<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
November 27, 1996
Dear Shareholder:
We are pleased to report on the favorable performance of the Municipal
Advantage Fund in the fiscal year ended October 31, 1996. The Fund's total
return for the year was 7.3%, based on its net asset value (NAV) per common
share and assuming reinvestment of dividends. This easily surpassed the 5.7%
return of the Lehman Brothers Municipal Bond Index and the 6.7% average total
return of the leveraged closed-end municipal bond funds monitored by Lipper
Analytical Services, Inc. The Fund's performance was 21st among the 64 funds in
this Lipper universe.
The Fund also exceeded the Lehman index and the Lipper average in the
fourth fiscal quarter. The Fund's total return on NAV of 3.4% in the quarter
outpaced the 2.5% return of the index and the 3.3% average total return of the
leveraged closed-end municipal bond funds monitored by Lipper. The Fund's
performance was 24th among the 64 funds in this Lipper universe for the quarter.
Because the price of the Fund's common shares on the New York Stock
Exchange rose more than the NAV, the Fund delivered a higher total return, 9.2%
in the year and 5.0% in the fourth quarter, based on change in market price and
assuming reinvestment of dividends, than it did at NAV. Although we measure
ourselves as investment managers based on performance at NAV, performance at
market--that is, market appreciation plus dividends--is the return to
shareholders.
As the market price rose, the common shares' discount (the amount the
market price is below NAV) narrowed to 14.9% as of October 31, 1996 from 16.0%
three months earlier. Most closed-end municipal bond funds trade at discounts to
NAV. As we have said in the past, 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.
FUND OBJECTIVE AND PREFERRED STOCK COSTS
The Fund's objective is to provide a high level of income exempt from
regular federal income tax by investing in a diversified portfolio of quality
municipal securities. The Fund uses leverage from its preferred shares to
generate additional income. Dividend costs on the preferred stock averaged 3.71%
in the fiscal year. At the latest auction on November 25, 1996, the Fund sold
91-day auction rate preferred stock at an annual rate of 3.69%, down from 3.80%
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 ENVIRONMENT
The fiscal year saw considerable volatility in the municipal bond market.
Prices of tax-exempt municipal securities increased during the first two months
of the fiscal year, then turned downward from January 1996 through July 1996
because of investor concerns about radical tax reform proposals and uncertainty
about the inflation outlook. As these worries faded, prices rallied over the
remainder of the fiscal year.
We are long-term investors and, as such, tend to remain fully invested
regardless of near-term market trends. Nonetheless, we did have about 5% of the
Fund's assets invested in short-term securities as the market fell, and
<PAGE>
this moderated the Fund's risk and strengthened its relative performance. By
mid-summer, as prices rallied, we were once again fully invested in long-term
securities, with an emphasis on purchasing high-quality discount issues, which
tend to outperform the market when prices are increasing.
PORTFOLIO PROFILE
As of October 31, 1996, 99.8% of the portfolio was invested in long-term
securities, with the remainder in cash and cash equivalents. We place great
emphasis on investment quality. Of the long-term securities, 80.7% of the assets
were rated A or better by Standard & Poor's or Moody's.
We also seek to control risk through investment diversification. The five
largest market sectors in the portfolio as of October 31, 1996 were: health and
hospital, 20.7%; housing, 17.6%; general obligation, 12.9%; water and sewer,
11.5%; and airline and airport, 9.0%. There was no significant change in asset
allocation among sectors during the fourth quarter. The five largest portfolio
positions by state were: New York, 16.1%; Illinois, 8.1%; Texas, 7.6%;
California, 7.4%; and Michigan, 6.6%. The average maturity of the portfolio at
October 31, 1996 was 21 years.
DIVIDEND INCREASE AND YIELD
The Fund paid monthly dividends of 6.5 cents per common share for the first
11 months of the fiscal year, increasing the monthly rate to 6.65 cents per
common share effective with the October 1996 distribution (paid November 4th to
common shareholders of record October 21st). Total dividends for the year were
78.15 cents per common share.
The yield on the Fund's common shares was 6.7% as of October 31, 1996,
based on the $11.875 per share closing price on the New York Stock Exchange and
the annualized current monthly dividend rate of 6.65 cents per common share. For
an investor in the top federal tax bracket of 39.6%, this yield was equivalent
to 11.1% on a taxable basis.
TOLL-FREE UPDATE
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
We believe quality municipal securities offer good value at this time,
providing tax-exempt yields well above the rate of inflation. We remain
dedicated to providing a high level of income exempt from regular federal income
tax through a diversified, leveraged portfolio of quality municipal securities.
As always, we at the Fund, along with the Fund's manager, Advantage
Advisers, Inc., and its adviser, OpCap Advisors, appreciate the trust you have
placed in us. Thank you for investing with us.
