UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07642
Name of Fund: MuniAssets Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, MuniAssets Fund, Inc., 800 Scudders Mill Road, Plainsboro, NJ
08536. Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 05/31/05
Date of reporting period: 06/01/04 - 05/31/05
Item 1 - Report to Stockholders
MuniAssets
Fund, Inc.
Annual Report
May 31, 2005
MuniAssets Fund, Inc.
Portfolio Information as of May 31, 2005
Percent of
Quality Ratings by Total
S&P/Moody's Investments
--------------------------------------------------------------------------------
AAA/Aaa ................................................. 0.9%
AA/Aa ................................................... 0.2
A/A ..................................................... 3.4
BBB/Baa ................................................. 17.8
BB/Ba ................................................... 21.5
B/B ..................................................... 12.3
CCC/Caa ................................................. 3.4
NR (Not Rated) .......................................... 40.1
Other* .................................................. 0.4
--------------------------------------------------------------------------------
* Includes portfolio holdings in variable rate demand notes.
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 stable level of dividend distributions, 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.
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. As of May 31, 2005, none of the Fund's total net
assets were invested in inverse floaters.
2 MUNIASSETS FUND, INC. MAY 31, 2005
A Letter From the President
Dear Shareholder
After expanding at an annualized rate of 4.4% in 2004, U.S. gross domestic
product grew at an estimated 3.5% in the first quarter of 2005. The slowdown was
not entirely unexpected given last year's healthy growth and the evolution of
the economic cycle. The Federal Reserve Board -- with one eye firmly affixed on
the economic indicators and the other on inflationary measures -- has increased
the federal funds rate by 25 basis points (.25%) at each of its eight meetings
since June 2004. At period-end, the target short-term interest rate stood at 3%.
U.S. equity markets ended 2004 in a strong rally, but have struggled to record
meaningful gains in 2005. The potential for slowing economic and corporate
earnings growth, as well as volatile energy prices, have intermittently hampered
equity market progress. On the positive side, corporate transactions, such as
mergers and acquisitions, stock buy-backs and dividend payouts, have all
increased. In Asia, equities have continued to benefit from higher economic
growth prospects and valuations that appear inexpensive relative to other parts
of the world.
In the bond market, the yield curve flattening "conundrum" continued as
short-term and long-term yields moved still closer together. Over the past year,
the two-year Treasury yield increased 106 basis points while the 10-year
Treasury yield declined 66 basis points. At May 31, 2005, the two-year Treasury
note yielded 3.60% and the 10-year Treasury note yielded 4%. The falling
long-term rates may be partly attributed to foreign interest in U.S. assets and
increased issuance of short-term Treasury bonds to finance the federal deficit.
Notably, the government is considering the reissuance of the 30-year Treasury,
which was suspended in August 2001. This would allow the U.S. Treasury to adopt
a more flexible approach to borrowing, while providing investors with another
long-term fixed income option.
Amid these conditions, the major benchmarks posted six-month and 12-month
returns as follows:
Total Returns as of May 31, 2005 6-month 12-month
===============================================================================================
U.S. equities (Standard & Poor's 500 Index) +2.42% + 8.24%
-----------------------------------------------------------------------------------------------
Small-cap U.S. equities (Russell 2000 Index) -2.10% + 9.82%
-----------------------------------------------------------------------------------------------
International equities (MSCI Europe Australasia Far East Index) +1.81% +14.62%
-----------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) +2.90% + 6.82%
-----------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +3.51% + 7.96%
-----------------------------------------------------------------------------------------------
High yield bonds (Credit Suisse First Boston High Yield Index) +0.60% + 9.97%
-----------------------------------------------------------------------------------------------
While the environment is likely to remain somewhat challenging, we believe
opportunities exist for investors. With this in mind, we encourage you to meet
with your financial advisor to review your goals and asset allocation and to
rebalance your portfolio, as necessary, to ensure it remains aligned with your
objectives and risk tolerance. As always, we thank you for trusting Merrill
Lynch Investment Managers with your investment assets, and we look forward to
serving you in the months and years ahead.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Director
MUNIASSETS FUND, INC. MAY 31, 2005 3
A Discussion With Your Fund's Portfolio Manager
The Fund's total return exceeded the Lipper category average by nearly 200
basis points for the fiscal year, reflecting both favorable sector allocations
and positive security selection.
Describe the recent market environment relative to municipal bonds.
Amid significant volatility, long-term bond yields moved sharply lower over the
past 12 months as short-term interest rates increased. For all of 2004, real
gross domestic product (GDP) grew at an annualized rate of 4.4%, well ahead of
2003's annual rate of 3%. The initial estimate of first quarter 2005 GDP growth
came in at 3.5%, in keeping with many economists' expectations.
It appeared that continued economic improvements were generally disregarded as
investors focused on inflationary trends, currency-related demand for long-term
U.S. securities, slowing foreign economies and interest rate action on the part
of the Federal Reserve Board (the Fed). Over the past 12 months, 30-year U.S.
Treasury bond yields declined 103 basis points (1.03%) to 4.32%, while 10-year
Treasury note yields fell 66 basis points to 4%. The Fed continued to raise
short-term interest rates at each of its meetings since June 2004, bringing the
federal funds rate to 3% by period-end. As short-term interest rates increased
while longer-term interest rates fell, the yield curve continued to flatten.
In the tax-exempt market, yields on 30-year revenue bonds, as measured by the
Bond Buyer Revenue Bond Index, fell 58 basis points during the year to 4.78%.
According to Municipal Market Data, yields on AAA-rated issues maturing in 30
years declined 73 basis points to 4.26%, while AAA-rated bonds maturing in 10
years saw their yields decline 44 basis points to 3.49%.
Over the past year, nearly $375 billion in long-term municipal securities was
underwritten, roughly in line with last year's issuance of $385 billion.
Issuance so far in 2005 has been boosted by more than a 40% increase in
refunding issues as municipalities sought to refinance existing higher-coupon
debt. These refunding issues have been heavily weighted in the 10-year - 20-year
maturity range to lower the overall interest cost of the refunding issue. This
concentration has put pressure on intermediate tax-exempt bond yields while
supporting longer-term bond prices.
Investor demand for municipal product remained generally positive during the
period. Investment Company Institute statistics indicate that, year-to-date
through April 30, 2005, net new cash flows into long-term municipal bond funds
exceeded $697 million. This represented a significant improvement from the $2.86
billion net outflow seen during the same period in 2004. Throughout much of the
past 12 months, high yield tax-exempt bond funds experienced very positive net
cash flows. During May, these lower-rated/non-rated bond funds received an
average of $175 million per week. The need to invest these ongoing cash flows
has led to strong demand for lower-rated issues and a resultant narrowing of
credit spreads.
Looking ahead, the tax-exempt market's supply/demand position remains generally
favorable. The refunding deals that inflated new-issue supply so far in 2005 are
not likely to be repeated later in the year. Municipal bond issues have
underperformed their taxable counterparts in recent months as U.S. Treasury
bonds enjoyed increased demand from foreign governments, which are unable to
benefit from the tax advantage inherent in tax-exempt products. This
underperformance, however, has resulted in very attractive tax-exempt bond yield
ratios. At 95% - 102%, tax-exempt bond yield ratios are well above recent
historic averages. We believe this should continue to attract both traditional
and nontraditional investors to the marketplace, especially if new municipal
bond issuance remains modest.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended May 31, 2005, the Common Stock of MuniAssets Fund,
Inc. had net annualized yields of 6.04% and 6.10%, based on a year-end per share
net asset value of $13.40 and a per share market price of $13.27, respectively,
and $.810 per share income dividends. Over the same period, the total investment
return on the Fund's Common Stock was +15.65%, based on a change in per share
net asset value from $12.36 to $13.40, and assuming reinvestment of all
distributions.
The Fund's total return for the year, based on net asset value, exceeded the
+13.77% average return of the Lipper High Yield Municipal Debt Funds category.
(Funds in this Lipper category invest at least 50% of their assets in
lower-rated municipal debt issues.) The outperformance is attributed to the
sector allocations that we implemented some time ago and have kept largely
intact. Specifically, the Fund's overweight exposure to corporate-related
tax-exempt debt in the transportation and health care sectors, as well as
tax-backed
4 MUNIASSETS FUND, INC. MAY 31, 2005
and assessment-related residential and commercial real estate projects,
contributed to the strong relative performance. These sectors benefited from the
ongoing contraction of credit spreads, a trend that was particularly
advantageous in the airline and tobacco sectors, two of the market's top
performers. The narrowing of spreads has been supported by a generally improving
economy, a moderate pace of inflation and the Fed's measured approach to
interest rate increases, which generally served to sustain investors' appetites
for risk.
In terms of specific securities, we saw strong performance from capital
appreciation bonds (or zero coupon bonds) representing toll road financing for
the Pocahontas Parkway in Virginia. In conjunction with the toll road's opening
in 2002 and the subsequent increase in traffic, spreads on these bonds narrowed
significantly, making it a meaningful contributor to the Fund's performance.
