MuniEnhanced
Fund, Inc.
FUND LOGO
Annual Report
January 31, 1996
Officers and Directors
Arthur Zeikel, President and Director
James H. Bodurtha, Director
Robert R. Martin, Director
Herbert I. London, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
State Street Bank and Trust Company
225 Franklin Square
Boston, MA 02110
Transfer Agents
<PAGE>
Common Stock:
State Street Bank and Trust Company
225 Franklin Square
Boston, MA 02110
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MEN
This report, including the financial information herein, is
transmitted to the shareholders of MuniEnhanced 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 the report. Past performance results shown
in this report should not be considered a representation of future
performance. The Fund has leveraged its Common Stock by issuing
Preferred Stock to provide the Common Stock shareholders with a
potentially higher rate of return. Leverage creates risks for Common
Stock shareholders, including the likelihood of greater volatility
of net asset value and market price of shares of the Common Stock,
and the risk that fluctuations in the short-term dividend rates of
the Preferred Stock may affect the yield to Common Stock
shareholders. Statements and other information herein are as dated
and are subject to change.
MuniEnhanced
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MUNIENHANCED FUND, INC.
<PAGE>
The Benefits and
Risks of
Leveraging
MuniEnhanced Fund, Inc. utilizes leveraging to seek to enhance the
yield and net asset value of its Common Stock. However, these
objectives cannot be achieved in all interest rate environments. To
leverage, the Fund issues Preferred Stock, which pays dividends at
prevailing short-term interest rates, and invests the proceeds in
long-term municipal bonds. The interest earned on these investments
is paid to Common Stock shareholders in the form of dividends, and
the value of these portfolio holdings is reflected in the per share
net asset value of the Fund's Common Stock. However, in order to
benefit Common Stock shareholders, the yield curve must be
positively sloped; that is, short-term interest rates must be lower
than long-term interest rates. At the same time, a period of
generally declining interest rates will benefit Common Stock
shareholders. If either of these conditions change, then the risks
of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred Stock
for an additional $50 million, creating a total value of $150
million available for investment in long-term municipal bonds. If
prevailing short-term interest rates are approximately 3% and long-
term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million
of Preferred Stock based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pick-up on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value on the fund's Common Stock (that is, its
price as listed on the New York Stock Exchange), may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Stock does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Stock may
also decline.
<PAGE>
Important Tax
Information
(unaudited)
All of the net investment income distributions paid monthly by
MuniEnhanced Fund, Inc. during its taxable year ended January 31,
1996 qualify as tax-exempt interest dividends for Federal income tax
purposes.
Additionally, there were no capital gains distributed by the Fund
during the year.
Please retain this information for your records.
TO OUR SHAREHOLDERS
For the six-month period ended January 31, 1996, the Common Stock of
MuniEnhanced Fund, Inc. earned $0.360 per share income dividends,
which included earned and unpaid dividends of $0.062. This
represents a net annualized yield of 5.75%, based on a month-end per
share net asset value of $12.40. Over the same period, total
investment return on the Fund's Common Stock was +9.81%, based on a
change in per share net asset value from $11.67 to $12.40, and
assuming reinvestment of $0.358 per share income dividends.
For the year ended January 31, 1996, the Common Stock of
MuniEnhanced Fund, Inc. earned $0.723 per share income dividends,
representing a net annualized yield of 5.83%, based on a month-end
per share net asset value of $12.40. Over the same period, total
investment return on the Fund's Common Stock was +18.71%, based on a
change in per share net asset value from $11.17 to $12.40, and
assuming reinvestment of $0.723 per share income dividends.
For the six-month period ended January 31, 1996, the Fund's
Preferred Stock had an average dividend yield as follows: Series A,
3.44%; Series B, 3.97%; and Series C, 3.78%.
The Municipal Market
The municipal bond market rallied strongly over the six months ended
January 31, 1996. Long-term, tax-exempt revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined over 65
basis points (0.65%) to end the January period at 5.69%. Continued
weak economic conditions coupled with low inflation fostered a very
positive environment for almost all fixed-income investments during
the last three months of 1995. Long-term US Treasury bond yields
also declined approximately 65 basis points to 6.00% by January 31,
1996. Both US Treasury and long-term tax-exempt bond yields are near
their lowest levels in the past two years.
<PAGE>
The municipal bond market had to contend with a number of
difficulties for much of 1995. Various tax reform proposals have
made the future tax advantage of municipal bonds uncertain. This
has, at a minimum, reduced the overall demand for tax-exempt
securities. At the same time, as municipal bond yields declined, tax-
exempt authorities have rushed to issue debt at near historic low
yield levels. During the six-month period ended January 31, 1996,
approximately $90 billion in municipal securities were underwritten,
an increase of over 30% compared to the same period last year.
However, as early 1995 issuance was significantly reduced, the last
12 months issuance of approximately $160 billion remained the same
as that issued a year earlier. Tax-exempt bond yields declined
throughout the six months ended January 31, 1996, despite investor
uncertainty and increased supply pressures.
