As filed with the Securities and Exchange Commission on July 8, 2005
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: 811-21315
NEUBERGER BERMAN REALTY 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 Realty Income Fund Inc.
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart Nicholson Graham LLP
1800 Massachusetts Avenue, N.W. 2nd Floor
Washington, DC 20036
(Names and addresses of agents for service)
Date of fiscal year end: October 31, 2005
Date of reporting period: April 30, 2005
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 SHAREHOLDERS
[NEUBERGER BERMAN LOGO]
A LEHMAN BROTHERS COMPANY
SEMI-ANNUAL REPORT
APRIL 30, 2005
NEUBERGER BERMAN
REALTY INCOME
FUND INC.
NEUBERGER BERMAN APRIL 30, 2005 (UNAUDITED)
CONTENTS
THE FUND
CHAIRMAN'S LETTER 1
PORTFOLIO COMMENTARY/PERFORMANCE HIGHLIGHTS 2
SCHEDULE OF INVESTMENTS/TOP TEN EQUITY HOLDINGS 6
FINANCIAL STATEMENTS 9
FINANCIAL HIGHLIGHTS/PER SHARE DATA 21
DIVIDEND REINVESTMENT PLAN 23
DIRECTORY 25
PROXY VOTING POLICIES AND PROCEDURES 26
QUARTERLY PORTFOLIO SCHEDULE 26
REPORT OF VOTES OF SHAREHOLDERS 27
CHAIRMAN'S LETTER
DEAR SHAREHOLDER,
I am pleased to present to you this semi-annual report for the Neuberger Berman
Realty Income Fund Inc. for the reporting period ending April 30, 2005. The
report includes portfolio commentary, a listing of the Fund's investments, and
its unaudited financial statements for the reporting period.
The Fund seeks to provide high current income with capital appreciation as a
secondary objective. To pursue both, we have assembled 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 real estate company securities that are
attractively priced relative to both their historical growth rates and the
valuation of other property sectors.
We believe our conservative investment 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 earn it.
/s/ Peter Sundman
PETER SUNDMAN
CHAIRMAN OF THE BOARD
NEUBERGER BERMAN
REALTY INCOME FUND INC.
"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)2004 Neuberger Berman Management Inc. All
rights reserved.
1
REALTY INCOME FUND INC. Portfolio Commentary
For the six months ending April 30, 2005, on a Net Asset Value (NAV) basis, the
Neuberger Berman Realty Income Fund (AMEX: NRI) provided a 6.22% return,
compared to a gain of 7.06% for the NAREIT Equity REIT Index. In our opinion,
the positive returns for both the Fund and the index reflect the general
strength of the REIT market during the reporting period and are an indication of
continued investor interest in and improving fundamentals for REIT securities.
The Fund's underperformance relative to the index can be attributed to its
holdings of preferred REIT securities, which did not perform as well as REIT
common stocks over the past six months.
We believe that the positive trends that lifted the broader REIT market over the
past six months will remain intact as investors continue to search for higher
yielding securities in a rising, but still low interest rate environment.
Commercial real estate fundamentals in particular continue to improve, as
evidenced by increasing rent and occupancy levels.
Our emphasis on diversification across property sectors and geographic regions
continues to enhance the Fund's ability to deliver consistent returns. The
Fund's position in the office sector provides a good example. Performance in
this area improved during the first four months of calendar 2005, reflecting the
attractive valuation levels and dividend yields that were prevalent in the
sector at the start of the year. Since then, continued evidence of an improving
leasing environment has positively affected valuations. We expect this trend to
continue throughout the year.
During the six-month reporting period, the Fund also benefited from holdings in
regional malls, hotels and self storage, but was hurt by its holdings in mixed
asset REITs. We remain optimistic about the Fund's performance and will continue
to emphasize office, regional mall and apartment REITs.
Along with our conviction that real estate fundamentals should improve over the
next 12 months, we also believe that merger and acquisition activity may
accelerate. Many investors, ourselves included, believe that REITs are trading
at a discount to their underlying real estate value. In our opinion, this
discount, combined with the current accommodative borrowing environment, should
lead to increased M&A activity. We believe that the Fund could be a beneficiary
of that development, thanks to our focus on buying REITs that trade at a
discount to net asset value.
The current economic environment is characterized by rising short-term interest
rates, benign long-term interest rates and expected GDP growth of 3%. We
believe, absent a recession, that REITs are on track for 8-9% earnings-per-share
growth in calendar 2005 as demand for real estate continues to outstrip supply.
The first quarter earnings season confirmed this trend. If there is continued
evidence of earnings acceleration, it should benefit REIT share prices as we
move through the year. We continue to seek companies with improving
fundamentals, strong financial positions and opportunistic management teams.
Sincerely,
/s/ Steven R. Brown
STEVEN R. BROWN
PORTFOLIO MANAGER
2
PERFORMANCE HIGHLIGHTS
SIX MONTH AVERAGE ANNUAL TOTAL
NEUBERGER BERMAN REALTY INCOME PERIOD ENDED RETURN ENDED 4/30/2005
FUND INCEPTION DATE 4/30/2005 1 YEAR SINCE INCEPTION
NAV (1),(3) 04/24/2003 6.22% 34.48% 29.02%
PERFORMANCE HIGHLIGHTS
SIX MONTH AVERAGE ANNUAL TOTAL
NEUBERGER BERMAN REALTY INCOME PERIOD ENDED RETURN ENDED 4/30/2005
FUND INCEPTION DATE 4/30/2005 1 YEAR SINCE INCEPTION
MARKET PRICE (2),(3) 04/24/2003 1.84% 21.81% 15.96%
INDUSTRY DIVERSIFICATION
(% OF TOTAL NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS)
Apartments 19.4%
Commercial Services 1.3
Community Centers 18.6
Diversified 18.9
Health Care 18.3
Industrial 6.6
Lodging 1.1
Manufactured Homes 0.4
Office 28.0
Office-Industrial 3.2
Regional Malls 19.6
Self Storage 3.2
Specialty 0.5
Short-Term Investments 11.2
Liabilities, less cash, receivables and other assets (50.3)
Closed-end funds, unlike open-end funds, are not continually offered. There is
an initial public offering and once issued, common shares of closed-end funds
are sold in the open market through a stock exchange.
The composition, industries and holdings of the fund are subject to change.
Investment return will fluctuate. Past performance is no guarantee of future
results.
3
ENDNOTES
(1). Returns based on Net Asset Value ("NAV") of the Fund.
(2). Returns based on market price of Fund shares on the New York Stock
Exchange.
(3). Neuberger Berman Management Inc. has contractually agreed to waive a
portion of the management fees that it is entitled to receive from the
Fund. The undertaking lasts until October 31, 2011. Please see the notes to
the financial statements for specific information regarding the rate of the
management fees waived by Neuberger Berman Management Inc. Absent such a
waiver, the performance of the Fund would be lower.
