<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
March 7, 1997
Dear Shareholder:
In the first fiscal quarter ended January 31, 1997, the Municipal Advantage
Fund continued to meet its objective of providing a high level of income exempt
from federal income tax by investing in a leveraged portfolio of quality
municipal securities. The Fund paid regular monthly dividends of 6.65 cents per
common share during the quarter, or a total of 19.95 cents per share in the
three-month period.
The Fund's total return on net asset value (dividends plus change in net
asset value per share, assuming reinvestment of dividends) was 1.2% in the
quarter, below the 1.6% return of the Lehman Brothers Municipal Bond Index
(Lehman Index), a widely followed benchmark. The Fund's return compared with an
average total return of 1.4% for the leveraged closed-end general municipal bond
funds monitored by Lipper Analytical Services, Inc. The Fund's performance was
45th among the 63 funds in this Lipper universe.
Based on the market price of the common shares and assuming reinvestment of
dividends, the Fund provided a total return of 1.7% in the quarter, exceeding
the Lehman Index. Although we measure ourselves as investment managers based on
performance at net asset value (NAV), performance at market--that is, change in
market price on the New York Stock Exchange plus dividends--is the return to
shareholders.
PREFERRED STOCK COSTS
The Fund uses leverage from its preferred shares to generate additional
income. At the latest auction on February 24, 1997, the Fund sold 91-day auction
rate preferred stock at an annual dividend rate of 3.50%, down from 3.69% on the
previous 91-day issue. Proceeds from the preferred stock are invested in
municipal bonds that yield more than the cost of the preferred, with the Fund's
common shares realizing the difference. Besides adding to income, the use of
leverage tends to magnify capital appreciation in a rising bond market and
magnify capital losses in a declining market.
MARKET REVIEW
The economy continues to be characterized by persistently low inflation and
moderate economic growth, conditions that are usually favorable for investments
in bonds. Nonetheless, prices of fixed income securities were erratic during the
first fiscal quarter, reflecting investor concerns that the Federal Reserve
might raise interest rates to forestall the threat of inflation. In fact,
inflation remained in check, and the Fed did not raise rates.
Bond prices rose in November, then gave up much of those gains in December
and January. In this relatively volatile environment, tax-exempt municipal
securities were one of the better-performing sectors of the bond market,
continuing to benefit from the rapidly evaporating support for radical tax
reform proposals. These proposals, which might have undermined the tax benefits
of municipal securities, appear now to be dormant.
We believe quality municipal securities offer good value at this time.
Yields on 30-year triple-A municipals were recently equal to about 82% of the
yield on comparable Treasury maturities, above the historic norm. This could
provide room for prices of municipals to increase relative to Treasuries.
PORTFOLIO ANALYSIS
At January 31, 1997, 98.1% (based on market value) of the portfolio was
invested in long-term securities, with the remainder in cash and cash
equivalents. The average maturity of the portfolio at January 31, 1997 was 21
years, unchanged from October 31, 1996.
In the quarter, we increased the Fund's investments in housing and
water/sewer bonds, where we find good value, and in the general obligation bonds
of states with improving economies, such as California, Texas and New York. The
five largest market sectors in the portfolio as of January 31, 1997 were:
housing, 18.2%; health and hospital, 17.5%; general obligation, 15.0%; water and
sewer, 13.3%; and airline and airport, 9.7%. The five
<PAGE>
largest portfolio positions by state were: New York, 18.0%; California, 10.6%;
Texas, 10.1%; Illinois, 6.1%; and Michigan, 6.1%. The diversity of the Fund's
investments, by both market sector and state, helps control risk.
We also increased the Fund's investments in higher rated securities, since
lower rated municipals offer relatively little additional value at this time. As
of January 31, 1997, of the long-term securities owned by the Fund, 83.8% of the
assets were rated A or better by Standard & Poor's or Moody's, up from 80.7%
three months earlier.
