N-CSR 1 ml7141.txt MUNIYIELD INSURED UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-6540 Name of Fund: MuniYield Insured Fund, Inc. Fund Address: P.O. Box 9011 Princeton, NJ 08543-9011 Name and address of agent for service: Terry K. Glenn, President, MuniYield Insured Fund, Inc., 800 Scudders Mill Road, Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton, NJ, 08543- 9011 Registrant's telephone number, including area code: (609) 282-2800 Date of fiscal year end: 10/31/04 Date of reporting period: 11/01/03 - 04/30/04 Item 1 - Report to Stockholders (BULL LOGO) Merrill Lynch Investment Managers www.mlim.ml.com MuniYield Insured Fund, Inc. Semi-Annual Report April 30, 2004 MuniYield Insured 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, in the opinion of bond counsel to the issuer, is exempt from Federal income taxes. This report, including the financial information herein, is transmitted to shareholders of MuniYield Insured 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. The Fund has leveraged its Common Stock and intends to remain leveraged by issuing Preferred Stock to provide the Common Stock shareholders with a potentially higher rate of return. Leverage creates risks for Common Stock shareholders, including the likelihood of greater volatility of net asset value and market price of shares of the Common Stock, and the risk that fluctuations in the short-term dividend rates of the Preferred Stock may affect the yield to Common Stock shareholders. Statements and other information herein are as dated and are subject to change. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863; (2) on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's website at http://www.sec.gov. MuniYield Insured Fund, Inc. Box 9011 Princeton, NJ 08543-9011 (GO PAPERLESS LOGO) It's Fast, Convenient, & Timely! To sign up today, go to www.icsdelivery.com/live. MuniYield Insured Fund, Inc. The Benefits and Risks of Leveraging MuniYield Insured Fund, Inc. utilizes leveraging to seek to enhance the yield and net asset value of its Common Stock. However, these objectives cannot be achieved in all interest rate environments. To leverage, the Fund issues Preferred Stock, which pays dividends at prevailing short-term interest rates, and invests the proceeds in long-term municipal bonds. The interest earned on these investments, net of dividends to Preferred Stock, is paid to Common Stock shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share net asset value of the Fund's Common Stock. However, in order to benefit Common Stock shareholders, the yield curve must be positively sloped; that is, short-term interest rates must be lower than long-term interest rates. At the same time, a period of generally declining interest rates will benefit Common Stock shareholders. If either of these conditions change, then the risks of leveraging will begin to outweigh the benefits. To illustrate these concepts, assume a fund's Common Stock capitalization of $100 million and the issuance of Preferred Stock for an additional $50 million, creating a total value of $150 million available for investment in long-term municipal bonds. If prevailing short-term interest rates are approximately 3% and long-term interest rates are approximately 6%, the yield curve has a strongly positive slope. The fund pays dividends on the $50 million of Preferred Stock based on the lower short-term interest rates. At the same time, the fund's total portfolio of $150 million earns the income based on long-term interest rates. Of course, increases in short-term interest rates would reduce (and even eliminate) the dividends of the Common Stock. In this case, the dividends paid to Preferred Stock shareholders are significantly lower than the income earned on the fund's long-term investments, and therefore the Common Stock shareholders are the beneficiaries of the incremental yield. However, if short-term interest rates rise, narrowing the differential between short-term and long-term interest rates, the incremental yield pickup on the Common Stock will be reduced or eliminated completely. At the same time, the market value of the fund's Common Stock (that is, its price as listed on the New York Stock Exchange) may, as a result, decline. Furthermore, if long-term interest rates rise, the Common Stock's net asset value will reflect the full decline in the price of the portfolio's investments, since the value of the fund's Preferred Stock does not fluctuate. In addition to the decline in net asset value, the market value of the fund's Common Stock may also decline. 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 interest rates increase and increase when short-term interest 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 floaters, the market value of the Fund's portfolio and the net asset value of the Fund's shares may also be more volatile than if the Fund did not invest in such securities. As of April 30, 2004, the percentage of the Fund's total net assets invested in inverse floaters was 14.10%. Swap Agreements The Fund may also invest in swap agreements, which are over-the- counter contracts in which one party agrees to make periodic payments based on the change in market value of a specified bond, basket of bonds, or index in return for periodic payments based on a fixed or variable interest rate or the change in market value of a different bond, basket of bonds or index. Swap agreements may be used to obtain exposure to a bond or market without owning or taking physical custody of securities. MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 A Letter From the President Dear Shareholder For the six-month and 12-month periods ended April 30, 2004, the Lehman Brothers Municipal Bond Index posted returns of +1.19% and +2.68%, respectively. Its taxable counterpart, the Lehman Brothers Aggregate Bond Index, had returns of +1.25% and +1.82% for the same periods. Amid considerable month-to-month volatility, tax-exempt bond yields rose over the past year, although not to the same extent as 10-year U.S. Treasury yields. In all, tax-exempt securities continued to be an attractive fixed income investment alternative. As of April month-end, the Federal Reserve Board maintained its accommodative policy stance, although a better-than-expected employment report for the month of March prompted speculation that an interest rate increase could come sooner than many had expected. On April 2, 2004, the good news on the employment front - previously the one dim spot in an otherwise bright economic picture - helped prompt the yield on the 10-year Treasury bond to spike nearly 25 basis points (.25%), from 3.91% to 4.15%. Market watchers continue to monitor the economic data and Federal Reserve Board language for indications of interest rate direction. If economic growth maintains its recent pace and employment figures continue to improve, many believe it is just a matter of time before interest rates move upward. Equity markets, in the meantime, gleaned support from the improving economic environment and provided attractive returns. For the six-month and 12-month periods ended April 30, 2004, the Standard & Poor's 500 Index returned +6.27% and +22.88%, respectively. Significant fiscal and monetary stimulus in 2003, including low interest rates and tax cuts, has opened the door to consumer spending, capital