UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07532
---------
Municipal Advantage Fund Inc.
--------------------------------------------------
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
-----------------------------------------------------
(Address of principal executive offices) (Zip code)
Brian S. Shlissel - 1345 Avenue of the Americas, New York, New York 10105
-------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-739-3371
------------
Date of fiscal year end: October 31
----------
Date of reporting period: October 31
----------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO SHAREHOLDERS
Annual Report
10.31.03
MUNICIPAL ADVANTAGE FUND INC.
[MAF LOGO]
CONTENTS
Letter to Shareholders .................................1
Performance Summary and Statistics .....................2
Schedule of Investments ..............................3-8
Statement of Assets and Liabilities ....................9
Statement of Operations ...............................10
Statement of Changes in Net Assets ....................11
Notes to Financial Statements ......................12-14
Financial Highlights ..................................15
Report of Independent Auditors ........................16
Tax Information, Dividend Reinvestment
and Cash Purchase Plan/Other Information ............17
Board of Directors ....................................18
Privacy Policy ........................................19
P I M C O
---------
ADVISORS
MUNICIPAL ADVANTAGE FUND INC. LETTER TO SHAREHOLDERS
December 3, 2003
Dear Shareholder:
We are pleased to provide you with the annual report of Municipal Advantage Fund
Inc. (the "Fund") for the fiscal year ended October 31, 2003.
Please refer to the following page for specific Fund information. If you have
any questions regarding the information provided, please contact your financial
advisor or call our shareholder services area at 1-800-426-5523. Please note
that a wide range of information and resources can be accessed through our Web
site, www.pimcoadvisors.com.
We at the Fund, together with PIMCO Advisors Fund Management LLC, the Fund's
investment manager and OpCap Advisors LLC, the Fund's investment adviser, thank
you for investing with us. We remain dedicated to serving your investment needs.
Sincerely,
/s/ Stephen Treadway /s/ Brian S. Shlissel
-------------------- ---------------------
Stephen Treadway Brian S. Shlissel
CHAIRMAN PRESIDENT, CHIEF EXECUTIVE OFFICER
| 10.31.03 | Municipal Advantage Fund Annual Report 1
MUNICIPAL ADVANTAGE FUND INC. PERFORMANCE SUMMARY AND STATISTICS
October 31, 2003 (unaudited)
SYMBOL: PRIMARY INVESTMENTS: INCEPTION DATE:
MAF Municipal fixed-income April 30, 1993
securities, the interest
OBJECTIVE: from which is exempt TOTAL NET ASSETS (1):
Municipal Advantage Fund Inc. from federal income tax. $163.3 million
seeks a high level of current
income exempt from federal PORTFOLIO MANAGER:
income tax. Matthew Greenwald
AVERAGE ANNUAL TOTAL RETURN (2): Market Price NAV
--------------------------------------------------------------------------------
1 year 11.04% 6.75%
3 years 12.47% 8.68%
5 years 5.58% 5.32%
10 years 6.23% 6.02%
WEEKLY COMMON SHARE PRICE PERFORMANCE: PORTFOLIO STATISTICS:
Commencement of Operations (4/30/93) ---------------------------------
to 10/31/03 Market Price $13.57
[ ] at Market Price ---------------------------------
[ ] at NAV Net Asset Value $14.93
---------------------------------
Market Price Yield (3) 6.63%
---------------------------------
[DATA BELOW REPRESENTS A LINE CHART IN THE ORIGINAL PIECE.]
At Market
Price At NAV
--------- ------
4/30/93 15 14.04
15 14.09
15 14.08
15 13.98
15 14.1
15 14.11
15 14.17
15 14.22
15 14.33
15 14.23
15 14.26
14.75 14.21
14.75 13.96
14.375 14.06
14.25 14.16
14.625 14.36
14.5 14.52
14.5 14.57
14.75 14.73
14.5 14.91
14.25 14.76
14.125 14.73
14.5 14.74
14.375 14.81
14.375 14.98
14.25 14.84
14.125 14.75
14.125 14.38
14 14.4
13.875 14.29
13.625 14.37
14 14.46
14.125 14.63
13.5 14.53
13.875 14.63
13.875 14.64
13.875 14.67
14.125 14.61
14 14.67
13.875 14.85
13.875 14.72
13.875 14.55
13.625 14.35
13.375 14.06
13.125 13.7
13.125 13.53
13 13.64
12.75 13.46
12.25 12.89
12 12.8
11.875 12.74
12 12.88
12 12.83
11.875 12.65
11.875 12.6
11.75 12.84
11.875 13.04
12.375 13.27
12.25 13.35
12.125 13.12
12 12.83
11.875 12.69
11.75 12.69
11.625 12.84
11.25 12.89
11.5 13.1
11.375 12.95
11.125 12.72
11.125 12.89
11 12.97
11.125 13.08
11 12.77
10.625 12.61
10.125 12.49
10.25 12.44
10.375 12.22
10.375 12.38
10 12.16
9.875 11.79
9.5 11.32
9 10.95
9.625 10.8
10.125 11.02
10.25 11.54
10.125 11.52
10 11.76
9.875 11.7
9.875 11.79
10.5 11.86
10.375 12.07
10.375 12.06
10.875 12.25
11.375 12.66
11.25 12.71
11 12.8
11.25 12.95
11.375 12.95
11.375 12.9
11.125 13.1
11.25 13.09
11.25 13.12
11.375 13.29
11.375 13.31
11.25 13.31
11.125 12.99
11.125 13.24
11.5 13.3
11.375 13.42
11.5 13.59
11.875 13.82
11.625 13.54
11.625 13.31
11.625 13.58
11.5 13.21
11.625 13.53
11.75 13.59
11.75 13.13
11.125 13.21
11.375 13.13
11.375 12.94
11.25 12.95
11.25 13.17
11.375 13.46
11.375 13.52
11.25 13.59
11.375 13.31
11.25 13.44
11.375 13.6
11.5 13.78
11.625 13.73
11.5 13.72
11.625 13.89
11.75 13.8
11.625 13.91
11.75 13.92
12.125 14.19
12 14.3
11.875 14.1
11.875 14.19
11.875 14.33
12 14.24
12 14.15
12.125 14.29
12.25 14.23
12.375 14.29
12.5 14.42
12.25 14.29
12.125 14.13
12 14.1
11.5 13.65
11.375 13.31
11.625 13.58
11.5 13.6
11.625 13.55
11.25 13.42
11.375 13.52
11.375 13.53
11.125 13.19
11.25 13.37
