MuniInsured
Fund, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
September 30, 2000
<PAGE>
MuniInsured Fund, Inc.
DEAR SHAREHOLDER
For the year ended September 30, 2000, MuniInsured Fund, Inc. earned $0.462 per
share income dividends, which included earned and unpaid dividends of $0.038.
This represents a net annualized yield of 4.97%, based on a month-end net asset
value of $9.29 per share. During the same period, the Fund's total investment
return was +6.53%, based on a change in per share net asset value from $9.27 to
$9.29, and assuming reinvestment of $0.462 per share income dividends and $0.020
long-term capital gains distributions.
During the six-month period ended September 30, 2000, the Fund's total
investment return was +4.52%, based on a change in per share net asset value
from $9.15 to $9.29, and assuming reinvestment of $0.234 per share income
dividends.
The Municipal Market Environment
During the six-month period ended September 30, 2000, long-term US Treasury bond
yields drifted slightly higher. A number of economic indicators, particularly
employment, new home sales and consumer spending, have suggested that US
economic growth, while still robust, has moderated from 1999's levels. Consensus
estimates for the third-quarter US gross domestic product are centered around
3%, well below the 4.8% growth rate of the first-quarter 2000 and second-quarter
2000 gross domestic product of 5.62%. This decline in economic growth suggested
to some analysts that the Federal Reserve Board is approaching the end of its
current tightening cycle. Given the ongoing US Treasury debt reduction program
and forecasts of sizeable Federal budgeting surpluses going forward, investor
emphasis has remained largely focused on the future shortage of longer-dated
maturity US Treasury bonds. By late August, US Treasury bond yields declined
more than 15 basis points (0.15%) to 5.66%, their lowest level in over a year.
However, for the remainder of the period, bond yields were unable to maintain
their earlier gains. Rising prices were the major factor behind the decline in
bond prices, as many investors feared that higher oil prices would result in
increased inflationary pressures. Additionally, US corporations have been
issuing large amounts of taxable debt in order to take advantage of the current
low interest rate environment. During the last three months, US corporations
issued more than $100 billion in investment-grade securities, offering yields in
the 7.25%-9% range, and many investors found these taxable issues an attractive
and more plentiful alternative to US Treasury bonds. As the demand for US
Treasury issues weakened in recent weeks, US bond yields rose. By the end of
September, US Treasury bonds rose to 5.88%, an increase of 5 basis points over
the last six months.
The six-month period ended September 30, 2000 was one of the few periods in
recent years in which the tax-exempt bond market outperformed its taxable
counterpart. This has largely been a reflection of the continuing reduction in
new municipal bond issuance and a moderate increase in investor demand. Thus,
for this year, only $141 billion in new long-term tax-exempt bonds was issued, a
decline of almost 20% compared to the same period in 1999. Recent issuance has
been even more restricted. In September 2000, just over $14 billion in municipal
bonds was underwritten, a decline of more than 25% from September 1999 levels.
Recently, investor demand has been stronger, particularly among individual
retail investors. Investors received more than $45 billion in coupon payments,
bond maturities and the proceeds from early redemptions during June and July.
Traditional institutional investors, such as mutual funds, have not played a
major role during recent months, as fund flows,
1
<PAGE>
MuniInsured Fund, Inc. September 30, 2000
although slowing, remained negative. However, non-traditional buyers, hedge
funds and arbitrageurs, have noticeably increased their activity as may be
expected when tax-exempt bond yield ratios exceed 100% of their taxable
counterparts as they have in recent weeks. Property/casualty insurers, after
being unprofitable for a number of years, have also begun to return to the
tax-exempt bond market. During the period, long-term municipal revenue bond
yields, as measured by the Bond Buyer Revenue Bond Index, declined more than 15
basis points to end the period at 5.85%.
However, tax-exempt bond yields have generally declined throughout most of this
year. Much of the resulting price appreciation has been triggered by the
significant improvement in the long-term US Treasury market. While the technical
position of the municipal bond market has been very positive this year, it was
also positive for most of 1999 when tax-exempt bond yields rose dramatically.
