As filed with the Securities and Exchange Commission on January 9, 2004
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file Number: 811-21421
NEUBERGER BERMAN REAL ESTATE SECURITIES INCOME FUND INC.
--------------------------------------------------------
(Exact Name of the Registrant as Specified in Charter)
c/o Neuberger Berman Management Inc.
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Registrant's Telephone Number, including area code: (212) 476-8800
Peter E. Sundman, Chief Executive Officer
c/o Neuberger Berman Management Inc.
Neuberger Berman Real Estate Securities Income Fund Inc.
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq. Ellen Metzger, Esq.
Kirkpatrick & Lockhart LLP Neuberger Berman, LLC
1800 Massachusetts Avenue, N.W. 2nd Floor 605 Third Avenue
Washington, DC 20036-1800 New York, New York 10158-3698
(Names addresses of agents for service)
Date of fiscal year end: October 31, 2003
Date of reporting period: October 31, 2003
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS
ANNUAL REPORT
OCTOBER 31, 2003
[NEUBERGER BERMAN A LEHMAN BROTHERS COMPANY LOGO]
NEUBERGER BERMAN
REAL ESTATE
SECURITIES INCOME
FUND INC.
<Page>
NEUBERGER BERMAN OCTOBER 31, 2003
CHAIRMAN'S LETTER
Dear Fellow Shareholder,
I am pleased to present to you this annual report of the Neuberger Berman Real
Estate Securities Income Fund, for the period ending October 31, 2003. The
report includes a listing of the Fund's investments and its financial statements
for the reporting period.
The Fund's investment objective is to provide high current income, and its
secondary objective is to provide capital appreciation. In seeking to accomplish
both, we are assembling a portfolio with a broad mix of equity securities of
real estate investment trusts (REITs) and other real estate companies.
Portfolio Manager Steven Brown's investment approach combines analysis of
security fundamentals and real estate with property sector diversification. His
disciplined valuation methodology seeks out real estate securities that are
attractively priced relative to their historical growth rates and the valuation
of other property sectors.
We believe our conservative investing philosophy and disciplined investment
process will benefit you with superior returns over the long term.
Thank you for your confidence in Neuberger Berman. We will continue to do our
best to keep earning it.
Sincerely,
/s/ Peter Sundman
PETER SUNDMAN
CHAIRMAN OF THE BOARD
NEUBERGER BERMAN REAL ESTATE
SECURITIES INCOME FUND INC. CLOSED-END FUNDS
"Neuberger Berman" and the Neuberger Berman logo are service marks of
Neuberger Berman, LLC. "Neuberger Berman Management Inc." and the individual
fund name in this shareholder report are either service marks or registered
service marks of Neuberger Berman Management Inc. (C)2003 Neuberger Berman
Management Inc. All rights reserved.
CONTENTS
<Table>
THE FUND
CHAIRMAN'S LETTER 1
PORTFOLIO COMMENTARY/PERFORMANCE HIGHLIGHTS 2
SCHEDULE OF INVESTMENTS/TOP EQUITY HOLDINGS 5
FINANCIAL STATEMENTS 7
FINANCIAL HIGHLIGHTS/PER SHARE DATA 14
REPORT OF INDEPENDENT AUDITORS 16
DIVIDEND REINVESTMENT PLAN 17
DIRECTORY 19
DIRECTORS AND OFFICERS 20
</Table>
1
<Page>
REAL ESTATE SECURITIES INCOME FUND INC. Portfolio Commentary
We are pleased to present our first report to shareholders of the Neuberger
Berman Real Estate Securities Income Fund Inc. (AMEX: NRO), which opened on
October 28, 2003. At the close of this reporting period, on October 31, 2003,
the Fund was not fully invested, but we are optimistic about the opportunities
we see in the real estate marketplace and particularly in Real Estate Investment
Trusts (REITs).
We believe the U.S. economy is in the early stages of a recovery that will
extend through 2004 and into 2005. Consumer spending, which has supported the
economy over the last several years, remains strong. Capital spending appears to
be recovering as the capacity glut recedes. Perhaps most importantly, corporate
America is finally hiring again. More Americans going back to work has positive
implications for consumer confidence and consumer spending. It should also
revive demand in the office sector, fundamentally the weakest property category.
We doubt 2004 Gross Domestic Product Growth (GDP) growth will match the calendar
third quarter's impressive 8.2% growth rate, but we expect growth in the healthy
4% plus range.
We also expect commercial real estate fundamentals to improve significantly over
the next 12 months. Supply growth, as measured by new permits and construction
starts as a percentage of existing supply, is decelerating and we expect the
level of supply growth for most property sectors to be below long-term averages
for the next 12 to 18 months. Demand should improve substantially as the economy
expands. Increasing demand should translate into accelerating earnings growth
for REITs.
We believe hotel/lodging, apartment, and industrial REITs should be among the
first property sectors to benefit. The hotel/lodging sector appears particularly
attractive to us. Construction activity has been at historically low levels for
three years. The significant operating leverage resulting from recent years'
intense cost cutting could be magnified in earnings as the business traveler
takes to the road again and vacancy rates fall. We think the apartment sector
should rebound as rising mortgage rates price more people out of the new housing
market, and we expect industrial REITs (warehouses) to benefit as businesses
rebuild inventories after an extended inventory liquidation cycle.
Due to the resilience of the American consumer, the regional mall sector has
performed exceptionally well over the last three years. If consumer spending
remains at or near current levels, regional mall REIT earnings should continue
to grow nicely. Although valuations are not as attractive as other property
sectors, based on above-average earnings growth potential, we believe regional
mall REITs are still reasonably valued.
After REITs' exceptional absolute and relative performance in recent years,
valuations are in the
[SIDENOTE]
CUMULATIVE TOTAL RETURN (Life of Fund as of October 31, 2003)
<Table>
<Caption>
REAL ESTATE
SECURITIES INCOME FUND
AMEX TICKER SYMBOL NRO
NAV (0.24%)
MARKET PRICE 0.07%
INCEPTION DATE 10/28/2003
</Table>
2
<Page>
mid- to upper-end of historical ranges. While REITs no longer appear "cheap," we
think they are reasonably priced relative to asset values and improving earnings
prospects. We believe that even if the stock market continues to rally strongly
in the year ahead, REITs will retain a loyal following, in large part because
the increased institutional sponsorship of REITs makes a robust stock market
less of a competitive threat than it has been in the past.
