- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
As filed with the Securities and Exchange Commission on April 12, 1994
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
MUNIINSURED FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
MUNIINSURED FUND, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies.
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MUNIINSURED FUND, INC.
BOX 9011
PRINCETON, NEW JERSEY 08543-9011
NOTICE OF 1994 ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1994
TO THE STOCKHOLDERS OF
MUNIINSURED FUND, INC.:
Notice is hereby given that the 1994 Annual Meeting of Stockholders (the
"Meeting") of MuniInsured Fund, Inc. (the "Fund") will be held at the offices of
Merrill Lynch Asset Management, 800 Scudders Mill Road, Plainsboro, New Jersey,
on Thursday, May 13, 1994 at 9:00 A.M. for the following purposes:
(1) To elect one Director to serve until the 1996 Annual Meeting of
Stockholders and two Directors to serve until the 1997 Annual
Meeting of Stockholders;
(2) To consider and act upon a proposal to ratify the selection of
Deloitte & Touche to serve as independent auditors of the Fund for
its current fiscal year; and
(3) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 18, 1994 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Meeting or any adjournment thereof.
A complete list of the stockholders of the Fund entitled to vote at the
Meeting will be available and open to the examination of any stockholder of the
Fund for any purpose germane to the Meeting during ordinary business hours from
and after April 29, 1994, at the office of the Fund, 800 Scudders Mill Road,
Plainsboro, New Jersey. You are cordially invited to attend the Meeting.
Stockholders who do not expect to attend the Meeting in person are requested to
complete, date and sign the enclosed form of proxy and return it promptly in the
envelope provided for this purpose. The enclosed proxy is being solicited on
behalf of the Board of Directors of the Fund.
By Order of the Board of Directors
MARK B. GOLDFUS
Secretary
Plainsboro, New Jersey
Dated: April 11, 1994
<PAGE>
PROXY STATEMENT
------------------------
MUNIINSURED FUND, INC.
BOX 9011
PRINCETON, NEW JERSEY 08543-9011
------------------------
1994 ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1994
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of MuniInsured Fund, Inc., a
Maryland corporation (the "Fund"), to be voted at the 1994 Annual Meeting of
Stockholders of the Fund (the "Meeting"), to be held at the offices of Merrill
Lynch Asset Management ("MLAM"), 800 Scudders Mill Road, Plainsboro, New Jersey,
on Wednesday, May 13, 1994 at 9:00 A.M. The approximate mailing date of this
Proxy Statement is April 13, 1994.
All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon, or otherwise
as provided therein. Unless instructions to the contrary are marked, proxies
will be voted for the election of one Director to serve until the 1996 Annual
Meeting of Stockholders and of two Directors to serve until the 1997 Annual
Meeting of Stockholders and for the ratification of the selection of independent
auditors to serve for the Fund's current fiscal year. Any proxy may be revoked
at any time prior to the exercise thereof by giving written notice to the
Secretary of the Fund.
The Board of Directors has fixed the close of business on March 18, 1994 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Meeting and at any adjournment thereof. Stockholders on the
record date will be entitled to one vote for each share held, with no shares
having cumulative voting rights. As of March 18, 1994, the Fund had outstanding
8,053,709 shares of common stock, par value $.10 per share. To the knowledge of
the Fund, no person is the beneficial owner of more than five percent of its
outstanding shares.
The Board of Directors of the Fund knows of no business other than that
mentioned in Items 1 and 2 of the Notice of Meeting which will be presented for
consideration at the Meeting. If any other matter is properly presented, it is
the intention of the persons named in the enclosed proxy to vote in accordance
with their best judgment.
ELECTION OF DIRECTORS
Pursuant to the Articles of Incorporation of the Fund, the Board of
Directors is divided into three classes, designated Class I, Class II and Class
III. Each class has a term of office of three years, and each year the term of
office of one class will expire. A Director elected by stockholders will serve
until
1
<PAGE>
the Annual Meeting of Stockholders for the year in which his term expires and
until his successor is elected and qualified.
It is the intention of the persons named in the enclosed proxy to nominate
and vote in favor of the election of Joe Grills,* Melvin R. Seiden and Stephen
B. Swensrud, Directors whose current terms expire at the Meeting. The Board of
Directors of the Fund knows of no reason why these nominees will be unable to
serve, but in the event of any such unavailability, the proxies received will be
voted for such substitute nominees as the Board of Directors may recommend.
