-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lynzt100ysKRyQvJLGKehZ/hrkhFGBg2s7Oq+uClsknKmB6TWQsrsdSOF0jGLiwA vL+/E8rQP5E05acJoYUhhg== 0000898432-05-000112.txt : 20050207 0000898432-05-000112.hdr.sgml : 20050207 20050207172537 ACCESSION NUMBER: 0000898432-05-000112 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20050308 FILED AS OF DATE: 20050207 DATE AS OF CHANGE: 20050207 EFFECTIVENESS DATE: 20050207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEUBERGER BERMAN REAL ESTATE INCOME FUND INC CENTRAL INDEX KEY: 0001187520 IRS NUMBER: 550799916 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 811-21200 FILM NUMBER: 05581423 BUSINESS ADDRESS: STREET 1: 605 THIRD AVENUE, 2ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10158 DEF 14A 1 def-14a.txt SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Under Rule 14a-12 NEUBERGER BERMAN REAL ESTATE INCOME FUND INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: [LOGO: NEUBERGER BERMAN] A Lehman Brothers Company NEUBERGER BERMAN REAL ESTATE INCOME FUND INC. 605 THIRD AVENUE NEW YORK, NEW YORK 10158-0180 --------------------------- NOTICE OF ANNUAL MEETING OF STOCKHOLDERS --------------------------- Dear Stockholder: NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Meeting") of Neuberger Berman Real Estate Income Fund Inc. ("Fund"), will be held on Tuesday, March 8, 2005, at 11:00 a.m. Eastern time at the offices of Neuberger Berman, LLC, 605 Third Avenue, 41st Floor, New York, New York 10158-3698 for the following purposes: 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; and 2. To consider and act upon any other business that may properly come before the Meeting or any adjournments thereof. You are entitled to vote at the Meeting and any adjournments thereof if you owned Fund shares at the close of business on January 12, 2005 ("Record Date"). If you attend the meeting, you may vote your shares in person. IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE REVIEW THE ENCLOSED MATERIALS AND FOLLOW THE INSTRUCTIONS THAT APPEAR ON THE ENCLOSED PROXY CARD(S). If we do not hear from you by a certain date, our proxy solicitor may contact you. If you have any questions about the proposals or the voting instructions, please call us at 877-461-1899. Any proposal submitted to a vote at the meeting by anyone other than the officers or directors of the Fund may be voted only in person or by written proxy. We will admit to the Meeting (1) all stockholders of record of the Fund as of the Record Date, (2) persons holding proof of beneficial ownership at the Record Date such as a letter or account statement from a broker, (3) persons who have been granted proxies, and (4) such other persons that we, in our sole discretion, may elect to admit. ALL PERSONS WISHING TO BE ADMITTED TO THE MEETING MUST PRESENT PHOTO IDENTIFICATION. IF YOU PLAN TO ATTEND THE MEETING, PLEASE CONTACT US AT 877-461-1899. Unless proxy cards submitted by corporations and partnerships are signed by the appropriate persons as indicated in the voting instructions on the proxy cards, they will not be voted. By order of the Board of Directors, /s/ Claudia A. Brandon Claudia A. Brandon Secretary Dated: February 4, 2005 - -------------------------------------------------------------------------------- YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES OF STOCK YOU OWN. PLEASE RETURN YOUR PROXY CARD PROMPTLY. IF YOU OWN SHARES OF COMMON STOCK AND PREFERRED STOCK, THERE WILL BE TWO PROXY CARDS ENCLOSED. PLEASE FILL OUT AND RETURN EACH ONE. STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY STOCKHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO REVIEW THE ENCLOSED MATERIALS AND FOLLOW THE INSTRUCTIONS THAT APPEAR ON THE ENCLOSED PROXY CARD(S). IF WE DO NOT HEAR FROM YOU BY A CERTAIN DATE, OUR PROXY SOLICITOR MAY CONTACT YOU. TO AVOID THE ADDITIONAL EXPENSE TO THE FUND OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN VOTING YOUR PROXY PROMPTLY, NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. - -------------------------------------------------------------------------------- [LOGO: NEUBERGER BERMAN] A Lehman Brothers Company NEUBERGER BERMAN REAL ESTATE INCOME FUND INC. 605 THIRD AVENUE NEW YORK, NEW YORK 10158-0180 --------------------------- PROXY STATEMENT --------------------------- ANNUAL MEETING OF STOCKHOLDERS MARCH 8, 2005 INTRODUCTION This Proxy Statement is furnished to the stockholders of Neuberger Berman Real Estate Income Fund Inc. ("Fund"), by the Board of Directors of the Fund in connection with the solicitation of stockholder votes by proxy to be voted at the Annual Meeting of Stockholders or any adjournments thereof ("Meeting") to be held on Tuesday, March 8, 2005, at 11:00 a.m. Eastern time at the offices of Neuberger Berman, LLC ("Neuberger Berman"), 605 Third Avenue, 41st Floor, New York, New York 10158-3698. The matters to be acted upon at the Meeting are set forth in the accompanying Notice of Annual Meeting. It is expected that the Notice of Annual Meeting, this Proxy Statement and form of proxy first will be mailed to stockholders on or about February 4, 2005. If an enclosed proxy card is executed properly and returned, shares represented thereby will be voted at the Meeting in accordance with the instructions on the proxy card. A proxy may nevertheless be revoked at any time prior to its use by written notification received by the Fund, by the execution of a subsequently dated proxy card or by attending the Meeting and voting in person. However, if no instructions are specified on a proxy card, shares will be voted "FOR" the election of each nominee for Director and "FOR" or "AGAINST" any other matters acted upon at the Meeting in the discretion of the persons named as proxies. The close of business on January 12, 2005, has been fixed as the record date for the determination of stockholders entitled to notice of and to vote at the Meeting ("Record Date"). On that date, the Fund had 4,157,116.626 shares of common stock ("Common Shares") and 1,680 shares of preferred stock ("Preferred Shares") outstanding and entitled to vote. Holders of the Fund's outstanding Common Shares and Preferred Shares will vote together as a single class to elect four of the Class III Directors. As described herein under the section entitled "Election of Directors -- Proposal," holders of the Fund's Preferred Shares will vote separately from holders of the Common Shares to elect one additional Class III Director. As to any other business that may properly come before the Meeting or any adjournments thereof, holders of the Common Shares and Preferred Shares may vote together as a single class or separately, depending on the requirements of the Investment Company Act of 1940, as amended ("1940 Act"), the Maryland General Corporation Law and the Fund's charter with respect to said item of business. Each full share of the Fund's Common Shares or Preferred Shares is entitled to one vote and each fractional share of the Fund's Common Shares or Preferred Shares is entitled to a proportionate share of one vote. Solicitation is made primarily by the mailing of this Proxy Statement and the accompanying proxy card(s). Supplementary solicitations may be made by mail, telephone, and electronic transmission or in person by regular employees of Neuberger Berman Management Inc. ("NB Management"), affiliates of NB Management or other representatives of the Fund. NB Management serves as the Fund's investment manager and administrator. In addition, the Fund has engaged Georgeson Shareholder Communications Inc., a proxy solicitation firm, to assist in the solicitation of proxies. The aggregate cost of retaining Georgeson Shareholder Communications Inc. is expected to be about $33,000 plus expenses in connection with the solicitation of proxies. All expenses in connection with preparing this Proxy Statement and its enclosures, and additional solicitation expenses including reimbursement of brokerage firms and others for their expenses in forwarding proxy solicitation material to the beneficial owners of shares, will be borne by the Fund. The presence at the Meeting, in person or by proxy, of