<Page> 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: 811-02319 ---------------------------------------------- FORT DEARBORN INCOME SECURITIES, INC. ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) One North Wacker Drive, Chicago, Illinois 60606 ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Amy R. Doberman UBS Global Asset Management (Americas) Inc. One North Wacker Drive Chicago, Illinois 60606 (Name and address of agent for service) Registrant's telephone number, including area code: 312-525-7100 Date of fiscal year end: September 30, 2003 Date of reporting period: March 31, 2003 <Page> ITEM 1. REPORTS TO STOCKHOLDERS. <Page> FORT DEARBORN INCOME SECURITIES, INC. [LOGO] FTD [LOGO] THE LISTED CHICAGO NYSE STOCK EXCHANGE FORT DEARBORN INCOME SECURITIES, INC. SEMI-ANNUAL REPORT MARCH 31, 2003 <Page> APRIL 14, 2003 DEAR SHAREHOLDER: This financial report covers the six-month period ended March 31, 2003, which is our thirty-first fiscal year of operations. Daily headlines brought an ever-changing picture of what the situation in Iraq would mean for the United States and the rest of the developed world. This cloud of uncertainty weighed heavily on consumer and business confidence. Forward-looking economic indicators amplified negative sentiment and provided further worrisome headlines for markets to digest. In this environment, U.S. fixed income continued to enjoy increased demand as a flight to quality made it more attractive than riskier assets. By the tone of headlines and market sentiment, one would think that bond yields would have fallen to historically low levels. However, price history since September of last year shows a market that is very much range bound. We have seen 30-year Treasury yields at 4.9% in every one of the past six months, and yields are currently trading above that level. High quality spreads have also been remarkably stable, which indicates that the flight to quality has not only benefited Treasuries, but also the mortgage, agency and high-quality corporate markets. We continue to be defensive on duration as rates across the entire yield curve are trading below our estimates of fair value. However, there have been several market developments that have provided us with the opportunity to add value as we wait for bond yields to normalize. In October 2002, the difference between the nominal yield of the 10-year Treasury notes and the real yield of Treasury inflation-protected securities (TIPS) was roughly 1.5%. This yield difference, which is referred to as the break-even inflation (BEI), represents the level of inflation over the life of the securities that would make investors indifferent to owning one versus the other. At this level, our valuation indicated that there was significant value in the sector and we maintained positive exposure relative to our benchmark. Over the remainder of 2002, talk of deflation faded and fear of higher oil prices increased. By February 2003, this resulted in BEI increasing to nearly 2.0%. At this level, we reduced our exposure to the sector and positioned the portfolio back into nominal Treasury notes. Another interesting development in bond markets involves the lower end of the credit quality spectrum. As 2002 produced more corporate downgrades than any other period in recent history, market participants sought to quantify the risk of corporate debt and to build models that might predict future credit deterioration. The best of these models use a Merton methodology to relate a company's credit spreads to its equity price volatility. This framework has intuitive appeal and was generally accepted as a good way to monitor investment grade credit. Looking back to 2002, the theory appears sound as one could observe a relationship between aggregated credit spreads and the general level and volatility of the equity market. However, 2003 has yielded very different results. Corporate bond spreads have improved and stabilized while equity prices have declined and remain volatile. This breakdown does not come as a surprise to us, as we believe investment grade corporate bonds are much more sensitive to expected changes in liquidity and leverage than to equity volatility. All else equal, an increase in leverage, particularly in the short-term, tends to cause bond yields to increase while equity price direction is more uncertain. 1 <Page> At the end of 2002, we did extensive back testing on what, in our opinion, was the best of the Merton models. Our results indicated that this representative model had very little predictive power. Based on what we considered poor results for these models, we have chosen to continue with our long-standing process of utilizing bottom-up credit analysis to look at investment grade corporate debt. Following a stellar fourth quarter of 2002, corporate debt was again the best performing investment grade sector in the first quarter of 2003. We attribute the resiliency in corporate bond spreads to balance sheet repair (de-leveraging) and strong investor demand. The more volatile BBB sector led performance, tightening by 38 basis points relative to Treasuries. Adding exposure to the corporate bond market over the last six months was timely. We will continue to increase our credit exposure as good lending opportunities arise. Net investment income for the six months was $0.42 per share and net realized and unrealized gains on investments totaled $0.41 per share. On March 31, 2003, the net asset value per share was $16.05 and the stock closed that day at $15.00 per share. During the period the Board of Directors declared regular quarterly dividends of $0.23 per share and $0.22 per share payable on December 13, 2002 and March 22, 2003, respectively. In addition to regular dividends, the Board declared a capital gains distribution of $0.04 per share payable on December 13, 2003. At the end of the period, the 160 issues in the portfolio had an average market yield of 5.02%, an average Moody's quality rating of A1, an average duration of 7.2, and an average maturity of 15.0 years. The distribution of the portfolio expected maturities and quality was as follows: <Table> <Caption> Maturities - ----------------------------------------- 0-1 year 1.9% 1-3 years 11.3 3-5 years 1.7 5-10 years 52.4 10-20 years 10.3 20 plus years 22.4 ------ 100.0% Quality - ----------------------------------------- Treasury, Agency and Aaa 37.7% Aa 11.9 A 22.9 Baa 25.6 Below Baa 1.9 ------ 100.0% </Table> STOCK REPURCHASE PLAN: On July 28, 1988, the Board of Directors