MuniInsured
Fund, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
September 30, 1999
<PAGE>
MuniInsured Fund, Inc.
DEAR SHAREHOLDER
For the year ended September 30, 1999, MuniInsured Fund, Inc. earned $0.468 per
share income dividends. This represents a net annualized yield of 5.05%, based
on a month-end net asset value of $9.27 per share. During the same period, the
Fund's total investment return was - 3.49%, based on a change in per share net
asset value from $10.30 to $9.27, and assuming reinvestment of $0.527 per share
ordinary income dividends and $0.132 long-term capital gains distributions.
During the six-month period ended September 30, 1999, the Fund's total
investment return was - 4.13%, based on a change in per share net asset value
from $9.93 to $9.27, and assuming reinvestment of $0.231 per share income
dividends.
The Municipal Market Environment
The combination of steady strong domestic economic growth, improvement in
foreign economies (most notably in Japan) and increasing investor concerns
regarding potential increases in US inflation put upward pressure on bond yields
throughout the six-month period ended September 30, 1999. Continued strong US
employment growth, particularly the decline in the US unemployment rate to 4.2%
in early June, was among the reasons the Federal Reserve Board cited for raising
short-term interest rates in late June and again in late August. Long-term US
Treasury bond yields reacted by climbing above 6.25% by mid-August before
improving somewhat to 6.05% by September 30, 1999. During the period, yields on
30-year US Treasury bonds increased over 40 basis points (0.40%).
Long-term tax-exempt bond yields also rose during the six months ended September
30, 1999. Until early May, the municipal bond market was able to withstand much
of the upward pressure on bond yields. However, investor concerns of additional
moves by the Federal Reserve Board to moderate US economic growth and, more
importantly, the loss of the strong technical support that the tax-exempt market
enjoyed in early 1999 helped push municipal bond yields significantly higher for
the remainder of the period. The yields on long-term tax-exempt revenue bonds
rose over 65 basis points to 5.96% by September 30, 1999, as measured by the
Bond Buyer Revenue Bond Index.
In recent months, the significant decline in new tax-exempt bond issuance has
remained a positive factor within the municipal bond market, as it had been for
much of the past year. During the last six months, more than $113 billion in
long-term municipal bonds was issued, a decline of over 20% compared to the same
period a year ago. During the past three months, $55 billion in municipal bonds
was underwritten, representing a decline of nearly 15% compared to the
corresponding period in 1998. Additionally, in June and July, investors received
more than $40 billion in coupon income and proceeds from bond maturities and
early bond redemptions. These proceeds have generated considerable retail
investor interest, which has helped absorb the recent diminished supply.
Although tax-exempt bond yields are at their highest level in over two years and
have attracted significant retail investor interest, institutional demand has
declined sharply. Long-term municipal mutual funds have seen consistent outflows
in recent months as the yields of individual securities have risen faster than
those of larger, more diverse mutual funds. In addition, the demand from
property/casualty insurance companies has weakened as a result of the losses,
and anticipated losses, incurred as a result of the series of damaging storms
across much of the eastern United States. Additionally, many institutional
investors who were attracted to the municipal bond market in recent years by
historically attractive tax-exempt bond yield ratios of over 90% have found
other asset classes even more attractive. Even with a reduced supply position,
tax-exempt issuers have been forced to repeatedly raise municipal bond yields in
the attempt to attract adequate demand.
The recent relative underperformance of the municipal bond market has resulted
in an opportunity for long-term investors to purchase tax-exempt issues whose
yields are nearly identical to taxable US
1
<PAGE>
MuniInsured Fund, Inc. September 30, 1999
Treasury securities. At September 30, 1999, long-term uninsured municipal
revenue bond yields were almost 99% of comparable US Treasury securities. In
recent months, many taxable asset classes, such as corporate bonds,
mortgage-backed securities and US agency debt, have all accelerated debt
issuance. This acceleration was initiated largely to avoid issuing securities at
year-end and to minimize any associated Year 2000 (Y2K) problems that may
develop. However, this increased issuance has also resulted in higher yield
levels in the various asset classes as lower bond prices became necessary to
attract sufficient investor demand. Going forward, it is believed that the pace
of non-US Government debt issuance is likely to slow significantly. As the
supply of this debt declines, we would expect many institutional investors to
return to the municipal bond market and the attractive yield ratios available.