For the six-month period ended May 31, 2005, the total investment return on the
Fund's Common Stock was +7.23%, based on a change in per share net asset value
from $12.90 to $13.40, and assuming reinvestment of all distributions.
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (as measured by the trading
price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of dividends, please refer to the Financial Highlights section of
this report. As a closed-end fund, the Fund's shares may trade in the secondary
market at a premium or discount to the Fund's net asset value. As a result,
total investment returns based on changes in the market value of the Fund's
Common Stock can vary significantly from total investment returns based on
changes in the Fund's net asset value.
What changes were made to the portfolio during the year?
We continued to trim our exposure to corporate-related sectors through tactical
sales as the market provided opportunities. Because the corporate sector tends
to be the most volatile in the municipal market, our goal was to realize profits
while also preparing the Fund for an eventual turn in the credit cycle (i.e.,
widening credit spreads). Offsetting these sales, we increased the Fund's
position in the tax-backed sector, specifically commercial and residential real
estate, as well as long-term care, a subsector of health care. Long-term care
focuses on the construction of retirement facilities that provide a range of
continuing care options, including independent living arrangements, assisted
living and skilled nursing facilities.
Reflecting our move out of corporate bonds and into the other two sectors, many
of the holdings sold have been in the B, BB and BBB rating categories. In turn,
the bonds we purchased tended to be non-rated. While ostensibly this may appear
to indicate a reduction in the portfolio's average credit quality, we actually
view many of the non-rated issues we added as more solid credits than some of
the corporate bonds we sold. They tend to exhibit lower volatility and, in some
cases, higher degrees of liquidity. As mentioned in our previous report to
shareholders, another reason for initiating this trade is our desire to achieve
more market-neutral weightings in each of these categories. We have been
overweight in the B-BBB range for some time, and underweight in non-rated
issues. By reallocating assets to lower-rated issues, we have effectively been
able to boost portfolio income and increase the Fund's dividend reserves.
Finally, we maintained our exposure to debt issued by the State of California,
which has continued to benefit Fund performance as spreads tightened. We believe
additional upside could exist in the California market, particularly if the
state pursues refinancing opportunities in the current low interest rate
environment.
How would you characterize the Fund's position at the close of the period?
We continue to focus on capturing relative value within the high yield municipal
arena as a means of enhancing the Fund's returns over time. At period-end, the
Fund remained overweight in the B to BBB range, although less so than at the
beginning of the period. We expect to continue our strategy of trimming our
exposure in this area. We have made strides in terms of diversifying the
portfolio during the past year, and we look forward to discussing further
progress in our next report to shareholders.
Theodore R. Jaeckel Jr., CFA
Vice President and Portfolio Manager
June 9, 2005
MUNIASSETS FUND, INC. MAY 31, 2005 5
Schedule of Investments (in Thousands)
Face
State Amount Municipal Bonds Value
====================================================================================================================================
Alabama--0.9% $ 2,420 Brewton, Alabama, IDB, PCR, Refunding (Container Corporation of America--Jefferson
Smurfit Corp. Project), 8% due 4/01/2009 $ 2,478
====================================================================================================================================
Alaska--0.5% 1,290 Alaska Industrial Development and Export Authority Revenue Bonds (Williams Lynxs Alaska
Cargoport), AMT, 7.80% due 5/01/2014 1,361
====================================================================================================================================
Arizona--7.3% Coconino County, Arizona, Pollution Control Corporation, Revenue Refunding Bonds
(Tucson Electric Power--Navajo):
3,000 AMT, Series A, 7.125% due 10/01/2032 3,171
2,500 Series B, 7% due 10/01/2032 2,610
1,425 Maricopa County, Arizona, IDA, Education Revenue Bonds (Arizona Charter Schools Project
1), Series A, 6.625% due 7/01/2020 1,419
Maricopa County, Arizona, IDA, M/F Housing Revenue Bonds (Sun King Apartments Project):
1,540 Series A, 6.75% due 5/01/2031 1,257
2,345 Sub-Series C, 9.50% due 11/01/2031 1,809
7,600 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds (America West Airlines
Inc. Project), AMT, 6.30% due 4/01/2023 5,601
Pima County, Arizona, IDA, Education Revenue Bonds:
1,420 (Arizona Charter Schools Project), Series E, 7.25% due 7/01/2031 1,535
1,000 (Arizona Charter Schools Project II), Series A, 6.75% due 7/01/2031 1,046
1,320 Show Low, Arizona, Improvement District No. 5, Special Assessment Bonds,
6.375% due 1/01/2015 1,381
====================================================================================================================================
California--2.8% California State, Various Purpose, GO:
1,900 5.25% due 11/01/2025 2,073
1,300 5.50% due 11/01/2033 1,445
1,320 Fontana, California, Special Tax, Refunding (Community Facilities District No. 22--
Sierra), 6% due 9/01/2034 1,363
2,620 Golden State Tobacco Securitization Corporation of California, Tobacco Settlement
Revenue Bonds, Series B, 5.50% due 6/01/2043 2,809
====================================================================================================================================
Colorado--7.2% 2,000 Denver, Colorado, City and County Airport Revenue Bonds, AMT, Series D,
7.75% due 11/15/2013 (a) 2,402
Denver, Colorado, Urban Renewal Authority, Tax Increment Revenue Bonds (Pavilions),
AMT:
2,450 7.75% due 9/01/2016 2,589
3,000 7.75% due 9/01/2017 3,165
Elk Valley, Colorado, Public Improvement Revenue Bonds (Public Improvement Fee):
1,890 Series A, 7.10% due 9/01/2014 2,047
2,095 Series A, 7.30% due 9/01/2022 2,262
1,000 Series B, 7% due 9/01/2031 1,033
1,760 North Range, Colorado, Metropolitan District No. 1, GO, 7.25% due 12/15/2031 1,783
2,850 Plaza Metropolitan District No. 1, Colorado, Tax Allocation Revenue Bonds (Public
Improvement Fees), 8% due 12/01/2025 3,172
1,170 Southlands, Colorado, Medical District, GO (Metropolitan District No. 1),
7.125% due 12/01/2034 1,288
====================================================================================================================================
Connecticut--3.4% 2,350 Bridgeport, Connecticut, Senior Living Facilities Revenue Bonds (3030 Park Retirement
Community Project), 7.25% due 4/01/2035 2,441
680 Connecticut State Development Authority, Airport Facility Revenue Bonds (LearJet Inc.
Project), AMT, 7.95% due 4/01/2026 809
3,490 Connecticut State Development Authority, IDR (AFCO Cargo BDL-LLC Project), AMT,
8% due 4/01/2030 3,714
2,330 New Haven, Connecticut, Facility Revenue Bonds (Hill Health Corporation Project),
9.25% due 5/01/2017 2,338
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 at right.