Sincerely,
/s/ Mark C. Biderman
Mark C. Biderman
President
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal Credit Rating*
Amount (Moody's/S&P) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS--97.9%
ALABAMA--1.9%
$1,000,000 Alabama State Docks Department Facility
Revenue,
6.15%, 10/1/14....................... Aaa/AAA 1,038,130
2,000,000 DCH Health Care Authority, Health Care
Facilities Revenue,
5.70%, 6/1/15........................ A1/A+ 1,989,460
------------
3,027,590
------------
CALIFORNIA--7.4%
1,000,000 Burbank Redevelopment Agency,
6.00%, 12/1/13....................... Baa1/A- 1,007,590
2,500,000 California Health Facilities Financing
Authority Revenue,
6.25%, 3/1/21........................ Aa3/AA 2,565,325
1,000,000 California State Public Works Board,
Lease Revenue,
6.30%, 10/1/10....................... A/A 1,058,900
1,000,000 Lafayette Elementary School District,
5.90%, 5/15/17....................... Aaa/AAA 1,016,710
1,250,000 Los Angeles Public Works Finance
Authority (MBIA insured),
5.25%, 9/1/15........................ Aaa/AAA 1,202,200
1,000,000 Los Angeles Regional Airports Revenue,
6.70%, 1/1/22........................ NR/A- 1,066,480
1,000,000 Madera County Certificates of
Participation (MBIA insured),
6.125%, 3/15/23...................... Aaa/AAA 1,035,230
1,000,000 San Francisco City & County
Certificates of Participation
(CGIC insured),
5.60%, 4/1/16........................ Aaa/AAA 985,980
1,500,000 Student Education Loan Marketing
Corporation, Student Loan Revenue,
7.00%, 7/1/10........................ NR/A 1,579,290
------------
11,517,705
------------
COLORADO--5.8%
3,085,000 Colorado Health Facilities Authority
Revenue (MBIA insured),
5.95%, 5/15/12....................... Aaa/AAA 3,164,130
Denver City & County Airport Revenue
(MBIA insured),
1,500,000 5.60%, 11/15/25...................... Aaa/AAA 1,451,940
4,500,000 5.75%, 11/15/17...................... Aaa/AAA 4,488,975
------------
9,105,045
------------
FLORIDA--1.2%
2,000,000 Florida State Board of Education,
5.00%, 6/1/20........................ Aa/AA 1,834,080
------------
</TABLE>
3
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal Credit Rating*
Amount (Moody's/S&P) Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONT'D)
GEORGIA--1.5%
$1,000,000 Savannah Hospital Authority Revenue,
6.125%, 7/1/12....................... A/NR $ 1,036,260
1,260,000 Toombs County Hospital Authority
Revenue
7.00%, 12/1/17....................... NR/BBB 1,290,290
------------
2,326,550
------------
ILLINOIS--8.1%
2,000,000 Chicago O'Hare International Airport
Revenue (AMBAC insured),
5.625%, 1/1/15....................... Aaa/AAA 1,980,760
3,500,000 Du Page Water Commission, Water
Revenue,
5.25%, 5/1/14........................ Aa1/AA 3,398,640
Illinois Health Facilities Authority
Revenue,
1,000,000 6.00%, 2/15/19....................... A/A 988,990
2,855,000 9.00%, 11/15/15...................... Baa1/BBB 3,203,910
2,985,000 Illinois Housing Development Authority
Revenue,
6.70%, 8/1/25........................ Aa/AA 3,083,803
------------
12,656,103
------------
KENTUCKY--.7%
1,000,000 Louisville & Jefferson Counties
Metropolitan Sewer District
(AMBAC insured),
6.50%, 5/15/24....................... Aaa/AAA 1,094,970
------------
LOUISIANA--1.0%
1,500,000 New Orleans General Obligation Bonds
(AMBAC insured),
6.125%, 10/1/16...................... Aaa/AAA 1,562,700
------------
MAINE--.7%
1,000,000 Maine State Housing Authority, Mortgage
Purchase,
7.55%, 11/15/22...................... Aa/AA- 1,055,990
------------
MARYLAND--1.2%
1,820,000 Maryland State Community Development
Administration (FHA insured),
7.60%, 4/1/23........................ Aa/NR 1,868,721
------------
</TABLE>
4
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal Credit Rating*
Amount (Moody's/S&P) Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONT'D)
MASSACHUSETTS--3.5%
$2,250,000 Massachusetts State Health & Education
Facilities Authority Revenue,
6.25%, 12/1/22....................... A1/A $ 2,305,912
1,175,000 Massachusetts State Water Pollution
Abatement Trust,
6.375%, 2/1/15....................... Aa/AA- 1,243,397
2,000,000 Massachusetts State Water Resource
Authority,
5.25%, 3/1/13........................ A/A 1,913,180
------------
5,462,489
------------
MICHIGAN--6.6%
1,000,000 Alpena Public Schools General
Obligation Bonds,
5.70%, 5/1/14........................ Aaa/AAA 1,011,340
1,700,000 Dearborn School District,
6.00%, 5/1/14........................ Aa/AA 1,738,046
1,000,000 Ferndale School District (FGIC
insured),
5.375%, 5/1/21....................... Aaa/AAA 961,190
1,000,000 Grand Rapids Water Supply Systems
