MuniAssets
Fund, Inc.
FUND LOGO
Annual Report
May 31, 1996
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. Statements and other information herein are as dated
and are subject to change.
<PAGE>
MuniAssets
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniAssets Fund, Inc.
Officers and
Directors
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, 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
<PAGE>
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
DEAR SHAREHOLDER
For the year ended May 31, 1996, MuniAssets Fund, Inc. earned $0.868
per share income dividends, which included earned and unpaid
dividends of $0.072. This represents a net annualized yield of
6.32%, based on a month-end net asset value of $13.74 per share.
Over the same period, the Fund's total investment return was +7.46%,
based on a change in per share net asset value from $13.73 to
$13.74, and assuming reinvestment of $0.887 per share income
dividends.
For the six-month period ended May 31, 1996, the Fund's total
investment return was +1.17%, based on a change in per share net
asset value from $14.05 to $13.74, and assuming reinvestment of
$0.431 per share income dividends.
The Environment
Conflicting economic indicators began to create greater uncertainty
in the investment outlook during the six-month period ended May 31,
1996. Although there were expectations of a slowing economy early in
the period, with the release of stronger-than-expected employment
data in February and March investors began to anticipate renewed
economic growth. Interest rates rose, and the Federal Reserve Board
left monetary policy on hold. However, revised data indicate the US
economy actually grew more slowly in the first quarter of 1996 than
had been originally reported. In addition, consumer sentiment does
not appear to be improving markedly.
Investors also became concerned that inflationary pressures are
increasing because of higher prices for agricultural commodities and
a sharp upturn in the price of crude oil. Nevertheless, other
wholesale and consumer price increases remain subdued. More
important, wage increases--a significant factor in the inflation
outlook--continue to be well-contained.
<PAGE>
Investors are likely to continue to focus on the probable direction
of economic activity and Federal Reserve Board monetary policy in
the weeks ahead. At this time, it appears that the economy is not on
the verge of overheating. Nevertheless, it is likely that any
further near-term indication of stronger-than-expected economic
activity may increase investor apprehension concerning the outlook
for higher inflation and interest rates.
The Municipal Market
During the six months ended May 31, 1996, tax-exempt bond yields
rose as investors became increasingly concerned that recent economic
growth would reignite inflationary pressures. Through early February
1996, municipal bond yields continued their earlier declines
supported by continued moderate economic growth and favorable
inflationary expectations. As measured by the Bond Buyer Revenue
Bond Index, yields on uninsured, A-rated municipal revenue bonds
declined an additional 30 basis points (0.30%) to 5.70% by early
February. As signs of emerging economic growth became more numerous,
particularly with the release of the strong March employment
figures, inflation fears increased and bond yields rose in response
for the remainder of the six-month period ended May 31, 1996. At May
31, 1996, long-term municipal bond yields were approximately 6.20%,
an increase of approximately 40 basis points for the last six
months. The rise in US Treasury bond yields was more substantial.
Over the last six months, yields on US Treasury securities rose
approximately 90 basis points to 7.00%. During the May period, the
municipal bond market reversed the trend seen throughout much of
1995 and significantly outperformed the US Treasury bond market.
The municipal bond market's recent outperformance was largely the
result of two principal factors. First, and perhaps the more
important, much of the earlier concern regarding proposed changes in
Federal income tax codes and their effect on the tax treatment of
tax-exempt bond income has dissipated. As the negative revenue
impact of the various proposals, such as the flat tax, became
apparent, the likelihood of immediate reform quickly diminished.
When the Kemp Commission dealing with Federal income tax reform
released its findings early in 1996, the obvious need for reform was
highlighted. However, no specific recommendations of a flat tax,
value-added tax or any other reform were made. Consequently, fears
of losing the favored tax treatment of municipal bond income
declined even further. As a percentage of Treasury bond yields, tax-
exempt bond yield ratios quickly declined from 95% to below 90%.
This allowed the municipal bond market to maintain much of the gains
made since early 1995.
