|
|
|
PIMCO Municipal
Advantage Fund Inc.
Notes to Financial Statements
|
|
October 31, 2008
|
|
|
1. Organization and Significant Accounting Policies
(continued)
(f) Custody Credits 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 and accounting agent expenses. Had these cash balances been invested
in income producing securities, they would have generated income for the Fund.
2. Investment Manager/Sub-Adviser
The Fund has an Investment Management Agreement (the ‘‘Agreement’’) with
the Investment Manager. Subject to the supervision by each Fund’s Board of Directors,
the Investment Manager is responsible for managing, either directly or through
others selected by it, the Fund’s investment activities, business affairs and
administrative matters. Pursuant to the Agreements, the Investment Manager
receives an annual fee, payable monthly, at an annual rate of 0.60% of each
Fund’s average daily net assets, inclusive of net assets attributable to any
preferred stock that may be outstanding.
The Investment Manager has retained its affiliate, Pacific Investment
Management Company LLC (the “Sub-Adviser”), to manage the Fund’s investments.
Subject to the supervision of the Investment Manager, the Sub-Adviser makes all
of the Fund’s investment decisions. The Investment Manager, not the Fund, pays
a portion of the fees it receives as Investment Manager to the Sub-Adviser in
return for its services.
3. Investments in Securities
For the year ended October 31, 2008, purchases and sales of investments,
other than short-term securities and U.S. government obligations were $24,538,220
and $37,174,403, respectively.
(1) Futures
contracts outstanding at October 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type
|
|
Contracts
|
|
Market
Value
(000)
|
|
Expiration
Date
|
|
Unrealized
Appreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short:
|
|
U.S. Treasury Bond Futures
|
|
(250)
|
|
$ (28,281)
|
|
12/19/08
|
|
$ 1,300,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Fund
pledged $678,100 in cash as collateral for futures contracts.
4. Income Tax Information
The tax
character of dividends paid was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
October 31, 2008
|
|
Year ended
October 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary Income
|
|
|
|
$ 33,899
|
|
|
|
|
$ 25,142
|
|
|
|
|
|
|
Tax Exempt Income
|
|
|
|
7,268,287
|
|
|
|
|
5,769,937
|
|
|
At October 31, 2008, the Fund had no distributable earnings.
At October 31, 2008, the Fund had a capital loss carryforward of
$988,533 ($132,219 of which will expire in 2013 and $856,314 of which will
expire in 2016), 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 realized capital gains, such gains will not be
distributed.
The cost basis of portfolio securities of $149,776,268 is substantially
the same for both federal income tax and financial reporting purposes.
Aggregate gross unrealized appreciation for securities in which there is an
excess of value over tax cost is $1,118,809; aggregate gross unrealized
depreciation for securities in which there is an excess of tax cost over value
is $28,689,866; net unrealized depreciation for federal income tax purposes is
$27,571,057.
|
10.31.08
|
PIMCO Municipal Advantage Fund Inc. Annual Report
15
|
|
|
PIMCO Municipal
Advantage Fund Inc.
Notes to Financial Statements
|
|
October 31, 2008
|
|
|
5. Auction Rate Preferred Stock
The Fund has issued 1,100 shares of Preferred Stock with a net asset and
liquidation preference of $50,000 per share plus accumulated dividends.
Dividends are accumulated daily at an annual rate set through auction
procedures. The annualized dividend rate ranged from 2.448% to 11.347% during
the year ended October 31, 2008 and was 3.475% at October 31, 2008.
The Fund is subject to certain limitations and restrictions while
Preferred Stock are 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 their liquidation value.
Preferred Stock, which are entitled to one vote per share, generally
vote with the common stock but vote separately as a class to elect two
Directors and on any matters affecting the rights of the Preferred Stock.
Since mid-February 2008, holders of auction-rate preferred stock
(“ARPS”) issued by the Fund has been directly impacted by an unprecedented lack
of liquidity, which has similarly affected ARPS holders in many of the nation’s
closed-end funds. Since then, regularly scheduled auctions for ARPS issued by
the Fund has consistently “failed” because of insufficient demand (bids to buy
shares) to meet the supply (shares offered for sale) at each auction. In a
failed auction, ARPS holders cannot sell all, and may not be able to sell any,
of their shares tendered for sale. While repeated auction failures have
affected the liquidity for ARPS, they do not constitute a default or alter the
credit quality of the ARPS, and ARPS holders have continued to receive
dividends at the defined “maximum rate” as the higher of the 30-day “AA”
Composite Commercial Paper Rate multiplied by 110% or the Taxable Equivalent of
the Short-Term Municipal Obligations Rate-defined as 90% of the quotient of (A)
the per annum rate expressed on an interest equivalent basis equal to the Kenny
S&P 30-day High Grade Index divided by (B) 1.00 minus the Marginal Tax Rate
(expressed as a decimal) multiplied by 110% (which is a function of short-term
interest rates and typically higher than the rate that would have otherwise
been set through a successful auction).
These developments with respect to ARPS have not affected the management
or investment policies of the Fund, and the Fund’s outstanding common shares
continue to trade on the NYSE. If the Fund’s ARPS auctions continue to fail and
the “maximum rate” payable on the ARPS rises as a result of changes in
short-term interest rates, returns for the Fund’s common shareholders could be
adversely affected.
6. Subsequent Dividend Declarations
On November 3, 2008, a dividend of $0.06 per share was declared to
common shareholders payable December 1, 2008 to shareholders of record on
November 13, 2008.
On December 1, 2008, a dividend of $0.06 per share was declared to
common shareholders payable December 31, 2008 to shareholders of record on
December 11, 2008.
7. Legal Proceedings
In June and September 2004, the Investment Manager and certain of its
affiliates (including PEA Capital LLC (“PEA”), Allianz Global Investors
Distributors LLC and Allianz Global Investors of America L.P.), agreed to
settle, without admitting or denying the allegations, claims brought by the
Securities and Exchange Commission and the New Jersey Attorney General alleging
violations of federal and state securities laws with respect to certain
open-end funds for which the Investment Manager serves as investment adviser.
The settlements related to an alleged “market timing” arrangement in certain
open-end funds formerly sub-advised by PEA. The Investment Manager and its
affiliates agreed to pay a total of $68 million to settle the claims. In
addition to monetary payments, the settling parties agreed to undertake certain
corporate governance, compliance and disclosure reforms related to market
timing and consented to cease and desist orders and censures. Subsequent to
these events, PEA deregistered as an investment adviser and dissolved. None of
the settlements alleged that any inappropriate activity took place with respect
to the Fund.
Since February 2004, the Investment Manager and certain of its
affiliates and their employees have been named as defendants in a number of
pending lawsuits concerning “market timing” which allege the same or similar
conduct underlying the regulatory settlements discussed above. The market
timing lawsuits have been consolidated in a multi-district litigation
proceeding in the U.S. District Court of Maryland. Any potential resolution of
these matters may include, but not be limited to, judgments or settlements for
damages against the Investment Manager or its affiliates or related
injunctions.
16
PIMCO Municipal Advantage Fund Inc. Annual Report
|
10.31.08
|
|
|
|
PIMCO Municipal
Advantage Fund Inc.
Notes to Financial Statements
|
|
October 31, 2008
|
|
|
7. Legal Proceedings
(continued)
The Investment Manager and the Sub-Adviser believe that these matters
are not likely to have a material adverse effect on the Fund or on their
ability to perform their respective investment advisory activities relating to
the Fund.
The
foregoing speaks only as of the date hereof.
8. Subsequent Event – Proposed Fund Liquidation
At a meeting held on December 22, 2008, the Fund’s Board of Directors
approved a Plan of Liquidation and Dissolution for the Fund pursuant to the
Fund’s discount policy, which was adopted in February 2008. The Fund’s
liquidation is subject to stockholder approval, and a proposal to approve the
Plan of Liquidation and Dissolution will be included in the proxy statement for
the Fund’s Annual Meeting of Stockholders to be held on February 26, 2009. If
the common and preferred stockholders approve the Plan of Liquidation and
Dissolution, the directors and officers of the Fund will proceed to wind up the
Fund’s affairs as soon as reasonably practicable thereafter and subject to
market conditions.
|
10.31.08
|
PIMCO Municipal Advantage Fund Inc. Annual Report
17
|
|
|
PIMCO
Municipal Advantage Fund Inc.