spending, increases in exports and long-awaited job growth. As expected, these developments have led the way to improvements in corporate earnings - a positive for stock markets. The events and efforts of the past year leave us with a much stronger economy today. Of course, markets will always fluctuate, and there are many uncertainties - not the least of which are geopolitical in nature - which can translate into negative market movements. Keeping this in mind, we encourage you to revisit your portfolio and your asset allocation strategy to ensure you are well positioned to take advantage of the opportunities that lie ahead. Importantly, your financial advisor can help you develop a strategy most suitable for your circumstances through all types of market and economic cycles. We thank you for trusting Merrill Lynch Investment Managers with your investment assets, and we look forward to serving you in the months and years ahead. Sincerely, (Terry K. Glenn) Terry K. Glenn President and Director MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 A Discussion With Your Fund's Portfolio Manager We continued to focus on premium-coupon bonds with longer maturities, usually in the 20-year - 30-year range, where we found the best opportunity to enhance yield while seeking to preserve the Fund's net asset value. Describe the recent market environment relative to municipal bonds. For much of the six-month period, a positive economic backdrop helped bond prices to move higher as yields, which typically move opposite of prices, declined. In early April, however, a surprisingly strong monthly employment report triggered fears that the long-accommodative Federal Reserve Board might raise interest rates sooner than many had expected. As a result, bond yields rose (prices fell) sharply for the remainder of the period. At the end of April, long-term U.S. Treasury bond yields had climbed to 5.13%, representing an increase of approximately 15 basis points (.15%) over the past six months. Ten-year U.S. Treasury note yields stood at 4.30% as of period-end, an increase of more than 20 basis points. Tax-exempt bond yields generally mimicked the movement of their taxable counterparts, although volatility in the municipal market was more subdued. Long-term revenue bond yields, as measured by the Bond Buyer Revenue Bond Index, rose just four basis points over the past six months. For the same period, yields on Aaa-rated issues maturing in 30 years rose approximately 10 basis points to 4.93% while yields on 10-year, Aaa-rated issues increased more than 16 basis points to nearly 4%, according to Municipal Market Data. The more marked increase in 10-year bond yields may be attributed to the fact that recent issuance has been heavily concentrated in the 10-year - 20-year range. The resulting supply imbalance prompted higher intermediate bond yields (and lower prices). Longer-maturity and lower-rated issues continued to benefit from more favorable supply/demand factors and, therefore, have seen less price depreciation. For the six-month period as a whole, municipal bond supply declined approximately 5% compared to the same period a year ago. While investor enthusiasm for stocks has taken some attention away from fixed income markets, overall demand for tax-exempt municipal bonds has remained positive. Recent Federal Reserve Board statistics showed that U.S. household holdings of municipal securities increased by more than $25 billion during the fourth quarter of 2003 to approximately $680 billion. In addition, data from the Investment Company Institute indicates that, in just the first three months of 2004, tax-exempt bond funds have seen net new cash flows of almost $640 million. How did the Fund perform during the period in light of the existing market conditions? For the six-month period ended April 30, 2004, the Common Stock of MuniYield Insured Fund, Inc. had net annualized yields of 6.41% and 7.00%, based on a period-end per share net asset value of $15.07 and a per share market price of $13.81, respectively, and $.482 per share income dividends. Over the same period, the total investment return on the Fund's Common Stock was +1.35%, based on a change in per share net asset value from $15.36 to $15.07, and assuming reinvestment of $.480 per share ordinary income dividends. For the six-month period ended April 30, 2004, the Fund's Auction Market Preferred Stock (AMPS) had average yields of: .92% for Series A; .93% for Series B; .87% for Series C; .96% for Series D; .94% for Series E; .87% for Series F; and .98% for Series G. The Fund's total return, based on net asset value, for the period exceeded that of its comparable Lipper category of Insured Municipal Debt Funds (Leveraged), which had a return of +1.01%. (Funds in this Lipper category invest primarily in municipal debt issues insured as to timely payment. These funds can be leveraged via use of debt, preferred equity and/or reverse repurchase agreements.) The Fund also provided an above-average yield to shareholders relative to the Lipper group average. Performance during the period reflects our continued focus on enhancing the Fund's dividend yield and preserving net asset value in a volatile interest rate environment. For a description of the Fund's total investment return based on a change in the per share market value of the Fund's Common Stock (as measured by the trading price of the Fund's shares on the New York Stock Exchange), and assuming reinvestment of dividends, please refer to the Financial Highlights section included in this report. As a closed-end fund, the Fund's shares may trade in the secondary market at a premium or discount to the Fund's net asset value. As a result, total investment returns based on changes in the market value of the Fund's Common Stock can vary significantly from total investment return based on changes in the Fund's net asset value. MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 What changes were made to the portfolio during the period? Throughout the past six months, we continued to focus on buying premium-coupon bonds with longer maturities, usually in the 20-year - 30-year range. Our observations and research reveal that the longer end of the yield curve has held firm, while the 10-year - 15-year sector has continued to be volatile. By taking advantage of the steep yield curve, we generally have been able to increase the Fund's yield while muting its price volatility. We purchased uninsured California general obligation bonds and state- appropriated bonds at what we believed were relatively attractive yields compared to the overall municipal market. Our belief was that conditions in the state would improve along with the strengthening national economy, and California debt securities would benefit as a result. Midway through the period, we took some profits and reduced the duration of these bonds through the sale of some of the longer-maturity issues. Ultimately, this move proved premature as rates continued to decline. Later in the period, we were able to take advantage of attractively priced insurance and insured $25 million of the California-appropriated bonds. (State- appropriated bonds are issued by an agency. The state legislature must approve an appropriation in the state budget to pay for the bonds. If the agency has a shortfall, the legislature would have