<PAGE>
The second major factor leading to the municipal bond market's
recent outperformance was the return of a more favorable technical
environment. Over the past six months approximately $90 billion in
municipal securities were underwritten, an increase of approximately
40% versus the comparable period a year earlier. However, much of
this increase was biased by recent underwritings dedicated toward
refinancing. Like individual homeowners, municipal issuers sought to
refinance their existing higher-couponed debt as tax-exempt bond
yields declined from their highs in 1995. In recent months such
refinancings were estimated to represent at least 50% of total
issuance. However, the recent rise in tax-exempt interest rates
slowed the pace of such refinancings. Over the last three months
approximately $45 billion in long-term tax-exempt securities were
underwritten, an increase of nearly 25% compared to the same period
a year ago. At current interest rate levels, large amounts of
refundings are unlikely and the rate of new bond issuance should
continue to decline.
Additionally, investors continue to receive significant amounts of
assets derived from coupon income, bond maturities, and proceeds
from early redemptions. In June and July, investors are expected to
receive over $50 billion in such assets. Annual new bond issuance
has declined in recent years and is expected to remain below levels
seen in the early 1990s. Consequently, as the higher-couponed bonds
issued in the early-to-mid 1980s have been redeemed at their first
optional call dates, the number of total outstanding tax-exempt
bonds has continued to decline as well. This combination of a
declining total supply and significant amounts of new assets has
helped to maintain investor demand in recent months. Additionally,
major institutional investors, such as certain property/casualty
insurance companies whose underwriting profits were cyclically high,
demonstrated ongoing interest in the tax-exempt bond market,
particularly on higher-quality issues. Individual and institutional
investor demand was strong enough during the six-month period ended
May 31, 1996 to easily absorb the relative increase in bond
issuance.
Looking ahead, we believe the municipal bond market is likely to
continue to outperform the US Treasury market. Investor demand
should remain adequate to absorb new bond issuance. It is also
unlikely that the rapid pace of issuance seen thus far in 1996 will
be maintained. The recent rise in yields has made further bond
refinancings economically unfeasible. Since these refinancings were
the driving force of recent bond issuance, as the amount of these
refundings decline, overall issuance should decline. This should
allow the current demand/supply balance to be easily maintained in
the coming months.
Additionally, as a percentage of US Treasury bond yields, long-term
municipal bond yields remain historically attractive. It is likely
that recent interest rate increases will have a negative impact on
economic growth, perhaps as early as late summer 1996. With long-
term mortgage rates above 8%, the domestic housing sector has
already indicated some signs of slower growth. If other interest
rate sectors of the economy, like the automobile industry, begin to
show similar adverse effects, taxable interest rates would be poised
to resume their decline. With long-term tax-exempt revenue bonds
yielding approximately 90% of their taxable counterparts, municipal
bond yields are poised to decline further.
<PAGE>
Portfolio Strategy
In our November 30, 1995 report to shareholders, we stated that we
believed a more circumspect approach to the bond market was
warranted. This cautious outlook and the strategy employed as a
result helped to insulate MuniAssets Fund, Inc. from much of the
volatility experienced over the past six months. While no material
changes have occurred in the portfolio structure, we anticipate
positioning the Fund somewhat more aggressively should interest
rates continue to rise from current levels.
For some time now, the Fund has remained defensively structured.
High-yield securities are generally less influenced by fluctuations
in interest rates than credit-related developments. As a result, the
Fund experienced little of the volatility shared by the more
interest rate-sensitive general market tax-exempt mutual bond funds.
During the current market downturn, this characteristic benefited
shareholders since most of the Fund's holdings retained their value
better than the investment-grade municipal market as a whole. The
recent rise in long-term interest rates provides us with an
opportunity to lock in yields at attractive levels as well as extend
the portfolio's average call protection. While these efforts may
increase the portfolio's sensitivity to interest rate fluctuations
somewhat, there is compelling value at current levels and so a
modestly more aggressive approach seems appropriate, given the
potential returns.
In Conclusion
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
<PAGE>
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Theodore R. Jaeckel Jr.)
Theodore R. Jaeckel Jr.
