MuniInsured
Fund, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
September 30, 1998
<PAGE>
MuniInsured Fund, Inc.
DEAR SHAREHOLDER
For the year ended September 30, 1998, MuniInsured Fund, Inc. earned $0.551 per
share income dividends. This represents a net annualized yield of 5.35%, based
on a month-end net asset value of $10.30 per share. Over the same period, the
Fund's total investment return was +10.02%, based on a change in per share net
asset value from $10.02 to $10.30, and assuming reinvestment of $0.551 per share
income dividends and $0.099 long-term capital gains distributions.
During the six-month period ended September 30, 1998, the Fund's total
investment return was +5.24%, based on a change in per share net asset value
from $10.05 to $10.30, and assuming reinvestment of $0.250 per share income
dividends.
The Municipal Market Environment
During the six months ended September 30, 1998, long-term bond yields declined
significantly. The near absence of any inflationary pressures in the United
States continued to support historic low interest rates. Additionally, foreign
economic factors have continued to outweigh US domestic fundamentals, as they
have for much of 1998. The economic crisis that began in Asia over a year ago
has spread both to Russia and South America. However, economic factors in these
countries have begun to negatively impact US growth. For example, employment in
the US manufacturing sector declined in recent months as a result of reduced
demand for export goods. Concern that the modest decline in US economic growth
seen thus far would spread and intensify led the Federal Reserve Board to lower
short-term interest rates in late September and again in October. This action
was taken mainly to offset the drag of foreign economies on future US economic
growth.
Long-term uninsured municipal revenue bond yields, as measured by the Bond Buyer
Revenue Bond Index, declined by more than 30 basis points (0.30%) to close the
six-month period ended September 30, 1998 at 5.09%, their lowest level since the
early 1970s. US Treasury bond yields benefited from a "flight to quality" as
foreign investors were drawn to the relative safe haven of US Government
securities. Additionally, the sharp US equity market correction, which began at
the end of August, triggered an additional flight into US Treasury securities.
Long-term US Treasury bond yields fell 100 basis points to finish the six-month
period ended September 30, 1998 at 4.97%. This is the lowest level since the US
Treasury reintroduced 30-year maturity bond auctions in 1977.
During the past 12 months, the tax-exempt bond market has had to contend with
significant new-issue supply pressures. Over the past year, approximately $280
billion in new long-term municipal bonds were underwritten, an increase of
almost 33% compared to the same period a year ago. During the most recent
six-month period, nearly $140 billion in new securities were issued,
representing an increase of nearly 25% over the same six-month period last year.
For the quarter ended September 30, 1998, approximately $65 billion in long-term
municipal bonds were underwritten, an increase of more than 10% compared to the
quarter ended September 30, 1997.
The continued increase in bond issuance has required lower and lower tax-exempt
bond yields to generate the economic savings necessary for additional municipal
bond financings. Consequently, the pace of new bond issuance has slowed in
recent months. In fact, the trend may be reversing. During the month of
September, only $17.3 billion in new long-term municipal bonds were issued, a
decrease of almost 25% from the more than $22 billion issued in September 1997.
In the coming months, we will monitor this trend closely to determine if supply
pressures exerted thus far in 1998 are abating and fostering a more balanced
supply/demand environment.
The current weaknesses in the global financial system suggest that over the near
term, bond yields, including municipal bond yields, are unlikely to rise by any
appreciable amount. With recent supply pressures, and since municipal securities
do not have the same safe-haven status enjoyed by US Treasury
1
<PAGE>
MuniInsured Fund, Inc. September 30, 1998
securities, municipal bond yield spreads widened relative to US Treasury bond
yields. At September 30, 1998, long-term tax-exempt bond yield spreads were
attractive relative to US Treasury securities of comparable maturities (over
100%), well in excess of their historic range of 85%-88%. Tax-exempt bond yield
ratios have rarely exceeded 90% in the 1980s and 1990s. Historically, yield
spreads have been wider than these levels only when there have been potential
changes in Federal tax codes that would have adversely affected the tax-favored
status of municipal bonds.
