MUNIYIELD
INSURED
FUND, INC.
FUND LOGO
Semi-Annual Report
April 30, 1996
<PAGE>
Officers and Directors
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
William R. Bock, Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Transfer Agents
Common Stock:
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MYI
<PAGE>
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield Insured Fund, Inc. for
their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock 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 Com-mon Stock shareholders. Statements and other
information herein are as dated and are subject to change.
MuniYield
Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield Insured Fund, Inc.
TO OUR SHAREHOLDERS
For the six-month period ended April 30, 1996, the Common Stock of
MuniYield Insured Fund, Inc. earned $0.521 per share income
dividends, which included earned and unpaid dividends of $0.074.
This represents a net annualized yield of 6.96%, based on a month-
end per share net asset value of $15.03. Over the same period, the
total investment return on the Fund's Common Stock was +1.03%, based
on a change in per share net asset value from $15.46 to $15.03, and
assuming reinvestment of $0.525 per share income dividends and
$0.022 per share capital gains distributions.
The average yields of the Fund's Auction Market Preferred Stock for
the six months ended April 30, 1996 were as follows: Series A,
3.66%; Series B, 3.68%; Series C, 3.73%; Series D, 3.61%; and Series
E, 3.97%.
The Environment
Investor perceptions regarding the US economy changed over the
course of the six-month period ended April 30, 1996. As 1995 drew to
a close and 1996 began, it appeared that the US economy was losing
momentum. Lackluster retail sales, increases in initial unemployment
claims (along with weak job and income growth), and evidence of
slowing in the manufacturing sector all suggested that the rate of
economic growth was decelerating, with some forecasters even
suggesting the possibility of an imminent recession.
<PAGE>
However, the consensus outlook for the rate of future economic
growth changed dramatically with the report of stronger-than-
expected employment data for February and March. As a result,
investors began to anticipate renewed economic growth. Long-term
interest rates rose, and the Federal Reserve Board left monetary
policy on hold. Adding to investor concerns was the report that the
Knight Ridder-Commodity Research Bureau Index was near an eight-year
high, largely because of an increase in agricultural prices and an
upward spike in the price of crude oil.
Investors are likely to continue to focus on the probable direction
of economic activity and Federal Reserve Board monetary policy in
the weeks ahead. At this time, inflationary pressures do not seem to
be building and the capital spending, housing and consumption
sectors are still relatively weak, which suggest that the economy is
not on the verge of overheating. Nevertheless, it is unlikely that
further indications of stronger economic activity in the weeks ahead
may add to investor concerns that accelerating economic activity
could lead to higher inflation and interest rates.
The Municipal Market
During the six months ended April 30, 1996, tax-exempt bond yields
rose as investors became increasingly concerned that recent economic
growth would reignite inflationary pressures. Through early February
1996, municipal bond yields continued their earlier declines
supported by continued moderate economic growth and favorable
inflationary expectations. As measured by the Bond Buyer Revenue
Bond Index, yields on uninsured, A-rated municipal revenue bonds
declined an additional 30 basis points (0.30%) to 5.70% by early
February. As signs of emerging economic growth became more numerous,
particularly with the release of the strong March employment
figures, inflation fears increased and bond yields rose in response
for the remainder of the six-month period ended April 30, 1996. At
April 30, 1996, long-term municipal bond yields were approximately
6.30%, an increase of approximately 30 basis points over the last
six months. The rise in US Treasury bond yields was more
substantial. Over the last six months, yields on US Treasury
securities rose approximately 60 basis points to 6.90%. During the
April period, the municipal bond market reversed the trend seen
throughout much of 1995 and significantly outperformed the US
Treasury bond market.
<PAGE>
The municipal bond market's recent outperformance was largely the
result of two principal factors. First, and perhaps more important,
much of the earlier concern regarding proposed changes in Federal
income tax codes and their effect on the tax treatment of tax-exempt
bond income has dissipated. As the negative revenue impact of the
various proposals, such as the flat tax, became apparent, the
likelihood of immediate reform quickly diminished. When the Kemp
Commission dealing with Federal income tax reform released its
findings early in 1996, the obvious need for reform was highlighted.