stockholders entitled to vote 33-1/3% of the shares outstanding and entitled to vote at the Meeting is required for a quorum. The affirmative vote of the holders of a plurality of the Fund's Common Shares and Preferred Shares voted at the meeting, voting as a single class, is required to elect four of the Fund's Class III Directors. The affirmative vote of the holders of a plurality of the Fund's Preferred Shares voted at the meeting, voting separately from the holders of Common Shares, is required to elect one additional Class III Director for the Fund. With respect to other items of business (and the Fund is not currently aware of any other items to be brought before the Meeting), the necessary affirmative vote will depend on the requirements of the 1940 Act, the Maryland General Corporation Law and the Fund's charter with respect to said item of business. If a quorum is not present at the Meeting or a quorum is present but sufficient votes to approve a proposed item are not received, or for any other reason, the persons named as proxies may propose one or more adjournments of such Meeting to permit further solicitation of proxies. Subject to the rules established by the Chairman of the Meeting, the holders of a majority of the shares entitled to vote at the Meeting and present in person or by proxy may vote to adjourn, or, if no stockholder entitled to vote is present in person or by proxy, any officer present entitled to preside or act as secretary of the Meeting may adjourn the Meeting. In the former case, the persons named as proxies will vote those proxies that they are entitled to vote in favor of such item "FOR" such an adjournment, and will vote those proxies required to be voted against such item "AGAINST" such an adjournment. A stockholder vote may be taken on the nominations in this Proxy Statement prior to any such adjournment if sufficient votes have been received and it is otherwise appropriate. 2 The Fund expects that broker-dealer firms holding shares of the Fund in "street name" for the benefit of their customers and clients will request the instructions of such customers and clients on how to vote their shares on each proposal at the Meeting. The Fund understands that, under the rules of the New York Stock Exchange ("NYSE"), such broker-dealers may grant authority to the proxies designated by the Fund to vote on the election of Directors for the Fund if no instructions have been received prior to the date specified in the broker-dealer firm's request for voting instructions. Certain broker-dealer firms may exercise discretion over shares held in their names for which no instructions are received by voting such shares in the same proportion as they have voted shares for which they have received instructions. In tallying stockholder votes, abstentions and "broker non-votes" (i.e., shares held by brokers or nominees as to which instructions have not been received from the beneficial owners or the persons entitled to vote and either (i) the broker or nominee does not have discretionary voting power or (ii) the broker or nominee returns the proxy but expressly declines to vote on a particular matter) will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum. Accordingly, abstentions and broker non-votes effectively will be a vote against any adjournment but will have no effect on the election of the Directors because the required vote is a plurality of the votes cast. As of January 12, 2005, the Fund does not know of any person other than those identified below who owns beneficially 5% or more of the outstanding Common Shares or Preferred Shares of the Fund.
NUMBER OF PERCENTAGE OF COMMON SHARES COMMON SHARES COMMON STOCKHOLDER OWNED* AS OF JANUARY 12, 2005* - -------------------------------------------------------------------------------- Lola Brown Trust No. 1B** 4,900 0.12% Ernest Horejsi Trust No. 1B** 463,200 11.14% - --------------------------------------------------------------------------------
* This information is based on the joint Schedule 13D filed September 2, 2004 by these trusts along with Stewart R. Horejsi, as updated by the Schedule TO filed September 10, 2004, reporting aggregate holdings of 468,100 of the Fund's outstanding Common Shares by these entities as of September 10, 2004 (which equals approximately 11.26% of the Fund's outstanding Common Shares as of the Record Date). The Schedule 13D indicates that, because of the relationships between Mr. Horejsi and the two trusts, Mr. Horejsi may be deemed to share indirect beneficial ownership of such shares. Due to these relationships, the two trusts and Mr. Horejsi could be viewed as a group and will hereinafter be referred to as the "Horejsi Group." No subsequent amendment to the joint Schedule 13D of the Horejsi Group had been received by the Fund through January 12, 2005. Likewise, through January 12, 2005, the Fund had not received any amendments to the Schedule TO reporting increased share ownership among the Horejsi Group. ** The address of each of these entities is c/o Badlands Trust Company, P.O. Box 801 (614 Broadway), Yankton, South Dakota 57078. In addition, the Directors and officers of the Fund, in the aggregate, owned less than 1% of the Fund's outstanding shares as of January 12, 2005. NB Management serves as the investment manager and administrator to the Fund. NB Management provides investment management and advisory services to 3 private accounts of institutional and individual clients and to mutual funds. NB Management is located at 605 Third Avenue, New York, New York 10158-0180. NB Management retains Neuberger Berman, 605 Third Avenue, New York, New York 10158-3698, as sub-adviser with respect to the Fund. As of September 30, 2004, Neuberger Berman affiliates had approximately $65.6 billion in assets under management. Neuberger Berman and NB Management are indirect wholly owned subsidiaries of Lehman Brothers Holdings Inc., a publicly held company. STOCKHOLDERS OF RECORD OR BENEFICIAL OWNERS AS OF THE RECORD DATE MAY OBTAIN A FREE COPY OF THE FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED OCTOBER 31, 2004, WHICH INCLUDES AUDITED FINANCIAL STATEMENTS, BY WRITING NB MANAGEMENT AT 605 THIRD AVENUE, 2ND FLOOR, NEW YORK, NEW YORK 10158-0180, OR BY CALLING TOLL FREE 877-461-1899. Stockholders may send communications that they would like to direct to the Board of Directors of the Fund to the attention of Philip R. Carroll, Chief Compliance Officer of the Fund, Neuberger Berman Funds, 605 Third Avenue, 21st Floor, New York, NY, 10158-0180. The Board has directed Mr. Carroll to send such communications to the chairperson of the Code of Ethics Committee. Nominee recommendations and stockholder proposals should be directed to the attention of Claudia A. Brandon, Secretary of the Funds, Neuberger Berman Funds, 605 Third Avenue, 21st Floor, New York, NY, 10158-0180 as described in this Proxy Statement under "Information Regarding the Fund's Process for Nominating Director Candidates" and "Stockholder Proposals." 