gilt Bond | Long | 325,742 | |||||||||||||||
Global Allocation | June 2013 | 80 US Treasury Note, 10 Year | Long | 129,797 | |||||||||||||||
Total | $ | 1,128,175 | |||||||||||||||||
Long Short | June 2013 | 831 S&P 500 E-Mini Index | Short | $ | (1,531,385 | ) | |||||||||||||
Long Short | June 2013 | 205 US Treasury Note, 10 Year | Short | (328,319 | ) | ||||||||||||||
Total | $ | (1,859,704 | ) |
During the period ended April 30, 2013, the average notional value of financial futures contracts was:
Long positions | Short positions | ||||||||||
Dynamic Real Return | $ | 272,814 | $ | (380,485 | ) | ||||||
Global Allocation | $ | 30,755,294 | $ | (20,210,523 | ) | ||||||
Long Short | $ | — | $ | (45,374,942 | ) |
44
At April 30, 2013, the notional value of financial futures contracts was:
Long positions | Short positions | ||||||||||
Dynamic Real Return | $ | 538,165 | $ | (164,575 | ) | ||||||
Global Allocation | $ | 65,834,227 | $ | (25,279,468 | ) | ||||||
Long Short | $ | — | $ | (93,494,582 | ) |
At April 30, 2013, the Funds had deposited the following in segregated accounts to cover margin requirements on open futures contracts:
Dynamic Real Return | $ | 3,888 | |||||
Global Allocation | $ | 1,974,430 | |||||
Long Short | $ | 3,220,777 |
Forward foreign currency contracts: During the six months ended April 30, 2013, Global Allocation entered into forward foreign currency contracts ("forward contract") to manage or adjust the risk profile and investment exposure of the Fund, including altering investment exposures to certain currencies provided by the Fund's total return swaps, described above.
A forward contract is an agreement between two parties to buy or sell a specific currency for another at a set price on a future date, which is individually negotiated and privately traded by currency traders and their customers in the interbank market. The market value of a forward contract fluctuates with changes in forward currency exchange rates. Forward contracts are marked to market daily, and the change in value is recorded by the Fund as an unrealized gain or loss. At the consummation of a forward contract to purchase or sell currency, a Fund may either exchange the currencies specified at the maturity of a forward contract or enter into a closing transaction involving the purchase or sale of an offsetting forward contract. Closing transactions with respect to forward contracts are usually performed with the counterparty to the original forward contract. The gain or loss arising from the difference between the US dollar cost of the original contract and the value of the foreign currency in US dollars upon closing a contract is included in "Net realized gain (loss) from forward foreign currency contracts" in the Statements of Operations. These contracts may involve market risk in excess of the unrealized gain or loss reflected in a Fund's Statement of Assets and Liabilities. In addition, a Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if the value of the currency changes unfavorably to the US dollar.
At April 30, 2013, open forward contracts for Global Allocation were as follows:
Buy | Counterparty | Contracts to Receive | In Exchange For | Settlement Date | Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Brazilian Real | Goldman Sachs | 531,890 | $ | 262,532 | 5/16/13 | $ | 265,447 | $ | 2,915 | ||||||||||||||||||
Chilean Peso | Goldman Sachs | 332,014,815 | 697,950 | 5/16/13 | 703,674 | 5,724 | |||||||||||||||||||||
New Taiwan Dollar | JP Morgan Chase | 21,554,925 | 722,229 | 5/16/13 | 730,498 | 8,269 | |||||||||||||||||||||
South African Rand | JP Morgan Chase | 3,875,154 | 418,076 | 5/16/13 | 431,086 | 13,010 | |||||||||||||||||||||
Total | $ | 29,918 | |||||||||||||||||||||||||
Sell | Counterparty | Contracts to Deliver | In Exchange For | Settlement Date | Value | Net Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
Czech Koruna | Barclays | 10,219,834 | $ | 505,320 | 5/16/13 | $ | 521,802 | $ | (16,482 | ) | |||||||||||||||||
Hungarian Forint | Morgan Stanley | 147,301,609 | 622,445 | 5/16/13 | 647,209 | (24,764 | ) | ||||||||||||||||||||
Idonesian Rupiah | JP Morgan Chase | 1,427,595,400 | 145,673 | 5/16/13 | 146,587 | (914 | ) | ||||||||||||||||||||
South Korean Won | Barclays | 413,885,955 | 368,718 | 5/16/13 | 375,637 | (6,919 | ) | ||||||||||||||||||||
Mexican Peso | Barclays | 1,712,156 | 138,203 | 5/16/13 | 140,856 | (2,653 | ) | ||||||||||||||||||||
Polish Zloty | Goldman Sachs | 821,224 | 250,526 | 5/16/13 | 259,701 | (9,175 | ) | ||||||||||||||||||||
Singapore Dollar | Morgan Stanley | 86,196 | 69,635 | 5/16/13 | 69,981 | (346 | ) | ||||||||||||||||||||
Total | $ | (61,253 | ) |
45
For the six months ended April 30, 2013, Global Allocation's investment in forward contracts had an average value of $3,216,031.
Options: Premiums received by a Fund upon writing a covered call option or a put option are recorded in the liability section of the Fund's Statement of Assets and Liabilities and are subsequently adjusted to the current market value. When an option is exercised, closed, or expired, the Fund realizes a gain or loss and the liability is eliminated.
When writing a covered call option, a Fund, in return for the premium, gives up the opportunity for profit from a price increase in the underlying security above the exercise price, but conversely retains the risk of loss should the price of the security decline. When writing a put option, a Fund, in return for the premium, takes the risk that it must purchase the underlying security at a price that may be higher than the current market price of the security. If a covered call or a put option that a Fund has written expires unexercised, the Fund will realize a gain in the amount of the premium. All securities covering outstanding written options are held in escrow by the custodian bank.
There were no written option transactions for Long Short for the six months ended April 30, 2013.
Premiums paid by a Fund upon purchasing a call or put option are recorded in the asset section of the Fund's Statement of Assets and Liabilities and are subsequently adjusted to the current market value. When an option is exercised, closed, or expired, the Fund realizes a gain or loss and the asset is eliminated.
For purchased call options, a Fund's loss is limited to the amount of the option premium paid.
Purchased option transactions were used either for hedging purposes or in an attempt to generate incremental returns for Long Short for the six months ended April 30, 2013. Purchased option transactions for Long Short for the six months ended April 30, 2013 were:
Long Short
Number | Value When Purchased | ||||||||||
Contracts outstanding 10/31/2012 | 100 | $ | 21,650 | ||||||||
Contracts purchased | 2,605 | 205,425 | |||||||||
Contracts expired | (1,730 | ) | (165,102 | ) | |||||||
Contracts exercised | (250 | ) | (15,606 | ) | |||||||
Contracts closed | (725 | ) | (46,367 | ) | |||||||
Contracts outstanding 4/30/2013 | — | $ | — |
For the six months ended April 30, 2013, Long Short had an average market value of $18,107 in purchased options.
At April 30, 2013, the Funds had the following derivatives (which did not qualify as hedging instruments under ASC 815), grouped by primary risk exposure:
Asset Derivatives | |||||||||||||||||||||||
Derivative Type | Statements of Assets and Liabilities Location | Interest Rate Risk | Currency Risk | Equity Risk | Total | ||||||||||||||||||
Dynamic Real Return | |||||||||||||||||||||||
Futures contracts | Receivable/Payable for variation margin(2) | $ | 248 | $ | 7,848 | $ | — | $ | 8,096 | ||||||||||||||
Total Value—Assets | $ | 248 | $ | 7,848 | $ | — | $ | 8,096 |
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Derivative Type | Statements of Assets and Liabilities Location | Interest Rate Risk | Currency Risk | Equity Risk | Total | ||||||||||||||||||
Global Allocation | |||||||||||||||||||||||
Swap contracts | Total return swaps, at value(1) | $ | — | $ | — | $ | 301,434 | $ | 301,434 | ||||||||||||||
Futures contracts | Receivable/Payable for variation margin(2) | 1,348,426 | 162,097 | — | 1,510,523 | ||||||||||||||||||
Forward contracts | Receivable for open forward foreign currency contracts | — | 29,918 | — | 29,918 | ||||||||||||||||||
Total Value—Assets | $ | 1,348,426 | $ | 192,015 | $ | 301,434 | $ | 1,841,875 | |||||||||||||||
Liability Derivatives | |||||||||||||||||||||||
Derivative Type | Statements of Assets and Liabilities Location | Interest Rate Risk | Currency Risk | Equity Risk | Total | ||||||||||||||||||
Dynamic Real Return | |||||||||||||||||||||||
Futures contracts | Receivable/Payable for variation margin(2) | $ | $ | (3,229 | ) | $ | — | $ | (3,229 | ) | |||||||||||||
Total Value—Liabilities | $ | — | $ | (3,229 | ) | $ | — | $ | (3,229 | ) | |||||||||||||
Global Allocation | |||||||||||||||||||||||
Futures contracts | Receivable/Payable for variation margin(2) | $ | (30,776 | ) | $ | (351,572 | ) | $ | — | $ | (382,348 | ) | |||||||||||
Forward contracts | Payable for open | — | (61,253 | ) | — | (61,253 | ) | ||||||||||||||||
forward foreign currency contracts | |||||||||||||||||||||||
Total Value—Liabilities | $ | (30,776 | ) | $ | (412,825 | ) | $ | — | $ | (443,601 | ) | ||||||||||||
Long Short | |||||||||||||||||||||||
Futures contracts | Receivable/Payable for variation margin(2) | $ | (328,319 | ) | $ | — | $ | (1,531,385 | ) | $ | (1,859,704 | ) | |||||||||||
Total Value—Liabilities | $ | (328,319 | ) | $ | — | $ | (1,531,385 | ) | $ | (1,859,704 | ) |
(1) "Swap contracts" reflects the appreciation (depreciation) of the total return swap contracts plus accrued interest as of April 30, 2013, which is reflected in the Statements of Assets and Liabilities under the caption "Total return swaps, at value."
(2) "Futures contracts" reflects the cumulative appreciation (depreciation) of futures contracts as of April 30, 2013, which is reflected in the Statements of Assets and Liabilities under the caption "Net unrealized appreciation (depreciation) in value of investments." The outstanding variation margin as of April 30, 2013, if any, is reflected in the Statements of Assets and Liabilities under the caption "Receivable/Payable for variation margin."
The impact of the use of these derivative instruments on the Statements of Operations during the six months ended April 30, 2013, was as follows:
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Realized Gain (Loss) | |||||||||||||||||||||||
Derivative Type | Statements of Operations Location | Interest Rate Risk | Currency Risk | Equity Risk | Total | ||||||||||||||||||
Dynamic Real Return | |||||||||||||||||||||||
Futures contracts | Net realized gain (loss) on: financial futures contracts | $ | (28,115) | $ | (8,430) | $ | — | $ | (36,545) | ||||||||||||||
Total Realized Gain (Loss) | $ | (28,115) | $ | (8,430) | $ | — | $ | (36,545) | |||||||||||||||
Global Allocation | |||||||||||||||||||||||
Swap contracts | Net realized gain (loss) on: total return swap contracts | $ | — | $ | — | $ | 1,128,589 | $ | 1,128,589 | ||||||||||||||
Futures contracts | Net realized gain (loss) on: financial futures contracts | (868,066) | (47,466) | — | (915,532) | ||||||||||||||||||
Forward contracts | Net realized gain (loss) on: forward foreign currency contracts | — | 28,737 | — | 28,737 | ||||||||||||||||||
Total Realized Gain (Loss) | $ | (868,066) | $ | (18,729) | $ | 1,128,589 | $ | 241,794 | |||||||||||||||
Long Short | |||||||||||||||||||||||
Futures contracts | Net realized gain (loss) on: financial futures contracts | $ | (116,919) | $ | — | $ | (2,123,465) | $ | (2,240,384) | ||||||||||||||
Option contracts purchased | Net realized gain (loss) on: sales of investment securities of unaffiliated issuers | — | — | (118,433) | (118,433) | ||||||||||||||||||
Total Realized Gain (Loss) | $ | (116,919) | $ | — | $ | (2,241,898) | $ | (2,358,817) | |||||||||||||||
Change in Appreciation (Depreciation) | |||||||||||||||||||||||
Derivative Type | Statements of Operations Location | Interest Rate Risk | Currency Risk | Equity Risk | Total | ||||||||||||||||||
Dynamic Real Return | |||||||||||||||||||||||
Futures contracts | Change in net unrealized appreciation (depreciation) in value of: financial futures contracts | $ | 248 | $ | 4,619 | $ | — | $ | 4,867 | ||||||||||||||
Total Change in Appreciation (Depreciation) | $ | 248 | $ | 4,619 | $ | — | $ | 4,867 |
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Derivative Type | Statements of Operations Location | Interest Rate Risk | Currency Risk | Equity Risk | Total | ||||||||||||||||||
Global Allocation | |||||||||||||||||||||||
Swap contracts | Change in net unrealized appreciation (depreciation) in value of: total return swap contracts | $ | — | $ | — | $ | 386,466 | $ | 386,466 | ||||||||||||||
Futures contracts | Change in net unrealized appreciation (depreciation) in value of: financial futures contracts | 1,256,744 | (141,279 | ) | — | 1,115,465 | |||||||||||||||||
Forward contracts | Change in net unrealized appreciation (depreciation) in value of: forward foreign currency contracts | — | (27,618 | ) | — | (27,618 | ) | ||||||||||||||||
Total Change in Appreciation (Depreciation) | $ | 1,256,744 | $ | (168,897 | ) | $ | 386,466 | $ | 1,474,313 | ||||||||||||||
Long Short | |||||||||||||||||||||||
Futures contracts | Change in net unrealized appreciation (depreciation) in value of: financial futures contracts | $ | (328,319 | ) | $ | — | $ | (1,710,582 | ) | $ | (2,038,901 | ) | |||||||||||
Option contracts purchased | Change in net unrealized appreciation (depreciation) in value of: unaffiliated investment securities | — | — | (2,900 | ) | (2,900 | ) | ||||||||||||||||
Total Change in Appreciation (Depreciation) | $ | (328,319 | ) | $ | — | $ | (1,713,482 | ) | $ | (2,041,801 | ) |
15 Indemnifications: Like many other companies, the Trust's organizational documents provide that its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, both in some of its principal service contracts and in the normal course of its business, the Trust enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Trust's maximum exposure under these arrangements is unknown as this could involve future claims against the Trust
16 Transactions with other funds managed by Neuberger Berman Management LLC: Neuberger Berman Alternative Funds and Management have obtained an exemptive order from the Securities and Exchange Commission ("SEC") that permits the Fund to invest in both affiliated and unaffiliated investment companies, including exchange-traded funds, in excess of the limits in Section 12(d)(1)(A) of the 1940 Act, subject to the terms and conditions of such order. Through April 30, 2013, Dynamic Real Return invested in the Neuberger Berman Emerging Markets Equity Fund ("Emerging Markets Equity"), Neuberger Berman High Income Bond Fund ("High Income"), Neuberger Berman Floating Rate Income Fund ("Floating Rate Income"), and Neuberger Berman Risk Balanced Commodity Strategy Fund ("Risk Balanced Commodity Strategy") (collectively the "Underlying Funds").