Financial Highlights
|
|
For
a share of common stock outstanding throughout each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended October 31,
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, beginning of year
|
|
|
$14.02
|
|
|
|
$14.69
|
|
|
|
$14.39
|
|
|
|
$15.10
|
|
|
|
$14.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income
|
|
|
0.91
|
|
|
|
0.85
|
|
|
|
0.81
|
|
|
|
0.85
|
|
|
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and
unrealized gain (loss) on investments and futures contracts
|
|
|
(4.04
|
)
|
|
|
(0.72
|
)
|
|
|
0.33
|
|
|
|
(0.46
|
)
|
|
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
from investment operations
|
|
|
(3.13
|
)
|
|
|
0.13
|
|
|
|
1.14
|
|
|
|
0.39
|
|
|
|
1.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
and Distributions on
Preferred Stock from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income
|
|
|
(0.30
|
)
|
|
|
(0.29
|
)
|
|
|
(0.25
|
)
|
|
|
(0.15
|
)
|
|
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized gains
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
(0.00
|
)*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total dividends and
distributions on preferred shares
|
|
|
(0.30
|
)
|
|
|
(0.29
|
)
|
|
|
(0.26
|
)
|
|
|
(0.18
|
)
|
|
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in net assets applicable to common shareholders resulting from
investment operations
|
|
|
(3.43
|
)
|
|
|
(0.16
|
)
|
|
|
0.88
|
|
|
|
0.21
|
|
|
|
1.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
and Distributions to
Common Shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income
|
|
|
(0.71
|
)
|
|
|
(0.51
|
)
|
|
|
(0.56
|
)
|
|
|
(0.68
|
)
|
|
|
(0.82
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized gains
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.02
|
)
|
|
|
(0.24
|
)
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total dividends and
distributions to
common shareholders
|
|
|
(0.71
|
)
|
|
|
(0.51
|
)
|
|
|
(0.58
|
)
|
|
|
(0.92
|
)
|
|
|
(0.87
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of year
|
|
|
$9.88
|
|
|
|
$14.02
|
|
|
|
$14.69
|
|
|
|
$14.39
|
|
|
|
$15.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
price, end of year
|
|
|
$9.62
|
|
|
|
$13.19
|
|
|
|
$13.11
|
|
|
|
$12.37
|
|
|
|
$13.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Return (1)
|
|
|
(22.69
|
)%
|
|
|
4.50
|
%
|
|
|
11.02
|
%
|
|
|
(0.14
|
)%
|
|
|
4.41
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RATIOS/SUPPLEMENTAL DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
applicable to common shareholders, end of year (000)
|
|
|
$71,743
|
|
|
|
$101,744
|
|
|
|
$106,576
|
|
|
|
$104,395
|
|
|
|
$109,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of expenses to average net assets (2)(3)
|
|
|
1.58
|
%
|
|
|
1.42
|
%
|
|
|
1.45
|
%
|
|
|
1.34
|
%
|
|
|
1.30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of net
investment income to average net assets (2)
|
|
|
7.17
|
%
|
|
|
5.93
|
%
|
|
|
5.64
|
%
|
|
|
5.73
|
%
|
|
|
5.89
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
shares asset coverage per share
|
|
|
$115,196
|
|
|
|
$142,474
|
|
|
|
$146,878
|
|
|
|
$144,857
|
|
|
|
$149,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
turnover
|
|
|
17
|
%
|
|
|
46
|
%
|
|
|
32
|
%
|
|
|
26
|
%
|
|
|
82
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Less
than $0.005 per common share
|
|
(1)
|
Total
investment return is calculated assuming a purchase of shares of common stock
at the current market price on the first day of each year and a sale of a
share of common stock at the current market price on the last day of each
year reported. Dividends and distributions 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 shares and
preferred stock 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 1(f) in Notes to Financial Statements).
|
18
PIMCO
Municipal Advantage Fund Inc. Annual Report | 10.31.08 |
See accompanying Notes to Financial Statements
|
PIMCO Municipal Advantage Fund Inc.
Report of Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
|
|
To the Shareholders and Board of Directors
of PIMCO 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 PIMCO Municipal Advantage Fund Inc. (the “Fund”) at October 31,
2008, the results of each 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 the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements 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, 2008 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
As discussed in Note 8, the Board of Directors has approved a plan of
Liquidation and Dissolution subject to the approval of stockholders.
PricewaterhouseCoopers
LLP
New York, New York
December 22, 2008
|
10.31.08
|
PIMCO
Municipal Advantage Fund Inc. Annual Report
19
|
|
|
|
|
PIMCO Municipal Advantage Fund Inc.
Tax Information / Annual Shareholder Meeting Results
/
Board
of Directors Update
(unaudited)
|
|
|
|
|
Tax Information:
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 ended
(October 31, 2008) 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, 2008 were federally exempt interest
dividends. Additionally, the Fund invested in municipal bonds containing market
discount, whose accretion is taxable. Accordingly, 0.46% of the Fund’s
dividends paid during the fiscal year are taxable. Per share dividends for the
tax year ended October 31, 2008 were:
|
|
|
|
|
|
|
Dividends to
common shareholders from net investment income
|
|
|
$0.71
|
|
|
Dividends to
preferred stock from net investment income
|
|
|
$1,953.83
|
|
Since the Fund’s tax year is not the calendar year, another notification
will be sent with respect to calendar year 2008. In January 2009, shareholders
will be advised on IRS Form 1099 DIV as to the federal tax status of the
dividends and distributions received during calendar 2008. The amount that will
be reported will be the amount to use on your 2008 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, 2008. Shareholders are advised to consult
their tax advisers as to the federal, state and local tax status of the
dividend 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. You should consult your tax advisor to
discuss the tax consequences of your investment in the Fund.
Annual Shareholder Meeting Results:
The Fund held its annual shareholder meeting on February 27, 2008.
Common and/or Preferred shareholders voted as indicated below:
|
|
|
|
|
|
|
|
|
|
|
|
Affirmative
|
|
Withheld
Authority
|
|
|
|
|
|
|
|
|
|
Class II Directors:
|
|
|
|
|
|
|
|
|
Re-election of Paul Belica to serve until
2011
|
|
|
6,742,081
|
|
|
83,615
|
|
|
Re-election of John C. Maney* to serve
until 2011
|
|
|
927
|
|
|
—
|
|
Messrs.
Robert E. Connor*, Hans W. Kertess, William B. Ogden IV and R. Peter Sullivan III
continue to serve as Directors of the Fund.
* Preferred
Stock Director
Board of Directors Update:
In May 2008, the Fund’s Board of Directors appointed Diana L. Taylor as
a Class II Director of the Fund. Mr. John J. Dalessandro served as a Director
of the Fund until his death on September 14, 2008.
20
PIMCO
Municipal Advantage Fund Inc. Annual Report
|
10.31.08
|
|
|
|
|
|
PIMCO Municipal Advantage Fund Inc.
Matters
Relating to the Directors’ Consideration of the Investment
Management
and Portfolio Management Agreements
(unaudited)
|
|
|
|
|
The Investment Company Act of 1940 requires that both the full Board of
Directors (the “Directors”) and a majority of the non-interested
(“Independent”) Directors, voting separately, approve the Fund’s Management Agreement
(the “Advisory Agreement”) with the Investment Manager and Portfolio Management
Agreement (the “Sub-Advisory Agreement”, and together with the Advisory
Agreement, the “Agreements”) between the Investment Manager and the
Sub-Adviser. The Directors met on June 10 - 11, 2008 (the “contract review
meeting”) for the specific purpose of considering whether to approve the
Advisory Agreement and the Sub-Advisory Agreement. The Independent Directors
were assisted in their evaluation of the Agreements by independent legal
counsel, from whom they received separate legal advice and with whom they met
separately from Fund management during the contract review meeting.
Based on their evaluation of factors that they deemed to be material,
including those factors described below, the Board of Directors, including a
majority of the Independent Directors, concluded that the continuation of the
Fund’s Advisory Agreement and the Sub-Advisory Agreement should be approved for
a one-year period commencing July 1, 2008.
In connection with their deliberations regarding the continuation of the
Agreements, the Directors, including the Independent Directors, considered such
information and factors as they believed, in light of the legal advice
furnished to them and their own business judgment, to be relevant. As described
below, the Directors considered the nature, quality, and extent of the various
investment management, administrative and other services performed by the
Investment Manager or the Sub-Adviser under the applicable Agreement.
In connection with their contract review meeting, the Directors received
and relied upon materials provided by the Investment Manager which included,
among other items: (i) information provided by Lipper Inc. (“Lipper”) on the
total return investment performance (based on net assets) of the Funds for
various time periods and the investment performance of a group of funds with
substantially similar investment classifications/objectives as the Funds
identified by Lipper and the performance of applicable benchmark indices, (ii)
information provided by Lipper. on the Fund’s management fees and other
expenses and the management fees and other expenses of comparable funds
identified by Lipper, (iii) information regarding the investment performance and
management fees of comparable portfolios of other clients of the Sub-Adviser,
(iv) the profitability to the Investment Manager and the Sub-Adviser from their
relationship with the Fund for the twelve months ended March 31, 2008, (v)
descriptions of various functions performed by the Investment Manager and the
Sub-Adviser for the Fund, such as portfolio management, compliance monitoring
and portfolio trading practices, and (vi) information regarding the overall
organization of the Investment Manager and the Sub-Adviser, including
information regarding senior management, portfolio managers and other personnel
providing investment management, administrative and other services to the Fund.