AMT Alternative Minimum Tax (subject to)
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
VRDN Variable Rate Demand Notes
6 MUNIASSETS FUND, INC. MAY 31, 2005
Schedule of Investments (continued) (in Thousands)
Face
State Amount Municipal Bonds Value
====================================================================================================================================
Florida--5.1% $ 740 Arbor Greene Community Development District, Florida, Special Assessment Revenue Bonds,
7.60% due 5/01/2018 $ 778
1,130 Capital Projects Finance Authority, Florida, Continuing Care Retirement Revenue Bonds
(Glenridge on Palmer Ranch), Series A, 8% due 6/01/2032 1,237
495 Harbor Bay, Florida, Community Development District, Capital Improvement Special
Assessment Revenue Bonds, Series A, 7% due 5/01/2033 533
2,000 Hillsborough County, Florida, IDA, Exempt Facilities Revenue Bonds (National Gypsum
Company), AMT, Series A, 7.125% due 4/01/2030 2,250
3,255 Midtown Miami, Florida, Community Development District, Special Assessment Revenue
Bonds, Series A, 6.25% due 5/01/2037 3,444
2,305 Orlando, Florida, Urban Community Development District, Capital Improvement Special
Assessment Bonds, Series A, 6.95% due 5/01/2033 2,488
2,400 Santa Rosa Bay Bridge Authority, Florida, Revenue Bonds, 6.25% due 7/01/2028 2,303
935 Waterchase, Florida, Community Development District, Capital Improvement Revenue Bonds,
Series A, 6.70% due 5/01/2032 1,000
====================================================================================================================================
Georgia--3.5% 3,000 Atlanta, Georgia, Tax Allocation Bonds (Atlantic Station Project), 7.90% due 12/01/2024 3,287
Brunswick & Glynn County, Georgia, Development Authority, First Mortgage Revenue Bonds
(Coastal Community Retirement Corporation Project), Series A:
1,165 7.125% due 1/01/2025 1,229
1,690 7.25% due 1/01/2035 1,788
2,000 Milledgeville-Baldwin County, Georgia, Development Authority Revenue Bonds (Georgia
College and State University Foundation), 5.625% due 9/01/2030 2,123
1,170 Savannah, Georgia, EDA, Revenue Bonds (Marshes of Skidaway), First Mortgage, Series A,
7.40% due 1/01/2034 1,225
====================================================================================================================================
Idaho--0.4% 1,000 Idaho Health Facilities Authority, Revenue Refunding Bonds (Valley Vista Care
Corporation), Series A, 7.75% due 11/15/2016 1,019
====================================================================================================================================
Illinois--4.7% 2,630 Caseyville, Illinois, Senior Tax Increment Revenue Bonds (Forest Lakes Project),
7% due 12/30/2022 2,653
4,000 Chicago, Illinois, O'Hare International Airport, Special Facility Revenue Refunding
Bonds (American Airlines Inc. Project), 8.20% due 12/01/2024 3,710
600 Chicago, Illinois, Special Assessment Bonds (Lake Shore East), 6.75% due 12/01/2032 625
Illinois Development Finance Authority Revenue Bonds (Primary Health Care Centers
Facilities Acquisition Program):
560 7.50% due 12/01/2006 574
115 7.50% due 12/01/2006 (e) 120
475 7.75% due 12/01/2006 (d) 515
2,720 7.75% due 12/01/2016 2,854
685 Illinois State Finance Authority Revenue Bonds (Primary Health Care Centers Program),
6.60% due 7/01/2024 698
1,070 Lincolnshire, Illinois, Special Service Area No. 1, Special Tax Bonds (Sedgebrook
Project), 6.25% due 3/01/2034 1,139
====================================================================================================================================
Iowa--1.0% 2,250 Iowa Finance Authority, Health Care Facilities Revenue Refunding Bonds (Care
Initiatives Project), 9.25% due 7/01/2025 2,751
====================================================================================================================================
Kentucky--0.9% 2,850 Kenton County, Kentucky, Airport Board, Special Facilities Revenue Bonds (Mesaba
Aviation Inc. Project), AMT, Series A, 6.70% due 7/01/2029 2,350
====================================================================================================================================
Louisiana--2.8% 7,500 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain Company Project),
7.50% due 7/01/2013 7,754
====================================================================================================================================
Maine--0.4% 1,160 Maine Finance Authority, Solid Waste Recycling Facilities Revenue Bonds (Great Northern
Paper Project--Bowater), AMT, 7.75% due 10/01/2022 1,166
====================================================================================================================================
Maryland--1.7% 1,910 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 2,041
2,500 Maryland State Energy Financing Administration, Limited Obligation Revenue Bonds
(Cogeneration--AES Warrior Run), AMT, 7.40% due 9/01/2019 2,554
MUNIASSETS FUND, INC. MAY 31, 2005 7
Schedule of Investments (continued) (in Thousands)
Face
State Amount Municipal Bonds Value
====================================================================================================================================
Massachusetts--1.8% $ 1,680 Massachusetts State Development Finance Agency, Revenue Refunding Bonds (Eastern
Nazarene College), 5.625% due 4/01/2029 $ 1,686
1,150 Massachusetts State Health and Educational Facilities Authority Revenue Bonds (Jordan
Hospital), Series E, 6.75% due 10/01/2033 1,273
2,045 Massachusetts State Health and Educational Facilities Authority, Revenue Refunding
Bonds (Bay Cove Human Services Issue), Series A, 5.90% due 4/01/2028 2,027
====================================================================================================================================
Michigan--0.8% 400 Eastern Michigan University Revenue Refunding Bonds, VRDN, 2.96% due 6/01/2027 (b)(f) 400
1,635 Macomb County, Michigan, Hospital Finance Authority, Hospital Revenue Bonds (Mount
Clemens General Hospital), Series B, 5.875% due 11/15/2034 1,650
====================================================================================================================================
Minnesota--1.3% 1,180 Minneapolis & Saint Paul, Minnesota, Metropolitan Airports Commission, Special
Facilities Revenue Refunding Bonds (Northwest Airlines Inc. Project), AMT, 7.375%
due 4/01/2025 1,151
1,770 Saint Paul, Minnesota, Port Authority, Hotel Facility Revenue Refunding Bonds (Radisson
Kellogg Project), Series 2, 7.375% due 8/01/2029 1,858
440 Virginia, Minnesota, Housing and Redevelopment Authority, Health Care Facility Lease
Revenue Bonds, 5.25% due 10/01/2025 462
====================================================================================================================================
Missouri--0.9% Fenton, Missouri, Tax Increment Revenue Refunding and Improvement Bonds (Gravois Bluffs):
235 6.75% due 10/01/2015 237
1,000 7% due 10/01/2021 1,082
1,000 Kansas City, Missouri, IDA, First Mortgage Health Facilities Revenue Bonds (Bishop
Spencer Place), Series A, 6.50% due 1/01/2035 1,024
====================================================================================================================================
Nevada--0.3% 650 Clark County, Nevada, Improvement District No. 142 Special Assessment,
6.375% due 8/01/2023 671
====================================================================================================================================
New Jersey--16.4% Camden County, New Jersey, Improvement Authority, Lease Revenue Bonds (Holt Hauling &
Warehousing), AMT, Series A (g)(h):
5,600 9.625% due 1/01/2011 713
5,800 9.875% due 1/01/2021 738
770 Camden County, New Jersey, Pollution Control Financing Authority, Solid Waste Resource
Recovery Revenue Bonds, Series D, 7.25% due 12/01/2010 770
Camden County, New Jersey, Pollution Control Financing Authority, Solid Waste Resource
Recovery Revenue Refunding Bonds, AMT:
9,000 Series A, 7.50% due 12/01/2010 8,999
985 Series B, 7.50% due 12/01/2009 985
3,065 New Jersey EDA, Cigarette Tax Revenue Bonds, 5.50% due 6/15/2024 3,258
2,500 New Jersey EDA, IDR, Refunding (Newark Airport Marriott Hotel), 7% due 10/01/2014 2,605
New Jersey EDA, Retirement Community Revenue Bonds:
1,665 (Cedar Crest Village Inc. Facility), Series A, 7.25% due 11/15/2021 1,802
5,800 (Seabrook Village Inc.), Series A, 8.125% due 11/15/2023 6,560
New Jersey EDA, Special Facility Revenue Bonds (Continental Airlines Inc. Project), AMT:
2,000 6.25% due 9/15/2019 1,757
6,195 6.25% due 9/15/2029 5,222
1,250 9% due 6/01/2033 1,322
2,650 New Jersey Health Care Facilities Financing Authority Revenue Bonds (Pascack Valley
Hospital Association), 6.625% due 7/01/2036 2,647
1,500 New Jersey Health Care Facilities Financing Authority, Revenue Refunding Bonds
(Trinitas Hospital Obligation Group), 7.40% due 7/01/2020 1,716
4,115 Tobacco Settlement Financing Corporation of New Jersey, Asset-Backed Revenue Bonds,
5.75% due 6/01/2032 4,162
1,425 Tobacco Settlement Financing Corporation of New Jersey Revenue Bonds, 7% due 6/01/2041 1,578
====================================================================================================================================
New Mexico--1.0% 2,500 Farmington, New Mexico, PCR, Refunding (Tucson Electric Power Co.--San Juan Project),
Series A, 6.95% due 10/01/2020 2,622
====================================================================================================================================
New York--3.3% 1,400 Dutchess County, New York, IDA, Civic Facility Revenue Refunding Bonds (Saint Francis
Hospital), Series A, 7.50% due 3/01/2029 1,465
New York City, New York, City IDA, Civic Facility Revenue Bonds:
510 Series C, 6.80% due 6/01/2028 543
2,715 (Special Needs Facilities Pooled Program), Series C-1, 6.625% due 7/01/2029 2,607
2,400 New York City, New York, City IDA, Special Facility Revenue Bonds (British Airways Plc
Project), AMT, 7.625% due 12/01/2032 2,677
1,575 Westchester County, New York, IDA, Continuing Care Retirement, Mortgage Revenue Bonds
(Kendal on Hudson Project), Series A, 6.50% due 1/01/2034 1,661
8 MUNIASSETS FUND, INC. MAY 31, 2005
Schedule of Investments (continued) (in Thousands)
Face
State Amount Municipal Bonds Value
====================================================================================================================================
North Carolina--0.6% $ 1,500 North Carolina Medical Care Commission, Retirement Facilities, First Mortgage Revenue
Bonds (Givens Estates Project), Series A, 6.50% due 7/01/2032 $ 1,618
====================================================================================================================================
Oregon--0.8% Western Generation Agency, Oregon, Cogeneration Project Revenue Bonds (Wauna
Cogeneration Project):
1,440 AMT, Series B, 7.40% due 1/01/2016 1,476
700 Series A, 7.125% due 1/01/2021 718
====================================================================================================================================
Pennsylvania--5.4% 2,330 Montgomery County, Pennsylvania, IDA Revenue Bonds (Whitemarsh Continuing Care
Project), 6.125% due 2/01/2028 2,408
3,250 Pennsylvania Economic Development Financing Authority, Exempt Facilities Revenue Bonds
(National Gypsum Company), AMT, Series A, 6.25% due 11/01/2027 3,501