4
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 or
any tax consequences of investing in the individual securities that it tracks
and that investors cannot invest directly in any index. Data about the
performance of the index is prepared or obtained by Neuberger Berman Management
Inc. and includes reinvestment of all dividends and capital gain distributions.
The Fund may invest in securities not included in its index.
5
SCHEDULE OF INVESTMENTS Realty Income Fund Inc.
TOP TEN EQUITY HOLDINGS
HOLDING %
1 Mills Corp. 7.4
2 iStar Financial 6.7
3 Ventas, Inc. 6.4
4 Citigrop Global Markets 5.9
5 Health Care REIT 5.4
6 New Plan Excel Realty Trust 4.4
7 Apartment Investment & Management 4.3
8 Maguire Properties 4.3
9 Camden Property Trust 4.2
10 EastGroup Properties 4.2
MARKET VALUE+
NUMBER OF SHARES (000'S OMITTED)
COMMON STOCKS (102.8%)
APARTMENTS (15.4%)
138,200 Amli Residential Properties Trust $ 3,859
531,400 Apartment Investment & Management 20,257~
410,500 Archstone-Smith Trust 14,766
464,200 Camden Property Trust 23,674~
433,500 Gables Residential Trust 15,888
171,100 Home Properties 7,160
---------------
85,604
COMMERCIAL SERVICES (0.6%)
92,000 Capital Trust 3,098
COMMUNITY CENTERS (10.6%)
221,400 Heritage Property Investment Trust 6,819
942,400 New Plan Excel Realty Trust 24,323
331,100 Ramco-Gershenson Properties Trust 9,168
809,400 Tanger Factory Outlet Centers 18,746
---------------
59,056
DIVERSIFIED (13.4%)
607,900 Colonial Properties Trust 23,495~
813,100 iStar Financial 32,394^^
219,600 Lexington Corporate Properties Trust 5,046~
182,100 Vornado Realty Trust 13,922
---------------
74,857
HEALTH CARE (14.9%)
652,800 Health Care Property Investors 16,738
382,400 Health Care REIT 12,811~
157,300 Healthcare Realty Trust 6,073~
563,700 Nationwide Health Properties 12,080
1,312,900 Ventas, Inc. 35,422
---------------
83,124
INDUSTRIAL (6.6%)
628,000 EastGroup Properties 23,550
353,000 First Industrial Realty Trust 13,485~
---------------
37,035
LODGING (0.4%)
51,000 Hospitality Properties Trust 2,131
OFFICE (24.8%)
191,000 Arden Realty 6,817
385,400 Brandywine Realty Trust 10,907
290,400 CarrAmerica Realty 9,595
374,300 Equity Office Properties Trust 11,779
217,000 Glenborough Realty Trust 4,457
408,700 Highwoods Properties 11,497
341,000 HRPT Properties Trust $ 4,007
271,300 Kilroy Realty 11,837
120,200 Mack-Cali Realty 5,287
942,000 Maguire Properties 24,021
323,500 Prentiss Properties Trust 10,747
704,700 Reckson Associates Realty 22,726
233,600 Trizec Properties 4,670
---------------
138,347
OFFICE--INDUSTRIAL (2.9%)
149,500 Bedford Property Investors 3,183
332,200 Liberty Property Trust 13,231
---------------
16,414
REGIONAL MALLS (10.0%)
55,500 CBL & Associates Properties 4,294
452,700 Glimcher Realty Trust 11,395
104,700 Macerich Co. 6,313~
164,000 Mills Corp. 9,371~
177,600 Pennsylvania REIT 7,486
253,200 Simon Property Group 16,729~
---------------
55,588
SELF STORAGE (3.2%)
175,100 Extra Space Storage 2,276~
119,700 Public Storage, Depositary Shares 3,387
75,700 Shurgard Storage Centers 3,166~
131,500 Sovran Self Storage 5,622
195,000 U-Store-It Trust 3,409
---------------
17,860
TOTAL COMMON STOCKS
(COST $410,492) 573,114
---------------
PREFERRED STOCKS (36.3%)
APARTMENTS (4.0%)
7,200 Apartment Investment & Management, Ser. Q 189
8,600 Apartment Investment & Management, Ser. R 229
138,000 Apartment Investment & Management, Ser. T 3,491~
377,800 Mid-America Apartment Communities, Ser. H 9,870
151,300 Post Properties, Ser. A 8,473
---------------
22,252
COMMERCIAL SERVICES (0.7%)
156,000 Anthracite Capital, Ser. C 4,056
COMMUNITY CENTERS (8.0%)
743,644 Citigroup Global Markets 32,828
66,000 Developers Diversified Realty, Ser. I 1,700
6
MARKET VALUE+
NUMBER OF SHARES (000'S OMITTED)
49,600 Ramco-Gershenson Properties Trust, Ser. B $ 1,317
85,500 Saul Centers, Ser. A 2,202
60,000 Urstadt Biddle Properties, Ser. C 6,506
---------------
44,553
DIVERSIFIED (5.5%)
398,600 Crescent Real Estate Equities, Ser. B 10,523
200,000 iStar Financial, Ser. E 5,138
580,000 Lexington Corp. Properties Trust, Ser. B 14,686
---------------
30,347
HEALTH CARE (3.4%)
685,000 Health Care REIT, Ser. D 17,467
59,000 LTC Properties, Ser. F 1,524
1,000 Nationwide Health Properties 101
---------------
19,092
LODGING (0.7%)
81,700 Hospitality Properties Trust, Ser. B 2,201
32,000 Host Marriott, Ser. E 867
40,000 Strategic Hotel Capital, Ser. A 999^*
---------------
4,067
MANUFACTURED HOMES (0.4%)
80,000 American Land Lease, Ser. A 2,001~
OFFICE (3.2%)
96,400 Highwoods Properties, Ser. D 2,420
50,000 HRPT Properties Trust, Ser. B 1,328
480,000 Parkway Properties, Ser. D 12,576
53,200 SL Green Realty, Ser. D 1,356
---------------
17,680
OFFICE-INDUSTRIAL (0.3%)
70,000 Digital Realty Trust, Ser. A 1,844
REGIONAL MALLS (9.6%)
40,000 CBL & Associates Properties, Ser. B 2,134
48,000 Glimcher Realty Trust, Ser. F 1,255
108,500 Glimcher Realty Trust, Ser. G 2,759
31,200 Mills Corp., Ser. B 822
206,200 Mills Corp., Ser. C 5,413
965,900 Mills Corp., Ser. E 25,529
225,300 Pennsylvania REIT, Ser. A 13,297
23,400 Simon Property Group, Ser. I 1,359
7,700 Taubman Centers, Ser. A 195
32,000 Taubman Centers, Ser. G 820
---------------
53,583
SPECIALTY (0.5%)
30,000 Capital Automotive REIT, Ser. B $ 767
76,500 Entertainment Properties Trust, Ser. A 2,063
---------------
2,830
TOTAL PREFERRED STOCKS
(COST $187,136) 202,305
---------------
PRINCIPAL AMOUNT
SHORT-TERM INVESTMENTS (11.2%)
$ 3,174,747 Neuberger Berman Prime Money Fund
Trust Class 3,175@
59,548,000 Neuberger Berman Securities Lending
Quality Fund, LLC 59,548++
---------------
TOTAL SHORT-TERM INVESTMENTS
(COST $62,723) 62,723#
---------------
TOTAL INVESTMENTS (150.3%)
(COST $660,351) 838,142##
Liabilities, less cash, receivables and other assets [(9.4%)] (52,623)
Liquidation Value of Auction Preferred Shares [(40.9%)] (228,000)
---------------
TOTAL NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS (100.0%) $ 557,519
---------------
See Notes to Schedule of Investments
7
NOTES TO SCHEDULE OF INVESTMENTS
+ Investments in equity securities by Neuberger Berman Realty Income Fund
Inc. (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. 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 Board of Directors of the Fund
(the "Board") believes 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. Foreign security prices are furnished by independent
quotation services and expressed in local currency values. Foreign
security prices are translated from the local currency into U.S. dollars
using the exchange rate as of 12:00 noon, Eastern time. The Board has
approved the use of FT Interactive Data Corporation ("FT Interactive") to
assist in determining the fair value of the Fund's foreign equity
securities in the wake of certain significant events. When changes in the
value of a certain index suggest that the closing prices on the foreign
exchanges may no longer represent the amount that the Fund could expect to
receive for those securities, FT Interactive will provide adjusted prices
for certain foreign equity securities using an analysis based on
historical correlations between the prices of those securities and changes
in the index. In the absence of precise information about the market
values of these foreign securities as of the close of the New York Stock
Exchange, the Board has determined on the basis of available data that
prices adjusted in this way are likely to be closer to the prices the Fund