Sincerely,
/s/ Steven Brown
STEVEN BROWN
PORTFOLIO MANAGER
3
<Page>
GLOSSARY OF INDICES
NAREIT EQUITY REIT INDEX: Tracks the performance of all Equity
REITs currently listed on the New York
Stock Exchange, the NASDAQ National
Market System and the American Stock
Exchange. REITs are classified as
Equity if 75% or more of their gross
invested book assets are invested
directly or indirectly in equity of
commercial properties.
Please note that the index does not take into account any fees and expenses of
investing in individual securities that it tracks, and that investors cannot
invest directly in any index or average. Data about the performance of the index
is prepared or obtained by Management and includes reinvestment of all dividends
and capital gain distributions. The Fund may invest in securities not included
in its index.
4
<Page>
NEUBERGER BERMAN OCTOBER 31,2003
SCHEDULE OF INVESTMENTS Real Estate Securities Income Fund Inc.
<Table>
<Caption>
MARKET VALUE+
NUMBER OF SHARES (000's OMITTED)
COMMON STOCKS (0.3%)
COMMUNITY CENTERS (0.3%)
100,000 Cedar Shopping Centers
(COST $1,155) $ 1,155
-----------
PREFERRED STOCKS (0.4%)
COMMUNITY CENTERS (0.4%)
70,000 Saul Centers, Ser. A
(COST $1,761) 1,761
-----------
PRINCIPAL AMOUNT
SHORT-TERM INVESTMENTS (100.2%)
$ 50,000,000 Sallie Mae, Disc. Notes,
0.96%, due 11/7/03 49,992
150,000,000 U.S. Treasury Bills,
0.90%, due 11/6/03 149,981
150,000,000 U.S. Treasury Bills,
0.89%, due 11/13/03 149,956
65,535,000 U.S. Treasury Bills,
0.92%, due 11/20/03 65,503
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $415,432) 415,432#
-----------
TOTAL INVESTMENTS (100.9%)
(COST $418,348) 418,348##
Liabilities, less cash,
receivables and other assets
[(0.9%)] (3,723)
-----------
TOTAL NET ASSETS (100.0%) $ 414,625
-----------
</Table>
See Notes to Schedule of Investments
5
<Page>
NOTES TO SCHEDULE OF INVESTMENTS
+ Investment securities of the Fund are valued at the latest sales price
where that price is readily available; securities for which no sales were
reported, unless otherwise noted, are valued at the last available bid
price on that day. Securities traded primarily on the NASDAQ Stock Market
are normally valued by the 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. The Fund values all other securities by
a method the directors of Neuberger Berman Real Estate Securities Income
Fund Inc. believe accurately reflects fair value. Numerous factors may be
considered when determining the fair value of a security, 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. Short-term debt securities with less than 60 days until
maturity may be valued at cost which, when combined with interest earned,
approximates market value.
# At cost, which approximates market value.
## At October 31, 2003, the cost of investments for U.S. Federal income tax
purposes and book purposes was $418,348,000.
See Notes to Financial Statements
6
<Page>
NEUBERGER BERMAN OCTOBER 31, 2003
STATEMENT OF ASSETS AND LIABILITIES
<Table>
<Caption>
REAL ESTATE
NEUBERGER BERMAN SECURITIES
(000's OMITTED EXCEPT PER SHARE AMOUNTS) INCOME FUND
ASSETS
INVESTMENTS IN SECURITIES, AT MARKET VALUE* (NOTE A)--SEE
SCHEDULE OF INVESTMENTS $ 418,348
Cash 103
- ----------------------------------------------------------------------------------------------------------
TOTAL ASSETS 418,451
- ----------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 2,916
Payable for offering costs (Note A) 870
Payable to investment manager-net (Note B) 4
Payable to administrator (Note B) 3
Accrued expenses and other payables 33
- ----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 3,826
- ----------------------------------------------------------------------------------------------------------
NET ASSETS AT VALUE $ 414,625
- ----------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $ 414,625
- ----------------------------------------------------------------------------------------------------------
NET ASSETS AT VALUE $ 414,625
- ----------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING ($.0001 PAR VALUE; 1,000,000,000 SHARES AUTHORIZED) 29,007
NET ASSET VALUE PER SHARE OUTSTANDING $ 14.29
- ----------------------------------------------------------------------------------------------------------
*COST OF INVESTMENTS $ 418,348
- ----------------------------------------------------------------------------------------------------------
</Table>
See Notes to Financial Statements
7
<Page>
NEUBERGER BERMAN FOR THE ONE DAY PERIOD ENDED OCTOBER 31, 2003 (COMMENCEMENT OF
OPERATIONS)
STATEMENT OF OPERATIONS
<Table>
<Caption>
REAL ESTATE
NEUBERGER BERMAN SECURITIES
(000's OMITTED) INCOME FUND
INVESTMENT INCOME
Interest income $ 10
- ----------------------------------------------------------------------------------------------------------
EXPENSES:
Investment management fee (Note B) 7
Administration fee (Note B) 3
Auditing fees 15
Custodian fees (Note B) 1
Directors' fees and expenses 2
Shareholder reports 14
Miscellaneous 1
- ----------------------------------------------------------------------------------------------------------
Total expenses 43
Investment management fee waived (Note B) (3)
- ----------------------------------------------------------------------------------------------------------
Expenses reduced by custodian fee expense offset and
commission recapture arrangements (Note B) (0)
- ----------------------------------------------------------------------------------------------------------
Total net expenses 40
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) (30)
- ----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (30)
- ----------------------------------------------------------------------------------------------------------
</Table>
See Notes to Financial Statements
8
<Page>
NEUBERGER BERMAN OCTOBER 31, 2003
STATEMENT OF CHANGES IN NET ASSETS
REAL ESTATE SECURITIES INCOME FUND
<Table>
<Caption>
ONE DAY PERIOD
ENDED
OCTOBER 31,
2003
NEUBERGER BERMAN (COMMENCEMENT
(000's OMITTED) OF OPERATIONS)
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ (30)
- ----------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from initial capitalization (Note D) 100
Net proceeds from issuance of common shares 414,555
- ----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 414,625
NET ASSETS:
Beginning of period --
- ----------------------------------------------------------------------------------------------------------
End of period $ 414,625
- ----------------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income at end of period $ --
- ----------------------------------------------------------------------------------------------------------
</Table>
See Notes to Financial Statements
9
<Page>
NOTES TO FINANCIAL STATEMENTS Real Estate Securities Income Fund Inc.