From that perspective, it may be too early to become overly positive about the
extent to which the municipal bond market can continue to improve. The US
Treasury bond market demonstrated on a number of occasions this year that its
positive technical backdrop can quickly be subordinated by resurgent domestic
economic growth.
Portfolio Strategy
During the six-month period ended September 30, 2000, we continued to
restructure the Fund toward a more neutral duration. This restructuring is
expected to temper any portfolio volatility in response to long-term interest
rate movements. Our emphasis was to increase coupon income through the purchase
of securities maturing in the 15-year-20-year range. As tax-exempt bond rates
fell during the period, the duration of the Fund declined below a neutral
position. Given our generally positive market outlook, the Fund's duration was
restored to neutral. During the period, we were able to increase both the coupon
income and the overall credit quality of the Fund. At September 30, 2000, 89.6%
of the Fund was rated AAA.
Looking forward, we will maintain our fully invested position in order to seek
to increase shareholder income. We believe that the Fund's current position
offers the opportunity to achieve generous tax-exempt income, while limiting any
price volatility.
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
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 1, 2000
2
<PAGE>
MuniInsured Fund, Inc. September 30, 2000
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
State Ratings Ratings Amount Issue Value
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alaska--2.9% AAA Aaa $1,150 Alaska, Energy Authority, Power Revenue Refunding Bonds
(Bradley Lake), 4th Series, 6% due 7/01/2020 (i) $ 1,216
NR* Aaa 1,000 Alaska State Housing Finance Corporation Revenue Refunding
Bonds, RITR, Series 2, 5.82% due 12/01/2024 (b)(f)(g)(h) 976
----------------------------------------------------------------------------------------------------------------------------------
California--18.5% AAA Aaa 1,405 California Educational Facilities Authority Revenue Bonds
(Loyola Marymount University), 5.90% due 10/01/2021 (b) 1,464
AAA Aaa 1,500 California HFA, Revenue Bonds, Series F, 6% due 8/01/2017 (b)(g) 1,512
AAA Aaa 3,025 California State, GO, 5.375% due 6/01/2026 (d) 2,981
AAA Aaa 2,130 California State Public Works Board, Lease Revenue Bonds
(Department of Corrections), Series A, 5.50% due 10/01/2019 (a) 2,166
A+ Aa3 2,000 Los Angeles, California, Department of Water and Power,
Electric Plant Revenue Refunding Bonds, 6.10% due 2/15/2017 2,105
NR* Aaa 1,000 Los Angeles, California, Harbor Department Revenue Bonds, RITR,
AMT, Series RI-7, 6.595% due 11/01/2026 (b)(f) 1,110
AAA Aaa 145 Port Oakland, California, Revenue Bonds, AMT, Series K,
5.75% due 11/01/2021 (d) 148
NR* Aaa 1,000 Port Oakland, California, Trust Receipts, Revenue Bonds, AMT,
Class R, Series K, 6.247% due 11/01/2021 (d)(f) 1,049
AAA NR* 1,300 San Bernardino County, California, COP, Refunding
(Medical Center Financing Project), 5.50% due 8/01/2019 (b) 1,308
----------------------------------------------------------------------------------------------------------------------------------
Colorado--4.3% AA Aa2 1,500 Colorado HFA, Revenue Refunding Bonds (S/F Program), AMT,
Series D-2, 6.90% due 4/01/2029 1,634
NR* Aaa 1,000 Colorado Health Facilities Authority, Hospital Revenue
Refunding Bonds (Poudre Valley Health Care), Series A,
5.75% due 12/01/2023 (i) 1,001
A1 NR* 600 Pitkin County, Colorado, IDR, Refunding (Aspen Skiing Company
Project), VRDN, AMT, Series B, 5.75% due 4/01/2014 (c) 600
----------------------------------------------------------------------------------------------------------------------------------
Connecticut--2.4% AAA Aaa 1,750 Bridgeport, Connecticut, GO, Refunding, Series A,
5.875% due 7/15/2019 (d) 1,797
----------------------------------------------------------------------------------------------------------------------------------
Illinois--13.7% AAA Aaa 2,000 Chicago, Illinois, Board of Education, GO (Chicago School Reform),
5.75% due 12/01/2020 (a) 2,014
AAA Aaa 2,000 Chicago, Illinois, GO, Project and Refunding,