of the Company approved a resolution to repurchase up to 700,000 of its common shares. The Company may repurchase shares, at a price not in excess of market and at a discount from net asset value, if and when such repurchases are deemed appropriate and in the shareholder's best interest. Any repurchases will be made in compliance with applicable requirements of the federal securities law. Under such law, the Company is required to give written notice to all shareholders of its intention to purchase stock within six months of the actual repurchase of shares. This report is to serve as notice to all 2 <Page> shareholders with respect to any shares repurchased within the next six months pursuant to the Company's stock repurchase plan. Unaudited financial statements for the six-month period ended March 31, 2003, and a list of the securities owned on that date are included in this report. Sincerely, /s/ Jeffrey J. Diermeier Jeffrey J. Diermeier, CFA PRESIDENT 3 <Page> FORT DEARBORN INCOME SECURITIES, INC. is a closed-end bond fund investing principally in investment grade long-term fixed income debt securities. The primary objective of Fort Dearborn is to provide its shareholders with: - a stable stream of current income consistent with external interest rate conditions, and - a total return over time that is above what they could receive by investing individually in the investment grade and long-term maturity sectors of the bond market. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Fort Dearborn Income Securities, Inc. MARKET VALUE OF INDEX AND SHARE PRICE(1) WITH ALL DIVIDENDS REINVESTED AS OF MARCH 31, 2003 <Table> <Caption> ANNUALIZED RETURNS 12 MONTHS SINCE INCEPTION Fort Dearborn 8.88% 8.68% Investment Grade Bond Index 14.68% 8.13% </Table> <Table> <Caption> $ WEALTH INDEX FORT INVESTMENT DEARBORN GRADE BOND INDEX 12/31/72 18.17 18.17 3/31/73 18.17 18.16 6/30/73 17.10 18.06 9/30/73 17.09 18.41 12/31/73 16.74 18.23 3/31/74 13.73 17.55 6/30/74 15.62 16.61 9/30/74 13.40 16.07 12/31/74 16.33 17.05 3/31/75 16.82 17.83 6/30/75 17.61 18.43 9/30/75 16.79 17.79 12/31/75 16.54 19.39 3/31/76 18.45 20.17 6/30/76 18.37 20.19 9/30/76 20.03 21.28 12/31/76 20.26 22.83 3/31/77 20.50 22.26 6/30/77 21.07 23.08 9/30/77 21.49 23.28 12/31/77 20.68 23.04 3/31/78 20.93 23.00 6/30/78 21.00 22.70 9/30/78 20.90 23.36 12/31/78 19.04 22.84 3/31/79 20.31 23.16 6/30/79 21.40 24.15 9/30/79 20.84 23.61 12/31/79 19.25 21.70 3/31/80 17.16 18.79 6/30/80 20.99 23.31 9/30/80 18.99 20.76 12/31/80 19.11 20.93 3/31/81 19.19 20.69 6/30/81 19.51 20.24 9/30/81 19.39 18.40 12/31/81 20.85 20.51 3/31/82 21.83 21.47 6/30/82 22.26 21.63 9/30/82 26.55 26.21 12/31/82 28.83 29.02 3/31/83 29.96 30.14 6/30/83 31.44 30.55 9/30/83 31.01 30.40 12/31/83 31.22 30.59 3/31/84 32.50 30.09 6/30/84 30.21 28.94 9/30/84 32.66 32.51 12/31/84 37.09 35.48 3/31/85 37.34 35.82 6/30/85 43.27 40.17 9/30/85 42.71 40.92 12/31/85 46.79 45.80 3/31/86 53.14 50.64 6/30/86 55.71 50.88 9/30/86 56.95 51.74 12/31/86 57.70 54.47 3/31/87 60.37 55.37 6/30/87 58.78 53.02 9/30/87 55.66 49.70 12/31/87 56.99 53.50 3/31/88 62.51 55.86 6/30/88 63.41 56.58 9/30/88 63.23 57.95 12/31/88 65.30 58.38 3/31/89 63.95 59.10 6/30/89 69.00 64.57 9/30/89 71.79 64.91 12/31/89 73.38 67.02 3/31/90 75.08 65.82 6/30/90 75.50 68.35 9/30/90 74.62 67.72 12/31/90 80.42 71.21 3/31/91 83.65 74.02 6/30/91 85.57 75.16 9/30/91 91.67 80.14 12/31/91 96.45 84.58 3/31/92 93.81 83.43 6/30/92 97.18 87.02 9/30/92 102.91 91.22 12/31/92 101.67 91.65 3/31/93 108.40 96.61 6/30/93 113.71 100.19 9/30/93 117.42 104.21 12/31/93 112.65 103.37 3/31/94 107.51 98.48 6/30/94 106.80 96.30 9/30/94 105.14 96.42 12/31/94 101.57 97.14 3/31/95 107.51 103.18 6/30/95 116.50 111.98 9/30/95 118.69 114.54 12/31/95 126.33 121.13 3/31/96 124.45 116.32 6/30/96 122.62 116.17 9/30/96 129.34 118.35 12/31/96 137.71 123.00 3/31/97 135.62 120.84 6/30/97 142.43 126.34 9/30/97 148.57 131.91 12/31/97 156.83 136.87 3/31/98 160.03 138.88 6/30/98 159.51 142.78 9/30/98 166.11 147.81 12/31/98 178.86 148.73 3/31/99 174.77 146.24 6/30/99 164.31 142.24 9/30/99 161.53 142.02 12/31/99 145.64 140.99 3/31/2000 157.67 143.82 6/30/2000 164.57 144.71 9/30/2000 168.54 149.23 12/31/2000 176.54 155.49 3/31/2001 190.74 161.70 6/30/2001 201.75 162.17 9/30/2001 200.54 168.73 12/31/2001 207.71 169.83 3/31/2002 206.82 168.71 6/30/2002 217.23 173.81 9/30/2002 219.50 183.85 12/31/2002 219.07 189.15 3/31/2003 225.18 193.48 </Table> Returns are net of fees (1) Share price return is impacted by changes in the premium or discount to the net asset value (NAV). At March 31, 2003, the share price was at a 6.54% discount to NAV. Total Return does not reflect brokerage commissions on purchases and sales of fund shares or the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. 4 <Page> STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2003 (UNAUDITED) <Table> ASSETS: Portfolio of investments: Debt securities, at value (cost $131,656,245)............. $ 138,321,546 Short-term securities, at cost, which approximates market.................................................. 1,167,983 ------------- Total portfolio of investments........................ 139,489,529 Cash........................................................ 17,552 Receivable for interest on debt securities.................. 1,903,352 Receivable for investments sold............................. 1,901,396 Other assets................................................ 18,082 ------------- Total assets.......................................... 143,329,911 ------------- LIABILITIES: Expenses: Payable for investments purchased......................... 2,309,728 Accrued investment advisory and administrative fees....... 157,198 Accrued custodial and transfer agent fees................. 17,367 Accrued professional fees................................. 13,134 Accrued other expenses.................................... 26,659 ------------- Total liabilities..................................... 2,524,086 ------------- NET ASSETS (equivalent to $16.05 per share for 8,775,665 shares of capital stock outstanding)....................... $ 140,805,825 ============= Analysis of Net Assets: Shareholder capital....................................... $ 135,120,133 Overdistribution of net investment income................. (160,395) Accumulated net realized loss on sales of investments..... (819,214) Unrealized appreciation on investments.................... 6,665,301 ------------- Net assets applicable to outstanding shares............... $ 140,805,825 ============= </Table> See Notes to Financial Statements. 