MuniInsured
Fund, Inc.
FUND LOGO
Annual Report
September 30, 1996
Officers and Directors
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, 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
<PAGE>
Transfer Agent
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02101
(617) 328-5000
ASE Symbol
MIF
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. Statements and other information herein are as dated
and are subject to change.
MuniInsured
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MuniInsured Fund, Inc.
DEAR SHAREHOLDER
<PAGE>
During the six-month period ended September 30, 1996, MuniInsured
Fund, Inc. earned $0.253 per share income dividends, representing a
net annualized yield of 5.17%, based on a month-end net asset value
of $9.77 per share. Over the same period, the Fund's total
investment return was +3.38%, based on a change in per share net
asset value from $9.73 to $9.77, and assuming reinvestment of $0.254
per share income dividends.
For the year ended September 30, 1996, the Fund earned $0.505 per
share income dividends, representing a net annualized yield of
5.17%, based on a month-end net asset value of $9.77 per share. Over
the same period, the Fund's total investment return was +7.34%,
based on a change in per share net asset value from $9.64 to $9.77,
and assuming reinvestment of $0.506 per share income dividends.
The Municipal Market Environment
Municipal bond yields generally moved lower during the six months
ended September 30, 1996. Long-term tax-exempt revenue bond yields,
as measured by the Bond Buyer Revenue Bond Index, declined
approximately 15 basis points (0.15%) to end the period at
approximately 6.00%. The municipal bond market exhibited
considerable weekly yield volatility over the last six months with
bond yields fluctuating by as much as 20 basis points. This ongoing
volatility was in response to fluctuating evidence regarding the
degree to which recent economic growth will result in any
significant increase in inflationary pressures. Much of the evidence
supporting stronger growth centered around the strong employment
growth seen in April and June and bond yields rose in response.
Other economic indicators suggested that economic growth will not be
excessive and inflationary pressures will remain well-contained.
This continued benign inflationary environment supported lower tax-
exempt bond yields in recent months. US Treasury bond yields
exhibited similar, albeit greater, volatility during the period,
rising over 25 basis points to end the period at 6.92%. Over the
last six months, tax-exempt bond yields moderately declined while US
Treasury bond yields rose. This relative outperformance by the muni-
cipal bond market was largely the result of the strong technical
support the tax-exempt market enjoyed throughout most of 1996.
Perhaps most significantly, the pace of new bond issuance recently
slowed.
Over the last year, approximately $180 billion in long-term
municipal securities was issued, an increase of over 25% versus the
same period a year ago. Much of this increase was the result of
issuers seeking to refinance their existing higher-couponed debt as
interest rates declined in 1995 and early 1996. As interest rates
rose these financings became increasingly economically impractical
and issuance declined. Over the last six months less than $90
billion in long-term tax-exempt securities were underwritten, an
increase of 9% versus the comparable period a year earlier. Only $36
billion in tax-exempt securities were issued during the last three
months, a 3% decline in issuance compared to the September 30, 1995
quarter.
<PAGE>
At the same time investor demand remained consistently strong. With
nominal new-issue yields above 6%, retail investor interest was
steady. Additionally, investors received over $50 billion this June
and July in assets derived from coupon income, bond maturities and
proceeds from early redemptions. Annual new bond issuance declined
in recent years and is expected to remain below levels seen in the
early 1990s. Consequently, as the higher-coupon bonds issued in the
early-to-mid 1980s were redeemed at their first optional call dates,
the total number of outstanding tax-exempt bonds declined. This
combination of a declining net supply and significant amounts of new
assets helped maintain investor demand in recent months.
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance led to the yield
ratio between long-term taxable and tax-exempt securities falling
from in excess of 90% to approximately 85%. While historically still
very attractive, some institutional investors, particularly short-
term traders, began to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor, such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
Looking ahead, no clear consensus for the direction of interest
rates currently exists. Perhaps, the primary focus going forward
will be the extent to which the increase in interest rates seen thus
far in 1996 will negatively impact future economic growth. Should
growth slow in the interest rate-sensitive sectors of the economy,
like housing, auto, and consumer spending, as many economists assert
is likely, then bond yields are likely to decline. Under such a
scenario, the municipal bond market's performance is likely to
closely mirror that of the US Treasury bond market.
Portfolio Strategy
Our portfolio strategy changed markedly over the course of the
fiscal year ended September 30, 1996. As we entered the last half of
the fiscal year we anticipated that municipal bond yields would
continue to decline because of below-trend growth in the economy.
