MuniAssets
Fund, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
May 31, 2000
<PAGE>
MuniAssets Fund, Inc.
Managed Dividend Policy
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. 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
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, 2000
DEAR SHAREHOLDER
For the year ended May 31, 2000, MuniAssets Fund, Inc. earned $0.814 per share
income dividends, which included earned and unpaid dividends of $0.067. This
represents a net annualized yield of +6.38%, based on a month-end per share net
asset value of $12.76. Over the same period, the Fund's total investment return
was -5.45%, based on a change in per share net asset value from $14.46 to
$12.76, and assuming reinvestment of $0.813 per share income dividends.
For the six-month period ended May 31, 2000, the Fund's total investment return
was -0.96%, based on a change in per share net asset value from $13.35 to
$12.76, and assuming reinvestment of $0.402 per share income dividends.
The Municipal Market Environment
From November 1999 to mid-January 2000, fixed-income bond yields rose steadily
higher. US economic growth, in part intensified by Year 2000 preparations, grew
at a 7.3% rate in the fourth quarter of 1999 and at a 4.2% annual rate for all
of 1999. Initial estimates for the first quarter of 2000 were reported at 5.4%.
However, despite these significant growth rates and the lowest unemployment
rates since January 1970, no price measure indicator has shown any considerable
signs of future price pressures at the consumer level. Given no signs of an
economic slowdown, the Federal Reserve Board continued to raise short-term
interest rates in February, March and May 2000. The Federal Reserve Board cited
both the continued growth of US employment and the impressive strength of the US
equity markets as reasons for attempting to moderate US economic growth before
inflationary price increases are realized. By mid-January 2000, US Treasury bond
yields rose 45 basis points (0.45%) to 6.75%. Similarly, as measured by the Bond
Buyer Revenue Bond Index, long-term tax-exempt bond yields rose approximately 20
basis points to 6.35%.
Since mid-January, fixed-income markets have largely ignored strong economic
fundamentals and concentrated upon very positive technical supply factors.
Declining bond issuance, both current, and more importantly, expected future
issuance, helped push bond yields lower from mid-January to mid-April 2000. In
late January and early February 2000, the US Treasury announced its intention to
reduce the number of issues to be auctioned in the quarterly Treasury note and
bond auctions. Furthermore, budgetary surpluses would allow the US Treasury to
repurchase outstanding, higher-couponed Treasury issues, primarily in the
15-year and longer-term maturity sectors. Both these actions would result in a
significant reduction in the outstanding supply of long-term US Treasury debt.
Domestic and international investors quickly began to accumulate what was
expected to become a scarce commodity and Government bond prices quickly rose.
By mid-April 2000, US Treasury bond yields had declined over 100 basis points to
5.67%. However, bond yields rose somewhat during the remainder of the period as
economic statistics were released, indicating that the economic strength seen in
late 1999 was continuing into early 2000. The decline in long-term US Treasury
yields resulted in an inverted taxable yield curve as short-term and
intermediate-term interest rates have not fallen proportionately since the
Federal Reserve Board is expected to continue to raise short-term interest
rates. The current inversion has had much more to do with debt reduction and
Treasury buybacks than with investor expectations of slower economic growth.
Over the last six months, long-term US Treasury bond yields have fallen almost
30 basis points to close the six-month period ended May 31, 2000 at 6.00%.
Tax-exempt bond yields have also declined in recent months. The decline has
largely been in response to the rally in US Treasury securities, as well as a
continued positive technical supply environment. States such as California and
Maryland have announced that their large current and anticipated future budget
surpluses will permit the cancellation or postponement of expected bond
issuance. Additionally, some issuers have also initiated tenders to repurchase
existing debt, reducing the supply of tax-exempt bonds in the secondary market
as well. Since their recent peak in January 2000, long-term municipal bond
yields declined over 15 basis points to finish the six-month period ended May
31, 2000 at 6.20%.