11.375 13.53
11.375 13.61
11.375 13.36
11.25 13.2
11.125 13.26
11.25 13.28
11.5 13.54
11.125 13.19
11.125 13.49
11.375 13.57
11.5 13.63
12 13.88
11.875 14.02
11.75 13.86
11.75 13.71
11.625 13.58
11.625 13.54
11.625 13.79
11.5 13.65
11.75 13.84
12 14.04
11.875 13.89
12 13.85
11.875 13.77
11.75 13.96
11.875 14.07
12 14.04
12.125 14.11
12.125 14.26
12 14.08
11.875 13.97
11.625 13.99
11.75 14.08
11.875 13.98
11.875 13.84
11.875 13.82
12 13.81
11.875 13.93
12.125 14.09
12 14.2
12.125 14.14
12.125 14.04
12.25 14
12.125 13.87
12.25 13.82
12.25 13.68
12.125 13.64
11.875 13.55
11.875 13.65
12.125 13.64
12.25 13.86
12.25 13.94
12.25 13.97
12.25 14
12.25 14.05
12.375 14.19
12.625 14.31
12.625 14.34
12.625 14.22
13.25 14.51
13.25 14.55
13.0625 14.67
13.125 14.64
13.1875 14.45
13.0625 14.39
12.875 14.34
13 14.4
13.25 14.43
13.25 14.42
13.0625 14.55
13.4375 14.56
13.5 14.63
13.1875 14.47
13.375 14.37
13.3125 14.47
13.1875 14.64
13.1875 14.57
13 14.56
13.25 14.64
13.25 14.67
13.3125 14.76
13.25 14.83
13.625 14.91
13.6875 14.94
13.8125 14.97
13.8125 15.18
13.875 15.12
13.75 14.99
13.625 15.05
13.75 15.02
13.75 15.04
13.8125 15.04
13.6875 14.95
13.5625 14.83
13.9375 14.88
13.625 14.94
13.4375 14.92
13.5 15.06
13.5 14.88
13.3125 14.77
13.1875 14.75
13.125 14.8
13.0625 14.84
13.1875 14.92
13.25 15.01
13.4375 15.01
13.625 15.04
13.625 14.98
13.5 14.97
13.5625 14.99
13.6875 15.04
13.5625 14.91
13.625 14.96
13.6875 14.96
13.5625 15.02
13.5 15.07
13.6875 15.17
13.625 15.26
13.4375 15.19
13.625 15.25
13.5625 15.24
13.6875 15.32
14.1875 15.54
14.0625 15.28
14.1875 15.36
14.125 15.2
14.125 15.24
14.1875 15.11
14.1875 15.12
14.1875 15.18
14.375 15.19
14.375 15.27
14.25 15.32
14.375 15.22
14.25 15.09
14.375 15.16
14.4375 15.13
14 15.14
14.125 15.19
14 15.3
14.0625 15.19
13.875 15.11
13.9375 15.16
13.875 15.11
13.9375 15.06
13.875 15.1
13.625 15.09
13.625 15.04
13.75 15.01
13.75 15.09
13.375 15.01
13.5 14.99
13.25 14.96
13.3125 14.88
13.1875 14.71
13.1875 14.75
13.0625 14.71
13 14.64
12.5625 14.39
12.625 14.41
12.5 14.25
12.75 14.32
12.75 14.33
12.75 14.37
12.75 14.33
12.875 14.21
12.6875 13.98
12.1875 13.7
12.375 13.69
12.375 13.84
12.4375 13.76
12.125 13.78
12 13.66
11.75 13.66
11.875 13.52
11.9375 13.47
11.5625 13.22
11.375 13.09
11.75 13.18
11.9375 13.41
12 13.39
12.25 13.38
12.0625 13.34
11.8125 13.3
11.875 13.31
11.6875 13.07
11.4375 12.99
11.5625 13.02
11.6875 12.95
11.75 12.84
11.6875 12.77
11.875 12.78
12 12.87
11.9375 12.84
11.75 12.9
11.375 13.01
11.25 13.08
11.0625 13.15
11.0625 13.22
11.125 13.43
11.1875 13.43
11.5 13.52
11.3125 13.4
11.4375 13.31
11.4375 13.18
11.3125 12.86
11.125 12.73
11.0625 12.7
10.875 12.83
11.3125 13.1
11.1875 13.23
11.25 13.36
11.0625 13.33
11.125 13.39
11.5625 13.5
11.6875 13.54
11.5625 13.51
11.5 13.57
11.5 13.65
11.6875 13.73
11.75 13.72
11.6875 13.81
11.75 13.83
11.875 13.85
11.875 13.71
11.75 13.62
11.6875 13.6
11.4375 13.59
11.375 13.62
11.3125 13.71
11.375 13.75
11.4375 13.73
11.4375 13.7
11.375 13.69
11.3125 13.75
11.375 13.85
11.4375 14.08
11.5 14.24
11.875 14.35
12.125 14.36
12.4375 14.58
12.5 14.54
12.5625 14.53
12.5625 14.35
12.75 14.47
12.95 14.49
12.81 14.38
12.8 14.35
12.89 14.42
12.84 14.48
12.85 14.53
12.7 14.57
12.55 14.49
12.57 14.43
12.58 14.27
12.4 14.1
12.34 14.1
12.44 14.09
12.37 14.21
12.39 14.16
12.34 14.21
12.34 14.22
12.39 14.25
12.33 14.29
12.38 14.4
12.45 14.36
12.53 14.38
12.7 14.34
12.78 14.34
12.67 14.33
12.63 14.48
12.72 14.55
12.77 14.62
12.97 14.71
12.97 14.77
13 14.81
13.09 14.89
13.08 14.87
12.55 14.6
12.75 14.66
13.26 14.85
12.94 14.71
13 14.74
13.05 14.82
13.2 14.98
13.2 14.67
12.98 14.55
13.01 14.54
12.84 14.27
12.61 14.18
12.95 14.19
12.96 14.22
13.04 14.3
13 14.5
13.18 14.56
13.12 14.44
13.23 14.5
13.31 14.57
13.31 14.53
13.12 14.64
13.25 14.63
13 14.37
12.82 14.21
12.63 14.14
12.72 14.14
12.66 14.26
12.65 14.31
12.66 14.29
12.72 14.39
12.76 14.4
12.86 14.43
13 14.33
12.89 14.22
12.79 14.37
12.96 14.46
13.09 14.48
13.12 14.55
13.18 14.58
13.24 14.57
13.3 14.59
13.39 14.68
13.35 14.73
13.44 14.81
13.53 14.79
13.73 14.84
13.48 14.81
13.45 14.81
13.55 14.9
13.75 15.11
13.85 15.13
13.81 15.28
13.82 15.3
13.97 15.35
13.97 15.31
13.7 15.16
12.95 14.64
12.7 14.57
13.15 14.81
13.15 14.98
13.1 14.76
12.98 14.67
13.09 14.64
13.14 14.8
13.09 14.81
13.09 14.91
13.23 15
13.3 15.09
13.25 15
13.06 14.88
12.96 14.83
13.05 14.89
13.24 14.88
13.44 14.94
13.47 14.92
13.38 14.99
13.47 15.19
13.55 15.3
13.59 15.22
13.51 14.78
13.62 15
13.75 15.09
13.76 14.99
13.57 14.95
13.7 15.04
13.7 15.19
13.97 15.23
13.94 15.39
14.18 15.56
14.17 15.68
14.31 15.6
14.35 15.67
14.35 15.79
14.2 15.41
14.18 15.29
14.21 15.27
14.11 15.21
13.53 14.98
13.49 14.82
13.63 14.42
13.51 14.68
13.42 14.39
13.41 14.46
13.16 14.53
13.41 14.63
13.5 14.8
13.68 14.91
13.53 15
13.55 14.93
13.6 14.77
13.4 14.71
13.5 14.91
10/31/03 13.57 14.93
(1) Inclusive of net assets attributable to Preferred Shares outstanding.
(2) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is
determined by subtracting the initial investment from the redeemable value at
the end of the period and dividing the remainder by the initial investment and
expressing the result as a percentage. The calculation assumes that all income
dividends and capital gain distributions by the Fund have been reinvested at
prices obtained under the Fund's dividend reinvestment plan. Total investment
return does not reflect broker commissions or sales charges. Total return for a
period of less than one year is not annualized.