4 ELECTION OF DIRECTORS PROPOSAL The Board of Directors of the Fund is divided into three classes (Class I, Class II and Class III). The terms of office of Class I, Class II and Class III Directors will expire at the annual meeting of stockholders held in 2006, 2007 and 2005, respectively, and at each third annual meeting of stockholders thereafter. Each Director shall hold office until his or her successor is elected and qualified or until his or her earlier death, resignation or removal. The classification of the Fund's Directors helps to promote the continuity and stability of the Fund's management and policies because the majority of the Directors at any given time will have prior experience as Directors of the Fund. At least two stockholder meetings, instead of one, are required to effect a change in a majority of the Directors, except in the event of vacancies resulting from removal for cause or other reasons, in which case the remaining Directors may fill the vacancies so created, to the extent permitted by the 1940 Act. Holders of the Fund's Preferred Shares are entitled, as a class, to the exclusion of the holders of all other classes of stock of the Fund, to elect two Directors of the Fund (regardless of the total number of Directors serving on the Fund's Board of Directors). One of those two Directors, Howard A. Mileaf, is a Class III Director currently up for election. The other is a Class II Director up for election in 2007. The Class II Director is not a nominee to be considered at the Meeting. The term of each current Class III Director expires in 2005, but each expressed his or her willingness to serve another term as Director of the Fund if nominated by the Board of Directors. The Nominating Committee of the Fund reviewed the qualifications, experience and background of each incumbent Director. Based upon this review, the Committee determined that nominating the incumbents would be in the best interests of the Fund's stockholders. The Fund's Board believes that the incumbents are well suited for service on the Board due to their familiarity with the Fund as a result of their prior service as Directors, their knowledge of the financial services sector, and their substantial experience in serving as directors or trustees, officers or advisers of public companies and business organizations, including other investment companies. At a meeting on December 15, 2004, the Board of Directors received the recommendation of the Nominating Committee. After discussion and consideration of, among other things, the backgrounds of the incumbents, the Fund's Board voted to nominate Robert A. Kavesh, Howard A. Mileaf, Edward I. O'Brien, William E. Rulon, and Candace L. Straight for election as Class III Directors with a term expiring in 2008. The Fund has a policy that at least three-fourths of all Directors be Independent Fund Directors. Independent Fund Directors are those who are not associated with the Fund's investment adviser or sub-adviser or their affiliates, or with any broker-dealer used by the Fund, the investment adviser or the sub-adviser in the past six months. It is the intention of the persons named in the enclosed proxy card(s) to vote in favor of the election of each nominee named in this Proxy Statement. 5 Each nominee has consented to be named in this Proxy Statement and to serve as Director if elected. The Fund's Board of Directors has no reason to believe that any nominee will become unavailable for election as a Director, but if that should occur before the Meeting, the proxies will be voted for such other nominees as the Board of Directors may recommend. None of the Directors is related to any other. The following tables set forth certain information regarding each Director of the Fund. Unless otherwise noted, each Director has engaged in the principal occupation listed in the following table for five years or more. The business address of each listed person is 605 Third Avenue, New York, New York 10158. INFORMATION REGARDING NOMINEES FOR ELECTION AT 2005 ANNUAL MEETING
- ---------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN FUND COMPLEX OTHER DIRECTORSHIPS OVERSEEN BY HELD OUTSIDE FUND COMPLEX NAME AND AGE PRINCIPAL OCCUPATION(S) DIRECTOR BY DIRECTOR - ---------------------------------------------------------------------------------------------------------- CLASS III - ---------------------------------------------------------------------------------------------------------- Independent Fund Directors - ---------------------------------------------------------------------------------------------------------- Robert A. Kavesh Marcus Nadler 41 Director, DEL (77) Professor Emeritus of Laboratories, Inc. Finance and Economics, (cosmetics and New York University pharmaceuticals) since Stern School 1978; Director, The of Business. Caring Community (not-for-profit). - ---------------------------------------------------------------------------------------------------------- Howard A. Mileaf Retired. Formerly, Vice 41 Director, WHX (68) President and Special Corporation (holding Counsel, WHX company) since Corporation (holding August 2002; Director, company) 1993 to 2001. Webfinancial Corporation (holding company) since December 2002; Director, State Theatre of New Jersey (not-for-profit theater) since 2000; formerly, Director, Kevlin Corporation (manufacturer of microwave and other products). - ----------------------------------------------------------------------------------------------------------
6
- ---------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN FUND COMPLEX OTHER DIRECTORSHIPS OVERSEEN BY HELD OUTSIDE FUND COMPLEX NAME AND AGE PRINCIPAL OCCUPATION(S) DIRECTOR BY DIRECTOR - ---------------------------------------------------------------------------------------------------------- William E. Rulon Retired. Formerly, 41 Director, Pro-Kids Golf (72) Senior Vice President, and Learning Academy Foodmaker, Inc. (teach golf and computer (operator and franchiser usage to "at risk" of restaurants) until children) since 1998; January 1997. formerly, Director, Prandium, Inc. (restaurants) from March 2001 until July 2002. - ---------------------------------------------------------------------------------------------------------- Candace L. Straight Private investor and 41 Director, The (57) consultant specializing Proformance Insurance in the insurance Company (personal lines industry; formerly, property and casualty Advisory Director, insurance) since March Securitas Capital LLC 2004; Director, (a global private equity Providence Washington investment firm (property and casualty dedicated to making insurance company) since investments in the December 1998; Director, insurance sector) 1998 Summit Global Partners to December 2002. (insurance brokerage firm) since October 2000. - ---------------------------------------------------------------------------------------------------------- Director who is an "Interested Person" - ---------------------------------------------------------------------------------------------------------- Edward I. O'Brien* Formerly, Member, 41 Director, Legg Mason, (76) Investment Policy Inc. (financial services Committee, Edward holding company) since Jones 1993 to 2001; 1993; formerly, Director, President, Securities Boston Financial Group Industry Association (real estate and tax (SIA) (securities shelters) 1993 to 1999. industry's representative in government relations and regulatory matters at the federal and state levels) from 1974 to 1992; Adviser to SIA, November 1992 to November 1993. - ----------------------------------------------------------------------------------------------------------
7 INFORMATION REGARDING DIRECTORS WHOSE CURRENT TERMS CONTINUE
- ---------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN FUND COMPLEX OTHER DIRECTORSHIPS OVERSEEN BY HELD OUTSIDE FUND COMPLEX NAME AND AGE PRINCIPAL OCCUPATION(S) DIRECTOR BY DIRECTOR - ---------------------------------------------------------------------------------------------------------- CLASS I - ---------------------------------------------------------------------------------------------------------- Independent Fund Directors - ---------------------------------------------------------------------------------------------------------- Faith Colish (69) Counsel, Carter Ledyard 41 Director, American Bar & Millburn LLP (law Retirement Association firm) since October (ABRA) since 1997 2002; formerly, (not-for-profit Attorney-at-Law and membership association). President, Faith Colish, A Professional Corporation, 1980 to 2002. - ---------------------------------------------------------------------------------------------------------- C. Anne Harvey (67) Consultant, C. A. 41 President, Board of Harvey Associates, Associates to The since June 2001; National Rehabilitation formerly, Director, Hospital's Board of AARP, 1978 Directors, since 2002; to December 2001. formerly, Member, Individual Investors Advisory Committee to the New York Stock Exchange Board of Directors, 1998 to June 2002; formerly, Member, American Savings Education Council's Policy Board (ASEC), 1998 to 2000; formerly, Member, Executive Committee, Crime Prevention Coalition of America, 1997 to 2000. - ---------------------------------------------------------------------------------------------------------- Cornelius T. Ryan Founding General 41 Director, Capital Cash (73) Partner, Oxford Partners Management Trust and Oxford Bioscience (money market fund), Partners (venture capital Naragansett Insured partnerships) and Tax-Free Income Fund, President, Oxford Rocky Mountain Equity Venture Corporation. Fund, Prime Cash Fund, several private companies and QuadraMed Corporation (NASDAQ). - ----------------------------------------------------------------------------------------------------------
