As filed with the Securities and Exchange Commission on July 7, 2004
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file Number: 811-21499
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. Ellen Metzger, Esq.
Kirkpatrick & Lockhart LLP Neuberger Berman, LLC
1800 Massachusetts Avenue, N.W. 2nd Floor 605 Third Avenue
Washington, DC 20036-1800 New York, New York 10158-3698
(Names addresses of agents for service)
Date of fiscal year end: October 31, 2004
Date of reporting period: April 30, 2004
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS
SEMI-ANNUAL REPORT
APRIL 30, 2004
[NEUBERGER BERMAN LOGO]
A LEHMAN BROTHERS COMPANY
NEUBERGER BERMAN
DIVIDEND ADVANTAGE FUND INC.
NEUBERGER BERMAN APRIL 30, 2004 (UNAUDITED)
CHAIRMAN'S LETTER
Dear Fellow Shareholder,
We are pleased to present the first report of the Neuberger Berman Dividend
Advantage Fund Inc., which commenced operations on March 30th, 2004. The report
includes a portfolio commentary, a listing of the Fund's investments, and its
financial statement for the reporting period.
The Fund seeks high total return, comprised of high current income, a portion of
which may be qualified dividend income, and capital appreciation. Securities in
the portfolio that meet the requirements for qualified dividend income are taxed
at the same 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 at preserving and growing your capital.
Sincerely,
/s/ Peter Sundman
PETER SUNDMAN
CHAIRMAN OF THE BOARD
NEUBERGER BERMAN DIVIDEND
ADVANTAGE FUND INC.
CONTENTS
THE FUND
CHAIRMAN'S LETTER 1
PORTFOLIO COMMENTARY/
PERFORMANCE HIGHLIGHTS 2
SCHEDULE OF INVESTMENTS/
TOP TEN EQUITY HOLDINGS 5
FINANCIAL STATEMENTS 8
FINANCIAL HIGHLIGHTS/
PER SHARE DATA 16
DIVIDEND REINVESTMENT PLAN 18
DIRECTORY 20
DIRECTORS AND OFFICERS 21
PROXY VOTING POLICIES AND PROCEDURES 28
"Neuberger Berman" and the Neuberger Berman logo are service marks of Neuberger
Berman, LLC. "Neuberger Berman Management Inc." and the individual fund name in
this shareholder report are either service marks or registered service marks of
Neuberger Berman Management Inc. (C)2004 Neuberger Berman Management Inc. All
rights reserved.
1
DIVIDEND ADVANTAGE FUND INC. PORTFOLIO COMMENTARY
We would like to take this opportunity to welcome shareholders to the
Neuberger Berman Dividend Advantage Fund Inc. (AMEX: NDD). The Fund
has only been open for a short time, but we are pleased with the
opportunities we are finding among the portfolio's two main areas of
investment: stocks with dividend yields higher than the average
dividend yield of the S&P 500 and income-producing securities issued
by real estate companies.
The Fund's investments in stocks with dividends greater than the S&P
500 are chosen from among those recommended by Neuberger Berman's
Research Department. These securities are ranked in the firm's top two
rating categories that the firm's research analysts believe will
provide the greatest potential for price appreciation. Neuberger
Berman's Chief Investment Officer heads the Asset Allocation Committee
and along with a team of experienced professionals, makes the final
selections for the portfolio.
In our opinion, the portion of the portfolio that is invested in real
estate company securities benefits from a distinct investment approach
that combines securities analysis and direct real estate analysis with
property sector diversification. Our real estate portfolio manager
uses a disciplined valuation methodology that seeks attractively
priced real estate securities relative to their historical growth
rates and alternative property sectors. This segment of the portfolio
broadly invests across available issuers, industries and property
sectors in an effort to mitigate risk.
We believe that the Fund's combination of equity securities and real
estate company securities can provide attractive current income as
well as the potential for capital appreciation. Its distinctive
structure capitalizes on Neuberger Berman's strengths in bottom-up
stock selection and asset allocation among the different portfolio
segments.
We thank you for entrusting your assets to our care. We will continue
to work hard at providing you with peace of mind where your
investments are concerned.
Sincerely,
NEUBERGER BERMAN DIVIDEND ADVANTAGE
FUND INC.
ASSET ALLOCATION COMMITTEE
PERFORMANCE HIGHLIGHTS
CUMULATIVE
TOTAL RETURN
INCEPTION DATE SINCE INCEPTION
NEUBERGER BERMAN NAV (1)
DIVIDEND ADVANTAGE FUND 03/25/2004 (3.77%)
CUMULATIVE
TOTAL RETURN
INCEPTION DATE SINCE INCEPTION
MARKET PRICE (2)
DIVIDEND ADVANTAGE FUND 03/25/2004 (9.50%)
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.
2
ENDNOTES
(1) Returns based on Net Asset Value ("NAV") of the Fund.
(2) Returns based on price of Fund shares on the American Stock
Exchange.
3
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.
Please note that the index does not take into account any fees and expenses of
investing in the individual securities that it tracks, and that investors cannot
invest directly in any index or average. Data about the performance of the index
is prepared or obtained by Management and includes reinvestment of all dividends
and capital gain distributions. The Fund may invest in many securities not
included in its index.
4
SCHEDULE OF INVESTMENTS DIVIDEND ADVANTAGE FUND INC.