Portfolio Manager
June 26, 1996
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)
COP Certificates of Participation
EDA Economic Development Authority
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
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--4.3% NR* Ba2 $ 1,000 Birmingham, Alabama, IDB, PCR (USG Interiors), 7.125% due
4/01/2002 $ 1,011
B+ NR* 1,420 Brewton, Alabama, IDB, PCR, Refunding (Container Corporation
American Project), 8% due 4/01/2009 1,501
BBB- Baa3 3,500 Mobile, Alabama, IDB, Solid Waste Disposal, Revenue Refunding
Bonds (Mobile Energy Services Co. Project), 6.95% due 1/01/2020 3,620
Alaska--1.3% NR* NR* 2,000 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Amerada
Hess Pipeline Corporation), 6.10% due 2/01/2024 1,882
Arkansas-- NR* P1 100 Crossett, Arkansas, PCR (Georgia-Pacific Corp. Project), VRDN,
0.1% 3.55% due 10/01/2007 (a) 100
California BBB- Baa 13,000 Foothill-Eastern Transportation Corridor Agency, California,
- --5.8% Toll Road Senior Lien Revenue Bonds, Series A, 6.85% due
1/01/2026 (d) 1,737
NR* NR* 3,305 Long Beach, California, Redevelopment Agency, M/F Housing
Revenue Bonds (Pacific Court Apartments), AMT, Issue B, 6.80%
due 9/01/2013 2,677
AA Aa 2,000 Metropolitan Water District, Southern California, Waterworks
Revenue Bonds, RIB,8.075% due 8/05/2022 (b) 1,870
NR* NR* 1,940 Pleasanton, California, Joint Powers Financing Authority,
Reassessment Subordinated Revenue Bonds, Series B, 6.60% due
9/02/2008 1,977
Colorado-- NR* Baa 2,500 Arapahoe County, Colorado, Capital Improvement Trust Fund,
5.1% Highway Revenue Bonds (SR-E-470 Project), Series B, 7% due
8/31/2026 2,581
BBB Baa 1,000 Denver, Colorado, City and County Airport Revenue Bonds, AMT,
Series A, 8% due 11/15/2025 1,116
NR* NR* 3,370 Mountain Village Metropolitan District, Colorado, San Miguel
County Revenue Bonds, 7.40% due 12/15/2013 (c) 3,610
Connecticut NR* NR* 1,920 Eastern Connecticut, State Regional Educational Service
- --1.3% Center Revenue Bonds, 6.50% due 5/15/2009 1,926
District of District of Columbia, COP:
Columbia B- NR* 2,000 6.875% due 1/01/2003 1,998
- --4.6% B- NR* 3,130 7.30% due 1/01/2013 3,180
A1 VMIG1++ 1,400 District of Columbia Revenue Bonds (American Association for
the Advancement of Science--Issue Project), VRDN, 3.80% due
10/01/2022 (a) 1,400
<PAGE>
Georgia-- NR* NR* 1,975 Hancock County, Georgia, COP, 8.50% due 4/01/2015 (c) 2,146
1.5%
Illinois-- Illinois Health Facilities Authority Revenue Bonds:
6.8% BBB+ NR* 1,000 (Community Hospital of Ottawa Project), 6.75% due 8/15/2014 995
BBB+ NR* 2,000 (Community Hospital of Ottawa Project), 6.85% due 8/15/2024 1,977
A A 1,000 (Edward Hospital Association Project), 7% due 2/15/2022 1,037
NR* Baa1 2,150 (Holy Cross Hospital Project), 6.70% due 3/01/2014 2,126
BBB NR* 1,485 Refunding (Saint Elizabeth's Hospital of Chicago), 7.625%
due 7/01/2010 1,574
BBB- NR* 2,000 Metropolitan Pier and Exposition Authority, Illinois,
Hospitality Facilities Revenue Bonds
(McCormick Place Convention), 6.25% due 7/01/2017 1,964
</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>
Indiana-- BB Ba2 $ 1,000 East Chicago, Indiana, Economic Development Revenue Bonds (U.S.
