MUNICIPAL ADVANTAGE FUND INC. November 27, 2000
Dear Shareholder:
The Municipal Advantage Fund (the "Fund") recorded strong performance during
the fiscal year ended October 31, 2000, achieving a net asset value ("NAV")
total return of 10.4%, exceeding the 8.5% return of the Fund's benchmark, the
Lehman Brothers Municipal Bond Index ("Lehman Index"). The Fund's market value
total return (the price change of the Fund's common shares on the New York Stock
Exchange plus reinvested dividends) was 3.4%, as the market price of the Fund's
common shares trailed the increase in the NAV.
During the six months ended October 31, 2000, the Fund's NAV total return of
7.2% surpassed the 5.7% return of the Lehman Index. The market value total
return was 2.2% during this period.
STRENGTHENING OF BOND PRICES
The Fund achieved its strong fiscal-year results through the benefits of
utilizing leverage in a rising bond market and through favorable security
selection.
The bond market has performed well since January, reversing the difficult
market conditions of calendar year 1999. Several factors have sparked the
market's rally, particularly, growing evidence that the Federal Reserve (the
"Fed") has been successful in its efforts to slow economic growth and keep
inflation under control. Low inflation is beneficial to investments in bonds.
The Fund invests substantially all of its assets in long-term tax-exempt
securities that are rated "investment grade" at the time of purchase by at least
one recognized rating agency. At October 31, 2000, 96.5% of the Fund was
invested in long-term securities.
In managing the portfolio, we invest in those sector, maturity and quality
groups of the municipal bond market that we believe offer the best relative
value--the highest yield at the lowest price with the least amount of risk.
Because currently there is minimal yield difference between higher-rated and
lower-rated securities, the Fund is invested primarily in higher-quality
bonds--as 95.1% of the Fund at year-end was allocated to securities rated A or
better by Standard & Poor's or Moody's. In particular, we have emphasized
longer-term, triple-A insured municipals, one of the better performing sectors
of the municipal securities market during the past few months.
At the same time, the municipal yield curve is quite steep--longer bonds offer
significantly higher yields than medium and shorter issues. For this reason, the
Fund currently owns many securities with maturities of 15 years or more; where
we believe yields are especially attractive.
PORTFOLIO ANALYSIS
We seek to control risk not only through investment quality, but also by
diversifying the Fund's portfolio across states and market sectors. The Fund's
five largest state positions at the end of October were: Texas, representing
10.6% of the Fund's net assets; New York, 10.5%; California, 8.6%; Nevada, 7.8%;
and Michigan, 7.2%.
The five largest market sectors were: health and hospitals, representing 18.1%
of the Fund's net assets; general obligations, 16.3%; housing, 15.0%; airlines
and airports, 13.2%; and water and sewer, 13.1%. Our sizable holdings in
healthcare and housing bonds provide incremental yield, while our holdings of
general obligation securities have benefited from the currently strong financial
condition of many state and local agencies as federal surpluses have filtered
down to local governments.
The average maturity of the portfolio was 19.8 years at the end of October
2000, compared with 20.8 years at the end of October 1999.
<PAGE>
PREFERRED STOCK COSTS
The Fund issues auction rate preferred stock to generate additional income for
common shareholders. Proceeds from the preferred stock are invested in municipal
bonds that currently yield more than the cost of the preferred stock, with the
Fund's common shares realizing the difference. In addition to generating more
income, the use of leverage tends to magnify the capital appreciation of the
common shares in a rising bond market and magnify their capital losses in a
declining market.
At the most recent auction on November 6, 2000, the Fund sold 28-day auction
rate preferred stock at an annual dividend rate of 4.30%, compared to a rate of
4.25% on the previous 28-day issue.
COMMON SHARE DIVIDENDS
The Fund paid dividends totaling 75.65 cents per common share during the fiscal
year ended October 31, 2000. As previously reported, the Fund reduced its
monthly dividend rate twice during the year as higher borrowing costs on the
preferred stock (driven generally by rising short-term interest rates) reduced
the amount of income available for distribution to common shareholders. The
first reduction was to 6.35 cents per month per common share from 6.65 cents per
common share in March 2000, followed by a further reduction to 6.00 cents per
common share in June 2000.
In spite of these reductions, we believe the Fund's common shares offer an
attractive yield relative to other quality fixed-income investments. The yield
on the common shares was 6.33% at October 31, 2000, based on the $11.375 per
share closing market price at the end of October and the annualized monthly
dividend rate of 6 cents per common share. For an investor in the top federal
tax bracket of 39.6%, the Fund's yield was equivalent to 10.48% on a taxable
basis.
DISCOUNT
The Fund's common shares trade at a discount to their NAV, as is true of many
closed-end municipal bond funds. The size of the discount has fluctuated over
time, based on the relationship of the Fund's market price to its NAV. The
discount widened to 17.3% at October 31, 2000 from 10.8% one year earlier.
Common shareholders have an opportunity to capitalize on the discount and
acquire an interest in quality securities at a price below NAV by reinvesting
their dividends.
RECORDED UPDATE
For an update on the municipal bond markets and to receive specific information
concerning the Fund, including largest holdings, asset allocation, NAV,
performance and other information, please call our toll-free number, (800)
223-2413.
