UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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: 05/31/06
Date of reporting period: 06/01/05 - 11/30/05
Item 1 - Report to Stockholders
MuniAssets
Fund, Inc.
Semi-Annual Report
November 30, 2005
MuniAssets Fund, Inc.
Portfolio Information as of November 30, 2005
Percent of
Quality Ratings by Total
S&P/Moody's Investments
--------------------------------------------------------------------------------
AAA/Aaa ............................................................. 1.9%
A/A ................................................................. 1.9
BBB/Baa ............................................................. 20.2
BB/Ba ............................................................... 20.2
B/B ................................................................. 6.6
CCC/Caa ............................................................. 3.3
NR (Not Rated) ...................................................... 44.0
Other* .............................................................. 1.9
--------------------------------------------------------------------------------
* Includes portfolio holdings in variable rate demand notes, bond
anticipation notes and short-term investments.
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 November 30, 2005, none of the Fund's total
net assets were invested in inverse floaters.
2 MUNIASSETS FUND, INC. NOVEMBER 30, 2005
A Letter From the President
Dear Shareholder
As the financial markets continued to muddle their way through 2005, the Federal
Reserve Board (the Fed) advanced its monetary tightening campaign full steam
ahead. The 13th consecutive interest rate hike since June 2004 came on December
13, bringing the target federal funds rate to 4.25%. Oil prices, after reaching
record highs on more than one occasion over the past several months, moderated
somewhat by period-end, as did inflation expectations. Against this backdrop,
most major market indexes managed to post positive results for the current
reporting period:
Total Returns as of November 30, 2005 6-month 12-month
===================================================================================
U.S. equities (Standard & Poor's 500 Index) + 5.88% + 8.44%
-----------------------------------------------------------------------------------
Small-cap U.S. equities (Russell 2000 Index) +10.47 + 8.14
-----------------------------------------------------------------------------------
International equities (MSCI Europe Australasia Far East Index) +11.23 +13.25
-----------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) - 0.48 + 2.40
-----------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.36 + 3.88
-----------------------------------------------------------------------------------
High yield bonds (Credit Suisse First Boston High Yield Index) + 2.33 + 2.94
-----------------------------------------------------------------------------------
With the kick-off of the holiday shopping season, attention turned to the
consumer, who has remained resilient even amid high energy prices and rising
interest rates. Some observers surmise that a slowdown in residential real
estate may ultimately contribute to a weakening in consumer spending. At this
juncture, the outlook remains unclear.
Equity markets moved sideways for much of 2005, notwithstanding a strong rally
in the middle of the fourth quarter. Corporate earnings have continued to
surprise on the upside and company profit margins remain high, as does
productivity. On the other hand, high energy prices, more Fed interest rate
hikes, a consumer slowdown and/or the potential for slower earnings growth pose
the greatest risks to U.S. stocks. Internationally, many markets have benefited
from strong economic statistics, trade surpluses and solid finances. Emerging
markets have had a particularly strong year, partly reflecting high economic
growth rates and positive financial reforms.
The bond market continued to be characterized by a flattening yield curve. The
difference between the two-year and 10-year Treasury yield was just seven basis
points (.07%) at period-end, compared to 40 basis points six months ago and 134
basis points 12 months ago.
Navigating the financial markets can be a challenge, particularly during
uncertain times. With that in mind, we invite you to visit our online magazine
at www.mlim.ml.com/shareholdermagazine. Shareholder is a publication designed to
provide insights on investing and timely "food for thought" for investors. We
are pleased to make the magazine available online, where we are able to expand
our reach in terms of content and readership.
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. NOVEMBER 30, 2005 3
A Discussion With Your Fund's Portfolio Manager
The Fund outperformed the Lipper High Yield Municipal Debt Funds category
average for the period, as we continued our efforts to diversify the portfolio
among sectors and issuers.
Describe the recent market environment relative to municipal bonds.
Over the past six months, long-term bond yields generally rose. Bond prices,
which move opposite of yields, fell as investors focused on inflationary
pressures, especially higher energy costs in the wake of the Gulf Coast
hurricanes. A strengthening U.S. economy, which grew at a faster-than-expected
4.3% rate in the third quarter of 2005, added further to concerns.
The Federal Reserve Board (the Fed) continued to raise short-term interest rates
at each of its meetings during the period, lifting the federal funds target rate
to 4% by period-end (and to 4.25% on December 13). With short-term interest
rates increasing more than long-term rates, the yield curve continued to
flatten.
During the past six months, 10-year Treasury note yields rose 49 basis points
(.49%) to 4.49%, while 30-year U.S. Treasury yields rose 37 basis points to
4.69%. Tax-exempt bond yields exhibited a similar pattern during the period.
According to Municipal Market Data, the yield on AAA-rated issues maturing in 30
years increased 29 basis points to 4.55%, while the yield on AAA-rated issues
maturing in 10 years rose 38 basis points to 3.87%.
Historically low nominal tax-exempt bond yields continued to encourage
municipalities to issue new debt and refund outstanding, higher-couponed issues.
During the past six months, almost $207 billion in new municipal bonds was
underwritten, a 16.8% increase compared to issuance during the same six months
of 2004. Year-to-date through November 30, the volume of refunding issues
increased by more than 44% on a year-over-year basis. Refunding issues were
heavily weighted in the 10-year - 20-year maturity range, putting pressure on
intermediate tax-exempt bond yields while supporting longer-term bond prices.
Investor demand for municipal product remained positive during much of the
period. The most current statistics from the Investment Company Institute
indicate that, year-to-date through October 2005, net new cash flows into
long-term municipal bond funds exceeded $6.9 billion -- a significant
improvement from the $12.7 billion net outflow seen during the same period in
2004. Solid investor demand enabled municipal bonds to perform generally in line
with their taxable counterparts, reversing some of their recent
underperformance. We believe that attractive yield ratios relative to taxable
bonds should continue to attract both traditional and non-traditional investors
to the municipal marketplace, especially if municipal bond issuance remains
manageable.