An investment in the Fund involves risk, including the loss of principal.
Investment return, price, yield and net asset value will fluctuate with changes
in market conditions. This data is provided for information only and is not
intended for trading purposes. A portion of the income generated by the Fund may
be subject to federal, state and local taxes, and may at times be subject to the
alternative minimum tax. Closed-end funds, unlike open-end funds, are not
continuously offered. There is a one-time public offering and once issued,
shares of closed-end funds are sold in the open market through a stock exchange.
Net asset value is total assets applicable to common shareholders less total
liabilities divided by the number of common shares outstanding. Holdings are
subject to change daily.
(3) Market Price Yield is determined by dividing the annualized current per
share dividend payable to common shareholders by the market price per common
share at October 31, 2003.
2 Municipal Advantage Fund Annual Report | 10.31.03 |
MUNICIPAL ADVANTAGE FUND INC. SCHEDULE OF INVESTMENTS
October 31, 2003
Principal
Amount Credit Rating*
(000) (Moody's/S&P) Value**
---------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS--98.3%
ALABAMA--0.7%
$1,000 State Docks Dept. Fac. Rev., 6.15%, 10/1/14 (MBIA) + Aaa/AAA $ 1,125,540
============
ARIZONA--1.8%
2,540 State Univ. Rev., 5.50%, 7/1/17 (FGIC) Aaa/AAA 2,804,846
============
CALIFORNIA--2.0%
1,000 Burbank Redev. Agcy., 6.00%, 12/1/13 A3/A- 1,024,110
1,000 Foothill/Eastern Corridor Agcy., Toll Rd. Rev.,
5.75%, 1/15/40 Baa3/BBB- 1,011,630
1,000 State Dept. Water Res. Rev.,
5.50%, 5/1/16, Ser. A (AMBAC) Aaa/AAA 1,105,950
------------
3,141,690
============
COLORADO--4.0%
Denver City & Cnty. Airpt. Rev., (MBIA),
1,500 5.60%, 11/15/25, Ser. C + Aaa/AAA 1,549,740
3,000 5.75%, 11/15/17, Ser. B + Aaa/AAA 3,266,160
1,500 Denver Convention Center Auth. Rev., 5.00%, 12/1/21,
Ser. A (XLCA) Aaa/AAA 1,541,820
------------
6,357,720
============
DISTRICT OF COLUMBIA--1.4%
State GO,
955 5.25%, 6/1/27, Ser. A (MBIA)
(Pre-refunded @ 101, 6/1/08) ++ Aaa/AAA 974,482
145 5.25%, 6/1/27 Ser. A (MBIA) Aaa/AAA 164,646
1,000 World Wildlife Fund, 6.00%, 7/1/18, Ser. A (AMBAC) Aaa/AAA 1,137,720
------------
2,276,848
============
FLORIDA--0.7%
1,000 Jacksonville Port. Auth. Airpt. Rev.,
6.25%, 10/1/24, Ser. A (FGIC) + Aaa/AAA 1,099,760
============
GEORGIA--2.6%
1,000 Atlanta Dev. Auth. Rev., 5.25%, 7/1/12, Ser. A A3/NR 1,069,940
1,750 Cherokee Cnty. Water & Sewer Auth. Rev.,
5.50%, 8/1/23 (MBIA) Aaa/AAA 1,931,125
1,050 Municipal Elec. Auth., 5.00%, 11/1/06, Ser. A (MBIA) Aaa/AAA 1,150,695
------------
4,151,760
============
HAWAII--2.7%
1,000 State Airpt. Syst. Rev., 5.75%, 7/1/21, Ser. A (FGIC) Aaa/AAA 1,093,410
3,000 State Dept. of Budget & Finance, Hawaiian Elec. Co.,
5.75%, 12/1/18, Ser. B (AMBAC)+ Aaa/AAA 3,262,830
------------
4,356,240
============
ILLINOIS--9.1%
1,145 Chicago O' Hare Intl. Airpt. Rev.,
5.50%, 1/1/15 (AMBAC) Aaa/AAA 1,255,905
| 10.31.03 | Municipal Advantage Fund Annual Report 3
MUNICIPAL ADVANTAGE FUND INC. SCHEDULE OF INVESTMENTS
October 31, 2003
Principal
Amount Credit Rating*
(000) (Moody's/S&P) Value**
---------------------------------------------------------------------------------------------------------
ILLINOIS--(CONTINUED)
$1,000 Chicago Wastewater Transmission Rev.,
6.00%, 1/1/17, (MBIA) (Pre-refunded @ 101,
1/1/10) ++ Aaa/AAA $ 1,177,260
1,000 Chicago Water Rev., 5.25%, 11/1/17 (FGIC) Aaa/AAA 1,075,120
1,000 Health Facs. Auth. Rev., Centegra Health Syst.,
5.25%, 9/1/24 NR/A- 948,600
1,000 Madison & St. Clair Cmnty. School Dist., GO,
5.50%, 2/1/16 (FGIC) Aaa/AAA 1,105,240
1,100 McHenry & Lake Cntys. Cmnty. High School Dist., GO,
5.125%, 1/1/19 (FGIC) Aaa/NR 1,157,563
2,500 Metropolitan Pier & Exposition Auth.,
5.25%, 6/15/27, Ser. A (AMBAC) Aaa/AAA 2,554,450
1,005 Regional Transmission Auth.,
5.50%, 6/1/16, Ser. B (FGIC) Aaa/AAA 1,135,861
2,300 State GO, 5.50%, 4/1/16 Aaa/AAA 2,532,323
1,500 State Sales Tax Rev., 5.375%, 6/15/16 Aa3/AAA 1,644,990
------------
14,587,312
============
INDIANA--2.5%
1,000 Indianapolis Local Pub. Impt., 5.00%, 2/1/17, Ser. A Aaa/AAA 1,054,540
1,040 Indianapolis Marion Cnty. Pub., GO, 5.00%, 7/1/20 Aa2/AAA 1,067,914
1,795 Merrillville School Bldg. Corp., 5.00%, 1/5/21 (MBIA) Aaa/AAA 1,837,380
------------
3,959,834
============
KENTUCKY--2.0%
1,000 Louisville & Jefferson Cnty. Metropolitan Sewer
& Drain Syst., 6.50%, 5/15/24, Ser. A (AMBAC)
(Pre-refunded @ 102, 11/15/04) ++ Aaa/AAA 1,076,250