2,270 Philadelphia, Pennsylvania, Authority for IDR (Air Cargo), AMT, Series A,
7.50% due 1/01/2025 2,366
6,440 Philadelphia, Pennsylvania, Authority for IDR, Commercial Development,
7.75% due 12/01/2017 6,581
====================================================================================================================================
South Carolina--1.4% 3,500 South Carolina Jobs, EDA, Economic Development Revenue Bonds (Westminster Presbyterian
Center), 7.75% due 11/15/2030 3,743
====================================================================================================================================
Tennessee--0.9% 2,500 Shelby County, Tennessee, Health, Educational and Housing Facilities Board Revenue
Bonds (Germantown Village), Series A, 7.25% due 12/01/2034 2,604
====================================================================================================================================
Texas--8.4% 1,000 Austin, Texas, Convention Center Revenue Bonds (Convention Enterprises Inc.), First
Tier, Series A, 6.70% due 1/01/2028 1,072
700 Bell County, Texas, Health Facilities Development Corporation, Hospital Revenue Bonds
(Scott & White Memorial Hospital), VRDN, Series 2001-2, 2.95% due 8/15/2031 (c)(f) 700
Brazos River Authority, Texas, PCR, Refunding, AMT:
2,550 (Texas Utility Company), Series A, 7.70% due 4/01/2033 3,028
3,865 (Utilities Electric Company), Series B, 5.05% due 6/01/2030 3,932
1,680 Brazos River Authority, Texas, Revenue Refunding Bonds (Reliant Energy Inc. Project),
Series B, 7.75% due 12/01/2018 1,866
2,340 Grand Prairie, Texas, Housing Finance Corporation Revenue Bonds (Independent Senior
Living Center), 7.75% due 1/01/2034 2,305
1,400 Houston, Texas, Health Facilities Development Corporation, Retirement Facility Revenue
Bonds (Buckingham Senior Living Community), Series A, 7.125% due 2/15/2034 1,510
3,190 Matagorda County, Texas, Navigation District No. 1 Revenue Refunding Bonds (Reliant
Energy Inc.), Series C, 8% due 5/01/2029 3,516
1,860 Port Corpus Christi, Texas, Individual Development Corporation, Environmental
Facilities Revenue Bonds (Citgo Petroleum Corporation Project), AMT, 8.25%
due 11/01/2031 1,995
3,000 Port Corpus Christi, Texas, Revenue Refunding Bonds (Celanese Project), AMT, Series B,
6.70% due 11/01/2030 3,162
====================================================================================================================================
Utah--0.6% 1,660 Carbon County, Utah, Solid Waste Disposal Revenue Refunding Bonds (Laidlaw
Environmental), AMT, Series A, 7.45% due 7/01/2017 1,711
====================================================================================================================================
Virginia--8.4% 1,500 Dulles Town Center, Virginia, Community Development Authority, Special Assessment Tax
(Dulles Town Center Project), 6.25% due 3/01/2026 1,549
Pocahontas Parkway Association, Virginia, Toll Road Revenue Bonds, Capital Appreciation,
Senior Series B:
48,400 5.95%* due 8/15/2031 10,177
48,400 5.95%* due 8/15/2032 9,538
1,590 Tobacco Settlement Financing Corporation of Virginia, Asset-Backed Revenue Bonds,
5.625% due 6/01/2037 1,584
====================================================================================================================================
West Virginia--0.4% 1,320 Princeton, West Virginia, Hospital Revenue Refunding Bonds (Community Hospital
Association Inc. Project), 6% due 5/01/2019 1,187
====================================================================================================================================
Wisconsin--0.7% 1,855 Wisconsin State Health and Educational Facilities Authority Revenue Bonds (New Castle
Place Project), Series A, 7% due 12/01/2031 1,899
====================================================================================================================================
Wyoming--0.9% 2,500 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds (FMC Corporation
Project), AMT, Series A, 7% due 6/01/2024 2,527
MUNIASSETS FUND, INC. MAY 31, 2005 9
Schedule of Investments (concluded) (in Thousands)
Face
Amount Municipal Bonds Value
====================================================================================================================================
U.S. Virgin $ 3,000 Virgin Islands Government Refinery Facilities, Revenue Refunding Bonds (Hovensa Coker
Islands--1.2% Project), AMT, 6.50% due 7/01/2021 $ 3,412
====================================================================================================================================
Total Investments (Cost--$266,013**)--98.1% 268,224
Other Assets Less Liabilities--1.9% 5,158
--------
Net Assets--100.0% $273,382
========
* Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase by the Fund.
** The cost and unrealized appreciation (depreciation) of investments as of
May 31, 2005, as computed for federal income tax purposes, were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Aggregate cost .............................................. $265,729
========
Gross unrealized appreciation ............................... $ 16,828
Gross unrealized depreciation ............................... (14,333)
--------
Net unrealized appreciation ................................. $ 2,495
========
(a) AMBAC Insured.
(b) FGIC Insured.
(c) MBIA Insured.
(d) Prerefunded.
(e) Escrowed to maturity.
(f) Security may have a maturity of more than one year at time of issuance,
but has variable rate and demand features that qualify it as a short-term
security. The rate disclosed is that currently in effect. This rate
changes periodically based upon prevailing market rates.
(g) Restricted securities as to resale, representing 0.5% of net assets, were
as follows:
(in Thousands)
--------------------------------------------------------------------------
Acquisition
Issue Date(s) Cost Value
--------------------------------------------------------------------------
Camden County, New Jersey,
Improvement Authority, Lease
Revenue Bonds (Holt Hauling &
Warehousing), AMT, Series A,
9.625% due 1/01/2011 1/29/1997 $ 5,925 $ 713
Camden County, New Jersey,
Improvement Authority, Lease
Revenue Bonds (Holt Hauling &
Warehousing), AMT, Series A, 2/06/1996-
9.875% due 1/01/2021 1/29/1997 5,944 738
--------------------------------------------------------------------------
Total $11,869 $1,451
=================
(h) Non-income producing security; issuer filed for bankruptcy or is in
default of interest payments.
See Notes to Financial Statements.
10 MUNIASSETS FUND, INC. MAY 31, 2005
Statement of Assets, Liabilities and Capital
As of May 31, 2005
========================================================================================================================
Assets
------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value
(identified cost--$266,013,344) ............................. $ 268,224,409
Cash ......................................................... 13,201
Receivables:
Interest .................................................. $ 5,070,505
Securities sold ........................................... 165,000 5,235,505
-------------
Prepaid expenses and other assets ............................ 254,723
-------------
Total assets ................................................. 273,727,838
-------------
========================================================================================================================
Liabilities
------------------------------------------------------------------------------------------------------------------------
Payables:
Dividends to shareholders ................................. 204,705
Investment adviser ........................................ 94,290
Other affiliates .......................................... 2,340 301,335
-------------
Accrued expenses ............................................. 44,650
-------------
Total liabilities ............................................ 345,985
-------------
========================================================================================================================
Net Assets
------------------------------------------------------------------------------------------------------------------------
Net Assets ................................................... $ 273,381,853
=============
========================================================================================================================
Capital
------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.10 per share; 200,000,000 shares
authorized; 20,399,713 shares issued and outstanding ........ $ 2,039,971
Paid-in capital in excess of par ............................. 297,146,644
Undistributed investment income--net ......................... $ 3,524,872
Accumulated realized capital losses--net ..................... (31,540,699)
Unrealized appreciation--net ................................. 2,211,065
-------------
Total accumulated losses--net ................................ (25,804,762)
-------------
Total capital--Equivalent to $13.40 net asset value per
share of Common Stock (market price--$13.27) ................ $ 273,381,853
=============
See Notes to Financial Statements.
MUNIASSETS FUND, INC. MAY 31, 2005 11
Statement of Operations
For the Year Ended May 31, 2005
========================================================================================================================
Investment Income
------------------------------------------------------------------------------------------------------------------------
Interest ..................................................... $ 18,361,106
========================================================================================================================
Expenses
------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ..................................... $ 1,447,637
Accounting services .......................................... 93,581
Transfer agent fees .......................................... 50,687
Professional fees ............................................ 47,937
Printing and shareholder reports ............................. 46,384
Listing fees ................................................. 19,117
Directors' fees and expenses ................................. 18,549
Pricing fees ................................................. 15,865
Custodian fees ............................................... 15,562
Other ........................................................ 19,975
-------------
Total expenses ............................................... 1,775,294
-------------
Investment income--net ....................................... 16,585,812
-------------
========================================================================================================================
Realized & Unrealized Gain (Loss)--Net
------------------------------------------------------------------------------------------------------------------------
Realized loss on investments--net ............................ (37,012)
Change in unrealized appreciation/depreciation on
investments--net ............................................ 21,092,669
-------------
Total realized and unrealized gain--net ...................... 21,055,657
-------------
Net Increase in Net Assets Resulting from Operations ......... $ 37,641,469
=============
See Notes to Financial Statements.