5.25% due 1/01/2028 (d) 1,851
AAA Aaa 1,000 Decatur, Illinois, Hospital Revenue Refunding Bonds
(Decatur Memorial Hospital), Series A, 7.75% due 10/01/2021 (b) 1,047
AA Aa2 1,000 Illinois HDA, Homeowner Mortgage Revenue Bonds,
Sub-Series D-1, 6.40% due 8/01/2017 1,022
</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
IDR Industrial Development Revenue Bonds
PCR Pollution Control Revenue Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
3
<PAGE>
MuniInsured Fund, Inc. September 30, 2000
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
State Ratings Ratings Amount Issue Value
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Illinois AAA Aaa $3,000 Illinois Health Facilities Authority, Revenue Refunding Bonds
(concluded) (Ingalls Health System Project), 6.25% due 5/15/2024 (b) $ 3,070
AAA Aaa 1,000 Regional Transportation Authority, Illinois, Revenue Bonds,
Series C, 7.75% due 6/01/2020 (d) 1,263
----------------------------------------------------------------------------------------------------------------------------------
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) 1,415
AAA NR* 1,000 Indiana Bond Bank Revenue Bonds (State Revolving Fund
Program), Series A, 6.75% due 2/01/2017 1,088
----------------------------------------------------------------------------------------------------------------------------------
Kansas--3.4% AAA Aaa 2,500 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric
Company Project), 7% due 6/01/2031 (b) 2,584
----------------------------------------------------------------------------------------------------------------------------------
Kentucky--1.3% NR* NR* 1,000 Kentucky Economic Development Finance Authority, Health
System Revenue Bonds (Norton Healthcare Inc.), Series A,
6.50% due 10/01/2020 970
----------------------------------------------------------------------------------------------------------------------------------
Louisiana--2.2% AAA Aaa 1,500 Louisiana Local Government, Environmental Facilities,
Community Development Authority Revenue Bonds
(Capital Projects and Equipment Acquisition), Series A,
6.30% due 7/01/2030 (a) 1,623
----------------------------------------------------------------------------------------------------------------------------------
Maine--0.7% AA Aa2 545 Maine State Housing Authority, Mortgage Purchase Revenue Bonds,
AMT, Series C-2, 6.875% due 11/15/2023 564
----------------------------------------------------------------------------------------------------------------------------------
Maryland--1.5% A1+ VMIG1+ 1,100 Maryland State Energy Financing Administration, Solid Waste
Disposal Revenue Bonds (Cimenteries Project), VRDN, AMT,
5.75% due 5/01/2035 (c) 1,100
----------------------------------------------------------------------------------------------------------------------------------
Massachusetts--2.6% AAA Aaa 750 Massachusetts Education Loan Authority, Education Loan
Revenue Bonds, AMT, Issue E, Series A, 7.375% due 1/01/2012 (a) 797
AAA Aaa 1,240 Massachusetts State Water Resource Authority, Revenue
Refunding Bonds, Series D, 5% due 8/01/2024 (b) 1,119
----------------------------------------------------------------------------------------------------------------------------------
Michigan--1.1% NR* VMIG1+ 800 Michigan State Strategic Fund, PCR, Refunding (Consumers
Power Project), VRDN, 5.55% due 4/15/2018 (a)(c) 800
----------------------------------------------------------------------------------------------------------------------------------
Minnesota--3.9% NR* Aaa 2,760 Saint Cloud, Minnesota, Health Care Revenue Refunding Bonds
(Saint Cloud Hospital Obligation Group), Series A,
6.25% due 5/01/2020 (i) 2,918
----------------------------------------------------------------------------------------------------------------------------------
Nevada--2.5% AAA Aaa 2,000 Director of the State of Nevada, Department of Business and
Industry Revenue Bonds (Las Vegas Monorail Project), 1st Tier,
5.375% due 1/01/2040 (a) 1,854
----------------------------------------------------------------------------------------------------------------------------------
New York--9.7% AAA Aaa 1,450 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, Series A, 6% due 7/01/2016 (d) 1,513
