MuniAssets
Fund, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
May 31, 1999
<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.
Officers and Directors
Terry K. Glenn, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Arthur Zeikel, Director
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Theodore R. Jaeckel Jr., Vice President
John M. Loffredo, Vice President
Donald C. Burke, Vice President and Treasurer
Bradley J. Lucido, Secretary
- --------------------------------------------------------------------------------
Gerald M. Richard, Treasurer of MuniAssets Fund, Inc. has recently retired. His
colleagues at Merrill Lynch Asset Management, L.P. join the Fund's Board of
Directors in wishing Mr. Richard well in his retirement.
- --------------------------------------------------------------------------------
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
<PAGE>
MuniAssets Fund, Inc., May 31, 1999
DEAR SHAREHOLDER
For the year ended May 31, 1999, MuniAssets Fund, Inc. earned $0.814 per share
income dividends, which included earned and unpaid dividends of $0.066. This
represents a net annualized yield of 5.63%, based on a month-end per share net
asset value of $14.46. Over the same period, the Fund's total investment return
was +3.74%, based on a change in per share net asset value from $14.77 to
$14.46, and assuming reinvestment of $0.820 per share income dividends.
For the six-month period ended May 31, 1999, the Fund's total investment return
was +1.23%, based on a change in per share net asset value from $14.70 to
$14.46, and assuming reinvestment of $0.398 per share income dividends.
The Municipal Market Environment
Long-term bond yields generally moved higher during the six-month period ended
May 31, 1999. Investor concern that increasingly strong domestic economic growth
would eventually trigger inflationary pressures gradually pushed yields higher,
despite the absence of visible increases in producer or retail prices. However,
in May the combination of an unexpectedly strong consumer price report and a
warning from the Federal Reserve Board that it was considering an eventual
increase in short-term interest rates pushed long-term bond yields appreciably
higher. By the end of May, US Treasury bond yields stood at 5.83%, an increase
of 75 basis points (0.75%) during the six-month period. Long-term municipal bond
yields followed a similar although muted pattern, as measured by the Bond Buyer
Revenue Bond Index. Through April, tax-exempt bond yields traded in a relatively
narrow range, at approximately 5.25%. During May, long-term municipal bond
yields rose to end the month at 5.41%. During the six-month period ended May 31,
1999, tax-exempt bond yields rose just over 15 basis points.
The tax-exempt bond market's strong technical position has prevented municipal
bond yields from increasing as much as their taxable counterparts in recent
months. The principal factor promoting this technical support has been the
decline of municipal bond issuance. During the six months ended May 31, 1999,
less than $120 billion in new long-term tax-exempt securities was underwritten,
a decline of over 12% compared to the same period a year ago. During the six
months ended May 31, 1999, municipalities issued less than $60 billion in
long-term tax-exempt securities, a decline of nearly 20% compared to the May 31,
1998 quarter. During May 1999, municipalities issued $15 billion in long-term
securities, a decline of nearly 40% compared to May 1998 levels. This represents
the lowest May issuance since 1995. Additionally, retail and institutional
demand remained positive, easily absorbing available issuance. Investor demand
is likely to remain positive going forward since June and July usually are
seasonally strong months. Traditionally, investors receive significant cash
inflows from bond maturities and coupon payments during these months. Generally,
$15 billion-$20 billion becomes available for reinvestment each month.
Recent outperformance by the municipal bond market has come at the expense of
the very attractive yield ratios available in late 1998. At year-end 1998,
long-term municipal revenue bond yields were 102% of comparable US Treasury bond
yields. This ratio has declined as US Treasury bond yields have risen faster
than tax-exempt bond yields. At the end of May, the yield ratio was
approximately 92%, still well above the historic average of 86%-88%. This yield
ratio may rise somewhat in the coming months if issue supply were to suddenly
increase. However, yield ratios in excess of 100% are unlikely in the near
future.
