MuniAssets
Fund, Inc.
[FUND LOGO]
STRATEGIC
Performance
Annual Report
May 31, 1997
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.
MuniAssets
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #16716 -- 5/97
[RECYCLE LOGO]
Printed on post-consumer recycled paper
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
Patrick D. Sweeney, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agent
The Bank of New York
101 Barclay Street, 22W
New York, NY 10286
NYSE Symbol
MUA
MuniAssets Fund, Inc., May 31, 1997
DEAR SHAREHOLDER
For the year ended May 31, 1997, MuniAssets Fund, Inc. earned
$0.839 per share income dividends, which included earned and
unpaid dividends of $0.072. This represents a net annualized yield
of 5.92%, based on a month-end per share net asset value of $14.16. Over
the same period, the Fund's total investment return was +10.11%, based
on a change in per share net asset value from $13.74 to $14.16, and
assuming reinvestment of $0.839 per share income dividends.
For the six-month period ended May 31, 1997, the Fund's total investment
return was +3.54%, based on a change in per share
net asset value from $14.13 to $14.16 and assuming reinvest-
ment of $0.415 per share income dividends.
The Municipal Market
Environment
Long-term municipal bond yields rose slightly during the six months
ended May 31, 1997. However, both taxable and tax-exempt bond yields
exhibited considerable volatility during the six-month period. By mid-
January 1997, municipal bond yields had risen over 20 basis points
(0.20%) to over 6% as investors reacted negatively to reports of
progressively stronger domestic economic growth. However, a continued
lack of any material inflationary pressures allowed bond yields to
decline to their prior levels by late February.
Bond yields rose again as investors became increasingly concerned that
the US domestic economic strength seen thus far in 1997 would continue
and that the increase in short-term interest rates administered by the
Federal Reserve Board (FRB) in late March would be the first in a
series of such moves designed to slow the US economy before any dormant
inflationary pressures were awakened. Long-term tax-exempt bond yields
rose approximately 35 basis points to almost 6.15% by mid-April.
Similarly, long-term US Treasury bond yields rose over 55 basis points
over the same period to 7.16%. However, in late April economic indicators
were released showing that, despite considerable economic growth,
any inflationary pressures, particularly those associated with wage
increases, were well-contained and of no immediate concern. Fixed-income
bond prices staged a significant rally for the remainder of the six-
month period ended May 31, 1997 with long-term US Treasury bond yields
falling nearly 25 basis points to end the month
at 6.90%. Municipal bond yields, as measured by the Bond Buyer
Revenue Bond Index, declined over 20 basis points to stand at 6.01% by
May 31, 1997.
As in recent quarters, the relative stability of long-term tax-exempt
bond yields was supported by low levels of new municipal bond issuance.
Over the six months ended May 31, 1997, approximately $90 billion in
long-term tax-exempt bonds was underwritten, a decline of more than 3%
versus the corresponding period a year earlier. During the three months
ended May 31, 1997, $45 billion in new long-term municipal bonds was
issued, a 5% decline in issuance as compared to the three-month period
ended May 31, 1996. Overall investor demand has remained strong,
particularly from property and casualty insurance companies and
individual retail investors. In recent years, investor demand has
increased whenever tax-exempt bond yields have approached or exceeded
the 6% level as they have in the past few months. Additionally, during
the coming June and July, municipal bond market investors are expected
to receive over $50 billion in payment from tax-exempt bond maturities,
coupon payments, and the proceeds from advance and current refundings.
It is likely that, despite the continued allure of the US equity market,
much of the assets will be reinvested in tax-advantaged products
suggesting that investor demand will remain strong in the coming months.
Additionally, in recent months much of the new bond issuance was
dominated by a number of larger issues. These included $710 million in
New York City water bonds, $600 million in state of California bonds, $1
billion in New York City general obligation bonds, $435 million in Dade
County, Florida water and sewer revenue bonds, $450 million in Puerto
Rico Electric Authority issues, and $930 million in Port Authority of
New York and New Jersey issues. These bonds have typically been issued
in states with relatively high state income taxes and consequently
generally were underwritten at yields that were relatively unattractive
to residents in other states. This has exacerbated the general decline
in overall issuance in recent years, making the decrease in supply even
more dramatic for general market investors.