The relative underperformance of the municipal bond market in recent months has
been especially disappointing given the strong technical position the tax-exempt
bond market enjoyed. The issuance of long-term tax-exempt securities has
dramatically declined. Over the last year, $205 billion in new long-term
municipal securities was issued, a decline of almost 20% compared to the same
period a year earlier. For the six months ended May 31, 2000, approximately $90
billion in new tax-exempt bonds was underwritten, a decline of more than 25%
compared to the same period in 1999. Although investors received over $30
billion in coupon payments, bond maturities and proceeds from early bond
redemptions in January and February, and are expected to receive a similar
amount in June and July, and despite the highest municipal bond yields in three
years, overall investor demand has diminished. Long-term municipal bond mutual
funds have seen consistent outflows in recent months as the yields of individual
securities have risen faster than those of larger, more diverse mutual funds.
Over the last five months, tax-exempt mutual funds have had net redemptions of
more than $11 billion. Also, the demand from property and casualty insurance
companies has weakened as a result of the losses incurred from the series of
damaging storms across much of the eastern United States. Additionally, many
institutional investors who have in recent years been drawn to the municipal
bond market by historically attractive tax-exempt bond yield ratios of over 90%
found other asset classes even more compelling. Even with a favorable supply
position, tax-exempt municipal bond yields have underperformed their taxable
counterparts.
Any significantly lower municipal bond yields are still likely to require weaker
US employment growth and consumer spending. The actions taken in recent months
by the Federal Reserve Board, as well as those expected in June and perhaps
August 2000, should eventually slow US economic growth. The recent declines in
US home sales are perhaps the first sign that consumer spending is being slowed
by higher interest rates. Until further signs develop, it is likely that the
municipal bond market's current favorable technical position will dampen
significant tax-exempt interest rate volatility and provide a stable environment
for eventual improvement in municipal bond prices.
Portfolio Strategy
During the six-month period ended May 31, 2000, the volatility in the
fixed-income markets fostered an environment characterized by an above-average
degree of both risk and opportunity. At 1999 year-end, credit spreads were
subjected to a considerable amount of strain, as issuers, pressured by concerns
over the century date change, attempted to float debt at a time when investors
were understandably reluctant to commit capital. Consequently, borrowers were
forced to raise yields in an effort to attract sufficient buying interest. Since
credit spreads have yet to recover, there is presently an opportunity for
investing. The current environment has afforded the chance to more aggressively
pursue an investment strategy that has been in place for some time now. In our
effort to maintain an attractive dividend, we consistently sought to improve the
average degree of protection from early redemption with respect to the Fund's
holdings. In our opinion, it is possible to limit the Fund's exposure to this
type of reinvestment risk and avoid the potential loss of income should issuers
redeem outstanding debt as interest rates fall. Since speculative grade
tax-exempt bonds have generally offered some of the most attractive yields in
recent years, we believe the gradual restructuring of the portfolio can be
accomplished without having to forgo income. Given that no such opportunity has
existed for years, the argument for aggressively pursuing this strategy becomes
even more compelling.
However, it is important to understand that an element of risk remains. This
focus necessitated the purchase of relatively current issues, which typically
possess the most attractive redemption features. Generally, they also tend to be
subject to a higher degree of interest rate volatility, which in turn has had
the effect of extending the Fund's overall measure of duration and thereby
increasing the portfolio's own measure of interest rate sensitivity. In the
past, we stated that our intention in managing the Fund was not to forecast the
direction of long-term interest rates. However, the value inherent in the
current market environment suggests that a higher tolerance for interest rate
risk may be appropriate.
Perhaps the most adversely affected industry in the portfolio was healthcare,
since non-profit hospitals faced increased competition from managed care, rising
costs and reduced reimbursement rates. We have been extremely cautious regarding
this sector for some time. However, even though it remains a significant
percentage of the Fund's net assets, the bulk of our exposure lies with
long-term care facilities and human service providers. These issuers tend not to
be subject to the same degree of
2 & 3
<PAGE>
MuniAssets Fund, Inc., May 31, 2000
competitive pressure and, with respect to the former, stand to benefit from
favorable demographic trends while the latter receive significant support in the
form of state funding.