The communities shattered by Hurricanes Katrina and Rita will require extensive
reconstruction. It is too early, however, to estimate of the amount of
tax-exempt debt that may be required to finance these efforts or assess the
overall impact on the municipal market. However, much of the rebuilding is
likely to be funded through federal loans and grants, and the reconstruction
will likely be spread over a number of years. Consequently, any new municipal
bond issuance prompted by the hurricanes is not likely to disrupt the tax-exempt
market in the near future.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended November 30, 2005, the Common Stock of MuniAssets
Fund, Inc. had net annualized yields of 6.14% and 6.02%, based on a period-end
per share net asset value of $13.44 and a per share market price of $13.72,
respectively, and $.414 per share income dividends. Over the same period, the
total investment return on the Fund's Common Stock was +3.42%, based on a change
in per share net asset value from $13.40 to $13.44, and assuming reinvestment of
all distributions.
The Fund's total return, based on net asset value, exceeded the +1.87% average
return of the Lipper High Yield Municipal Debt Funds category for the six-month
period. (Funds in this Lipper category invest at least 50% of their assets in
lower-rated municipal debt issues.) The relative outperformance is largely
attributable to our continued above-market exposure to industrial development
bonds as well as tax-backed revenue bonds, both of which benefited from the
ongoing contraction of credit spreads. In addition, our below-market exposure to
the poor-performing multi-family housing sector contributed to relative
performance. This sector historically experiences the highest default rate in
the high yield tax-exempt arena, and our underweighting versus many of our
competitors proved to be an important factor in the Fund's outperformance.
4 MUNIASSETS FUND, INC. NOVEMBER 30, 2005
A noteworthy development in the past six months was the underperformance of
airline-backed debt, a sector the Fund has overweighted and that contributed
positively to performance in prior periods. The sector has lagged recently,
largely due to bankruptcy declarations by both Delta Air Lines, Inc. and
Northwest Airlines Corporation. While the Fund had no exposure to either of
these carriers, the collateral effects of the bankruptcy filings on other
airlines, such as American Airlines, Inc. and Continental Airlines, Inc., proved
detrimental over the past six months. Nevertheless, the strong performance from
our industrial development bonds and tax-backed revenue bonds handily offset the
negative impact of our airline-related investments.
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 period?
As the market provided opportunities, we continued to trim the Fund's overweight
exposure to corporate-related debt -- the industrial development bonds that have
outperformed. In particular, we reduced positions in the chemicals, tobacco and
forest products industries. We also had started to pare back exposure to
airlines prior to the recent decline in that sector. We have placed those
efforts on hold for now as we await better times, which would allow us to exit
our airline-related investments at more attractive levels.
The six-month period also brought the early redemption of one of the Fund's most
significant holdings -- an industrial development bond backed by a full-service
agricultural company known as Conti Group. Representing approximately 2.7% of
the portfolio's net assets, the bond was one of the Fund's largest and
longest-held investments. Proceeds from the redemption were invested in the
health care and hotels and lodging sectors, both of which we find to exhibit
stable credit outlooks.
How would you characterize the Fund's position at the close of the period?
Looking ahead, we expect to make further progress in reducing our overweight
position in industrial development bonds. A recovery in the airline sector would
likely prompt renewed efforts to trim exposure there as well.
Given the extent to which credit spreads have contracted over the better part of
the past two years - three years, we are finding fewer compelling investment
opportunities in the high yield investment arena. Having said that, we continue
to use that dynamic to trim the portfolio's weaker holdings and believe we have
made significant strides in that respect over the course of the past six months.
At the same time, we continue to scour the market for suitable opportunities in
an effort to provide our shareholders with an attractive level of income and
enhance Fund returns over time.
Theodore R. Jaeckel Jr., CFA
Vice President and Portfolio Manager
December 13, 2005
MUNIASSETS FUND, INC. NOVEMBER 30, 2005 5
Schedule of Investments (in Thousands)
Face
Amount Municipal Bonds Value
===========================================================================================
Alabama--1.6%
$ 2,420 Brewton, Alabama, IDB, PCR, Refunding (Container
Corporation of America--Jefferson Smurfit Corp.
Project), 8% due 4/01/2009 $ 2,478
1,800 Sylacauga, Alabama, Health Care Authority Revenue
Bonds (Coosa Valley Medical Center), Series A, 6%
due 8/01/2035 1,806
===========================================================================================
Alaska--0.5%
1,290 Alaska Industrial Development and Export Authority
Revenue Bonds (Williams Lynxs Alaska Cargoport),
AMT, 7.80% due 5/01/2014 1,249
===========================================================================================
Arizona--6.6%
Coconino County, Arizona, Pollution Control
Corporation Revenue Refunding Bonds (Tucson
Electric Power--Navajo):
3,000 AMT, Series A, 7.125% due 10/01/2032 3,148
2,500 Series B, 7% due 10/01/2032 2,598
1,425 Maricopa County, Arizona, IDA, Education Revenue
Bonds (Arizona Charter Schools Project 1), Series A,
6.625% due 7/01/2020 1,429
1,615 Maricopa County, Arizona, IDA, M/F Housing Revenue
Bonds (Sun King Apartments Project), Series A,
6.75% due 5/01/2031 1,371
7,600 Phoenix, Arizona, IDA, Airport Facility, Revenue
Refunding Bonds (America West Airlines Inc. Project),
AMT, 6.30% due 4/01/2023 5,571
Pima County, Arizona, IDA, Education Revenue Bonds:
1,420 (Arizona Charter Schools Project), Series E,
7.25% due 7/01/2031 1,534
1,000 (Arizona Charter Schools Project II), Series A,
6.75% due 7/01/2031 1,047
1,320 Show Low, Arizona, Improvement District No. 5,
Special Assessment Bonds, 6.375% due 1/01/2015 1,366
===========================================================================================