The present economic situation remains nearly ideal. The domestic
economy continues to grow steadily with little, if any, sign of a
resurgence in inflation. Recent economic growth generated considerable
unexpected tax revenues for the Federal government. Forecasts for the
1997 Federal fiscal deficit were reduced to under $100 billion, a level
not seen since the early 1980s. Such a reduced Federal deficit enhances
the prospect for a balanced Federal budget. All of these factors support
a scenario of steady, or even falling, interest rates in the coming
years. Present annual estimates of future municipal bond issuance remain
centered around $175 billion, indicating that the current relative
scarcity of tax-exempt bonds should continue for at least the remainder
of the year. Should interest rates begin to decline later this year,
either as the result of a balanced Federal budget or continued benign
inflation, investors are unlikely to be able to purchase long-term
municipal bonds at their currently attractive levels.
Portfolio Strategy
While interest rates failed to continue to decline as we had been
expecting six months ago, long-term tax-exempt securities, particularly
those in the high-yield sector, held their value surprisingly well
considering the volatility experienced in the Treasury market. A lack of
high-yield municipal bonds in the new-issue market coupled with
heightened demand for these bonds allowed this sector to successfully
weather periods of instability and contributed directly to the Fund's
relatively resilient net asset value. As a consequence, we were able to
maintain a fully invested posture, thereby ensuring a stable dividend
stream throughout the six-month period ended May 31, 1997.
Despite relatively low volume in the tax-exempt high-yield market, we
successfully purchased $15.8 million in bonds bearing an average
weighted yield of 7.73%. An example of one purchase is bonds issued by
Tucson Electric Power Company. This investor-owned utility is currently
emerging from serious financial straits dating back to the early 1990s
and is demonstrating signs of continued improvement in its credit
characteristics. In addition, the purchase reflects a continuation of
our focus on corporate-related debt, a sector in which we have
experienced a high degree of success resulting in an enhanced degree of
performance relative to industry benchmarks.
In the past, we have alluded to the narrowing of credit spreads,
particularly in the area of healthcare, and the influence this has had
on portfolio strategy. We continue to maintain healthcare holdings close
to the minimum levels allowable by the prospectus. The compressed nature
of credit spreads in the tax-exempt arena is largely attributable to the
positive technical environment described earlier. However, the buoyant
state of the economy also plays a significant role, since favorable
earnings have improved the credit outlook for a broad cross section of
corporate issuers. It would seem that the current situation is unlikely
to reverse unless the economy exhibits signs of a marked slowdown.
Currently, no such slowdown appears imminent, and we are comfortable
maintaining the current credit structure of the portfolio.
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,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/THEODORE R. JAECKEL JR.
Theodore R. Jaeckel Jr.
Portfolio Manager
July 2, 1997
MuniAssets Fund, Inc., May 31, 1997
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C> <C>
Alabama -- 4.4% AA Aa $1,390 Birmingham, Alabama, Special Care Facilities Financing Authority, Revenue
Refunding Bonds (Daughter's Charity - Saint Vincents), 5% due 11/01/2025 $1,247
B+ NR* 1,420 Brewton, Alabama, IDB, PCR, Refunding (Container Corporation American Project),
8% due 4/01/2009 1,529
BBB- Baa3 3,500 Mobile, Alabama, IDB, Solid Waste Disposal, Revenue Refunding Bonds (Mobile Energy
Services Co. Project), 6.95% due 1/01/2020 3,725
Alaska -- 1.4% NR* NR* 2,000 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Amerada Hess Pipeline
Corporation), 6.10% due 2/01/2024 1,990
Arizona --
1.7% B- B2 2,500 Coconino County, Arizona, PCR (Tucson Electric Power Navajo Corporation), Series B,