Corporate-related credits, which have long been a dominant component of our
holdings, also suffered from the general deterioration in liquidity despite
favorable ratings actions affecting over 17% of the Fund's net assets. One
ongoing focus was issuance on behalf of investor-owned utilities. In addition,
during the past year, three separate issuers (representing almost 10% of our
holdings) were the beneficiaries of ratings upgrades. The prospect of ongoing
consolidation within this industry suggests that additional improvement from a
credit standpoint remains likely.
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/ 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, 2000
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Alabama--2.2% B NR* $ 1,420 Brewton, Alabama, IDB, PCR, Refunding (Container Corporation of
America--Jefferson Smurfit Corp. Project), 8% due 4/01/2009 $ 1,461
CCC Ca 4,324 Mobile, Alabama, IDB, Solid Waste Disposal Revenue Refunding
Bonds (Mobile Energy Services Co. Project), 6.95% due
1/01/2020 (b) 1,401
====================================================================================================================================
Alaska--1.4% NR* NR* 2,000 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Amerada
Hess Pipeline Corporation), 6.10% due 2/01/2024 1,924
====================================================================================================================================
Arizona--10.5% B+ Ba3 2,500 Coconino County, Arizona, Pollution Control Corporation Revenue
Refunding Bonds (Tucson Electric Power Navajo), Series B, 7%
due 10/01/2032 2,407
BBB+ Baa1 2,045 Maricopa County, Arizona, IDA, Health Facilities Revenue Bonds
(Catholic Healthcare West Project), Series A, 5% due 7/01/2021 1,517
NR* NR* 1,115 Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds (Sun
King Apartments Project), Sub-Series C, 9.50% due 11/01/2031 1,119
BBB- Baa3 1,500 Maricopa County, Arizona, Pollution Control Corporation, PCR,
Refunding (Public Service Company of New Mexico), Series A,
5.75% due 11/01/2022 1,308
NR* B1 3,000 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds
(America West Airlines Inc. Project), AMT, 6.30% due 4/01/2023 2,586
Pima County, Arizona, IDA, Industrial Revenue Refunding Bonds
(Tucson Electric Power Company Project):
B+ Ba3 1,000 Series B, 6% due 9/01/2029 855
B+ Ba3 1,000 Series C, 6% due 9/01/2029 855
A1+ P1 1,600 Pinal County, Arizona, IDA, PCR (Newmont Mining), DATES, 4.45%
due 12/01/2009 (f) 1,600
NR* NR* 1,780 Show Low, Arizona, Improvement District No. 5, Special
Assessment Bonds, 6.375% due 1/01/2015 1,757
====================================================================================================================================
California--6.3% AAA Aaa 9,545 Anaheim, California, Public Financing Authority, Lease Revenue
Bonds (Public Improvements Project), Sub-Series C, 5.95%** due
9/01/2036 (a) 1,009
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 (b) 2,049
AAA NR* 4,000 Los Angeles, California, Department of Water and Power, Electric
Plant Revenue Bonds, RIB, Series 144, 6.87% due 6/15/2029 (a)(e) 3,475
NR* NR* 1,780 Pleasanton, California, Joint Powers Financing Authority,
Revenue Refunding Bonds, Reassessment, Sub-Series B, 6.60% due
9/02/2008 1,830
====================================================================================================================================
Colorado--3.1% NR* NR* 1,000 Colorado Post-Secondary Educational Facilities Authority Revenue
Bonds (Colorado Ocean Journey Inc. Project), 8.30% due
12/01/2017 1,086
NR* NR* 2,500 Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue
Bonds (Pavilions), AMT, 7.75% due 9/01/2016 2,626
A1+ VMIG1+ 355 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects),
VRDN, 4.45% due 5/01/2013 (f)(g) 355
====================================================================================================================================
Connecticut--5.8% NR* NR* 1,590 Connecticut State Development Authority, IDR (AFCO Cargo BDL-LLC
Project), AMT, 8% due 4/01/2030 1,579
BB+ Ba1 6,000 Connecticut State Development Authority, PCR, Refunding
(Connecticut Light and Power Company), Series A, 5.85% due
9/01/2028 5,214
NR* NR* 1,000 Connecticut State Health and Educational Facilities Authority
Revenue Bonds (Edgehill Issue), Series A, 6.875% due 7/01/2027 952
====================================================================================================================================