It is likely that the municipal market will regain much of the
technical support it enjoyed earlier in 1995. 1995 issuance remained
significantly below levels underwritten in 1993, when over $290
billion in long-term tax-exempt securities were issued. Also,
municipal investors received over $25 billion in bond maturities,
coupon income and early redemptions on January 1, 1996. This $25
billion is almost twice the average monthly issuance for 1995. The
amount of outstanding municipal securities will continue to decline
throughout 1996 and into early 1997. As the uncertainties
surrounding proposed tax reforms are resolved in 1996, the tax-
exempt bond market's renewed technical position should provide
support to municipal bond prices.
Many of the features that made tax-exempt products attractive to
investors last year are still in place. Long-term, A-rated municipal
revenue bonds continue to yield well over 90% of comparable US
Treasury bond yields. Historically, analysts have considered yields
in excess of 82% attractive for long-term investors. For example,
currently available tax-exempt bond yields generate taxable
equivalent yields in excess of 8.50% for an investor in the 36%
Federal income tax bracket. While the uncertainties regarding
potential changes in current tax law remain, it appears that, at
current price levels, bond investors have discounted at least some
of the uncertainty.
<PAGE>
Looking ahead, it may be unreasonable to expect to duplicate the
double-digit returns produced by most tax-exempt issues in 1995,
given current municipal bond yields. Municipal bond yields would
have to decline to levels not seen since the 1960s in order to
generate such significant returns in the coming years. While the
current economic environment may still justify additional declines
in interest rates, it may be prudent to expect some period of
consolidation before the interest rate decline resumes. Tax-exempt
bond market performance in 1996 is likely to be generated more by
enhancing current income and limiting credit risk than by
significant interest rate declines.
Portfolio Strategy
MuniEnhanced Fund, Inc. enjoyed the steady march toward lower
interest rates that took place during the fiscal year ended January
31, 1996. This environment brought higher bond prices and double-
digit total returns to our shareholders. Over the course of the
year, our strategy was to seek high-quality, performance-oriented
municipal securities with attractive yields. A constant theme we
employed over the past year was to sell current coupon or par bonds
to buy lower-coupon discount bonds to seek to enhance the portfolio's
potential appreciation. This price appreciation, when combined
with our core position of older, higher-yielding municipal securities,
enabled the Fund to achieve double-digit returns for its fiscal year.
Looking ahead, we will continue to extend the Fund's call protection
and duration to seek to further capitalize on the expected continued
drop in interest rates. Should the bond markets continue to advance,
MuniEnhanced Fund, Inc. may possibly see a sizable portion of the
portfolio prerefunded, which will benefit our shareholders. In
keeping with our past strategy, we will continue to seek to enhance
total return to our shareholders without sacrificing yield or
quality.
In Conclusion
We appreciate your ongoing interest in MuniEnhanced Fund, Inc., and
we look forward to assisting you with your financial needs in the
months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
<PAGE>
(Hugh T. Hurley III)
Hugh T. Hurley III
Portfolio Manager
March 6, 1996
We are pleased to announce that Hugh T.Hurley III is responsible for
the day-to-day management of MuniEnhanced Fund, Inc. Mr. Hurley has
been employed by Merrill Lynch Asset Management, L.P. (an affiliate
of the Fund's investment adviser) since 1996 as Vice President and
was Assistant Vice President from 1993 to 1996. Prior thereto, he
was employed by Titus and Donnelly Municipal Bond Brokers as
Municipal Bond Broker from 1990 to 1993.
PROXY RESULTS
<TABLE>