TOP TEN EQUITY HOLDINGS
HOLDING %
1 Bedford Property Investors 4.5
2 Felcor Lodging Trust 3.3
3 Glimcher Realty Trust 2.7
4 EastGroup Properties 1.8
5 United Dominion Realty Trust 1.7
6 Abbott Laboratories 1.7
7 General Dynamics 1.7
8 BP PLC ADR 1.7
9 ChevronTexaco Corp. 1.7
10 ConocoPhillips 1.6
NUMBER OF SHARES MARKET VALUE +
(000'S OMITTED)
COMMON STOCKS (86.7%)
AEROSPACE (3.3%)
19,000 General Dynamics $ 1,779
36,400 Lockheed Martin 1,736
---------
3,515
APARTMENTS (5.2%)
18,000 Camden Property Trust 762
32,500 Equity Residential 892
30,000 Home Properties 1,120
34,200 Post Properties 920
102,900 United Dominion Realty Trust 1,847
---------
5,541
AUTO/TRUCK REPLACEMENT PARTS (0.8%)
25,300 Genuine Parts 906
BANKING & FINANCIAL (6.5%)
10,200 Bank of America 821
32,300 Citigroup Inc. 1,553
15,000 Fifth Third Bancorp 805
31,700 Friedman, Billings, Ramsey Group 587
18,100 Northern Trust 765
11,900 SunTrust Banks 810
35,600 Wachovia Corp. 1,629
---------
6,970
BUILDING MATERIALS (0.8%)
21,600 York International 847
COMMUNITY CENTERS (5.1%)
24,000 BRE Properties 761
38,000 Developers Diversified Realty 1,245
40,000 Heritage Property Investment Trust 1,015
9,000 Regency Centers 341^^
36,000 Tanger Factory Outlet Centers 1,375
25,600 Weingarten Realty Investors 740
---------
5,477
CONSUMER DISCRETIONARY (2.3%)
45,000 Mattel Inc. 763
35,700 V. F. Corp. 1,648
---------
2,411
DIVERSIFIED (7.7%)
40,400 Colonial Properties Trust 1,425
29,200 Cooper Industries Class A 1,603
69,000 Crescent Real Estate Equities 1,068
54,500 General Electric 1,632
29,000 iStar Financial 1,031
29,500 Vornado Realty Trust 1,488
---------
8,247
ENERGY (5.7%)
33,600 BP PLC ADR $ 1,777
19,400 ChevronTexaco Corp. 1,775
24,600 ConocoPhillips 1,754
13,200 Kinder Morgan 795
---------
6,101
FOOD & BEVERAGE (3.2%)
16,800 Coca-Cola 849
15,700 Diageo PLC ADR 856
31,800 PepsiCo, Inc. 1,733
---------
3,438
HEALTH CARE (4.2%)
40,500 Abbott Laboratories 1,783
35,000 Health Care Property Investors 836
20,000 Health Care REIT 639
56,500 Ventas, Inc. 1,248
---------
4,506
INDUSTRIAL (5.7%)
43,100 Dover Corp. 1,725
66,000 EastGroup Properties 1,911
31,000 First Industrial Realty Trust 1,043
31,000 Keystone Property Trust 631
22,300 Praxair, Inc. 815
---------
6,125
OFFICE (10.3%)
38,000 Arden Realty 1,072^^
41,000 Brandywine Realty Trust 1,039
36,000 CarrAmerica Realty 1,026
55,000 Glenborough Realty Trust 1,034
47,000 Highwoods Properties 1,060
109,000 HRPT Properties Trust 1,041
35,000 Kilroy Realty 1,097
67,400 Koger Equity 1,412
28,000 Mack-Cali Realty 1,046
35,000 Prentiss Properties Trust 1,121
---------
10,948
OFFICE--INDUSTRIAL (1.7%)
65,700 Bedford Property Investors 1,780
OFFICE EQUIPMENT (0.8%)
19,800 Pitney Bowes 866
PHARMACEUTICAL (1.6%)
47,400 Pfizer Inc. 1,695
PUBLISHING & BROADCASTING (2.4%)
10,900 McGraw-Hill Cos. 860
56,800 R.R. Donnelley 1,671
---------
2,531
See Notes to Schedule of Investments
5
NUMBER OF SHARES MARKET VALUE +
(000'S OMITTED)
REGIONAL MALLS (4.5%)
16,600 CBL & Associates Properties $ 834
76,000 Glimcher Realty Trust 1,607
27,900 Macerich Co. 1,168
36,000 Pennsylvania REIT 1,165
---------
4,774
SELF STORAGE (1.7%)
24,000 Shurgard Storage Centers 799
30,000 Sovran Self Storage 1,013
---------
1,812
TELECOMMUNICATIONS (3.2%)
92,400 Sprint Corp. 1,653
45,700 Verizon Communications 1,725
---------
3,378
TRANSPORTATION (1.6%)
26,400 Burlington Northern Santa Fe 863
13,600 Union Pacific 802
---------
1,665
UTILITIES (8.4%)
40,700 Cinergy Corp. 1,544
26,200 Dominion Resources 1,672
74,800 Duke Energy 1,575
24,300 Exelon Corp. 1,627
75,200 ONEOK, Inc. 1,575
29,400 TXU Corp. 1,004
---------
8,997
TOTAL COMMON STOCKS
(COST $96,508) 92,530
---------
PREFERRED STOCKS (8.7%)
APARTMENTS (1.1%)
51,500 Apartment Investment &
Management, Ser. U 1,210
COMMUNITY CENTERS (0.3%)
12,000 Developers Diversified Realty,
Ser. I 297^
DIVERSIFIED (0.0%)
2,000 Capital Automotive REIT, Ser. B 48
LODGING (3.3%)
147,500 Felcor Lodging Trust, Ser. A 3,518
OFFICE--INDUSTRIAL (2.8%)
125,000 Bedford Property Investors,
Ser. B 2,999
REGIONAL MALLS (1.2%)
50,000 Glimcher Realty Trust, Ser. G $ 1,231
TOTAL PREFERRED STOCKS
(COST $9,529) 9,303
---------
PRINCIPAL AMOUNT
SHORT-TERM INVESTMENTS (4.7%)
$ 4,991,918 Neuberger Berman
Institutional Cash Fund
Trust Class (COST $4,992) 4,992#@
---------
TOTAL INVESTMENTS (100.1%)
(COST $111,029) 106,825##
Liabilities, less cash, receivables
and other assets [(0.1%)] (148)
---------
TOTAL NET ASSETS (100.0%) $ 106,677
---------
6
NOTES TO SCHEDULE OF INVESTMENTS
+ Investments in securities by the Fund are valued at the latest
sales price where that price is readily available; securities for
which no sales were reported, unless otherwise noted, are valued
at the last available bid price on that day. Securities traded
primarily on the NASDAQ Stock Market are normally valued by the
Fund at the NASDAQ Official Closing Price ("NOCP") provided by
NASDAQ each business day. The NOCP is the most recently reported
price as of 4:00:02 p.m., Eastern time, unless that price is
outside the range of the "inside" bid and asked prices (i.e., the
bid and asked prices that dealers quote to each other when
trading for their own accounts); in that case, NASDAQ will adjust
the price to equal the inside bid or asked price, whichever is
closer. Because of delays in reporting trades, the NOCP may not
be based on the price of the last trade to occur before the
market closes. The Fund values all other securities by a method
the Board of Directors of the Fund (the "Board") believes
accurately reflects fair value. Numerous factors may be
considered when determining the fair value of a security,
including available analyst, media or other reports, trading in
futures or ADRs and whether the issuer of the security being fair
valued has other securities outstanding. Foreign security prices
are furnished by independent quotation services 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 p.m., Eastern time. The Board has approved the use of
FT Interactive Data Corporation ("FT Interactive") to assist in
determining the fair value of the Fund's foreign equity
securities in the wake of certain significant events.
