MuniAssets
Fund, Inc.
STRATEGIC
Performance
[GRAPHIC OMITTED]
Semi-Annual Report
November 30, 1998
<PAGE>
MuniAssets Fund, Inc.
Managed Dividend
Policy
The Fund's dividend policy is to distribute substantially all of its net
investment income to its shareholders on a monthly basis. However, in order to
provide shareholders with a more consistent yield to the current trading price
of shares of Common Stock of the Fund, the Fund may at times pay out less than
the entire amount of net investment income earned in any particular month and
may at times in any particular month pay out such accumulated but undistributed
income in addition to net investment income earned in that month. As a result,
the dividends paid by the Fund for any particular month may be more or less than
the amount of net investment income earned by the Fund during such month. The
Fund's current accumulated but undistributed net investment income, if any, is
disclosed in the Statement of Assets, Liabilities and Capital, which comprises
part of the financial information included in this report.
Quality Profile
The quality ratings of securities in the Fund as of November 30, 1998 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa ............................................................. 2.8%
AA/Aa ............................................................... 2.2
A/A ................................................................. 6.3
BBB/Baa ............................................................. 13.4
BB/Ba ............................................................... 18.7
B/B ................................................................. 14.1
CCC/Caa ............................................................. 2.1
NR (Not Rated) ...................................................... 41.3
Other* .............................................................. 0.3
- --------------------------------------------------------------------------------
* Temporary investments in short-term municipal securities.
<PAGE>
MuniAssets Fund, Inc., November 30, 1998
DEAR SHAREHOLDER
For the six months ended November 30, 1998, MuniAssets Fund, Inc. earned $0.418
per share income dividends, which included earned and unpaid dividends of
$0.068. This represents a net annualized yield of 5.67%, based on a month-end
per share net asset value of $14.70. Over the same period, the Fund's total
investment return was +2.48%, based on a change in per share net asset value
from $14.77 to $14.70, and assuming reinvestment of $0.422 per share income
dividends.
The Municipal Market Environment
During the six months ended November 30, 1998, long-term bond yields declined
significantly. The near absence of any inflationary pressures in the United
States continued to support historic low interest rates. Additionally, foreign
economic factors have continued to outweigh US domestic fundamentals, as they
have for much of 1998. The economic crisis that began in Asia over a year ago
has spread both to Russia and South America. However, economic factors in these
countries have begun to negatively impact US growth. For example, employment in
the US manufacturing sector declined in recent months as a result of reduced
demand for export goods. Concern that the modest decline in US economic growth
seen thus far would spread and intensify led the Federal Reserve Board to lower
short-term interest rates in late September, in mid-October and in mid-November.
These actions were taken to offset the drag of foreign economies on future US
growth.
US Treasury bond yields continued to benefit from a strong "flight to quality"
as foreign investors were drawn to the relative safe haven of US Government
securities. Additionally, the sharp equity market correction, which began at the
end of August, triggered a further flight into US Treasury securities. Long-term
US Treasury bond yields fell over 75 basis points (0.75%) to approximately 5% by
the end of November.
By early October, worldwide investor confidence began to rise, reducing the
demand for the safety and liquidity of US Treasury securities. Investor
confidence was restored by the belief that major world governments, as well as
the International Monetary Fund, would take the necessary action to support weak
domestic economies in Asia and Latin America. Additionally, rapid recovery in US
and world equity markets caused some investors to reallocate funds from US debt
investments back to various world equity markets. US Treasury security yields
rose through mid-November to approximately 5.375%. However, the resumption of
the decline in foreign financial markets, particularly in Asia, as well as
renewed concerns of additional US economic weakness, led to a further lowering
of short-term interest rates by the Federal Reserve Board in mid-November. These
factors pushed taxable interest rates lower for the remainder of the period to
end November at 5.07%. During the six-month period ended November 30, 1998,
long-term US Treasury bond yields declined approximately 70 basis points.
During much of the past 12 months, the tax-exempt bond market has contended with
significant new-issue supply pressures. Over the past year, more than $277
billion in new long-term tax-exempt bonds were underwritten, an increase of
almost 30% compared to the same period a year ago. During the most recent
six-month period, approximately $140 billion in new long-term municipal bonds
were underwritten, representing an increase of nearly 10% compared to the same
six-month period last year. This increased supply, coupled with the high returns
the US equity market generated for much of 1998, was one of the major reasons
municipal bond yields declined less than their taxable counterparts during the
period.
