UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-06540
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 - 10/31/04
Item 1 - Report to Stockholders
(BULL LOGO)
Merrill Lynch Investment Managers
www.mlim.ml.com
MuniYield Insured Fund, Inc.
Annual Report
October 31, 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) at www.mutualfunds.ml.com;
and (3) on the Securities and Exchange Commission's Web site at
http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the
most recent 12-month period ended June 30 is available (1) at
www.mutualfunds.ml.com; and (2) on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
MuniYield Insured Fund, Inc.
Box 9011
Princeton, NJ 08543-9011
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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
October 31, 2004, the percentage of the Fund's total net assets
invested in inverse floaters was 12.82%, before the deduction of
Preferred Stock.
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. Swap agreements involve the risk
that the party with whom the Fund has entered into the swap will
default on its obligation to pay the Fund and the risk that the Fund
will not be able to meet its obligations to pay the other party to
the agreement.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
A Letter From the President
Dear Shareholder
As we ended the current reporting period, the financial markets were
facing a number of uncertainties. At the top of investors' minds
were questions about economic expansion, corporate earnings,
interest rates and inflation, politics, oil prices and terrorism.
After benefiting from aggressive monetary and fiscal policy
stimulus, some fear the U.S. economy has hit a "soft patch." In
fact, economic expansion has slowed somewhat in recent months, but
we believe it is easing into a pace of growth that is sustainable
and healthy. The favorable economic environment has served to
benefit American corporations, which have continued to post strong
earnings. Although the most impressive results were seen earlier in
the year, solid productivity, improved revenue growth and cost
discipline all point to a vital corporate sector.
In terms of inflation and interest rates, the Federal Reserve Board
(the Fed) has signaled its confidence in the economic recovery by
increasing the Federal Funds target rate four times in the past
several months, from 1% to 2% as of the November 10 Federal Open
Market Committee meeting. Inflation, for its part, has remained in
check. Investors and economists are focused on how quickly Fed
policy will move from here.
With the presidential election now behind us, any politically
provoked market angst should subside to some extent. The effect of
oil prices, however, is more difficult to predict. At around $50 per
barrel, the price of oil is clearly a concern. However, on an
inflation-adjusted basis and considering modern usage levels, the
situation is far from the crisis proportions we saw in the 1980s.
Finally, although terrorism and geopolitical tensions are realities
we are forced to live with today, history has shown us that the
financial effects of any single event tend to be short-lived.
Amid the uncertainty, the Lehman Brothers Municipal Bond Index
posted a 12-month return of +6.03% and a six-month return of
+4.79% as of October 31, 2004. Long-term bond yields were slightly
lower at October 31, 2004 than they were a year earlier. As always,
our investment professionals are closely monitoring the markets,
the economy and the overall environment in an effort to make
well-informed decisions for the portfolios they manage. For the
individual investor, the key during uncertain times is to remain
focused on the big picture. Investment success comes not from
reacting to short-term volatility, but from maintaining a long-term
perspective and adhering to the disciplines of asset allocation,
diversification and rebalancing. We encourage you to work with your
financial advisor to ensure these time-tested techniques are
incorporated into your investment plan.
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., OCTOBER 31, 2004
A Discussion With Your Fund's Portfolio Manager
The Fund outperformed its comparable Lipper category average for the
fiscal year, as we sought to limit net asset value volatility and
maintain a competitive yield.
Describe the recent market environment relative to municipal bonds.
Over the past 12 months, amid considerable monthly volatility, long-
term U.S. Treasury bond yields generally moved lower - despite an
increase in short-term interest rates by the Federal Reserve Board
(the Fed).
As the period began, long-term Treasury yields declined while their
prices, which move in the opposite direction, rose. Somewhat
surprisingly, this increase in bond prices came as the U.S. economy
continued to improve. However, solid job creation remained elusive,
producing a drag on consumer confidence. Against this backdrop,
investors became convinced that the Fed would hold short-term
interest rates near their historic lows, and by mid-March 2004,
yields on 30-year U.S. Treasury bonds had declined to 4.65%.
In early April, however, monthly jobs reports began to show
unexpectedly large gains. Consumer confidence increased, and
investors started to anticipate that the Fed would soon be forced to
raise short-term interest rates to ward off potential inflation.
Yields rose in response, with long-term Treasury bond yields
surpassing 5.50% early in June 2004.
For the rest of the period, bond yields generally fell (and prices
rose) as payroll growth began to wane and inflation appeared
negligible. Although the Fed embarked on a tightening cycle with a
25 basis point (.25%) interest rate hike in June, it also
telegraphed its intention to continue raising rates at a measured
pace, removing earlier concerns about the potential for more
dramatic increases in the near future. Despite additional Fed
interest rate hikes in August and September, the prospect for a
moderate tightening of monetary policy helped support higher bond
prices, and lower yields, for the remainder of the Fund's fiscal
year. By October 31, 2004, the 30-year Treasury bond yield stood at
4.79%, a decline of 34 basis points from a year earlier. The yield
on the 10-year U.S. Treasury note was 4.02%, a 27 basis point drop
during the same 12-month period.
While tax-exempt bond yields followed the same pattern as their
taxable counterparts, volatility in the municipal market was more
subdued. Yields on long-term revenue bonds, as measured by the Bond
Buyer Revenue Bond Index, fell 27 basis points during the past 12
months. According to Municipal Market Data, yields on AAA-rated
issues maturing in 30 years declined 22 basis points to 4.60%, while
yields on 10-year AAA-rated issues dropped 28 basis points to 3.40%.
The tax-exempt market was supported by generally positive supply/
demand dynamics. While more than $360 billion in new long-term tax-
exempt bonds was issued in the past 12 months, this represented a
decline of approximately 6% compared to the previous year. The
declining supply amid favorable demand allowed tax-exempt bond
prices to perform in line with the taxable market.
How did the Fund perform during the fiscal year in light of the
existing market conditions?
For the 12-month period ended October 31, 2004, the Common Stock of
MuniYield Insured Fund, Inc. had net annualized yields of 6.21% and
6.64%, based on a year-end per share net asset value of $15.59 and a
per share market price of $14.57, respectively, and $.968 per share
income dividends. Over the same period, the total investment return
on the Fund's Common Stock was +8.52%, based on a change in per
share net asset value from $15.36 to $15.59, and assuming
reinvestment of ordinary income dividends.
The Fund's total return, based on net asset value, outpaced its
comparable Lipper category of Insured Municipal Debt Funds
(Leveraged), which had an average return of +7.41% for the
12-month period. (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.) In addition, the Fund's 12-month net yield
of 6.17% exceeded that of the Lipper category average.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
The Fund's yield curve strategies and security selection benefited
performance for much of the period. Our strategy of overweighting
the 15-year to 20-year segment of the curve early in the period
helped the Fund's performance as the municipal yield curve
steepened, causing this part of the curve to outperform both shorter
maturities (10 years and shorter) and long maturities (25+ years).
Late in the second quarter of 2004, the Fund shifted further out
the curve due to the historically steep yield curve. Despite
considerable market volatility throughout the year, our yield curve
stance worked to the Fund's advantage as interest rates remained
near historic lows. The Fund's overweight posture in both California
exempt bonds and airport revenue bonds backed by AAA-rated insurers
added to the Fund's outperformance during the period. The Fund
had been overweight in California exempt bonds as the budgetary
problems the state was experiencing caused their debt to trade at
historically inexpensive levels. This sector performed well,
especially unenhanced California general obligation bonds, as the
state's finances have improved. Insured airport revenue bonds also
represented value as that sector was feeling the effects of weaker
airline traffic. We were careful to invest in enhanced bonds, with
AAA-rated insurers backing the payments. As air traffic volume has
increased, these bonds have outperformed the general market, helping
the Fund's relative performance.
For the six-month period ended October 31, 2004, the total
investment return on the Fund's Common Stock was +7.08%, based
on a change in per share net asset value from $15.07 to $15.59,
and assuming reinvestment of ordinary income dividends.
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 of 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
returns based on changes in the Fund's net asset value.
What changes were made to the portfolio during the year?
We continued to focus on buying premium-coupon bonds with longer
maturities. In particular, we preferred securities in the 20-year
to 30-year maturity range. Based on our observations and research,
longer bonds have remained relatively stable, while bonds with
10-year to 15-year maturities have continued to be quite volatile.
By taking advantage of the steep yield curve, we generally were able
to increase the Fund's yield while muting its price volatility.
We increased the Fund's use of leverage during the past year,
issuing an additional $130 million of Auction Market Preferred Stock
(AMPS). We used part of the proceeds from this issuance to reduce
the Fund's derivative position from approximately 14% of net assets
to 10%.
The Fund's income stream was adversely affected when $20 million
worth of bonds issued by Burlington KC were called from the
marketplace. Finally, we eliminated the Fund's exposure to tobacco
bonds. In all, we were successful in our efforts to add to the
Fund's yield while keeping the portfolio's credit quality high.
For the six-month period ended October 31, 2004, the Fund's Auction
Market Preferred Stock had average yields of: 1.26% for Series A;
1.34% for Series B; 1.14% for Series C; 1.16% for Series D; 1.13%
for Series E; 1.30% for Series F; 1.18% for Series G; 1.34% for
Series H; and 1.39% for Series I. These attractive funding levels,
in combination with a positively sloped yield curve, continued to
provide a generous income benefit to the Common Stock shareholder
from the leveraging of Preferred Stock. While the Fed is likely to
continue raising short-term interest rates, the increases are
expected to be gradual and should not have an immediate 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 35.20% of total net 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 Fund's position at the close of the
period?
We plan to maintain our focus on adding premium-coupon bonds with 25-
year to 30-year maturities. In the current market, however, the
availability of bonds offering coupons of 5.25% and higher is
extremely limited. Given the relatively low yield levels, we believe
supply/demand factors will become a driving force behind future
municipal market performance.
We expect the market to be highly sensitive to economic news in the
months ahead, contributing to continued bond price volatility. This
should present the Fund with buying and selling opportunities.
Similarly, the Fed and its actions will continue to bear heavily on
bond values. Should the Fed continue to increase short-term interest
rates at a "measured" pace over the next 12 months to 18 months, we
would expect long-term bond yields to head modestly higher.
