-----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, Pn99r8+TOrgptOhXJmO58Zp1YecEZ2YoUtvUBF1aaSt1mH/fJ8t9VFMEAjxilMUW GUXZu4Erm1KgH9pTyBdIEQ== 0000898432-06-000599.txt : 20060710 0000898432-06-000599.hdr.sgml : 20060710 20060710171138 ACCESSION NUMBER: 0000898432-06-000599 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060430 FILED AS OF DATE: 20060710 DATE AS OF CHANGE: 20060710 EFFECTIVENESS DATE: 20060710 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEUBERGER BERMAN DIVIDEND ADVANTAGE FUND INC CENTRAL INDEX KEY: 0001276893 IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-21499 FILM NUMBER: 06954563 BUSINESS ADDRESS: STREET 1: 605 THIRD AVENUE 2ND FL CITY: NEW YORK STATE: NY ZIP: 10158 BUSINESS PHONE: 2124768800 MAIL ADDRESS: STREET 1: 605 THIRD AVENUE 2ND FL CITY: NEW YORK STATE: NY ZIP: 10158 FORMER COMPANY: FORMER CONFORMED NAME: NEUBERGER BERMAN DIVIDEND PLUS FUND INC DATE OF NAME CHANGE: 20040120 N-CSRS 1 nbdaf_ncsrs.txt As filed with the Securities and Exchange Commission on July 10, 2006 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: 811-21499 NEUBERGER BERMAN DIVIDEND ADVANTAGE 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 Dividend Advantage Fund Inc. 605 Third Avenue, 2nd Floor New York, New York 10158-0180 Arthur C. Delibert, Esq. Kirkpatrick & Lockhart Nicholson Graham LLP 1601 K Street, N.W. Washington, DC 20006-1600 (Names and addresses of agents for service) Date of fiscal year end: October 31, 2006 Date of reporting period: April 30, 2006 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, 100 F Street, NE, 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, 2006 Neuberger Berman DIVIDEND ADVANTAGE FUND INC. NEUBERGER BERMAN APRIL 30, 2006 (UNAUDITED) CHAIRMAN'S LETTER Dear Shareholder, I am pleased to present to you this semi-annual report for Neuberger Berman Dividend Advantage Fund Inc. The report includes a portfolio commentary, a listing of the Fund's investments, and its unaudited financial statements for the six months ended April 30, 2006. The Fund seeks high total return, comprising high current income (a portion of which may be qualified dividend income) and capital appreciation. Income from securities in the portfolio that meet the requirements for qualified dividend income is taxed at the same federal tax rates applicable to long-term capital gains, which can create a favorable tax situation for shareholders. The Fund is built on a foundation of fundamental research. An Asset Allocation Committee takes responsibility for allocating assets between income producing securities recommended by the Neuberger Berman, LLC Research Department, and real estate company securities--a structure that we believe provides shareholders with an added level of confidence. Thank you for entrusting your hard-earned assets to Neuberger Berman. We will continue to work hard to preserve and grow your capital. Sincerely, /s/ PETER SUNDMAN - ------------------------------------- PETER SUNDMAN CHAIRMAN OF THE BOARD NEUBERGER BERMAN DIVIDEND ADVANTAGE 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)2006 Neuberger Berman Management Inc. All rights reserved. CONTENTS THE FUND CHAIRMAN'S LETTER 1 PORTFOLIO COMMENTARY 2 SCHEDULE OF INVESTMENTS/TOP TEN EQUITY HOLDINGS 6 FINANCIAL STATEMENTS 9 FINANCIAL HIGHLIGHTS/PER SHARE DATA 20 DISTRIBUTION REINVESTMENT PLAN 22 DIRECTORY 24 PROXY VOTING POLICIES AND PROCEDURES 25 QUARTERLY PORTFOLIO SCHEDULE 25 ADDITION OF ASSOCIATE PORTFOLIO MANAGER 25 REPORT OF VOTES OF SHAREHOLDERS 26
1 DIVIDEND ADVANTAGE FUND INC. Portfolio Commentary For the six months ended April 30, 2006, on a Net Asset Value (NAV) basis, Neuberger Berman Dividend Advantage Fund Inc. (AMEX: NDD) provided a total return of 18.66%, compared to gains of 9.63% and 14.90% for the S&P 500 Index and the FTSE NAREIT Equity REITs Index, respectively, over the same period. The Fund includes an approximately even mix of 1) income-producing securities that are chosen by the firm's in-house research department and a team of experienced portfolio managers, and 2) real estate company securities. The portion of the portfolio driven by our in-house research seeks to invest a significant majority of its assets in stocks rated Buy (B) or New Funds (N) which have recently had a higher average dividend yield than that of the S&P 500. The remaining assets in this segment are chosen by a team of managers with experience selecting attractive income opportunities. Over the past six months, the segment of the portfolio derived from our research department performed well, although it modestly underperformed relative to the benchmark indexes. The commodity-related sector of the portfolio has been particularly strong, with copper, mining, and metals stocks turning in good results. Utility stocks, which comprise a significant portion of the research department driven allocation, were weak following strong performance in 2005. We continue to like this sector and plan to maintain our current weighting. This area of the portfolio also benefited from the recent trend toward dividend-paying stocks that now receive more favorable tax treatment than they did in the past, as well as from investors seeking income in a rising, albeit relatively benign, interest rate environment. Real estate investment trusts (REITs) generally benefited from ongoing investor interest in this segment of the market and healthy operating results, which we expect to continue over the coming quarters. During the six-month reporting period, the commercial real estate market was robust, as occupancies and rents improved due to a healthy economy and stronger demand than supply in most regions of the country. Despite ongoing rate hikes by the Federal Reserve, the long-term interest rate environment was relatively benign, while REIT earnings were strong in both the fourth quarter of (calendar) 2005 and the first quarter of 2006. A variety of property sectors showed strength, particularly Office properties, Shopping Centers, Apartments and Hotels. Gains in the Apartment sector reflected a slowdown in the housing market, as higher interest rates and slower housing price appreciation lessened the attractiveness of buying homes and encouraged renters to stay longer. With a slower supply of new apartments, we anticipate improving occupancy and economics for apartment REITs. REITs that own office buildings were bolstered by growing evidence of improvement in the office market, particularly over the last three months of the period, as occupancy and expectations for rising rents improved. In addition, community shopping centers and hotels performed well. With fundamentals particularly strong in the Lodging/Resorts sector, a number of hotel REITs have been acquired by private buyers, reflecting optimism for continued improvement. On the downside, Regional Malls lagged over the six-month period, as investors showed concern that a slowdown in housing price appreciation and the rise in interest rates would have a negative impact on consumers. Despite the ongoing strength of consumer spending, we think this remains a worrisome issue. The Health Care sector also exhibited weakness, due to concerns over new government reimbursement rates for Medicare and Medicaid and the potential impact of higher interest rates on their ability to finance acquisitions. In this environment, the portfolio's REIT allocation enjoyed strong performance across most