7% due 10/01/2032 2,573
California --
5.9% 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 2,148
AA Aa 2,000 Metropolitan Water District, Southern California, Waterworks Revenue Bonds, RIB,
7.905% due 8/05/2022 (c) 2,030
NR* NR* 1,890 Pleasanton, California, Joint Powers Financing Authority, Reassessment Subordinated
Revenue Bonds, Sub-Series B, 6.60% due 9/02/2008 1,987
NR* NR* 11,500 San Joaquin Hills, California, Transportation Corridor Agency, Toll Road Revenue
Bonds, Senior Lien, 6.60% due 1/01/2022 (e) 2,479
Colorado --
6.6% NR* Baa 2,500 Arapahoe County, Colorado, Capital Improvement Trust Fund, Highway Revenue Bonds
(SR-E-470 Project), Series B, 7% due 8/31/2026 2,681
NR* NR* 1,000 Colorado Postsecondary Educational Facilities Authority Revenue Bonds (Colorado
Ocean Journey Inc. Project), 8.30% due 12/01/2017 1,022
NR* NR* 2,500 Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue Bonds (Downtown
Denver), AMT, Series A, 7.75% due 9/01/2016 2,521
NR* NR* 3,275 Mountain Village Metropolitan District, Colorado, San Miguel County, 7.40%
due 12/15/2013 3,552
Connecticut --
1.3% NR* NR* 1,920 Eastern Connecticut, State Regional Educational Service Center, 6.50%
due 5/15/2009 1,975
District of B- NR* 2,000 District of Columbia, COP, 6.875% due 1/01/2003 2,090
Columbia --
1.4%
Georgia --
3.4% NR* NR* 1,900 Hancock County, Georgia, COP, 8.50% due 4/01/2015 2,069
NR* NR* 1,380 Rockdale County, Georgia, Development Authority, Solid Waste Disposal Revenue Bonds
(Visy Paper Inc. Project), AMT, 7.40% due 1/01/2016 1,423
NR* NR* 1,500 Savannah, Georgia, EDA, IDR (Stone Container Corporation Project), AMT, 7.40%
due 4/01/2026 1,516
Illinois --
11.6% A1+ Aa3 2,215 Illinois Development Finance Authority Revenue Bonds (Presbyterian Home Lake),
Series B, 6.40% due 9/01/2031 2,305
NR* NR* 2,400 Illinois Development Finance Authority Revenue Bonds (Primary Health Care Centers -
Facilities Acquisition Program), 7.50% due 12/01/2006 2,424
Illinois Health Facilities Authority Revenue Bonds:
BBB+ NR* 1,000 (Community Hospital of Ottawa Project), 6.75% due 8/15/2014 1,042
BBB+ NR* 2,000 (Community Hospital of Ottawa Project), 6.85% due 8/15/2024 2,091
A A2 2,000 (Edward Hospital Association Project), 7% due 2/15/2022 2,128
NR* Baa1 2,150 (Holy Cross Hospital Project), 6.70% due 3/01/2014 2,230
A A3 1,250 Refunding (Riverside Health System), Series A, 6% due 11/15/2018 1,256
BBB NR* 1,485 Refunding (Saint Elizabeth's Hospital of Chicago), 7.625% due 7/01/2010 1,630
BBB- NR* 2,000 Metropolitan Pier and Exposition Authority, Illinois, Hospitality Facilities Revenue
Bonds (McCormick Place Convention), 6.25% due 7/01/2017 2,026
Indiana --
2.2% NR* A2 3,000 Indiana Health Facility Financing Authority, Hospital Revenue Refunding Bonds
(Saint Anthony Medical Center), Series A, 7% due 10/01/2017 3,224
Iowa --
1.4% BB+ NR* 1,000 Des Moines County, Iowa, IDR, Refunding (U.S. Gypsum Company Project), 7.20%
due 11/01/2007 1,069
NR* NR* 800 Iowa Finance Authority, Health Care Facilities, Revenue Refunding Bonds (Care
Initiatives Project), 9.25% due 7/01/2025 943
Louisiana --
5.0% 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 1,928
BB+ NR* 1,600 New Orleans, Louisiana, IDB, IDR, Refunding (U.S. Gypsum Company Project),
7.20% due 10/01/2007 1,709
BB NR* 3,500 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain Company Project),
7.50% due 7/01/2013 3,762
Maryland --
2.4% NR* NR* 3,000 Maryland State Energy Financing Administration, Limited Obligation Revenue Bonds
(Cogeneration - AES Warrior Run), AMT, 7.40% due 9/01/2019 3,139
A1+ VMIG1+ 400 University of Maryland Revenue Bonds (Equipment Loan Program), VRDN, Series A,
3.80% due 7/01/2015 (a) 400
Massachusetts -- Massachusetts State Health and Educational Facilities Authority Revenue Bonds:
7.8% NR* B 960 (New England Memorial Hospital Project), Series C, 7% due 4/01/2014 882
A- NR* 1,000 Refunding (Melrose - Wakefield Hospital), Series B, 6.25% due 7/01/2012 1,029
Massachusetts State Industrial Finance Agency Revenue Bonds:
NR* B1 2,930 (Bay Cove Human Services Inc.), 8.375% due 4/01/2019 3,202