YIELD AND MARKET DISCOUNT
The yield on the Fund's common shares (based on the $11.875 per share
closing market price on January 31, 1997 and the annualized current monthly
dividend rate of 6.65 cents per common share) was 6.7% at the end of the
quarter, providing a significant real return above inflation. For an investor in
the top federal tax bracket of 39.6%, the Fund's yield was equivalent to 11.1%
on a taxable basis.
The Fund's common shares continue to trade in the market at a discount to
their NAV, as is true of most closed-end municipal bond funds. The Fund's
discount at the end of the quarter was 14.8%, narrowing slightly from the 14.9%
discount three months earlier. One way for owners of the Fund's common shares to
capitalize on the discount and acquire quality securities at a price well below
NAV is by reinvesting dividends, as many of the Fund's shareholders do.
RECENT DEVELOPMENT
On February 14, 1997, it was announced that a definitive agreement had been
reached for PIMCO Advisors L.P. and its affiliate, Thomson Advisory Group Inc.,
to acquire 100% of the stock of Advantage Advisers, Inc., the Fund's investment
manager, a 32.5% managing general partnership interest in Oppenheimer Capital
and a 1% general partner interest in Oppenheimer Capital, L.P. (owner of
approximately a two-thirds interest in Oppenheimer Capital). Oppenheimer Capital
is the parent of OpCap Advisors, the Fund's investment adviser. No change is
contemplated in the individuals managing the Fund or in the investment
strategies now employed.
Directors of the Fund will soon be asked to approve new investment advisory
agreements which will be substantially the same as the existing agreements. If
approved by the Board of Directors, shareholders will receive a proxy statement
with more detailed information seeking their approval. The acquisitions are also
subject to certain client, lender, IRS and other approvals, and are expected to
take several months to complete.
TOLL-FREE UPDATE
We remind you that a recorded periodic update, reviewing the municipal bond
markets and containing specific information regarding the Fund and its
portfolio, including largest holdings, asset allocation, NAV, performance and
other information, is available by calling (800) 421-4777.
SUMMARY
Whatever the direction of the bond market in the coming months, we will
continue to be disciplined in our value approach, seeking to capture the returns
that are available on long-term municipal securities while controlling risk.
We at the Fund, along with the Fund's manager, Advantage Advisers, Inc.,
and its adviser, OpCap Advisors, remain dedicated to serving your investment
needs. Thank you for investing with us.
Sincerely,
Mark C. Biderman
President
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (UNAUDITED)
JANUARY 31, 1997
<TABLE>
<CAPTION>
Principal Credit Rating
Amount (Moody's/S&P) Value(A)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS--98.2%
ALABAMA--1.9%
$1,000,000 Alabama State Docks Department Facility
Revenue,
6.15%, 10/1/14....................... Aaa/AAA $ 1,042,200
2,000,000 DCH Health Care Authority, Health Care
Facilities Revenue,
5.70%, 6/1/15........................ A1/A+ 1,985,000
-----------
3,027,200
-----------
CALIFORNIA--9.2%
1,000,000 Burbank Redevelopment Agency,
6.00%, 12/1/13....................... Baa1/A- 1,009,450
2,500,000 California Health Facilities Financing
Authority Revenue,
6.25%, 3/1/21........................ Aa3/AA 2,565,825
1,000,000 California State Public Works Board,
Lease Revenue,
6.30%, 10/1/10....................... A/A 1,059,270