Therefore, we concentrated on seeking to enhance the total return
potential of the Fund by buying high-quality performance-oriented
bonds. However, as indications of stronger economic growth were
released, particularly the strong employment report, fears of
inflationary pressures mounted and municipal bond yields rose in
response. We subsequently adopted a more defensive portfolio
strategy by adding higher-coupon issues and selling lower-coupon
bonds. We also raised the cash reserve level of the Fund in order to
seek to protect principal. Recent economic data indicated some
moderation of growth and few inflationary pressures. Therefore, we
reduced our cash level and modestly increased the average portfolio
maturity of the Fund. This investment strategy benefited the Fund's
total returns for the fiscal year ended September 30, 1996. The Fund
also provided attractive yields for its shareholders for the 12
months ended September 30, 1996.
<PAGE>
Looking ahead, we expect the municipal market to continue to
experience volatility within a narrow trading range. Therefore, our
investment strategy will be cautious. We intend to continue to
stress buying current coupon securities during periods of market
weakness.
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
(William R. Bock)
William R. Bock
Portfolio Manager
November 4, 1996
PORTFOLIO ABBREVIATIONS
<PAGE>
To simplify the listings of MuniInsured Fund, Inc.'s port-folio
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
HDA Housing Development Authority
HFA Housing Finance Agency
INFLOS Inverse Floating Rate Municipal Bonds
PCR Pollution Control Revenue Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<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--3.9% AAA Aaa $ 2,000 Alaska State Housing Finance Corporation, Refunding, Series A,
5.875% due 12/01/2024 (b)(h) $ 1,982
AAA Aaa 1,000 Ketchikan, Alaska, Municipal Utility Revenue Bonds, Series R,
6.65% due 12/01/2012 (e) 1,091
California AAA Aaa 1,405 California Educational Facilities Authority Revenue Bonds
- --17.5% (Loyola Marymount University), Series 1996, 5.90% due
10/01/2021 (b) 1,415
AAA Aaa 1,500 California HFA, Home Mortgage Revenue Bonds, Series F,
6% due 8/01/2017 (b) 1,514
AAA Aaa 2,670 California State, Variable Purpose Bonds, 5.90% due 3/01/2025 (a) 2,693
AAA Aaa 1,500 Los Angeles, California, Wastewater System Revenue Refunding
Bonds, Series A, 5.80% due 6/01/2021 (b) 1,500
AAA Aaa 2,000 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding Bonds (Property A-
Second Tier), 6% due 7/01/2026 (b) 2,028
AAA Aaa 1,620 Los Angeles County, California, Public Works Financing
Authority, Lease Revenue Refunding Bonds, Series A, 5.25%
due 9/01/2014 (b) 1,553
AAA Aaa 1,000 San Francisco, California, Bay Area Rapid Transit District,
Sales Tax Revenue Bonds, 5.50% due 7/01/2020 (d) 971
AAA Aaa 2,000 San Francisco, California, City and County Public Safety
Improvement Projects, UT, Series B, 6.30% due 6/15/2014 (d) 2,103
<PAGE>
Colorado--2.7% AA Aa 1,000 Colorado Springs, Colorado, Utilities Revenue Bonds, Series A,
6.10% due 11/15/2024 1,027
A1 VMIG1++ 1,100 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects),
VRDN, 3.90% due 5/01/2013 (a)(c) 1,100
Connecticut AAA Aaa 1,350 Connecticut State Health and Educational Facilities Authority
- --2.9% Revenue Bonds (Veteran Memorial Medical Center), Series A,
5.375% due 7/01/2013 (b) 1,300
AA Aa 1,000 Connecticut State, HFA (Housing Mortgage Finance Program),
AMT, Series A, Sub-Series A-2, 6.45% due 5/15/2022 1,013
Florida--1.2% AAA Aaa 1,000 Florida State Board of Education, Capital Outlay (Public
Education), Series F, 5.50% due 6/01/2026 (d) 970
</TABLE>
<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>
Illinois AAA Aaa $ 2,605 Chicago, Illinois, Board of Education (Chicago School Reform),
- --18.3% UT, 6% due 12/01/2026 (b) $ 2,641
AAA Aaa 1,000 Chicago, Illinois, Wastewater Transmission Revenue Bonds,
6.375% due 1/01/2024 (b) 1,053
AAA Aaa 1,000 Decatur, Illinois, Hospital Revenue Refunding Bonds (Decatur
Memorial Hospital), Series A, 7.75% due 10/01/2021 (b) 1,143
AA Aa 1,000 Illinois HDA, Homeowner Mortgage Revenue Bonds,
Sub-Series D-1, 6.40% due 8/01/2017 1,020