2,125 Louisville & Jefferson Cnty. Reg. Airpt. Auth. Syst. Rev.,
5.375%, 7/1/23, Ser. A (FSA) + Aaa/AAA 2,174,194
------------
3,250,444
============
LOUISIANA--1.0%
1,500 New Orleans GO, 6.125%, 10/1/16 (AMBAC) Aaa/AAA 1,640,940
============
MASSACHUSETTS--7.5%
540 State College Bldg. Auth. Proj. Rev.,
5.625%, 5/1/16, Ser. A (MBIA) Aaa/NR 626,092
1,500 State GO, 5.50%, 11/1/20 Ser. C Aa2/AA- 1,707,795
State Health & Educ. Fac. Auth. Rev.,
1,000 5.125%, 7/1/19, Ser. B Aa3/AA- 1,023,800
2,250 6.25%, 12/1/22, Ser. G-1 A2/A 2,358,270
5,000 State Higher Educ. Dev. Fin. Agy. Rev., Smith College,
5.75%, 7/1/29 Aa1/AA 5,870,950
State Water Poll. Abatement Trust, Ser. A,
300 6.375%, 2/1/15 (Pre-refunded @ 102, 2/1/04)++ Aaa/AA+ 310,020
90 6.375%, 2/1/15 Aaa/AA+ 92,912
------------
11,989,839
============
4 Municipal Advantage Fund Annual Report | 10.31.03 |
MUNICIPAL ADVANTAGE FUND INC. SCHEDULE OF INVESTMENTS
October 31, 2003
Principal
Amount Credit Rating*
(000) (Moody's/S&P) Value**
---------------------------------------------------------------------------------------------------------
MICHIGAN--5.9%
$1,065 Bloomingdale Pub. School Dist., No. 16, GO,
5.50%, 5/1/19 Aaa/AAA $ 1,167,922
1,400 Garden City School Dist., GO, 5.50%, 5/1/17 Aaa/AAA 1,547,980
2,000 Grand Valley Univ. Rev., 5.50%, 2/1/18 (FGIC) NR/AAA 2,261,600
1,075 Lincoln School Dist., GO, 5.50%, 5/1/19 Aaa/AAA 1,178,888
2,000 State Hospital Fin. Auth. Rev.,
8.125%, 10/1/21 (Pre-refunded @ 102, 10/1/05) ++ NR/AAA 2,296,340
1,000 State Poll. Control. Rev., Gen. Motors Corp.,
6.20%, 9/1/20 Baa1/BBB 1,027,140
------------
9,479,870
============
NEVADA--3.4%
1,100 Clark Cnty. Park & Regl. Justice Ctr., 5.50%, 11/1/17 Aa2/AA 1,220,604
2,000 Clark Cnty. Passenger Fac. Charge Rev.,
(MBIA), 5.75%, 7/1/23 Aaa/AAA 2,113,980
Housing Div. Rev.,
185 5.65%, 4/1/22, Ser. A. NR/AA 187,272
750 5.95%, 4/1/22 Aa2/AA 807,960
635 6.125%, 4/1/22, Ser. B-2 (FHA) Aa2/AA 660,133
435 6.20%, 4/1/17, Ser. B-1 (AMBAC) Aaa/AAA 438,976
------------
5,428,925
============
NEW HAMPSHIRE--0.9%
1,000 Higher Educ. & Health Fac. Auth. Rev.,
6.125%, 10/1/13 A3/NR 1,023,150
State Housing Finance Auth.,
190 6.50%, 7/1/14, Ser. D + Aa2/NR 199,454
135 6.90%, 7/1/19, Ser. C + Aa2/NR 136,845
------------
1,359,449
============
NEW JERSEY--2.5%
1,000 Economic Dev. Auth. Heating & Cooling Rev.,
6.20%, 12/1/07, Ser. B + NR/BBB- 999,330
2,000 State Transportation Syst.,
6.00%, 12/15/15, Ser. B (MBIA) Aaa/AAA 2,380,500
750 Tobacco Settlement Fin. Corp., 6.75%, 6/1/39 Baa2/BBB 680,392
------------
4,060,222
============
NEW YORK--9.8%
1,000 Central Islip Union Free School Dist., GO,
4.00%, 7/15/20, Ser. B (MBIA) Aaa/NR 920,640
425 Long Island Pwr. Auth. Elec. Syst. Rev.,
5.00%, 6/1/06, Ser. B Baa1/A- 455,672
Metropolitan Trans. Auth., Ser. A,
5,000 5.00%, 11/15/30 (FSA) Aaa/AAA 5,043,300
1,000 5.50%, 11/15/14 (AMBAC) Aaa/AAA 1,140,460
1,000 5.75%, 1/1/16 A3/AA- 1,133,140
| 10.31.03 | Municipal Advantage Fund Annual Report 5
MUNICIPAL ADVANTAGE FUND INC. SCHEDULE OF INVESTMENTS
October 31, 2003
Principal
Amount Credit Rating*
(000) (Moody's/S&P) Value**
---------------------------------------------------------------------------------------------------------
NEW YORK--(CONTINUED)
State GO,
$ 750 5.25%, 9/15/33, Ser. C A2/A $ 758,018
1,000 6.00%, 8/1/14, Ser. H A2/A 1,113,410
15 State Medical Care Fac. Fin. Agcy. Rev.,
6.50%, 8/15/24 A3/AA- 15,939
1,000 State Mtg. Agcy. Rev., 5.80%, 10/1/12 Aa1/NR 1,041,880
1,000 State Urban Dev. Corp. Rev., Personal Income Tax,
5.50%, 3/15/18, Ser. C-1 (FGIC) Aaa/AAA 1,106,340
2,825 Triborough Bridge & Tunnel Auth. Revs.,
5.125%, 11/15/29, Ser. B Aa3/AA- 2,872,968
------------
15,601,767
============
NORTH DAKOTA--1.0%
State Housing Fin. Agcy. Rev.,
1,008 5.50%, 7/1/18, Ser. C + Aa2/NR 1,041,970
530 5.85%, 7/1/10, Ser. A + Aa2/NR 551,544
------------
1,593,514
============
OHIO--2.1%
1,155 Akron Sewer Syst. Rev., 5.25%, 12/1/18 (MBIA) Aaa/NR 1,243,046
1,000 Hamilton Cnty. Sewer Syst. Rev.,
5.75%, 12/1/25, Ser. A (MBIA) Aaa/AAA 1,091,080
885 Summit Cnty., GO, 6.25%, 12/1/15 (FGIC) Aaa/AAA 1,073,443
------------
3,407,569
============
PENNSYLVANIA--2.0%
2,000 Allegheny Cnty. Hosp. Dev. Auth.,
6.00%, 7/1/23, Ser. B (MBIA) Aaa/AAA 2,300,340
845 South Wayne Cnty. Water and Sewer,
5.95%, 10/15/13 (AMBAC) Aaa/AAA 963,849
------------
3,264,189
============
SOUTH CAROLINA--2.5%
1,250 Charleston Cnty., GO, 6.125%, 9/1/13 Aa1/AA+ 1,456,712
1,000 State Public Service Auth. Rev., 5.75%, 1/1/15, Ser. A (MBIA) Aaa/AAA 1,126,510