California--2.8%
California State, Various Purpose, GO:
1,900 5.25% due 11/01/2025 2,007
1,300 5.50% due 11/01/2033 1,397
1,320 Fontana, California, Special Tax, Refunding (Community
Facilities District Number 22--Sierra), 6%
due 9/01/2034 1,382
2,620 Golden State Tobacco Securitization Corporation of
California, Tobacco Settlement Revenue Bonds,
Series B, 5.50% due 6/01/2013 (b) 2,900
===========================================================================================
Colorado--6.9%
2,000 Denver, Colorado, City and County Airport Revenue
Bonds, AMT, Series D, 7.75% due 11/15/2013 (a) 2,339
Denver, Colorado, Urban Renewal Authority, Tax
Increment Revenue Bonds (Pavilions), AMT:
2,295 7.75% due 9/01/2016 2,387
3,000 7.75% due 9/01/2017 3,117
Elk Valley, Colorado, Public Improvement Revenue
Bonds (Public Improvement Fee):
1,690 Series A, 7.10% due 9/01/2014 1,811
2,095 Series A, 7.30% due 9/01/2022 2,238
800 Series B, 7% due 9/01/2031 819
1,760 North Range, Colorado, Metropolitan District Number 1,
GO, 7.25% due 12/15/2031 1,857
2,850 Plaza Metropolitan District Number 1, Colorado, Tax
Allocation Revenue Bonds (Public Improvement
Fees), 8% due 12/01/2025 3,135
1,170 Southlands, Colorado, Medical District, GO
(Metropolitan District Number 1), 7.125%
due 12/01/2034 1,272
===========================================================================================
Connecticut--3.2%
2,350 Bridgeport, Connecticut, Senior Living Facilities
Revenue Bonds (3030 Park Retirement Community
Project), 7.25% due 4/01/2035 1,983
680 Connecticut State Development Authority, Airport
Facility Revenue Bonds (LearJet Inc. Project), AMT,
7.95% due 4/01/2026 812
3,490 Connecticut State Development Authority, IDR (AFCO
Cargo BDL-LLC Project), AMT, 8% due 4/01/2030 3,775
2,330 New Haven, Connecticut, Facility Revenue Bonds (Hill
Health Corporation Project), 9.25% due 5/01/2017 2,338
===========================================================================================
Florida--5.5%
715 Arbor Greene Community Development District,
Florida, Special Assessment Revenue Bonds,
7.60% due 5/01/2018 743
1,130 Capital Projects Finance Authority, Florida, Continuing
Care Retirement Revenue Bonds (Glenridge on
Palmer Ranch), Series A, 8% due 6/01/2032 1,248
495 Harbor Bay, Florida, Community Development District,
Capital Improvement Special Assessment Revenue
Bonds, Series A, 7% due 5/01/2033 535
2,000 Hillsborough County, Florida, IDA, Exempt Facilities
Revenue Bonds (National Gypsum Company), AMT,
Series A, 7.125% due 4/01/2030 2,222
3,255 Midtown Miami, Florida, Community Development
District, Special Assessment Revenue Bonds, Series A,
6.25% due 5/01/2037 3,447
1,180 Orlando, Florida, Greater Orlando Aviation Authority,
Airport Facilities Revenue Bonds (JetBlue Airways
Corp.), AMT, 6.375% due 11/15/2026 1,141
2,305 Orlando, Florida, Urban Community Development
District, Capital Improvement Special Assessment
Bonds, Series A, 6.95% due 5/01/2033 2,490
2,400 Santa Rosa Bay Bridge Authority, Florida, Revenue
Bonds, 6.25% due 7/01/2028 2,412
925 Waterchase, Florida, Community Development District,
Capital Improvement Revenue Bonds, Series A,
6.70% due 5/01/2032 987
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)
BAN Bond Anticipation Notes
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. NOVEMBER 30, 2005
Schedule of Investments (continued) (in Thousands)
Face
Amount Municipal Bonds Value
===========================================================================================
Georgia--3.4%
Atlanta, Georgia, Tax Allocation Bonds:
$ 3,000 (Atlantic Station Project), 7.90% due 12/01/2024 $ 3,242
590 (Eastside Project), Series B, 5.40% due 1/01/2020 601
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 1,219
1,690 7.25% due 1/01/2035 1,766
200 Burke County, Georgia, Development Authority, PCR,
Refunding (Oglethorpe Power Corporation), VRDN,
Series B, 3% due 1/01/2020 (a)(d) 200
1,060 Fulton County, Georgia, Development Authority, PCR
(General Motors Corporation), Refunding, VRDN,
6.75% due 4/01/2010 (d) 1,060
1,170 Savannah, Georgia, EDA, Revenue Bonds (Marshes of
Skidaway), First Mortgage, Series A, 7.40%
due 1/01/2034 1,226
===========================================================================================
Idaho--0.4%
1,000 Idaho Health Facilities Authority, Revenue Refunding
Bonds (Valley Vista Care Corporation), Series A,
7.75% due 11/15/2016 1,016
===========================================================================================
Illinois--7.3%
2,630 Caseyville, Illinois, Senior Tax Increment Revenue Bonds
(Forest Lakes Project), 7% due 12/30/2022 2,759
4,000 Chicago, Illinois, O'Hare International Airport, Special
Facility Revenue Refunding Bonds (American Airlines
Inc. Project), 8.20% due 12/01/2024 3,470
Illinois Development Finance Authority Revenue
Bonds (Primary Health Care Centers Facilities
Acquisition Program):
290 7.50% due 12/01/2006 295
60 7.50% due 12/01/2006 (c) 61
475 7.75% due 12/01/2006 (b) 503
2,720 7.75% due 12/01/2016 2,828
Illinois State Finance Authority Revenue Bonds:
2,950 (Clare At Water Tower Project), Series A,
6.125% due 5/15/2038 2,938
600 (Landing At Plymouth Place Project), Series A,
6% due 5/15/2037 595
685 (Primary Health Care Centers Program),
6.60% due 7/01/2024 699
1,070 Lincolnshire, Illinois, Special Service Area No. 1, Special
Tax Bonds (Sedgebrook Project), 6.25%
due 3/01/2034 1,133
2,600 Lombard, Illinois, Public Facilities Corporation, First Tier
Revenue Bonds (Conference Center and Hotel),
Series A-1, 7.125% due 1/01/2036 2,718
1,165 Naperville, Illinois, IDR (General Motors Corporation),
Refunding, VRDN, 6.75% due 12/01/2012 (d) 1,165
825 Village of Wheeling, Illinois, Revenue Bonds (North
Milwaukee/Lake-Cook Tax Increment Financing
(TIF) Redevelopment Project), 6% due 1/01/2025 811
===========================================================================================
Iowa--1.0%
2,235 Iowa Finance Authority, Health Care Facilities, Revenue
Refunding Bonds (Care Initiatives Project),
9.25% due 7/01/2025 2,717
===========================================================================================
Kansas--0.5%
1,770 Wyandotte County, Kansas, Kansas City Unified
Government Revenue Refunding Bonds (General
Motors Corporation Project), 6% due 6/01/2025 1,367
===========================================================================================
Kentucky--0.7%
2,850 Kenton County, Kentucky, Airport Board, Special
Facilities Revenue Bonds (Mesaba Aviation Inc.