8
- ---------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN FUND COMPLEX OTHER DIRECTORSHIPS OVERSEEN BY HELD OUTSIDE FUND COMPLEX NAME AND AGE PRINCIPAL OCCUPATION(S) DIRECTOR BY DIRECTOR - ---------------------------------------------------------------------------------------------------------- Peter P. Trapp (60) Regional Manager for 41 None Atlanta Region, Ford Motor Credit Company since August 1997; formerly, President, Ford Life Insurance Company, April 1995 to August 1997. - ---------------------------------------------------------------------------------------------------------- Director who is an "Interested Person" - ---------------------------------------------------------------------------------------------------------- Peter E. Sundman* Executive Vice 41 Director and Vice (45) President, Neuberger President, Neuberger & Berman Inc. (holding Berman Agency, Inc. company) since 1999; since 2000; formerly, Head of Neuberger Director, Neuberger Berman Inc.'s Mutual Berman Inc. (holding Funds and Institutional company) from October Business since 1999; 1999 through March President and Director, 2003; Trustee, Frost NB Management since Valley YMCA. 1999; Executive Vice President, Neuberger Berman since 1999; formerly, Principal, Neuberger Berman from 1997 until 1999; formerly, Senior Vice President, NB Management from 1996 to 1999. - ---------------------------------------------------------------------------------------------------------- CLASS II - ---------------------------------------------------------------------------------------------------------- Independent Fund Directors - ---------------------------------------------------------------------------------------------------------- John Cannon (75) Consultant. Formerly, 41 Independent Trustee or Chairman, CDC Director of three series of Investment Advisers OppenheimerFunds: (registered investment Limited Term New York adviser), 1993 to Municipal Fund, January 1999; formerly, Rochester Fund President and Chief Municipals, and Executive Officer, AMA Oppenheimer Convertible Investment Advisors, an Securities Fund, affiliate of the American since 1992. Medical Association. - ----------------------------------------------------------------------------------------------------------
9
- ---------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN FUND COMPLEX OTHER DIRECTORSHIPS OVERSEEN BY HELD OUTSIDE FUND COMPLEX NAME AND AGE PRINCIPAL OCCUPATION(S) DIRECTOR BY DIRECTOR - ---------------------------------------------------------------------------------------------------------- Barry Hirsch (71) Attorney-at-Law. 41 None Formerly, Senior Counsel, Loews Corporation (diversified financial corporation) May 2002 until April 2003; formerly, Senior Vice President, Secretary and General Counsel, Loews Corporation. - ---------------------------------------------------------------------------------------------------------- Tom D. Seip (54) General Partner, Seip 41 Director, H&R Block, Investments LP (a Inc. (financial services private investment company) since May partnership); formerly, 2001; Director, Forward President and CEO, Management, Inc. (asset Westaff, Inc. (temporary management) since 2001; staffing), May 2001 to formerly, Director, January 2002; Senior General Magic (voice Executive at the Charles recognition software) Schwab Corporation 2001 to 2002; Director, from 1983 to 1999, E-Finance Corporation including Chief (credit decisioning Executive Officer, services) 1999 to 2003; Charles Schwab formerly, Director, Save- Investment Daily.com (micro Management, Inc. and investing services) 1999 Trustee, Schwab Family to 2003; Director, of Funds and Schwab Offroad Capital Inc. Investments from 1997 (pre-public internet to 1998 and Executive commerce company). Vice President-Retail Brokerage, Charles Schwab Investment Management from 1994 to 1997. - ----------------------------------------------------------------------------------------------------------
10
- ---------------------------------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN FUND COMPLEX OTHER DIRECTORSHIPS OVERSEEN BY HELD OUTSIDE FUND COMPLEX NAME AND AGE PRINCIPAL OCCUPATION(S) DIRECTOR BY DIRECTOR - ---------------------------------------------------------------------------------------------------------- Director who is an "Interested Person" - ---------------------------------------------------------------------------------------------------------- Jack L. Rivkin*(64) Executive Vice 41 Director, Dale Carnegie President and Chief and Associates, Inc. Investment Officer, (private company) since Neuberger Berman Inc. 1998; Director, Emagin (holding company) Corp. (public company) since 2002 and 2003, since 1997; Director, respectively; Executive Solbright, Inc. (private Vice President and company) since 1998; Chief Investment Director, Infogate, Inc. Officer, Neuberger (private company) Berman since December since 1997; Director, 2002 and 2003, Broadway Television respectively; Director Network (private and Chairman, NB company) since 2000. Management since December 2002; formerly, Executive Vice President, Citigroup Investments, Inc. from September 1995 to February 2002; formerly, Executive Vice President, Citigroup Inc. from September 1995 to February 2002. - ----------------------------------------------------------------------------------------------------------
* Indicates a director who is an "interested person" within the meaning of the 1940 Act. Mr. Sundman and Mr. Rivkin are interested persons of the Fund by virtue of the fact that each is an officer and/or director of NB Management and Executive Vice President of Neuberger Berman. Mr. O'Brien is an interested person of the Fund by virtue of the fact that he is a director of Legg Mason, Inc., a wholly owned subsidiary of which, from time to time, serves as a broker or dealer to the Fund and other funds or accounts for which NB Management serves as investment manager. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Under Section 16(a) of the Securities Exchange Act of 1934, as amended ("1934 Act"), Section 30(h) of the 1940 Act and Securities and Exchange Commission ("SEC") regulations thereunder, certain of the Fund's officers and the Fund's Directors and portfolio managers, persons owning more than 10% of the Fund's stock and certain officers and principals of the Fund's investment manager and sub-adviser are required to report their transactions in the Fund's stock to the SEC and the NYSE. Based solely on the review by the Fund of the copies of such reports received by it, the Fund believes that, during its fiscal year ended October 31, 2004, all filing requirements applicable to such persons were met. 11 BOARD OF DIRECTORS AND COMMITTEE MEETINGS The Fund's Board met seven times during the fiscal year ended October 31, 2004. Each Director other than William Rulon attended at least 75% of the total number of meetings of the Board and of any committee of which he or she was a member during that period. The Board has established several standing committees to oversee particular aspects of the Fund's management. The standing committees of the Board are described below. The Board does not have a standing compensation committee. AUDIT COMMITTEE. The Audit Committee's purposes are (a) to oversee the accounting and financial reporting processes of the Fund and its internal control over financial reporting and, as the Committee deems appropriate, to inquire into the internal control over financial reporting of certain third-party service providers; (b) to oversee the quality and integrity of the Fund's financial