1,450 York Cnty. Ind. Rev., 5.70%, 1/1/24 + Baa2/BBB 1,434,456
------------
4,017,678
============
SOUTH DAKOTA--0.7%
960 Heartland Consumer Pwr. Dist. Rev., 7.00%,1/1/16 Aaa/AAA 1,158,960
============
TENNESSEE--1.2%
765 Housing Dev. Agcy., 6.375%, 7/1/22 + Aa2/AA 776,444
960 Memphis-Shelby Cnty. Airpt. Auth. Rev.,
6.25%, 3/1/15, Ser. D (AMBAC) + Aaa/AAA 1,074,624
------------
1,851,068
============
TEXAS--15.8%
1,000 Alliance Airpt. Auth. Rev., Fed. Express Corp.,
6.375%, 4/1/21 Baa2/BBB 1,049,330
6 Municipal Advantage Fund Annual Report | 10.31.03 |
MUNICIPAL ADVANTAGE FUND INC. SCHEDULE OF INVESTMENTS
October 31, 2003
Principal
Amount Credit Rating*
(000) (Moody's/S&P) Value**
---------------------------------------------------------------------------------------------------------
TEXAS--(CONTINUED)
$1,195 Arlington GO, 5.00%, 8/15/16 Aa2/AA $ 1,254,917
1,000 Corpus Christi Refin. & Impt., GO, 5.00%, 3/1/21 (FSA) Aaa/AAA 1,022,720
2,000 Cypress-Fairbanks Indpt. School Dist., GO,
5.50%, 2/15/17 Aaa/AAA 2,200,380
1,000 Denton Cnty. GO, 5.00%, 7/15/16 (AMBAC) Aaa/AAA 1,049,900
3,400 Fort Bend Indpt. School Dist., GO, 5.25%, 8/15/18 NR/AAA 3,638,748
1,900 Hays Indpt. School Dist., GO, 5.50%, 8/15/09 Aaa/AAA 2,165,449
1,250 Houston Indpt. School Dist., GO, 4.75%, 2/15/22, Ser. A Aaa/AAA 1,245,375
1,000 Houston Univ. Rev., 5.25%, 2/15/17 (MBIA) Aaa/AAA 1,076,410
Houston Water Conveyance Syst., CP, (AMBAC)
1,000 6.25%, 12/15/14, Ser. J Aaa/AAA 1,192,410
1,400 7.50%, 12/15/15, Ser. H Aaa/AAA 1,818,152
1,500 Port Houston Auth., Harris Cnty., GO, 5.75%, 10/1/17 + Aa1/AA+ 1,548,990
1,000 South San Antonio Indpt. School Dist., GO,
5.00%, 8/15/21 Aaa/AAA 1,026,400
595 State Housing Fin. Assist, GO, 5.15%, 6/1/24, Ser. A Aa1/AA 627,814
500 State Pub. Fin. Auth. Bldg. Rev.,
5.625%, 8/1/19, Ser. B (FSA) Aaa/AAA 550,435
2,000 Texas Tech Univ. Rev., 5.50%, 8/15/18 (MBIA) Aaa/AAA 2,174,440
Water Dev. Board Rev.,
1,000 5.75%, 7/15/14, Ser. B Aaa/AAA 1,116,200
400 5.75%, 7/15/17, Ser. A Aaa/AAA 452,456
------------
25,210,526
============
UTAH--1.9%
2,000 State Go, Ser. A, 5.00%, 7/1/15 Aaa/AAA 2,175,660
State Housing Fin. Agcy., (FHA),
140 6.35%, 7/1/11 Aaa/NR 140,815
650 6.55%, 1/1/22-7/1/26 Aaa/AAA 661,070
------------
2,977,545
============
VERMONT--0.4%
690 Housing Fin. Agcy., 5.70%, 5/1/12, Ser. 9 (MBIA) + Aaa/AAA 713,350
============
VIRGINIA--2.6%
3,000 Commonwealth Trans. Board Rev., U.S. Rte. 58,
5.25%, 5/15/16 Aa1/AA+ 3,264,840
1,000 Virginia Beach GO, Ser. A, 4.25%, 5/1/23 Aa1/AA+ 939,300
------------
4,204,140
============
WASHINGTON--4.8%
1,205 Franklin Cnty. Pub. Util. Rev., 5.625%, 9/1/15 (MBIA) Aaa/AAA 1,351,793
1,500 Port Seattle Rev., 5.625%, 2/1/24, Ser. B (MBIA) Aaa/AAA 1,558,065
1,000 Seattle Museum Dev. Auth., 6.30%, 7/1/13 Aa1/AAA 1,033,060
500 State GO, 5.00%, 1/1/17, Ser. R-03-A (MBIA) Aaa/AAA 525,620
3,000 State GO, Motor Vehicle Dept., 5.625%, 7/1/25, Ser. B Aa1/AA+ 3,196,710
------------
7,665,248
============
| 10.31.03 | Municipal Advantage Fund Annual Report 7
MUNICIPAL ADVANTAGE FUND INC. SCHEDULE OF INVESTMENTS
October 31, 2003
Principal
Amount Credit Rating*
(000) (Moody's/S&P) Value**
---------------------------------------------------------------------------------------------------------
WEST VIRGINIA--1.3%
$2,000 Braxton Cnty. Solid Waste Disp. Rev., Weyerhaeuser Co.,
6.125%-6.50%, 4/1/25-4/1/26 + Baa2/BBB $ 2,047,740
============
WISCONSIN--0.8%
1,305 State GO, 5.30%, 5/1/23, Ser. B + Aa3/AA- 1,310,390
============
WYOMING--0.7%
1,000 Student Loan Corp. Rev., 6.20%, 6/1/24, Ser. A NR/AA 1,061,310
============
Total Municipal Bonds (cost-$150,017,521) 157,156,233
============
OTHER MUNICIPAL BONDS--1.7%
PUERTO RICO--1.7%
2,460 Commonwealth Hwy. & Transportation Auth Rev.,
5.25%, 7/1/10 (FGIC) (cost-$2,799,974) Aaa/AAA 2,791,288
============
TOTAL INVESTMENTS (cost-$152,817,495oo)--100% $159,947,521
============
--------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS:
* 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.
oo The cost basis of portfolio securites for federal income tax purposes is
$152,817,495. Aggregate gross unrealized appreciation for securities in
which there is an excess value over tax cost is $7,588,336; aggregate gross
unrealized depreciation for securities in which there is an excess of tax
cost over value is $458,310; net unrealized appreciation for federal income
tax purpose is $7,130,026.
--------------------------------------------------------------------------------
GLOSSARY:
AMBAC--insured by American Municipal Bond Assurance Corp.