The continued increase in new bond issuance has required ever-lower tax-exempt
bond yields to generate the economic savings necessary for additional municipal
bond financings. Consequently, the pace of new bond issuance has slowed in
recent months. In fact, the trend may be reversing. During the three months
ended November 30, 1998, just under $60 billion in new long-term municipal bonds
were underwritten, a decline of 10% compared to the same quarter a year ago.
During the month of November, there were less than $20 billion in new municipal
bond securities issued, a decline of over 8% compared to November 1997. We will
monitor this trend closely in the coming months to determine if the supply
pressures exerted thus far in 1998 are abating and fostering a more balanced
supply/demand environment.
Throughout the six-month period ended November 30, 1998, municipal bond yields
followed a pattern that was similar to US Treasury securities, although the
yield declines were more muted. As measured by the Bond Buyer Revenue Bond
Index, long-term, uninsured tax-exempt revenue bond yields declined
approximately 30 basis points to 5.09% by early October. Municipal bond yields
then rose during the remainder of October and November and ended the period at
5.25%. Over the past six months, long-term tax-exempt bond yields declined
approximately 15 basis points.
Although municipal bond yields declined during the six-month period, recent
supply pressures and the absence of the safe-haven status enjoyed by US Treasury
bonds caused municipal bond yields to rise relative to US Treasury bond yields.
At November 30, 1998, long-term tax-exempt bond yields were attractive relative
to US Treasury securities of comparable maturities (over 100%), well in excess
of their expected range of 85%-88%. Tax-exempt bond yield ratios have rarely
exceeded 90% in the 1980s and 1990s. Historically, yield spreads have been wider
than these levels when there have been potential changes in Federal tax codes
that would have adversely affected the tax-favored status of municipal bonds.
Currently, municipal bond investors find themselves in a unique investment
environment. Previous opportunities to purchase tax-exempt bonds with yields
exceeding that of comparable US Treasury issues have been limited to relatively
brief episodes and then further limited to a few municipal credits undergoing
specific financial pressures. However, the current opportunity may quickly
disappear should tax-exempt bond supply pressures diminish or the safe-haven
status of US Treasury securities become less desirable. Under these conditions,
municipal bond ratios should quickly revert to more normal historic percentages,
certainly well below their presently attractive levels.
Portfolio Strategy
During the six months ended November 30, 1998, portfolio activity continued to
reflect our efforts to reduce holdings that possessed unattractive redemption
features as well as those perceived to be vulnerable to the continuing
deterioration in the global economic outlook. We generally limited high-yield
purchases to industry sectors with limited exposure to international economic
and financial disruptions. Accordingly, the electric utility sector was
particularly attractive to us. In addition, we favored this sector because of
the perception that its fundamental credit outlook continues to improve.
Municipal credit spreads have widened somewhat over the last few months,
reflecting wider spreads in the taxable arena. Much of this has occurred only
with corporate-related tax-exempt debt, reflecting concerns over the impending
slide in earnings growth. Thus far, the impact has been relatively modest,
perhaps attesting to the extent of demand for yield in an otherwise increasingly
homogenized municipal market.
Nonetheless, we will continue to carefully monitor our existing holdings and the
market at large for opportunities to improve the Fund's performance. During the
year-end period, numerous high-yield issuers typically rush to market. This
could put additional pressure on yield spreads and may well represent an
opportunity to move forward in our efforts to restructure the Fund.
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.
Vice President and Portfolio Manager
/s/ John M. Loffredo
John M. Loffredo
Vice President and Portfolio Manager
January 5, 1999
2 & 3
<PAGE>
MuniAssets Fund, Inc., November 30, 1998
PROXY RESULTS
During the six-month period ended November 30, 1998, MuniAssets Fund, Inc.