Project), AMT, Series A, 6.70% due 7/01/2029 1,954
===========================================================================================
Louisiana--1.4%
1,870 Louisiana Public Facilities Authority, Hospital Revenue
Bonds (Franciscan Missionaries of Our Lady Health
System, Inc.), Series A, 5.25% due 8/15/2036 1,906
1,860 New Orleans, Louisiana, Sewer Service Revenue Notes,
BAN, 8.357% due 7/26/2006 1,795
===========================================================================================
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 1,179
===========================================================================================
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 2,031
2,500 Maryland State Energy Financing Administration,
Limited Obligation Revenue Bonds (Cogeneration --
AES Warrior Run), AMT, 7.40% due 9/01/2019 2,536
===========================================================================================
Massachusetts--1.8%
1,680 Massachusetts State Development Finance Agency,
Revenue Refunding Bonds (Eastern Nazarene
College), 5.625% due 4/01/2029 1,663
1,150 Massachusetts State Health and Educational Facilities
Authority Revenue Bonds (Jordan Hospital), Series E,
6.75% due 10/01/2033 1,248
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 2,054
===========================================================================================
Michigan--0.6%
1,635 Macomb County, Michigan, Hospital Finance Authority,
Hospital Revenue Bonds (Mount Clemens General
Hospital), Series B, 5.875% due 11/15/2034 1,654
===========================================================================================
Minnesota--0.8%
1,770 Saint Paul, Minnesota, Port Authority, Hotel Facility,
Revenue Refunding Bonds (Radisson Kellogg
Project), Series 2, 7.375% due 8/01/2029 1,845
440 Virginia, Minnesota, Housing and Redevelopment
Authority, Health Care Facility Lease Revenue
Bonds, 5.25% due 10/01/2025 449
===========================================================================================
Missouri--0.8%
Fenton, Missouri, Tax Increment Revenue Refunding and
Improvement Bonds (Gravois Bluffs):
120 6.75% due 10/01/2015 120
1,000 7% due 10/01/2021 1,070
1,000 Kansas City, Missouri, IDA, First Mortgage Health
Facilities Revenue Bonds (Bishop Spencer Place),
Series A, 6.50% due 1/01/2035 1,047
===========================================================================================
Nevada--0.2%
650 Clark County, Nevada, Improvement District No. 142
Special Assessment, 6.375% due 8/01/2023 672
===========================================================================================
New Jersey--15.6%
Camden County, New Jersey, Improvement Authority,
Lease Revenue Bonds (Holt Hauling & Warehousing),
AMT, Series A (f)(g):
5,600 9.625% due 1/01/2011 727
5,800 9.875% due 1/01/2021 753
MUNIASSETS FUND, INC. NOVEMBER 30, 2005 7
Schedule of Investments (continued) (in Thousands)
Face
Amount Municipal Bonds Value
===========================================================================================
New Jersey (concluded)
$ 325 Camden County, New Jersey, Pollution Control
Financing Authority, Solid Waste Resource Recovery,
Revenue Bonds, Series D, 7.25% due 12/01/2010 $ 328
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 9,164
765 Series B, 7.50% due 12/01/2009 779
3,065 New Jersey EDA, Cigarette Tax Revenue Bonds,
5.50% due 6/15/2024 3,181
2,500 New Jersey EDA, IDR, Refunding (Newark Airport
Marriott Hotel), 7% due 10/01/2014 2,576
New Jersey EDA, Retirement Community
Revenue Bonds, Series A:
1,665 (Cedar Crest Village Inc. Facility), 7.25%
due 11/15/2021 1,817
5,800 (Seabrook Village Inc.), 8.125% due 11/15/2023 6,561
New Jersey EDA, Special Facility Revenue Bonds
(Continental Airlines Inc. Project) AMT:
2,000 6.25% due 9/15/2019 1,731
4,650 6.25% due 9/15/2029 3,845
1,250 9% due 6/01/2033 1,297
2,650 New Jersey Health Care Facilities Financing Authority
Revenue Bonds (Pascack Valley Hospital Association),
6.625% due 7/01/2036 2,713
1,500 New Jersey Health Care Facilities Financing Authority,
Revenue Refunding Bonds (Trinitas Hospital
Obligation Group), 7.40% due 7/01/2020 1,683
Tobacco Settlement Financing Corporation of New
Jersey, Asset-Backed Revenue Bonds:
4,115 5.75% due 6/01/2032 4,211
1,425 7% due 6/01/2041 1,618
===========================================================================================
New Mexico--0.9%
2,500 Farmington, New Mexico, PCR, Refunding (Tucson
Electric Power Co.--San Juan Project), Series A,
6.95% due 10/01/2020 2,607
===========================================================================================
New York--5.3%
1,400 Dutchess County, New York, IDA, Civic Facility Revenue
Refunding Bonds (Saint Francis Hospital), Series A,
7.50% due 3/01/2029 1,520
New York City, New York, City IDA, Civic Facility
Revenue Bonds:
510 Series C, 6.80% due 6/01/2028 548
2,715 (Special Needs Facilities Pooled Program),
Series C-1, 6.625% due 7/01/2029 2,576
2,400 New York City, New York, City IDA, Special Facility
Revenue Bonds (British Airways PLC Project), AMT,
7.625% due 12/01/2032 2,578
2,920 New York State Dormitory Authority, Non-State
Supported Debt, Revenue Bonds (Mount Sinai-NYU
Medical Center Health System), 5.50% due 7/01/2026 2,953
2,635 New York State Dormitory Authority, Non-State
Supported Debt, Revenue Refunding Bonds (Mount
Sinai Hospital), Series C, 5.50% due 7/01/2026 2,664
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 1,673
===========================================================================================
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 1,601
===========================================================================================
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 1,460