SUMMARY AND OUTLOOK
The Fund enjoyed a year of strong NAV performance, due in large part to
improved bond market conditions. Because many of the factors that have bolstered
bond prices are still in place, we believe the investment outlook for municipal
securities remains constructive. Bonds continue to benefit from the weakness and
volatility plaguing the stock market. Moreover, the Fed's six short-term rate
increases from mid-1999 through mid-2000 have dampened economic growth and it
appears as if the Fed is at or near the end of its tightening cycle. Inflation,
though certainly threatened by the sustained rise in oil prices, remains in
check.
We continue to focus on providing holders of the Fund's common shares with a
high level of income exempt from regular federal income tax, consistent with the
preservation of capital. We at the Fund, together with PIMCO Advisors L.P., the
Fund's investment manager, and OpCap Advisors, which provides advisory and
administrative services to the Fund, are mindful of the trust you have placed in
us. Thank you for investing in the Fund.
Sincerely,
/s/ Stephen J. Treadway
-----------------------
Stephen J. Treadway
Chairman
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT RATING*
(000) (MOODY'S/S&P) Value**
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS--96.5%
ALABAMA--2.6%
$2,000 DCH Hlth. Care Auth., Health Care Fac. Rev., Ser. B,
5.70%, 6/1/15................................................ A1/A+ $ 1,936,820
1,000 State Docks Dept. Fac. Rev., (MBIA),
6.15%, 10/1/14............................................... Aaa/AAA 1,049,840
1,250 State Pub. School & College Auth., (FSA),
4.25%, 11/1/18................................................ Aaa/AAA 1,059,288
-------------
4,045,948
-------------
CALIFORNIA--8.6%
1,000 Burbank Redev. Agcy.,
6.00%, 12/1/13................................................ Baa1/A- 1,040,260
1,000 Foothill/Eastern Corridor Agcy., Toll Rd. Rev.,
5.75%, 1/15/40................................................ Baa3/BBB- 979,920
2,500 Health Fac. Fin. Auth. Rev., Ser. A,
6.25%, 3/1/21................................................. A3/A 2,536,475
1,000 Lafayette Elem. School Dist., (FSA),
5.90%, 5/15/17................................................ NR/AAA 1,054,130
4,000 Los Angeles Harbor Dept. Rev., Ser. B,
5.375%, 11/1/23+............................................. Aa3/AA 3,889,440
1,000 Los Angeles Regional Arpt. Rev.,
6.70%, 1/1/22................................................. NR/A- 1,030,980
1,000 Madera Cnty. CP, (MBIA),
6.125%, 3/15/23 (Pre-refunded @ 102, 3/15/05)++.............. Aaa/AAA 1,095,730
2,000 Tustin, Univ. Sch. Dist. Spec. Tax, (FSA),
4.50%, 9/1/24................................................. Aaa/AAA 1,719,400
-------------
13,346,335
-------------
COLORADO--5.0%
Denver City & Cnty. Arpt. Rev., (MBIA),
1,500 5.60%, 11/15/25, Ser. C....................................... Aaa/AAA 1,466,400
3,000 5.75%, 11/15/17, Ser. B...................................... Aaa/AAA 3,034,500
3,085 Health Fac. Auth. Rev., (MBIA),
5.95%, 5/15/12............................................... Aaa/AAA 3,202,631
-------------
7,703,531
-------------
CONNECTICUT--0.4%
555 State Housing Fin. Auth., Ser. D-2,
6.20%, 11/15/27+ ............................................. Aa2/AA 567,027
-------------
DISTRICT OF COLUMBIA--1.3%
1,100 Dist. of Col., Ser. A,
5.25%, 6/1/27 (MBIA).......................................... Aaa/AAA 1,032,020
1,000 World Wildlife Fund, Ser. A,
6.00%, 7/1/18 (AMBAC)......................................... Aaa/AAA 1,049,840
--------------
2,081,860
--------------
FLORIDA--0.7%
1,000 Jacksonville Port Auth. Arpt. Rev., Ser. A, (AMBAC),
6.25%, 10/1/24+............................................... Aaa/AAA 1,040,280
-------------
</TABLE>
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT RATING*
(000) (MOODY'S/S&P) Value**
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
GEORGIA--3.3%
$1,750 Cherokee Cnty. Water & Sewer Auth. Rev., (MBIA),
5.50%, 8/1/23................................................ Aaa/AAA $ 1,765,733
1,000 Savannah Hosp. Auth. Rev.,
6.125%, 7/1/12 (Pre-refunded @ 102, 7/1/03)++................. A2/NR 1,057,580
1,000 State GO, Ser. B,
5.00%, 3/1/13................................................. Aaa/AAA 1,002,670
1,260 Toombs Cnty. Hosp. Auth. Rev.,
7.00%, 12/1/17................................................ NR/BBB 1,263,074
-------------
5,089,057
--------------
HAWAII--2.6%
3,000 Dept. of Budget & Finance, Ser. B, (AMBAC),
5.75%, 12/1/18................................................ Aaa/AAA 3,004,380
1,000 State Arpt. Sys. Rev., Ser. A, (FGIC),
5.75%, 7/1/21................................................. Aaa/AAA 1,015,850
--------------
4,020,230
--------------
ILLINOIS--3.2%
1,000 Chicago Wastewater Transmission Rev.,
6.00%, 1/1/17................................................ Aaa/AAA 1,049,580
1,000 Chicago Water Rev., (FGIC),
5.25%, 11/1/17............................................... Aaa/AAA 976,500
1,000 Educational Facs. Auth. Rev.,
5.25%, 9/1/24................................................ A-/A- 820,300
1,435 State GO, (AMBAC),
5.875%, 6/1/12............................................... Aa2/AA 1,476,127
680 Housing Dev. Auth. Rev., Ser. A-2,
6.70%, 8/1/25+............................................... Aa2/AA 693,192
--------------
5,015,699
--------------
KENTUCKY--0.7%
1,000 Louisville & Jefferson Cntys.