stockholders voted on the following proposals. The proposals were approved at
the stockholders' meeting on September 14, 1998. The description of each
proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the Fund's Directors: Robert S. Salomon Jr. 10,104,216 202,523
Arthur Zeikel 10,100,410 206,329
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the current fiscal year. 10,124,546 25,906 156,287
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Alabama--2.5% B- NR* $ 1,420 Brewton, Alabama, IDB, PCR, Refunding (Container Corporation
American Project), 8% due 4/01/2009 $ 1,587
CCC Ca 4,500 Mobile, Alabama, IDB, Solid Waste Disposal, Revenue Refunding
Bonds (Mobile Energy Services Co. Project), 6.95% due 1/01/2020 2,340
===================================================================================================================================
Alaska--1.4% NR* NR* 2,000 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Amerada Hess
Pipeline Corporation), 6.10% due 2/01/2024 2,123
===================================================================================================================================
Arizona--6.5% A1+ P1 100 Coconino County, Arizona, PCR, Arizona Public Service (Navajo Project),
VRDN, AMT, Series A, 3.40% due 10/01/2029 (a) 100
B B2 2,500 Coconino County, Arizona, PCR, Refunding (Tucson Electric Power Navajo
Corporation), Series B, 7% due 10/01/2032 2,792
NR* B1 3,000 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds
(America West Airlines, Inc.), AMT, 6.30% due 4/01/2023 3,107
B B2 2,000 Pima County, Arizona, IDA, Industrial Revenue Bonds (Tucson
Electric Power Company Project), Series B, 6% due 9/01/2029 2,015
NR* NR* 1,880 Show-Low, Arizona, Improvement District No. 5, 6.375% due 1/01/2015 2,001
===================================================================================================================================
California--4.0% 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 (d) 1,818
AA Aa2 2,000 Metropolitan Water District, Southern California, Waterworks
Revenue Bonds, RIB, 7.864% due 2/07/2003 (b)(c) 2,348
NR* NR* 1,790 Pleasanton, California, Joint Powers Financing Authority,
Reassessment Subordinated Revenue Bonds, Series B, 6.60%
due 9/02/2008 1,951
===================================================================================================================================
Colorado--4.9% NR* NR* 1,000 Colorado Postsecondary Educational Facilities Authority Revenue
Bonds (Colorado Ocean Journey Inc. Project), 8.30% due 12/01/2017 1,182
NR* NR* 2,500 Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue
Bonds (Downtown Denver), AMT, Series A, 7.75% due 9/01/2016 2,795
NR* NR* 3,170 Mountain Village Metropolitan District, Colorado, San Miguel
County, 7.40% due 12/15/2000 (c) 3,462
===================================================================================================================================
</TABLE>
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
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
4 & 5
<PAGE>
MuniAssets Fund, Inc., November 30, 1998
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Connecticut--5.3% B+ Ba3 $ 5,000 Connecticut State Development Authority, PCR, Refunding
(Connecticut Light & Power Co.), Series A, 5.85% due 9/01/2028 $ 5,033
NR* NR* 1,000 Connecticut State Health and Educational Facilities Authority
Revenue Bonds (Edgehill Issue), Series A, 6.875% due 7/01/2027 1,078
NR* NR* 1,920 Eastern Connecticut, State Regional Educational Service Center,
6.50% due 5/15/2009 2,035
===================================================================================================================================
District of BB- NR* 1,700 District of Columbia, COP, 6.875% due 1/01/2003 1,777
Columbia--1.2%
===================================================================================================================================
Florida--1.1% NR* NR* 1,625 North Springs Improvement District, Florida, Special Assessment
Revenue Bonds (Parkland Isles Project), Series B, 6.25% due
5/01/2005 1,669
===================================================================================================================================
Georgia--1.4% NR* NR* 1,900 Hancock County, Georgia, COP, 8.50% due 4/01/2015 2,191
===================================================================================================================================
Illinois--5.3% NR* NR* 2,370 Illinois Development Finance Authority Revenue Bonds (Primary
Health Care Centers--Facilities Acquisition Program), 7.50%
due 12/01/2006 2,571
Illinois Health Facilities Authority Revenue Bonds:
BBB+ NR* 1,000 (Community Hospital of Ottawa Project), 6.75% due 8/15/2014 1,097
BBB+ NR* 2,000 (Community Hospital of Ottawa Project), 6.85% due 8/15/2024 2,199
NR* Baa1 2,150 (Holy Cross Hospital Project), 6.70% due 3/01/2014 2,343
===================================================================================================================================
Indiana--2.1% NR* A2 3,000 Indiana Health Facility Financing Authority, Hospital Revenue
Refunding Bonds (Saint Anthony Medical Center), Series A, 7%
due 10/01/2017 3,262
===================================================================================================================================
Iowa--0.7% NR* NR* 800 Iowa Finance Authority, Health Care Facilities, Revenue Refunding
Bonds (Care Initiatives Project), 9.25% due 7/01/2025 1,078
===================================================================================================================================
Louisiana--3.7% NR* A3 1,700 Lake Charles, Louisiana, Harbor and Terminal District, Port
Facilities Revenue Refunding Bonds (Trunkline Long Company
Project), 7.75% due 8/15/2022 1,923
B+ NR* 3,500 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain
Company Project), 7.50% due 7/01/2013 3,733
===================================================================================================================================
Maryland--2.1% 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
===================================================================================================================================
Massachusetts--7.1% NR* Caa 945 Massachusetts State Health and Educational Facilities Authority
Revenue Bonds (New England Memorial Hospital Project), Series C,
7% due 4/01/2014 945
Massachusetts State Industrial Finance Agency Revenue Bonds:
NR* Ba2 2,850 (Bay Cove Human Services Inc.), 8.375% due 4/01/2019 3,399
BBB- Ba1 1,815 (Vinfen Corporation), 7.10% due 11/15/2018 2,074
NR* NR* 4,000 Massachusetts State Port Authority, Special Project Revenue Bonds
(Harborside Hyatt Project), AMT, 10% due 3/01/2026 4,417
===================================================================================================================================
Michigan--3.2% A- A3 2,900 Michigan State Hospital Finance Authority, Revenue Refunding
Bonds (Detroit Medical Center Obligation Group), Series A,
6.50% due 8/15/2018 3,174
NR* NR* 1,500 Wayne Charter County, Michigan, Special Airport Facilities, Revenue
Refunding Bonds (Northwest Airlines, Inc.), 6.75% due 12/01/2015 1,648
===================================================================================================================================
Minnesota--0.7% AA Aa2 960 Minnesota State, HFA, S/F Mortgage Revenue Bonds, Series Q, 6.70%
due 1/01/2017 1,030
===================================================================================================================================
Mississippi--1.0% BBB- Ba1 1,500 Mississippi Business Finance Corporation, PCR, Refunding (System
Energy Resources Inc.), 5.875% due 4/01/2022 1,500
===================================================================================================================================
Missouri--1.1% 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 1,646
===================================================================================================================================
Nevada--0.2% A1+ P1 300 Washoe County, Nevada, Water Facility Revenue Bonds (Sierra
Pacific Power Co. Project), VRDN, AMT, 3.45% due 12/01/2020 (a) 300
===================================================================================================================================
New Jersey--11.1% Camden County, New Jersey, Improvement Authority, Lease Revenue
Bonds (Holt Hauling and Warehousing), Series A:
BB- NR* 1,000 9.625% due 1/01/2011 1,235
BB- NR* 3,800 9.875% due 1/01/2021 4,746
Camden County, New Jersey, Pollution Control Financing Authority,
Solid Waste Resource Recovery Revenue Bonds, AMT:
B- B2 3,000 Series A, 7.50% due 12/01/2010 3,022
B- B2 500 Series B, 7.50% due 12/01/2009 505
NR* NR* 1,000 New Jersey EDA, IDR, Refunding (Newark Airport Marriott Hotel),
7% due 10/01/2014 1,105
New Jersey EDA, Revenue Bonds:
NR* NR* 1,000 (First Mortgage--Cranes Mill Project), Series A, 7.375% due
2/01/2017 1,111
BBB- NR 1,000 (First Mortgage--Fellowship Village Project), Series C, 5.50% due
1/01/2028 969
NR* NR* 2,000 (Glimcher Properties LP Project), 6% due 11/01/2028 2,002
NR* NR* 2,500 (Kapkowski Road Landfill), Series A, 6.375% due 4/01/2031 2,461
===================================================================================================================================