However, no specific recommendations of a flat tax, value-added tax
or any other reform were made. Consequently, fears of losing the
favored tax treatment of municipal bond income declined even
further. As a percentage of Treasury bond yields, tax-exempt bond
yield ratios quickly declined from 95% to approximately 90%. This
allowed the municipal bond market to maintain much of the gains made
since early 1995.
The second major factor leading to the municipal bond market's
recent improvement was the return of a more favorable technical
environment. Over the past six months, approximately $90 billion in
municipal securities were underwritten, an increase of approximately
45% versus the comparable period a year earlier. However, much of
this increase was biased by recent underwritings dedicated toward
refinancing. Like individual homeowners, municipal issuers sought to
refinance their existing higher-couponed debt as tax-exempt bond
yields declined from their highs in 1995. In recent months such
refinancings were estimated to represent at least 50% of total
issuance. However, the recent rise in tax-exempt interest rates
slowed the pace of such refinancings. Over the last three months
approximately $40 billion in long-term tax-exempt securities were
underwritten, an increase of 35% compared to the same period a year
ago. At current interest rate levels large amounts of refundings are
unlikely and the rate of new bond issuance should continue to
decline.
Additionally, investors continue to receive significant amounts of
assets derived from coupon income, bond maturities, and proceeds
from early redemptions. In recent months investors received over $30
billion in such assets. These cash flows helped maintain individual
retail investor demand in recent months. Additionally, major
institutional investors, such as certain insurance companies whose
underwriting profits were cyclically high, demonstrated significant
ongoing interest in the tax-exempt bond market, particularly on
higher-quality securities. Individual and institutional investor
demand was strong enough during the six-month period ended April 30,
1996 to absorb the relative increase in bond issuance.
Looking ahead, we believe the municipal bond market is likely to
continue to outperform the US Treasury market. Investor demand
should remain adequate to absorb new bond issuance. It is also
unlikely that the rapid pace of issuance seen thus far in 1996 will
be maintained. The recent rise in yields made further bond
refinancings economically unfeasible. Since these refinancings were
the driving force of recent bond issuance, as the amount of these
refundings decline, overall issuance should decline. This should
allow the current demand/supply balance to be easily maintained in
upcoming months.
<PAGE>
Additionally, as a percentage of US Treasury bond yields, long-term
municipal bond yields remain historically attractive. It is likely
that recent interest rate increases will have a negative impact on
economic growth, perhaps as early as late summer 1996. With long-
term mortgage rates above 8%, the domestic housing sector has
already indicated signs of slower growth. If other interest rate
sectors of the economy, such as the automobile industry, begin to
show similar adverse effects, taxable interest rates would be poised
to resume their decline. With long-term tax-exempt revenue bonds
yielding approximately 90% of their taxable counterparts, municipal
bond yields are poised to decline further.
Portfolio Strategy
As we entered the six-month period ended April 30, 1996, we
anticipated that municipal bond yields would decline because of the
continued slowing of the economy and the prospect of additional
easing by the Federal Reserve Board. With this expectation, our
portfolio strategy concentrated on seeking to enhance the Fund's
total return with the acquisition of performance-oriented
securities. However, given the recent strength evident in the
economic data, we became cautious toward the market. Therefore, in
order to be more defensive we added higher-coupon issues and raised
the Fund's cash reserve level.
Looking ahead, we expect the municipal bond market to increase in
volatility within a wide trading range over the next few months. Our
investment strategy will be circumspect. We intend to increase the
cash level as the bond market moves higher and selectively buy
during periods of market weakness, particularly emphasizing high-
quality issues of high-tax states.
In Conclusion
We appreciate your ongoing interest in MuniYield Insured Fund, Inc.,
and we look forward to assisting you with your financial needs in
the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(William R. Bock)
William R. Bock
Vice President and Portfolio Manager
June 5, 1996
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
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.
<PAGE>
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 pick-up 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.
