As filed with the Securities and Exchange Commission on January 9, 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
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
1800 Massachusetts Avenue, N.W. 2nd Floor
Washington, DC 20036-1800
(Names and addresses of agents for service)
Date of fiscal year end: October 31, 2005
Date of reporting period: October 31, 2005
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO SHAREHOLDERS
[NEUBERGER BERMAN LOGO]
A LEHMAN BROTHERS COMPANY
ANNUAL REPORT
OCTOBER 31, 2005
NEUBERGER BERMAN
DIVIDEND ADVANTAGE FUND INC.
<Page>
NEUBERGER BERMAN OCTOBER 31, 2005
CONTENTS
<Table>
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
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 22
DIVIDEND REINVESTMENT PLAN 23
DIRECTORY 25
DIRECTORS AND OFFICERS 26
PROXY VOTING POLICIES AND PROCEDURES 34
QUARTERLY PORTFOLIO SCHEDULE 34
CHANGE TO INVESTMENT POLICY 34
NOTICE TO SHAREHOLDERS 34
BOARD CONSIDERATION OF THE MANAGEMENT AND SUB-ADVISORY AGREEMENTS 35
</Table>
CHAIRMAN'S LETTER
DEAR SHAREHOLDER,
I am pleased to present to you this annual report for the Neuberger Berman
Dividend Advantage Fund Inc. The report includes a portfolio commentary, a
listing of the Fund's investments, and its audited financial statements for the
fiscal year ending October 31, 2005.
The Fund seeks high total return, comprising 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 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) 2005 Neuberger Berman Management Inc. All
rights reserved.
1
<Page>
DIVIDEND ADVANTAGE FUND INC. PORTFOLIO COMMENTARY
For the fiscal year ending October 31, 2005, on a Net Asset Value (NAV) basis,
the Neuberger Berman Dividend Advantage Fund Inc. (AMEX: NDD) provided a total
return of 20.57%, compared to gains of 8.72% and 17.94% for the S&P 500 Index
and the NAREIT Equity REIT 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 Buy (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.
The segment of the portfolio focused on income-producing securities has
continued to outperform the S&P 500. During the reporting period, the Fund's
energy holdings did well on strength in oil prices, and the natural resource
companies also performed well. 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. While
there remains some risk, we expect the tax law favoring qualifying dividends,
which is scheduled to expire in 2008, to be extended when it comes before
Congress.
REITs performed well across the board--office properties, regional malls,
apartments and industrial properties all provided strong returns. The office
sector benefited from improved economic growth and modest rent growth. Shares in
industrial properties rose as the demand for warehouse space increased, pension
funds became more interested in the sector and industrial property joint
ventures multiplied. Apartment properties fared well, reflecting the recent
improvement in fundamentals and rising occupancy rates. The apartment sector
also benefited from the perception that the market for housing sales has peaked.
Regional malls did well, in part due to healthy consumer spending and excellent
retail economics this year.
In this environment, the Fund benefited from the strength of--and an overweight
position in--the office sector. Health care REITs also performed well and the
Fund's holdings outperformed benchmark sector components. In the apartment
sector, the portfolio's market weight position in this strongly performing
segment helped overall returns. However, the hotel sector lagged, as did our
holdings in the group, as investors took gains made in 2004 and moved on to
other property areas. Community shopping centers also lagged behind other REIT
sectors, which we attribute to limited acquisition opportunities.
We believe that our emphasis on diversification across property sectors and
geographic regions continues to enhance the Fund's ability to deliver consistent
returns.
From a broader perspective, we remain optimistic about REIT fundamentals. As a
result of rising construction costs (a 10%-15% rise over the last 12 months,
concentrated in labor and raw materials), we believe that supply growth will
remain modest over the coming year. Furthermore, we remain positive on demand
growth, particularly in light of expectations for 3% GDP growth in 2006. We also
expect the Federal Reserve to complete its series of rate increases in the first
half of 2006. If this supply/demand environment continues, we anticipate a rise
in occupancy rates and rent levels for 2006, a scenario that bodes well for the
commercial real estate market.
The REIT industry's solid earnings growth through the first three quarters of
2005 suggests to us a favorable earnings outlook for 2006. Commercial real
estate fundamentals remain attractive, which is consistent with market
expectations. We expect REIT dividend growth also to be attractive, at around 3%
to 4% in the coming 12 months. In addition, continued healthy capital markets
would be expected to lead to an increase in merger and acquisition activity in
2006. We expect the Fund to be a beneficiary of this trend.
Sincerely,
NEUBERGER BERMAN
DIVIDEND ADVANTAGE FUND INC.
ASSET ALLOCATION COMMITTEE
2
<Page>
DIVIDEND ADVANTAGE FUND
<Table>
<Caption>
DIVIDEND ADVANTAGE FUND
AMEX TICKER SYMBOL NDD
1 YEAR TOTAL RETURN
NAV (1),(3) 20.57%
MARKET PRICE (2),(3) 13.57%
AVERAGE ANNUAL TOTAL RETURN (Life of Fund as of October 31, 2005)
NAV (1),(3) 20.47%
MARKET PRICE (2),(3) 5.98%
INCEPTION DATE 03/25/2004
</Table>
INDUSTRY DIVERSIFICATION
(% OF TOTAL NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS)
<Table>
Aerospace 0.9%
Apartments 12.1
Banking & Financial 10.7
Basic Materials 2.6
Chemicals 0.9
Community Centers 7.1
Consumer Cyclicals 0.9
Consumer Discretionary 1.9
Diversified 9.6
Energy 9.1
Entertainment 1.4
Finance 0.8
Financial Services 2.2
Food & Beverage 2.9
Health Care 5.5
Industrial 5.4
Insurance 1.1
Lodging 4.8
Office 19.2
Office - Industrial 4.1
Pharmaceutical 3.2
Publishing & Broadcasting 1.9
Regional Malls 8.7
Software 1.0
Telecommunications 5.2
Utilities 6.5
Waste Management 2.0
Short-Term Investments 17.6
Liabilities, less cash, receivables and other assets (49.3)
</Table>
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
<Page>
ENDNOTES
1. Return based on Net Asset Value ("NAV") of the Fund.
2. Return 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 statement 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
<Page>
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.
NAREIT EQUITY REIT INDEX: Tracks the performance of all Equity REITs
currently listed on the New York Stock Exchange,
the NASDAQ National Market System and the American
Stock Exchange. REITs are classified as Equity if
75% or more of their gross invested book assets are
invested directly or indirectly in equity of
commercial properties.
Please note that the 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
<Page>
SCHEDULE OF INVESTMENTS DIVIDEND ADVANTAGE FUND INC.