Florida--2.1% NR* NR* 2,800 Parkway Center, Florida, Community Development District Special
Assessment Refunding Bonds, Series B, 8% due 5/01/2010 2,733
====================================================================================================================================
Idaho--0.7% NR* NR* 1,000 Idaho Health Facilities Authority, Revenue Refunding Bonds
(Valley Vista Care Corporation), Series A, 7.75% due 11/15/2016 955
====================================================================================================================================
</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)
DATES Daily Adjustable Tax-Exempt Securities
EDA Economic Development Authority
GO General Obligation Bonds
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>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Illinois--5.4% NR* NR* $ 1,975 Illinois Development Finance Authority Revenue Bonds (Primary
Health Care Centers Facilities Acquisition Program), 7.50% due
12/01/2006 $ 2,041
Illinois Health Facilities Authority Revenue Bonds:
BBB+ NR* 1,000 (Community Hospital of Ottawa Project), 6.75% due 8/15/2014 1,006
BBB+ NR* 2,000 (Community Hospital of Ottawa Project), 6.85% due 8/15/2024 1,962
NR* Baa1 2,150 (Holy Cross Hospital Project), 6.70% due 3/01/2014 2,123
====================================================================================================================================
Iowa--0.7% NR* NR* 800 Iowa Finance Authority, Health Care Facilities Revenue Refunding
Bonds (Care Initiatives Project), 9.25% due 7/01/2025 946
====================================================================================================================================
Kentucky--0.7% NR* NR* 1,000 Kenton County, Kentucky, Airport Board, Special Facilities
Revenue Bonds (Mesaba Aviation Inc. Project), AMT, Series A,
6.70% due 7/01/2029 912
====================================================================================================================================
Louisiana--3.4% CC NR* 4,500 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain
Company Project), 7.50% due 7/01/2013 4,568
====================================================================================================================================
Maryland--3.8% NR* NR* 1,930 Maryland State Economic Development Corporation, Revenue
Refunding Bonds (Baltimore Association for Retarded
Citizens--Health and Mental Hygiene Program), Series A, 7.75%
due 3/01/2025 1,893
NR* NR* 3,000 Maryland State Energy Financing Administration, Limited
Obligation Revenue Bonds (Cogeneration--AES Warrior Run), AMT,
7.40% due 9/01/2019 3,026
NR* VMIG1+ 200 University of Maryland, University Revenue Bonds (Revolving
Equipment Loan Program), VRDN, Series B, 4.25% due 7/01/2015 (f) 200
====================================================================================================================================
Massachusetts--5.6% NR* NR* 825 Massachusetts State Health and Educational Facilities Authority
Revenue Bonds (New England Memorial Hospital Project), Series C,
7% due 4/01/2014 (b) 207
NR* Aaa 2,765 Massachusetts State Industrial Finance Agency, Revenue Refunding
Bonds (Bay Cove Human Services Inc.), 8.375% due 4/01/2004 (d) 3,052
NR* NR* 4,000 Massachusetts State Port Authority, Special Project Revenue
Bonds (Harborside Hyatt Project), AMT, 10% due 3/01/2026 4,168
====================================================================================================================================
Michigan--1.8% A NR* 500 Grand Rapids Charter Township, Michigan, Revenue Bonds (Porter
Hills Obligation Group), 5.45% due 7/01/2029 416
A1+ VMIG1+ 600 University of Michigan, University Hospital Revenue Refunding
Bonds, VRDN, Series A, 4.45% due 12/01/2019 (f) 600
NR* NR* 1,500 Wayne Charter County, Michigan, Special Airport Facilities
Revenue Refunding Bonds (Northwest Airlines Inc.), 6.75% due
12/01/2015 1,432
====================================================================================================================================
Mississippi--0.9% NR* NR* 1,250 Mississippi Development Bank, Special Obligation Revenue
Refunding Bonds (Diamond Lakes Utilities), Series A, 6.25% due
12/01/2017 1,162
====================================================================================================================================
Missouri--0.2% NR* Baa2 350 Missouri State Health and Educational Facilities Authority,