sectors, benefiting from an overweight in Lodging/Resorts and healthy returns in the "Mixed" REIT category, while losing some ground due to an overweight in Health Care and modest underweight in Regional Malls. Looking forward, we believe that REITs are unlikely to maintain the exceptional performance they have shown over the past six months. Still, our outlook remains positive for a number of 2 DIVIDEND ADVANTAGE FUND reasons. First, the supply growth of commercial real estate has been modest, due to the increased costs of raw materials, construction and financing, and is likely to remain that way for the next 12-18 months. We anticipate that this dynamic, combined with modest economic growth, bodes well for REIT earnings and price performance moving into the second half of the fiscal year. In addition, we expect to see solid dividend growth from REITs, as well as a continuation of the merger and acquisition activity that has taken place over the past 12 months. Although current yields are lower than usual, we believe that they will grow over time through dividend increases reflecting the ongoing strength of the commercial real estate market. Sincerely, NEUBERGER BERMAN DIVIDEND ADVANTAGE FUND INC. ASSET ALLOCATION COMMITTEE PERFORMANCE HIGHLIGHTS
SIX MONTH AVERAGE ANNUAL PERIOD ENDED TOTAL RETURN INCEPTION DATE 4/30/2006 1 YEAR SINCE INCEPTION NAV(1,3) 03/25/2004 18.66% 29.77% 25.07%
SIX MONTH AVERAGE ANNUAL PERIOD ENDED TOTAL RETURN INCEPTION DATE 4/30/2006 1 YEAR SINCE INCEPTION MARKET PRICE(2,3) 03/25/2004 16.92% 28.92% 12.62%
INDUSTRY DIVERSIFICATION (% OF TOTAL NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS) Aerospace 1.1% Apartments 12.2 Banking & Financial 8.9 Basic Materials 2.2 Chemicals 0.9 Commercial Services 0.4 Community Centers 7.3 Consumer Cyclicals 1.0 Consumer Discretionary 2.2 Diversified 9.8 Energy 8.3 Entertainment 1.5 Financial Services 2.4 Food & Beverage 4.8 Health Care 6.4 Industrial 4.3 Insurance 0.9 Lodging 9.7 Office 14.5 Office - Industrial 0.7 Pharmaceutical 4.1 Publishing & Broadcasting 1.8 Regional Malls 10.0 Restaurants 1.0 Telecommunications 3.9 Utilities 7.7 Waste Management 1.3 Repurchase Agreement 11.9 Short-Term Investments 20.4 Liabilities, less cash, receivables and other assets (61.6)
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 American 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, 2010. 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 for the Fund would be lower. (4.) Unaudited performance data current to the most recent month-end are available at www.nb.com. 4 GLOSSARY OF INDICES S&P 500 INDEX: The S&P 500 Index is widely regarded as the standard for measuring large-cap U.S. stock markets' performance and includes a representative sample of leading companies in leading industries. FTSE NAREIT EQUITY REITS INDEX: The FTSE NAREIT Equity REITs 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 indices do not take into account any fees and expenses or any tax consequences of investing in the individual securities that they track and that investors cannot invest directly in any index. Data about the performance of each 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 indices. 5 SCHEDULE OF INVESTMENTS Dividend Advantage Fund Inc. TOP TEN EQUITY HOLDINGS
HOLDING % 1 Colonial Properties Trust 2.6 2 Camden Property Trust 2.2 3 Equity Office Properties Trust 2.2 4 Host Marriott 2.2 5 Maguire Properties 1.8 6 Equity Residential 1.8 7 Tanger Factory Outlet Centers 1.8 8 PNC Financial Services Group 1.8 9 ConocoPhillips 1.8 10 Simon Property Group 1.7
MARKET VALUE + NUMBER OF SHARES (000'S OMITTED) COMMON STOCKS (127.1%) AEROSPACE (1.1%) 35,500 Goodrich Corp. $ 1,580(E) APARTMENTS (12.2%) 23,000 Avalonbay Communities 2,477 63,300 Camden Property Trust 4,351(E) 20,000 Education Realty Trust 298(E) 80,000 Equity Residential 3,590 11,300 Essex Property Trust 1,233(E) 64,300 Home Properties 3,216(E) 82,200 United Dominion Realty Trust 2,235(E) -------- 17,400 BANKING & FINANCIAL (8.9%) 29,000 Bank of America 1,448 44,600 Bank of New York 1,568 12,000 Freddie Mac 733 16,300 Hartford Financial Services Group 1,498 47,600 Lincoln National 2,765(E) 35,600 Nationwide Financial Services 1,562 51,600 Wachovia Corp. 3,088 -------- 12,662 BASIC MATERIALS (2.2%) 22,100 Freeport-McMoRan Copper & Gold 1,427 7,700 Rio Tinto 1,715 -------- 3,142 CHEMICALS (0.9%) 28,300 duPont 1,248 COMMERCIAL SERVICES (0.4%) 24,800 Gramercy Capital 616(E) COMMUNITY CENTERS (7.3%) 64,900 Heritage Property Investment Trust 2,507(E) 36,200 Pan Pacific Retail Properties 2,412 31,000 Regency Centers 1,956 107,200 Tanger Factory Outlet Centers 3,514 -------- 10,389 CONSUMER CYCLICALS (1.0%) 53,800 Eastman Kodak 1,450(E) CONSUMER DISCRETIONARY (2.2%) 50,500 V.F. Corp. 3,090 DIVERSIFIED (9.8%) 105,000 Colonial Properties Trust 5,170(E) 77,200 General Electric 2,670(OO) 60,500 iStar Financial 2,315(E) 38,500 Newkirk Realty Trust 688(E) 33,200 Vornado Realty Trust 3,175 -------- 14,018 ENERGY (8.3%) 46,100 ChevronTexaco Corp. 2,813 51,200 ConocoPhillips 3,426 54,900 Enterprise Products Partners 1,358 25,300 Exxon Mobil 1,596 30,200 Kinder Morgan 2,658 -------- 11,851 ENTERTAINMENT (1.5%) 100,400 Regal Entertainment Group 2,110(E) FINANCIAL SERVICES (2.4%) 49,000 PNC Financial Services Group 3,502 FOOD & BEVERAGE (4.8%) 66,900 Cadbury Schweppes ADR 2,673(E) 22,700 Diageo PLC ADR 1,504(E) 46,720 PepsiCo, Inc. 2,721 -------- 6,898 HEALTH CARE (6.4%) 61,500 Abbott Laboratories 2,629 43,300 Health Care REIT 1,507(E) 56,200 Nationwide Health Properties 1,209(E) 95,100 OMEGA Healthcare Investors 1,216(E) 77,700 Ventas, Inc. 2,539 -------- 9,100 INDUSTRIAL (4.3%) 28,200 Dover Corp. 1,403 66,000 First Industrial Realty Trust 2,590(E) 43,800 Prologis 2,199 -------- 6,192 INSURANCE (0.9%) 44,000 Endurance Specialty Holdings 1,362 LODGING (7.5%) 205,600 Host Marriott 4,322 48,200 Lasalle Hotel Properties 2,108(E) 100,300 Strategic Hotel Capital 2,275 71,200 Sunstone Hotel Investors 2,046 -------- 10,751 OFFICE (14.5%) 85,300 Brandywine Realty Trust 2,415(E) 134,600 Equity Office Properties Trust 4,348 87,600 Highwoods Properties 2,763(E) 191,100 HRPT Properties Trust 2,098 64,400 Mack-Cali Realty 2,912(E) 105,900 Maguire Properties 3,596(E) 37,500 Reckson Associates Realty 1,526(E) 44,500 Trizec Properties 1,113 -------- 20,771 OFFICE -- INDUSTRIAL (0.7%) 33,200 Digital Realty Trust 936(E) PHARMACEUTICAL (4.1%) 46,200 Johnson & Johnson 2,708 54,600 Novartis AG ADR 3,140 -------- 5,848
6 SCHEDULE OF INVESTMENTS Dividend Advantage Fund Inc. cont'd