BBB Ba1 1,865 (Vinfen Corporation), 7.10% due 11/15/2018 1,964
NR* NR* 4,000 Massachusetts State Port Authority, Special Project Revenue Bonds (Harborside Hyatt
Project), AMT, 10% due 3/01/2026 4,453
Michigan --
4.1% Michigan State Hospital Finance Authority, Revenue Refunding Bonds, Series A:
A A2 2,900 (Detroit Medical Center Obligation Group), 6.50% due 8/15/2018 3,060
AA Aa2 1,500 (Henry Ford Health Systems), 5.25% due 11/15/2025 1,400
NR* NR* 1,500 Wayne Charter County, Michigan, Special Airport Facilities, Revenue Refunding Bonds
(Northwest Airlines, Inc.), 6.75% due 12/01/2015 1,552
Minnesota --
0.7% AA+ Aa2 1,000 Minnesota State, HFA, S/F Mortgage, Series Q, 6.70% due 1/01/2017 1,050
Missouri --
2.3% BBB- NR* 1,705 Joplin, Missouri, IDA, Hospital Facilities Revenue Refunding and Improvement Bonds
(Tri-State Osteopathic), 8.25% due 12/15/2014 1,861
NR* Baa 1,500 Missouri State Health and Educational Facilities Authority, Health Facilities
Revenue Bonds (Jefferson Memorial Hospital Obligation Group), 6.80% due 5/15/2025 1,547
New Jersey --
5.0% Camden County, New Jersey, Improvement Authority, Lease Revenue Bonds (Holt
Hauling and Warehousing), Series A:
NR* NR* 1,000 9.625% due 1/01/2011 1,101
NR* NR* 3,800 9.875% due 1/01/2021 4,229
NR* NR* 1,000 New Jersey, EDA, IDR, Refunding (Newark Airport Marriott Hotel), 7%
due 10/01/2014 1,044
NR* NR* 1,000 New Jersey, EDA, Revenue Bonds (First Mortgage - Cranes Mill Project), Series A,
7.375% due 2/01/2017 1,001
New Mexico --
0.5% A1+ P1 700 Farmington, New Mexico, PCR (Arizona Public Service Co.), VRDN, AMT, Series C,
4.20% due 9/01/2024 (a) 700
New York --
5.7% New York City, New York, GO, UT, Series B:
BBB+ Baa1 1,000 Fiscal 92, 7% due 2/01/2016 1,065
BBB+ Baa1 95 Sub-Series B-1, 7% due 8/15/2004 (d) 108
BBB+ Baa1 235 Sub-Series B-1, 7.25% due 8/15/2004 (d) 271
BBB+ Baa1 100 Sub-Series B-1, 7.375% due 8/15/2004 (d) 116
BBB+ Baa1 1,055 Sub-Series B-1, 7.375% due 8/15/2013 1,167
BBB+ Baa1 905 Sub-Series B-1, 7% due 8/15/2016 971
BBB+ Baa1 580 Sub-Series B-1, 7.25% due 8/15/2019 642
NR* NR* 1,500 Port Authority of New York and New Jersey, Special Obligation Revenue Bonds
(Special Project - KIAC), AMT, Series 4, Fifth Installment, 6.75% due 10/01/2019 1,573
Utica, New York, Public Improvement Bonds, UT:
CCC B 700 9.25% due 8/15/2001 754
CCC B 700 9.25% due 8/15/2002 761
CCC B 700 9.25% due 8/15/2003 769
CCC B 250 8.50% due 8/15/2015 269
North
Carolina -- AA Aa3 1,000 North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds
0.60% (Carolina Medicorp. Project), 5.25% due 5/01/2026 931
Oregon --
3.2% AAA Aaa 5,000 Oregon Health Sciences University Revenue Bonds, Series A, 5.93%
due 7/01/2021(b)(e) 1,285
A1+ A3 300 Port St. Helen's, Oregon, PCR (Portland General Electric Company Project), VRDN,
AMT, Series A, 4.15% due 8/01/2014 (a) 300
NR* NR* 1,000 Western Generation Agency, Oregon, Revenue Bonds (Wauna Cogeneration Project),
Series A, 7.125% due 1/01/2021 1,042
B+ NR* 2,000 Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint Corporation Project),
8% due 12/01/2003 2,167
Pennsylvania -- BBB- Baa3 1,250 Allegheny County, Pennsylvania, IDA, Environmental Improvement, Revenue Refunding
8.60% Bonds (USX Corporation), Series A, 6.70% due 12/01/2020 1,314
NR* NR* 1,275 Lehigh County, Pennsylvania, General Purpose Authority Revenue Bonds (Wiley House
Kids Peace), 8.75% due 11/01/2014 1,327
NR* Ba3 1,500 Montgomery County, Pennsylvania, IDA, Revenue Bonds (Pennsburg Nursing and
Rehabilitation Center), 7.625% due 7/01/2018 1,559
NR* NR* 3,000 Pennsylvania Economic Development Financing Authority, Recycling Revenue Bonds
(Ponderosa Fibres Project), AMT, Series A, 9.25% due 1/01/2022 2,557
NR* NR* 1,455 Pennsylvania State Higher Educational Facilities Authority, Eastern College and
University Revenue Refunding Bonds (Eastern College), Series A, 8% due 10/15/2015 1,550
NR* NR* 4,000 Philadelphia, Pennsylvania, Authority for IDR, Refunding (Commercial Development -
Philadelphia Airport), AMT, 7.75% due 12/01/2017 4,335
South
Carolina -- AA- Aa3 4,100 Greenville, South Carolina, Hospital Systems, Hospital Facilities Revenue
2.60% Refunding Bonds, Series B, 5.25% due 5/01/2023 3,857