4.5% Gypsum Company Project), 7.25% due 5/01/2014 $ 1,007
Indiana Health Facility Financing Authority, Hospital Revenue
Bonds:
AA Aa 2,500 (Daughters of Charity--Saint Vincent Hospital and Healthcare
Center), 5.75% due 11/15/2022 2,358
NR* A 3,000 Refunding (Saint Anthony Medical Center), Series A, 7% due
10/01/2017 3,153
Iowa--1.3% BB NR* 1,000 Des Moines County, Iowa, IDR, Refunding (U.S. Gypsum Company
Project), 7.20% due 11/01/2007 (c) 1,041
NR* NR* 800 Iowa Finance Authority, Health Care Facilities, Revenue
Refunding Bonds (Care Initiatives Project), 9.25% due 7/01/2025 887
Kentucky-- BB+ Baa3 1,500 Kenton County, Kentucky, Airport Board, Special Facilities
1.0% Revenue Bonds (Delta Airlines Project), AMT, Series A, 6.125%
due 2/01/2022 1,412
Louisiana-- NR* Baa1 1,000 Lafourche Parish, Louisiana, Revenue Bonds (Hospital Service
5.7% District No. 003), 6% due 10/01/2012 958
NR* Baa2 1,700 Lake Charles, Louisiana, Harbor and Terminal District, Port
Facilities Revenue Refunding Bonds (Trunkline Long Company
Project), 7.75% due 8/15/2022 1,887
BB NR* 1,600 New Orleans, Louisiana, IDB, IDR, Refunding (U.S. Gypsum
Company Project), 7.20% due 10/01/2007 1,659
BB- NR* 3,500 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain
Company Project), 7.50% due 7/01/2013 3,605
<PAGE>
Maryland-- NR* NR* 3,000 Maryland State Energy Financing Administration, Limited Obligation
2.2% Revenue Bonds (Cogeneration--AES Warrior Run), AMT, 7.40% due
9/01/2019 3,081
Massachusetts-- NR* B 1,000 Massachusetts State Health and Educational Facilities Authority
8.0% Revenue Bonds (New England Memorial Hospital Project), Series C,
7% due 4/01/2014 893
Massachusetts State Industrial Finance Agency Revenue Bonds:
NR* B1 3,000 (Bay Cove Human Services Inc.), 8.375% due 4/01/2019 3,188
BB+ Ba1 1,935 (Vinfen Corporation), 7.10% due 11/15/2018 1,901
NR* NR* 1,000 Massachusetts State Industrial Finance Agency, Solid Waste
Disposal Revenue Bonds (Molten Metal Technology Project), 8.25%
due 8/01/2014 1,021
NR* NR* 4,000 Massachusetts State Port Authority, Special Project Revenue
Bonds (Harborside Hyatt Project), AMT, 10% due 3/01/2026 4,477
Michigan-- Michigan State Hospital Finance Authority, Revenue Refunding
6.2% Bonds, Series A:
A A 2,900 (Detroit Medical Center Obligation Group), 6.50% due 8/15/2018 2,942
BBB Baa1 2,000 (Pontiac Osteopathic), 6% due 2/01/2014 1,821
BBB Baa1 1,500 (Pontiac Osteopathic), 6% due 2/01/2024 1,311
AA Aa 1,230 Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds
(William Beaumont Hospital), Series D, 6.75% due 1/01/2020 1,290
NR* NR* 1,500 Wayne Charter County, Michigan, Special Airport Facilities,
Revenue Refunding Bonds (Northwest Airlines, Inc.), 6.75% due
12/01/2015 1,502
Minnesota-- AA+ Aa 1,000 Minnesota State, HFA, S/F Mortgage Revenue Bonds, Series Q,
0.7% 6.70% due 1/01/2017 1,037
Missouri-- NR* Ba2 700 Clay County, Missouri, IDA, IDR, Refunding (U.S. Gypsum
2.7% Corporate Project), 7.25% due 5/01/2014 706
BBB- NR* 1,555 Joplin, Missouri, IDA, Hospital Facilities, Revenue Refunding
and Improvement Bonds (Tri-State Osteopathic), 8.25% due
12/15/2014 1,657
NR* Baa 1,500 Missouri State Health and Educational Facilities Authority,
Revenue Health Facilities Bonds (Jefferson Memorial Hospital
Obligation Group), 6.80% due 5/15/2025 1,467
New Jersey-- NR* NR* 1,300 Camden County, New Jersey, Improvement Authority, Lease Revenue
1.6% & Bonds (Holt Hauling Warehousing), Series A, 9.875% due 1/01/2021 1,276
NR* NR* 1,000 New Jersey, EDA, IDR, Refunding (Newark Airport Marriott Hotel),
7% due 10/01/2014 992
New Mexico-- Farmington, New Mexico, PCR:
2.1% A1+ P1 600 (Arizona Public Service Co.), VRDN, AMT, Series C, 3.90% due