Metropolitan Sewer Dist., Ser. A, (AMBAC),
6.50%, 5/15/24 (Pre-refunded @ 102, 11/15/04)++ ............. Aaa/AAA 1,089,410
--------------
LOUISIANA--1.0%
1,500 New Orleans GO, (AMBAC),
6.125%, 10/1/16.............................................. Aaa/AAA 1,565,160
--------------
MASSACHUSETTS--3.8%
State Health & Education Fac. Auth. Rev.,
1,000 5.125%, 7/1/19, Ser. B....................................... A1/AA- 885,020
2,250 6.25%, 12/1/22, Ser. G-1...................................... A1/A 2,262,622
1,175 State Water Poll. Abatement Trust, Ser. A,
6.375%, 2/1/15............................................... Aa1/AA+ 1,247,192
1,750 State Water Resource Auth., Ser. B, (FSA),
4.50%, 8/1/22 ............................................... Aaa/AAA 1,477,613
--------------
5,872,447
--------------
</TABLE>
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT RATING*
(000) (MOODY'S/S&P) Value**
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
MICHIGAN--7.2%
$3,000 State Hospital Fin. Auth. Rev.,
5.50%, 10/1/18................................................ Aaa/NR $ 1,001,340
8.125%, 10/1/21 (Pre-refunded @ 102, 10/1/05)++............... Aaa/AAA 2,338,940
1,000 Muncipal Bond Auth. Rev., Drinking Water Revolving Fund,
4.75%, 10/1/18............................................... Aaa/AAA 905,650
1,000 State Poll. Control Rev.,
6.20%, 9/1/20................................................ A2/A 1,024,020
6,500 Wayne Cnty. Arpt. Rev., (MBIA),
5.00%, 12/1/22-12/1/28+...................................... Aaa/AAA 5,819,175
-------------
11,089,125
\-------------
minnesota--3.8%
State Housing Fin. Agcy.,
3,940 6.00%-6.10%, 2/1/14-8/1/22, Ser. E........................... Aa1/AA 3,985,965
1,865 6.25%, 8/1/22, Ser. B ....................................... Aa1/AA 1,867,742
-------------
5,853,707
-------------
NEVADA--7.8%
2,000 Clark Cnty. GO, Ser. A, (MBIA),
6.00%, 6/1/13 (Pre-refunded @ 101, 6/1/04)++................. Aaa/AAA 2,111,140
1,000 Clark Cnty. Ind. Dev. Rev., Ser. A,
5.60%, 10/1/30............................................... NR/BBB 845,110
2,000 Clark Cnty. Passenger Fac. Charge Rev., (MBIA),
5.75%, 7/1/23................................................ Aaa/AAA 1,997,300
2,400 Henderson Water & Sewer Rev., Ser. A, (FGIC),
4.75%, 9/1/18................................................ Aaa/AAA 2,152,104
Housing Division Rev.,
1,250 5.95%, 4/1/22................................................ Aa2/AA 1,254,662
1,600 6.125%, 4/1/22, Ser. B-2, (FHA)............................... Aa2/AA 1,619,616
990 6.20%, 10/1/28, Ser. E, (FHA)................................. Aaa/NR 1,002,276
1,050 6.20%, 4/1/17, Ser. B-1, (AMBAC)............................. Aaa/AAA 1,061,729
-----------
12,043,937
-----------
NEW HAMPSHIRE--1.6%
1,000 Higher Educational & Health Fac. Auth. Rev.,
6.125%, 10/1/13.............................................. Baa1/NR 964,110
State Housing Finance Auth.,
725 6.50%, 7/1/14, Ser. D+....................................... Aa2/NR 737,042
775 6.90%, 7/1/19, Ser. C+....................................... Aa3/NR 793,081
-------------
2,494,233
-------------
NEW JERSEY--0.6%
1,000 Economic Dev. Auth. Heating & Cooling Rev., Ser. B,
6.20%, 12/1/07................................................ NR/BBB- 985,500
-------------
</TABLE>
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT RATING*
(000) (MOODY'S/S&P) Value**
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
NEW YORK--10.3%
$1,000 Long Island Pwr. Auth. Elec. Syst. Rev., Ser. A,
5.50%, 12/1/29................................................ Baa1/A $ 956,680
1,000 Municipal Asst. Corp., City of Troy, Ser. A, (MBIA),
5.00%, 1/15/16............................................... Aaa/AAA 963,810
New York City GO,
2,000 5.75%, 2/1/17, Ser. G......................................... A2/A 2,028,180
1,500 5.75%, 2/1/19, Ser. F......................................... A2/A 1,515,780
1,000 5.875%, 3/15/18, Ser. I....................................... A2/A 1,020,580
1,000 6.00%, 8/1/14, Ser. H......................................... A2/A 1,046,220
1,000 6.00%, 8/1/16, Ser. F......................................... A2/A 1,036,850
1,000 6.95%, 8/15/12, Ser. B1, (Pre-refunded @ 101, 8/15/04) (MBIA)++ Aaa/AAA 1,095,830
200 7.00%, 10/1/09, Ser. B, (Pre-refunded @ 101.5, 10/1/02)++.... A2/A 212,512
3,000 New York City Ind. Dev. Agcy. Spec. Fac. Rev.,
6.125%, 1/1/24............................................... A3/A- 3,060,120
1,000 State Dorm. Auth. Rev., State Univ. Fac., Ser. B, (FSA),
5.50%, 5/15/30............................................... Aaa/AAA 982,770
15 State Medical Care Fac. Fin. Agcy. Rev.,
6.50%, 8/15/24............................................... A3/A 15,807
1,000 State Mortgage Agcy. Rev.,
5.80%, 10/1/12............................................... Aa1/NR 1,030,380
1,080 State Urban Dev. Corp. Rev., Correctional Cap. Fac., Ser. 6,
5.375%, 1/1/25............................................... Baa1/A 1,020,643
------------
15,986,162
------------
NORTH CAROLINA--1.1%
Medical Care Commun. Hosp. Rev.,
1,000 4.75%, 12/1/28, Ser. B....................................... Aa3/AA- 839,640
1,000 4.75%, 12/1/28, Ser. B, (MBIA)............................... Aaa/AAA 851,710
------------
1,691,350
------------
NORTH DAKOTA--1.5%
State Housing Fin. Agcy.,
1,450 5.50%, 7/1/18, Ser. C........................................ Aa3/NR 1,411,560
885 5.85%, 7/1/10, Ser. A ....................................... Aa3/NR 923,551
------------
2,335,111
------------
OHIO--1.3%
1,000 Hamilton Cnty. Sewer Sys. Rev., Ser. A, (MBIA),
5.75%, 12/1/25............................................... Aaa/AAA 1,015,790
885 Summit Cnty. GO, (FGIC),
6.25%, 12/1/15............................................... Aaa/AAA 971,208