Revenue (FGIC insured),
6.50%, 1/1/15........................ Aaa/AAA 1,073,550
Michigan State Hospital Finance
Authority Revenue,
2,490,000 5.375%, 10/15/13..................... A1/NR 2,351,033
2,000,000 8.125%, 10/1/21....................... Baa/BBB 2,232,560
1,000,000 Michigan State Pollution Control
Revenue,
6.20%, 9/1/20........................ A3/A- 1,020,610
------------
10,388,329
------------
MINNESOTA--4.6%
Minnesota State Housing Finance Agency,
1,650,000 6.00%, 2/1/14........................ Aa/AA 1,674,486
2,950,000 6.10%, 8/1/22........................ Aa/AA 2,987,554
2,500,000 6.25%, 8/1/22........................ Aa/AA 2,525,425
------------
7,187,465
------------
NEVADA--4.0%
2,000,000 Clark County General Obligation Bonds
(MBIA insured),
6.00%, 6/1/13........................ Aaa/AAA 2,064,820
2,000,000 Clark County Passenger Facility Charge
Revenue (MBIA insured),
5.75%, 7/1/23........................ Aaa/AAA 1,967,660
1,000,000 Las Vegas General Obligation Bonds,
6.60%, 10/1/12....................... Aaa/AAA 1,093,850
</TABLE>
5
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal Credit Rating*
Amount (Moody's/S&P) Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONT'D)
NEVADA (CONT'D)
$1,055,000 Nevada Housing Division Revenue,
6.20%, 4/1/17........................ Aaa/NR $ 1,078,316
------------
6,204,646
------------
NEW HAMPSHIRE--1.9%
1,000,000 New Hampshire Higher Educational &
Health Facilities Authority Revenue,
6.125%, 10/1/13...................... Baa/NR 968,760
New Hampshire State Housing Finance
Authority,
995,000 6.50%, 7/1/14........................ Aa/NR 1,025,765
1,000,000 6.90%, 7/1/19........................ Aa/NR 1,042,830
------------
3,037,355
------------
NEW JERSEY--.6%
1,000,000 New Jersey Economic Development
Authority, Heating & Cooling Revenue,
6.20%, 12/1/07....................... NR/BBB- 1,018,130
------------
NEW YORK--16.0%
2,000,000 Metropolitan Transportation Authority,
Transportation Facilities Revenue,
6.00%, 7/1/14........................ Baa/BBB+ 2,003,820
New York City General Obligation Bonds,
300,000 5.75%, 2/1/12........................ Baa1/BBB+ 288,489
2,000,000 5.75%, 2/1/17........................ Baa1/BBB+ 1,901,200
1,300,000 6.00%, 8/1/09........................ Baa1/BBB+ 1,299,857
1,000,000 6.00%, 2/1/11........................ Baa1/BBB+ 987,650
1,000,000 6.95%, 8/15/12 (MBIA insured)........ Aaa/AAA 1,119,560
2,270,000 7.00%, 10/1/09....................... Baa1/BBB+ 2,444,291
2,000,000 New York City Industrial Development
Agency, Special Facilities Revenue,
6.125%, 1/1/24....................... A/A 2,008,840
3,550,000 New York City Municipal Water Finance
Authority, Water & Sewer Systems
Revenue,
6.00%, 6/15/25....................... A/A- 3,577,442
New York State Dormitory Authority
Revenues,
1,500,000 5.75%, 5/15/24....................... Baa1/BBB+ 1,430,340
500,000 6.25%, 7/1/25........................ Baa1/BBB- 506,940
1,500,000 6.75%, 7/1/24 (MBIA insured)(A)...... Aaa/AAA 1,713,795
1,000,000 7.65%, 8/1/30 (FHA insured).......... NR/AAA 1,091,360
</TABLE>
6
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal Credit Rating*
Amount (Moody's/S&P) Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONT'D)
NEW YORK (CONT'D)
$1,500,000 New York State Local Government
Assistance Corporation,
6.50%, 4/1/20........................ A/A $ 1,591,350
1,000,000 New York State Medical Care Facilities,
Finance Agency Revenue,
6.50%, 8/15/24....................... Baa1/BBB+ 1,043,270
1,000,000 New York State Thruway Authority,
Service Contract Revenue,
5.875%, 4/1/14....................... Baa1/BBB 977,050
New York State Urban Development
Corporation, Correctional
Capital Facility,
500,000 5.375%, 1/1/25....................... Baa1/BBB 456,465
565,000 5.625%, 1/1/07....................... Baa1/BBB 564,299
------------
25,006,018
------------
NORTH CAROLINA--.6%
1,000,000 North Carolina Municipal Power Agency,
No. 1 Catawba
Electric Revenue (MBIA insured),
5.00%, 1/1/18........................ Aaa/AAA 914,490
------------
OHIO--1.6%
2,500,000 Lucas County Hospital Revenue (MBIA
insured),
5.45%, 8/15/14....................... Aaa/AAA 2,446,850
------------
PENNSYLVANIA--3.9%
4,600,000 Philadelphia Hospital & Higher
Education Facilities Authority,
Hospital Revenue,
6.60%, 7/1/10........................ NR/BBB 4,654,418
1,500,000 Philadelphia Water and Wastewater
Revenue (MBIA insured),
5.25%, 6/15/23....................... Aaa/AAA 1,402,170
------------
6,056,588
------------
SOUTH CAROLINA--.9%
1,450,000 York County Industrial Revenue,
5.70%, 1/1/24........................ A2/A+ 1,415,635
------------
SOUTH DAKOTA--.7%