9/01/2024 (a) 600
BB Ba2 2,500 Refunding (Public Service Company--San Juan Project), Series A,
6.40% due 8/15/2023 2,389
<PAGE>
New York-- New York City, New York, GO, UT, Series B:
3.7% BBB+ Baa1 1,000 7% due 2/01/2016 1,042
BBB+ Baa1 1,155 Sub-Series B-1, 7.375% due 8/15/2013 1,260
BBB+ Baa1 1,000 Sub-Series B-1, 7% due 8/15/2016 1,047
BBB+ Baa1 1,800 Sub-Series B-1, 7.25% due 8/15/2019 1,925
Ohio--2.5% NR* Aa 1,000 Franklin County, Ohio, Hospital Improvement Revenue Refunding
Hospital Bonds (Children's Project), Series A, 5.875% due
11/01/2025 969
NR* Ba1 2,300 Ohio State, IDR, Refunding (Kroger Company), 8.65% due 6/01/2011 2,553
Oregon--2.6% A1+ A3 600 Port St. Helen's, Oregon, PCR (Portland General Electric
Company Project), VRDN, AMT, Series A, 4% due 8/01/2014 (a) 600
NR* NR* 1,000 Western Generation Agency, Oregon, Revenue Bonds (Wauna
Cogeneration Project), Series A, 7.125% due 1/01/2021 1,020
B+ NR* 2,000 Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint
Corporation Project), 8% due 12/01/2003 2,094
Pennsylvania-- BB+ Baa3 1,250 Allegheny County, Pennsylvania, IDA, Environmental Improvement,
11.0% Revenue Refunding Bonds (USX Corporation), Series A, 6.70% due
12/01/2020 1,257
BB Ba2 1,500 Beaver County, Pennsylvania, IDA, PCR, Refunding (Cleveland
Electric), Series A, 7.75% due 7/15/2025 1,522
NR* NR* 1,275 Lehigh County, Pennsylvania, General Purpose Authority Revenue
Bonds (Wiley House Kids Peace), 8.75% due 11/01/2014 1,311
NR* Ba 1,500 Montgomery County, Pennsylvania, IDA, Revenue Bonds (Pennsburg
Nursing and Rehabilitation Center), 7.625% due 7/01/2018 1,501
AA NR* 1,235 Northeastern Pennsylvania, Hospital and Educational Authority,
University Revenue Refunding Bonds (Wilkes University), 5.625%
due 10/01/2018 (e) 1,141
NR* NR* 3,000 Pennsylvania Economic Development Financing Authority, Recycling
Revenue Bonds (Ponderosa Fibres Project), AMT, Series A, 9.25%
due 1/01/2022 2,946
NR* NR* 1,455 Pennsylvania State Higher Educational Facilities Authority,
College and University Revenue Refunding Bonds (Eastern College),
Series A, 8% due 10/15/2015 1,444
NR* NR* 4,000 Philadelphia, Pennsylvania, Authority for IDR, Refunding
(Commercial Development--Philadelphia Airport), AMT, 7.75% due
12/01/2017 4,147
NR* NR* 550 Washington County, Pennsylvania, Hospital Authority, Revenue
Refunding Bonds (Canonsburg General Hospital Project), 7.35% due
6/01/2013 518
</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>
Rhode Island-- West Warwick, Rhode Island, GO, UT, Series A:
1.2% NR* Baa $ 745 6.80% due 7/15/1998 $ 771
NR* Baa 910 7.30% due 7/15/2008 985
South Carolina AA- Aa 2,000 Greenville, South Carolina, Hospital System Revenue Refunding
- --1.2% Bonds, Series B, 5.25% due 5/01/2023 1,781
Tennessee-- NR* NR* 2,400 Knox County, Tennessee, Health, Educational and Housing
1.8% Facilities Board, Hospital Facilities Revenue Bonds (Baptist
Health Systems of East Tennessee), 8.60% due 4/15/2016 2,534
Texas--2.6% BB Ba 3,500 Odessa, Texas, Junior College District, Revenue Refunding
Bonds, Series A, 8.125% due 12/01/2018 3,706
Vermont-- Vermont Educational and Health Buildings Financing Agency,
3.9% Revenue Bonds:
NR* NR* 3,065 (College of Saint Joseph's Project), 8.50% due 11/01/2024 3,293
NR* Baa 2,445 Refunding (Norwich University Project), 6% due 9/01/2013 2,331
Virginia-- NR* NR* 1,000 Pittsylvania County, Virginia, IDA, Multi-trade Revenue Bonds,
0.7% AMT, Series A, 7.55% due 1/01/2019 1,048
Total Investments (Cost--$138,305)--98.0% 140,269
Other Assets Less Liabilities-- 2.0% 2,926
--------
Net Assets--100.0% $143,195
========
<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 May 31, 1996.