Looking ahead, it appears to us that long-term municipal bond yields will remain
under pressure, trading in a broad range centered near current levels. Investors
are likely to remain concerned about future action by the Federal Reserve Board.
Y2K considerations may prohibit a series of Federal Reserve Board moves at the
end of the year and the beginning of 2000. Any improvement in bond prices will
probably be contingent upon weakening in both US employment growth and consumer
spending. The 100 basis point rise in US Treasury bond yields seen thus far this
year may negatively affect US economic growth. The US housing market will be
among the first sectors likely to be affected, as some declines have already
been evidenced in response to higher mortgage rates. We believe that it is also
unrealistic to expect double-digit returns in US equity markets to continue
indefinitely. Much of the US consumer's wealth is tied to recent stock market
appreciation. Any slowing in these incredible growth rates is likely to reduce
consumer spending. We believe that these factors suggest that the worst of the
recent increase in bond yields has passed and stable, if not slightly improving,
bond prices may be expected.
Portfolio Strategy
During the six-month period ended September 30, 1999, the municipal bond market
underperformed the US Treasury market. This sub-par performance can be
attributed to a lack of institutional demand and a large increase of corporate
and agency issues resulting in wider yield spreads to US Treasury issues and
certain allocations away from municipal bonds. Early in the period, we had a
positive stance toward the municipal bond market and expected that interest
rates would remain stable. We therefore remained fully invested and continued
this strategy for the first two months of the period.
However, we revised our strategy when it did not seem probable that long-term
interest rates would decline given the robust economic environment. We shifted
our focus to income-producing securities rather than on the potential for
capital gains. We believed that coupon income could potentially be a more
significant segment of the Fund's annual total return if the tax-exempt bond
market performed as anticipated in the coming months. For the majority of the
past several months, the Fund was fully invested in an effort to seek to enhance
shareholder income, and we expect to maintain this position going forward.
In Conclusion
We appreciate your investment in MuniInsured Fund, Inc., and we look forward to
assisting you with your financial needs in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ William R. Bock
William R. Bock
Vice President and Portfolio Manager
November 3, 1999
2
<PAGE>
MuniInsured Fund, Inc. September 30, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <S> <C>
Alaska--1.4% NR* Aaa $1,000 Alaska State Housing Finance Corporation, Revenue
Refunding Bonds, RITR, Series 2, 7.52% due
12/01/2024 (b)(f)(g)(i) $ 1,029
- -----------------------------------------------------------------------------------------------------------------------------------
California--10.3% AAA Aaa 1,405 California Educational Facilities Authority Revenue Bonds
(Loyola Marymount University), 5.90% due 10/01/2021 (b) 1,429
AAA Aaa 1,500 California HFA, Revenue Bonds, Series F, 6% due 8/01/2017 (b) 1,529
BBB+ Baa1 1,000 California Health Facilities Finance Authority, Revenue Refunding
Bonds (Catholic Healthcare West), Series A, 5% due 7/01/2028 805
AAA Aaa 3,025 California State, GO, 5.375% due 6/01/2026 (d) 2,895
NR* Aaa 1,000 Los Angeles, California, Harbor Department Revenue Bonds,
RITR, AMT, Series RI-7, 8.345% due 11/01/2026 (b)(f) 1,086
- -----------------------------------------------------------------------------------------------------------------------------------
Connecticut--1.2% AA Aa2 855 Connecticut State, HFA, Revenue Refunding Bonds (Housing
Mortgage Finance Program), AMT, Series A, Sub-Series A-2,
6.45% due 5/15/2022 875
- -----------------------------------------------------------------------------------------------------------------------------------
Illinois--15.8% AAA Aaa 2,000 Chicago, Illinois, Board of Education, GO (Chicago School