TOP TEN EQUITY HOLDINGS
<Table>
<Caption>
HOLDING %
1 Colonial Properties Trust 3.4
2 Camden Property Trust 3.0
3 Reckson Associates Realty 2.7
4 Kinder Morgan 2.5
5 ConocoPhillips 2.5
6 Equity Residential 2.3
7 Northern Trust 2.3
8 Apartment Investment & Management 2.3
9 Maguire Properties 2.3
10 Cooper Industries Class A 2.2
</Table>
<Table>
<Caption>
NUMBER OF SHARES MARKET VALUE +
(000'S OMITTED)
COMMON STOCKS (129.5%)
AEROSPACE (0.9%)
35,500 Goodrich Corp. $ 1,280
APARTMENTS (12.1%)
80,400 Apartment Investment & Management 3,087
72,300 Camden Property Trust 4,074^
80,000 Equity Residential 3,140^
11,300 Essex Property Trust 1,016
64,300 Home Properties 2,498^
123,200 United Dominion Realty Trust 2,727
--------
16,542
BANKING & FINANCIAL (10.7%)
29,000 Bank of America 1,268
12,000 Freddie Mac 736
35,900 Hartford Financial Services Group 2,863
26,400 Lincoln National 1,336
35,600 Nationwide Financial Services 1,438
58,200 Northern Trust 3,120
42,500 U.S. Bancorp 1,257
51,600 Wachovia Corp. 2,607
--------
14,625
BASIC MATERIALS (2.6%)
35,200 Freeport-McMoRan Copper & Gold 1,739
11,700 Rio Tinto 1,786
--------
3,525
CHEMICALS (0.9%)
28,300 duPont 1,180
COMMUNITY CENTERS (7.1%)
63,000 Developers Diversified Realty 2,752^
64,900 Heritage Property Investment Trust 2,116
29,900 Pan Pacific Retail Properties 1,899^
107,200 Tanger Factory Outlet Centers 2,882^
--------
9,649
CONSUMER CYCLICALS (0.9%)
53,800 Eastman Kodak 1,178
CONSUMER DISCRETIONARY (1.9%)
50,500 V. F. Corp. 2,639
DIVERSIFIED (9.6%)
105,000 Colonial Properties Trust 4,589^
42,500 Cooper Industries Class A 3,013
77,200 General Electric 2,618@@
35,700 Vornado Realty Trust 2,892
--------
13,112
ENERGY (9.1%)
26,700 ChevronTexaco Corp. $ 1,524
51,200 ConocoPhillips 3,347
54,900 Enterprise Products Partners 1,420
25,300 Exxon Mobil 1,420
37,800 Kinder Morgan 3,436^
32,200 TEPPCO Partners 1,259^
--------
12,406
ENTERTAINMENT (1.4%)
100,400 Regal Entertainment Group 1,850^
FINANCE (0.8%)
223,100 ECC Capital 587^
19,200 Gramercy Capital 453
--------
1,040
FINANCIAL SERVICES (2.2%)
49,000 PNC Financial Services Group 2,975
FOOD & BEVERAGE (2.9%)
66,900 Cadbury Schweppes ADR 2,655
22,700 Diageo PLC ADR 1,349
--------
4,004
HEALTH CARE (5.5%)
61,500 Abbott Laboratories 2,647
43,300 Health Care REIT 1,526^
55,200 Nationwide Health Properties 1,280^
64,500 Ventas, Inc. 1,976^
--------
7,429
INDUSTRIAL (5.4%)
70,700 Dover Corp. 2,756
66,000 First Industrial Realty Trust 2,682^
43,800 ProLogis 1,883
--------
7,321
INSURANCE (1.1%)
44,000 Endurance Specialty Holdings 1,459
LODGING (2.6%)
96,400 Strategic Hotel Capital 1,638^
84,200 Sunstone Hotel Investors 1,886^
--------
3,524
OFFICE (19.2%)
14,000 Boston Properties 969
85,300 Brandywine Realty Trust 2,337^
91,400 CarrAmerica Realty 3,010^
131,900 Columbia Equity Trust 1,935^
91,100 Equity Office Properties Trust 2,806
87,600 Highwoods Properties 2,471^
191,100 HRPT Properties Trust 2,085^
64,400 Mack-Cali Realty 2,747
102,100 Maguire Properties 3,063^
</Table>
6
<Page>
<Table>
<Caption>
NUMBER OF SHARES MARKET VALUE +
(000'S OMITTED)
106,100 Reckson Associates Realty $ 3,725^
44,500 Trizec Properties 990^
--------
26,138
OFFICE--INDUSTRIAL (4.1%)
91,600 Bedford Property Investors 2,056
48,600 Digital Realty Trust 932^
76,500 Duke Realty 2,609^
--------
5,597
PHARMACEUTICAL (3.2%)
22,300 Johnson & Johnson 1,396
54,600 Novartis AG ADR 2,939
--------
4,335
PUBLISHING & BROADCASTING (1.9%)
75,000 R.R. Donnelley 2,627
REGIONAL MALLS (8.7%)
51,500 CBL & Associates Properties 1,923^
90,500 Glimcher Realty Trust 2,079^
31,200 Macerich Co. 2,005
16,800 Mills Corp. 899
52,000 Pennsylvania REIT 2,002^
40,500 Simon Property Group 2,901
--------
11,809
SOFTWARE (1.0%)
54,700 Microsoft Corp. 1,406
TELECOMMUNICATIONS (5.2%)
23,800 ALLTEL Corp. 1,472
124,400 Sprint Corp. 2,900
104,200 Vodafone Group ADR 2,736
--------
7,108
UTILITIES (6.5%)
28,000 Ameren Corp. 1,473
19,450 Dominion Resources 1,480
53,000 Duke Energy 1,403
33,000 Exelon Corp. 1,717
60,500 NiSource Inc. 1,431
40,400 Southern Co. 1,413
--------
8,917
WASTE MANAGEMENT (2.0%)
90,300 Waste Management 2,665
TOTAL COMMON STOCKS
(COST $160,706) 176,340
--------
PREFERRED STOCKS (2.2%)
LODGING (2.2%)
108,300 Felcor Lodging Trust, Ser. A 2,585
19,000 LaSalle Hotel Properties, Ser. D 456
--------
TOTAL PREFERRED STOCKS
(COST $2,692) 3,041
--------
<Caption>
PRINCIPAL AMOUNT MARKET VALUE +
(000'S OMITTED)
REPURCHASE AGREEMENTS (0.7%)
$ 916,554 Banc of America Securities LLC, Repurchase Agreement, 4.02%,
due 11/1/05, dated 10/31/05, Maturity Value $916,657,
Collateralized by $1,023,744 Fannie Mae, 5.00%, due 4/1/35
(Collateral Value $934,886)
(COST $917) $ 917#
---------
SHORT-TERM INVESTMENTS (17.6%)
15,643,047 Neuberger Berman Securities Lending Quality Fund, LLC 15,643++
8,307,241 Neuberger Berman Prime Money Fund Trust Class 8,307@
---------
TOTAL SHORT-TERM INVESTMENTS
(COST $23,950) 23,950#
---------
TOTAL INVESTMENTS (150.0%)
(COST $188,265) 204,248##
Liabilities, less cash, receivables and other assets [(11.5%)] (15,544)
Liquidation Value of Auction Preferred Shares [(38.5%)] (52,500)
---------
TOTAL NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS (100.0%) $ 136,204
---------
</Table>
See Notes to Schedule of Investments
7
<Page>
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 October 31, 2005, the cost of investments for U.S. Federal income tax
purposes was $188,269,000. Gross unrealized appreciation of investments was
$59,388,000 and gross unrealized depreciation of investments was
$43,409,000, resulting in net unrealized appreciation of $15,979,000, based
on cost for U.S. Federal income tax purposes.
@@ 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. (see Notes A & E of Notes to Financial
Statements) and may be considered an affiliate since it has the same
officers, Board members, and investment manager as the Fund and because, at
times, the Fund may own 5% or more of the outstanding voting securities of
Prime Money.
^ All or a portion of this security is on loan (see Note A of Notes to
Financial Statements).
++ Managed by an affiliate of Neuberger Berman Management Inc. and could be
deemed an affiliate of the Fund (see Notes A & E of Notes to Financial
Statements).
See Notes to Financial Statements
8
<Page>
STATEMENT OF ASSETS AND LIABILITIES
<Table>
<Caption>
DIVIDEND
NEUBERGER BERMAN ADVANTAGE
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) FUND
ASSETS
INVESTMENTS IN SECURITIES, AT MARKET VALUE*+ (NOTES A & E)--SEE SCHEDULE OF INVESTMENTS:
Unaffiliated issuers $ 180,298
Affiliated issuers 23,950
- ----------------------------------------------------------------------------------------------------------
204,248
Interest rate swaps, at market value (Note A) 936
Dividends and interest receivable 290
Prepaid expenses and other assets 15
- ----------------------------------------------------------------------------------------------------------
TOTAL ASSETS 205,489
- ----------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for collateral on securities loaned (Note A) 16,560
Dividends payable--preferred shares 44
Payable to investment manager--net (Notes A & B) 63
Payable to administrator (Note B) 40
Accrued expenses and other payables 78
- ----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 16,785
- ----------------------------------------------------------------------------------------------------------
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 $ 136,204
- ----------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS CONSIST OF:
Paid-in capital--common shares $ 108,409
Distributions in excess of net investment income (47)
Accumulated net realized gains (losses) on investments 10,954
Net unrealized appreciation (depreciation) in value of investments 16,888
- ----------------------------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS AT VALUE $ 136,204
- ----------------------------------------------------------------------------------------------------------
COMMON SHARES OUTSTANDING ($.0001 PAR VALUE; 999,995,200 SHARES AUTHORIZED) 5,805
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER COMMON SHARE OUTSTANDING $ 23.46
- ----------------------------------------------------------------------------------------------------------
+SECURITIES ON LOAN, AT MARKET VALUE $ 16,058
- ----------------------------------------------------------------------------------------------------------
*COST OF INVESTMENTS:
Unaffiliated issuers $ 164,315
Affiliated issuers 23,950
- ----------------------------------------------------------------------------------------------------------
TOTAL COST OF INVESTMENTS $ 188,265
- ----------------------------------------------------------------------------------------------------------
</Table>
See Notes to Financial Statements
9
<Page>
NEUBERGER BERMAN FOR THE YEAR ENDED OCTOBER 31, 2005
STATEMENT OF OPERATIONS
<Table>
<Caption>
DIVIDEND
NEUBERGER BERMAN ADVANTAGE
(000'S OMITTED) FUND
INVESTMENT INCOME
INCOME (NOTE A):
Dividend income--unaffiliated issuers $ 5,162
Income from investments in affiliated issuers (Note E) 150
Income from securities loaned--affiliated issuer (Note E) 5
Foreign taxes withheld (27)
- ----------------------------------------------------------------------------------------------------------
Total income 5,290
- ----------------------------------------------------------------------------------------------------------
EXPENSES:
Investment management fee (Notes A & B) 1,107
Administration fee (Note B) 461
Auction agent fees (Note B) 133
Audit fees 43
Basic maintenance expense (Note B) 25
Custodian fees (Note B) 91
Directors' fees and expenses 26
Insurance expense 7
Legal fees 96
Shareholder reports 44
Stock exchange listing fees 2
Stock transfer agent fees 33
Miscellaneous 21
- ----------------------------------------------------------------------------------------------------------
Total expenses 2,089
Investment management fee waived (Notes A & B) (374)
Expenses reduced by custodian fee expense offset and commission
recapture arrangements (Note B) (20)
- ----------------------------------------------------------------------------------------------------------
Total net expenses 1,695
- ----------------------------------------------------------------------------------------------------------
Net investment income 3,595
- ----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE A)
Net realized gain (loss) on:
Sales of investment securities of unaffiliated issuers 15,954
Interest rate swap contracts (354)
Change in net unrealized appreciation (depreciation) in value of:
Unaffiliated investment securities 4,095
Interest rate swap contracts 1,571
-----------------------------------------------------------------------------------------------------