AAA Aaa 1,500 New York City, New York, City Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, RITR, Series FR-6,
5.545% due 6/15/2026 (b)(f) 1,508
New York City, New York, GO:
AAA Aaa 1,295 Series A, 5.50% due 5/15/2026 (d) 1,260
AAA Aaa 2,000 Series B, 5.875% due 8/01/2016 (b) 2,080
AAA Aaa 1,000 New York State Dormitory Authority, Revenue Refunding Bonds
(Mental Health Services Facilities Improvement), Series D,
5% due 2/15/2023 (b) 903
----------------------------------------------------------------------------------------------------------------------------------
Oklahoma--1.3% NR* Aaa 1,000 Tulsa, Oklahoma, Tulsa Industrial Authority Revenue Bonds
(University of Tulsa), Series A, 5.375% due 10/01/2031 (b) 947
----------------------------------------------------------------------------------------------------------------------------------
South Carolina--3.3% NR* Aaa 2,400 South Carolina Housing Finance and Development Authority,
Mortgage Revenue Refunding Bonds, AMT, Series A-2,
6.35% due 7/01/2019 (i) 2,489
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
MuniInsured Fund, Inc. September 30, 2000
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
State Ratings Ratings Amount Issue Value
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Texas--4.9% AAA Aaa $1,150 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light and Power), Series A, 6.70% due 3/01/2017 (a) $ 1,199
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) 1,479
AAA Aaa 1,000 Houston, Texas, Airport System Revenue Bonds, AMT, Sub-Lien,
Series A, 6.75% due 7/01/2021 (d) 1,031
----------------------------------------------------------------------------------------------------------------------------------
Washington--14.2% AAA Aaa 2,000 Port Seattle, Washington, Passenger Facility Charge Revenue
Bonds, Series A, 5% due 12/01/2023 (b) 1,795
AAA Aaa 1,000 Port Seattle, Washington, Revenue Bonds, Series A,
5.50% due 2/01/2026 (b) 969
AAA Aaa 1,720 Seattle, Washington, Drain and Wastewater Utility Revenue Bonds,
5.75% due 11/01/2029 (b) 1,713
AAA Aaa 2,000 Seattle, Washington, Water System Revenue Bonds, Series B,
6% due 7/01/2029 (d) 2,064
AAA Aaa 2,275 Tacoma, Washington, Sewer Revenue Bonds, Series B,
6.375% due 12/01/2015 (d) 2,423
NR* Aaa 1,630 Washington State Housing Finance Commission Revenue Bonds
(S/F Program), AMT, Series 1A, 6.40% due 12/01/2019 (e)(h) 1,680
----------------------------------------------------------------------------------------------------------------------------------
West Virginia--2.1% 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) 1,610
----------------------------------------------------------------------------------------------------------------------------------
Wisconsin--1.5% AAA Aaa 1,120 Wisconsin Public Power Inc., Power Supply System Revenue Bonds,
Series A, 6% due 7/01/2015 (b) 1,166
----------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$74,166)--101.3% 75,995
Liabilities in Excess of Other Assets--(1.3%) (970)
-------
Net Assets--100.0% $75,025
=======
----------------------------------------------------------------------------------------------------------------------------------
</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, 2000.
(d) FGIC Insured.
(e) GNMA Collateralized.
(f) The interest rate is subject to change periodically and is inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at September 30, 2000.
(g) FHA Insured.
(h) FNMA Collateralized.
(i) 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 (unaudited)
The quality ratings of securities in the Fund as of September 30, 2000 were as
follows:
--------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
--------------------------------------------------------------------------------
AAA/Aaa .................................................. 89.6%
AA/Aa .................................................... 7.1
NR (Not Rated) ........................................... 1.3
Other* ................................................... 3.3
--------------------------------------------------------------------------------
* Temporary investments in short-term municipal securities.