Currently, municipal bond investors find themselves in a unique investment
environment. At present, almost the entire municipal bond universe, across
nearly all maturity and credit sectors, can be purchased at yields greater than
their taxable counterparts. However, the current opportunity could quickly
disappear if tax-exempt bond supply pressures diminish or if US Treasury
securities become less desirable as safe-haven investments. Under these
conditions, municipal bond ratios should quickly revert to more normal historic
percentages, certainly well below their presently attractive levels.
Portfolio Strategy
During the six-month period ended September 30, 1998, we continued to maintain a
constructive outlook toward the municipal bond market because we believed that
the robust economic growth seen thus far this year would be tempered by the lack
of inflation and the deteriorating economic situation in Asia. Consequently, we
expected tax-exempt bond yields to trade in a relatively narrow range, with a
bias toward lower bond yields. We maintained a fully invested position in order
to seek to enhance shareholder income and participate in any investment
appreciation that arose.
Looking ahead, we expect to remain fully invested with little change in the
Fund's present structure in an effort to enhance the Fund's dividend and capital
appreciation potential. Current economic fundamentals and a strong domestic
economy with high productivity offset by equally favorable deflationary
pressures from Asia suggest that interest rates could trend lower in the coming
months.
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,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ William R. Bock
William R. Bock
Vice President and Portfolio Manager
November 6, 1998
PROXY RESULTS
During the six-month period ended September 30, 1998, MuniInsured Fund, Inc.
shareholders voted on the following proposals. The proposals were approved at a
shareholders' meeting on May 21, 1998. The description of each proposal and
number of shares voted are as follows:
- --------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- --------------------------------------------------------------------------------
1. To elect two Directors to serve until the 2001
Meeting of Stockholders: Robert S. Salomon Jr. 7,620,275 165,163
Arthur Zeikel 7,619,879 165,558
- --------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- --------------------------------------------------------------------------------
2. To ratify the selection of
Deloitte & Touche LLP as the
Fund's independent auditors
for the current fiscal year. 7,617,419 35,517 132,502
- --------------------------------------------------------------------------------
2
<PAGE>
MuniInsured Fund, Inc. September 30, 1998
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alaska--2.6% AAA Aaa $1,000 Alaska State Housing Finance Corporation, RITR, Series 2,
7.22% due 12/01/2024 (b)(f)(g) $ 1,115
AAA Aaa 1,000 Ketchikan, Alaska, Municipal Utility Revenue Bonds, Series R,
6.65% due 12/01/2012 (e) 1,119
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Arizona--1.1% A1+ P1 200 Coconino County, Arizona, Pollution Control Corp. Revenue Bonds,
Arizona Public Service (Navajo Project), VRDN, AMT, Series A,
4.15% due 10/01/2029 (c) 200
A1+ P1 780 Maricopa County, Arizona, Pollution Control Corp., PCR,
Refunding (Arizona Public Service Co.), VRDN, Series F,
4.20% due 5/01/2029 (c) 780
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California--17.1% AAA Aaa 1,405 California Educational Facilities Authority Revenue Bonds
(Loyola Marymount University), Series 1996,
5.90% due 10/01/2021 (b) 1,557
AAA Aaa 1,500 California HFA, Home Mortgage Revenue Bonds, Series F,
6% due 8/01/2017 (b) 1,607
AAA Aaa 2,570 California State, GO, 5.90% due 3/01/2005 (a)(h) 2,911
AAA Aaa 3,025 California State Revenue Refunding Bonds, 5.375%
due 6/01/2026 (d) 3,162
AAA Aaa 1,000 East Bay, California, Municipal Utility District Water System,
Revenue Refunding Bonds, 4.75% due 6/01/2021 (d) 984
AAA Aaa 1,000 Los Angeles, California, Harbor Department Revenue Bonds,
RITR, AMT, Series 7, 7.945% due 11/01/2026 (b)(f) 1,260
AAA Aaa 1,605 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Bonds (Proposition A--First