12 MUNIASSETS FUND, INC. MAY 31, 2005
Statements of Changes in Net Assets
For the Year Ended
May 31,
-------------------------------
Increase (Decrease) in Net Assets: 2005 2004
========================================================================================================================
Operations
------------------------------------------------------------------------------------------------------------------------
Investment income--net ....................................... $ 16,585,812 $ 16,864,937
Realized loss--net ........................................... (37,012) (5,384,520)
Change in unrealized appreciation/depreciation--net .......... 21,092,669 13,149,431
-------------------------------
Net increase in net assets resulting from operations ......... 37,641,469 24,629,848
-------------------------------
========================================================================================================================
Dividends & Distributions to Shareholders
------------------------------------------------------------------------------------------------------------------------
Investment income--net ....................................... (16,462,568) (15,993,376)
Realized gain--net ........................................... -- (104,855)
-------------------------------
Net decrease in net assets resulting from dividends and
distributions to Common Stock shareholders .................. (16,462,568) (16,098,231)
-------------------------------
========================================================================================================================
Net Assets
------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ................................. 21,178,901 8,531,617
Beginning of year ............................................ 252,202,952 243,671,335
-------------------------------
End of year* ................................................. $ 273,381,853 $ 252,202,952
===============================
* Undistributed investment income--net .................... $ 3,524,872 $ 3,401,628
===============================
See Notes to Financial Statements.
MUNIASSETS FUND, INC. MAY 31, 2005 13
Financial Highlights
For the Year Ended May 31,
The following per share data and ratios have been derived --------------------------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ........ $ 12.36 $ 11.94 $ 12.55 $ 12.96 $ 12.76
--------------------------------------------------------------------
Investment income--net .................... .81+ .83+ .81+ .79 .83
Realized and unrealized gain (loss)--net .. 1.04 .38 (.64) (.41) .19
--------------------------------------------------------------------
Total from investment operations .......... 1.85 1.21 .17 .38 1.02
--------------------------------------------------------------------
Less dividends and distributions:
Investment income--net ................. (.81) (.78) (.78) (.79) (.82)
Realized gain--net ..................... -- (.01) -- -- --
--------------------------------------------------------------------
Total dividends and distributions ......... (.81) (.79) (.78) (.79) (.82)
--------------------------------------------------------------------
Net asset value, end of year .............. $ 13.40 $ 12.36 $ 11.94 $ 12.55 $ 12.96
====================================================================
Market price per share, end of year ....... $ 13.27 $ 11.38 $ 11.91 $ 11.66 $ 13.00
====================================================================
===================================================================================================================================
Total Investment Return*
-----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ........ 15.65% 10.74% 1.61% 3.30% 8.58%
====================================================================
Based on market price per share ........... 24.39% 2.22% 9.09% (4.32%) 24.22%
====================================================================
===================================================================================================================================
Ratios to Average Net Assets
-----------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding reorganization expenses .67% .67% .78% .74% .76%
====================================================================
Expenses .................................. .67% .67% .78% .83% .76%
====================================================================
Investment income--net .................... 6.30% 6.71% 6.76% 6.16% 6.44%
====================================================================
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) .... $273,382 $252,203 $243,671 $255,150 $135,448
====================================================================
Portfolio turnover ........................ 19.67% 19.14% 26.98% 20.07% 17.11%
====================================================================
* 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
charges.
+ Based on average shares outstanding.
See Notes to Financial Statements.
14 MUNIASSETS FUND, INC. MAY 31, 2005
Notes to Financial Statements
1. Significant Accounting Policies:
MuniAssets Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as amended, as a non-diversified, closed-end management investment
company. The Fund's financial statements are prepared in conformity with U.S.
generally accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. The Fund determines and makes available for publication the net asset
value of its Common Stock on a daily basis. The Fund's Common Stock shares are
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 ("OTC") markets and are valued at the last available bid price
in the OTC market or on the basis of values as obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer-supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the general direction
of the Board of Directors. Such valuations and procedures are reviewed
periodically by the Board of Directors of the Fund. 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 OTC market, valuation is the last asked price
(options written) or the last bid price (options purchased). Swap agreements are
valued by quoted fair values received daily by the Fund's pricing service.
Short- term investments with a remaining maturity of 60 days or less are valued
at amortized cost, which approximates market value, under which method the
investment is valued at cost and any premium or discount is amortized on a
straight line basis to maturity. Investments in open-end investment companies
are valued at their net asset value each business day. Securities and other
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.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
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. 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 may 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.
o Forward interest rate swaps -- The Fund may enter into forward interest
rate swaps. In a forward interest rate swap, the Fund and the counterparty
agree to make periodic net payments on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. The value of the agreement is determined by quoted fair values
received daily by the Fund from the counterparty. When the agreement is
closed, the Fund records a realized gain or loss in an amount equal to the
value of the agreement.
MUNIASSETS FUND, INC. MAY 31, 2005 15
Notes to Financial Statements (concluded)
(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).
Realized gains and losses on security transactions are determined on the
identified cost basis. Interest income is recognized on the accrual basis. The
Fund amortizes all premiums and discounts on debt securities.
(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.
For the year ended May 31, 2005, the Fund reimbursed FAM $5,717 for certain
accounting services.
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, 2005, were $50,628,079 and $51,960,935, respectively.
4. Common Stock Transactions:
At May 31, 2005, the Fund had one class of shares of Common Stock, par value
$.10 per share, of which 200,000,000 shares were authorized.
5. Distributions to Shareholders:
The Fund paid a tax-exempt income dividend to holders of Common Stock in the
amount of $.069000 per share on June 29, 2005 to shareholders of record on June
14, 2005.
The tax character of distributions paid during the fiscal years ended May 31,
2005 and May 31, 2004 was as follows:
--------------------------------------------------------------------------------
5/31/2005 5/31/2004
--------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income .................. $16,462,568 $15,993,376
Ordinary Income .................... -- 104,855
--------------------------------
Total distributions .................. $16,462,568 $16,098,231
================================
As of May 31, 2005, the components of accumulated losses on a tax basis were as
follows:
-----------------------------------------------------------------------------
Undistributed tax-exempt income -- net ................... $ 3,826,072
Undistributed long-term capital gains -- net ............. --
------------
Total undistributed earnings -- net ...................... 3,826,072
Capital loss carryforward ................................ (31,361,746)*
Unrealized gains -- net .................................. 1,730,912**
------------
Total accumulated losses -- net .......................... $(25,804,762)
============
* On May 31, 2005, the Fund had a net capital loss carryforward of
$31,361,746, of which $2,052,069 expires in 2007, $6,860,553 expires in
2008, $3,487,083 expires in 2009, $2,260,830 expires in 2010, $7,452,325
expires in 2011, $5,486,273 expires in 2012 and $3,762,613 expires in
2013. This amount will be available to offset like amounts of any future
taxable gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on straddles, the
difference between book and tax amortization methods for premiums and
discounts on fixed income securities, the deferral of post-October capital
losses for tax purposes and the book/tax differences in the accrual of
income on securities in default.
16 MUNIASSETS FUND, INC. MAY 31, 2005
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
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,
2005, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal controls over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purposes
of expressing an opinion on the effectiveness of the Fund's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of May 31, 2005, by correspondence with the custodian. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
MuniAssets Fund, Inc. as of May 31, 2005, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and its financial highlights for each of the five years in
the period then ended, in conformity with U.S. generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
July 15, 2005
Fund Certification (unaudited)
In September 2004, the Fund filed its Chief Executive Officer Certification for
the prior year with the New York Stock Exchange pursuant to Section 303A. 12(a)
of the New York Stock Exchange Corporate Governance Listing Standards.
The Fund's Chief Executive Officer and Chief Financial Officer Certifications
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 were filed with the
Fund's Form N-CSR and are available on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
Important Tax Information (unaudited)
All of the net investment income distributions paid monthly by MuniAssets Fund,
Inc. during the taxable year ended May 31, 2005 qualify as tax-exempt interest
dividends for federal income tax purposes.
MUNIASSETS FUND, INC. MAY 31, 2005 17
Automatic Dividend Reinvestment Plan
The following description of the Fund's Automatic Dividend Reinvestment Plan
(the "Plan") is sent to you annually as required by federal securities laws.
Pursuant to the Fund's Plan, unless a holder of Common Stock otherwise elects,
all dividend and capital gains distributions will be automatically reinvested by
The Bank of New York (the "Plan Agent"), as agent for shareholders in
administering the Plan, in additional shares of Common Stock of the Fund.