MARKET VALUE + NUMBER OF SHARES (000'S OMITTED) PUBLISHING & BROADCASTING (1.8%) 75,000 R.R. Donnelley $ 2,527 REGIONAL MALLS (10.0%) 51,500 CBL & Associates Properties 2,060 90,500 Glimcher Realty Trust 2,335(E) 31,200 Macerich Co. 2,284(E) 69,600 Mills Corp. 2,221 52,000 Pennsylvania REIT 2,109(E) 40,500 Simon Property Group 3,316(E) -------- 14,325 RESTAURANTS (1.0%) 41,900 McDonald's Corp. 1,448 TELECOMMUNICATIONS (3.9%) 44,600 ALLTEL Corp. 2,871 50,000 AT&T Inc. 1,310 58,300 Sprint Nextel 1,446 -------- 5,627 UTILITIES (7.7%) 28,000 Ameren Corp. 1,410 19,450 Dominion Resources 1,456 53,000 Duke Energy 1,543 48,000 Exelon Corp. 2,592 33,900 FPL Group 1,343 55,200 PNM Resources 1,397(E) 28,000 Sempra Energy 1,289 -------- 11,030 WASTE MANAGEMENT (1.3%) 50,500 Waste Management 1,892 TOTAL COMMON STOCKS (COST $153,777) 181,765 -------- PREFERRED STOCKS (2.2%) LODGING (2.2%) 108,300 Felcor Lodging Trust, Ser. A 2,668 19,000 Lasalle Hotel Properties, Ser. D 455 -------- 3,123 TOTAL PREFERRED STOCKS (COST $2,845) 3,123 -------- PRINCIPAL AMOUNT MARKET VALUE + (000'S OMITTED) REPURCHASE AGREEMENT (11.9%) $17,000,000 Banc of America Securities LLC, Repurchase Agreement, 4.78%, due 5/1/06, dated 4/28/06, Maturity Value $17,006,772, Collateralized by $18,239,998 Fannie Mae, 5.00%, due 4/1/35 (Collateral Value $17,340,000) (Cost $17,000) 17,000# -------- NUMBER OF SHARES SHORT-TERM INVESTMENTS (20.4%) 19,530,901 Neuberger Berman Securities Lending Quality Fund, LLC 19,531++ 9,661,057 Neuberger Berman Prime Money Fund Trust Class 9,661@ -------- TOTAL SHORT-TERM INVESTMENTS (COST $29,192) 29,192# -------- TOTAL INVESTMENTS (161.6%) (COST $202,814) 231,080## Liabilities, less cash, receivables and other assets [(24.9%)] (35,578) Liquidation Value of Auction Market Preferred Shares [(36.7%)] (52,500) -------- TOTAL NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS (100.0%) $143,002 --------
See Notes to Schedule of Investments 7 NOTES TO SCHEDULE OF INVESTMENTS + Investments in equity securities by Neuberger Berman Dividend Advantage Fund Inc. (the "Fund") are valued at the latest sale 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, including securities for which the necessary last sale, asked, and/or bid prices are not readily available, by methods the Board of Directors of the Fund (the "Board") has approved on the belief that they reflect fair value. Numerous factors may be considered when determining the fair value of a security, 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 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. In this event, FT Interactive will provide adjusted prices for certain foreign equity securities using a statistical analysis of historical correlations of multiple factors. 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, 2006, the cost of investments for U.S. federal income tax purposes was $202,814,000. Gross unrealized appreciation of investments was $29,207,000 and gross unrealized depreciation of investments was $941,000, resulting in net unrealized appreciation of $28,266,000, based on cost for U.S. federal income tax purposes. (00) All or a portion of this security is segregated as collateral for interest rate swap contracts. @ Neuberger Berman Prime Money Fund ("Prime Money") is also managed by Neuberger Berman Management Inc. 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 (see Notes A & E of Notes to Financial Statements). (E) 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). See Notes to Financial Statements 8 STATEMENT OF ASSETS AND LIABILITIES
NEUBERGER BERMAN DIVIDEND (000'S OMITTED EXCEPT PER SHARE AMOUNTS) ADVANTAGE FUND ASSETS INVESTMENTS IN SECURITIES, AT MARKET VALUE*+ (NOTES A & E)--SEE SCHEDULE OF INVESTMENTS: Unaffiliated issuers $201,888 - ---------------------------------------------------------------------------------------- Affiliated issuers 29,192 ======================================================================================== 231,080 - ---------------------------------------------------------------------------------------- Interest rate swaps, at market value (Note A) 1,194 - ---------------------------------------------------------------------------------------- Dividends and interest receivable 422 - ---------------------------------------------------------------------------------------- Receivable for securities sold 1,458 - ---------------------------------------------------------------------------------------- Receivable for securities lending income (Note A) 107 - ---------------------------------------------------------------------------------------- Prepaid expenses and other assets 10 ======================================================================================== TOTAL ASSETS 234,271 ======================================================================================== LIABILITIES Payable for collateral on securities loaned (Note A) 36,531 - ---------------------------------------------------------------------------------------- Distributions payable--preferred shares 95 - ---------------------------------------------------------------------------------------- Payable for securities purchased 1,861 - ---------------------------------------------------------------------------------------- Payable to investment manager--net (Notes A & B) 63 - ---------------------------------------------------------------------------------------- Payable to administrator (Note B) 40 - ---------------------------------------------------------------------------------------- Payable for securities lending fees (Note A) 104 - ---------------------------------------------------------------------------------------- Accrued expenses and other payables 75 ======================================================================================== TOTAL LIABILITIES 38,769 ======================================================================================== AUCTION MARKET PREFERRED SHARES SERIES A & B AT LIQUIDATION VALUE 4,800 shares authorized; 2,100 shares issued and outstanding $.0001 par value; $25,000 liquidation value per share (Note A) 52,500 ======================================================================================== NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS AT VALUE $143,002 ======================================================================================== NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS CONSIST OF: Paid-in capital-common shares $108,409 - ---------------------------------------------------------------------------------------- Distributions in excess of net investment income (13,665) - ---------------------------------------------------------------------------------------- Accumulated net realized gains (losses) on investments 18,826 - ---------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) in value of investments 29,432 ======================================================================================== NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS AT VALUE $143,002 ======================================================================================== COMMON SHARES OUTSTANDING ($.0001 PAR VALUE; 999,995,200 SHARES AUTHORIZED) 5,805 ======================================================================================== NET ASSET VALUE PER COMMON SHARE OUTSTANDING $ 24.63 ======================================================================================== +SECURITIES ON LOAN, AT MARKET VALUE: $ 35,414 ======================================================================================== *COST OF INVESTMENTS: Unaffiliated issuers $173,622 - ---------------------------------------------------------------------------------------- Affiliated issuers 29,192 ======================================================================================== TOTAL COST OF INVESTMENTS $202,814 ========================================================================================
See Notes to Financial Statements 9 NEUBERGER BERMAN FOR THE SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED) STATEMENT OF OPERATIONS