The Directors’ conclusions as to the continuation of the Agreements were
based on a comprehensive consideration of all information provided to the
Directors and not the result of any single factor. Some of the factors that
figured particularly in the Directors’ deliberations are described below,
although individual Directors may have evaluated the information presented
differently from one another, giving different weights to various factors.
As part of their review, the Directors examined the Investment Manager’s
and the Sub-Adviser’s abilities to provide high quality investment management
and other services to the Fund. The Directors considered the investment
philosophy and research and decision-making processes of the Sub-Adviser; the
experience of key advisory personnel of the Sub-Adviser responsible for
portfolio management of the Fund; the ability of the Investment Manager and the
Sub-Adviser to attract and retain capable personnel; the capability and
integrity of the senior management and staff of the Investment Manager and the
Sub-Adviser; and the level of skill required to manage the Fund. In addition,
the Directors reviewed the quality of the Investment Manager’s and the
Sub-Adviser’s services with respect to regulatory compliance and compliance
with the investment policies of the Fund; the nature and quality of certain administrative
services the Investment Manager is responsible for providing to the Fund; and
conditions that might affect the Investment Manager’s or the Sub-Adviser’s
ability to provide high quality services to the Fund in the future under the
Agreements, including each organization’s respective business reputation,
financial condition and operational stability. Based on the foregoing, the
Directors concluded that the Sub-Adviser’s investment process, research
capabilities and philosophy were well suited to the Fund given their investment
objectives and policies, and that the Investment Manager and the Sub-Adviser
would be able to continue to meet any reasonably foreseeable obligations under
the Agreements.
Based on information provided by Lipper, the Directors also reviewed the
Fund’s total return investment performance as well as the performance of
comparable funds identified by Lipper In the course of their deliberations, the
Directors took into account information provided by the Investment Manager in connection
with the contract review meeting, as well
|
10.31.08
|
PIMCO
Municipal Advantage Fund Inc. Annual Report
21
|
|
|
|
|
PIMCO Municipal Advantage Fund Inc.
Matters
Relating to the Directors’ Consideration of the Investment
Management
and Portfolio Management Agreements
(unaudited)
(continued)
|
|
|
|
|
as during investment review meetings conducted with portfolio management
personnel during the course of the year regarding the Fund’s performance.
In assessing the reasonableness of the Fund’s fees under the Agreements,
the Directors considered, among other information, the Fund’s management fee
and the total expense ratio as a percentage of average net assets attributable
to common shares and the management fee and total expense ratios of comparable
funds identified by Lipper Inc.
The Directors specifically took note of how the Fund compared to its
Lipper Inc. peers as to performance, management fee expenses and total
expenses. The Directors noted that the Investment Manager had provided a memorandum
containing comparative information on the performance and expenses information
of the Funds compared to the their Lipper peer categories. The Directors noted
that while the Funds are not charged a separate administration fee, it was not
clear whether the peer funds in the Lipper categories were charged such a fee
by their investment managers.
The Directors noted that the Fund had underperformed its peer group’s
high and median returns but had outperformed its peer group’s low returns for
the one-year period ended March 31, 2008 and had underperformed its peer
group’s high and median returns for the three-year, five-year and ten-year
periods ended March 31, 2008. The Directors also noted that the Fund’s expense
ratio was above the median and the low for its peer group but was below the
high for its peer group.
After reviewing these and related factors, the Directors concluded,
within the context of their overall conclusions regarding the Agreements, that
they were satisfied with the Investment Manager’s and the Sub-Adviser’s
responses and efforts relating to investment performance and the comparative
positioning of the Fund with respect to the management fee paid to the
Investment Manager.
The Directors noted that the management fees paid by the Fund was
generally higher than the fees paid by the open-end funds offered for
comparison but were advised that there are additional portfolio management
challenges in managing the Fund, such as the use of leverage and meeting a
regular dividend.
The Directors also took into account that the Fund have preferred shares
outstanding, which increases the amount of fees received by the Investment
Manager and the Sub-Adviser under the Agreements (because the fees are
calculated based on either the Fund’s net assets or total managed assets,
including assets attributable to preferred shares and other forms of leverage
outstanding but not deducting any liabilities connected to the leverage). In
this regard, the Directors took into account that the Investment Manager and the
Sub-Adviser have a financial incentive for the Fund to continue to have
preferred shares outstanding, which may create a conflict of interest between
the Investment Manager and the Sub-Adviser, on the one hand, and the Fund’s
common shareholders, on the other. In this regard, the Directors considered
information provided by the Investment Manager and the Sub-Adviser indicating
that the Fund’s use of leverage through preferred shares continues to be
appropriate and in the interests of the respective Fund’s common shareholders.
Based on a profitability analysis provided by the Investment Manager,
the Directors also considered the profitability of the Investment Manager and
the Sub-Adviser from its relationship with the Fund and determined that such
profitability was not excessive.
The Directors also took into account that, as closed-end investment
companies, the Fund did not currently intend to raise additional assets, so the
assets of the Fund would grow (if at all) only through the investment
performance of the Fund. Therefore, the Directors did not consider potential
economies of scale as a principal factor in assessing the fee rates payable
under the Agreements.
Additionally, the Directors considered so-called “fall-out benefits” to
the Investment Manager and the Sub-Adviser, such as reputational value derived
from serving as Investment Manager and Sub-Adviser to the Fund.
After reviewing these and other factors described herein, the Directors
concluded, within the context of their overall conclusions regarding the
Agreements, that the fees payable under the Agreements represent reasonable
compensation in light of the nature and quality of the services being provided
by the Investment Manager and Sub-Adviser to the Fund.
22
PIMCO
Municipal Advantage Fund Inc. Annual Report
|
10.31.08
|
|
|
|
|
|
PIMCO Municipal Advantage Fund Inc.
Privacy Policy / Proxy Voting
Policies & Procedures
(unaudited)
|
|
|
|
|
Privacy Policy:
Our Commitment 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 and
certain service providers to the Fund, such as the Fund’s investment adviser,
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
As a matter of policy, 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 or as necessary for third parties to
perform their agreements with respect to the Fund. 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. In most cases you will be
clients of the third party, but 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, the fund may disclose information about your accounts to a
non-affiliated third party with your consent or upon your request.
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 sponsored by us or our affiliates, 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.
Procedures to Safeguard Private Information
The Fund takes seriously the obligation to safeguard your non-public
personal information. In addition to this policy, the Fund has also implemented
procedures that are designed to restrict access to a shareholder’s non-public
personal information only to internal personnel who need to know that
information in order to provide products or services to such shareholders. In
order to guard a shareholder’s non-public personal information, physical,
electronic and procedural safeguards are in place.
|
|
|
|
|
|
|
Proxy Voting
Policies & Procedures:
|
A description of the policies and procedures that the Fund has adopted
to determine how to vote proxies relating to portfolio securities and
information about how the Fund voted proxies relating to portfolio securities
held during the most recent twelve month period ended June 30 is available (i)
without charge, upon request, by calling the Fund’s shareholder servicing agent
at (800) 331-1710; (ii) on the Fund’s website at
www.allianzinvestors.com/closedendfunds; and (iii) on the Securities and
Exchange Commission’s website at www.sec.gov.
|
10.31.08
|
PIMCO
Municipal Advantage Fund Inc. Annual Report
23
|
PIMCO Municipal Advantage Fund Inc.
Dividend Reinvestment
Plan
(unaudited)
|
|
|
|
|
Pursuant to the Fund’s Dividend Reinvestment Plan (the “Plan”), all
Common Shareholders whose shares are registered in their own names will have
all dividends, including any capital gain dividends, reinvested automatically in
additional Common Shares by PFPC Inc., as agent for the Common Shareholders
(the “Plan Agent”), unless the shareholder elects to receive cash. An election
to receive cash may be revoked or reinstated at the option of the shareholder.
In the case of record shareholders such as banks, brokers or other nominees
that hold Common Shares for others who are the beneficial owners, the Plan
Agent will administer the Plan on the basis of the number of Common Shares
certified from time to time by the record shareholder as representing the total
amount registered in such shareholder’s name and held for the account of
beneficial owners who are to participate in the Plan. Shareholders whose shares
are held in the name of a bank, broker or nominee should contact the bank,
broker or nominee for details. All distributions to investors who elect not to
participate in the Plan (or whose broker or nominee elects not to participate
on the investor’s behalf), will be paid cash by check mailed, in the case of
direct shareholder, to the record holder by PNC Global Investment Servicing, as
the Fund’s dividend disbursement agent.