For the Fund's investments in the Underlying Funds, Management waived a portion of its management fee equal to the management fee it received from the Underlying Funds on those assets (the "Arrangement"). For the fiscal period ended April 30, 2013, management fees waived under this Arrangement are reflected in the Statements of Operations under the caption "Investment management fees waived." For the fiscal period ended April 30, 2013,
49
income earned under this Arrangement on Dynamic Real Return's investments is reflected in the Statements of Operations under the caption "Dividend income—affiliated issuers." For the fiscal period ended April 30, 2013, management fees waived and income earned under this Arrangement on Dynamic Real Return's investments in the Underlying Funds were as follows:
Management fee waived | $ | 7,507 | |||||
Income earned | 44,267 |
17 Expense offset arrangement: Prior to January 1, 2013, each Fund had an expense offset arrangement in connection with its custodian contract. For the six months ended April 30, 2013, the impact of this arrangement was a reduction of expenses of $0, $16 and $48 for Dynamic Real Return, Global Allocation and Long Short, respectively.
18 Other: All net investment income and realized and unrealized capital gains and losses of each Fund are allocated, on the basis of relative net assets, pro rata among its respective classes.
Note B—Management Fees, Administration Fees, Distribution Arrangements, and Other Transactions with Affiliates:
Each Fund retains Management as its investment manager under a Management Agreement. For such investment management services, Dynamic Real Return pays Management a fee at the annual rate of 0.650% of the first $250 million of the Fund's average daily net assets, 0.625% of the next $250 million, 0.600% of the next $250 million, 0.575% of the next $250 million, 0.550% of the next $500 million, 0.525% of the next $2.5 billion, and 0.500% of the average daily net assets in excess of $4 billion. As of February 28, 2013, Global Allocation pays Management a fee at the annual rate of 0.650% of the first $1 billion of the Fund's average daily net assets, 0.625% of the next $1 billion and 0.600% of average daily net assets in excess of $2 billion. Prior to February 28, 2013 Global Allocation paid Management a fee at the annual rate of 0.900% of the first $1 billion of the Fund's average daily net assets, 0.875% of the next $1 billion and 0.850% of average daily net assets in excess of $2 billion. Long Short pays Management a fee at the annual rate of 1.200% of the first $250 million of the Fund's average daily net assets, 1.175% of the next $250 million, 1.150% of the next $250 million, 1.125% of the next $250 million, 1.100% of the next $500 million, 1.075% of the next $2.5 billion, and 1.050% of average daily net assets in excess of $4 billion. Accordingly, for the period ended April 30, 2013, the fee pursuant to the Management Agreement was equivalent to an annual effective rate of 0.65% (0.41% after management fee waiver (See Note A-16)), 0.79% and 1.19% of Dynamic Real Return's, Global Allocation's and Long Short's average daily net assets, respectively.
Each Fund retains Management as its administrator under an Administration Agreement. Each Fund pays Management an administration fee at the annual rate of 0.06% of its average daily net assets under this agreement. In addition, each Fund's Institutional Class pays Management an administration fee at the annual rate of 0.09% of its average daily net assets under this agreement and each Fund's Class A and Class C pays Management an administration fee at the annual rate of 0.20% of its average daily net assets under this agreement. Additionally, Management retains State Street as its sub-administrator under a Sub-Administration Agreement. Management pays State Street a fee for all services received under the agreement.
Management has contractually agreed to waive current payment of fees and/or reimburse certain expenses of the Institutional Class, Class A and Class C of each Fund so that the total annual operating expenses of those classes do not exceed the expense limitations as detailed in the following table. These undertakings apply to a Fund's direct expenses and exclude interest, taxes, brokerage commissions, acquired fund fees and expenses, and extraordinary expenses, and, as of June 22, 2011 for Global Allocation and as of the commencement of operations for Dynamic Real Return and Long Short, exclude dividend expenses relating to short sales, as well as interest expenses relating to short sales for Dynamic Real Return, if any; consequently, net expenses may exceed the contractual expense limitations. Each Fund has agreed that each of its respective classes will repay Management for fees and expenses waived or reimbursed for that class provided that repayment does not cause that class' annual operating expenses to
50
exceed its contractual expense limitation in place at the time the fees and expenses were waived or reimbursed. Any such repayment must be made within three years after the year in which Management incurred the expense.
During the six months ended April 30, 2013, the Institutional Class of Long Short, Class A of Long Short and Class C of Long Short reimbursed Management $42,286, $14,132 and $3,812, respectively, under its contractual expense limitation.
At April 30, 2013, contingent liabilities to Management under the contractual expense limitation were as follows:
Expenses Reimbursed In Fiscal Period Ending, October 31, | |||||||||||||||||||||||
2011 | 2012 | 2013 | |||||||||||||||||||||
Subject to Repayment until October 31, | |||||||||||||||||||||||
Class | Contractual Expense Limitation(1) | Expiration | 2014 | 2015 | 2016 | ||||||||||||||||||
Dynamic Real Return Institutional Class | 0.90 | % | 10/31/15 | $ | — | $ | — | $ | 299,884 | (4) | |||||||||||||
Dynamic Real Return Class A | 1.26 | % | 10/31/15 | — | — | 5,808 | (4) | ||||||||||||||||
Dynamic Real Return Class C | 2.01 | % | 10/31/15 | — | — | 5,868 | (4) | ||||||||||||||||
Global Allocation Institutional Class | 0.90 | %(5) | 10/31/16 | 894,111 | (2) | 342,304 | 144,608 | ||||||||||||||||
Global Allocation Class A | 1.26 | %(5) | 10/31/16 | 11,162 | (2) | 125,936 | 76,685 | ||||||||||||||||
Global Allocation Class C | 2.01 | %(5) | 10/31/16 | 6,919 | (2) | 19,134 | 40,540 | ||||||||||||||||
Long Short Institutional Class | 1.70 | % | 10/31/16 | — | 226,826 | (3) | — | ||||||||||||||||
Long Short Class A | 2.06 | % | 10/31/16 | — | 29,385 | (3) | — | ||||||||||||||||
Long Short Class C | 2.81 | % | 10/31/16 | — | 7,239 | (3) | — |
(1) Expense limitation per annum of the respective class' average daily net assets.
(2) Period from December 29, 2010 (Commencement of Operations) to October 31, 2011.
(3) Period from December 29, 2011 (Commencement of Operations) to October 31, 2012.
(4) Period from December 19, 2012 (Commencement of Operations) to April 30, 2013.
(5) Prior to February 28, 2013, the contractual expense limitation was 1.20% for Institutional Class, 1.56% for Class A and 2.31% for Class C.
Neuberger Berman Fixed Income LLC ("NBFI"), as the sub-adviser to Dynamic Real Return and Global Allocation, is retained by Management to provide day-to-day investment management services and receives a monthly fee paid by Management. As investment manager, Management is responsible for overseeing the investment activities of NBFI. Neuberger Berman LLC ("Neuberger"), as the sub-adviser to Long Short, is retained by Management to furnish it with investment recommendations and research information without added cost to the Fund. Several individuals who are officers and/or Trustees of the Trust are also employees of NBFI, Neuberger and/or Management.
Management, NBFI, and Neuberger are indirect subsidiaries of Neuberger Berman Group LLC (("NBG") and together with its consolidated subsidiaries ("NB Group")). NBSH Acquisition, LLC ("NBSH" and together with NBG, the "NB Parties"), which is owned by portfolio managers, members of the NB Group management team and certain of NB Group's key employees, senior professionals, and certain of their permitted transferees, owns, as of March 14, 2013, approximately 72% of NBG's common units, and Lehman Brothers Holdings Inc. ("LBHI") and certain of its subsidiaries (collectively the "LBHI Parties") own the remaining 28% of such common units. Pursuant to agreements among the NB Parties and the LBHI Parties, as well as the issuance of NBSH common equity to employees with respect to their previously made equity elections relating to 2013 compensation, it is expected that NBSH will own 81% of NBG's common units as of January 1, 2014. NBG has the opportunity to continue to
51
redeem the remaining NBG Class A common units from the LBHI Parties through a process that is expected to end in 2016 (and if necessary, 2017).
Each Fund also has a distribution agreement with Management with respect to each class of shares. Management acts as agent in arranging for the sale of class shares without sales commission or other compensation, except as described below for Class A and Class C shares, and bears advertising and promotion expenses.
However, Management receives fees from Class A and Class C under their distribution plans (each a "Plan", collectively the "Plans") pursuant to Rule 12b-1 under the 1940 Act. The Plans provide that, as compensation for administrative and other services provided to these classes, Management's activities and expenses related to the sale and distribution of these classes of shares, and ongoing services provided to investors in these classes, Management receives from each of these classes a fee at the annual rate of 0.25% of Class A's and 1.00% of Class C's average daily net assets. Management receives this amount to provide distribution and shareholder servicing for these classes and pays a portion of it to institutions that provide such services. Those institutions may use the payments for, among other purposes, compensating employees engaged in sales and/or shareholder servicing. The amount of fees paid by each class during any year may be more or less than the cost of distribution and other services provided to that class. FINRA rules limit the amount of annual distribution fees that may be paid by a mutual fund and impose a ceiling on the cumulative distribution fees paid. The Trust's Plans comply with those rules.
Class A shares of each Fund are generally sold with an initial sales charge of up to 5.75% and no contingent deferred sales charge ("CDSC"), except that a CDSC of 1.00% will apply to certain redemptions made within 18 months following purchases of $1 million or more without an initial sales charge. Class C shares of each Fund are sold with no initial sales charge and a 1.00% CDSC if shares are sold within one year after purchase.
For the six months ended April 30, 2013, Management, acting as underwriter and broker-dealer, received net initial sales charges from the purchase of Class A shares and CDSCs from the redemption of Class A and Class C shares as follows:
Underwriter | Broker-Dealer | ||||||||||||||||||
Net Initial Sales Charge | CDSC | Net Initial Sales Charge | CDSC | ||||||||||||||||
Dynamic Real Return Class A | $ | — | $ | — | $ | — | $ | — | |||||||||||
Dynamic Real Return Class C | — | — | — | — | |||||||||||||||
Global Allocation Class A | 9,044 | — | — | — | |||||||||||||||
Global Allocation Class C | — | 352 | — | — | |||||||||||||||
Long Short Class A | 53,978 | — | — | — | |||||||||||||||
Long Short Class C | — | 2,777 | — | — |
Note C—Securities Transactions:
During the six months ended April 30, 2013, there were purchase and sale transactions of long-term securities (excluding total return swaps, financial futures contracts, forward foreign currency contracts and option contracts) as follows:
Purchases | Securities Sold Short | Sales | Covers on Securities Sold Short | ||||||||||||||||
Dynamic Real Return | $ | 16,146,359 | $ | — | $ | 1,300,332 | $ | — | |||||||||||
Global Allocation | 8,311,188 | 7,751,314 | 5,611,089 | 4,389,109 | |||||||||||||||
Long Short | 433,497,274 | 107,185,946 | 83,212,578 | 38,767,600 |
During the six months ended April 30, 2013, no brokerage commissions on securities transactions were paid to affiliated brokers.
52
Note D—Fund Share Transactions:
Share activity for the six months ended April 30, 2013 and for the year ended October 31, 2012 was as follows:
For the Six Months Ended April 30, 2013 | For the Year Ended October 31, 2012 | ||||||||||||||||||||||||||||||||||
Shares Sold | Shares Issued on Reinvestment of Dividends and Distributions | Shares Redeemed | Total | Shares Sold | Shares Issued on Reinvestment of Dividends and Distributions | Shares Redeemed | Total | ||||||||||||||||||||||||||||
Dynamic Real Return | |||||||||||||||||||||||||||||||||||
Institutional Class(2) | 1,487,348 | — | (490 | ) | 1,486,858 | — | — | — | — | ||||||||||||||||||||||||||
Class A(2) | 10,246 | — | — | 10,246 | — | — | — | — | |||||||||||||||||||||||||||
Class C(2) | 10,343 | — | — | 10,343 | — | — | — | — | |||||||||||||||||||||||||||
Global Allocation | |||||||||||||||||||||||||||||||||||
Institutional Class | 661,621 | 14,913 | (119,079 | ) | 557,455 | 1,526,708 | 58,760 | (1,285,156 | ) | 300,312 | |||||||||||||||||||||||||
Class A | 638,209 | 4,880 | (75,951 | ) | 567,138 | 962,595 | 1,841 | (643,796 | ) | 320,640 | |||||||||||||||||||||||||
Class C | 213,849 | 1,050 | (5,254 | ) | 209,645 | 209,308 | 756 | (939 | ) | 209,125 | |||||||||||||||||||||||||
Long Short | |||||||||||||||||||||||||||||||||||
Institutional Class | 25,346,136 | 76,375 | (2,033,858 | ) | 23,388,653 | 8,577,855 | — | (231,938 | ) | 8,345,917 | (1) | ||||||||||||||||||||||||
Class A | 15,416,993 | 26,279 | (849,223 | ) | 14,594,049 | 2,458,443 | — | (14,658 | ) | 2,443,785 | (1) | ||||||||||||||||||||||||
Class C | 3,443,099 | 1,606 | (39,535 | ) | 3,405,170 | 305,335 | — | — | 305,335 | (1) |
(1) Period from December 29, 2011 (Commencement of Operations) to October 31, 2012.
(2) Period from December 19, 2012 (Commencement of Operations) to April 30, 2013.
Note E—Line of Credit:
At April 30, 2013, each Fund (except Dynamic Real Return) was a participant in a single committed, unsecured $200,000,000 line of credit with State Street, to be used only for temporary or emergency purposes. Other investment companies managed by Management also participate in this line of credit on the same terms. Interest is charged on borrowings under this line of credit at the higher of (a) the Federal Funds Rate plus 1.25% per annum or (b) the Overnight LIBOR Rate plus 1.25% per annum. A commitment fee of 0.10% per annum of the available line of credit is charged, of which each participating Fund has agreed to pay its pro rata share, based on the ratio of its individual net assets to the net assets of all participants at the time the fee is due and payable. The fee is paid quarterly in arrears. Because several mutual funds participate, there is no assurance that an individual Fund will have access to all or any part of the $200,000,000 at any particular time. There were no loans outstanding pursuant to this line of credit at April 30, 2013. During the six months ended April 30, 2013, none of the Funds utilized this line of credit.