AAA Aaa 3,000 Illinois Health Facilities Authority Revenue Bonds
(Ingalls Health System Project), 6.25% due 5/15/2024 (b) 3,094
AAA Aaa 2,000 Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Refunding Bonds (McCormick Place
Expansion Project), Series A, 5.25% due 6/15/2027 (a) 1,846
AAA Aaa 1,000 Regional Transportation Authority, Illinois, GO, UT, Series C,
7.75% due 6/01/2020 (d) 1,267
AAA Aaa 2,180 Waukegan, Illinois, GO, UT, Series A, 6.75% due 11/15/2013 (d) 2,369
Indiana--1.4% A NR* 1,000 Indiana Bond Bank Revenue Bonds (State Revolving Fund
Program), Series A, 6.75% due 2/01/2017 1,097
Kansas--3.5% AAA Aaa 2,500 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric
Company Project), 7% due 6/01/2031 (b) 2,756
Louisiana--2.0% AAA Aaa 1,500 Louisiana State, Refunding, Series A, 6% due 8/01/2001 (d) 1,586
Maine--1.3% AA- A1 1,000 Maine State Housing Authority, Mortgage Purchase Revenue
Bonds, AMT, Series C-2, 6.875% due 11/15/2023 1,035
<PAGE>
Maryland--0.5% NR* VMIG1++ 200 Maryland State Health and Higher Educational Facilities
Authority Revenue Bonds (Pooled Loan Program), VRDN,
Series A, 3.90% due 4/01/2035 (c) 200
A1+ VMIG1++ 200 University of Maryland Revenue Bonds (Equipment Loan
Program), VRDN, Series A, 3.70% due 7/01/2015 (c) 200
Massachusetts AAA Aaa 1,050 Massachusetts Education Loan Authority, Education Loan
- --4.0% Revenue Bonds, AMT, Issue E, Series A, 7.375% due 1/01/2012 (a) 1,151
AAA Aaa 1,000 Massachusetts State, Consolidated Loan, Series C, 5.50% due
9/01/2015 (b) 983
A+ Aa 1,000 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT,
Series 32, 6.60% due 12/01/2026 1,024
Michigan--1.6% AAA Aaa 1,250 Chelsea, Michigan, School District, UT, 5.875% due 5/01/2025 (d) 1,256
Mississippi AAA Aaa 1,000 Mississippi Development Bank Special Obligation, Revenue
- --1.2% Refunding Bonds (Adams County Hospital Project), 5.75% due
7/01/2016 (e) 984
Nevada--2.2% AAA Aaa 1,500 Clark County, Nevada, School District, 6.75% due 12/15/2004 (d)(g) 1,696
New Mexico A1+ P1 400 Farmington, New Mexico, PCR (Arizona Public Service Co.),
- --3.4% VRDN, AMT, Series C, 4.10% due 9/01/2024 (c) 400
A1+ P1 2,300 Hurley, New Mexico, PCR (Kennecott Santa Fe), VRDN,
3.95% due 12/01/2015 (c) 2,300
New York--2.8% BBB+ Baa1 2,000 New York City, New York, GO, UT, Refunding, Series F,
7.625% due 2/01/2015 2,209
North A1+ NR* 2,000 Raleigh-Durham, North Carolina, Airport Authority, Special
Carolina--2.5% Facility Revenue Refunding Bonds (American Airlines),
VRDN, Series A, 3.95% due 11/01/2015 (c) 2,000
</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>
Oregon--1.6% A-1 VMIG1++ $ 200 Medford, Oregon, Hospital Facilities Authority Revenue Bonds
(Gross-Rogue Valley Health Services), VRDN, 4% due
10/01/2016 (c) $ 200
AAA Aaa 1,000 Port of Portland, Oregon, International Airport Revenue Bonds
(Portland International Airport), AMT, Series 11, 5.625% due
9/01/2026 (d) 961
A1+ A3 100 Port Saint Helens, Oregon, PCR (Portland General Electric
Company Project), VRDN, AMT, Series A, 4.10% due 8/01/2014 (c) 100
<PAGE>
Texas--11.9% AAA Aaa 1,150 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light and Power), Series A, 6.70% due 3/01/2017 (a) 1,250
AAA Aaa 3,000 Harris County, Texas, Health Facilities Development Corp.,
Hospital Revenue Bonds (Hermann Hospital Project),
6.375% due 10/01/2024 (b) 3,154
AAA Aaa 1,000 Houston, Texas, Airport System Revenue Bonds (Sub-Lien),
AMT, Series A, 6.75% due 7/01/2021 (d) 1,070
A+ A2 1,000 Port Corpus Christi Authority, Texas, Nueces County, PCR
(Hoechst Celanese Corporation Project), AMT, 6.875% due
4/01/2017 1,065
AAA Aaa 3,000 Texas State Turnpike Authority, Dallas North Thruway Revenue
Bonds (President George Bush Turnpike), 5.25% due 1/01/2023 (d) 2,813
Utah--4.7% AAA Aaa 3,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospitals, Inc.), INFLOS, 9.621% due 5/15/2020 (a)(f) 3,386
NR* P1 300 Salt Lake County, Utah, PCR, Refunding (Service Station
Holdings Project), VRDN, 3.95% due 2/01/2008 (c) 300
Virginia--2.6% Virginia State, HDA, Commonwealth Mortgage:
AAA Aaa 1,000 AMT, Series A, Sub-Series A-4, 6.45% due 7/01/2028 (b) 1,022
AA+ Aa1 1,000 Series J, Sub-Series J-2, 6.75% due 7/01/2017 1,047