Net gain (loss) on investments 21,266
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM:
Net investment income (1,557)
-----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS RESULTING FROM OPERATIONS $ 23,304
- ----------------------------------------------------------------------------------------------------------
</Table>
See Notes to Financial Statements
10
<Page>
NEUBERGER BERMAN OCTOBER 31, 2005
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
DIVIDEND ADVANTAGE FUND
----------------------------------
PERIOD FROM
MARCH 30, 2004
YEAR (COMMENCEMENT
ENDED OF OPERATIONS) TO
NEUBERGER BERMAN OCTOBER 31, OCTOBER 31,
(000'S OMITTED) 2005 2004
INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
FROM OPERATIONS:
Net investment income (loss) $ 3,595 $ 2,268
Net realized gain (loss) on investments 15,600 311
Change in net unrealized appreciation (depreciation) of investments 5,666 11,222
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM (NOTE A):
Net investment income (702) (163)
Net realized gain on investments (855) (45)
Tax return of capital -- (97)
- -------------------------------------------------------------------------------------------------------------
Total distributions to preferred shareholders (1,557) (305)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets applicable to common shareholders
resulting from operations 23,304 13,496
- -------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM (NOTE A):
Net investment income (3,141) (1,861)
Net realized gain on investments (3,825) (510)
Tax return of capital -- (1,112)
- -------------------------------------------------------------------------------------------------------------
Total distributions to common shareholders (6,966) (3,483)
- -------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE D):
Net proceeds from initial capitalization -- 100
Net proceeds from issuance of common shares -- 110,548
Preferred shares offering costs 5 (800)
- -------------------------------------------------------------------------------------------------------------
Total net proceeds from capital share transactions 5 109,848
- -------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 16,343 119,861
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 119,861 --
- -------------------------------------------------------------------------------------------------------------
End of period $ 136,204 $ 119,861
- -------------------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) at end of period $ -- $ 11
- -------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income at end of period $ (47) $ --
- -------------------------------------------------------------------------------------------------------------
</Table>
See Notes to Financial Statements
11
<Page>
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 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
<Page>
The tax character of distributions paid during the year ended October
31, 2005 and the period ended October 31, 2004 was as follows:
<Table>
<Caption>
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 $ 3,788,45
</Table>
As of October 31, 2005, the components of distributable earnings
(accumulated losses) on a U.S. Federal income tax basis were as
follows:
<Table>
<Caption>
UNDISTRIBUTED UNREALIZED LOSS
UNDISTRIBUTED LONG-TERM APPRECIATION CARRYFORWARDS
ORDINARY INCOME GAIN (DEPRECIATION) AND DEFERRALS TOTAL
$ 3,659,562 $ 7,299,243 $ 16,880,095 $ -- $ 27,838,900
</Table>
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 2005 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. Income
distributions and capital gain 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-7.
The Fund invests a significant portion of its assets in securities
issued by real estate companies, including real estate investment
trusts ("REITs"). The distributions received from REITs held by the
Fund are generally comprised of income, capital gains, and return of
REIT capital, but the REITs do not report this information to the Fund
until the following calendar year. At October 31, 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. 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
13
<Page>
distributions during the current fiscal year will be considered tax
return of capital but the actual amount of tax return of capital, if
any, is not determinable until after the Fund's fiscal year. After
calendar year-end, when the Fund learns the nature of the
distributions paid by 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 1099 DIV.
Subsequent to October 31, 2005, the Fund, on November 15, 2005
declared a distribution to common shareholders in the amount of $0.30
per share payable December 15, 2005, to shareholders of record on
November 25, 2005, with an ex-date of November 22, 2005.
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 year ended October 31,
2005, distribution rates ranged from 1.90% to 3.75% for Series A and
1.94% to 3.85% for Series B AMPS. The Fund declared distributions to
preferred shareholders for the period November 1, 2005 to November 30,
2005 of $769,682 and $786,921 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 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.
14
<Page>
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 October 31, 2005, the Fund had outstanding
interest rate swap contracts as follows:
<Table>
<Caption>
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% 3.97% $ 2,533 $ 933,073 $ 935,606
</Table>
(1) 30 day LIBOR (London Interbank Offered Rate)
10 SECURITY LENDING: Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund entered into a Securities
Lending Agreement ("Neuberger Agreement") on July 1, 2004 with
Neuberger Berman, LLC ("Neuberger"), an affiliate of the Fund,
pursuant to which Neuberger acted as the Fund's lending agent. Under
the Neuberger Agreement, Neuberger guaranteed a certain amount of
revenue to the Fund and received any revenue earned in excess of the
guaranteed amount as a lending agency fee. For the year ended October
31, 2005, Neuberger received revenue under the Agreement of $46,940.
On September 13, 2005, the Fund entered into new securities lending
arrangements using a third party, eSecLending, to secure bids.
Pursuant to such arrangements, eSecLending currently acts as agent for
the Fund.
15
<Page>
Under the Neuberger Agreement and the new 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). Prior to February 7, 2005, the Fund invested the cash
collateral in the N&B Securities Lending Quality Fund, LLC ("Old
Fund"), which was managed by State Street Bank and Trust Company
("State Street") pursuant to guidelines approved by Management.
Effective February 7, 2005, the Fund changed the collateral investment
vehicle from the Old Fund to the Neuberger Berman Securities Lending
Quality Fund, LLC ("Quality Fund"), a fund managed by Lehman Brothers
Asset Management LLC, an affiliate of Management, as approved by the
Board.
Income earned on the securities loaned, if any, is reflected in the
Statement of Operations under the caption "Income from securities
loaned-affiliated issuers."
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. Prior to December 2004, the
Fund invested in the Neuberger Berman Institutional Cash Fund (the
"Cash Fund"), as approved by the Board. As of December 2004, the Fund
changed its investment from the Cash Fund to the newly created
Neuberger Berman Prime Money Fund ("Prime Money"), as approved by the
Board. The Cash Fund and Prime Money each seek to provide the highest
available current income consistent with safety and liquidity. For any
cash that the Fund invests in the Cash Fund or Prime Money, Management
waives a portion of its management fee equal to the management fee it
receives from the Cash Fund and Prime Money on those assets (the
"Arrangement"). For the year ended October 31, 2005, management fees
waived under this Arrangement with respect to the Cash Fund and Prime
Money amounted to $1,246 and $3,687, respectively. For the year ended
October 31, 2005, income earned under this Arrangement with respect to
the Cash Fund and Prime Money amounted to $20,004 and $129,944,
respectively, and is reflected in the Statement of Operations under
the caption "Income from investments in affiliated issuers."
13 ORGANIZATION EXPENSES AND OFFERING COSTS: Management 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
on March 30, 2004 and amounted to $232,209.
Additionally, offering costs of $269,056 and sales loads of $525,000
incurred through the issuance of AMPS were charged as a reduction of
common stock paid-in-capital at the completion of the Fund's AMPS
offerings on June 28, 2004.
As of October 31, 2005, there was no remaining payable for offering
costs.
16
<Page>
14 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 values of the securities of such companies may
fluctuate more due to economic, legal, cultural, geopolitical or
technological developments affecting the United States real estate
industry or a segment of the 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.
15 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:
<Table>
<Caption>
YEAR ENDED % OF AVERAGE
OCTOBER 31, DAILY MANAGED ASSETS
---------------------------------------------------------------------
2005-2008 0.20
2009 0.14
2010 0.07
</Table>
Management has not contractually agreed to waive any portion of its
fees beyond October 31, 2010.
For the year ended October 31, 2005, such waived fees amounted to
$369,031.
The Fund retains Management as its administrator under an
Administration Agreement. The Fund pays Management an administration
fee at the annual rate of 0.25% of its average daily Managed Assets
under this agreement. Additionally, Management retains State Street as
its sub-administrator under a Sub-Administration Agreement. Management
pays State Street a fee for all services received under the agreement.
17
<Page>
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.
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
year ended October 31, 2005, the impact of this arrangement was a
reduction of expenses of $20,193.
The Fund has an expense offset arrangement in connection with its
custodian contract. For the year ended October 31, 2005, the impact of
this arrangement was a reduction of expenses of $58.
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 AMPS 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 year ended October 31, 2005, there were purchase and sale
transactions (excluding short-term securities and interest rate swap
contracts) of $113,099,318 and $118,729,123, respectively.
During the year ended October 31, 2005, brokerage commissions on
securities transactions amounted to $319,687, of which Lehman received
$55,594, and other brokers received $264,093.