During the six-month period ended January 31, 1996, MuniEnhanced
Fund, Inc. Common Stock shareholders voted on the following
proposals. The proposals were approved at a special shareholders'
meeting on September 8, 1995. The description of each proposal and
number of shares voted are as follows:
<CAPTION>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: James H. Bodurtha 27,486,718 564,861
Robert R. Martin 27,478,488 573,091
Joseph L. May 27,493,467 558,112
Arthur Zeikel 27,473,754 577,825
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the current fiscal year. 27,444,322 186,914 420,343
<PAGE>
<CAPTION>
During the six-month period ended January 31, 1996, MuniEnhanced
Fund, Inc. Preferred Stock shareholders (Series A, B and C) voted on
the following proposals. The proposals were approved at a special
shareholders' meeting on September 8, 1995. The description of each
proposal and number of shares voted are as follows:
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: James H. Bodurtha
Herbert I. London, Robert R. Martin, Joseph L. May,
Andre F. Perold and Arthur Zeikel as follows: Series A 1,891 9
Series B 1,800 0
Series C 1,159 555
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the current fiscal year as follows: Series A 1,891 0 9
Series B 1,800 0 0
Series C 1,614 92 8
</TABLE>
Portfolio
Abbreviations
To simplify the listings of MuniEnhanced Fund, Inc.'s
portfolio holdings in the Schedule of Investments,
we have abbreviated the names of many of the securities
according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
RAW Revenue Anticipation Warrants
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama--0.5% AAA Aaa $ 2,500 Huntsville, Alabama, Health Care Authority, Health Care
Facilities Revenue Bonds, Series B, 6.625% due 6/01/2023 (c) $ 2,780
Alaska--1.7% A+ Aa1 3,000 Alaska State Housing Finance Corporation, Refunding
(Insured Mortgage Program), First Series, 7.75% due 12/01/2014 3,182
AA- Aa3 5,000 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds
(Sohio Pipeline), 7.125% due 12/01/2025 5,536
California-- SP1 MIG1++ 10,100 California State, GO, RAW, Series C, 5.75% due 4/25/1996 10,148
10.6% California State Public Works Board, Lease Revenue Bonds
(Various University of California Projects):
AAA Aaa 2,000 Series A, 6.40% due 12/01/2016 (d) 2,167
A- A1 2,500 Series B, 6.625% due 12/01/2019 2,749
AAA Aaa 5,000 Central Coast Water Authority, California, Revenue Bonds
(State Water Project Regional Facilities), 6.60% due
10/01/2022 (d) 5,499
AAA Aaa 4,450 Compton, California, Community Redevelopment Agency, Tax
Allocation Refunding Bonds (Walnut Industrial Park), Series A,
7.50% due 8/01/1999 (d)(h) 5,061
A+ A1 2,500 Contra Costa County, California, COP, 6.50% due 8/01/2019 2,663
AAA Aaa 4,000 East Bay, California, Municipal Utility District, Wastewater
Treatment System Revenue Bonds, 6.375% due 6/01/2021 (d) 4,276
AAA Aaa 2,000 Irvine, California, GO, Unified School District, Special Tax
Community Facilities Bonds (District No. 86-1), Series A,
8.10% due 11/15/2013 (c) 2,238
AAA Aaa 8,235 Los Angeles County, California, Transportation Commission,
Sales Tax Revenue Refunding Bonds, AMT, Series B, 6.50%
due 7/01/2015 (b) 8,965
AAA Aaa 1,500 M-S-R Public Power Agency, California, Revenue Bonds
(San Juan Project), Series E, 6.50% due 7/01/2017 (c) 1,633
AAA Aaa 1,500 Northern California Transmission Revenue Bonds (California-Oregon
Transmission Project), Series A, 6.50% due 5/01/2016 (c) 1,636
AAA Aaa 4,210 San Francisco, California, City and County Airports Commission,
International Airport Revenue Bonds, AMT, Second-Series, Issue
6, 6.60% due 5/01/2024 (d) 4,608
AAA Aaa 2,000 Santa Clara County, California, Financing Authority, Lease
Revenue Bonds (VMC Facility Replacement Project), Series A,
6.75% due 11/15/2020 (d) 2,269
<PAGE>
Colorado--2.9% AAA Aaa 1,000 Adams County, Colorado, School District No. 012 (Adam
Twelve Five Star School), Series C, UT, 5.60% due 12/15/2012 (c) 1,032
Adams County, Colorado, School District No. 012,
Series A, UT (c)(k):