Further increases in bond yields are likely to be dependent on an acceleration
in US economic growth. However, it is also likely that the increases in interest
rates seen over recent months have yet to fully impact the US economy. For
example, recent increases in mortgage rates have yet to slow home purchases or
construction. Additionally, economic indicators of future price inflation, such
as the price of gold or world commodity prices, all remain well contained. In
such an environment, any moves by the Federal Reserve Board to slow economic
growth are likely to be gradual and limited. Furthermore, any Federal Reserve
Board action is also likely to keep inflation low in the United States for the
remainder of 1999 and into 2000. This suggests that while interest rates may
have further to rise, any increases are not likely to be major but are likely to
be temporary should the US economy slow later this year.
Portfolio Strategy
Despite a surplus of high-yield tax-exempt issuance at year-end 1998, we chose
not to participate in the majority of financings. In our view, credit spreads
remain narrow on a historical basis. As a result, we have become more
circumspect in our approach to the high-yield market. We continued to reduce
exposure to the healthcare industry as a precaution against relative price
declines brought on by deteriorating fundamentals. The financial condition of
nonprofit hospitals has weakened in recent quarters as they struggle to cope
with rising costs, reduced reimbursement rates and increased competition.
At the same time, corporate-related tax-exempt debt stabilized in the face of
aggressive moves by the Federal Reserve Board to alleviate the liquidity crisis
brought on by the turmoil in global financial markets last fall. The portfolio
remains heavily weighted in this sector partly because of the diversification
opportunities it offers. In addition, the ready availability of adequate and
continuous disclosure substantially enhances liquidity within this sector,
especially in comparison to many of the smaller low investment-grade healthcare
issuers. For these reasons, we expect the debt of corporations as well as of
investor-owned utilities to remain a significant portion of our investment
portfolio for the foreseeable future.
In Conclusion
We appreciate your investment in the MuniAssets Fund, Inc., and we look forward
to assisting you with your financial needs in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/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
June 28, 1999
2 & 3
<PAGE>
MuniAssets Fund, Inc., May 31, 1999
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--2.0% B- NR* $ 1,420 Brewton, Alabama, IDB, PCR, Refunding (Container Corporation of
America Project), 8% due 4/01/2009 $ 1,550
CCC Ca 4,324 Mobile, Alabama, IDB, Solid Waste Disposal, Revenue Refunding Bonds
(Mobile Energy Services Co. Project), 6.95% due 1/01/2020 1,503
===================================================================================================================================
Alaska--1.4% NR* NR* 2,000 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Amerada Hess
Pipeline Corporation), 6.10% due 2/01/2024 2,078
===================================================================================================================================
Arizona--7.6% B B2 2,500 Coconino County, Arizona, Pollution Control Corporation, Revenue
Refunding Bonds (Tucson Electric Power Navajo), Series B, 7% due
10/01/2032 2,754
BB+ Ba1 1,700 Maricopa County, Arizona, Pollution Control Corporation, PCR,
Refunding (Public Service Company), Series A, 5.75% due 11/01/2022 1,690
NR* B1 3,000 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds
(America West Airlines Inc.), AMT, 6.30% due 4/01/2023 3,113
B B2 2,000 Pima County, Arizona, IDA, Industrial Revenue Refunding Bonds (Tucson
Electric Power Company Project), Series B, 6% due 9/01/2029 2,000
NR* NR* 1,880 Show Low, Arizona, Improvement District No. 5, Special Assessment
Bonds, 6.375% due 1/01/2015 1,970
===================================================================================================================================
California--6.4% AAA Aaa 9,545 Alameda Corridor Transportation Authority, California, Revenue Bonds,
