MuniInsured
Fund, Inc.
FUND LOGO
Semi-Annual Report
March 31, 1995
This report, including the financial information herein, is
transmitted to the shareholders of MuniInsured Fund, Inc. for their
information. It is not a prospectus, circular or representation
intended for use in the purchase of shares of the Fund or any
securities mentioned in the report. Past performance results shown
in this report should not be considered a representation of future
performance.
MuniInsured
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
MuniInsured Fund, Inc.
DEAR SHAREHOLDER
During the six-month period ended March 31, 1995, MuniInsured Fund,
Inc. earned $0.268 per share income dividends, representing a net
annualized yield of 5.66%, based on a month-end net asset value of
$9.48 per share. Over the same period, the Fund's total investment
return was +5.13%, based on a change in per share net asset value
from $9.50 to $9.48, and assuming reinvestment of $0.270 per share
income dividends and $0.193 per share capital gains distributions.
The Environment
During the six months ended March 31, 1995, the perception that the
US economy was overheating and inflationary pressures were
increasing gave way to a more benign economic outlook. With more
signs of slowing growth investors now appear to be forecasting a
"soft landing" for the US economy. Although gross domestic product
was reported to have increased at a revised 5.1% rate during the
final quarter of 1994, declines in other indicators such as new home
sales and durable goods orders registered thus far in 1995 have led
investors to anticipate that the economy is losing enough momentum
to keep inflation under control and preclude further significant
monetary policy tightening by the Federal Reserve Board.
However, as US stock and bond markets have risen on more positive
economic news, the value of the US dollar reached new lows relative
to the yen and the Deutschemark. Persistent trade deficits and
exports of capital from the United States have kept the US currency
in a decade-long decline relative to the Japanese and German
currencies. Over the longer term, since the United States has the
highest productivity among industrialized nations and among the
lowest labor costs, demand for US dollar-denominated assets may
improve. However, a reduction of the still-widening US trade deficit
may be necessary before the US dollar appreciates substantially
relative to the yen and the Deutschemark.
The first months of 1995 have been very positive for the stock and
bond markets. Continued signs of a moderating expansion and
well-contained inflationary pressures would provide further
assurance that the peak in interest rates is behind us. On the other
hand, indications of reaccelerating growth and further significant
monetary policy tightening by the Federal Reserve Board would be a
decided negative for the US financial markets.
<PAGE>
The Municipal Market
Throughout the three months ended March 31, 1995, the municipal bond
market rallied strongly, continuing the improvement it showed at the
end of 1994. During the quarter ended March 31, 1995, long-term
tax-exempt revenue bond yields, as measured by the Bond Buyer
Revenue Bond Index, declined almost 70 basis points (0.70%) to
6.29%. Bond yields declined over 100 basis points from the highs
experienced in November 1994 and are now lower than they were a year
ago. US Treasury bond yields exhibited similar declines in recent
months. Thus far in 1995, the 30-year US Treasury bond yield has
fallen approximately 50 basis points to 7.43%.
Tax-exempt bond yields declined more than their taxable counterparts
so far in 1995 largely because of the dramatic decline in new
municipal bond issuance in recent quarters. During the three months
ended March 31, 1995, less than $30 billion in new long-term
municipal securities were issued, representing a 45% decline in
issuance compared to the three months ended March 31, 1994.
Similarly, over the past six months less than $75 billion in
municipal bonds were issued, a decline of approximately 50% versus
the comparable period a year ago. Issuance was particularly low
during January and February with monthly volume of less than $8
billion. These levels are the lowest monthly totals since the
mid-1980s.
Both institutional and individual investors saw significant cash
inflows in recent months. These cash flows were derived from regular
coupon payment, bond maturities and the proceeds from early bond
calls and redemptions. Investors received approximately $20 billion
in principal redemptions and coupon income during January 1995. With
monthly issuance in the $7 billion--$10 billion range, the current
supply/demand imbalance dominated the municipal market, and bond
prices have risen accordingly. The tax-exempt bond market's
technical position is likely to remain strong throughout most of
this year. We estimate that investor proceeds from all sources will
exceed $200 billion during 1995. Estimates of total bond issuance
for this year continue to be reduced, with most estimates currently
in the $125 billion range. Investors should find it increasingly
difficult to replace existing holdings as they mature and reinvest
coupon income in such an environment.