NOTE D--CAPITAL:
At October 31, 2005, the common shares outstanding and the common
shares of the Fund owned by Neuberger were as follows:
<Table>
<Caption>
COMMON SHARES COMMON SHARES
OUTSTANDING OWNED BY NEUBERGER
5,805,236 5,236
</Table>
18
<Page>
Transactions in common shares for the year ended October 31, 2005 and
for the period ended October 31, 2004 were as follows:
<Table>
<Caption>
COMMON SHARES ISSUED IN CONNECTION WITH:
UNDERWRITERS' EXERCISE REINVESTMENT OF
INITIAL OF OVER-ALLOTMENT DIVIDENDS AND NET INCREASE IN COMMON
CAPITALIZATION INITIAL PUBLIC OFFERING OPTION DISTRIBUTIONS SHARES OUTSTANDING
2005 2004 2005 2004 2005 2004 2005 2004 2005 2004
-- 5,236 -- 5,800,000 -- -- -- -- -- 5,805,236
</Table>
NOTE E--INVESTMENTS IN AFFILIATES*:
<Table>
<Caption>
INCOME FROM
BALANCE OF BALANCE OF INVESTMENTS
SHARES GROSS SHARES IN AFFILIATED
HELD GROSS SALES HELD VALUE ISSUERS
OCTOBER 31, PURCHASES AND OCTOBER 31, OCTOBER 31, INCLUDED IN
NAME OF ISSUER 2004 AND ADDITIONS REDUCTIONS 2005 2005 TOTAL INCOME
Neuberger Berman
Securities
Lending
Quality Fund,
LLC** 19,215,500 1,550,908,451 1,554,480,904 15,643,047 $ 15,643,047 $ 4,901
Neuberger Berman
Institutional
Cash Fund
Trust Class*** 2,171,204 18,334,409 20,505,613 -- -- 20,004
Neuberger
Berman Prime
Money Fund Trust
Class*** -- 69,778,186 61,470,945 8,307,241 8,307,241 129,944
------------ -----------
TOTAL $ 23,950,288 $ 154,849
------------ -----------
</Table>
* Affiliated issuers, as defined in the 1940 Act.
** Prior to February 7, 2005, the Old Fund, an investment vehicle
established by the Fund's custodian, was used to invest cash the
Fund received as collateral for securities loans. Effective
February 7, 2005, the Fund changed the collateral investment
vehicle from the Old Fund to the Quality Fund, a fund managed by
Lehman Brothers Asset Management LLC an affiliate of Management,
as approved by the Board. The Fund's shares in the Old Fund and
Quality Fund were and are non-voting. However, because all shares
of the Old Fund and Quality Fund were and are held by funds in
the related investment company complex, the Old Fund and Quality
Fund may have been and may be considered affiliates of the Fund.
*** The Cash Fund and Prime Money are also managed by Management and
may be considered affiliates since they have the same officers,
Board members, and investment manager as the Fund and because, at
times, the Fund may own 5% or more of the outstanding voting
securities of the Cash Fund or Prime Money, respectively.
19
<Page>
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.
<Table>
<Caption>
PERIOD FROM
YEAR ENDED MARCH 30, 2004^
OCTOBER 31, TO OCTOBER 31,
------------ ---------------
2005 2004
COMMON SHARE NET ASSET VALUE, BEGINNING OF PERIOD $ 20.65 $ 19.10
--------- --------
INCOME FROM INVESTMENT OPERATIONS APPLICABLE TO COMMON SHAREHOLDERS:
NET INVESTMENT INCOME (LOSS)~ .62 .39
NET GAINS OR LOSSES ON SECURITIES (BOTH REALIZED AND UNREALIZED) 3.66 1.99
COMMON SHARE EQUIVALENT OF DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM:
NET INVESTMENT INCOME~ (.12) (.03)
NET CAPITAL GAINS~ (.15) (.00)
TAX RETURN OF CAPITAL~ -- (.02)
--------- --------
TOTAL DISTRIBUTIONS TO PREFERRED SHAREHOLDERS (.27) (.05)
--------- --------
TOTAL FROM INVESTMENT OPERATIONS APPLICABLE TO COMMON SHAREHOLDERS 4.01 2.33
--------- --------
LESS DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM:
NET INVESTMENT INCOME (.54) (.32)
NET CAPITAL GAINS (.66) (.09)
TAX RETURN OF CAPITAL -- (.19)
--------- --------
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS (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 $ 23.46 $ 20.65
--------- --------
COMMON SHARE MARKET VALUE, END OF PERIOD $ 20.00 $ 18.69
--------- --------
TOTAL RETURN, COMMON SHARE NET ASSET VALUE+ +20.57% +11.83%**
TOTAL RETURN, COMMON SHARE MARKET VALUE+ +13.57% -3.33%**
RATIOS/SUPPLEMENTAL DATA++
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS, END OF PERIOD (IN
MILLIONS) $ 136.2 $ 119.9
PREFERRED STOCK, AT LIQUIDATION VALUE ($25,000 PER SHARE
LIQUIDATION PREFERENCE) (IN MILLIONS) $ 52.5 $ 52.5
RATIO OF GROSS EXPENSES TO AVERAGE NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS# 1.30% 1.14%*
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS## 1.28% 1.12%*
RATIO OF NET INVESTMENT INCOME (LOSS) EXCLUDING PREFERRED SHARE
DIVIDENDS TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 2.72% 3.47%*
RATIO OF PREFERRED SHARE DIVIDENDS TO AVERAGE NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS 1.18% .47%*
RATIO OF NET INVESTMENT INCOME (LOSS) INCLUDING PREFERRED SHARE
DIVIDENDS TO AVERAGE NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 1.54% 3.00%*
PORTFOLIO TURNOVER RATE 63% 28%**
ASSET COVERAGE PER PREFERRED SHARE, END OF PERIOD@ $ 89,880 $ 82,086
</Table>
See Notes to Financial Highlights
20
<Page>
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 dividend reinvestment plan. Results represent
past performance and do not guarantee future results. Current returns may
be lower or higher than the performance data quoted. Total return would
have been lower if Management had not waived a portion of the investment
management fee. Performance data current to the most recent month-end are
available at www.nb.com.
# The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
## After waiver of a portion of the investment management fee. Had Management
not undertaken such action, the annualized ratios of net expenses to
average daily net assets applicable to common shareholders would have been:
<Table>
<Caption>
PERIOD FROM
YEAR ENDED MARCH 30, 2004
OCTOBER 31, 2005 TO OCTOBER 31, 2004
1.57% 1.38%
</Table>
^ The date investment operations commenced.
* Annualized.
** Not annualized.
@ Calculated by subtracting the Fund's total liabilities (excluding
accumulated unpaid dividends 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.
~ Calculated based on the average number of shares outstanding during each
fiscal period.
21
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Neuberger Berman Dividend Advantage Fund Inc.
We have audited the accompanying statement of assets and liabilities of
Neuberger Berman Dividend Advantage Fund Inc. (the "Fund"), including the
schedule of investments, as of October 31, 2005, and the related statement of
operations for the year then ended, the statements of changes in net assets for
the year ended October 31, 2005 and the period from March 30, 2004 (commencement
of operations) to October 31, 2004 and financial highlights for the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2005, by correspondence with the custodian
and brokers. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Neuberger Berman Dividend Advantage Fund Inc., at October 31, 2005, the results
of its operations for the year then ended, the changes in its net assets for the
year ended October 31, 2005 and for the period from March 30, 2004 (commencement
of operations) to October 31, 2004, and the financial highlights for the periods
indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
December 9, 2005
22
<Page>
DIVIDEND REINVESTMENT PLAN
The Bank of New York ("Plan Agent") will act as Plan Agent for shareholders who
have not elected in writing to receive dividends and distributions in cash (each
a "Participant"), will open an account for each Participant under the Dividend
Reinvestment Plan ("Plan") in the same name as their then current Shares are
registered, and will put the Plan into effect for each Participant as of the
first record date for a dividend or capital gains distribution.
Whenever the Fund declares a dividend or distribution with respect to the common
stock of the Fund ("Shares"), each Participant will receive such dividends and
distributions in additional Shares, including fractional Shares acquired by the
Plan Agent and credited to each Participant's account. If on the payment date
for a cash dividend or distribution, the net asset value is equal to or less
than the market price per Share plus estimated brokerage commissions, the Plan
Agent shall automatically receive such Shares, including fractions, for each
Participant's account. Except in the circumstances described in the next
paragraph, the number of additional Shares to be credited to each Participant's
account shall be determined by dividing the dollar amount of the dividend or
distribution payable on their Shares by the greater of the net asset value per
Share determined as of the date of purchase or 95% of the then current market
price per Share on the payment date.
Should the net asset value per Share exceed the market price per Share plus
estimated brokerage commissions on the payment date for a cash dividend or
distribution, the Plan Agent or a broker-dealer selected by the Plan Agent shall
endeavor, for a purchase period lasting until the last business day before the
next date on which the Shares trade on an "ex-dividend" basis, but in no event,
except as provided below, more than 30 days after the dividend payment date, to
apply the amount of such dividend or distribution on each Participant's Shares
(less their PRO RATA share of brokerage commissions incurred with respect to the
Plan Agent's open-market purchases in connection with the reinvestment of such
dividend or distribution) to purchase Shares on the open market for each
Participant's account. No such purchases may be made more than 30 days after the
payment date for such dividend except where temporary curtailment or suspension
of purchase is necessary to comply with applicable provisions of federal
securities laws. If, at the close of business on any day during the purchase
period the net asset value per Share equals or is less than the market price per
Share plus estimated brokerage commissions, the Plan Agent will not make any
further open-market purchases in connection with the reinvestment of such
dividend or distribution. If the Plan Agent is unable to invest the full
dividend or distribution amount through open-market purchases during the
purchase period, the Plan Agent shall request that, with respect to the
uninvested portion of such dividend or distribution amount, the Fund issue new
Shares at the close of business on the earlier of the last day of the purchase
period or the first day during the purchase period on which the net asset value
per Share equals or is less than the market price per Share, plus estimated
brokerage commissions, such Shares to be issued in accordance with the terms
specified in the third paragraph hereof. These newly issued Shares will be
valued at the then-current market price per Share at the time such Shares are to
be issued.