------------
1,986,998
------------
PENNSYLVANIA--3.3%
2,000 Allegheny Cnty. Hosp. Dev. Auth., Ser. B, (MBIA),
6.00%, 7/1/23................................................ Aaa/AAA 2,109,760
1,750 Philadelphia Hosp. & Higher Fac. Auth. Rev., (AMBAC),
5.125%, 5/15/18.............................................. Aaa/AAA 1,646,138
1,500 Philadelphia Water and Wastewater Rev., (MBIA),
5.25%, 6/15/23............................................... Aaa/AAA 1,429,335
-------------
5,185,233
-------------
</TABLE>
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
(CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT RATING*
(000) (MOODY'S/S&P) Value**
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
SOUTH CAROLINA--2.4%
$1,250 Charleston Cnty. GO,
6.125%, 9/1/13............................................... Aa3/AA $ 1,360,213
1,000 Public Service Auth. Rev., Ser. A, (MBIA),
5.75%, 1/1/15................................................ Aaa/AAA 1,041,320
1,450 York Cnty. Ind. Rev.,
5.70%, 1/1/24................................................ Baa2/BBB 1,302,375
------------
3,703,908
------------
SOUTH DAKOTA--0.7%
1,000 Heartland Consumer Pwr. Dist. Rev.,
7.00%, 1/1/16................................................ Aaa/AAA 1,142,400
-------------
TENNESSEE--2.0%
2,000 Housing Dev. Agcy.,
6.375%, 7/1/22+............................................... Aa2/AA 2,033,080
960 Memphis-Shelby Cnty. Arpt. Auth. Rev., Ser. D, (AMBAC),
6.25% 3/1/15+................................................ Aaa/AAA 1,024,675
------------
3,057,755
------------
TEXAS--10.6%
1,000 Alliance Arpt. Auth. Rev.,
6.375%, 4/1/21............................................... Baa2/BBB 984,800
1,195 Arlington GO,
5.00%, 8/15/16............................................... Aa2/AA 1,145,778
1,000 Denton Cnty. GO, (AMBAC),
5.00%, 7/15/16............................................... Aaa/AAA 962,020
1,000 Harlandale Indpt. Sch. Dist.,
4.50%, 8/15/23............................................... Aaa/NR 839,360
785 Harris Cnty., Toll Rd. Sub. Lien,
6.50%, 8/15/15............................................... A2/AA+ 823,214
1,250 Houston GO, Ser. A,
5.00%, 3/1/13................................................ Aa3/AA- 1,232,725
Houston Water Conveyance Syst., CP, (AMBAC),
1,000 6.25%, 12/15/14, Ser. J...................................... Aaa/AAA 1,096,680
1,400 7.50%, 12/15/15, Ser. H ..................................... Aaa/AAA 1,704,360
2,500 Houston Water & Sewer Syst. Rev., Ser. D, (FGIC),
5.00%, 12/1/25............................................... Aaa/AAA 2,295,900
1,000 North East Indpt. Sch. Dist.,
4.50%, 2/1/16................................................ Aaa/AAA 892,830
1,500 Port Houston Auth., Harris Cnty., GO,
5.75%, 10/1/17............................................... Aa1/AA+ 1,511,865
500 State Pub. Fin. Auth. Bldg. Rev., Ser. B, (FSA),
5.625%, 8/1/19............................................... Aaa/AAA 503,900
Water Dev. Board Rev.,
1,000 5.75%, 7/15/14, Ser. B....................................... Aaa/AAA 1,045,700
400 5.75%, 7/15/17, Ser. A........................................ Aaa/AAA 411,264
1,000 Houston Univ. Revs., (MBIA),
5.25%, 2/15/17............................................... Aaa/AAA 980,720
------------
16,431,116
------------
</TABLE>
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
(CONCLUDED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT RATING*
(000) (MOODY'S/S&P) Value**
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS (CONCLUDED)
UTAH--2.0%
State Housing Fin. Agcy., (FHA),
$ 445 6.35%, 7/1/11................................................. Aa2/NR $ 452,770
2,340 6.55%, 1/1/22................................................ Aaa/AAA 2,381,184
220 6.55%, 7/1/26................................................ Aa2/AAA 223,713
------------
3,057,667
------------
VERMONT--1.4%
Housing Fin. Agcy.,
910 5.70%, 5/1/12, Ser. 9 (MBIA).................................. Aaa/AAA 928,637
1,175 7.85%, 12/1/29, Ser. A (FHA).................................. A1/A 1,194,152
------------
2,122,789
------------
WASHINGTON--0.7%
1,000 Seattle Museum Dev. Auth.,
6.30%, 7/1/13................................................ Aa1/AA+ 1,045,700
------------
WEST VIRGINIA--1.3%
2,000 Braxton Cnty. Solid Waste Disp. Rev.,
6.125%-6.50%, 4/1/25-4/1/26.................................. A3/A 1,996,050
------------
WISCONSIN--3.0%
1,500 GO, Ser. B,
5.30%, 5/1/23+............................................... Aa2/AA 1,385,175
3,500 Health & Educational Fac. Auth. Rev., (MBIA)
5.25%, 8/15/27............................................... Aaa/AAA 3,216,850
------------
4,602,025
------------
WYOMING--0.7%
1,000 Student Loan Corp. Rev., Ser. A,
6.20%, 6/1/24................................................ NR/AA 1,042,660
------------
Total Municipal Bonds (cost--$148,530,393) ..................... 149,290,410
------------
SHORT-TERM VARIABLE RATE DEMAND NOTES#--0.3%
DELAWARE--0.1%
200 State Econ Dev. Auth. Rev.,
4.55%, 11/1/00............................................... A2/A 200,000
------------
NEW YORK--0.2%
300 State Job Dev. Auth., Ser. B1-B2,
4.55%, 11/1/00............................................... A2/A+ 300,000
------------
Total Short-Term Variable Rate Demand Notes (cost--$500,000).... 500,000
------------
Total Investments (cost--$149,030,393+++)....................... 96.8% 149,790,410
Other assets less liabilities................................... 3.2% 4,987,896
------ ------------
Net Assets...................................................... 100.0% $154,778,306
======= ============
</TABLE>
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
(CONCLUDED)
-------------------------------------------------------------------------------
* Unaudited