Certain information concerning the nominees and the continuing Directors is
set forth as follows:
<TABLE> <CAPTION>
SHARES OF
COMMON STOCK
OF THE FUND
BENEFICIALLY
OWNED AT MARCH
PRINCIPAL OCCUPATION PAST FIVE YEARS DIRECTOR 18,
NAME AND ADDRESS AND PUBLIC DIRECTORSHIPS(1) AGE SINCE 1994
- ------------------------------------ ------------------------------------------ ----------- ----------- --------------
<S> <C> <C> <C> <C>
Class I Nominee to serve until the 1996 Annual Meeting of Stockholders:
Joe Grills*......................... Member of the Committee of Investment of 59 1994 -0-
183 Soundview Lane Employee Benefit Assets of the Financial
New Canaan, Connecticut Executives Institute ("CIEBA") since
06840 1986, member of CIEBA's Executive
Committee since 1988 and its Chairman
from 1991 to 1992; Assistant Treasurer
of International Business Machines
Incorporated ("IBM") and Chief
Investment Officer of IBM Retirement
Funds from 1986 until 1992; Member of
the Investment Advisory Committee of the
State of New York Common Retirement
Fund; Director, Duke Management Company.
Class II Nominees to serve until the 1997 Annual Meeting of Stockholders:
Melvin R. Seiden.................... President of Silbanc Properties, Ltd. 63 1987 -0-
780 Third Avenue (real estate, investments and con-
Suite 2502 sulting) since 1987; Chairman and
New York, New York 10017 President of Seiden & de Cuevas, Inc.
(private investment firm) from 1964 to
1987.
</TABLE>
- ---------------
* Joe Grills was unanimously elected by the Fund's Board of Directors to serve
as a Class I Director at a regularly scheduled meeting of the Board held on
January 19, 1994. Pursuant to law, Joe Grills' term expires at the Meeting
notwithstanding the fact that Class I Directors are otherwise not to be
elected until the 1996 Annual Meeting of Stockholders.
2
<PAGE>
<TABLE> <CAPTION>
SHARES OF
COMMON STOCK
OF THE FUND
BENEFICIALLY
OWNED AT MARCH
PRINCIPAL OCCUPATION PAST FIVE YEARS DIRECTOR 18,
NAME AND ADDRESS AND PUBLIC DIRECTORSHIPS(1) AGE SINCE 1994
- ------------------------------------ ------------------------------------------ ----------- ----------- --------------
<S> <C> <C> <C> <C>
Stephen B. Swensrud................. Principal of Fernwood Associates 60 1987 -0-
24 Federal Street (financial consultants); Director,
Boston, Massachusetts 02110 Nautilus Fund, Inc. and Hitchiner
Manufacturing Company.
Class III Directors serving until the 1995 Annual Meeting of Stockholders:
Harry Woolf......................... Professor and former Director of the 71 1987 -0-
The Institute for Institute for Advanced Study; Member of
Advanced Study the editorial boards of several
Olden Lane publishers and journals; Director, Alex.
Princeton, New Jersey 08540 Brown Mutual Funds, ATL, Inc. and
Spacelabs Medical, Inc.
Arthur Zeikel(2).................... President and Chief Investment Officer of 61 1987 -0-
Box 9011 Fund Asset Management, L.P. ("FAM");
Princeton, New Jersey President and Chief Investment Officer
08543-9011 of Merrill Lynch Asset Management, L.P.,
doing business as Merrill Lynch Asset
Management ("MLAM"); President and
Director of Princeton Services, Inc.
("Princeton Services") since 1993; an
Executive Vice President of Merrill
Lynch & Co., Inc. ("ML&Co.") since 1990;
an Executive Vice President of Merrill
Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") since
1990 and a Senior Vice President from
1985 to 1990.
Class I Director serving until the 1996 Annual Meeting of Stockholders:
Walter Mintz........................ Special Limited Partner of Cumberland 65 1987 -0-
1114 Avenue of the Americas Partners (investment partnership) since
New York, New York 10036 1982.
</TABLE>
- ---------------
(1) Each of the nominees and continuing directors is a director, trustee or
member of an advisory board of certain other investment companies for which
FAM or MLAM acts as investment advisor. See "Merrill Lynch Investment
Company Directorships" below.
(2) Interested person, as defined in the Investment Company Act of 1940 (the
"Investment Company Act"), of the Fund.
3
<PAGE>
Committees and Board of Directors' meetings. The Board of Directors has a
standing Audit Committee, which consists of the Directors who are not
"interested persons" of the Fund within the meaning of the Investment Company
Act. The principal purpose of the Audit Committee is to review the scope of the
annual audit conducted by the Fund's independent auditors and the evaluation by
such auditors of the accounting procedures followed by the Fund. The
non-interested Directors have retained independent legal counsel to assist them
in connection with these duties. The Board of Directors does not have a
nominating committee.
During the fiscal year ended September 30, 1993, the Board of Directors
held four meetings and the Audit Committee held four meetings. Each of the
Directors then in office attended at least 75% of the total number of meetings
of the Board of Directors and, if a member, at least 75% of the total number of
meetings of the Audit Committee held during such period.
Compliance with Section 16(a) of the Securities Exchange Act of
1934. Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Fund's officers, directors and persons who own
more than 10% of a registered class of the Fund's equity securities, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission ("SEC") and the American Stock Exchange.
Officers, directors and greater than 10% stockholders are required by SEC
regulations to furnish the Fund with copies of all Forms 3, 4 and 5 they file.