Series 1999-A, 5.27%** due 10/01/2035 (c) 1,372
BBB- Baa3 1,840 Foothill/Eastern Corridor Agency, California, Toll Road Revenue
Bonds, Senior Lien, Series A, 6% due 1/01/2016 1,993
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 (g) 2,049
AA Aa2 2,000 Metropolitan Water District of Southern California, Waterworks
Revenue Bonds, RIB, 8.483% due 2/07/2003 (d)(e) 2,293
NR* NR* 1,785 Pleasanton, California, Joint Powers Financing Authority, Revenue
Refunding Bonds, Reassessment Sub-Series B, 6.60% due 9/02/2008 1,903
===================================================================================================================================
Colorado--3.5% NR* NR* 1,000 Colorado Post-Secondary Educational Facilities Authority Revenue
Bonds (Colorado Ocean Journey Inc. Project), 8.30% due 12/01/2017 1,159
NR* NR* 2,500 Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue
Bonds (Pavilions), AMT, 7.75% due 9/01/2016 2,851
A1+ VMIG1+ 1,000 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects), VRDN,
3.30% due 5/01/2013 (a)(f) 1,000
A1+ NR* 300 Pitkin County, Colorado, IDR, Refunding (Aspen Skiing Company
Project), VRDN, AMT, Series B, 3.50% due 4/01/2014 (f) 300
===================================================================================================================================
Connecticut--5.3% BB- Ba1 5,000 Connecticut State Development Authority, PCR, Refunding (Connecticut
Light & Power Company), Series A, 5.85% due 9/01/2028 5,013
NR* NR* 1,000 Connecticut State Health and Educational Facilities Authority Revenue
Bonds (Edgehill Issue), Series A, 6.875% due 7/01/2027 1,063
NR* NR* 1,795 Eastern Connecticut, State Regional Educational Service Center
Revenue Bonds, 6.50% due 5/15/2009 1,902
===================================================================================================================================
District of BBB- NR* 1,395 District of Columbia, COP, 6.875% due 1/01/2003 1,451
Columbia--1.0%
===================================================================================================================================
Georgia--1.4% NR* NR* 1,900 Hancock County, Georgia, COP, 8.50% due 4/01/2015 2,157
===================================================================================================================================
Illinois--5.2% NR* NR* 2,180 Illinois Development Finance Authority Revenue Bonds (Primary Health
Care Centers Facilities Acquisition Program), 7.50% due 12/01/2006 2,322
Illinois Health Facilities Authority Revenue Bonds (Community
Hospital of Ottawa Project):
BBB+ NR* 1,000 6.75% due 8/15/2014 1,080
BBB+ NR* 2,000 6.85% due 8/15/2024 2,163
NR* Baa1 2,150 Illinois Health Facilities Authority Revenue Bonds (Holy Cross
Hospital Project), 6.70% due 3/01/2014 2,330
===================================================================================================================================
Indiana--2.2% NR* A2 3,000 Indiana Health Facilities Financing Authority, Hospital Revenue
Refunding Bonds (Saint Anthony Medical Center), Series A, 7% due
4/01/2002 (d) 3,290
===================================================================================================================================
Iowa--0.7% NR* NR* 800 Iowa Finance Authority, Health Care Facilities Revenue Bonds (Care
Initiatives Project), 9.25% due 7/01/2025 1,048
===================================================================================================================================
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 1,914
B- NR* 3,500 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain
Company Project), 7.50% due 7/01/2013 3,629
===================================================================================================================================
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 3,231
===================================================================================================================================
Massachusetts--8.7% Massachusetts State Health and Educational Facilities Authority
Revenue Bonds:
NR* NR* 945 (New England Memorial Hospital Project), Series C, 7% due 4/01/2014 293
A NR* 3,000 (Schepens Eye Research Project), Series A, 6.50% due 7/01/2028 3,211