(b)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 May 31, 1996.
(c)Bank Qualified.
(d)Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
(e)Asset Guaranty.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of May 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$138,304,691) (Note 1a) $140,269,001
Cash 37,313
Receivables:
Interest $ 2,964,015
Securities sold 188,123 3,152,138
------------
Deferred organization expenses (Note 1e) 31,425
Prepaid expenses and other assets 30,171
------------
Total assets 143,520,048
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 135,453
Investment adviser (Note 2) 71,187 206,640
------------
Accrued expenses and other liabilities 118,463
------------
Total liabilities 325,103
------------
Net Assets: Net assets $143,194,945
============
Capital: Common Stock, par value $.10 per share; 200,000,000 shares
authorized; 10,424,616 shares issued and outstanding (Note 4) $ 1,042,461
Paid-in capital in excess of par 148,421,136
Undistributed investment income--net 798,832
Accumulated realized capital losses on investments--net (Note 5) (9,031,794)
Unrealized appreciation on investments--net 1,964,310
------------
Total capital--Equivalent to $13.74 net asset value per share of
Common Stock (market price--$12.375) $143,194,945
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended May 31, 1996
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 9,898,645
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $ 799,239
Printing and shareholder reports 68,459
Professional fees 59,240
Transfer agent fees (Note 2) 43,366
Accounting services (Note 2) 36,849
Directors' fees and expenses 31,582
Listing fees 28,988
Amortization of organization expenses (Note 1e) 15,254
Custodian fees 13,962
Pricing fees 11,370
Other 13,374
------------
Total expenses before reimbursement 1,121,683
Reimbursement of expenses (Note 2) (315,811)
------------
Total expenses after reimbursement 805,872
------------
Investment income--net 9,092,773
------------
Realized & Realized loss on investments--net (357,178)
Unrealized Gain Change in unrealized appreciation on investments--net 645,318
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 9,380,913
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended May 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 9,092,773 $ 4,637,913
Realized loss on investments--net (357,178) (3,074,947)
Change in unrealized appreciation/depreciation on investments--net 645,318 5,812,630
------------ ------------
Net increase in net assets resulting from operations 9,380,913 7,375,596
------------ ------------
Dividends to Investment income--net (9,250,148) (4,046,565)
Shareholders ------------ ------------
(Note 1f): Net decrease in net assets resulting from dividends to
shareholders (9,250,148) (4,046,565)
------------ ------------
<PAGE>
Common Stock Net proceeds from issuance of Common Stock resulting from
Transactions reorganization -- 75,686,368
(Note 4): Offering costs resulting from reorganization (105,274) --
------------ ------------
Net increase (decrease) in net assets derived from capital
stock transactions (105,274) 75,686,368
------------ ------------
Net Assets: Total increase in net assets 25,491 79,015,399
Beginning of year 143,169,454 64,154,055
------------ ------------
End of year* $143,194,945 $143,169,454
============ ============
<FN>
*Undistributed investment income--net $ 798,832 $ 956,207
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
For the Period
The following per share data and ratios have been derived June 25,
from information provided in the financial statements. 1993++ to
For the Year Ended May 31, May 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.73 $ 13.40 $ 14.18
Operating ------------ ------------ ------------
Performance: Investment income--net .88 .87 .81
Realized and unrealized gain (loss) on investments
--net .03 .33 (.66)
------------ ------------ ------------
Total from investment operation . .91 1.20 .15
------------ ------------ ------------
Less dividends and distributions:
Investment income--net (.89) (.85) (.74)
Realized gain on investments--net -- -- (.15)
------------ ------------ ------------
Total dividends and distributions (.89) (.85) (.89)
------------ ------------ ------------
Capital charge resulting from issuance of Common
Stock (.01) (.02) (.04)
------------ ------------ ------------
Net asset value, end of period $ 13.74 $ 13.73 $ 13.40