1,000,000 Lafayette Elementary School District,
5.90%, 5/15/17....................... Aaa/AAA 1,017,220
3,000,000 Los Angeles Harbor Department Revenue,
5.375%, 11/1/23...................... Aa/AA 2,792,910
1,250,000 Los Angeles Public Works Finance
Authority (MBIA insured),
5.25%, 9/1/15........................ Aaa/AAA 1,205,400
1,000,000 Los Angeles Regional Airports Revenue,
6.70%, 1/1/22........................ NR/A- 1,065,890
1,000,000 Madera County Certificates of
Participation (MBIA insured),
6.125%, 3/15/23...................... Aaa/AAA 1,031,490
1,000,000 San Francisco City & County
Certificates of Participation
(CGIC insured),
5.60%, 4/1/16........................ Aaa/AAA 974,700
1,500,000 Student Education Loan Marketing
Corporation,
Student Loan Revenue,
7.00%, 7/1/10........................ NR/A 1,574,535
-----------
14,296,690
-----------
COLORADO--5.8%
3,085,000 Colorado Health Facilities Authority
Revenue (MBIA insured),
5.95%, 5/15/12....................... Aaa/AAA 3,177,365
Denver City & County Airport Revenue
(MBIA insured),
1,500,000 5.60%, 11/15/25...................... Aaa/AAA 1,435,875
4,500,000 5.75%, 11/15/17...................... Aaa/AAA 4,429,890
-----------
9,043,130
-----------
</TABLE>
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED)
JANUARY 31, 1997
<TABLE>
<CAPTION>
Principal Credit Rating
Amount (Moody's/S&P) Value(A)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONT'D)
FLORIDA--1.2%
$2,000,000 Florida State Board of Education,
5.00%, 6/1/20........................ Aa/AA $ 1,834,880
-----------
GEORGIA--1.5%
1,000,000 Savannah Hospital Authority Revenue,
6.125%, 7/1/12....................... A2/NR 1,036,150
1,260,000 Toombs County Hospital Authority
Revenue,
7.00%, 12/1/17....................... NR/BBB 1,308,056
-----------
2,344,206
-----------
ILLINOIS--6.1%
3,500,000 Du Page Water Commission, Water
Revenue,
5.25%, 5/1/14........................ Aa1/AA 3,365,285
2,800,000 Illinois Health Facilities Authority
Revenue,
9.00%, 11/15/15...................... Baa1/BBB 3,130,932
2,985,000 Illinois Housing Development Authority
Revenue,
6.70%, 8/1/25........................ Aa/AA 3,080,132
-----------
9,576,349
-----------
KENTUCKY--.7%
1,000,000 Louisville & Jefferson Counties
Metropolitan Sewer District
(AMBAC insured),
6.50%, 5/15/24....................... Aaa/AAA 1,097,050
-----------
LOUISIANA--1.0%
1,500,000 New Orleans General Obligation Bonds
(AMBAC insured),
6.125%, 10/1/16...................... Aaa/AAA 1,554,630
-----------
MAINE--.7%
1,000,000 Maine State Housing Authority, Mortgage
Purchase,
7.55%, 11/15/22...................... Aa2/AA 1,053,090
-----------
MARYLAND--1.2%
1,820,000 Maryland State Community Development
Administration
(FHA insured),
7.60%, 4/1/23........................ Aa/NR 1,881,207
-----------
MASSACHUSETTS--3.5%
2,250,000 Massachusetts State Health & Education
Facilities
Authority Revenue,
6.25%, 12/1/22....................... A1/A 2,306,722
1,175,000 Massachusetts State Water Pollution
Abatement Trust,
6.375%, 2/1/15....................... Aa3/AA+ 1,252,797
</TABLE>
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 1997
<TABLE>
<CAPTION>
Principal Credit Rating
Amount (Moody's/S&P) Value(A)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONT'D)
MASSACHUSETTS (CONT'D)
$2,000,000 Massachusetts State Water Resource
Authority,
5.25%, 3/1/13........................ A/A $ 1,922,220
-----------
5,481,739
-----------
MICHIGAN--6.1%
1,000,000 Alpena Public Schools,
5.70%, 5/1/14........................ Aaa/AAA 1,010,730
1,700,000 Dearborn School District,
6.00%, 5/1/14........................ Aa/AA 1,735,836