For purposes of making the dividend reinvestment purchase comparison under the
Plan, (a) the market price of the Shares on a particular date shall be the last
sales price on the New York Stock Exchange (or if the Shares are not listed on
the New York Stock Exchange, such other exchange on which the Shares are
principally traded) on that date, or, if there is no sale on such Exchange (or
if not so listed, in the over-the-counter market) on that date, then the mean
between the closing bid and asked quotations for such Shares on such Exchange on
such date and (b) the net asset value per Share on a particular date shall be
the net asset value per Share most recently calculated by or on behalf of the
Fund. All dividends, distributions and other payments (whether made in cash or
Shares) shall be made net of any applicable withholding tax.
Open-market purchases provided for above may be made on any securities exchange
where the Fund's Shares are traded, in the over-the-counter market or in
negotiated transactions and may be on such terms as to price, delivery and
otherwise as the Plan Agent shall determine. Each Participant's uninvested funds
held by the Plan Agent will not bear interest, and it is understood that, in any
event, the Plan Agent shall have no liability in connection with any inability
to purchase Shares within 30 days after the initial date of such purchase as
herein provided, or with the timing of any purchases effected. The Plan Agent
shall have no responsibility as to the value of the Shares acquired for each
Participant's account. For the purpose of cash investments, the Plan Agent may
commingle each Participant's funds with those of other shareholders of the Fund
for whom the Plan Agent similarly acts as agent, and the average price
(including brokerage commissions) of all Shares purchased by the Plan Agent as
Plan Agent shall be the price per Share allocable to each Participant in
connection therewith.
23
<Page>
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. Upon any termination, the Plan Agent
will cause a certificate or certificates for the number of Shares held for each
Participant under the Plan to be delivered to the Participant (or if the Shares
are not then in certificated form, will cause the Shares to be transferred to
the Participant) without charge.
These terms and conditions may be amended or supplemented by the Plan Agent or
the Fund at any time or times but, except when necessary or appropriate to
comply with applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority, only by mailing to each
Participant appropriate written notice at least 30 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by each
Participant unless, prior to the effective date thereof, the Plan Agent receives
written notice of the termination of their account under the Plan. Any such
amendment may include an appointment by the Plan Agent in its place and stead of
a successor Plan Agent under these terms and conditions, with full power and
authority to perform all or any of the acts to be performed by the Plan Agent
under these terms and conditions. Upon any such appointment of any Plan Agent
for the purpose of receiving dividends and distributions, the Fund will be
authorized to pay to such successor Plan Agent, for each Participant's account,
all dividends and distributions payable on Shares held in their name or under
the Plan for retention or application by such successor Plan Agent as provided
in these terms and conditions.
The Plan Agent shall at all times act in good faith and agrees to use its best
efforts within reasonable limits to ensure the accuracy of all services
performed under this Agreement and to comply with applicable law, but assumes no
responsibility and shall not be liable for loss or damage due to errors unless
such error is caused by the Plan Agent's negligence, bad faith, or willful
misconduct or that of its employees.
These terms and conditions shall be governed by the laws of the State of
Maryland.
24
<Page>
DIRECTORY
INVESTMENT MANAGER AND ADMINISTRATOR
Neuberger Berman Management Inc.
605 Third Avenue, 2nd Floor
New York, NY 10158-0180
800.461.1899 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
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
25
<Page>
DIRECTORS AND OFFICERS
The following tables set forth information concerning the directors and officers
of the Funds. All persons named as directors and officers also serve in similar
capacities for other funds administered or managed by Management and Neuberger.
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
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) AND LENGTH OF TIME OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
POSITION (2) WITH FUND SERVED PRINCIPAL OCCUPATION(S) (4) DIRECTOR (5) FUND COMPLEX BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS I
INDEPENDENT FUND DIRECTORS
Faith Colish (70) Since the Counsel, Carter Ledyard & 45 Director, American Bar
Director inception of Milburn LLP (law firm) since Retirement Association (ABRA)
the Fund(3) October 2002; formerly, since 1997 (not-for-profit
Attorney-at-Law and President, membership association).
Faith Colish, A Professional
Corporation, 1980 to 2002.
C. Anne Harvey (68) Since the Consultant, C.A. Harvey 45 President, Board of Associates
Director inception of Associates since June 2001; to The National Rehabilitation
the Fund(3) formerly, Director, AARP, 1978 Hospital's Board of Directors
to December 2001. since 2002; formerly, Member,
Individual Investors Advisory
Committee to the New York
Stock Exchange Board of
Directors, 1998 to June 2002;
formerly, Member, American
Savings Education Council's
Policy Board (ASEC), 1998 to
2000; formerly, Member,
Executive Committee, Crime
Prevention Coalition of
America, 1997 to 2000.
Cornelius T. Ryan (74) Since the Founding General Partner, Oxford 45 Director, Capital Cash
Director inception of Partners and Oxford Bioscience Management Trust (money market
the Fund(3) Partners (venture capital fund), Naragansett Insured
partnerships) and President, Tax-Free Income Fund, Rocky
Oxford Venture Corporation. Mountain Equity Fund, Prime
Cash Fund, several private
companies and QuadraMed
Corporation (NASDAQ).
</Table>
26
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) AND LENGTH OF TIME OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
POSITION (2) WITH FUND SERVED PRINCIPAL OCCUPATION(S) (4) DIRECTOR (5) FUND COMPLEX BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
Peter P. Trapp (61) Since the Regional Manager for Atlanta 45 None.
Director inception of Region, Ford Motor Credit
the Fund(3) Company since August 1997;
formerly, President, Ford Life
Insurance Company, April 1995
to August 1997.
DIRECTOR WHO IS AN "INTERESTED PERSON"
Peter E. Sundman* (46) Since the Executive Vice President, 45 Director and Vice President,
Chief Executive Officer, inception of Neuberger Berman Inc. (holding Neuberger & Berman Agency, Inc.
Director and Chairman the Fund(3) company) since 1999; Head of since 2000; formerly, Director,
of the Board Neuberger Berman Inc.'s Mutual Neuberger Berman Inc. (holding
Funds Business (since 1999) and company) from October 1999 to
Institutional Business (from March 2003; Trustee, Frost
1999 to October 2005); Valley YMCA.
responsible for Managed
Accounts Business and
intermediary distribution since
October 2005; President and
Director, Management since
1999; Executive Vice President,
Neuberger since 1999; formerly,
Principal, Neuberger from 1997
to 1999; formerly, Senior Vice
President, Management from 1996
to 1999.
CLASS II
INDEPENDENT FUND DIRECTORS
John Cannon (75) Since the Consultant. Formerly, 45 Independent Trustee or
Director inception of Chairman, CDC Investment Director of three series of
the Fund(3) Advisers (registered investment Oppenheimer Funds:
adviser), 1993 to January 1999; Limited Term New York
formerly, President and Chief Municipal Fund, Rochester
Executive Officer, AMA Fund Municipals, and
Investment Advisors, an Oppenheimer Convertible
affiliate of the American Securities Fund, since 1992.
Medical Association.
Barry Hirsch (72) Since the Attorney-at-Law. Formerly, 45 None.
Director inception of Senior Counsel, Loews
the Fund(3) Corporation (diversified
financial corporation) May 2002
to April 2003; formerly, Senior
Vice President, Secretary and
General Counsel, Loews
Corporation.
</Table>
27
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) AND LENGTH OF TIME OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
POSITION (2) WITH FUND SERVED PRINCIPAL OCCUPATION(S) (4) DIRECTOR (5) FUND COMPLEX BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
Tom D. Seip (55) Since the General Partner, Seip 45 Director, H&R Block, Inc.
Director inception of Investments LP (a private (financial services company)
the Fund(3) investment partnership); since May 2001; Director,
formerly, President and CEO, Forward Management, Inc.
Westaff, Inc. (temporary (asset management) since
staffing), May 2001 to January 2001; formerly, Director,
2002; Senior Executive at the General Magic (voice
Charles Schwab Corporation from recognition software) 2001 to
1983 to 1999, including Chief 2002; formerly, Director,
Executive Officer, Charles E-Finance Corporation (credit
Schwab Investment Management, decisioning services) 1999 to
Inc. and Trustee, Schwab Family 2003; formerly, Director,
of Funds and Schwab Investments Save-Daily.com (micro
from 1997 to 1998; and Executive investing services) 1999 to
Vice President-Retail Brokerage, 2003; Director, Offroad
Charles Schwab Investment Capital Inc. (pre-public
Management from 1994 to 1997. internet commerce company).