53
Note F—Investments in Affiliates(1):
Balance of Shares Held December 19(2), 2012 | Gross Purchases and Additions | Gross Sales and Reductions | Balance of Shares Held April 30, 2013 | Value April 30, 2013 | Income from Investments in Affiliated Issuers | Net Realized Gain (Loss) from Investments in Affiliated Issuers | |||||||||||||||||||||||||
Dynamic Real Return | |||||||||||||||||||||||||||||||
Neuberger Berman Emerging Markets Equity Fund Institutional Class | — | 70,685 | — | 70,685 | $ | 1,195,934 | $ | — | $ | — | |||||||||||||||||||||
Neuberger Berman Floating Rate Income Fund Institutional Class | — | 140,358 | — | 140,358 | 1,454,081 | 15,414 | — | ||||||||||||||||||||||||
Neuberger Berman High Income Bond Fund Institutional Class | — | 147,928 | — | 147,928 | 1,443,406 | 28,853 | — | ||||||||||||||||||||||||
Neuberger Berman Risk Balanced Commodity Strategy Fund Institutional Class | — | 171,487 | — | 171,487 | 1,580,087 | — | — | ||||||||||||||||||||||||
Total | $ | 5,673,508 | $ | 44,267 | $ | — |
(1) Affiliated issuers, as defined in the 1940 Act. Neuberger Berman Alternative Funds and Management have obtained an exemptive order from the SEC that permits the Fund to invest in both affiliated and unaffiliated investment companies, including exchange-traded funds, in excess of the limits in Section 12(d)(1)(A) of the 1940 Act, as amended, subject to the terms and conditions of such order.
(2) Commencement of Operations.
Note G—Recent Accounting Pronouncement:
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11 Disclosures about Offsetting Assets and Liabilities ("ASU 2011-11"). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. At this time, Management is evaluating the implications of ASU 2011-11 and its impact on the financial statements.
Note H—Unaudited Financial Information:
The financial information included in this interim report is taken from the records of each Fund without audit by an independent registered public accounting firm. Annual reports contain audited financial statements.
54
Financial Highlights
The following tables include selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. Per share amounts that round to less than $.01 or $(0.01) per share are presented as $0.00 or $(0.00), respectively. Net Asset amounts with a zero balance may reflect actual amounts rounding to less than $0.1 million.
Net Asset Value, Beginning of Period | Net Investment Income (Loss)@ | Net Gains or Losses on Securities (both realized and unrealized) | Total From Investment Operations | Dividends from Net Investment Income | Distributions from Net Realized Capital Gains | Total Distributions | Net Asset Value, End of Period | Total Return†† | |||||||||||||||||||||||||||||||
Dynamic Real Return Fund | |||||||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||||||
Period from 12/19/2012^ to 4/30/2013 (Unaudited) | $ | 10.00 | $ | 0.08 | $ | 0.34 | $ | 0.42 | $ | — | $ | — | $ | — | $ | 10.42 | 4.20 | %** | |||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||||||
Period from 12/19/2012^ to 4/30/2013 (Unaudited) | $ | 10.00 | $ | 0.06 | $ | 0.35 | $ | 0.41 | $ | — | $ | — | $ | — | $ | 10.41 | 4.10 | %** | |||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||||||
Period from 12/19/2012^ to 4/30/2013 (Unaudited) | $ | 10.00 | $ | 0.04 | $ | 0.34 | $ | 0.38 | $ | — | $ | — | $ | — | $ | 10.38 | 3.80 | %** | |||||||||||||||||||||
Global Allocation Fund | |||||||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 10.30 | $ | (0.03 | ) | $ | 1.10 | $ | 1.07 | $ | (0.15 | ) | $ | — | $ | (0.15 | ) | $ | 11.22 | 10.52 | %** | ||||||||||||||||||
10/31/2012 | $ | 10.30 | $ | (0.12 | ) | $ | 1.02 | $ | 0.90 | $ | (0.21 | ) | $ | (0.69 | ) | $ | (0.90 | ) | $ | 10.30 | 9.60 | % | |||||||||||||||||
Period from 12/29/2010^ to 10/31/2011 | $ | 10.00 | $ | (0.08 | ) | $ | 0.38 | $ | 0.30 | $ | — | $ | — | $ | — | $ | 10.30 | 3.00 | %** | ||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 10.25 | $ | (0.05 | ) | $ | 1.10 | $ | 1.05 | $ | (0.12 | ) | $ | — | $ | (0.12 | ) | $ | 11.18 | 10.30 | %** | ||||||||||||||||||
10/31/2012 | $ | 10.27 | $ | (0.15 | ) | $ | 1.01 | $ | 0.86 | $ | (0.19 | ) | $ | (0.69 | ) | $ | (0.88 | ) | $ | 10.25 | 9.24 | % | |||||||||||||||||
Period from 12/29/2010^ to 10/31/2011 | $ | 10.00 | $ | (0.14 | ) | $ | 0.41 | $ | 0.27 | $ | — | $ | — | $ | — | $ | 10.27 | 2.70 | %** | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 10.13 | $ | (0.09 | ) | $ | 1.09 | $ | 1.00 | $ | (0.04 | ) | $ | — | $ | (0.04 | ) | $ | 11.09 | 9.93 | %** | ||||||||||||||||||
10/31/2012 | $ | 10.21 | $ | (0.23 | ) | $ | 1.00 | $ | 0.77 | $ | (0.16 | ) | $ | (0.69 | ) | $ | (0.85 | ) | $ | 10.13 | 8.34 | % | |||||||||||||||||
Period from 12/29/2010^ to 10/31/2011 | $ | 10.00 | $ | (0.18 | ) | $ | 0.39 | $ | 0.21 | $ | — | $ | — | $ | — | $ | 10.21 | 2.10 | %** |
See Notes to Financial Highlights
55
Net Assets, End of Period (in millions) | Ratio of Gross Expenses to Average Net Assets# | Ratio of Gross Expenses to Average Net Assets (excluding expenses on securities sold short) | Ratio of Net Expenses to Average Net Assets | Ratio of Net Expenses to Average Net Assets (excluding expenses on securities sold short) | Ratio of Net Investment Income/ (Loss) to Average Net Assets | Portfolio Turnover Rate (including securities sold short) | Portfolio Turnover Rate (excluding securities sold short) | ||||||||||||||||||||||||||||
Dynamic Real Return Fund | |||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||
Period from 12/19/2012^ to 4/30/2013 (Unaudited) | $ | 15.5 | 6.34 | %‡* | 6.34 | %‡Ø* | .67 | %‡* | .67 | %‡Ø* | 2.02 | %‡* | 14 | %** | 14 | %Ø** | |||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
Period from 12/19/2012^ to 4/30/2013 (Unaudited) | $ | 0.1 | 11.66 | %‡* | 11.66 | %‡Ø* | 1.03 | %‡* | 1.03 | %‡Ø* | 1.70 | %‡* | 14 | %** | 14 | %Ø** | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
Period from 12/19/2012^ to 4/30/2013 (Unaudited) | $ | 0.1 | 12.35 | %‡* | 12.35 | %‡Ø* | 1.78 | %‡* | 1.78 | %‡Ø* | .95 | %‡* | 14 | %** | 14 | %Ø** | |||||||||||||||||||
Global Allocation Fund | |||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 16.0 | 4.10 | %* | 3.60 | %* | 1.59 | %* | 1.09 | %* | (.60 | %)* | 119 | %** | 103 | %** | |||||||||||||||||||
10/31/2012 | $ | 8.9 | 5.01 | % | 4.55 | % | 1.68 | % | 1.22 | % | (1.19 | %) | 446 | % | 423 | % | |||||||||||||||||||
Period from 12/29/2010^ to 10/31/2011 | $ | 5.8 | 18.45 | %‡* | 18.31 | %‡*^^ | 1.36 | %‡* | 1.21 | %‡*^^ | (.95 | %)‡* | 268 | %** | 216 | %** | |||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 10.1 | 4.42 | %* | 3.90 | %* | 1.96 | %* | 1.44 | %* | (1.04 | %)* | 119 | %** | 103 | %** | |||||||||||||||||||
10/31/2012 | $ | 3.4 | 5.41 | % | 4.93 | % | 2.07 | % | 1.59 | % | (1.48 | %) | 446 | % | 423 | % | |||||||||||||||||||
Period from 12/29/2010^ to 10/31/2011 | $ | 0.1 | 22.01 | %‡* | 21.63 | %‡*^^ | 1.96 | %‡* | 1.58 | %‡*^^ | (1.64 | %)‡* | 268 | %** | 216 | %** | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 4.7 | 5.19 | %* | 4.68 | %* | 2.70 | %* | 2.19 | %* | (1.78 | %)* | 119 | %** | 103 | %** | |||||||||||||||||||
10/31/2012 | $ | 2.2 | 6.47 | % | 6.03 | % | 2.78 | % | 2.34 | % | (2.26 | %) | 446 | % | 423 | % | |||||||||||||||||||
Period from 12/29/2010^ to 10/31/2011 | $ | 0.0 | 25.07 | %‡* | 24.87 | %‡*^^ | 2.52 | %‡* | 2.33 | %‡*^^ | (2.12 | %)‡* | 268 | %** | 216 | %** |
56
Financial Highlights (cont'd)
Net Asset Value, Beginning of Period | Net Investment Income (Loss)@ | Net Gains or Losses on Securities (both realized and unrealized) | Total From Investment Operations | Dividends from Net Investment Income | Distributions from Net Realized Capital Gains | Total Distributions | Net Asset Value, End of Period | Total Return†† | |||||||||||||||||||||||||||||||
Long Short Fund | |||||||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 11.09 | $ | 0.03 | $ | 0.80 | $ | 0.83 | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.09 | ) | $ | 11.83 | 7.56 | %** | ||||||||||||||||||
Period from 12/29/2011^ to 10/31/2012 | $ | 10.00 | $ | 0.04 | $ | 1.05 | $ | 1.09 | $ | — | $ | — | $ | — | $ | 11.09 | 10.90 | %** | |||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 11.06 | $ | 0.00 | $ | 0.81 | $ | 0.81 | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.09 | ) | $ | 11.78 | 7.34 | %** | ||||||||||||||||||
Period from 12/29/2011^ to 10/31/2012 | $ | 10.00 | $ | 0.00 | $ | 1.06 | $ | 1.06 | $ | — | $ | — | $ | — | $ | 11.06 | 10.60 | %** | |||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 10.99 | $ | (0.04 | ) | $ | 0.80 | $ | 0.76 | $ | (0.01 | ) | $ | (0.06 | ) | $ | (0.07 | ) | $ | 11.68 | 6.92 | %** | |||||||||||||||||
Period from 12/29/2011^ to 10/31/2012 | $ | 10.00 | $ | (0.06 | ) | $ | 1.05 | $ | 0.99 | $ | — | $ | — | $ | — | $ | 10.99 | 9.90 | %** |
See Notes to Financial Highlights
57
Net Assets, End of Period (in millions) | Ratio of Gross Expenses to Average Net Assets# | Ratio of Gross Expenses to Average Net Assets (excluding expenses on securities sold short) | Ratio of Net Expenses to Average Net Assets | Ratio of Net Expenses to Average Net Assets (excluding expenses on securities sold short) | Ratio of Net Investment Income/ (Loss) to Average Net Assets | Portfolio Turnover Rate (including securities sold short) | Portfolio Turnover Rate (excluding securities sold short) | ||||||||||||||||||||||||||||
Long Short Fund | |||||||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 375.4 | 1.81 | %* | 1.70 | %* | 1.81 | %§* | 1.70 | %§* | .46 | %* | 67 | %** | 33 | %** | |||||||||||||||||||
Period from 12/29/2011^ to 10/31/2012 | $ | 92.6 | 2.78 | %‡* | 2.65 | %‡* | 1.83 | %‡* | 1.70 | %‡* | .40 | %‡* | 93 | %** | 56 | %** | |||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 200.7 | 2.17 | %* | 2.06 | %* | 2.17 | %§* | 2.06 | %§* | .06 | %* | 67 | %** | 33 | %** | |||||||||||||||||||
Period from 12/29/2011^ to 10/31/2012 | $ | 27.0 | 3.21 | %‡* | 3.11 | %‡* | 2.17 | %‡* | 2.06 | %‡* | .05 | %‡* | 93 | %** | 56 | %** | |||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 43.4 | 2.91 | %* | 2.81 | %* | 2.91 | %§* | 2.81 | %§* | (.70 | %)* | 67 | %** | 33 | %** | |||||||||||||||||||
Period from 12/29/2011^ to 10/31/2012 | $ | 3.4 | 4.34 | %‡* | 4.20 | %‡* | 2.95 | %‡* | 2.81 | %‡* | (.69 | %)‡* | 93 | %** | 56 | %** |
58
Notes to Financial Highlights (Unaudited)
†† Total return based on per share NAV reflects the effects of changes in NAV on the performance of each Fund during each fiscal period and assumes income dividends and other distributions, if any, were reinvested, but does not reflect the effect of sales charges. Results represent past performance and do not indicate future results. Current returns may be lower or higher than the performance data quoted. Investment returns and principal may fluctuate and shares when redeemed may be worth more or less than original cost. For each Fund, total return would have been lower if Management had not reimbursed and/or waived certain expenses. Total return would have been higher if Management had not recouped previously reimbursed and/or waived expense.
^ The date investment operations commenced.
‡ Organization expense, which is a non-recurring expense, is included in these ratios on a non-annualized basis.
@ Calculated based on the average number of shares outstanding during each fiscal period.
§ After repayment of expenses previously reimbursed and/or fees previously waived by Management, as applicable. Had the Fund not made such repayments, the annualized ratios of net expenses to average daily net assets would have been:
Including Expenses on Securities Sold Short | Excluding Expenses on Securities Sold Short | ||||||||||
Six Months Ended April 30, 2013 | |||||||||||
Long Short Fund Institutional Class | 1.77 | % | 1.66 | % | |||||||
Long Short Fund Class A | 2.14 | % | 2.03 | % | |||||||
Long Short Fund Class C | 2.86 | % | 2.76 | % |
* Annualized.
** Not annualized.
^^ As of June 22, 2011, Global Allocation's Institutional Class, Class A and Class C contractual expense limitations exclude dividend expenses relating to short sales, if any; consequently, net expenses may exceed the contractual expense limitations (See Note B of Notes to Financial Statements).