Based solely on the Fund's review of the copies of such forms, and
amendments thereto, furnished to it during or with respect to its most recent
fiscal year, and written representations from certain reporting persons that
they were not required to file Form 5 with respect to the most recent fiscal
year, the Fund believes that all of its officers, directors, greater than 10%
beneficial owners and other persons subject to Section 16 of the Exchange Act
because of the requirements of Section 30 of the Investment Company Act, i.e.,
any advisory board member, investment adviser or affiliated person of the Fund's
investment adviser, have complied with all filing requirements applicable to
them with respect to transactions during the Fund's most recent fiscal year,
except that Donald C. Burke inadvertently neglected to file a Form 3 to report
his election as Vice President of the Fund. This information was, however,
included in a Form 5 which was filed with the SEC, although not within the 45
day period following the Fund's fiscal year end as specified by Rule 16a-3(f)(1)
of the Exchange Act.
Interested Persons. The Fund considers Mr. Zeikel to be an "interested
person" of the Fund within the meaning of Section 2(a)(19) of the Investment
Company Act as a result of the position he holds with FAM and its affiliates.
Mr. Zeikel is the President of the Fund and the President of FAM and MLAM.
Compensation of Directors. FAM, the Fund's investment adviser, pays
compensation of all officers of the Fund and all Directors of the Fund who are
affiliated with ML & Co. or its subsidiaries. The Fund pays each Director not
affiliated with the investment adviser a fee of $2,600 per year plus $250 per
meeting attended, together with such Director's actual out-of-pocket expenses
relating to attendance at meetings. The Fund also pays each member of its Audit
Committee a fee of $800 per year plus $150 per meeting attended, together with
such Director's out-of-pocket expenses relating to attendance at meetings. These
fees and expenses aggregated $35,416 for the fiscal year ended September 30,
1993.
4
<PAGE>
Merrill Lynch Investment Company Directorships. MLAM and its affiliate,
FAM, act as the investment adviser for more than 90 registered investment
companies. Mr. Zeikel is a trustee or director of each of these companies except
for Merrill Lynch Series Fund, Inc., Merrill Lynch Funds For Institutions
Series, Merrill Lynch Institutional Intermediate Fund and Merrill Lynch
Institutional Tax-Exempt Fund. Messrs. Grills, Mintz, Seiden, Swensrud and Woolf
are trustees or directors of Apex Municipal Fund, Inc., Merrill Lynch Federal
Securities Trust, Merrill Lynch Phoenix Fund, Inc., Merrill Lynch Retirement
Series Trust, Merrill Lynch Variable Series Funds, Inc., Financial Institutions
Series Trust, Merrill Lynch Adjustable Rate Securities Fund, Inc., MuniYield
Insured Fund, Inc., Income Opportunities Fund 1999, Inc., Income Opportunities
Fund 2000, Inc., Corporate High Yield Fund, Inc., Corporate High Yield Fund II,
Inc., MuniBond Income Fund, Inc. and Merrill Lynch Fundamental Growth Fund, Inc.
Mr. Swensrud is also a director of Merrill Lynch Series Fund, Inc.
Officers of the Fund. The following table sets forth information concerning
the officers of the Fund:
<TABLE> <CAPTION>
OFFICER
NAME AND PRINCIPAL OCCUPATION OFFICE AGE SINCE
- ---------------------------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
Arthur Zeikel................................................... President 61 1987
President; Executive Vice President and Director of Princeton
Services since 1993; and Chief Investment Officer of FAM
since 1977; President of MLAM since 1977 and Chief
Investment Officer since 1976; President and Director of
Princeton Services since 1993; an Executive Vice President
of ML & Co. since 1990; an Executive Vice President of
Merrill Lynch since 1990 and a Senior Vice President from
1985 to 1990; Director of Merrill Lynch Funds Distributor,
Inc.
Terry K. Glenn.................................................. Executive Vice 53 1987
Executive Vice President of FAM and MLAM since 1983; Executive President
Vice President and Director of Princeton Services since
1993; President of Merrill Lynch Funds Distributor, Inc.
("MLFD") since 1986 and Director thereof since 1991.
Vincent R. Giordano............................................. Vice President 49 1987
Senior Vice President of FAM and MLAM since 1984.
Donald C. Burke................................................. Vice President 33 1993
Vice President and Director of Taxation of MLAM since 1990;
Employee at Deloitte & Touche from 1982 to 1990.
</TABLE>
5
<PAGE>
<TABLE> <CAPTION>
OFFICER
NAME AND PRINCIPAL OCCUPATION OFFICE AGE SINCE
- ---------------------------------------------------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
Gerald M. Richard............................................... Treasurer 44 1987
Senior Vice President and Treasurer of MLAM and FAM since
1984; Vice President of MLFD since 1981 and Treasurer since
1984; Employee of MLFD since 1978; Senior Vice President of
Princeton Services since 1993.
Mark B. Goldfus................................................. Secretary 47 1987
Vice President of MLAM and FAM since 1985.