DIRECTOR WHO IS AN "INTERESTED PERSON"
Jack L. Rivkin* (65) Since 2002(3) Executive Vice President and 45 Director, Dale Carnegie and
President and Director Chief Investment Officer, Associates, Inc. (private
Neuberger Berman Inc. (holding company) since 1998;
company) since 2002 and 2003, Director, Emagin Corp.
respectively; Executive Vice (public company) since 1997;
President and Chief Investment Director, Solbright, Inc.
Officer, Neuberger since (private company) since 1998;
December 2002 and 2003, Director, Infogate, Inc.
respectively; Director and (private company) since 1997;
Chairman, Management since Director, Broadway Television
December 2002; formerly, Network (private company)
Executive Vice President, since 2000.
Citigroup Investments, Inc.
from September 1995 to February
2002; formerly, Executive Vice
President, Citigroup Inc. from
September 1995 to February
2002.
</Table>
28
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) AND LENGTH OF TIME OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
POSITION (2) WITH FUND SERVED PRINCIPAL OCCUPATION(S) (4) DIRECTOR (5) FUND COMPLEX BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS III
INDEPENDENT FUND DIRECTORS
Robert A. Kavesh (78) Since the Marcus Nadler Professor Emeritus 45 Director, The Caring
Director inception of the of Finance and Economics, New Community (not-for-profit);
Fund(3) York University Stern School of formerly, Director, DEL
Business; formerly, Executive Laboratories, Inc. (cosmetics
Secretary-Treasurer, American and pharmaceuticals), 1978 to
Finance Association, 1961 to 2004; formerly, Director,
1979. Apple Bank for Savings, 1979
to 1990; formerly, Director,
Western Pacific Industries,
Inc., 1972 to 1986 (public
company).
Howard A. Mileaf (68) Since the Retired. Formerly, Vice 45 Director, WHX Corporation
Director inception of the President and Special Counsel, (holding company) since
Fund(3) WHX Corporation (holding August 2002; Director,
company) 1993 to 2001. Webfinancial Corporation
(holding company) since
December 2002; Director, State
Theatre of New Jersey
(not-for-profit theater) since
2000; formerly, Director,
Kevlin Corporation
(manufacturer of microwave and
other products).
Edward I. O'Brien (77) Since the Formerly, Member, Investment 45 Director, Legg Mason, Inc.
Director inception of the Policy Committee, Edward Jones, (financial services holding
Fund(3) 1993 to 2001; President, company) since 1993;
Securities Industry Association formerly, Director, Boston
("SIA") (securities industry's Financial Group (real estate
representative in government and tax shelters) 1993 to
relations and regulatory matters 1999.
at the federal and state levels)
1974 to 1992; Adviser to SIA,
November 1992 to November 1993.
William E. Rulon (73) Since the Retired. Formerly, Senior Vice 45 Director, Pro-Kids Golf and
Director inception of the President, Foodmaker, Inc. Learning Academy (teach golf
Fund(3) (operator and franchiser of and computer usage to "at
restaurants) until January 1997. risk" children) since 1998;
formerly, Director, Prandium,
Inc. (restaurants) from March
2001 to July 2002.
</Table>
29
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
NAME, AGE, ADDRESS (1) AND LENGTH OF TIME OVERSEEN BY OTHER DIRECTORSHIPS HELD OUTSIDE
POSITION (2) WITH FUND SERVED PRINCIPAL OCCUPATION(S) (4) DIRECTOR (5) FUND COMPLEX BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
Candace L. Straight (58) Since the Private investor and consultant 45 Director, The Proformance
Director inception of specializing in the insurance Insurance Company (personal
the Fund(3) industry; formerly, Advisory lines property and casualty
Director, Securitas Capital LLC insurance company) since March
(a global private equity 2004; Director, Providence
investment firm dedicated to Washington (property and
making investments in the casualty insurance company)
insurance sector) 1998 to since December 1998; Director,
December 2002. Summit Global Partners
(insurance brokerage firm)
since October 2000.
</Table>
(1) The business address of each listed person is 605 Third Avenue, New York,
New York 10158.
(2) The Board of Directors shall at 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 meeting of shareholders held in 2006, 2007, and
2008, respectively, and at each third annual meeting of stockholders
thereafter.
(3) The Director has served since the Fund's inception except for Mr. Rivkin
who has served as a Director since December 2002 for the Funds with an
inception date of 2002. The inception date of Neuberger Berman Intermediate
Municipal Fund Inc., Neuberger Berman California Intermediate Municipal
Fund Inc., Neuberger Berman New York Intermediate Municipal Fund Inc., and
Neuberger Berman Real Estate Income Fund Inc. is 2002. The inception date
of Neuberger Berman Realty Income Fund Inc., Neuberger Berman Real Estate
Securities Income Fund Inc. and Neuberger Berman Income Opportunity Fund
Inc. is 2003. The inception date of Neuberger Berman Dividend Advantage
Fund Inc. is 2004.
(4) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
(5) For funds organized in a master-feeder structure, we count the master fund
and its associated feeder funds as a single portfolio.
* 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 they are officers and/or directors of Management
and Executive Vice Presidents of Neuberger Berman.
30
<Page>
INFORMATION ABOUT THE OFFICERS OF THE FUND
<Table>
<Caption>
POSITION AND
NAME, AGE, AND ADDRESS (1) LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) (2)
- -----------------------------------------------------------------------------------------------------------------------------------
Michael J. Bradler (35) Assistant Treasurer since 2005 Employee, Management since 1997; Assistant
Treasurer, fifteen registered investment
companies for which Management acts as
investment manager and administrator since
2005.
Claudia A. Brandon (49) Secretary since the Fund's Vice President-Mutual Fund Board Relations,
inception (3) Management since 2000 and Assistant Secretary
since 2004; Vice President, Neuberger since
2002 and employee since 1999; Assistant
Secretary, Management since 2004; formerly,
Vice President, Management from 1986 to 1999;
Secretary, fifteen registered investment
companies for which Management acts as
investment manager and administrator (three
since 2000, four since 2002, three since 2003,
four since 2004 and one since 2005).
Robert Conti (49) Vice President since the Fund's Senior Vice President, Neuberger since 2003;
inception (3) formerly, Vice President, Neuberger from 1999
to 2003; Senior Vice President, Management
since 2000; formerly, Controller, Management
until 1996; formerly, Treasurer, Management
from 1996 to 1999; Vice President, fifteen
registered investment companies for which
Management acts as investment manager and
administrator (three since 2000, four since
2002, three since 2003, four since 2004 and one
since 2005).
Brian J. Gaffney (52) Vice President since the Fund's Managing Director, Neuberger since 1999;
inception (3) Senior Vice President, Management since 2000;
formerly, Vice President, Management from 1997
to 1999; Vice President, fifteen registered
investment companies for which Management acts
as investment manager and administrator (three
since 2000, four since 2002, three since 2003,
four since 2004 and one since 2005).
</Table>
31
<Page>
<Table>
<Caption>
POSITION AND
NAME, AGE, AND ADDRESS (1) LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) (2)
- -----------------------------------------------------------------------------------------------------------------------------------
Sheila R. James (40) Assistant Secretary since the Employee, Neuberger since 1999; formerly,
Fund's inception (3) Employee, Management from 1991 to 1999;
Assistant Secretary, fifteen registered
investment companies for which Management acts
as investment manager and administrator (seven
since 2002, three since 2003, four since 2004
and one since 2005).
Kevin Lyons (50) Assistant Secretary since 2003 (4) Employee, Neuberger since 1999; formerly,
Employee, Management from 1993 to 1999;
Assistant Secretary, fifteen registered
investment companies for which Management acts
as investment manager and administrator (ten
since 2003, four since 2004 and one since
2005).
John M. McGovern (35) Treasurer and Principal Financial Vice President, Neuberger since January 2004;
and Accounting Officer since Employee, Management since 1993; Treasurer
2005; prior thereto, Assistant and Principal Financial and Accounting Officer,
Treasurer since the Fund's fifteen registered investment companies for
inception (3) which Management acts as investment manager and
administrator (fifteen since 2005); formerly,
Assistant Treasurer, fifteen registered
investment companies for which Management acts
as investment manager and administrator from
2002 to 2005.
Frank Rosato (34) Assistant Treasurer since 2005 Employee, Management since 1995; Assistant
Treasurer, fifteen registered investment
companies for which Management acts as
investment manager and administrator since
2005.
Frederic B. Soule (59) Vice President since the Fund's Senior Vice President, Neuberger since 2003;
inception (3) formerly, Vice President, Neuberger from 1999
to 2003; formerly, Vice President, Management
from 1995 to 1999; Vice President, fifteen
registered investment companies for which
Management acts as investment manager and
administrator (three since 2000, four since
2002, three since 2003, four since 2004 and one
since 2005).
</Table>
32
<Page>
<Table>
<Caption>
POSITION AND
NAME, AGE, AND ADDRESS (1) LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) (2)
- -----------------------------------------------------------------------------------------------------------------------------------
Chamaine Williams (34) Chief Compliance Officer Vice President, Lehman Brothers Inc. since
since 2005 2003; Chief Compliance Officer, fifteen
registered investment companies for which
Management acts as investment manager and
administrator (fifteen since 2005); Chief
Compliance Officer, Lehman Brothers Asset
Management Inc. since 2003; Chief Compliance
Officer, Lehman Brothers Alternative Investment
Management LLC since 2003; formerly, Vice
President, UBS Global Asset Management (US)
Inc. (formerly, Mitchell Hutchins Asset
Management, a wholly-owned subsidiary of
PaineWebber Inc.) from 1997-2003.