Holders of Common Stock who elect not to participate in the Plan will receive
all distributions in cash paid by check mailed directly to the shareholder of
record (or, if the shares are held in street or other nominee name then to such
nominee) by The Bank of New York, as dividend paying agent. Such participants
may elect not to participate in the Plan and to receive all distributions of
dividends and capital gains in cash by sending written instructions to The Bank
of New York, as dividend paying agent, at the address set forth below.
Participation in the Plan is completely voluntary and may be terminated or
resumed at any time without penalty by written notice if received by the Plan
Agent not less than ten days prior to any dividend record date; otherwise such
termination will be effective with respect to any subsequently declared dividend
or distribution.
Whenever the Fund declares an income dividend or capital gains distribution
(collectively referred to as "dividends") payable either in shares or in cash,
non-participants in the Plan will receive cash and participants in the Plan will
receive the equivalent in shares of Common Stock. The shares will be acquired by
the Plan Agent for the participant's account, depending upon the circumstances
described below, either (i) through receipt of additional unissued but
authorized shares of Common Stock from the Fund ("newly issued shares") or (ii)
by purchase of outstanding shares of Common Stock on the open market
("open-market purchases") on the New York Stock Exchange or elsewhere. If, on
the payment date for the dividend, the net asset value per share of the Common
Stock is equal to or less than the market price per share of the Common Stock
plus estimated brokerage commissions (such conditions being referred to herein
as "market premium"), the Plan Agent will invest the dividend amount in newly
issued shares on behalf of the participant. The number of newly issued shares of
Common Stock to be credited to the participant's account will be determined by
dividing the dollar amount of the dividend by the net asset value per share on
the date the shares are issued, provided that the maximum discount from the then
current market price per share on the date of issuance may not exceed 5%. If, on
the dividend payment date, the net asset value per share is greater than the
market value (such condition being referred to herein as "market discount"), the
Plan Agent will invest the dividend amount in shares acquired on behalf of the
participant in open-market purchases.
In the event of a market discount on the dividend payment date, the Plan Agent
will have until the last business day before the next date on which the shares
trade on an "ex- dividend" basis or in no event more than 30 days after the
dividend payment date (the "last purchase date") to invest the dividend amount
in shares acquired in open-market purchases. It is contemplated that the Fund
will pay monthly income dividends. Therefore, the period during which
open-market purchases can be made will exist only from the payment date on the
dividend through the date before the next "ex-dividend" date, which typically
will be approximately ten days. If, before the Plan Agent has completed its
open-market purchases, the market price of a share of Common Stock exceeds the
net asset value per share, the average per share purchase price paid by the Plan
Agent may exceed the net asset value of the Fund's shares, resulting in the
acquisitions of fewer shares than if the dividend had been paid in newly issued
shares on the dividend payment date. Because of the foregoing difficulty with
respect to open-market purchases, the Plan provides that if the Plan Agent is
unable to invest the full dividend amount in open-market purchases during the
purchase period or if the market discount shifts to a market premium during the
purchase period, the Plan Agent will cease making open-market purchases and will
invest the uninvested portion of the dividend amount in newly issued shares at
the close of business on the last purchase date determined by dividing the
uninvested portion of the dividend by the net asset value per share.
The Plan Agent maintains all shareholders' accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent in non-certificated form in the name
of the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan. The Plan Agent will forward all
proxy solicitation materials to participants and vote proxies for shares held
pursuant to the Plan in accordance with the instructions of the participants.
18 MUNIASSETS FUND, INC. MAY 31, 2005
In the case of shareholders such as banks, brokers or nominees which hold shares
of others who are the beneficial owners, the Plan Agent will administer the Plan
on the basis of the number of shares certified from time to time by the record
shareholders as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who are to
participate in the Plan.
There will be no brokerage charges with respect to shares issued directly by the
Fund as a result of dividends or capital gains distributions payable either in
shares or in cash. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open-market
purchases in connection with the reinvestment of dividends.
The automatic reinvestment of dividends and distributions will not relieve
participants of any federal, state or local income tax that may be payable (or
required to be withheld) on such dividends.
Shareholders participating in the Plan may receive benefits not available to
shareholders not participating in the Plan. If the market price plus commissions
of the Fund's shares is above the net asset value, participants in the Plan will
receive shares of the Fund at less than they could otherwise purchase them and
will have shares with a cash value greater than the value of any cash
distribution they would have received on their shares. If the market price plus
commissions is below the net asset value, participants will receive
distributions in shares with a net asset value greater than the value of any
cash distribution they would have received on their shares. However, there may
be insufficient shares available in the market to make distributions in shares
at prices below the net asset value. Also, since the Fund does not redeem
shares, the price on resale may be more or less than the net asset value.
The value of shares acquired pursuant to the Plan will generally be excluded
from gross income to the extent that the cash amount reinvested would be
excluded from gross income. If, when the Fund's shares are trading at a premium
over net asset value, the Fund issues shares pursuant to the Plan that have a
greater fair market value than the amount of cash reinvested, it is possible
that all or a portion of such discount (which may not exceed 5% of the fair
market value of the Fund's shares) could be viewed as a taxable distribution. If
the discount is viewed as a taxable distribution, it is also possible that the
taxable character of this discount would be allocable to all the shareholders,
including shareholders who do not participate in the Plan. Thus, shareholders
who do not participate in the Plan might be required to report as ordinary
income a portion of their distributions equal to their allocable share of the
discount.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants in the Plan; however, the Fund reserves the right
to amend the Plan to include a service charge payable by the participants.
All correspondence concerning the Plan should be directed to the Plan Agent at
The Bank of New York, Church Street Station, P.O. Box 11258, New York, NY
10286-1258, Telephone: 800-432-8224.
MUNIASSETS FUND, INC. MAY 31, 2005 19
Officers and Directors
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Interested Director
------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 President 2005 to President of the MLIM/FAM-advised funds since 2005; 125 Funds None
Doll, Jr.* Princeton, NJ and present President of MLIM and FAM since 2001; Co-Head 169 Portfolios
08543-9011 Director (Americas Region) thereof from 2000 to 2001 and
Age: 50 Senior Vice President from 1999 to 2001; President
and Director of Princeton Services, Inc. ("Princeton
Services") since 2001; President of Princeton
Administrators, L.P. ("Princeton Administrators")
since 2001; Chief Investment Officer of Oppenheimer
Funds, Inc. in 1999 and Executive Vice President
thereof from 1991 to 1999.
------------------------------------------------------------------------------------------------------------------------
* Mr. Doll is a director, trustee or member of an advisory board of certain other investment companies for which MLIM or
FAM acts as investment adviser. Mr. Doll is an "interested person," as defined in the Investment Company Act, of the
Fund based on his current positions with MLIM, FAM, Princeton Services and Princeton Administrators. Directors serve
until their resignation, removal or death, or until December 31 of the year in which they turn 72. As Fund President,
Mr. Doll serves at the pleasure of the Board of Directors.
====================================================================================================================================
Independent Directors*
------------------------------------------------------------------------------------------------------------------------------------
James H. P.O. Box 9095 Director 2002 to Director, The China Business Group, Inc. since 38 Funds None
Bodurtha Princeton, NJ present 1996 and Executive Vice President thereof from 55 Portfolios
08543-9095 1996 to 2003; Chairman of the Board, Berkshire
Age: 61 Holding Corporation since 1980; Partner, Squire,
Sanders & Dempsey from 1980 to 1993.
------------------------------------------------------------------------------------------------------------------------------------
Joe Grills P.O. Box 9095 Director 1994 to Member of the Committee of Investment of 38 Funds Kimco
Princeton, NJ present Employee Benefit Assets of the Association of 55 Portfolios Realty
08543-9095 Financial Professionals ("CIEBA") since 1986; Corporation
Age: 70 Member of CIEBA's Executive Committee since 1988
and its Chairman from 1991 to 1992; Assistant
Treasurer of International Business Machines
Corporation ("IBM") and Chief Investment Officer
of IBM Retirement Funds from 1986 to 1993;
Member of the Investment Advisory Committee of
the State of New York Common Retirement Fund
since 1989; Member of the Investment Advisory
Committee of the Howard Hughes Medical Institute
from 1997 to 2000; Director, Duke University
Management Company from 1992 to 2004, Vice
Chairman thereof from 1998 to 2004 and Director
Emeritus thereof since 2004; Director, LaSalle
Street Fund from 1995 to 2001; Director, Kimco
Realty Corporation since 1997; Member of the
Investment Advisory Committee of the Virginia
Retirement System since 1998; Vice Chairman
thereof from 2002 to 2005 and Chairman thereof
since 2005; Director, Montpelier Foundation
since 1998 and its Vice Chairman since 2000;
Member of the Investment Committee of the
Woodberry Forest School since 2000; Member of
the Investment Committee of the National Trust
for Historic Preservation since 2000.