============ ============ ============
Market price per share, end of period $ 12.375 $ 11.875 $ 12.25
============ ============ ============
<PAGE>
Total Investment Based on net asset value per share 7.46% 9.93% .83%+++
Return:** ============ ============ ============
Based on market price per share 11.91% 4.00% (12.87%)+++
============ ============ ============
Ratios to Average Expenses, net of reimbursement .55% .50% .20%*
Net Assets: ============ ============ ============
Expenses .77% .85% .85%*
============ ============ ============
Investment income--net 6.24% 6.54% 6.12%*
============ ============ ============
Supplemental Net assets, end of period (in thousands) $ 143,195 $ 143,169 $ 64,154
Data: ============ ============ ============
Portfolio turnover 42.72% 55.51% 101.59%
============ ============ ============
<FN>
*Annualized.
**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.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniAssets Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a 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 MUA. 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.
* Options--The Fund is authorized to write and purchase call and 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 to reflect 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).
<PAGE>
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) Deferred organization expenses--Deferred organization expenses
are charged to expense on a straight-line basis over a five-year
period.
(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.
NOTES TO FINANCIAL STATEMENTS (concluded)
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.
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 year ended
May 31, 1996, FAM earned fees of $799,239, of which $315,811 was
voluntarily waived.
<PAGE>
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 May 31, 1996 were $66,157,946 and $59,207,615,
respectively.
Net realized and unrealized gains (losses) as of May 31, 1996 were
as follows:
Realized Unrealized
Losses Gains
Long-term investments $(357,178) $ 1,964,310
--------- -----------
Total $(357,178) $ 1,964,310
========= ===========
As of May 31, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $1,964,310, of which $3,477,399 related to
appreciated securities and $1,513,089 related to depreciated
securities. The aggregate cost of investments at May 31, 1996 for
Federal income tax purposes was $138,304,691.
4. Common Stock Transactions:
At May 31, 1996, 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 year ended May 31, 1996, shares issued and
outstanding remained constant at 10,424,616. At May 31, 1996, total
paid-in capital amounted to $149,463,597.
5. Capital Loss Carryforward:
At May 31, 1996, the Fund had a net capital loss carryforward of
approximately $8,485,000, of which $2,353,000 expires in 2002,
$1,350,000 expires in 2003 and $4,782,000 expires in 2004. This
amount will be available to offset like amounts of any future
taxable gains.
6. Subsequent Event:
On June 7, 1996, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$0.072023 payable on June 27, 1996 to shareholders of record as of
June 18, 1996.
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
MuniAssets Fund, Inc.:
We have audited the accompanying statement of assets, liabilities,
and capital, including the schedule of investments, of MuniAssets
Fund, Inc. as of May 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 two-year period then ended
and for the period June 25, 1993 (commencement of operations) to May
31, 1994. 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.
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 the 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 May 31,
1996 by correspondence with the custodian. 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 financial highlights
present fairly, in all material respects, the financial position of
MuniAssets Fund, Inc. as of May 31, 1996, the results of its
operations, the changes in net assets and the financial highlights
for the respective stated periods in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
June 26, 1996
</AUDIT-REPORT>
<PAGE>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
MuniAssets Fund, Inc. during its taxable year ended May 31, 1996
qualify as tax-exempt interest dividends for Federal income tax
purposes.
Please retain this information for your records.