Reform), 5.75% due 12/01/2020 (a) 1,978
AAA NR* 1,250 Chicago, Illinois, Sales Tax Revenue Bonds, RIB, Series 92,
6.585% due 1/01/2030 (d)(f) 1,059
AAA Aaa 1,000 Chicago, Illinois, Wastewater Transmission Revenue Bonds,
6.375% due 1/01/2005 (b)(h) 1,096
AAA Aaa 1,500 Cook County, Illinois, GO, Capital Improvement, Series A,
5% due 11/15/2023 (d) 1,315
AAA Aaa 1,000 Decatur, Illinois, Hospital Revenue Refunding Bonds (Decatur
Memorial Hospital), Series A, 7.75% due 10/01/2021 (b) 1,077
AA Aa2 1,000 Illinois HDA, Homeowner Mortgage Revenue Bonds,
Sub-Series D-1, 6.40% due 8/01/2017 1,022
AAA Aaa 3,000 Illinois Health Facilities Authority, Revenue Refunding Bonds
(Ingalls Health System Project), 6.25% due 5/15/2024 (b) 3,073
AAA Aaa 1,000 Regional Transportation Authority, Illinois, Revenue Bonds,
Series C, 7.75% due 6/01/2020 (d) 1,247
- -----------------------------------------------------------------------------------------------------------------------------------
Indiana--3.3% AAA Aaa 1,360 Hammond, Indiana, Multi-School Building Corporation, Revenue
Refunding Bonds, First Mortgage, 6.125% due 7/15/2019 (b) 1,382
AAA NR* 1,000 Indiana Bond Bank Revenue Bonds (State Revolving Fund
Program), Series A, 6.75% due 2/01/2017 1,084
- -----------------------------------------------------------------------------------------------------------------------------------
Kansas--3.5% AAA Aaa 2,500 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric
Company Project), 7% due 6/01/2031 (b) 2,639
- -----------------------------------------------------------------------------------------------------------------------------------
</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 at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
VRDN Variable Rate Demand Notes
3
<PAGE>
MuniInsured Fund, Inc. September 30, 1999
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <S> <C>
Louisiana--5.0% AAA Aaa $4,000 Louisiana State Office Facilities Corporation, Lease Revenue
Bonds (Capitol Complex Program), Series A, 5.25% due
3/01/2018 (b) $ 3,757
- -----------------------------------------------------------------------------------------------------------------------------------
Maine--0.8% AA Aa2 575 Maine State Housing Authority, Mortgage Purchase Revenue
Bonds, AMT, Series C-2, 6.875% due 11/15/2023 603
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland--0.5% NR* VMIG1+ 400 Maryland State Health and Higher Educational Facilities
Authority, Revenue Refunding Bonds (Pooled Loan Program),
VRDN, Series A, 3.75% due 4/01/2035 (c) 400
- -----------------------------------------------------------------------------------------------------------------------------------
Massachusetts--1.2% AAA Aaa 850 Massachusetts Education Loan Authority, Education Loan
Revenue Bonds, AMT, Issue E, Series A, 7.375% due 1/01/2012 (a) 902
- -----------------------------------------------------------------------------------------------------------------------------------
Michigan--5.5% A1+ VMIG1+ 1,000 Grand Rapids, Michigan, Water Supply Revenue Refunding Bonds,
VRDN, 3.80% due 1/01/2020 (c)(d) 1,000
AA VMIG1+ 900 Royal Oak, Michigan, Hospital Finance Authority, Hospital
Revenue Bonds (William Beaumont Hospital), VRDN, Series L,
3.95% due 1/01/2027 (c) 900
A1+ VMIG1+ 1,100 University of Michigan, University Hospital Revenue Refunding
Bonds, VRDN, Series A, 4% due 12/01/2019 (c) 1,100
A1+ VMIG1+ 1,100 University of Michigan, University Revenue Bonds (Medical
Service Plan), VRDN, Series A, 4% due 12/01/2027 (c) 1,100
- -----------------------------------------------------------------------------------------------------------------------------------
Minnesota--2.0% AAA Aaa 1,700 Minneapolis and Saint Paul, Minnesota, Metropolitan Airports
Commission, Airport Revenue Bonds, Series A, 5% due 1/01/2030 (a) 1,485
- -----------------------------------------------------------------------------------------------------------------------------------
New York--3.8% AAA Aaa 1,350 Nassau Health Care Corporation, New York, Health System
Revenue Bonds, 5.75% due 8/01/2029 (j) 1,327
A1 Aaa 1,500 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, RITR, Series FR-5,