5
<PAGE>
MuniInsured Fund, Inc. September 30, 2000
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of September 30, 2000
<TABLE>
<S> <C> <C>
Assets: Investments, at value (identified cost--$74,166,352) ....................... $ 75,994,757
Cash ....................................................................... 59,762
Interest receivable ........................................................ 1,192,825
Prepaid expenses and other assets .......................................... 28,969
------------
Total assets ............................................................... 77,276,313
------------
----------------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased ..................................................... $ 2,076,820
Dividends to shareholders ................................................ 42,596
Investment adviser ....................................................... 27,859 2,147,275
------------
Accrued expenses and other liabilities ..................................... 104,082
------------
Total liabilities .......................................................... 2,251,357
------------
----------------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets ................................................................. $ 75,024,956
============
----------------------------------------------------------------------------------------------------------------------------------
Capital: Common Stock, par value $.10 per share; 150,000,000 shares authorized;
8,079,388 shares issued and outstanding .................................... $ 807,939
Paid-in capital in excess of par ........................................... 74,515,276
Undistributed investment income--net ....................................... 315,632
Accumulated realized capital losses on investments--net .................... (1,958,302)
Accumulated distributions in excess of realized capital gains on
investments--net ........................................................... (483,994)
Unrealized appreciation on investments--net ................................ 1,828,405
------------
Total capital--Equivalent to $9.29 net asset value per share of
Common Stock (market price--$8.1875) ....................................... $ 75,024,956
============
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Statement of Operations for the Year Ended September 30, 2000
<TABLE>
<S> <C> <C>
Investment Income: Interest and amortization of premium and discount earned ................... $ 4,327,648
----------------------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees ................................................... $ 368,843
Professional fees .......................................................... 53,778
Accounting services ........................................................ 40,296
Transfer agent fees ........................................................ 39,425
Directors' fees and expenses ............................................... 25,334
Printing and shareholder reports ........................................... 19,858
Listing fees ............................................................... 13,125
Custodian fees ............................................................. 6,689
Pricing fees ............................................................... 6,474
Other ...................................................................... 12,517
------------
Total expenses ............................................................. 586,339
------------
Investment income--net ..................................................... 3,741,309
------------
----------------------------------------------------------------------------------------------------------------------------------
Realized & Realized loss on investments--net .......................................... (1,958,173)
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net ......... 2,247,709
(Loss) on ------------
Investments--Net: Net Increase in Net Assets Resulting from Operations ....................... $ 4,030,845
============
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
MuniInsured Fund, Inc. September 30, 2000
FINANCIAL INFORMATION (concluded)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended Sept. 30,
-----------------------------
Increase (Decrease) in Net Assets: 2000 1999
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations: Investment income--net ..................................................... $ 3,741,309 $ 3,784,514
Realized gain (loss) on investments--net ................................... (1,958,173) 770,017
Change in unrealized appreciation/depreciation on investments--net ......... 2,247,709 (7,605,314)
------------ ------------
Net increase (decrease) in net assets resulting from operations ............ 4,030,845 (3,050,783)
------------ ------------
----------------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net ..................................................... (3,730,754) (3,813,859)
Distributions to Realized gain on investments--net .......................................... -- (1,181,313)
Shareholders: In excess of realized gain on investments--net ............................. (158,897) (325,097)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ............................................................ (3,889,651) (5,320,269)
------------ ------------
----------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total increase (decrease) in net assets .................................... 141,194 (8,371,052)
Beginning of year .......................................................... 74,883,762 83,254,814
------------ ------------
End of year* ............................................................... $ 75,024,956 $ 74,883,762
============ ============
----------------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net ...................................... $ 315,632 $ 304,948
============ ============
----------------------------------------------------------------------------------------------------------------------------------
</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: 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ............. $ 9.27 $ 10.30 $ 10.02 $ 9.77 $ 9.64
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ......................... .46 .47 .50 .51 .51
Realized and unrealized gain (loss) on
investments--net ............................... .04 (.84) .43 .31 .13
-------- -------- -------- -------- --------
Total from investment operations ............... .50 (.37) .93 .82 .64
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ....................... (.46) (.47) (.50) (.51) (.51)
Realized gain on investments--net ............ -- (.15) (.15) (.06) --
In excess of realized gain on investments--net (.02) (.04) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions .............. (.48) (.66) (.65) (.57) (.51)
-------- -------- -------- -------- --------
Net asset value, end of year ................... $ 9.29 $ 9.27 $ 10.30 $ 10.02 $ 9.77
======== ======== ======== ======== ========
Market price per share, end of year ............ $ 8.1875 $ 8.00 $ 9.8125 $ 9.50 $ 8.75
======== ======== ======== ======== ========
-----------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on market price per share ................ 8.79% (12.58%) 10.55% 15.73% 5.91%
Return:* ======== ======== ======== ======== ========
Based on net asset value per share ............. 6.53% (3.49%) 10.02% 9.33% 7.34%
======== ======== ======== ======== ========
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Expenses ....................................... .79% .78% .77% .78% .78%
Net Assets: ======== ======== ======== ======== ========
Investment income--net ......................... 5.06% 4.74% 4.96% 5.15% 5.15%
======== ======== ======== ======== ========
-----------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of year (in thousands) ......... $ 75,025 $ 74,884 $ 83,255 $ 80,963 $ 78,916
Data: ======== ======== ======== ======== ========
Portfolio turnover ............................. 71.12% 71.48% 53.14% 73.22% 94.61%
======== ======== ======== ======== ========
-----------------------------------------------------------------------------------------------------------------------------------
</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.