William R. Bock
Vice President and Portfolio Manager
November 12, 2004
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Schedule of Investments (In Thousands)
S&P Moody's Face
State Ratings++ Ratings++ Amount Municipal Bonds Value
Alaska--1.7% Alaska Energy Authority, Power Revenue Refunding Bonds
(Bradley Lake), Fourth Series (g):
AAA Aaa $ 3,695 6% due 7/01/2018 $ 4,459
AAA Aaa 1,150 6% due 7/01/2020 1,392
AAA Aaa 11,280 Alaska State Housing Finance Corporation Revenue Refunding
Bonds, Series A, 5.875% due 12/01/2024 (d)(i)(j) 11,629
Arkansas--0.1% NR* Aaa 1,000 University of Arkansas, University Construction Revenue
Bonds (UAMS Campus), Series B, 5% due 11/01/2034 (i) 1,024
California-- AAA Aaa 10,000 Alameda Corridor Transportation Authority, California,
36.1% Capital Appreciation Revenue Refunding Bonds, Subordinate Lien,
Series A, 5.473% due 10/01/2024 (a)(f) 7,031
AAA Aaa 7,735 Anaheim, California, Public Financing Authority, Electric
System Distribution Facilities Revenue Bonds, Series A, 5%
due 10/01/2031 (g) 7,928
AAA Aaa 5,000 Antioch, California, Public Finance Authority, Lease Revenue
Refunding Bonds (Municipal Facilities Project), Series A, 5.50%
due 1/01/2032 (i) 5,400
AAA Aaa 10,000 California Infrastructure and Economic Development Bank, Bay
Area Toll Bridges Revenue Bonds, First Lien, Series A, 5% due
7/01/2025 (c) 10,450
California State Department of Water Resources, Power Supply
Revenue Bonds, Series A:
AAA Aaa 10,000 5.25% due 5/01/2020 (i) 10,891
BBB+ A2 3,675 5.375% due 5/01/2021 3,991
AAA Aaa 12,010 5.375% due 5/01/2022 (i) 13,112
California State, GO:
A A3 9,115 5.125% due 2/01/2028 9,468
AAA NR* 7,450 DRIVERS, Series 556, 8.935% due 11/01/2011 (i)(k) 8,715
AAA NR* 6,450 DRIVERS, Series 557, 8.935% due 4/01/2012 (i)(k) 7,607
NR* Aaa 5,000 California State, GO, Refunding, RIB, Series 471x, 8.99%
due 9/01/2024 (i)(k) 6,052
California State Public Works Board, Lease Revenue Bonds
(Department of Corrections):
A- Baa1 5,500 (Department of Corrections), Series C, 5.25% due 6/01/2028 5,736
A- Baa1 3,755 (Department of General Services), Series D, 5.25% due 6/01/2028 3,916
A- Baa1 5,250 (Department of Mental Health-Coalinga State Hospital),
Series A, 5.125% due 6/01/2029 5,392
A A3 12,000 California State, Various Purpose, GO, 5.25% due 11/01/2029 12,570
California Statewide Communities Development Authority:
A A3 7,740 Health Facility Revenue Bonds (Memorial Health Services),
Series A, 6% due 10/01/2023 (g) 8,345
AAA Aaa 4,205 Water Revenue Bonds (Pooled Financing Program), Series C,
5.25% due 10/01/2034 (g) 4,422
AAA Aaa 5,800 Fairfield-Suisun, California, Unified School District, GO
(Election of 2002), 5.50% due 8/01/2028 (i) 6,364
AAA Aaa 10,030 Gavilan, California, Joint Community College District, GO
(Election of 2004), Series A, 5.50% due 8/01/2028 (a) 11,005
Golden State Tobacco Securitization Corporation of California,
Tobacco Settlement Revenue Bonds:
NR* Aaa 13,500 RIB, Series 920X, 8.99% due 6/01/2033 (c)(k) 15,866
A- Baa1 1,500 Series B, 5.50% due 6/01/2033 1,594
A- Baa1 12,000 Series B, 5.625% due 6/01/2038 12,794
A- Baa1 2,500 Series B, 5.50% due 6/01/2043 2,634
AAA Aaa 1,000 Long Beach, California, Harbor Revenue Refunding Bonds, AMT,
Series B, 5.20% due 5/15/2027 (i) 1,032
AAA Aaa 10,000 Los Angeles, California, Community College District, GO,
Series A, 5.50% due 8/01/2018 (i) 11,238
Los Angeles, California, Department of Water and Power,
Waterworks Revenue Bonds:
AAA Aaa 12,810 Series A, 5% due 7/01/2038 (c) 13,046
AAA Aaa 15,605 Series C, 5% due 7/01/2029 (i) 16,136
AAA Aaa 5,000 Los Angeles, California, Harbor Department Revenue Bonds,
RITR, AMT, Series RI-7, 10.295% due 11/01/2026 (i)(k) 5,769
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
EDA Economic Development Authority
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., OCTOBER 31, 2004
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
State Ratings++ Ratings++ Amount Municipal Bonds Value
California Los Angeles, California, Unified School District, GO:
(concluded) AAA NR* $ 6,265 DRIVERS, Series 261, 8.749% due 7/01/2022 (c)(k) $ 7,532
AAA Aaa 18,800 Series A, 5% due 1/01/2028 (i) 19,454
AAA Aaa 11,775 Los Angeles, California, Water and Power Revenue Bonds
(Power System), Series B, 5% due 7/01/2035 (g) 12,091
AAA Aaa 5,500 Metropolitan Water District of Southern California, Waterworks
Revenue Bonds, Series B-1, 5% due 10/01/2036 (c) 5,651
AAA Aaa 3,000 Palm Springs, California, Financing Authority, Lease Revenue
Refunding Bonds (Convention Center Project), Series A, 5.50%
due 11/01/2029 (i) 3,316
AAA Aaa 145 Port Oakland, California, Revenue Bonds, AMT, Series K, 5.75%
due 11/01/2021 (c) 159
AAA Aaa 9,465 Port Oakland, California, Revenue Refunding Bonds, AMT, Series L,
5.375% due 11/01/2027 (c) 9,932
AAA Aaa 7,000 Port Oakland, California, Trust Receipts, Revenue Bonds, AMT,
Class R, Series K, 9.374% due 11/01/2021 (c)(k) 8,362
AAA Aa3 20,000 Sacramento County, California, Sanitation District Financing
Authority Revenue Bonds, Series A, 5% due 12/01/2035 (a) 20,607
San Diego County, California, Water Authority, Water Revenue
Bonds, COP, Series A (g):
AAA Aaa 20,000 5% due 5/01/2030 20,661
AAA Aaa 10,000 5% due 5/01/2031 10,313
AAA Aaa 5,000 San Jose, California, Redevelopment Agency, Tax Allocation
Bonds (Merged Area Redevelopment Project), 5% due 8/01/2025 (c) 5,208
AAA Aaa 6,895 San Jose, California, Redevelopment Agency, Tax Allocation
Refunding Bonds (Merged Area Redevelopment Project), 5.60% due
8/01/2019 (i) 7,617
A-1+ Aaa 10,445 Stanislaus, California, Waste-to-Energy Financing Agency, Solid
Waste Facility Revenue Refunding Bonds (Ogden Martin System Inc.
Project), VRDN, 1.75% due 1/01/2010 (h)(i) 10,445
AAA Aaa 8,310 Stockton, California, Public Financing Authority, Lease Revenue
Bonds (Parking & Capital Projects), 5.25% due 9/01/2034 (c) 8,773
Colorado--0.2% A-1+ VMIG1** 1,855 Moffat County, Colorado, PCR, Refunding (Pacificorp Projects),
VRDN, 1.74% due 5/01/2013 (a)(h) 1,855
Florida--3.6% 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) 3,586
Miami-Dade County, Florida, Aviation Revenue Refunding Bonds
(Miami International Airport), AMT (c):
AAA Aaa 10,750 5.375% due 10/01/2025 11,311
AAA Aaa 1,000 5.375% due 10/01/2027 1,045
Orange County, Florida, Health Facilities Authority, Hospital
Revenue Bonds (Adventist Health System):
A A2 5,000 5.625% due 11/15/2032 5,266
A A2 2,000 5.75% due 12/01/2032 2,110
A-1 VMIG1** 6,450 Pinellas County, Florida, Health Facilities Authority Revenue
Refunding Bonds (Pooled Hospital Loan Program), DATES, 1.76%
due 12/01/2015 (a)(h) 6,450
A-1+ VMIG1** 8,600 Sarasota County, Florida, Public Hospital Board, Hospital
Revenue Bonds (Sarasota Memorial Hospital), VRDN, Series A,
1.78% due 7/01/2037 (a)(h) 8,600
Georgia--4.1% Atlanta, Georgia, Airport General Revenue Refunding Bonds (g):
AAA Aaa 26,500 AMT, Series A, 5.125% due 1/01/2030 27,177
AAA Aaa 12,500 Series B, 5.25% due 1/01/2033 13,258
A-1+ VMIG1** 2,500 Atlanta, Georgia, Water and Wastewater Revenue Bonds, VRDN,
Series C, 1.74% due 11/01/2041 (g)(h) 2,500
Hawaii--1.6% AAA Aaa 2,000 Hawaii State, GO, Series CX, 5.50% due 2/01/2021 (g) 2,236
AAA Aaa 1,100 Hawaii State Highway Revenue Bonds, 5.50% due 7/01/2020 (g) 1,222
AAA Aaa 12,845 Honolulu, Hawaii, City and County GO, Refunding, Series A,
5.25% due 3/01/2028 (i) 13,587
Illinois--13.0% AAA Aaa 10,000 Chicago, Illinois, GO, Refunding, Series A, 5% due 1/01/2034 (g) 10,236
AAA Aaa 2,350 Chicago, Illinois, Midway Airport Revenue Bonds, AMT, Series A,
6.25% due 1/01/2024 (i) 2,404
AAA Aaa 13,000 Chicago, Illinois, Motor Fuel Tax Revenue Refunding Bonds,
Series A, 5% due 1/01/2033 (a) 13,293
Chicago, Illinois, O'Hare International Airport Revenue Bonds AMT:
AAA NR* 13,115 DRIVERS, Series 368, 8.895% due 7/01/2011 (i)(k) 16,169
AAA NR* 8,600 DRIVERS, Series 369, 9.378% due 7/01/2011 (e)(k) 10,452
AAA Aaa 16,685 Third Lien, Series B-2, 5.25% due 1/01/2027(i) 17,324
Chicago, Illinois, O'Hare International Airport Revenue
Refunding Bonds Third Lien, AMT, Series C-2:
AAA Aaa 16,400 5.25% due 1/01/2030 (g) 16,929
AAA Aaa 1,500 5.25% due 1/01/2034 (e) 1,546
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
State Ratings++ Ratings++ Amount Municipal Bonds Value
Illinois A-1+ VMIG1** $ 3,310 Chicago, Illinois, Second Lien Water Revenue Refunding