1,000,000 Heartland Consumers Power District
Revenue,
7.00%, 1/1/16........................ Aaa/AAA 1,133,990
------------
TENNESSEE--3.5%
2,020,000 Shelby County General Obligation Notes,
5.80%, 4/1/19........................ Aa/AA+ 2,051,593
</TABLE>
7
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal Credit Rating*
Amount (Moody's/S&P) Value
- --------------------------------------------------------------------------------
<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 $ 2,025,240
1,410,000 Tennessee Housing Development Agency,
Mortgage Finance,
5.90%, 7/1/18........................ A1/A+ 1,420,321
------------
5,497,154
------------
TEXAS--7.5%
1,000,000 Alliance Airport Authority Revenue,
6.375%, 4/1/21....................... Baa2/BBB 1,001,540
1,000,000 Austin Hotel Occupancy Tax Revenue
(AMBAC insured),
5.125%, 11/15/19..................... Aaa/AAA 920,720
1,500,000 Brownsville Utility System Revenue
(AMBAC insured),
5.25%, 9/1/15........................ Aaa/AAA 1,442,640
1,500,000 Harris County Port Authority General
Obligation Bonds,
5.75%, 10/1/17....................... Aa/AA 1,487,310
1,000,000 Harris County Toll Road Subordinated
Lien,
6.50%, 8/15/15....................... Aa/AA 1,078,140
Houston Water Conveyance System,
Contract Certificates of
Participation (AMBAC insured),
1,000,000 6.25%, 12/15/14...................... Aaa/AAA 1,082,870
1,400,000 7.50%, 12/15/15...................... Aaa/AAA 1,714,356
2,500,000 San Antonio Electric & Gas Revenue,
6.00%, 2/1/14........................ Aa1/AA 2,536,750
500,000 San Antonio Water & Sewer Revenue (MBIA
insured),
5.60%, 5/15/21....................... Aaa/AAA 493,425
------------
11,757,751
------------
UTAH--3.4%
4,000,000 Intermountain Power Agency, Power
Supply Revenue,
5.00%, 7/1/21........................ Aa/A+ 3,606,840
Utah Housing Finance Agency (FHA
insured),
1,130,000 6.35%, 7/1/11........................ Aa/NR 1,166,104
460,000 6.55%, 7/1/26........................ Aa/NR 477,282
------------
5,250,226
------------
VERMONT--1.1%
1,690,000 Vermont Housing Finance Agency (FHA
insured),
7.85%, 12/1/29....................... A1/A- 1,769,667
------------
VIRGINIA--2.8%
4,200,000 Virginia Housing Development Authority,
6.50%, 1/1/13........................ Aa1/AA+ 4,380,390
------------
</TABLE>
8
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal Credit Rating*
Amount (Moody's/S&P) Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONT'D)
WASHINGTON--1.5%
$1,000,000 King County School District No. 415,
6.45%, 12/1/12....................... A1/AA- $ 1,074,170
1,160,000 Seattle Museum Development Authority,
6.30%, 7/1/13........................ Aa1/AA+ 1,212,142
------------
2,286,312
------------
WEST VIRGINIA--.6%
1,000,000 Braxton County Solid Waste Disposal
Revenue,
6.125%, 4/1/26....................... A2/A 999,940
------------
WISCONSIN--1.3%
2,000,000 Janesville Pollution Control Revenue,
5.55%, 4/1/09........................ A3/A- 1,993,680
------------
PUERTO RICO--1.8%
1,565,000 Puerto Rico Commonwealth Highway &
Transportation Authority, Highway
Revenue,
5.75%, 7/1/18........................ Baa1/A 1,536,360
1,250,000 Puerto Rico Electric Power Authority,
Power Revenue,
6.00%, 7/1/15........................ Baa1/BBB+ 1,260,650
------------
2,797,010
------------
Total Long-Term Investments (cost -
$149,262,206)........................ $153,053,569
------------
SHORT-TERM INVESTMENTS--.2%
NEW YORK--.1%
$ 200,000 New York State Pollution Control
Revenue, VRDN**,
3.35%, 11/1/96....................... VMIG1/A1+ $ 200,000
------------
TEXAS--.1%
100,000 Grapevine Industrial Development
Revenue, VRDN**,
3.50%, 11/1/96....................... VMIG1/A1+ 100,000
------------
Total Short-Term Investments (cost -
$300,000)............................ $ 300,000
------------
Total Investments (cost -
$149,562,206)***..................... 98.1% $153,353,569
Other Assets in Excess of Other
Liabilities.......................... 1.9 2,943,730
------------- ------------
Total Net Assets....................... 100.0% $156,297,299
------------- ------------
------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
* Unaudited.
** Variable Rate Demand Notes (VRDN) 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.
*** Aggregate unrealized appreciation for securities in which there is an excess
of value over tax cost is $4,308,907, aggregate gross unrealized
depreciation for securities in which there is an excess of tax cost over
value is $517,544 and net unrealized appreciation for Federal income tax
purposes is $3,791,363. The cost basis of portfolio securities for Federal
income tax basis is $149,562,206.