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1 GENERAL: Neuberger Berman Real Estate Securities Income Fund Inc. (the
"Fund") was organized as a Maryland corporation on August 28, 2003 as a
non-diversified, closed-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund had no
operations until October 31, 2003, other than matters relating to its
organization and the sale on September 26, 2003 of 6,981 shares of common
stock for $100,003 ($14.325 per share) to Neuberger Berman, LLC
("Neuberger"), the Fund's sub-adviser. The Board of Directors of the Fund may
classify or re-classify any unissued shares of capital stock into one or more
classes of preferred stock without the approval of shareholders.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires Neuberger Berman
Management Inc. ("Management") to make estimates and assumptions at the date
of the financial statements. Actual results could differ from those
estimates.
2 PORTFOLIO VALUATION: Investment securities are valued as indicated in the
notes following the Schedule of Investments.
3 SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Dividend income is recorded on the
ex-dividend date. 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 original issue discount, where applicable, and
accretion of discount on short-term investments, is recorded on the accrual
basis. Realized gains and losses from securities transactions are recorded on
the basis of identified cost.
4 FEDERAL INCOME TAXES: It is the intention of the Fund to qualify as a
regulated investment company by complying with the provisions available to
certain investment companies, as defined in applicable sections of the
Internal Revenue Code, and to make distributions of investment company
taxable income and net capital gains (after reduction for any amounts
available for U.S. Federal income tax purposes as capital loss carryforwards)
sufficient to relieve it from all, or substantially all, U.S. Federal income
taxes. Accordingly, the Fund paid no U.S. Federal income taxes and no
provision for U.S. Federal income taxes was required.
5 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund earns income, net of
expenses, daily on its investments. It is the policy of the Fund to declare
quarterly and pay dividends from net investment income on a monthly basis.
Distributions from net realized capital gains, if any, are normally
distributed in December. Income dividends and capital gain distributions to
shareholders are recorded on the ex-dividend date. 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.
The Fund distinguishes between dividends on a tax basis and a financial
reporting basis and only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the
financial statements and
10
<Page>
tax earnings and profits which result in temporary over-distributions for
financial statement purposes are classified as distributions in excess of net
investment income or accumulated net realized gains in the components of net
assets on the Statement of Assets and Liabilities.
As of October 31, 2003, the components of distributable earnings (accumulated
losses) on a federal income tax basis were as follows:
<Table>
<Caption>
LOSS
UNDISTRIBUTED CARRY-
ORDINARY FORWARDS
INCOME AND DEFERRALS TOTAL
$ - $ - $ -
</Table>
The difference between book basis and tax basis is attributable primarily to
net operating losses.
6 EXPENSE ALLOCATION: Some bills are applicable to multiple funds. Expenses
directly attributable to a Fund are charged to that Fund. Expenses not
directly attributed to a Fund are allocated, on the basis of relative net
assets, except where a more appropriate allocation of expenses can otherwise
be made fairly.
7 ORGANIZATION EXPENSES AND OFFERING COSTS: Management has agreed to pay all
organizational expenses and the amount by which the Fund's offering costs for
common stock (other than sales load) exceed $0.03 per share. The costs
incurred by Management were approximately $25,500. Offering costs for common
stock to be paid by the Fund were charged as a reduction of paid-in-capital
at the completion of the Fund's offering and amounted to $870,000.
8 CONCENTRATION OF RISK: The Fund may, for cash management purposes, during a
reasonable start-up period following the initial offering, or for defensive
purposes, temporarily hold all or a substantial portion of its assets in
cash, high-quality, short-term money market instruments, or in high-quality
debt securities. The ability of the issuers of the money market instruments
and debt securities held by the Fund to meet their obligations may be
affected by economic developments, including those particular to a specific
industry or region.
Following the start-up period, under normal market conditions, the Fund's
investments will be concentrated in income-producing common equity
securities, preferred securities, convertible securities and non-convertible
debt securities issued by companies deriving the majority of their revenue
from the ownership, construction, financing, management and/or sale of
commercial, industrial, and/or residential real estate. Values of the
securities of such companies may fluctuate due to economic, legal, cultural,
geopolitical or technological developments affecting the United States real
estate industry.
NOTE B--MANAGEMENT FEES, ADMINISTRATION FEES, 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 0.60% of its average daily Managed Assets.
Managed Assets equal the total assets of the Fund less liabilities, other
11
<Page>
than the aggregate indebtedness entered into for purposes of leverage. For
purposes of calculating Managed Assets, the liquidation value of any
preferred shares outstanding is not considered a liability.
Management has contractually agreed to waive a portion of the management fees
it is entitled to receive from the Fund at the following annual rates:
<Table>
<Caption>
FISCAL PERIOD OR YEAR ENDED % OF AVERAGE
OCTOBER 31, DAILY MANAGED ASSETS
---------------------------------------------------------------------------
2003 - 2008 0.25
2009 0.19
2010 0.13
2011 0.07
</Table>
Management has not agreed to waive any portion of its fees beyond October 31,
2011.
For the period ended October 31, 2003, such waived fees amounted to $2,840.
The Fund retains Management as its administrator under an Administration
Agreement ("Agreement"). Pursuant to this Agreement the Fund pays Management
an administration fee at the annual rate of 0.25% of its average daily
Managed Assets. Additionally, Management retains State Street Bank and Trust
Company ("State Street") as its sub-administrator under a Sub-Administration
Agreement. Management pays State Street a fee for all services received under
the agreement.
On October 31, 2003, Management and Neuberger, a member firm of The New York
Stock Exchange and sub-adviser to the Fund, became indirect wholly owned
subsidiaries of Lehman Brothers Holdings Inc. ("Lehman"), a publicly held
company (the "Transaction"). Upon completion of the Transaction, the Fund's
management and sub-advisory agreements automatically terminated. To provide
for continuity of management, the Board of Directors, which was aware of the
impending Transaction when the Fund was established, and the initial sole
shareholder of the Fund voted to approve new management and sub-advisory
agreements to take effect upon closing of the Transaction. Neuberger 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 Directors of the Fund are also employees of Neuberger
and/or Management.
The Fund entered into a commission recapture program, which enables it to pay
some of its operational expenses by recouping a portion of the commissions it
pays to a broker that is not a related party of the Fund. Expenses paid
through this program may include costs of custodial, transfer agency or
accounting services. There were no amounts recaptured for the one day period
ended October 31, 2003.
