MUNIASSETS
FUND, INC.
FUND LOGO
Semi-Annual Report
November 30, 1994
This report, including the financial information herein, is
transmitted to the shareholders of MuniAssets 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.
MuniAssets
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
MUNIASSETS FUND, INC.
<TABLE>
Per Share
Selected Quarterly Financial Data*
<CAPTION>
Net Realized Unrealized Dividends / Distributions
Investment Gains Gains Net Investment Capital
For the Period Income (Losses) (Losses) Income Gains
<S> <C> <C> <C> <C> <C>
June 25, 1993++ to August 31, 1993 $.15 $ .07 $ .39 -- --
September 1, 1993 to November 30, 1993 .22 .09 (.33) $.30 --
December 1, 1993 to February 28, 1994 .22 .03 (.01) .22 --
March 1, 1994 to May 31, 1994 .22 (.12) (.78) .22 $.15
June 1, 1994 to August 31, 1994 .22 (.07) .16 .22 --
September 1, 1994 to November 30, 1994 .21 (.16) (.88) .21 --
Net Asset Value Market Price**
For the Period High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
June 25, 1993++ to August 31, 1993 $14.74 $14.13 $15.00 $14.25 396
September 1, 1993 to November 30, 1993 14.99 14.42 14.875 13.75 241
December 1, 1993 to February 28, 1994 14.76 14.25 14.375 13.25 620
March 1, 1994 to May 31, 1994 14.22 12.97 13.875 12.125 513
June 1, 1994 to August 31, 1994 13.78 13.19 12.875 11.75 448
September 1, 1994 to November 30, 1994 13.68 12.26 12.375 10.125 848
<FN>
++Commencement of Operations.
*Calculations are based upon shares of Common Stock outstanding at
the end of each period.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
<PAGE>
DEAR SHAREHOLDER
For the year ended November 30, 1994, MuniAssets Fund, Inc. earned
$0.874 per share income dividends, which included earned and unpaid
dividends of $0.071. This represents a net annualized yield of
7.02%, based on a month-end net asset value of $12.45 per share.
Over the same period, the Fund's total investment return was -6.57%,
based on a change in per share net asset value from $14.44 to
$12.45, and assuming reinvestment of $1.031 per share income
dividends.
For the six-month period ended November 30, 1994, the Fund's total
investment return was -3.66%, based on a change in per share net
asset value from $13.40 to $12.45, and assuming reinvestment of
$0.434 per share income dividends.
The Environment
Volatility in the US financial markets continued during the period,
largely prompted by concerns of increasing inflationary pressures.
The possibility of continued monetary policy tightening by the
Federal Reserve Board was predominant in the minds of investors
throughout most of the period. Therefore, there was little surprise
when the central bank continued to raise short-term interest rates.
The weakness of the US dollar in foreign exchange markets also
prompted declines in US stock and bond prices, but some
strengthening of the US currency has occurred recently.
Despite widespread inflationary expectations, recently released data
show that the rate of inflation remains near a 30-year low, as
consumer prices barely rose in October. Other economic results show
little evidence of an overheating economy. Housing starts fell
during October, and higher interest rates will likely continue to
weaken housing demand. Although retail sales are rising, the real
strength in the economy is still in the manufacturing sector.
In the weeks ahead, investors will continue to assess economic data
and inflationary trends in order to gauge whether further increases
in short-term interest rates are likely. In addition, investor
interest will also be focused on the progress that the new Congress
makes on both reducing the Federal budget deficit and providing tax
cuts that promote savings and investment. Legislative progress,
combined with continued indications of moderate and sustainable
levels of economic growth, would be positive for the US capital
markets.
<PAGE>
The Municipal Market
The long-term tax-exempt market continued to erode throughout the
six months ended November 30, 1994. As measured by the Bond Buyer
Revenue Bond Index, yields on A-rated municipal revenue bonds
maturing in 30 years rose by over 90 basis points (0.90%) to 7.32%
during the period ended November 30, 1994. This represents the
highest level of tax-exempt bond yields in over two years. US
Treasury bonds suffered even greater declines during the six-month
period as Treasury bond yields rose approximately 60 basis points to
end the period at 8.00%.