(A) 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
on the municipal issue and to retire the bonds in full at the earliest
refunding date.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost - $149,562,206)............................................................ $153,353,569
Cash................................................................................................... 16,845
Interest receivable.................................................................................... 2,699,460
Receivable for investments sold........................................................................ 1,514,294
Deferred organization expenses......................................................................... 26,373
Prepaid expenses....................................................................................... 13,741
------------
Total Assets........................................................................................ 157,624,282
------------
LIABILITIES
Payable for investments purchased...................................................................... 489,649
Dividends payable attributable to common shares........................................................ 482,597
Dividends payable attributable to preferred shares..................................................... 179,972
Investment management fee payable...................................................................... 79,165
Other payables and accrued expenses.................................................................... 95,600
------------
Total Liabilities................................................................................... 1,326,983
------------
NET ASSETS
Preferred stock ($.001 par value and $50,000 net asset and liquidation value per share applicable to
1,100 shares issued)................................................................................ 55,000,000
------------
Common stock:
Par value ($.001 per share, applicable to 7,257,093 shares issued).................................. 7,257
Paid-in-capital..................................................................................... 100,618,353
Undistributed net investment income.................................................................... 334,661
Accumulated net realized loss on investments and futures transactions.................................. (3,454,335)
Net unrealized appreciation on investments............................................................. 3,791,363
------------
Net assets applicable to common shareholders........................................................ 101,297,299
------------
Total Net Assets.................................................................................. $156,297,299
------------
------------
Net asset value per common share.................................................................. $13.96
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest................................................................................................. $9,273,853
----------
OPERATING EXPENSES
Investment management fee (note 2)....................................................................... 929,882
Auction fees and commissions............................................................................. 150,096
Auditing, consulting and tax return preparation fees..................................................... 66,100
Reports and notices to shareholders...................................................................... 54,202
Legal fees............................................................................................... 53,213
Custodian fees (note 2).................................................................................. 40,508
Directors' fees and expenses............................................................................. 25,605
Transfer and dividend disbursing agent fees.............................................................. 23,705
Amortization of deferred organization expenses........................................................... 17,582
Stock exchange listing fee............................................................................... 16,503
Miscellaneous............................................................................................ 21,673
----------
Total operating expenses.............................................................................. 1,399,069
Less: Expense offset arrangement (note 2)........................................................... (3,449)
----------
Net operating expenses.............................................................................. 1,395,620
----------
Net investment income............................................................................ 7,878,233
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET
Net realized gain on investments......................................................................... 59,946
Net realized loss on futures transactions (note 1f)...................................................... (212,998)
----------
Net realized loss on investments and futures transactions........................................... (153,052)
Net change in unrealized appreciation (depreciation) on investments...................................... 1,411,332
----------
Net realized loss and change in unrealized appreciation (depreciation) on investments............... 1,258,280
----------
Net increase in net assets resulting from operations....................................................... $9,136,513
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment income....................................................... $ 7,878,233 $ 7,866,577
Net realized loss on investments and futures transactions................... (153,052) (2,041,826)
Net change in unrealized appreciation (depreciation) on investments......... 1,411,332 16,416,958
------------ ------------
Net increase in net assets resulting from operations..................... 9,136,513 22,241,709
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends to preferred shareholders from net investment income.............. (2,076,179) (2,223,538)
Dividends to common shareholders from net investment income................. (5,671,420) (5,660,535)
------------ ------------
Total dividends to shareholders.......................................... (7,747,599) (7,884,073)
------------ ------------
Total increase in net assets........................................... 1,388,914 14,357,636
NET ASSETS
Beginning of year........................................................... 154,908,385 140,550,749
------------ ------------
End of year (including undistributed net investment income of $334,661 and
$204,027, respectively).................................................. $156,297,299 $154,908,385
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Municipal Advantage Fund Inc. (the 'Fund') was incorporated in Maryland on
February 23, 1993 and is registered as a diversified, closed-end management
investment company under the Investment Company Act of 1940.
The Fund has entered into a management agreement with Advantage Advisers,
Inc. (the 'Investment Manager'), a subsidiary of Oppenheimer & Co., Inc.,
pursuant to which the Investment Manager will, among other things, supervise the
Fund's investment program and monitor the performance of the Fund's service
providers.
The Investment Manager entered into an advisory contract with OpCap
Advisors (the 'Investment Adviser'), pursuant to which the Investment Adviser
provides investment advisory and administrative services to the Fund. The
Investment Adviser is responsible for the management of the Fund's portfolio in
accordance with the Fund's investment objective and policies, for making
decisions to buy, sell, or hold particular securities and is responsible for the
day-to-day administration of the Fund.
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. The following is a summary of significant accounting policies
consistently followed by the Fund:
(A) VALUATION OF INVESTMENTS
Investment debt securities are valued each week by an independent pricing
service approved by the Board of Directors. Any security or other asset for
which market quotations are not readily available is valued at its fair value as
determined in good faith under procedures established by the Board of Directors.
The Fund invests substantially all of its assets in a diversified portfolio of
debt obligations issued by states, territories and possessions of the United
States and by the District of Columbia and their political subdivisions. The
issuers' abilities to meet their obligations may be affected by economic and
political developments in a specific state or region.
(B) FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable and non-taxable income to its shareholders;
accordingly, no Federal income tax provision is required.
(C) ORGANIZATION AND OFFERING COSTS
Costs incurred by the Fund in connection with its organization and offering
of its common shares were $87,909 and $433,917, respectively; offering costs
were charged to capital. Organization costs have been deferred and are being
amortized to expense on a straight line basis over sixty months from
commencement of operations. Offering costs and underwriting discounts in
connection with the preferred share issuance were $303,393 and $962,500,
respectively, and were charged to capital attributable to common shares at the
time of issuance of such shares.