The Fund has an expense offset arrangement in connection with its custodian
contract. The impact of this arrangement, reflected in the Statement of
Operations under the caption Custodian fees, was a reduction of $54.
12
<Page>
NOTE C--SECURITIES TRANSACTIONS:
During the period ended October 31, 2003, there were purchase and sale
transactions (excluding short-term securities) of $2,915,500 and $0,
respectively.
During the period ended October 31, 2003, brokerage commissions on securities
transactions amounted to $8,500, of which Neuberger received $0, Lehman
received $0, and other brokers received $8,500.
NOTE D--CAPITAL:
At October 31, 2003, the common shares outstanding and the common shares
owned by Neuberger for the Fund were as follows:
<Table>
<Caption>
COMMON SHARES COMMON SHARES
OUTSTANDING OWNED BY NEUBERGER
29,006,981 6,981
</Table>
Transactions in common shares of capital stock for the period ended October
31, 2003 were as follows:
<Table>
<Caption>
COMMON SHARES ISSUED IN CONNECTION WITH:
UNDERWRITERS' EXERCISE REINVESTMENT OF
INITIAL PUBLIC OF OVER-ALLOTMENT DIVIDENDS AND NET INCREASE IN COMMON
INITIAL CAPITALIZATION OFFERING OPTION DISTRIBUTIONS SHARES OUTSTANDING
6,981 29,000,000 - - 29,006,981
</Table>
NOTE E--USE OF LEVERAGE:
Subject to market conditions, the Fund intends to offer Preferred Shares
representing approximately 33% of the Fund's capital after issuance. The Fund
also may add leverage to the portfolio through the utilization of derivative
instruments. The Fund may issue Preferred Shares so long as after their
issuance the liquidation value of the Preferred Shares, plus the aggregate
amount of senior securities representing indebtedness, does not exceed 50% of
the Fund's capital. Once Preferred Shares are issued and/or other forms of
leverage are used, the asset value and market price of the common shares and
the yield to common stockholders will be more volatile.
13
<Page>
FINANCIAL HIGHLIGHTS Real Estate Securities Income Fund Inc.
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the Financial
Statements.
<Table>
<Caption>
ONE DAY
PERIOD ENDED
OCTOBER 31, 2003^
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.32
--------------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (.00)
--------------
LESS CAPITAL CHARGES
ISSUANCE OF COMMON SHARES (.03)
--------------
NET ASSET VALUE, END OF PERIOD $ 14.29
--------------
MARKET VALUE, END OF PERIOD $ 15.01
--------------
TOTAL RETURN, NET ASSET VALUE+ -0.24%**
TOTAL RETURN, MARKET VALUE+ +0.07%**
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (IN MILLIONS) $ 414.6
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS# 3.57%*
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS++ 3.57%*
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS (2.65%)*
PORTFOLIO TURNOVER RATE 0%
</Table>
See Notes to Financial Highlights
14
<Page>
NOTES TO FINANCIAL HIGHLIGHTS Real Estate Securities Income Fund Inc.
+ Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of the Fund during the fiscal
period. Total return based on per share market value assumes the purchase
of common shares at the market price on the first day and sales of common
shares at the market price on the last day of the period indicated.
Dividends and distributions, if any, are assumed to be reinvested at prices
obtained under the Fund's dividend reinvestment plan. Results represent
past performance and do not guarantee future results. Total return would
have been lower if Management had not waived a portion of the investment
management fee.
# The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
++ After waiver of a portion of the investment management fee. Had Management
not undertaken such action the annualized ratio of net expenses to average
daily net assets would have been:
<Table>
<Caption>
ONE DAY
PERIOD ENDED
OCTOBER 31,
2003
3.82%
</Table>
^ The date investment operations commenced.
* Annualized.
** Not annualized.
15
<Page>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and
Shareholders of Neuberger Berman Real Estate Securities Income Fund Inc.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Neuberger Berman Real Estate Securities Income
Fund Inc., (the "Fund") as of October 31, 2003, and the related statement of
operations, statement of changes in net assets and financial highlights for the
one day period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of October 31, 2003, by correspondence with
the custodian and brokers or other appropriate auditing procedures where replies
from brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Neuberger Berman Real Estate Securities Income Fund Inc. at October 31, 2003,
the results of its operations, changes in its net assets, and its financial
highlights for the one day period then ended, in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 5, 2003
16
<Page>
DIVIDEND REINVESTMENT PLAN (Unaudited)
The Bank of New York ("Plan Agent") will act as Plan Agent for shareholders who
have not elected in writing to receive dividends and distributions in cash (each
a "Participant"), will open an account for each Participant under the Dividend
Reinvestment Plan ("Plan") in the same name as their then current Shares are
registered, and will put the Plan into effect for each Participant as of the
first record date for a dividend or capital gains distribution.
Whenever the Fund declares a dividend or distribution with respect to the common
stock of the Fund ("Shares"), each Participant will receive such dividends and
distributions in additional Shares, including fractional Shares acquired by the
Plan Agent and credited to each Participant's account. If on the payment date
for a cash dividend or distribution, the net asset value is equal to or less
than the market price per Share plus estimated brokerage commissions, the Plan
Agent shall automatically receive such Shares, including fractions, for each
Participant's account. Except in the circumstances described in the next
paragraph, the number of additional Shares to be credited to each Participant's
account shall be determined by dividing the dollar amount of the dividend or
distribution payable on their Shares by the greater of the net asset value per
Share determined as of the date of purchase or 95% of the then current market
price per Share on the payment date.