5 <Page> STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2003 (UNAUDITED) <Table> Investment income: Interest income earned.................................... $ 4,174,565 ------------- Expenses: Investment advisory and administrative fees............... 325,583 Directors fees............................................ 48,056 Transfer agent and dividend disbursing agent fees......... 37,216 Stockholders reports and annual meeting fees.............. 34,217 Professional fees......................................... 24,930 Custody fees.............................................. 16,860 Franchise taxes........................................... 4,914 Other expenses............................................ 28,074 ------------- Total expenses.............................................. 519,850 ------------- Net investment income....................................... 3,654,715 ------------- Net realized and unrealized gain (loss) on investments: Net realized loss from investment transactions............ (442,657) Change in unrealized appreciation......................... 4,032,176 ------------- Total realized and unrealized gain (loss) on investments.... 3,589,519 ------------- Net increase in net assets from operations.................. $ 7,244,234 ============= </Table> See Notes to Financial Statements. 6 <Page> STATEMENT OF CHANGES IN NET ASSETS <Table> <Caption> SIX MONTHS FOR THE YEAR ENDED ENDED MARCH 31, 2003 SEPTEMBER 30, (UNAUDITED) 2002 --------------- -------------- From operations: Net investment income....................... $ 3,654,715 $ 8,314,247 Net realized gain (loss) from investment transactions.............................. (442,657) 623,636 Change in unrealized appreciation (depreciation) of investments............. 4,032,176 (1,229,377) ------------ ------------ Net increase in net assets from operations................................ 7,244,234 7,708,506 Distributions to shareholders from: Net investment income....................... (3,949,049) (8,424,638) Net realized gain........................... (351,027) (1,404,106) ------------ ------------ Total distributions....................... (4,300,076) (9,828,744) ------------ ------------ Net increase (decrease) in net assets..... 2,944,158 (2,120,238) Net Assets: Beginning of period......................... 137,861,667 139,981,905 ------------ ------------ End of period (including accumulated undistributed net investment income of $133,939 at 9/30/02)...................... $140,805,825 $137,861,667 ============ ============ </Table> See Notes to Financial Statements. 7 <Page> FINANCIAL HIGHLIGHTS Financial highlights for each share of capital stock outstanding through each period: <Table> <Caption> SIX MONTHS ENDED MARCH 31, YEARS ENDED SEPTEMBER 30, 2003 --------------------------------------------------------- (UNAUDITED) 2002 2001 2000 1999 1998 ----------- --------- --------- --------- --------- --------- Net asset value, beginning of period........................ $ 15.71 $ 15.95 $ 15.05 $ 15.11 $ 16.87 $ 16.30 ------- -------- -------- -------- -------- -------- Net investment income.......... 0.42 0.95 1.04 1.05 1.05 1.05 Net realized and unrealized gain (loss) on investments.... 0.41 (0.07) 0.90 (0.06) (1.27) 0.71 ------- -------- -------- -------- -------- -------- Total from investment operations.................... 0.83 0.88 1.94 0.99 (0.22) 1.76 Less distributions from: Net investment income...... (0.45) (0.96) (1.04) (1.04) (1.04) (1.04) Net realized gain.......... (0.04) (0.16) -- (0.01) (0.50) (0.15) ------- -------- -------- -------- -------- -------- Total distributions............ (0.49) (1.12) (1.04) (1.05) (1.54) (1.19) ------- -------- -------- -------- -------- -------- Net asset value, end of period........................ $ 16.05 $ 15.71 $ 15.95 $ 15.05 $ 15.11 $ 16.87 ======= ======== ======== ======== ======== ======== Market price per share at end of period..................... $ 15.00 $ 15.10 $ 14.84 $ 13.38 $ 13.88 $ 15.75 Total investment return (market value) (1)............ 2.58% 9.46% 18.98% 4.34% (2.76)% 11.81% Total return (net asset value) (2).................... 5.32% 5.82% 13.22% 6.77% (1.48)% 11.07% Net assets at end of period (in millions)................. $140.81 $ 137.86 $ 139.98 $ 132.09 $ 132.81 $ 148.30 Ratios of expenses to average net assets.................... 0.75%+ 0.73% 0.71% 0.74% 0.73% 0.71% Ratio of net investment income to average net assets......... 5.30%+ 6.07% 6.68% 7.01% 6.61% 6.29% Portfolio turnover............. 28.6% 126.8% 142.7% 73.8% 69.9% 63.5% Number of shares outstanding at end of period (in thousands)................ 8,776 8,776 8,776 8,776 8,789 8,789 </Table> - -------------------------- (1) Total investment return (market value) reflects the market value experiences of a continuous shareholder who made commission-free acquisitions through distributions in accordance with the shareholder reinvestment plan. (2) Total return (net asset value) reflects the Company's portfolio performance and is the combination of reinvested dividend income, reinvested capital gains distributions at NAV, if any, and changes in net asset value per share. + Annualized See Notes to Financial Statements. 8 <Page> PORTFOLIO OF INVESTMENTS MARCH 31, 2003 (UNAUDITED) <Table> <Caption> MOODY'S FACE VALUE RATING COST VALUE - ----------- ------- ------------ ------------ DEBT SECURITIES--(99.2%) / / MUNICIPAL SECURITIES--(3.1%) New Jersey Economic Development Authority, $10,000,000 Zero Coupon Revenue Bond, due 02/15/18.... Aaa $ 3,294,908 $ 4,274,000 ------------ ------------ / / U.S. GOVERNMENT SECURITIES--(15.0%) AGENCY OBLIGATIONS--(9.5%) Fannie Mae Grantor Trust, 799,196 5.500%, due 03/01/33..................... (a) 823,671 817,131 Federal Home Loan Mortgage Corp, Gold Pool, 1,894,184 5.500%, due 12/01/17..................... (a) 1,952,786 1,966,732 Federal National Mortgage Association, 1,872,519 5.500%, due 12/01/17..................... (a) 1,929,864 1,945,406 2,023,264 5.500%, due 01/01/18..................... (a) 2,089,653 2,101,817 1,164,961 6.000%, due 11/01/28..................... (a) 1,147,122 1,209,306 2,188,390 6.500%, due 08/01/32..................... (a) 2,267,036 2,284,474 865,266 7.000%, due 03/01/31..................... (a) 876,217 917,095 685,000 7.125%, due 01/15/30..................... (a) 766,310 853,048 Federal National Mortgage Association, Guaranteed Mortgage Pass Thru Certificates, 404,027 REMIC, 7.000%, due 06/25/13.............. (a) 375,700 431,088 Government National Mortgage Association, 650,496 6.500%, due 05/15/29..................... (a) 600,184 683,918 ------------ ------------ 12,828,543 13,210,015 ------------ ------------ U.S. TREASURY NOTES--(5.5%) 80,000 2.000%, due 11/30/04..................... Aaa 80,650 80,803 1,050,000 3.250%, due 08/15/07..................... Aaa 1,064,172 1,078,793 210,000 4.250%, due 05/31/03..................... Aaa 211,109 211,067 3,645,000 4.375%, due 08/15/12..................... Aaa 3,766,880 3,810,450 1,585,000 6.250%, due 05/15/30..................... Aaa 1,879,989 1,891,474 35,000 6.750%, due 05/15/05..................... Aaa 38,469 38,769 </Table> See Notes to Financial Statements. 