# Represents the annualized ratios of net expenses to average daily net assets if Management had not reimbursed certain expenses and/or waived a portion of the investment management fee.
Ø Dynamic Real Return did not engage in short sales.
59
Directory
Investment Manager, Administrator and Distributor
Neuberger Berman Management LLC
605 Third Avenue, 2nd Floor
New York, NY 10158-0180
800.877.9700 or 212.476.8800
Intermediary Client Services 800.366.6264
Sub-Advisers
Neuberger Berman Fixed Income LLC
190 South LaSalle Street
Chicago, IL 60603
Neuberger Berman LLC
605 Third Avenue
New York, NY 10158-3698
Custodian and Shareholder Servicing Agent
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, MA 02111
For Institutional Class Shareholders
Address correspondence to:
Neuberger Berman Management LLC
605 Third Avenue, Mail Drop 2-7
New York, NY 10158-0180
Attn: Intermediary Client Services
800.366.6264
For Class A and Class C Shareholders:
Please contact your investment provider
Legal Counsel
K&L Gates LLP
1601 K Street, NW
Washington, DC 20006
Independent Registered Public Accounting Firms
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
Tait, Weller & Baker LLP
1818 Market Street
Suite 2400
Philadelphia, PA 19103
60
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to portfolio securities is available, without charge, by calling 800-877-9700 (toll-free) and on the website of the Securities and Exchange Commission, at www.sec.gov. Information regarding how the Trust voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is also available, without charge, by calling 800-877-9700 (toll-free), on the website of the Securities and Exchange Commission at www.sec.gov, and on Management's website at www.nb.com.
Quarterly Portfolio Schedule
The Trust files a complete schedule of portfolio holdings for each Fund with the Securities and Exchange Commission for the first and third quarters of the fiscal year on Form N-Q. The Trust's Forms N-Q are available on the Securities and Exchange Commission's website at www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. The information on Form N-Q is available upon request, without charge, by calling 800-877-9700 (toll-free).
61
Board Consideration of the Management and Sub-Advisory Agreements
At a meeting held on June 24, 2012, the Board of Trustees of Neuberger Berman Alternative Funds ("Board"), including the Trustees who are not "interested persons" of Neuberger Berman Management LLC ("Management") (including its affiliates) or Neuberger Berman Alternative Funds ("Independent Fund Trustees"), approved the Management and Sub-Advisory Agreements ("Agreements") for Neuberger Berman Dynamic Real Return Fund (the "Fund").
In evaluating the Agreements, the Board, including the Independent Fund Trustees, reviewed materials furnished by Management and met with senior representatives of Management regarding personnel, operations and financial conditions of Management and Neuberger Berman Fixed Income LLC ("NBFI"), the Sub-Adviser, as they relate to the Fund. The Independent Fund Trustees were advised by counsel that is experienced in Investment Company Act of 1940 matters and that is independent of Management.
The Board evaluated the terms of the Agreements, the overall fairness of the Agreements to the Fund and whether the Agreements were in the best interests of the Fund and its shareholders. The Board considered the following factors, among others, in connection with its approval of the Agreements: (1) the nature, extent, and quality of the services to be provided by Management and NBFI; (2) the expected costs of the services to be provided; (3) the extent to which economies of scale might be realized as the Fund grows; and (4) whether fee levels reflect any such potential economies of scale for the benefit of investors in the Fund. In their deliberations, the Board members did not identify any particular information that was all-important or controlling, and each Trustee may have attributed different weights to the various factors.
With respect to the nature, extent and quality of the services provided, the Board considered the experience of the portfolio management personnel of Management and NBFI who would perform services for the Fund. The Board also considered the hypothetical performance over a several year period of a model portfolio using similar investment objectives, policies and strategies to the Fund. The Board noted that Management also would provide certain administrative services, including fund accounting and compliance oversight. The Board also considered Management's and NBFI's policies and practices regarding brokerage and allocation of portfolio transactions for the Fund. In addition, the Board noted the positive compliance history of Management and NBFI, as each firm has been free of significant compliance problems. The Board also considered the manner in which Management addressed various non-routine matters that have arisen from time to time, some of them a result of developments in the broader fund industry or the regulations governing it.
With respect to the overall fairness of the Agreements, the Board considered the fee structure for the Fund under the Agreements as compared to a peer group of comparable funds and any fall-out benefits likely to accrue to Management or NBFI or their affiliates from their relationship with the Fund. They considered that the Fund was intended to invest primarily in affiliated underlying funds pursuant to exemptive relief obtained from the Securities and Exchange Commission.
The Board reviewed a comparison of the Fund's management fee and overall expense ratio for each class of the Fund to a peer group of broadly comparable funds and classes, including how the Fund's effective management fee at different asset levels and the Fund's net expenses for each class compared to the mean and median of the peer group. The Board considered, for any assets that the Fund invests in an affiliated underlying fund, Management's undertaking to waive a portion of the Fund's advisory fee equal to the advisory fee it receives from such affiliated underlying fund. In addition, the Board considered the contractual limits on the Fund's expenses undertaken by Management for the Fund. The Board considered that the Fund's fee structure provides for a reduction of payments resulting from the use of breakpoints. The Board also considered whether it would be appropriate to evaluate any anticipated economies of scale in relation to the services Management provides to the Fund, noting that it may be too soon to anticipate the economies at the start-up phase of a fund. The Board was advised that most funds in the comparison group either had no breakpoints or had breakpoints that were only instituted once the comparable fund had assets in excess of $1 billion. Although advisory and administrative fees for some classes of the Fund were in the bottom quartile of the comparison group, the expense ratio was close to the median of that group, indicating that in return for its fee, Management would provide more of the required administrative services than do some other manager/administrators in the comparison group.
62
Conclusions
In approving the Agreements, the Board concluded that the terms of each Agreement are fair and reasonable to the Fund and that approval of the Agreements is in the best interests of the Fund and its shareholders. In reaching this determination, the Board considered that Management and NBFI could be expected to provide a high level of service to the Fund; that the Fund's fee structure appeared to the Board to be reasonable given the nature and quality of services expected to be provided; and that the expected benefits accruing to Management and its affiliates by virtue of their relationship to the Fund were reasonable in comparison with the expected costs of providing the investment advisory services and the expected benefits accruing to the Fund.
63
Neuberger Berman Management LLC
605 Third Avenue 2nd Floor
New York, NY 10158–0180
Shareholder Services
800.877.9700
Institutional Services
800.366.6264
www.nb.com
Statistics and projections in this report are derived from sources deemed to be reliable but cannot be regarded as a representation of future results of the Funds. This report is prepared for the general information of shareholders and is not an offer of shares of the Funds. Shares are sold only through the currently effective prospectus, which must precede or accompany this report.
L0088 06/13
1 | General: Neuberger Berman Alternative Funds (the “Trust”) is a Delaware statutory trust organized pursuant to an Amended and Restated Trust Instrument dated October 14, 2010. The Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and its shares are registered under the Securities Act of 1933, as amended (the “1933 Act”). Each Fund is a separate operating series of the Trust. Global Allocation and Long Short are each non-diversified and Dynamic Real Return is diversified. Long Short had no operations until December 29, 2011, other than matters relating to its organization and registration of shares under the 1933 Act. Dynamic Real Return had no operations until December 19, 2012, other than matters relating to its organization and registration of shares under the 1933 Act. Each Fund offers Institutional Class shares, Class A shares and Class C shares. The Board may establish additional series or classes of shares without the approval of shareholders. |
![]() Neuberger Berman Management LLC 605 Third Avenue 2nd Floor New York, NY 10158-0180 800.877.9700 Institutional Services: 800.366.6264 Web site: www.nb.com N0217 06/13 | |
Neuberger Berman
Alternative and Multi-Asset Class Funds
Institutional Class Shares
Class A Shares
Class C Shares
Risk Balanced Commodity Strategy Fund
Semi-Annual Report
April 30, 2013
Contents
PRESIDENT'S LETTER | 1 | ||||||
PORTFOLIO COMMENTARY | 2 | ||||||
FUND EXPENSE INFORMATION | 6 | ||||||
CONSOLIDATED SCHEDULE OF INVESTMENTS | 8 | ||||||
CONSOLIDATED FINANCIAL STATEMENTS | 12 | ||||||
CONSOLIDATED FINANCIAL HIGHLIGHTS/ PER SHARE DATA | 25 | ||||||
Directory | 28 | ||||||
Proxy Voting Policies and Procedures | 29 | ||||||
Quarterly Portfolio Schedule | 29 |
The "Neuberger Berman" name and logo are registered service marks of Neuberger Berman Group LLC. "Neuberger Berman Management LLC" and the individual Fund name in this piece are either service marks or registered service marks of Neuberger Berman Management LLC. ©2013 Neuberger Berman Management LLC. All rights reserved.
President's Letter
Dear Shareholder,
I am pleased to present this semi-annual shareholder report for Neuberger Berman Risk Balanced Commodity Strategy Fund. The report includes a portfolio commentary, a listing of the Fund's investments and its unaudited financial statements for the six months ended April 30, 2013. The Fund seeks to generate returns that are not highly correlated with other major asset classes and that may improve the overall risk-reward profile of an investment portfolio.
Overall, the commodity markets were weak during the reporting period. This was triggered by a number of factors, including concerns about China's ability to orchestrate a soft landing for its economy, uncertainties related to the U.S. fiscal cliff and sequestration, as well as fears of contagion from the sovereign debt crisis in Europe. Precious metals and agricultural commodities were the weakest performers during the reporting period, whereas energy produced relatively better results.
While we acknowledge continued uncertainties surrounding the outlook for global growth, we maintain our overall positive long-term outlook for the commodity markets. From a demand perspective, a number of secular trends, including consumption from emerging market countries, remain intact, in our view. In terms of supply, a scarcity of resources persists and, we believe, is not likely to change for some time. Given these dynamics, we feel that commodities continue to be a compelling investment opportunity and a way for investors to diversify their portfolios.
Thank you for your continued support and trust. We look forward to continue serving your investment needs in the years to come.
Sincerely,
ROBERT CONTI
PRESIDENT AND CEO
NEUBERGER BERMAN MUTUAL FUNDS
1
Risk Balanced Commodity Strategy Fund Commentary
Neuberger Berman Risk Balanced Commodity Strategy Fund1 Institutional Class generated a -6.40% total return for the six months ended April 30, 2013 and underperformed its benchmark, the Dow Jones-UBS Commodity Index, which posted a -6.34% return for the period. (Performance for all share classes is provided in the table immediately following this letter.)
Overall, the commodity markets generated weak results during the reporting period. A confluence of factors contributed to generally declining commodity prices, including decelerating growth in China as well as fiscal cliff and sequestration-related concerns in the U.S. Investor sentiment was also negatively impacted by ongoing uncertainty in Europe, worsened by the inconclusive election results in Italy and a banking crisis in Cyprus. Within the commodity markets, precious metals posted the weakest results, driven by sharply falling silver and gold prices. Agricultural commodities also performed poorly. Energy and softs (e.g., cotton and sugar) produced relatively better results given rallies in natural gas and cotton.
The Fund's core strategy uses a systematic investment process to balance risk among each of the underlying individual commodities which aggregate into six major commodity sectors: energy, industrial metals, precious metals, agriculture, livestock and softs. The Fund's tactical strategy seeks to gain exposure to commodities and commodity-linked derivative instruments (collectively "commodities") primarily by investing in a wholly owned subsidiary of the Fund formed in the Cayman Islands. Discussion of the Fund's investments in commodities in this report mainly refers to the investments made by that subsidiary. Over the six month reporting period, the core strategy largely drove the Fund's underperformance, while its tactical strategy modestly added value. The largest detractors within the core strategy were precious metals, which fell sharply due to concerns over global demand. The next largest detractor was agriculture, which was dragged down by declining wheat prices given falling grain exports and an oversupply of soy and soybeans. The Fund's allocations to livestock, industrial metals, energy and softs were also detrimental to performance, albeit to lesser extents.
Our active strategy seeks to enhance the Fund's performance by tilting each commodity's exposure relative to its core strategy weight. These tilts are based on short- to medium-term factors, including macroeconomics, supply/demand, the pricing relationships among commodities and the shape of the futures curve. The active strategy added value during each month of the reporting period except for April. The Fund generally maintained overweights versus the benchmark in energy, precious metals and industrial metals, while it was underweighted in agriculture, livestock and softs. Within the active strategy, positioning in nickel, wheat and feeder cattle provided the largest contribution to returns, while our positions in zinc, aluminum and platinum were the largest detractors.
Looking ahead, we believe that the fundamental drivers of commodity prices remain intact. In our view, recent weakness has been driven by business cycle movements and short-term supply increases, rather than structural shifts in the asset class. Over time, we anticipate commodities will be supported by rapid growth in emerging markets. The so-called BRICs (Brazil, Russia, India and China), with perhaps a few additional countries, are projected to experience long-term significant population and per-capita income growth, resulting in larger-than-ever middle classes. We believe these factors are likely to continue to trigger increased consumption of commodities, from food to oil to materials necessary for infrastructure development. At the same time, we anticipate long-term supply issues will persist in the face of a scarcity of resources. Against this backdrop, we feel that commodities remain an important, diversifying component of a long-term investor's portfolio.
Sincerely,
WAI LEE, HAKAN KAYA AND THOMAS SONTAG
PORTFOLIO CO-MANAGERS
Information about the principal risks of investing in the Fund is set forth in the prospectus and statement of additional information.
The portfolio composition, industries and holdings of the Fund are subject to change.
The opinions expressed are those of the Fund's portfolio managers. The opinions are as of the date of this report and are subject to change without notice.
1 Much of the Fund's investment exposure is accomplished through the use of derivatives which may not require the Fund to deposit the full notional amount of the investment with its counterparties, such as a futures commission merchant. The Fund's resulting cash balances are invested in money market mutual funds.