AAA Aaa 3,000 5.90% due 12/15/2011 1,304
AAA Aaa 3,000 5.95% due 12/15/2012 1,217
AAA Aaa 1,000 Alamosa and Conejos Counties, Colorado, School District
No. 11-J, 5% due 12/01/2015 (d)(i) 977
AA Aa 1,800 Arapahoe County, Colorado, School District No. 5 (Cherry
Creek), Series B, 5.15% due 12/15/2015 1,784
NR* Aa 3,600 Colorado, HFA, S/F Project, Senior Series C-1, AMT, 7.65%
due 12/01/2025 4,039
AAA Aaa 2,750 Douglas County, Colorado, School District No. 1 (Douglas and
Elbert Counties Improvement Project), Series A, 6.50% due
12/15/2016 (c) 3,090
AAA Aaa 1,500 Gunnison Watershed, Colorado, School District No. 1-J, UT,
5% due 12/01/2015 (c) 1,465
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Connecticut-- AA- A1 $ 2,000 Connecticut State Health and Educational Facilities
1.2% Authority Revenue Bonds (Nursing
Home Program - AHF/Hartford), 7.125% due 11/01/2024 $ 2,304
AAA Aaa 3,500 Connecticut State Special Tax Obligation Revenue Bonds,
Series B, 6.25% due 10/01/2014 (b) 3,794
Delaware--0.4% AAA Aaa 2,000 Delaware Transportation Service Authority Revenue Bonds,
7% due 7/01/2013 (b) 2,309
Florida--2.0% AAA Aaa 1,390 Florida, HFA, S/F Mortgage, Refunding, AMT, Series B, 6.55%
due 7/01/2017 (g) 1,437
AA Aa 5,240 Florida State Board of Education, Capital Outlay Bonds (Public
Education), Series D, UT, 5.25% due 6/01/2023 5,092
Hillsborough County, Florida, Capital Improvement Program,
Revenue Refunding Bonds:
AAA Aaa 1,895 6% due 8/01/2004 (b) 2,110
AAA Aaa 1,515 (County Center Project), Series B, 6% due 7/01/2004 (c) 1,685
<PAGE>
Georgia--4.7% AAA Aaa 4,000 Cherokee County, Georgia, Water and Sewer Authority Revenue
Bonds, 5.20% due 8/01/2025 (c) 3,976
Georgia Municipal Electric Authority, Power Revenue Bonds:
AAA Aaa 1,500 Refunding, Series Z, 5.50% due 1/01/2020 (c) 1,561
AAA Aaa 7,725 Series EE, 7% due 1/01/2025 (d) 9,765
AAA Aaa 3,500 Metropolitan Atlanta, Georgia, Rapid Transit Authority, Sales
Tax Revenue Bonds, Second Indenture, Series A, 6.90% due
7/01/2020 (c) 4,009
AAA Aaa 3,000 Municipal Electric Authority of Georgia, Project 1, Sub-Series
A, 6.50% due 1/01/2026 (d) 3,280
AAA Aaa 1,000 Municipal Electric Authority of Georgia, Special Obligation,
Third Crossover, 6.60% due 1/01/2018 (c) 1,179
Hawaii--4.3% AAA Aaa 11,250 Hawaii State Airport System Revenue Bonds, AMT, Second
Series, 7.50% due 7/01/2020 (b) 12,604
AAA Aaa 6,070 Hawaii State Department of Budget and Finance, Special
Purpose Mortgage Revenue Bonds (Hawaiian Electric Company),
AMT, Series C, 7.375% due 12/01/2020 (c) 6,799
AAA Aaa 2,385 Honolulu, Hawaii, City and County, Series 95, UT, 6%
due 11/01/2001 (c) 2,608
Illinois--6.3% Chicago, Illinois:
AAA Aaa 5,125 (Project Series), 5.50% due 1/01/2024 (b) 5,089
AAA Aaa 5,000 Series A-1, 5.125% due 1/01/2025 (d) 4,730
AAA Aaa 5,000 Chicago, Illinois, Water Revenue Bonds, 5% due 11/01/2020 (b) 4,741
AAA Aaa 2,240 Cook County, Illinois, Chicago Community College District
No. 508, COP, UT, 8.75% due 1/01/2007 (b) 3,003
AAA Aaa 3,000 Illinois Health Facilities Authority Revenue Bonds
(Servantcor Project), Series A, 6.375% due 8/15/2021 (f) 3,220
AAA Aaa 9,115 Regional Transportation Authority, Illinois, Series A, 7.20%
due 11/01/2020 (d) 11,486
Indiana--0.6% NR* Aaa 2,770 Indiana State, HFA, S/F Mortgage Revenue Bonds (Home Mortgage
Program), AMT, Series B-2, 7.80% due 1/01/2022 (j) 2,929
Iowa--0.7% NR* Aaa 3,210 Iowa Finance Authority, S/F Mortgage Revenue Bonds, AMT,
Series A, 7.90% due 11/01/2022 (j) 3,382
Kansas--1.8% AAA Aaa 5,500 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric
Company Project), 7% due 6/01/2031 (c) 6,223
AAA Aaa 2,500 Wamego, Kansas, PCR, Refunding (Kansas Gas and Electric Company
Project), 7% due 6/01/2031 (c) 2,829
Louisiana--1.3% Louisiana Public Facilities Authority Revenue Bonds:
AAA Aaa 1,500 (General Health Inc. Project), 6.375% due 11/01/2024 (c) 1,620
AAA Aaa 4,340 Refunding (Jefferson Parish Eastbank Project), 7.70% due
8/01/2010 (b) 4,860
Maine--0.6% AA- A1 3,000 Maine State Housing Authority, Mortgage Purchase Revenue Bonds,
AMT, Series C-2, 6.875% due 11/15/2023 3,120