</TABLE>
Stock Ownership. At March 18, 1993, the Directors and officers of the Fund
as a group (eleven persons) owned an aggregate of less than 1/4 of 1% of the
common stock of the Fund outstanding at such date. At such date, Mr. Zeikel, a
Director of the Fund and the officers of the Fund owned an aggregate of less
than 1/4 of 1% of the outstanding shares of common stock of ML & Co.
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Fund, including a majority of the Directors
who are not interested persons of the Fund, has selected the firm of Deloitte &
Touche ("D&T"), independent auditors, to examine the financial statements of the
Fund for the current fiscal year. The Fund knows of no direct or indirect
financial interest of D&T in the Fund. Such appointment is subject to
ratification or rejection by the stockholders of the Fund. Unless a contrary
specification is made, the accompanying proxy will be voted in favor of
ratifying the selection of such auditors.
D&T also acts as independent auditors for ML & Co. and all of its
subsidiaries and for substantially all of the other investment companies for
which FAM or MLAM acts as investment adviser. The fees received by D&T from
these other entities are substantially greater, in the aggregate, than the total
fees received by it from the Fund. The Board of Directors of the Fund considered
the fact that D&T has been retained as the independent auditors for ML & Co. and
the other entities described above in its evaluation of the independence of D&T
with respect to the Fund.
Representatives of D&T are expected to be present at the Meeting and will
have the opportunity to make a statement if they so desire and to respond to
questions from stockholders.
INVESTMENT ADVISORY AGREEMENT
On October 19, 1987, the Fund entered into an investment advisory agreement
(the "Investment Advisory Agreement") with FAM. The continuance of the
Investment Advisory Agreement was most recently approved by the stockholders of
the Fund at the 1992 Annual Meeting held on May 13, 1992. On January 19, 1994
the Board of Directors of the Fund, including a majority of the Directors who
are not interested persons of the Fund, approved the continuation of the
Investment Advisory Agreement for a period of one year.
6
<PAGE>
INFORMATION CONCERNING FAM
Effective January 1, 1994, FAM was reorganized as a Delaware limited
partnership. FAM (the general partner of which is Princeton Services, a
wholly-owned subsidiary of ML & Co.) is owned and controlled by ML & Co. and is
located at 800 Scudders Mill Road, Plainsboro, New Jersey 08536. ML & Co. is
located at 250 Vesey Street, New York, New York 10281. The reorganization did
not result in a change of management of FAM, in any of its personnel, or in an
adverse change in its financial condition. Prior to the reorganization, FAM,
which was known as Fund Asset Management, Inc., was a Delaware corporation which
had been incorporated in 1976. Prior to its reorganization, FAM was a
wholly-owned subsidiary of MLAM, a Delaware corporation, which was also
reorganized as a Delaware limited partnership effective January 1, 1994. MLAM
was a wholly-owned subsidiary of ML & Co. prior to its reorganization, and
continues to be owned and controlled by ML & Co. after its reorganization. MLAM
is also located at 800 Scudders Mill Road, Plainsboro, New Jersey 08536. MLAM or
FAM acts as the investment adviser to more than 90 other registered investment
companies. In addition, MLAM offers portfolio management and portfolio analysis
services to individuals and institutions. FAM's audited balance sheet for its
most recent fiscal year is appended to this Proxy Statement as Exhibit A.
Securities held by the Fund may also be held by or be appropriate
investments for other investment companies for which MLAM or FAM acts as an
adviser or by investment advisory clients of MLAM. Because of different
investment objectives or other factors, a particular security may be bought for
one or more clients when one or more clients are selling the security. If
purchases or sales of securities for the Fund or other investment company or
advisory clients arise for consideration at or about the same time, transactions
in such securities will be made, insofar as feasible, for the respective
investment companies and clients in a manner deemed equitable to all. To the
extent that transactions on behalf of more than one client of FAM or MLAM during
the same period may increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect on price.
The following table sets forth the name, title and principal occupation of
the principal executive officer of FAM and the directors of Princeton Services,
the general partner of FAM:
<TABLE> <CAPTION>
NAME* TITLE PRINCIPAL OCCUPATION
- --------------------------------------------------- ------------------------- -----------------------
<S> <C> <C>
Arthur Zeikel...................................... President and Chief President of MLAM and
Investment Officer of FAM
FAM and Director of
Princeton Services
Terry K. Glenn..................................... Executing Vice President Executive Vice
of FAM and Director of President of MLAM and
Princeton Services FAM
Philip L. Kirstein................................. Senior Vice President and Senior Vice President,
General Counsel of FAM General Counsel and
and Director of Secretary of MLAM and
Princeton Services FAM
</TABLE>
- ---------------
* The address of Messrs. Zeikel, Glenn and Kirstein is Box 9011, Princeton, New
Jersey 08543-9011, which is also the address of MLAM and FAM. Mr. Zeikel is
presently a Director of the Fund.