Should the net asset value per Share exceed the market price per Share plus
estimated brokerage commissions on the payment date for a cash dividend or
distribution, the Plan Agent or a broker-dealer selected by the Plan Agent shall
endeavor, for a purchase period lasting until the last business day before the
next date on which the Shares trade on an "ex-dividend" basis, but in no event,
except as provided below, more than 30 days after the dividend payment date, to
apply the amount of such dividend or distribution on each Participant's Shares
(less their PRO RATA share of brokerage commissions incurred with respect to the
Plan Agent's open-market purchases in connection with the reinvestment of such
dividend or distribution) to purchase Shares on the open market for each
Participant's account. No such purchases may be made more than 30 days after the
payment date for such dividend except where temporary curtailment or suspension
of purchase is necessary to comply with applicable provisions of federal
securities laws. If, at the close of business on any day during the purchase
period the net asset value per Share equals or is less than the market price per
Share plus estimated brokerage commissions, the Plan Agent will not make any
further open-market purchases in connection with the reinvestment of such
dividend or distribution. If the Plan Agent is unable to invest the full
dividend or distribution amount through open-market purchases during the
purchase period, the Plan Agent shall request that, with respect to the
uninvested portion of such dividend or distribution amount, the Fund issue new
Shares at the close of business on the earlier of the last day of the purchase
period or the first day during the purchase period on which the net asset value
per Share equals or is less than the market price per Share, plus estimated
brokerage commissions, such Shares to be issued in accordance with the terms
specified in the third paragraph hereof. These newly issued Shares will be
valued at the then-current market price per Share at the time such Shares are to
be issued.
For purposes of making the dividend reinvestment purchase comparison under the
Plan, (a) the market price of the Shares on a particular date shall be the last
sales price on the New York Stock Exchange (or if the Shares are not listed on
the New York Stock Exchange, such other exchange on which the Shares are
principally traded) on that date, or, if there is no sale on such Exchange (or
if not so listed, in the over-the-counter market) on that date, then the mean
between the closing bid and asked quotations for such Shares on such Exchange on
such date and (b) the net asset value per Share on a particular date shall be
the net asset value per Share most recently calculated by or on behalf of the
Fund. All dividends, distributions and other payments (whether made in cash or
Shares) shall be made net of any applicable withholding tax.
Open-market purchases provided for above may be made on any securities exchange
where the Fund's Shares are traded, in the over-the-counter market or in
negotiated transactions and may be on such terms as to price, delivery and
otherwise as the Plan Agent shall determine. Each Participant's uninvested funds
held by the Plan Agent will not bear interest, and it is understood that, in any
event, the Plan Agent shall have no liability in connection with any inability
to purchase Shares within 30 days after the initial date of such purchase as
herein provided, or with the timing of any purchases effected. The Plan Agent
shall have no responsibility as to the value of the Shares acquired for each
Participant's account. For the purpose of cash investments, the Plan Agent may
commingle each Participant's funds with those of other shareholders of the Fund
for whom the Plan Agent similarly acts as agent, and the average price
(including brokerage commissions) of all Shares purchased by the Plan Agent as
Plan Agent shall be the price per Share allocable to each Participant in
connection therewith.
17
<Page>
The Plan Agent may hold each Participant's Shares acquired pursuant to the Plan
together with the Shares of other shareholders of the Fund acquired pursuant to
the Plan in noncertificated form in the Plan Agent's name or that of the Plan
Agent's nominee. The Plan Agent will forward to each Participant any proxy
solicitation material and will vote any Shares so held for each Participant only
in accordance with the instructions set forth on proxies returned by the
participant to the Fund.
The Plan Agent will confirm to each Participant each acquisition made for their
account as soon as practicable but not later than 60 days after the date
thereof. Although each Participant may from time to time have an undivided
fractional interest (computed to three decimal places) in a Share, no
certificates for a fractional Share will be issued. However, dividends and
distributions on fractional Shares will be credited to each Participant's
account. In the event of termination of a Participant's account under the Plan,
the Plan Agent will adjust for any such undivided fractional interest in cash at
the market value of the Shares at the time of termination, less the PRO RATA
expense of any sale required to make such an adjustment.
Any Share dividends or split Shares distributed by the Fund on Shares held by
the Plan Agent for Participants will be credited to their accounts. In the event
that the Fund makes available to its shareholders rights to purchase additional
Shares or other securities, the Shares held for each Participant under the Plan
will be added to other Shares held by the Participant in calculating the number
of rights to be issued to each Participant.
The Plan Agent's service fee for handling capital gains distributions or income
dividends will be paid by the Fund. Participants will be charged their PRO RATA
share of brokerage commissions on all open-market purchases.
Each Participant may terminate their account under the Plan by notifying the
Plan Agent in writing. Such termination will be effective immediately if the
Participant's notice is received by the Plan Agent not less than ten days prior
to any dividend or distribution record date, otherwise such termination will be
effective the first trading day after the payment date for such dividend or
distribution with respect to any subsequent dividend or distribution. The Plan
may be terminated by the Plan Agent or the Fund upon notice in writing mailed to
each Participant at least 30 days prior to any record date for the payment of
any dividend or distribution by the Fund.
These terms and conditions may be amended or supplemented by the Plan Agent or
the Fund at any time or times but, except when necessary or appropriate to
comply with applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority, only by mailing to each
Participant appropriate written notice at least 30 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by each
Participant unless, prior to the effective date thereof, the Plan Agent receives
written notice of the termination of their account under the Plan. Any such
amendment may include an appointment by the Plan Agent in its place and stead of
a successor Plan Agent under these terms and conditions, with full power and
authority to perform all or any of the acts to be performed by the Plan Agent
under these terms and conditions. Upon any such appointment of any Plan Agent
for the purpose of receiving dividends and distributions, the Fund will be
authorized to pay to such successor Plan Agent, for each Participant's account,
all dividends and distributions payable on Shares held in their name or under
the Plan for retention or application by such successor Plan Agent as provided
in these terms and conditions.
The Plan Agent shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to ensure the accuracy of all services
performed under this Agreement and to comply with applicable law, but assumes no
responsibility and shall not be liable for loss or damage due to errors unless
such error is caused by the Plan Agent's negligence, bad faith, or willful
misconduct or that of its employees.
These terms and conditions shall be governed by the laws of the State of
Maryland.
18
<Page>
DIRECTORY
INVESTMENT MANAGER AND ADMINISTRATOR
Neuberger Berman Management Inc.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
877.461.1899 or 212.476.8800
SUB-ADVISER
Neuberger Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
STOCK TRANSFER AGENT
Bank of New York
101 Barclay Street, 11-E
New York, NY 10286
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
19
<Page>
DIRECTORS AND OFFICERS (Unaudited)
The following tables set forth information concerning the directors and officers
of the Funds. All persons named as directors and officers also serve in similar
capacities for other funds administered or managed by NB Management and
Neuberger Berman, LLC. The Statement of Additional Information for each Fund
includes additional information about fund directors and is available upon
request, without charge, by calling (877) 461-1899.