New Mexico--1.7% BB+ Ba1 2,500 Farmington, New Mexico, PCR, Refunding (Public Service Company),
Series A, 5.80% due 4/01/2022 2,551
===================================================================================================================================
New York--2.8% NR* NR* 1,500 Port Authority of New York and New Jersey, Special Obligation
Revenue Bonds (Special Project--KIAC), AMT, Series 4, 5th
Installment, 6.75% due 10/01/2019 1,647
Utica, New York, Public Improvement Bonds, UT:
CCC B2 700 9.25% due 8/15/2001 771
CCC B2 700 9.25% due 8/15/2002 786
CCC B2 700 9.25% due 8/15/2003 799
CCC B2 250 8.50% due 8/15/2015 292
===================================================================================================================================
Ohio--5.8% NR* A2 1,000 Butler County, Ohio, Hospital Facilities Revenue and Refunding
Improvement Bonds (Middletown Hospital), 5% due 11/15/2028 974
BB Ba2 4,750 Cleveland, Ohio, Airport Special Revenue Refunding Bonds
(Continental Airlines, Inc.), AMT, 5.70% due 12/01/2019 4,600
Ohio State Solid Waste Disposal Revenue Bonds (USG Corporation
Project), AMT:
BBB P1 1,000 5.60% due 8/01/2032 1,001
BBB Ba1 1,000 5.65% due 3/01/2033 987
NR* NR* 1,400 Ohio State Water Development Authority, Solid Waste Disposal
Revenue Bonds (Bay Shore Power Project), AMT, Series A, 5.875%
due 9/01/2020 1,410
===================================================================================================================================
</TABLE>
6 & 7
<PAGE>
MuniAssets Fund, Inc., November 30, 1998
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Oregon--2.0% NR* VMIG1+ $ 100 Oregon State Health, Housing, Educational and Cultural
Facilities Authority Revenue Bonds (Guide Dogs for the Blind),
VRDN, Series A, 3.20% due 7/01/2025 (a) $ 100
NR* NR* 700 Western Generation Agency, Oregon, Revenue Bonds (Wauna
Cogeneration Project), Series A, 7.125% due 1/01/2021 759
B- NR* 2,000 Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint Corporation
Project), 8% due 12/01/2003 2,210
===================================================================================================================================
Pennsylvania--6.3% NR* NR* 1,500 Lehigh County, Pennsylvania, General Purpose Authority, Revenue
Refunding Bonds (Kidspeace Obligation Group), 6% due 11/01/2023 1,499
NR* NR* 3,000 Pennsylvania Economic Development Financing Authority, Recycling
Revenue Bonds (Ponderosa Fibres Project), AMT, Series A,
9.25% due 1/01/2022 (d) 1,950
NR* NR* 1,455 Pennsylvania State Higher Educational Facilities Authority,
Eastern College and University Revenue Refunding Bonds, 8%
due 10/15/2015 1,742
NR* NR* 4,000 Philadelphia, Pennsylvania, Authority for IDR, Refunding (Commercial
Development--Philadelphia Airport), AMT, 7.75% due 12/01/2017 4,501
===================================================================================================================================
Texas--5.9% BB- Ba1 4,500 Lower Colorado River Authority, Texas, PCR (Samsung Austin
Semiconductor), AMT, 6.375% due 4/01/2027 4,670
AAA Aaa 3,500 Odessa, Texas, Junior College District, Revenue Refunding Bonds,
Series A, 8.125% due 6/01/2005 (c) 4,328
===================================================================================================================================
Vermont--2.3% NR* NR* 3,015 Vermont Educational and Health Buildings Financing Agency Revenue
Bonds (College of Saint Joseph's Project), 8.50% due 11/01/2024 3,480
===================================================================================================================================
Virginia--7.8% NR* NR* 1,500 Dulles Town Center Community Development Authority, Virginia,
Special Assessment Tax (Dulles Town Center Project), 6.25% due
3/01/2026 1,531
Pittsylvania County, Virginia, IDA, Multi-Trade Revenue Bonds,
AMT, Series A:
NR* NR* 1,700 7.50% due 1/01/2014 1,877
NR* NR* 1,000 7.55% due 1/01/2019 1,103
Pocahontas Parkway Association, Virginia, Connector Toll Road
Revenue Bonds (Route 895):
BBB- Baa3 48,400 Series B, 5.95%** due 8/15/2032 6,806
NR* Ba1 6,200 Series C, 6.25%** due 8/15/2032 779
===================================================================================================================================
Total Investments (Cost--$148,809)--101.2% 155,191
Liabilities in Excess of Other Assets--(1.2%) (1,830)
--------
Net Assets--100.0% $153,361
========
===================================================================================================================================
</TABLE>
(a) The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate
in effect at November 30, 1998.