</Table>
- ----------------
(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.
(3) The officer has served since the Fund's inception. The inception date of
Neuberger Berman Intermediate Municipal Fund, Inc., Neuberger Berman
California Intermediate Municipal Fund, Inc., Neuberger Berman New York
Intermediate Municipal Fund, Inc., and Neuberger Berman Real Estate Income
Fund is 2002. The inception date of Neuberger Berman Realty Income Fund,
Inc., Neuberger Berman Real Estate Securities Income Fund, Inc. and
Neuberger Berman Income Opportunity Fund, Inc. is 2003. The inception date
of the Neuberger Berman Dividend Advantage Fund, Inc. is 2004.
(4) For Neuberger Berman Dividend Advantage Fund, Inc., the officer has served
since the Fund's inception in May.
33
<Page>
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust 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
Trust voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is 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 Trust'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).
CHANGE TO INVESTMENT POLICY
On August 17, 2005, the Board approved a change to the Fund's investment policy
stating that securities lending and the investment of collateral in the
Neuberger Berman Securities Lending Quality Fund are permitted exceptions to the
policies of the Fund requiring that it invest a specific percentage of its
assets in accordance with its principal investment program.
NOTICE TO SHAREHOLDERS
For Neuberger Berman Dividend Advantage Fund, 8.28% of dividends distributed
during the fiscal year ended October 31, 2005 qualifies for the dividends
received deduction for corporate shareholders.
For the fiscal year ended October 31, 2005, Neuberger Berman Dividend Advantage
Fund Inc. designates $1,007,104 or up to the maximum amount of such dividends
allowable pursuant to the Internal Revenue Code, as qualified dividend income
eligible for reduced tax rates. These lower rates range from 5% to 15% depending
upon an individual's tax bracket. Complete information regarding the fund's
distributions during the calendar year 2005 will be reported in conjunction with
Form 1099-DIV.
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BOARD CONSIDERATION OF THE MANAGEMENT AND SUB-ADVISORY AGREEMENTS
At a meeting held on September 21, 2005, the Board of Directors ("Board") of
Neuberger Berman Dividend Advantage Fund Inc. ("Fund"), including the Directors
who are not "interested persons" of the Fund ("Independent Fund Directors"),
approved continuance of the Management and Sub-Advisory Agreements
("Agreements") for the Fund.
In evaluating the Agreements, the Board, including the Independent Fund
Directors, reviewed materials furnished by Management and Neuberger Berman, LLC
("Neuberger") in response to questions submitted by counsel to the Independent
Fund Directors, and met with senior representatives of Management and Neuberger
regarding their personnel and operations. The Independent Fund Directors were
advised by counsel that is experienced in Investment Company Act of 1940 matters
and that is independent of Management and Neuberger. The Independent Fund
Directors received a memorandum from independent counsel discussing the legal
standards for their consideration of the proposed continuance of the Agreements.
They met with such counsel separately from representatives of Management to
discuss the annual contract review. The annual contract review extends over two
regular meetings of the Board to ensure that Management and Neuberger have time
to respond to any questions the Independent Fund Directors may have on their
initial review of the report and that the Independent Fund Directors have time
to consider those responses. In addition, during this process, the Board held a
separate meeting devoted to reviewing and discussing Fund performance.
The Board considered the following factors, among others, in connection with its
approval of the continuance of the Agreements: (1) the nature, extent, and
quality of the services to be provided by Management and Neuberger; (2) the
performance of the Fund compared to relevant market indices and a peer group of
investment companies; (3) the costs of the services to be provided and profits
historically realized by Management and its affiliates from the relationship
with the Fund; (4) the extent to which economies of scale might be realized as
the Fund grows; and (5) whether fee levels reflect those potential economies of
scale for the benefit of investors in the Fund. In their deliberations, the
Board members did not identify any particular information that was all-important
or controlling, and each Director may have attributed different weights to the
various factors.
The Board evaluated the terms of the Agreements and whether the Agreements were
in the best interests of the Fund and its shareholders. The Board considered,
with respect to the Fund, the nature, extent and quality of the services
provided under the Agreements and the overall fairness of the Agreements to the
Fund. The Board requested and evaluated a report from Management and Neuberger
that addressed specific factors designed to inform the Board's consideration of
these and other issues. The Board also retained an independent consultant to
provide additional data.
With respect to the nature, extent and quality of the services provided, the
Board considered the performance of the Fund and the degree of risk undertaken
by the portfolio managers. The Board considered the experience and staffing of
portfolio management and the investment research personnel of Management and
Neuberger dedicated to performing services for the Fund. The Board noted that
Management also provides certain administrative services, including fund
accounting and compliance oversight. The Board also considered Management's and
Neuberger's policies and practices regarding brokerage and allocation of
portfolio transactions for the Fund. The Board considered the quality of
brokerage execution provided by Management and its affiliates. The Board's
Portfolio Transactions and Pricing Committee from time to time reviews the
quality of the brokerage services that Neuberger and Lehman provide, and has
reviewed studies by independent firms engaged to review and evaluate the quality
of brokerage execution received by the Fund. In addition, the Board noted the
positive compliance history of Management and Neuberger, as each firm has been
free of significant compliance problems.
With respect to the performance of the Fund, the Board considered the
performance of the Fund on both a market return and net asset value basis
relative to its benchmark and a peer group of investment companies pursuing
broadly similar strategies. The Board also considered the performance in
relation to the degree of risk undertaken by the portfolio managers. The Board
noted the difficulty of constructing an appropriate peer group. The Board
discussed the Fund's performance with Management and discussed steps that
Management had taken, or intended to take, to improve the Fund's performance.
The Board also considered Management's resources and responsiveness with respect
to the Fund.
35
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With respect to the overall fairness of the Agreements, the Board considered the
fee structure of the Agreements as compared to a peer group of comparable funds
and any fall-out benefits likely to accrue to Management or Neuberger or their
affiliates. The Board also considered the profitability of Management and its
affiliates from their association with the Fund.
The Board received a detailed report from an independent consultant that
compares the Fund's management fee and overall expense ratio to a peer group of
comparable funds. The Board considered the range and average of the management
fees and expense ratios of the peer group. With regard to the sub-advisory fee
paid to Neuberger, the Board noted that this fee is reflective of an "at cost"
basis and there is no profit to Neuberger with regard to these fees. The Board
considered the Fund's overall expenses in relation to the overall expenses of
the peer group median. In addition, the Board considered the contractual waiver
of a portion of the management fee undertaken by Management. The Board noted
that Management incurred a loss on the Fund on an after-tax basis.
The Board considered whether there were other funds that were sub-advised by
Management or its affiliates or separate accounts managed by Management with
similar investment objectives, policies and strategies as the Fund. The Board
noted that there were no comparable sub-advised funds or separate accounts.
The Board also evaluated any actual or anticipated economies of scale in
relation to the services Management provides to the Fund. The Board considered
that the Fund was a closed-end fund that is not continuously offering shares and
that, without daily inflows and outflows of capital, there were not at this time
significant economies of scale to be realized by Management in managing the
Fund's assets.
In concluding that the benefits accruing to Management and its affiliates by
virtue of their relationship to the Fund were reasonable in comparison with the
costs of providing the investment advisory services and the benefits accruing to
the Fund, the Board reviewed specific data as to Management's profit or loss on
the Fund for a recent period. The Board also carefully examined Management's
cost allocation methodology and had an independent expert review the
methodology. It also reviewed an analysis from an independent data service on
investment management profitability margins. The Board also reviewed whether
Management and Neuberger used brokers to execute Fund transactions that provide
research and other services to Management and Neuberger, and the types of
benefits potentially derived by the Fund and by other clients of Management and
Neuberger from such services. The Board recognized that Management should be
entitled to earn a reasonable level of profits for services it provides to the
Fund and, based on its review, concluded it was satisfied that Management's
level of profitability from its relationship with the Fund was not excessive.
CONCLUSIONS
In approving the Agreements, the Board concluded that the terms of each
Agreement are fair and reasonable and that approval of the Agreements is in the
best interest of the Fund and its shareholders. In reaching this determination,
the Board considered that Management and Neuberger could be expected to provide
a high level of service to the Fund; that it retained confidence in Management's
and Neuberger's capabilities to manage the Fund; that the Fund's fee structure
appeared to the Board to be reasonable given the quality of services expected to
be provided; and that the benefits accruing to Management and its affiliates by
virtue of their relationship to the Fund were reasonable in comparison with the
costs of providing the investment advisory services and the benefits accruing to
the Fund.
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[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] E0100 12/05
ITEM 2. CODE OF ETHICS
The 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"). 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 an independent directors as defined by Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Ernst & Young, LLP ("E&Y") serves as independent registered public accounting
firm to the Registrant.