The tax-exempt bond market reacted negatively throughout the period
to indications that, despite a series of interest rate increases by
the Federal Reserve Board, the strength of the domestic economy seen
in recent quarters has not yet been significantly reduced. While
inflationary pressures have remained well contained, additional
Federal Reserve Board actions have been expected both to ensure that
domestic economic growth is eventually confined to current levels
and to assure nervous financial markets of its anti-inflationary
intentions. Within this context, institutional investors have
largely withdrawn from the municipal market to await a more stable
environment. At the same time, retail investors have been redeeming
mutual fund shares, largely in anticipation of continued price
declines. Investor withdrawals were particularly heavy in October
and early November, with tax-exempt mutual fund outflows exceeding
$3 billion during the last quarter.
Fortunately, while the demand for tax-exempt bonds has declined
somewhat in recent months, new bond issuance has remained greatly
reduced. During the three months ended November 30, 1994, only $32
billion in long-term tax-exempt securities were issued, a decline of
over 50% compared to the November 30, 1993 quarter. Similarly, for
the six months ended November 30, 1994, only $75 billion in
municipal securities were underwritten, a decline of over 50%
compared to the comparable period a year earlier. This reduction in
issuance in recent quarters has allowed the municipal bond market to
react to both the decline in investor demand and the rise in fixed-
income yields in a more orderly fashion than in similar situations
in the past, particularly during 1987.
Long-term tax-exempt revenue bonds currently yield approximately 7%,
or almost 11.5% on an after-tax equivalent basis, to an investor in
the 39.6% Federal income tax bracket. As inflation has only
marginally increased in the past year, real tax-exempt interest
rates have risen dramatically. The Federal Reserve Board appears
committed to maintaining inflation at or below its current levels.
Indeed, most forecasts expect inflation to remain in its present
range of 3%--4% throughout 1995 and, potentially, for the remainder
of the 1990s. Real after-tax equivalent interest rates exceeding 7%
represent historically attractive municipal investments for long-
term investors.
<PAGE>
Federal Reserve Board actions taken thus far have yet to fully
impact US domestic growth, and expected additional actions should
promote only a modest economic expansion within a benign
inflationary context beginning sometime early in 1995. Within such
an environment, it is unlikely that tax-exempt interest rates will
remain at their current attractive levels. Tax-exempt bond issuance
is unlikely to return to the historic high levels seen in 1992 and
1993, while investor demand should return as markets stabilize. As
we have discussed in earlier reports, the total number of tax-exempt
bonds outstanding is scheduled to decline dramatically in 1994 and
1995 as a result of both regular bond maturities and early
redemptions. Investors seeking tax-advantaged issues are likely to
find it very difficult to obtain currently available tax-exempt
yields as the current supply/demand balance is unlikely to be
maintained in the coming quarters.
Portfolio Strategy
In early September, we adopted a more defensive posture, raising the
Fund's cash reserve position to approximately 10% of net assets.
This defensive position has had two principal benefits. First,
additional capital depreciation in response to rising interest rates
has been reduced. Second, this increased liquidity has allowed us to
more quickly respond to attractive market opportunities recent
periods of volatility have presented. These episodes of market
uncertainty have allowed us to add attractively priced, investment-
grade issues to the Fund. These issues should enhance the Fund's
current yield in the coming years. Also, while we have adopted a
more defensive posture in recent months, the Fund remains well
positioned to take advantage of expected interest rate declines
later this year and in 1995.
In November, we reduced the Fund's cash position to below 5% of net
assets as municipal bond interest rates became particularly
attractive both on an after-tax basis and as a percentage of US
Treasury bond yields. We believe that while recent volatility is
likely to persist, much, if not most of the dramatic increase in
fixed-income yields seen in the last 12 months has run its course.
Recent interest rate increases by the Federal Reserve Board have
done much to calm nervous investors' concerns regarding both an
overheating domestic economy and potential inflationary pressures.
In this environment, currently available tax-exempt yields are
likely to prove very attractive to long-term investors.