700 Series A, 7.125% due 1/01/2021 709
===========================================================================================
Pennsylvania--5.4%
2,330 Montgomery County, Pennsylvania, IDA, Revenue Bonds
(Whitemarsh Continuing Care Project), 6.125%
due 2/01/2028 2,418
3,250 Pennsylvania Economic Development Financing
Authority, Exempt Facilities Revenue Bonds (National
Gypsum Company), AMT, Series A, 6.25%
due 11/01/2027 3,463
2,270 Philadelphia, Pennsylvania, Authority for IDR (Air Cargo),
AMT, Series A, 7.50% due 1/01/2025 2,417
6,440 Philadelphia, Pennsylvania, Authority for IDR,
Commercial Development, 7.75% due 12/01/2017 6,517
===========================================================================================
Rhode Island--1.0%
2,495 Central Falls, Rhode Island, Detention Facility
Corporation, Detention Facility, Revenue Refunding
Bonds, 7.25% due 7/15/2035 2,676
===========================================================================================
South Carolina--1.8%
3,500 South Carolina Jobs, EDA, Economic Development
Revenue Bonds (Westminster Presbyterian Center),
7.75% due 11/15/2030 4,149
885 South Carolina Jobs, EDA, Economic Development
Revenue Refunding Bonds (Westminster Presbyterian
Center), 5.375% due 11/15/2030 863
===========================================================================================
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 2,548
===========================================================================================
Texas--7.2%
1,000 Austin, Texas, Convention Center Revenue Bonds
(Convention Enterprises Inc.), First Tier, Series A,
6.70% due 1/01/2028 1,068
Brazos River Authority, Texas, PCR, Refunding AMT:
2,550 (Texas Utility Company), Series A, 7.70%
due 4/01/2033 2,984
3,865 (Utilities Electric Company), Series B, 5.05%
due 6/01/2030 3,892
1,680 Brazos River Authority, Texas, Revenue Refunding Bonds
(Reliant Energy Inc. Project), Series B, 7.75%
due 12/01/2018 1,844
2,340 Grand Prairie, Texas, Housing Finance Corporation
Revenue Bonds (Independent Senior Living Center),
7.75% due 1/01/2034 2,431
1,400 Houston, Texas, Health Facilities Development
Corporation, Retirement Facility Revenue Bonds
(Buckingham Senior Living Community), Series A,
7.125% due 2/15/2034 1,528
750 Kerrville, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Sid Peterson
Memorial Hospital Project), 5.375% due 8/15/2035 748
3,190 Matagorda County, Texas, Navigation District Number 1,
Revenue Refunding Bonds (Reliant Energy Inc.),
Series C, 8% due 5/01/2029 3,467
8 MUNIASSETS FUND, INC. NOVEMBER 30, 2005
Schedule of Investments (concluded) (in Thousands)
Face
Amount Municipal Bonds Value
===========================================================================================
Texas (concluded)
$ 1,860 Port Corpus Christi, Texas, Individual Development
Corporation, Environmental Facilities Revenue Bonds
(Citgo Petroleum Corporation Project), AMT,
8.25% due 11/01/2031 $ 1,966
===========================================================================================
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 1,757
===========================================================================================
Virginia--8.3%
1,500 Dulles Town Center, Virginia, Community Development
Authority, Special Assessment Tax (Dulles Town
Center Project), 6.25% due 3/01/2026 1,581
Pocahontas Parkway Association, Virginia, Toll Road
Revenue Bonds, Capital Appreciation, Senior-Series B:
48,400 5.95%** due 8/15/2031 10,976
48,400 5.95%** due 8/15/2032 10,351
===========================================================================================
West Virginia--0.5%
1,320 Princeton, West Virginia, Hospital Revenue Refunding
Bonds (Community Hospital Association Inc. Project),
6% due 5/01/2019 1,232
===========================================================================================
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 1,910
===========================================================================================
Wyoming--0.9%
2,500 Sweetwater County, Wyoming, Solid Waste Disposal
Revenue Bonds (FMC Corporation Project), AMT,
Series A, 7% due 6/01/2024 2,517
===========================================================================================
U.S. Virgin Islands--1.2%
3,000 Virgin Islands Government Refinery Facilities, Revenue
Refunding Bonds (Hovensa Coker Project), AMT,
6.50% due 7/01/2021 3,383
-------------------------------------------------------------------------------------------
Total Municipal Bonds
(Cost--$272,198)--99.8% 274,562
===========================================================================================
Shares
Held Short-Term Securities
===========================================================================================
901 Merrill Lynch Institutional Tax-Exempt Fund (e) 901
-------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$901)--0.3% 901
===========================================================================================
Total Investments
(Cost--$273,099*)--100.1% 275,463
Liabilities in Excess of Other Assets--(0.1%) (290)
--------
Net Assets--100.0% $275,173
========
* The cost and unrealized appreciation (depreciation) of investments as of
November 30, 2005, as computed for federal income tax purposes, were as
follows:
Aggregate cost ............................................... $272,773
========
Gross unrealized appreciation ................................ $ 17,057
Gross unrealized depreciation ................................ (14,367)
--------
Net unrealized appreciation .................................. $ 2,690
========
** Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
(a) AMBAC Insured.
(b) Prerefunded.
(c) Escrowed to maturity.