Unless you (or your broker or nominee) elects not to participate in the
Plan, the number of Common Shares you will receive will be determined as
follows:
|
|
|
|
(1)
|
If on the
payment date the net asset value of the Common Shares is equal to or less
than the market price per Common Share plus estimated brokerage commissions
that would be incurred upon the purchase of Common Shares on the open market,
the Fund will issue new shares at the greater of (i) the net asset value per
Common Share on the payment date or (ii) 95% of the market price per Common
Share on the payment date; or
|
|
|
|
|
(2)
|
If on the
payment date the net asset value of the Common Shares is greater than the
market price per Common Share plus estimated brokerage commissions that would
be incurred upon the purchase of Common Shares on the open market, the Plan
Agent will receive the dividend or distribution in cash and will purchase
Common Shares in the open market, on the NYSE or elsewhere, for the
participants’ accounts. It is possible that the market price for the Common
Shares may increase before the Plan Agent has completed its purchases.
Therefore, the average purchase price per share paid by the Plan Agent may
exceed the market price on the payment date, resulting in the purchase of
fewer shares than if the dividend or distribution had been paid in Common
Shares issued by the Fund. The Plan Agent will use all dividends and
distributions received in cash to purchase Common Shares in the open market
on or shortly after the payment date, but in no event later than the
ex-dividend date for the next distribution. Interest will not be paid on any
uninvested cash payments.
|
You may withdraw from the Plan at any time by giving notice to the Plan
Agent. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan and you will
receive a cash payment for any fraction of a share in your account. If you
wish, the Plan Agent will sell your shares and send you the proceeds, minus
brokerage commissions.
The Plan Agent maintains all shareholders’ accounts in the Plan and
gives written confirmation of all transactions in the accounts, including
information you may need for tax records. The Plan Agent will also furnish each
person who buys Common Shares with written instructions detailing the
procedures for electing not to participate in the Plan and to instead receive
distributions in cash. Common Shares in your account will be held by the Plan
Agent in non-certificated form. Any proxy you receive will include all Common
Shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or
distributions in Common Shares. However, all participants will pay a pro rata
share of brokerage commissions incurred by the Plan Agent when it makes open
market purchases.
Automatically reinvested dividends and distributions are taxed in the
same manner as cash dividends and distributions.
The Fund and the Plan Agent reserve the right to amend or terminate the
Plan. There is no direct service charge to participants in the Plan; however,
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants. Additional information about the Plan may be
obtained from the Fund’s shareholder servicing agent, PNC Global Investment
Servicing., P.O. Box 43027, Providence, RI 02940-3027, telephone number (800)
331-1710.
24
PIMCO
Municipal Advantage Fund Inc. Annual Report
|
10.31.08
|
|
|
|
PIMCO Municipal Advantage Fund Inc.
Board of Directors
(unaudited)
|
|
|
|
|
|
|
|
Name, Date of
Birth, Position(s) Held with Fund,
Length of Service, Other Trusteeships/Directorships
Held by Director; Number of Portfolios in Fund
Complex/Outside Fund Complexes Currently
Overseen by Director
|
|
Principal
Occupation(s) During Past 5 Years:
|
|
|
|
|
|
|
|
The address of
each director is 1345 Avenue of the Americas, New York, NY 10105
|
|
|
|
|
|
Hans W. Kertess
|
|
President,
H. Kertess & Co., a financial advisory company; Formerly, Managing
Director, Royal Bank of Canada Capital Markets.
|
|
Date of Birth:
7/12/39
|
|
|
Chairman of the
Board of Directors since: 2007
|
|
|
Director since:
2006
|
|
|
Term of office: Expected to stand for
re-election
at 2010 annual meeting of shareholders.
|
|
|
Trustee/Director
of 35 Funds in Fund Complex;
|
|
|
Trustee/Director
of no funds outside of Fund Complex
|
|
|
|
|
|
|
Paul Belica
|
|
Retired.
Formerly Director, Student Loan Finance Corp., Education Loans, Inc., Goal
Funding, Inc., Goal Funding II, Inc. and Surety Loan Fund, Inc.; formerly,
Manager of Stratigos Fund LLC, Whistler Fund LLC, Xanthus Fund LLC &
Wynstone Fund LLC.
|
|
Date of Birth:
9/27/21
|
|
|
Director since:
2003
|
|
|
Term of office: Expected to stand for
re-election
at 2011 annual meeting of shareholders.
|
|
|
Trustee/Director
of 35 Funds in Fund Complex
|
|
|
Trustee/Director
of no funds outside of Fund Complex
|
|
|
|
|
|
|
Robert E. Connor
|
|
Retired.
Formerly, Senior Vice President, Corporate Office, Smith Barney Inc.
|
|
Date of Birth:
9/17/34
|
|
|
Director since:
2000
|
|
|
Term of office: Expected to stand for
re-election
at 2010 annual meeting of shareholders.
|
|
|
Trustee/Director
of 35 Funds in Fund Complex
|
|
|
Trustee/Director
of no funds outside of Fund Complex
|
|
|
|
|
|
|
William B.
Ogden, IV
|
|
Asset
Management Industry Consultant; Formerly, Managing Director, Investment
Banking Division of Citigroup Global Markets Inc.
|
|
Date of Birth:
1/11/45
|
|
|
Director since:
2006
|
|
|
Term of office: Expected to stand for
election
at 2010 annual meeting of shareholders.
|
|
|
Trustee/Director
of 35 Funds in Fund Complex;
|
|
|
Trustee/Director
of no funds outside of Fund Complex
|
|
|
|
|
|
|
R. Peter
Sullivan III
|
|
Retired.
Formerly, Managing Partner, Bear Wagner Specialists LLC, specialist firm on
the New York Stock Exchange.
|
|
Date of Birth:
9/4/41
|
|
|
Director since:
2006
|
|
|
Term of office: Expected to stand for
re-election
at 2009 annual meeting of shareholders.
|
|
|
Trustee/Director
of 35 funds in Fund Complex
|
|
|
Trustee/Director
of no funds outside of Fund Complex
|
|
|
10.31.08
|
PIMCO Municipal Advantage
Fund Inc. Annual Report
25
|
|
|
PIMCO Municipal Advantage Fund Inc.
Board
of Directors
(unaudited) (continued)
|
|
|
|
|
|
|
|
Name, Date of
Birth, Position(s) Held with Fund,
Length of Service, Other Trusteeships/Directorships
Held by Director; Number of Portfolios in Fund
Complex/Outside Fund Complexes Currently
Overseen by Director
|
|
Principal
Occupation(s) During Past 5 Years:
|
|
|
|
|
|
|
|
The address of
each director is 1345 Avenue of the Americas, New York, NY 10105
|
|
|
|
|
|
Diana L. Taylor
|
|
Managing
Director, Wolfensohn & Co., 2007-Present; Superintendent of Banks, State
of New York, 2003-2007.
|
|
Date of Birth:
2/16/55
|
|
|
Director since
2008
|
|
|
Term of office: Expected to stand for
election
at 2009 annual meeting of shareholders.
|
|
|
Trustee/Director
of 31 Funds in Fund Complex
|
|
|
Trustee/Director of Brookfield
Properties Corporation
and Sotheby’s
|
|
|
|
|
|
|
John C. Maney†
|
|
Management
Board of Allianz Global Investors Fund Management LLC; Management Board and
Managing Director of Allianz Global Investors
of
America L.P. since January 2005
and also Chief Operating
Officer of Allianz Global Investors of America L.P. since November 2006.
|
|
Date of Birth:
8/3/59
|
|
|
Director since
2006
|
|
|
Term of office: Expected to stand for
re-election
at 2009 annual meeting of shareholders.
|
|
|
Trustee/Director
of 77 Funds in Fund Complex
|
|
|
Trustee/Director
of no funds outside the Fund Complex
|
|
† Mr. Maney is an “interested person” of the Fund due to his affiliation
with Allianz Global Investors of America L.P. In addition to Mr. Maney’s
positions set forth in the table above, he holds the following positions with
affiliated persons:
Management Board, Managing Director and Chief
Operating Officer of Allianz Global Investors of America L.P.; Member—Board of
Directors, Chief Operating Officer and Chief Financial Officer of Allianz
Global Investors of America Holdings Inc. and Oppenheimer Group, Inc.;
Management Board, Managing Director, Chief Operating Officer and Chief
Financial Officer of Allianz Global Investors of America LLC; Managing
Director, Chief Operating Officer and Chief Financial Officer of Allianz Global
Investors NY Holdings LLC and Allianz Global Investors U.S. Equities LLC;
Managing Director and Chief Financial Officer of Allianz Hedge Fund Partners
Holding L.P., Allianz-Pac Life Partners LLC and Allianz Global Investors U.S.