<PAGE>
We appreciate your investment in MuniAssets 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
Senior Vice President and
Portfolio Manager
December 27, 1994
Portfolio
Abbreviations
To simplify the listings of MuniAssets 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)
GO General Obligation Bonds
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<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--2.3% NR* B2 $1,000 Birmingham, Alabama, Industrial Development Board, PCR
(USG Interiors), 7.50% due 4/01/2002 $ 970
B+ NR* 420 Brewton, Alabama, Industrial Development Board, PCR,
Refunding (Container Corporation of America Project),
8% due 4/01/2009 405
<PAGE>
Arizona--2.6% BB Ba2 1,000 Maricopa County, Arizona, Pollution Control Corporation,
PCR, Refunding (Public Service Company-Palo Verde), Series
A, 6.375% due 8/15/2023 830
AA P1 700 Pinal County, Arizona, IDA, PCR (Magma Copper/Newmont
Mining Corp.), VRDN, 3.65% due 12/01/2009 (a) 700
Arkansas--1.5% NR* NR* 1,000 Pine Bluff, Arkansas, IDR, Refunding (Coltec Industries
Incorporated), 6.50% due 2/15/2009 909
California--10.2% NR* NR* 1,500 Long Beach, California, Redevelopment Agency, M/F Housing
Revenue Refunding Bonds (Pacific Court Apartments), AMT,
Issue B, 6.80% due 9/01/2013 1,381
AA Aa 2,000 Metropolitan Water District, Southern California, Waterworks
Revenue Bonds, RIB, 7.811% due 8/05/2022 (c) 1,393
AAA Aaa 2,500 Northern California, Transmission Revenue Bonds,
RIB, 6.457% due 4/29/2024 (b)(c) 1,459
NR* NR* 1,960 Pleasanton, California, Joint Powers Financing Authority,
Reassessment Subordinated Revenue Bonds, Series B, 6.60%
due 9/02/2008 1,848
Colorado--9.8% Denver, Colorado, City and County Airport Revenue Bonds, AMT:
BB Baa 1,000 Series A, 8% due 11/15/2025 960
BB Baa 2,500 Series B, 7.25% due 11/15/2023 (d) 2,236
BB Baa 1,500 Series C, 6.75% due 11/15/2022 1,258
NR* NR* 1,460 Mountain Village Metropolitan District, Colorado, San Miguel
County Revenue Bonds, 7.40% due 12/15/2013 1,398
Connecticut--3.0% NR* NR* 1,920 Eastern Connecticut, State Regional Educational Service
Center Revenue Bonds, 6.50% due 5/15/2009 1,768
Florida--0.3% A1+ VMIG1 200 Hillsborough County, Florida, IDA, PCR, Refunding (Tampa
Electric Company Project), VRDN, 3.45% due 5/15/2018 (a) 200
Illinois--7.7% Illinois Health Facilities Authority Revenue Bonds:
BBB+ NR* 1,000 (Community Hospital of Ottawa), 6.85% due 8/15/2024 864
A+ A 4,450 Refunding (Lutheran General Health), Series C, 6% due
4/01/2018 3,715
Indiana--3.1% NR* NR* 1,000 Burns Harbor, Indiana, Solid Waste Disposal Facilities
Revenue Bonds (Bethlehem Steel Corporation Project), AMT,
8% due 4/01/2024 949
BB- B1 1,000 East Chicago, Indiana, Economic Development Revenue Bonds
(U.S. Gypsum Company Project), 7.25% due 5/01/2014 931
<PAGE>
Iowa--1.4% NR* NR* 800 Iowa Finance Authority, Health Care Facilities Revenue Bonds
(Mercy Health Initiatives Project), 9.95% due 7/01/2019 841
Massachusetts-- Massachusetts State Industrial Finance Agency Revenue Bonds:
8.2% NR* B1 1,000 (Bay Cove Human Services Inc.), 8.375% due 4/01/2019 931
BB+ Ba1 1,000 (Vinfen Corporation), 7.10% due 11/15/2018 875
NR* NR* 1,000 Massachusetts State Industrial Finance Agency, Solid Waste
Disposal Revenue Bonds (Molten Metal Technology Project),
8.25% due 8/01/2014 948
NR* NR* 2,000 Massachusetts State Port Authority Special Project Revenue
Bonds (Harborside Hyatt Project), AMT, 10% due 3/01/2026 2,136
Mississippi--2.6% NR* P1 600 Perry County, Mississippi, PCR, Refunding (Leaf River Forest
Project), VRDN, 3.45% due 3/01/2002 (a) 600
NR* Baa3 1,000 Warren County, Mississippi, PCR, Refunding (Mississippi Power
and Light Company Project), 7% due 4/01/2022 921
Missouri--1.1% NR* B1 700 Clay County, Missouri, IDA, IDR, Refunding (U.S. Gypsum