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 below and at
right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
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
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama--0.4% AAA Aaa $ 3,500 Huntsville, Alabama, Health Care Authority, Health Care
Facilities Revenue Bonds, Series B, 6.625% due 6/01/2023 (d) $ 3,658
Alaska--1.8% AAA Aaa 18,960 Alaska State Housing Finance Corporation, Refunding, Series A,
5.875% due 12/01/2024 (d)(j)(k) 18,261
Arizona--0.4% NR* VMIG1++ 200 Arizona Educational Loan Marketing Corporation, Educational
Loan Revenue Bonds, VRDN, AMT, Series A, 4.35% due 12/01/2020 (a) 200
NR* NR* 3,500 Mohave County, Arizona, IDA, IDR (North Star Steel Company
Project), AMT, 6.70% due 3/01/2020 3,687
AA P1 100 Pinal County, Arizona, IDA, PCR (Magma Copper/Newmont
Mining Corporation), VRDN, 4.05% due 12/01/2009 (a) 100
Arkansas--0.1% NR* P1 600 Crosset, Arkansas, PCR (Georgia--Pacific Corporation Project),
VRDN, 4.20% due 10/01/2007 (a) 600
<PAGE>
California California HFA, Revenue Bonds, AMT:
- --16.0% AA- Aa 3,850 RIB, 9.237% due 8/01/2023 (i) 3,889
AAA Aaa 1,595 Series E, 7% due 8/01/2026 (d) 1,656
AAA Aaa 6,500 California State Department of Water Resources, Water Systems
Revenue Bonds (Central Valley Project), Series O, 4.75%
due 12/01/2029 (d) 5,276
California State Public Works Board, Lease Revenue Bonds:
A- A 8,500 (Department of Corrections--Monterey County Soledad II),
Series A, 7% due 11/01/2019 9,252
A- A 2,750 (Various California State University Projects), 6.375%
due 10/01/2019 2,835
AAA Aaa 3,000 (Various University of California Projects), Series A,
6.40% due 12/01/2016 (b) 3,120
A- A1 4,000 (Various University of California Projects), Series B,
6.625% due 12/01/2019 4,194
AAA Aaa 7,000 California State, Various Purpose, 5.90% due 4/01/2023 (c) 6,888
AAA Aaa 5,000 Contra Costa, California, Water District, Water Revenue Bonds,
Series D, 6.375% due 10/01/2022 (b) 5,179
AAA Aaa 3,000 East Bay, California, Municipal Utility District, Wastewater
Treatment Systems, Revenue Refunding Bonds, Sub-Series,
5% due 6/01/2026 (c) 2,599
AAA Aaa 11,500 Los Angeles, California, Convention and Exhibition Center
Authority, Lease Revenue Refunding Bonds, Series A, 5.375%
due 8/15/2018 (d) 10,556
Los Angeles, California, Harbor Department Revenue
Bonds, AMT, Series B (b):
AAA Aaa 3,000 6.625% due 8/01/2019 3,124
AAA Aaa 8,725 6.625% due 8/01/2025 8,989
AAA Aaa 11,585 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Bonds, Second Senior Series B,
Proposition C, 5.25% due 7/01/2023 (b) 10,341
AAA Aaa 5,000 Los Angeles County, California, Transportation Commission,
Sales Tax Revenue Refunding Bonds, Series B, 6.50% due
7/01/2015 (c) 5,277
AAA Aaa 8,210 M-S-R Public Power Agency, California, Revenue Bonds