(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 November 30, 1998.
(c) Prerefunded.
(d) Non-income producing security.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
+ Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
As of November 30, 1998
====================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $148,808,640) (Note 1a) ..................... $155,190,871
Cash .................................................................................. 97,480
Interest receivable ................................................................... 2,821,600
Prepaid expenses and other assets ..................................................... 22,692
------------
Total assets .......................................................................... 158,132,643
------------
====================================================================================================================================
Liabilities: Payables:
Securities purchased ................................................................ $ 4,667,333
Investment adviser (Note 2) ......................................................... 66,865 4,734,198
-----------
Accrued expenses and other liabilities ................................................ 37,359
------------
Total liabilities ..................................................................... 4,771,557
------------
====================================================================================================================================
Net Assets: Net assets ............................................................................ $153,361,086
============
====================================================================================================================================
Capital: Common Stock, par value $.10 per share; 200,000,000 shares authorized; 10,432,191
shares issued and outstanding (Note 4) ................................................ $ 1,043,220
Paid-in capital in excess of par ...................................................... 148,531,655
Undistributed investment income--net .................................................. 708,460
Accumulated realized capital losses on investments--net (Note 5) ...................... (3,304,480)
Unrealized appreciation on investments--net ........................................... 6,382,231
------------
Total capital--Equivalent to $14.70 net asset value per share of Common Stock (market
price--$14.75) ........................................................................ $153,361,086
============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
8 & 9
<PAGE>
MuniAssets Fund, Inc., November 30, 1998
STATEMENT OF OPERATIONS
<TABLE>
For the Six Months Ended November 30, 1998
==================================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned .................. $ 4,900,651
Income (Note 1d):
==================================================================================================================================
Expenses: Investment advisory fees (Note 2) ......................................... $ 424,014
Professional fees ......................................................... 29,164
Directors' fees and expenses .............................................. 19,131
Transfer agent fees (Note 2) .............................................. 17,492
Accounting services (Note 2) .............................................. 17,103
Listing fees .............................................................. 11,526
Printing and shareholder reports .......................................... 10,152
Custodian fees ............................................................ 5,916
Pricing fees .............................................................. 5,841
Other ..................................................................... 5,966
------------
Total expenses ............................................................ 546,305
------------
Investment income--net .................................................... 4,354,346
------------
==================================================================================================================================
Realized & Realized gain on investments--net ......................................... 2,630,091
Unrealized Change in unrealized appreciation on investments--net ..................... (3,286,517)
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations ...................... $ 3,697,920
(Notes 1b, 1d & 3): ============
==================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: Nov. 30, 1998 May 31, 1998
===============================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ....................................................... $ 4,354,346 $ 8,733,645
Realized gain on investments--net ............................................ 2,630,091 2,000,762
Change in unrealized appreciation on investments--net ........................ (3,286,517) 4,412,572
------------ ------------
Net increase in net assets resulting from operations ......................... 3,697,920 15,146,979
------------ ------------
===============================================================================================================================
Dividends to Investment income--net ....................................................... (4,395,018) (8,830,400)
Shareholders ------------ ------------
(Note 1e): Net decrease in net assets resulting from dividends to shareholders .......... (4,395,018) (8,830,400)
------------ ------------
===============================================================================================================================
Common Stock Value of shares issued to Common Stock shareholders in reinvested dividends .. 111,278 --
Transactions ------------ ------------
(Note 4):
===============================================================================================================================
Net Assets: Total increase (decrease) in net assets ...................................... (585,820) 6,316,579
Beginning of period .......................................................... 153,946,906 147,630,327
------------ ------------
End of period* ............................................................... $153,361,086 $153,946,906
============ ============
===============================================================================================================================
* Undistributed investment income--net ......................................... $ 708,460 $ 749,132