Corporate Project), 7.25% due 5/01/2014 649
Montana--1.5% NR* NR* 1,000 Montana State Board Investment, Resource Recovery Revenue Bonds
(Yellowstone Energy LP Project), AMT, 7% due 12/31/2019 878
New Jersey--1.6% AAA Aaa 1,000 New Jersey State Housing and Mortgage Finance Agency Revenue
Bonds (Home Buyer), AMT, Series M, 6.95% due 10/01/2022 (b) 970
New Mexico--1.7% BB Ba2 1,250 Farmington, New Mexico, PCR, Refunding (Public Service
Company--San Juan Project), Series A, 6.40% due 8/15/2023 1,045
New York--1.2% New York City, New York, GO, VRDN (a):
A1 VMIG1 500 Series E, 3.60% due 5/15/1996 500
A1+ VMIG1 200 Series H, Sub-Series H-6, 3.50% due 8/01/2012(b) 200
Ohio--2.1% BB Ba2 1,500 Ohio State Air Quality Development Authority, PCR,
Refunding (Cleveland Electric Company), AMT,
6.85% due 7/01/2023 1,268
<PAGE>
Oregon--3.1% NR* NR* 1,000 Western Generation Agency, Oregon, Revenue Bonds
(Wauna Cogeneration Project), Series A, 7.125%
due 1/01/2021 899
B+ NR* 1,000 Yamhill County, Oregon, PCR, Refunding (Smurfit
Newsprint Corporation Project), 8% due 12/01/2003 977
Pennsylvania-- NR* Ba 1,500 Montgomery County, Pennsylvania, IDA, Revenue Bonds
15.9% (Pennsburg Nursing and Rehabilitation Center),
7.625% due 7/01/2018 1,378
BB Ba 2,000 Pennsylvania Convention Center Authority, Revenue
Refunding Bonds, GO, Series A, 6.75% due 9/01/2019 1,795
BBB Baa1 2,000 Philadelphia, Pennsylvania, Gas Works Revenue Refunding
Bonds, Fourteenth Series A, 6.375% due 7/01/2014 1,813
BBB+ Baa1 1,000 Philadelphia, Pennsylvania, Hospitals and Higher Educational
Facilities Authority Revenue Bonds (Graduate Health System),
Series A, 6.25% due 7/01/2018 816
BBB Baa 2,175 Ridley Park, Pennsylvania, Hospital Authority, Revenue
Refunding Bonds (Taylor Hospital), Series A, 6%
due 12/01/2013 1,787
NR* NR* 2,000 Washington County, Pennsylvania, Hospital Authority,
Revenue Refunding Bonds (Canonsburg General Hospital Project),
7.35% due 6/01/2013 1,877
</TABLE>
<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>
Rhode Island-- West Warwick, Rhode Island, GO, UT, Series A:
3.2% NR* Ba $ 995 6.80% due 7/15/1998 $ 1,008
NR* Ba 910 7.30% due 7/15/2008 887
Tennessee--1.7% NR* NR* 1,000 Knox County, Tennessee, Health, Educational and Housing
Facilities Board, Hospital Facilities Revenue Bonds
(Baptist Health Systems of East Tennessee), 8.60% due
4/15/2016 1,021
Texas--3.3% BB Ba1 1,000 Dallas-Fort Worth, Texas, International Airport Facility
Improvement, Corporate Revenue Refunding Bonds (Delta
Airlines, Incorporated), 6.25% due 11/01/2013 827
NR* NR* 1,250 Gulf Coast Waste Disposal Authority, Texas, PCR, Solid
Waste Disposal (Diamond Shamrock Corporate Project),
6.75% due 6/01/2009 1,151
<PAGE>
Vermont--3.2% BBB NR* 450 Swanton Village, Vermont, Electric Systems Revenue Bonds,
6.70% due 12/01/2023 411
NR* NR* 1,500 Vermont Educational and Health Buildings Financing Agency,
Revenue Refunding Bonds (College of Saint Joseph's Project),
8.50% due 11/01/2024 1,493
Virginia--3.9% NR* NR* 1,000 Pittsylvania County, Virginia, IDA, Multitrade Revenue
Bonds, AMT, Series A, 7.55% due 1/01/2019 927
AA+ Aa1 1,375 Virginia State Housing Development Authority, Commonwealth
Mortgage, AMT, Series A, Subseries A-4, 7.80% due 7/01/2028 1,395
Puerto Rico--1.8% A Baa 1,000 Puerto Rico Commonwealth, Aqueduct and Sewer Authority
Revenue Bonds, Series A, 7.875% due 7/01/2017 1,046
Total Investments (Cost--$65,315)--98.0% 58,444
Variation Margin on Futures Contracts**--(0.1)% (58)
Other Assets Less Liabilities--2.1% 1,237
-------
Net Assets--100.0% $59,623
=======
<FN>
(a)The interest rate is subject to change periodically based upon
the prevailing market rate. The interest rate shown is the rate in
effect at November 30, 1994.