Retail LLC; Chief Financial Officer of Allianz Global Investors Advertising
Agency Inc., Allianz Global Investors Managed Accounts LLC, Allianz Global
Investors Distributors LLC, Alpha Vision LLC, Alpha Vision Capital Management
LLC, NFJ Investment Group L.P., Nicholas-Applegate Capital Management LLC,
Nicholas-Applegate Securities LLC, Oppenheimer Capital LLC, Pacific Investment
Management Company LLC, PIMCO Australia Pty Ltd, PIMCO Canada Holding LLC,
PIMCO Canada Management Inc., PIMCO Canada Corp., PIMCO Europe Limited, PIMCO
Global Advisors LLC, StocksPLUS Management, Inc. and Vision Holdings LLC;
Management Board and Chief Financial Officer of Allianz Global Investors Fund
Management LLC, Nicholas-Applegate Holdings LLC and OpCap Advisors LLC;
Member—Board of Directors and Chief Financial Officer of NFJ Management Inc.
and PIMCO Global Advisors (Resources) Limited; and Executive Vice President and
Chief Financial Officer of PIMCO Japan Ltd.
Additional information about certain of the Fund’s Directors is
available in the Fund’s Statement of Additional Information, dated August 26,
2003, which can be obtained upon request, without charge, by calling the Fund’s
shareholder servicing agent at (800) 331-1710.
26
PIMCO Municipal Advantage Fund Inc. Annual Report
|
10.31.08
|
|
|
|
PIMCO Municipal Advantage Fund Inc.
Fund Officers
(unaudited)
|
|
|
|
|
|
|
|
Name, Date of
Birth, Position(s) Held with Fund
|
|
Principal
Occupation(s) During Past 5 Years:
|
|
|
|
|
|
|
|
|
|
Brian S.
Shlissel
Date of Birth:
11/14/64
President & Chief Executive Officer since: 2005
|
|
Executive Vice President,
Director of Fund Administration, Allianz Global Investors Fund Management
LLC; Director of 8 funds in the Fund Complex; President and Chief Executive
Officer of 35 funds in the Fund Complex; Treasurer; Principal Financial and
Accounting Officer of 38 funds in the Fund Complex.
|
|
|
|
|
|
Lawrence G.
Altadonna
Date of Birth:
3/10/66
Treasurer, Principal/Financial and Accounting Officer
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Senior Vice President, Allianz
Global Investors Fund Management LLC; Treasurer, Principal Financial and
Accounting officer of 35 funds in the Fund Complex; Assistant Treasurer of 38
funds in the Fund Complex.
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since: 2005
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Thomas J.
Fuccillo
Date of Birth:
3/22/68
Vice President, Secretary & Chief Legal Officer
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Senior Vice President, Senior
Fund Attorney, Allianz Global Investors of America L.P., Secretary of 73
funds in the Fund Complex. Formerly, Vice President and Associate General
Counsel, Neuberger Berman LLC.
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since: 2005
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Scott Whisten
Date of Birth:
3/13/71
Assistant Treasurer since: 2007
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Vice President, Allianz Global
Investors Fund Management LLC; Assistant Treasurer of 72 funds in the Fund
Complex. Formerly Accounting Manager Prudential Investments (2002-2005).
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Richard J.
Cochran
Date of Birth:
1/23/61
Assistant Treasurer since: 2008
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Vice President, Allianz Global
Investors Fund Management LLC; Assistant Treasurer of 32 funds in the Fund
Complex. Formerly, Tax Manager, Teacher Insurance Annuity Association/College
Retirement Equity Fund (2002-2008).
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Youse E. Guia
Date of Birth:
9/3/72
Chief Compliance Officer since: 2005
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Senior Vice President, Group
Compliance Manager, Allianz Global Investors of America L.P., Chief
Compliance Officer of 73 funds in the Fund Complex. Formerly, Vice President,
Group Compliance Manager, Allianz Global Investors of America L.P.
(2002-2004), Audit Manager, Pricewaterhouse Coopers LLP (1996-2002).
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William V. Healy
Date of Birth:
7/28/53
Assistant Secretary since: 2006
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Executive Vice President and
Chief Legal Officer, Allianz Global Investors of America L.P., Executive Vice
President, Chief Legal Officer and Secretary, Allianz Global Investors Fund
Management LLC, Allianz Global Investors Distributors LLC, Allianz Global Investors
Advertising Agency Inc., Allianz Global Investors Managed Accounts LLC,
Allianz Global Investors U.S. Retail LLC and OpCap Advisors LLC. Assistant
Secretary of 72 funds in the Fund Complex; formerly, Chief Legal Officer,
Vice President and Associate General Counsel of The Prudential Insurance
Company of America (1998-2005).
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Richard H. Kirk
Date of Birth:
4/6/61
Assistant Secretary since: 2006
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Senior Vice President, Allianz
Global Investors of America L.P. (since 2004). Senior Vice President, Associate
General Counsel, Allianz Global Investors Distributors LLC. Assistant
Secretary of 72 funds in the Fund Complex; formerly, Vice President, Counsel,
The Prudential Insurance Company of America/American Skandia (2002-2004).
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Kathleen A.
Chapman
Date of Birth:
11/11/54
Assistant Secretary since: 2006
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Assistant Secretary of 72 funds
in the Fund Complex; Manager IIG Advisory Law, Morgan Stanley (2004-2005);
The Prudential Insurance Company of America and Assistant Corporate Secretary
of affiliated American Skandia companies (1996-2004).
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Lagan Srivastava
Date of Birth:
9/20/77
Assistant Secretary since: 2006
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Assistant Secretary of 72 funds
in the Fund Complex; formerly Research Assistant, Dechert LLP (2004-2005);
Research Assistant, Swidler Berlin Shereff Friedman LLP (2002-2004).
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Officers hold
office at the pleasure of the Board and until their successors are appointed
and qualified or until their earlier resignation or removal.
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10.31.08
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PIMCO Municipal Advantage
Fund Inc. Annual Report
27
(This Page Intentionally Left Blank)
28
PIMCO Municipal Advantage Fund Inc. Annual Report
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10.31.08
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Directors and Fund Officers
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Hans W. Kertess
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Brian S. Shlissel
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Director, Chairman
of the Board of Directors
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President &
Chief Executive Officer
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Paul Belica
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Lawrence G. Altadonna
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Director
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Treasurer,
Principal Financial & Accounting Officer
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Robert E. Connor
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Thomas J. Fuccillo
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Director
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Vice
President, Secretary & Chief Legal Officer
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John C. Maney
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Scott Whisten
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Director
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Assistant
Treasurer
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William B. Ogden, IV
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Richard J. Cochran
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Director
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Assistant
Treasurer
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R. Peter Sullivan III
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Youse E. Guia
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Director
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Chief
Compliance Officer
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Diana L. Taylor
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William V. Healey
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Director
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Assistant
Secretary
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Richard H. Kirk
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Assistant
Secretary
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Kathleen A. Chapman
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Assistant
Secretary
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Lagan Srivastava
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Assistant
Secretary
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Investment Manager
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Allianz
Global Investors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
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Sub-Adviser
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Pacific
Investment Management Company LLC
840 Newport Center Drive
Newport Beach, CA 92660
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Custodian & Accounting Agent
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State
Street Bank & Trust Co.
225 Franklin St.
Boston, MA 02110
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Transfer Agent, Dividend Paying Agent and Registrar
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PNC
Global Investment Servicing
P.O. Box 43027
Providence, RI 02940-3027
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Independent Registered Public Accounting Firm
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PricewaterhouseCoopers
LLP
300 Madison Avenue
New York, NY 10017
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Legal Counsel
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Ropes
& Gray LLP
One International Place
Boston, MA 02110-2624
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This report,
including the financial information herein, is transmitted to the shareholders
of PIMCO 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.
The Fund files
its complete schedules of portfolio holdings with the Securities and Exchange
Commission (“SEC”) for the first and third quarters of its fiscal year on Form
N-Q. The Fund’s Form N-Q is available on the SEC’s website at www.sec.gov, and
may be reviewed and copied at the SEC’s Public Reference Room in Washington,
DC. Information on the operation of the Public Reference Room may be obtained
by calling (800) SEC-0330. The information on Form N-Q is also available on the
Fund’s web-site at www.allianzinvestors.com/closedendfunds.
On March
18,2008, the Fund submitted a CEO annual certification to the New York Stock
Exchange (‘‘NYSE’’) on which the Fund’s principal executive officer certified
that he was not aware, as of that date, of any violation by the Fund of the
NYSE’s Corporate Governance listing standards. In addition, as required by
Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Fund’s
principal executive and principal financial officer made quarterly
certifications, included in filings with the SEC on Forms N-CSR and N-Q
relating to, among other things, the Fund’s disclosure controls and procedures
and internal control over financial reporting, as applicable.