2
Risk Balanced Commodity Strategy Fund
TICKER SYMBOLS
Institutional Class | NRBIX | ||||||
Class A | NRBAX | ||||||
Class C | NRBCX |
PORTFOLIO BY TYPE OF SECURITY
(as a % of Total Investments) | |||||||
Corporate Debt Securities | 25.7 | % | |||||
Mortgage-Backed Securities | 3.7 | ||||||
U.S. Government Agency Securities | 3.6 | ||||||
Short-Term Investments | 67.0 | ||||||
Total | 100.0 | % |
PORTFOLIO BY INVESTMENT EXPOSURE
TO COMMODITY DERIVATIVES
(as a % of Total Notional Value) | |||||||
Commodity Futures: | |||||||
Agriculture | 16.0 | % | |||||
Energy | 33.7 | ||||||
Industrial Metals | 17.7 | ||||||
Livestock | 9.0 | ||||||
Precious Metals | 16.8 | ||||||
Softs | 6.8 | ||||||
Total | 100.0 | % |
PERFORMANCE HIGHLIGHTS2
Inception Date | Six Month Period Ended 04/30/2013 | Cumulative Total Return Ended 04/30/2013 Life of Fund | |||||||||||||
At NAV | |||||||||||||||
Institutional Class | 08/27/2012 | -6.40 | % | -7.90 | % | ||||||||||
Class A | 08/27/2012 | -6.61 | % | -8.10 | % | ||||||||||
Class C | 08/27/2012 | -7.02 | % | -8.60 | % | ||||||||||
With Sales Charge | |||||||||||||||
Class A | -11.97 | % | -13.38 | % | |||||||||||
Class C | -7.95 | % | -9.51 | % | |||||||||||
Index | |||||||||||||||
Dow Jones-UBS Commodity Index1,3 | -6.34 | % | -8.01 | % |
The performance data quoted represent past performance and do not indicate future results. Current performance may be lower or higher than the performance data quoted. For more current performance data, please visit www.nb.com/performance.
The results shown in the table reflect the reinvestment of income dividends and other distributions, if any. The results do not reflect the effect of taxes a shareholder would pay on Fund distributions or on the redemption of Fund shares.
The investment return and principal value of an investment will fluctuate and shares, when redeemed, may be worth more or less than their original cost.
Returns would have been lower if Neuberger Berman Management LLC ("Management") had not reimbursed certain expenses and/or waived a portion of the investment management fees during certain of the periods shown. Repayment by a class (of expenses previously reimbursed and/or fees previously waived by Management) will decrease the class's returns. Please see Note B in the Notes to Financial Statements for specific information regarding expense reimbursement and/or fee waiver arrangements.
Returns shown with a sales charge reflect the deduction of the current maximum initial sales charge of 5.75% for Class A shares and the applicable contingent deferred sales charges (CDSC) for Class C shares. The maximum CDSC for Class C shares is 1%, which is reduced to 0% after 1 year. The performance of the Fund's share classes will differ primarily due to different sales charge structures and class expenses. Please see the prospectus for more information about sales charge structures, if any, and class expenses for your share class.
3
Endnotes
1 Please see "Description of Index" on page 5 for a description of the index. Please note that the index does not take into account any fees, expenses or tax consequences of investing in the individual securities that it tracks, and that individuals cannot invest directly in any index. Data about the performance of an index is prepared or obtained by Neuberger Berman Management LLC ("Management") and reflects the reinvestment of income dividends and other distributions, if any. The Fund may invest in securities not included in a described index and may not invest in all securities included in a described index.
2 The Fund was relatively small during the period from August 2012 through January 2013. The same techniques used to produce returns in a small fund may not work to produce similar returns in a larger fund.
3 The date used to calculate Life of Fund performance for the index is the inception date of the oldest share class.
For more complete information on any of the Neuberger Berman Alternative and Multi-Asset Class Funds, call Management at (800) 877-9700, or visit our website at www.nb.com.
4
Description of Index
Dow Jones-UBS Commodity Index: | A rolling index composed of futures contracts on 19 physical commodities traded on U.S. exchanges, with the exception of aluminum, nickel and zinc, which are traded on the London Metal Exchange (LME). Weighting is based on liquidity, or the relative amount of trading activity of a particular commodity; dollar-adjusted production data are secondary. All data used are averaged over a five-year period. The DJ-UBSCI is calculated on an excess return basis, reflecting only the return of its underlying commodity price movements. A total return index reflects the return on a fully collateralized investment of the index. |
5
Information About Your Fund's Expenses (Unaudited)
As a Fund shareholder, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds (if applicable); and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees (if applicable), and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and compare these costs with the ongoing costs of investing in other mutual funds.
This table is designed to provide information regarding costs related to your investments. The following examples are based on an investment of $1,000 made at the beginning of the six month period ended April 30, 2013 and held for the entire period. The table illustrates the Fund's costs in two ways:
Actual Expenses and Performance: | The first section of the table provides information about actual account values and actual expenses in dollars, based on the Fund's actual performance during the period. You may use the information in this line, together with the amount you invested, to estimate the expenses you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section of the table under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid over the period. | ||||||
Hypothetical Example for Comparison Purposes: | The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return at 5% per year before expenses. This return is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in this Fund versus other funds. To do so, compare the expenses shown in this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. |
Please note that the expenses in the table are meant to highlight your ongoing costs only and do not include any transaction costs, such as sales charges (loads) (if applicable). Therefore, the information under the heading "Hypothetical (5% annual return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
6
Expense Information as of 4/30/13 (Unaudited)
Neuberger Berman Alternative Funds | |||||||||||||||||||||||||||||||||||
ACTUAL | HYPOTHETICAL (5% ANNUAL RETURN BEFORE EXPENSES)(2) | ||||||||||||||||||||||||||||||||||
Beginning Account Value 11/1/12 | Ending Account Value 4/30/13 | Expenses Paid During the Period(1) 11/1/12 - 4/30/13 | Expense Ratio | Beginning Account Value 11/1/12 | Ending Account Value 4/30/13 | Expenses Paid During the Period(1) 11/1/12 - 4/30/13 | Expense Ratio | ||||||||||||||||||||||||||||
Neuberger Risk Balanced Commodity Strategy Fund | |||||||||||||||||||||||||||||||||||
Institutional Class | $ | 1,000.00 | $ | 936.00 | $ | 5.28 | 1.10 | % | $ | 1,000.00 | $ | 1,019.34 | $ | 5.51 | 1.10 | % | |||||||||||||||||||
Class A | $ | 1,000.00 | $ | 933.90 | $ | 7.00 | 1.46 | % | $ | 1,000.00 | $ | 1,017.55 | $ | 7.30 | 1.46 | % | |||||||||||||||||||
Class C | $ | 1,000.00 | $ | 929.80 | $ | 10.57 | 2.21 | % | $ | 1,000.00 | $ | 1,013.84 | $ | 11.03 | 2.21 | % |
(1) For each class, expenses are equal to the annualized expense ratio for the class, including expenses of the Fund's subsidiary (See Note A-1 of Notes to Consolidated Financial Statements) multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown).
(2) Hypothetical 5% annual return before expenses is calculated by multiplying the number of days in the most recent period divided by 365.
7
Consolidated Schedule of Investments Risk Balanced Commodity Strategy Fund (Unaudited)
PRINCIPAL AMOUNT | VALUE† | ||||||||||
U.S. Government Agency Securities (3.5%) | |||||||||||
$ | 250,000 | Federal Farm Credit Banks, Bonds, 0.23%, due 3/13/15 (Cost $250,123) | $ | 249,939 | µ | ||||||
Mortgage-Backed Securities (3.5%) | |||||||||||
Fannie Mae (3.5%) | |||||||||||
250,000 | Federal National Mortgage Association, Notes, 0.18%, due 6/20/14 (Cost $250,073) | 250,067 | µ | ||||||||
Corporate Debt Securities (24.8%) | |||||||||||
Banks (5.3%) | |||||||||||
150,000 | JPMorgan Chase & Co., Unsecured Notes, 0.73%, due 4/23/15 | 150,090 | µ | ||||||||
50,000 | JPMorgan Chase & Co., Senior Unsecured Notes, 4.75%, due 5/1/13 | 50,000 | |||||||||
50,000 | Royal Bank of Canada, Senior Unsecured Medium-Term Notes, Ser. 1, 0.58%, due 4/17/14 | 50,149 | µ | ||||||||
50,000 | US Bancorp, Medium-Term Notes, 2.00%, due 6/14/13 | 50,099 | |||||||||
75,000 | Wells Fargo & Co., Senior Unsecured Notes, 1.20%, due 6/26/15 | 75,933 | µ | ||||||||
376,271 | |||||||||||
Beverages (1.4%) | |||||||||||
100,000 | PepsiCo, Inc., Senior Unsecured Notes, 0.37%, due 5/10/13 | 100,006 | µ | ||||||||
Computers (2.6%) | |||||||||||
55,000 | Apple, Inc., Senior Unsecured Notes, 0.32%, due 5/3/16 | 55,000 | µ | ||||||||
125,000 | International Business Machines Corp., Senior Unsecured Notes, 2.10%, due 5/6/13 | 125,019 | |||||||||
180,019 | |||||||||||
Cosmetics - Personal Care (2.1%) | |||||||||||
150,000 | Procter & Gamble Co., Senior Unsecured Notes, 0.22%, due 2/6/14 | 149,934 | µ | ||||||||
Diversified Financial Services (5.1%) | |||||||||||
84,000 | American Express Credit Corp., Senior Unsecured Notes, 1.13%, due 6/24/14 | 84,590 | µ | ||||||||
50,000 | Caterpillar Financial Services Corp., Senior Unsecured Medium-Term Notes, 0.44%, due 8/27/14 | 50,097 | µ | ||||||||
100,000 | General Electric Capital Corp., Senior Unsecured Medium-Term Notes, Ser. A, 0.54%, due 9/15/14 | 100,096 | µ | ||||||||
100,000 | John Deere Capital Corp., Senior Unsecured Notes, 0.43%, due 4/25/14 | 100,166 | µ | ||||||||
30,000 | Toyota Motor Credit Corp., Senior Unsecured Medium-Term Notes, 0.73%, due 10/11/13 | 30,065 | µ | ||||||||
365,014 | |||||||||||
Insurance (0.7%) | |||||||||||
50,000 | Berkshire Hathaway Finance Corp., Guaranteed Notes, 0.61%, due 1/10/14 | 50,117 | µ | ||||||||
Media (0.9%) | |||||||||||
65,000 | Walt Disney Co., Senior Unsecured Medium-Term Notes, 0.28%, due 2/11/15 | 65,000 | µ | ||||||||
Oil & Gas (0.7%) | |||||||||||
50,000 | BP Capital Markets PLC, Guaranteed Notes, 0.88%, due 3/11/14 | 50,241 | µ |
See Notes to Schedule of Investments
8
Consolidated Schedule of Investments Risk Balanced Commodity Strategy Fund (Unaudited) cont'd
PRINCIPAL AMOUNT | VALUE† | ||||||||||
Pipelines (0.8%) | |||||||||||
$ | 57,000 | TransCanada PipeLines Ltd., Senior Unsecured Notes, 4.00%, due 6/15/13 | $ | 57,220 | |||||||
Retail (3.1%) | |||||||||||
68,000 | Home Depot, Inc., Senior Unsecured Notes, 5.25%, due 12/16/13 | 70,085 | |||||||||
50,000 | Target Corp., Senior Unsecured Notes, 0.45%, due 7/18/14 | 50,110 | µ | ||||||||
97,000 | Wal-Mart Stores, Inc., Senior Unsecured Notes, 4.55%, due 5/1/13 | 97,000 | |||||||||
217,195 | |||||||||||
Telecommunications (2.1%) | |||||||||||
100,000 | Cisco Systems, Inc., Senior Unsecured Notes, 0.53%, due 3/14/14 | 100,205 | µ | ||||||||
50,000 | Verizon Communications, Inc., Senior Unsecured Notes, 0.89%, due 3/28/14 | 50,210 | µ | ||||||||
150,415 | |||||||||||
Total Corporate Debt Securities (Cost $1,761,174) | 1,761,432 | ||||||||||
Short-Term Investments (64.5%) | |||||||||||
U.S. Treasury Securities-Backed by the Full Faith and Credit of the U.S. Government(a) (49.1%) | |||||||||||
550,000 | U.S. Treasury Bills, Disc. Notes, 0.02%, due 5/16/13 | 549,991 | |||||||||
300,000 | U.S. Treasury Bills, Disc. Notes, 0.02%, due 5/23/13 | 299,995 | |||||||||
400,000 | U.S. Treasury Bills, Disc. Notes, 0.03%, due 6/6/13 | 399,992 | |||||||||
600,000 | U.S. Treasury Bills, Disc. Notes, 0.05%, due 6/27/13 | 599,978 | |||||||||
500,000 | U.S. Treasury Bills, Disc. Notes, 0.04%, due 7/5/13 | 499,973 | |||||||||
600,000 | U.S. Treasury Bills, Disc. Notes, 0.06%, due 8/8/13 | 599,914 | |||||||||
400,000 | U.S. Treasury Bills, Disc. Notes, 0.08%, due 8/22/13 | 399,931 | |||||||||
150,000 | U.S. Treasury Bills, Disc. Notes, 0.08%, due 10/17/13 | 149,945 | |||||||||
3,499,719 | |||||||||||
NUMBER OF SHARES | |||||||||||
Money Market Fund (15.4%) | |||||||||||
1,095,534 | State Street Institutional Government Money Market Fund Institutional Class | 1,095,534 | Ø؆† | ||||||||
Total Short-Term Investments (Cost $4,594,910) | 4,595,253 | ||||||||||
Total Investments (96.3%) (Cost $6,856,280) | 6,856,691 | ## | |||||||||
Cash, receivables and other assets, less liabilities (3.7%) | 265,948 | ± | |||||||||
Total Net Assets (100.0%) | $ | 7,122,639 |
See Notes to Schedule of Investments
9
Notes to Consolidated Schedule of Investments (Unaudited)
† In accordance with Accounting Standards Codification ("ASC") 820 "Fair Value Measurements and Disclosures" ("ASC 820"), all investments held by Neuberger Berman Risk Balanced Commodity Strategy Fund (the "Fund") are carried at the value that Neuberger Berman Management LLC ("Management") believes the Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment under current market conditions. Various inputs, including the volume and level of activity for the asset or liability in the market, are considered in valuing the Fund's investments, some of which are discussed below. Significant management judgment may be necessary to value investments in accordance with ASC 820.
ASC 820 established a three-tier hierarchy of inputs to create a classification of value measurements for disclosure purposes. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
• Level 1 – quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, amortized cost, etc.)
• Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing an investment are not necessarily an indication of the risk associated with investing in those securities.
The value of the Fund's investments in debt securities is determined by Management primarily by obtaining valuations from independent pricing services based on readily available bid quotations, or if quotations are not available, by methods which include various considerations based on security type (generally Level 2 inputs). In addition to the consideration of yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions, the following is a description of other Level 2 inputs and related valuation techniques used by an independent pricing service to value certain types of debt securities of the Fund:
Corporate Debt Securities. Inputs used to value corporate debt securities generally include relative credit information, observed market movements, sector news, spread to the U.S. Treasury market, and other market information which may include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, benchmark securities, bids, offers, and reference data, such as market research publications, when available ("Other Market Information").
