MuniInsured
Fund, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
March 31, 1999
<PAGE>
MuniInsured Fund, Inc.
DEAR SHAREHOLDER
During the six-month period ended March 31, 1999, MuniInsured Fund, Inc. earned
$0.239 per share income dividends, which included earned and unpaid dividends of
$0.040. This represents a net annualized yield of 4.83%, based on a month-end
net asset value of $9.93 per share. Over the same period, the Fund's total
investment return was +0.67%, based on a change in per share net asset value
from $10.30 to $9.93, and assuming reinvestment of $0.296 per share ordinary
income dividends and $0.132 per share capital gains distributions.
The Municipal Market Environment
During the six-month period ended March 31, 1999, long-term tax-exempt revenue
bond yields rose moderately. However, long-term US Treasury bond yields were
under significant pressure throughout the March period. Investors became
increasingly concerned that the strong growth the US economy displayed during
the fourth quarter of 1998 would continue into the first half of 1999. Continued
strong US equity market performance also reduced investor interest in long-term
fixed-income products. Furthermore, foreign economic growth, while clearly not
expanding, appears to have stabilized. This reduced much of the strong "flight
to quality" benefit the US Treasury market had enjoyed in recent quarters. These
factors helped push US Treasury bond yields higher throughout the period. US
Treasury bond yields rose 65 basis points (0.65%) to end the March period at
5.625%. Long-term municipal revenue bond yields rose slightly more than 10 basis
points to end the March period at 5.29% as measured by the Bond Buyer Revenue
Bond Index.
The relative stability of the municipal bond market in recent months was largely
the result of a return to a strong technical position within the tax-exempt
market. For much of 1998, new long-term municipal bond issuance was
significantly above recent historic trends. Additionally, the strong demand
exerted by world equity markets also sapped much of the demand for
tax-advantaged products. However, in recent months, a much stronger
supply/demand relationship has developed.
Over the last 12 months, nearly $275 billion in new long-term municipal bonds
was issued, an increase of approximately 10% compared to the same period a year
ago. As interest rates declined in the recent quarters, it has become
increasingly difficult for municipalities to generate the economic savings
necessary for additional tax-free financings. Consequently, the pace of new bond
issuance slowed in recent quarters. During the six months ended March 31, 1999,
more than $125 billion in new long-term municipal securities was underwritten, a
decrease of 6% compared to the same six-month period a year ago. During the
quarter ended March 31, 1999, approximately $60 billion in new long-term
tax-exempt bonds was issued, a decline of almost 20% compared to the quarter
ended March 31, 1998.
Additionally, in January and February, tax-exempt bondholders received over $40
billion from coupon payments, bond maturities and proceeds from early bond
redemptions. Consequently, retail investor demand has been strong in recent
months, easily matching, if not at times exceeding, available supply. We will
monitor this trend closely in the coming months to determine if the supply
pressures exerted in 1998 are abating and fostering a more balanced
supply/demand environment for 1999.
The recent relative outperformance of the municipal bond market has resulted in
a decline in their recent historic high yield ratios. As recently as the end of
1998, long-term, A-rated municipal revenue bond yields were in excess of 100% of
comparable US Treasury bond yields. At March 31, 1999, municipal bond yield
ratios were approximately 95% of their taxable
1
<PAGE>
MuniInsured Fund, Inc. March 31, 1999
counterparts, still well above their recent historic average. During 1997,
tax-exempt bond yield ratios averaged 84%. Should the current positive technical
environment in municipal securities continue to improve, it is likely that
tax-exempt bond yield ratios will return to more historic levels.
Looking ahead, the direction and intensity of the next move in interest rates is
difficult to predict. In recent years, US bond yields tended to reach their
annual peak sometime in April and move downward for the remainder of the year.