However, despite their strong technical position, municipal bonds
remain an attractive investment alternative. At current levels,
long-term municipal revenue bonds yield over 84% of the US Treasury
bond's yield. Municipal bond yields are usually considered
attractive whenever the yield ratio exceeds 82%. For example, to an
investor in the 39% Federal income tax bracket, municipal revenue
bonds currently yield in excess of 10% on a tax equivalent basis. As
municipal bonds become increasingly scarce during 1995 and beyond,
currently available tax-exempt bond yields should be attractive to
long-term investors.
<PAGE>
Portfolio Strategy
During the three months ended March 31, 1995, the Fund's investment
strategy continued to be cautious, since the prevailing economic
environment did not warrant an aggressive portfolio restructuring,
in our view. Within this context, we focused on the continued
acquisition of current coupon and premium noncallable
income-oriented securities of high tax states and the sale of bonds
with approaching call dates that we regarded to be fully valued in
relation to the market as a whole. We have been averse to increasing
the Fund's cash position because of the negative consequence to the
dividend for our shareholders and the lack of new-issue supply, and
therefore, we have kept cash reserves to a minimum.
In Conclusion
We appreciate your ongoing interest in MuniInsured Fund, Inc., and
we look forward to assisting you with your financial needs in the
months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
May 2, 1995
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniInsured Fund, Inc.'s portfolio
holdings in the Schedule of Investments, we have abbreviated the
names of many of the securities according to the list below and at
right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate Municipal Bonds
PARS Periodic Auction Reset Securities
PCR Pollution Control Revenue Bonds
RAW Revenue Anticipation Warrants
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (IN THOUSANDS)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alaska--1.4% AAA Aaa $1,000 Ketchikan, Alaska, Municipal Utility Revenue Bonds, Series R,
6.65% due 12/01/2012 (d) $ 1,065
California--6.3% AAA Aaa 750 California State, RAW, Series C, 5.75% due 4/25/1996 (c) 760
AAA Aaa 1,000 Cucamonga, California, County Water District, COP (Water
Facility Projects), 5.45% due 9/01/2023 (c) 914
AAA Aaa 1,400 Los Angeles, California, Department of Water and Power, Electric
Plant Revenue Bonds, 5.30% due 2/15/2021 (c) 1,262
AAA Aaa 2,000 Los Angeles, California, Wastewater Systems, Revenue Refunding
Bonds, Series A, 5.80% due 6/01/2021 (b) 1,919
Colorado--3.1% AAA Aaa 1,500 Auraria, Colorado, Higher Education Center Revenue Bonds
(Student Fee), Series B, 6.50% due 11/01/2016 (a) 1,564
A1 NR* 800 Pitkin County, Colorado, IDR, Refunding (Aspen Skiing Co.
Project), VRDN, AMT, Series B, 4.60% due 4/01/2014 (e) 800
Connecticut-- AA Aa 2,100 Connecticut State HFA (Housing Mortgage Finance Program),
2.7% AMT, Series A, Subseries A-2, 6.45% due 5/15/2022 2,092
District of AAA Aaa 3,000 Metropolitan Washington, DC Airports Authority, General Airports
Columbia--3.7% Revenue Bonds, AMT, Series A, 5.75% due 10/01/2020 (b) 2,824
Florida--4.4% AAA Aaa 3,000 Reedy Creek, Florida, Improvement District, Florida Utility
Revenue Bonds, AMT, Series 1, 9% due 10/01/2007 (b) 3,342
Georgia--2.0% AAA Aaa 1,450 Municipal Electric Authority, Georgia, Special Obligation Bonds
(Fifth Crossover Series Project One), 6.40% due 1/01/2013 (a) 1,526
Illinois-- AAA Aaa 1,000 Chicago, Illinois, GO, 6.125% due 1/01/2016 (a) 990
16.4% AAA Aaa 1,000 Chicago, Illinois, Wastewater Transmission Revenue Bonds,
6.375% due 1/01/2024 (b) 1,013
AAA Aaa 1,000 Decatur, Illinois, Hospital Revenue Refunding Bonds (Decatur
Memorial Hospital), Series A, 7.75% due 10/01/2021 (b) 1,119
AAA Aaa 3,000 Illinois Health Facilities Authority Revenue Bonds (Ingalls