(d) 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.
(e) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Institutional Tax-Exempt Fund 901 $1
--------------------------------------------------------------------------
(f) Non-income producing security; issuer filed for bankruptcy or is in
default of interest payments.
(g) Restricted securities as to resale, representing 0.5% of net assets, were
as follows:
--------------------------------------------------------------------------
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 $ 727
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 5,944 753
--------------------------------------------------------------------------
Total $11,869 $1,480
===================
See Notes to Financial Statements.
MUNIASSETS FUND, INC. NOVEMBER 30, 2005 9
Statement of Assets, Liabilities and Capital
As of November 30, 2005
=============================================================================================================================
Assets
-----------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value
(identified cost--$272,197,929) ..................................... $ 274,562,043
Investments in affiliated securities, at value
(identified cost--$901,260) ......................................... 901,260
Cash ................................................................. 54,702
Receivables:
Interest .......................................................... $ 5,046,264
Securities sold ................................................... 990,000 6,036,264
-------------
Prepaid expenses and other assets .................................... 398,166
-------------
Total assets ......................................................... 281,952,435
-------------
=============================================================================================================================
Liabilities
-----------------------------------------------------------------------------------------------------------------------------
Payables:
Securities purchased .............................................. 6,641,792
Investment adviser ................................................ 99,046
Other affiliates .................................................. 3,374
Dividends to shareholders ......................................... 12 6,744,224
-------------
Accrued expenses ..................................................... 35,366
-------------
Total liabilities .................................................... 6,779,590
-------------
=============================================================================================================================
Net Assets
-----------------------------------------------------------------------------------------------------------------------------
Net Assets ........................................................... $ 275,172,845
=============
=============================================================================================================================
Capital
-----------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.10 per share; 200,000,000 shares authorized;
20,474,603 shares issued and outstanding ............................ $ 2,047,460
Paid-in capital in excess of par ..................................... 298,151,056
Undistributed investment income--net ................................. $ 3,376,714
Accumulated realized capital losses--net ............................. (30,766,499)
Unrealized appreciation--net ......................................... 2,364,114
-------------
Total accumulated losses--net ........................................ (25,025,671)
-------------
Total capital--Equivalent to $13.44 net asset value per share of
Common Stock (market price--$13.72) ................................. $ 275,172,845
=============
See Notes to Financial Statements.
10 MUNIASSETS FUND, INC. NOVEMBER 30, 2005
Statement of Operations
For the Six Months Ended November 30, 2005
=============================================================================================================================
Investment Income
-----------------------------------------------------------------------------------------------------------------------------
Interest and amortization of premium and discount earned ............. $ 9,240,330
Dividends from affiliates ............................................ 1,260
-------------
Total income ......................................................... 9,241,590
-------------
=============================================================================================================================
Expenses
-----------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ............................................. $ 759,247
Accounting services .................................................. 47,999
Transfer agent fees .................................................. 25,955
Professional fees .................................................... 24,382
Printing and shareholder reports ..................................... 23,320
Directors' fees and expenses ......................................... 9,532
Listing fees ......................................................... 9,248
Pricing fees ......................................................... 8,513
Custodian fees ....................................................... 7,807
Other ................................................................ 13,883
-----------
Total expenses before reimbursement .................................. 929,886
Reimbursement of expenses ............................................ (67)
-----------
Total expenses after reimbursement ................................... 929,819
-------------
Investment income--net ............................................... 8,311,771
-------------
=============================================================================================================================
Realized & Unrealized Gain--Net
-----------------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net .................................... 774,200
Change in unrealized appreciation on investments--net ................ 153,049
-------------
Total realized and unrealized gain--net .............................. 927,249
-------------
Net Increase in Net Assets Resulting from Operations ................. $ 9,239,020
=============
See Notes to Financial Statements.
MUNIASSETS FUND, INC. NOVEMBER 30, 2005 11
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
November 30, May 31,
Increase (Decrease) in Net Assets: 2005 2005
==============================================================================================================================
Operations
------------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................... $ 8,311,771 $ 16,585,812
Realized gain (loss)--net ............................................ 774,200 (37,012)
Change in unrealized appreciation--net ............................... 153,049 21,092,669
-----------------------------
Net increase in net assets resulting from operations ................. 9,239,020 37,641,469
-----------------------------
==============================================================================================================================
Dividends to Shareholders
------------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................... (8,459,929) (16,462,568)
-----------------------------
Net decrease in net assets resulting from dividends to Common
Stock shareholders .................................................. (8,459,929) (16,462,568)
-----------------------------
==============================================================================================================================
Common Stock Transactions
------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to Common Stock shareholders in reinvestment
of dividends ........................................................ 1,011,901 --
-----------------------------
==============================================================================================================================
Net Assets
------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ......................................... 1,790,992 21,178,901
Beginning of period .................................................. 273,381,853 252,202,952
-----------------------------
End of period* ....................................................... $275,172,845 $ 273,381,853
=============================
* Undistributed investment income--net ............................ $ 3,376,714 $ 3,524,872
=============================
See Notes to Financial Statements.