1,000,000 Grand Rapids Water Supply Systems
Revenue (FGIC insured),
6.50%, 1/1/15........................ Aaa/AAA 1,073,260
Michigan State Hospital Finance
Authority Revenue,
2,490,000 5.375%, 10/15/13..................... A1/NR 2,336,990
2,000,000 8.125%, 10/1/21...................... Baa/BBB 2,276,420
1,000,000 Michigan State Pollution Control
Revenue,
6.20%, 9/1/20........................ A3/A- 1,018,420
-----------
9,451,656
-----------
MINNESOTA--4.5%
Minnesota State Housing Finance Agency,
1,650,000 6.00%, 2/1/14........................ Aa/AA 1,668,595
2,950,000 6.10%, 8/1/22........................ Aa/AA 2,975,281
2,350,000 6.25%, 8/1/22........................ Aa/AA 2,372,960
-----------
7,016,836
-----------
NEVADA--4.6%
2,000,000 Clark County General Obligation Bonds
(MBIA insured),
6.00%, 6/1/13........................ Aaa/AAA 2,074,060
2,000,000 Clark County Passenger Facility Charge
Revenue
(MBIA insured),
5.75%, 7/1/23........................ Aaa/AAA 1,959,980
1,000,000 Las Vegas General Obligation Bonds,
6.60%, 10/1/12....................... Aaa/AAA 1,109,020
Nevada Housing Division Revenue,
1,055,000 6.20%, 4/1/17........................ Aaa/NR 1,072,745
1,000,000 6.20%, 10/1/28....................... Aaa/NR 1,002,360
-----------
7,218,165
-----------
</TABLE>
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 1997
<TABLE>
<CAPTION>
Principal Credit Rating
Amount (Moody's/S&P) Value(A)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONT'D)
NEW HAMPSHIRE--2.0%
$1,000,000 New Hampshire Higher Educational &
Health Facilities
Authority Revenue,
6.125%, 10/1/13...................... Baa/NR $ 986,860
New Hampshire State Housing Finance
Authority,
995,000 6.50%, 7/1/14........................ Aa/NR 1,024,512
1,000,000 6.90%, 7/1/19........................ Aa/NR 1,040,620
-----------
3,051,992
-----------
NEW JERSEY--2.2%
1,000,000 New Jersey Economic Development
Authority,
Heating & Cooling Revenue,
6.20%, 12/1/07....................... NR/BBB- 1,014,900
2,670,000 North Hudson Sewer Authority Revenue
(FGIC insured),
5.125%, 8/1/22....................... Aaa/AAA 2,502,351
-----------
3,517,251
-----------
NEW YORK--18.0%
2,000,000 Metropolitan Transportation Authority,
Transportation
Facilities Revenue,
6.00%, 7/1/14........................ Baa/BBB+ 2,005,120
1,000,000 Municipal Assistance Corporation, City
of Troy
(MBIA insured),
5.00%, 1/15/16....................... Aaa/AAA 924,940
New York City General Obligation Bonds,
300,000 5.75%, 2/1/12........................ Baa1/BBB+ 290,349
2,000,000 5.75%, 2/1/17........................ Baa1/BBB+ 1,906,440
1,000,000 5.875%, 3/15/18...................... Baa1/BBB+ 964,210
1,000,000 6.00%, 8/1/14........................ Baa1/BBB+ 987,220
2,500,000 6.00%, 8/1/16........................ Baa1/BBB+ 2,452,175
1,000,000 6.95%, 8/15/12 (MBIA insured)........ Aaa/AAA 1,116,080
2,270,000 7.00%, 10/1/09....................... Baa1/BBB+ 2,424,337
3,000,000 New York City Industrial Development
Agency,
Special Facilities Revenue,
6.125%, 1/1/24....................... A/A 2,982,180
3,550,000 New York City Municipal Water Finance
Authority,
Water & Sewer Systems Revenue,
6.00%, 6/15/25....................... A/A- 3,566,011
</TABLE>
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 1997
<TABLE>
<CAPTION>
Principal Credit Rating
Amount (Moody's/S&P) Value(A)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONT'D)
NEW YORK (CONT'D)
New York State Dormitory Authority
Revenue,
$1,500,000 5.75%, 5/15/24....................... Baa1/BBB+ $ 1,428,570
500,000 6.25%, 7/1/25........................ Baa1/BBB- 504,535