statements and the independent audit thereof; (c) to oversee, or, as appropriate, assist Board oversight of, the Fund's compliance with legal and regulatory requirements that relate to the Fund's accounting and financial reporting, internal control over financial reporting and independent audits; (d) to approve prior to appointment the engagement of the Fund's independent auditors and, in connection therewith, to review and evaluate the qualifications, independence and performance of the Fund's independent auditors; (e) to act as a liaison between the Fund's independent auditors and the full Board; and (f) to prepare an audit committee report as required by Item 306 of Regulation S-K to be included in proxy statements relating to the election of directors/trustees. The charter of the Audit Committee was attached to the Fund's proxy statement dated January 12, 2004. The Audit Committee of the Fund has delegated the authority to grant pre-approval of permissible non-audit services and all audit, review or attest engagements of the Fund's independent auditors to the Chairman of the Audit Committee. The Audit Committee of the Fund is composed entirely of Independent Fund Directors who are also considered independent under the listing standards applicable to the Fund. Its members are John Cannon, Cornelius T. Ryan (Chairman), Tom D. Seip and Peter P. Trapp. Members of the Audit Committee receive additional compensation for serving on this committee. The Report of the Audit Committee relating to the audit of Fund financial statements for the fiscal year ended October 31, 2004 is attached hereto as Appendix A. During the fiscal year ended October 31, 2004, the Committee met seven times. CODE OF ETHICS COMMITTEE. The Code of Ethics Committee oversees the administration of the Fund's Code of Ethics, which restricts the personal securities transactions of employees and officers of NB Management and Neuberger Berman, and the Directors. Its members are Faith Colish, C. Anne Harvey, Robert A. Kavesh (Chairman), Howard A. Mileaf and Edward I. O'Brien. All members except for Mr. O'Brien are Independent Fund Directors. During the fiscal year ended October 31, 2004, the Committee met once. 12 CONTRACT REVIEW COMMITTEE. The Contract Review Committee is responsible for review and oversight of the Fund's principal contractual arrangements. Its members are Faith Colish (Chairwoman), Barry Hirsch, Howard A. Mileaf, William E. Rulon and Candace L. Straight. All members are Independent Fund Directors. During the fiscal year ended October 31, 2004, the Committee met twice. EXECUTIVE COMMITTEE. The Executive Committee is responsible for acting in an emergency when the full board is not available. It has all the powers of the Directors when the Directors are not in session, to the extent permitted by Maryland law. Its members are John Cannon, Howard A. Mileaf, Edward I. O'Brien, Jack L. Rivkin, William E. Rulon, Cornelius T. Ryan and Peter E. Sundman (Chairman). All members except for Messrs. O'Brien, Rivkin and Sundman are Independent Fund Directors. During the fiscal year ended October 31, 2004, the Committee of the Fund did not meet. NOMINATING COMMITTEE. The Nominating Committee is responsible for nominating individuals to serve as Directors, including as Independent Fund Directors, as members of committees, and as officers of the Fund. The Committee met to discuss matters relating to the nomination of Class III Directors. Its members are C. Anne Harvey (Chairwoman), Barry Hirsch, Robert A. Kavesh, Howard A. Mileaf and Tom D. Seip. All members are Independent Fund Directors. During the fiscal year ended October 31, 2004, the Committee met twice. PORTFOLIO TRANSACTIONS COMMITTEE. The Portfolio Transactions Committee from time to time reviews, among other things, data on the quality of execution of portfolio trades, actual and potential uses of portfolio brokerage commissions, agency cross-transactions, information relating to the commissions charged by Neuberger Berman and Lehman Brothers Inc. ("Lehman Brothers") to the Fund, and information concerning the prevailing level of commissions charged by other brokers having comparable execution capability, reports prepared by third party consultants regarding the execution of the Fund's trades and the consideration given to alternative trading systems. The members of the Committee of the Fund are Faith Colish, C. Anne Harvey, Cornelius T. Ryan, Candace L. Straight (Chairwoman) and Peter P. Trapp. All members are Independent Fund Directors. During the fiscal year ended October 31, 2004, the Committee met four times. PRICING COMMITTEE. The Pricing Committee oversees the procedures for pricing the Fund's portfolio securities and, from time to time, may be called upon to establish or ratify the fair value of portfolio securities for which market prices are not readily available. Its members are John Cannon, Edward I. O'Brien, Jack L. Rivkin (Vice Chairman), William E. Rulon and Tom D. Seip (Chairman). All members except for Mr. Rivkin and Mr. O'Brien are Independent Fund Directors. During the fiscal year ended October 31, 2004, the Committee met twice. INFORMATION REGARDING THE FUND'S PROCESS FOR NOMINATING DIRECTOR CANDIDATES NOMINATING COMMITTEE CHARTER. The Fund's Nominating Committee is currently reviewing a written charter. 13 STOCKHOLDER COMMUNICATIONS. The Fund's Nominating Committee will consider nominees recommended by stockholders; stockholders may send resumes of recommended persons to the attention of Claudia A. Brandon, Secretary, Neuberger Berman Funds, 605 Third Avenue, 21st Floor, New York, NY, 10158-0180. No nominee recommendation has been received from a stockholder within the past 120 days. NOMINEE QUALIFICATIONS. While there is no formal list of qualifications, the Nominating Committee considers, among other things, whether prospective nominees have distinguished records in their primary careers, unimpeachable integrity, and substantive knowledge in areas important to the Board's operations, such as background or education in finance, auditing, securities law, the workings of the securities markets, or investment advice. For candidates to serve as independent directors, independence from the Fund's investment adviser, its affiliates and other principal service providers is critical, as is an independent and questioning mindset. The Committee also considers whether the prospective candidates' workloads would allow them to attend the vast majority of Board meetings, be available for service on Board committees, and devote the additional time and effort necessary to keep up with Board matters and the rapidly changing regulatory environment in which the Fund operates. Different substantive areas may assume greater or lesser significance at particular times, in light of the Board's present composition and the Committee's (or the Board's) perceptions about future issues and needs. IDENTIFYING NOMINEES. The Nominating Committee considers prospective candidates from any reasonable source. The Committee initially evaluates prospective candidates on the basis of their resumes, considered in light of the criteria discussed above. Those prospective candidates that appear likely to be able to fill a significant need of the Board would be contacted by a Committee member by telephone to discuss the position; if there appeared to be sufficient interest, an in-person meeting with one or more Committee members would be arranged. If the Committee, based on the results of these contacts, believed it had identified a viable candidate, it would air the matter with the full group of independent Board members for input. Any request by management to meet with the prospective candidate would be given appropriate consideration. The Fund has not paid a fee to third parties to assist in finding nominees. DIRECTOR ATTENDANCE AT ANNUAL MEETINGS The Fund does not have a policy on Director attendance at the annual meeting of stockholders. One Board member attended the 2004 annual meeting of stockholders. 14 OWNERSHIP OF SECURITIES Set forth below is the dollar range of equity securities owned by each Director as of December 31, 2004.