DIVIDEND NEUBERGER BERMAN ADVANTAGE (000'S OMITTED) FUND INVESTMENT INCOME INCOME (NOTE A): Dividend income--unaffiliated issuers $ 3,074 - ---------------------------------------------------------------------------------------- Income from investments in affiliated issuers (Note E) 124 - ---------------------------------------------------------------------------------------- Income from securities loaned (affiliated issuers $463) (Note E) 19 - ---------------------------------------------------------------------------------------- Foreign taxes withheld (7) ======================================================================================== Total income 3,210 ======================================================================================== EXPENSES: Investment management fee (Notes A & B) 567 - ---------------------------------------------------------------------------------------- Administration fee (Note B) 236 - ---------------------------------------------------------------------------------------- Auction agent fees (Note B) 66 - ---------------------------------------------------------------------------------------- Audit fees 20 - ---------------------------------------------------------------------------------------- Basic maintenance expense (Note B) 12 - ---------------------------------------------------------------------------------------- Custodian fees (Note B) 52 - ---------------------------------------------------------------------------------------- Directors' fees and expenses 14 - ---------------------------------------------------------------------------------------- Insurance expense 5 - ---------------------------------------------------------------------------------------- Legal fees 28 - ---------------------------------------------------------------------------------------- Shareholder reports 16 - ---------------------------------------------------------------------------------------- Stock exchange listing fees 1 - ---------------------------------------------------------------------------------------- Stock transfer agent fees 18 - ---------------------------------------------------------------------------------------- Miscellaneous 17 ======================================================================================== Total expenses 1,052 Investment management fee waived (Notes A & B) (191) - ---------------------------------------------------------------------------------------- Expenses reduced by custodian fee expense offset and commission recapture arrangements (Note B) (7) ======================================================================================== Total net expenses 854 ======================================================================================== Net investment income (loss) 2,356 ======================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE A) Net realized gain (loss) on: Sales of investment securities of unaffiliated issuers 7,761 - ---------------------------------------------------------------------------------------- Interest rate swap contracts 111 - ---------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) in value of: Unaffiliated investment securities 12,283 - ---------------------------------------------------------------------------------------- Interest rate swap contracts 261 ======================================================================================== Net gain (loss) on investments 20,416 ======================================================================================== DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM: Net investment income (1,110) ======================================================================================== NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM OPERATIONS $ 21,662 ========================================================================================
See Notes to Financial Statements 10 STATEMENT OF CHANGES IN NET ASSETS
DIVIDEND ADVANTAGE FUND ------------------------- Six Months Year Ended Ended April 30, October 31, NEUBERGER BERMAN 2006 2005 (000'S OMITTED) (Unaudited) INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS: FROM OPERATIONS: Net investment income (loss) $ 2,356 $ 3,595 - --------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 7,872 15,600 - --------------------------------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of investments 12,544 5,666 =================================================================================================== DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM (NOTE A): Net investment income (1,110) (702) - --------------------------------------------------------------------------------------------------- Net realized gain on investments -- (855) =================================================================================================== Total distributions to preferred shareholders (1,110) (1,557) =================================================================================================== Net increase (decrease) in net assets applicable to common shareholders resulting from operations 21,662 23,304 =================================================================================================== DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM (NOTE A): Net investment income (14,864) (3,141) - --------------------------------------------------------------------------------------------------- Net realized gain on investments -- (3,825) =================================================================================================== Total distributions to common shareholders (14,864) (6,966) =================================================================================================== FROM CAPITAL SHARE TRANSACTIONS (NOTE D): Preferred shares offering costs -- 5 =================================================================================================== Total net proceeds from capital share transactions -- 5 =================================================================================================== NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 6,798 16,343 NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS: Beginning of period 136,204 119,861 =================================================================================================== End of period $143,002 $136,204 =================================================================================================== Distributions in excess of net investment income at end of period $(13,665) $ (47) ===================================================================================================
See Notes to Financial Statements 11 NOTES TO FINANCIAL STATEMENTS Dividend Advantage Fund Inc. NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 1 GENERAL: Neuberger Berman Dividend Advantage Fund Inc. (the "Fund") was organized as a Maryland corporation on January 29, 2004 as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund had no operations until March 30, 2004, other than matters relating to its organization and the sale on March 8, 2004 of 5,236 shares of common stock for $100,008 ($19.10 per share) to Neuberger Berman, LLC ("Neuberger"), the Fund's sub-adviser. 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 distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. 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, 2005, 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 fiscal year-end. These reclassifications had no effect on net income, net assets applicable to common shareholders or net asset value per common share of the Fund. 12 The tax character of distributions paid during the year ended October 31, 2005 and the period ended October 31, 2004 was as follows:
DISTRIBUTIONS PAID FROM: ORDINARY INCOME LONG-TERM CAPITAL GAIN TAX RETURN OF CAPITAL TOTAL 2005 2004 2005 2004 2005 2004 2005 2004 $8,522,886 $2,386,586 $-- $193,309 $-- $1,208,557 $8,522,886 $3,788,452
As of October 31, 2005, 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 $3,659,562 $7,299,243 $16,880,095 $-- $27,838,900
The difference between book basis and tax basis distributable earnings is attributable primarily to timing differences on distribution payments, wash sales and income recognized on interest rate swaps. 5 FOREIGN TAXES: Foreign taxes withheld represent amounts withheld by foreign tax authorities, net of refunds recoverable. 6 DISTRIBUTIONS TO SHAREHOLDERS: The Fund earns income, net of expenses, daily on its investments. It is the policy of the Fund to declare and pay quarterly distributions to common shareholders. The Fund has adopted a policy to pay common shareholders a stable quarterly 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, distributions paid on preferred shares and the level of expenses. 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 a distribution will consist solely of net investment income and realized capital gains. The composition of the Fund's distributions for the calendar year 2006 will be reported to Fund shareholders on IRS Form 1099DIV. 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. Distributions to common shareholders are recorded on the ex-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. Distributions to preferred shareholders are accrued and determined as described in Note A-8. 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, 2005, the Fund estimated these amounts within the financial statements since the information is not available from the REITs until after the Fund's fiscal year-end. At April 30, 2006, the Fund estimated these amounts for the period January 1, 2006 through April 30, 2006 within the financial statements since the 2006 information is not 13 available from the REITs until after the Fund's fiscal period. For the year ended October 31, 2005 the character of distributions paid to shareholders is disclosed within the Statement of Changes and is also based on these estimates. All estimates are based upon REIT information sources available to the Fund together with actual IRS Forms 1099DIV 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-end. After calendar year-end, when the Fund learns the nature of the distributions paid by 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 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 1099DIV. Subsequent to April 30, 2006, the Fund on May 15, 2006 declared a distribution to common shareholders in the amount of $0.30 per share payable June 15, 2006, to shareholders of record on May 25, 2006, with an ex-date of May 23, 2006. 7 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. 8 REDEEMABLE PREFERRED SHARES: On March 4, 2004, the Fund re-classified 4,800 unissued shares of capital stock as Series A Auction Market Preferred Shares and Series B Auction Market Preferred Shares ("AMPS"). On June 28, 2004, the Fund issued 1,050 Series A AMPS and 1,050 Series B AMPS. All AMPS 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 for Series A AMPS and every 28 days for Series B AMPS. Distribution rates are reset every 7 days for Series A AMPS and every 28 days for Series B AMPS based on the results of an auction, except during special rate periods. For the six months ended April 30, 2006, distribution rates ranged from 3.65% to 4.80% for Series A and 3.85% to 4.70% for Series B AMPS. The Fund declared distributions to preferred shareholders for the period May 1, 2006 to May 31, 2006 of $106,121 and $109,817 for Series A and Series B AMPS, respectively. The Fund may redeem AMPS, 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 14 AMPS. 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 AMPS at Liquidation Value. The holders of AMPS are entitled to one vote per share and will vote with holders of common shares as a single class, except that the AMPS will vote separately as a class on certain matters, as required by law or the Fund's charter. The holders of the AMPS, 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 AMPS for two consecutive years. 9 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 AMPS. 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 applicable to common shareholders or its total net increase (decrease) in net assets applicable to common shareholders resulting from operations. At April 30, 2006, the Fund had outstanding interest rate swap contracts as follows:
RATE TYPE -------------------------- FIXED-RATE VARIABLE-RATE ACCRUED SWAP PAYMENTS PAYMENTS NET INTEREST UNREALIZED COUNTER NOTIONAL TERMINATION MADE BY RECEIVED BY RECEIVABLE APPRECIATION TOTAL PARTY AMOUNT DATE THE FUND THE FUND(1) (PAYABLE) (DEPRECIATION) FAIR VALUE Merrill Lynch $40,000,000 July 16, 2008 3.818% 4.90% $16,851 $1,177,309 $1,194,160
(1) 30 day LIBOR (London Interbank Offered Rate) 15 10 SECURITY LENDING: Effective September 13, 2005, the Fund entered into securities lending arrangements using a third party, eSecLending, to secure bids. Pursuant to such arrangements, eSecLending currently acts as lending agent for the Fund and assisted the Fund in conducting a bidding process to identify principals that would guarantee a certain amount of revenue to the Fund. Under the securities lending arrangements, the Fund receives cash collateral at the beginning of each transaction equal to at least 102% of the prior day's market value of the loaned securities (105% in the case of international securities). The Fund invests the cash collateral in the Neuberger Berman Securities Lending Quality Fund, LLC ("Quality Fund"), a fund managed by Lehman Brothers Asset Management LLC, an affiliate of Management, as approved by the Board. Income from the lending program represents income earned on the cash collateral and, where necessary, payment under the guarantee for the Fund, less fees and expenses associated with the loans. These amounts are reflected in the Statement of Operations under the caption "Income from securities loaned." 11 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 transferred to ensure that their value, including accrued interest, is greater than amounts owed to the Fund under each such repurchase agreement. 12 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. The Fund invests in the Neuberger Berman Prime Money Fund ("Prime Money"), as approved by the Board. Prime Money seeks to provide the highest available current income consistent with safety and liquidity. For any cash that the Fund invests in Prime Money, Management waives a portion of its management fee equal to the management fee it receives from Prime Money on those assets (the "Arrangement"). For the six months ended April 30, 2006, management fees waived under this Arrangement amounted to $2,392 and are reflected in the Statement of Operations under the caption "Investment management fee waived." For the six months ended April 30, 2006, income earned under this Arrangement amounted to $124,284, and is reflected in the Statement of Operations under the caption "Income from investments in affiliated issuers." 13 CONCENTRATION OF RISK: Under normal market conditions, the Fund's investments will be primarily concentrated in 1) income-producing securities recommended by the Neuberger Research Department that, at the time of investment, have a dividend yield greater than the average dividend yield of the S&P 500 Composite Stock Index and 2) income-producing common equity securities, preferred equity securities, securities convertible into equity 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. The value of the Fund's shares may fluctuate more 16 due to economic, legal, cultural, geopolitical or technological developments affecting the United States real estate industry or a segment of the 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 AMPS 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 ---------------------------------- 2006 - 2008 0.20 2009 0.14 2010 0.07