Specifically, when changes in the value of a certain index
suggest that the closing prices on the foreign exchanges no
longer represent the amount that the Fund could expect to receive
for those securities, FT Interactive will provide adjusted prices
for certain foreign equity securities based on an analysis
showing historical correlations between the prices of those
securities and changes in the index. In the absence of precise
information about the market values of these foreign securities
as of the close of the New York Stock Exchange, the Board has
determined on the basis of available data that prices adjusted in
this way are likely to be closer to the prices the Fund could
realize on a current sale than are the prices of those securities
established at the close of the foreign markets in which the
securities primarily trade. However, fair value prices are
necessarily estimates, and there is no assurance that such a
price will be at or close to the price at which the security next
trades. Short-term debt securities with less than 60 days until
maturity may be valued at cost which, when combined with interest
earned, approximates market value.
# At cost, which approximates market value.
## At April 30, 2004, the cost of investments for U.S. Federal
income tax purposes was $111,029,000. Gross unrealized
appreciation of investments was $1,092,000 and gross unrealized
depreciation of investments was $5,296,000, resulting in net
unrealized depreciation of $4,204,000, based on cost for U.S.
Federal income tax purposes.
@ Neuberger Berman Institutional Cash Fund is also managed by
Neuberger Berman Management Inc. (see Note A of Notes to
Financial Statements).
^ Security purchased on a when-issued basis. At April 30, 2004,
these securities amounted to $297,000.
^^ Security is segregated as collateral for when-issued purchase
commitments.
See Notes to Financial Statements
7
STATEMENT OF ASSETS AND LIABILITIES
NEUBERGER BERMAN DIVIDEND ADVANTAGE
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) FUND
ASSETS
INVESTMENTS IN SECURITIES, AT MARKET VALUE* (NOTE A)--SEE
SCHEDULE OF INVESTMENTS:
Unaffiliated issuers $ 101,833
Non-controlled affiliated issuers 4,992
=====================================================================================================
106,825
Dividends and interest receivable 225
- -----------------------------------------------------------------------------------------------------
Prepaid expenses and other assets 1
=====================================================================================================
TOTAL ASSETS 107,051
=====================================================================================================
LIABILITIES
Payable for securities purchased 300
Payable to investment manager--net (Note B) 34
- -----------------------------------------------------------------------------------------------------
Payable to administrator (Note B) 22
Accrued expenses and other payables 18
=====================================================================================================
TOTAL LIABILITIES 374
=====================================================================================================
NET ASSETS AT VALUE $ 106,677
=====================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 110,648
Undistributed net investment income (loss) 205
- -----------------------------------------------------------------------------------------------------
Accumulated net realized gains (losses) on investments 28
Net unrealized appreciation (depreciation) in value of investments (4,204)
=====================================================================================================
NET ASSETS AT VALUE $ 106,677
=====================================================================================================
SHARES OUTSTANDING ($.0001 PAR VALUE; 1,000,000,000 SHARES AUTHORIZED) 5,805
=====================================================================================================
NET ASSET VALUE PER SHARE OUTSTANDING $ 18.38
=====================================================================================================
*COST OF INVESTMENTS:
Unaffiliated issuers $ 106,037
Non-controlled affiliated issuers 4,992
=====================================================================================================
TOTAL COST OF INVESTMENTS $ 111,029
=====================================================================================================
See Notes to Financial Statements
8
NEUBERGER BERMAN FOR THE PERIOD FROM MARCH 30, 2004 (COMMENCEMENT OF OPERATIONS)
TO APRIL 30, 2004 (UNAUDITED)
STATEMENT OF OPERATIONS
NEUBERGER BERMAN DIVIDEND ADVANTAGE
(000'S OMITTED) FUND
INVESTMENT INCOME
Dividend income $ 267
Interest income (Note A) 18
- -----------------------------------------------------------------------------------------------------
Income from investments in affiliated issuers (Note A) 6
=====================================================================================================
Total income 291
=====================================================================================================
EXPENSES:
Investment management fee (Note B) 57
Administration fee (Note B) 24
- -----------------------------------------------------------------------------------------------------
Audit fees 5
Custodian fees (Note B) 8
- -----------------------------------------------------------------------------------------------------
Directors' fees and expenses 2
Legal fees 2
- -----------------------------------------------------------------------------------------------------
Shareholder reports 3
Stock transfer agent fees 3
- -----------------------------------------------------------------------------------------------------
Miscellaneous 2
=====================================================================================================
Total expenses 106
Investment management fee waived (Note B) (20)
Expenses reduced by custodian fee expense offset arrangement (Note B) (0)
=====================================================================================================
Total net expenses 86
=====================================================================================================
Net investment income 205
=====================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investment securities sold in unaffiliated issuers 28
Change in net unrealized appreciation (depreciation) in value of:
- -----------------------------------------------------------------------------------------------------
Investment securities (Note A) (4,204)
==============================================================================================
Net gain (loss) on investments (4,176)
=====================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (3,971)
=====================================================================================================
See Notes to Financial Statements
9
NEUBERGER BERMAN APRIL 30, 2004 (UNAUDITED)
STATEMENT OF CHANGES IN NET ASSETS
DIVIDEND ADVANTAGE FUND
-----------------------
PERIOD FROM
MARCH 30, 2004
(COMMENCEMENT
OF OPERATIONS) TO
NEUBERGER BERMAN APRIL 30, 2004
(000'S OMITTED) (UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 205
Net realized gain (loss) on investments 28
- -----------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of investments (4,204)
=====================================================================================================
Net increase (decrease) in net assets resulting from operations (3,971)
=====================================================================================================
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from initial capitalization (Note D) 100
Net proceeds from issuance of common shares 110,548
=====================================================================================================
Total net proceeds from capital share transactions 110,648
=====================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS 106,677
NET ASSETS:
Beginning of period --
=====================================================================================================
End of period $ 106,677
=====================================================================================================
Undistributed net investment income (loss) at end of period $ 205
=====================================================================================================
See Notes to Financial Statements
10
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
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 may classify or re-classify any
unissued shares of capital stock into one or more classes of
preferred stock without the approval of shareholders.