THE BOARD OF DIRECTORS
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
AND POSITION WITH FUND PRINCIPAL OCCUPATION(S) (2) DIRECTOR FUND COMPLEX BY DIRECTOR
- ----------------------------------------------------------------------------------------------------------------------------
CLASS I
INDEPENDENT FUND
DIRECTORS*
Faith Colish (68) Counsel, Carter Ledyard & Milburn LLP (law firm) 37 Director, American Bar
Director since October 2002; Formerly, Attorney at Law and Retirement Association
President, Faith Colish, A Professional (ABRA) since 1997
Corporation, 1980 to 2002. (not-for-profit membership
association).
C. Anne Harvey (66) Consultant, C.A. Harvey Associates, since June 37 Member, Individual Investors
Director 2001; Director, AARP, 1978 to December 2000. Advisory Committee to the
New York Stock Exchange Board
of Directors, 1998 to June
2002; President, Board of
Associates to The National
Rehabilitation Hospital's Board
of Directors, since 2002;
Member, American Savings
Education Council's Policy
Board (ASEC), 1998-2000;
Member, Executive Committee,
Crime Prevention Coalition of
America, 1997-2000.
Cornelius T. Ryan (71) Founding General Partner, Oxford Partners and 37 Director, Capital Cash
Director Oxford Bioscience Partners (venture capital Management Trust (money
partnerships) and President, Oxford Venture market fund), Naragansett
Corporation. Insured Tax-Free Income
Fund, Rocky Mountain Equity
Fund, Prime Cash Fund, several
private companies and QuadraMed
Corporation (NASDAQ).
Peter P. Trapp (58) Regional Manager for Atlanta Region, Ford Motor 37
Director Credit Company since August 1997; prior thereto,
President, Ford Life Insurance Company,
April 1995 until August 1997.
</Table>
20
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
AND POSITION WITH FUND PRINCIPAL OCCUPATION(S) (2) DIRECTOR FUND COMPLEX BY DIRECTOR
- ----------------------------------------------------------------------------------------------------------------------------
DIRECTOR WHO IS AN
"INTERESTED PERSON"
Peter E. Sundman* (44) Executive Vice President, Neuberger Berman since 37 Executive Vice President,
Chief Executive Officer, 1999; Principal, Neuberger Berman from 1997 Neuberger Berman Inc.
Director and Chairman until 1999; Senior Vice President, NB Management (holding company) since
of the Board from 1996 until 1999. 1999 and Director from
October 1999 through March
2003; President and Director, NB
Management since 1999; Head of
Neuberger Berman Inc.'s Mutual
Funds and Institutional
Business since 1999; Director
and Vice President, Neuberger &
Berman Agency, Inc. since 2000.
CLASS II
INDEPENDENT FUND
DIRECTORS*
John Cannon (73) Consultant. Formerly, Chairman and Chief 37 Independent Trustee or
Director Investment Officer, CDC Capital Management Director of three series of
(registered investment adviser), 1993-January OppenheimerFunds: Limited
1999; prior thereto, President and Chief Term New York Municipal
Executive Officer, AMA Investment Advisors, an Fund, Rochester Fund
affiliate of the American Medical Association. Municipals, and Oppenheimer
Convertible Securities Fund,
since 1992.
Barry Hirsch (70) Attorney at Law. Senior Counsel, Loews 37
Director Corporation (diversified financial corporation)
May 2002 until April 2003; prior thereto, Senior
Vice President, Secretary and General Counsel,
Loews Corporation.
John P. Rosenthal (70) Senior Vice President of Burnham Securities 37 Director, 92nd Street Y (non-
Director Inc. (a registered broker-dealer) since 1991. profit) since 1967; Formerly,
Director, Cancer Treatment
Holdings, Inc.
</Table>
21
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
AND POSITION WITH FUND PRINCIPAL OCCUPATION(S) (2) DIRECTOR FUND COMPLEX BY DIRECTOR
- ----------------------------------------------------------------------------------------------------------------------------
Tom Decker Seip (53) General Partner, Seip Investments LP (a private 37 Director, H&R Block, Inc.
Director investment partnership); President and CEO, (financial services company)
Westaff, Inc.(temporary staffing), May 2001 to since May 2001; Director,
January 2002; Senior Executive at the Charles General Magic (voice
Schwab Corporation from 1983 to 1999, including recognition software) since
Chief Executive Officer, Charles Schwab November 2001; Director,
Investment Management, Inc.and Trustee, Forward Management, Inc.
Schwab Family of Funds and Schwab Investments (asset management), since
from 1997 to 1998 and Executive Vice 2001; Director, E-Finance
President-Retail Brokerage, Charles Schwab Corporation (credit
Investment Management from 1994 to 1997. decisioning services) since
1999; Director, Save-Daily.com
(micro investing services) since
1999; Formerly, Director,
Offroad Capital Inc. (pre-public
internet commerce company).
DIRECTOR WHO IS AN
"INTERESTED PERSON"
Jack L. Rivkin* (63) Executive Vice President and Chief Investment 37 Director, Dale Carnegie and
President and Director Officer, Neuberger Berman since 2002 and 2003, Associates, Inc.(private
respectively; Director and Chairman, NB company) since 1998;
Management since December 2002; Executive Vice Director, Emagin Corp.
President, Citigroup Investments, Inc. from (public company) since 1997;
September 1995 to February 2002; Executive Vice Director, Solbright, Inc.
President, Citigroup Inc. from September 1995 to (private company) since 1998;
February 2002. Director, Infogate, Inc.
(private company) since 1997.
CLASS III
INDEPENDENT FUND
DIRECTORS*
Walter G. Ehlers (70) Consultant; Retired President and Director, 37
Director Teachers Insurance & Annuity (TIAA) and College
Retirement Equities Fund (CREF).
Robert A. Kavesh (76) Marcus Nadler Professor of Finance 37 Director, DEL Laboratories,
Director and Economics Emeritus, New York Inc.(cosmetics and
University Stern School of Business. pharmaceuticals) since 1978;
The Caring Community
(not-for-profit).
Howard A. Mileaf (66) Retired.Formerly, Vice President and Special 37 Director, WHX Corporation
Director Counsel, WHX Corporation (holding company) (holding company) since
1993-2001. August 2002; Director,
Webfinancial Corporation
(holding company) since
December 2002; Director, State
Theatre of New Jersey (not-for-
profit theater) since 2000;
Formerly, Director, Kevlin
Corporation (manufacturer of
microwave and other products).