CP--Certificates of Participation
FGIC--insured by insured 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
XLCA--insured by XL Capital Assurance
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
8 Municipal Advantage Fund Annual Report | 10.31.03 |
MUNICIPAL ADVANTAGE FUND INC. STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at value (cost-$152,817,495) $159,947,521
----------------------------------------------------------------- ------------
Cash 280,883
----------------------------------------------------------------- ------------
Interest receivable 2,630,592
----------------------------------------------------------------- ------------
Receivable for investments sold 1,200,806
----------------------------------------------------------------- ------------
Prepaid expenses 13,338
----------------------------------------------------------------- ------------
Total Assets 164,073,140
================================================================= ============
LIABILITIES:
Dividends payable to common and preferred shareholders 558,551
----------------------------------------------------------------- ------------
Investment management fee payable 82,934
----------------------------------------------------------------- ------------
Accrued expenses 116,960
----------------------------------------------------------------- ------------
Total Liabilities 758,445
----------------------------------------------------------------- ------------
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
----------------------------------------------------------------- ------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $108,314,695
================================================================= ============
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
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 154,518
----------------------------------------------------------------- ------------
Accumulated net realized gain 404,541
----------------------------------------------------------------- ------------
Net unrealized appreciation of investments 7,130,026
----------------------------------------------------------------- ------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $108,314,695
================================================================= ============
NET ASSET VALUE PER COMMON SHARE $14.93
================================================================= ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
| 10.31.03 | Municipal Advantage Fund Annual Report 9
MUNICIPAL ADVANTAGE FUND INC. STATEMENT OF OPERATIONS
Year ended October 31, 2003
INVESTMENT INCOME:
Interest $8,082,697
================================================================= ============
EXPENSES:
Investment management fees 982,607
----------------------------------------------------------------- ------------
Auction agent fees and commissions 147,012
----------------------------------------------------------------- ------------
Audit and tax service fees 78,785
----------------------------------------------------------------- ------------
New York Stock Exchange listing fee 46,250
----------------------------------------------------------------- ------------
Custodian fees 44,212
----------------------------------------------------------------- ------------
Transfer agent fees 37,204
----------------------------------------------------------------- ------------
Reports to shareholders 36,665
----------------------------------------------------------------- ------------
Legal fees 35,790
----------------------------------------------------------------- ------------
Directors' fees and expenses 28,660
----------------------------------------------------------------- ------------
Insurance expense 5,847
----------------------------------------------------------------- ------------
Investor relations expense 3,142
----------------------------------------------------------------- ------------
Miscellaneous 16,947
----------------------------------------------------------------- ------------
Total expenses 1,463,121
----------------------------------------------------------------- ------------
Less: expense offset (2,142)
================================================================= ============
Net expenses 1,460,979
================================================================= ============
NET INVESTMENT INCOME 6,621,718
================================================================= ============
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments 1,001,615
----------------------------------------------------------------- ------------
Futures contracts 164,310
----------------------------------------------------------------- ------------
Net change in unrealized appreciation/depreciation of investments (82,365)
----------------------------------------------------------------- ------------
Net realized and unrealized gain on investments and futures
contracts 1,083,560
================================================================= ============
NET INCREASE IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS 7,705,278
================================================================= ============
DIVIDENDS ON PREFERRED STOCK FROM NET INVESTMENT INCOME (604,891)
================================================================= ============
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
RESULTING FROM INVESTMENT OPERATIONS $7,100,387
================================================================= ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
10 Municipal Advantage Fund Annual Report | 10.31.03 |
MUNICIPAL ADVANTAGE FUND INC. STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
Year ended Year ended
October 31, October 31,
2003 2002
----------- -----------
INVESTMENT OPERATIONS:
Net investment income $ 6,621,718 $ 7,227,439
---------------------------------------------------------------- ----------------------------
Net realized gain on investments and futures contracts 1,165,925 85,434
---------------------------------------------------------------- ----------------------------
Net change in unrealized appreciation/depreciation of investments (82,365) (270,395)
---------------------------------------------------------------- ----------------------------
Net increase in net assets resulting from investment operations 7,705,278 7,042,478
---------------------------------------------------------------- ----------------------------
DIVIDENDS ON PREFERRED STOCK FROM NET INVESTMENT INCOME (604,891) (832,810)
================================================================ ============================
Net increase in net assets applicable to common shareholders
resulting from investment operations. 7,100,387 6,209,668
---------------------------------------------------------------- ----------------------------
DIVIDENDS TO COMMON SHAREHOLDERS FROM NET INVESTMENT INCOME (6,458,814) (6,070,558)
================================================================ ============================
Total increase in net assets applicable to common shareholders 641,573 139,110
---------------------------------------------------------------- ----------------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of year 107,673,122 107,534,012
---------------------------------------------------------------- ----------------------------
End of year (including undistributed net investment income of
$154,518, and $596,505, respectively) $108,314,695 $107,673,122
================================================================ ============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
| 10.31.03 | Municipal Advantage Fund Annual Report 11
MUNICIPAL ADVANTAGE FUND, INC. NOTES TO FINANCIAL STATEMENTS
October 31, 2003
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Municipal Advantage Fund Inc. (the "Fund") was incorporated in the State of
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 accounting
principles generally accepted in the United States of America 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.
In the normal course of business, the Fund enters into contracts that contain a
variety of representations which provide general indemnifications. The Fund's
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against the Fund that have not yet occurred.
However, the Fund expects the risk of any loss to be remote.
The following is a summary of significant accounting policies followed by the
Fund:
(a) VALUATION OF INVESTMENTS
The Fund determines its net asset value at the close of regular trading
(normally 4:00 p.m. Eastern time) on the New York Stock Exchange ("NYSE") on
each day the NYSE is open. Debt securities are valued by an independent pricing
service approved by the Board of Directors. Certain fixed income securities,
including those to be purchased under firm commitment agreements, are normally
valued on the basis of quotes obtained from brokers and dealers or independent
pricing services. Any security or financial instrument for which market
quotations are not readily available is valued as determined in good faith under
procedures established by the Board of Directors. Short-term investments having
a remaining maturity of sixty days or less are valued at amortized cost, which
approximates market value.
(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 taxable 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.
(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 and premiums on
debt securities purchased are accreted or amortized daily to non-taxable
interest income. Market discount, if any, is 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
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.
12 Municipal Advantage Fund Annual Report | 10.31.03 |
MUNICIPAL ADVANTAGE FUND, INC. NOTES TO FINANCIAL STATEMENTS
October 31, 2003
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (concluded)
(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
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, 2003.
(f) CUSTODY CREDITS EARNED ON CASH BALANCES
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 INVESTMENT ADVISER
The Fund has an Investment Management Agreement with PIMCO Advisors Fund
Management LLC (the "Investment Manager"). The Investment Manager, among other
things, supervises the Fund's investment program, including advising and
consulting with OpCap Advisors LLC (the "Investment Adviser") regarding the
Fund's overall investment strategy. The Investment Manager and Investment
Adviser are indirect-wholly-owned subsidiaries of Allianz Dresdner Asset
Management of America L.P. ("ADAM"). ADAM is an indirect-majority-owned
subsidiary of Allianz AG. The Investment Manager, for its services, receives a
monthly fee at an annual rate of 0.60% of the Fund's average weekly net assets,
inclusive of net assets attributable to any preferred stock that may be
outstanding. The Investment Adviser receives from the Investment Manager (not
the Fund) a monthly fee at an annual rate of 0.36% of the Fund's average weekly
net assets, inclusive of net assets attributable to any preferred stock that may
be outstanding. The Investment Manager informed the Fund that it paid the
Investment Adviser $589,564 for the year ended October 31, 2003.
3. INVESTMENTS IN SECURITIES
For the year ended October 31, 2003, aggregate purchases and sales of
investments, other than short-term securities, were $42,331,278 and $36,129,678,
respectively.
4. INCOME TAX INFORMATION
The tax character of dividends paid were:
Year Ended Year Ended
October 31, 2003 October 31, 2002
---------------- ----------------
Ordinary Income $ 12,483 $ 18,359
Tax Exempt Income $7,051,222 $6,885,009
At October 31, 2003, the tax character of distributable earnings of $559,059 was
composed of $154,518 of tax exempt income and $404,541 of long-term capital
gains.
During the year ended October 31, 2003 the Fund utilized $761,384 of capital
losses carried over from prior years.
| 10.31.03 | Municipal Advantage Fund Annual Report 13
MUNICIPAL ADVANTAGE FUND, INC. NOTES TO FINANCIAL STATEMENTS
October 31, 2003
5. CAPITAL
There are 100 million shares of $0.001 par value common stock authorized.
For the years ended October 31, 2003 and October 31, 2002, there were no
transactions in shares of common stock.
6. 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 0.849% to 1.42% during the
year ended October 31, 2003 and was 0.849% at October 31, 2003. Distributions of
net realized gains, if any, are paid annually to Preferred Stockholders.
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.