Maryland--0.9% AAA Aaa 5,000 Baltimore, Maryland, Revenue Refunding Bonds (Water Projects),
Series A, 5% due 7/01/2024 (b) 4,838
<PAGE>
Massachusetts-- AAA Aaa 3,000 Massachusetts Bay Transportation Authority, COP, Series A, 7.65%
4.3% due 8/01/2000 (f)(h) 3,490
AAA Aaa 5,000 Massachusetts Municipal Wholesale Electric Company, Power Supply
System Revenue Refunding Bonds, Series B, 5% due 7/01/2017 (c) 4,797
AAA Aaa 4,300 Massachusetts State, HFA, Housing Revenue Refunding Bonds
(Insured Rental), AMT, Series A, 6.75% due 7/01/2028 (d) 4,530
AAA Aaa 2,500 Massachusetts State Port Authority Revenue Bonds, AMT,
Series A, 7.50% due 7/01/2020 (b) 2,802
AAA Aaa 1,500 Massachusetts State Water Resource Authority, General Purpose
Refunding Bonds, Series B, 5.50% due 3/01/2017 (c) 1,483
AAA Aaa 5,000 Massachusetts State Water Resource Authority, Series B, 5%
due 12/01/2025 (c) 4,747
Michigan--0.7% AAA Aaa 3,000 Monroe County, Michigan, PCR (Detroit Edison Company Project),
AMT, Project 1, 7.65% due 9/01/2020 (b) 3,391
Mississippi-- AAA Aaa 2,000 Mississippi Hospital Equipment and Facilities Authority
0.4% Revenue Bonds (Mississippi Baptist Medical Center), Series A,
7.50% due 5/01/2000 (c)(h) 2,300
Missouri--0.7% AAA Aaa 3,000 Kansas City, Missouri, Airport General Revenue Improvement
Bonds, Series B, 6.875% due 9/01/2014 (f) 3,404
Montana--0.5% AAA Aaa 2,185 Forsyth, Montana, PCR, Refunding (Puget Sound Power and Light),
AMT, Series B, 7.25% due 8/01/2021 (d) 2,491
Nebraska--2.3% AAA Aaa 11,850 Nebraska Public Power District Revenue Bonds, Series A,
5.25% due 1/01/2022 (c) 11,668
Nevada--0.6% AAA Aaa 3,000 Washoe County, Nevada, Water Facility Revenue Bonds (Sierra
Pacific Power), AMT,
6.65% due 6/01/2017 (c) 3,271
New Jersey-- Montgomery Township, New Jersey, Board of Education, UT (b):
9.9% AAA Aaa 1,250 5.50% due 8/01/2021 1,255
AAA Aaa 1,250 5.50% due 8/01/2022 1,255
AAA Aaa 1,250 5.50% due 8/01/2023 1,255
AAA Aaa 1,250 5.50% due 8/01/2024 1,255
AAA Aaa 1,240 5.50% due 8/01/2025 1,245
New Jersey State Housing and Mortgage Finance Agency Revenue
Bonds (Home Buyer), AMT (c):
AAA Aaa 3,230 Series B, 7.90% due 10/01/2022 3,401
AAA Aaa 5,830 Series D, 7.70% due 10/01/2029 6,078
AAA Aaa 5,000 Series K, 6.375% due 10/01/2026 5,159
New Jersey State Transportation Trust Fund Authority, Refunding
(Transportation Systems), Series A:
AAA Aaa 4,635 6% due 6/15/2004 (d) 5,136
AAA Aaa 25,000 5% due 6/15/2015 (c) 24,422
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
New Mexico-- AAA Aaa $ 2,375 Albuquerque, New Mexico, Airport Revenue Bonds, AMT, Series A,
1.0% 6.60% due 7/01/2016 (d) $ 2,606
AAA Aaa 2,300 Santa Fe, New Mexico, Revenue Bonds, Series A, 6.30% due
6/01/2004 (d)(h) 2,605
New York--7.4% AAA Aaa 2,000 Metropolitan Transportation Authority, New York, Service
Contract Refunding Bonds (Transportation Facilities),
Series L, 7.50% due 7/01/2017 (d) 2,188
New York City, New York, GO, UT:
NR* Aaa 1,560 Series B, 8.25% due 6/01/2001 (h) 1,886
BBB+ Baa1 1,675 Series B, 8.25% due 6/01/2002 1,925
BBB+ Baa1 3,000 Series D, 9.50% due 8/01/2002 3,625
SP1+ MIG1++ 1,400 New York City, New York, RAN, Series A, 4.50% due 4/11/1996 1,403
AAA Aaa 2,355 New York State Crossover, Refunding, 7% due 11/15/2002 (d) 2,735
BBB+ Baa1 4,450 New York State Dormitory Authority Revenue Bonds (Court
Facilities Lease), Series A, 5.25% due 5/15/2021 4,144
AAA Aaa 4,710 New York State Medical Care Facilities Finance Agency
Revenue Bonds (Saint Francis Hospital Project), Series A,
7.625% due 11/01/2021 (b) 5,203
BBB Aaa 1,500 New York State Urban Development Corporation, State Facilities
Revenue Bonds, 7.50% due 4/01/2001 (h) 1,753
AAA Aaa 13,340 Port Authority of New York and New Jersey, 5.20% due 7/15/2021 13,063
North A1+ NR* 100 Raleigh-Durham, North Carolina, Airport Authority, Special
Carolina-- Facilities Revenue Refunding Bonds (American Airlines),
0.0% Series B, 3.75% due 2/01/1996 100
North Dakota-- AAA Aaa 3,000 Bismarck, North Dakota, Hospital Revenue Refunding and Improvement