============ ============
===============================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
MuniAssets Fund, Inc., November 30, 1998
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have For the
been derived from information provided in the Six Months For the Year
financial statements. Ended Ended May 31,
Nov. 30, --------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1998 1997 1996 1995
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ........... $ 14.77 $ 14.16 $ 13.74 $ 13.73 $ 13.40
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ....................... .42 .84 .84 .88 .87
Realized and unrealized gain (loss) on
investments--net ............................. (.07) .62 .42 .03 .33
-------- -------- -------- -------- --------
Total from investment operations ............... .35 1.46 1.26 .91 1.20
-------- -------- -------- -------- --------
Less dividends from investment income--net ..... (.42) (.85) (.84) (.89) (.85)
-------- -------- -------- -------- --------
Capital charge resulting from issuance of
Common Stock ................................... -- -- -- (.01) (.02)
-------- -------- -------- -------- --------
Net asset value, end of period ................. $ 14.70 $ 14.77 $ 14.16 $ 13.74 $ 13.73
======== ======== ======== ======== ========
Market price per share, end of period .......... $ 14.75 $ 13.75 $ 12.625 $ 12.375 $ 11.875
======== ======== ======== ======== ========
===============================================================================================================================
Total Investment Based on net asset value per share ............. 2.48%++ 10.87% 10.11% 7.46% 9.93%
Return:** ======== ======== ======== ======== ========
Based on market price per share ................ 10.46%++ 15.76% 9.01% 11.91% 4.00%
======== ======== ======== ======== ========
===============================================================================================================================
Ratios to Average Expenses, net of reimbursement ................. .71%* .75% .76% .55% .50%
Net Assets: ======== ======== ======== ======== ========
Expenses ....................................... .71%* .75% .76% .77% .85%
======== ======== ======== ======== ========
Investment income--net ......................... 5.65%* 5.75% 6.06% 6.24% 6.54%
======== ======== ======== ======== ========
===============================================================================================================================
Supplemental Net assets, end of period (in thousands) ....... $153,361 $153,947 $147,630 $143,195 $143,169
Data: ======== ======== ======== ======== ========
Portfolio turnover ............................. 21.35% 36.39% 45.15% 42.72% 55.51%
======== ======== ======== ======== ========
===============================================================================================================================
</TABLE>
* 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.
++ Aggregate total investment return.
See Notes to Financial Statements.
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's financial statements are prepared in accordance with generally accepted
accounting principles which may require the use of management accruals and
estimates. These unaudited 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 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 written or purchased are valued at the last sale price in the case of
exchange-traded options. In the case of options traded in the over-the-counter
market, valuation is the last asked price (options written) or the last bid
price (options purchased). 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.
o Financial futures contracts--The Fund may purchase or sell financial 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.
o Options--The Fund is authorized to write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the premium received
by the Fund is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked to market 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
12 & 13
<PAGE>
MuniAssets Fund, Inc., November 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
closing transaction), the Fund realizes a gain or loss on the option to the
extent of the premiums received or paid (or gain or loss to the extent the cost
of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Dividends and distributions--Dividends from net investment income are
declared 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 six
months ended November 30, 1998 were $35,120,992 and $32,990,089, respectively.
Net realized gains for the six months ended November 30, 1998 and net unrealized
gains as of November 30, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ........................... $2,630,091 $6,382,231
---------- ----------
Total ........................................... $2,630,091 $6,382,231
========== ==========
- --------------------------------------------------------------------------------
As of November 30, 1998, net unrealized appreciation for Federal income tax
purposes aggregated $6,382,231, of which $10,793,260 related to appreciated
securities and $4,411,029 related to depreciated securities. The aggregate cost
of investments at November 30, 1998 for Federal income tax purposes was
$148,808,640.
4. Common Stock Transactions:
At November 30, 1998, the Fund had one class of shares of Common Stock, par
value $.10 per share, of which 200,000,000 shares were authorized. Shares issued
and outstanding during the six months ended November 30, 1998 increased by 7,575
due to dividend reinvestment and during the year ended May 31, 1998 remained
constant.
5. Capital Loss Carryforward:
At May 31, 1998, the Fund had a net capital loss carryforward of approximately
$5,155,000, of which $373,000 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 December 7, 1998, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.067910 payable on
December 30, 1998 to shareholders of record as of December 23, 1998.
ABOUT INVERSE FLOATERS
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed rate, tax-exempt securities. To the extent the Fund invests in
inverse securities, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in these securities.
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
Theodore R. Jaeckel Jr., Vice President
John M. Loffredo, 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
14 & 15
<PAGE>
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--11/98
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