However, such trends have been predicated on subsequent declines in US economic
activity. Currently, there appears to be little indication of significant
economic weakness going forward. On the other hand, by nearly every measure,
inflation is well contained. Future indicators of inflation, such as the prices
of gold and other commodities, are giving little evidence for any significant
inflationary increase. Additionally, inflation-adjusted real rates of return are
historically attractive to long-term investors. These factors suggest that
fixed-income bond yields may trade in a relatively narrow range, centered around
current levels, for a protracted period of time. Should the US economy weaken
later this year, it is likely that bond yields will decline as they have in
recent years.
Portfolio Strategy
During the six months ended March 31, 1999, we maintained our constructive
portfolio strategy for MuniInsured Fund, Inc. that was adopted in early 1998. We
believed that strong economic growth would continue to be offset by the
combination of deteriorating global economic conditions and very low inflation.
In fact, tax-exempt bond yields traded in a relatively narrow range, with a bias
toward lower bond yields over the last six months. The Fund was fully invested
in long-term, insured, tax-exempt securities throughout the period in an effort
to seek to enhance shareholder income and participate fully in any market
improvement.
In Conclusion
Going forward, we expect little change in the Fund's existing structure. Current
economic fundamentals, a strong domestic economy offset by equally favorable
inflationary pressures, suggest that interest rates should remain stable. As
such, we anticipate remaining fully invested in the months ahead.
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/ 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
May 11, 1999
================================================================================
After more than 20 years of service, Arthur Zeikel recently retired as Chairman
of Merrill Lynch Asset Management, L.P. (MLAM). Mr. Zeikel served as President
of MLAM from 1977 to 1997 and as Chairman since December 1997. Mr. Zeikel is one
of the country's most respected leaders in asset management and presided over
the growth of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500 billion. Mr.
Zeikel will remain on MuniInsured Fund, Inc.'s Board of Directors. We are
pleased to announce that Terry K. Glenn has been elected President and Director
of the Fund. Mr. Glenn has held the position of Executive Vice President of MLAM
since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors in wishing
him well in his retirement from Merrill Lynch and are pleased that he will
continue as a member of the Fund's Board of Directors.
================================================================================
2
<PAGE>
MuniInsured Fund, Inc. March 31, 1999
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--1.4% NR* Aaa $1,000 Alaska State Housing Finance Corporation, RITR,
Series 2, 8.32% due 12/01/2024 (f) $ 1,099
=================================================================================================================================
California--15.9% AAA Aaa 1,405 California Educational Facilities Authority Revenue Bonds
(Loyola Marymount University), 5.90% due 10/01/2021 (b) 1,529
AAA Aaa 1,500 California HFA, Revenue Bonds, Series F, 6% due 8/01/2017 (b)(g) 1,593
A A2 1,000 California Health Facilities Finance Authority, Revenue Refunding
Bonds (Catholic Healthcare West), Series A, 5% due 7/01/2028 967
AAA Aaa 3,025 California State, GO, 5.375% due 6/01/2026 (d) 3,123
AAA Aaa 2,505 California State, GO, Refunding, 5% due 10/01/2014 (b) 2,565
NR* Aaa 1,000 Los Angeles, California, Harbor Department Revenue
Bonds, RITR, AMT, Series 7, 9.195% due 11/01/2026 (f) 1,222
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) 1,735
=================================================================================================================================
Colorado--1.9% A1+ VMIG1+ 1,500 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects),
VRDN, 3% due 5/01/2013 (a)(c) 1,500
=================================================================================================================================
Connecticut--1.3% AA Aa 1,000 Connecticut State, HFA, Revenue Refunding Bonds (Housing