</Table>
22
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
AND POSITION WITH FUND PRINCIPAL OCCUPATION(S) (2) DIRECTOR FUND COMPLEX BY DIRECTOR
- ----------------------------------------------------------------------------------------------------------------------------
William E. Rulon (71) Retired. Senior Vice President, Foodmaker, Inc. 37 Director, Pro-Kids Golf and
Director (operator and franchiser of restaurants) until Learning Academy (teach golf
January 1997. and computer usage to "at risk"
children) since 1998; Director,
Prandium, Inc. (restaurants)
from March 2001 until
July 2002.
Candace L. Straight (56) Private investor and consultant specializing in 37 Director, Providence
Director the insurance industry; Advisory Director, Washington (property and
Securitas Capital LLC (a global private equity casualty insurance company)
investment firm dedicated to making investments since December 1998;
in the insurance sector). Director, Summit Global
Partners (insurance
brokerage firm)
since October 2000.
DIRECTOR WHO IS AN
"INTERESTED PERSON"
Edward I. O'Brien* (75) Member, Investment Policy Committee, Edward 37 Director, Legg Mason, Inc.
Director Jones, 1993-2001; President, Securities Industry (financial services holding
Association ("SIA") (securities industry's company) since 1993;
representative in government relations and Director, Boston Financial
regulatory matters at the federal and state levels) Group (real estate and tax
1974-1992; Adviser to SIA, shelters) 1993-1999.
November 1992-November 1993.
</Table>
* Indicates a director who is an "interested person" within the
meaning of the 1940 Act. Mr. Sundman and Mr. Rivkin are interested
persons of the Fund by virtue of the fact that each is an officer
and/or director of NB Management and Executive Vice President of
Neuberger Berman. Mr. O'Brien is an interested person of the Fund by
virtue of the fact that he is a director of Legg Mason, Inc., a
wholly owned subsidiary of which, from time to time, serves as a
broker or dealer to the Fund and other funds or accounts for which
NB Management serves as investment manager.
(1) The business address of each listed person is 605 Third Avenue, New
York, New York 10158.
(2) Except as otherwise indicated, each person has held the positions
shown for at least the last five years. The Board of Directors shall
at all times be divided as equally as possible into three classes of
Directors designated Class I, Class II, and Class III. The terms of
office of Class I, Class II, and Class III Directors shall expire at
the annual meetings of stockholders held in 2006, 2004, and 2005
respectively, and at each third annual meeting of stockholders
thereafter.
23
<Page>
INFORMATION ABOUT THE OFFICERS OF THE FUND (OTHER THAN THOSE LISTED ABOVE)
<Table>
<Caption>
POSITION AND
NAME, AGE, AND ADDRESS (1) LENGTH OF TIME SERVED (2) PRINCIPAL OCCUPATION(S)
- ----------------------------------------------------------------------------------------------------------------------------
Claudia A. Brandon (47) Secretary since 2002 Vice President-Mutual Fund Board Relations, NB
Management since 2000; Vice President, Neuberger
Berman since 2002 and employee since 1999; Vice
President, NB Management from 1986 to 1999;
Secretary, ten registered investment companies for
which NB Management acts as investment manager and
administrator (four since 2002 and three since
2003).
Robert Conti (47) Vice President since 2002 Senior Vice President, Neuberger Berman since
2003; Vice President, Neuberger Berman from 1999
until 2003; Senior Vice President, NB Management
since 2000; Controller, NB Management until 1996;
Treasurer, NB Management from 1996 until 1999; Vice
President, ten registered investment companies for
which NB Management acts as investment manager and
administrator (three since 2000, four since 2002
and three since 2003).
Brian P. Gaffney (50) Vice President since 2002 Managing Director, Neuberger Berman since 1999;
Senior Vice President, NB Management since 2000;
Vice President, NB Management from 1997 until 1999;
Vice President, ten registered investment companies
for which NB Management acts as investment manager
and administrator (three since 2000, four since
2002 and three since 2003).
Sheila R. James (38) Assistant Secretary since 2002 Employee, Neuberger Berman since 1999; Employee, NB
Management from 1991 to 1999; Assistant Secretary,
ten registered investment companies for which NB
Management acts as investment manager and
administrator (seven since 2002 and three since
2003).
Kevin Lyons (48) Assistant Secretary since 2003 Employee, Neuberger Berman since 1999; Employee, NB
Management from 1993 to 1999; Assistant Secretary,
ten registered investment companies for which NB
Management acts as investment manager and
administrator (since 2003).
</Table>
24
<Page>
<Table>
<Caption>
POSITION AND
NAME, AGE, AND ADDRESS (1) LENGTH OF TIME SERVED (2) PRINCIPAL OCCUPATION(S)
- ----------------------------------------------------------------------------------------------------------------------------
John M. McGovern (33) Assistant Treasurer since 2002 Employee, NB Management since 1993; Assistant
Treasurer, ten registered investment companies for
which NB Management acts as investment manager and
administrator (seven since 2002 and three since
2003).
Barbara Muinos (44) Treasurer and Principal Financial and Vice President, Neuberger Berman
since 1999; Accounting Officer since 2002 Assistant
Vice President, NB Management from 1993 to 1999;
Treasurer and Principal Financial and Accounting
Officer, ten registered investment companies for
which NB Management acts as investment manager and
administrator (seven since 2002 and three since
2003); Assistant Treasurer, three registered
investment companies for which NB Management acts
as investment manager and administrator from 1996
until 2002.
Frederic B. Soule (57) Vice President since 2002 Senior Vice President, Neuberger Berman since 2003;
Vice President, Neuberger Berman from 1999 until
2003; Vice President, NB Management from 1995 until
1999; Vice President, ten registered investment
companies for which NB Management acts as
investment manager and administrator (three since
2000, four since 2002 and three since 2003).
Trani Jo Wyman (34) Assistant Treasurer since 2002 Employee, NB Management since 1991; Assistant
Treasurer, ten registered investment companies for
which NB Management acts as investment manager and
administrator (seven since 2002 and three since
2003).
</Table>
- ---------------
(1) The business address of each listed person is 605 Third Avenue, New York,
New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
25
<Page>
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<Page>
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<Page>
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<Page>
Statistics and projections in this report are derived from sources deemed to be
reliable but cannot be regarded as a representation of future results of the
Fund. This report is prepared for the general information of shareholders and is
not an offer of shares of the Fund.