Health Facilities Revenue Bonds (Jefferson Memorial Hospital
Obligation Group), 6.80% due 5/15/2025 329
====================================================================================================================================
New Jersey--10.7% Camden County, New Jersey, Improvement Authority, Lease Revenue
Bonds (Holt Hauling & Warehousing), AMT, Series A:
CCC+ NR* 1,000 9.625% due 1/01/2011 994
CCC+ NR* 3,800 9.875% due 1/01/2021 3,775
Camden County, New Jersey, Pollution Control Financing
Authority, Solid Waste Resource Recovery Revenue Refunding
Bonds, AMT:
CCC B2 3,000 Series A, 7.50% due 12/01/2010 2,796
CCC B2 500 Series B, 7.50% due 12/01/2009 467
NR* NR* 2,000 New Jersey EDA, Economic Development Revenue Bonds (Glimcher
Properties LP Project), AMT, 6% due 11/01/2028 1,763
NR* NR* 200 New Jersey EDA, First Mortgage Revenue Bonds (Cranes Mill),
Series A, 7.375% due 2/01/2017 200
NR* NR* 1,000 New Jersey EDA, IDR, Refunding (Newark Airport Marriott Hotel),
7% due 10/01/2014 1,003
BB Ba2 2,000 New Jersey EDA, Special Facility Revenue Bonds (Continental
Airlines Inc. Project), AMT, 6.25% due 9/15/2029 1,754
BBB- Baa3 1,500 New Jersey Health Care Facilities Financing Authority, Revenue
Refunding Bonds (Trinitas Hospital Obligation Group), 7.40% due
7/01/2020 1,490
====================================================================================================================================
New Mexico--1.6% Farmington, New Mexico, PCR, Refunding (Public Service
Company--San Juan Project):
NR* Baa3 1,500 Series A, 5.80% due 4/01/2022 1,298
NR* Baa3 1,000 Series C, 5.80% due 4/01/2022 866
====================================================================================================================================
New York--1.9% Utica, New York, GO, Public Improvement Bonds:
CCC B2 700 9.25% due 8/15/2001 724
CCC B2 700 9.25% due 8/15/2002 738
CCC B2 700 9.25% due 8/15/2003 749
CCC B2 250 8.50% due 8/15/2015 273
====================================================================================================================================
North Carolina--0.3% BBB Baa3 500 North Carolina Eastern Municipal Power Agency, Power System
Revenue Refunding Bonds, Series A, 5.75% due 1/01/2026 432
====================================================================================================================================
Ohio--1.1% NR* Ba2 1,750 Cleveland, Ohio, Airport Special Revenue Refunding Bonds
(Continental Airlines Inc. Project), AMT, 5.70% due 12/01/2019 1,452
====================================================================================================================================
Oregon--3.1% NR* NR* 1,630 Klamath Falls, Oregon, Electric Revenue Refunding Bonds (Klamath
Cogeneration Project), Senior Lien, 6% due 1/01/2025 1,400
NR* NR* 700 Western Generation Agency, Oregon, Cogeneration Project Revenue
Bonds (Wauna Cogeneration Project), Series A, 7.125% due
1/01/2021 707
B NR* 2,000 Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint
Corporation Project), 8% due 12/01/2003 2,058
====================================================================================================================================
Pennsylvania--7.8% NR* NR* 1,000 Lancaster County, Pennsylvania, Hospital Authority Revenue Bonds
(Health Center--Saint Annes Home), 6.60% due 4/01/2024 879
NR* NR* 1,500 Lehigh County, Pennsylvania, General Purpose Authority, Revenue
Refunding Bonds (Kidspeace Obligation Group), 6% due 11/01/2023 1,233
3 Northhampton Pulp LLC (b)(c) 403
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) 1,688
NR* NR* 4,000 Philadelphia, Pennsylvania, Authority for IDR, Commercial
Development, AMT, 7.75% due 12/01/2017 4,164
NR* NR* 2,625 Philadelphia, Pennsylvania, Authority for Industrial Development,
Health Care Facility Revenue Refunding Bonds (Paul's Run),
Series A, 5.875% due 5/15/2028 2,057
====================================================================================================================================
South Carolina--1.6% BBB NR* 1,500 South Carolina Jobs, EDA, Economic Development Revenue Bonds
(Westminster Presbyterian Center), 7.75% due 11/15/2030 1,484
NR* NR* 750 South Carolina Jobs, EDA, Health Facilities Revenue Bonds, First
Mortgage (Lutheran Homes Project), 6.625% due 5/01/2028 683
====================================================================================================================================