1,500,000 6.75%, 7/1/24 (MBIA insured)(B)...... Aaa/AAA 1,713,900
1,000,000 7.65%, 8/1/30 (FHA insured).......... NR/AAA 1,091,840
1,500,000 New York State Local Government
Assistance Corporation,
6.50%, 4/1/20........................ A/A 1,606,800
1,000,000 New York State Medical Care Facilities,
Finance Agency Revenue,
6.50%, 8/15/24....................... Baa1/BBB+ 1,044,740
New York State Urban Development
Corporation, Correctional
Capital Facility,
500,000 5.375%, 1/1/25....................... Baa1/BBB 457,890
565,000 5.625%, 1/1/07....................... Baa1/BBB 566,576
-----------
28,033,913
-----------
NORTH CAROLINA--2.0%
3,500,000 North Carolina Municipal Power Agency,
No. 1 Catawba
Electric Revenue (MBIA insured),
5.00%, 1/1/18........................ Aaa/AAA 3,159,135
-----------
OHIO--1.6%
2,500,000 Lucas County Hospital Revenue (MBIA
insured),
5.45%, 8/15/14....................... Aaa/AAA 2,460,575
-----------
PENNSYLVANIA---.9%
1,500,000 Philadelphia Water and Wastewater
Revenue (MBIA insured),
5.25%, 6/15/23....................... Aaa/AAA 1,385,340
-----------
SOUTH CAROLINA--.9%
1,450,000 York County Industrial Revenue,
5.70%, 1/1/24........................ A2/A+ 1,413,141
-----------
SOUTH DAKOTA--.7%
1,000,000 Heartland Consumers Power District
Revenue,
7.00%, 1/1/16........................ Aaa/AAA 1,152,280
-----------
TENNESSEE--3.5%
2,020,000 Shelby County General Obligation Bonds,
5.80%, 4/1/19........................ Aa/AA+ 2,045,331
</TABLE>
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 1997
<TABLE>
<CAPTION>
Principal Credit Rating
Amount (Moody's/S&P) Value(A)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONT'D)
TENNESSEE (CONT'D)
$2,000,000 Tennessee Housing Development Agency,
6.375%, 7/1/22....................... Aa/AA $ 2,021,680
1,410,000 Tennessee Housing Development Agency,
Mortgage Finance,
5.90%, 7/1/18........................ A1/A+ 1,415,485
-----------
5,482,496
-----------
TEXAS--10.1%
1,000,000 Alliance Airport Authority Revenue,
6.375%, 4/1/21....................... Baa2/BBB 1,007,030
1,000,000 Austin Hotel Occupancy Tax Revenue
(AMBAC insured),
5.125%, 11/15/19..................... Aaa/AAA 912,800
2,500,000 Brownsville Utility System Revenue
(AMBAC insured),
5.25%, 9/1/15........................ Aaa/AAA 2,402,400
2,300,000 Carrollton Independent School District,
5.00%, 2/15/17....................... Aaa/AAA 2,140,219
1,500,000 Harris County Port Authority General
Obligation Bonds,
5.75%, 10/1/17....................... Aa/AA 1,483,785
1,000,000 Harris County Toll Road Subordinated
Lien,
6.50%, 8/15/15....................... Aa/AA 1,074,040
Houston Water Conveyance System,
Contract Certificates of
Participation (AMBAC insured),
1,000,000 6.25%, 12/15/14...................... Aaa/AAA 1,085,770
1,400,000 7.50%, 12/15/15...................... Aaa/AAA 1,699,936
2,500,000 San Antonio Electric & Gas Revenue,
6.00%, 2/1/14........................ Aa1/AA 2,550,725
500,000 San Antonio Water & Sewer Revenue (MBIA
insured),
5.60%, 5/15/21....................... Aaa/AAA 488,920
1,000,000 Texas Turnpike Authority Revenue (FGIC
insured),
5.25%, 1/1/23........................ Aaa/AAA 940,690
-----------
15,786,315
-----------
UTAH--1.0%
Utah Housing Finance Agency (FHA
insured),
1,105,000 6.35%, 7/1/11........................ Aa/NR 1,138,857
420,000 6.55%, 7/1/26........................ Aa/NR 435,187
-----------
1,574,044
-----------
VERMONT--1.1%
1,690,000 Vermont Housing Finance Agency (FHA
insured),
7.85%, 12/1/29....................... A1/A- 1,775,801
-----------
</TABLE>