Mortgage Finance Program), AMT, Series A, Sub-Series A-2, 6.45%
due 5/15/2022 1,064
=================================================================================================================================
Illinois--15.5% AAA Aaa 2,000 Chicago, Illinois, Board of Education, GO (Chicago School Reform),
5.75% due 12/01/2020 (a) 2,141
AAA Aaa 4,000 Chicago, Illinois, Board of Education, GO, Refunding, Capital
Appreciation (Chicago School Reform), Series A, 5.28%**
due 12/01/2024 (d) 1,037
AAA NR* 1,250 Chicago, Illinois, Sales Tax Revenue Bonds, RITR, Series 92,
7.315% due 1/01/2030 (d)(f) 1,294
AAA Aaa 1,000 Chicago, Illinois, Wastewater Transmission Revenue Bonds,
6.375% due 1/01/2005 (b)(h) 1,136
AAA Aaa 1,000 Decatur, Illinois, Hospital Revenue Refunding Bonds (Decatur
Memorial Hospital), Series A, 7.75% due 10/01/2021(b) 1,105
AA Aa2 1,000 Illinois, HDA, Homeowner Mortgage Revenue Bonds, Sub-Series
D-1, 6.40% due 8/01/2017 1,063
AAA Aaa 3,000 Illinois Health Facilities Authority, Revenue Refunding Bonds
(Ingalls Health System Project), 6.25% due 5/15/2024 (b) 3,300
AAA Aaa 1,000 Regional Transportation Authority, Illinois, Revenue Bonds,
Series C, 7.75% due 6/01/2020 (d) 1,349
=================================================================================================================================
</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
PCR Pollution Control Revenue Bonds
RITR Residual Interest Trust Receipts
VRDN Variable Rate Demand Notes
3
<PAGE>
MuniInsured Fund, Inc. March 31, 1999
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>
Indiana--3.2% AAA Aaa $1,360 Hammond, Indiana, Multi-School Building Corporation Revenue
Refunding Bonds (First Mortgage), 6.125% due 7/15/2019 (b) $ 1,486
AAA NR* 1,000 Indiana Bond Bank Revenue Bonds (State Revolving Fund
Program), Series A, 6.75% due 2/01/2017 1,130
=================================================================================================================================
Kansas--3.4% AAA Aaa 2,500 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric
Company Project), 7% due 6/01/2031 (b) 2,700
=================================================================================================================================
Maine--1.2% AA Aa2 885 Maine State Housing Authority, Mortgage Purchase Revenue
Bonds, AMT, Series C-2, 6.875% due 11/15/2023 958
=================================================================================================================================
Maryland--1.2% NR* VMIG1+ 1,000 Maryland State Health and Higher Educational Facilities
Authority, Revenue Refunding Bonds (Pooled Loan Program), VRDN,
Series A, 3.05% due 4/01/2035 (c) 1,000
=================================================================================================================================
Massachusetts--7.7% AAA Aaa 890 Massachusetts Education Loan Authority, Education Loan
Revenue Bonds, AMT, Issue E, Series A, 7.375% due 1/01/2012 (a) 974
AAA Aaa 3,985 Massachusetts State Turnpike Authority, Metropolitan Highway
System Revenue Refunding Bonds, Senior Series A,
5% due 1/01/2037 (b) 3,828
AAA Aaa 1,440 Massachusetts State Water Resources Authority Revenue Bonds,
Series A, 4.75% due 8/01/2027 (e) 1,348
=================================================================================================================================
Michigan--0.6% A1+ VMIG1+ 500 University of Michigan, University Hospital Revenue Bonds, VRDN,
Series A, 3% due 12/01/2027 (c) 500
=================================================================================================================================
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) 1,671
AA+ NR* 1,000 Rochester, Minnesota, Health Care Facilities Revenue Bonds
(Mayo Foundation), Series A, 5.50% due 11/15/2027 1,035
=================================================================================================================================
Nevada--1.0% A1+ P1 800 Washoe County, Nevada, Water Facility Revenue Bonds
(Sierra Pacific Power Company Project), VRDN, AMT,
3.10% due 12/01/2020 (c) 800
=================================================================================================================================
New Jersey--1.3% AA+ Aa1 1,000 New Jersey State, GO, 5% due 2/01/2007 1,054