The preparation of financial statements in accordance with
accounting principles generally accepted in the United States
requires Neuberger Berman Management Inc. ("Management") to make
estimates and assumptions at the date of the financial
statements. Actual results could differ from those estimates.
2 PORTFOLIO VALUATION: Investment securities are valued as
indicated in the notes following the Schedule of Investments.
3 SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Dividend income
is recorded on the ex-dividend date. Non-cash dividends included
in dividend income, if any, are recorded at the fair market value
of the securities received. Interest income, including accretion
of original issue discount, where applicable, and accretion of
discount on short-term investments, is recorded on the accrual
basis. Realized gains and losses from securities transactions and
foreign currency transactions are recorded on the basis of
identified cost and stated separately in the Statement of
Operations.
4 FEDERAL INCOME TAXES: It is the intention of the Fund to qualify
as a regulated investment company by complying with the
provisions available to certain investment companies, as defined
in applicable sections of the Internal Revenue Code, and to make
distributions of investment company taxable income and net
capital gains (after reduction for any amounts available for U.S.
Federal income tax purposes as capital loss carryforwards)
sufficient to relieve it from all, or substantially all, U.S.
Federal income taxes. Accordingly, the Fund paid no U.S. Federal
income taxes and no provision for U.S. Federal income taxes was
required.
5 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund earns
income, net of expenses, daily on its investments. It is the
policy of the Fund to declare and pay quarterly distributions to
common shareholders. The Fund has adopted a policy to pay common
shareholders a stable distribution. In an effort to maintain a
stable distribution amount, distributions may consist of net
investment income, realized gains and paid-in capital. The Fund
may pay distributions in excess of those required by its stable
distribution policy to avoid excise tax or to satisfy the
requirements of Subchapter M of the Internal Revenue Code. Income
dividends and capital gain distributions to common shareholders
are recorded on the ex-dividend date. Net realized capital gains,
if any, will be offset by capital loss carryforwards. Any such
offset will not reduce the level of the stable distribution paid
by the Fund.
11
The Fund invests a significant portion of its assets in
securities issued by real estate companies, including real estate
investment trusts. After calendar year-end, real estate companies
often recharacterize the nature of the distributions paid during
that year, frequently with the result that distributions
previously identified as income are recharacterized as return of
capital and/or capital gain. 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 Form 1099.
The Fund distinguishes between dividends on a tax basis and a
financial reporting basis and only distributions in excess of tax
basis earnings and profits are reported in the financial
statements as a tax return of capital. Differences in the
recognition or classification of income between the financial
statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are
classified as distributions in excess of net investment income or
accumulated net realized gains in the components of net assets on
the Statement of Assets and Liabilities.
Subsequent to April 30, 2004, the Fund on May 7, 2004 declared a
dividend to common shareholders in the amount of $0.30 per share
payable June 15, 2004, to shareholders of record on May 27, 2004,
with an ex-dividend date of May 25, 2004.
6 EXPENSE ALLOCATION: Some bills are applicable to multiple funds.
Expenses directly attributable to the Fund are charged to the
Fund. Expenses borne by the complex of related investment
companies, which includes open-end and closed-end investment
companies for which Management serves as investment manager, that
are not directly attributed to the Fund, are allocated among the
Fund and the other investment companies in the complex or series
thereof, on the basis of relative net assets, except where a more
appropriate allocation of expenses to each investment company in
the complex or series thereof can otherwise be made fairly.
7 REPURCHASE AGREEMENTS: The Fund may enter into repurchase
agreements with institutions that the Fund's investment manager
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.
8 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 the
Neuberger Berman Institutional Cash Fund (the "Cash Fund"), a
fund managed by Management and having the same Board members as
the Fund. The Cash Fund seeks to provide as high a level of
current income as is consistent with the preservation of capital
and the maintenance of liquidity. For any cash that the Fund
invests in the Cash Fund, Management waives a portion of its
management fee equal to the management fee it receives from the
Cash Fund on those assets. For the period from March 30, 2004 to
April 30, 2004, such waived fees amounted to $737. For the period
from March 30, 2004 to April 30, 2004, income earned on this
investment amounted to $5,706 and is reflected in the Statement
of Operations under the caption Income from investments in
affiliated issuers.
12
9 ORGANIZATION EXPENSES AND OFFERING COSTS: Management has agreed
to pay all organizational expenses and the amount by which the
Fund's offering costs for common stock (other than sales load)
exceed $0.04 per share. The costs incurred by Management were
approximately $531,958. Offering costs for common stock paid by
the Fund were charged as a reduction of common stock
paid-in-capital at the completion of the Fund's offering and
amounted to $232,209. As of April 30, 2004, total offering costs
of $209 remain payable by the Fund.
10 CONCENTRATION OF RISK: The Fund may, for cash management
purposes, during a reasonable start-up period following the
initial offering, or for defensive purposes, temporarily hold all
or a substantial portion of its assets in cash, short-term money
market instruments, including shares of money market funds that
are managed by Management, or in debt securities. The ability of
the issuers of the money market instruments and debt securities
held by the Fund to meet their obligations may be affected by
economic developments, including those particular to a specific
industry or region.
Following the start-up period, under normal market conditions,
the Fund's investments will be primarily concentrated in 1)
income-producing securities recommended by the Neuberger Berman,
LLC 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 Fund shares may fluctuate more due to economic, legal,
cultural, 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.
NOTE B--MANAGEMENT FEES, ADMINISTRATION FEES, AND OTHER
TRANSACTIONS WITH AFFILIATES:
The Fund retains Management as its investment manager under a
Management Agreement. For such investment management services,
the Fund pays Management a fee at the annual rate of 0.60% of its
average daily Managed Assets. Managed Assets equal the total
assets of the Fund, less liabilities other than the aggregate
indebtedness entered into for purposes of leverage. For purposes
of calculating Managed Assets, the liquidation value of any
preferred shares outstanding is not considered a liability.