20 MUNIASSETS FUND, INC. MAY 31, 2005
Officers and Directors (continued)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Independent Directors* (concluded)
------------------------------------------------------------------------------------------------------------------------------------
Herbert I. P.O. Box 9095 Director 2002 to John M. Olin Professor of Humanities, New York 38 Funds None
London Princeton, NJ present University since 1993 and Professor thereof since 55 Portfolios
08543-9095 1980; President, Hudson Institute since 1997
Age: 66 and Trustee thereof since 1980; Dean, Gallatin
Division of New York University from 1976 to 1993;
Distinguished Fellow, Herman Kahn Chair, Hudson
Institute from 1984 to 1985; Director, Damon Corp.
from 1991 to 1995; Overseer, Center for Naval
Analyses from 1983 to 1993.
------------------------------------------------------------------------------------------------------------------------------------
Roberta P.O. Box 9095 Director 2002 to Shareholder, Modrall, Sperling, Roehl, Harris & 38 Funds None
Cooper Princeton, NJ present Sisk, P.A. since 1993; President, American Bar 55 Portfolios
Ramo 08543-9095 Association from 1995 to 1996 and Member of
Age: 62 the Board of Governors thereof from 1994 to 1997;
Shareholder, Poole, Kelly & Ramo, Attorneys at Law,
P.C. from 1977 to 1993; Director, ECMC Group
(service provider to students, schools and lenders)
since 2001; Director, United New Mexico Bank
(now Wells Fargo) from 1983 to 1988; Director,
First National Bank of New Mexico (now Wells
Fargo) from 1975 to 1976; Vice President, American
Law Institute since 2004.
------------------------------------------------------------------------------------------------------------------------------------
Robert S. P.O. Box 9095 Director 1996 to Principal of STI Management (investment adviser) 38 Funds None
Salomon, Princeton, NJ present since 1994; Chairman and CEO of Salomon Brothers 55 Portfolios
Jr. 08543-9095 Asset Management from 1992 to 1995; Chairman
Age: 68 of Salomon Brothers Equity Mutual Funds from
1992 to 1995; regular columnist with Forbes
Magazine from 1992 to 2002; Director of Stock
Research and U.S. Equity Strategist at Salomon
Brothers Inc. from 1975 to 1991; Trustee,
Commonfund from 1980 to 2001.
------------------------------------------------------------------------------------------------------------------------------------
Stephen B. P.O. Box 9095 Director 1993 to Chairman of Fernwood Associates, Inc. (investment 39 Funds None
Swensrud Princeton, NJ present adviser) since 1996; Principal, Fernwood Associates 56 Portfolios
08543-9095 (financial consultants) since 1975; Chairman of
Age: 71 R.P.P. Corporation (manufacturing company)
since 1978; Director of International Mobile
Communications, Incorporated (telecommunications)
since 1998.
------------------------------------------------------------------------------------------------------------------------
* Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
MUNIASSETS FUND, INC. MAY 31, 2005 21
Officers and Directors (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1993 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999 and Director
08543-9011 and and 1999 since 2004; Vice President of FAM Distributors, Inc. ("FAMD") since 1999; Vice
Age: 45 Treasurer to President of MLIM and FAM from 1990 to 1997; Director of Taxation of MLIM from
present 1990 to 2001; Vice President, Treasurer and Secretary of the IQ Funds since 2004.
------------------------------------------------------------------------------------------------------------------------------------
Kenneth A. P.O. Box 9011 Senior 2003 to Managing Director of MLIM since 2000; Director (Tax-Exempt Fund Management) of
Jacob Princeton, NJ Vice present MLIM from 1997 to 2000.
08543-9011 President
Age: 54
------------------------------------------------------------------------------------------------------------------------------------
John M. P.O. Box 9011 Senior 2003 to Managing Director of MLIM since 2000; Director (Tax-Exempt Fund Management) of
Loffredo Princeton, NJ Vice present MLIM from 1997 to 2000.
08543-9011 President
Age: 41
------------------------------------------------------------------------------------------------------------------------------------
Theodore R. P.O. Box 9011 Vice 1997 to Managing Director of MLIM since 2005; Director (Municipal Tax-Exempt Fund
Jaeckel Jr. Princeton, NJ President present Management) of MLIM since 1997; Vice President of MLIM since 1991.
08543-9011
Age: 45
------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President and
Hiller Princeton, NJ Compliance present Chief Compliance Officer of MLIM (Americas Region) since 2004; Chief Compliance
08543-9011 Officer Officer of the IQ Funds since 2004; Global Director of Compliance at Morgan Stanley
Age: 53 Investment Management from 2002 to 2004; Managing Director and Global Director of
Compliance at Citigroup Asset Management from 2000 to 2002; Chief Compliance
Officer at Soros Fund Management in 2000; Chief Compliance Officer at Prudential
Financial from 1995 to 2000; Senior Counsel in the Commission's Division of
Enforcement in Washington, D.C. from 1990 to 1995.
------------------------------------------------------------------------------------------------------------------------------------
Alice A. P.O. Box 9011 Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from 1999 to
Pellegrino Princeton, NJ present 2002; Attorney associated with MLIM since 1997; Secretary of MLIM, FAM, FAMD and
08543-9011 Princeton Services since 2004.
Age: 45
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors.
------------------------------------------------------------------------------------------------------------------------------------
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
The Bank of New York
101 Barclay Street -- 11 East
New York, NY 10286
NYSE Symbol
MUA
22 MUNIASSETS FUND, INC. MAY 31, 2005
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions. When you
visit this site, you will obtain a personal identification number (PIN). You
will need this PIN should you wish to update your e-mail address, choose to
discontinue this service and/or make any other changes to the service. This
service is not available for certain retirement accounts at this time.
MUNIASSETS FUND, INC. MAY 31, 2005 23
[LOGO] Merrill Lynch Investment Managers
www.mlim.ml.com
--------------------------------------------------------------------------------
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
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.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
MuniAssets Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
#16716 -- 5/05
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of the
end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial officer
and principal accounting officer, or persons performing similar
functions. A copy of the code of ethics is available without charge
upon request by calling toll-free 1-800-MER-FUND (1-800-637-3863).
Item 3 - Audit Committee Financial Expert - The registrant's board of directors
has determined that (i) the registrant has the following audit
committee financial experts serving on its audit committee and (ii)
each audit committee financial expert is independent: (1) Joe Grills,
(2) Andre F. Perold (resigned as of October 1, 2004), (3) Robert S.
Salomon, Jr., and (4) Stephen B. Swensrud.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending May 31, 2005 - $27,500
Fiscal Year Ending May 31, 2004 - $26,000
(b) Audit-Related Fees - Fiscal Year Ending May 31, 2005 - $0
Fiscal Year Ending May 31, 2004 - $0
(c) Tax Fees - Fiscal Year Ending May 31, 2005 - $5,700
Fiscal Year Ending May 31, 2004 - $5,610
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending May 31, 2005 - $0
Fiscal Year Ending May 31, 2004 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval"). However, such
services will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any proposed
services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject
to general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending May 31, 2005 - $9,030,943
Fiscal Year Ending May 31, 2004 - $16,581,086
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals are
members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act (15 U.S.C. 78c(a)(58)(A)):
James H. Bodurtha
Joe Grills
Herbert I. London
Andre F. Perold (resigned as of October 1, 2004)
Roberta Cooper Ramo
Robert S. Solomon, Jr.
Stephen B. Swensrud
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Proxy Voting Policies and Procedures
Each Fund's Board of Directors/Trustees has delegated to Merrill Lynch
Investment Managers, L.P. and/or Fund Asset Management, L.P. (the
"Investment Adviser") authority to vote all proxies relating to the
Fund's portfolio securities. The Investment Adviser has adopted
policies and procedures ("Proxy Voting Procedures") with respect to the
voting of proxies related to the portfolio securities held in the
account of one or more of its clients, including a Fund. Pursuant to
these Proxy Voting Procedures, the Investment Adviser's primary
objective when voting proxies is to make proxy voting decisions solely
in the best interests of each Fund and its shareholders, and to act in
a manner that the Investment Adviser believes is most likely to enhance
the economic value of the securities held by the Fund. The Proxy Voting
Procedures are designed to ensure that the Investment Adviser considers
the interests of its clients, including the Funds, and not the
interests of the Investment Adviser, when voting proxies and that real
(or perceived) material conflicts that may arise between the Investment
Adviser's interest and those of the Investment Adviser's clients are
properly addressed and resolved.
In order to implement the Proxy Voting Procedures, the Investment
Adviser has formed a Proxy Voting Committee (the "Committee"). The
Committee is comprised of the Investment Adviser's Chief Investment
Officer (the "CIO"), one or more other senior investment professionals
appointed by the CIO, portfolio managers and investment analysts
appointed by the CIO and any other personnel the CIO deems appropriate.