(b)MBIA Insured.
(c)The interest rate is subject to change periodically and
inversely based upon prevailing market rates. The interest rate shown
is the rate in effect at November 30, 1994.
(d)Portion of security held in connection with open future contract.
*Not Rated.
**Financial futures contracts sold as of November 30, 1994 were as
follows:
Value
Number of Expiration (in thousands)
Contracts Issue Date (Note 1a)
88 US Treasury Bonds March 1995 $(8,630)
(Total Contract Price--$8,649) $(8,630)
=======
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of November 30, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$65,315,496) (Note 1a) $58,443,999
Cash 128,659
Interest receivable 1,218,502
Deferred organization expenses (Note 1e) 61,892
Prepaid expenses and other assets 22,543
-----------
Total assets 59,875,595
-----------
Liabilities: Payables:
Dividends to shareholders (Note 1f) $ 134,378
Variation margin (Note 1b) 57,750
Investment adviser (Note 2) 9,823 201,951
-----------
Accrued expenses and other liabilities 50,883
-----------
Total liabilities 252,834
-----------
Net Assets: Net assets $59,622,761
===========
Capital: Common Stock, par value $.10 per share; 200,000,000
shares authorized; 4,787,055 shares issued and outstanding $ 478,706
Paid-in capital in excess of par 67,187,000
Undistributed investment income--net 340,073
Accumulated realized capital losses on investments--net (Note 5) (1,530,771)
Unrealized depreciation on investments--net (6,852,247)
-----------
Total capital--Equivalent to $12.45 net asset value per share of
Common Stock (market price--$11.375) (Note 4) $59,622,761
===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended November 30, 1994
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 2,233,873
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 174,139
Professional fees 25,373
Printing and shareholder reports 16,674
Accounting services (Note 2) 13,272
Directors' fees and expenses 13,195
Transfer agent fees (Note 2) 12,363
Listing fees 8,403
Amortization of organization expenses (Note 1e) 7,900
Custodian fees 3,906
Pricing fees 3,490
Other 4,836
-----------
Total expenses before reimbursement 283,551
Reimbursement of expenses (Note 2) (110,816)
-----------
Total expenses after reimbursement 172,735
-----------
Investment income--net 2,061,138
-----------
Realized & Realized loss on investments (1,160,475)
Unrealized Loss on Change in unrealized depreciation on investments--net (3,352,413)
Investments--Net -----------
(Notes 1d & 3): Net Decrease in Net Assets Resulting from Operations $(2,451,750)
===========
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the For the Period
Six Months June 25,
Ended 1993++ to
Increase (Decrease) in Net Assets: Nov. 30, 1994 May 31, 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 2,061,138 $ 3,917,327
Realized gain (loss) on investments--net (1,160,475) 365,341
Change in unrealized depreciation on investments--net (3,352,413) (3,499,834)
----------- -----------
Net increase (decrease) in net assets resulting from operations (2,451,750) 782,834
----------- -----------
Dividends & Investment income--net (2,079,544) (3,558,848)
Distributions to Realized gain on investments--net -- (735,637)
Shareholders ----------- -----------
(Note 1f): Net decrease in net assets resulting from
dividends and distributions to shareholders (2,079,544) (4,294,485)
----------- -----------
Common Stock Net proceeds from issuance of Common Stock -- 67,756,500
Transactions Offering and underwriting costs resulting from the issuance of
(Note 4): Common Stock -- (190,799)
----------- -----------
Net increase in net assets derived from
Common Stock transactions -- 67,565,701
----------- -----------
Net Assets: Total increase (decrease) in net assets (4,531,294) 64,054,050
Beginning of period 64,154,055 100,005
----------- -----------
End of period* $59,622,761 $64,154,055
=========== ===========
<FN>
*Undistributed investment income--net $ 340,073 $ 358,479
=========== ===========
++Commencement of Operations.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived For the For the Period
from information provided in the financial statements. Six Months June 25,
Ended 1993++ to
Increase (Decrease) in Net Asset Value: Nov. 30, 1994 May 31, 1994
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 13.40 $ 14.18
Operating ----------- -----------
Performance: Investment income--net .43 .81
Realized and unrealized loss on investments--net (.95) (.66)
----------- -----------
Total from investment operations (.52) .15
----------- -----------
Less dividends and distributions:
Investment income--net (.43) (.74)
Realized gain on investments--net -- (.15)
----------- -----------
Total dividends and distributions (.43) (.89)
----------- -----------
Capital charge resulting from issuance of Common Stock -- (.04)
----------- -----------
Net asset value, end of period $ 12.45 $ 13.40