Management has not contractually agreed to waive any portion of its fees beyond October 31, 2010. For the six months ended April 30, 2006, such waived fees amounted to $189,090. 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 Bank and Trust Company ("State Street") as its sub-administrator under a Sub-Administration Agreement. Management pays State Street a fee for all services received under the agreement. 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. 17 The Fund has 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, 2006, the impact of this arrangement was a reduction of expenses of $6,495. The Fund has an expense offset arrangement in connection with its custodian contract. For the six months ended April 30, 2006, the impact of this arrangement was a reduction of expenses of $98. In connection with the settlement of each AMPS auction, the Fund pays, through the auction agent, a service fee to each participating broker-dealer based upon the aggregate liquidation preference of the AMPS 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 AMPS. "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 which is reflected in the Statement of Operations under the caption "Basic maintenance expense." NOTE C--SECURITIES TRANSACTIONS: During the six months ended April 30, 2006, there were purchase and sale transactions (excluding short-term securities and interest rate swap contracts) of $42,596,265 and $55,988,662, respectively. During the six months ended April 30, 2006, brokerage commissions on securities transactions amounted to $132,624, of which Neuberger received $35, Lehman Brothers, Inc. received $24,243, and other brokers received $108,346. NOTE D--CAPITAL: At April 30, 2006, 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 5,805,236 5,236
18 There were no transactions in common shares for the six months ended April 30, 2006 and the year ended October 31, 2005. NOTE E--INVESTMENTS IN AFFILIATES*:
INCOME FROM BALANCE OF BALANCE OF INVESTMENTS SHARES GROSS SHARES IN AFFILIATED HELD GROSS SALES HELD VALUE ISSUERS OCTOBER 31, PURCHASES AND APRIL 30, APRIL 30, INCLUDED IN NAME OF ISSUER 2005 AND ADDITIONS REDUCTIONS 2006 2006 TOTAL INCOME Neuberger Berman Securities Lending Quality Fund, LLC** 15,643,047 37,134,535 33,246,681 19,530,901 $19,530,901 $462,698 Neuberger Berman Prime Money Fund Trust Class*** 8,307,241 39,939,279 38,585,463 9,661,057 9,661,057 124,284 ----------- -------- TOTAL $29,191,958 $586,982 =========== ========
* Affiliated issuers, as defined in the 1940 Act. ** The Quality Fund, a fund managed by Lehman Brothers Asset Management LLC, an affiliate of Management, is used to invest cash the Fund receives as collateral for securities loans as approved by the Board. Because all shares of the Quality Fund are held by funds in the related investment management complex, the Quality Fund may be considered an affiliate of the Fund. *** Prime Money is also managed by Management 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. 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. 19 FINANCIAL HIGHLIGHTS Dividend Advantage Fund Inc. The following table includes selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements.
YEAR PERIOD FROM SIX MONTHS ENDED ENDED MARCH 30, 2004^ APRIL 30, OCTOBER 31, TO OCTOBER 31, ---------------- ----------- --------------- 2006 2005 2004 (UNAUDITED) COMMON SHARE NET ASSET VALUE, BEGINNING OF PERIOD $ 23.46 $ 20.65 $ 19.10 ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS APPLICABLE TO COMMON SHAREHOLDERS: NET INVESTMENT INCOME (LOSS)(cc) .41 .62 .39 NET GAINS OR LOSSES ON SECURITIES (BOTH REALIZED AND UNREALIZED) 3.51 3.66 1.99 COMMON SHARE EQUIVALENT OF DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM: NET INVESTMENT INCOME(cc) (.19) (.12) (.03) NET CAPITAL GAINS(cc) -- (.15) (.00) TAX RETURN OF CAPITAL(cc) -- -- (.02) ------- ------- ------- TOTAL DISTRIBUTIONS TO PREFERRED SHAREHOLDERS (.19) (.27) (.05) ------- ------- ------- TOTAL FROM INVESTMENT OPERATIONS APPLICABLE TO COMMON SHAREHOLDERS 3.73 4.01 2.33 ------- ------- ------- LESS DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: NET INVESTMENT INCOME (2.56) (.54) (.32) NET CAPITAL GAINS -- (.66) (.09) TAX RETURN OF CAPITAL -- -- (.19) ------- ------- ------- TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS (2.56) (1.20) (.60) ------- ------- ------- LESS CAPITAL CHARGES FROM: ISSUANCE OF COMMON SHARES -- -- (.04) ISSUANCE OF PREFERRED SHARES -- -- (.14) ------- ------- ------- TOTAL CAPITAL CHARGES -- (.00) (.18) ------- ------- ------- COMMON SHARE NET ASSET VALUE, END OF PERIOD $ 24.63 $ 23.46 $ 20.65 ------- ------- ------- COMMON SHARE MARKET VALUE, END OF PERIOD $ 20.69 $ 20.00 $ 18.69 ------- ------- ------- TOTAL RETURN, COMMON SHARE NET ASSET VALUE+ +18.66%** +20.57% +11.83%** TOTAL RETURN, COMMON SHARE MARKET VALUE+ +16.92%** +13.57% -3.33%** RATIOS/SUPPLEMENTAL DATA+++ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS, END OF PERIOD (IN MILLIONS) $ 143.0 $ 136.2 $ 119.9 PREFERRED SHARES, AT LIQUIDATION VALUE ($25,000 PER SHARE LIQUIDATION PREFERENCE) (IN MILLIONS) $ 52.5 $ 52.5 $ 52.5 RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS# 1.26%* 1.30% 1.14%* RATIO OF NET EXPENSES TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS++ 1.25%* 1.28% 1.12%* RATIO OF NET INVESTMENT INCOME (LOSS) EXCLUDING PREFERRED SHARES DISTRIBUTIONS TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 3.44%* 2.72% 3.47%* RATIO OF PREFERRED SHARES DISTRIBUTIONS TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 1.62%* 1.18% .47%* RATIO OF NET INVESTMENT INCOME (LOSS) INCLUDING PREFERRED SHARE DISTRIBUTIONS TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 1.82%* 1.54% 3.00%* PORTFOLIO TURNOVER RATE 23%** 63% 28%** ASSET COVERAGE PER PREFERRED SHARE, END OF PERIOD@ $93,141 $89,880 $82,086
See Notes to Financial Highlights 20 NOTES TO FINANCIAL HIGHLIGHTS Dividend Advantage 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 distribution reinvestment plan. Results represent past performance and do not guarantee future results. Current returns may be lower or higher than the performance data quoted. Investment returns may fluctuate and shares when sold may be worth more or less than original cost. Total return would have been lower if Management had not waived a portion of the investment management fee. # The Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. ++ After waiver of a portion of the investment management fee by Management. 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 MARCH 30, 2004 APRIL 30, 2006 OCTOBER 31, 2005 TO OCTOBER 31, 2004 1.53% 1.57% 1.38%