Mortgage-Backed Securities. Inputs used to value mortgage-backed securities generally include models that consider a number of factors, which may include the following: prepayment speeds, cash flows, spread adjustments and Other Market Information.
U.S. Treasury Securities. Inputs used to value U.S. Treasury securities generally include quotes from several inter-dealer brokers and Other Market Information.
U.S. Government Agency Securities. Inputs used to value U.S. Government Agency securities generally include obtaining benchmark quotes and Other Market Information.
The value of commodity futures contracts is determined by obtaining valuations from independent pricing services at the settlement price at the market close (Level 1 inputs).
Management has developed a process to periodically review information provided by independent pricing services for all types of securities.
See Notes to Financial Statements
10
Notes to Consolidated Schedule of Investments (Unaudited) (cont'd)
Investments in money market funds are valued using the fund's daily calculated net asset value per share (Level 2 inputs).
If a valuation is not available from an independent pricing service, or if Management has reason to believe that the valuation received does not represent the amount the Fund might reasonably expect to receive on a current sale in an orderly transaction, the Fund seeks to obtain quotations from principal market makers (generally considered Level 3 inputs). If such quotations are not readily available, the security is valued using methods the Neuberger Berman Alternative Funds' Board of Trustees (the "Board") has approved on the belief that they reflect fair value. Numerous factors may be considered when determining the fair value of a security based on Level 2 or 3 inputs, including available analyst, media or other reports, trading in futures or ADRs and whether the issuer of the security being fair valued has other securities outstanding.
Fair value prices are necessarily estimates, and there is no assurance that such a price will be at or close to the price at which the security is next quoted or next trades.
The following is a summary, categorized by Level, of inputs used to value the Fund's investments as of April 30, 2013:
Asset Valuation Inputs | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Investments: | |||||||||||||||||||
U.S. Government Agency Securities | $ | — | $ | 249,939 | $ | — | $ | 249,939 | |||||||||||
Mortgage-Backed Securities^ | — | 250,067 | — | 250,067 | |||||||||||||||
Corporate Debt Securities^ | — | 1,761,432 | — | 1,761,432 | |||||||||||||||
Short-Term Investments^ | — | 4,595,253 | — | 4,595,253 | |||||||||||||||
Total Investments | $ | — | $ | 6,856,691 | $ | — | $ | 6,856,691 |
^ The Consolidated Schedule of Investments provides information on the industry categorization for the portfolio.
The following is a summary, categorized by Level, of inputs used to value the Fund's derivatives as of April 30, 2013:
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Futures Contracts (unrealized appreciation) | $ | 182,236 | $ | — | $ | — | $ | 182,236 | |||||||||||
Liability Valuation Inputs | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Futures Contracts (unrealized depreciation) | $ | (399,093 | ) | $ | — | $ | — | $ | (399,093 | ) |
## At April 30, 2013, the cost of investments for U.S. federal income tax purposes was $6,856,280. Gross unrealized appreciation of investments was $788 and gross unrealized depreciation of investments was $377, resulting in net unrealized appreciation of $411 based on cost for U.S. federal income tax purposes.
ØØ All or a portion of this security is segregated in connection with obligations for commodity futures contracts.
†† A portion of this security is held by Neuberger Berman Cayman Commodity Fund I Ltd., (the "Subsidiary") a wholly-owned subsidiary of the Fund. See Note A-1 of the Notes to Consolidated Financial Statements.
(a) Interest rate represents discount rate at time of purchase, not a coupon rate.
µ Floating rate securities are securities whose yields vary with a designated index or market rate. These securities are shown at their current rates as of April 30, 2013, and their final maturity dates.
± See Note A-11 in the Notes to Consolidated Financial Statements for the Fund's or Subsidiary's open positions in derivatives at April 30, 2013.
See Notes to Financial Statements
11
Consolidated Statement of Assets and Liabilities* (Unaudited)
Neuberger Berman Alternative Funds | |||||||
RISK BALANCED COMMODITY STRATEGY FUND | |||||||
April 30, 2013 | |||||||
Assets | |||||||
Investments in securities, at value** (Note A)—see Schedule of Investments: | |||||||
Unaffiliated issuers | $ | 6,856,691 | |||||
Deposits with brokers for futures contracts (Note A-11) | 356,966 | ||||||
Dividends and interest receivable | 8,100 | ||||||
Receivable for Fund shares sold | 3,333 | ||||||
Receivable for variation margin (Note A-11) | 8,019 | ||||||
Receivable from Management—net (Note B) | 51,759 | ||||||
Prepaid expenses and other assets | 32,503 | ||||||
Total Assets | 7,317,371 | ||||||
Liabilities | |||||||
Payable for securities purchased | 105,524 | ||||||
Payable for Fund shares redeemed | 5,769 | ||||||
Payable to investment manager (Note B) | 3,967 | ||||||
Accrued expenses and other payables | 79,472 | ||||||
Total Liabilities | 194,732 | ||||||
Net Assets | $ | 7,122,639 | |||||
Net Assets consist of: | |||||||
Paid-in capital | $ | 7,606,852 | |||||
Undistributed net investment income (loss) | (30,819) | ||||||
Accumulated net realized gains (losses) on investments | (236,948) | ||||||
Net unrealized appreciation (depreciation) in value of investments | (216,446) | ||||||
Net Assets | $ | 7,122,639 | |||||
Net Assets | |||||||
Institutional Class | $ | 6,852,782 | |||||
Class A | 178,442 | ||||||
Class C | 91,415 | ||||||
Shares Outstanding ($.001 par value; unlimited shares authorized) | |||||||
Institutional Class | 744,120 | ||||||
Class A | 19,418 | ||||||
Class C | 10,000 | ||||||
Net Asset Value, offering and redemption price per share | |||||||
Institutional Class | $ | 9.21 | |||||
Net Asset Value and redemption price per share | |||||||
Class A | $ | 9.19 | |||||
Offering Price per share | |||||||
Class A‡ | $ | 9.75 | |||||
Net Asset Value and offering price per share | |||||||
Class C^ | $ | 9.14 | |||||
**Cost of Investments | $ | 6,856,280 |
‡ On single retail sales of less than $50,000. On sales of $50,000 or more or in certain other circumstances described in the Fund's prospectus, offering price is reduced.
^ Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
* See Notes A-1 and A-2 of the Notes to Consolidated Financial Statements.
See Notes to Financial Statements
12
Consolidated Statement of Operations* (Unaudited)
Neuberger Berman Alternative Funds | |||||||
RISK BALANCED COMMODITY STRATEGY FUND | |||||||
For the Six Months Ended April 30, 2013 | |||||||
Investment Income: | |||||||
Income (Note A): | |||||||
Interest income—unaffiliated issuers | $ | 4,260 | |||||
Expenses: | |||||||
Investment management fees (Note B) | 21,284 | ||||||
Administration fees (Note B) | 1,824 | ||||||
Administration fees (Note B): | |||||||
Institutional Class | 2,620 | ||||||
Class A | 163 | ||||||
Class C | 96 | ||||||
Distribution fees (Note B): | |||||||
Class A | 204 | ||||||
Class C | 481 | ||||||
Shareholder servicing agent fees: | |||||||
Institutional Class | 322 | ||||||
Class A | 108 | ||||||
Class C | 61 | ||||||
Subsidiary administration fees (Note B) | 24,920 | ||||||
Audit fees | 55,633 | ||||||
Custodian fees | 20,163 | ||||||
Legal fees | 59,638 | ||||||
Registration and filing fees | 35,633 | ||||||
Shareholder reports | 27,934 | ||||||
Trustees' fees and expenses | 23,585 | ||||||
Miscellaneous | 4,634 | ||||||
Total expenses | 279,303 | ||||||
Expenses reimbursed by Management (Note B) | (244,997) | ||||||
Expenses reduced by custodian fee expense offset arrangement (Note A-13) | (2) | ||||||
Total net expenses | 34,304 | ||||||
Net investment income (loss) | $ | (30,044) | |||||
Realized and Unrealized Gain (Loss) on Investments (Note A): | |||||||
Net realized gain (loss) on: | |||||||
Sales of investment securities of unaffiliated issuers | 110 | ||||||
Commodity futures contracts | (237,058) | ||||||
Change in net unrealized appreciation (depreciation) in value of: | |||||||
Unaffiliated investment securities | 326 | ||||||
Commodity futures contracts | (181,281) | ||||||
Net gain (loss) on investments | (417,903) | ||||||
Net increase (decrease) in net assets resulting from operations | $ | (447,947) |
* See Notes A-1 and A-2 of the Notes to Consolidated Financial Statements.
See Notes to Financial Statements
13
Consolidated Statements of Changes in Net Assets*
Neuberger Berman Alternative Funds
RISK BALANCED COMMODITY STRATEGY FUND | |||||||||||
Six Months Ended April 30, 2013 (Unaudited) | Period from August 27, 2012 (Commencement of Operations) to October 31, 2012 | ||||||||||
Increase (Decrease) in Net Assets: | |||||||||||
From Operations (Note A): | |||||||||||
Net investment income (loss) | $ | (30,044 | ) | $ | (9,258 | ) | |||||
Net realized gain (loss) on investments | (236,948 | ) | (52,003 | ) | |||||||
Change in net unrealized appreciation (depreciation) of investments | (180,955 | ) | (35,491 | ) | |||||||
Net increase (decrease) in net assets resulting from operations | (447,947 | ) | (96,752 | ) | |||||||
From Fund Share Transactions (Note D): | |||||||||||
Proceeds from shares sold: | |||||||||||
Institutional Class | 3,757,651 | 5,069,219 | |||||||||
Class A | 70,501 | 129,263 | |||||||||
Class C | — | 100,000 | |||||||||
Payments for shares redeemed: | |||||||||||
Institutional Class | (1,453,371 | ) | — | ||||||||
Class A | (5,925 | ) | — | ||||||||
Net increase (decrease) from Fund share transactions | 2,368,856 | 5,298,482 | |||||||||
Net Increase (Decrease) in Net Assets | 1,920,909 | 5,201,730 | |||||||||
Net Assets: | |||||||||||
Beginning of period | 5,201,730 | — | |||||||||
End of period | $ | 7,122,639 | $ | 5,201,730 | |||||||
Undistributed net investment income (loss) at end of period | $ | (30,819 | ) | $ | (775 | ) |
* See Notes A-1 and A-2 of the Notes to Consolidated Financial Statements.
See Notes to Financial Statements
14
Notes to Consolidated Financial Statements Risk Balanced Commodity Strategy Fund (Unaudited)
Note A—Summary of Significant Accounting Policies:
1 General: Neuberger Berman Alternative Funds (the "Trust") is a Delaware statutory trust organized pursuant to an Amended and Restated Trust Instrument dated October 14, 2010. The Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and its shares are registered under the 1933 Act. The Fund is a separate operating series of the Trust and is non-diversified. The Fund had no operations until August 27, 2012, other than matters relating to its organization and registration of shares under the 1933 Act. The Fund offers Institutional Class shares, Class A shares and Class C shares. The Board may establish additional series or classes of shares without the approval of shareholders.
The assets of the Fund belong only to the Fund, and the liabilities of the Fund are borne solely by the Fund and no other.
The Fund invests in commodity-related instruments through the Subsidiary, which is organized under the laws of the Cayman Islands. Subscription agreements were entered into between the Fund and the Subsidiary with the intent that the Fund will remain the sole shareholder of the Subsidiary. The Subsidiary is governed by its own Board of Directors.
As of April 30, 2013, the value of the Fund's investment in the Subsidiary was as follows:
Investment in Subsidiary | Percentage of Net Assets | ||||||
$ | 1,246,551 | 17.5 | % |
The preparation of financial statements in accordance with U.S. generally accepted accounting principles ("GAAP") requires Management to make estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates.
2 Consolidation: The accompanying financial statements of the Fund present the consolidated accounts of the Fund and the Subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.
3 Portfolio valuation: Investment securities are valued as indicated in the notes following the Schedule of Investments.
4 Foreign currency translation: The accounting records of the Fund and Subsidiary are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars using the exchange rate as of 4:00 p.m., Eastern time, to determine the value of investments, other assets and liabilities. Purchase and sale prices of securities, and income and expenses, are translated into U.S. dollars at the prevailing rate of exchange on the respective dates of such transactions. Net unrealized foreign currency gain (loss), if any, arises from changes in the value of assets and liabilities, other than investments in securities, as a result of changes in exchange rates and is stated separately in the Consolidated Statement of Operations.
5 Securities transactions and investment income: Securities transactions are recorded on trade date for financial reporting purposes. Dividend income is recorded on the ex-dividend date or, for certain foreign dividends, as soon as the Fund becomes aware of the dividends. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, including accretion of discount (adjusted for original issue discount, where applicable) and amortization of premium, where applicable, is recorded on the accrual basis. Realized gains and losses from securities transactions and foreign currency transactions, if any, are recorded on the basis of identified cost and stated separately in the Consolidated Statement of Operations.
15
6 Income tax information: It is the policy of the Fund to continue to qualify for treatment as a regulated investment company by complying with the requirements of the U.S. Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its net investment income and net realized capital gains to its shareholders. To the extent the Fund distributes substantially all of its net investment income and net realized capital gains to shareholders, no federal income or excise tax provision is required.
The Fund has adopted the provisions of ASC 740 "Income Taxes" ("ASC 740"). ASC 740 sets forth a minimum threshold for financial statement recognition of a tax position taken, or expected to be taken, in a tax return. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as an income tax expense in the Consolidated Statement of Operations. As of April 30, 2013, the Fund did not have any unrecognized tax positions.
The Subsidiary is a controlled foreign corporation under the U.S. Internal Revenue Code. As a U.S. shareholder of a controlled foreign corporation, the Fund will include in its gross income its share of the Subsidiary's current earnings and profits (including net realized gains). Any deficit generated by the Subsidiary will be disregarded for purposes of computing the Fund's gross income in the current period and also disregarded for all future periods.
Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund. The Fund may also utilize earnings and profits distributed to shareholders on redemption of shares as a part of the dividends-paid deduction for income tax purposes.
As determined on October 31, 2012, permanent differences resulting primarily from different book and tax accounting were reclassified at period end. Such differences may be attributed to one or more of the following: non-deductible Rule 12b-1 fees, and Subsidiary income, gain (loss) and expense adjustments. These reclassifications had no effect on net income, net asset value ("NAV") or NAV per share of the Fund. For the period ended October 31, 2012, the Fund recorded the following permanent reclassifications:
Paid-in Capital | Undistributed Net Investment Income (Loss) | Accumulated Net Realized Gains (Losses) on Investments | |||||||||
$ | (60,486 | ) | $ | 8,483 | $ | 52,003 |
For tax purposes, distributions of short-term gains are taxable to shareholders as ordinary income.