Tier), Senior Series A, 6% due 7/01/2026 (b) 1,776
AAA Aaa 1,000 San Joaquin Hills, California, Transportation Corridor Agency, Toll
Road Revenue Refunding Bonds, Series A, 5.25% due 1/15/2030 (b) 1,032
- ------------------------------------------------------------------------------------------------------------------------------------
Colorado--1.2% A1+ VMIG1+ 1,000 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects),
VRDN, 4.15% due 5/01/2013 (a)(c) 1,000
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Connecticut--1.3% AA Aa 1,000 Connecticut State, HFA (Housing Mortgage Finance Program),
AMT, Series A, Sub-Series A-2, 6.45% due 5/15/2022 1,074
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Illinois--15.4% AAA Aaa 2,000 Chicago, Illinois, Board of Education (Chicago School Reform),
UT, 5.75% due 12/01/2020 (a) 2,199
AAA Aaa 1,000 Chicago, Illinois, Wastewater Transmission Revenue Bonds,
6.375% due 1/01/2005 (b)(h) 1,151
AAA Aaa 1,000 Decatur, Illinois, Hospital Revenue Refunding Bonds (Decatur
Memorial Hospital), Series A, 7.75% due 10/01/2021 (b) 1,117
</TABLE>
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
HDA Housing Development Authority
HFA Housing Finance Agency
INFLOS Inverse Floating Rate Securities
PCR Pollution Control Revenue Bonds
RITR Residual Interest Trust Receipts
UT Unlimited Tax
VRDN Variable Rate Demand Notes
3
<PAGE>
MuniInsured Fund, Inc. September 30, 1998
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Illinois AA Aa3 $1,000 Illinois HDA, Homeowner Mortgage Revenue Bonds, Sub-Series
(concluded) D-1, 6.40% due 8/01/2017 $ 1,073
AAA Aaa 3,000 Illinois Health Facilities Authority Revenue Bonds (Ingalls Health
System Project), 6.25% due 5/15/2024 (b) 3,335
AAA Aaa 1,000 Regional Transportation Authority, Illinois, UT, Series C,
7.75% due 6/01/2020 (d) 1,398
AAA Aaa 2,180 Waukegan, Illinois, GO, UT, Series A, 6.75% due 11/15/2004 (d)(h) 2,554
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana--3.2% AAA Aaa 1,360 Hammond, Indiana, Multi-School Building Corp., Refunding
(First Mortgage), 6.125% due 7/15/2019 (b) 1,514
AAA NR* 1,000 Indiana Bond Bank Revenue Bonds (State Revolving Fund
Program), Series A, 6.75% due 2/01/2017 1,148
- ------------------------------------------------------------------------------------------------------------------------------------
Kansas--3.3% AAA Aaa 2,500 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric
Company Project), 7% due 6/01/2031 (b) 2,728
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Kentucky--2.9% AAA Aaa 2,500 Louisville and Jefferson County, Kentucky, Sewer and Drain
System Revenue Refunding Bonds (Metropolitan Sewer District),
Series A, 4.75% due 5/15/2028 (d) 2,445
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Maine--1.2% AA Aa2 885 Maine State Housing Authority, Mortgage Purchase Revenue Bonds,
AMT, Series C-2, 6.875% due 11/15/2023 955
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts--6.0% AAA Aaa 930 Massachusetts Education Loan Authority, Education Loan Revenue
Bonds, AMT, Issue E, Series A, 7.375% due 1/01/2012 (a) 1,033
AAA Aaa 3,985 Massachusetts State Turnpike Authority, Metropolitan Highway
System Revenue Bonds, Series A, 5% due 1/01/2037 (b) 3,964
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota--3.4% AAA Aaa 1,700 Minneapolis and St. Paul, Minnesota, Metropolitan Airports,
Commission Airport Revenue Bonds, Series A, 5% due 1/01/2030 (a) 1,704
AA+ NR* 1,000 Rochester, Minnesota, Health Care Facilities Revenue Bonds
(Mayo Foundation), Series A, 5.50% due 11/15/2027 1,057
- ------------------------------------------------------------------------------------------------------------------------------------
New York--2.1% AAA Aaa 1,500 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, RITR, Series RI-97-6,
6.945% due 6/15/2026 (b)(f) 1,742
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North Carolina-- A1+ NR* 2,000 Raleigh-Durham, North Carolina, Airport Authority, Special
2.4% Facility Revenue Refunding Bonds (American Airlines), VRDN,
Series B, 4.15% due 11/01/2015 (c) 2,000
- ------------------------------------------------------------------------------------------------------------------------------------