[NEUBERGER BERMAN A LEHMAN BROTHERS COMPANY LOGO]
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
INTERNAL SALES & SERVICES
877.461.1899
www.nb.com
[RECYCLED SYMBOL] D0501 12/03
THE FOLLOWING INFORMATION WILL BE INCLUDED WITH THE REGISTRANT'S PROXY STATEMENT
TO SHAREHOLDERS DATED JANUARY 12, 2004:
The following information supplements the Annual Report to Shareholders for the
fiscal period ended October 31, 2003:
A DESCRIPTION OF THE POLICIES AND PROCEDURES THAT THE FUND USES TO DETERMINE HOW
TO VOTE PROXIES RELATING TO PORTFOLIO SECURITIES IS AVAILABLE (1) WITHOUT
CHARGE, UPON REQUEST, BY CALLING TOLL-FREE 877-461-1899; OR (2) ON THE WEBSITE
OF THE U.S. SECURITIES AND EXCHANGE COMMISSION AT WWW.SEC.GOV.
ITEM 2. CODE OF ETHICS
At a meeting on September 10, 2003, the Board of Directors ("Board") of
Neuberger Berman Real Estate Securities Income Fund Inc. ("Registrant") adopted
a code of ethics that applies to the Registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions ("Code of Ethics"). A copy of the Code of
Ethics is filed as Exhibit 10(a)(1) to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board has determined that the Registrant has two audit committee financial
experts serving on its audit committee. The Registrant's audit committee
financial experts are John Cannon and Walter G. Ehlers. Mr. Cannon and Mr.
Ehlers are both independent directors as defined by Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Form N-CSR disclosure requirement not yet effective with respect to the
Registrant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
The Board has established an Audit Committee to oversee particular aspects of
the Registrant's management. The Audit Committee's purposes are (a) to oversee
the accounting and financial reporting processes of the Registrant and their
internal controls and, as the Committee deems appropriate, to inquire into the
internal controls of certain service providers; (b) to oversee the quality and
objectivity of the Registrant's financial statements and the independent audit
thereof; (c) to oversee, or, as appropriate, assist Board oversight of, the
Registrant's compliance with legal and regulatory requirements that relate to
the Portfolios' accounting and financial reporting, internal controls and
independent audits; (d) to approve prior to appointment the engagement of the
Registrant's independent auditors and, in connection therewith, to review and
evaluate the qualifications, independence and performance of the Registrant's
independent auditors; and (e) to act as a liaison between the Registrant's
independent auditors and the full Board. The Audit Committee is composed
entirely of Independent Fund Directors; its members are John Cannon, Walter G.
Ehlers, Cornelius T. Ryan (Chairman), Tom D. Seip (appointed 12/10/03), and
Peter P. Trapp.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Board has delegated to Neuberger Berman, LLC ("Neuberger Berman") the
responsibility to vote proxies related to the securities held in the Fund's
portfolios. Under this authority, Neuberger Berman is required by the Board to
vote proxies related to portfolio securities in the best interests of the Fund
and its stockholders. The Board permits Neuberger Berman to contract with a
third party to obtain proxy voting and related services, including research of
current issues.
Neuberger Berman has implemented written Proxy Voting Policies and Procedures
("Proxy Voting Policy") that are designed to reasonably ensure that Neuberger
Berman votes proxies prudently and in the best interest of its advisory clients
for whom Neuberger Berman has voting authority, including the Fund. The Proxy
Voting Policy also describes how Neuberger Berman addresses any conflicts that
may arise between its interests and those of its clients with respect to proxy
voting.
Neuberger Berman's Proxy Committee is responsible for developing, authorizing,
implementing and updating the Proxy Voting Policy, overseeing the proxy voting
process and engaging and overseeing any independent third-party vendors as
voting delegate to review, monitor and/or vote proxies. In order to apply the
Proxy Voting Policy noted above in a timely and consistent manner, Neuberger
Berman utilizes Institutional Shareholder Services Inc. ("ISS") to vote proxies
in accordance with Neuberger Berman's voting guidelines.
Neuberger Berman's guidelines adopt the voting recommendations of ISS. Neuberger
Berman retains final authority and fiduciary responsibility for proxy voting.
Neuberger Berman believes that this process is reasonably designed to address
material conflicts of interest that may arise between Neuberger Berman and a
client as to how proxies are voted.
In the event that an investment professional at Neuberger Berman believes that
it is in the best interests of a client or clients to vote proxies in a manner
inconsistent with Neuberger Berman's proxy voting guidelines or in a manner
inconsistent with ISS recommendations, the Proxy Committee will review
information submitted by the investment professional to determine that there is
no material conflict of interest between Neuberger Berman and the client with
respect to the voting of the proxy in that manner.
If the Proxy Committee determines that the voting of a proxy as recommended by
the investment professional presents a material conflict of interest between
Neuberger Berman and the client or clients with respect to the voting of the
proxy, the Proxy Committee shall: (i) take no further action, in which case ISS
shall vote such proxy in accordance with the proxy voting guidelines or as ISS
recommends; (ii) disclose such conflict to the client or clients and obtain
written direction from the client as to how to vote the proxy; (iii) suggest
that the client or clients engage another party to determine how to vote the
proxy; or (iv) engage another independent third party to determine how to vote
the proxy.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES
(a) Based on an evaluation of the disclosure controls and procedures (as
defined in rule 30a-2(c) under 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 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 half-year that have
materially affected, or are reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 10. EXHIBITS
(a) A copy of the Code of Ethics is filed as Exhibit 10(a)(1).
(b) The certifications required by Rule 30a-2 of the Investment Company Act
of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act
of 2002 are attached hereto.
The certifications provided pursuant to Section 906 of the Sarbanes-Oxley Act
are not deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934 ("Exchange Act"), or otherwise subject to the liability of that section.
Such certifications will not be deemed to be incorporated by reference into any
filing under the Securities Act of 1933 or the Exchange Act, except to the
extent that the Registrant specifically incorporates them by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Neuberger Berman Real Estate Securities Income Fund Inc.
By: /s/ Peter E. Sundman
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Peter E. Sundman
Chief Executive Officer
Date: December 31, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Peter E. Sundman
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Peter E. Sundman
Chief Executive Officer
Date: December 31, 2003
By: /s/ Barbara Muinos
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Barbara Muinos
Treasurer and Principal Financial
and Accounting Officer
Date: January 8, 2004