As of October 31, 2012, the components of distributable earnings (accumulated losses) on a U.S. federal income tax basis were as follows:
Undistributed Ordinary Income | Unrealized Appreciation (Depreciation) | Loss Carryforwards and Deferrals | Other Temporary Differences | Total | |||||||||||||||
$ | — | $ | 85 | $ | — | $ | (36,351 | ) | $ | (36,266 | ) |
The difference between book basis and tax basis distributable earnings is primarily due to organizational expenses.
To the extent the Fund's net realized capital gains, if any, can be offset by capital loss carryforwards, it is the policy of the Fund not to distribute such gains.
7 Distributions to shareholders: The Fund may earn income, net of expenses, daily on its investments. Distributions from net investment income and net realized capital gains, if any, generally are distributed once a year (usually in December) and are recorded on the ex-date.
8 Foreign taxes: Foreign taxes withheld, if any, represent amounts withheld by foreign tax authorities, net of refunds recoverable.
16
9 Expense allocation: Certain expenses are applicable to multiple funds. Expenses directly attributable to the Fund are charged to the Fund. Expenses of the Trust that are not directly attributable to a particular series of the Trust (e.g., the Fund) are allocated among the series of the Trust, on the basis of relative net assets, except where a more appropriate allocation of expenses to each of the series can otherwise be made fairly. Expenses borne by the complex of related investment companies, which includes open-end and closed-end investment companies for which Management serves as investment manager, that are not directly attributable to a particular investment company in the complex (e.g., the Trust) or series thereof are allocated among the investment companies in the complex or series thereof, on the basis of relative net assets, except where a more appropriate allocation of expenses to each of the investment companies in the complex or series thereof can otherwise be made fairly. The Fund's expenses (other than those specific to each class) are allocated proportionally each day among the classes based upon the relative net assets of each class.
10 Investments in foreign securities: Investing in foreign securities may involve certain sovereign and other risks, in addition to the credit and market risks normally associated with domestic securities. These additional risks include the possibility of adverse political and economic developments (including political instability, nationalization, expropriation, or confiscatory taxation) and the potentially adverse effects of unavailability of public information regarding issuers, less governmental supervision and regulation of financial markets, reduced liquidity of certain financial markets, and the lack of uniform accounting, auditing, and financial reporting standards or the application of standards that are different or less stringent than those applied in the United States. Foreign securities also may experience greater price volatility, higher rates of inflation, and delays in settlement.
11 Derivative instruments: During the six months ended April 30, 2013, the Fund's use of derivatives was limited to commodity futures contracts. The Fund has adopted the provisions of ASC 815 "Derivatives and Hedging" ("ASC 815"). The disclosure requirements of ASC 815 distinguish between derivatives that qualify for hedge accounting and those that do not. Because investment companies value their derivatives at fair value and recognize changes in fair value through the Consolidated Statement of Operations, they do not qualify for hedge accounting. Accordingly, even though the Fund's investments in derivatives may represent economic hedges, they are considered non-hedge transactions for purposes of this disclosure.
Commodity futures contracts: During the six months ended April 30, 2013, the Fund entered into commodity futures contracts (through investments in the Subsidiary) to provide investment exposure to individual commodities, as well as to manage and/or adjust the risk profile of the Fund.
At the time the Fund or Subsidiary enters into a commodity futures contract, it is required to deposit with the futures commission merchant a specified amount of cash or liquid securities, known as "initial margin," which is a percentage of the value of the commodity futures contract being traded that is set by the exchange upon which the futures contract is traded. Each day, the futures contract is valued at the official settlement price of the board of trade or U.S. commodity exchange on which such futures contract is traded. Subsequent payments, known as "variation margin," to and from the broker are made on a daily basis as the market price of the commodity futures contract fluctuates. Daily variation margin adjustments, arising from this "mark to market," are recorded by the Fund or Subsidiary as unrealized gains or losses.
Although some commodity futures contracts by their terms call for actual delivery or acquisition of the underlying securities or currency, in most cases the contracts are closed out prior to delivery by offsetting purchases or sales of matching commodity futures contracts. When the contracts are closed, the Fund or Subsidiary recognizes a gain or loss. Risks of entering into futures contracts include the possibility there may be an illiquid market, possibly at a time of rapidly declining prices, and/or a change in the value of the contract may not correlate with changes in the value of the underlying securities. Futures executed on regulated futures exchanges have minimal counterparty risk to a fund because the exchange's clearinghouse assumes the position of the counterpary in each transaction. Thus, the Fund is exposed to risk only in connection with the clearinghouse and not in connection with the original counterpary to the transaction.
For U.S. federal income tax purposes, the futures transactions undertaken by the Fund or Subsidiary may cause the Fund or Subsidiary to recognize gains or losses from marking contracts to market even though its positions have
17
not been sold or terminated, may affect the character of the gains or losses recognized as long-term or short-term, and may affect the timing of some capital gains and losses realized by the Fund or Subsidiary. Also, the Fund's or Subsidiary's losses on transactions involving futures contracts may be deferred rather than being taken into account currently in calculating the Fund's or Subsidiary's taxable income.
At April 30, 2013, open positions in commodity futures contracts(1) were:
Expiration | Open Contracts | Position | Unrealized Appreciation (Depreciation) | ||||||||||||
May 2013 | 7 Aluminum High Grade | Long | $ | (42,828 | ) | ||||||||||
May 2013 | 6 Lead | Long | (54,989 | ) | |||||||||||
May 2013 | 2 Nickel | Long | (24,702 | ) | |||||||||||
May 2013 | 5 Zinc | Long | (30,844 | ) | |||||||||||
June 2013 | 6 Aluminum High Grade | Long | (23,016 | ) | |||||||||||
June 2013 | 5 Lead | Long | (30,314 | ) | |||||||||||
June 2013 | 2 Nickel | Long | (15,099 | ) | |||||||||||
June 2013 | 5 Zinc | Long | (26,883 | ) | |||||||||||
July 2013 | 6 Aluminum High Grade | Long | (5,860 | ) | |||||||||||
July 2013 | 5 Lead | Long | (10,102 | ) | |||||||||||
July 2013 | 2 Nickel | Long | (16,599 | ) | |||||||||||
July 2013 | 2 Platinum | Long | (7,911 | ) | |||||||||||
July 2013 | 5 Zinc | Long | (4,071 | ) | |||||||||||
August 2013 | 6 Aluminum High Grade | Long | (2,222 | ) | |||||||||||
August 2013 | 4 Cattle Feeder | Long | (1,852 | ) | |||||||||||
August 2013 | 6 Gas Oil | Long | (3,615 | ) | |||||||||||
August 2013 | 3 Gasoline RBOB | Long | (879 | ) | |||||||||||
August 2013 | 4 Gold 100 Oz. | Long | (51,425 | ) | |||||||||||
August 2013 | 3 Heating Oil | Long | (2,366 | ) | |||||||||||
August 2013 | 4 Lead | Long | (1,656 | ) | |||||||||||
August 2013 | 5 Lean Hogs | Long | (148 | ) | |||||||||||
August2013 | 5 Light Sweet Crude Oil | Long | (1,776 | ) | |||||||||||
August 2013 | 5 Live Cattle | Long | (3,239 | ) | |||||||||||
August 2013 | 5 Natural Gas | Long | (356 | ) | |||||||||||
August 2013 | 3 Nickel | Long | 265 | ||||||||||||
August 2013 | 5 Zinc | Long | (4,570 | ) | |||||||||||
September 2013 | 5 Brent Crude Oil | Long | (5,363 | ) | |||||||||||
September 2013 | 5 Cocoa | Long | 1,963 | ||||||||||||
September 2013 | 2 Coffee | Long | 556 | ||||||||||||
September 2013 | 4 Copper High Grade | Long | 937 | ||||||||||||
October 2013 | 5 Sugar 11 | Long | (73 | ) | |||||||||||
November 2013 | 6 Soybean | Long | (14,046 | ) | |||||||||||
December 2013 | 11 Corn | Long | (6,039 | ) | |||||||||||
December 2013 | 4 Cotton No. 2 | Long | 2,211 | ||||||||||||
December 2013 | 2 Silver | Long | (536 | ) | |||||||||||
December 2013 | 3 Soybean Meal | Long | (2,160 | ) | |||||||||||
December 2013 | 3 Soybean Oil | Long | (3,371 | ) |
18
Expiration | Open Contracts | Position | Unrealized Appreciation (Depreciation) | ||||||||||||
December 2013 | 5 Wheat | Long | $ | 1,870 | |||||||||||
December 2013 | 4 Wheat | Long | 1,534 | ||||||||||||
May 2013 | 7 Aluminum High Grade | Short | 33,751 | ||||||||||||
May 2013 | 6 Lead | Short | 47,953 | ||||||||||||
May 2013 | 2 Nickel | Short | 15,135 | ||||||||||||
May 2013 | 5 Zinc | Short | 27,805 | ||||||||||||
June 2013 | 6 Aluminum High Grade | Short | 9,003 | ||||||||||||
June 2013 | 5 Lead | Short | 11,148 | ||||||||||||
June 2013 | 2 Nickel | Short | 16,557 | ||||||||||||
June 2013 | 5 Zinc | Short | 3,867 | ||||||||||||
July 2013 | 6 Aluminum High Grade | Short | 1,790 | ||||||||||||
July 2013 | 5 Lead | Short | 1,711 | ||||||||||||
July 2013 | 2 Nickel | Short | (183 | ) | |||||||||||
July 2013 | 5 Zinc | Short | 4,180 | ||||||||||||
$ | (216,857 | ) |
(1) Commodity futures are held by the Subsidiary. See Note A-1 of the Notes to Financial Statements.
During the six months ended April 30, 2013, the average notional value of commodity futures contracts was $9,062,088 for long positions and $(2,766,098) for short positions.
The notional value of commodity futures contracts at April 30, 2013 was $10,088,264 for long positions and $(2,935,729) for short positions.
At April 30, 2013, the Fund had deposited $356,966 in a segregated account to cover margin requirements on open futures contracts.
At April 30, 2013, the Fund had the following derivatives (which did not qualify as hedging instruments under ASC 815), grouped by primary risk exposure:
Asset Derivatives
Commodity Risk | Consolidated Statement of Assets and Liabilities Location | ||||||||||
Futures Contracts | $ | 182,236 | Receivable/Payable for | ||||||||
Total Value | $ | 182,236 | variation margin(1) |
Liability Derivatives
Commodity Risk | Consolidated Statement of Assets and Liabilities Location | ||||||||||
Futures Contracts | $ | (399,093 | ) | Receivable/Payable for | |||||||
Total Value | $ | (399,093 | ) | variation margin(1) |
(1) "Futures Contracts" reflects the cumulative appreciation (depreciation) of futures contracts as of April 30, 2013, which is reflected in the Consolidated Statement of Assets and Liabilities under the caption "Net unrealized appreciation (depreciation) in value of investments." The outstanding variation margin as of April 30, 2013, if any, is reflected in the Consolidated Statement of Assets and Liabilities under the caption "Receivable/Payable for variation margin."
19
The impact of the use of these derivative instruments on the Consolidated Statement of Operations during the six months ended April 30, 2013, was as follows:
Realized Gain (Loss)
Commodity Risk | Consolidated Statement of Operations Location | ||||||||||
Futures Contracts | $ | (237,058 | ) | Net realized gain (loss) on: commodity | |||||||
Total Realized Gain (Loss) | $ | (237,058 | ) | futures contracts |
Change in Appreciation (Depreciation)
Commodity Risk | |||||||||||
Futures Contracts | $ | (181,281 | ) | Change in net unrealized appreciation (depreciation) in value of: | |||||||
Total Change in Appreciation (Depreciation) | $ | (181,281 | ) | commodity futures contracts |
12 Indemnifications: Like many other companies, the Trust's organizational documents provide that its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, both in some of its principal service contracts and in the normal course of its business, the Trust enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Trust's maximum exposure under these arrangements is unknown as this could involve future claims against the Trust.
13 Expense offset arrangement: Prior to January 1, 2013, the Fund had an expense offset arrangement in connection with its custodian contract. For the six months ended April 30, 2013, the impact of this arrangement was a reduction of expenses of $2.
14 Other: All net investment income and realized and unrealized capital gains and losses of the Fund are allocated, on the basis of relative net assets, pro rata among its respective classes.
Note B—Management Fees, Administration Fees, Distribution Arrangements, and Other Transactions with Affiliates:
The Fund retains Management as its investment manager under a Management Agreement. For such investment management services, the Fund pays Management a fee at the annual rate of 0.70% of the first $250 million of the Fund's average daily net assets, 0.675% of the next $250 million, 0.65% of the next $250 million, 0.625% of the next $250 million, 0.60% of the next $500 million, 0.575% of the next $2.5 billion and 0.55% of average daily net assets in excess of $4 billion, less the net asset value of the Subsidiary. Accordingly, for the six months ended April 30, 2013, the management fee pursuant to the Management Agreement was equivalent to an annual effective rate of 0.70% of the Fund's average daily net assets.
Management also serves as investment adviser to the Subsidiary. For such investment management services, the Subsidiary pays Management a fee at the annual rate of 0.70% of the first $250 million of the Subsidiary's average daily net assets, 0.675% of the next $250 million, 0.65% of the next $250 million, 0.625% of the next $250 million, 0.60% of the next $500 million, 0.575% of the next $2.5 billion and 0.55% of average daily net assets in excess of $4 billion. Accordingly, for the six months ended April 30, 2013, the management fee pursuant to the Management Agreement was equivalent to an annual effective rate of 0.70% of the Subsidiary's average daily net assets.
The Fund retains Management as its administrator under an Administration Agreement. The Fund pays Management an administration fee at the annual rate of 0.06% of its average daily net assets under this agreement. In addition, the Fund's Institutional Class pays Management an administration fee at the annual rate of 0.09% of its average daily net assets under this agreement and the Fund's Class A and Class C pays Management an administration fee at the annual rate of 0.20% of its average daily net assets under this agreement. Additionally,
20
Management retains State Street Bank and Trust Company ("State Street") as its sub-administrator under a Sub-Administration Agreement. Management pays State Street a fee for all services received under this agreement. The Subsidiary also retains Management as its administrator, and State Street as its sub-administrator.