7
<PAGE>
TERMS OF INVESTMENT ADVISORY AGREEMENT
The Investment Advisory Agreement provides that, subject to the direction
of the Board of Directors of the Fund, FAM is responsible for the actual
management of the Fund's portfolio and for the review of the Fund's holdings in
light of its own research analysis and analyses from other relevant sources. The
responsibility for making decisions to buy, sell or hold a particular security
rests with FAM, subject to review by the Board of Directors. FAM provides the
portfolio managers for the Fund, who consider analyses from various sources
(including brokerage firms with which the Fund does business), make the
necessary investment decisions and place transactions accordingly. FAM is also
obligated to perform certain administrative and management services for the Fund
and is obligated to provide all the office space, facilities, equipment and
personnel necessary to perform its duties under the Investment Advisory
Agreement.
Investment Advisory Fee. The Investment Advisory Agreement provides that as
compensation for its services to the Fund, FAM receives from the Fund a monthly
fee based upon the average weekly value of the Fund's net assets at the annual
rate of 0.50% of the average weekly net assets. The assets for each weekly
period are determined by averaging the net assets at the end of a week with the
net assets at the end of the prior week. For the fiscal year ended September 30,
1993, the investment advisory fee paid by the Fund to FAM aggregated $409,671
(based upon average net assets of approximately $81.8 million). At February 28,
1994, the Fund had net assets of approximately $82.4 million. At this asset
level the Fund's annual investment advisory fee would aggregate approximately
$412,603.
Payment of Expenses. The Investment Advisory Agreement obligates FAM to
provide investment advisory services and to pay all compensation of and furnish
office space for officers and employees of the Fund connected with the
investment and economic research, trading and investment management of the Fund,
as well as the fees of all Directors of the Fund who are affiliated persons of
FAM or any of its affiliates. The Fund pays all other expenses incurred in the
operation of the Fund, including, among other things, expenses for legal and
auditing services, taxes, costs of printing proxies, stock certificates and
shareholder reports, registration statements, charges of the Custodian and
Transfer Agent, Dividend Disbursing Agent and Registrar, Securities and Exchange
Commission fees, fees and expenses of unaffiliated Directors, accounting and
pricing costs, insurance, interest, brokerage costs, listing fees, litigation
and other extraordinary or non-recurring expenses, mailing and other expenses
properly payable by the Fund. Accounting services are provided to the Fund by
FAM, and the Fund reimburses FAM for its costs in connection with such services.
For the fiscal year ended September 30, 1993, the Fund reimbursed $45,604 to FAM
for such accounting services.
Duration and Termination. The Investment Advisory Agreement will continue
in effect from year to year if approved annually (a) by the Board of Directors
of the Fund or by a majority of the outstanding shares of the Fund and (b) by a
majority of the Directors who are not parties to such agreement or interested
persons (as defined in the Investment Company Act) of any such party. Such
agreement is not assignable and may be terminated without penalty on 60 days'
written notice at the option of either party thereto or by the vote of the
stockholders of the Fund.
8
<PAGE>
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors of the Fund, the
Investment Adviser is primarily responsible for the execution of the Fund's
portfolio transactions and the allocation of the brokerage. In executing such
transactions, FAM seeks to obtain the best results for the Fund, taking into
account such factors as price (including the applicable brokerage commission or
dealer spread), size of order, difficulty of execution and operational
facilities of the firm involved and the firm's risk in positioning a block of
securities. While FAM generally seeks reasonably competitive commission rates,
the Fund does not necessarily pay the lowest commission or spread available.
The Fund has no obligation to deal with any broker or group of brokers in
the execution of transactions in portfolio securities. Subject to obtaining the
best price and execution, brokers who provided supplemental investment research
to FAM, including Merrill Lynch, may receive orders for transactions by the
Fund. Information so received will be in addition to and not in lieu of the
services required to be performed by FAM under the Investment Advisory Agreement
and the expenses of FAM will not necessarily be reduced as a result of the
receipt of such supplemental information.
The securities in which the Fund will invest are traded in the
over-the-counter markets. The Fund intends to deal directly with dealers who
make markets in the securities involved, except in those circumstances where
better prices and execution are available elsewhere. Under the Investment
Company Act, except as permitted by exemptive order, persons affiliated with the
Fund are prohibited from dealing with the Fund as principal in the purchase and
sale of securities. Because transactions in the over-the-counter market usually
involve transactions with dealers acting as principal for their own account, the
Fund will not deal with affiliated persons, including Merrill Lynch and its
affiliates, in connection with such transactions. However, pursuant to an
exemptive order obtained by FAM, the Fund may engage in principal transactions
with Merrill Lynch in high quality, short term, tax-exempt securities. For the
fiscal year ended September 30, 1993, pursuant to such order, the Fund engaged
in four transactions with Merrill Lynch in the aggregate amount of $1,701,569
representing 1.7% of the Fund's aggregate dollar amount of transactions. Also,
an affiliated person of the Fund may serve as its broker in over-the-counter
transactions conducted on an agency basis. For the fiscal year ended September
30, 1993, the Fund paid no brokerage commissions.