Management has contractually agreed to waive a portion of the
management fees it is entitled to receive from the Fund at the
following annual rates:
FISCAL PERIOD OR YEAR ENDED % OF AVERAGE
OCTOBER 31, DAILY MANAGED ASSETS
-----------------------------------------------------------------
2004 - 2008 0.20
2009 0.14
2010 0.07
13
Management has not agreed to waive any portion of its fees beyond
October 31, 2010.
For the period from March 30, 2004 to April 30, 2004, such waived
fees amounted to $19,130.
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 indirect 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.
The Fund entered into a commission recapture program, which
enables it to pay some of its operational expenses by recouping a
portion of the commissions it pays to a broker that is not a
related party of the Fund. Expenses paid through this program may
include costs of custodial, transfer agency or accounting
services. There were no amounts recaptured for the period from
March 30, 2004 to April 30, 2004.
The Fund has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in
the Statement of Operations under the caption Custodian fees, was
a reduction of $1.
NOTE C--SECURITIES TRANSACTIONS:
During the period from March 30, 2004 to April 30, 2004, there
were purchase and sale transactions (excluding short-term
securities) of $109,175,000 and $3,088,000, respectively.
During the period from March 30, 2004 to April 30, 2004,
brokerage commissions on securities transactions amounted to
$148,460, of which Neuberger received $730, Lehman received
$30,163, and other brokers received $117,567.
NOTE D--CAPITAL:
At April 30, 2004, the common shares outstanding and the common
shares owned by Neuberger for the Fund were as follows:
COMMON SHARES COMMON SHARES
OUTSTANDING OWNED BY NEUBERGER
5,805,236 5,236
14
Transactions in common shares for the period from March 30, 2004
to April 30, 2004 were as follows:
COMMON SHARES ISSUED IN CONNECTION WITH:
UNDERWRITERS' EXERCISE REINVESTMENT OF NET INCREASE
OF OVER-ALLOTMENT DIVIDENDS AND IN COMMON SHARES
INITIAL CAPITALIZATION INITIAL PUBLIC OFFERING OPTION DISTRIBUTIONS OUTSTANDING
5,236 5,800,000 -- -- 5,805,236
NOTE E--USE OF LEVERAGE:
Subject to market conditions, the Fund intends to offer preferred
shares representing approximately 33% of the Fund's capital after
issuance. The Fund also may add leverage to the portfolio through
the utilization of derivative instruments. The Fund may issue
preferred shares so long as after their issuance the liquidation
value of the preferred shares, plus the aggregate amount of
senior securities representing indebtedness, does not exceed 50%
of the Fund's capital. Once preferred shares are issued and/or
other forms of leverage are used, the asset value and market
price of the common shares and the yield to common stockholders
will be more volatile. The costs of issuing any preferred shares
will be borne by common stockholders.
NOTE F--UNAUDITED FINANCIAL INFORMATION:
The financial information included in this interim report is
taken from the records of the Fund without audit by independent
auditors. Annual reports contain audited financial statements.
15
FINANCIAL HIGHLIGHTS DIVIDEND ADVANTAGE FUND INC.
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the Financial
Statements.
PERIOD FROM
MARCH 30, 2004^
TO APRIL 30,
------------------
2004
(UNAUDITED)
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.10
------------------
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) .04
NET GAINS OR LOSSES ON SECURITIES (BOTH REALIZED AND UNREALIZED) (.72)
------------------
TOTAL FROM INVESTMENT OPERATIONS (.68)
------------------
LESS CAPITAL CHARGES:
ISSUANCE OF COMMON SHARES (.04)
------------------
NET ASSET VALUE, END OF PERIOD $ 18.38
------------------
MARKET VALUE, END OF PERIOD $ 18.10
------------------
TOTAL RETURN, NET ASSET VALUE+ -3.77%**
TOTAL RETURN, MARKET VALUE+ -9.50%**
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD (IN MILLIONS) $ 106.7
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS# .89%*
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS++ .89%*
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS 2.14%*
PORTFOLIO TURNOVER RATE 4%
See Notes to Financial Highlights
16
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 the fiscal
period. Total return based on per share market value assumes the purchase
of common shares at the market price on the first day and sales of common
shares at the market price on the last day of the period indicated.
Dividends and distributions, if any, are assumed to be reinvested at prices
obtained under the Fund's dividend reinvestment plan. Results represent
past performance and do not guarantee future results. Current returns may
be lower or higher than the performance data quoted. Total return would
have been lower if Management had not waived a portion of the investment
management fee. Performance data current to the most recent month-end are
available at www.nb.com.
# The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
++ After waiver of a portion of the investment management fee. Had Management
not undertaken such action, the annualized ratio of net expenses to average
daily net assets would have been:
PERIOD ENDED
APRIL 30,
2004(1)
1.10%
(1) Period from March 30, 2004 to April 30, 2004.
^ The date investment operations commenced.
* Annualized.
** Not annualized.
17
DIVIDEND REINVESTMENT PLAN
The Bank of New York ("Plan Agent") will act as Plan Agent for shareholders who
have not elected in writing to receive dividends and distributions in cash (each
a "Participant"), will open an account for each Participant under the Dividend
Reinvestment Plan ("Plan") in the same name as their then current Shares are
registered, and will put the Plan into effect for each Participant as of the
first record date for a dividend or capital gains distribution.
Whenever the Fund declares a dividend or distribution with respect to the common
stock of the Fund ("Shares"), each Participant will receive such dividends and
distributions in additional Shares, including fractional Shares acquired by the
Plan Agent and credited to each Participant's account. If on the payment date
for a cash dividend or distribution, the net asset value is equal to or less
than the market price per Share plus estimated brokerage commissions, the Plan
Agent shall automatically receive such Shares, including fractions, for each
Participant's account. Except in the circumstances described in the next
paragraph, the number of additional Shares to be credited to each Participant's
account shall be determined by dividing the dollar amount of the dividend or
distribution payable on their Shares by the greater of the net asset value per
Share determined as of the date of purchase or 95% of the then current market
price per Share on the payment date.