</TABLE>
6 & 7
<PAGE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Texas--5.1% BB Ba1 $ 3,000 Houston, Texas, Airport System Revenue Bonds (Special
Facilities--Continental Airlines), AMT, Series B, 6.125% due
7/15/2017 $ 2,648
BB Baa3 4,500 Lower Colorado River Authority, Texas, PCR (Samsung Austin
Semiconductor), AMT, 6.375% due 4/01/2027 4,068
====================================================================================================================================
Vermont--2.5% NR* NR* 3,015 Vermont Educational and Health Buildings Financing Agency,
Revenue Refunding Bonds (College of Saint Joseph Project), 8.50%
due 11/01/2024 3,286
====================================================================================================================================
Virginia--8.7% NR* NR* 1,500 Dulles Town Center, Virginia, Community Development Authority,
Special Assessment Tax (Dulles Town Center Project), 6.25% due
3/01/2026 1,372
NR* NR* 3,075 Peninsula Ports Authority, Virginia, Revenue Refunding Bonds
(Port Facility--Zeigler Coal), 6.90% due 5/02/2022 2,483
Pittsylvania County, Virginia, IDA, Revenue Refunding Bonds,
Exempt-Facility, AMT, Series A:
NR* NR* 1,700 7.50% due 1/01/2014 1,727
NR* NR* 1,000 7.55% due 1/01/2019 1,013
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 490
BBB- Baa3 48,400 Senior Series B, 5.95%** due 8/15/2032 4,463
====================================================================================================================================
Total Investments (Cost--$144,220)--99.0% 131,776
Other Assets Less Liabilities--1.0% 1,289
--------
Net Assets--100.0% $133,065
========
====================================================================================================================================
</TABLE>
(a) FSA Insured.
(b) Non-income producing security.
(c) Represents an equity interest in the reorganization of Ponderosa Fibres
PA. The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(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, 2000.
(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,
2000.
(g) AMBAC Insured.
* 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.
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of May 31, 2000
================================================================================================================
<C> <S> <C> <C>
Assets: Investments, at value (identified cost -- $144,219,996) ........ $ 131,776,228
Cash ........................................................... 37,874
Interest receivable ............................................ 2,621,141
Prepaid expenses and other assets .............................. 8,187
-------------
Total assets ................................................... 134,443,430
-------------
================================================================================================================
Liabilities: Payables:
Securities purchased ........................................ $ 1,125,298
Dividends to shareholders ................................... 97,085
Investment adviser .......................................... 47,748 1,270,131
-------------
Accrued expenses and other liabilities ......................... 107,924
-------------
Total liabilities .............................................. 1,378,055
-------------
================================================================================================================
Net Assets: Net assets ..................................................... $ 133,065,375
=============
================================================================================================================
Capital: Common Stock, par value $.10 per share; 200,000,000 shares
authorized; 10,432,191 shares issued and outstanding ........... $ 1,043,219
Paid-in capital in excess of par ............................... 148,531,655
Undistributed investment income--net ........................... 747,094
Accumulated realized capital losses on investments--net ........ (4,812,825)
Unrealized depreciation on investments--net .................... (12,443,768)
-------------
Total capital--Equivalent to $12.76 net asset value per share of
Common Stock (market price--$11.1875) .......................... $ 133,065,375
=============
================================================================================================================
</TABLE>
See Notes to Financial Statements.