9 <Page> PORTFOLIO OF INVESTMENTS--(CONTINUED) MARCH 31, 2003 (UNAUDITED) <Table> <Caption> MOODY'S FACE VALUE RATING COST VALUE - ----------- ------- ------------ ------------ $ 465,000 8.000%, due 11/15/21..................... Aaa $ 626,925 $ 648,003 ------------ ------------ 7,668,194 7,759,359 ------------ ------------ Total U.S. Government Securities.......... 20,496,737 20,969,374 ------------ ------------ / / CORPORATE BONDS AND NOTES--(81.1%) FINANCE--(40.2%) 195,000 Allstate Corp. (The), 6.750%, due 05/15/18................................. A1 208,298 219,878 205,000 American Express Co., 3.750%, due 11/20/07................................. A1 204,075 209,882 745,000 Anadarko Finance Co., 7.500%, due 05/01/31................................. Baa1 785,844 893,462 375,000 Avalonbay Communities, Inc., 7.500%, due 08/01/09................................. Baa1 392,528 432,640 1,915,000 Bank of America Corp., 7.400%, due 01/15/11................................. Aa3 1,982,161 2,281,512 235,000 Bank of New York Co., Inc., 7.300%, due 12/01/09................................. A1 267,551 279,603 815,000 Bank One Corp., 7.875%, due 08/01/10...... A1 871,776 987,411 1,655,000 Barclays Bank, PLC, 144-A, 8.550%, due 12/31/49................................. Aa3 1,652,733 2,032,214 280,000 Boeing Capital Corp., 7.375%, due 09/27/10................................. A3 299,689 309,268 200,000 ChevronTexaco Capital Co., 3.500%, due 09/17/07................................. Aa2 199,106 204,128 140,000 CIT Group, Inc., 7.750%, due 04/02/12..... A2 153,396 156,636 2,175,000 Citigroup, Inc., 7.250%, due 10/01/10..... Aa2 2,305,297 2,576,881 275,000 Conoco Funding Co., 7.250%, due 10/15/31................................. A3 315,096 323,798 335,000 Countrywide Home Loans, Inc., 5.500%, due 02/01/07................................. A3 338,792 358,238 3,000,000 CPL Transition Funding LLC, 6.250%, due 01/15/17................................. Aaa 3,243,281 3,330,542 1,105,000 Credit Suisse First Boston USA, Inc., 6.500%, due 01/15/12..................... Aa3 1,124,737 1,187,601 1,250,000 Credit Suisse First Boston USA, Inc., 6.500%, due 03/25/33..................... Aaa 1,296,875 1,294,875 2,800,000 CS First Boston Mortgage Securities Corp., 00-C1, Class A2, 7.545%, due 04/15/62.... AAA* 3,026,625 3,329,437 635,000 DLJ Commercial Mortgage Corp., 00-CKP1, Class A1B, 7.180%, due 08/10/10.......... Aaa 638,274 738,642 </Table> See Notes to Financial Statements. 10 <Page> PORTFOLIO OF INVESTMENTS--(CONTINUED) MARCH 31, 2003 (UNAUDITED) <Table> <Caption> MOODY'S FACE VALUE RATING COST VALUE - ----------- ------- ------------ ------------ $ 2,000,000 DLJ Commercial Mortgage Corp., 99-CG3, Class A1B, 7.340%, due 10/10/32.......... Aaa $ 2,171,250 $ 2,354,166 615,000 EOP Operating LP, 7.875%, due 07/15/31.... Baa1 624,293 700,011 590,000 FleetBoston Financial Corp., 7.375%, due 12/01/09................................. A3 626,221 692,728 1,805,000 Ford Motor Co., 7.450%, due 07/16/31...... Baa1 1,656,201 1,381,524 510,000 Ford Motor Credit Co., 5.800%, due 01/12/09................................. A3 478,775 456,382 1,185,000 Ford Motor Credit Co., 7.375%, due 02/01/11................................. A3 1,167,833 1,104,166 930,000 General Electric Capital Corp., 6.750%, due 03/15/32............................. Aaa 907,269 1,047,498 1,730,000 General Electric Capital Corp., 6.000%, due 06/15/12............................. Aaa 1,839,208 1,886,548 1,130,000 General Motors Acceptance Corp., 6.875%, due 09/15/11............................. A2 1,112,949 1,116,593 1,710,000 General Motors Acceptance Corp., 8.000%, due 11/01/31............................. A2 1,735,364 1,664,967 170,000 Goldman Sachs Group, Inc., 6.125%, due 02/15/33................................. Aa3 170,000 170,564 665,000 Goldman Sachs Group, Inc., 6.875%, due 01/15/11................................. Aa3 664,830 758,208 1,165,000 Household Finance Corp., 6.750%, due 05/15/11................................. A2 1,156,113 1,294,141 260,000 HSBC Holdings PLC, 5.250%, due 12/12/12... A1 259,321 268,853 475,000 Lehman Brothers Holdings, Inc., 6.625%, due 01/18/12............................. A2 472,554 536,018 390,000 Lincoln National Corp., 6.200%, due 12/15/11................................. A3 388,534 420,622 320,000 Marsh & McClennan Co., Inc., 6.250%, due 03/15/12................................. A2 356,277 359,390 190,000 MBNA America Bank N.A., 7.125%, due 11/15/12................................. Baa2 194,871 205,809 195,000 Mellon Funding Corp., 5.000%, due 12/01/14................................. A2 193,366 200,778 1,410,000 Merrill Lynch Mortgage Investors, Inc., 96-C2, Class A3, 6.960%, due 11/21/28.... AAA* 1,496,748 1,549,000 170,000 Morgan Stanley, 7.250%, due 04/01/32...... Aa3 170,968 194,646 1,640,000 Morgan Stanley, 6.750%, due 04/15/11...... Aa3 1,645,291 1,835,514 482,883 Norwest Asset Securities Corp., 96-2, Class A, 7.000%, due 09/25/11............ AAA* 486,806 483,703 </Table> See Notes to Financial Statements. 