Management has contractually agreed to waive current payment of fees and/or reimburse certain expenses of the Institutional Class, Class A and Class C of the Fund so that the total annual operating expenses of those classes do not exceed the expense limitations as detailed in the following table. These undertakings apply to the Fund's direct expenses and exclude interest, taxes, brokerage commissions, acquired fund fees and expenses, extraordinary expenses, and dividend and interest expenses relating to short sales, if any; consequently, net expenses may exceed the contractual expense limitations. The Fund has agreed that each of its respective classes will repay Management for fees and expenses waived or reimbursed for that class provided that repayment does not cause that class' annual operating expenses to exceed its contractual expense limitation at the time the fees and expenses were waived or reimbursed. Any such repayment must be made within three years after the year in which Management incurred the expense. The expenses of the Subsidiary are included in the total expenses used to calculate the reimbursement, which the Fund has agreed to share with the Subsidiary. For the six months ended April 30, 2013, these Subsidiary expenses amounted to $50,375.
During the six months ended April 30, 2013, there was no reimbursement to Management under this agreement.
At April 30, 2013, contingent liabilities to Management under the contractual expense limitation were as follows:
Expenses Reimbursed In Fiscal Period Ending, October 31, | |||||||||||||||||||
2012 | 2013 | ||||||||||||||||||
Subject to Repayment until October 31, | |||||||||||||||||||
Contractual Expense Limitation(1) | Expiration | 2015 | 2016 | ||||||||||||||||
Institutional Class | 1.10 | % | 10/31/16 | $ | 518,969 | (2) | $ | 234,377 | |||||||||||
Class A | 1.46 | % | 10/31/16 | 13,769 | (2) | 6,689 | |||||||||||||
Class C | 2.21 | % | 10/31/16 | 12,521 | (2) | 3,931 |
(1) Expense limitation per annum of the respective class' average daily net assets.
(2) Period from August 27, 2012 (Commencement of Operations) to October 31, 2012.
Neuberger Berman Fixed Income LLC ("NBFI"), as the sub-adviser to the Fund and the Subsidiary, is retained by Management to provide day-to-day investment management services and receives a monthly fee paid by Management. As investment manager, Management is responsible for overseeing the investment activities of NBFI. Several individuals who are officers and/or Trustees of the Trust are also employees of NBFI, Neuberger Berman LLC ("Neuberger") and/or Management.
Management and NBFI are indirect subsidiaries of Neuberger Berman Group LLC (("NBG") and together with its consolidated subsidiaries ("NB Group")). NBSH Acquisition, LLC ("NBSH" and together with NBG, the "NB Parties"), which is owned by portfolio managers, members of the NB Group management team and certain of NB Group's key employees, senior professionals, and certain of their permitted transferees, owns, as of March 14, 2013, approximately 72% of NBG's common units, and Lehman Brothers Holdings Inc. ("LBHI") and certain of its subsidiaries (collectively the "LBHI Parties") own the remaining 28% of such common units. Pursuant to agreements among the NB Parties and the LBHI Parties, as well as the issuance of NBSH common equity to employees with respect to their previously made equity elections relating to 2013 compensation, it is expected that NBSH will own 81% of NBG's common units as of January 1, 2014. NBG has the opportunity to continue to redeem the remaining NBG Class A common units from the LBHI Parties through a process that is expected to end in 2016 (and if necessary, 2017).
21
The Fund also has a distribution agreement with Management with respect to each class of shares. Management acts as agent in arranging for the sale of class shares without sales commission or other compensation, except as described below for Class A and Class C shares, and bears advertising and promotion expenses.
However, Management receives fees from Class A and Class C under their distribution plans (each a "Plan", collectively the "Plans") pursuant to Rule 12b-1 under the 1940 Act. The Plans provide that, as compensation for administrative and other services provided to these classes, Management's activities and expenses related to the sale and distribution of these classes of shares, and ongoing services provided to investors in these classes, Management receives from each of these classes a fee at the annual rate of 0.25% of Class A's and 1.00% of Class C's average daily net assets. Management receives this amount to provide distribution and shareholder servicing for these classes and pays a portion of it to institutions that provide such services. Those institutions may use the payments for, among other purposes, compensating employees engaged in sales and/or shareholder servicing. The amount of fees paid by each class during any year may be more or less than the cost of distribution and other services provided to that class. FINRA rules limit the amount of annual distribution fees that may be paid by a mutual fund and impose a ceiling on the cumulative distribution fees paid. The Trust's Plans comply with those rules.
Class A shares are generally sold with an initial sales charge of up to 5.75% and no contingent deferred sales charge ("CDSC"), except that a CDSC of 1.00% applies to certain redemptions made within 18 months following purchases of $1 million or more without an initial sales charge. Class C shares are sold with no initial sales charge and a 1.00% CDSC if shares are sold within one year after purchase.
For the six months ended April 30, 2013, Management, acting as underwriter and broker-dealer, received net initial sales charges from the purchase of Class A shares and CDSCs from the redemption of Class A and Class C shares as follows:
Underwriter | Broker-Dealer | ||||||||||||||||||
Net Initial Sales Charges | CDSC | Net Initial Sales Charges | CDSC | ||||||||||||||||
Class A | $ | 248 | $ | — | $ | — | $ | — | |||||||||||
Class C | — | — | — | — |
Note C—Securities Transactions:
During the six months ended April 30, 2013, there were purchase and sale transactions (excluding commodity futures contracts and short-term investments) of $1,583,074 and $50,341, respectively.
Note D—Fund Share Transactions:
Share activity for the six months ended April 30, 2013 and for the period ended October 31, 2012 was as follows:
For the Six Months Ended April 30, 2013 | For the Period Ended October 31, 2012(1) | ||||||||||||||||||||||
Shares Sold | Shares Redeemed | Total | Shares Sold | Total | |||||||||||||||||||
Institutional Class | 383,768 | (145,157 | ) | 238,611 | 505,509 | 505,509 | |||||||||||||||||
Class A | 7,161 | (644 | ) | 6,517 | 12,901 | 12,901 | |||||||||||||||||
Class C | — | — | — | 10,000 | 10,000 |
(1) Period from August 27, 2012 (Commencement of Operations) to October 31, 2012.
At April 30, 2013, the Neuberger Berman Dynamic Real Return Fund, which is also managed by Management, held 22% of the outstanding shares of the Fund.
22
Note E—Line of Credit:
At April 30, 2013, the Fund was a participant in a single committed, unsecured $200,000,000 line of credit with State Street, to be used only for temporary or emergency purposes. Other investment companies managed by Management also participate in this line of credit on the same terms. Interest is charged on borrowings under this line of credit at the higher of (a) the Federal Funds Rate plus 1.25% per annum or (b) the Overnight LIBOR Rate plus 1.25% per annum. A commitment fee of 0.10% per annum of the available line of credit is charged, of which each participating Fund has agreed to pay its pro rata share, based on the ratio of its individual net assets to the net assets of all participants at the time the fee is due and payable. The fee is paid quarterly in arrears. Because several mutual funds participate, there is no assurance that an individual Fund will have access to all or any part of the $200,000,000 at any particular time. There were no loans outstanding pursuant to this line of credit at April 30, 2013. During the six months ended April 30, 2013, the Fund did not utilize this line of credit.
Note F—Recent Accounting Pronouncement:
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11 Disclosures about Offsetting Assets and Liabilities ("ASU 2011-11"). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. At this time, Management is evaluating the implications of ASU 2011-11 and its impact on the financial statements.
Note G—Unaudited Financial Information:
The financial information included in this interim report is taken from the records of the Fund without audit by an independent registered public accounting firm. Annual reports contain audited financial statements.
23
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Consolidated Financial Highlights
The following tables include selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. Per share amounts that round to less than $0.01 or $(0.01) per share are presented as $0.00 or $(0.00) respectively. Net Asset amounts with a zero balance may reflect actual amounts rounding to less than $0.1 million.
Net Asset Value, Beginning of Period | Net Investment Income (Loss)@ | Net Gains or Losses on Securities (both realized and unrealized) | Total From Investment Operations | Dividends from Net Investment Income | Distributions from Net Realized Capital Gains | Total Distributions | |||||||||||||||||||||||||
Risk Balanced Commodity Strategy Fund | |||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 9.84 | $ | (0.05 | ) | $ | (0.58 | ) | $ | (0.63 | ) | $ | — | $ | — | $ | — | ||||||||||||||
Period from 8/27/2012^ to 10/31/2012 | $ | 10.00 | $ | (0.02 | ) | $ | (0.14 | ) | $ | (0.16 | ) | $ | — | $ | — | $ | — | ||||||||||||||
Class A | |||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 9.84 | $ | (0.06 | ) | $ | (0.59 | ) | $ | (0.65 | ) | $ | — | $ | — | $ | — | ||||||||||||||
Period from 8/27/2012^ to 10/31/2012 | $ | 10.00 | $ | (0.03 | ) | $ | (0.13 | ) | $ | (0.16 | ) | $ | — | $ | — | $ | — | ||||||||||||||
Class C | |||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 9.83 | $ | (0.10 | ) | $ | (0.59 | ) | $ | (0.69 | ) | $ | — | $ | — | �� | $ | — | |||||||||||||
Period from 8/27/2012^ to 10/31/2012 | $ | 10.00 | $ | (0.04 | ) | $ | (0.13 | ) | $ | (0.17 | ) | $ | — | $ | — | $ | — |
See Notes to Financial Highlights
25
Net Asset Value, End of Period | Total Return†† | Net Assets, End of Period (in millions) | Ratio of Gross Expenses to Average Net Assets# | Ratio of Net Expenses to Average Net Assets | Ratio of Net Investment Income/ (Loss) to Average Net Assets | Portfolio Turnover Rate | |||||||||||||||||||||||||
Risk Balanced Commodity Strategy Fund | |||||||||||||||||||||||||||||||
Institutional Class | |||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 9.21 | (6.40 | )%** | $ | 6.9 | 9.15 | %* | 1.10 | %* | (.96 | )%* | 7 | %** | |||||||||||||||||
Period from 8/27/2012^ to 10/31/2012 | $ | 9.84 | (1.60 | )%** | $ | 5.0 | 25.60 | %*‡ | 1.10 | %*‡ | (.99 | )%*‡ | 0 | %** | |||||||||||||||||
Class A | |||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 9.19 | (6.61 | )%** | $ | 0.2 | 9.67 | %* | 1.46 | %* | (1.32 | )%* | 7 | %** | |||||||||||||||||
Period from 8/27/2012^ to 10/31/2012 | $ | 9.84 | (1.60 | )%** | $ | 0.1 | 33.04 | %*‡ | 1.46 | %*‡ | (1.36 | )%*‡ | 0 | %** | |||||||||||||||||
Class C | |||||||||||||||||||||||||||||||
4/30/2013 (Unaudited) | $ | 9.14 | (7.02 | )%** | $ | 0.1 | 10.38 | %* | 2.21 | %* | (2.07 | )%* | 7 | %** | |||||||||||||||||
Period from 8/27/2012^ to 10/31/2012 | $ | 9.83 | (1.70 | )%** | $ | 0.1 | 35.12 | %*‡ | 2.21 | %*‡ | (2.11 | )%*‡ | 0 | %** |
26
Notes to Financial Highlights (Unaudited)
†† Total return based on per share NAV reflects the effects of changes in NAV on the performance of the Fund during the fiscal period and assumes income dividends and other distributions, if any, were reinvested, but does not reflect the effect of sales charges. Results represent past performance and do not indicate future results. Current returns may be lower or higher than the performance data quoted. Investment returns and principal may fluctuate and shares when redeemed may be worth more or less than original cost. Total return would have been lower if Management had not reimbursed and/or waived certain expenses.
# Represents the annualized ratios of net expenses to average daily net assets if Management had not reimbursed certain expenses and/or waived a portion of the investment management fee.
@ Calculated based on the average number of shares outstanding during each fiscal period.
^ The date investment operations commenced.
‡ Organization expense, which is a non-recurring expense, is included in these ratios on a non-annualized basis.
* Annualized.
** Not annualized.
27
Directory
Investment Manager, Administrator and Distributor
Neuberger Berman Management LLC
605 Third Avenue, 2nd Floor
New York, NY 10158-0180
800.877.9700 or 212.476.8800
Intermediary Client Services 800.366.6264
Sub-Adviser
Neuberger Berman Fixed Income LLC
190 South LaSalle Street
Chicago, IL 60603
Custodian and Shareholder Servicing Agent
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, MA 02111
For Institutional Class Shareholders
Address correspondence to:
Neuberger Berman Management LLC
605 Third Avenue, Mail Drop 2-7
New York, NY 10158-0180
Attn: Intermediary Client Services
800.366.6264
For Class A and Class C Shareholders:
Please contact your investment provider
Legal Counsel
K&L Gates LLP
1601 K Street, NW
Washington, DC 20006
Independent Registered Public Accounting Firms
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
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Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to portfolio securities is available, without charge, by calling 800-877-9700 (toll-free) and on the website of the Securities and Exchange Commission, at www.sec.gov. Information regarding how the Trust voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is also available, without charge, by calling 800-877-9700 (toll-free), on the website of the Securities and Exchange Commission at www.sec.gov, and on Management's website at www.nb.com.
Quarterly Portfolio Schedule
The Trust files a complete schedule of portfolio holdings for the Fund with the Securities and Exchange Commission for the first and third quarters of the fiscal year on Form N-Q. The Trust's Forms N-Q are available on the Securities and Exchange Commission's website at www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. The information on Form N-Q is available upon request, without charge, by calling 800-877-9700 (toll-free).
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Neuberger Berman Management LLC
605 Third Avenue 2nd Floor
New York, NY 10158–0180
Shareholder Services
800.877.9700
Institutional Services
800.366.6264
www.nb.com
Statistics and projections in this report are derived from sources deemed to be reliable but cannot be regarded as a representation of future results of the Fund. This report is prepared for the general information of shareholders and is not an offer of shares of the Fund. Shares are sold only through the currently effective prospectus, which must precede or accompany this report.
N0088 06/13
(a) | Based on an evaluation of the disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “Act”)) as of a date within 90 days of the filing date of this document, the Chief Executive Officer and Treasurer and Principal Financial and Accounting Officer of the Registrant have concluded that such disclosure controls and procedures are effectively designed to ensure that information required to be disclosed by the Registrant on Form N-CSR and Form N-Q is accumulated and communicated to the Registrant’s management to allow timely decisions regarding required disclosure. |
(b) | There were no significant changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
(a)(1) | A copy of the Code of Ethics is incorporated by reference to Neuberger Berman Equity Funds’ Form N-CSR, Investment Company Act file number 811-00582 (filed May 6, 2013). |
(a)(2) | The certifications required by Rule 30a-2(a) of the Act and Section 302 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) are filed herewith. |
(a)(3) | Not applicable to the Registrant. |
(b) | The certifications required by Rule 30a-2(b) of the Act and Section 906 of the Sarbanes-Oxley Act are filed herewith. |