8 & 9
<PAGE>
MuniAssets Fund, Inc., May 31, 2000
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended May 31, 2000
=====================================================================================================================
<C> <S> <C> <C>
Investment Interest and amortization of premium and discount earned ......... $ 9,426,951
Income:
=====================================================================================================================
Expenses: Investment advisory fees ......................................... $ 770,217
Professional fees ................................................ 55,542
Accounting services .............................................. 40,954
Directors' fees and expenses ..................................... 40,534
Transfer agent fees .............................................. 36,719
Printing and shareholder reports ................................. 36,483
Listing fees ..................................................... 24,260
Pricing fees ..................................................... 11,403
Custodian fees ................................................... 10,932
Other ............................................................ 13,999
------------
Total expenses ................................................... 1,041,043
------------
Investment income--net ........................................... 8,385,908
------------
=====================================================================================================================
Realized & Realized loss on investments--net ................................ (3,125,349)
Unrealized Change in unrealized appreciation/depreciation on investments--net (14,597,801)
Loss on ------------
Investments--Net: Net Decrease in Net Assets Resulting from Operations ............. $ (9,337,242)
============
=====================================================================================================================
</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: 2000 1999
=================================================================================================================================
<C> <S> <C> <C>
Operations: Investment income--net .................................................... $ 8,385,908 $ 8,639,850
Realized gain (loss) on investments--net .................................. (3,125,349) 4,247,096
Change in unrealized appreciation/depreciation on investments--net ........ (14,597,801) (7,514,715)
------------- -------------
Net increase (decrease) in net assets resulting from operations ........... (9,337,242) 5,372,231
------------- -------------
=================================================================================================================================
Dividends to Dividends to shareholders from net investment income ...................... (8,480,641) (8,547,155)
Shareholders: ------------- -------------
=================================================================================================================================
Common Stock Value of shares issued to Common Stock shareholders in reinvested dividends -- 111,277
Transactions: ------------- -------------
=================================================================================================================================
Net Assets: Total decrease in net assets .............................................. (17,817,884) (3,063,647)
Beginning of year ......................................................... 150,883,259 153,946,906
------------- -------------
End of year* .............................................................. $ 133,065,375 $ 150,883,259
============= =============
=================================================================================================================================
*Undistributed investment income--net ...................................... $ 747,094 $ 841,827
============= =============
=================================================================================================================================
</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: 2000 1999 1998 1997 1996
====================================================================================================================================
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ............. $ 14.46 $ 14.77 $ 14.16 $ 13.74 $ 13.73
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ....................... .80 .83 .84 .84 .88
Realized and unrealized gain (loss) on
investments--net (1.69) (.32) .62 .42 .03
-------- -------- -------- -------- --------
Total from investment operations ............... (.89) .51 1.46 1.26 .91
-------- -------- -------- -------- --------
Less dividends from investment income--net ..... (.81) (.82) (.85) (.84) (.89)
-------- -------- -------- -------- --------
Capital charge resulting from issuance of
Common Stock ................................... -- -- -- -- (.01)
-------- -------- -------- -------- --------
Net asset value, end of year ................... $ 12.76 $ 14.46 $ 14.77 $ 14.16 $ 13.74
======== ======== ======== ======== ========
Market price per share, end of year ............ $11.1875 $ 13.00 $ 13.75 $ 12.625 $ 12.375
======== ======== ======== ======== ========
====================================================================================================================================
Total Investment Based on net asset value per share ............. (5.45%) 3.74% 10.87% 10.11% 7.46%
Return:* ======== ======== ======== ======== ========
Based on market price per share ................ (7.79%) .19% 15.76% 9.01% 11.91%
======== ======== ======== ======== ========
====================================================================================================================================
Ratios to Average Expenses, net of reimbursement ................. .74% .72% .75% .76% .55%
Net Assets: ======== ======== ======== ======== ========
Expenses ....................................... .74% .72% .75% .76% .77%
======== ======== ======== ======== ========
Investment income--net ......................... 5.96% 5.66% 5.75% 6.06% 6.24%
======== ======== ======== ======== ========
====================================================================================================================================
Supplemental Net assets, end of year (in thousands) ......... $133,065 $150,883 $153,947 $147,630 $143,195
Data: ======== ======== ======== ======== ========
Portfolio turnover ............................. 32.38% 40.57% 36.39% 45.15% 42.72%
======== ======== ======== ======== ========
====================================================================================================================================
</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 excludes the effects of sales charges.