See Notes to Financial Statements.
7
<PAGE>
MuniInsured Fund, Inc. September 30, 2000
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 conformity with accounting
principles generally accepted in the United States of America, 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
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. 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
8
<PAGE>
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. Distributions in excess of realized capital gains are due
primarily to differing tax treatments for post-October losses.
(f) Reclassification--Generally accepted accounting principles require that
certain components of net assets be adjusted to reflect permanent differences
between financial and tax reporting. Accordingly, the current year's permanent
book/tax differences of $129 have been reclassified between accumulated net
realized capital losses and undistributed net investment income. These
reclassifications have no effect on net assets or net asset value per share.
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, 2000 were $52,942,123 and $49,587,323, respectively.
Net realized losses for the year ended September 30, 2000 and net unrealized
gains as of September 30, 2000 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Losses Gains
--------------------------------------------------------------------------------
Long-term investments .................... $(1,712,604) $1,828,405
Financial futures contracts .............. (245,569) --
----------- ----------
Total .................................... $(1,958,173) $1,828,405
=========== ==========
--------------------------------------------------------------------------------
As of September 30, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $1,828,405, of which $2,159,946 related to appreciated
securities and $331,541 related to depreciated securities. The aggregate cost of
investments at September 30, 2000 for Federal income tax purposes was
$74,166,352.
4. Common Stock Transactions:
At September 30, 2000, 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, 2000 and September 30, 1999
remained constant.
5. Capital Loss Carryforward:
At September 30, 2000, the Fund had a net capital loss carryforward of
approximately $853,000, all of which expires in 2008. This amount will be
available to offset like amounts of any future taxable gains.
6. Subsequent Event:
On October 6, 2000, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.037808 per share,
payable on October 30, 2000 to shareholders of record as of October 17, 2000.
9
<PAGE>
MuniInsured Fund, Inc. September 30, 2000
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, 2000, 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 auditing standards generally accepted
in the United States of America. 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, 2000 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, 2000, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated periods in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
November 3, 2000
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by MuniInsured Fund,
Inc. during its taxable year ended September 30, 2000 qualify as tax-exempt
interest dividends for Federal income tax purposes. Additionally, the Fund
distributed $.019667 per share of long-term capital gains, payable on December
30, 1999 to shareholders of record as of December 23, 1999. The entire
distribution is subject to the 20% tax rate.
Please retain this information for your records.
10
<PAGE>
MuniInsured Fund, Inc. September 30, 2000
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. 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.
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
11
<PAGE>
MuniInsured Fund, Inc. seeks to provide shareholders with as high a level of
current income exempt from Federal income taxes as is consistent with its
investment policies and prudent investment management by investing primarily in
a portfolio of long-term, investment-grade municipal obligations, the interest
on which is exempt from Federal income taxes in the opinion of bond counsel to
the issuer.
This report, including the financial information herein, is transmitted to
shareholders of MuniInsured Fund, Inc. for their information. It is not a
prospectus. 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--9/00
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