0.7% Bonds (Medical Center One, Inc.), 7.50% due 5/01/2013 (e) 3,331
Ohio--1.0% AAA Aaa 2,500 North Canton, Ohio, City School District, Improvement Bonds, UT,
6.70% due 12/01/2019 (d) 2,891
AAA Aaa 2,150 Ohio State Air Quality Development Authority, PCR, Refunding
(Ohio Edison), Series A, 7.45% due 3/01/2016 (b) 2,425
Oklahoma--0.2% AAA Aaa 865 Muskogee County, Oklahoma, Home Financing Authority, S/F Mortgage
Revenue Refunding Bonds, Series A, 7.60% due 12/01/2010 (b) 920
Pennsylvania-- AAA Aaa 4,000 Pennsylvania State Higher Educational Assistance Agency, Student
0.9% Loan Revenue Bonds, AMT, 7.437% due 3/01/2020 (c) 4,389
South AAA Aaa 15,000 South Carolina State Public Service Authority Revenue Bonds
Carolina-- (Santee Cooper), Series D, 6.50% due 7/01/2002 (d)(h) 17,097
3.4%
<PAGE>
South Dakota-- AAA Aaa 8,000 South Dakota State Health and Educational Facilities Authority,
1.8% Revenue Refunding Bonds (McKennan Hospital), Series A, 7.625%
due 7/01/2014 (c) 8,948
Tennessee--1.8% AAA Aaa 2,250 Chattanooga - Hamilton County, Tennessee, Hospital Authority,
Revenue Refunding Bonds (Erlanger Medical Center), 5.50% due
10/01/2013 (f) 2,277
AAA Aaa 5,450 Mount Juliet, Tennessee, Public Building Authority Revenue Bonds
(Madison Suburban Utility District Loan), Series B, 7.80% due
2/01/2004 (c)(h) 7,055
Texas--12.6% A1+ VMIG1++ 200 Brazos River Authority, Texas, PCR (Texas Utilities Electric
Co.), VRDN, AMT, Series A, 3.85% due 2/01/1996 (a) 200
AAA Aaa 3,000 Brazos River Authority, Texas, Revenue Refunding Bonds (Houston
Light and Power Company Project), Series C, 8.10% due 5/01/2019 (e) 3,306
A1+ NR* 300 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Methodist Hospital), VRDN, 3.70%
due 12/01/2025 (a) 300
A-1 VMIG1++ 300 Harris County, Texas, Industrial Development Corporation,
Solid Waste Disposal Revenue Bonds (Deer Park Limited Partnership),
VRDN, AMT, Series A, 3.95% due 2/01/2023 (a) 300
AAA Aaa 2,000 Houston, Texas, Hotel Occupancy Tax Revenue Bonds (Customer
Receipt - Senior Lien), Series A, 7% due 7/01/2001 (h) 2,273
AAA Aaa 5,000 Houston, Texas, Water and Sewer System, Revenue Refunding Bonds
(Junior Lien), Series C, 6.375% due 12/01/2017 (d) 5,363
San Antonio, Texas, Electric and Gas Revenue Bonds, Series 95 (c):
AAA Aaa 10,000 5.375% due 2/01/2017 10,031
AAA Aaa 14,000 5.375% due 2/01/2018 14,006
Texas State Turnpike Authority, Dallas North Thruway
Revenue Bonds:
AAA Aaa 3,700 (President George Bush Turnpike), 5% due 1/01/2025 3,521
AAA Aaa 13,900 (Texas Turnpike), 5.25% due 1/01/2023 13,644
AAA Aaa 10,475 Texas Water Resource Finance Authority Revenue Bonds, 7.50%
due 8/15/2013 (d) 11,414
Utah--1.1% AA- Aa 5,000 Intermountain Power Agency, Utah, Power Supply Revenue Bonds,
Series B, 7% due 7/01/2021 5,431
Vermont--1.7% AAA Aaa 8,150 Vermont, HFA, Home Mortgage Purchase Bonds, AMT, Series B, 7.60%
due 12/01/2024 (c) 8,628
Virginia--5.3% AA Aa 3,500 Big Stone Gap, Virginia, Redevelopment and Housing Authority,
Correctional Facility Lease Revenue Bonds (Wallens Ridge
Development Project), 5.50% due 9/01/2015 3,527
AAA Aaa 6,000 Loudoun County, Virginia, COP, GO, 6.80% due 3/01/2014 (f) 6,826
AAA Aaa 3,855 Norfolk, Virginia, Water Revenue Bonds, 5.375% due 11/01/2023 (d) 3,797
AAA Aaa 2,650 Roanoke, Virginia, IDA, Hospital Revenue Refunding Bonds (Roanoke
Memorial Hospitals Project), Series A, 5.25% due 7/01/2025 (c) 2,569
Virginia State, HDA, Commonwealth Mortgage, AMT:
AAA Aaa 5,000 Series A, Sub-Series A-4, 6.45% due 7/01/2028 (c) 5,159
AA+ Aa 5,000 Series B, Sub-Series B-3, 6.75% due 7/01/2021 5,148
<PAGE>
Wisconsin-- AAA Aaa 2,075 Wisconsin Public Power Inc., Power Supply System Revenue Bonds,
0.5% Series A, 7.50% due
7/01/2000 (d)(h) 2,397
Total Investments (Cost--$471,254)--99.3% 506,144
Other Assets Less Liabilities--0.7% 3,619
--------
Net Assets--100.0% $509,763
========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at January 31, 1996.
(b)FGIC Insured.
(c)MBIA Insured.
(d)AMBAC Insured.
(e)BIG Insured.
(f)FSA Insured.
(g)FNMA/GNMA Collateralized.
(h)Prerefunded.
(i)Bank Qualified.
(j)GNMA Insured.