could realize on a current sale than are the prices of those securities
established at the close of the foreign markets in which the securities
primarily trade. However, fair value prices are necessarily estimates, and
there is no assurance that such a price will be at or close to the price
at which the security next trades. 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 April 30, 2005 the cost of investments for U.S. Federal income tax
purposes was $660,351,000. Gross unrealized appreciation of investments
was $178,684,000 and gross unrealized depreciation of investments was
$893,000, resulting in net unrealized appreciation of $177,791,000, based
on cost for U.S. Federal income tax purposes.
@ Neuberger Berman Prime Money Fund ("Prime Money") is also managed by
Neuberger Berman Management Inc. (see Notes A & E of Notes to Financial
Statements) and may be considered an affiliate since it has the same
officers, Board members, and investment manager as the Fund and because,
at times, the Fund may own 5% or more of the outstanding voting securities
of Prime Money.
~ All or a portion of this security is on loan (see Note A of Notes to
Financial Statements).
++ Managed by an affiliate of Neuberger Berman Management Inc. and could be
deemed an affiliate of the Fund (see Notes A & E of Notes to Financial
Statements).
^ Security exempt from registration under the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers under Rule 144A and are deemed
liquid. At April 30, 2005, these securities amounted to $999,000 or 0.2%
of net assets applicable to common shareholders.
^^ All or a portion of this security is segregated as collateral for interest
rate swap contracts.
* Non-income producing security.
See Notes to Financial Statements
8
STATEMENT OF ASSETS AND LIABILITIES
NEUBERGER BERMAN REALTY INCOME
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) FUND
ASSETS
INVESTMENTS IN SECURITIES, AT MARKET VALUE*+(NOTES A & E)--SEE
SCHEDULE OF INVESTMENTS:
Unaffiliated issuers $ 775,419
Affiliated issuers 62,723
---------------------------------------------------------------------------------------------
838,142
Interest rate swaps, at market value (Note A) 6,506
Dividends and interest receivable 2,545
Prepaid expenses and other assets 23
---------------------------------------------------------------------------------------------
TOTAL ASSETS 847,216
---------------------------------------------------------------------------------------------
LIABILITIES
Payable for collateral on securities loaned (Note A) 59,548
Dividends payable--preferred shares 75
Dividends payable--common shares 335
Payable for securities purchased 1,247
Payable to investment manager--net (Notes A & B) 213
Payable to administrator (Note B) 152
Accrued expenses and other payables 127
---------------------------------------------------------------------------------------------
TOTAL LIABILITIES 61,697
---------------------------------------------------------------------------------------------
AUCTION PREFERRED SHARES SERIES A, B, C & D AT LIQUIDATION VALUE
14,000 shares authorized; 9,120 shares issued and outstanding
$.0001 par value; $25,000 liquidation value per share (Note A) 228,000
---------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS AT VALUE $ 557,519
---------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS CONSIST OF:
Paid-in capital--common shares $ 379,851
Distributions in excess of net investment income (17,106)
Accumulated net realized gains (losses) on investments 10,491
Net unrealized appreciation (depreciation) in value of investments 184,283
---------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS AT VALUE $ 557,519
---------------------------------------------------------------------------------------------
COMMON SHARES OUTSTANDING ($.0001 PAR VALUE; 999,986,000 SHARES AUTHORIZED) 27,372
---------------------------------------------------------------------------------------------
NET ASSET VALUE PER COMMON SHARE OUTSTANDING $ 20.37
---------------------------------------------------------------------------------------------
+SECURITIES ON LOAN, AT MARKET VALUE $ 58,472
---------------------------------------------------------------------------------------------
*COST OF INVESTMENTS:
Unaffiliated issuers $ 597,628
Affiliated issuers 62,723
---------------------------------------------------------------------------------------------
TOTAL COST OF INVESTMENTS $ 660,351
---------------------------------------------------------------------------------------------
See Notes to Financial Statements
9
NEUBERGER BERMAN FOR THE SIX MONTHS ENDED APRIL 30, 2005 (UNAUDITED)
STATEMENT OF OPERATIONS
NEUBERGER BERMAN REALTY INCOME
(000'S OMITTED) FUND
INVESTMENT INCOME
INCOME (NOTE A):
Dividend income--unaffiliated issuers $ 12,068
Income from investments in affiliated issuers (Note E) 29
Income from securities loaned--affiliated issuer (Note E) 15
-------------------------------------------------------------------------------------------------------------------
Total income 12,112
-------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment management fee (Notes A & B) 2,336
Administration fee (Note B) 973
Auction agent fees (Note B) 294
Audit fees 21
Basic maintenance expense (Note B) 12
Custodian fees (Note B) 82
Directors' fees and expenses 12
Insurance expense 12
Legal fees 40
Shareholder reports 52
Stock exchange listing fees 21
Stock transfer agent fees 18
Miscellaneous 5
-------------------------------------------------------------------------------------------------------------------
Total expenses 3,878
Investment management fee waived (Notes A & B) (975)
Expenses reduced by custodian fee expense offset and commission recapture arrangements (Note B) (1)
-------------------------------------------------------------------------------------------------------------------
Total net expenses 2,902
-------------------------------------------------------------------------------------------------------------------
Net investment income 9,210
-------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE A)
Net realized gain (loss) on:
Sales of investment securities of unaffiliated issuers 10,458
---------------------------------------------------------------------------------------------------------------
Interest rate swap contracts 33
Change in net unrealized appreciation (depreciation) in value of:
Unaffiliated investment securities 10,871
Interest rate swap contracts 2,374
---------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 23,736
-------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM:
Net investment income (2,825)
---------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS $ 30,121
-------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements
10
NEUBERGER BERMAN APRIL 30, 2005 (UNAUDITED)
STATEMENT OF CHANGES IN NET ASSETS
REALTY INCOME FUND
----------------------------
SIX MONTHS
ENDED YEAR
APRIL 30, ENDED
NEUBERGER BERMAN 2005 OCTOBER 31,
(000'S OMITTED) (UNAUDITED) 2004
INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
FROM OPERATIONS:
Net investment income (loss) $ 9,210 $ 27,361
Net realized gain (loss) on investments 10,491 6,514
Change in net unrealized appreciation (depreciation) of investments 13,245 98,384
--------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM (NOTE A):
Net investment income (2,825) (2,126)
Net realized gain on investments -- (590)