The Board of Directors has considered the possibility of recapturing for
the benefit of the Fund brokerage commissions, dealer spreads and other expenses
of possible portfolio transactions, such as underwriting commissions, by
conducting portfolio transactions through affiliated entities, including Merrill
Lynch. For example, brokerage commissions received by Merrill Lynch could be
offset against the investment advisory fee paid by the Fund to FAM. After
considering all factors deemed relevant, the Directors made a determination not
to seek such recapture. The Directors will reconsider this matter from time to
time.
9
<PAGE>
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form of
proxy and accompanying Notice and Proxy Statement will be borne by the Fund. The
Fund will reimburse banks, brokers and others for their reasonable expenses in
forwarding proxy solicitation material to the beneficial owners of the shares of
the Fund. The Fund may also hire proxy solicitors at the expense of the Fund.
In order to obtain the necessary quorum (a majority of the outstanding
voting securities of the Fund) at the Meeting, supplementary solicitation may be
made by mail, telephone, telegraph or personal interview by officers of the
Fund. It is anticipated that the cost of such supplementary solicitation, if
any, will be nominal.
All shares represented by properly executed proxies, unless such proxies
have previously been revoked, will be voted at the Meeting in accordance with
the directions on the proxies; if no direction is indicated, the shares will be
voted "FOR" the Director nominees and "FOR" the ratification of D&T as
independent auditors.
Broker-dealer firms, including Merrill Lynch, holding Fund shares in
"street name" for the benefit of their customers and clients will request the
instructions of such customers and clients on how to vote their shares on each
Item before the Meeting. The Fund understands that, under the rules of the New
York Stock Exchange, such broker-dealer firms may, without instructions from
their customers and clients, grant authority to the proxies designated to vote
on the election of Directors (Item 1) and ratification of the selection of
independent auditors (Item 2) if no instructions have been received prior to the
date specified in the broker-dealer firm's request for voting instructions.
Merrill Lynch has advised that it intends to exercise discretion over shares
held in its name for which no instructions are received by voting such shares in
the same proportion as it has voted shares for which it has received
instructions. The Fund will include shares held of record by broker-dealers as
to which such authority has been granted in its tabulation of the total number
of votes present for purposes of determining whether the necessary quorum of
stockholders exists. The Fund also will count towards a quorum, those shares as
to which proxies are returned by record stockholders but which are marked
"abstain" on any Item. A failure by a broker-dealer who returns a proxy to vote
for their clients on an Item or an abstention will have no effect with respect
to the vote on Item 1 or Item 2.
STOCKHOLDER PROPOSALS
If a stockholder intends to present a proposal at the 1995 Annual Meeting
of Stockholders of the Fund and desires to have the proposal included in the
Fund's proxy statement and form of proxy for that meeting, the stockholder must
deliver the proposal to the offices of the Fund by December 11, 1994.
By Order of the Board of Directors
MARK B. GOLDFUS
Secretary
Dated: April 11, 1994
10
<PAGE>
EXHIBIT A
INDEPENDENT AUDITORS' REPORT
FUND ASSET MANAGEMENT, INC.:
We have audited the accompanying consolidated balance sheet of Fund Asset
Management, Inc. and subsidiary (the "Company") as of December 31, 1993. This
balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on the balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such consolidated balance sheet presents fairly, in all material
respects, the financial position of the Company at December 31, 1993 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Parsippany, New Jersey
February 28, 1994
A-1
<PAGE>
FUND ASSET MANAGEMENT, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE> <CAPTION>
DECEMBER 31,
1993
-----------------
<S> <C>
ASSETS
Cash........................................................................................... $ 996,680
Receivable from affiliated companies:
Lease transactions........................................................................... 24,501,523
Sale of leased investment.................................................................... 48,312,532
Fund management fees receivable................................................................ 28,927,938
Investments in leases:
Leveraged leases............................................................................. 57,431,668
Sales-type lease............................................................................. 3,362,521
Investments in affiliated investment companies--(market: $19,731,088).......................... 18,181,262
Investment in affiliated limited partnership................................................... 31,109,264
-----------------
TOTAL ASSETS................................................................................... $ 212,823,388
-----------------
-----------------
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Payable to Merrill Lynch & Co., Inc. and affiliates............................................ $ 21,554,955
Deferred income taxes:
Arising from leveraged leases................................................................ 52,938,886
Arising from sales-type lease................................................................ 1,351,622
Other........................................................................................ 15,838,124
Other.......................................................................................... 8,501
-----------------
Total liabilities.............................................................................. 91,692,088
-----------------
STOCKHOLDER'S EQUITY:
Common stock, par value $1.00 per share--authorized 25,000 shares;
outstanding 1,000 shares..................................................................... 1,000
Additional paid-in capital..................................................................... 686,215,876
Retained earnings.............................................................................. 119,029,472
Proceeds receivable from Merrill Lynch & Co., Inc. from sale of subsidiaries................... (684,115,048)
-----------------
Total stockholder's equity..................................................................... 121,131,300
-----------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY..................................................... $ 212,823,388
-----------------
-----------------
</TABLE>
See notes to consolidated balance sheet.