to approve the coverage of the shortfall. Because the state coverage is not a certainty, these bonds tend to be a lower credit than general obligation bonds.) The insurance increased the market value of these bonds, and this had a positive impact on Fund performance. Finally, late in the period, we increased the Fund's cash reserves to 3% of assets. This action was designed to make the portfolio more defensive and less sensitive to rising interest rates. In terms of leverage, the Fund's borrowing costs remained around 1% throughout most of the six-month period. These attractive funding levels, in combination with the steep municipal yield curve, continued to generate significant income to the Fund's Common Stock shareholders. The Federal Reserve Board appears poised to begin raising short-term interest rates, most likely later in 2004. The increase, however, is expected to be gradual and should not have a material impact on the positive advantage leverage has had on the Fund's Common Stock yield. However, should the spread between short- term and long-term interest rates narrow, the benefits of leveraging will decline and, as a result, reduce the yield on the Fund's Common Stock. At the end of the period, the Fund's leverage amount, due to AMPS, was 31.99% of total assets. (For a more complete explanation of the benefits and risks of leveraging, see page 2 of this report to shareholders.) How would you characterize the portfolio's position at the close of the period? The economy is showing signs of real growth - including job growth, which until recently had been one of the last areas of weakness. With preliminary signs of higher inflation on the horizon, the market already has begun to anticipate a near-term change in the Federal Reserve Board's interest rate policy. Given this scenario, we are looking for further flattening of the yield curve and significant underperformance in the 10-year - 15-year range. Against this backdrop, we plan to adopt a more defensive market posture. Specifically, we expect to focus on premium-coupon bonds with 20-year - 27-year maturities as well as maintain the portfolio's existing hedge position. These actions should moderate the Fund's downside risk and, we believe, represent a prudent investment strategy for the expected market environment. Finally, we also plan to collapse the Fund's shorter-maturity derivative holdings in an effort to provide the portfolio with additional downside protection. William R. Bock Vice President and Portfolio Manager May 17, 2004 MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Schedule of Investments (In Thousands)
S&P Moody's Face State Ratings Ratings Amount Municipal Bonds Value Alaska--1.0% AAA Aaa $ 3,695 Alaska Energy Authority, Power Revenue Refunding Bonds (Bradley Lake), Fourth Series, 6% due 7/01/2018 (g) $ 4,241 AAA Aaa 5,145 Alaska State Housing Finance Corporation, Revenue Refunding Bonds, RITR, Series 2, 10.28% due 12/01/2024 (d)(i)(k)(m) 5,389 California-- AAA Aaa 10,000 Alameda Corridor Transportation Authority, California, Capital 34.7% Appreciation Revenue Refunding Bonds, Subordinate Lien, Series A, 5.474%** due 10/01/2024 (a) 6,321 AAA Aaa 8,300 California Infrastructure and Economic Development Bank, Bay Area Toll Bridges Revenue Bonds, First Lien, Series A, 5% due 7/01/2025 (c) 8,348 AAA Aaa 24,250 California Pollution Control Financing Authority, PCR, Refunding (Pacific Gas & Electric), AMT, Series A, 5.35% due 12/01/2016 (i) 25,582 California State Department of Water Resources, Power Supply Revenue Bonds, Series A: AAA Aaa 10,000 5.25% due 5/01/2020 (i) 10,452 BBB+ A3 3,675 5.375% due 5/01/2021 3,786 AAA Aaa 10,010 5.375% due 5/01/2022 (i) 10,539 BBB Baa1 17,985 California State, GO, 5% due 2/01/2033 17,090 California State, GO, Refunding: BBB Baa1 20,000 5.125% due 6/01/2031 19,415 NR* Aaa 5,000 RIB, Series 471X, 9.63% due 9/01/2024 (i)(k) 5,412 California State Public Works Board, Lease Revenue Bonds: BBB- Baa2 5,500 (Department of Corrections), Series C, 5.25% due 6/01/2028 5,386 BBB- Baa2 2,255 (Department of General Services), Series D, 5.25% due 6/01/2028 2,208 BBB- Baa2 5,250 (Department of Mental Health--Coalinga State Hospital), Series A, 5.125% due 6/01/2029 5,032 California State, Various Purpose, GO: BBB Baa1 10,000 5.25% due 11/01/2029 9,848 BBB Baa1 5,000 5.50% due 4/01/2030 5,098 BBB Baa1 13,325 5.50% due 11/01/2033 13,612 BBB Baa1 5,000 5.25% due 4/01/2034 4,931 A A3 7,740 California Statewide Communities Development Authority, Health Facility Revenue Bonds (Memorial Health Services), Series A, 6% due 10/01/2023 8,194 AAA Aaa 5,235 Calleguas-Las Virgenes, California, Public Finance Authority Revenue Bonds (Calleguas Municipal Water District Project), Series A, 5% due 7/01/2028 (i) 5,238 AAA Aaa 4,000 Garden Grove, California, Community Development Agency, Tax Allocation Refunding Bonds (Garden Grove Community Project), 5% due 10/01/2025 (a) 4,006 Golden State Tobacco Securitization Corporation of California, Tobacco Settlement Revenue Bonds: NR* Aaa 12,500 RIB, Series 920X, 9.66% due 6/01/2033 (c)(k) 13,421 NR* Baa3 3,000 Series A-2, 7.90% due 6/01/2042 3,189 BBB Baa3 2,200 Series A-3, 7.875% due 6/01/2042 2,335 BBB Baa3 12,100 Series A-4, 7.80% due 6/01/2042 12,783 BBB- Baa2 5,000 Series B, 5.625% due 6/01/2038 4,981 AAA NR* 11,245 Los Angeles, California, Community College District, DRIVERS, Series 216, 9.655% due 8/01/2018 (i)(k) 13,182
Portfolio Abbreviations To simplify the listings of MuniYield Insured 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 DATES Daily Adjustable Tax-Exempt Securities DRIVERS Derivative Inverse Tax-Exempt Receipts GO General Obligation Bonds HDA Housing Development Authority HFA Housing Finance Agency IDA Industrial Development Authority IDR Industrial Development Revenue Bonds PCR Pollution Control Revenue Bonds RIB Residual Interest Bonds RITR Residual Interest Trust Receipts S/F Single-Family VRDN Variable Rate Demand Notes MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face State Ratings Ratings Amount Municipal Bonds Value California AAA Aaa $16,110 Los Angeles, California, Community Redevelopment Agency, Community (concluded) Redevelopment Financing Authority Revenue Bonds (Bunker Hill Project), Series A, 5% due 12/01/2027 $ 16,065 AAA Aaa 4,000 Los Angeles, California, Harbor Department Revenue Bonds, RITR, AMT, Series RI-7, 10.975% due 11/01/2026 (i)(k) 4,696 AAA NR* 6,265 Los Angeles, California, Unified School District, GO, DRIVERS, Series 261, 9.454% due 7/01/2022 (c)(k) 6,981 Los Angeles, California, Water and Power Revenue Bonds (Power System), Series B (g): AAA Aaa 3,365 5% due 7/01/2023 3,412 AAA Aaa 6,000 5% due 7/01/2025 6,021 AAA Aaa 3,315 North Orange County, California, Community College District, GO, Series A, 5% due 8/01/2023 (i) 3,369 AAA Aaa 9,465 Port Oakland, California, Revenue Refunding Bonds, AMT, Series L, 5.375% due 11/01/2027 (c) 9,667 NR* Aaa 6,000 Port Oakland, California, Trust Receipts, Revenue Bonds, AMT, Class R, Series K, 10.06% due 11/01/2021 (c)(k) 6,767 AAA Aaa 445 Sacramento, California, Municipal Utility District, Electric Revenue Bonds, Series I, 6% due 1/01/2024 (i) 455 AAA Aaa 1,280 San Diego, California, Unified School District, Election 1998, GO, Series D, 5.25% due 7/01/2024 (c) 1,331 AAA Aaa 5,000 San Francisco, California, City and County, COP (San Francisco Courthouse Project), 5.875% due 4/01/2021 (g) 5,259 AAA Aaa 7,660 San Francisco, California, City and County Public Utilities Commission, Water Revenue Refunding Bonds, Series A, 5% due 11/01/2027 (i) 7,676 AAA Aaa 6,895 San Jose, California, Redevelopment Agency, Tax Allocation Refunding Bonds (Merged Area Redevelopment Project), 5.60% due 8/01/2019 (i) 7,517 AAA Aaa 3,000 Santa Clara, California, Subordinated Electric Revenue Bonds, Series A, 5% due 7/01/2025 (i) 3,011 AAA Aaa 3,750 University of California, General Revenue Refunding Bonds, Series A, 5% due 5/15/2024 (a) 3,793 AAA Aaa 9,000 University of California, Hospital Revenue Bonds (UCLA Medical Center), Series A, 5.25% due 5/15/2030 (a) 9,188 AAA Aaa 8,720 University of California Revenue Bonds (Multiple Purpose Projects), Series Q, 5% due 9/01/2024 (g) 8,823 Colorado--0.8% AA Baa2 3,410 Boulder County, Colorado, Hospital Development Revenue Bonds (Longmont United Hospital Project), 6% due 12/01/2030 (f) 3,607 A1+ VMIG1++ 3,600 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects), VRDN, 1.07% due 5/01/2013 (a)(h) 3,600 Connecticut-- AAA Aaa 2,500 Connecticut State, GO, Series C, 5% due 4/01/2024 (c) 2,545 0.9% AAA Aaa 5,730 Connecticut State, HFA, Revenue Bonds (Housing Mortgage Finance Program), AMT, Sub-Series A-2, 5.50% due 11/15/2022 5,952 District of AAA Aaa 13,000 Metropolitan Washington, D.C. Airports Authority, Airport System Columbia--1.4% Revenue Bonds, AMT, Series B, 5% due 10/01/2027 (g) 12,751 Florida--7.2% NR* Aaa 3,500 Escambia County, Florida, Health Facilities Authority, Health Facility Revenue Bonds (Florida Health Care Facility Loan), 5.95% due 7/01/2020 (a) 3,651 AAA Aaa 3,270 Florida Municipal Loan Council Revenue Bonds, Series B, 5% due 12/01/2028 (i) 3,266 AAA Aaa 31,095 Miami-Dade County, Florida, Aviation Revenue Bonds (Miami International Airport), AMT, Series A, 5% due 10/01/2030 (c) 30,512 AAA Aaa 10,750 Miami-Dade County, Florida, Aviation Revenue Refunding Bonds (Miami International Airport), AMT, 5.375% due 10/01/2025 (c) 11,008 Orange County, Florida, Health Facilities Authority, Hospital Revenue Bonds: A A3 5,000 (Adventist Health System), 5.625% due 11/15/2032 5,155 A- A2 2,000 (Orlando Regional Healthcare), 5.75% due 12/01/2032 2,043 AAA Aaa 5,000 Palm Beach County, Florida, School Board COP, Series A, 5% due 8/01/2029 (c) 5,004 A1+ VMIG1++ 6,800 Pinellas County, Florida, Health Facilities Authority, Revenue Refunding Bonds (Pooled Hospital Loan Program), DATES, 1.10% due 12/01/2015 (a)(h) 6,800 Georgia--1.3% A1+ VMIG1++ 4,550 Atlanta, Georgia, Water and Wastewater Revenue Bonds, VRDN, Series C, 1.09% due 11/01/2041 (g)(h) 4,550 AAA Aaa 7,500 Gwinnett County, Georgia, Development Authority, COP (Gwinnett County Public Schools Project), 5.25% due 1/01/2025 (i) 7,711
MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face State Ratings Ratings Amount Municipal Bonds Value Hawaii--2.6% Hawaii State, GO: AAA Aaa $ 2,000 Series CX, 5.50% due 2/01/2021 (g) $ 2,138 AAA Aaa 9,000 Series DD, 5.25% due 5/01/2024 (i) 9,319 AAA Aaa 12,845 Honolulu, Hawaii, City and County GO, Refunding, Series A, 5.25% due 3/01/2028 (i) 13,166 Illinois-- AAA Aaa 10,000 Chicago, Illinois, GO (City Colleges of Chicago Capital Improvement 9.6% Project), 5%** due 1/01/2030 (c) 2,356 AAA Aaa 2,350 Chicago, Illinois, Midway Airport Revenue Bonds, AMT, Series A, 6.25% due 1/01/2024 (i) 2,404 Chicago, Illinois, O'Hare International Airport Revenue Bonds, AMT: AAA NR* 13,115 DRIVERS, Series 368, 9.57% due 7/01/2011 (i)(k) 15,377 AAA NR* 7,500 DRIVERS, Series 369, 9.57% due 7/01/2011 (e)(k) 8,674 AAA Aaa 13,000 Third Lien, Series B-2, 5.25% due 1/01/2027 (i) 13,087 AAA Aaa 16,400 Chicago, Illinois, O'Hare International Airport Revenue Refunding Bonds, Third Lien, AMT, Series C-2, 5.25% due 1/01/2030 (g) 16,461 AAA Aaa 10,000 Illinois State, GO, First Series, 5.50% due 4/01/2016 (g) 10,857 AAA Aa3 2,000 Illinois State Sales Tax Revenue Bonds, 6.125% due 6/15/2016 2,276 NR* Aaa 6,035 Mc Lean and Woodford Counties, Illinois, Community Unit, School District Number 005, GO, Refunding, 6.375% due 12/01/2016 (g) 7,042 Metropolitan Pier and Exposition Authority, Illinois, Dedicated State Tax Revenue Bonds (McCormick Place Expansion), Series A (i): AAA Aaa 10,000 5.10%** due 6/15/2031 2,143 AAA Aaa 30,000 5.04%** due 12/15/2031 6,249 AAA NR* 2,400 Metropolitan Pier and Exposition Authority, Illinois, Dedicated State Tax Revenue Refunding Bonds, DRIVERS, Series 269, 10.117% due 6/15/2023 (i)(k) 2,841 Indiana--2.0% AAA Aaa 11,805 Indiana Transportation Finance Authority, Highway Revenue Bonds, Series A, 5% due 6/01/2024 (g) 11,864 AAA Aaa 7,000 Indianapolis, Indiana, Local Public Improvement Bond Bank Revenue Bonds (Waterworks Project), Series A, 5.125% due 7/01/2027 (i) 7,073 Kansas--2.3% AAA Aaa 20,250 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric Company Project), 7% due 6/01/2031 (i) 21,329 Louisiana-- AAA Aaa 2,250 Louisiana Local Government, Environmental Facilities, Community 0.3% Development Authority Revenue Bonds (Capital Projects and Equipment Acquisition), Series A, 6.30% due 7/01/2030 (a) 2,602 Massachusetts-- AAA Aaa 10,000 Massachusetts State, Consolidated Loan, GO, Series B, 5.50% due 1.5% 3/01/2012 (g)(j) 11,137 AAA Aaa 2,500 Massachusetts State, HFA, Housing Development Revenue Refunding Bonds, Series B, 5.40% due 12/01/2028 (i) 2,554 Michigan--2.5% A1+ VMIG1++ 4,500 Detroit, Michigan, Sewer Disposal Revenue Bonds, Senior Lien, VRDN, Series B, 1.09% due 7/01/2033 (g)(h) 4,500 Michigan State Strategic Fund, Limited Obligation Revenue Refunding Bonds (Detroit Edison Company Project), AMT (e): AAA Aaa 8,000 Series A, 5.50% due 6/01/2030 8,240 AAA Aaa 5,000 Series C, 5.65% due 9/01/2029 5,172 AAA Aaa 5,000 Monroe County, Michigan, PCR (Detroit Edison Company Project), AMT, Series CC, 6.55% due 6/01/2024 (i) 5,071 Minnesota--1.8% Minneapolis and Saint Paul, Minnesota, Metropolitan Airports Commission, Airport Revenue Bonds (c): AAA Aaa 10,000 Series A, 5.90% due 1/01/2029 10,931 AAA Aaa 2,500 Sub-Series C, 5.50% due 1/01/2016 2,721 AAA Aaa 2,500 Sub-Series C, 5.50% due 1/01/2017 2,719 AA+ Aa1 685 Minnesota State, HFA, S/F Mortgage Revenue Bonds, AMT, Series L, 6.70% due 7/01/2020 699 Missouri--1.4% AAA Aaa 10,250 Missouri State Health and Educational Facilities Authority Revenue Bonds (SSM Health Care System), Series A, 5.25% due 6/01/2028 (a) 10,402 AAA Aaa 2,800 Saint Louis, Missouri, Airport Revenue Bonds (Airport Development Program), Series A, 5.625% due 7/01/2019 (i) 3,040
MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face State Ratings Ratings Amount Municipal Bonds Value Nevada--10.0% Clark County, Nevada, School District, GO (j): AAA Aaa $15,000 6% due 6/15/2006 (c) $ 16,422 AAA Aaa 10,830 Series A, 5.50% due 6/15/2010 (i) 12,147 BBB+ Baa1 6,000 Henderson, Nevada, Health Care Facilities Revenue Bonds (Catholic Healthcare West), Series A, 5.625% due 7/01/2024 5,911 AAA Aaa 5,000 Humboldt County, Nevada, PCR, Refunding (Sierra Pacific Project), 6.55% due 10/01/2013 (a) 5,207 AAA Aaa 3,000 Las Vegas, Nevada, New Convention and Visitors Authority Revenue Bonds, 6% due 7/01/2019 (a) 3,396 AAA Aaa 20,375 Nevada State, Nevada Municipal Bond Bank, GO, Series A, 5.50% due 11/01/2025 (c) 21,269 AAA Aaa 3,130 Reno, Nevada, Capital Improvement Revenue Bonds, 5.50% due 6/01/2019 (c) 3,377 Washoe County, Nevada, Gas Facilities Revenue Bonds (Sierra Pacific Power Company), AMT: AAA Aaa 15,000 6.65% due 12/01/2017 (a) 15,206 AAA Aaa 5,000 6.55% due 9/01/2020 (i) 5,138 AAA Aaa 5,000 Washoe County, Nevada, Water Facility Revenue Bonds (Sierra Pacific Power Company), AMT, 6.65% due 6/01/2017 (i) 5,258 New BBB+ Baa1 2,900 New Hampshire Health and Education Facilities Authority, Revenue Hampshire--0.3% Refunding Bonds (Elliot Hospital), Series B, 5.60% due 10/01/2022 2,904 New Mexico-- NR* A2 1,635 New Mexico Educational Assistance Foundation, Student Loan Revenue 0.3% Refunding Bonds (Student Loan Program), AMT, First Sub-Series A-2, 6.65% due 11/01/2025 1,659 AAA NR* 1,120 New Mexico Mortgage Finance Authority, S/F Mortgage Revenue Bonds, AMT, Series C-2, 6.95% due 9/01/2031 (l) 1,182 New York--8.1% AAA Aaa 12,500 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue Refunding Bonds, Series B, 5.125% due 7/01/2024 (a)(b) 12,841 AAA Aaa 8,740 Metropolitan Transportation Authority, New York, Transit Facilities Revenue Refunding Bonds, Series B, 4.75% due 7/01/2026 (b)(c) 8,645 AAA Aaa 25,830 New York City, New York, City Municipal Water Finance Authority, Water and Sewer System Revenue Bonds, RITR, Series FR-6, 10.025% due 6/15/2026 (i)(k) 29,799 NR* Aaa 5,920 New York City, New York, GO, RIB, Series 394, 10.352% due 8/01/2016 (i)(k) 7,416 AAA Aaa 9,000 Port Authority of New York and New Jersey, Consolidated Revenue Refunding Bonds, One Hundred Thirty-Fifth Series, 5% due 9/15/2027 (e) 9,033 A A3 8,160 Suffolk County, New York, IDA, IDR (Keyspan--Port Jefferson), AMT, 5.25% due 6/01/2027 7,974 North AAA Aa1 11,980 Raleigh, North Carolina, Combined Enterprise System Revenue Bonds, Carolina--1.3% 5% due 3/01/2031 12,016 North Dakota-- AAA Aaa 2,500 Grand Forks, North Dakota, Health Care Facilities Revenue Bonds 0.6% (United Hospital Obligated Group), 6.25% due 12/01/2024 (i) 2,606 NR* Aa2 3,250 North Dakota State Housing Finance Agency, Home Mortgage Revenue Refunding Bonds (Housing Finance Program), AMT, Series A, 6.40% due 7/01/2020 3,436 Ohio--3.1% Cincinnati, Ohio, City School District, Classroom Facilities Construction & Improvement, GO (g): AAA Aaa 11,000 5% due 12/01/2024 11,116 AAA Aaa 8,300 5% due 12/01/2031 8,300 AAA Aaa 10,000 Franklin County, Ohio, Hospital Revenue Refunding Bonds (OhioHealth Corporation), Series C, 5% due 5/15/2033 (i) 9,909 Oklahoma--2.7% Oklahoma State Industries Authority, Revenue Refunding Bonds (i): AAA Aaa 15,000 (Health System--Obligation Group), Series A, 5.75% due 8/15/2029 15,868 A1+ VMIG1++ 9,560 (Integris Baptist), VRDN, Series B, 1.10% due 8/15/2029 (h) 9,560 Oregon--2.3% Multnomah-Clackamas Counties, Oregon, Gresham-Barlo School District Number 10JT, GO (g): AAA Aaa 2,625 5.50% due 6/15/2016 2,858 AAA Aaa 2,525 5.50% due 6/15/2017 2,744 AAA Aaa 3,035 5.50% due 6/15/2018 3,290 AAA Aaa 3,140 Oregon State Department of Administrative Services, COP, Series A, 6.25% due 5/01/2010 (a)(j) 3,673 NR* Aaa 7,500 Portland, Oregon, Sewer System Revenue Bonds, RIB, Series 386, 10.08% due 8/01/2020 (c)(k) 9,100
MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face State Ratings Ratings Amount Municipal Bonds Value Pennsylvania-- AAA Aaa $10,000 Pennsylvania State Public School Building Authority, School Lease 3.3% Revenue Bonds (The School District of Philadelphia Project), 5% due 6/01/2033 (g) $ 9,939 AAA Aaa 10,000 Pennsylvania State Turnpike Commission, Oil Franchise Tax Revenue Bonds, Sub Series B, 5% due 12/01/2031 (i) 10,000 AAA Aaa 5,175 Philadelphia, Pennsylvania, School District, GO, Series B, 5.625% due 8/01/2021 (c) 5,565 A- NR* 5,000 Sayre, Pennsylvania, Health Care Facilities Authority Revenue Bonds (Guthrie Health Issue), Series B, 1% due 12/01/2031 5,680 South AAA Aaa 2,500 Florence County, South Carolina, Hospital Revenue Refunding Bonds Carolina--1.0% (McLeod Regional Medical Center Project), Series A, 5.25% due 11/01/2027 (g) 2,549 AAA A3 2,000 Richland-Lexington, South Carolina, Airport District, Airport Revenue Refunding Bonds (Columbia Metropolitan Airport), AMT, 5.125% due 1/01/2025 (g) 1,908 NR* A1 4,200 Spartanburg County, South Carolina, Solid Waste Disposal Facilities Revenue Bonds (BMW Project), AMT, 7.55% due 11/01/2024 4,498 Tennessee-- Sevier County, Tennessee, Public Building Authority Revenue Bonds, 1.8% Local Government Public Improvement IV-I, VRDN (a)(h): NR* VMIG1++ 3,725 Series E-4, 1.09% due 6/01/2020 3,725 NR* VMIG1++ 2,000 Series E-5, 1.09% due 6/01/2020 2,000 Tennessee HDA, Revenue Bonds (Homeownership Program), AMT, Series 2C: AA Aa2 1,795 6.05% due 7/01/2012 1,890 AA Aa2 2,250 6.15% due 7/01/2014 2,349 Tennessee HDA, Revenue Refunding Bonds (Homeownership Program), AMT, Series A (g): AAA Aaa 4,135 5.25% due 7/01/2022 4,236 AAA Aaa 2,930 5.35% due 1/01/2026 2,984 Texas--20.6% A- Aa3 9,000 Austin, Texas, Convention Center Revenue Bonds (Convention Enterprises Inc.), Trust Certificates, Second Tier, Series B, 5.75% due 1/01/2032 9,179 A1+ VMIG1++ 31,600 Bell County, Texas, Health Facilities Development Corporation, Hospital Revenue Bonds (Scott & White Memorial Hospital), VRDN, Series 2001-2, 1.07% due 8/15/2031 (h)(i) 31,600 AAA Aaa 1,880 Bexar, Texas, Metropolitan Water District, Waterworks System Revenue Refunding Bonds, 6.35% due 5/01/2025 (i) 1,993 AAA NR* 10,000 Dallas-Fort Worth, Texas, International Airport Revenue Bonds, DRIVERS, AMT, Series 353, 9.57% due 5/01/2011 (i)(k) 10,536 AAA NR* 6,750 Dallas-Fort Worth, Texas, International Airport Revenue Refunding Bonds, DRIVERS, AMT, Series 336Z, 9.831% due 11/01/2026 (c)(k) 7,238 AAA Aaa 9,000 Fort Bend County, Texas, Toll Road Revenue Bonds, Subordinate Lien, 5% due 3/01/2030 (i) 8,935 Harris County, Houston, Texas, Sports Authority, Revenue Refunding Bonds, Senior Lien, Series G (i): AAA Aaa 1,665 5.75% due 11/15/2019 1,804 AAA Aaa 3,500 5.75% due 11/15/2020 3,772 AAA Aaa 10,000 5.25% due 11/15/2030 10,143 A1+ VMIG1++ 10,800 Harris County, Texas, Health Facilities Development Corporation, Hospital Revenue Bonds (Texas Children's Hospital), VRDN, Series B-1, 1.07% due 10/01/2029 (h)(i) 10,800 Harris County, Texas, Toll Road Revenue Refunding Bonds, Senior Lien (g): AAA A1 9,000 5.375% due 8/15/2023 9,457 AAA A1 10,000 5% due 8/15/2030 9,970 Houston, Texas, Airport System Revenue Refunding Bonds (g): NR* Aaa 15,000 RIB, Series 845X, 9.62% due 7/01/2030 (k) 16,058 AAA Aaa 9,500 Sub-Lien, AMT, Series A, 5.70% due 7/01/2030 9,608 Houston, Texas, Community College System, GO (a): AAA Aaa 5,000 5% due 2/15/2025 5,007 AAA Aaa 3,000 5% due 2/15/2026 2,996 AAA Aaa 4,940 Texas State Department of Housing and Community Affairs, S/F Mortgage Revenue Bonds, AMT, Series A, 5.45% due 9/01/2023 (i)(l) 5,062 AAA Aaa 9,500 Texas State Turnpike Authority, Central Texas Turnpike System Revenue Bonds, First Tier, Series A, 5.50% due 8/15/2039 (a) 9,882
MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Schedule of Investments (continued) (In Thousands)