(k)Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been auditedby Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of January 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$471,253,600) (Note 1a) $506,143,875
Cash 84,221
Receivables:
Securities sold $ 34,596,378
Interest 6,488,003 41,084,381
------------
Prepaid expenses and other assets 19,759
------------
Total assets 547,332,236
------------
<PAGE>
Liabilities: Payables:
Securities purchased 36,793,434
Dividends to shareholders (Note 1e) 409,514
Investment adviser (Note 2) 229,678 37,432,626
------------
Accrued expenses and other liabilities 136,928
------------
Total liabilities 37,569,554
------------
Net Assets: Net assets $509,762,682
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (6,000 shares of
AMPS* issued and outstanding at $25,000 per share liquidation
preference) $150,000,000
Common Stock, par value $.10 per share (29,007,770 shares
issued and outstanding) $ 2,900,777
Paid-in capital in excess of par 319,102,131
Undistributed investment income--net 3,774,715
Accumulated realized capital losses on investments--net (905,216)
Unrealized appreciation on investments--net 34,890,275
------------
Total--Equivalent to $12.40 net asset value per share of
Common Stock (market price--$11.375) 359,762,682
------------
Total capital $509,762,682
============
<FN>
*Auction Market Preferred Stock.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended January 31, 1996
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 30,114,602
Income (Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 2,472,860
Commission fees (Note 4) 379,580
Transfer agent fees 116,421
Professional fees 86,590
Accounting services (Note 2) 69,276
Printing and shareholder reports 66,036
Directors' fees and expenses 42,028
Listing fees 33,656
Custodian fees 30,779
Pricing fees 16,293
Other 23,707
------------
Total expenses 3,337,226
------------
Investment income--net 26,777,376
------------
Realized & Realized gain on investments--net 5,498,127
Unrealized Gain on Change in unrealized appreciation on investments--net 30,124,671
Investments--Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $ 62,400,174
============
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended January 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 26,777,376 $ 27,881,785
Realized gain (loss) on investments--net 5,498,127 (4,704,132)
Change in unrealized appreciation on investments--net 30,124,671 (44,946,070)
------------ ------------
Net increase (decrease) in net assets resulting from operations 62,400,174 (21,768,417)
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (20,979,145) (22,948,395)
Shareholders Preferred Stock (5,780,540) (4,542,390)
(Note 1e): Realized gain on investments--net:
Common Stock -- (1,651,828)
In excess of realized gain on investments--net:
Common Stock -- (1,692,768)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (26,759,685) (30,835,381)
============ ============
<PAGE>
Net Assets: Total increase (decrease) in net assets 35,640,489 (52,603,798)
Beginning of year 474,122,193 526,725,991
------------ ------------
End of year* $509,762,682 $474,122,193
============ ============
*Undistributed investment income--net (Note 1f) $ 3,774,715 $ 3,751,156
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 1996+++ 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 11.17 $ 12.99 $ 12.29 $ 11.96 $ 11.45
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .92 .96 1.01 1.06 1.09
Realized and unrealized gain (loss) on
investments--net 1.23 (1.71) 1.09 .68 .71
-------- -------- -------- -------- --------
Total from investment operations 2.15 (.75) 2.10 1.74 1.80
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.72) (.79) (.85) (.91) (.84)
Realized gain on investments--net -- (.06) (.43) (.35) (.20)
In excess of realized gain on
investments--net -- (.06) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.72) (.91) (1.28) (1.26) (1.04)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Investment income--net (.20) (.16) (.12) (.15) (.25)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.20) (.16) (.12) (.15) (.25)
-------- -------- -------- -------- --------
Net asset value, end of year $ 12.40 $ 11.17 $ 12.99 $ 12.29 $ 11.96
======== ======== ======== ======== ========
Market price per share, end of year $ 11.375 $ 10.25 $ 13.125 $ 13.25 $ 12.625
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on market price per share 18.67% (14.88%) 9.28% 16.27% 21.23%
Return:* ======== ======== ======== ======== ========
Based on net asset value per share 18.71% (6.27%) 16.61% 13.84% 14.09%
======== ======== ======== ======== ========
Ratios to Average Expenses .68% .69% .68% .69% .70%
Net Assets:** ======== ======== ======== ======== ========
Investment income--net 5.42% 5.76% 5.54% 6.13% 6.41%
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock,
Data: end of year (in thousands) $359,763 $324,122 $376,726 $350,843 $335,268
======== ======== ======== ======== ========
Preferred Stock outstanding, end of year
(in thousands) $150,000 $150,000 $150,000 $150,000 $150,000
======== ======== ======== ======== ========
Portfolio turnover 114.30% 60.88% 41.61% 34.42% 70.17%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,398 $ 3,161 $ 3,512 $ 3,339 $ 3,235
======== ======== ======== ======== ========
Dividends Per Share Series A--Investment income--net $ 961 $ 752 $ 597 $ 749 $ 1,135
On Preferred Stock Series B--Investment income--net 959 764 608 733 1,085
Outstanding:++ Series C--Investment income--net 971 755 580 735 1,095
<FN>
*Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales loads.
**Does not reflect the effect of dividends to Preferred Stock
shareholders.
++Dividends per share have been adjusted to reflect a four-for-one
stock split.
+++Based on average shares outstanding during the period.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniEnhanced Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a newly organized, non-
diversified, closed-end management investment company. The Fund
determines and makes available for publication the net asset value
of its Common Stock on a weekly basis. The Fund's Common Stock is
listed on the New York Stock Exchange under the symbol MEN. The
following is a summary of significant accounting policies followed
by the Fund.