Texas --
3.5% BB Ba 3,500 Odessa, Texas, Junior College District, Revenue Refunding Bonds, Series A, 8.125%
due 12/01/2018 3,787
NR* VMIG1+ 1,300 Southwest Texas, Higher Education Authority Incorporated, Revenue Refunding
Bonds (Southern Methodist University), VRDN, 4.05% due 7/01/2015 (a) 1,300
Vermont --
2.3% NR* NR* 3,065 Vermont Educational and Health Buildings Financing Agency Revenue Bonds
(College of Saint Joseph's Project), 8.50% due 11/01/2024 3,373
Virginia --
2.5% Pittsylvania County, Virginia, IDA, Multi-Trade Revenue Bonds, AMT, Series A:
NR* NR* 1,700 7.50% due 1/01/2014 1,803
NR* NR* 1,000 7.55% due 1/01/2019 1,057
AAA Aaa 1,000 Upper Occoquan, Virginia, Sewer Authority Regional Sewer Revenue Bonds, Series A,
4.75% due 7/01/2029 (b) 859
----------
Total Investments (Cost -- $139,551) -- 98.1% 144,807
Other Assets Less Liabilities -- 1.9% 2,823
----------
Net Assets -- 100.0% $147,630
==========
(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, 1997.
(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 May 31, 1997.
(d) Prerefunded.
(e) 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 audited by Deloitte & Touche LLP.
Portfolio To simplify the listings of MuniAssets Fund, Inc.'s portfolio holdings in the Schedule
Abbreviations 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
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
As of May 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $139,551,297) (Note 1a) $144,807,473
Cash 33,307
Interest receivable 3,043,486
Deferred organization expenses (Note 1e) 16,213
Prepaid expenses and other assets 7,163
------------
Total assets 147,907,642
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) $125,885
Investment adviser (Note 2) 72,984 198,869
------------
Accrued expenses and other liabilities 78,446
------------
Total liabilities 277,315
------------
Net Assets: Net assets $147,630,327
============
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 845,887
Accumulated realized capital losses on investments -- net (Note 5) (7,935,333)
Unrealized appreciation on investments -- net 5,256,176
------------
Total capital -- Equivalent to $14.16 net asset value per share of
Common Stock (market price -- $12.625) $147,630,327
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Year Ended May 31, 1997
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned $9,884,192
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $797,742
Professional fees 59,170
Accounting services (Note 2) 47,089
Directors' fees and expenses 39,974
Listing fees 38,412
Printing and shareholder reports 30,838
Amortization of organization expenses (Note 1e) 15,212
Transfer agent fees (Note 2) 13,442
Pricing fees 11,859
Custodian fees 11,636
Other 30,399
------------
Total expenses 1,095,773
------------
Investment income -- net 8,788,419
------------
Realized & Realized gain on investments -- net 1,096,461
Unrealized Change in unrealized appreciation on investments -- net 3,291,866
Gain on ------------
Investments -- Net Net Increase in Net Assets Resulting from Operations $13,176,746
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended May 31,
1997 1996
Increase (Decrease) in Net Assets:
<S> <C> <C> <C>
Operations: Investment income -- net $8,788,419 $9,092,773
Realized gain (loss) on investments -- net 1,096,461 (357,178)
Change in unrealized appreciation on investments -- net 3,291,866 645,318
------------ ------------
Net increase in net assets resulting from operations 13,176,746 9,380,913
------------ ------------
Dividends to Investment income -- net (8,741,364) (9,250,148)
Shareholders ------------ ------------
(Note 1f): Net decrease in net assets resulting from dividends to shareholders (8,741,364) (9,250,148)
------------ ------------
Common Stock Offering costs resulting from reorganization -- (105,274)
Transactions ------------ ------------
(Note 4): Net decrease in net assets derived from Common Stock transactions -- (105,274)
------------ ------------
Net Assets: Total increase in net assets 4,435,382 25,491
Beginning of year 143,194,945 143,169,454
------------ ------------
End of year* $147,630,327 $143,194,945