Oregon--2.5% AA Aa2 1,000 Oregon State Veterans Welfare Bonds, Series 77, 5.30%
due 10/01/2029 1,023
AAA Aaa 1,000 Port of Portland, Oregon, International Airport Revenue Bonds
(Portland International Airport), AMT, Series 11, 5.625%
due 7/01/2026 (d) 1,060
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Pennsylvania-- Pennsylvania State Turnpike Commission, Oil Franchise, Tax
2.0% Revenue Bonds (a):
AAA Aaa 465 Senior Series A, 4.75% due 12/01/2027 453
AAA Aaa 1,165 Sub-Series B, 4.75% due 12/01/2027 1,135
- ------------------------------------------------------------------------------------------------------------------------------------
Texas--8.3% AAA Aaa 1,150 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light and Power), Series A, 6.70% due 3/01/2017 (a) 1,262
AAA Aaa 1,500 Dallas-Fort Worth, Texas, Regional Airport Revenue Refunding
Bonds (JT Dallas-Fort Worth International), AMT, 5.75%
due 11/01/2024 (b) 1,556
AAA Aaa 1,500 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds, RITR, Series 12, 8.22%
due 10/01/2004 (b)(f)(h) 1,917
AAA Aaa 1,000 Houston, Texas, Airport System Revenue Bonds (Sub-Lien),
AMT, Series A, 6.75% due 7/01/2021 (d) 1,083
</TABLE>
4
<PAGE>
MuniInsured Fund, Inc. September 30, 1998
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Texas A+ A2 $1,000 Port Corpus Christi Authority, Texas, Nueces County, PCR
(concluded) (Hoechst Celanese Corporation Project), AMT, 6.875%
due 4/01/2017 $ 1,098
- ------------------------------------------------------------------------------------------------------------------------------------
Utah--4.3% AAA Aaa 3,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospitals, Inc.), INFLOS, 9.768% due 5/15/2020 (a)(f) 3,555
- ------------------------------------------------------------------------------------------------------------------------------------
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 1,077
AA+ Aa1 1,000 Series J, Sub-Series J-2, 6.75% due 7/01/2017 1,079
- ------------------------------------------------------------------------------------------------------------------------------------
Washington--14.3% AAA Aaa 2,000 Port Seattle, Washington, Passenger Facilities Charge Revenue
Bonds, Series A, 5% due 12/01/2023 (b) 2,000
AAA Aaa 2,275 Tacoma, Washington, Sewer Revenue Bonds, Series B,
6.375% due 12/01/2015 (d) 2,543
AAA Aaa 2,240 Washington State, COP, 5.80% due 10/01/2015 (a) 2,415
AAA Aaa 2,000 Washington State, GO, UT, Series A, 4.50% due 7/01/2023 (e) 1,902
AAA Aaa 1,520 Washington State Health Care Facilities Authority, Revenue
Refunding Bonds (Catholic Health Initiatives), Series A,
5.125% due 12/01/2021 (b) 1,517
AAA Aaa 1,500 Washington State Public Power Supply Systems, Revenue
Refunding Bonds (Nuclear Project No. 1), Series B, 5.125%
due 7/01/2017 (a) 1,524
- ------------------------------------------------------------------------------------------------------------------------------------
West Virginia--2.0% AAA Aaa 1,500 Harrison County, West Virginia, Commonwealth Solid Waste
Disposal Revenue Bonds (Monongahela Power), AMT,
Series C, 6.75% due 8/01/2024 (a) 1,702
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin--1.5% AAA Aaa 1,120 Wisconsin Public Power Inc., Power Supply System Revenue
Bonds, Series A, 6% due 7/01/2015 (b) 1,245
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$76,654)--100.7% 83,840
Liabilities in Excess of Other Assets--(0.7%) (585)
-------
Net Assets--100.0% $83,255
=======
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</TABLE>
(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, 1998.
(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, 1998.
(g) FNMA/GNMA Collateralized.
(h) Prerefunded.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
QUALITY PROFILE
The quality ratings of securities in the Fund as of September 30, 1998 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa ................................................ 87.1%
AA/Aa .................................................. 7.5
A/A .................................................... 1.3
Other* ................................................. 4.8
- --------------------------------------------------------------------------------
* Temporary investments in short-term securities.