AAA Ba1 1,815 Massachusetts State Industrial Finance Agency Revenue Bonds (Vinfen
Corporation), 7.10% due 11/15/2003 (d) 2,073
NR* Aaa 2,765 Massachusetts State Industrial Finance Agency, Revenue Refunding
Bonds (Bay Cove Human Services Inc.), 8.375% due 4/01/2004 (d) 3,256
NR* NR* 4,000 Massachusetts State Port Authority, Special Project Revenue Bonds
(Harborside Hyatt Project), AMT, 10% due 3/01/2026 4,352
===================================================================================================================================
</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
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
VRDN Variable Rate Demand Notes
4 & 5
<PAGE>
MuniAssets Fund, Inc., May 31, 1999
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>
Michigan--1.9% A NR* $ 1,000 Grand Rapids Charter Township, Michigan, Revenue Bonds (Porter Hills
Obligation Group), 5.45% due 7/01/2029 $ 957
A1+ VMIG1+ 300 Royal Oak, Michigan, Hospital Finance Authority, Hospital Revenue
Bonds (William Beaumont Hospital), VRDN, Series J, 3.35% due
1/01/2003 (f) 300
NR* NR* 1,500 Wayne Charter County, Michigan, Special Airport Facilities Revenue
Refunding Bonds, 6.75% due 12/01/2015 1,619
===================================================================================================================================
Missouri--1.1% NR* Baa2 1,500 Missouri State Health and Educational Facilities Authority, Health
Facilities Revenue Bonds (Jefferson Memorial Hospital Obligation
Group), 6.80% due 5/15/2025 1,618
===================================================================================================================================
New Jersey--11.3% Camden County, New Jersey, Improvement Authority, Lease Revenue
Bonds (Holt Hauling & Warehousing), AMT, Series A:
BB- NR* 1,000 9.625% due 1/01/2011 1,208
BB- NR* 3,800 9.875% due 1/01/2021 4,638
Camden County, New Jersey, Pollution Control Financing Authority,
Solid Waste Resource Recovery, Revenue Refunding Bonds, AMT:
B- B2 3,000 Series A, 7.50% due 12/01/2010 2,996
B- B2 500 Series B, 7.50% due 12/01/2009 499
New Jersey EDA, Economic Development Revenue Bonds:
NR* NR* 2,000 (Glimcher Properties LP Project), AMT, 6% due 11/01/2028 2,007
NR* NR* 2,500 (Kapkowski Road Landfill), Series A, 6.375% due 4/01/2031 2,567
New Jersey EDA, First Mortgage Revenue Bonds:
NR* NR* 1,000 (Cranes Mill), Series A, 7.375% due 2/01/2017 1,090
BBB- NR* 1,000 (Fellowship Village Project), Series C, 5.50% due 1/01/2028 956
NR* NR* 1,000 New Jersey EDA, IDR, Refunding (Newark Airport Marriott Hotel), 7%
due 10/01/2014 1,089
===================================================================================================================================
New Mexico--1.7% NR* Ba1 2,500 Farmington, New Mexico, PCR, Refunding (Public Service Company),
Series A, 5.80% due 4/01/2022 2,504
===================================================================================================================================
New York--3.2% AAA Aaa 2,500 Metropolitan Transportation Authority, New York, Commuter Facilities
Revenue Refunding Bonds, Series B, 4.75% due 7/01/2026 (b) 2,300
Utica, New York, Public Improvement Bonds:
CCC B2 700 9.25% due 8/15/2001 757
CCC B2 700 9.25% due 8/15/2002 773
CCC B2 700 9.25% due 8/15/2003 787
CCC B2 250 8.50% due 8/15/2015 289
===================================================================================================================================
Ohio--4.4% BB Ba2 4,750 Cleveland, Ohio, Airport Special Revenue Refunding Bonds (Continental
Airlines Inc. Project), AMT, 5.70% due 12/01/2019 4,660
BBB Baa2 2,000 Ohio State Solid Waste Disposal Revenue Bonds (USG Corporation
Project), AMT, 5.65% due 3/01/2033 1,986
===================================================================================================================================
Oregon--3.1% NR* NR* 1,630 Klamath Falls, Oregon, Electric Revenue Refunding Bonds (Klamath
Cogeneration Project), Senior Lien, 6% due 1/01/2025 1,626
NR* VMIG1+ 100 Oregon State Health, Housing, Educational and Cultural Facilities
Authority Revenue Bonds (Guide Dogs for the Blind), VRDN, Series A,
3.25% due 7/01/2025 (f) 100
NR* NR* 700 Western Generation Agency, Oregon, Cogeneration Project Revenue Bonds