(concluded) Bonds, VRDN, 1.76% due 11/01/2031 (h)(i) $ 3,310
AAA Aaa 13,365 Cook County, Illinois, Capital Improvement, GO, Series B,
5% due 11/15/2029 (i) 13,748
A-1+ VMIG1** 3,400 Illinois Health Facilities Authority, Revenue Refunding
Bonds (Resurrection Health Care), VRDN, Series A, 1.75% due
5/15/2029 (g)(h) 3,400
AAA Aaa 10,000 Illinois State, GO, First Series, 5.50% due 4/01/2016 (g) 11,304
AAA Aa3 2,000 Illinois State Sales Tax Revenue Bonds, 6.125% due 6/15/2016 2,309
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) 7,187
AAA Aaa 4,800 Metropolitan Pier and Exposition Authority, Illinois, Dedicated
State Tax Revenue Refunding Bonds (McCormick Place Expansion),
Series B, 5.75% due 6/15/2023 (i) 5,472
AAA Aaa 1,000 Regional Transportation Authority, Illinois, Revenue Bonds,
Series C, 7.75% due 6/01/2020 (c) 1,420
Indiana--6.9% AAA Aaa 2,250 Indiana Health Facilities Financing Authority, Hospital Revenue
Bonds (Deaconess Hospital Obligated Group), Series A, 5.375%
due 3/01/2034 (a) 2,386
Indiana Municipal Power Agency, Power Supply System Revenue
Bonds, Series A (c):
AAA Aaa 2,850 5% due 1/01/2029 2,911
AAA Aaa 4,350 5% due 1/01/2032 4,429
Indiana Transportation Finance Authority, Highway Revenue
Bonds, Series A (c):
AAA Aaa 3,000 5.25% due 6/01/2026 3,210
AAA Aaa 14,000 5.25% due 6/01/2028 14,891
AAA Aaa 20,000 5.25% due 6/01/2029 21,221
Indianapolis, Indiana, Local Public Improvement Bond Bank
Revenue Bonds (i):
AAA Aaa 15,000 (Indianapolis Airport Authority Project), AMT, Series I,
5% due 1/01/2034 15,011
AAA Aaa 8,000 (Waterworks Project), Series A, 5.125% due 7/01/2027 8,340
Kansas--0.9% AAA Aaa 8,500 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric
Company Project), Series A, 5.30% due 6/01/2031 (i) 9,046
Kentucky--0.2% A-1+ VMIG1** 2,200 Kentucky Economic Development Finance Authority, Hospital
Facilities Revenue Refunding Bonds (Baptist Healthcare), VRDN,
Series C, 1.74% due 8/15/2031 (h)(i) 2,200
Louisiana--0.4% AAA Aaa 3,750 Louisiana Local Government, Environmental Facilities, Community
Development Authority Revenue Bonds (Capital Projects and Equipment
Acquisition), Series A, 6.30% due 7/01/2030 (a) 4,321
Massachusetts-- AAA Aaa 355 Massachusetts Education Loan Authority, Education Loan Revenue
3.8% Bonds, AMT, Issue E, Series A, 7.375% due 1/01/2012 (a) 356
AAA Aaa 2,500 Massachusetts State, HFA, Housing Development Revenue Refunding
Bonds, Series B, 5.40% due 12/01/2028 (i) 2,581
Massachusetts State Special Obligation Dedicated Tax Revenue
Bonds (c):
AAA Aaa 8,460 5.25% due 1/01/2025 9,070
AAA Aaa 6,160 5.25% due 1/01/2028 6,551
AAA Aaa 10,000 5.75% due 1/01/2032 11,185
AAA Aaa 10,000 5% due 1/01/2034 10,288
Michigan--2.5% AAA Aaa 9,360 Clarkston, Michigan, Community Schools, GO, 5.25% due
5/01/2029 (g) 9,885
AAA VMIG1** 2,650 Detroit, Michigan, Sewer Disposal Revenue Bonds, Senior Lien,
VRDN, Series A, 1.74% due 7/01/2033 (g)(h) 2,650
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 8,456
AAA Aaa 5,000 Series C, 5.65% due 9/01/2029 5,286
Minnesota--1.1% AAA Aaa 10,000 Minneapolis and Saint Paul, Minnesota, Metropolitan Airports
Commission, Airport Revenue Bonds, Series A, 5.90% due
1/01/2029 (c) 11,225
Missouri--0.3% AAA NR* 250 Missouri State Housing Development Commission, S/F Mortgage
Revenue Bonds (Homeowner Loan), AMT, Series C-1, 7.15% due
3/01/2032 (l) 265
AAA Aaa 2,800 Saint Louis, Missouri, Airport Revenue Bonds (Airport Development
Program), Series A, 5.625% due 7/01/2019 (i) 3,153
Nebraska--1.6% AAA Aaa 16,025 Nebraska Public Power District Revenue Bonds, Series A, 5%
due 1/01/2035 (a) 16,427
Nevada--12.0% Clark County, Nevada, Airport System Subordinate Lien Revenue
Bonds, Series A-2 (c):
AAA Aaa 25,000 5% due 7/01/2030 25,596
AAA Aaa 10,000 5% due 7/01/2036 10,177
Clark County, Nevada, IDR (Southwest Gas Corporation Project),
AMT:
AAA Aaa 12,675 Series A, 5.25% due 7/01/2034 (a) 13,056
AAA Aaa 12,000 Series D, 3.35% due 3/01/2038 (c) 12,248
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
State Ratings++ Ratings++ Amount Municipal Bonds Value
Nevada BBB+ Baa1 $ 6,000 Henderson, Nevada, Health Care Facilities Revenue Bonds
(concluded) (Catholic Healthcare West), Series A, 5.625% due 7/01/2024 $ 6,217
AAA Aaa 5,000 Humboldt County, Nevada, PCR, Refunding (Sierra Pacific
Project), 6.55% due 10/01/2013 (a) 5,231
AAA Aaa 3,000 Las Vegas New Convention and Visitors Authority Revenue Bonds,
6% due 7/01/2019 (a) 3,423
AAA Aaa 20,375 Nevada State, Nevada Municipal Bond Bank, GO, Series A, 5.50%
due 11/01/2025 (c) 21,168
AAA Aaa 3,130 Reno, Nevada, Capital Improvement Revenue Bonds, 5.50% due
6/01/2019 (c) 3,527
Washoe County, Nevada, Gas Facilities Revenue Bonds (Sierra
Pacific Power Company), AMT:
AAA Aaa 15,000 6.65% due 12/01/2017 (a) 15,205
AAA Aaa 5,000 6.55% due 9/01/2020 (i) 5,135
AAA Aaa 5,000 Washoe County, Nevada, Water Facility Revenue Bonds (Sierra
Pacific Power Company), AMT, 6.65% due 6/01/2017 (i) 5,177
New Jersey-- AAA Aa3 16,000 Garden State Preservation Trust of New Jersey, Open Space and
8.3% Farmland Preservation Revenue Bonds, Series A, 5.75% due
11/01/2028 (g) 18,440
New Jersey EDA, Cigarette Tax Revenue Bonds:
BBB Baa2 3,060 5.75% due 6/15/2029 3,138
BBB Baa2 2,610 5.50% due 6/15/2031 2,626
BBB Baa2 14,135 5.75% due 6/15/2034 14,509
New Jersey EDA, Motor Vehicle Surcharge Revenue Bonds,
Series A (i):
AAA Aaa 14,665 5.25% due 7/01/2031 15,590
AAA Aaa 15,000 5.25% due 7/01/2033 15,934
New Jersey EDA, School Facilities Construction Revenue Bonds,
Series I:
AAA Aaa 4,000 5% due 9/01/2027 (c) 4,169
A+ A1 5,500 5.25% due 9/01/2028 5,784
A+ A1 3,250 5.25% due 9/01/2029 3,413
Newark, New Jersey, Housing Authority, Port Authority-Port Newark
Marine Terminal Additional Rent-Backed Revenue Bonds (City of
Newark Redevelopment Projects) (i):
AAA Aaa 1,500 5.50% due 1/01/2027 1,647
AAA Aaa 1,380 5.50% due 1/01/2028 1,510
New Mexico-- NR* A2 1,605 New Mexico Educational Assistance Foundation, Student Loan
0.7% Revenue Refunding Bonds (Student Loan Program), AMT, First
Sub-Series A-2, 6.65% due 11/01/2025 1,607
AAA NR* 895 New Mexico Mortgage Finance Authority, S/F Mortgage Revenue Bonds,
AMT, Series C-2, 6.95% due 9/01/2031 (l) 926
AAA Aaa 4,500 University of New Mexico, University Revenue Bonds, 5% due
7/01/2032 (d)(g) 4,569
New York-- Long Island Power Authority, New York, Electric System Revenue
12.2% Bonds, Series A:
A- Baa1 10,250 5.10% due 9/01/2029 10,538
AAA Aaa 12,500 5% due 9/01/2034 (a) 12,870
AAA Aaa 12,500 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Refunding Bonds, Series B, 5.125% due
7/01/2024 (a)(b) 13,650
AAA Aaa 7,500 Metropolitan Transportation Authority, New York, Transportation
Revenue Refunding Bonds, Series F, 5.25% due 11/15/2027 (i) 7,955
AAA Aaa 27,330 New York City, New York, City Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, RITR, Series FR-6, 9.345%
due 6/15/2026 (i)(k) 31,205
New York City, New York, GO:
NR* Aaa 6,920 RIB, Series 394, 9.692% due 8/01/2016 (i)(k) 8,980
A A2 10,000 Series J, 5.25% due 5/15/2024 10,600
A A2 1,000 Series J, 5.25% due 5/15/2025 1,058
A A2 6,000 Sub-Series C-1, 5.25% due 8/15/2026 6,314
AAA Aaa 5,000 New York City, New York, Sales Tax Asset Receivable Corporation
Revenue Bonds, Series A, 5% due 10/15/2032 (a) 5,170
AAA Aaa 19,500 Port Authority of New York and New Jersey, Consolidated Revenue
Bonds, AMT, One Hundred Thirty-Seventh Series, 5.125% due
7/15/2030 (g) 20,166
North Dakota-- AAA Aaa 2,500 Grand Forks, North Dakota, Health Care Facilities Revenue Bonds
0.5% (United Hospital Obligated Group), 6.25% due 12/01/2024 (i) 2,560
NR* Aa2 2,315 North Dakota State Housing Finance Agency, Home Mortgage Revenue
Refunding Bonds (Housing Finance Program), AMT, Series A, 6.40%
due 7/01/2020 2,488
Ohio--0.6% NR* Aaa 1,500 Franklin County, Ohio, Hospital Improvement Revenue Bonds
(Children's Hospital Project), 5.50% due 5/01/2028 (a) 1,598
AA Aa2 5,020 Montgomery County, Ohio, Revenue Bonds (Catholic Health
Initiatives), Series A, 5% due 5/01/2032 5,088
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
State Ratings++ Ratings++ Amount Municipal Bonds Value
Oklahoma--0.9% NR* Aaa $ 7,500 Oklahoma State, IDR, Refunding, DRIVERS, Series 455, 9.424%
due 2/15/2008 (i)(k) $ 9,042