12 MUNIASSETS FUND, INC. NOVEMBER 30, 2005
Financial Highlights
For the Six
Months Ended For the Year Ended May 31,
The following per share data and ratios have been derived November 30, --------------------------------------------
from information provided in the financial statements. 2005 2005 2004 2003 2002
================================================================================================================================
Per Share Operating Performance
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ....... $ 13.40 $ 12.36 $ 11.94 $ 12.55 $ 12.96
----------------------------------------------------------
Investment income--net ..................... .41+ .81+ .83+ .81+ .79
Realized and unrealized gain (loss)--net ... .04 1.04 .38 (.64) (.41)
----------------------------------------------------------
Total from investment operations ........... .45 1.85 1.21 .17 .38
----------------------------------------------------------
Less dividends and distributions:
Investment income--net .................. (.41) (.81) (.78) (.78) (.79)
Realized gain--net ...................... -- -- (.01) -- --
----------------------------------------------------------
Total dividends and distributions .......... (.41) (.81) (.79) (.78) (.79)
----------------------------------------------------------
Net asset value, end of period ............. $ 13.44 $ 13.40 $ 12.36 $ 11.94 $ 12.55
==========================================================
Market price per share, end of period ...... $ 13.72 $ 13.27 $ 11.38 $ 11.91 $ 11.66
==========================================================
================================================================================================================================
Total Investment Return**
--------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ......... 3.42%++ 15.65% 10.74% 1.61% 3.30%
==========================================================
Based on market price per share ............ 6.60%++ 24.39% 2.22% 9.09% (4.32%)
==========================================================
================================================================================================================================
Ratios to Average Net Assets
--------------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement and excluding
reorganization expenses ................. .67%* .67% .67% .78% .74%
==========================================================
Expenses, excluding reorganization expenses .67%* .67% .67% .78% .74%
==========================================================
Expenses ................................... .67%* .67% .67% .78% .83%
==========================================================
Investment income--net ..................... 6.02%* 6.30% 6.71% 6.76% 6.16%
==========================================================
================================================================================================================================
Supplemental Data
--------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ... $275,173 $273,382 $252,203 $243,671 $255,150
==========================================================
Portfolio turnover ......................... 10.19% 19.67% 19.14% 26.98% 20.07%
==========================================================
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
+ Based on average shares outstanding.
++ Aggregate total investment return. See Notes to Financial Statements.
MUNIASSETS FUND, INC. NOVEMBER 30, 2005 13
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. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to present a fair statement of the
results for the interim period. All such adjustments are of a normal, recurring
nature. The Fund determines and makes available for publication the net asset
value of its Common Stock on a 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.
14 MUNIASSETS FUND, INC. NOVEMBER 30, 2005
Notes to Financial Statements (concluded)
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.
(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. The
Investment Adviser has agreed to reimburse its management fee by the amount of
management fees the Fund pays to FAM indirectly through its investments in the
Merrill Lynch Institutional Tax-Exempt Fund. For the six months ended November
30, 2005, FAM reimbursed the Fund in the amount of $67.
For the six months ended November 30, 2005, the Fund reimbursed FAM $6,654 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 six
months ended November 30, 2005, were $29,269,644 and $27,446,260, respectively.
4. Common Stock Transactions:
At November 30, 2005, the Fund had one class of shares of Common Stock, par
value $.10 per share, of which 200,000,000 shares were authorized.
Shares issued and outstanding during the six months ended November 30, 2005
increased by 74,890 as a result of dividend investment and for the year ended
May 31, 2005 remained constant.
5. Capital Loss Carryforward:
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.
6. Subsequent Event:
The Fund paid a tax-exempt income dividend to holders of Common Stock in the
amount of $.069000 per share on December 29, 2005 to shareholders of record on
December 15, 2005.
MUNIASSETS FUND, INC. NOVEMBER 30, 2005 15
Disclosure of Investment Advisory Agreement
Activities of and Composition of the Board of Directors
All but one member of the Board of Directors is an independent director whose
only affiliation with Fund Asset Management, L.P. (the "Investment Adviser") or
other Merrill Lynch affiliates is as a director of the Fund and certain other
funds advised by the Investment Adviser or its affiliates. The Co-chairmen of
the Board are also independent directors. New director nominees are chosen as
nominees by a Nominating Committee comprised of independent directors. All
independent directors also are members of the Board's Audit Committee and the
independent directors meet in executive session at each in-person Board meeting.
The Board and the Audit Committee meet in person for at least two days each
quarter and conduct other in-person and telephone meetings throughout the year,
some of which are formal board meetings, and some of which are informational
meetings. The independent counsel to the independent directors attends all
in-person Board and Audit Committee meetings and other meetings at the
independent directors' request.
Investment Advisory Agreement -- Matters Considered by the Board
Every year, the Board considers approval of the Fund's investment advisory
agreement (the "Investment Advisory Agreement"). The Board assesses the nature,
scope and quality of the services provided to the Fund by the personnel of the
Investment Adviser and its affiliates, including administrative services,
shareholder services, oversight of fund accounting, marketing services and
assistance in meeting legal and regulatory requirements. The Board also receives
and assesses information regarding the services provided to the Fund by certain
unaffiliated service providers.
At various times throughout the year, the Board also considers a range of
information in connection with its oversight of the services provided by the
Investment Adviser and its affiliates. Among the matters considered are: (a)
fees (in addition to management fees) paid to the Investment Adviser and its
affiliates by the Fund; (b) Fund operating expenses paid to third parties; (c)
the resources devoted to and compliance reports relating to the Fund's
investment objective, policies and restrictions, and its compliance with its
Code of Ethics and the Investment Adviser's compliance policies and procedures;
and (d) the nature, cost and character of non-investment management services
provided by the Investment Adviser and its affiliates.
The Board believes that the Investment Adviser is one of the most experienced
global asset management firms and considers the overall services provided by the
Investment Adviser to be of high quality. The Board also believes that the
Investment Adviser is financially sound and well managed and notes that the
Investment Adviser is affiliated with one of America's largest financial firms.
The Board works closely with the Investment Adviser in overseeing the Investment
Adviser's efforts to achieve good performance. As part of this effort, the Board
discusses portfolio manager effectiveness and, when performance is not
satisfactory, discusses with the Investment Adviser taking steps such as
changing investment personnel.
Annual Consideration of Approval by the Board of Directors
In the period prior to the Board meeting to consider renewal of the Investment
Advisory Agreement, the Board requests and receives materials specifically
relating to the Fund's Investment Advisory Agreement. These materials include
(a) information compiled by Lipper Inc. ("Lipper") on the fees and expenses and
the investment performance of the Fund as compared to a comparable group of
funds as classified by Lipper; (b) information comparing the Fund's market price
with its net asset value per share; (c) a discussion by the Fund's portfolio
management team of investment strategies used by the Fund during its most recent
fiscal year; and (d) information on the profitability to the Investment Adviser
and its affiliates of the Investment Advisory Agreement and other relationships
with the Fund. The Board also considers other matters it deems important to the
approval process such as services related to the valuation and pricing of Fund
portfolio holdings, allocation of Fund portfolio transactions, the Fund's
portfolio turnover statistics, and direct and indirect benefits to the
Investment Adviser and its affiliates from their relationship with the Fund.