============ ============
* Undistributed investment income -- net $845,887 $798,832
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
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: 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $13.74 $13.73 $13.40 $14.18
Operating --------- --------- --------- ---------
Performance: Investment income -- net .84 .88 .87 .81
Realized and unrealized gain (loss) on investments --
net .42 .03 .33 (.66)
--------- --------- --------- ---------
Total from investment operations 1.26 .91 1.20 .15
--------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.84) (.89) (.85) (.74)
Realized gain on investments -- net -- -- -- (.15)
--------- --------- --------- ---------
Total dividends and distributions (.84) (.89) (.85) (.89)
--------- --------- --------- ---------
Capital charge resulting from issuance of Common Stock -- (.01) (.02) (.04)
--------- --------- --------- ---------
Net asset value, end of period $14.16 $13.74 $13.73 $13.40
========= ========= ========= =========
Market price per share, end of period $12.625 $12.375 $11.875 $12.25
========= ========= ========= =========
Total Investment Based on net asset value per share 10.11% 7.46% 9.93% .83%++++
Return:** ========= ========= ========= =========
Based on market price per share 9.01% 11.91% 4.00% (12.87%)++++
========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement .76% .55% .50% .20%*
Net Assets: ========= ========= ========= =========
Expenses .76% .77% .85% .85%*
========= ========= ========= =========
Investment income -- net 6.06% 6.24% 6.54% 6.12%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $147,630 $143,195 $143,169 $64,154
Data: ========= ========= ========= =========
Portfolio turnover 45.15% 42.72% 55.51% 101.59%
========= ========= ========= =========
* 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>
MuniAssets Fund, Inc., May 31, 1997
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.
(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.
[bullet] 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.
[bullet] 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).
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.
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.
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, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the year ended May 31, 1997 were $63,949,326 and $64,057,996,
respectively.
Net realized and unrealized gains (losses) as of May 31, 1997 were as
follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $1,435,436 $5,256,176
Financial futures contracts (338,975) --
---------- ----------
Total $1,096,461 $5,256,176
========== ==========
As of May 31, 1997, net unrealized appreciation for Federal income tax
purposes aggregated $5,256,176, of which $6,968,068 related to
appreciated securities and $1,711,892 related to depreciated securities.
The aggregate cost of investments at May 31, 1997 for Federal income tax
purposes was $139,551,297.
4. Common Stock Transactions:
At May 31, 1997, 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, 1997, shares issued and outstanding
remained constant at 10,424,616. At May 31, 1997, total paid-in capital
amounted to $149,463,597.
5. Capital Loss Carryforward:
At May 31, 1997, the Fund had a net capital loss carryforward of
approximately $7,156,000, of which $1,023,000 expires in 2002,
$1,351,000 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 9, 1997, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of $.072114
payable on June 27, 1997 to shareholders of record as of June 19, 1997.
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, 1997, 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 three-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, 1997 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, 1997, 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
July 3, 1997
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
MuniAssets Fund, Inc. during its taxable year ended May 31, 1997 qualify
as tax-exempt interest dividends for Federal income tax
purposes.
Please retain this information for your records.