Oregon--3.1% Multnomah-Clackamas Counties, Oregon, Gresham-Barlo School
District Number 10JT, GO (g):
AAA Aaa 2,625 5.50% due 6/15/2016 2,941
AAA Aaa 2,525 5.50% due 6/15/2017 2,829
AAA Aaa 3,035 5.50% due 6/15/2018 3,401
Portland, Oregon, Sewer System Revenue Bonds, Series A (c):
AAA Aaa 5,000 5.75% due 8/01/2019 5,676
AAA Aaa 10,000 5.75% due 8/01/2020 11,285
AA Aa2 6,715 Umatilla County, Oregon, Hospital Facility Authority Revenue
Bonds (Catholic Health Intiatives), Series A, 5% due 5/01/2032 6,806
Pennsylvania-- NR* NR* 7,800 Pennsylvania State Turnpike Commission, Turnpike Revenue Bonds,
4.8% DRIVERS, Series 460-Z, 8.945% due 6/01/2012 (a)(k) 9,212
AAA Aaa 10,000 Philadelphia, Pennsylvania, Gas Works Revenue Bonds, 1998 General
Ordinance, 4th Series, 5% due 8/01/2032 (g) 10,259
Philadelphia, Pennsylvania, School District, GO (c):
AAA Aaa 5,175 Series B, 5.625% due 8/01/2021 5,720
AAA Aaa 12,115 Series D, 5.125% due 6/01/2034 12,608
AAA Aaa 6,000 Series D, 5.25% due 6/01/2034 6,347
A- NR* 5,000 Sayre, Pennsylvania, Health Care Facilities Authority Revenue
Bonds (Guthrie Health Issue), Series B, 7.125% due 12/01/2031 5,875
South NR* Aaa 1,490 South Carolina Housing Finance and Development Authority, Mortgage
Carolina--2.3% Revenue Refunding Bonds, AMT, Series A-2, 6.35% due 7/01/2019 (g) 1,558
NR* Aaa 18,030 South Carolina Transportation Infrastructure Bank Revenue Bonds,
Series A, 5% due 10/01/2029 (a) 18,479
NR* A1 4,200 Spartanburg County, South Carolina, Solid Waste Disposal
Facilities Revenue Bonds (BMW Project), AMT, 7.55% due 11/01/2024 4,392
Tennessee--2.4% NR* VMIG1** 1,400 Blount County, Tennessee, Public Building Authority, Local
Government Public Improvement Revenue Bonds, VRDN, Series A-1G,
1.75% due 6/01/2017 (a)(h) 1,400
A-1+ VMIG1** 1,600 Knoxville, Tennessee, Utilities Board, Subordinated Gas System
Revenue Bonds, VRDN, 1.74% due 1/15/2005 (g)(h) 1,600
A-1+ VMIG1** 4,000 Knoxville, Tennessee, Utilities Board, Subordinated Wastewater
System Revenue Bonds, VRDN, 1.74% due 1/15/2005 (g)(h) 4,000
Sevier County, Tennessee, Public Building Authority Revenue Bonds,
Local Government Public Improvement IV, VRDN (h):
NR* VMIG1** 1,500 Series B-6, 1.75% due 6/01/2020 (g) 1,500
NR* VMIG1** 1,980 Series E-4, 1.75% due 6/01/2020 (a) 1,980
NR* VMIG1** 3,500 Series E-5, 1.75% due 6/01/2020 (a) 3,500
Tennessee HDA, Revenue Bonds (Homeownership Program), AMT,
Series 2C:
AA Aa2 1,795 6.05% due 7/01/2012 1,870
AA Aa2 2,250 6.15% due 7/01/2014 2,320
Tennessee HDA, Revenue Refunding Bonds (Homeownership Program),
AMT, Series A (g):
AAA Aaa 4,010 5.25% due 7/01/2022 4,200
AAA Aaa 2,840 5.35% due 1/01/2026 2,947
Texas--13.2% NR* A3 7,500 Austin, Texas, Convention Center Revenue Bonds (Convention
Enterprises Inc.), Trust Certificates, Second Tier, Series B,
5.75% due 1/01/2032 7,607
AAA Aaa 1,880 Bexar, Texas, Metropolitan Water District, Waterworks System
Revenue Refunding Bonds, 6.35% due 5/01/2025 (i) 1,958
AAA NR* 10,500 Dallas-Fort Worth, Texas, International Airport Revenue Bonds,
DRIVERS, AMT, Series 353, 8.895% due 5/01/2011 (i)(k) 11,643
AAA NR* 7,500 Dallas-Fort Worth, Texas, International Airport Revenue Refunding
Bonds, DRIVERS, AMT, Series 336Z, 9.639% due 11/01/2026 (c)(k) 8,410
Harris County, Houston, Texas, Sports Authority, Revenue Refunding
Bonds, Senior Lien, Series G (i):
AAA Aaa 1,665 5.75% due 11/15/2019 1,883
AAA Aaa 3,500 5.75% due 11/15/2020 3,958
AAA Aaa 10,000 5.25% due 11/15/2030 10,387
AAA VMIG1** 10,840 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Texas Children's Hospital), VRDN,
Series B-1, 1.75% due 10/01/2029 (h)(i) 10,840
Houston, Texas, Airport System Revenue Refunding Bonds (g):
NR* Aaa 15,000 RIB, Series 845X, 8.95% due 7/01/2030 (k) 17,473
AAA Aaa 9,500 Sub-Lien, AMT, Series A, 5.70% due 7/01/2030 9,666
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
State Ratings++ Ratings++ Amount Municipal Bonds Value
Texas AAA Aaa $ 7,750 Houston, Texas, Combined Utility System, First Lien Revenue
(concluded) Refunding Bonds, Series A, 5.125% due 5/15/2028 (i) $ 8,097
A-1+ NR* 1,000 North Central Texas, Health Facility Development Corporation
Revenue Bonds (Methodist Hospitals--Dallas), VRDN, Series B,
1.74% due 10/01/2015 (h)(i) 1,000
AAA Aaa 4,875 Texas State Department of Housing and Community Affairs,
S/F Mortgage Revenue Bonds, AMT, Series A, 5.45% due
9/01/2023 (i)(l) 5,114
AAA Aaa 10,000 Texas State Turnpike Authority, Central Texas Turnpike System
Revenue Bonds, First Tier, Series A, 5.50% due 8/15/2039 (a) 10,795
AAA Aaa 4,000 Texas Technical University, Financing System Revenue Bonds,
Seventh Series, 5.50% due 8/15/2019 (i) 4,503
AAA Aaa 10,000 Travis County, Texas, Health Facilities Development Corporation,
Revenue Refunding Bonds, RITR, Series 4, 9.563% due
11/15/2024 (a)(k) 13,053
AAA Aaa 11,240 University of Houston, Texas, University Revenue Bonds, 5.50%
due 2/15/2030 (i) 12,210
Vermont--0.1% AAA Aaa 1,095 Vermont HFA, S/F Housing Revenue Bonds, AMT, Series 12B, 6.30%
due 11/01/2019 (g) 1,095
Virginia--0.2% 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) 2,712
Washington-- Bellevue, Washington, GO, Refunding (i):
18.2% AAA Aaa 2,545 5.25% due 12/01/2026 2,717
AAA Aaa 2,455 5.25% due 12/01/2027 2,613
AAA Aaa 2,850 5.25% due 12/01/2028 3,023
AAA Aaa 3,000 5.25% due 12/01/2029 3,181
AAA Aaa 17,600 5% due 12/01/2034 18,032
AAA Aaa 3,030 Chelan County, Washington, Public Utility District Number 001,
Consolidated Revenue Bonds (Chelan Hydro System), AMT, Series A,
5.45% due 7/01/2037 (a) 3,154
Chelan County, Washington, Public Utility District Number 001,
Consolidated Revenue Refunding Bonds (Chelan Hydro System),
AMT (i):
AAA Aaa 6,595 Series B, 6.35% due 7/01/2026 7,309
AAA Aaa 6,000 Series C, 5.65% due 7/01/2032 6,399
AAA Aaa 10,000 Energy Northwest, Washington, Electric Revenue Refunding Bonds
(Project Number 1), Series B, 6% due 7/01/2017 (i) 11,669
AAA Aaa 3,500 Port Seattle, Washington, Revenue Bonds, Series A, 5.50% due
2/01/2026 (i) 3,804
AAA Aaa 19,565 Port Seattle, Washington, Revenue Refunding Bonds, Series B, AMT,
5.20% due 7/01/2029 (i) 20,210
AAA Aaa 10,000 Radford Court Properties, Washington, Student Housing Revenue
Bonds, 5.75% due 6/01/2032 (i) 11,148
AAA Aaa 1,720 Seattle, Washington, Drain and Wastewater Utility Revenue Bonds,
5.75% due 11/01/2029 (i) 1,916
AAA Aaa 9,250 Seattle, Washington, Municipal Light and Power Revenue Bonds, 6%
due 10/01/2024 (i) 10,566
Seattle, Washington, Water System Revenue Bonds:
AAA Aaa 23,665 5% due 9/01/2034 (i) 24,208
AAA Aaa 2,000 Series B, 6% due 7/01/2029 (c) 2,246
Skagit County, Washington, Public Hospital District, GO,
Series A (i):
NR* Aaa 4,945 5.25% due 12/01/2025 5,309
NR* Aaa 5,450 5.25% due 12/01/2026 5,819
AAA Aaa 7,250 Tacoma, Washington, Solid Waste Utility Revenue Refunding Bonds,
Series B, 5.50% due 12/01/2019 (a) 7,957
AAA Aaa 7,000 Washington State Health Care Facilities Authority Revenue Bonds
(Providence Health System), Series A, 5.25% due 10/01/2021 (i) 7,480
Washington State, GO:
NR* NR* 10,000 DRIVERS, Series 438Z, 9.175% due 1/01/2009 (i)(k) 12,049
AAA Aaa 10,235 Series B, 6% due 1/01/2015 (g) 11,601
AAA Aaa 5,695 Series B, 6% due 1/01/2017 (g) 6,455
AAA Aaa 2,000 University of Washington, University Revenue Bonds (Student
Facilities Fee), 5.75% due 6/01/2025 (g) 2,242
West AAA Aaa 5,925 Harrison County, West Virginia, County Commission for Solid
Virginia--0.6% Waste Disposal Revenue Bonds (Monongahela Power), AMT, Series C,
6.75% due 8/01/2024 (a) 6,066
Wisconsin--0.6% Wisconsin State Health and Educational Facilities Authority
Revenue Bonds:
A-1+ Aaa 2,600 (Gundersen Clinic, Ltd. & Lutheran Hospital-La Crosse), VRDN,
Series A, 1.74% due 12/01/2015 (g)(h) 2,600
BBB+ NR* 3,395 (Synergyhealth Inc.), 6% due 11/15/2032 3,572
Puerto Rico-- A- Baa1 11,000 Puerto Rico Public Buildings Authority, Government Facilities
1.1% Revenue Refunding Bonds, Series I, 5.25% due 7/01/2029 11,535
Total Municipal Bonds (Cost--$1,588,566)--159.9% 1,678,472
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 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---$1,588,697***)--159.9% 1,678,603
Liabilities in Excess of Other Assets--(5.6%) (59,078)
Preferred Stock, at Redemption Value--(54.3%) (570,102)
-----------
Net Assets Applicable to Common Stock--100.0% $ 1,049,423
===========
* Not Rated.