Health System Project), Series A, 6.25% due 5/15/2024 (b) 2,996
Illinois Regional Transportation Authority, Illinois, GO:
AAA Aaa 2,500 Series A, 7.20% due 11/01/2020 (a) 2,871
AAA Aaa 1,000 UT, Series C, 7.75% due 6/01/2020 (c) 1,218
AAA Aaa 2,180 Waukegan, Illinois, GO, Series A, UT, 6.75% due 11/15/2013 (c) 2,306
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (IN THOUSANDS)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Indiana--1.4% A NR* $1,000 Indiana Bond Bank Revenue Bonds (State Revolving Fund
Program), Series A, 6.75% due 2/01/2017 $ 1,045
Iowa--4.2% AAA Aaa 3,500 Cedar Rapids, Iowa, PCR, Refunding (Iowa Electric Light &
Power Company Project), 5.50% due 11/01/2023 (b) 3,182
Kansas--3.5% AAA Aaa 2,500 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric
Company Project), 7% due 6/01/2031 (b) 2,670
Louisiana--2.9% AAA Aaa 2,300 Louisiana Stadium and Expo District, Revenue Refunding
Bonds (Hotel and Stadium Occupancy Tax), Series A, 6% due
7/01/2024 (c) 2,250
Maine--1.3% AA- A1 1,000 Maine Housing Authority, Mortgage Purchase Revenue Bonds,
AMT, Series C-2, 6.875% due 11/15/2023 1,017
Maryland--1.3% AAA Aaa 1,000 Baltimore, Maryland, Revenue Refunding Bonds (Wastewater
Projects), Series A, 6% due 7/01/2015 (c) 1,017
Massachu- AAA Aaa 1,050 Massachusetts Education Loan Authority, Educational
setts--2.8% Loan Revenue Bonds, AMT, Issue E, Series A, 7.375% due
1/01/2012 (a) 1,145
A+ Aa 1,000 Massachusetts State Housing Finance Agency, S/F Housing
Revenue Bonds, AMT, Series 32, 6.60% due 12/01/2026 1,002
Nevada--2.1% AAA Aaa 1,500 Clark County, Nevada, School District Revenue Bonds, 6.75% due
6/15/2015 (c) 1,594
New York--7.8% BBB Baa1 1,000 Metropolitan Transportation Authority, New York, Service
Contract Revenue Bonds (Transit Facilities), Series O, 5.75% due
7/01/2013 936
A- Baa1 2,000 New York City, New York, GO, UT, Refunding, Series F, 7.625% due
2/01/2015 2,111
BBB Baa1 2,000 New York State Dormitory Authority Revenue Bonds (City
University), Series F, 5.50% due 7/01/2012 1,818
BBB Baa1 1,000 New York State Urban Development Corporation Revenue Bonds
(State Facilities), 7.50% due 4/01/2020 1,072
Rhode Island AAA Aaa 2,000 Rhode Island Depositors, Economic Protection Corporation,
--2.8% Special Obligation Bonds, Series A, 6.50% due 8/01/2007 (d) 2,125
South Carolina AAA Aaa 1,000 South Carolina State Port Authority Revenue Bonds, AMT, 6.75%
--1.3% due 7/01/2021 (a) 1,032
<PAGE>
Texas--8.2% AAA Aaa 1,150 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light and Power), Series A, 6.70% due 3/01/2017 (a) 1,204
AAA Aaa 3,000 Harris County, Texas, Health Facilities Development Corp.,
Hospital Revenue Bonds (Hermann Hospital Project), 6.375% due
10/01/2024 (b) 3,038
AAA Aaa 1,000 Houston, Texas, Airport System Revenue Bonds (Sub-Lien), AMT,
Series A, 6.75% due 7/01/2021 (c) 1,031
AA- A2 1,000 Port Corpus Christi Authority, Texas, Nueces County, PCR
(Hoechst Celanese Corporation Project), AMT, 6.875% due
4/01/2017 1,029
Utah--8.1% AAA Aaa 6,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospitals, Inc.), Linked PARS and INFLOS, 6.75% due
5/15/2020 (a) 6,227
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (IN THOUSANDS)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Virginia--2.6% Virginia State Housing Development Authority, Commonwealth
Mortgage:
AAA Aaa $1,000 AMT, Series A, Subseries A-4, 6.45% due 7/01/2028 (b) $ 996
AA+ Aa1 1,000 Series J, Subseries J-2, 6.75% due 7/01/2017 1,028
Washington--3.8% AAA Aaa 2,500 Washington State Public Power Supply System, Revenue
Refunding Bonds (Nuclear Project No. 3), Series C, 7.50% due
7/01/2008 (b) 2,894
West Virginia AAA Aaa 1,500 Harrison County, West Virginia, Solid Waste Disposal Revenue Bonds
--2.0% (Monongahela Power), AMT, Series C, 6.75% due 8/01/2024 (a) 1,558
Total Investments (Cost--$71,480)--96.1% 73,602
Other Assets Less Liabilities--3.9% 2,962
-------
Net Assets--100.0% $76,564
=======
<FN>
(a)AMBAC Insured.