** Long-term debt securities are valued by an independent pricing service
authorized by the Board of Directors.
+ Subject to Alternative Minimum Tax
++ Pre-refunded bonds are collateralized by U.S. Government or other eligible
securities which are held in escrow and used to pay principal and interest
and retire the bonds at the earliest refunding date.
+++ Aggregate unrealized appreciation for securities in which there is an excess
of value over tax cost is $3,641,799, aggregate gross unrealized
depreciation for securities in which there is an excess of tax cost over
value is $2,881,782 and net unrealized appreciation for federal income tax
purposes is $760,017. The cost basis of portfolio securities for federal
income tax purposes is $149,030,393.
# 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 the date of next rate change.
Glossary:
---------
AMBAC--insured by American Municipal Bond Assurance Corp.
CP--Certificates of Participation
FGIC--insured by Financial Guaranty Insurance Co.
FHA--insured by Federal Housing Administration
FSA--insured by Financial Security Assurance, Inc.
GO--General Obligation Bonds
MBIA--insured by Municipal Bond Investors Assurance
NR--not rated
See accompanying notes to financial statements.
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost--$149,030,393) ........................ $ 149,790,410
Cash .............................................................. 47,280
Receivable for investments called ................................. 2,989,909
Interest receivable ............................................... 2,748,645
Prepaid expenses .................................................. 3,091
-------------
Total Assets .................................................... 155,579,335
-------------
LIABILITIES:
Dividends payable to common and preferred shareholders ............ 578,280
Investment management fee payable ................................. 78,259
Accrued expenses .................................................. 144,490
-------------
Total Liabilities ............................................... 801,029
-------------
Net Assets ................................................... $ 154,778,306
=============
COMPOSITION OF NET ASSETS:
Preferred stock ($0.001 par value and $50,000 net asset and
liquidation value per share applicable to 1,100 shares
issued and outstanding)......................................... $55,000,000
-------------
COMMON STOCK:
Par value ($0.001 per share, applicable to 7,257,093 shares
issued and outstanding)......................................... 7,257
Paid-in-capital in excess of par ............................... 100,618,353
Undistributed net investment income .............................. 25,349
Accumulated net realized loss .................................... (1,632,670)
Net unrealized appreciation of investments ....................... 760,017
-------------
Net assets applicable to common shareholders .................. 99,778,306
-------------
Net Assets .................................................. $ 154,778,306
=============
NET ASSET VALUE PER COMMON SHARE ............................ $ 13.75
=======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2000
<TABLE>
<S> <C>
Investment Income:
Interest ........................................................... $ 8,998,636
------------
Expenses:
Investment management fee ........................................... 908,977
Auction agent fees and commissions .................................. 147,255
Legal fees .......................................................... 85,700
Audit and tax service fees .......................................... 69,862
Custodian fees ...................................................... 49,021
Reports to shareholders ............................................. 36,340
Transfer agent fees ................................................. 34,320
Directors' fees and expenses ........................................ 28,014
New York Stock Exchange listing fee ................................. 18,872
Insurance expense ................................................... 3,432
Miscellaneous ....................................................... 9,707
------------
Total expenses .................................................... 1,391,500
Less: expense offset ............................................ (4,199)
------------
Net expenses .................................................... 1,387,301
------------
Net investment income ......................................... 7,611,335
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS:
Net realized loss on:
Investments ........................................................ (548,420)
Futures contracts .................................................. (220,069)
Net change in unrealized appreciation/depreciation of:
Investments ........................................................ 5,049,777
Futures contracts .................................................. 62,025
------------
Net realized and unrealized gain on investments and futures contracts 4,343,313
------------
Net increase in net assets resulting from investment operations ...... $ 11,954,648
============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended October 31,
----------------------
2000 1999
--------------- -------------
<S> <C> <C>
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ........................................... $ 7,611,335 $ 7,652,219
Net realized loss on investments and futures contracts ........... (768,489) (494,461)
Net change in unrealized appreciation/depreciation of investments
and futures contracts ......................................... 5,111,802 (14,408,017)
----------- -----------
Net increase (decrease) in net assets resulting from investment