Information on
the Fund is available at www.allianzinvestors.com/closedendfunds or by calling
the Fund’s shareholder servicing agent at (800) 331-1710.
ITEM 2. CODE OF ETHICS
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(a)
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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 1-800-331-1710. The code
of ethics are included as an Exhibit 99.CODE ETH hereto.
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(b)
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During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above.
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(c)
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During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above.
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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
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a)
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Audit fees. The aggregate fees billed
for each of the last two fiscal years (the “Reporting Periods”)
for professional services rendered by the Registrant’s principal accountant
(the
“Auditor”) for the audit of the Registrant’s annual financial
statements, or services that are normally provided by the Auditor in connection
with the statutory and regulatory filings or engagements for the Reporting Periods,
were
$36,000 in 2007 and $39,000 in 2008.
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b)
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Audit-Related Fees. The aggregate fees
billed in the Reporting Periods for assurance and related services by the
principal accountant that are reasonably related to the performance of the
audit registrant’s financial statements and are not reported under
paragraph (e) of this Item were $8,000 in 2007 and $8,000 in 2008.
These services consist of accounting consultations, agreed upon procedure
reports (inclusive of annual review of basic maintenance testing associated
with the Preferred Shares), attestation reports and comfort letters.
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c)
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Tax Fees. The aggregate fees billed
in the Reporting Periods for professional services rendered by the Auditor
for tax compliance, tax service and tax planning (“Tax Services”)
were $6,500 in
2007 and $6,700 in 2008. These services consisted of review or preparation
of U.S. federal, state, local and excise tax returns and calculation of excise
tax distributions.
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d)
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All Other Fees. There were no other fees billed in the Reporting Periods for products and services provided by the Auditor to the Registrant.
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e)
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1. Audit Committee Pre-Approval Policies and Procedures. The Registrant’s Audit Committee has established policies and procedures for pre-approval of all audit and permissible non-audit services by the
Auditor for the Registrant, as well as the Auditor’s engagements related directly to the operations and financial reporting of the Registrant. The Registrant’s policy is stated below.
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PIMCO Municipal Advantage Fund Inc. (the “Fund”)
AUDIT OVERSIGHT COMMITTEE POLICY FOR PRE-APPROVAL OF SERVICES PROVIDED BY THE INDEPENDENT ACCOUNTANTS
The Fund’s Audit Oversight Committee (“Committee”) is charged with the oversight of the Fund’s financial reporting policies and practices and their internal controls. As part of this responsibility, the
Committee must pre-approve any independent accounting firm’s engagement to render audit and/or permissible non-audit services, as required by law. In evaluating a proposed engagement by the independent accountants, the Committee will assess the
effect that the engagement might reasonably be expected to have on the accountant’s independence. The Committee’s evaluation will be based on:
a review of the nature of the professional services expected to provided, the fees to be charged in connection with the services expected to be provided, a review of the safeguards put into place by the accounting firm to
safeguard independence, and periodic meetings with the accounting firm.
POLICY FOR AUDIT AND NON-AUDIT SERVICES TO BE PROVIDED TO THE FUND
On an annual basis, the Fund’s Committee will review and pre-approve the scope of the audit of the Fund and proposed audit fees and permitted non-audit (including audit-related) services that may be performed by the
Fund’s independent accountants. At least annually, the Committee will receive a report of all audit and non-audit services that were rendered in the previous calendar year pursuant to this Policy. In addition to the Committee’s
pre-approval of services pursuant to this Policy, the engagement of the independent accounting firm for any permitted non-audit service provided to the Fund will also require the separate written pre-approval of the President of the Fund, who will
confirm, independently, that the accounting firm’s engagement will not adversely affect the firm’s independence. All non-audit services performed by the independent accounting firm will be disclosed, as required, in filings with the
Securities and Exchange Commission.
AUDIT SERVICES
The categories of audit services and related fees to be reviewed and pre-approved annually by the Committee are:
Annual Fund financial statement audits
Seed audits (related to new product filings, as required)
SEC and regulatory filings and consents
Semiannual financial statement reviews
AUDIT-RELATED SERVICES
The following categories of audit-related services are considered to be consistent with the role of the Fund’s independent accountants and services falling under one of these categories will be pre-approved by the
Committee on an annual basis if the Committee deems those services to be consistent with the accounting firm’s independence:
Accounting consultations
Fund merger support services
Agreed upon procedure reports (inclusive of quarterly review of Basic Maintenance testing
associated with issuance of Preferred Shares and semiannual report review)
Other attestation reports
Comfort letters
Other internal control reports
Individual audit-related services that fall within one of these categories and are not presented to the Committee as part of the annual pre-approval process described above, may be pre-approved, if deemed consistent with
the accounting firm’s independence, by the Committee Chair (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this responsibility has been delegated) so long as the estimated fee for those
services does not exceed $250,000. Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.
TAX SERVICES
The following categories of tax services are considered to be consistent with the role of the Fund’s independent accountants and services falling under one of these categories will be pre-approved by the Committee on
an annual basis if the Committee deems those services to be consistent with the accounting firm’s independence:
Tax compliance services related to the filing or amendment of the following:
Federal, state and local income tax compliance; and, sales and use tax compliance
Timely RIC qualification reviews
Tax distribution analysis and planning
Tax authority examination services
Tax appeals support services
Accounting methods studies
Fund merger support service
Other tax consulting services and related projects
Individual tax services that fall within one of these categories and are not presented to the Committee as part of the annual pre-approval process described above, may be pre-approved, if deemed consistent with the
accounting firm’s independence, by the Committee Chairman (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this responsibility has been delegated) so long as the estimated fee for those
services does not exceed $250,000. Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.
PROSCRIBED SERVICES
The Fund’s independent accountants will not render services in the following categories of non-audit services:
Bookkeeping or other services related to the accounting records or financial statements of the Fund
Financial information systems design and implementation
Appraisal or valuation services, fairness opinions, or contribution-in-kind reports
Actuarial services
Internal audit outsourcing services
Management functions or human resources
Broker or dealer, investment adviser or investment banking services
Legal services and expert services unrelated to the audit
Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible
PRE-APPROVAL OF NON-AUDIT SERVICES PROVIDED TO OTHER ENTITIES WITHIN THE FUND COMPLEX
The Committee will pre-approve annually any permitted non-audit services to be provided to Allianz Global Investors Fund Management LLC (Formerly, PA Fund Management LLC) or any other investment manager to the Funds (but
not including any sub-adviser whose role is primarily portfolio management and is sub-contracted by the investment manager) (the “Investment Manager”) and any entity controlling, controlled by, or under common control with the Investment
Manager that provides ongoing services to the Fund (including affiliated sub-advisers to the Fund), provided, in each case, that the engagement relates directly to the operations and financial reporting of the Fund (such entities, including the
Investment Manager, shall be referred to herein as the “Accounting Affiliates”). Individual projects that are not presented to the Committee as part of the annual pre-approval process, may be pre-approved, if deemed consistent with the
accounting firm’s independence, by the Committee Chairman (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this responsibility has been delegated) so long as the estimated fee for those
services does not exceed $250,000. Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.
Although the Committee will not pre-approve all services provided to the Investment Manager and its affiliates, the Committee will receive an annual report from the Fund’s independent accounting firm showing the
aggregate fees for all services provided to the Investment Manager and its affiliates.
DE MINIMUS EXCEPTION TO REQUIREMENT OF PRE-APPROVAL OF NON-AUDIT SERVICES
With respect to the provision of permitted non-audit services to a Fund or Accounting Affiliates, the pre-approval requirement is waived if:
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(1)
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The aggregate amount of all such permitted non-audit services provided constitutes no more than (i) with respect to such services provided to the Fund, five percent (5%) of the total amount of revenues paid
by the Fund to its independent accountant during the fiscal year in which the services are provided, and (ii) with respect to such services provided to Accounting Affiliates, five percent (5%) of the total amount of revenues paid to the Fund’s
independent accountant by the Fund and the Accounting Affiliates during the fiscal year in which the services are provided;
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(2)
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Such services were not recognized by the Fund at the time of the engagement for such services to be non-audit services; and
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(3)
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Such services are promptly brought to the attention of the Committee and approved prior to the completion of the audit by the Committee or by the Committee Chairman (or any other Committee member who is a
disinterested trustee under the Investment Company Act to whom this Committee Chairman or other delegate shall be reported to the full Committee at its next regularly scheduled meeting.
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e)
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2. No services were approved pursuant to the procedures contained in paragraph (C) (7) (i) (C) of Rule 2-01 of Registration S-X.