(a) Audit Fees
----------
The aggregate fees billed for professional services rendered by E&Y for the
audit of the annual financial statements or services that are normally provided
by E&Y in connection with statutory and regulatory filings or engagements were
$49,750 and $31,250 for the fiscal years ended 2004 and 2005, respectively.
(b) Audit-Related Fees
------------------
The aggregate fees billed to the Registrant for assurance and related services
by E&Y that are reasonably related to the performance of the audit of the
Registrant's financial statements and are not reported above in Audit Fees were
$0 and $6,000 for the fiscal years ended 2004 and 2005, respectively. The nature
of the services provided involved agreed upon procedures relating to the
Preferred Shares. The Audit Committee approved 0% of these services provided by
E&Y for the fiscal year ended 2005 pursuant to the waiver provisions of Rule
2-01(c)(7)(i)(C) of Regulation S-X.
The fees billed to other entities in the investment company complex for
assurance and related services by E&Y that are reasonably related to the
performance of the audit that the Audit Committee was required to approve
because the engagement related directly to the operations and financial
reporting of the Registrant were $0 and $0 for the fiscal years ended 2004 and
2005, respectively.
(c) Tax Fees
--------
The aggregate fees billed to the Registrant for professional services rendered
by E&Y for tax compliance, tax advice, and tax planning were $8,700 and $8,700
for the fiscal years ended 2004 and 2005. The nature of the services provided
was tax compliance, tax advice, and tax planning. The Audit Committee approved
0% and 0% of these services provided by E&Y for the fiscal years ended 2004 and
2005, respectively, pursuant to the waiver provisions of Rule 2-01(c)(7)(i)(C)
of Regulation S-X.
The fees billed to other entities in the investment company complex for tax
compliance, tax advice, and tax planning that the Audit Committee was required
to approve because the engagement related directly to the operations and
financial reporting of the Registrant were $0 and $0 for the fiscal years ended
2004 and 2005, respectively.
(d) All Other Fees
--------------
The aggregate fees billed to the Registrant for products and services provided
by E&Y, other than services reported in AUDIT FEES, AUDIT-RELATED FEES, and TAX
FEES were $0 and $0 for the fiscal years ended 2004 and 2005, respectively.
The fees billed to other entities in the investment company complex for products
and services provided by E&Y, other than services reported in AUDIT FEES,
AUDIT-RELATED FEES, and TAX FEES that the Audit Committee was required to
approve because the engagement related directly to the operations and financial
reporting of the Registrant were $0 and $0 for the fiscal years ended 2004 and
2005, respectively.
(e) Audit Committee's Pre-Approval Policies and Procedures
------------------------------------------------------
(1) The Audit Committee's pre-approval policies and procedures for the
Registrant to engage an accountant to render audit and non-audit services
delegate to the Chair of the Committee the power to pre-approve services between
meetings of the Committee.
(2) None of the services described in paragraphs (b) through (d) above were
approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.
(f) Hours Attributed to Other Persons
---------------------------------
Not applicable.
(g) Non-Audit Fees
--------------
Non-audit fees billed by E&Y for services rendered to the Registrant were $8,700
and $14,700 for the fiscal years ended 2004 and 2005, respectively.
Non-audit fees billed by E&Y for services rendered to the Registrant's
investment adviser and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the Registrant were
$256,050 and $160,650 for the fiscal years ended 2004 and 2005.
(h) The Audit Committee of the Board considered whether the provision of
non-audit services rendered to the Registrant's investment adviser and any
entity controlling, controlled by, or under common control with the adviser that
provides ongoing services to the Registrant that were not pre-approved by the
Audit Committee because the engagement did not relate directly to the operations
and financial reporting of the Registrant is compatible with maintaining E&Y's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
The Board has established an Audit Committee to oversee particular aspects of
the Registrant's management. The Audit Committee's purposes are (a) to oversee
the Funds' accounting and financial reporting processes, their internal control
over financial reporting and, as the Committee deems appropriate, to inquire
into the internal control over financial reporting of certain third-party
service providers; (b) to oversee the quality and integrity of the Funds'
financial statements and the independent audit thereof; (c) to oversee, or, as
appropriate, assist Board oversight of, the Funds' compliance with legal and
regulatory requirements that relate to the Funds' accounting and financial
reporting, internal control over financial reporting and independent audits; (d)
to approve prior to appointment the engagement of the Funds' independent
registered public accounting firms and, in connection therewith, to review and
evaluate the qualifications, independence and performance of the Funds'
independent registered public accounting firms; (e) to act as a liaison between
the Funds' independent registered public accounting firms and the full Board;
and (f) to prepare an audit committee report as required by Item 306 of
Regulations S-K to be included in proxy statements relating to the election of
directors. Its members are John Cannon, Howard A. Mileaf, Cornelius T. Ryan
(Chairman), Tom D. Seip, and Peter P. Trapp. All members are Independent Fund
Trustees.
ITEM 6. SCHEDULE OF INVESTMENTS
The complete schedule of investments for each series is disclosed in the
Registrant's Annual Report, which is included as Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
The Board has delegated to Neuberger Berman, LLC ("Neuberger Berman") the
responsibility to vote proxies related to the securities held in the Fund's
portfolios. Under this authority, Neuberger Berman is required by the Board to
vote proxies related to portfolio securities in the best interests of the Fund
and its stockholders. The Board permits Neuberger Berman to contract with a
third party to obtain proxy voting and related services, including research of
current issues.
Neuberger Berman has implemented written Proxy Voting Policies and Procedures
("Proxy Voting Policy") that are designed to reasonably ensure that Neuberger
Berman votes proxies prudently and in the best interest of its advisory clients
for whom Neuberger Berman has voting authority, including the Fund. The Proxy
Voting Policy also describes how Neuberger Berman addresses any conflicts that
may arise between its interests and those of its clients with respect to proxy
voting.
Neuberger Berman's Proxy Committee is responsible for developing, authorizing,
implementing and updating the Proxy Voting Policy, overseeing the proxy voting
process and engaging and overseeing any independent third-party vendors as
voting delegate to review, monitor and/or vote proxies. In order to apply the
Proxy Voting Policy noted above in a timely and consistent manner, Neuberger
Berman utilizes Institutional Shareholder Services Inc. ("ISS") to vote proxies
in accordance with Neuberger Berman's voting guidelines.
Neuberger Berman's guidelines adopt the voting recommendations of ISS. Neuberger
Berman retains final authority and fiduciary responsibility for proxy voting.
Neuberger Berman believes that this process is reasonably designed to address
material conflicts of interest that may arise between Neuberger Berman and a
client as to how proxies are voted.
In the event that an investment professional at Neuberger Berman believes that
it is in the best interests of a client or clients to vote proxies in a manner
inconsistent with Neuberger Berman's proxy voting guidelines or in a manner
inconsistent with ISS recommendations, the Proxy Committee will review
information submitted by the investment professional to determine that there is
no material conflict of interest between Neuberger Berman and the client with
respect to the voting of the proxy in that manner.
If the Proxy Committee determines that the voting of a proxy as recommended by
the investment professional presents a material conflict of interest between
Neuberger Berman and the client or clients with respect to the voting of the
proxy, the Proxy Committee shall: (i) take no further action, in which case ISS
shall vote such proxy in accordance with the proxy voting guidelines or as ISS
recommends; (ii) disclose such conflict to the client or clients and obtain
written direction from the client as to how to vote the proxy; (iii) suggest
that the client or clients engage another party to determine how to vote the
proxy; or (iv) engage another independent third party to determine how to vote
the proxy.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable to the Registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
No reportable purchases for the period covered by this report.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no changes to the procedures by which shareholders may recommend
nominees to the Board.
ITEM 11. CONTROLS AND PROCEDURES
(a) Based on an evaluation of the disclosure controls and procedures (as
defined in rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the "Act")) as of a date within 90 days of the filing date of
this document, the Chief Executive Officer and Treasurer and Principal
Financial and Accounting Officer of the Registrant have concluded that
such disclosure controls and procedures are effectively designed to
ensure that information required to be disclosed by the Registrant is
accumulated and communicated to the Registrant's management to allow
timely decisions regarding required disclosure.
(b) There were no significant changes in the Registrant's internal controls
over financial reporting (as defined in rule 30a-3(d) under the Act)
that occurred during the Registrant's last fiscal half-year that have
materially affected, or are reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS
(a)(1) A copy of the Code of Ethics is filed as Exhibit 12(a)(1).
(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.
(a)(3) Not applicable to the Registrant.
(b) The certifications required by Rule 30a-2(b) of the Act and Section 906
of the Sarbanes-Oxley Act are attached hereto.
The certifications provided pursuant to Section 906 of the Sarbanes-Oxley Act
are not deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934 ("Exchange Act"), or otherwise subject to the liability of that section.
Such certifications will not be deemed to be incorporated by reference into any
filing under the Securities Act of 1933 or the Exchange Act, except to the
extent that the Registrant specifically incorporates them by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Neuberger Berman Dividend Advantage Fund Inc.
By: /s/ Peter E. Sundman
------------------------
Peter E. Sundman
Chief Executive Officer
Date: January 9, 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: January 9, 2006
By: /s/ John M. McGovern
------------------------
John M. McGovern
Treasurer and Principal Financial
and Accounting Officer
Date: January 9, 2006