operations ................................................... 11,954,648 (7,250,259)
----------- -----------
DIVIDENDS TO SHAREHOLDERS:
To preferred shareholders from net investment income ............. (2,349,067) (1,851,326)
To common shareholders from net investment income ............... (5,489,991) (5,791,160)
----------- -----------
Total dividends to shareholders ................................ (7,839,058) (7,642,486)
----------- -----------
Total increase (decrease) in net assets ..................... 4,115,590 (14,892,745)
NET ASSETS:
Beginning of year ............................................... 150,662,716 165,555,461
----------- -----------
End of year (including undistributed net investment income of
$25,349 and $253,072, respectively) ............................. $154,778,306 $150,662,716
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2000
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 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. Actual results could differ from those estimates. The following is a
summary of significant accounting policies consistently followed by the Fund:
(a) VALUATION OF INVESTMENTS
Debt securities are valued each week by an independent pricing service approved
by the Board of Directors. Futures contracts are valued at the last sale price
on the market where the futures contracts are principally traded. Any security
or other asset for which market quotations are not readily available is valued
at 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
The Fund intends to distribute all of its taxable income and to comply with the
other requirements of the U.S. Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies. Accordingly, no provision for U.S.
federal income taxes is required. In addition, by distributing substantially all
of its ordinary income and long-term capital gains, if any during each calendar
year, the Fund intends not to be subject to U.S. federal excise tax.
At October 31, 2000, the Fund had a capital loss carryforward of $1,632,670
($369,720 of which will expire in 2004, $556,486 of which will expire in 2007
and $706,464 of which will expire in 2008) available as a reduction, to the
extent provided in the regulations, of any future net realized capital gains. To
the extent that these losses are used to offset future net capital gains, such
gains will not be distributed to shareholders.
(c) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Realized gains and
losses on investments are determined on the identified cost basis. Interest
income is recorded on an accrual basis. Original issue discounts or premiums on
debt securities purchased are accreted or amortized daily to non-taxable
interest income. Market discounts, if any, are accreted daily to taxable income.
(d) DIVIDENDS AND DISTRIBUTIONS--COMMON STOCK
The Fund declares dividends from net investment income monthly to common
shareholders. Distributions of net realized capital gains, if any, are paid at
least annually. The Fund records dividends and distributions to its shareholders
on the ex-dividend date. The amount of dividends and distributions from net
investment income and net realized capital gains are determined in accordance
with federal income tax regulations, which may differ from generally accepted
accounting principles. These "book-tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their federal income tax treatment; temporary differences do not require
reclassification. To the extent dividends and/or distributions exceed current
and accumulated earnings and profits for federal income tax purposes, they are
reported as dividends and/or distributions of paid-in-capital in excess of par.
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2000
(CONTINUED)
(e) FUTURES CONTRACTS
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 involves the risk of an
imperfect correlation in the movements in the price of futures contracts,
interest rates and the underlying hedged assets, and the possible inability of
the counterparties to meet the terms of their contracts. The Fund did not have
any futures contracts outstanding at October 31, 2000.
(f) EXPENSE OFFSET
The Fund benefits from an expense offset arrangement with its custodian bank
whereby uninvested cash balances earn credits which reduce monthly custodian
expenses. Had these cash balances been invested in income producing securities,
they would have generated income for the Fund.
2. INVESTMENT MANAGER AND ADVISER
On September 17, 1999 the Board of Directors of the Fund approved the assignment
of the Management Agreement between the Fund and Value Advisors LLC to PIMCO
Advisors L.P. (the "Investment Manager"), the parent of Value Advisors LLC. The
assignment did not require the approval of the shareholders of the Fund.
Subsequent to the assignment, services are being provided by the same persons
who provided services on behalf of Value Advisors LLC. The Management Agreement
between Value Advisors LLC and the Fund was approved by the Fund's shareholders
on October 14, 1997 and became effective on November 5, 1997. Prior thereto,
Advantage Advisers, Inc., a wholly-owned subsidiary of CIBC World Markets Corp.,
served as the Fund's investment manager. The Investment Manager, among other
things supervises the Fund's investment program, including advising and
consulting with OpCap Advisors, the Fund's investment adviser (the "Adviser")
regarding the Fund's overall investment strategy. Pursuant to an Investment
Advisory Agreement, the Adviser is responsible on a day-to-day basis for
investing the Fund's portfolio in accordance with its investment objectives and
policies. The Adviser is an indirect wholly-owned subsidiary of the Investment
Manager and was acquired by the Investment Manager on November 4, 1997.