The Committee will also include two non-voting representatives from the
Investment Adviser's Legal department appointed by the Investment
Adviser's General Counsel. The Committee's membership shall be limited
to full-time employees of the Investment Adviser. No person with any
investment banking, trading, retail brokerage or research
responsibilities for the Investment Adviser's affiliates may serve as a
member of the Committee or participate in its decision making (except
to the extent such person is asked by the Committee to present
information to the Committee, on the same basis as other interested
knowledgeable parties not affiliated with the Investment Adviser might
be asked to do so). The Committee determines how to vote the proxies of
all clients, including a Fund, that have delegated proxy voting
authority to the Investment Adviser and seeks to ensure that all votes
are consistent with the best interests of those clients and are free
from unwarranted and inappropriate influences. The Committee
establishes general proxy voting policies for the Investment Adviser
and is responsible for determining how those policies are applied to
specific proxy votes, in light of each issuer's unique structure,
management, strategic options and, in certain circumstances, probable
economic and other anticipated consequences of alternate actions. In so
doing, the Committee may determine to vote a particular proxy in a
manner contrary to its generally stated policies. In addition, the
Committee will be responsible for ensuring that all reporting and
recordkeeping requirements related to proxy voting are fulfilled.
The Committee may determine that the subject matter of a recurring
proxy issue is not suitable for general voting policies and requires a
case-by-case determination. In such cases, the Committee may elect not
to adopt a specific voting policy applicable to that issue. The
Investment Adviser believes that certain proxy voting issues require
investment analysis - such as approval of mergers and other significant
corporate transactions - akin to investment decisions, and are,
therefore, not suitable for general guidelines. The Committee may elect
to adopt a common position for the Investment Adviser on certain proxy
votes that are akin to investment decisions, or determine to permit the
portfolio manager to make individual decisions on how best to maximize
economic value for a Fund (similar to normal buy/sell investment
decisions made by such portfolio managers). While it is expected that
the Investment Adviser will generally seek to vote proxies over which
the Investment Adviser exercises voting authority in a uniform manner
for all the Investment Adviser's clients, the Committee, in conjunction
with a Fund's portfolio manager, may determine that the Fund's specific
circumstances require that its proxies be voted differently.
To assist the Investment Adviser in voting proxies, the Committee has
retained Institutional Shareholder Services ("ISS"). ISS is an
independent adviser that specializes in providing a variety of
fiduciary-level proxy-related services to institutional investment
managers, plan sponsors, custodians, consultants, and other
institutional investors. The services provided to the Investment
Adviser by ISS include in-depth research, voting recommendations
(although the Investment Adviser is not obligated to follow such
recommendations), vote execution, and recordkeeping. ISS will also
assist the Fund in fulfilling its reporting and recordkeeping
obligations under the Investment Company Act.
The Investment Adviser's Proxy Voting Procedures also address special
circumstances that can arise in connection with proxy voting. For
instance, under the Proxy Voting Procedures, the Investment Adviser
generally will not seek to vote proxies related to portfolio securities
that are on loan, although it may do so under certain circumstances. In
addition, the Investment Adviser will vote proxies related to
securities of foreign issuers only on a best efforts basis and may
elect not to vote at all in certain countries where the Committee
determines that the costs associated with voting generally outweigh the
benefits. The Committee may at any time override these general policies
if it determines that such action is in the best interests of a Fund.
From time to time, the Investment Adviser may be required to vote proxies in
respect of an issuer where an affiliate of the Investment Adviser (each, an
"Affiliate"), or a money management or other client of the Investment Adviser
(each, a "Client") is involved. The Proxy Voting Procedures and the Investment
Adviser's adherence to those procedures are designed to address such conflicts
of interest. The Committee intends to strictly adhere to the Proxy Voting
Procedures in all proxy matters, including matters involving Affiliates and
Clients. If, however, an issue representing a non-routine matter that is
material to an Affiliate or a widely known Client is involved such that the
Committee does not reasonably believe it is able to follow its guidelines (or if
the particular proxy matter is not addressed by the guidelines) and vote
impartially, the Committee may, in its discretion for the purposes of ensuring
that an independent determination is reached, retain an independent fiduciary to
advise the Committee on how to vote or to cast votes on behalf of the Investment
Adviser's clients.
In the event that the Committee determines not to retain an independent
fiduciary, or it does not follow the advice of such an independent
fiduciary, the powers of the Committee shall pass to a subcommittee,
appointed by the CIO (with advice from the Secretary of the Committee),
consisting solely of Committee members selected by the CIO. The CIO
shall appoint to the subcommittee, where appropriate, only persons
whose job responsibilities do not include contact with the Client and
whose job evaluations would not be affected by the Investment Adviser's
relationship with the Client (or failure to retain such relationship).
The subcommittee shall determine whether and how to vote all proxies on
behalf of the Investment Adviser's clients or, if the proxy matter is,
in their judgment, akin to an investment decision, to defer to the
applicable portfolio managers, provided that, if the subcommittee
determines to alter the Investment Adviser's normal voting guidelines
or, on matters where the Investment Adviser's policy is case-by-case,
does not follow the voting recommendation of any proxy voting service
or other independent fiduciary that may be retained to provide research
or advice to the Investment Adviser on that matter, no proxies relating
to the Client may be voted unless the Secretary, or in the Secretary's
absence, the Assistant Secretary of the Committee concurs that the
subcommittee's determination is consistent with the Investment
Adviser's fiduciary duties
In addition to the general principles outlined above, the Investment
Adviser has adopted voting guidelines with respect to certain recurring
proxy issues that are not expected to involve unusual circumstances.
These policies are guidelines only, and the Investment Adviser may
elect to vote differently from the recommendation set forth in a voting
guideline if the Committee determines that it is in a Fund's best
interest to do so. In addition, the guidelines may be reviewed at any
time upon the request of a Committee member and may be amended or
deleted upon the vote of a majority of Committee members present at a
Committee meeting at which there is a quorum.
The Investment Adviser has adopted specific voting guidelines with
respect to the following proxy issues:
o Proposals related to the composition of the Board of Directors of issuers
other than investment companies. As a general matter, the Committee
believes that a company's Board of Directors (rather than shareholders) is
most likely to have access to important, nonpublic information regarding a
company's business and prospects, and is therefore best-positioned to set
corporate policy and oversee management. The Committee, therefore,
believes that the foundation of good corporate governance is the election
of qualified, independent corporate directors who are likely to diligently
represent the interests of shareholders and oversee management of the
corporation in a manner that will seek to maximize shareholder value over
time. In individual cases, the Committee may look at a nominee's history
of representing shareholder interests as a director of other companies or
other factors, to the extent the Committee deems relevant.
o Proposals related to the selection of an issuer's independent auditors. As
a general matter, the Committee believes that corporate auditors have a
responsibility to represent the interests of shareholders and provide an
independent view on the propriety of financial reporting decisions of
corporate management. While the Committee will generally defer to a
corporation's choice of auditor, in individual cases, the Committee may
look at an auditors' history of representing shareholder interests as
auditor of other companies, to the extent the Committee deems relevant.
o Proposals related to management compensation and employee benefits. As a
general matter, the Committee favors disclosure of an issuer's
compensation and benefit policies and opposes excessive compensation, but
believes that compensation matters are normally best determined by an
issuer's board of directors, rather than shareholders. Proposals to
"micro-manage" an issuer's compensation practices or to set arbitrary
restrictions on compensation or benefits will, therefore, generally not be
supported.
o Proposals related to requests, principally from management, for approval
of amendments that would alter an issuer's capital structure. As a general
matter, the Committee will support requests that enhance the rights of
common shareholders and oppose requests that appear to be unreasonably
dilutive.
o Proposals related to requests for approval of amendments to an issuer's
charter or by-laws. As a general matter, the Committee opposes poison pill
provisions.
o Routine proposals related to requests regarding the formalities of
corporate meetings.
o Proposals related to proxy issues associated solely with holdings of
investment company shares. As with other types of companies, the Committee
believes that a fund's Board of Directors (rather than its shareholders)
is best-positioned to set fund policy and oversee management. However, the
Committee opposes granting Boards of Directors authority over certain
matters, such as changes to a fund's investment objective, that the
Investment Company Act envisions will be approved directly by
shareholders.
o Proposals related to limiting corporate conduct in some manner that
relates to the shareholder's environmental or social concerns. The
Committee generally believes that annual shareholder meetings are
inappropriate forums for discussion of larger social issues, and opposes
shareholder resolutions "micromanaging" corporate conduct or requesting
release of information that would not help a shareholder evaluate an
investment in the corporation as an economic matter. While the Committee
is generally supportive of proposals to require corporate disclosure of
matters that seem relevant and material to the economic interests of
shareholders, the Committee is generally not supportive of proposals to
require disclosure of corporate matters for other purposes.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable at this time
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the second fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MuniAssets Fund, Inc.
By: /s/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniAssets Fund, Inc.
Date: July 15, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniAssets Fund, Inc.
Date: July 15, 2005
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
MuniAssets Fund, Inc.
Date: July 15, 2005