(Wauna Cogeneration Project), Series A, 7.125% due 1/01/2021 748
B- NR* 2,000 Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint Corporation
Project), 8% due 12/01/2003 2,176
===================================================================================================================================
Pennsylvania--7.6% NR* NR* 1,500 Lehigh County, Pennsylvania, General Purpose Authority Revenue Bonds
(Kidspeace Obligation Group), 6% due 11/01/2023 1,479
NR* NR* 2,210 Pennsylvania Economic Development Financing Authority, Exempt
Facilities Revenue Bonds (National Gypsum Company), AMT, Series A,
6.25% due 11/01/2027 2,230
NR* NR* 3,000 Pennsylvania Economic Development Financing Authority, Recycling
Revenue Bonds (Ponderosa Fibres Project), AMT, Series A, 9.25% due
1/01/2022 (g) 1,485
AAA NR* 1,455 Pennsylvania State Higher Educational Facilities Authority, College
and University Revenue Refunding Bonds (Eastern College), Series A,
8% due 10/15/2006 (d) 1,808
NR* NR* 4,000 Philadelphia, Pennsylvania, Authority for IDR, Commercial
Development, AMT, 7.75% due 12/01/2017 4,430
===================================================================================================================================
Texas--3.1% BB- Ba1 4,500 Lower Colorado River Authority, Texas, PCR (Samsung Austin
Semiconductor), AMT, 6.375% due 4/01/2027 4,707
===================================================================================================================================
Vermont--2.3% NR* NR* 3,015 Vermont Educational and Health Buildings Financing Agency Revenue
Bonds (College of Saint Joseph Project), 8.50% due 11/01/2024 3,427
===================================================================================================================================
Virginia--10.1% NR* NR* 1,500 Dulles Town Center Community Development Authority, Virginia,
Special Assessment Tax (Dulles Town Center Project), 6.25% due
3/01/2026 1,528
NR* NR* 3,075 Peninsula Ports Authority, Virginia, Revenue Refunding Bonds (Port
Facility--Zeigler Coal), 6.90% due 5/02/2022 3,106
Pittsylvania County, Virginia, IDA, Revenue Bonds, Exempt-Facility,
AMT, Series A:
NR* NR* 1,700 7.50% due 1/01/2014 1,848
NR* NR* 1,000 7.55% due 1/01/2019 1,086
Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds,
Capital Appreciation:
NR* Ba1 6,200 First Tier, Sub-Series C, 6.25%** due 8/15/2032 774
BBB- Baa3 48,400 Senior Series B, 5.95%** due 8/15/2032 6,893
===================================================================================================================================
Total Investments (Cost--$150,252)--101.0% 152,407
Liabilities in Excess of Other Assets--(1.0%) (1,524)
--------
Net Assets--100.0% $150,883
========
===================================================================================================================================
</TABLE>
(a) AMBAC Insured.
(b) FGIC Insured.
(c) MBIA Insured.
(d) Prerefunded.
(e) 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, 1999.
(f) 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, 1999.
(g) Non-income producing security.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase by the Fund.
+ 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.
6 & 7
<PAGE>
MuniAssets Fund, Inc., May 31, 1999
QUALITY PROFILE
The quality ratings of securities in the Fund as of May 31, 1999 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa ........................................................... 7.2%
AA/Aa ............................................................. 1.5
A/A ............................................................... 7.5
BBB/Baa ........................................................... 12.5
BB/Ba ............................................................. 16.7
B/B ............................................................... 14.1
CCC/Caa ........................................................... 1.0
NR (Not Rated) .................................................... 39.6
Other* ............................................................ 0.9
- --------------------------------------------------------------------------------
* Temporary investments in short-term municipal securities.