7.295% due 6/15/2026 (b)(f) 1,484
- -----------------------------------------------------------------------------------------------------------------------------------
Ohio--1.3% AAA NR* 1,000 Ohio HFA, Mortgage Revenue Refunding Bonds (Residential),
AMT, Series C, 5.75% due 9/01/2030 (e) 965
- -----------------------------------------------------------------------------------------------------------------------------------
Oregon--1.3% AAA Aaa 1,000 Port of Portland, Oregon, Airport Revenue Bonds (Portland
International Airport), AMT, Series 11, 5.625% due 7/01/2026 (d) 968
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania--9.2% NR* Aaa 2,725 Allegheny County, Pennsylvania, COP, 5% due 12/01/2024 (a) 2,376
A1+ VMIG1+ 1,100 Geisinger Authority, Pennsylvania, Health System Revenue
Refunding Bonds (Penn State-Geisinger Health), VRDN,
Series B, 3.95% due 8/15/2028 (c) 1,100
AAA Aaa 2,000 Philadelphia, Pennsylvania, School District GO, Series A,
4.50% due 4/01/2023 (b) 1,627
AAA Aaa 2,000 Pittsburgh and Allegheny Counties, Pennsylvania, Public
Auditorium Revenue Bonds (Hotel Room), 5% due 2/01/2024 (a) 1,769
- -----------------------------------------------------------------------------------------------------------------------------------
Texas--9.3% AAA Aaa 1,150 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light and Power), Series A, 6.70% due 3/01/2017 (a) 1,221
AAA Aaa 1,500 Dallas-Fort Worth, Texas, Regional Airport Revenue Refunding
Bonds (Joint Dallas-Fort Worth International), AMT, 5.75%
due 11/01/2024 (b) 1,455
AAA Aaa 3,000 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Hermann Hospital Project), 6.375%
due 10/01/2004 (b)(h) 3,264
AAA Aaa 1,000 Houston, Texas, Airport System Revenue Bonds, AMT, Sub-Lien,
Series A, 6.75% due 7/01/2021 (d) 1,050
- -----------------------------------------------------------------------------------------------------------------------------------
Utah--2.9% AAA Aaa 2,285 Utah Water Finance Agency Revenue Bonds (Pooled Loan
Financing Program), Series A, 5.50% due 10/01/2029 (a) 2,163
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
MuniInsured Fund, Inc. September 30, 1999
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <S> <C>
Washington--18.5% AAA Aaa $1,000 Central Puget Sound, Washington, Regional Transit Authority,
Sales Tax and Motor Revenue Bonds, 4.75% due 2/01/2028 (d) $ 821
AAA Aaa 1,400 King County, Washington, GO, Refunding, Series B, 5.25%
due 1/01/2034 (b) 1,244
AAA Aaa 2,400 King County, Washington, Sewer Revenue Bonds, 5.25%
due 1/01/2026 (d) 2,172
AAA Aaa 2,000 Port Seattle, Washington, Passenger Facility Charge Revenue
Bonds, Series A, 5% due 12/01/2023 (b) 1,753
AAA Aaa 1,720 Seattle, Washington, Drain and Wastewater Utility Revenue
Bonds, 5.75% due 11/01/2029 (b) 1,681
AAA Aaa 2,275 Tacoma, Washington, Sewer Revenue Bonds, Series B, 6.375%
due 12/01/2015 (d) 2,430
AAA Aaa 2,240 Washington State, COP, 5.80% due 10/01/2005 (a)(h) 2,376
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) 1,353
- -----------------------------------------------------------------------------------------------------------------------------------
West Virginia--2.2% AAA Aaa 1,500 Harrison County, West Virginia, County Commission for Solid
Waste Disposal Revenue Bonds (Monongahela Power), AMT,
Series C, 6.75% due 8/01/2024 (a) 1,621
- -----------------------------------------------------------------------------------------------------------------------------------
Wisconsin--1.5% AAA Aaa 1,120 Wisconsin Public Power Inc., Power Supply System Revenue
Bonds, Series A, 6% due 7/01/2015 (b) 1,148
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$75,654)--100.5% 75,235
Liabilities in Excess of Other Assets--(0.5%) (351)
-------
Net Assets--100.0% $74,884
=======
- -----------------------------------------------------------------------------------------------------------------------------------
</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, 1999.
(d) FGIC Insured.
(e) GNMA Collateralized.
(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, 1999.
(g) FHA Insured.
(h) Prerefunded.
(i) FNMA Collateralized.
(j) FSA Insured.