=================================================================================================================================
New York--7.0% AA Aa2 1,000 Municipal Assistance Corporation for New York City, New York,
Revenue Refunding Bonds, Series O, 5.25% due 7/01/2008 1,070
New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds:
AAA Aaa 1,500 RITR, Series 5, 8.095% due 6/15/2026 (f) 1,721
AAA Aaa 3,000 Series A, 4.75% due 6/15/2031 (d) 2,812
=================================================================================================================================
North Carolina--1.2% A1+ NR* 1,000 Raleigh-Durham, North Carolina, Airport Authority, Special
Facility Revenue Refunding Bonds (American Airlines), VRDN,
Series A, 2.90% due 11/01/2005 (c) 1,000
=================================================================================================================================
Oregon--1.3% 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) 1,041
=================================================================================================================================
Pennsylvania--1.4% AAA Aaa 1,165 Pennsylvania State Turnpike Commission, Oil Franchise Tax
Revenue Bonds, Sub-Series B, 4.75% due 12/01/2027 (a) 1,099
=================================================================================================================================
Texas--7.2% AAA Aaa 1,150 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light and Power), Series A, 6.70% due 3/01/2017 (a) 1,250
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) 1,550
NR* Aaa 1,500 Harris County, Texas, Health Facilities Development Corp.,
Hospital Revenue Bonds, RITR, Series 12, 6.375%
due 10/01/2004 (b)(f) 1,875
</TABLE>
4
<PAGE>
MuniInsured Fund, Inc. March 31, 1999
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 AAA Aaa $1,000 Houston, Texas, Airport System Revenue Bonds, AMT, Sub-Lien,
(concluded) Series A, 6.75% due 7/01/2021 (d) $ 1,075
=================================================================================================================================
Utah--1.8% AAA Aaa 1,500 Weber County, Utah, Hospital Revenue Bonds (Health Services
Inc.), 5% due 8/15/2030 (a) 1,443
=================================================================================================================================
Virginia--1.3% AA+ Aa1 1,000 Virginia State, HDA, Commonwealth Mortgage Revenue Bonds,
Series J, Sub-Series J-2, 6.75% due 7/01/2017 1,070
=================================================================================================================================
Washington--14.6% AAA Aaa 2,000 Port Seattle, Washington, Passenger Facility Charge Revenue
Bonds, Series A, 5% due 12/01/2023 (b) 1,950
AAA Aaa 2,275 Tacoma, Washington, Sewer Revenue Bonds, Series B, 6.375%
due 12/01/2015 (d) 2,526
AAA Aaa 2,240 Washington State, COP, 5.80% due 10/01/2015 (a) 2,404
AAA Aaa 2,000 Washington State, GO, Series A, 4.50% due 7/01/2023 (e) 1,821
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) 1,489
AAA Aaa 1,500 Washington State Public Power Supply System, Revenue
Refunding Bonds (Nuclear Project No. 1), Series B, 5.125%
due 7/01/2017 (a) 1,505
=================================================================================================================================
West Virginia--2.1% AAA Aaa 1,500 Harrison County, West Virginia, Commission for Solid Waste
Disposal Revenue Bonds (Monongahela Power), AMT, Series C,
6.75% due 8/01/2024 (a) 1,682
=================================================================================================================================
Wisconsin--1.5% AAA Aaa 1,120 Wisconsin Public Power Inc., Power Supply System Revenue
Bonds, Series A, 6% due 7/01/2015 (b) 1,222
=================================================================================================================================
Total Investments (Cost--$74,771)--98.4% 78,911
Other Assets Less Liabilities--1.6% 1,316
-------
Net Assets--100.0% $80,227
=======
=================================================================================================================================
</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 March 31,
1999.
(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 March 31, 1999.
(g) FHA Insured.
(h) Prerefunded.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is the effective
yield at time of purchase by the Fund.
+ Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
QUALITY PROFILE
The quality ratings of securities in the Fund as of March 31, 1999 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa ........................................................... 82.1%
AA/Aa ............................................................. 9.1
A/A ............................................................... 1.2
Other+ ............................................................ 6.0
- --------------------------------------------------------------------------------
+ Temporary investments in short-term securities.
5
<PAGE>
MuniInsured Fund, Inc. March 31, 1999
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of March 31, 1999
<TABLE>
<CAPTION>
==========================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$74,770,709) (Note 1a) ............. $78,911,272
Cash ....................................................................... 104,661
Interest receivable ........................................................ 1,296,002
Prepaid expenses and other assets .......................................... 26,401
-----------
Total assets ............................................................... 80,338,336
-----------
==========================================================================================================================
Liabilities: Payables:
Dividends to shareholders (Note 1e) ...................................... $ 51,823
Investment adviser (Note 2) .............................................. 34,163 85,986
-----------
Accrued expenses and other liabilities ..................................... 25,020
-----------
Total liabilities .......................................................... 111,006
-----------
==========================================================================================================================
Net Assets: Net assets ................................................................. $80,227,330
===========
==========================================================================================================================
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 ....................................... 319,766
Undistributed realized capital gains on investments--net ................... 443,786
Unrealized appreciation on investments--net ................................ 4,140,563
-----------
Total capital--Equivalent to $9.93 net asset value per share of
Common Stock (market price--$9.3125) ....................................... $80,227,330
===========
==========================================================================================================================
</TABLE>
See Notes to Financial Statements.
Statement of Operations for the Six Months Ended March 31, 1999
<TABLE>
<CAPTION>
==========================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned ................... $ 2,245,410
Income
(Note 1d):
==========================================================================================================================
Expenses: Investment advisory fees (Note 2) .......................................... $ 203,692
Professional fees .......................................................... 28,690
Accounting services (Note 2) ............................................... 23,172
Transfer agent fees ........................................................ 17,035
Directors' fees and expenses ............................................... 11,896
Printing and shareholder reports ........................................... 10,047
Listing fees ............................................................... 4,972
Pricing fees ............................................................... 3,612
Custodian fees ............................................................. 2,628
Other ...................................................................... 5,776
-----------
Total expenses ............................................................. 311,520
-----------
Investment income--net ..................................................... 1,933,890
-----------
==========================================================================================================================
Realized & Realized gain on investments--net .......................................... 1,538,900
Unrealized Gain Change in unrealized appreciation on investments--net ...................... (3,045,447)
(Loss) on -----------
Investments--Net Net Increase in Net Assets Resulting from Operations ....................... $ 427,343
(Notes 1b, 1d & 3): ===========
==========================================================================================================================
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
MuniInsured Fund, Inc. March 31, 1999
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 1999 1998
==============================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ..................................... $ 1,933,890 $ 4,040,988
Realized gain on investments--net .......................... 1,538,900 1,283,857
Change in unrealized appreciation on investments--net ...... (3,045,447) 2,216,766
------------ ------------
Net increase in net assets resulting from operations ....... 427,343 7,541,611
------------ ------------
==============================================================================================================
Dividends & Investment income--net ..................................... (1,948,417) (4,043,168)
Distributions to Realized gain on investments--net .......................... (1,506,410) (1,206,851)
Shareholders ------------ ------------
(Note 1e): Net decrease in net assets resulting from dividends and
distributions to shareholders .............................. (3,454,827) (5,250,019)
------------ ------------
==============================================================================================================
Net Assets: Total increase (decrease) in net assets .................... (3,027,484) 2,291,592
Beginning of period ........................................ 83,254,814 80,963,222
------------ ------------