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL REGISTERED INVESTMENT DOLLAR RANGE OF COMPANIES OVERSEEN BY EQUITY SECURITIES DIRECTOR IN FAMILY NAME OF DIRECTOR OWNED IN THE FUND* OF INVESTMENT COMPANIES* - -------------------------------------------------------------------------- Independent Fund Directors - -------------------------------------------------------------------------- John Cannon None $50,001 - $100,000 Faith Colish None Over $100,000 C. Anne Harvey None $50,001 - $100,000 Barry Hirsch None Over $100,000 Robert A. Kavesh None $ 10,001 - $50,000 Howard A. Mileaf None Over $100,000 William E. Rulon None $50,001 - $100,000 Cornelius T. Ryan None Over $100,000 Tom D. Seip None Over $100,000 Candace L. Straight None Over $100,000 Peter P. Trapp None $50,001 - $100,000 - -------------------------------------------------------------------------- Directors who are "Interested Persons" - -------------------------------------------------------------------------- Edward I. O'Brien None Over $100,000 Jack L. Rivkin None $ 10,001 - $50,000 Peter E. Sundman None Over $100,000 - --------------------------------------------------------------------------
* Valuation as of December 31, 2004. INDEPENDENT FUND DIRECTORS' OWNERSHIP OF SECURITIES As of December 31, 2004, no Independent Fund Director (or his/her immediate family members) owned securities of NB Management or securities in an entity controlling, controlled by or under common control with NB Management (not including registered investment companies). 15 OFFICERS OF THE FUND The following table sets forth certain information regarding the officers of the Fund. Except as otherwise noted, each individual has held the positions shown in the table below for at least the last five years. The business address of each listed person is 605 Third Avenue, New York, New York 10158. Officers of the Fund are appointed by the Directors and serve at the pleasure of the Board.
- -------------------------------------------------------------------------------------- POSITION AND LENGTH NAME AND AGE OF TIME SERVED PRINCIPAL OCCUPATION(S) - -------------------------------------------------------------------------------------- Claudia A. Brandon (48) Secretary since Vice President-Mutual Fund Board Inception* Relations, NB Management since 2000; Vice President, Neuberger Berman since 2002 and employee since 1999; formerly, Vice President, NB Management from 1986 to 1999; Secretary, fourteen registered investment companies for which NB Management acts as investment manager and administrator (four since 2002, three since 2003 and four since 2004). - -------------------------------------------------------------------------------------- Philip R. Carroll (70) Chief Vice President, Neuberger Berman Compliance since 2002; Associate General Officer Counsel, Neuberger Berman since since 2004 2001; Director-Mutual Fund Compliance, NB Management since 1995; Chief Legal Officer, fourteen registered investment companies for which NB Management acts as investment manager and administrator (ten since 2003, four since 2004); Chief Compliance Officer, fourteen registered investment companies for which NB Management acts as investment manager and administrator (fourteen since 2004) and Lehman Brothers/First Trust Income Opportunity Fund. - --------------------------------------------------------------------------------------
16
- -------------------------------------------------------------------------------------- POSITION AND LENGTH NAME AND AGE OF TIME SERVED PRINCIPAL OCCUPATION(S) - -------------------------------------------------------------------------------------- Robert Conti (48) Vice President Senior Vice President, Neuberger since Inception* Berman since 2003; formerly, Vice President, Neuberger Berman from 1999 to 2003; Senior Vice President, NB Management since 2000; formerly, Controller, NB Management until 1996; formerly, Treasurer, NB Management from 1996 to 1999; Vice President, fourteen registered investment companies for which NB Management acts as investment manager and administrator (three since 2000, four since 2002, three since 2003 and four since 2004). - -------------------------------------------------------------------------------------- Brian J. Gaffney (51) Vice President Managing Director, Neuberger since Inception* Berman since 1999; Senior Vice President, NB Management since 2000; formerly, Vice President, NB Management from 1997 until 1999; Vice President, fourteen registered investment companies for which NB Management acts as investment manager and administrator (three since 2000, four since 2002, three since 2003 and four since 2004). - -------------------------------------------------------------------------------------- Sheila R. James (39) Assistant Employee, Neuberger Berman since Secretary since 1999; formerly, Employee, NB Inception* Management from 1991 to 1999; Assistant Secretary, fourteen registered investment companies for which NB Management acts as investment manager and administrator (seven since 2002, three since 2003 and four since 2004). - --------------------------------------------------------------------------------------
17
POSITION AND LENGTH NAME AND AGE OF TIME SERVED PRINCIPAL OCCUPATION(S) - -------------------------------------------------------------------------------------- Kevin Lyons (49) Assistant Employee, Neuberger Berman since Secretary since 1999; formerly, Employee, NB 2003 Management from 1993 to 1999; Assistant Secretary, fourteen registered investment companies for which NB Management acts as investment manager and administrator (ten since 2003 and four since 2004). - -------------------------------------------------------------------------------------- John M. McGovern (34) Assistant Vice President, Neuberger Berman Treasurer since since January 2004; Employee, NB Inception* Management since 1993; Assistant Treasurer, fourteen registered investment companies for which NB Management acts as investment manager and administrator (seven since 2002, three since 2003 and four since 2004). - -------------------------------------------------------------------------------------- Barbara Muinos (46) Treasurer and Vice President, Neuberger Berman Principal since 1999; formerly, Assistant Vice Financial and President, NB Management from 1993 Accounting to 1999; Treasurer and Principal Officer since Financial and Accounting Officer, Inception* fourteen registered investment companies for which NB Management acts as investment manager and administrator (seven since 2002, three since 2003 and four since 2004); formerly, Assistant Treasurer of three registered investment companies for which NB Management acts as investment manager and administrator from 1996 to 2002. - --------------------------------------------------------------------------------------
18
- -------------------------------------------------------------------------------------- POSITION AND LENGTH NAME AND AGE OF TIME SERVED PRINCIPAL OCCUPATION(S) - -------------------------------------------------------------------------------------- Frederic B. Soule (58) Vice President Senior Vice President, Neuberger since Inception* Berman since 2003; formerly, Vice President, Neuberger Berman from 1999 to 2003; formerly, Vice President, NB Management from 1995 to 1999; Vice President, fourteen registered investment companies for which NB Management acts as investment manager and administrator (three since 2000, four since 2002, three since 2003 and four since 2004). - --------------------------------------------------------------------------------------
* Neuberger Berman Real Estate Income Fund Inc. commenced operations in 2002. COMPENSATION OF DIRECTORS The following table sets forth information concerning the compensation of the Fund's Directors. The Fund does not have any retirement plan for its Directors. For the fiscal year ended October 31, 2004, the Directors received the amounts set forth in the following table from the Fund. For the calendar year ended December 31, 2004, the Directors received the compensation set forth in the following table for serving as Trustees or Directors of investment companies in the "Fund Complex." Each officer and Director who is a director, officer or employee of NB Management, Neuberger Berman or any entity controlling, controlled by or under common control with NB Management or Neuberger Berman serves as a Fund Director and/or officer without any compensation from the Fund. TABLE OF COMPENSATION