11 <Page> PORTFOLIO OF INVESTMENTS--(CONTINUED) MARCH 31, 2003 (UNAUDITED) <Table> <Caption> MOODY'S FACE VALUE RATING COST VALUE - ----------- ------- ------------ ------------ $ 480,000 Pemex Project Funding Master Trust, 144-A, 8.000%, due 11/15/11..................... Baa1 $ 518,332 $ 525,600 1,500,000 PNC Mortgage Acceptance Corp., 99-CM1, Class A1B, 7.330%, due 12/10/32.......... Aaa 1,608,750 1,766,706 870,000 Prudential Mortgage Capital Funding, LLC, 01-ROCK, Class A2, 6.605%, due 05/10/34................................. Aaa 874,350 990,458 1,380,000 PSE&G Transition Funding LLC, 6.450%, due 03/15/13................................. Aaa 1,445,766 1,582,542 3,000,000 PSE&G Transition Funding LLC, 6.610%, due 06/15/15................................. Aaa 3,376,875 3,462,984 830,000 Qwest Capital Funding, Inc., 7.900%, due 08/15/10................................. Caa2 863,845 639,100 115,000 SLM Corp., 5.125%, due 08/27/12........... A2 114,202 117,971 945,000 Unilever Capital Corp., 7.125%, due 11/01/10................................. A1 1,012,363 1,117,859 500,000 US Bank N.A., Minnesota, 6.375%, due 08/01/11................................. Aa3 510,408 564,964 1,620,000 Wachovia Bank N.A. (Charlotte), 7.800%, due 08/18/10............................. Aa3 1,714,314 1,978,525 350,000 Washington Mutual Bank, 6.875%, due 06/15/11................................. A3 379,412 397,852 1,025,000 Wells Fargo Bank, N.A., 6.450%, due 02/01/11................................. Aa2 1,014,743 1,172,960 ------------ ------------ 52,714,536 56,145,998 ------------ ------------ INDUSTRIAL--(16.3%) 720,000 Alcoa, Inc., 6.000%, due 01/15/12......... A2 718,305 782,882 430,000 Amerada Hess Corp., 6.650%, due 08/15/11................................. Baa2 431,506 469,697 940,000 Anheuser-Busch Cos., Inc., 9.000%, due 12/01/09................................. A1 1,106,321 1,220,571 1,815,000 AOL Time Warner, Inc., 7.625%, due 04/15/31................................. Baa1 1,784,855 1,926,005 1,270,000 Avon Products, Inc., 7.150%, due 11/15/09................................. A2 1,292,178 1,486,209 185,000 Bristol-Myers Squibb Co., 5.750%, due 10/01/11................................. Aa2 180,649 198,475 720,000 Caterpillar, Inc., 6.550%, due 05/01/11... A2 720,993 819,529 900,000 Cendant Corp., 6.875%, due 08/15/06....... Baa1 899,207 964,745 330,000 Centex Corp., 9.750%, due 06/15/05........ Baa2 329,993 372,753 420,000 Conagra Foods, Inc., 6.750%, due 09/15/11................................. Baa1 469,340 472,603 350,000 Coors Brewing Co., 6.375%, due 05/15/12... Baa2 348,586 391,941 </Table> See Notes to Financial Statements. 12 <Page> PORTFOLIO OF INVESTMENTS--(CONTINUED) MARCH 31, 2003 (UNAUDITED) <Table> <Caption> MOODY'S FACE VALUE RATING COST VALUE - ----------- ------- ------------ ------------ $ 1,005,000 DaimlerChrysler N.A. Holdings Corp., 8.500%, due 01/18/31..................... A3 $ 1,116,556 $ 1,185,561 825,000 Deere & Co., 7.125%, due 03/03/31......... A3 841,456 957,409 445,000 Dow Chemical Co. (The), 6.125%, due 02/01/11................................. A3 450,212 460,108 375,000 First Data Corp., 5.625%, due 11/01/11.... A1 373,845 405,972 440,000 Harrahs Operating Co., Inc., 7.500%, due 01/15/09................................. Baa3 484,276 493,507 875,000 International Paper Co., 6.750%, due 09/01/11................................. Baa2 876,113 980,960 285,000 Kohl's Corp., 6.300%, due 03/01/11........ A3 288,795 320,840 685,000 Kroger Co., 7.500%, due 04/01/31.......... Baa3 766,071 766,086 520,000 Merck & Co., Inc., 6.400%, due 03/01/28... Aaa 563,681 583,157 235,000 Newell Rubbermaid, Inc., 6.750%, due 03/15/12................................. Baa1 260,087 268,399 735,000 Occidental Petroleum Corp., 8.450%, due 02/15/29................................. Baa2 830,977 953,574 680,000 Pepsi Bottling Holdings, Inc., 144-A, 5.625%, due 02/17/09..................... A1 684,869 751,495 185,000 Progressive Corp. (The), 6.250%, due 12/01/32................................. A2 183,607 194,533 290,000 Rohm & Haas Co., 7.850%, due 07/15/29..... A3 319,414 354,684 320,000 Safeway, Inc., 7.250%, due 02/01/31....... Baa2 334,391 359,168 525,000 Target Corp., 7.000%, due 07/15/31........ A2 567,917 592,095 1,135,000 Transocean, Inc., 7.500%, due 04/15/31.... Baa2 1,102,267 1,333,374 430,000 United Technologies Corp., 6.100%, due 05/15/12................................. A2 429,248 482,371 475,000 UST, Inc., 6.625%, due 07/15/12........... A3 472,777 529,854 145,000 Wal-Mart Stores, Inc., 6.875%, due 08/10/09................................. Aa2 154,118 171,385 400,000 Walt Disney Co. (The), 6.375%, due 03/01/12................................. Baa1 406,542 429,957 310,000 Wendy's International, Inc., 6.200%, due 06/15/14................................. Baa1 309,095 345,243 665,000 Weyerhaeuser Co., 7.375%, due 03/15/32.... Baa2 658,430 726,592 ------------ ------------ 20,756,677 22,751,734 ------------ ------------ UTILITIES--(8.6%) 265,000 Apache Corp., 6.250%, due 04/15/12........ A3 263,113 300,159 110,000 Boston Edison Co., 4.875%, due 10/15/12... A1 109,227 112,599 370,000 Burlington Resources Finance Co., 6.680%, due 02/15/11............................. Baa1 406,208 419,222 </Table> See Notes to Financial Statements. 13 <Page> PORTFOLIO OF INVESTMENTS--(CONTINUED) MARCH 31, 2003 (UNAUDITED) <Table> <Caption> MOODY'S FACE VALUE RATING COST VALUE - ----------- ------- ------------ ------------ $ 270,000 Commonwealth Edison Co., 6.150%, due 03/15/12................................. A3 $ 270,597 $ 301,471 680,000 ConocoPhillips, 8.750%, due 05/25/10...... A3 775,323 851,953 1,400,000 Consolidated Edison Co. of New York, 7.500%, due 09/01/10..................... A1 1,389,332 1,673,137 670,000 Devon Financing Corp., ULC, 6.875%, due 09/30/11................................. Baa2 650,429 762,514 415,000 Dominion Resources, Inc., 5.700%, due 09/17/12................................. Baa1 414,718 434,976 205,000 DTE Energy Co., 7.050%, due 06/01/11...... Baa2 223,832 234,738 1,300,000 Duke Energy Field Services, LLC, 8.125%, due 08/16/30............................. Baa2 1,405,838 1,411,694 835,000 FirstEnergy Corp., 6.450%, due 11/15/11... Baa2 826,754 882,752 165,000 Kerr-McGee Corp., 7.875%, due 09/15/31.... Baa2 198,360 191,367 345,000 Midamerican Energy Co., 5.125%, due 01/15/13................................. A3 344,251 355,822 985,000 Mirant Americas Generation, Inc., 9.125%, due 05/01/31............................. B3 1,067,491 467,875 210,000 Praxair, Inc., 6.375%, due 04/01/12....... A3 213,200 235,070 520,000 Progress Energy, Inc., 7.000%, due 10/30/31................................. Baa2 526,527 555,796 105,000 PSEG Power LLC, 7.750%, due 04/15/11...... Baa1 98,969 121,108 250,000 PSEG Power LLC, 8.625%, due 04/15/31...... Baa1 158,571 306,864 1,000,000 Sempra Energy, 7.950%, due 03/01/10....... Baa1 997,380 1,163,355 325,000 Southern Power Co., 6.250%, due 07/15/12................................. Baa1 329,001 355,859 300,000 Union Oil Co. of California, 7.500%, due 02/15/29................................. Baa2 316,322 343,712 470,000 Valero Energy Corp., 7.500%, due 04/15/32................................. Baa3 465,959 505,770 ------------ ------------ 11,451,402 11,987,813 ------------ ------------ COMMUNICATION--(7.3%) 455,000 AT&T Corp., 8.000%, due 11/15/31.......... Baa2 396,996 489,105 140,000 AT&T Wireless Services, Inc., 7.875%, due 03/01/11................................. Baa2 117,554 156,583 760,000 AT&T Wireless Services, Inc., 8.750%, due 03/01/31................................. Baa2 836,950 871,539 315,000 BellSouth Telecommunications Corp., 6.000%, due 10/15/11..................... Aa3 321,935 350,932 </Table> See Notes to Financial Statements. 