Tax return of capital -- (363)
--------------------------------------------------------------------------------------------------------------------------------
Total distributions to preferred shareholders (2,825) (3,079)
--------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to common shareholders resulting from operations 30,121 129,180
--------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM (NOTE A):
Net investment income (23,102) (25,515)
Net realized gain on investments -- (7,083)
Tax return of capital -- (4,353)
--------------------------------------------------------------------------------------------------------------------------------
Total distributions to common shareholders (23,102) (36,951)
--------------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Preferred shares offering costs -- (50)
--------------------------------------------------------------------------------------------------------------------------------
Total net proceeds from capital share transactions -- (50)
--------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 7,019 92,179
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 550,500 458,321
--------------------------------------------------------------------------------------------------------------------------------
End of period $ 557,519 $ 550,500
--------------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income at end of period $ (17,106) $ (389)
--------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements
11
NOTES TO FINANCIAL STATEMENTS Realty Income Fund Inc.
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1 GENERAL: Neuberger Berman Realty Income Fund Inc. (the "Fund") was
organized as a Maryland corporation on March 4, 2003 as a non-diversified,
closed-end management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"). The Board of Directors of the Fund
(the "Board") 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 U.S. generally
accepted accounting principles 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, if any, is recorded on
the accrual basis. Realized gains and losses from securities transactions
and foreign currency transactions, if any, are recorded on the basis of
identified cost and stated separately in the Statement of Operations.
4 INCOME TAX INFORMATION: It is the policy of the Fund to continue to qualify
as a regulated investment company by complying with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its earnings to
its shareholders. Therefore, no Federal income or excise tax provision is
required.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities
held by the Fund, timing differences and differing characterization of
distributions made by the Fund as a whole.
As determined on October 31, 2004, permanent differences resulting
primarily from different book and tax accounting for distributions in
excess of earnings and income recognized on interest rate swaps were
reclassified at year end. These reclassifications had no effect on net
income, net assets or net assets per share of the Fund.
The tax character of distributions paid during the year ended October 31,
2004 and the period ended October 31, 2003 was as follows:
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME LONG-TERM CAPITAL GAIN TAX RETURN OF CAPITAL TOTAL
2004 2003 2004 2003 2004 2003 2004 2003
$ 28,122,835 $ 12,073,815 $ 7,191,866 $ 1,518,618 $ 4,716,586 $ 2,607,119 $ 40,031,287 $ 16,199,552
12
As of October 31, 2004, the components of distributable earnings
(accumulated losses) on a U.S. Federal income tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED UNREALIZED LOSS
ORDINARY LONG-TERM APPRECIATION CARRYFORWARDS
INCOME GAIN (DEPRECIATION) AND DEFERRALS TOTAL
$ -- $ -- $ 171,051,311 $ -- $ 171,051,311
The difference between book and tax basis distributable earnings is
attributable primarily to timing differences of distribution payments and
income recognized on interest rate swaps.
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 monthly distributions to common shareholders. The Fund
has adopted a policy to pay common shareholders a stable distribution. The
Fund's ability to satisfy its policy will depend on a number of factors,
including the stability of income received from its investments, the
availability of capital gains, and distributions paid on preferred shares.
In an effort to maintain a stable distribution amount, the Fund may pay
distributions consisting of net investment income, realized gains and
paid-in capital. There is no assurance that the Fund will always be able to
pay distributions of a particular size, or that distributions will consist
solely of net investment income and realized capital gains. The composition
of the Fund's distributions for the calendar year 2005 will be reported to
Fund shareholders on IRS Form 1099. The Fund may pay distributions in
excess of those required by its stable distribution policy to avoid excise
tax or to satisfy the requirements of Subchapter M of the Internal Revenue
Code. Income dividends and capital gain distributions to common
shareholders are recorded on the ex-dividend date. Net realized capital
gains, if any, will be offset to the extent of any available capital loss
carryforwards. Any such offset will not reduce the level of the stable
distribution paid by the Fund. Dividends and distributions to preferred
shareholders are accrued and determined as described in Note A-7.
The Fund invests a significant portion of its assets in securities issued
by real estate companies, including real estate investment trusts
("REITs"). The distributions received from REITs held by the Fund are
generally comprised of income, capital gains, and return of REIT capital,
but the REITs do not report this information to the Fund until the
following calendar year. At October 31, 2004, the Fund estimated these
amounts within the financial statements since the information was not
available from the REITs until after the Fund's fiscal year end. At April
30, 2005, the Fund estimated these amounts for the period January 1, 2005
through April 30, 2005 within the financial statements since the 2005
information is not available from the REITs until after the Fund's fiscal
period. For the year ended October 31, 2004, the character of distributions
paid to shareholders is disclosed within the Statement of Changes and is
based on these estimates. All estimates are based upon REIT information
sources available to the Fund together with actual IRS Forms 1099 received
to date. Based on past experience it is probable that a portion of the
Fund's distributions during the current fiscal year will be considered tax
return of capital but the actual amount of tax return of capital, if any,
is not determinable until after the Fund's fiscal year. After calendar
year-end, when the Fund learns the nature of the distributions paid by the
REITs during that year, distributions previously identified as income are
often recharacterized as return of capital and/or capital gain. After all
applicable REITs have informed the Fund of the actual breakdown of
distributions paid to
13
the Fund during its fiscal year, estimates previously recorded are adjusted
to reflect actual results. As a result, the composition of the Fund's
distributions as reported herein may differ from the final composition
determined after calendar year-end and reported to Fund shareholders on IRS
Form 1099.