TOTAL COMPENSATION FROM REGISTERED ACTUAL INVESTMENT COMPANIES IN THE COMPENSATION NEUBERGER BERMAN FUND FOR FISCAL COMPLEX PAID TO DIRECTORS NAME AND POSITION YEAR ENDING FOR CALENDAR YEAR ENDED WITH EACH FUND 10/31/04 12/31/04 - ---------------------------------------------------------------------- Independent Fund Directors - ---------------------------------------------------------------------- John Cannon Director $ 9,766 $91,000 Faith Colish Director $17,498 $92,500 C. Anne Harvey Director $17,498 $92,500 Barry Hirsch Director $ 9,800 $85,000
19
TOTAL COMPENSATION FROM REGISTERED ACTUAL INVESTMENT COMPANIES IN THE COMPENSATION NEUBERGER BERMAN FUND FOR FISCAL COMPLEX PAID TO DIRECTORS NAME AND POSITION YEAR ENDING FOR CALENDAR YEAR ENDED WITH EACH FUND 10/31/04 12/31/04 - ----------------------------------------------------------------------------- Robert A. Kavesh Director $17,300 $ 85,000 Howard A. Mileaf Director $ 9,800 $ 85,000 William E. Rulon Director $ 1,906 $ 70,000 Cornelius T. Ryan Director $17,762 $103,500 Tom D. Seip Director $ 9,936 $ 91,000 Candace L. Straight Director $17,498 $ 92,500 Peter P. Trapp Director $17,661 $ 98,500 - ----------------------------------------------------------------------------- Directors who are "Interested Persons" - ----------------------------------------------------------------------------- Edward I. O'Brien Director $17,498 $ 92,500 Jack L. Rivkin Director and President $ 0 $ 0 Peter E. Sundman Director, Chairman of the Board and Chief Executive Officer $ 0 $ 0
VOTE REQUIRED Robert A. Kavesh, William E. Rulon, Candace L. Straight, and Edward I. O'Brien must be elected by the holders of a plurality of the Common Shares and Preferred Shares voted at the meeting, voting together. Howard A. Mileaf must be elected by the holders of a plurality of the Preferred Shares voted at the Meeting, voting separately from the holders of the Common Shares. THE BOARD OF DIRECTORS OF THE FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH NOMINEE. 20 INFORMATION ON THE FUND'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP ("Ernst & Young") audited the Fund's financial statements for the fiscal year ended October 31, 2004. Ernst & Young, 200 Clarendon Street, Boston, MA 02116, serves as independent registered public accounting firm for the Fund and provides audit services, tax compliance services and assistance and consultation in connection with the review of the Fund's filings with the SEC. In the opinion of the Audit Committee, the services provided by Ernst & Young are compatible with maintaining the independence of the Fund's independent registered public accounting firm. The Fund's Board of Directors has selected Ernst & Young as the independent registered public accounting firm for the Fund for the fiscal year ending October 31, 2005. Ernst & Young has served as the Fund's independent auditors since the Fund's inception. Ernst & Young has informed the Fund that it has no material direct or indirect financial interest in the Fund. Representatives of Ernst & Young are not expected to be present at the Meeting but have been given the opportunity to make a statement if they so desire and will be available should any matter arise requiring their presence. AUDIT FEES The aggregate fees billed by Ernst & Young for the audit of the Fund's annual financial statements and for the review of the financial statements included in the Fund's regulatory filings for the fiscal period ended October 31, 2003 and the fiscal year ended October 31, 2004 were $66,925 and $46,250, respectively. AUDIT-RELATED FEES The aggregate audit-related fees billed by Ernst & Young for the fiscal period ended October 31, 2003 and the fiscal year ended October 31, 2004, for performing agreed-upon procedures for the Preferred Shares of the Fund were $0 and $5,000, respectively. TAX FEES The aggregate fees billed by Ernst & Young for the fiscal period ended October 31, 2003 and the fiscal year ended October 31, 2004, for tax compliance, tax advice, and tax planning were $8,000 and $8,700, respectively. ALL OTHER FEES Aggregate fees billed by Ernst & Young during the fiscal period ended October 31, 2003 and the fiscal year ended October 31, 2004 for other services provided to the Fund were $0 and $0, respectively. The aggregate fees billed for non-audit work performed for the Fund, NB Management and Neuberger Berman were $241,037 and $269,750, respectively, for the fiscal period ended October 31, 2003 and for the fiscal year October 31, 2004. The Audit Committee has considered these fees and the nature of the services rendered, and has concluded that they are compatible with maintaining the independence of Ernst & Young. 21 The Audit Committee did not approve any of the services described above pursuant to the "de minimis exceptions" set forth in Rule 2-01(c)(7)(i)(C) and Rule 2-01(c)(7)(ii) of Regulation S-X. Ernst & Young did not provide any audit-related services, tax services or other non-audit services to NB Management or Neuberger Berman that the Audit Committee was required to approve pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. OTHER MATTERS No business, other than as set forth above, is expected to come before the Meeting. Should any other matters requiring a vote of stockholders properly come before the Meeting, the persons named in the enclosed proxy will vote thereon in accordance with their best judgment in the interests of the Fund. STOCKHOLDER PROPOSALS The Fund's Bylaws require stockholders wishing to nominate Directors or make proposals to be voted on at the Fund's annual meeting to provide notice of the nominations or proposals in writing delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Fund. The Secretary must receive the nomination or proposal not less than 90 days in advance of the anniversary of the date of the Fund's proxy statement released to stockholders in connection with the previous year's annual meeting. In order to be considered at the Fund's 2006 annual meeting, stockholder nominations and proposals must be received by the Fund no later than November 6, 2005 and must satisfy the other requirements of the federal securities laws. The chairperson of the Meeting may refuse to acknowledge a nomination or other proposal by a stockholder that is not made in the manner described above. NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES Please advise the Fund, at 605 Third Avenue New York, New York 10158, whether other persons are beneficial owners of shares for which proxies are being solicited and, if so, the number of copies of the Proxy Statement you wish to receive in order to supply copies to such beneficial owners of shares. By order of the Board of Directors, /s/ Claudia A. Brandon Secretary Dated: February 4, 2005 22 This page is intentionally left blank. APPENDIX A AUDIT COMMITTEE REPORT NEUBERGER BERMAN DIVIDEND ADVANTAGE FUND INC. NEUBERGER BERMAN INCOME OPPORTUNITY FUND INC. NEUBERGER BERMAN INTERMEDIATE MUNICIPAL FUND INC. NEUBERGER BERMAN CALIFORNIA INTERMEDIATE MUNICIPAL FUND INC. NEUBERGER BERMAN NEW YORK INTERMEDIATE MUNICIPAL FUND INC. NEUBERGER BERMAN REAL ESTATE INCOME FUND INC. NEUBERGER BERMAN REAL ESTATE SECURITIES INCOME FUND INC. NEUBERGER BERMAN REALTY INCOME FUND INC. (COLLECTIVELY, THE "FUNDS") The Audit Committees of the Boards of Directors of the Funds operate pursuant to a Charter, which sets forth the role of the Audit Committee in each Fund's financial reporting process. Pursuant to the Charter, the role of the Audit Committee is to oversee the Funds' accounting and financial reporting processes and the quality and objectivity of the Funds' financial statements and the independent audit of those financial statements. The Committee is responsible for, among other things, selection of the auditors and