5
<PAGE>
MuniInsured Fund, Inc. September 30, 1998
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of September 30, 1998
<TABLE>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$76,653,842)
(Note 1a) ................................................. $ 83,839,852
Cash ...................................................... 19,866
Interest receivable ....................................... 1,375,626
Prepaid expenses and other assets ......................... 26,401
------------
Total assets .............................................. 85,261,745
------------
- -----------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased .................................... $ 1,840,120
Dividends to shareholders (Note 1e) ..................... 61,172
Investment adviser (Note 2) ............................. 33,918 1,935,210
Accrued expenses and other liabilities .................... ----------- 71,721
------------
Total liabilities ......................................... 2,006,931
------------
- -----------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ................................................ $ 83,254,814
============
- -----------------------------------------------------------------------------------------------------------------
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 ...................... 334,293
Undistributed realized capital gains on investments--net .. 411,296
Unrealized appreciation on investments--net ............... 7,186,010
------------
Total capital--Equivalent to $10.30 net asset value per
share of Common Stock (market price--$9.8125) ............. $ 83,254,814
============
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Statement of Operations for the Year Ended September 30, 1998
<TABLE>
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned .. $ 4,669,839
(Note 1d):
- -----------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) ......................... $ 407,681
Professional fees ......................................... 61,492
Accounting services (Note 2) .............................. 45,939
Transfer agent fees ....................................... 34,146
Directors' fees and expenses .............................. 25,164
Printing and shareholder reports .......................... 15,310
Listing fees .............................................. 10,500
Pricing fees .............................................. 8,602
Custodian fees ............................................ 6,726
Other ..................................................... 13,291
----------
Total expenses ............................................ 628,851
------------
Investment income--net .................................... 4,040,988
------------
- -----------------------------------------------------------------------------------------------------------------
Realized & Realized gain on investments--net ......................... 1,283,857
Unrealized Gain Change in unrealized appreciation on investments--net ..... 2,216,766
on Investments-- ------------
Net (Notes 1b, Net Increase in Net Assets Resulting from Operations ...... $ 7,541,611
1d & 3): ============
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
MuniInsured Fund, Inc. September 30, 1998
FINANCIAL INFORMATION (concluded)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended Sept. 30,
----------------------------
Increase (Decrease) in Net Assets: 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net .................................... $ 4,040,988 $ 4,085,429
Realized gain on investments--net ......................... 1,283,857 1,031,451
Change in unrealized appreciation on investments--net ..... 2,216,766 1,532,475
------------ ------------
Net increase in net assets resulting from operations ...... 7,541,611 6,649,355
------------ ------------
- -----------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net .................................... (4,043,168) (4,083,840)
Distributions to Realized gain on investments--net ......................... (1,206,851) (518,066)
Shareholders ------------ ------------
(Note 1e): Net decrease in net assets resulting from dividends
and distributions to shareholders ......................... (5,250,019) (4,601,906)
------------ ------------
- -----------------------------------------------------------------------------------------------------------------
Net Assets: Total increase in net assets .............................. 2,291,592 2,047,449
Beginning of year ......................................... 80,963,222 78,915,773
------------ ------------
End of year* .............................................. $ 83,254,814 $ 80,963,222
============ ============
- -----------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net ...................... $ 334,293 $ 336,473
============ ============
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Financial Highlights
<TABLE>
<CAPTION>
The following per share data and ratios have been derived For the Year Ended
from information provided in the financial statements. September 30,
--------------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ............. $ 10.02 $ 9.77 $ 9.64 $ 9.50 $ 10.72
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ......................... .50 .51 .51 .52 .57
Realized and unrealized gain (loss) on
investments--net ............................... .43 .31 .13 .34 (.99)
------- ------- ------- ------- -------
Total from investment operations ............... .93 .82 .64 .86 (.42)
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net ....................... (.50) (.51) (.51) (.53) (.57)
Realized gain on investments--net ............ (.15) (.06) -- (.19) (.23)
In excess of realized gain on investments--net -- -- -- --** --
------- ------- ------- ------- -------
Total dividends and distributions .............. (.65) (.57) (.51) (.72) (.80)
------- ------- ------- ------- -------
Net asset value, end of year ................... $ 10.30 $ 10.02 $ 9.77 $ 9.64 $ 9.50
======= ======= ======= ======= =======
Market price per share, end of year ............ $9.8125 $ 9.50 $ 8.75 $ 8.75 $ 8.75
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------
Total Investment Based on market price per share ................ 10.55% 15.73% 5.91% 8.46% (12.93%)
Return:* ======= ======= ======= ======= =======
Based on net asset value per share ............. 10.02% 9.33% 7.34% 10.06% (4.10%)
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ....................................... .77% .78% .78% .79% .77%
Net Assets: ======= ======= ======= ======= =======
Investment income--net ......................... 4.96% 5.15% 5.15% 5.55% 5.58%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) ......... $83,255 $80,963 $78,916 $77,858 $76,662
Data: ======= ======= ======= ======= =======
Portfolio turnover ............................. 53.14% 73.22% 94.61% 83.52% 47.17%
======= ======= ======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
7
<PAGE>
MuniInsured Fund, Inc. September 30, 1998
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.