^ The date investment operations commenced. * Annualized. ** Not annualized. @ Calculated by subtracting the Fund's total liabilities (excluding accumulated unpaid distributions on AMPS) from the Fund's total assets and dividing by the number of AMPS outstanding. +++ Expense ratios do not include the effect of distributions to preferred shareholders. Income ratios include income earned on assets attributable to AMPS. (cc) Calculated based on the average number of shares outstanding during each fiscal period. 21 DISTRIBUTION 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 Distribution 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 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 or distribution 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 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. 22 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. 23 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 The Bank of New York 101 Barclay Street, 11-E New York, NY 10286 LEGAL COUNSEL Kirkpatrick & Lockhart Nicholson Graham LLP 1601 K Street, NW Washington, DC 20006 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 200 Clarendon Street Boston, MA 02116 24 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 is also 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 for the Fund 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). ADDITION OF ASSOCIATE PORTFOLIO MANAGER In January 2006, Steve S. Shigekawa was made an Associate Portfolio Manager for the Fund. He is a Vice President of Neuberger Berman Management Inc. and of Neuberger Berman, LLC. He was an analyst for the Fund from 2002 to 2005. He held associate analyst positions at two other investment firms from 2000 to 2002. 25 REPORT OF VOTES OF SHAREHOLDERS An annual meeting of shareholders of Neuberger Berman Dividend Advantage Fund Inc. was held on April 6, 2006. Shareholders voted on the following matter: (1) To elect five Class I Directors to serve until the annual meeting of shareholders in 2009, or until their successors are elected and qualified. Class II and III Directors continue to hold office until the annual meeting in 2007 and 2008, respectively. Proposal 1 - To elect five Class I Directors to serve until the annual meeting of shareholders in 2009. COMMON AND PREFERRED SHARES
VOTES BROKER VOTES FOR WITHHELD ABSTENTIONS NON-VOTES Faith Colish 5,477,844.000 82,340.000 -- -- C. Anne Harvey 5,476,580.000 83,604.000 -- -- Cornelius T. Ryan 5,477,244.000 82,940.000 -- -- Peter E. Sundman 5,482,174.000 78,010.000 -- -- Peter P. Trapp 5,478,410.000 81,774.000 -- --
26 This page has been left blank intentionally This page has been left blank intentionally Statistics and projections in this report are derived from sources deemed to be reliable but cannot be regarded as a representation of future results of the Fund. This report is prepared for the general information of shareholders and is not an offer of shares of the Fund. NEUBERGER | BERMAN A LEHMAN BROTHERS COMPANY NEUBERGER BERMAN MANAGEMENT INC. 605 Third Avenue, 2nd Floor New York, NY 10158-0180 INTERNAL SALES & SERVICES 877.461.1899 WWW.NB.COM [GRAPHIC] E0099 06/06 ITEM 2. CODE OF ETHICS The Board of Directors ("Board") of Neuberger Berman Dividend Advantage 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 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 is filed as Exhibit 12(a)(1) to this Form N-CSR. 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 two audit committee financial experts serving on its audit committee. The Registrant's audit committee financial experts are John Cannon and Howard Mileaf. Mr. Cannon and Mr. Mileaf are independent directors 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 the Fund is disclosed in the Registrant's semi-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 in the report it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management to allow timely decisions regarding required disclosure. (b) There were no significant changes in the Registrant's internal controls over financial reporting (as defined in rule 30a-3(d) under the Act) that occurred during the Registrant's second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS (a)(1) A copy of the Code of Ethics is filed herewith. (a)(2) The certifications required by Rule 30a-2(a) of the Act and Section 302 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act") are filed herewith. (a)(3) Not applicable. (b) The certifications required by Rule 30a-2(b) of the Act and Section 906 of the Sarbanes-Oxley Act are filed herewith. 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 Dividend Advantage Fund Inc. By: /s/ Peter E. Sundman ----------------------- Peter E. Sundman Chief Executive Officer Date: July 10, 2006 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: July 10, 2006 By: /s/ John M. McGovern ----------------------- John M. McGovern Treasurer and Principal Financial and Accounting Officer Date: July 10, 2006 EX-99.CODE ETH 2 codeofethics.txt EXHIBIT 12(A)(1) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS OF NEUBERGER BERMAN FUNDS I. COVERED OFFICERS/PURPOSE OF THE CODE This code of ethics ("Code") for the registered investment companies within the Neuberger Berman Fund complex (each, a "Company") applies to each Company's Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer (the "Covered Officers," each of whom is listed in Exhibit A). The purpose of the Code is to promote: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that a Company files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Company; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL, POTENTIAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual, potential and apparent conflicts of interest. An "actual conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, the Company. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Company. A "potential conflict of interest" occurs when a Covered Officer's private interest is such that it might, under certain circumstances, interfere with the interests of the Company or the Officer's service to the Company, but those circumstances do not now exist. Appearances may create an "apparent conflict of interest" even when an actual conflict does not exist. For example, an apparent conflict may exist if a Covered Officer owns a thinly traded security that a series of a Company (a "Fund") is buying, even if there is no actual conflict of interest. Certain actual or potential conflicts of interest may arise out of the relationships between Covered Officers and the Company and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Fund because of their status as "affiliated persons" of the Company. The compliance programs and procedures of Neuberger Berman Management Inc., Neuberger Berman, LLC (collectively referred to as the "investment adviser") and each Company are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, actual or potential conflicts may arise from, or as a result of, the contractual relationship between the Company and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Company or for the investment adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the adviser and the Company. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the investment adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Company. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Companies' Boards of Trustees/Directors ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Company. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. Each Covered Officer must not: o use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the 2 Company, as for example where the Covered Officer would benefit personally to the detriment of the Company; o cause the Company to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Company; o retaliate against any other Covered Officer, or any employee of a Company, its service providers, or the affiliated persons of any of them, for good faith reports of potential violations of this Code. There are some actual or potential conflict of interest situations that should always be approved by the Company's Chief Legal Officer1 if material. Covered Officers are encouraged to discuss with the Chief Legal Officer any potential conflict the materiality of which is uncertain. Examples of reportable conflicts include: o service as a director on the board of any public or private company, other than the Companies, their investment adviser, and its affiliates; o the receipt of any non-nominal gifts, i.e., those in excess of $100; o the receipt of any entertainment from any company with which the Company has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any ownership interest in, or any consulting or employment relationship with, any of the Company's service providers, other than its investment adviser or any affiliated person thereof; and o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. DISCLOSURE AND COMPLIANCE o Each Covered Officer must familiarize himself or herself with the disclosure requirements generally applicable to the Company and the Company's Disclosure Controls and Procedures; o each Covered Officer must not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's trustees/directors and auditors, and to governmental regulators and self-regulatory organizations; - ---------------- 1 The Board of each Company has appointed Maxine L. Gerson as Chief Legal Officer. 3 o each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Companies and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Companies file with, or submit to, the SEC and in other public communications made by the Companies; and o each Covered Officer should promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. Reporting and Accountability Each Covered Officer must: o upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he or she has received, read, and understands the Code; o annually thereafter affirm to the Board that he or she has complied with the requirements of the Code; o report on the Company's Questionnaire for Trustees/Directors and Officers, where responsive to appropriate questions, all categories of affiliations or other relationships giving rise to actual or potential conflicts of interest; and o notify the Chief Legal Officer promptly if he or she is aware of facts and circumstances that he or she knows are a violation of this Code. Failure to do so is itself a violation of this Code. The Chief Legal Officer is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation.2 However, any approvals or waivers3 sought by the Principal Executive Officer will be considered by the Independent Trustees/ Directors of the affected Company (the "Committee"). - ---------------- 2 The Chief Legal Officer is authorized to consult, as appropriate, with counsel to the Company and counsel to the Independent Trustees/Directors, and is encouraged to do so. 3 Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics" and "implicit waiver" as "the registrant's failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer" of the registrant. Both waivers and implicit waivers must be disclosed publicly. 4 The Companies will follow these procedures in investigating and enforcing this Code: o The Chief Legal Officer will take all appropriate action to investigate any potential violations reported to him or her. o The Chief Legal Officer will report to the Committee the outcome of the investigation, including the facts of the initial report, the scope and outcome of the investigation, and whether or not the Chief Legal Officer believes that a violation occurred. o The person who initially reported the matter will be informed that the matter has been investigated and reported to the Committee. o If the Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer. o The Committee will be responsible for granting waivers, as appropriate. o Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Companies for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Companies, the investment adviser, the Companies' principal underwriter, or other service providers purport to apply a lesser standard to the behavior or activities of the Covered Officers, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Companies' and the investment adviser's codes of ethics under Rule 17j-l under the Investment Company Act and the investment adviser's more detailed policies and procedures set forth in Neuberger Berman Management Inc.'s Compliance Manual are separate requirements applying to the Covered Officers and others, and are not preempted by this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of Independent Trustees/Directors. 5 VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Company, its Board (and any Committee of the Board) and their counsel. VIII. INTERNAL USE The Code is intended solely for internal use by the Companies and does not constitute an admission, by or on behalf of any Company, as to any fact, circumstance, or legal conclusion. 6 EXHIBIT A Persons Covered by this Code of Ethics: Peter E. Sundman, Chairman and Chief Executive Officer John M. McGovern, Treasurer and Principal Financial and Accounting Officer EX-99.CERT 3 cert99.txt EXHIBIT 12(A)(2) CERTIFICATIONS I, Peter E. Sundman, certify that: 1. I have reviewed this report on Form N-CSR of Neuberger Berman Dividend Advantage Fund Inc. ("Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officers and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: July 10, 2006 By: /s/ Peter E. Sundman ----------------------- Peter E. Sundman Chief Executive Officer I, John M. McGovern, certify that: 1. I have reviewed this report on Form N-CSR of Neuberger Berman Dividend Advantage Fund Inc. ("Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officers and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: July 10, 2006 By: /s/ John M. McGovern ------------------------ John M. McGovern Treasurer and Principal Financial and Accounting Officer EX-99.906CERT 4 ex906.txt EXHIBIT 12(B) SECTION 906 CERTIFICATIONS We, Peter E. Sundman, Chief Executive Officer, and John M. McGovern, Treasurer and Principal Financial and Accounting Officer, of Neuberger Berman Dividend Advantage Fund Inc. ("Registrant"), certify, pursuant to 18 U.S.C. Section 1350 enacted under Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge: 1. The Registrant's periodic report on Form N-CSR for the period ended April 30, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m(a) or 78o(d)); and 2. The information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: July 10, 2006 /s/ Peter E. Sundman -------------------- Peter E. Sundman Chief Executive Officer /s/ John M. McGovern -------------------- John M. McGovern Treasurer and Principal Financial and Accounting Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----