S&P Moody's Face State Ratings Ratings Amount Municipal Bonds Value Texas AAA Aaa $ 4,000 Texas Technical University, Financing System Revenue Bonds, (concluded) Seventh Series, 5.50% due 8/15/2019 (i) $ 4,319 AAA Aaa 10,000 Travis County, Texas, Health Facilities Development Corporation, Revenue Refunding Bonds, RITR, Series 4, 10.25% due 11/15/2024 (a)(k) 12,936 AAA Aaa 11,240 University of Houston, Texas, University Revenue Bonds, 5.50% due 2/15/2030 (i) 11,666 Utah--4.4% A1 VMIG1++ 29,300 Emery County, Utah, PCR, Refunding (Pacificorp Projects), VRDN, 1.10% due 11/01/2024 (a)(h) 29,300 AAA Aaa 11,525 Utah Transit Authority, Sales Tax Revenue Bonds, Series A, 5% due 6/15/2032 (g) 11,464 Vermont--0.2% AAA Aaa 1,475 Vermont HFA, S/F Housing Revenue Bonds, AMT, Series 12B, 6.30% due 11/01/2019 (g) 1,500 Virginia--0.3% AAA Aaa 2,500 Halifax County, Virginia, IDA, Exempt Facility Revenue Refunding Bonds (Old Dominion Electric Cooperative Project), AMT, 5.625% due 6/01/2028 (a) 2,632 Washington-- AAA Aaa 3,030 Chelan County, Washington, Public Utility District Number 001, 18.7% Consolidated Revenue Bonds (Chelan Hydro System), AMT, Series A, 5.45% due 7/01/2037 (a) 3,090 Chelan County, Washington, Public Utility District Number 001, Consolidated Revenue Refunding Bonds (Chelan Hydro), AMT (i): AAA Aaa 6,595 Series B, 6.35% due 7/01/2026 7,308 AAA Aaa 6,000 Series C, 5.65% due 7/01/2032 6,249 Energy Northwest, Washington, Electric Revenue Refunding Bonds (Project Number 1) (i): AAA Aaa 10,000 Series A, 5.75% due 7/01/2017 10,980 AAA Aaa 10,000 Series B, 6% due 7/01/2017 11,234 AAA Aaa 8,000 Pierce County, Washington, School District Number 3 (Puyallup), GO, 5% due 12/01/2023 (g) 8,075 Port Seattle, Washington, Revenue Bonds, Series A: AAA Aaa 3,500 5.50% due 2/01/2026 (i) 3,631 AAA Aaa 3,450 Sub-Lien, 5% due 9/01/2024 (c) 3,459 Port Seattle, Washington, Revenue Refunding Bonds (i): AAA Aaa 7,500 Series A, 5% due 7/01/2033 7,420 AAA Aaa 19,565 Series B, AMT, 5.20% due 7/01/2029 19,630 AAA Aaa 10,000 Radford Court Properties, Washington, Student Housing Revenue Bonds, 5.75% due 6/01/2032 (i) 10,684 AAA Aaa 10,045 Redmond, Washington, Community Properties Lease Revenue Bonds (City Hall Project), 5% due 12/01/2035 (i) 9,858 AAA Aaa 9,250 Seattle, Washington, Municipal Light and Power Revenue Bonds, 6% due 10/01/2024 (i) 10,223 AAA Aaa 1,500 Snohomish County, Washington, Public Utility District Number 001, Electric Revenue Bonds, 5.50% due 12/01/2023 (g) 1,579 AAA Aaa 7,500 Tacoma, Washington, Electric System Revenue Refunding Bonds, Series A, 5.75% due 1/01/2020 (g) 8,217 AAA Aaa 7,250 Tacoma, Washington, Solid Waste Utility Revenue Refunding Bonds, Series B, 5.50% due 12/01/2019 (a) 7,802 Washington State, GO: NR* Aaa 7,965 RIB, Series 390, 10.58% due 1/01/2017 (g)(k) 9,918 AAA Aaa 3,000 Series A, 5% due 7/01/2028 (c) 3,000 AAA Aaa 7,000 Washington State Health Care Facilities Authority Revenue Bonds (Providence Health System), Series A, 5.25% due 10/01/2021 (i) 7,172 AAA Aaa 8,395 Washington State, Motor Vehicle Fuel Tax, GO, Series F, 5%** due 12/01/2018 (a) 4,004 AAA Aaa 20,000 Washington State, Various Purpose, GO, Series A, 5.625% due 7/01/2025 (i) 21,108 West AAA Aaa 4,425 Harrison County, West Virginia, County Commission for Solid Waste Virginia--0.7% Disposal Revenue Bonds (Monongahela Power), AMT, Series C, 6.75% due 8/01/2024 (a) 4,565 AAA Aaa 2,100 West Virginia State Water Development Authority, Water Development Revenue Refunding Bonds (Loan Program), Series A-1, 5% due 11/01/2026 (a) 2,107 Wisconsin--1.5% AA- Aa3 2,500 Madison, Wisconsin IDR (Madison Gas & Electric Co.), Refunding, AMT, Series A, 5.875% due 10/01/2034 2,594 AAA NR* 6,840 Wisconsin Public Power Inc., Power Supply System Revenue Bonds, DRIVERS, Series 285, 10.114% due 7/01/2023 (i)(k) 8,216 BBB+ NR* 3,395 Wisconsin State Health and Educational Facilities Authority Revenue Bonds (Synergyhealth Inc.), 6% due 11/15/2032 3,419 Total Municipal Bonds (Cost--$1,380,377)--152.5% 1,426,631
MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Schedule of Investments (concluded) (In Thousands)
Shares Held Short-Term Securities Value 131 Merrill Lynch Institutional Tax-Exempt Fund++++ $ 131 Total Short-Term Securities (Cost--$131)--0.0% 131 Total Investments (Cost--$1,380,508)--152.5% 1,426,762 Liabilities in Excess of Other Assets--(5.5%) (51,113) Preferred Stock, at Redemption Value--(47.0%) (440,012) --------- Net Assets Applicable to Common Stock--100.0% $ 935,637 ========= *Not Rated. **Represents a zero coupon or step bond; the interest rate shown reflect the effective yield at the time of purchase by the Fund. ++Highest short-term rating by Moody's Investors Service, Inc. ++++Investments in companies considered to be an affiliate of the Fund (such companies are defined as "Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940) are as follows: (in Thousands) Net Dividend Affiliate Activity Income Merrill Lynch Institutional Tax-Exempt Fund -- $1 (a)AMBAC Insured. (b)Escrowed to maturity. (c)FGIC Insured. (d)FHA Insured. (e)XL Capital Insured. (f)Radian Insured. (g)FSA Insured. (h)The interest rate is subject to change periodically based upon prevailing market rates. The interest rate shown is the rate in effect at April 30, 2004. (i)MBIA Insured. (j)Prerefunded. (k)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 April 30, 2004. (l)GNMA/FNMA Collateralized. (m)FNMA Collateralized. Forward interest rate swaps entered into as of April 30, 2004 were as follows: (in Thousands) Notional Unrealized Amount Appreciation Receive a variable rate equal to 7-Day Bond Market Association Municipal Swap Index Rate and pay a fixed rate equal to 4.366% Broker, J.P. Morgan Chase Bank Expires July 2024 $153,000 $ 730 See Notes to Financial Statements.
MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Statement of Net Assets
As of April 30, 2004 Assets Investments in unaffiliated securities, at value (identified cost--$1,380,376,883) $ 1,426,630,911 Investments in affiliated securities, at value (identified cost--$131,009) 131,009 Unrealized appreciation on forward interest rate swaps 729,963 Cash 67,895 Receivables: Securities sold $ 25,246,219 Interest 24,612,683 Dividends from affiliates 3 49,858,905 --------------- Prepaid expenses and other assets 24,741 --------------- Total assets 1,477,443,424 --------------- Liabilities Payables: Securities purchased 100,333,773 Dividends to Common Stock shareholders 672,655 Investment adviser 666,756 Other affiliates 9,696 101,682,880 --------------- Accrued expenses 111,679 --------------- Total liabilities 101,794,559 --------------- Preferred Stock Preferred Stock, at redemption value, par value $.10 per share (2,200 Series A Shares, 2,200 Series B Shares, 2,200 Series C Shares, 2,200 Series D Shares, 4,000 Series E Shares, 2,400 Series F Shares and 2,400 Series G Shares of AMPS* issued and outstanding at $25,000 per share liquidation preference) 440,011,736 --------------- Net Assets Applicable to Common Stock Net assets applicable to Common Stock $ 935,637,129 =============== Analysis of Net Assets Applicable to Common Stock Common Stock, par value $.10 per share (62,099,095 shares issued and outstanding) $ 6,209,910 Paid-in capital in excess of par 869,788,780 Undistributed investment income--net $ 15,108,316 Accumulated realized capital losses on investments--net (2,453,868) Unrealized appreciation on investments--net 46,983,991 --------------- Total accumulated earnings--net 59,638,439 --------------- Total--Equivalent to $15.07 net asset value per share of Common Stock (market price--$13.81) $ 935,637,129 =============== *Auction Market Preferred Stock. See Notes to Financial Statements.
MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Statement of Operations
For the Six Months Ended April 30, 2004 Investment Income Interest $ 37,074,562 Dividends from affiliates 551 --------------- Total income 37,075,113 --------------- Expenses Investment advisory fees $ 3,515,844 Commission fees 557,849 Accounting services 179,327 Transfer agent fees 79,888 Professional fees 42,958 Custodian fees 34,183 Printing and shareholder reports 27,247 Listing fees 22,228 Directors' fees and expenses 21,069 Pricing fees 15,325 Other 36,193 --------------- Total expenses before reimbursement 4,532,111 Reimbursement of expenses (131) --------------- Total expenses after reimbursement 4,531,980 --------------- Investment income--net 32,543,133 --------------- Realized & Unrealized Gain (Loss) on Investments--Net Realized gain on investments--net 9,202,611 Change in unrealized appreciation on investments--net (27,929,902) --------------- Total realized and unrealized loss on investments--net (18,727,291) --------------- Dividends to Preferred Stock Shareholders Investment income--net (2,032,752) --------------- Net Increase in Net Assets Resulting from Operations $ 11,783,090 =============== See Notes to Financial Statements.
MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Statements of Changes in Net Assets
For the For the Six Months Year Ended Ended April 30, October 31, Increase (Decrease) in Net Assets: 2004 2003 Operations Investment income--net $ 32,543,133 $ 66,913,994 Realized gain on investments--net 9,202,611 14,488,371 Change in unrealized appreciation on investments--net (27,929,902) (5,044,358) Dividends and distributions to Preferred Stock shareholders (2,032,752) (4,678,286) --------------- --------------- Net increase in net assets resulting from operations 11,783,090 71,679,721 --------------- --------------- Dividends to Common Stock Shareholders Investment income--net (29,807,565) (58,869,942) --------------- --------------- Net decrease in net assets resulting from dividends to Common Stock shareholders (29,807,565) (58,869,942) --------------- --------------- Net Assets Applicable to Common Stock Total increase (decrease) in net assets applicable to Common Stock (18,024,475) 12,809,779 Beginning of period 953,661,604 940,851,825 --------------- --------------- End of period* $ 935,637,129 $ 953,661,604 =============== =============== *Undistributed investment income--net $ 15,108,316 $ 14,405,500 =============== =============== See Notes to Financial Statements.
MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Financial Highlights
The following per share data and ratios have been derived For the Six from information provided in the financial statements. Months Ended April 30, For the Year Ended October 31, Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001++++ 2000++++ Per Share Operating Performance Net asset value, beginning of period $ 15.36 $ 15.15 $ 15.18 $ 14.16 $ 13.64 ---------- ---------- ---------- ---------- ---------- Investment income--net .52+++++ 1.08+++++ 1.07 1.08 1.09 Realized and unrealized gain (loss) on investments--net (.30) .16 (.04) 1.05 .57 Dividends and distributions to Preferred Stock shareholders: Investment income--net (.03) (.08) (.11) (.23) (.29) Realized gain on investments--net -- -- --++ -- -- ---------- ---------- ---------- ---------- ---------- Total from investment operations .19 1.16 .92 1.90 1.37 ---------- ---------- ---------- ---------- ---------- Less dividends and distributions to Common Stock shareholders: Investment income--net (.48) (.95) (.95) (.88) (.85) Realized gain on investments--net -- -- --++ -- -- ---------- ---------- ---------- ---------- ---------- Total dividends and distributions to Common Stock shareholders (.48) (.95) (.95) (.88) (.85) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period $ 15.07 $ 15.36 $ 15.15 $ 15.18 $ 14.16 ========== ========== ========== ========== ========== Market price per share, end of period $ 13.81 $ 14.51 $ 14.31 $ 15.06 $ 12.75 ========== ========== ========== ========== ========== Total Investment Return** Based on market price per share (1.69%)+++ 8.19% 1.42% 25.49% 5.94% ========== ========== ========== ========== ========== Based on net asset value per share 1.35%+++ 8.18% 6.52% 13.89% 11.06% ========== ========== ========== ========== ========== Ratios Based on Average Net Assets of Common Stock Total expenses, net of reimbursement*** .93%* .94% .97% .98% .99% ========== ========== ========== ========== ========== Total expenses*** .93%* .95% .97% .98% .99% ========== ========== ========== ========== ========== Total investment income--net*** 6.71%* 6.99% 7.16% 7.34% 7.92% ========== ========== ========== ========== ========== Amount of dividends to Preferred Stock shareholders .42%* .49% .73% 1.59% 2.13% ========== ========== ========== ========== ========== Investment income--net, to Common Stock shareholders 6.29%* 6.50% 6.43% 5.75% 5.79% ========== ========== ========== ========== ========== Ratios Based on Average Net Assets of Common & Preferred Stock*** Total expenses, net of reimbursement .64%* .64% .66% .66% .65% ========== ========== ========== ========== ========== Total expenses .64%* .65% .66% .66% .65% ========== ========== ========== ========== ========== Total investment income--net 4.62%* 4.78% 4.86% 4.95% 5.22% ========== ========== ========== ========== ==========
MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Financial Highlights (concluded)
For the Six Months Ended The following per share data and ratios have been derived April 30, For the Year Ended October 31, from information provided in the financial statements. 2004 2003 2002 2001++++ 2000++++ Ratios Based on Average Net Assets of Preferred Stock Dividends to Preferred Stock shareholders .93%* 1.06% 1.53% 3.30% 4.11% ========== ========== ========== ========== ========== Supplemental Data Net assets applicable to Common Stock, end of period (in thousands) $ 935,637 $ 953,662 $ 940,852 $ 940,359 $ 877,390 ========== ========== ========== ========== ========== Preferred Stock outstanding, end of period (in thousands) $ 440,000 $ 440,000 $ 440,000 $ 440,000 $ 440,000 ========== ========== ========== ========== ========== Portfolio turnover 57.48% 114.05% 97.34% 99.00% 107.11% ========== ========== ========== ========== ========== Leverage Asset coverage per $1,000 $ 3,126 $ 3,167 $ 3,138 $ 3,137 $ 2,994 ========== ========== ========== ========== ========== Dividends Per Share on Preferred Stock Outstanding Series A--Investment income--net $ 114 $ 270 $ 364 $ 833 $ 1,051 ========== ========== ========== ========== ========== Series B--Investment income--net $ 116 $ 273 $ 364 $ 842 $ 1,051 ========== ========== ========== ========== ========== Series C--Investment income--net $ 109 $ 268 $ 360 $ 849 $ 1,063 ========== ========== ========== ========== ========== Series D--Investment income--net $ 120 $ 247 $ 348 $ 825 $ 986 ========== ========== ========== ========== ========== Series E--Investment income--net $ 118 $ 240 $ 352 $ 790 $ 1,048 ========== ========== ========== ========== ========== Series F--Investment income--net $ 108 $ 274 $ 359 $ 860 $ 1,010 ========== ========== ========== ========== ========== Series G--Investment income--net $ 122 $ 304 $ 545 $ 799 $ 992 ========== ========== ========== ========== ========== *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 charges. ***Do not reflect the effect of dividends to Preferred Stock shareholders. ++Amount is less than $(.01) per share. ++++Certain prior year amounts have been reclassified to conform to current year presentation. +++Aggregate total investment return. +++++Based on average shares outstanding. See Notes to Financial Statements.
MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Notes to Financial Statements 1. Significant Accounting Policies: MuniYield Insured Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, 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. Actual results may differ from these 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 New York Stock Exchange under the symbol MYI. 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 options thereon, 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 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 both to increase the return of the Fund and to hedge, or protect, its exposure to interest rate movements and movements in the securities markets. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. * Financial futures contracts--The Fund may purchase or sell financial futures contracts and options on such futures contracts. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. * Options--The Fund may write covered call options and purchase put options. When the Fund writes an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired, or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. * Forward interest rate swaps--The Fund may enter into forward interest rate swaps. In a forward interest rate swap, the Fund and the counterparty agree to make periodic net payments on a specified notional contract amount, commencing on a specified future effective date, unless terminated earlier. When the agreement is closed, the Fund records a realized gain or loss in an amount equal to the value of the agreement. MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Notes to Financial Statements (continued) (c) Income taxes--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax provision is required. (d) Security transactions and investment income--Security transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Interest income is recognized on the accrual basis. The Fund amortizes all premiums and discounts on debt securities. (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 .50% of the Fund's average weekly net assets, including proceeds from the issuance of Preferred Stock. For the six months ended April 30, 2004, FAM reimbursed the Fund in the amount of $131. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, received $1,140 in commissions on the execution of portfolio security transactions for the Fund for the six months ended April 30, 2004. For the six months ended April 30, 2004, the Fund reimbursed FAM $15,536 for certain accounting services. 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 April 30, 2004 were $788,851,359 and $775,779,410, respectively. Net realized gains (losses) for the six months ended April 30, 2004 and net unrealized appreciation as of April 30, 2004 were as follows: Realized Unrealized Gains (Losses) Appreciation Long-term investments $ 12,183,929 $ 46,254,028 Forward interest rate swaps (2,981,318) 729,963 -------------- -------------- Total $ 9,202,611 $ 46,983,991 ============== ============== As of April 30, 2004, net unrealized appreciation for Federal income tax purposes aggregated $46,288,274, of which $54,078,115 related to appreciated securities and $7,789,841 related to depreciated securities. The aggregate cost of investments at April 30, 2004 for Federal income tax purposes was $1,380,473,646. 4. Stock Transactions: The Fund is authorized to issue 200,000,000 shares of stock, including Preferred Stock, par value $.10 per share, all of which were initially classified as Common Stock. The Board of Directors is authorized, however, to reclassify any unissued shares of capital without approval of the holders of Common Stock. Preferred Stock Auction Market Preferred Stock are redeemable shares of Preferred Stock of the Fund, with a par value of $.10 per share and a liquidation preference of $25,000 per share, plus accrued and unpaid dividends, that entitle their holders to receive cash dividends at an annual rate that may vary for the successive dividend periods. The yields in effect at April 30, 2004 were as follows: Series A, .91%; Series B, .90%; Series C, .90%; Series D, 1.04%; Series E, 1.02%; Series F, .95%; and Series G, 1.02%. MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Notes to Financial Statements (concluded) The Fund pays commissions to certain broker-dealers at the end of each auction at an annual rate ranging from .25% to .375%, calculated on the proceeds of each auction. For the six months ended April 30, 2004, MLPF&S earned $232,155 as commissions. 5. Capital Loss Carryforward: On October 31, 2003, the Fund had a net capital loss carryforward of $1,624,552, all of which expires in 2008. This amount will be available to offset like amounts of any future taxable gains. 6. Subsequent Event: The Fund paid a tax-exempt income dividend to holders of Common Stock in the amount of $.081000 per share on May 27, 2004 to shareholders of record on May 14, 2004. 7. Plan of Reorganization: On May 19, 2004, MuniInsured Fund, Inc.'s shareholders approved a plan of reorganization, subject to certain conditions, whereby the Fund would acquire substantially all of the assets and liabilities of MuniInsured Fund, Inc. in exchange for newly-issued shares of the Fund. Both funds have a similar investment objective and are managed by FAM. 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 stable level of dividend distributions, 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 particular 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 Net Assets, which comprises part of the financial information included in this report. MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Proxy Results
During the six-month period ended April 30, 2004, MuniYield Insured Fund, Inc.'s Common Stock shareholders voted on the following proposal. The proposal was approved at a shareholders' meeting on April 27, 2004. A description of the proposal and number of shares voted are as follows: Shares Voted Shares Withheld For From Voting 1. To elect the Fund's Directors: Joe Grills 58,794,683 1,483,650 Herbert I. London 58,801,471 1,476,872 Andre F. Perold 58,783,682 1,494,661 Roberta Cooper Ramo 58,787,285 1,491,058 Stephen B. Swensrud 58,778,878 1,499,465 During the six-month period ended April 30, 2004, MuniYield Insured Fund, Inc.'s Preferred Stock shareholders (Series A - G) voted on the following proposal. The proposal was approved at a shareholders' meeting on April 27, 2004. A description of the proposal and number of shares voted are as follows: Shares Voted Shares Withheld For From Voting 1. To elect the Fund's Board of Directors: James H. Bodurtha, Joe Grills, Herbert I. London, Andre F. Perold, Roberta Cooper Ramo, Robert S. Salomon, Jr., and Stephen B. Swensrud 15,046 7
Quality Profile The quality ratings of securities in the Fund as of April 30, 2004 were as follows: Percent of Total S&P Rating/Moody's Rating Investments AAA/Aaa 79.3% AA/Aa 1.7 A/A 2.7 BBB/Baa 8.8 NR (Not Rated)* -- Other** 7.5 *Holdings are less than 0.1%. **Temporary investments in short-term variable rate municipal securities. MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Officers and Directors Terry K. Glenn, President and Director James H. Bodurtha, Director Joe Grills, Director Herbert I. London, Director Andre F. Perold, Director Roberta Cooper Ramo, Director Robert S. Salomon, Jr., Director Stephen B. Swensrud, Director Kenneth A. Jacob, Senior Vice President John M. Loffredo, Senior Vice President William R. Bock, Vice President Donald C. Burke, Vice President and Treasurer Phillip S. Gillespie, Secretary Custodian State Street Bank and Trust Company P.O. Box 351 Boston, MA 02101 Transfer Agents Common Stock: EquiServe P.O. Box 43010 Providence, RI 02940-3010 Preferred Stock: The Bank of New York 101 Barclay Street - 7 West New York, NY 10286 NYSE Symbol MYI MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Electronic Delivery The Fund offers electronic delivery of communications to its shareholders. In order to receive this service, you must register your account and provide us with e-mail information. To sign up for this service, simply access this website http://www.icsdelivery.com/live and follow the instructions. When you visit this site, you will obtain a personal identification number (PIN). You will need this PIN should you wish to update your e-mail address, choose to discontinue this service and/or make any other changes to the service. This service is not available for certain retirement accounts at this time. MUNIYIELD INSURED FUND, INC., APRIL 30, 2004 Item 2 - Code of Ethics - Not Applicable to this semi-annual report Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual report Item 4 - Principal Accountant Fees and Services - Not Applicable to this semi-annual report Item 5 - Audit Committee of Listed Registrants - Not Applicable to this semi-annual report Item 6 - Schedule of Investments - Not Applicable Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies - Not Applicable to this semi-annual report Item 8 - Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers - Not Applicable Item 9 - Submission of Matters to a Vote of Security Holders - Not Applicable Item 10 - Controls and Procedures 10(a) - The registrant's certifying officers have reasonably designed such disclosure controls and procedures to ensure material information relating to the registrant is made known to us by others particularly during the period in which this report is being prepared. The registrant's certifying officers have determined that the registrant's disclosure controls and procedures are effective based on our evaluation of these controls and procedures as of a date within 90 days prior to the filing date of this report. 10(b) - There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11 - Exhibits attached hereto 11(a)(1) - Code of Ethics - Not Applicable to this semi-annual report 11(a)(2) - Certifications - Attached hereto 11(a)(3) - Not Applicable 11(b) - Certifications - Attached hereto Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MuniYield Insured Fund, Inc. By: _/s/ Terry K. Glenn_______ Terry K. Glenn, President of MuniYield Insured Fund, Inc. Date: June 18, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: _/s/ Terry K. Glenn________ Terry K. Glenn, President of MuniYield Insured Fund, Inc. Date: June 18, 2004 By: _/s/ Donald C. Burke________ Donald C. Burke, Chief Financial Officer of MuniYield Insured Fund, Inc. Date: June 18, 2004