Certain Specific Renewal Data
In connection with the most recent renewal of the Fund's Investment Advisory
Agreement which occurred in November 2005, the independent directors' and
Board's review included the following:
Services Provided by the Investment Adviser -- The Board reviewed the nature,
extent and quality of services provided by the Investment Adviser, including the
investment advisory services and the resulting performance of the Fund. The
Board focused primarily on the Investment Adviser's investment advisory services
and the Fund's investment performance, having concluded that the other services
provided to the Fund by the Investment Adviser were satisfactory. The Board
compared Fund performance -- both including and
16 MUNIASSETS FUND, INC. NOVEMBER 30, 2005
excluding the effects of the Fund's fees and expenses -- to the performance of a
comparable group of funds, and the performance of a relevant index or
combination of indexes. While the Board reviews performance data at least
quarterly, consistent with the Investment Adviser's investment goals, the Board
attaches more importance to performance over relatively long periods of time,
typically three to five years. For the periods ended August 31, 2005, the Fund's
performance after fees and expenses ranked in the first quintile for each of the
one- and three-year periods and in the second quintile for the five-year period.
Considering these factors, the Board concluded that the nature and quality of
these services supported the continuation of the Investment Advisory Agreement.
The Investment Adviser's Personnel and Investment Process -- The Board reviews
at least annually the Fund's investment objectives and strategies. The Board
discusses with senior management of the Investment Adviser responsible for
investment operations and the senior management of the Investment Adviser's
municipal investing group the strategies being used to achieve the stated
objectives. Among other things, the Board considers the size, education and
experience of the Investment Adviser's investment staff, its use of technology,
and the Investment Adviser's approach to training and retaining portfolio
managers and other research, advisory and management personnel. The Board also
reviews the Investment Adviser's compensation policies and practices with
respect to the Fund's portfolio managers. The Board also considered the
experience of the Fund's portfolio manager and noted that Mr. Jaeckel has more
than fifteen years of experience in portfolio management. The Investment Adviser
and its investment staff have extensive experience in analyzing and managing the
types of investments used by the Fund. The Board concluded that the Fund
benefits from that expertise.
Management Fees and Other Expenses -- The Board reviews the Fund's contractual
management fee rate and actual management fee rate as a percentage of total
assets at common asset levels -- the actual rate includes advisory and
administrative service fees and the effects of any fee waivers -- compared to
the other funds in its Lipper category. It also compares the Fund's total
expenses to those of other comparable funds. The Fund's contractual and actual
management fee rates and total expenses were below the median fees and expenses
charged by comparable funds, as determined by Lipper. The Board has concluded
that the Fund's management fee and fee rate and overall expense ratio are
reasonable compared to those of other comparable funds.
Profitability -- The Board considers the cost of the services provided to the
Fund by the Investment Adviser, and the Investment Adviser's and its affiliates'
profits relating to the management of the Fund and the MLIM/FAM-advised funds.
As part of its analysis, the Board reviewed the Investment Adviser's methodology
in allocating its costs to the management of the Fund and concluded that there
was a reasonable basis for the allocation. The Board also considered federal
court decisions discussing an investment adviser's profitability and
profitability levels considered to be reasonable in those decisions. The Board
believes the Investment Adviser's profits are acceptable in relation to the
nature and quality of services provided.
Economies of Scale -- The Board considered the extent to which economies of
scale might be realized as the assets of the Fund increase and whether there
should be changes in the management fee rate or structure in order to enable the
Fund to participate in these economies of scale. The Board considered economies
of scale to the extent applicable to the Fund's closed-end structure and
determined that the Fund appropriately benefits from any economies of scale and
no changes were currently necessary.
Conclusion
After the independent directors deliberated in executive session, the entire
Board, including all of the independent directors, approved the renewal of the
existing Investment Advisory Agreement, concluding that the advisory fee was
reasonable in relation to the services provided and that a contract renewal was
in the best interests of the shareholders.
MUNIASSETS FUND, INC. NOVEMBER 30, 2005 17
Officers and Directors
Robert C. Doll, Jr., President and Director
James H. Bodurtha, Director
Kenneth A. Froot, Director
Joe Grills, Director
Herbert I. London, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Stephen B. Swensrud, Director
Donald C. Burke, Vice President and Treasurer
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Theodore R. Jaeckel Jr., Vice President
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
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
--------------------------------------------------------------------------------
Effective January 1, 2006, Stephen B. Swensrud retired as Director of MuniAssets
Fund, Inc. The Fund's Board of Directors wishes Mr. Swensrud well in his
retirement.
--------------------------------------------------------------------------------
Proxy Results
During the six-month period ended November 30, 2005, MuniAssets Fund, Inc.'s
shareholders voted on the following proposals. Proposal 1 was approved at a
shareholders' meeting on August 23, 2005. With respect to Proposal 2, the
shareholders' meeting was adjourned until October 21, 2005, at which time it was
passed. A description of the proposals and number of shares voted were as
follows:
----------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
----------------------------------------------------------------------------------------------------------
1. To elect the Fund's Directors: Robert C. Doll, Jr. 15,735,768 455,791
Kenneth A. Froot 15,721,223 470,336
Herbert I. London 15,730,070 461,489
----------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------------------------------------------------------------------------
2. To approve an amendment to Fundamental Investment Restriction. 10,418,658 443,013 427,613
----------------------------------------------------------------------------------------------------------
18 MUNIASSETS FUND, INC. NOVEMBER 30, 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. NOVEMBER 30, 2005 19
[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 -- 11/05
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this
semi-annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-annual
report
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable to this semi-annual report
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 last 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 - Not Applicable to this semi-annual report
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: January 25, 2006
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: January 25, 2006
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
MuniAssets Fund, Inc.
Date: January 25, 2006