On March 30, 2005, the Fund declared two monthly distributions to common
shareholders in the amount of $0.1125 per share per month, payable after
the close of the reporting period, on May 31, 2005 and June 30, 2005, to
shareholders of record on May 13, 2005 and June 13, 2005, respectively,
with ex-dividend dates of May 11, 2005 and June 9, 2005, respectively.
6 EXPENSE ALLOCATION: Certain expenses are applicable to multiple funds.
Expenses directly attributable to the Fund are charged to the Fund.
Expenses borne by the complex of related investment companies, which
includes open-end and closed-end investment companies for which Management
serves as investment manager, that are not directly attributed to the Fund
are allocated among the Fund and the other investment companies in the
complex or series thereof on the basis of relative net assets, except where
a more appropriate allocation of expenses to each investment company in the
complex or series thereof can otherwise be made fairly.
7 REDEEMABLE PREFERRED SHARES: On June 5, 2003, the Fund re-classified 12,000
unissued shares of capital stock as Series A Auction Preferred Shares,
Series B Auction Preferred Shares, Series C Auction Preferred Shares and
Series D Auction Preferred Shares ("Preferred Shares"). On June 23, 2003,
the Fund issued 1,950 Series A Auction Preferred Shares, 1,950 Series B
Auction Preferred Shares, 1,950 Series C Auction Preferred Shares and 1,950
Series D Auction Preferred Shares. On September 10, 2003, the Fund
re-classified an additional 2,000 unissued shares of capital stock as
Preferred Shares. On October 24, 2003, the Fund issued an additional 330
Series A Auction Preferred Shares, 330 Series B Auction Preferred Shares,
330 Series C Auction Preferred Shares and 330 Series D Auction Preferred
Shares. All Preferred Shares have a liquidation preference of $25,000 per
share plus any accumulated unpaid distributions, whether or not earned or
declared by the Fund, but excluding interest thereon ("Liquidation Value").
Except when the Fund has declared a special rate period, distributions to
preferred shareholders, which are cumulative, are accrued daily and paid
every 7 days. Distribution rates are reset every 7 days based on the
results of an auction, except during special rate periods. For the six
months ended April 30, 2005, distribution rates ranged from 1.69% to 3.35%
for Series A, 1.88% to 3.60% for Series B, 1.74% to 3.55% for Series C, and
1.74% to 3.20% for Series D Preferred Shares. The Fund declared
distributions to preferred shareholders for the period May 1, 2005 to May
31, 2005 of $149,229, $149,776, $152,913, $155,803 for Series A, Series B,
Series C, and Series D Preferred Shares, respectively.
The Fund may redeem Preferred Shares, in whole or in part, on the second
business day preceding any distribution payment date at Liquidation Value.
The Fund is also subject to certain restrictions relating to the Preferred
Shares. Failure to comply with these restrictions could preclude the Fund
from declaring any distributions to common shareholders or repurchasing
common shares and/or could trigger the mandatory redemption of Preferred
Shares at Liquidation Value. The holders of Preferred Shares are
14
entitled to one vote per share and will vote with holders of common stock
as a single class, except that the Preferred Shares will vote separately as
a class on certain matters, as required by law or the Fund's charter. The
holders of the Preferred Shares, voting as a separate class, are entitled
at all times to elect two Directors of the Fund, and to elect a majority of
the Directors of the Fund if the Fund fails to pay distributions on
Preferred Shares for two consecutive years.
8 INTEREST RATE SWAPS: The Fund may enter into interest rate swap
transactions, with institutions that Management has determined are
creditworthy, to reduce the risk that an increase in short-term interest
rates could reduce common share net earnings as a result of leverage. Under
the terms of the interest rate swap contracts, the Fund agrees to pay the
swap counter party a fixed-rate payment in exchange for the counter party's
paying the Fund a variable-rate payment that is intended to approximate all
or a portion of the Fund's variable-rate payment obligation on the Fund's
Preferred Shares. The fixed-rate and variable-rate payment flows are netted
against each other, with the difference being paid by one party to the
other on a monthly basis. The Fund segregates cash or liquid securities
having a value at least equal to the Fund's net payment obligations under
any swap transaction, marked to market daily.
Risks may arise if the counter party to a swap contract fails to comply
with the terms of its contract. The loss incurred by the failure of a
counter party is generally limited to the net interest payment to be
received by the Fund, and/or the termination value at the end of the
contract. Additionally, risks may arise from movements in interest rates
unanticipated by Management.
Periodic expected interim net interest payments or receipts on the swaps
are recorded as an adjustment to unrealized gains/losses, along with the
fair value of the future periodic payment streams on the swaps. The
unrealized gains/losses associated with the periodic interim net interest
payments are reclassified to realized gains/losses in conjunction with the
actual net receipt or payment of such amounts. The reclassifications do not
impact the Fund's total net assets or its total net increase (decrease) in
net assets applicable to common shareholders resulting from operations. At
April 30, 2005, the Fund had outstanding interest rate swap contracts as
follows:
RATE TYPE
---------------------------
FIXED-RATE VARIABLE-RATE ACCRUED
PAYMENTS PAYMENTS NET INTEREST UNREALIZED
SWAP NOTIONAL TERMINATION MADE BY RECEIVED BY RECEIVABLE APPRECIATION TOTAL
COUNTER PARTY AMOUNT DATE THE FUND THE FUND(1) (PAYABLE) (DEPRECIATION) FAIR VALUE
Citibank, N.A. $ 83,000,000 June 26, 2007 2.22% 3.03% $ 9,337 $ 2,915,159 $ 2,924,496
Citibank, N.A. 82,000,000 June 26, 2008 2.58% 3.03% 5,125 3,576,101 3,581,226
------------ ------------- ------------
$ 14,462 $ 6,491,260 $ 6,505,722
(1) 30 day LIBOR (London Interbank Offered Rate)
9 REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements with
institutions that Management has determined are creditworthy. Each
repurchase agreement is recorded at cost. The Fund requires that the
securities purchased in a repurchase agreement be transferred to the
custodian in a manner sufficient to enable the Fund to assert a perfected
security interest in those securities in the event of a default under the
repurchase agreement. The Fund monitors, on a daily basis, the value of the
securities
15
transferred to ensure that their value, including accrued interest, is
greater than amounts owed to the Fund under each such repurchase agreement.