* 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, 1999 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa ............................................................. 88.6%
AA/Aa ............................................................... 3.3
BBB/Baa ............................................................. 1.1
Other* .............................................................. 7.5
- --------------------------------------------------------------------------------
* Temporary investments in short-term municipal securities.
5
<PAGE>
MuniInsured Fund, Inc. September 30, 1999
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of September 30, 1999
<TABLE>
<C> <S> <C> <C>
Assets: Investments, at value (identified cost--$75,654,195) (Note 1a) ........... $ 75,234,891
Cash ..................................................................... 93,596
Interest receivable ...................................................... 1,362,745
Prepaid expenses and other assets ........................................ 22,210
------------
Total assets ............................................................. 76,713,442
------------
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased ................................................... $ 1,698,736
Dividends to shareholders (Note 1e) .................................... 57,012
Investment adviser (Note 2) ............................................ 4,106 1,759,854
------------
Accrued expenses and other liabilities ................................... 69,826
------------
Total liabilities ........................................................ 1,829,680
------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ............................................................... $ 74,883,762
============
- -----------------------------------------------------------------------------------------------------------------------------------
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 ..................................... 304,948
Accumulated distributions in excess of realized capital gains on
investments--net (Note 1e) ............................................... (325,097)
Unrealized depreciation on investments--net .............................. (419,304)
------------
Total capital--Equivalent to $9.27 net asset value per share of
Common Stock (market price--$8.00) ....................................... $ 74,883,762
============
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Statement of Operations for the Year Ended September 30, 1999
<TABLE>
<C> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned ................. $ 4,407,360
(Note 1d):
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) ........................................ $ 398,745
Professional fees ........................................................ 62,437
Accounting services (Note 2) ............................................. 39,895
Transfer agent fees ...................................................... 34,025
Directors' fees and expenses ............................................. 25,591
Printing and shareholder reports ......................................... 22,119
Listing fees ............................................................. 10,500
Pricing fees ............................................................. 7,862
Custodian fees ........................................................... 5,835
Other .................................................................... 15,837
------------
Total expenses ........................................................... 622,846
------------
Investment income--net ................................................... 3,784,514
------------
- -----------------------------------------------------------------------------------------------------------------------------------
Realized & Realized gain on investments--net ........................................ 770,017
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net ....... (7,605,314)
(Loss) on ------------
Investments--Net Net Decrease in Net Assets Resulting from Operations ..................... $ (3,050,783)
(Notes 1b, 1d & 3): ============
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
MuniInsured Fund, Inc. September 30, 1999
FINANCIAL INFORMATION (concluded)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended Sept. 30,
----------------------------
Increase (Decrease) in Net Assets: 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Operations: Investment income--net ....................................................... $ 3,784,514 $ 4,040,988
Realized gain on investments--net ............................................ 770,017 1,283,857
Change in unrealized appreciation/depreciation on investments--net ........... (7,605,314) 2,216,766
------------ ------------
Net increase (decrease) in net assets resulting from operations .............. (3,050,783) 7,541,611
------------ ------------
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net ....................................................... (3,813,859) (4,043,168)
Distributions to Realized gain on investments--net ............................................ (1,181,313) (1,206,851)
Shareholders In excess of realized gain on investments--net ............................... (325,097) --
(Note 1e): ------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders .............................................................. (5,320,269) (5,250,019)
------------ ------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total increase (decrease) in net assets ...................................... (8,371,052) 2,291,592
Beginning of year ............................................................ 83,254,814 80,963,222
------------ ------------
End of year* ................................................................. $ 74,883,762 $ 83,254,814
============ ============
- -----------------------------------------------------------------------------------------------------------------------------------
* Undistributed investment income--net ......................................... $ 304,948 $ 334,293
============ ============
- -----------------------------------------------------------------------------------------------------------------------------------
</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: 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year .................. $ 10.30 $ 10.02 $ 9.77 $ 9.64 $ 9.50
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .............................. .47 .50 .51 .51 .52
Realized and unrealized gain (loss) on
investments--net .................................... (.84) .43 .31 .13 .34
-------- -------- -------- -------- --------
Total from investment operations .................... (.37) .93 .82 .64 .86
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ............................ (.47) (.50) (.51) (.51) (.53)
Realized gain on investments--net ................. (.15) (.15) (.06) -- (.19)
In excess of realized gain on investments--net .... (.04) -- -- -- --**
-------- -------- -------- -------- --------
Total dividends and distributions ................... (.66) (.65) (.57) (.51) (.72)
-------- -------- -------- -------- --------
Net asset value, end of year ........................ $ 9.27 $ 10.30 $ 10.02 $ 9.77 $ 9.64
======== ======== ======== ======== ========
Market price per share, end of year ................. $ 8.00 $ 9.8125 $ 9.50 $ 8.75 $ 8.75
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on market price per share ..................... (12.58%) 10.55% 15.73% 5.91% 8.46%
Return:* ======== ======== ======== ======== ========
Based on net asset value per share .................. (3.49%) 10.02% 9.33% 7.34% 10.06%
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ............................................ .78% .77% .78% .78% .79%
Net Assets: ======== ======== ======== ======== ========
Investment income--net .............................. 4.74% 4.96% 5.15% 5.15% 5.55%
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) .............. $ 74,884 $ 83,255 $ 80,963 $ 78,916 $ 77,858
Data: ======== ======== ======== ======== ========
Portfolio turnover .................................. 71.48% 53.14% 73.22% 94.61% 83.52%
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
</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
charges.