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f)
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Not applicable
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g)
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Non-audit fees. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to the Adviser, for the 2007 Reporting Period was $2,783,824 and the 2008
Reporting Period was $3,909,672.
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h)
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Auditor Independence. The Registrant’s Audit Oversight Committee has considered whether the provision of non-audit services that were rendered to the Adviser which were
not pre-approved is compatible
with maintaining the Auditor’s independence.
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ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT
The Fund has a separately designated standing audit
committee established in accordance with Section
3(a)(58)(A) of the Securities Exchange Act of 1934. The audit committee of the
Fund is comprised of Robert E. Connor, Paul Belica, Hans W. Kertess, R. Peter
Sullivan III, William B. Ogden, IV and Diana L. Taylor.
ITEM 6. SCHEDULE OF INVESTMENTS
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
PIMCO MUNICIPAL ADVANTAGE FUND INC.
(the “Trust”)
PROXY VOTING POLICY
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1.
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It is the policy of the Trust that proxies should be voted in the interest of its shareholders, as determined by those who are in the best position to make this determination. The Trust believes that the firms and/or persons purchasing and selling securities for the Trust and analyzing the performance of the Trust’s securities are in the best position and have the information necessary to vote proxies in the best interests of the Trust and its shareholders, including in situations where conflicts of interest may arise between the interests of shareholders, on one hand, and the interests of the investment adviser, a sub-adviser and/or any other affiliated person of the Trust, on the other. Accordingly, the Trust’s policy shall be to delegate proxy voting responsibility to those entities with portfolio management responsibility for the Trust.
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2.
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The Trust delegates the responsibility for voting proxies to Allianz Global Investors Fund Management LLC (“AGIFM”), which will in turn delegate such responsibility to the sub-adviser of the Trust. AGIFM’s Proxy Voting Policy Summary is attached as
Appendix A
hereto. A summary of the detailed proxy voting policy of PIMCO, the Trust’s current sub-adviser, is set forth in
Appendix B
attached hereto. Such summary may be revised from time to time to reflect changes to the sub-adviser’s detailed proxy voting policy.
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3.
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The party voting the proxies (i.e., the sub-adviser) shall vote such proxies in accordance with such party’s proxy voting policies and, to the extent consistent with such policies, may rely on information and/or recommendations supplied by others.
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4.
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AGIFM and the sub-adviser of the Trust with proxy voting authority shall deliver a copy of its respective proxy voting policies and any material amendments thereto to the applicable Board of the Trust promptly after the adoption or amendment of any such policies.
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5.
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The party voting the proxy shall: (i) maintain such records and provide such voting information as is required for the Trust’s regulatory filings including, without limitation, Form N-PX and the required disclosure of policy called for by Item 18 of Form N-2 and Item 7 of Form N-CSR; and (ii) shall provide such additional information as may be requested, from time to time, by the Board or the Trust’s Chief Compliance Officer.
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6.
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This Proxy Voting Policy Statement (including
Appendix B
), the Proxy Voting Policy Summary of AGIFM and summary of the detailed proxy voting policy of PIMCO, the sub-adviser of the Trust with proxy voting authority, shall be made available (i) without charge, upon request, by calling 1-800-426-0107 and (ii) on the Trust’s website at www.allianzinvestors.com. In addition, to the extent required by applicable law or determined by the Trust’s Chief Compliance Officer or Board of Trustees, the Proxy Voting Policy Summary of AGIFM and summary of the detailed proxy voting policy of PIMCO, the Trust’s sub-adviser with proxy voting authority shall also be included in the Trust’s Registration Statements or Form N-CSR filings.
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Appendix A
ALLIANZ GLOBAL INVESTORS FUND MANAGEMENT LLC (“AGIFM”)
|
1.
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It is the policy of AGIFM that proxies should be voted in the interest of the shareholders of the applicable fund, as determined by those who are in the best position to make this determination. AGIFM believes that the firms and/or persons purchasing and selling securities for the funds and analyzing the performance of the funds’ securities are in the best position and have the information necessary to vote proxies in the best interests of the funds and their shareholders, including in situations where conflicts of interest may arise between the interests of shareholders, on one hand, and the interests of the investment adviser, a sub-adviser and/or any other affiliated person of the fund, on the other. Accordingly, AGIFM’s policy shall be to delegate proxy voting responsibility to those entities with portfolio management responsibility for the
funds.
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2.
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AGIFM, for each fund which it acts as an investment adviser, delegates the responsibility for voting proxies to the sub-adviser for the respective fund, subject to the terms hereof.
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3.
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The party voting the proxies (e.g., the sub-adviser) shall vote such proxies in accordance with such party’s proxy voting policies and, to the extent consistent with such policies, may rely on information and/or recommendations supplied by others.
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4.
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AGIFM and each sub-adviser of a fund shall deliver a copy of its respective proxy voting policies and any material amendments thereto to the board of the relevant fund promptly after the adoption or amendment of any such policies.
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5.
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The party voting the proxy shall: (i) maintain such records and provide such voting information as is required for such funds’ regulatory filings including, without limitation, Form N-PX and the required disclosure of policy called for by Item 18 of Form N-2 and Item 7 of Form N-CSR; and (ii) shall provide such additional information as may be requested, from time to time, by such funds’ respective boards or chief compliance officers.
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6.
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This Proxy Voting Policy Summary and summaries of the proxy voting policies for each sub-adviser of a fund advised by AGIFM shall be available (i) without charge, upon request, by calling 1-800-426-0107 and (ii) at www.allianzinvestors.com. In addition, to the extent required by applicable law or determined by the relevant fund’s board of directors/trustees or chief compliance officer, this Proxy Voting Policy Summary and summaries of the detailed proxy voting policies of each sub-adviser and each other entity with proxy voting authority for a fund advised by AGIFM shall also be included in the Registration Statement or Form N-CSR filings for the relevant fund.
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Appendix B
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC
Pacific Investment Management Company LLC (“PIMCO”) has adopted written proxy voting policies and procedures (“Proxy Policy”) as required by Rule 206(4)-6 under the Investment Advisers Act of 1940, as amended. PIMCO has implemented the Proxy Policy for each of its clients as required under applicable law, unless expressly directed by a client in writing to refrain from voting that client’s proxies. Recognizing that proxy voting is a rare event in the realm of fixed income investing and is typically limited to solicitation of consent to changes in features of debt securities, the Proxy Policy also applies to any voting rights and/or consent rights of PIMCO, on behalf of its clients, with respect to debt securities, including but not limited to, plans of reorganization, and waivers and consents under applicable indentures.
The Proxy
Policy is designed and implemented in a manner reasonably expected to ensure
that voting and consent rights are exercised in the best interests of PIMCO’s
clients. Each proxy is voted on a case-bycase basis taking into consideration
any relevant contractual obligations as well as other relevant facts and
circumstances at the time of the vote. In general, PIMCO reviews and considers
corporate governance issues related to proxy matters and generally supports
proposals that foster good corporate governance practices. PIMCO may vote
proxies as recommended by management on routine matters related to the operation
of the issuer and on matters not expected to have a significant economic
impact on the issuer and/or its shareholders.
PIMCO will supervise and periodically review its proxy voting activities and implementation of the Proxy Policy. PIMCO will review each proxy to determine whether there may be a material conflict between PIMCO and its client. If no conflict exists, the proxy will be forwarded to the appropriate portfolio manager for consideration. If a conflict does exist, PIMCO will seek to resolve any such conflict in accordance with the Proxy Policy. PIMCO seeks to resolve any material conflicts of interest by voting in good faith in the best interest of its clients. If a material conflict of interest should arise, PIMCO will seek to resolve such conflict in the client’s best interest by pursuing any one of the following courses of action: (i) convening a committee to assess and resolve the conflict; (ii) voting in accordance with the instructions of the client; (iii) voting in accordance with the
recommendation of an independent third-party service provider; (iv) suggesting that the client engage another party to determine how the proxy should be voted; (v) delegating the vote to a third-party service provider; or (vi) voting in accordance with the factors discussed in the Proxy Policy.
Clients may obtain a copy of PIMCO’s written Proxy Policy and the factors that PIMCO may consider in determining how to vote a client’s proxy. Except as required by law, PIMCO will not disclose to third parties how it voted on behalf of a client. However, upon request from an appropriately authorized individual, PIMCO will disclose to its clients or the entity delegating the voting authority to PIMCO for such clients, how PIMCO voted such client’s proxy. In addition, a client may obtain copies of PIMCO’s Proxy Policy and information as to how its proxies have been voted by contacting PIMCO.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
(a)(1)
As of January 8, 2009, the following individual has primary responsibility for the day-to-day implementation of the PIMCO Municipal Advantage Fund (MAF), (the “Fund”):
John S. Cummings
Mr. Cummings has been the portfolio
manager for the Fund since December 11, 2008. Mr. Cummings is executive
vice president and a municipal bond portfolio manager at PIMCO in the Newport
Beach office. Prior to joining PIMCO in 2002, he was vice president, municipal
trading at Goldman Sachs, responsible for a number of municipal sectors,
including industrials, airlines, utilities, healthcare and high-yield. He
has 20 years of investment experience and holds an MBA, as well as his undergraduate
degree, from Rutgers University.