10 SECURITY LENDING: Pursuant to an exemptive order issued by the Securities
and Exchange Commission, the Fund has entered into a Securities Lending
Agreement ("Agreement") with Neuberger Berman, LLC ("Neuberger"), an
affiliate of the Fund, pursuant to which Neuberger acts as the Fund's
lending agent. Securities loans involve certain risks including delays or
inability to recover the loaned securities or, in the event a borrower
should fail financially, foreclose against the collateral. Neuberger, under
the general supervision of the Board, monitors the creditworthiness of the
parties to whom the Fund makes security loans. The Fund will not lend
securities on which covered call options have been written, or lend
securities on terms which would prevent the Fund from qualifying as a
regulated investment company. The Fund receives cash collateral equal to at
least 102% of the current market value of the loaned securities. Prior to
February 7, 2005, the Fund invested the cash collateral in the N&B
Securities Lending Quality Fund, LLC ("Old Fund"), which was managed by
State Street Bank and Trust Company ("State Street") pursuant to guidelines
approved by Management. Effective February 7, 2005, the Fund changed the
collateral investment vehicle from the Old Fund to the Neuberger Berman
Securities Lending Quality Fund, LLC ("Quality Fund") a fund managed by
Lehman Brothers Asset Management, LLC (formerly Lincoln Capital Fixed
Income Management Company, LLC), an affiliate of Management, as approved by
the Board.
Under the Agreement, Neuberger guarantees a certain amount of revenue to
the Fund and receives any revenue earned in excess of the guaranteed amount
as a lending agency fee. For the six months ended April 30, 2005, revenue
received under the Agreement was $47,827.
Income earned on the securities loaned, if any, is reflected in the
Statement of Operations under the caption "Income from securities
loaned-affiliated issuer."
11 TRANSACTIONS WITH OTHER FUNDS MANAGED BY NEUBERGER BERMAN MANAGEMENT INC.:
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the Fund may invest in a money market fund managed by
Management or an affiliate. Prior to December 2004, the Fund invested in
the Neuberger Berman Institutional Cash Fund (the "Cash Fund"), as approved
by the Board. As of December 2004, the Fund changed its investment from the
Cash Fund to the newly created Neuberger Berman Prime Money Fund ("Prime
Money"), as approved by the Board. The Cash Fund and Prime Money each seek
to provide the highest available current income consistent with safety and
liquidity. For any cash that the Fund invests in the Cash Fund or Prime
Money, Management waives a portion of its management fee equal to the
management fee it receives from the Cash Fund and Prime Money on those
assets (the "Arrangement"). For the six months ended April 30, 2005,
management fees waived under this Arrangement with respect to the Cash Fund
and Prime Money amounted to $537 and $705, respectively. For the six months
ended April 30, 2005, income earned under this Arrangement with respect to
the Cash Fund and Prime Money amounted to $9,013 and $20,401, respectively,
and is reflected in the Statements of Operations under the caption "Income
from investments in affiliated issuers."
16
12 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 $116,384. Offering costs for common stock paid
by the Fund were charged as a reduction of common stock paid-in-capital at
the completion of the Fund's offerings and amounted to $820,409.
Additionally, offering costs of $399,423 and sales loads of $2,280,000
incurred through the issuance of Preferred Shares were charged as a
reduction of common stock paid-in-capital at the completion of the Fund's
Preferred Shares offerings.
As of April 30, 2005 there was no remaining payable for offering costs.
13 CONCENTRATION OF RISK: 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 more due to
economic, legal, cultural, geopolitical or technological developments
affecting the United States real estate industry or a segment of the United
States real estate industry in which the Fund owns a substantial position,
than would the shares of a fund not concentrated in the real estate
industry.
14 INDEMNIFICATIONS: Like many other companies, the Fund's organizational
documents provide that its officers and directors are indemnified against
certain liabilities arising out of the performance of their duties to the
Fund. In addition, both in some of its principal service contracts and in
the normal course of its business, the Fund enters into contracts that
provide indemnifications to other parties for certain types of losses or
liabilities. The Fund's maximum exposure under these arrangements is
unknown as this could involve future claims against the Fund.
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 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:
YEAR ENDED % OF AVERAGE
OCTOBER 31, DAILY MANAGED ASSETS
--------------------------------------------------------------------
2005 - 2007 0.25
2008 0.20
2009 0.15
2010 0.10
2011 0.05
Management has not agreed to waive any portion of its fees beyond
October 31, 2011.
17
For the six months ended April 30, 2005, such waived fees amounted to
$973,429.
The Fund retains Management as its administrator under an Administration
Agreement. The Fund pays Management an administration fee at the annual
rate of 0.25% of its average daily Managed Assets under this agreement.
Additionally, Management retains State Street as its sub-administrator
under a Sub-Administration Agreement. Management pays State Street a fee
for all services received under the agreement.
Management and Neuberger, a member firm of the New York Stock Exchange and
sub-adviser to the Fund, are wholly owned subsidiaries of Lehman Brothers
Holdings Inc. ("Lehman"), a publicly-owned holding company. 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.
On July 1, 2003, 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. For the six months ended
April 30, 2005, the impact of this arrangement was a reduction of expenses
of $957.
The Fund has an expense offset arrangement in connection with its custodian
contract. For the six months ended April 30, 2005, the impact of this
arrangement was a reduction of expenses of $240.
In connection with the settlement of each Preferred Share auction, the Fund
pays, through the auction agent, a service fee to each participating
broker-dealer based upon the aggregate liquidation preference of the
Preferred Shares held by the broker-dealer's customers. For any auction
preceding a rate period of less than one year, the service fee is paid at
the annual rate of 1/4 of 1%; for any auction preceding a rate period of
one year or more, the service fee is paid at a rate agreed to by the Fund
and the broker-dealer.
In order to satisfy rating agencies' requirements, the Fund is required to
provide each rating agency a report on a monthly basis verifying that the
Fund is maintaining eligible assets having a discounted value equal to or
greater than the Preferred Shares Basic Maintenance Amount, which is a
minimum level set by each rating agency as one of the conditions to
maintain the AAA/Aaa rating on the Preferred Shares. "Discounted value"
refers to the fact that the rating agencies require the Fund, in performing
this calculation, to discount portfolio securities below their face value,
at rates determined by the rating agencies. The Fund pays a fee to State
Street for the preparation of this report.
NOTE C--SECURITIES TRANSACTIONS:
During the six months ended April 30, 2005, there were purchase and sale
transactions (excluding short-term securities and interest rate swap
contracts) of $6,796,695 and $8,536,591, respectively.
During the six months ended April 30, 2005, brokerage commissions on
securities transactions amounted to $12,865, of which Neuberger received
$0, Lehman received $3,247, and other brokers received $9,618.