** Amount is less than $.01 per share.
See Notes to Financial Statements.
7
<PAGE>
MuniInsured Fund, Inc. September 30, 1999
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's financial statements are prepared in accordance with generally accepted
accounting principles, which may require the use of management accruals and
estimates. 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. 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 written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets 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 and call 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.
8
<PAGE>
MuniInsured Fund, Inc. September 30, 1999
(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. Distributions in excess of realized capital gains are due
primarily to differing tax treatments for post-October losses.
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 .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, 1999 were $53,450,316 and $56,828,858, respectively.
Net realized gains for the year ended September 30, 1999 and net unrealized
losses as of September 30, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Losses
- --------------------------------------------------------------------------------
Long-term investments ............................. $770,017 $(419,304)
-------- ---------
Total ............................................. $770,017 $(419,304)
======== =========
- --------------------------------------------------------------------------------
As of September 30, 1999, net unrealized depreciation for Federal income tax
purposes aggregated $419,304, of which $1,692,596 related to appreciated
securities and $2,111,900 related to depreciated securities. The aggregate cost
of investments at September 30, 1999 for Federal income tax purposes was
$75,654,195.
4. Common Stock Transactions:
At September 30, 1999, 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, 1999 and September 30, 1998
remained constant.
5. Subsequent Event:
On October 6, 1999, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.037744 per share,
payable on October 28, 1999 to shareholders of record as of October 22, 1999.
9
<PAGE>
MuniInsured Fund, Inc. September 30, 1999
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, 1999, 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, 1999 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, 1999, 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 8, 1999
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by MuniInsured Fund,
Inc. during its taxable year ended September 30, 1999 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*
- --------------------------------------------------------------------------------
12/23/98 12/30/98 $.054875 $.131576
- --------------------------------------------------------------------------------
* The entire distribution is subject to the 20% tax rate.
Please retain this information for your records.
10
<PAGE>
MuniInsured Fund, Inc. September 30, 1999
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, income 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
these securities.
YEAR 2000 ISSUES
Many computer systems were designed using only two digits to designate years.
These systems may not be able to distinguish the Year 2000 from the Year 1900
(commonly known as the "Year 2000 Problem"). The Fund could be adversely
affected if the computer systems used by the Fund's management or other Fund
service providers do not properly address this problem before January 1, 2000.
The Fund's management expects to have addressed this problem before then, and
does not anticipate that the services it provides will be adversely affected.
The Fund's other service providers have told the Fund's management that they
also expect to resolve the Year 2000 Problem, and the Fund's management will
continue to monitor the situation as the Year 2000 approaches. However, if the
problem has not been fully addressed, the Fund could be negatively affected. The
Year 2000 Problem could also have a negative impact on the securities in which
the Fund invests, and this could hurt the Fund's investment returns.
11
<PAGE>
Officers and Directors
Terry K. Glenn, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Arthur Zeikel, Director
Vincent R. Giordano, Senior Vice President
William R. Bock, Vice President
Donald C. Burke, Vice President and
Treasurer
Bradley J. Lucido, 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--9/99
[RECYCLE LOGO] Printed on post-consumer recycled paper