Washington AAA Aaa 2,275 Tacoma, Washington, Sewer Revenue Bonds, Series B,
- --5.8% 6.375% due 12/01/2015 (d) 2,390
AAA Aaa 2,240 Washington State, COP, 5.80% due 10/01/2015 (a) 2,217
West Virginia AAA Aaa 1,500 Harrison County, West Virginia, Commonwealth Solid Waste
- --2.1% Disposal Revenue Bonds (Monongahela Power), AMT, Series C,
6.75% due 8/01/2024 (a) 1,637
Wisconsin--1.5% AAA Aaa 1,120 Wisconsin Public Power Inc., Power Supply System Revenue
Bonds, Series A, 6% due 7/01/2015 (b) 1,150
Total Investments (Cost--$77,895)--103.1% 81,332
Liabilities in Excess of Other Assets--(3.1%) (2,416)
-------
Net Assets--100.0% $78,916
=======
<FN>
(a)AMBAC Insured.
(b)MBIA Insured.
(c)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at September 30, 1996.
(d)FGIC Insured.
(e)FSA Insured.
(f)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at September 30, 1996.
(g)Prerefunded.
(h)FNMA/GNMA Collateralized.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of September 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$77,894,667) (Note 1a) $ 81,331,436
Cash 1,069,919
Receivables:
Interest $ 1,298,041
Securities sold 100,000 1,398,041
-------------
Prepaid expenses and other assets 27,008
-------------
Total assets 83,826,404
-------------
Liabilities: Payables:
Securities purchased 4,734,197
Dividends to shareholders (Note 1e) 71,403
Investment adviser (Note 2) 33,095 4,838,695
-------------
Accrued expenses and other liabilities 71,936
-------------
Total liabilities 4,910,631
-------------
Net Assets: Net assets $ 78,915,773
=============
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
Undistributed investment income--net 334,884
Accumulated realized capital losses on investments--net (179,095)
Unrealized appreciation on investments--net 3,436,769
-------------
Total capital--Equivalent to $9.77 net asset value per share of Common
Stock (market price--$8.75) $ 78,915,773
=============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statement of Operations for the Year Ended September 30, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 4,715,156
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 396,075
Professional fees 60,695
Accounting services (Note 2) 37,475
Transfer agent fees 31,941
Directors' fees and expenses 28,309
Printing and shareholder reports 27,541
Listing fees 9,500
Pricing fees 8,691
Custodian fees 6,389
Other 14,591
-------------
Total expenses 621,207
-------------
Investment income--net 4,093,949
-------------
Realized & Realized gain on investments--net 711,533
Unrealized Change in unrealized appreciation on investments--net 338,231
Gain on -------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 5,143,713
(Notes 1b, 1d & 3): =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended Sept. 30,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 4,093,949 $ 4,211,493
Realized gain (loss) on investments--net 711,533 (857,534)
Change in unrealized appreciation on investments--net 338,231 3,571,241
------------- -------------
Net increase in net assets resulting from operations 5,143,713 6,925,200
------------- -------------
Dividends & Investment income--net (4,085,981) (4,252,163)
Distributions to Realized gain on investments--net -- (1,526,541)
Shareholders In excess of realized gain on investments--net -- (32,875)
(Note 1e): ------------- -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (4,085,981) (5,811,579)
------------- -------------
Common Stock Net increase in net assets derived from shares issued to
Transactions shareholders in reinvestment of dividends and distributions -- 82,453
(Note 4): ------------- -------------
<PAGE>
Net Assets: Total increase in net assets 1,057,732 1,196,074
Beginning of year 77,858,041 76,661,967
------------- -------------
End of year* $ 78,915,773 $ 77,858,041
============= =============
<FN>
*Undistributed investment income--net $ 334,884 $ 326,916
============= =============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 9.64 $ 9.50 $ 10.72 $ 0.26 $ 10.21
Operating ------- ------- ------- ------- -------
Performance: Investment income--net .51 .52 .57 .60 .62
Realized and unrealized gain (loss) on