On May 5, 2000 the general partners of the Investment Manager closed the
transactions contemplated by the Implementation and Merger Agreement dated as of
October 31, 1999 ("Implementation Agreement"), as amended March 3, 2000, with
Allianz of America, Inc., Pacific Asset Management LLC, PIMCOPartners LLC, PIMCO
Holding LLC, PIMCO Partners, G.P., and other parties to the Implementation
Agreement. As a result of completing these transactions, the Investment Manager
is now majority-owned indirectly by Allianz AG with subsidiaries of Pacific Life
Insurance Company retaining a significant minority interest. Allianz AG is a
German based insurer. Pacific Life Insurance Company is a Newport Beach,
California based insurer. For the Fund, the change of control as a result of the
closing of the Implementation Agreement resulted in the automatic termination of
the current investment management agreement with the Investment Manager and the
current investment advisory/administration agreements with the Adviser. Prior to
the closing of the Implementation Agreement, the Board of Directors and
stockholders of the Fund approved new agreements with the Investment Manager and
the Adviser to become effective upon the closing of the Implementation
Agreement.
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2000
(CONCLUDED)
For its services, the Investment Manager receives a monthly fee at an annual
rate of 0.60% of the Fund's average weekly net assets and the Adviser receives
from the Investment Manager a monthly fee at an annual rate of 0.36% of the
Fund's average weekly net assets. The Investment Manager informed the Fund that
it paid the Adviser $545,386 for the year ended October 31, 2000.
3. INVESTMENTS IN SECURITIES
For the year ended October 31, 2000, aggregate purchases and sales of
investments, other than short-term securities, were $40,426,292 and $43,524,968,
respectively.
4. CAPITAL
There are 100 million shares of $0.001 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").
For the years ended October 31, 2000 and October 31, 1999, there were no
transactions in shares of common stock.
5. AUCTION RATE PREFERRED STOCK
The Fund has issued 1,100 shares of Preferred Stock with a net asset and
liquidation value of $50,000 per share plus accrued dividends.
Dividends are accumulated daily at an annual rate set through auction
procedures. The annualized dividend rate ranged from 3.75% to 5.10% during the
fiscal year and was 4.25% at October 31, 2000. Distributions of net realized
gains, if any, are paid annually.
The Fund is subject to certain limitations and restrictions while Preferred
Stock is outstanding. Failure to comply with these limitations and restrictions
could preclude the Fund from declaring any dividends or distributions to common
shareholders or repurchasing common shares and/or could trigger the mandatory
redemption of Preferred Stock at its 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. SUBSEQUENT DIVIDEND DECLARATIONS
On November 1, 2000, a dividend of $0.06 per share was declared to common
shareholders payable December 1, 2000 to shareholders of record on November 17,
2000.
On December 1, 2000, a dividend of $0.06 per share was declared to common
shareholders payable December 29, 2000 to shareholders of record on December 15,
2000.
7. TRANSACTIONS WITH AFFILIATES
For the year ended October 31, 2000, the Fund paid $7,500 to Deutsche Bank AG,
an affiliate of Allianz AG, for auction agent services in connection with the
Fund's Preferred Stock.
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
FINANCIAL HIGHLIGHTS
For a share of common stock outstanding throughout each year:
<TABLE>
<CAPTION>
Year ended October 31,
----------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................ $ 13.18 $ 15.23 $ 14.64 $ 13.96 $ 13.77
--------- --------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income ............................. 1.05 1.05 1.07 1.08 1.09
Net realized and unrealized gain (loss)
on investments and futures contracts ........... 0.60 (2.04) 0.60 0.68 0.17
--------- --------- -------- -------- --------
Total from investment operations ............. 1.65 (0.99) 1.67 1.76 1.26
--------- --------- -------- -------- --------
DIVIDENDS TO SHAREHOLDERS:
To preferred shareholders from net
investment income ............................... (0.32) (0.26) (0.28) (0.28) (0.29)
To common shareholders from net
investment income ............................... (0.76) (0.80) (0.80) (0.80) (0.78)
--------- --------- -------- -------- --------
Total dividends to shareholders ............... (1.08) (1.06) (1.08) (1.08) (1.07)
--------- --------- -------- -------- --------
Net asset value, end of year ....................... $ 13.75 $ 13.18 $ 15.23 $ 14.64 $ 13.96
========= ========= ======== ======== ========
Market price, end of year .......................... $ 11.375 $ 11.75 $ 14.125 $13.1875 $ 11.875
========= ========= ======== ======== ========
Total Investment Return (1) ........................ 3.4% (11.6)% 13.6% 18.4% 9.2%
====== ====== ===== ===== ====
Ratios/Supplemental Data:
Net assets applicable to common
shareholders, end of year (000's) ............... $ 99,778 $95,663 $110,555 $106,219 $101,297
Ratio of net expenses to average net assets (2)(3) . 1.44% 1.36% 1.31% 1.39% 1.40%
Ratio of net investment income to average net assets
(2)(3)............................................ 7.89% 7.22% 7.13% 7.64% 7.88%
Asset coverage per share of preferred stock ........ $ 140,473 $136,768 $150,252 $146,251 $141,788
Portfolio turnover ................................. 27% 22% 44% 44% 27%
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day and a sale at the current market
price on the last day of each year reported. Dividends are assumed, for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Total investment return does not reflect
brokerage commissions or sales charges.