(a)(2)
The following summarizes information regarding each of the accounts, excluding the respective Fund managed by the Portfolio Manager as of December 31, 2008, including accounts managed by a team, committee, or other group that includes the Portfolio Manager. Unless mentioned otherwise, the advisory fee charged for managing each of the accounts listed below is not based on performance.
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Registered Investment Companies
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Other Pooled Investment Vehicles
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Other Accounts
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PM
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Fund
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#
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AUM($million)
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#
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AUM($million)
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#
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AUM($million)
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John S. Cummings
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MAF
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19
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4,992.35
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4
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677.58
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52
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2,905.83
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From time to time, potential conflicts of interest may arise between a portfolio manager’s management of the investments of a fund, on the one hand, and the management of other accounts, on the other. The other accounts might have similar investment objectives or strategies as the funds, track the same index a fund tracks or otherwise hold, purchase, or sell securities that are eligible to be held, purchased or sold by the funds. The other accounts might also have different investment objectives or strategies than the funds.
Knowledge and Timing of Fund Trades. A potential conflict of interest may arise as a result of the portfolio manager’s day-to-day management of a fund. Because of their positions with the funds, the portfolio managers know the size, timing and possible market impact of a fund’s trades. It is theoretically possible that the portfolio managers could use this information to the advantage of other accounts they manage and to the possible detriment of a fund.
Investment Opportunities. A potential conflict of interest may arise as a result of the portfolio manager’s management of a number of accounts with varying investment guidelines. Often, an investment opportunity may be suitable for both a fund and other accounts managed by the portfolio manager, but may not be available in sufficient quantities for both the fund and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment held by a fund and another account. PIMCO has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time.
Under PIMCO’s allocation procedures, investment opportunities are allocated among various investment strategies based on individual account investment guidelines and PIMCO’s investment outlook. PIMCO has also adopted additional procedures to complement the general trade allocation policy that are designed to address potential conflicts of interest due to the side-by-side management of the funds and certain pooled investment vehicles, including investment opportunity allocation issues.
Performance Fees. A portfolio manager may advise certain accounts with respect to which the advisory fee is based entirely or partially on performance. Performance fee arrangements may create a conflict of interest for the portfolio manager in that the portfolio manager may have an incentive to allocate the investment opportunities that he or she believes might be the most profitable to such other accounts instead of allocating them to a fund. PIMCO has adopted policies and procedures reasonably designed to allocate investment opportunities between the funds and such other accounts on a fair and equitable basis over time.
(a) (3)
As of December 31, 2008,
the following explains the compensation structure of the individual that shares primary responsibility for day-to-day portfolio management of the Fund:
PIMCO has adopted a “Total Compensation Plan” for its professional level employees, including its portfolio managers, that is designed to pay competitive compensation and reward performance, integrity and teamwork consistent with the firm’s mission statement. The Total Compensation Plan includes a significant incentive component that rewards high performance standards, work ethic and consistent individual and team contributions to the firm. The compensation of portfolio managers consists of a base salary, a bonus, and may include a retention bonus. Portfolio managers who are Managing Directors of PIMCO also receive compensation from PIMCO’s profits. Certain employees of PIMCO, including portfolio managers, may elect to defer compensation through PIMCO’s deferred compensation plan. PIMCO also offers its employees a non-contributory defined contribution plan through
which PIMCO makes a contribution based on the employee’s compensation. PIMCO’s contribution rate increases at a specified compensation level, which is a level that would include portfolio managers.
Salary and Bonus. Base salaries are determined by considering an individual portfolio manager’s experience and expertise and may be reviewed for adjustment annually. Portfolio managers are entitled to receive bonuses, which may be significantly more than their base salary, upon attaining certain performance objectives based on predetermined measures of group or department success. These goals are specific to individual portfolio managers and are mutually agreed upon annually by each portfolio manager and his or her manager. Achievement of these goals is an important, but not exclusive, element of the bonus decision process.
In addition, the following non-exclusive list of qualitative criteria (collectively, the “Bonus Factors”) may be considered when determining the bonus for portfolio managers:
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•
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3-year, 2-year and 1-year dollar-weighted and account-weighted, pre-tax investment performance as judged against the applicable benchmarks for each account managed by a portfolio manager (including the funds) and relative to applicable industry peer groups;
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•
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Appropriate risk positioning that is consistent
with PIMCO’s investment philosophy and the Investment Committee/CIO
approach to the generation of alpha;
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•
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Amount and nature of assets managed by the portfolio manager;
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•
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Consistency of investment performance across portfolios of similar mandate and guidelines (reward low dispersion);
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•
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Generation and contribution of investment ideas in the context of PIMCO’s secular and cyclical forums, portfolio strategy meetings, Investment Committee meetings, and on a day-to-day basis;
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•
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Absence of defaults and price defaults for issues in the portfolios managed by the portfolio manager;
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•
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Contributions to asset retention, gathering and client satisfaction;
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•
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Contributions to mentoring, coaching and/or supervising; and
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•
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Personal growth and skills added.
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A portfolio manager’s compensation is not based directly on the performance of any fund or any other account managed by that portfolio manager. Final bonus award amounts are determined by the PIMCO Compensation Committee.
Investment professionals, including portfolio managers, are eligible to participate in a Long Term Cash Bonus Plan (“Cash Bonus Plan”), which provides cash awards that appreciate or depreciate based upon the performance of PIMCO’s parent company, Allianz Global Investors, and PIMCO over a three-year period. The aggregate amount available for distribution to participants is based upon Allianz Global Investors’ profit growth and PIMCO’s profit growth. Participation in the Cash Bonus Plan is based upon the Bonus Factors, and the payment of benefits from the Cash Bonus Plan, is contingent upon continued employment at PIMCO.
Key employees of PIMCO, including certain Managing Directors, Executive Vice Presidents, and Senior Vice Presidents, are eligible to participate in the PIMCO Class M Unit Equity Participation Plan, a long-term equity plan. The Class M Unit Equity Participation Plan grants options on PIMCO equity that vest in years three, four and five. Upon vesting, the options will convert into PIMCO M Units, which are non-voting common equity of PIMCO. M Units pay out quarterly distributions equal to a pro-rata share of PIMCO’s net profits. There is no assured liquidity and they may remain outstanding perpetually.
Profit Sharing Plan. Instead of a bonus, portfolio managers who are Managing Directors of PIMCO receive compensation from a non-qualified profit sharing plan consisting of a portion of PIMCO’s net profits. Portfolio managers who are Managing Directors receive an amount determined by the Partner Compensation Committee, based upon an individual’s overall contribution to the firm and the Bonus Factors. Under his employment agreement, William Gross receives a fixed percentage of the profit sharing plan.
Allianz Transaction Related Compensation. In May 2000, a majority interest in the predecessor holding company of PIMCO was acquired by a subsidiary of Allianz AG (currently known as Allianz SE) (“Allianz”). In connection with the transaction, Mr. Gross received a grant of restricted stock of Allianz, the last of which vested on May 5, 2005.
Portfolio managers who are Managing Directors also have long-term employment contracts, which guarantee severance payments in the event of involuntary termination of a Managing Director’s employment with PIMCO.
(a) (4)
The following summarizes the dollar range of securities the portfolio manager for the Fund beneficially owned of the Fund that he managed as of 12/31/08.
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PIMCO Municipal Advantage Fund
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Portfolio Manager
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Dollar Range of Equity Securities in the Fund
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John S. Cummings
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None
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ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED COMPANIES - None
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Trustees since the Fund last provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES
(a) The registrant’s President and Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule
30a-2(c) under the Act (17 CFR 270.30a-3(c))), 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 over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))) that occurred during the second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the registrants control over financial reporting.
ITEM 12. EXHIBITS
(a) (1) Exhibit 99.CODE ETH — Code of Ethics
(a) (2) Exhibit 99 Cert. — Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(b) 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)
PIMCO
Municipal Advantage Fund Inc.
By /s/ Brian S. Shlissel
President and Chief Executive Officer
Dated: January 8, 2009
By /s/ Lawrence G. Altadonna
Treasurer, Principal Financial &
Accounting Officer
Dated: January 8, 2009
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
Dated: January 8, 2009
By /s/ Lawrence G. Altadonna
Treasurer, Principal Financial &
Accounting Officer
Dated: January 8, 2009
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