The Fund's Investment Adviser voluntarily waived a portion
of its management fee. Without such waiver, the Fund's
performance would have been lower.
See Notes to Financial Statements.
10 & 11
<PAGE>
MuniAssets Fund, Inc., May 31, 2000
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 accounting
principles generally accepted in the United States of America, 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
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. 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
.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, 2000 were $44,741,146 and $49,022,844, respectively.
Net realized losses for the year ended May 31, 2000 and net unrealized losses as
of May 31, 2000 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Losses Losses
--------------------------------------------------------------------------------
Long-term investments ........................ $(3,125,349) $(12,443,768)
----------- ------------
Total ........................................ $(3,125,349) $(12,443,768)
=========== ============
--------------------------------------------------------------------------------
As of May 31, 2000, net unrealized depreciation for Federal income tax purposes
aggregated $12,443,768, of which $1,869,166 related to appreciated securities
and $14,312,934 related to depreciated securities. The aggregate cost of
investments at May 31, 2000 for Federal income tax purposes was $144,219,996.
4. Common Stock Transactions:
At May 31, 2000, 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, 2000 remained constant and during the
year ended May 31, 1999 increased by 7,575 as a result of dividend reinvestment.
5. Capital Loss Carryforward:
At May 31, 2000, the Fund had a net capital loss carryforward of approximately
$3,084,000, of which $1,047,000 expires in 2004 and $2,037,000 expires in 2008.
This amount will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On June 7, 2000, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.067438 payable on June
29, 2000 to shareholders of record as of June 19, 2000.
12 & 13
<PAGE>
MuniAssets Fund, Inc., May 31, 2000
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,
2000, 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 auditing standards generally accepted
in the United States of America. 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, 2000 by correspondence with the custodian and
broker. 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, 2000, the results of its operations, the changes in its net
assets and the financial highlights for the respective stated periods in
accordance with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
July 3, 2000
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by MuniAssets Fund,
Inc. during its taxable year ended May 31, 2000 qualify as tax-exempt interest
dividends for Federal income tax purposes.
Additionally there were no capital gain distributions paid by the Fund during
the year.
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.
QUALITY PROFILE (unaudited)
The quality ratings of securities in the Fund as of May 31, 2000 were as
follows:
--------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
--------------------------------------------------------------------------------
AAA/Aaa ............................................................. 6.9%
A/A ................................................................. 0.3
BBB/Baa ............................................................. 16.8
BB/Ba ............................................................... 11.8
B/B ................................................................. 8.9
CCC/Caa ............................................................. 4.6
CC/Ca ............................................................... 3.4
NR (Not Rated) ...................................................... 44.2
Other* .............................................................. 2.1
--------------------------------------------------------------------------------
* Temporary investments in short-term municipal securities.
14 & 15
<PAGE>
MuniAssets Fund, Inc. seeks to provide shareholders with current income exempt
from Federal income taxes by investing primarily in a portfolio of
medium-to-lower grade or unrated municipal obligations the interest on which, in
the opinion of bond counsel to the issuer, is exempt from Federal income taxes.
This report, including the financial information herein, is transmitted to
shareholders of MuniAssets Fund, Inc. for their information. It is not a
prospectus. 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--5/00
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