Should the net asset value per Share exceed the market price per Share plus
estimated brokerage commissions on the payment date for a cash dividend or
distribution, the Plan Agent or a broker-dealer selected by the Plan Agent shall
endeavor, for a purchase period lasting until the last business day before the
next date on which the Shares trade on an "ex-dividend" basis, but in no event,
except as provided below, more than 30 days after the dividend payment date, to
apply the amount of such dividend or distribution on each Participant's Shares
(less their PRO RATA share of brokerage commissions incurred with respect to the
Plan Agent's open-market purchases in connection with the reinvestment of such
dividend or distribution) to purchase Shares on the open market for each
Participant's account. No such purchases may be made more than 30 days after the
payment date for such dividend except where temporary curtailment or suspension
of purchase is necessary to comply with applicable provisions of federal
securities laws. If, at the close of business on any day during the purchase
period the net asset value per Share equals or is less than the market price per
Share plus estimated brokerage commissions, the Plan Agent will not make any
further open-market purchases in connection with the reinvestment of such
dividend or distribution. If the Plan Agent is unable to invest the full
dividend or distribution amount through open-market purchases during the
purchase period, the Plan Agent shall request that, with respect to the
uninvested portion of such dividend or distribution amount, the Fund issue new
Shares at the close of business on the earlier of the last day of the purchase
period or the first day during the purchase period on which the net asset value
per Share equals or is less than the market price per Share, plus estimated
brokerage commissions, such Shares to be issued in accordance with the terms
specified in the third paragraph hereof. These newly issued Shares will be
valued at the then-current market price per Share at the time such Shares are to
be issued.
For purposes of making the dividend reinvestment purchase comparison under the
Plan, (a) the market price of the Shares on a particular date shall be the last
sales price on the New York Stock Exchange (or if the Shares are not listed on
the New York Stock Exchange, such other exchange on which the Shares are
principally traded) on that date, or, if there is no sale on such Exchange (or
if not so listed, in the over-the-counter market) on that date, then the mean
between the closing bid and asked quotations for such Shares on such Exchange on
such date and (b) the net asset value per Share on a particular date shall be
the net asset value per Share most recently calculated by or on behalf of the
Fund. All dividends, distributions and other payments (whether made in cash or
Shares) shall be made net of any applicable withholding tax.
Open-market purchases provided for above may be made on any securities exchange
where the Fund's Shares are traded, in the over-the-counter market or in
negotiated transactions and may be on such terms as to price, delivery and
otherwise as the Plan Agent shall determine. Each Participant's uninvested funds
held by the Plan Agent will not bear interest, and it is understood that, in any
event, the Plan Agent shall have no liability in connection with any inability
to purchase Shares within 30 days after the initial date of such purchase as
herein provided, or with the timing of any purchases effected. The Plan Agent
shall have no responsibility as to the value of the Shares acquired for each
Participant's account. For the purpose of cash investments, the Plan Agent may
commingle each Participant's funds with those of other shareholders of the Fund
for whom the Plan Agent similarly acts as agent, and the average price
(including brokerage commissions) of all Shares purchased by the Plan Agent as
Plan Agent shall be the price per Share allocable to each Participant in
connection therewith.
18
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.
19
DIRECTORY
INVESTMENT MANAGER AND ADMINISTRATOR
Neuberger Berman Management Inc.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
877.461.1899 or 212.476.8800
SUB-ADVISER
Neuberger Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
STOCK TRANSFER AGENT
Bank of New York
101 Barclay Street, 11-E
New York, NY 10286
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1221
20
DIRECTORS AND OFFICERS (UNAUDITED)
The following tables set forth information concerning the directors and officers
of the Fund. All persons named as directors and officers also serve in similar
capacities for other funds administered or managed by NB Management and
Neuberger Berman, LLC. The Statement of Additional Information for each Fund
includes additional information about fund directors and is available upon
request, without charge, by calling (877) 461-1899.
THE BOARD OF DIRECTORS
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
AND POSITION WITH FUND PRINCIPAL OCCUPATION(S) (2) DIRECTOR FUND COMPLEX BY DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------------
CLASS I
INDEPENDENT FUND DIRECTORS*
Faith Colish (68) Counsel, Carter Ledyard & Milburn LLP 38 Director, American Bar Retirement
Director (law firm) since October 2002; formerly, Association (ABRA) since 1997 (not-for-
Attorney at Law and President, Faith profit membership association).
Colish, A Professional Corporation, 1980
to 2002.
C. Anne Harvey (66) Consultant, C. A. Harvey Associates, 38 Formerly, Member, Individual Investors
Director since June 2001; formerly, Director, Advisory Committee to the New York Stock
AARP, 1978 to December 2001. Exchange Board of Directors, 1998 to
June 2002; President, Board of
Associates to The National
Rehabilitation Hospital's Board of
Directors, since 2002; Member, American
Savings Education Council's Policy Board
(ASEC), 1998-2000; Member, Executive
Committee, Crime Prevention Coalition of
America, 1997-2000.
Cornelius T. Ryan (72) Founding General Partner, Oxford 38 Director, Capital Cash Management Trust
Director Partners and Oxford Bioscience Partners (money market fund), Naragansett Insured
(venture capital partnerships) and Tax-Free Income Fund, Rocky Mountain
President, Oxford Venture Corporation. Equity Fund, Prime Cash Fund, several
private companies and QuadraMed
Corporation (NASDAQ).
Peter P. Trapp (59) Regional Manager for Atlanta Region, 38 None.
Director Ford Motor Credit Company since August
1997; formerly, President, Ford Life
Insurance Company, April 1995 until
August 1997.
21
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
AND POSITION WITH FUND PRINCIPAL OCCUPATION(S) (2) DIRECTOR FUND COMPLEX BY DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------------
DIRECTOR WHO IS AN "INTERESTED PERSON"
Peter E. Sundman* (44) Executive Vice President, Neuberger 38 Director, Neuberger Berman Inc. (holding
Chief Executive Officer, Berman Inc. (holding company) since company) from October 1999 through March
Director and Chairman of 1999; Head of Neuberger Berman Inc.'s 2003; President and Director, NB
the Board Mutual Funds and Institutional Business Management since 1999; Director and Vice
since 1999; Executive Vice President, President, Neuberger & Berman Agency,
Neuberger Berman since 1999; Principal, Inc. since 2000.