13
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(D) SECURITY TRANSACTIONS AND OTHER INCOME
Security transactions are accounted for on the trade date. In determining
the gain or loss from the sale of securities, the cost of securities sold is
determined on the basis of identified cost. Interest income is accrued daily.
Original issue discounts or premiums on debt securities purchased are accreted
or amortized daily to non-taxable interest income. Market discounts are accreted
daily to taxable income.
(E) DIVIDENDS AND DISTRIBUTIONS--COMMON STOCK
The Fund intends to declare dividends from net investment income monthly to
holders of common stock. Distributions of net capital gains, if any, will be
paid at least annually. The Fund records dividends and distributions to common
shareholders on the ex-dividend date.
(F) FUTURES ACCOUNTING POLICIES
A futures contract is an agreement between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract the Fund is required to pledge to the broker an amount of cash or
securities equal to the minimum 'initial margin' requirements of the exchange.
Pursuant to the contracts, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contracts.
Such receipts or payments are known as 'variation margin' and are recorded by
the Fund as unrealized appreciation or depreciation. When the contracts are
closed the Fund records a realized gain or loss equal to the difference between
the value of the contracts at the time they were opened and the value at the
time they were closed. Any unrealized appreciation or depreciation recorded is
simultaneously reversed. The Fund invests in futures contracts solely for the
purpose of hedging its existing portfolio securities, or securities the Fund
intends to purchase against fluctuations in value caused by changes in
prevailing market interest rates. The use of futures transactions involves the
risk of imperfect correlation in movements in the price of futures contracts,
interest rates and the underlying hedged assets, and the possible inability of
counterparties to meet the terms of their contracts. There were no futures
contracts open at October 31, 1996.
2. INVESTMENT MANAGEMENT FEE
The investment management fee is payable monthly to the Investment Manager,
and is computed as a percentage of the Fund's average weekly net assets at the
annual rate of .60%. The Investment Manager pays the Investment Adviser a
monthly fee at an annual rate of .36% of the Fund's average weekly net assets
for its services. The Investment Manager paid the Investment Adviser $557,929
for the year ended October 31, 1996.
The Fund benefits from an expense offset arrangement with the custodian
bank where uninvested cash balances earn credits that reduce monthly expenses.
Had these cash balances been invested in an income producing asset, they would
have generated income for the Fund.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1996, purchases and sales of investment
securities, other than short-term securities, aggregated $41,209,277 and
$41,644,728, respectively.
14
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
4. CAPITAL
There are 100 million shares of $.001 par value common stock authorized.
The Fund's charter provides that the Board of Directors may classify or
reclassify any unissued shares of capital stock into one or more additional
classes or series, with rights determined by the Board of Directors. The Fund's
Board of Directors has authorized the reclassification of 1,100 shares of common
stock to Auction Rate Preferred Stock ('Preferred Stock').
5. AUCTION RATE PREFERRED STOCK
The Fund has issued 1,100 shares of Preferred Stock with net asset and
liquidation value of $50,000 per share plus any accumulated but unpaid
dividends.
Dividends are accumulated daily at an annual rate set through auction
procedures and are typically reset and paid every twenty eight days. The
annualized dividend rate ranged from 3.48% to 3.899% during the year ended
October 31, 1996 and was 3.80% at October 31, 1996. Distributions of net
realized capital gains, if any, will be paid at least annually.
The Fund is subject to certain restrictions relating to the Preferred
Stock. 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 Preferred Stock at liquidation
value.
The Preferred Stock, which is entitled to one vote per share, generally
votes with the common stock but votes separately as a class to elect two
Directors and on any matters affecting the rights of the Preferred Stock.
6. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Net Increase
Realized and (Decrease)
Unrealized in Net Assets
Net Gain (Loss) on Resulting from
Investment Income Investment Income Investments-Net Operations
-------------------- -------------------- --------------------- ---------------------
Per Per Per Per
Common Common Common Common
Quarter Ended Total Share Total Share Total Share Total Share
- ---------------------- ---------- ------ ---------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31, 1996...... $2,317,542 $0.32 $1,965,199 $0.27 $ 4,006,198 $0.55 $ 5,971,397 $0.82
April 30, 1996........ 2,307,130 0.32 1,966,485 0.27 (6,640,914) (0.91 ) (4,674,429) (0.64)
July 31, 1996......... 2,320,887 0.32 1,983,890 0.28 1,916,810 0.26 3,900,700 0.54
October 31, 1996...... 2,328,294 0.32 1,962,659 0.27 1,976,186 0.27 3,938,845 0.54
---------- ------ ---------- ------ ----------- ------ ----------- ------
$9,273,853 $1.28 $7,878,233 $1.09 $ 1,258,280 $0.17 $ 9,136,513 $1.26
---------- ------ ---------- ------ ----------- ------ ----------- ------
---------- ------ ---------- ------ ----------- ------ ----------- ------
January 31, 1995...... $2,283,921 $0.31 $1,967,434 $0.27 $ 4,208,926 $0.58 $ 6,176,360 $0.85
April 30, 1995........ 2,302,750 0.32 1,965,276 0.27 4,526,988 0.62 6,492,264 0.89
July 31, 1995......... 2,297,040 0.32 1,953,419 0.27 1,803,701 0.25 3,757,120 0.52
October 31, 1995...... 2,325,120 0.32 1,980,448 0.27 3,835,517 0.53 5,815,965 0.80
---------- ------ ---------- ------ ----------- ------ ----------- ------
$9,208,831 $1.27 $7,866,577 $1.08 $14,375,132 $1.98 $22,241,709 $3.06
---------- ------ ---------- ------ ----------- ------ ----------- ------
---------- ------ ---------- ------ ----------- ------ ----------- ------
</TABLE>
15
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
7. CAPITAL LOSS CARRYFORWARD
At October 31, 1996, accumulated net realized capital losses available as a
reduction against future net realized capital gains were $3,454,335 of which
$1,259,457, $1,732,476 and $462,402 will expire in 2002, 2003 and 2004,
respectively. To the extent that these capital loss carryovers are used to
offset future net capital gains, it is possible that gains so offset will not be
distributed to shareholders.