(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.
o Financial futures contracts--The Fund may purchase or sell financial 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.
o 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.
8
<PAGE>
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.
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, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended September 30, 1998 were $41,807,940 and $41,702,575, respectively.
Net realized gains for the year ended September 30, 1998 and net unrealized
gains as of September 30, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ............... $1,283,857 $7,186,010
---------- ----------
Total ............................... $1,283,857 $7,186,010
========== ==========
- --------------------------------------------------------------------------------
As of September 30, 1998, net unrealized appreciation for Federal income tax
purposes aggregated $7,186,010, all of which related to appreciated securities.
The aggregate cost of investments at September 30, 1998 for Federal income tax
purposes was $76,653,842.
4. Common Stock Transactions:
At September 30, 1998, the Fund had one class of shares of Common Stock, par
value $.10 per share, of which 150,000,000 shares were authorized. Shares issued
and outstanding during the years ended September 30, 1998 and September 30, 1997
remained constant.
5. Subsequent Event:
On October 8, 1998, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.041376 per share,
payable on October 29, 1998 to shareholders of record as of October 22, 1998.
9
<PAGE>
MuniInsured Fund, Inc. September 30, 1998
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, 1998, 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, 1998 by correspondence with the custodian and broker. 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, 1998, 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.
Deloitte & Touche LLP
Princeton, New Jersey
November 9, 1998
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income dividends paid monthly by MuniInsured Fund,
Inc. during its taxable year ended September 30, 1998 qualify as tax-exempt
interest dividends for Federal income tax purposes. Additionally, the following
table summarizes the per share capital gains distributions paid by the Fund
during the year:
- --------------------------------------------------------------------------------
Record Payable Short-Term Long-Term
Date Date Capital Gains Capital Gains
- --------------------------------------------------------------------------------
12/19/97 12/30/97 $.050545 $.098829*
- --------------------------------------------------------------------------------
* Of this distribution, 74.31% is subject to the 28% tax rate and 25.69% is
subject to the 20% tax rate.
Please retain this information for your records.
10
<PAGE>
MuniInsured Fund, Inc. September 30, 1998
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute substantially all of its net
investment income to its shareholders on a monthly basis. However, in order to
provide shareholders with a more consistent yield to the current trading price
of shares of Common Stock of the Fund, the Fund may at times pay out less than
the entire amount of net investment income earned in any particular month and
may at times in any month pay out such accumulated but undistributed income in
addition to net investment income earned in that month. As a result, the
dividends paid by the Fund for any particular month may be more or less than the
amount of net investment income earned by the Fund during such month. The Fund's
current accumulated but undistributed net investment income, if any, is
disclosed in the Statement of Assets, Liabilities and Capital, which comprises
part of the Financial Information included in this report.
ABOUT INVERSE FLOATERS
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, interest rates on inverse
floaters will decrease when short-term rates increase and increase when
short-term rates decrease. Investments in inverse floaters may be characterized
as derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse securities, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in such securities.
11
<PAGE>
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
Vincent R. Giordano, Senior Vice President
William R. Bock, Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Patrick D. Sweeney, Secretary
Custodian
State Street Bank and Trust Company
One Heritage Drive, P2N
North Quincy, MA 02171
Transfer Agent
State Street Bank and 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 #10662--9/98
[RECYLCE LOGO] Printed on post-consumer recycled paper