(2)Calculated on the basis of income and expenses applicable to both common and
preferred shares relative to the average net assets of common shareholders.
(3)Inclusive of expenses offset by earning credits from custodian bank. (See
note 1f in Notes to Financial Statements).
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
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, 2000, 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 five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America. 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 auditing standards generally accepted in
the United States of America, 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, 2000 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
December 11, 2000
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
TAX INFORMATION:
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise shareholders within 60 days of the Fund's fiscal year end
(October 31, 2000) as to the federal tax status of dividends and distributions
received by shareholders during such fiscal year. Accordingly, we are advising
that substantially all dividends paid from net investment income during the
fiscal year ended October 31, 2000 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. The percentage of
dividends paid from net investment income subject to such tax was 35.7%.
Additionally, the Fund invested in municipal bonds containing market discount,
whose accretion is taxable. Accordingly, 0.24% of the Fund's dividends paid
during the fiscal year are taxable. Per share dividends for the fiscal year
ended October 31, 2000 were as follows:
Dividends to common shareholders from net investment income $0.7565
Dividends to preferred shareholders from net investment income $2,135.52
Since the Fund's fiscal year is not the calendar year, another notification will
be sent with respect to calendar year 2000. In January 2001, you will be advised
on IRS Form 1099 DIV as to the federal tax status of the dividends received in
calendar 2000. The amount that will be reported, will be the amount to be used
on your 2000 federal income tax return and may differ from the amount which we
must report in connection for the Fund's fiscal year ended October 31, 2000.
Shareholders are advised to consult with their tax advisers as to the federal,
state and local tax status of the income received from the Fund. An allocation
of interest income 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 Fund has a Dividend Reinvestment and Cash Purchase Plan (the "Plan") in
which all dividends and distributions paid to Common Stockholders are
automatically reinvested in additional shares of the Fund (unless a shareholder
elects to receive cash). EquiServe L.P. ( the "Plan Agent") serves as agent for
the holders of Common Stock in administering the Plan. Subsequent to the Fund
paying a dividend and/or distribution, the Plan Agent, as agent for the
participants, receives cash and uses it to purchase 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. The Plan Agent's fees for the reinvestment of dividends and
distributions are paid for by the Fund. Each participant also 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. 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 to the Plan Agent.
Participants also have an option to make additional cash payments to the Plan
Agent for the purchase of Common Stock with a minimum investment of $250. 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 EquiServe L.P., Post Office Box
8200, Boston, Massachusetts 02266 or by telephone at 1-800-426-5523.
-------------------------------------------------------------------------------
OTHER INFORMATION:
Since October 31, 1999, there have been no: (i) material changes in the Fund's
investment objectives or policies; (ii) changes to the Fund's charter or
by-laws; (iii) material changes in the principal risk factors associated with
investment in the Fund; or (iv) change in the person primarily responsible for
the day-to-day management of the Fund's portfolio.
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
ANNUAL SHARE HOLDER MEETING
The Fund held its annual meeting of shareholders on February 24, 2000.
Shareholders for both common and preferred stock voted to: 1) approve a new
management agreement between PIMCO Advisors L.P. and the Fund; 2) approve a new
investment advisory and administration agreement among PIMCO Advisors L.P.,
OpCap Advisors and the Fund; 3) elect Jeswald W. Salacuse as a director of the
Fund; and 4) ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants for the fiscal year ending October 31, 2000.
The resulting vote count for each proposal is indicated below.
<TABLE>
<CAPTION>
WITHHOLD
AFFIRMATIVE AGAINST AUTHORITY
----------- ------- ---------
<S> <C> <C> <C>
1) Approval of a new management agreement
between PIMCO Advisors L.P. and the Fund. 6,135,887 136,472 143,567
2) Approval of a new investment advisory and
administration agreement among PIMCO
Advisors L.P., OpCap Advisors and the Fund. 6,132,655 136,930 146,341
3) Election of Jeswald W. Salacuse. 6,313,354 -- 102,572
4) Ratification of the appointment of
PricewaterhouseCoopers LLP as the Fund's
independent accountants for the fiscal year
ending October 31, 2000. 6,279,155 72,585 64,186
</TABLE>
In addition to the re-election of Jeswald W. Salacuse, Robert E. Connor*,
Raymond D. Horton and Stephen J. Treadway* continue to serve as Directors of the
Fund.
* Preferred Stock Director
<PAGE>
MUNICIPAL ADVANTAGE FUND INC.
DIRECTORS AND PRINCIPAL OFFICERS
STEPHEN J. TREADWAY
Director and Chairman of the Board
ROBERT E. CONNOR
Director
RAYMOND D. HORTON
Director
JESWALD W. SALACUSE
Director
BERNARD H. GARIL
President
NEWTON B. SCHOTT, JR.
Executive Vice President and Assistant Secretary
MATTHEW GREENWALD
Executive Vice President
BRIAN S. SHLISSEL
Treasurer
ELLIOT M. WEISS
Secretary
INVESTMENT MANAGER
PIMCO Advisors L.P.
800 Newport Center Drive
Newport Beach, CA 92660
INVESTMENT ADVISER
OpCap Advisors
1345 Avenue of the Americas
New York, NY 10105
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
EquiServe L.P.
Post Office Box 8200
Boston, MA 02266
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP [MAF LOGO]
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.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase
shares of its common stock in the open market.
ANNUAL REPORT
OCTOBER 31, 2000
MUNICIPAL ADVANTAGE FUND INC.