(San Juan Project), Series E, 6.75% due 7/01/2011 (d) 8,782
AAA Aaa 2,190 Northern California Transmission Revenue Bonds
(California--Oregon Transmission Project), Series A,
6.50% due 5/01/2016 (d) 2,319
AAA Aaa 3,000 Orange County, California, Financing Authority, Tax
Allocation Revenue Refunding Bonds, Series A, 6.25%
due 9/01/2014 (d) 3,074
AAA Aaa 3,000 Redwood City, California, Public Financing Authority,
Local Agency Revenue Refunding Bonds, Series A, 6.50%
due 7/15/2011 (b) 3,202
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
California AAA Aaa $ 5,000 Sacramento, California, City Financing Authority, Lease
(concluded) Revenue Refunding Bonds, Series A, 5.40% due 11/01/2020 (b) $ 4,684
AAA Aaa 2,250 Sacramento, California, Municipal Utility District, Electric
Revenue Bonds, Series J, 5.50% due 8/15/2021 (b) 2,127
AAA Aaa 6,000 San Francisco, California, Bay Area Rapid Transit District,
Sales Tax Revenue Bonds, 5.50% due 7/01/2020 (c) 5,678
San Francisco, California, City and County Airports Commission
Revenue Bonds (International Airport), Second Series:
AAA Aaa 6,000 AMT, Issue 6, 6.60% due 5/01/2024 (b) 6,190
AAA Aaa 13,500 Issue 9B, 5.25% due 5/01/2020 (c) 12,349
AAA Aaa 10,000 San Francisco, California, City and County Sewer Revenue
Bonds, Series A, 5.95% due 10/01/2025 (c) 9,863
AAA Aaa 5,375 San Mateo County, California, Joint Powers Financing
Authority, Lease Revenue Bonds (San Mateo County Health
Care Center), Series A, 5.75% due 7/15/2022 (e) 5,184
AAA Aaa 3,000 Santa Rosa, California, Wastewater Revenue Refunding Bonds,
Series A, 5.25% due 9/01/2016 (c) 2,818
AAA Aaa 4,900 Southern California Public Power Authority, Transmission
Project Revenue Refunding Bonds, Sub-Series A, 5% due
7/01/2022 (d) 4,216
AAA Aaa 2,500 Stanislaus County, California, COP, Refunding (Capital
Improvement Program), Series A, 5.25% due 5/01/2018 (d) 2,293
AAA Aaa 5,000 University of California Revenue Bonds (Multiple Purpose
Projects), Series D, 6.375% due 9/01/2024 (d) 5,171
Colorado--1.9% AA Aa 9,000 Colorado Springs, Colorado, Utilities Revenue Bonds,
Series A, 6.10% due 11/15/2024 9,051
AAA Aaa 7,000 Denver, Colorado, City and County Airport Revenue Bonds,
Series A, 5.50% due 11/15/2025 (d) 6,555
AAA Aaa 2,500 Douglas County, Colorado, School District No. Re-1 (Douglas
and Elbert Counties Improvement Project), Series A, 6.50%
due 12/15/2016(d) 2,641
Connecticut AAA Aaa 3,500 Connecticut State HFA (Housing Mortgage Finance Program),
- --1.2% Series B, 6.75% due 11/15/2023 (d) 3,626
AA- A1 5,000 Connecticut State Health and Educational Facilities
Authority Revenue Bonds (Nursing Home Program--AHF/Hartford),
7.125% due 11/01/2024 5,566
AA- Aa 2,000 Connecticut State, Series A, 5.50% due 5/15/2014 1,946
Delaware--1.3% AAA Aaa 8,490 Delaware State EDA, PCR, Refunding (Delmarva Power
Project), Series B, 7.15% due 7/01/2018 (c) 9,382