** Highest short-term rating by Moody's Investors Service, Inc.
*** The cost and unrealized appreciation/depreciation of investments as
of October 31, 2004, as computed for federal income tax purposes,
were as follows:
(in Thousands)
Aggregate cost $ 1,588,672
==============
Gross unrealized appreciation $ 90,149
Gross unrealized depreciation (218)
--------------
Net unrealized appreciation $ 89,931
==============
++ Ratings of issues shown are unaudited.
++++ 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) were 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) Represents a zero coupon bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
(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 October 31, 2004.
(i) MBIA Insured.
(j) FNMA Collateralized.
(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 October 31, 2004.
(l) FNMA/GNMA Collateralized.
Forward interest rate swaps outstanding as of October 31, 2004
were as follows:
(in Thousands)
Notional Unrealized
Amount Depreciation
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate
and pay a fixed rate equal to
3.476% interest
Broker, J.P. Morgan Chase Bank
Expires January 2015 $226,000 $ (93)
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate
and pay a fixed rate equal to
4.366% interest
Broker, J.P. Morgan Chase Bank
Expires August 2026 $ 15,555 (752)
--------
Total $ (845)
========
See Notes to Financial Statements.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Statement of Net Assets
As of October 31, 2004
Assets
Investments in unaffiliated securities, at value
(identified cost--$1,588,565,668) $ 1,678,472,207
Investments in affiliated securities, at value (identified cost--$131,009) 131,009
Cash 262,358
Receivables:
Interest $ 26,606,900
Securities sold 21,185,280
Dividends from affiliates 5 47,792,185
---------------
Prepaid expenses and other assets 71,113
---------------
Total assets 1,726,728,872
---------------
Liabilities
Unrealized depreciation on forward interest rate swaps 845,266
Payables:
Securities purchased 104,567,355
Investment adviser 771,224
Dividends to Common Stock shareholders 653,447
Other affiliates 55,315 106,047,341
---------------
Accrued expenses and other liabilities 310,771
---------------
Total liabilities 107,203,378
---------------
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,
2,400 Series G Shares, 2,600 Series H Shares and 2,600 Series I Shares
of AMPS* authorized, issued and outstanding at $25,000 per share
liquidation preference) 570,102,262
---------------
Net Assets Applicable to Common Stock
Net assets applicable to Common Stock $ 1,049,423,232
===============
Analysis of Net Assets Applicable to Common Stock
Common Stock, par value $.10 per share (67,303,124 shares issued and
outstanding) $ 6,730,312
Paid-in capital in excess of par 942,966,034
Undistributed investment income--net $ 14,317,850
Accumulated realized capital losses--net (3,652,237)
Unrealized appreciation--net 89,061,273
---------------
Total accumulated earnings--net 99,726,886
---------------
Total--Equivalent to $15.59 net asset value per share of Common Stock
(market price--$14.57) $ 1,049,423,232
===============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Statement of Operations
For the Year Ended October 31, 2004
Investment Income
Interest $ 76,023,977
Dividends from affiliates 1,231
---------------
Total income 76,025,208
---------------
Expenses
Investment advisory fees $ 7,224,356
Commission fees 1,161,872
Accounting services 355,833
Transfer agent fees 165,260
Professional fees 82,835
Custodian fees 74,799
Printing and shareholder reports 62,217
Listing fees 48,050
Directors' fees and expenses 41,834
Pricing fees 33,748
Other 82,904
---------------
Total expenses before reimbursement 9,333,708
Reimbursement of expenses (262)
---------------
Total expenses after reimbursement 9,333,446
---------------
Investment income--net 66,691,762
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net 22,975,631
Forward interest rate swaps--net (13,951,315) 9,024,316
---------------
Change in unrealized appreciation/depreciation on:
Investments--net 12,209,116
Forward interest rate swaps--net (254,112) 11,955,004
--------------- ---------------
Total realized and unrealized gain--net 20,979,320
---------------
Dividends to Preferred Stock Shareholders
Investment income--net (5,014,754)
---------------
Net Increase in Net Assets Resulting from Operations $ 82,656,328
===============
See Notes to Financial Statements.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Statements of Changes in Net Assets
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 2004 2003
Operations
Investment income--net $ 66,691,762 $ 66,913,994
Realized gain--net 9,024,316 14,488,371
Change in unrealized appreciation/depreciation--net 11,955,004 (5,044,358)
Dividends to Preferred Stock shareholders (5,014,754) (4,678,286)
--------------- ---------------
Net increase in net assets resulting from operations 82,656,328 71,679,721
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (61,673,831) (58,869,942)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock
shareholders (61,673,831) (58,869,942)
--------------- ---------------
Common Stock Transactions
Offering and underwriting costs resulting from issuance of Preferred Stock (1,509,721) --
Proceeds from issuance of Common Stock resulting from reorganization 76,288,852 --
--------------- ---------------
Net increase in net assets resulting from Common Stock transactions 74,779,131 --
--------------- ---------------
Net Assets Applicable to Common Stock
Total increase in net assets applicable to Common Stock 95,761,628 12,809,779
Beginning of year 953,661,604 940,851,825
--------------- ---------------
End of year* $ 1,049,423,232 $ 953,661,604
=============== ===============
* Undistributed investment income--net $ 14,317,850 $ 14,405,500
=============== ===============
See Notes to Financial Statements.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Financial Highlights
The following per share data and ratios have been derived
from information provided in the financial statements.
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 year $ 15.36 $ 15.15 $ 15.18 $ 14.16 $ 13.64
---------- ---------- ---------- ---------- ----------
Investment income--net 1.04+++ 1.08+++ 1.07 1.08 1.09
Realized and unrealized gain (loss)--net .25 .16 (.04) 1.05 .57
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.07) (.08) (.11) (.23) (.29)
Realized gain--net -- -- --++ -- --
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.22 1.16 .92 1.90 1.37
---------- ---------- ---------- ---------- ----------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.97) (.95) (.95) (.88) (.85)
Realized gain--net -- -- --++ -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions to Common
Stock shareholders (.97) (.95) (.95) (.88) (.85)
---------- ---------- ---------- ---------- ----------
Offering and underwriting costs resulting from
the issuance of Preferred Stock (.02) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 15.59 $ 15.36 $ 15.15 $ 15.18 $ 14.16
========== ========== ========== ========== ==========
Market price per share, end of year $ 14.57 $ 14.51 $ 14.31 $ 15.06 $ 12.75
========== ========== ========== ========== ==========
Total Investment Return*
Based on net asset value per share 8.52% 8.18% 6.52% 13.89% 11.06%
========== ========== ========== ========== ==========
Based on market price per share 7.36% 8.19% 1.42% 25.49% 5.94%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Common Stock
Total expenses, net of reimbursement** .95% .94% .97% .98% .99%
========== ========== ========== ========== ==========
Total expenses** .95% .95% .97% .98% .99%
========== ========== ========== ========== ==========
Total investment income--net** 6.77% 6.99% 7.16% 7.34% 7.92%
========== ========== ========== ========== ==========
Amount of dividends to Preferred Stock
shareholders .51% .49% .73% 1.59% 2.13%
========== ========== ========== ========== ==========
Investment income--net, to Common Stock
shareholders 6.26% 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 4.61% 4.78% 4.86% 4.95% 5.22%
========== ========== ========== ========== ==========
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Financial Highlights (concluded)
The following per share data and ratios have been derived 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 1.08% 1.06% 1.53% 3.30% 4.11%
========== ========== ========== ========== ==========
Supplemental Data
Net assets applicable to Common Stock,
end of year (in thousands) $1,049,423 $ 953,662 $ 940,852 $ 940,359 $ 877,390
========== ========== ========== ========== ==========
Preferred Stock outstanding, end of year
(in thousands) $ 570,000 $ 440,000 $ 440,000 $ 440,000 $ 440,000
========== ========== ========== ========== ==========
Portfolio turnover 144.40% 114.05% 97.34% 99.00% 107.11%
========== ========== ========== ========== ==========
Leverage
Asset coverage per $1,000 $ 2,841 $ 3,167 $ 3,138 $ 3,137 $ 2,994
========== ========== ========== ========== ==========
Dividends Per Share on Preferred Stock Outstanding
Series A--Investment income--net $ 272 $ 270 $ 364 $ 833 $ 1,051
========== ========== ========== ========== ==========
Series B--Investment income--net $ 283 $ 273 $ 364 $ 842 $ 1,051
========== ========== ========== ========== ==========
Series C--Investment income--net $ 251 $ 268 $ 360 $ 849 $ 1,063
========== ========== ========== ========== ==========
Series D--Investment income--net $ 264 $ 247 $ 348 $ 825 $ 986
========== ========== ========== ========== ==========
Series E--Investment income--net $ 259 $ 240 $ 352 $ 790 $ 1,048
========== ========== ========== ========== ==========
Series F--Investment income--net $ 271 $ 274 $ 359 $ 860 $ 1,010
========== ========== ========== ========== ==========
Series G--Investment income--net $ 269 $ 304 $ 545 $ 799 $ 992
========== ========== ========== ========== ==========
Series H+++++--Investment income--net $ 63 -- -- -- --
========== ========== ========== ========== ==========
Series I+++++--Investment income--net $ 65 -- -- -- --
========== ========== ========== ========== ==========
* 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.
+++ Based on average shares outstanding.
+++++ Series H and Series I were issued on August 23, 2004.
See Notes to Financial Statements.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 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 U.S. generally accepted
accounting principles, which may require the use of management
accruals and estimates. Actual results may differ from these
estimates. The Fund determines and makes available for publication
the net asset value of its Common Stock on a daily 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 last available
bid price in the over-the-counter market or on the basis of values
as obtained by a pricing service. Pricing services use valuation
matrixes that incorporate both dealer-supplied valuations and
valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the
general direction of the Board of Directors. Such valuations and
procedures will be reviewed periodically by the Board of Directors
of the Fund. 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). Swap agreements are valued by quoted fair
values received daily by the Fund's pricing service. Short-term
investments with a remaining maturity of 60 days or less are valued
at amortized cost, which approximates market value, under which
method the investment is valued at cost and any premium or discount
is amortized on a straight line basis to maturity. Investments in
open-end investment companies are valued at their net asset value
each business day. Securities and other 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.
(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.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Notes to Financial Statements (continued)
* 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.
(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.
(f) Offering costs--Direct expenses related to the public offering
of the Fund's Preferred Stock were charged to capital at the time of
issuance of the shares.