18
NOTE D--CAPITAL:
At April 30, 2005, the common shares outstanding and the common shares of
the Fund owned by Neuberger were as follows:
COMMON SHARES COMMON SHARES
OUTSTANDING OWNED BY NEUBERGER
27,372,139 6,981
Transactions in common shares for the six months ended April 30, 2005 and
for the year ended October 31, 2004 were as follows:
COMMON SHARES ISSUED IN CONNECTION WITH:
REINVESTMENT OF
DIVIDENDS AND NET INCREASE IN COMMON
DISTRIBUTIONS SHARES OUTSTANDING
2005 2004 2005 2004
-- -- -- --
NOTE E--INVESTMENTS IN AFFILIATES*:
BALANCE OF BALANCE OF INCOME FROM
SHARES GROSS SHARES INVESTMENTS IN
HELD GROSS SALES HELD VALUE AFFILIATED ISSUERS
OCTOBER 31, PURCHASES AND AND APRIL 30, APRIL 30, INCLUDED IN
NAME OF ISSUER 2004 ADDITIONS REDUCTIONS 2005 2005 TOTAL INCOME
Neuberger Berman
Securities Lending
Quality Fund, LLC** 83,008,100 4,550,006,500 4,573,466,600 59,548,000 $ 59,548,000 $ 14,876
Neuberger Berman
Institutional Cash Fund
Trust Class*** 3,376,748 3,716,685 7,093,433 -- -- 9,013
Neuberger Berman
Prime Money Fund
Trust Class*** -- 21,199,695 18,024,948 3,174,747 3,174,747 20,401
------------ ------------------
Total $ 62,722,747 $ 44,290
============ ==================
* Affiliated issuers, as defined in the 1940 Act, include issuers in
which the Fund held 5% or more of the outstanding voting securities.
** Prior to February 7, 2005, the Old Fund, an investment vehicle
established by the Fund's custodian, was used to invest cash the Fund
received as collateral for securities loans. Effective February 7,
2005, the Fund changed the collateral investment vehicle from the Old
Fund to the Quality Fund, a fund managed by Lehman Brothers Asset
Management LLC, an affiliate of Management, as approved by the Board.
The Fund's shares in the Old Fund and Quality Fund were and are
non-voting. However, because all shares of the Old Fund and Quality
Fund were and are held by funds in the related investment company
complex, the Old Fund and Quality Fund may have been and may be
considered affiliates of the Fund.
19
*** The Cash Fund and Prime Money are also managed by Management and may
be considered affiliates since they have the same officers, Board
members, and investment manager as the Fund and because, at times, the
Fund may own 5% or more of the outstanding voting securities of the
Cash Fund or Prime Money, respectively.
NOTE F--UNAUDITED FINANCIAL INFORMATION:
The financial information included in this interim report is taken from the
records of the Fund without audit by an independent registered public
accounting firm. Annual reports contain audited financial statements.
20
NEUBERGER BERMAN APRIL 30, 2005 (UNAUDITED)
FINANCIAL HIGHLIGHTS Realty Income Fund Inc.
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the Financial
Statements.CENTS
PERIOD FROM
SIX MONTHS ENDED YEAR ENDED APRIL 29, 2003^
APRIL 30, OCTOBER 31, TO OCTOBER 31,
---------------- ------------- ----------------
2005 2004 2003
(UNAUDITED)
COMMON SHARE NET ASSET VALUE, BEGINNING OF PERIOD $ 20.11 $ 16.74 $ 14.33
---------------- ------------- ----------------
INCOME FROM INVESTMENT OPERATIONS APPLICABLE TO COMMON SHAREHOLDERS:
NET INVESTMENT INCOME (LOSS) .34 1.00~ .43
NET GAINS OR LOSSES ON SECURITIES (BOTH REALIZED AND UNREALIZED) .86 3.83~ 2.70
COMMON SHARE EQUIVALENT OF DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
FROM:
NET INVESTMENT INCOME (.10) (.08) (.02)
NET CAPITAL GAINS -- (.02) (.00)
TAX RETURN OF CAPITAL -- (.01) (.01)
---------------- ------------- ----------------
TOTAL DISTRIBUTIONS TO PREFERRED SHAREHOLDERS (.10) (.11) (.03)
---------------- ------------- ----------------
TOTAL FROM INVESTMENT OPERATIONS APPLICABLE TO COMMON SHAREHOLDERS 1.10 4.72 3.10
---------------- ------------- ----------------
LESS DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM:
NET INVESTMENT INCOME (.84) (.93) (.42)
NET CAPITAL GAINS -- (.26) (.05)
TAX RETURN OF CAPITAL -- (.16) (.09)
---------------- ------------- ----------------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS (.84) (1.35) (.56)
---------------- ------------- ----------------
LESS CAPITAL CHARGES FROM:
ISSUANCE OF COMMON SHARES -- -- (.03)
ISSUANCE OF PREFERRED SHARES -- (.00) (.10)
---------------- ------------- ----------------
TOTAL CAPITAL CHARGES -- (.00) (.13)
---------------- ------------- ----------------
COMMON SHARE NET ASSET VALUE, END OF PERIOD $ 20.37 $ 20.11 $ 16.74
---------------- ------------- ----------------
COMMON SHARE MARKET VALUE, END OF PERIOD $ 17.19 $ 17.70 $ 16.00
---------------- ------------- ----------------
TOTAL RETURN, COMMON SHARE NET ASSET VALUE+ +6.22%** +30.07% +21.16%**
TOTAL RETURN, COMMON SHARE MARKET VALUE+ +1.84%** +19.77% +10.60%**
RATIOS/SUPPLEMENTAL DATA++
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS, END OF PERIOD
(IN MILLIONS) $ 557.5 $ 550.5 $ 458.3
PREFERRED STOCK, AT LIQUIDATION VALUE ($25,000 PER SHARE
LIQUIDATION PREFERENCE) (IN MILLIONS) $ 228.0 $ 228.0 $ 228.0
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS# 1.05%* 1.10%~ 1.35%*
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS++ 1.05%* 1.10%~ 1.35%*
RATIO OF NET INVESTMENT INCOME (LOSS) EXCLUDING PREFERRED STOCK
DIVIDENDS
TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 3.33%* 5.47%~ 5.42%*
RATIO OF PREFERRED STOCK DIVIDENDS TO AVERAGE NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS 1.02%* .62% .37%*
RATIO OF NET INVESTMENT INCOME (LOSS) INCLUDING PREFERRED
STOCK DIVIDENDS TO AVERAGE NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS 2.31%* 4.85%~ 5.05%*
PORTFOLIO TURNOVER RATE 1% 1% 1%
ASSET COVERAGE PER SHARE OF PREFERRED STOCK, END OF PERIOD@ $ 86,140 $ 85,368 $ 75,257
See Notes to Financial Highlights
21
NOTES TO FINANCIAL HIGHLIGHTS Realty 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 each
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. Current returns may
be lower or higher than the performance data quoted. Total return would
have been lower if Management had not waived a portion of the investment
management fee. Performance data current to the most recent month-end are
available at www.nb.com.