14 <Page> PORTFOLIO OF INVESTMENTS--(CONTINUED) MARCH 31, 2003 (UNAUDITED) <Table> <Caption> MOODY'S FACE VALUE RATING COST VALUE - ----------- ------- ------------ ------------ $ 340,000 British Telecommunications PLC, 8.125%, due 12/15/10............................. Baa1 $ 372,474 $ 412,966 260,000 Cingular Wireless, 6.500%, due 12/15/11... A3 251,213 281,120 520,000 Citizens Communications Co., 9.000%, due 08/15/31................................. Baa2 538,920 675,933 1,105,000 Comcast Cable Communications, 6.750%, due 01/30/11................................. Baa3 1,085,330 1,191,546 740,000 International Business Machines Corp., 5.875%, due 11/29/32..................... A1 716,497 756,219 170,000 Motorola, Inc., 7.625%, due 11/15/10...... Baa2 157,760 182,750 820,000 News America, Inc., 7.125%, due 04/08/28................................. Baa3 730,391 853,841 800,000 SBC Communications, Inc., 5.875%, due 02/01/12................................. A1 808,572 871,869 650,000 Sprint Capital Corp., 6.875%, due 11/15/28................................. Baa3 598,042 568,750 100,000 Tele-Communications, Inc., 7.875%, due 08/01/13................................. Baa3 85,772 114,516 260,000 Verizon New England, Inc., 6.500%, due 09/15/11................................. Aa3 245,392 292,262 960,000 Verizon New York, Inc., 7.375%, due 04/01/32................................. A2 857,653 1,133,197 825,000 Viacom, Inc., 6.625%, due 05/15/11........ A3 927,846 935,851 ------------ ------------ 9,049,297 10,138,979 ------------ ------------ INTERNATIONAL--(6.0%) 2,500,000 Augusta Funding Ltd., 7.375%, due 04/15/13................................. Aaa 2,426,113 2,749,350 285,000 Canadian National Railway Co., 6.900%, due 07/15/28................................. Baa1 296,768 328,874 625,000 Deutsche Telekom International Finance, 8.250%, due 06/15/30..................... Baa3 660,783 741,658 530,000 France Telecom, 8.500%, due 03/01/31...... Baa3 606,110 690,251 2,235,000 Mexico Government International Bond, 8.125%, due 12/30/19..................... Baa2 2,224,003 2,403,742 385,000 Royal Bank of Scotland, 9.118%, due 12/31/49................................. A1 472,832 479,563 365,000 Telus Corp., 8.000%, due 06/01/11......... Ba1 363,095 386,900 </Table> See Notes to Financial Statements. 15 <Page> PORTFOLIO OF INVESTMENTS--(CONTINUED) MARCH 31, 2003 (UNAUDITED) <Table> <Caption> MOODY'S FACE VALUE RATING COST VALUE - ----------- ------- ------------ ------------ $ 500,000 WestDeutsche Landesbank, 6.750%, due 06/15/05................................. Aa1 $ 542,531 $ 542,531 ------------ ------------ 7,592,235 8,322,869 ------------ ------------ TRANSPORTATION--(2.7%) 120,000 Burlington Northern Santa Fe Corp., 6.875%, due 12/01/27..................... Baa2 117,861 131,281 740,000 Burlington Northern Santa Fe Corp., 7.082%, due 05/13/29..................... Baa2 733,560 832,149 700,000 Delta Air Lines, Inc., 10.500%, due 04/30/16**............................... Ba1 853,510 337,162 1,065,000 Erac U.S.A. Finance Co., 144-A, 8.000%, due 01/15/11............................. Baa1 1,121,321 1,236,118 470,000 Union Pacific Corp., 6.650%, due 01/15/11................................. Baa3 474,201 532,089 3,000,000 United Airlines, Inc., 7.870%, due 01/30/19**............................... Caa2 3,000,000 661,980 ------------ ------------ 6,300,453 3,730,779 ------------ ------------ Total Corporate Bonds and Notes........... 107,864,600 113,078,172 ------------ ------------ Total Debt Securities..................... 131,656,245 138,321,546 ------------ ------------ <Caption> SHARES - ----------- SHORT-TERM INVESTMENTS--(0.8%) 1,167,983 UBS Supplementary Trust U.S. Cash Management Prime Fund.................... 1,167,983 1,167,983 ------------ ------------ Total Investments (100.0%)................ $132,824,228 $139,489,529 ============ ============ </Table> - ------------------------ (a) Moody's as a matter of policy, does not rate this issue. * Standard & Poor's Corporation rating. Security is not rated by Moody's Investor Service, Inc. ** Illiquid securities represent 0.72% of the total portfolio of investments. 144-A Securities exempt from registration under Rule 144-A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2003, the value of these securities amounted to $4,545,427 or 3.26% of the total portfolio of investments. REMIC Real Estate Mortgage Investment Conduit See Notes to Financial Statements. 16 <Page> NOTES TO FINANCIAL STATEMENTS MARCH 31, 2003 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Fort Dearborn Income Securities, Inc. ("the Company") is registered under the Investment Company Act of 1940, as amended, as a diversified closed-end management company. The Company invests principally in investment grade long-term fixed income debt securities with the primary objective of providing its shareholders with: - a stable stream of current income consistent with external interest rate conditions, and - a total return over time that is above what they could receive by investing individually in the investment grade and long-term maturity sectors of the bond market. The following is a summary of the significant accounting policies followed by the Company in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A. VALUATION OF INVESTMENTS -- The Fund calculates its net asset value based on the current market value, where available, for its portfolio securities. The Fund normally obtains market values for its securities from independent pricing sources and broker-dealers. Independent pricing sources may use reported last sale prices, current market quotations or valuations from computerized "matrix" systems that derive values based on comparable securities. A matrix system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities. B. INVESTMENT INCOME AND SECURITY TRANSACTIONS -- Interest income is recorded on the accrual basis. Dividend income is recorded on ex-dividend date. Security transactions are accounted for on the