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of May 31, 1999
====================================================================================================================
<S> <C> <C>
Assets: Investments, at value (identified cost--$150,252,474) (Note 1a) ......... $152,406,507
Cash .................................................................... 91,197
Receivables:
Securities sold ....................................................... $ 3,001,013
Interest .............................................................. 2,607,519 5,608,532
------------
Prepaid expenses and other assets ....................................... 31,742
------------
Total assets ............................................................ 158,137,978
------------
====================================================================================================================
Liabilities: Payables:
Securities purchased .................................................. 7,014,121
Dividends to shareholders (Note 1e) ................................... 97,159
Investment adviser (Note 2) ........................................... 65,793 7,177,073
------------
Accrued expenses and other liabilities .................................. 77,646
------------
Total liabilities ....................................................... 7,254,719
------------
====================================================================================================================
Net Assets: Net assets .............................................................. $150,883,259
============
====================================================================================================================
Capital: Common Stock, par value $.10 per share; 200,000,000 shares authorized;
10,432,191 shares issued and outstanding (Note 4) ....................... $ 1,043,219
Paid-in capital in excess of par ........................................ 148,531,655
Undistributed investment income--net .................................... 841,827
Accumulated realized capital losses on investments--net (Note 5) ........ (1,687,475)
Unrealized appreciation on investments--net ............................. 2,154,033
------------
Total capital--Equivalent to $14.46 net asset value per share of
Common Stock (market price--$13.00) ..................................... $150,883,259
============
====================================================================================================================
</TABLE>
See Notes to Financial Statements
8 & 9
<PAGE>
MuniAssets Fund, Inc., May 31, 1999
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended May 31, 1999
===========================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned ............. $ 9,745,862
Income (Note 1d):
===========================================================================================================================
Expenses: Investment advisory fees (Note 2) .................................... $ 839,645
Professional fees .................................................... 68,384
Accounting services (Note 2) ......................................... 54,814
Directors' fees and expenses ......................................... 40,284
Transfer agent fees (Note 2) ......................................... 29,201
Listing fees ......................................................... 24,260
Printing and shareholder reports ..................................... 23,998
Custodian fees ....................................................... 11,228
Pricing fees ......................................................... 11,224
Other ................................................................ 2,974
------------
Total expenses ....................................................... 1,106,012
------------
Investment income--net ............................................... 8,639,850
------------
===========================================================================================================================
Realized & Realized gain on investments--net .................................... 4,247,096
Unrealized Change in unrealized appreciation on investments--net ................ (7,514,715)
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations ................. $ 5,372,231
(Notes 1b, 1d & 3): ============
===========================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended May 31,
---------------------------
Increase (Decrease) in Net Assets: 1999 1998
===========================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ............................................... $ 8,639,850 $ 8,733,645
Realized gain on investments--net .................................... 4,247,096 2,000,762
Change in unrealized appreciation on investments--net ................ (7,514,715) 4,412,572
------------ ------------
Net increase in net assets resulting from operations ................. 5,372,231 15,146,979
------------ ------------
===========================================================================================================================
Dividends to Investment income--net ............................................... (8,547,155) (8,830,400)
Shareholders ------------ ------------
(Note 1e): Net decrease in net assets resulting from dividends to shareholders .. (8,547,155) (8,830,400)
------------ ------------
===========================================================================================================================
Common Stock Value of shares issued to Common Stock shareholders in reinvested
Transactions dividends ............................................................ 111,277 --
(Note 4): ------------ ------------
===========================================================================================================================
Net Assets: Total increase (decrease) in net assets .............................. (3,063,647) 6,316,579
Beginning of year .................................................... 153,946,906 147,630,327
------------ ------------
End of year* ......................................................... $150,883,259 $153,946,906
============ ============
===========================================================================================================================
* Undistributed investment income--net ................................. $ 841,827 $ 749,132
============ ============