# 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 ratios of net expenses to
average daily net assets applicable to common shareholders would have been:
PERIOD FROM
SIX MONTHS ENDED YEAR ENDED APRIL 29, 2003 TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2005 2004 2003
1.40% 1.47% 1.68%
^ The date investment operations commenced.
* Annualized.
** Not annualized.
@ Calculated by subtracting the Fund's total liabilities (excluding
accumulated unpaid dividends on Preferred Shares) from the Fund's total
assets and dividing by the number of Preferred Shares outstanding.
++ Expense ratios do not include the effect of dividend payments to preferred
shareholders. Income ratios include income earned on assets attributable
to Preferred Shares outstanding.
CENTS The per share amounts which are shown have been computed based on the
average number of shares outstanding during each fiscal period.
~ Prior to November 1, 2003, the Fund recorded the accrual of the net
interest income or expense expected to be received or paid at interim
settlement dates as a net payable or receivable for swap contracts and
actual amounts paid as net interest income or expense on swap contracts.
As a result of SEC staff guidance relating to the application of FASB
Statement No 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, to registered investment companies, effective November 1,
2003, periodic expected interim net interest payments or receipts on the
swaps are recorded as an adjustment to unrealized gains/losses, along with
the fair value of the future periodic payment streams on the swaps.
Accordingly, the per share amounts and ratios shown decreased or increased
as follows:
PERIOD FROM
YEAR ENDED APRIL 29, 2003 TO
OCTOBER 31, OCTOBER 31,
2004 2003
Net Investment Income .07 .06
Net Gains or Losses in Securities (both realized and unrealized) (.07) (.06)
Ratio of Gross Expenses to Average Net Assets Applicable to
Common Shareholders (.38)% (.36)%
Ratio of Net Expenses to Average Net Assets Applicable to
Common Shareholders (.38)% (.36)%
Ratio of Net Investment Income (Loss) Excluding Preferred Stock
Dividends to Average Net Assets Applicable to Common Shareholders .38% .36%
Ratio of Net Investment Income (Loss) Including Preferred Stock
Dividends to Average Net Assets Applicable to Common Shareholders .38% .36%
22
NEUBERGER BERMAN APRIL 30, 2005 (UNAUDITED)
DIVIDEND REINVESTMENT PLAN
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.
23
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.
24
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 Nicholson Graham LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1221
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
25
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available, without charge,
by calling 1-800-877-9700 (toll-free) and on the website of the Securities and
Exchange Commission at www.sec.gov. Information regarding how the Fund voted
proxies relating to portfolio securities during the most recent 12-month period
ended June 30 will also be available without charge, by calling 1-800-877-9700
(toll-free), on the website of the Securities and Exchange Commission at
www.sec.gov, and on the Fund's website at www.nb.com.
QUARTERLY PORTFOLIO SCHEDULE
The Fund files a complete schedule of portfolio holdings with the Securities and
Exchange Commission for the first and third quarters of each fiscal year on Form
N-Q. The Fund's Forms N-Q are available on the Securities and Exchange
Commission's website at www.sec.gov and may be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330. The information on Form N-Q is available upon request,
without charge, by calling 1-800-877-9700 (toll-free).
26
REPORT OF VOTES OF SHAREHOLDERS
An annual meeting of shareholders of Neuberger Berman Realty Income Fund Inc.
was held on March 8, 2005. Shareholders voted on the following matter: (1) To
elect five Class III Directors (one of which is to be elected only by holders of
the Fund's preferred stock) to serve until the annual meeting of stockholders in
2008, or until their successors are elected and qualified. Class I and II
Directors continue to hold office until the annual meeting in 2006 and 2007,
respectively.
Proposal 1 -- To elect five Class III Directors (one of which is to be elected
only by holders of the Fund's preferred stock) to serve until the annual meeting
of stockholders in 2008.
Common and Preferred Shares
VOTES VOTES BROKER
VOTES FOR AGAINST WITHHELD ABSTENTIONS NON-VOTES
Robert A. Kavesh 24,331,197.000 -- 193,414.000 -- --
Edward I. O'Brien 24,312,090.000 -- 212,521.000 -- --
William E. Rulon 24,288,936.000 -- 235,675.000 -- --
Candace L. Straight 24,287,848.000 -- 236,763.000 -- --
Preferred Shares
VOTES VOTES BROKER
VOTES FOR AGAINST WITHHELD ABSTENTIONS NON-VOTES
Howard A. Mileaf 8,738.000 - 7.000 - -
27
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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 LOGO]
A LEHMAN BROTHERS COMPANY
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] D0305 06/05
ITEM 2. CODE OF ETHICS
The Board of Directors ("Board") of Neuberger Berman Realty 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"). For the period covered by this Form N-CSR, there were no amendments to
the Code of Ethics and there were no waivers from the Code of Ethics granted to
the Registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.
A copy of the Code of Ethics was included as an exhibit to the Registrant's Form
N-CSR filed on January 9, 2004. The Code of Ethics is also available, without
charge, by calling 1-800-877-9700 (toll-free).
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board has determined that the Registrant has one audit committee financial
expert serving on its audit committee. The Registrant's audit committee
financial expert is John Cannon. Mr. Cannon is an independent director as
defined by Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Only required in the annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Only required in the annual report.
ITEM 6. SCHEDULE OF INVESTMENTS
The complete schedule of investments for each series is disclosed in the
Registrant's Annual Report, which is included as Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Only required in the annual report.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Only required in the annual report.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
No reportable purchases for the period covered by this report.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no changes to the procedures by which shareholders may recommend
nominees to the Board.
ITEM 11. CONTROLS AND PROCEDURES
(a) Based on an evaluation of the disclosure controls and procedures (as
defined in rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "Act")) as of a date within 90 days of the filing date of
this document, the Chief Executive Officer and Treasurer and Principal
Financial and Accounting Officer of the Registrant have concluded that
such disclosure controls and procedures are effectively designed to
ensure that information required to be disclosed by the Registrant 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 last fiscal half-year that have
materially affected, or are reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS
(a)(1) A copy of the Code of Ethics is incorporated by reference to
Registrant's Form N-CSR, Investment Company Act file number 811-21334
(filed January 9, 2004).
(a)(2) The certifications required by Rule 30a-2(a) of the Act and Section 302
of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act") are attached
hereto.
(b) The certification required by Rule 30a-2(b) of the Act and Section 906
of the Sarbanes-Oxley Act is 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 Realty Income Fund Inc.
By: /s/ Peter E. Sundman
--------------------
Peter E. Sundman
Chief Executive Officer
Date: June 28, 2005
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
--------------------
Peter E. Sundman
Chief Executive Officer
Date: June 28, 2005
By: /s/ John McGovern
-----------------
John McGovern
Treasurer and Principal Financial
and Accounting Officer
Date: June 28, 2005