trade date. The Company has elected to amortize market discount and premium on all issues purchased. Realized gains and losses from security transactions and unrealized appreciation and depreciation of investments are reported on a first-in first-out basis. C. FEDERAL INCOME TAXES -- For federal income tax purposes, the cost of securities owned at March 31, 2003, was substantially the same as the cost of securities for financial statement purposes. At March 31, 2003, the components of net unrealized appreciation of investments were as follows: <Table> Gross appreciation (investments having an excess of value over cost) $10,823,136 Gross depreciation (investments having an excess of cost over value) (4,157,835) ----------- Net unrealized appreciation of investments $ 6,665,301 =========== </Table> 17 <Page> NOTES TO FINANCIAL STATEMENTS--(CONTINUED) MARCH 31, 2003 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Fund intends to distribute substantially all of its taxable income and to comply with the other requirements of the Internal Revenue Code applicable to regulated investment companies. Accordingly, no provision for federal income taxes is required. In addition, by distributing during each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, the Fund intends not to be subject to a federal excise tax. Net realized gains or losses may differ for financial and tax reporting purposes as a result of post October 31 losses, which are not recognized for tax purposes until the first day of the following fiscal year along with losses from wash sales. 2. NET ASSET VALUATIONS The net asset value of the Company's shares is determined as of the close of business each day the New York Stock Exchange is open. 3. DISTRIBUTIONS Dividends and distributions payable to shareholders are recorded by the Company on the ex-date. Net realized gains from the sale of investments, if any, are distributed annually. Net investment income and realized gains and losses for federal income tax purposes may differ from that reported on the financial statements because of permanent and temporary book and tax basis differences. Distributions from net realized gains for book purposes may include short-term capital gains, which are included as ordinary income for tax purposes. 4. CAPITAL STOCK At March 31, 2003, there were 12,000,000 shares of $.01 par value capital stock authorized, and shareholder capital of $135,120,133. During the six months ended March 31, 2003 no new shares were issued as part of the dividend reinvestment plan and no shares were repurchased in the open market. 5. PURCHASES AND SALES OF SECURITIES Purchases and sales (including maturities) of portfolio securities during the six months ended March 31, 2003, were as follows: debt securities and preferred stock, $13,564,508 and $7,907,232, respectively; short-term securities, $14,216,001 and $17,599,093, respectively: and United States government debt obligations, $27,743,838 and $30,361,595, respectively. 6. MANAGEMENT AND OTHER FEES Under an agreement between the Company and UBS Global Asset Management (Americas) Inc. ("the Advisor"), the Advisor manages the Company's investment portfolio, maintains its accounts and records, and furnishes the services of individuals to perform executive and administrative functions for the Company. In return for these services, the Company pays the Advisor 50 basis points (annualized) of the 18 <Page> NOTES TO FINANCIAL STATEMENTS--(CONTINUED) MARCH 31, 2003 (UNAUDITED) 6. MANAGEMENT AND OTHER FEES (CONTINUED) Company's average weekly net assets up to $100,000,000 and 40 basis points (annualized) of average weekly net assets in excess of $100,000,000. The Company pays each of its directors (except the Chairman) at the rate of $9,000 annually to serve as directors and $750 for each Board of Directors meeting attended. The Company pays the Chairman at the rate of $13,000 annually to serve in such capacity and $750 for each Board of Directors meeting attended. All Company officers serve without direct compensation from Fort Dearborn. Fort Dearborn Income Securities, Inc. invests in shares of the UBS Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is a business trust managed by the Advisor. The Supplementary Trust is offered as a cash management option only to mutual funds and other accounts managed by the Advisor. The Supplementary Trust pays no management fees. Distributions from the Supplementary Trust are reflected as interest income on the statement of operations. Amounts relating to those investments at March 31, 2003 and for the period ended are summarized as follows: <Table> <Caption> % OF COST OF SALES INTEREST NET FUND PURCHASE PROCEEDS INCOME VALUE ASSETS - ---- ----------- ----------- -------- ---------- -------- UBS Supplementary Trust U.S. Cash Management Prime Fund................. $14,004,541 $17,599,093 $31,937 $1,167,983 0.8% </Table> 7. MORTGAGE BACKED SECURITIES AND OTHER INVESTMENTS The Company invests in Mortgage Backed Securities (MBS), representing interests in pools of mortgage loans. These securities provide shareholders with payments consisting of both principal and interest as the mortgages in the underlying mortgage pools are paid. Most of the securities are guaranteed by federally sponsored agencies -- Government National Mortgage Association (GNMA), Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC). However, some securities may be issued by private, non-governmental corporations. MBS issued by private entities are not government securities and are not directly guaranteed by any government agency. They are secured by the underlying collateral of the private issuer. Yields on privately issued MBS tend to be higher than those of government backed issues. However, risk of loss due to default and sensitivity to interest rate fluctuations is also higher. The Company invests in Collateralized Mortgage Obligations (CMOs). A CMO is a bond, which is collateralized by a pool of MBS. The Company also invests in REMICs (Real Estate Mortgage Investment Conduit) which are simply another form of CMO. These MBS pools are divided into classes or tranches with each class having its own characteristics. The different classes are retired in sequence as the 19 <Page> NOTES TO FINANCIAL STATEMENTS--(CONTINUED) MARCH 31, 2003 (UNAUDITED) 7. MORTGAGE BACKED SECURITIES AND OTHER INVESTMENTS (CONTINUED) underlying mortgages are repaid. For instance, a Planned Amortization Class (PAC) is a specific class of mortgages, which over its life will generally have the most stable cash flows and the lowest prepayment risk. A GPM (Graduated Payment Mortgage) is a negative amortization mortgage where the payment amount gradually increases over the life of the mortgage. The early payment amounts are not sufficient to cover the interest due, and therefore, the unpaid interest is added to the principal, thus increasing the borrower's mortgage balance. Prepayment may shorten the stated maturity of the CMO and can result in a loss of premium, if any has been paid. The Company invests in Asset Backed Securities, representing interests in pools of certain types of underlying installment loans or leases or by revolving lines of credit. They often include credit enhancement that help limit investors exposure to the underlying credit. These securities are valued on the basis of timing and certainty of cash flows compared to investments with similar durations. 