===========================================================================================================================
</TABLE>
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended May 31,
----------------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ........................ $ 14.77 $ 14.16 $ 13.74 $ 13.73 $ 13.40
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .................................. .83 .84 .84 .88 .87
Realized and unrealized gain (loss) on investments--net.. (.32) .62 .42 .03 .33
-------- -------- -------- -------- --------
Total from investment operations .......................... .51 1.46 1.26 .91 1.20
-------- -------- -------- -------- --------
Less dividends from investment income--net ................ (.82) (.85) (.84) (.89) (.85)
-------- -------- -------- -------- --------
Capital charge resulting from issuance of Common Stock .... -- -- -- (.01) (.02)
-------- -------- -------- -------- --------
Net asset value, end of year .............................. $ 14.46 $ 14.77 $ 14.16 $ 13.74 $ 13.73
======== ======== ======== ======== ========
Market price per share, end of year ....................... $ 13.00 $ 13.75 $ 12.625 $ 12.375 $ 11.875
======== ======== ======== ======== ========
===================================================================================================================================
Total Investment Based on net asset value per share ........................ 3.74% 10.87% 10.11% 7.46% 9.93%
Return:* ======== ======== ======== ======== ========
Based on market price per share ........................... .19% 15.76% 9.01% 11.91% 4.00%
======== ======== ======== ======== ========
===================================================================================================================================
Ratios to Average Expenses, net of reimbursement ............................ .72% .75% .76% .55% .50%
Net Assets: ======== ======== ======== ======== ========
Expenses .................................................. .72% .75% .76% .77% .85%
======== ======== ======== ======== ========
Investment income--net .................................... 5.66% 5.75% 6.06% 6.24% 6.54%
======== ======== ======== ======== ========
===================================================================================================================================
Supplemental Net assets, end of year (in thousands) .................... $150,883 $153,947 $147,630 $143,195 $143,169
Data: ======== ======== ======== ======== ========
Portfolio turnover ........................................ 40.57% 36.39% 45.15% 42.72% 55.51%
======== ======== ======== ======== ========
===================================================================================================================================
</TABLE>
* 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.
See Notes to Financial Statements.
10 & 11
<PAGE>
MuniAssets Fund, Inc., May 31, 1999
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. 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 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
year ended May 31, 1999 were $62,777,306 and $62,222,651, respectively.
Net realized gains for the year ended May 31, 1999 and net unrealized gains as
of May 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments .................... $4,247,096 $2,154,033
---------- ----------
Total .................................... $4,247,096 $2,154,033
========== ==========
- --------------------------------------------------------------------------------
As of May 31, 1999, net unrealized appreciation for Federal income tax purposes
aggregated $2,154,033, of which $8,063,087 related to appreciated securities and
$5,909,054 related to depreciated securities. The aggregate cost of investments
at May 31, 1999 for Federal income tax purposes was $150,252,474.
4. Common Stock Transactions:
At May 31, 1999, 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 year ended May 31, 1999 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, 1999, the Fund had a net capital loss carryforward of approximately
$1,047,000, all of which expires in 2004. This amount will be available to
offset like amounts of any future taxable gains.
6. Subsequent Event:
On June 9, 1999, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.066000 payable on June
29, 1999 to shareholders of record as of June 23, 1999.
12 & 13
<PAGE>
MuniAssets Fund, Inc., May 31, 1999
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,
1999, the related statements of operations for the year then ended and changes
in net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period then ended.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
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,
1999 by correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MuniAssets Fund,
Inc. as of May 31, 1999, the results of its operations, the changes in its net
assets and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
June 30, 1999
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by MuniAssets Fund,
Inc. during its taxable year ended May 31, 1999 qualify as tax-exempt interest
dividends for Federal income tax purposes.
Please retain this information for your records.
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.
YEAR 2000 ISSUES
Many computer systems were designed using only two digits to designate years.
These systems may not be able to distinguish the Year 2000 from the Year 1900
(commonly known as the "Year 2000 Problem"). The Fund could be adversely
affected if the computer systems used by the Fund's management or other Fund
service providers do not properly address this problem before January 1, 2000.
The Fund's management expects to have addressed this problem before then, and
does not anticipate that the services it provides will be adversely affected.
The Fund's other service providers have told the Fund's management that they
also expect to resolve the Year 2000 Problem, and the Fund's management will
continue to monitor the situation as the Year 2000 approaches. However, if the
problem has not been fully addressed, the Fund could be negatively affected. The
Year 2000 Problem could also have a negative impact on the securities in which
the Fund invests and this could hurt the Fund's investment returns.
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--5/99
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