End of period* ............................................. $ 80,227,330 $ 83,254,814
============ ============
==============================================================================================================
*Undistributed investment income--net ....................... $ 319,766 $ 334,293
============ ============
==============================================================================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
<TABLE>
<CAPTION>
For the
Six
Months For the Year Ended
The following per share data and ratios have been derived Ended September 30,
from information provided in the financial statements. March 31, --------------------------------------------
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............... $ 10.30 $ 10.02 $ 9.77 $ 9.64 $ 9.50
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ............................. .24 .50 .51 .51 .52
Realized and unrealized gain (loss) on
investments--net ................................... (.18) .43 .31 .13 .34
-------- -------- -------- -------- --------
Total from investment operations ................... .06 .93 .82 .64 .86
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ........................... (.24) (.50) (.51) (.51) (.53)
Realized gain on investments--net ................ (.19) (.15) (.06) -- (.19)
In excess of realized gain on investments--net ... -- -- -- -- --++
-------- -------- -------- -------- --------
Total dividends and distributions .................. (.43) (.65) (.57) (.51) (.72)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 9.93 $ 10.30 $ 10.02 $ 9.77 $ 9.64
======== ======== ======== ======== ========
Market price per share, end of period .............. $ 9.3125 $ 9.8125 $ 9.50 $ 8.75 $ 8.75
======== ======== ======== ======== ========
=================================================================================================================================
Total Investment Based on market price per share .................... (.90%)+ 10.55% 15.73% 5.91% 8.46%
Return:** ======== ======== ======== ======== ========
Based on net asset value per share ................. .67%+ 10.02% 9.33% 7.34% 10.06%
======== ======== ======== ======== ========
=================================================================================================================================
Ratios to Average Expenses ........................................... .76%* .77% .78% .78% .79%
Net Assets: ======== ======== ======== ======== ========
Investment income--net ............................. 4.74%* 4.96% 5.15% 5.15% 5.55%
======== ======== ======== ======== ========
=================================================================================================================================
Supplemental Net assets, end of period (in thousands) ........... $ 80,227 $ 83,255 $ 80,963 $ 78,916 $ 77,858
Data: ======== ======== ======== ======== ========
Portfolio turnover ................................. 27.87% 53.14% 73.22% 94.61% 83.52%
======== ======== ======== ======== ========
=================================================================================================================================
</TABLE>
* Annualized.
** 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.
+ Aggregate total investment return.
++ Amount is less than $.01 per share.
See Notes to Financial Statements.
8
<PAGE>
MuniInsured Fund, Inc. March 31, 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. These unaudited financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a normal recurring
nature. The Fund determines and makes available for publication the net asset
value of its Common Stock on a weekly basis. The Fund's Common Stock is listed
on the American Stock Exchange under the symbol MIF. The following is a summary
of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Municipal bonds for which quotations are not readily
available are valued at fair value on a consistent basis as determined by the
pricing service using a matrix system to determine valuations. The 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 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 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
9
<PAGE>
MuniInsured Fund, Inc. March 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
shareholders. Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
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 six
months ended March 31, 1999 were $21,664,671 and $25,902,426, respectively.
Net realized gains for the six months ended March 31, 1999 and net unrealized
gains as of March 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments $1,538,900 $4,140,563
---------- ----------
Total $1,538,900 $4,140,563
========== ==========
- --------------------------------------------------------------------------------
As of March 31, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $4,140,563, of which $4,351,022 related to appreciated
securities and $210,459 related to depreciated securities. The aggregate cost of
investments at March 31, 1999 for Federal income tax purposes was $74,770,709.
4. Common Stock Transactions:
At March 31, 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 six months ended March 31, 1999 and the year ended
September 30, 1998 remained constant.
5. Subsequent Event:
On April 8, 1999, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.039577 per share,
payable on April 29, 1999 to shareholders of record as of April 22, 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.
10
<PAGE>
MuniInsured Fund, Inc. March 31, 1999
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.
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
- --------------------------------------------------------------------------------
Gerald M. Richard, Treasurer of MuniInsured Fund, Inc. has recently retired. His
colleagues at Merrill Lynch Asset Management, L.P. join the Fund's Board of
Directors in wishing Mr. Richard well in his retirement.
- --------------------------------------------------------------------------------
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
11
<PAGE>
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--3/99
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