Neuberger Berman from 1997 until 1999;
Senior Vice President, NB Management
from 1996 until 1999.
CLASS II
INDEPENDENT FUND DIRECTORS*
John Cannon (74) Consultant. Formerly, Chairman and Chief 38 Independent Trustee or Director of three
Director Investment Officer, CDC Investment series of OppenheimerFunds: Limited Term
Advisors (registered investment New York Municipal Fund, Rochester Fund
adviser), 1993-January 1999; prior Municipals, and Oppenheimer Convertible
thereto, President and Chief Executive Securities Fund, since 1992.
Officer, AMA Investment Advisors, an
affiliate of the American Medical
Association.
Barry Hirsch (71) Attorney at Law. Formerly, Senior 38 None.
Director Counsel, Loews Corporation (diversified
financial corporation) May 2002 until
April 2003; formerly, Senior Vice
President, Secretary and General
Counsel, Loews Corporation.
22
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
AND POSITION WITH FUND PRINCIPAL OCCUPATION(S) (2) DIRECTOR FUND COMPLEX BY DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------------
Tom Decker Seip (54) General Partner, Seip Investments LP (a 38 Director, H&R Block, Inc. (financial
Director private investment partnership); services company) since May 2001;
formerly, President and CEO, Westaff, Director, Forward Management, Inc.
Inc. (temporary staffing), May 2001 to (asset management) since 2001; formerly,
January 2002; Senior Executive at the Director, General Magic (voice
Charles Schwab Corporation from 1983 to recognition software) November 2001
1999, including Chief Executive Officer, until 2002; Director, E-Finance
Charles Schwab Investment Management, Corporation (credit decisioning
Inc. and Trustee, Schwab Family of Funds services) 1999-2003; Director,
and Schwab Investments from 1997 to 1998 Save-Daily.com (micro investing
and Executive Vice President-Retail services) 1999-2003; Director, Offroad
Brokerage, Charles Schwab Investment Capital Inc. (pre-public internet
Management from 1994 to 1997. commerce company).
DIRECTORS WHO IS AN "INTERESTED PERSON"
Jack L. Rivkin* (63) Executive Vice President and Chief 38 Director, Dale Carnegie and Associates,
President and Director Investment Officer, Neuberger Berman Inc. (private company) since 1998;
Inc. (holding company) since 2002 and Director, Emagin Corp. (public company)
2003, respectively; Executive Vice since 1997; Director, Solbright, Inc.
President and Chief Investment Officer, (private company) since 1998; Director,
Neuberger Berman since 2002 and 2003, Infogate, Inc. (private company) since
respectively; Director and Chairman, NB 1997.
Management since December 2002;
formerly, Executive Vice President,
Citigroup Investments, Inc. from
September 1995 to February 2002;
Executive Vice President, Citigroup Inc.
from September 1995 to February 2002.
CLASS III
INDEPENDENT FUND DIRECTORS*
Walter G. Ehlers (71) Consultant; Retired President and 38 None.
Director Trustee, Teachers Insurance & Annuity
(TIAA) and College Retirement Equities
Fund (CREF).
Robert A. Kavesh (76) Marcus Nadler Professor of Finance and 38 Director, DEL Laboratories, Inc.
Director Economics Emeritus, New York University (cosmetics and pharmaceuticals) since
Stern School of Business. 1978; Director, The Caring Community
(not-for-profit).
23
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
AND POSITION WITH FUND PRINCIPAL OCCUPATION(S) (2) DIRECTOR FUND COMPLEX BY DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------------
Howard A. Mileaf (67) Retired. Formerly, Vice President and 38 Director, WHX Corporation (holding
Director Special Counsel, WHX Corporation company) since August 2002; Director,
(holding company) 1993-2001. Webfinancial Corporation (holding
company) since December 2002; Director,
State Theatre of New Jersey
(not-for-profit theater) since 2000;
formerly, Director, Kevlin Corporation
(manufacturer of microwave and other
products).
William E. Rulon (71) Retired. Senior Vice President, 38 Director, Pro-Kids Golf and Learning
Director Foodmaker, Inc. (operator and franchiser Academy (teach golf and computer usage
of restaurants) until January 1997. to "at risk" children) since 1998;
formerly, Director, Prandium, Inc.
(restaurants) from March 2001 until July
2002.
Candace L. Straight (56) Private investor and consultant 38 Director, The Proformance Insurance
Director specializing in the insurance industry; Company (personal lines property and
formerly, Advisory Director, Securitas casualty insurance company) since March
Capital LLC (a global private equity 2004; Director, Providence Washington
investment firm dedicated to making (property and casualty insurance
investments in the insurance sector) company) since December 1998; Director,
1998 until December 2002. Summit Global Partners (insurance
brokerage firm) since October 2000.
24
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
AND POSITION WITH FUND PRINCIPAL OCCUPATION(S) (2) DIRECTOR FUND COMPLEX BY DIRECTOR
- -------------------------------------------------------------------------------------------------------------------------------
DIRECTOR WHO IS AN "INTERESTED PERSON"
Edward I. O'Brien* (75) Formerly, Member, Investment Policy 38 Director, Legg Mason, Inc. (financial
Director Committee, Edward Jones 1993-2001; services holding company) since 1993;
President, Securities Industry formerly, Director, Boston Financial
Association ("SIA") (securities Group (real estate and tax shelters)
industry's representative in government 1993-1999.
relations and regulatory matters at the
federal and state levels) 1974-1992;
Adviser to SIA, November 1992-November
1993.
* Indicates a director who is an "interested person" within the meaning of
the 1940 Act. Mr. Sundman and Mr. Rivkin are interested persons of the Fund
by virtue of the fact that each is an officer and/or director of NB
Management and Executive Vice President of Neuberger Berman. Mr. O'Brien is
an interested person of the Fund by virtue of the fact that he is a
director of Legg Mason, Inc., a wholly owned subsidiary of which, from time
to time, serves as a broker or dealer to the Fund and other funds or
accounts for which NB Management serves as investment manager.
(1) The business address of each listed person is 605 Third Avenue, New York,
New York 10158.