AAA Aaa 3,525 Delaware Transportation Authority, Transportation System
Revenue Bonds, Senior Series, 7% due 7/01/2013 (c) 3,882
District of AAA Aaa 20,100 Metropolitan Washington, D.C., Virginia Airports Authority,
Columbia--2.1% General Airport Revenue Bonds, AMT, Series A, 6.625%
due 10/01/2019 (d) 20,812
<PAGE>
Florida--3.7% AAA Aaa 4,000 Dade County, Florida, Aviation Revenue Bonds, Series B,
5.60% due 10/01/2026 (d) 3,826
AA- VMIG1++ 3,300 Dade County, Florida, IDA, Exempt Facilities Revenue
Refunding Bonds (Florida Power & Light Co.), VRDN, 4.10%
due 6/01/2021 (a) 3,300
A1+ VMIG1++ 6,500 Dade County, Florida, IDA, IDR (Dolphins Stadium Project),
VRDN, Series D, 4.05% due 1/01/2016 (a) 6,500
AAA Aaa 6,250 Dade County, Florida, Refunding (Seaport), UT, 5.125%
due 10/01/2026 (d) 5,585
AAA Aaa 9,940 Orange County, Florida, Tourist Development, Tax Revenue
Bonds, Series B, 6.50% due 10/01/2019 (b) 10,472
A-1 VMIG1++ 6,800 Pinellas County, Florida, Health Facilities Authority,
Revenue Refunding Bonds (Pooled Hospital Loan Program),
DATES, 4.05% due 12/01/2015 (a) 6,800
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Georgia--2.8% AAA Aaa $ 10,000 Georgia Municipal Electric Authority, Power Revenue
Bonds, Series EE, 6.40% due 1/01/2023 (b) $ 10,311
AAA Aaa 1,200 Medical Center Hospital Authority, Georgia, Anticipation
Certificates (Columbus Regional Healthcare System),
5.50% due 8/01/2015 (d) 1,135
Metropolitan Atlanta Rapid Transportation Authority,
Georgia, Sales Tax Revenue Bonds:
AAA Aaa 6,500 Second Indenture, Series A, 6.90% due 7/01/2020 (d) 7,076
AAA Aaa 8,955 Series O, 6.55% due 7/01/2020 (c) 9,566
Hawaii--1.8% AAA Aaa 17,145 Hawaii State Airports Systems Revenue Bonds, AMT, Second
Series, 6.75% due 7/01/2021 (d) 17,934
Illinois--6.5% AAA Aaa 7,000 Chicago, Illinois (Central Public Library), Series B, 6.85%
due 7/01/2002 (b)(h) 7,845
AAA Aaa 9,160 Chicago, Illinois, Midway Airport Revenue Bonds, AMT, Series A,
6.25% due 1/01/2024 (d) 9,179
AAA Aaa 5,000 Chicago, Illinois (Project Series), UT, 5.50% due 1/01/2024 (c) 4,613
AAA Aaa 12,000 Chicago, Illinois, Public Building Commission, Building
Revenue Bonds, Series A, 6.50% due 1/01/2018 (d)(g) 12,498
AAA Aaa 15,000 Cook County, Illinois, GO, UT, Series A, 6.60% due
11/15/2022 (d) 15,655
Illinois Health Facilities Authority Revenue Bonds:
AAA Aaa 6,000 Refunding (Carle Foundation), Series A, 6.75% due
1/01/2010 (c) 6,309
AAA Aaa 8,545 (Rockford Memorial Hospital), Series B, 6.75% due
8/15/2018 (b) 8,933
<PAGE>
Indiana--0.7% AAA Aaa 5,000 Indianapolis, Indiana, Gas Utility Revenue Bonds, Series A,
6.20% due 6/01/2023 (c) 5,085
AAA Aaa 2,000 Monroe County, Indiana, Hospital Authority Revenue Bonds
(Bloomington Hospital Project), 6.70% due 5/01/2012 (d) 2,107
A-1 Aaa 300 Rockport, Indiana, PCR, Refunding, (AEP Generating Co.