7. SUBSEQUENT COMMON DIVIDEND DECLARATIONS
On November 3, 2003, a dividend of $0.075 per share was declared to common
shareholders payable December 1, 2003 to shareholders of record on November 14,
2003.
On December 1, 2003, a dividend of $0.075 per share was declared to common
shareholders payable December 31, 2003 to shareholders of record on December 12,
2003.
14 Municipal Advantage Fund Annual Report | 10.31.03 |
Municipal Advantage Fund Inc. Financial Highlights
For a share of common stock outstanding throughout each year:
Year ended October 31, 2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net asset value,
beginning of year $ 14.84 $ 14.82 $ 13.75 $ 13.18 $ 15.23
--------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS:
Net investment income 0.91 0.99 1.03 1.05 1.05
--------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments and
futures contracts 0.15 (0.03) 1.04 0.60 (2.04)
--------------------------------------------------------------------------------------------
Total from investment
operations 1.06 0.96 2.07 1.65 (0.99)
--------------------------------------------------------------------------------------------
DIVIDENDS ON PREFERRED
STOCK FROM NET
INVESTMENT INCOME (0.08) (0.11) (0.26) (0.32) (0.26)
--------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets applicable to
common shareholders resulting
from investment operations 0.98 0.85 1.81 1.33 (1.25)
--------------------------------------------------------------------------------------------
DIVIDENDS TO COMMON
SHAREHOLDERS FROM NET
INVESTMENT INCOME (0.89) (0.83) (0.74) (0.76) (0.80)
--------------------------------------------------------------------------------------------
Net asset value, end of year $ 14.93 $ 14.84 $ 14.82 $ 13.75 $ 13.18
--------------------------------------------------------------------------------------------
Market price, end of year $ 13.57 $ 13.04 $ 13.05 $ 11.375 $ 11.75
--------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN (1) 11.0% 6.4% 20.4% 3.4% (11.6)%
--------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets applicable to
common shareholders,
end of year (000's) $108,315 $107,673 $107,534 $ 99,778 $ 95,663
--------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (2)(3) 1.35% 1.38% 1.34% 1.44% 1.36%
--------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (2) 6.09% 6.83% 7.17% 7.89% 7.22%
--------------------------------------------------------------------------------------------
Asset coverage per share
of preferred stock $148,442 $147,846 $147,707 $140,473 $136,768
--------------------------------------------------------------------------------------------
Portfolio turnover 23% 37% 25% 27% 22%
--------------------------------------------------------------------------------------------
(1) Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day of the year 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 custody credits earned on cash balances at
the custodian bank. (See note 1f in Notes to Financial Statements)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
| 10.31.03 | Municipal Advantage Fund Annual Report 15
MUNICIPAL ADVANTAGE FUND INC. REPORT OF INDEPENDENT AUDITORS
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 applicable to common shareholders and the financial
highlights present fairly, in all material respects, the financial position of
Municipal Advantage Fund Inc. (the "Fund") at October 31, 2003, the results of
its operations for the year then ended, the changes in its net assets applicable
to common shareholders 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, 2003 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 16, 2003
16 Municipal Advantage Fund Annual Report | 10.31.03 |
MUNICIPAL ADVANTAGE FUND INC.
TAX INFORMATION (unaudited):
Subchapter M of the Internal Revenue Code of 1986, as amended, requires the Fund
to advise shareholders within 60 days of the Fund's tax year end (October 31,
2003) as to the federal tax status of dividends and distributions received by
shareholders during such tax year. Accordingly, the Fund is advising that
substantially all dividends paid from net investment income during the tax year
ended October 31, 2003 were federally exempt interest dividends, although the
Fund did invest in securities which paid interest subject to the federal
alternative minimum tax during the tax year. The percentage of dividends paid
from net investment income subject to such tax was 35.5%. Additionally, the Fund
invested in municipal bonds containing market discount, whose accretion is
taxable. Accordingly, 0.18% of the Fund's dividends paid during the fiscal year
are taxable. Per share dividends for the tax year ended October 31, were:
DIVIDENDS TO COMMON SHAREHOLDERS FROM NET INVESTMENT INCOME $0.885
DIVIDENDS ON PREFERRED STOCK FROM NET INVESTMENT INCOME $549.90
Since the Fund's tax year is not the calendar year, another notification will be
sent with respect to calendar year 2003. In January 2004, you will be advised on
IRS Form 1099 DIV as to the federal tax status of the dividends received in
calendar 2003. The amount that will be reported, will be the amount to be used
on your 2003 federal income tax return and may differ from the amount which must
be reported in connection with the Fund's tax year ended October 31, 2003.
Shareholders are advised to consult 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 provision of services in connection
with the reinvestment of dividends and distributions is paid 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
calling 1-800-426-5523.
--------------------------------------------------------------------------------
OTHER INFORMATION:
Since October 31, 2002, 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.
| 10.31.03 | Municipal Advantage Fund Annual Report 17
MUNICIPAL ADVANTAGE FUND INC. BOARD OF DIRECTORS
BOARD OF DIRECTORS
NAME, POSITION(S)
HELD WITH FUND, AGE AND
ADDRESS PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
----------------------------------------------------------------------------------------------------------
STEPHEN TREADWAY, DIRECTOR, CHAIRMAN, Managing Director, Allianz Dresdner Asset
CHAIRMAN OF THE BOARD Management of America L.P.; Managing Director and
1345 Avenue of the Americas Chief Executive Officer, PIMCO Advisors Fund
New York, NY 10105 Management LLC; Managing Director and Chief
Age: 56 Executive Officer, PIMCO Advisors Distributors
DIRECTOR SINCE: 1997 LLC; Member of the Board of Management of Allianz
TERM OF OFFICE: EXPECTED TO STAND FOR RE-ELECTION AT Dresdner Asset Management Gmbh; Mr. Treadway
2005 ANNUAL MEETING OF SHAREHOLDERS. serves as a director/trustee and holds various
DIRECTOR/TRUSTEE OF 53 FUNDS IN FUND COMPLEX executive officer positions in connection with
DIRECTOR/TRUSTEE OF NO FUNDS OUTSIDE OF FUND COMPLEX Allianz Dresdner Asset Management of America
L.P.'s affiliated open- and closed-end mutual
funds.
PAUL BELICA, DIRECTOR Trustee of fifteen open- and closed-end management
1345 Avenue of the Americas investment companies affiliated with Allianz
New York, NY 10105 Dresdner Asset Management of America L.P.;
Age: 82 Manager, Stratigos Fund, L.L.C., Whistler Fund,
TRUSTEE SINCE: 2003 L.L.C., Xanthus Fund, L.L.C., and Wynstone Fund,
TERM OF OFFICE: AFTER INITIAL TERM, EXPECTED TO L.L.C.; Director, Student Loan Finance Corp.,
STAND FOR ELECTION AT 2004 ANNUAL MEETING Education Loans, Inc., Goal Funding, Inc., Surety
OF SHAREHOLDERS. Loan Funding Inc.; Formerly, Advisor, Salomon
TRUSTEE OF 16 FUNDS IN FUND COMPLEX Smith Barney, Inc.; Director, The Central European
TRUSTEE OF 2 FUNDS OUTSIDE OF FUND COMPLEX Value Fund, Inc.; Deck House Inc.
ROBERT E. CONNOR, DIRECTOR Trustee of seventeen open- and closed-end
1345 Avenue of the Americas management investment companies affiliated with
New York, NY 10105 Allianz Dresdner Asset Management of America L.P.