(g) Reclassification--U.S. generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, during the current year, $90,827 has been reclassified
between undistributed net investment income and accumulated net
realized capital losses as a result of permanent differences
attributable to amortization methods on fixed income securities.
This reclassification has no effect on net assets or net asset
values 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, including proceeds from the
issuance of Preferred Stock. The Investment Advisor has agreed to
reimburse its management fee by the amount of the management fees
the Fund pays to FAM indirectly through its investment in Merrill
Lynch Institutional Tax-Exempt Fund. For the year ended October 31,
2004, FAM reimbursed the Fund in the amount of $262.
For the year ended October 31, 2004, Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S"), an affiliate of FAM, received
underwriting fees of $1,300,000 in connection with the issuance of
the Fund's Preferred Stock.
In addition, MLPF&S received $3,142 in commissions on the execution
of portfolio security transactions for the Fund for the year ended
October 31, 2004.
For the year ended October 31, 2004, the Fund reimbursed FAM $31,982
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 year ended October 31, 2004 were $2,224,263,547 and
$2,035,088,364, respectively.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Notes to Financial Statements (concluded)
4. Capital 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.
Common Stock
Shares issued and outstanding during the year ended October 31, 2004
increased by 5,204,029 as a result of issuance of Common Stock from
reorganization and for the year ended October 31, 2003 remained
constant.
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 October 31, 2004 were as follows: Series A,
1.549%; Series B, 1.60%; Series C, 1.37%; Series D, 1.419%; Series
E, 1.50%; Series F, 1.40%; Series G, 1.50%; Series H, 1.60%; and
Series I, 1.65%.
Shares issued and outstanding for the year ended October 31, 2004
increased by 5,200 shares from the issuance of two additional series
of Preferred Stock. Shares issued and outstanding for the year ended
October 31, 2003 remained constant.
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 year ended
October 31, 2004, MLPF&S earned $558,578 as commissions.
5. Distribution to Shareholders:
The Fund paid a tax-exempt income dividend to holders of Common
Stock in the amount of $.081000 per share on November 29, 2004 to
shareholders of record on November 12, 2004.
The tax character of distributions paid during the fiscal years
ended October 31, 2004 and October 31, 2003 was as follows:
10/31/2004 10/31/2003
Distributions paid from:
Tax-exempt income $ 66,688,585 $ 63,548,228
--------------- ---------------
Total distributions $ 66,688,585 $ 63,548,228
=============== ===============
As of October 31, 2004, the components of accumulated earnings on a
tax basis were as follows:
Undistributed ordinary income--net $ 90,826
Undistributed tax-exempt income--net 14,293,014
Undistributed long-term capital gains--net 939,137
---------------
Total undistributed earnings--net 15,322,977
Capital loss carryforward --
Unrealized gains--net 84,403,909*
---------------
Total accumulated earnings--net $ 99,726,886
===============
* The difference between book-basis and tax-basis net unrealized
gains is attributable primarily to the tax deferral of losses on
straddles and the difference between book and tax amortization
methods for premiums and discounts on fixed income securities.
6. Acquisition of MuniInsured Fund, Inc.:
On June 7, 2004, the Fund acquired substantially all of the assets
and the liabilities of MuniInsured Fund, Inc. pursuant to a plan of
reorganization. The acquisition was accomplished by a tax-free
exchange of 8,083,214 shares of Common Stock of MuniInsured Fund,
Inc. for 5,204,029 shares of Common Stock of the Fund. MuniInsured
Fund, Inc.'s net assets on that date of $76,288,852, including
$2,192,376 of net unrealized appreciation and $1,110,901 of
accumulated net realized capital losses were combined with those of
the Fund. The aggregate net assets, before the deduction of
Preferred Stock, immediately after the acquisition amounted to
$1,426,634,109.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
of MuniYield Insured Fund, Inc.:
We have audited the accompanying statement of net assets of
MuniYield Insured Fund, Inc., including the schedule of investments,
as of October 31, 2004, and the related statement of operations for
the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and financial
highlights for each of the years indicated therein. These financial
statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and
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 and financial
highlights. Our procedures included confirmation of securities owned
as of October 31, 2004, by correspondence with the custodian and
others. 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, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of MuniYield Insured Fund, Inc. as of October 31,
2004, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the years
indicated, in conformity with U.S. generally accepted accounting
principles.
(Ernst & Young LLP)
Philadelphia, Pennsylvania
December 16, 2004
Important Tax Information (unaudited)
All of the net investment income distributions paid by MuniYield
Insured Fund, Inc. during the taxable year ended October 31, 2004
qualify as tax-exempt interest dividends for federal income tax
purposes.
Please retain this information for your records.
Dividend Policy (unaudited)
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., OCTOBER 31, 2004
Automatic Dividend Reinvestment Plan (unaudited)
The following description of the Fund's Automatic Dividend
Reinvestment Plan (the "Plan") is sent to you annually as required
by federal securities laws.
Pursuant to the Fund's Plan, unless a holder of Common Stock
otherwise elects, all dividend and capital gains distributions will
be automatically reinvested by EquiServe (the "Plan Agent"), as
agent for shareholders in administering the Plan, in additional
shares of Common Stock of the Fund. Holders of Common Stock who
elect not to participate in the Plan will receive all distributions
in cash paid by check mailed directly to the shareholder of record
(or, if the shares are held in street or other nominee name then to
such nominee) by EquiServe, as dividend paying agent. Such
participants may elect not to participate in the Plan and to receive
all distributions of dividends and capital gains in cash by sending
written instructions to EquiServe, as dividend paying agent, at the
address set forth below. Participation in the Plan is completely
voluntary and may be terminated or resumed at any time without
penalty by written notice if received by the Plan Agent not less
than ten days prior to any dividend record date; otherwise such
termination will be effective with respect to any subsequently
declared dividend or distribution.
Whenever the Fund declares an income dividend or capital gains
distribution (collectively referred to as "dividends") payable
either in shares or in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the
equivalent in shares of Common Stock. The shares will be acquired by
the Plan Agent for the participant's account, depending upon the
circumstances described below, either (i) through receipt of
additional unissued but authorized shares of Common Stock from the
Fund ("newly issued shares") or (ii) by purchase of outstanding
shares of Common Stock on the open market ("open-market purchases")
on the New York Stock Exchange or elsewhere. If on the payment date
for the dividend, the net asset value per share of the Common Stock
is equal to or less than the market price per share of the Common
Stock plus estimated brokerage commissions (such conditions being
referred to herein as "market premium"), the Plan Agent will invest
the dividend amount in newly issued shares on behalf of the
participant. The number of newly issued shares of Common Stock to be
credited to the participant's account will be determined by dividing
the dollar amount of the dividend by the net asset value per share
on the date the shares are issued, provided that the maximum
discount from the then current market price per share on the date of
issuance may not exceed 5%. If on the dividend payment date the net
asset value per share is greater than the market value (such
condition being referred to herein as "market discount"), the Plan
Agent will invest the dividend amount in shares acquired on behalf
of the participant in open-market purchases.
In the event of a market discount on the dividend payment date, the
Plan Agent will have until the last business day before the next
date on which the shares trade on an "ex-dividend" basis or in no
event more than 30 days after the dividend payment date (the "last
purchase date") to invest the dividend amount in shares acquired in
open-market purchases. It is contemplated that the Fund will pay
monthly income dividends. Therefore, the period during which open-
market purchases can be made will exist only from the payment date
on the dividend through the date before the next "ex-dividend" date,
which typically will be approximately ten days. If, before the Plan
Agent has completed its open-market purchases, the market price of a
share of Common Stock exceeds the net asset value per share, the
average per share purchase price paid by the Plan Agent may exceed
the net asset value of the Fund's shares, resulting in the
acquisitions of fewer shares than if the dividend had been paid in
newly issued shares on the dividend payment date. Because of the
foregoing difficulty with respect to open-market purchases, the Plan
provides that if the Plan Agent is unable to invest the full
dividend amount in open-market purchases during the purchase period
or if the market discount shifts to a market premium during the
purchase period, the Plan Agent will cease making open-market
purchases and will invest the uninvested portion of the dividend
amount in newly issued shares at the close of business on the last
purchase date determined by dividing the uninvested portion of the
dividend by the net asset value per share.
The Plan Agent maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the account,
including information needed by shareholders for tax records. Shares
in the account of each Plan participant will be held by the Plan
Agent in non-certificated form in the name of the participant, and
each shareholder's proxy will include those shares purchased or
received pursuant to the Plan. The Plan Agent will forward all proxy
solicitation materials to participants and vote proxies for shares
held pursuant to the Plan in accordance with the instructions of the
participants.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
In the case of shareholders such as banks, brokers or nominees
which hold shares of others who are the beneficial owners, the
Plan Agent will administer the Plan on the basis of the number of
shares certified from time to time by the record shareholders as
representing the total amount registered in the record shareholder's
name and held for the account of beneficial owners who are to
participate in the Plan.
There will be no brokerage charges with respect to shares issued
directly by the Fund as a result of dividends or capital gains
distributions payable either in shares or in cash. However, each
participant will pay a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open-market purchases in
connection with the reinvestment of dividends.
The automatic reinvestment of dividends and distributions will not
relieve participants of any federal, state or local income tax that
may be payable (or required to be withheld) on such dividends.
Shareholders participating in the Plan may receive benefits not
available to shareholders not participating in the Plan. If the
market price plus commissions of the Fund's shares is above the net
asset value, participants in the Plan will receive shares of the
Fund at less than they could otherwise purchase them and will have
shares with a cash value greater than the value of any cash
distribution they would have received on their shares. If the market
price plus commissions is below the net asset value, participants
will receive distributions in shares with a net asset value greater
than the value of any cash distribution they would have received on
their shares. However, there may be insufficient shares available in
the market to make distributions in shares at prices below the net
asset value. Also, since the Fund does not redeem shares, the price
on resale may be more or less than the net asset value.
The value of shares acquired pursuant to the Plan will generally be
excluded from gross income to the extent that the cash amount
reinvested would be excluded from gross income. If, when the Fund's
shares are trading at a premium over net asset value, the Fund
issues shares pursuant to the Plan that have a greater fair market
value than the amount of cash reinvested, it is possible that all or
a portion of such discount (which may not exceed 5% of the fair
market value of the Fund's shares) could be viewed as a taxable
distribution. If the discount is viewed as a taxable distribution,
it is also possible that the taxable character of this discount
would be allocable to all the shareholders, including shareholders
who do not participate in the Plan. Thus, shareholders who do not
participate in the Plan might be required to report as ordinary
income a portion of their distributions equal to their allocable
share of the discount.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the
Plan. There is no direct service charge to participants in the Plan;
however, the Fund reserves the right to amend the Plan to include a
service charge payable by the participants.