A-2
<PAGE>
FUND ASSET MANAGEMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
ORGANIZATION
Fund Asset Management, Inc. and subsidiary (the "Company"), a wholly-owned
subsidiary of Merrill Lynch Investment Management Inc. (the "Parent"), or "MLIM"
which is an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc.
("ML&Co."), serves as an investment adviser to various registered open-end
investment companies. The Company is also a lessor participant in certain
leveraged and sales-type lease agreements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income Taxes--The results of the operations of the Company are included in
the consolidated Federal and combined state and local income tax returns filed
by ML&Co. It is the policy of ML&Co. to allocate the tax associated with such
operating results to each respective subsidiary in a manner which approximates
the separate company method. In 1992, ML&Co. adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109") which
requires an asset and liability method in recording income taxes on all
transactions that have been recognized in the financial statements. SFAS 109
provides that deferred taxes be adjusted to reflect tax rates at which future
tax liabilities or assets are expected to be settled or realized.
TRANSACTIONS WITH AFFILIATES
The Company serves as an investment adviser for certain affiliated
investment companies. The Company maintains investments in certain of these
investment companies. Such investments are carried at the lower of cost or
market value. Market value is determined based upon quoted market prices.
The Company has an arrangement with Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S") an affiliate which provides that the Company, which
receives revenue as investment adviser to certain investment companies (the
"Funds"), reimburse MLPF&S for certain costs incurred in processing transactions
involving shares of the Funds.
ML&Co. is the holder of the Company's excess cash, which is available on
demand to meet current liabilities. ML&Co. credits the Company for interest, at
a floating rate approximating ML&Co.'s average borrowing rate, based on the
Company's average daily balances due to/from ML&Co.
A-3
<PAGE>
FUND ASSET MANAGEMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
DECEMBER 31, 1993
TRANSACTIONS WITH AFFILIATES--(CONTINUED)
The "Receivable from affiliated companies" arising from lease transactions
is summarized as follows:
<TABLE>
<S> <C>
Monies advanced to fund lease transactions............................. $ (103,476,954)
Tax benefits allocated to the Company by ML&Co......................... 88,699,254
Other.................................................................. 39,279,223
-----------------
Total.................................................................. $ 24,501,523
-----------------
-----------------
</TABLE>
The Company has a 49 percent limited partnership interest in ML Plainsboro
Limited Partnership ("MLP") whose general partner is an affiliate. Profits and
losses are allocated to the Company based on its percentage interest.
During 1992, the Company sold its investment in Merrill Lynch Interfunding,
Inc. and Merlease Leasing Corp. to an affiliate at book value, resulting in a
receivable from ML&Co. This receivable is reflected as a reduction to
stockholder's equity.
INVESTMENTS IN LEASES
The Company is a lessor participant in leveraged leases.
Pertinent information relating to the Company's investments in leveraged
leases is summarized as follows:
<TABLE> <CAPTION>
ESTIMATED
LENGTH OF RESIDUAL VALUE
LEASE EQUITY OF LEASED
TYPE OF PROPERTY (YEARS) INVESTMENT PROPERTY
- -------------------------------------------------- ----------- ----------- -----------------
<S> <C> <C> <C>
Generating plant.................................. 24-25 34.06% 15.0%
</TABLE>
Financing beyond the Company's equity interest in the purchase price of the
properties was furnished by outside parties in the form of long-term debt that
provides for no recourse against the Company and is secured by a first lien on
the properties and related rentals. At the end of the respective lease terms,
ownership of the properties remains with the Company.
A-4
<PAGE>
FUND ASSET MANAGEMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
DECEMBER 31, 1993
INVESTMENTS IN LEASES--(CONTINUED)
The Company's net investment in leveraged leases is summarized as follows:
<TABLE>
<S> <C>
Rentals receivable (net of principal and interest on nonrecourse debt)... $ 66,075,030
Estimated residual values of leased assets............................... 18,964,143
Less:
Unearned and deferred income........................................... (26,617,505)
Allowance for uncollectibles........................................... (990,000)
---------------
Investment in leveraged leases........................................... $ 57,431,668
Less deferred taxes arising from leveraged leases........................ (52,938,886)
---------------
Net investment in leveraged leases....................................... $ 4,492,782
---------------
---------------
</TABLE>
During 1993, the Company sold its equity interest in the chemical tanker
previously accounted for as a leveraged lease. The sale resulted in an after-tax
gain of $112,000.
The Company's investment in the sales-type leases consisted of the
following elements at December 31, 1993:
<TABLE>
<S> <C>
Minimum lease payments receivable.......................................... $ 3,672,000
Less:
Unearned income.......................................................... (59,479)
Allowance for uncollectibles............................................. (250,000)
-------------
Investment in sales type financing leases.................................. $ 3,362,521
-------------
-------------
</TABLE>
At December 31, 1993 minimum lease payments receivable are $3,672,000 for
1994.