<PAGE>
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the last available
bid price in the over-the-counter market or on the basis of yield
equivalents as obtained by the Fund's pricing service from one or
more dealers that make markets in the securities. Financial futures
contracts and options thereon, which are traded on exchanges, are
valued at their closing prices as of the close of such exchanges.
Options, which are traded on exchanges, are valued at their last
sale price as of the close of such exchanges or, lacking any sales,
at the last available bid price. Short-term investments with a
remaining maturity of sixty days or less are valued at amortized
cost, which approximates market value. Securities and assets for
which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the
Board of Directors of the Fund, including valuations furnished by a
pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the
general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
<PAGE>
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market reflecting the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses.
(f) Reclassification--Generally accepted accounting principles
require that certain components of net assets be reclassified to
reflect permanent differences between financial reporting and tax
purposes. Accordingly, current year's permanent book/tax differences
of $5,868 have been reclassified from accumulated net realized
capital losses to undistributed net investment income. These
reclassifications have no effect on net assets or net asset value
per share.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended January 31, 1996 were $549,164,586 and
$542,560,141, respectively.
Net realized and unrealized gains (losses) as of January 31, 1996
were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 7,720,971 $ 34,897,015
Short-term investments 7,650 (6,740)
Financial futures contracts (2,230,494) --
----------- ------------
Total $ 5,498,127 $ 34,890,275
=========== ============
As of January 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $34,890,275, of which $34,941,158
related to appreciated securities and $50,883 related to depreciated
securities. The aggregate cost of investments at January 31, 1996
for Federal income tax purposes was $471,253,600.
4. Capital Share Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
par value $.10 per share, all of which were initially classified as
Common Stock. The Board of Directors is authorized, however, to
reclassify any unissued shares of capital stock without the approval
of the holders of Common Stock.
<PAGE>
For the year ended January 31, 1996, shares issued and outstanding
remained constant at 29,007,770. At January 31, 1996, total paid-in
capital amounted to $322,002,908.
Preferred Stock
The Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend period for each series. The yields in effect at January 31,
1996 were as follows: Series A, 3.579%; Series B, 3.470%; and Series
C, 3.600%.
For the year ended January 31, 1996, there were 6,000 AMPS shares
authorized, issued and outstanding with a liquidation preference of
$25,000 per share, plus accumulated and unpaid dividends of $97,817.
The Fund pays commissions to certain broker-dealers at the end of
each auction at the annual rate of one-quarter of 1% calculated on
the proceeds of each auction. For the year ended January 31, 1996,
MLPF&S, an affiliate of FAM, received $219,288 as commissions.
5. Subsequent Event:
On February 9, 1996, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $0.062065 per share, payable on February 28, 1996 to shareholders
of record as of February 20, 1996.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
MuniEnhanced Fund, Inc.:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniEnhanced
Fund, Inc., as of January 31, 1996, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
<PAGE>
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at January
31, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and the financial high-
lights present fairly, in all material respects, the financial
position of MuniEnhanced Fund, Inc. as of January 31, 1996, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
March 6, 1996
</AUDIT-REPORT>
PER SHARE INFORMATION (unaudited)
<TABLE>
Per Share
Selected Quarterly
Financial Data*
<CAPTION>
Dividends/Distributions
Net Realized Unrealized Net Investment
Investment Gains Gains Income Capital
For the Quarter Income (Losses) (Losses) Common Preferred Gains
<S> <C> <C> <C> <C> <C> <C>
February 1, 1994 to April 30, 1994 $.23 $ .12 $(1.48) $.20 $.03 --
May 1, 1994 to July 31, 1994 .24 (.13) .25 .20 .04 --
August 1, 1994 to October 31, 1994 .25 .01 (.81) .20 .04 --
November 1, 1994 to January 31, 1995 .24 (.16) .49 .19 .05 $.12
February 1, 1995 to April 30, 1995 .23 .03 .30 .19 .05 --
May 1, 1995 to July 31, 1995 .23 .02 .15 .17 .05 --
August 1, 1995 to October 31, 1995 .23 (.02) .37 .18 .05 --
November 1, 1995 to January 31, 1996 .23 .16 .22 .18 .05 --
<PAGE>
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
February 1, 1994 to April 30, 1994 $12.96 $11.26 $13.125 $10.75 2,600
May 1, 1994 to July 31, 1994 12.05 11.32 11.125 10.50 2,603
August 1, 1994 to October 31, 1994 11.77 10.95 11.00 9.25 4,260
November 1, 1994 to January 31, 1995 11.17 10.28 10.375 8.75 7,462
February 1, 1995 to April 30, 1995 11.82 11.20 11.00 10.375 3,205
May 1, 1995 to July 31, 1995 12.26 11.48 10.875 10.25 3,665
August 1, 1995 to October 31, 1995 12.09 11.50 10.75 10.125 3,097
November 1, 1995 to January 31, 1996 12.48 12.08 11.375 10.625 4,501
<FN>
*Calculations are based upon shares of Common Stock outstanding at
the end of each quarter.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