8. SUBSEQUENT EVENTS
On November 1, 1996, a dividend of $.0665 per share was declared to common
shareholders payable December 3, 1996 to shareholders of record on November 18,
1996.
At the last auction on November 25, 1996, the Fund sold 91-day auction rate
preferred stock at an annual rate of 3.69% with pay dates of January 2, 1997,
February 3, 1997 and February 25, 1997.
On December 2, 1996, a dividend of $.0665 per share was declared to common
shareholders payable December 31, 1996 to shareholders of record on December 16,
1996.
16
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
APRIL 30,
1993(1)
YEAR ENDED YEAR ENDED YEAR ENDED TO
OCTOBER 31, 1996 OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1993
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 13.77 $ 11.79 $ 14.75 $ 14.10
Income from investment operations:
Net investment income..................... 1.09 1.08 1.05 0.43
Net realized and unrealized gain (loss) on
investments............................. 0.17 1.98 (2.89) 0.84
---------------- ---------------- ---------------- ----------------
Total from investment operations...... 1.26 3.06 (1.84) 1.27
---------------- ---------------- ---------------- ----------------
Dividends and distributions to
shareholders:
Dividends to preferred shareholders from
net investment income................... (0.29) (0.30) (0.21) (0.07)
Dividends to common shareholders from net
investment income....................... (0.78) (0.78) (0.86) (0.31)
Distributions to preferred shareholders
from net realized gains................. -- -- (0.01) --
Distributions to common shareholders from
net realized gains...................... -- -- (0.04) --
---------------- ---------------- ---------------- ----------------
Total dividends and distributions to
shareholders........................ (1.07) (1.08) (1.12) (0.38)
---------------- ---------------- ---------------- ----------------
Capital charge in respect of issuance of
preferred shares........................ -- -- -- (0.18)
Capital charge in respect of issuance of
common shares........................... -- -- -- (0.06)
---------------- ---------------- ---------------- ----------------
Total capital charges................. -- -- -- (0.24)
---------------- ---------------- ---------------- ----------------
Net asset value, end of period............ $ 13.96 $ 13.77 $ 11.79 $ 14.75
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
Market value, end of period............... $ 11.875 $ 11.625 $ 9.75 $ 14.125
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
Total investment return(2)............ 9.2% 27.9% (25.7%) 2.4%(3)
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
Net assets, end of period(4).............. $156,297,299 $154,908,385 $140,550,749 $162,057,409
---------------- ---------------- ---------------- ----------------
Ratio of operating expenses to average net
assets(6)............................... 1.40%(7) 1.44% 1.39% 1.17%(5)
---------------- ---------------- ---------------- ----------------
Ratio of net investment income to average
net assets(6)........................... 7.88% 8.44% 7.85% 6.07%(5)
---------------- ---------------- ---------------- ----------------
Portfolio turnover........................ 27% 36% 22% 9%
---------------- ---------------- ---------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Commencement of operations.
(2) Change in market price assuming reinvestment of dividends and distributions
to common shareholders on payable date (at market).
(3) Return does not reflect underwriters' discount.
(4) 1940 Act Preferred Shares asset coverage were 283%, 281%, 255%, and 295%,
respectively.
(5) Annualized.
(6) Ratios calculated on the basis of income and expenses applicable to both the
common and preferred shares relative to the average net assets of common
shareholders. Average net assets of common shareholders for each period were
$99,980,261, $93,172,629 $97,502,978 and $102,609,821, respectively.
(7) Gross of expense offsets (see note 2 in Notes to Financial Statements).
17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of Municipal Advantage Fund Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Municipal Advantage Fund Inc. (the
'Fund') at October 31, 1996, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the three years in the
period then ended and for the period April 30, 1993 (commencement of operations)
through October 31, 1993, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as 'financial statements') are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1996 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 17, 1996
18
<PAGE>
TAX INFORMATION
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (October 31,
1996) as to the Federal tax status of dividends and distributions received by
shareholders during such fiscal year. Accordingly, we are advising you that
substantially all dividends paid from net investment income during the fiscal
year ended October 31, 1996 were Federally exempt interest dividends, although
the Fund did invest in securities which paid interest subject to the Federal
alternative minimum tax during the fiscal year. Dividends paid from net
investment income subject to such tax amounted to 18.8%. Per share dividends for
the fiscal year ended October 31, 1996 were as follows:
<TABLE>
<S> <C>
Dividends to common shareholders from net investment income...................... $ 0.7815
Dividends to preferred shareholders from net investment income................... $ 0.2861
</TABLE>
Since the Fund's fiscal year is not the calendar year, another notification
will be sent with respect to calendar year 1996. In January 1997, you will be
advised on IRS Form 1099 DIV as to the Federal tax status of the dividends
received by you in calendar 1996. The amount that will be reported, will be the
amount to use on your 1996 Federal income tax return and may differ from the
amount which we must report for the Fund's fiscal year ended October 31, 1996.