Age: 69 Corporate Affairs Consultant. Formerly, Senior
Director since: 2000 Vice President, Corporate Office, Smith Barney
TERM OF OFFICE: EXPECTED TO STAND FOR RE-ELECTION AT Inc.
2004 ANNUAL MEETING OF SHAREHOLDERS.
DIRECTOR/TRUSTEE OF 18 FUNDS IN FUND COMPLEX
DIRECTOR/TRUSTEE OF NO FUNDS OUTSIDE OF FUND COMPLEX
RAYMOND D. HORTON, DIRECTOR Professor, Columbia University Graduate School of
1345 Avenue of the Americas Business; Formerly, President, Citizens Budget
New York, NY 10105 Commission, Inc. (1986-1998).
Age: 64
DIRECTOR SINCE: 1994
TERM OF OFFICE: EXPECTED TO STAND FOR RE-ELECTION AT
2006 ANNUAL MEETING OF SHAREHOLDERS.
DIRECTOR/TRUSTEE OF 1 FUND IN FUND COMPLEX
DIRECTOR/TRUSTEE OF NO FUNDS OUTSIDE OF FUND COMPLEX
WENDY W. LUERS, DIRECTOR Founder and President, The Foundation for a Civil
1345 Avenue of the Americas Society, New York, Prague, Bratislava (a non
New York, NY 10105 profit foundation which sponsors various
Age: 63 organizations and programs in the Czech and Slovak
DIRECTOR SINCE: 2001 Republics).
TERM OF OFFICE: EXPECTED TO STAND FOR RE-ELECTION AT
2004 ANNUAL MEETING OF SHAREHOLDERS.
DIRECTOR/TRUSTEE OF 1 FUND IN FUND COMPLEX
DIRECTOR/TRUSTEE OF NO FUNDS OUTSIDE OF FUND COMPLEX
18 Municipal Advantage Fund Annual Report | 10.31.03
MUNICIPAL ADVANTAGE FUND INC. PRIVACY POLICY
OUR COMMITTMENT TO YOU
We consider customer privacy to be a fundamental aspect of our relationship with
clients. We are committed to maintaining the confidentiality, integrity, and
security of our current, prospective and former clients' personal information.
We have developed policies designed to protect this confidentiality, while
allowing client needs to be served.
OBTAINING PERSONAL INFORMATION
In the course of providing you with products and services, we may obtain
non-public personal information about you. This information may come from
sources such as account applications and other forms, from other written,
electronic or verbal correspondence, from your transactions, from your brokerage
or financial advisory firm, financial adviser or consultant, and/or from
information captured on our internet web sites.
RESPECTING YOUR PRIVACY
We do not disclose any personal or account information provided by you or
gathered by us to non-affiliated third parties, except as required or permitted
by law. As is common in the industry, non-affiliated companies may from time to
time be used to provide certain services, such as preparing and mailing
prospectuses, reports, account statements and other information, conducting
research on client satisfaction, and gathering shareholder proxies. We may also
retain non-affiliated companies to market our products and enter in joint
marketing agreements with other companies. These companies may have access to
your personal and account information, but are permitted to use the information
solely to provide the specific service or as otherwise permitted by law. We may
also provide your personal and account information to your brokerage or
financial advisory firm and/or to your financial adviser or consultant.
SHARING INFORMATION WITH THIRD PARTIES
We do reserve the right to disclose or report personal information to
non-affiliated third parties in limited circumstances where we believe in good
faith that disclosure is required under law, to cooperate with regulators or law
enforcement authorities, to protect our rights or property, or upon reasonable
request by any mutual fund in which you have chosen to invest. In addition, we
may disclose information about you or your accounts to a non-affiliated third
party at your request or if you consent in writing to the disclosure.
SHARING INFORMATION WITH AFFILIATES
We may share client information with our affiliates in connection with servicing
your account or to provide you with information about products and services that
we believe may be of interest to you. The information we share may include, for
example, your participation in our mutual funds or other investment programs,
your ownership of certain types of accounts (such as IRAs), or other data about
your accounts. Our affiliates, in turn, are not permitted to share your
information with non-affiliated entities, except as required or permitted by
law.
IMPLEMENTATION OF PROCEDURES
We take seriously the obligation to safeguard your non-public personal
information. We have implemented procedures designed to restrict access to your
non-public personal information to our personnel who need to know that
information to provide products or services to you. To guard your non-public
personal information, physical, electronic, and procedural safeguards are in
place.
| 10.31.03 | Municipal Advantage Fund Annual Report 19
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DIRECTORS AND PRINCIPAL OFFICERS
Stephen Treadway
Director, Chairman, Chairman of the Board
Paul Belica
Director
Robert E. Connor
Director
Raymond D. Horton
Director
Wendy W. Luers
Director
Brian S. Shlissel
President & Chief Executive Officer
Matthew Greenwald
Executive Vice President
Newton B. Schott, Jr.
Executive Vice President & Secretary
Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
INVESTMENT MANAGER
PIMCO Advisors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
INVESTMENT ADVISER
OpCap Advisors LLC
1345 Avenue of the Americas
New York, NY 10105
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
EquiServe Trust Co. N.A.
Post Office Box 8200
Boston, MA 02266
INDEPENDENT AUDITORS
PricewaterhouseCoopers 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.
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.
Daily information on the Fund is available at www.pimcoadvisors.com or by
calling 1-800-426-5523.
P I M C O
---------
ADVISORS
MVFCM-AR-10/03
ITEM 2. CODE OF ETHICS As of the end of the period covered by this report, the
registrant has adopted a code of ethics (the "Section 406 Standards for
Investment Companies -- Ethical Standards for Principal Executive and Financial
Officers") that applies to the registrant's Principal Executive Officer and
Principal Financial Officer; the registrant's Principal Financial Officer also
serves as the Principal Accounting Officer. The registrant undertakes to provide
a copy of such code of ethics to any person upon request, without charge, by
calling 1-800-426-5523.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT The registrant's Board has determined
that Mr. Paul Belica, a member of the Board's Audit Oversight Committee is an
"audit committee financial expert," and that he is "independent," for purposes
of this Item.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES Disclosure requirement not
currently effective
ITEM 5. [RESERVED]
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES Not applicable to this registrant
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES
(a) The registrant's President and Chief Executive Officer and Principal
Financial Officer have concluded that the registrant's disclosure controls
and procedures (as defined in Rule 30a-2(c) under the Investment Company
Act of 1940, as amended are effective based on their evaluation of these
controls and procedures as of a date within 90 days of the filing date of
this document.
(b) There were no significant changes in the registrant's internal controls or
in factors that could affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 10. EXHIBITS
(a) Exhibit 99.a - Code of Ethics
(b) Exhibit 99.Cert. - Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(c) Exhibit 99.906 Cert. - Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Municipal Advantage Fund Inc.
-----------------------------
By /s/ Brian S. Shlissel
------------------------
President and Chief Executive Officer
Date January 2, 2004
--------------------
By /s/ Lawrence G. Altadonna
----------------------------
Treasurer
Date January 2, 2004
--------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Brian S. Shlissel
------------------------
President and Chief Executive Officer
Date January 2, 2004
--------------------
By /s/ Lawrence G. Altadonna
----------------------------
Treasurer
Date January 2, 2004
--------------------