(b)MBIA Insured.
(c)FGIC Insured.
(d)FSA Insured.
(e)The interest rate is subject to change periodically based upon
the prevailing market rates. The interest rate shown is the rate in
effect at March 31, 1995.
*Not Rated.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of March 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$71,479,502) (Note 1a) $ 73,601,876
Cash 1,485,304
Receivables:
Securities sold $ 2,011,960
Interest 1,463,150 3,475,110
------------
Prepaid expenses and other assets 31,879
------------
Total assets 78,594,169
------------
Liabilities: Payables:
Securities purchased 1,846,388
Dividends to shareholders (Note 1e) 75,304
Investment adviser (Note 2) 32,511 1,954,203
------------
Accrued expenses and other liabilities 76,033
------------
Total liabilities 2,030,236
------------
Net Assets: Net assets $ 76,563,933
============
Capital: Common Stock, par value $.10 per share; 150,000,000 shares
authorized; 8,079,388 shares issued and outstanding (Note 4) $ 807,939
Paid-in capital in excess of par 74,515,276 $ 75,323,215
------------
Undistributed investment income--net 348,010
Accumulated realized capital losses--net (1,229,666)
Unrealized appreciation on investments--net 2,122,374
------------
Total capital--Equivalent to $9.48 net asset value per share
of Common Stock (market price--$8.75) (Note 4) $ 76,563,933
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (CONTINUED)
<TABLE>
Statement of Operations for the Six Months Ended March 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 2,460,707
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 185,705
Professional fees 32,051
Transfer agent fees 17,412
Accounting services (Note 2) 17,309
Printing and shareholder reports 14,743
Directors' fees and expenses 12,898
Listing fees 5,109
Custodian fees 4,147
Pricing fees 3,608
Other 7,274
------------
Total expenses 300,256
------------
Investment income--net 2,160,451
------------
Realized & Realized loss on investments--net (1,196,791)
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net 2,595,077
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 3,558,737
(Notes 1b, 1d & 3): ============
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 2,160,451 $ 4,532,097
Realized gain (loss) on investments--net (1,196,791) 2,354,713
Change in unrealized appreciation/depreciation on
investments--net 2,595,077 (10,322,871)
------------ ------------
Net increase (decrease) in net assets resulting
from operations 3,558,737 (3,436,061)
------------ ------------
Dividends & Investment income--net (2,179,808) (4,549,578)
Distributions to Realized gain on investments--net (1,559,416) (1,857,618)
Shareholders ------------ ------------
(Note 1e): Net decrease in net assets resulting from dividends
and distributions to shareholders (3,739,224) (6,407,196)
------------ ------------
Common Stock Net increase in net assets derived from shares issued
Transactions to shareholders in reinvestment of dividends 82,453 969,935
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (98,034) (8,873,322)
Beginning of period 76,661,967 85,535,289
------------ ------------
End of period* $ 76,563,933 $ 76,661,967
============ ============
<FN>
*Undistributed investment income--net $ 348,010 $ 367,367
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (CONCLUDED)
<TABLE>
Financial Highlights
<CAPTION>
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.50 $ 10.72 $ 10.26 $ 10.21 $ 9.68
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .26 .57 .60 .62 .64
Realized and unrealized gain (loss) on
investments--net .18 (.99) .68 .45 .60
-------- -------- -------- -------- --------
Total from investment operations .44 (.42) 1.28 1.07 1.24
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.27) (.57) (.60) (.62) (.63)
Realized gain on investments--net (.19) (.23) (.22) (.40) (.08)
-------- -------- -------- -------- --------
Total dividends and distributions (.46) (.80) (.82) (1.02) (.71)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.48 $ 9.50 $ 10.72 $ 10.26 $ 10.21
======== ======== ======== ======== ========
Market price per share, end of period $ 8.75 $ 8.75 $ 10.875 $ 10.875 $ 10.00
======== ======== ======== ======== ========
Total Investment Based on market price per share 5.35%++ (12.93%) 8.27% 20.15% 19.40%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 5.13%++ (4.10%) 13.12% 11.03% 13.35%
======== ======== ======== ======== ========
Ratios to Average Expenses .81%* .77% .80% .85% .89%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 5.82%* 5.58% 5.81% 6.17% 6.47%
======== ======== ======== ======== ========
Supplemental Data: Net assets, end of period (in thousands) $ 76,564 $ 76,662 $ 85,535 $ 80,737 $ 79,033
======== ======== ======== ======== ========
Portfolio turnover 41.83% 47.17% 27.89% 84.01% 92.07%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, result in
substantially different returns. Total investment returns exclude
the effects of sales loads.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniInsured Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. 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 weekly basis. The Fund's Common
Stock is listed on the American Stock Exchange under the symbol MIF.