(2) Except as otherwise indicated, each person has held the positions shown for
at least the last five years. The Board of Directors shall at all times be
divided as equally as possible into three classes of Directors designated
Class I, Class II, and Class III. The terms of office of Class I, Class II,
and Class III Directors shall expire at the annual meetings of stockholders
held in 2006, 2004, and 2005 respectively, and at each third annual meeting
of stockholders thereafter.
25
INFORMATION ABOUT THE OFFICERS OF THE FUND (OTHER THAN THOSE LISTED ABOVE)
POSITION AND
NAME, AGE, AND ADDRESS (1) LENGTH OF TIME SERVED (2) PRINCIPAL OCCUPATION(S)
- -----------------------------------------------------------------------------------------------------------------------------
Claudia A. Brandon (47) Secretary since 2002 Vice President-Mutual Fund Board Relations, NB Management
since 2000; Vice President, Neuberger Berman since 2002
and employee since 1999; Vice President, NB Management
from 1986 to 1999; Secretary, eleven registered
investment companies for which NB Management acts as
investment manager and administrator (four since 2002,
three since 2003, and one since 2004).
Robert Conti (47) Vice President since 2002 Senior Vice President, Neuberger Berman since 2003; Vice
President, Neuberger Berman from 1999 until 2003; Senior
Vice President, NB Management since 2000; Controller, NB
Management until 1996; Treasurer, NB Management from 1996
until 1999; Vice President, eleven registered investment
companies for which NB Management acts as investment
manager and administrator (three since 2000, four since
2002, three since 2003, and one since 2004).
Brian P. Gaffney (50) Vice President since 2002 Managing Director, Neuberger Berman since 1999; Senior
Vice President, NB Management since 2000; Vice President,
NB Management from 1997 until 1999; Vice President,
eleven registered investment companies for which NB
Management acts as investment manager and administrator
(three since 2000, four since 2002, three since 2003, and
one since 2004).
Sheila R. James (38) Assistant Secretary since 2002 Employee, Neuberger Berman since 1999; Employee, NB
Management from 1991 to 1999; Assistant Secretary, eleven
registered investment companies for which NB Management
acts as investment manager and administrator (seven since
2002, three since 2003, and one since 2004).
Kevin Lyons (48) Assistant Secretary since 2003 Employee, Neuberger Berman since 1999; Employee, NB
Management from 1993 to 1999; Assistant Secretary, eleven
registered investment companies for which NB Management
acts as investment manager and administrator (ten since
2003 and one since 2004).
26
POSITION AND
NAME, AGE, AND ADDRESS (1) LENGTH OF TIME SERVED (2) PRINCIPAL OCCUPATION(S)
- -----------------------------------------------------------------------------------------------------------------------------
John M. McGovern (34) Assistant Treasurer since 2002 Vice President, Neuberger Berman since 2004; Employee, NB
Management since 1993; Assistant Treasurer, eleven
registered investment companies for which NB Management
acts as investment manager and administrator (seven since
2002, three since 2003, and one since 2004).
Barbara Muinos (45) Treasurer and Principal Vice President, Neuberger Berman since 1999; Assistant
Financial and Accounting Officer Vice President, NB Management from 1993 to 1999;
since 2002 Treasurer and Principal Financial and Accounting Officer,
eleven registered investment companies for which NB
Management acts as investment manager and administrator
(seven since 2002, three since 2003, and one since 2004);
Assistant Treasurer, three registered investment
companies for which NB Management acts as investment
manager and administrator from 1996 until 2002.
Frederic B. Soule (57) Vice President since 2002 Senior Vice President, Neuberger Berman since 2003; Vice
President, Neuberger Berman from 1999 until 2003; Vice
President, NB Management from 1995 until 1999; Vice
President, eleven registered investment companies for
which NB Management acts as investment manager and
administrator (three since 2000, four since 2002, three
since 2003, and one since 2004).
Trani Jo Wyman (34) Assistant Treasurer since 2002 Employee, NB Management since 1991; Assistant Treasurer,
eleven registered investment companies for which NB
Management acts as investment manager and administrator
(seven since 2002, three since 2003, and one since 2004).
- ----------
(1) The business address of each listed person is 605 Third Avenue, New York,
New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
27
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. Beginning September 2004, information
regarding how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30 will also be available without charge,
by calling 1-800-877-9700 (toll-free), on the website of the Securities and
Exchange Commission, at www.sec.gov, and on the Fund's website at www.nb.com
[http://www.nb.com].
28
[NEUBERGER BERMAN LOGO]
A LEHMAN BROTHERS COMPANY
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
INTERNAL SALES & SERVICES
877.461.1899
www.nb.com
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.
[RECYCLED SYMBOL] E0099 06/04
ITEM 2. CODE OF ETHICS
Not Applicable. Only required in an annual report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not Applicable. Only required in an annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not Applicable. Only required in an annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable. Only required in an annual report.
ITEM 6. SCHEDULE OF INVESTMENTS
Not Yet Applicable. Item applies to periods ending on or after July 9, 2004.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable. Only required in an annual report.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Yet Applicable. Item applies to periods ending on or after June 15, 2004.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the disclosure controls and procedures (as
defined in rule 30a-2(c) under the Act) as of a date within 90 days of the
filing date of this document, the Chief Executive Officer and Treasurer and
Principal Financial and Accounting Officer of the Registrant have concluded
that such disclosure controls and procedures are effectively designed to
ensure that information required to be disclosed by the Registrant is
accumulated and communicated to the Registrant's management to allow timely
decisions regarding required disclosure.
(b) There were no significant changes in the Registrant's internal controls
over financial reporting (as defined in rule 30a-3(d) under the Act) that
occurred during the Registrant's second fiscal half-year that have
materially affected, or are reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 10. EXHIBITS
(a)(1) Not Applicable. Only required in an annual report.
(a)(2) The certifications required by Rule 30a-2(a) of the Act and Section 302
of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act") are attached
hereto
(b) The certification required by Rule 30a-2(b) of the Act and Section 906 of
the Sarbanes-Oxley Act is attached hereto.
The certification provided pursuant to Section 906 of the Sarbanes-Oxley Act is
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: June 28, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Peter E. Sundman
-----------------------
Peter E. Sundman
Chief Executive Officer
Date: June 28, 2004
By: /s/ Barbara Muinos
------------------
Barbara Muinos
Treasurer and Principal Financial
and Accounting Officer
Date: June 28, 2004