=========== ===========
Market price per share, end of period $ 11.375 $ 12.25
=========== ===========
Total Investment Based on net asset value per share (3.66%)+++ 0.83%+++
Return:** =========== ===========
Based on market price per share (3.72%)+++ (12.87%)+++
=========== ===========
Ratios to Average Expenses, net of reimbursement .54%* .20%*
Net Assets: =========== ===========
Expenses .89%* .85%*
=========== ===========
Investment income--net 6.49%* 6.12%*
=========== ===========
Supplemental Net assets, end of period (in thousands) $ 59,623 $ 64,154
Data: =========== ===========
Portfolio turnover 23.42% 101.59%
=========== ===========
<FN>
*Annualized .
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, result in
substantially different returns. Total investment returns exclude
the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniAssets Fund, Inc. (the "Fund") is presently the only series of
Merrill Lynch Municipal Series Trust (the "Trust"). The Fund is
registered under the Investment Company Act of 1940 as a newly
organized, non-diversified, closed-end management investment
company. These unaudited interim financial statements reflect all
adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All
such adjustments are of a normal recurring nature. 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 MUA. The
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the last available
bid price 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, 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.
(b) Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts. 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>
(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) Deferred organization and offering expenses--Deferred
organization expenses are charged to expense on a straight-line
basis over a five-year period, beginning with the commencement of
operations of the Fund. Direct expenses relating to the public
offering of the Fund's shares of Common Stock were charged to
capital at the time of issuance of the shares.
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
(g) Non-income producing investments--Written and purchased options
are non-income producing investments.
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."). The limited
partners are ML & Co. and Fund Asset Management, Inc. ("FAMI"),
which is also an indirect wholly-owned subsidiary of ML & Co.
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 of 0.55% based upon the
average weekly value of the Fund's net assets. For the six months
ended November 30, 1994, FAM earned fees of $174,139, of which
$110,816 was voluntarily waived.
Financial Data Services, Inc. ("FDS"), an indirect wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
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, FAMI, PSI, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended November 30, 1994 were $13,991,358 and
$15,973,594, respectively.
Net realized and unrealized gains (losses) as of November 30, 1994
were as follows:
Realized Unrealized
Losses Gains (Losses)
Long-term investments $ (1,107,572) $(6,871,497)
Financial futures contracts (52,903) 19,250
------------ -----------
Total $ (1,160,475) $(6,852,247)
============ ===========
As of November 30, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $6,871,497, of which $4,585 related
to appreciated securities and $6,876,082 related to depreciated
securities. The aggregate cost of investments at November 30, 1994
for Federal income tax purposes was $65,315,496.
4. Common Stock Transactions:
At November 30, 1994, the Fund had one class of shares of Common
Stock, par value $.10 per share, of which 200,000,000 shares were
authorized. During the six months ended November 30, 1994 shares
issued and outstanding remained constant at 4,787,055. At November
30, 1994, total paid-in capital amounted to $67,665,706.
5. Subsequent Event:
On December 9, 1994, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.071040 payable on December 29, 1994 to shareholders of record
as of December 19, 1994.
6. Reorganization Plan:
On July 13, 1994, the Board of Directors approved an Agreement and
Plan of Reorganization between the Fund and MuniBond Income Fund,
Inc. ("MuniBond Income") pursuant to which the Fund would acquire
substantially all of the assets and liabilities of MuniBond Income
in exchange for newly issued shares of the Fund. MuniBond Income is
a registered, non-diversified closed-end management investment
company, with a similar investment objective to the Fund, and is
managed by FAM.
<PAGE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Harry Woolf, Director
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Robert E. Putney, III, Assistant Secretary
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
Transfer Agent
The Bank of New York
101 Barclay Street, 22W
New York, New York 10286
NYSE Symbol
MUA