All correspondence concerning the Plan should be directed to the
Plan Agent at EquiServe, P.O. Box 43010, Providence, RI 02940-3010,
Telephone: 800-426-5523.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Officers and Directors (unaudited)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
Interested Director
Terry K. Glenn* President 1999 to President of the Merrill Lynch Investment 124 Funds None
P.O. Box 9011 and present Managers, L.P. ("MLIM")/Fund Asset 157 Portfolios
Princeton, Director Management, L.P. ("FAM")-advised funds
NJ 08543-9011 since 1999; Chairman (Americas Region) of
Age: 64 MLIM from 2000 to 2002; Executive Vice
President of MLIM and FAM (which terms as
used herein include their corporate
predecessors) from 1983 to 2002; President
of FAM Distributors, Inc. ("FAMD") from
1986 to 2002 and Director thereof from 1991
to 2002; Executive Vice President and
Director of Princeton Services, Inc.
("Princeton Services") from 1993 to 2002;
President of Princeton Administrators, L.P.
from 1989 to 2002; Director of Financial
Data Services, Inc. since 1985.
* Mr. Glenn is a director, trustee or member of an advisory board of
certain other investment companies for which MLIM or FAM acts as
investment adviser. Mr. Glenn is an "interested person," as
described in the Investment Company Act, of the Fund based on his
present and former positions with MLIM, FAM, FAMD, Princeton
Services and Princeton Administrators, L.P. The Director's term is
unlimited. Directors serve until their resignation, removal or
death, or until December 31 of the year in which they turn 72. As
Fund President, Mr. Glenn serves at the pleasure of the Board of
Directors.
Independent Directors*
James H. Bodurtha Director 2002 to Director, The China Business Group, Inc. 38 Funds None
P.O. Box 9095 present since 1996 and Executive Vice President 55 Portfolios
Princeton, thereof from 1996 to 2003; Chairman of the
NJ 08543-9095 Board, Berkshire Holding Corporation since
Age: 60 1980; Partner, Squire, Sanders & Dempsey
from 1980 to 1993.
Joe Grills Director 1994 to Member of the Committee of Investment of 38 Funds Kimco Realty
P.O. Box 9095 present Employee Benefit Assets of the Association 55 Portfolios Corporation
Princeton, of Financial Professionals ("CIEBA") since
NJ 08543-9095 1986; Member of CIEBA's Executive Committee
Age: 69 since 1988 and its Chairman from 1991 to 1992;
Assistant Treasurer of International Business
Machines Corporation ("IBM") and Chief
Investment Officer of IBM Retirement Funds
from 1986 to 1993; Member of the Investment
Advisory Committee of the State of New York
Common Retirement Fund since 1989; Member
of the Investment Advisory Committee of the
Howard Hughes Medical Institute from 1997 to
2000; Director, Duke University Management
Company from 1992 to 2004, Vice Chairman
thereof from 1998 to 2004 and Director Emeritus
thereof since 2004; Director, LaSalle Street
Fund from 1995 to 2001; Director, Kimco Realty
Corporation since 1997; Member of the Investment
Advisory Committee of the Virginia Retirement
System since 1998 and Vice Chairman thereof
since 2002; Director, Montpelier Foundation
since 1998 and its Vice Chairman since 2000;
Member of the Investment Committee of the
Woodberry Forest School since 2000; Member of
the Investment Committee of the National Trust
for Historic Preservation since 2000.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Officers and Directors (unaudited)(continued)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
Independent Directors* (concluded)
Herbert I. London Director 2002 to John M. Olin Professor of Humanities, New 38 Funds None
P.O. Box 9095 present York University since 1993 and Professor 55 Portfolios
Princeton, thereof since 1980; President, Hudson
NJ 08543-9095 Institute since 1997 and Trustee thereof
Age: 65 since 1980; Dean, Gallatin Division of
New York University from 1976 to 1993;
Distinguished Fellow, Herman Kahn Chair,
Hudson Institute from 1984 to 1985; Director,
Damon Corp. from 1991 to 1995; Overseer,
Center for Naval Analyses from 1983 to 1993.
Roberta Cooper Ramo Director 2002 to Shareholder, Modrall, Sperling, Roehl, 38 Funds None
P.O. Box 9095 present Harris & Sisk, P.A. since 1993; President, 55 Portfolios
Princeton, American Bar Association from 1995 to
NJ 08543-9095 1996 and Member of the Board of Governors
Age: 62 thereof from 1994 to 1997; Shareholder,
Poole, Kelly & Ramo, Attorneys at Law,
P.C. from 1977 to 1993; Director, ECMC
Group (service provider to students, schools
and lenders) since 2001; Director, United
New Mexico Bank (now Wells Fargo) from 1983
to 1988; Director, First National Bank of
New Mexico (now Wells Fargo) from 1975 to
1976; Vice President, American Law Institute
since 2004.
Robert S. Salomon, Jr. Director 1996 to Principal of STI Management (investment 38 Funds None
P.O. Box 9095 present adviser) since 1994; Chairman and CEO of 55 Portfolios
Princeton, Salomon Brothers Asset Management from
NJ 08543-9095 1992 to 1995; Chairman of Salomon Brothers
Age: 67 equity mutual funds from 1992 to 1995;
regular columnist with Forbes Magazine from
1992 to 2002; Director of Stock Research and
U.S. Equity Strategist at Salomon Brothers
from 1975 to 1991; Trustee, Commonfund from
1980 to 2001.
Stephen B. Swensrud Director 1992 to Chairman of Fernwood Advisors, Inc. 39 Funds None
P.O. Box 9095 present (investment adviser) since 1996; Principal, 56 Portfolios
Princeton, Fernwood Associates (financial consultants)
NJ 08543-9095 since 1975; Chairman of R.P.P. Corporation
Age: 71 (manufacturing company) since 1978; Director
of International Mobile Communications,
Incorporated (telecommunications) since 1998.
* The Director's term is unlimited. Directors serve until their
resignation, removal or death, or until December 31 of the year in
which they turn 72.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Officers and Directors (unaudited)(concluded)
Position(s) Length of
Held with Time
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years
Fund Officers*
Donald C. Burke Vice 1993 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since
P.O. Box 9011 President present 1999; Senior Vice President and Treasurer of Princeton Services since 1999
Princeton, and and and Director since 2004; Vice President of FAMD since 1999; Vice President of
NJ 08543-9011 Treasurer 1999 to MLIM and FAM from 1990 to 1997; Director of MLIM Taxation since 1990.
Age: 44 present
Kenneth A. Jacob Senior 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
P.O. Box 9011 Vice present Management) of MLIM from 1997 to 2000.
Princeton, President
NJ 08543-9011
Age: 53
John M. Loffredo Senior 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
P.O. Box 9011 Vice present Management) of MLIM from 1998 to 2000.
Princeton, President
NJ 08543-9011
Age: 40
William R. Bock Vice 1993 to Vice President of MLIM since 1994.
P.O. Box 9011 President present
Princeton,
NJ 08543-9011
Age: 68
Jeffrey Hiller Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice
P.O. Box 9011 Compliance present President and Chief Compliance Officer of MLIM since 2004; Global Director
Princeton, Officer of Compliance at Morgan Stanley Investment Management from 2002 to 2004;
NJ 08543-9011 Managing Director and Global Director of Compliance at Citigroup Asset
Age: 53 Management from 2000 to 2002; Chief Compliance Officer at Soros Fund
Management in 2000; Chief Compliance Officer at Prudential Financial from
1995 to 2000.
Alice A. Pellegrino Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from
P.O. Box 9011 present 1999 to 2002; Attorney associated with MLIM since 1997.
Princeton,
NJ 08543-9011
Age: 44
* Officers of the Fund serve at the pleasure of the Board of Directors.
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
Andre F. Perold resigned as a Director of the Fund
effective October 22, 2004.
MUNIYIELD INSURED FUND, INC., OCTOBER 31, 2004
Quality Profile (unaudited)
The quality ratings of securities in the Fund as of October 31, 2004
were as follows:
Percent of
Total
S&P Rating/Moody's Rating Investments
AAA/Aaa 85.3%
AA/Aa 1.1
A/A 7.9
BBB/Baa 1.8
NR (Not Rated) 1.3
Other* 2.6
* Includes portfolio holdings in short-term securities.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third
quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are
available on the SEC's Web site at http://www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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 Web site
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., OCTOBER 31, 2004
Item 2 - Code of Ethics - The registrant has adopted a code of
ethics, as of the end of the period covered by this report, that
applies to the registrant's principal executive officer, principal
financial officer and principal accounting officer, or persons
performing similar functions. A copy of the code of ethics
is available without charge upon request by calling toll-free
1-800-MER-FUND (1-800-637-3863).
Item 3 - Audit Committee Financial Expert - The registrant's board
of directors has determined that (i) the registrant has the
following audit committee financial experts serving on its audit
committee and (ii) each audit committee financial expert is
independent: (1) Joe Grills, (2) Andre F. Perold (resigned
as of October 1, 2004), (3) Robert S. Salomon, Jr., and (4)
Stephen B. Swensrud.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending October 31, 2004 - $32,000
Fiscal Year Ending October 31, 2003 - $32,550
(b) Audit-Related Fees -
Fiscal Year Ending October 31, 2004 - $3,000
Fiscal Year Ending October 31, 2003 - $3,000
The nature of the services include assurance and related services
reasonably related to the performance of the audit of financial
statements not included in Audit Fees.
(c) Tax Fees - Fiscal Year Ending October 31, 2004 - $5,200
Fiscal Year Ending October 31, 2003 - $5,000
The nature of the services include tax compliance, tax advice and
tax planning.
(d) All Other Fees - Fiscal Year Ending October 31, 2004 - $0
Fiscal Year Ending October 31, 2003 - $0
(e)(1) The registrant's audit committee (the "Committee") has
adopted policies and procedures with regard to the pre-approval of
services. Audit, audit-related and tax compliance services provided
to the registrant on an annual basis require specific pre-approval
by the Committee. The Committee also must approve other non-audit
services provided to the registrant and those non-audit services
provided to the registrant's affiliated service providers that
relate directly to the operations and the financial reporting of the
registrant. Certain of these non-audit services that the Committee
believes are a) consistent with the SEC's auditor independence rules
and b) routine and recurring services that will not impair the
independence of the independent accountants may be approved by the
Committee without consideration on a specific case-by-case basis
("general pre-approval"). However, such services will only be
deemed pre-approved provided that any individual project does not
exceed $5,000 attributable to the registrant or $50,000 for all of
the registrants the Committee oversees. Any proposed services
exceeding the pre-approved cost levels will require specific pre-
approval by the Committee, as will any other services not subject to
general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to
general pre-approval at the next regularly scheduled in-person board
meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending October 31, 2004 - $8,200
Fiscal Year Ending October 31, 2003 - $8,000
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling,
controlled by, or under common control with the investment adviser
that provides ongoing services to the registrant that were not pre-
approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation
S-X is compatible with maintaining the principal accountant's
independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0%
Item 5 - Audit Committee of Listed Registrants - The following
individuals are members of the registrant's separately-designated
standing audit committee established in accordance with Section
3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)):
James H. Bodurtha
Joe Grills
Herbert I. London
Andre F. Perold (resigned as of October 1, 2004)
Roberta Cooper Ramo
Robert S. Solomon, Jr.