The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Municipal
bonds for which quotations are not readily available are valued at
fair value on a consistent basis as determined by the pricing
service using a matrix system to determine valuations. The
procedures of the pricing service and its valuations are reviewed by
the officers of the Fund under the general supervision of the Board
of Directors. The Board of Directors has determined in good faith
that the use of a pricing service is a fair method of determining
the valuation of portfolio securities. Obligations with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Financial futures contracts and related
options, which are traded on exchanges, are valued at their closing
prices as of the close of such exchanges. Options, which are traded
on exchanges, are valued at their last sale price as of the close of
such exchanges or, lacking any sales, at the last available bid
price. Securities for which market quotations are not readily
available are valued at their 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 strategies to seek to increase its return by hedging its
portfolio against adverse movements in debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
<PAGE>
* Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
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 at an annual rate of 0.50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc.,
and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended March 31, 1995 were $29,654,695 and
$33,246,120, respectively.
Net realized and unrealized gains (losses) as of March 31, 1995 were
as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (357,349) $2,119,822
Short-term investments (27,780) 2,552
Financial futures contracts (811,662) --
----------- ----------
Total $(1,196,791) $2,122,374
=========== ==========
As of March 31, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $2,122,374, of which $2,615,703 related to
appreciated securities and $493,329 related to depreciated
securities. The aggregate cost of investments at March 31, 1995 for
Federal income tax purposes was $71,479,502.
4. Capital Stock Transactions:
At March 31, 1995, the Fund had one class of shares of Common Stock,
par value $.10 per share, of which 150,000,000 shares were
authorized. For the six months ended March 31, 1995, shares issued
and outstanding increased by 8,962 to 8,079,388 as a result of
dividend reinvestment. At March 31, 1995, total paid-in capital
amounted to $75,323,215.
<PAGE>
5. Subsequent Event:
On April 10, 1995, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $0.043073 per share, payable on April 27,1995 to shareholders on
record as of April 21, 1995.
PER SHARE INFORMATION
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Dividends/Distributions
Net Realized Unrealized
Investment Gains Gains Net Investment Capital
For the Quarter Income (Losses) (Losses) Income Gains
<S> <C> <C> <C> <C> <C>
April 1, 1993 to June 30, 1993 $0.15 $ 0.13 $ 0.07 $(0.15) --
July 1, 1993 to September 30, 1993 0.15 -- 0.24 (0.15) --
October 1, 1993 to December 31, 1993 0.15 0.10 (0.12) (0.15) $(0.23)
January 1, 1994 to March 31, 1994 0.14 0.11 (0.86) (0.14) --
April 1, 1994 to June 30, 1994 0.14 0.12 (0.18) (0.14) --
July 1, 1994 to September 30, 1994 0.14 (0.03) (0.11) (0.14) --
October 1, 1994 to December 31, 1994 0.13 (0.13) (0.15) (0.14) (0.19)
January 1, 1995 to March 31, 1995 0.13 (0.01) 0.47 (0.13) --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
April 1, 1993 to June 30, 1993 $10.49 $10.25 $10.75 $10.00 492
July 1, 1993 to September 30, 1993 10.78 10.37 11.00 10.125 475
October 1, 1993 to December 31, 1993 10.82 10.39 11.125 10.25 431
January 1, 1994 to March 31, 1994 10.59 9.72 10.875 8.875 464
April 1, 1994 to June 30, 1994 10.00 9.48 10.00 9.25 370
July 1, 1994 to September 30, 1994 9.82 9.50 9.875 8.50 538
October 1, 1994 to December 31, 1994 9.50 8.84 9.25 8.125 1,232
January 1, 1995 to March 31, 1995 9.52 9.00 9.50 8.625 425
<FN>
*Calculations are based upon shares of Common Stock outstanding at
the end of each quarter.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
<PAGE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Walter Mintz, Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Harry Woolf, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
State Street Bank & Trust Company
One Heritage Drive, P2N
North Quincy, MA 02171
Transfer Agent
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02101
(617) 328-5000
ASE Symbol
MIF