20 <Page> REPORT ON THE AUTOMATIC DIVIDEND INVESTMENT PLAN THE COMPANY'S AUTOMATIC DIVIDEND INVESTMENT PLAN, OPERATED FOR THE CONVENIENCE OF THE SHAREHOLDERS, HAS BEEN IN OPERATION SINCE THE DIVIDEND PAYMENT OF MAY 5, 1973. For the six months ended March 31, 2003, 32,443 shares were purchased for the Plan participants. The breakdown of these shares is listed below: <Table> <Caption> WHERE NO. OF SHARES DIVIDEND SHARES AVERAGE WERE PAYMENT DATE PURCHASED PRICE PURCHASED - -------------------------------------------------------------------- December 13, 2002 18,318 $14.83 Open Market March 26, 2003 14,125 $15.50 Open Market </Table> As explained in the Plan, shares are purchased at the lower of the market value (including commission) or net asset value, depending upon availability. The expense of maintaining the Plan, $1.35 for each participating account per dividend payment, is borne by the Company. Shareholders who have not elected to participate in the Plan receive all dividends in cash. The Plan had 768 participants on March 18, 2003. Under the terms of the Plan, any shareholder may terminate participation by giving written notice to the Company. Upon termination, a certificate for all full shares, plus a check for the value of any fractional interest in shares, will be sent to the withdrawing shareholders, unless the sale of all or part of such shares is requested. ANY REGISTERED SHAREHOLDER WHO WISHES TO PARTICIPATE IN THE PLAN MAY DO SO BY WRITING TO EQUISERVE TRUST COMPANY N.A. OF NEW YORK, P.O. BOX 2500, JERSEY CITY, NJ 07303-2500 OR CALLING THEM AT (800) 446-2617. A copy of the Plan and enrollment card will be mailed to you. Shareholders who own shares in nominee name should contact their brokerage firm. All new shareholders will receive a copy of the Plan and a card, which may be signed to authorize reinvestment of dividends pursuant to the Plan. THE INVESTMENT OF DIVIDENDS DOES NOT RELIEVE PARTICIPANTS OF ANY INCOME TAX WHICH MAY BE PAYABLE THEREON. THE COMPANY STRONGLY RECOMMENDS THAT ALL AUTOMATIC DIVIDEND INVESTMENT PLAN PARTICIPANTS RETAIN EACH YEAR'S FINAL STATEMENT ON THEIR PLAN PARTICIPATION AS A PART OF THEIR PERMANENT TAX RECORD. THIS WILL INSURE THAT COST INFORMATION IS AVAILABLE IF AND WHEN IT IS NEEDED. - -------------------------------------------------------------------------------- SHAREHOLDER INFORMATION FOR THE SIX MONTHS ENDED MARCH 31, 2003, THERE WERE: (I) NO MATERIAL CHANGES IN THE COMPANY'S INVESTMENT OBJECTIVES OR POLICIES, (II) NO CHANGES IN THE COMPANY'S CHARTER OR BY-LAWS THAT WOULD DELAY OR PREVENT A CHANGE OF CONTROL OF THE COMPANY, (III) NO MATERIAL CHANGES IN THE PRINCIPAL RISK FACTORS ASSOCIATED WITH INVESTMENT IN THE COMPANY, AND (IV) NO CHANGE IN THE PERSON PRIMARILY RESPONSIBLE FOR THE DAY-TO DAY MANAGEMENT OF THE COMPANY'S PORTFOLIO. 21 <Page> REPORT ON ANNUAL MEETING At the annual meeting of shareholders, held on December 16, 2002, shareholders elected the Company's four nominees as directors and ratified the selection of Ernst and Young LLP as accountants. The votes were as follows: <Table> <Caption> DIRECTORS FOR WITHHELD 1. ------------- --------- -------- C.R. O'Neil 7,613,606 55,326 A. Cepeda 7,613,226 55,706 F.K. Reilly 7,613,606 55,326 E.M. Roob 7,607,341 61,591 </Table> 22 <Page> BOARD OF DIRECTORS C. RODERICK O'NEIL, CFA Chairman of the Board ADELA CEPEDA Director FRANK K. REILLY, CFA Director EDWARD M. ROOB Director J. MIKESELL THOMAS Director OFFICERS JEFFREY J. DIERMEIER, CFA President DAVID M. GOLDENBERG Vice President and Secretary AMY R. DOBERMAN Vice President and Assistant Secretary RITA RUBIN Assistant Secretary PAUL H. SCHUBERT Vice President and Treasurer JOSEPH A. ANDERSON Assistant Treasurer CRAIG G. ELLINGER, CFA Portfolio Manager FORT DEARBORN INCOME SECURITIES, INC. One N. Wacker Drive 38th Floor Chicago, Illinois 60606 (312) 525-7877 STOCK TRANSFER AND DIVIDEND DISBURSEMENT AGENT (1-800-446-2617) Mail correspondence to: EquiServe P.O. Box 2500 Jersey City, New Jersey 07303-2500 Mail stock certificates to: EquiServe P.O. Box 2506 Jersey City, New Jersey 07303-2506 INDEPENDENT AUDITORS Ernst & Young LLP 5 Times Square New York, New York 10036 LEGAL COUNSEL Winston & Strawn 35 West Wacker Drive Chicago, IL 60601 23 <Page> ITEM 2. CODE OF ETHICS. Form N-CSR disclosure requirement not yet effective with respect to registrant. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Form N-CSR disclosure requirement not yet effective with respect to registrant. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Form N-CSR disclosure requirement not yet effective with respect to registrant. ITEM 5 - 6. [RESERVED BY SEC FOR FUTURE USE. ] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED - END MANAGEMENT INVESTMENT COMPANIES. Form N-CSR disclosure requirement not yet effective with respect to registrant. ITEM 8. [RESERVED BY SEC FOR FUTURE USE. ] ITEM 9. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. <Page> (b) There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS. (a) Form N-CSR disclosure requirement not yet effective with respect to registrant. (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. <Page> 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. FORT DEARBORN INCOME SECURITIES, INC. By: /s/ Jeffrey J. Diermeier ------------------------- Jeffrey J. Diermeier President Date: June 4, 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/ Jeffrey J. Diermeier ------------------------- Jeffrey J. Diermeier President Date: JUNE 4, 2003 By: /s/ Paul H. Schubert --------------------- Paul H. Schubert Chief Financial Officer Date: June 4, 2003