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 1997
<TABLE>
<CAPTION>
Principal Credit Rating
Amount (Moody's/S&P) Value(A)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONT'D)
VIRGINIA--2.8%
$4,200,000 Virginia Housing Development Authority,
6.50%, 1/1/13........................ Aa1/AA+ $ 4,370,898
-----------
WASHINGTON--1.5%
1,000,000 King County School District No. 415,
6.45%, 12/1/12....................... A1/AA- 1,070,150
1,160,000 Seattle Museum Development Authority,
6.30%, 7/1/13........................ Aa1/AA+ 1,216,550
-----------
2,286,700
-----------
WEST VIRGINIA--.6%
1,000,000 Braxton County Solid Waste Disposal
Revenue,
6.125%, 4/1/26....................... A2/A 998,010
-----------
WISCONSIN--1.3%
2,000,000 Janesville Pollution Control Revenue,
5.55%, 4/1/09........................ A3/A- 1,993,020
-----------
Total Long-Term Investments (cost -
$149,759,358)........................ $153,317,739
------------
SHORT-TERM INVESTMENTS--1.9%
CALIFORNIA--1.4%
$2,100,000 Los Angeles Regional Airports Lease
Revenue, VRDN,
3.65%, 2/3/97........................ VMIG1/A1+ $ 2,100,000
-----------
SOUTH CAROLINA--.4%
600,000 South Carolina Jobs Economic
Development Authority Revenue, VRDN,
3.55%, 2/3/97........................ VMIG1/A1+ 600,000
-----------
TENNESSEE--.1%
200,000 Metropolitan Nashville Airport
Authority Revenue, VRDN,
3.55%, 2/3/97........................ VMIG1/A1+ 200,000
-----------
Total Short-Term Investments (cost -
$2,900,000).......................... $ 2,900,000
-----------
Total Investments (cost -
$152,659,358)........................ 100.1% $156,217,739
Other Liabilities in Excess of Other
Assets............................... (0.1) (144,132)
------------- ------------
Total Net Assets....................... 100.0% $156,073,607
------------- ------------
------------- ------------
</TABLE>
- ------------------------------
VRDN--Variable rate demand notes are instruments whose interest rates change on
a specified date (such as a coupon date or interest payment date) and/or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). Maturity date shown is date of next rate change.
(A) Investment debt securities are valued each week by an independent pricing
service as provided by the Board of Directors.
(B) Pre-refunded on July 1, 2004. Collateralized by U.S. Government securities
and cash which are held in escrow and are used to pay principal and interest
and to retire the bonds in full at the earliest refunding date.
<PAGE>
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<PAGE>
[This page intentionally left blank.]
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
DIRECTORS AND PRINCIPAL OFFICERS
Mark C. Biderman
Director, Chairman of the Board and President
Raymond D. Horton
Director
Robert L. Rosen
Director
Jeswald W. Salacuse
Director
Robert I. Kleinberg
Director and Secretary
Robert A. Blum
Assistant Secretary
INVESTMENT MANAGER
Advantage Advisers, Inc.
One World Financial Center
New York, NY 10281
INVESTMENT ADVISER
OpCap Advisors
One World Financial Center
New York, NY 10281
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
BostonEquiServe L.P.
P.O. Box 8200
Boston, MA 02266-8200
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
This report, including the financial
information herein, is transmitted to
the shareholders of Municipal Advantage
Fund Inc. for their information. It is
not a prospectus, circular or
representation intended for use in the
purchase of shares of the Fund or any
securities mentioned in this report.
MUNICIPAL ADVANTAGE FUND INC.
<PAGE>
QUARTERLY REPORT
January 31, 1997