reviewing the scope and results of each Fund's annual audit with the Fund's independent auditors. Fund management is responsible for the preparation, presentation and integrity of the Funds' financial statements and for the procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors for the Fund are responsible for planning and carrying out proper audits and reviews. The Audit Committee met on December 14, 2004 to review each Fund's audited financial statements for the fiscal period ended October 31, 2004. In performing this oversight function, the Audit Committee has reviewed and discussed the audited financial statements with the Funds' management and their independent auditors, Ernst & Young, LLP ("E&Y"). The Audit Committee has discussed with E&Y the matters required to be discussed by Statement on Auditing Standards No. 61, and has received the written disclosures and the letter from E&Y required by Independence Standards Board Standard No. 1. The Audit Committee also has discussed with E&Y its independence. The members of the Audit Committee are not experts in the fields of auditing or accounting and are not employed by the Funds for accounting, financial management or internal control purposes. Members of the Audit Committee rely without independent verification on the information provided and the representations made to them by management and E&Y. Based upon this review and related discussions, and subject to the limitation on the role and responsibilities of the Audit Committee set forth above and in the Charter, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in each Fund's Annual Report to Stockholders for the fiscal period ended October 31, 2004, for filing with the Securities and Exchange Commission. A-1 The members of the Audit Committee are listed below. Each has been determined to be independent pursuant to American Stock Exchange Rule 121B(b)(1) and New York Stock Exchange Rule 303.01. John Cannon Walter G. Ehlers* Cornelius T. Ryan (Chairman) Tom D. Seip Peter P. Trapp December 14, 2004 - ---------------- * Retired from the Boards of Directors of all Funds, effective December 31, 2004. A-2 This page is intentionally left blank. This page is intentionally left blank. [NEUBERGER BERMAN] A Lehman Brothers Company Neuberger Berman Management Inc. 605 Third Avenue 2nd floor New York, New York 10158-0180 www.nb.com P06602 F0042 02/05 PLEASE DETACH PROXY CARD HERE - -------------------------------------------------------------------------------- /X/ PLEASE FILL IN BOX AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL. PLEASE DO NOT USE FINE POINT PENS. YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES OF STOCK YOU OWN. PLEASE SIGN AND DATE THIS PROXY CARD BELOW AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. 1. To elect four Class III Directors to serve until the annual meeting of stockholders in 2008, or until their successors FOR WITHHOLD FOR ALL are elected and qualified: ALL ALL EXCEPT* (01) Robert A. Kavesh / / / / / / *TO WITHHOLD AUTHORITY (02) Edward I. O'Brien TO VOTE FOR ANY (03) William E. Rulon NOMINEE(S), MARK THE (04) Candace L. Straight BOX "FOR ALL EXCEPT" AND WRITE ON THE LINE BELOW THE NUMBER(S) OF THE NOMINEE(S) FOR WHOM YOU DO NOT WANT TO VOTE. ----------------------- Date:__________________________ , 2005 ______________________________________ Signature ______________________________________ Signature Please sign exactly as name appears hereon. If shares are held in the name of two or more persons, any may sign. Attorneys-in-fact, executors, administrators, etc. should so indicate. If the stockholder is a corporation or partnership, please sign in full corporate or partnership name by authorized person. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PLEASE DETACH PROXY CARD HERE - -------------------------------------------------------------------------------- NEUBERGER BERMAN REAL ESTATE INCOME FUND INC. PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MARCH 8, 2005 The undersigned appoints as proxies Robert Conti, Frederic B. Soule and Claudia A. Brandon, and each of them (with power of substitution), to vote all the undersigned's shares of common stock in Neuberger Berman Real Estate Income Fund Inc. (the "Fund") at the Annual Meeting of Stockholders to be held on March 8, 2005, at 11:00 a.m. Eastern Time at the offices of Neuberger Berman, LLC, 605 Third Avenue, 41st Floor, New York, New York 10158-3698, and any adjournments thereof ("Meeting"), with all the power the undersigned would have if personally present. Receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement is acknowledged by your execution of this proxy. THIS PROXY IS BEING SOLICITED ON BEHALF OF THE FUND'S BOARD OF DIRECTORS. The shares of common stock represented by this proxy will be voted as instructed. UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE "FOR" THE NOMINEES WHOSE NAMES ARE SET FORTH ON THE REVERSE SIDE OF THIS PROXY CARD. THIS PROXY ALSO GRANTS DISCRETIONARY POWER TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. PLEASE SIGN AND DATE THIS PROXY BELOW AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU PLAN TO ATTEND THE MEETING, PLEASE CALL 1-877-461-1899. PLEASE SIGN ON THE REVERSE SIDE. PLEASE DETACH PROXY CARD HERE - -------------------------------------------------------------------------------- /X/ PLEASE FILL IN BOX AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL. PLEASE DO NOT USE FINE POINT PENS. YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES OF STOCK YOU OWN. PLEASE SIGN AND DATE THIS PROXY CARD BELOW AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. 1. To elect five Class III Directors to serve until the annual meeting of stockholders in 2008, or until their successors FOR WITHHOLD FOR ALL are elected and qualified: ALL ALL EXCEPT* (01) Robert A. Kavesh / / / / / / *TO WITHHOLD AUTHORITY (02) Howard A. Mileaf TO VOTE FOR ANY (03) Edward I. O'Brien NOMINEE(S), MARK THE BOX (04) William E. Rulon "FOR ALL EXCEPT" AND (05) Candace L. Straight WRITE ON THE LINE BELOW THE NUMBER(S) OF THE NOMINEE(S) FOR WHOM YOU DO NOT WANT TO VOTE. ------------------------ Date:__________________________ , 2005 ______________________________________ Signature ______________________________________ Signature Please sign exactly as name appears hereon. If shares are held in the name of two or more persons, any may sign. Attorneys-in-fact, executors, administrators, etc. should so indicate. If the stockholder is a corporation or partnership, please sign in full corporate or partnership name by authorized person. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. PLEASE DETACH PROXY CARD HERE - -------------------------------------------------------------------------------- NEUBERGER BERMAN REAL ESTATE INCOME FUND INC. PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MARCH 8, 2005 The undersigned appoints as proxies Robert Conti, Frederic B. Soule and Claudia A. Brandon, and each of them (with power of substitution), to vote all the undersigned's shares of preferred stock in Neuberger Berman Real Estate Income Fund Inc. (the "Fund") at the Annual Meeting of Stockholders to be held on March 8, 2005, at 11:00 a.m. Eastern Time at the offices of Neuberger Berman, LLC, 605 Third Avenue, 41st Floor, New York, New York 10158-3698, and any adjournments thereof ("Meeting"), with all the power the undersigned would have if personally present. Receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement is acknowledged by your execution of this proxy. THIS PROXY IS BEING SOLICITED ON BEHALF OF THE FUND'S BOARD OF DIRECTORS. The shares of common stock represented by this proxy will be voted as instructed. UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE "FOR" THE NOMINEES WHOSE NAMES ARE SET FORTH ON THE REVERSE SIDE OF THIS PROXY CARD. THIS PROXY ALSO GRANTS DISCRETIONARY POWER TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. PLEASE SIGN AND DATE THIS PROXY BELOW AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU PLAN TO ATTEND THE MEETING, PLEASE CALL 1-877-461-1899. PLEASE SIGN ON THE REVERSE SIDE. -----END PRIVACY-ENHANCED MESSAGE-----