For Federal income tax purposes, the Company receives the investment tax
credit and has the benefit of tax deductions for (i) depreciation on the entire
amount of leased assets and (ii) interest on the outstanding long-term debt. For
state and local tax purposes, the Company also receives the benefits of tax
deductions from (i) and (ii) above. Since, during the early years of the leases,
those deductions exceed the Company's lease rental income, substantial excess
deductions are available to be applied against the Company's other income and
the consolidated income of ML&Co. In the later years of these leases, rental
income will exceed the related deductions and taxes will be payable (to the
extent that net deductions arising from additional leveraged lease transactions
do not offset such net lease income). Deferred taxes have been provided to
reflect these temporary differences.
A-5
<PAGE>
FUND ASSET MANAGEMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET--(CONTINUED)
DECEMBER 31, 1993
INCOME TAXES
As part of the consolidated group, the Company transfers its current
Federal and state tax liabilities to MLIM. No such amounts were due to MLIM at
December 31, 1993.
PENSION PLAN
The Company participates in the ML&Co. Comprehensive Retirement Program
(the "Program") consisting of the Retirement Accumulation Plan ("RAP") and the
Employee Stock Ownership Plan (the "ESOP"). Under the Program, cash
contributions made by the Company and the ML&Co. stock held by the ESOP will be
allocated quarterly to participants' accounts. Allocations will be based on
years of service, age and eligible compensation. Actuarial data regarding the
Company's Plan participants is not separately available.
NAME CHANGE
Effective December 28, 1991, the Company's Parent, through an amendment of
its certificate of incorporation, changed its name to Merrill Lynch Investment
Management, Inc. ("MLIM"). MLIM does business under the name "Merrill Lynch
Asset Management".
SUBSEQUENT EVENT
Effective January 1, 1994, Fund Asset Management, Inc. contributed certain
net investment advisory assets to Fund Asset Management, L.P., a newly formed
Delaware limited partnership, in exchange for a 99% limited partnership
interest. The general partner, Princeton Services, Inc. (a wholly-owned
subsidiary of Merrill Lynch & Co., Inc.) contributed 1% of the value of the net
investment advisory assets in exchange for its 1% general partnership interest.
The partnership's profits and losses are to be allocated in proportion to the
capital contributions of the partners.
A-6
<PAGE>
MUNIINSURED FUND, INC.
P.O. Box 9011
Princeton, New Jersey 08543-9011
PROXY
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Arthur Zeikel, Terry K.
Glenn and Mark B. Goldfus as proxies, each with the power to
appoint his substitute, and hereby authorizes them to represent
and to vote, as designated on the reverse hereof, all of the
shares of Common Stock of MuniInsured Fund, Inc. (the "Fund")
held of record by the undersigned on March 18, 1994, at the
annual meeting of stockholders of the Fund to be held on May 13,
1994 or any adjournment thereof.
This proxy when properly executed, will be voted in the
manner directed herein by the undersigned stockholder. If no
direction is made, this proxy will be voted for the nominees for
Director and for Proposal 2.
By signing and dating the reverse side of this card, you
authorize the proxies to vote each proposal as marked, or if not
marked to vote "FOR" each proposal, and to use their discretion
to vote for any other matter as may properly come before the
meeting. If you do not intend to personally attend the meeting,
please complete and return this card at once in the enclosed
envelope.
(Continued and to be signed on the reverse side)
<PAGE>
1. To elect one Director to FOR the nominees WITHHOLD AUTHORITY
serve until the 1996 listed below to vote for the
Annual Meeting of nominee(s) listed
Stockholders, and to below
elect two Directors to
serve until the 1997
Annual Meeting of
Stockholders
Joe Grills Melvin R. Seiden and
Stephen B. Swensrud
2. To consider and act upon
a proposal to ratify the
selection of Deloitte &
Touche to serve as
independent auditors of
the Fund for its fiscal
year ending September
30, 1994. FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In the direction of such
proxies, upon such other
business as may properly
come before the meeting
or any adjournment
thereof
Please sign exactly as name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as attorney or as
executor, administrator, trustee or guardian,
please give full title as such. If a corporation,
please sign in full corporate name by president
or other authorized officer. If a partnership,
please sign in partnership name by authorized
person.
Dated: _____________________, 1994
X _________________________________
Signature
X _________________________________
Signature, if held jointly
Please mark boxes [fill in completely[ or [x] in blue or black ink. Sign,
Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
2
<PAGE>
- -----------------------------------------------------------------
BY SIGNING AND PROMPTLY RETURNING THE ENCLOSED PROXY YOU
MAY SAVE YOUR FUND THE EXPENSE OF ADDITIONAL SOLICITATION
COSTS.
- -----------------------------------------------------------------
THE ENCLOSED PROXY CARD HAS BEEN FORWARDED TO YOU BECAUSE
YOU WERE A SHAREHOLDER ON THE RECORD DATE.
IT IS IMPORTANT THAT YOU VOTE AND SIGN THIS PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
- -----------------------------------------------------------------