investments--net .13 .34 (.99) .68 .45
------- ------- ------- ------- -------
Total from investment operations .64 .86 (.42) 1.28 1.07
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.51) (.53) (.57) (.60) (.62)
Realized gain on investments--net -- (.19) (.23) (.22) (.40)
In excess of realized gain on
investments--net -- --** -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (.51) (.72) (.80) (.82) (1.02)
------- ------- ------- ------- -------
Net asset value, end of year $ 9.77 $ 9.64 $ 9.50 $ 10.72 $ 10.26
======= ======= ======= ======= =======
Market price per share, end of year $ 8.75 $ 8.75 $ 8.75 $10.875 $10.875
======= ======= ======= ======= =======
Total Investment Based on market price per share 5.91% 8.46% (12.93%) 8.27% 20.15%
Return:* ======= ======= ======= ======= =======
Based on net asset value per share 7.34% 10.06% (4.10%) 13.12% 11.03%
======= ======= ======= ======= =======
Ratios to Average Expenses .78% .79% .77% .80% .85%
Net Assets: ======= ======= ======= ======= =======
Investment income--net 5.15% 5.55% 5.58% 5.81% 6.17%
======= ======= ======= ======= =======
<PAGE>
Supplemental Net assets, end of year (in thousands) $78,916 $77,858 $76,662 $85,535 $80,737
Data: ======= ======= ======= ======= =======
Portfolio turnover 94.61% 83.52% 47.17% 27.89% 84.01%
======= ======= ======= ======= =======
<FN>
*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 loads.
**Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
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. 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 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, including
valuations furnished by a pricing service retained by the Fund,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Board of Directors.
<PAGE>
(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 the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
*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).
(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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
(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 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.
("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended September 30, 1996 were $70,882,502 and
$72,317,939, respectively.
Net realized and unrealized gains (losses) as of September 30, 1996
were as follows:
Realized Unrealized
Gains(Losses) Gains
Long-term investments $ 729,520 $ 3,436,769
Financial futures contracts (17,987) --
----------- -----------
Total $ 711,533 $ 3,436,769
=========== ===========
As of September 30, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $3,436,769, of which $3,472,878
related to appreciated securities and $36,109 related to depreciated
securities. The aggregate cost of investments at September 30, 1996,
for Federal income tax purposes was $77,894,667.
<PAGE>
4. Common Stock Transactions:
At September 30, 1996, 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 year ended September 30, 1996, shares issued and
outstanding remained constant at 8,079,388. At September 30, 1996,
total paid-in capital amounted to $75,323,215.
5. Subsequent Event:
On October 10, 1996, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $0.041449 per share, payable on October 30, 1996 to shareholders
of record as of October 21, 1996.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
MuniInsured Fund, Inc.:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniInsured
Fund, Inc. as of September 30, 1996, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at
September 30, 1996 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniInsured Fund, Inc. as of September 30, 1996, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
<PAGE>
Deloitte & Touche LLP
Princeton, New Jersey
November 4, 1996
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income dividends paid monthly by
MuniInsured Fund, Inc. during its taxable year ended September 30,
1996 qualify as tax-exempt interest dividends for Federal income tax
purposes. Additionally, there were no long-term capital gains
distributed by the Fund during the year.
Please retain this information for your records.