Shareholders are advised to consult with their own tax advisers as to the
Federal, state and local tax status of the Fund's income received. A breakdown
of interest by state will also be provided which may be of value in reducing a
shareholder's state or local tax liability, if any.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Municipal Advantage Fund Inc. has a Dividend Reinvestment and Cash
Purchase Plan (the 'Plan'). Under the Plan, all dividends and distributions on
the Fund's Common Stock automatically are reinvested in additional shares of
Common Stock purchased in the open market unless a shareholder elects to receive
cash. Dividends and distributions with respect to Common Stock registered in the
name of a bank, broker-dealer or other nominee are reinvested under the Plan
unless the service is not provided by the bank, broker-dealer or other nominee
or the shareholder elects to receive dividends and distributions in cash.
Investors that own shares registered in the name of a bank, broker-dealer or
other nominee should consult with such nominee as to their participation in the
Plan and may be required to have their shares registered in their own names in
order to participate in the Plan if they transfer their shares into the name of
another nominee.
BostonEquiServe L.P., (the 'Plan Agent') serves as agent for the holders of
Common Stock in administering the Plan. After the Fund declares a dividend on
the Common Stock or determines to make a capital gain distribution, the Plan
Agent, as agent for the participants, receives the cash payment and uses it to
buy the Common Stock in the open market, on the New York Stock Exchange or
elsewhere, for the participants' accounts. The Fund does not issue any new
shares of Common Stock in connection with the Plan.
Participants also have the option of making additional cash payments to the
Plan Agent, monthly, in a minimum amount of $250, for investment in Common
Stock. The Plan Agent uses all such funds received from participants to purchase
shares of Common Stock in the open market on or about the payable date. To avoid
unnecessary cash accumulations, and also to allow ample time for receipt and
processing by the Plan Agent, it is suggested that participants send in
voluntary cash payments to be received by the Plan Agent at least ten days
before an applicable purchase date. A participant may withdraw a voluntary cash
payment by written notice, if the notice is received by the Plan Agent not less
than 48 hours before such payment is to be invested.
The Plan agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in an account, including tax forms
required for personal and tax filing. Shares of Common Stock in
19
<PAGE>
the account of each Plan participant will be held by the Plan in the name of the
participant, and each shareholder's proxy will include those shares purchased
pursuant to the Plan. In the case of holders of Common Stock, such as banks,
broker-dealers or other nominees, that hold shares for others who are beneficial
owners, the Plan Agent will administer the Plan on the basis of the number of
Common Shares certified from time to time by the holders as representing the
total amount registered in such holders' names and held for the account
registered in such holders' names and held for the account of beneficial owners
that have not elected to receive distributions in cash.
There is no charge to participants for reinvesting dividends or capital
gains distributions or voluntary cash payments. The Plan Agent's fees for the
reinvestment of dividends and capital gains distributions and voluntary cash
payments are paid for by the Fund. However, each participant pays a pro rata
share of the brokerage commission incurred with respect to the Plan Agent's open
market purchases in connection with the reinvestment of income dividends,
capital gain distributions and voluntary cash payments made by the participant.
Brokerage charges for purchasing small amounts of stock for individual accounts
through the Plan are less than the usual brokerage charges for such transactions
because the Plan Agent purchases stock for all participants in blocks and
prorates the lower commission thus attainable.
The receipt of dividends and distributions under the Plan does not relieve
participants of any income tax which may be payable on such dividends or
distributions.
Participation in the Plan may be terminated at any time by written notice
from the participant received by the Plan Agent up to 10 days prior to the next
dividend record date. Upon termination, the Plan Agent will send the participant
a certificate for the full shares in his/her account and a check in an amount
equal to the then current market price of any fractional share, or upon written
instructions from the participant, will sell the full shares as soon as
practicable following termination and send the participant a check representing
the proceeds, less a service charge of $2.50, brokerage commissions and
applicable taxes, if any.
The Fund and the Plan Agent reserve the right to terminate the Plan as
applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the termination sent to participants in the Plan at
least 30 days before the record date for such dividend or distribution. The Plan
also may be amended by the Fund or the Plan Agent, but only by at least 30 days
written notice to participants in the Plan (except when necessary or appropriate
to comply with applicable laws, rules or policies of a regulatory authority).
All correspondence concerning the Plan including requests for additional
information or requests to be included or excluded from the Plan should be
addressed to the applicable bank, broker-dealer or other nominee or in the case
of shareholders whose shares are registered in their own name to BostonEquiServe
L.P., P.O. Box 8200, Boston, Massachusetts 02266-8200 or telephone
1-800-426-5523.
20
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
ANNUAL REPORT
October 31, 1996
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.
Post Office 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.