Stephen B. Swensrud
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies -
Proxy Voting Policies and Procedures
Each Fund's Board of Directors/Trustees has delegated to Merrill
Lynch Investment Managers, L.P. and/or Fund Asset Management, L.P.
(the "Investment Adviser") authority to vote all proxies relating to
the Fund's portfolio securities. The Investment Adviser has adopted
policies and procedures ("Proxy Voting Procedures") with respect to
the voting of proxies related to the portfolio securities held in
the account of one or more of its clients, including a Fund.
Pursuant to these Proxy Voting Procedures, the Investment Adviser's
primary objective when voting proxies is to make proxy voting
decisions solely in the best interests of each Fund and its
shareholders, and to act in a manner that the Investment Adviser
believes is most likely to enhance the economic value of the
securities held by the Fund. The Proxy Voting Procedures are
designed to ensure that that the Investment Adviser considers the
interests of its clients, including the Funds, and not the interests
of the Investment Adviser, when voting proxies and that real (or
perceived) material conflicts that may arise between the Investment
Adviser's interest and those of the Investment Adviser's clients are
properly addressed and resolved.
In order to implement the Proxy Voting Procedures, the Investment
Adviser has formed a Proxy Voting Committee (the "Committee"). The
Committee is comprised of the Investment Adviser's Chief Investment
Officer (the "CIO"), one or more other senior investment
professionals appointed by the CIO, portfolio managers and
investment analysts appointed by the CIO and any other personnel the
CIO deems appropriate. The Committee will also include two non-
voting representatives from the Investment Adviser's Legal
department appointed by the Investment Adviser's General Counsel.
The Committee's membership shall be limited to full-time employees
of the Investment Adviser. No person with any investment banking,
trading, retail brokerage or research responsibilities for the
Investment Adviser's affiliates may serve as a member of the
Committee or participate in its decision making (except to the
extent such person is asked by the Committee to present information
to the Committee, on the same basis as other interested
knowledgeable parties not affiliated with the Investment Adviser
might be asked to do so). The Committee determines how to vote the
proxies of all clients, including a Fund, that have delegated proxy
voting authority to the Investment Adviser and seeks to ensure that
all votes are consistent with the best interests of those clients
and are free from unwarranted and inappropriate influences. The
Committee establishes general proxy voting policies for the
Investment Adviser and is responsible for determining how those
policies are applied to specific proxy votes, in light of each
issuer's unique structure, management, strategic options and, in
certain circumstances, probable economic and other anticipated
consequences of alternate actions. In so doing, the Committee may
determine to vote a particular proxy in a manner contrary to its
generally stated policies. In addition, the Committee will be
responsible for ensuring that all reporting and recordkeeping
requirements related to proxy voting are fulfilled.
The Committee may determine that the subject matter of a recurring
proxy issue is not suitable for general voting policies and requires
a case-by-case determination. In such cases, the Committee may
elect not to adopt a specific voting policy applicable to that
issue. The Investment Adviser believes that certain proxy voting
issues require investment analysis - such as approval of mergers and
other significant corporate transactions - akin to investment
decisions, and are, therefore, not suitable for general guidelines.
The Committee may elect to adopt a common position for the
Investment Adviser on certain proxy votes that are akin to
investment decisions, or determine to permit the portfolio manager
to make individual decisions on how best to maximize economic value
for a Fund (similar to normal buy/sell investment decisions made by
such portfolio managers). While it is expected that the Investment
Adviser will generally seek to vote proxies over which the
Investment Adviser exercises voting authority in a uniform manner
for all the Investment Adviser's clients, the Committee, in
conjunction with a Fund's portfolio manager, may determine that the
Fund's specific circumstances require that its proxies be voted
differently.
To assist the Investment Adviser in voting proxies, the Committee
has retained Institutional Shareholder Services ("ISS"). ISS is an
independent adviser that specializes in providing a variety of
fiduciary-level proxy-related services to institutional investment
managers, plan sponsors, custodians, consultants, and other
institutional investors. The services provided to the Investment
Adviser by ISS include in-depth research, voting recommendations
(although the Investment Adviser is not obligated to follow such
recommendations), vote execution, and recordkeeping. ISS will also
assist the Fund in fulfilling its reporting and recordkeeping
obligations under the Investment Company Act.
The Investment Adviser's Proxy Voting Procedures also address
special circumstances that can arise in connection with proxy
voting. For instance, under the Proxy Voting Procedures, the
Investment Adviser generally will not seek to vote proxies related
to portfolio securities that are on loan, although it may do so
under certain circumstances. In addition, the Investment Adviser
will vote proxies related to securities of foreign issuers only on a
best efforts basis and may elect not to vote at all in certain
countries where the Committee determines that the costs associated
with voting generally outweigh the benefits. The Committee may at
any time override these general policies if it determines that such
action is in the best interests of a Fund.
From time to time, the Investment Adviser may be required to vote
proxies in respect of an issuer where an affiliate of the Investment
Adviser (each, an "Affiliate"), or a money management or other
client of the Investment Adviser (each, a "Client") is involved.
The Proxy Voting Procedures and the Investment Adviser's adherence
to those procedures are designed to address such conflicts of
interest. The Committee intends to strictly adhere to the Proxy
Voting Procedures in all proxy matters, including matters involving
Affiliates and Clients. If, however, an issue representing a non-
routine matter that is material to an Affiliate or a widely known
Client is involved such that the Committee does not reasonably
believe it is able to follow its guidelines (or if the particular
proxy matter is not addressed by the guidelines) and vote
impartially, the Committee may, in its discretion for the purposes
of ensuring that an independent determination is reached, retain an
independent fiduciary to advise the Committee on how to vote or to
cast votes on behalf of the Investment Adviser's clients.
In the event that the Committee determines not to retain an
independent fiduciary, or it does not follow the advice of such an
independent fiduciary, the powers of the Committee shall pass to a
subcommittee, appointed by the CIO (with advice from the Secretary
of the Committee), consisting solely of Committee members selected
by the CIO. The CIO shall appoint to the subcommittee, where
appropriate, only persons whose job responsibilities do not include
contact with the Client and whose job evaluations would not be
affected by the Investment Adviser's relationship with the Client
(or failure to retain such relationship). The subcommittee shall
determine whether and how to vote all proxies on behalf of the
Investment Adviser's clients or, if the proxy matter is, in their
judgment, akin to an investment decision, to defer to the applicable
portfolio managers, provided that, if the subcommittee determines to
alter the Investment Adviser's normal voting guidelines or, on
matters where the Investment Adviser's policy is case-by-case, does
not follow the voting recommendation of any proxy voting service or
other independent fiduciary that may be retained to provide research
or advice to the Investment Adviser on that matter, no proxies
relating to the Client may be voted unless the Secretary, or in the
Secretary's absence, the Assistant Secretary of the Committee
concurs that the subcommittee's determination is consistent with the
Investment Adviser's fiduciary duties
In addition to the general principles outlined above, the Investment
Adviser has adopted voting guidelines with respect to certain
recurring proxy issues that are not expected to involve unusual
circumstances. These policies are guidelines only, and the
Investment Adviser may elect to vote differently from the
recommendation set forth in a voting guideline if the Committee
determines that it is in a Fund's best interest to do so. In
addition, the guidelines may be reviewed at any time upon the
request of a Committee member and may be amended or deleted upon the
vote of a majority of Committee members present at a Committee
meeting at which there is a quorum.
The Investment Adviser has adopted specific voting guidelines with
respect to the following proxy issues:
* Proposals related to the composition of the Board of Directors of
issuers other than investment companies. As a general matter, the
Committee believes that a company's Board of Directors (rather than
shareholders) is most likely to have access to important, nonpublic
information regarding a company's business and prospects, and is
therefore best-positioned to set corporate policy and oversee
management. The Committee, therefore, believes that the foundation
of good corporate governance is the election of qualified,
independent corporate directors who are likely to diligently
represent the interests of shareholders and oversee management of
the corporation in a manner that will seek to maximize shareholder
value over time. In individual cases, the Committee may look at a
nominee's history of representing shareholder interests as a
director of other companies or other factors, to the extent the
Committee deems relevant.
* Proposals related to the selection of an issuer's independent
auditors. As a general matter, the Committee believes that
corporate auditors have a responsibility to represent the interests
of shareholders and provide an independent view on the propriety of
financial reporting decisions of corporate management. While the
Committee will generally defer to a corporation's choice of auditor,
in individual cases, the Committee may look at an auditors' history
of representing shareholder interests as auditor of other companies,
to the extent the Committee deems relevant.
* Proposals related to management compensation and employee
benefits. As a general matter, the Committee favors disclosure of
an issuer's compensation and benefit policies and opposes excessive
compensation, but believes that compensation matters are normally
best determined by an issuer's board of directors, rather than
shareholders. Proposals to "micro-manage" an issuer's compensation
practices or to set arbitrary restrictions on compensation or
benefits will, therefore, generally not be supported.
* Proposals related to requests, principally from management, for
approval of amendments that would alter an issuer's capital
structure. As a general matter, the Committee will support requests
that enhance the rights of common shareholders and oppose requests
that appear to be unreasonably dilutive.
* Proposals related to requests for approval of amendments to an
issuer's charter or by-laws. As a general matter, the Committee
opposes poison pill provisions.
* Routine proposals related to requests regarding the formalities of
corporate meetings.
* Proposals related to proxy issues associated solely with holdings
of investment company shares. As with other types of companies, the
Committee believes that a fund's Board of Directors (rather than its
shareholders) is best-positioned to set fund policy and oversee
management. However, the Committee opposes granting Boards of
Directors authority over certain matters, such as changes to a
fund's investment objective, that the Investment Company Act
envisions will be approved directly by shareholders.
* Proposals related to limiting corporate conduct in some manner
that relates to the shareholder's environmental or social concerns.
The Committee generally believes that annual shareholder meetings
are inappropriate forums for discussion of larger social issues, and
opposes shareholder resolutions "micromanaging" corporate conduct or
requesting release of information that would not help a shareholder
evaluate an investment in the corporation as an economic matter.
While the Committee is generally supportive of proposals to require
corporate disclosure of matters that seem relevant and material to
the economic interests of shareholders, the Committee is generally
not supportive of proposals to require disclosure of corporate
matters for other purposes.
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 second 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 - See Item 2
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: December 13, 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: December 13, 2004
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
MuniYield Insured Fund, Inc.
Date: December 13, 2004