Project), VRDN, Series A, 4.10% due 7/01/2025 (a)(b) 300
Kansas--2.2% AAA Aaa 20,250 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric
Company Project), 7% due 6/01/2031 (d) 22,162
Maryland--0.2% NR* Aa 1,995 Maryland State Community Development Administration,
Department of Housing and Community Development, S/F
Program, AMT, Second Series, 6.55% due 4/01/2026 2,020
Massachusetts Massachusetts Bay Transportation Authority, General
- --5.1% Transportation Systems, Series B (b):
AAA Aaa 7,000 5.375% due 3/01/2020 6,482
AAA Aaa 7,500 5.375% due 3/01/2025 6,899
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds (c):
AAA Aaa 6,400 (Bay State Medical Center), Series D, 5.50% due 7/01/2016 6,000
AAA Aaa 7,130 (New England Medical Center Hospitals), Series F, 6.625%
due 7/01/2025 7,456
AAA Aaa 5,000 Massachusetts State Industrial Finance Agency Revenue Bonds
(Brandeis University), Series C, 6.80% due 10/01/2019 (d) 5,335
Massachusetts State Water Resource Authority (d):
AAA Aaa 5,000 (General), Series A, 5.90% due 8/01/2016 4,878
AAA Aaa 6,000 Series B, 4.75% due 12/01/2021 4,977
AAA Aaa 12,000 Series B, 5% due 12/01/2025 10,407
Michigan--3.3% A1+ VMIG1++ 200 Grand Rapids, Michigan, Water Supply System, Revenue
Refunding Bonds, VRDN, 4.10% due 1/01/2020 (a)(c) 200
AAA Aaa 21,750 Michigan State Strategic Fund, Limited Obligation Revenue
Refunding Bonds (Detroit Edison Company Pollution Project),
6.875% due 12/01/2021 (c) 23,426
Monroe County, Michigan, PCR (Detroit Edison Co. Project), AMT (d):
AAA Aaa 5,000 Series CC, 6.55% due 6/01/2024 5,158
AAA Aaa 5,000 Series I-B, 6.55% due 9/01/2024 5,161
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Minnesota--0.7% Minnesota State HFA, S/F Mortgage Revenue Bonds, AMT:
AA+ Aa $ 3,800 Series H, 6.50% due 1/01/2026 $ 3,847
AA+ Aa 3,000 Series L, 6.70% due 7/01/2020 3,051
Missouri--0.4% AAA Aaa 4,000 Kansas City, Missouri, Airport General Revenue Improvement
Bonds, Series B, 6.875% due 9/01/2014 (e) 4,300
Nevada--5.7% AAA Aaa 9,250 Humboldt County, Nevada, PCR, Refunding (Sierra Pacific
Power Company Project), 6.55% due 10/01/2013 (b) 9,888
Las Vegas, Nevada, GO, Refunding (c):
AAA Aaa 4,180 6.60% due 10/01/2010 4,492
AAA Aaa 4,470 6.60% due 10/01/2011 4,785
AAA Aaa 4,770 6.60% due 10/01/2012 5,103
AAA Aaa 15,255 Nevada State GO, Nos. 49 and 50, 5.50% due 11/01/2025 (c) 14,378
AAA Aaa 2,400 Reno, Nevada, Hospital Revenue Bonds (Saint Mary's Regional
Medical Center), Series A, 6.70% due 7/01/2021 (d) 2,532
AAA Aaa 15,000 Washoe County, Nevada, Gas Facilities Revenue Bonds
(Sierra Pacific Power Co.), AMT, 6.65% due 12/01/2017 (b) 15,581
New Hampshire-- AAA Aaa 7,660 New Hampshire Higher Educational and Health Facilities
0.8% Authority Revenue Bonds (Elliot Hospital of Manchester),
6.25% due 10/01/2021 (b) 7,837
New Jersey AAA Aaa 4,695 New Jersey State Housing and Mortgage Finance Agency Revenue
- --1.7% Bonds (Home Buyer), AMT, Series K, 6.375% due 10/01/2026 (d) 4,716
AAA Aaa 12,000 New Jersey State Transportation Trust Fund Authority Refunding
Bonds (Transportation System), Series A, 5.50% due 6/15/2013 (d) 11,713
New Mexico A1+ P1 800 Farmington, New Mexico, PCR (Arizona Public Service Co.),
- --1.1% VRDN, AMT, Series C, 4.25% due 9/01/2024 (a) 800
AAA Aaa 10,275 Farmington, New Mexico, PCR, Refunding (Southern California
Edison Company), Series A, 5.875% due 6/01/2023 (d) 10,063
New York--5.6% BBB Baa1 10,980 Metropolitan Transportation Authority, New York, Service
Contract Refunding Bonds (Transit Facilities), Series 5, 7%
due 7/01/2012 11,604
New York City, New York, GO, UT:
BBB+ Baa1 2,210 Series C, Sub-Series C-1, 7.50% due 8/01/2019 2,421
BBB+ Baa1 1,000 Series D, 7.50% due 2/01/2016 1,090
BBB+ Baa1 12,000 Series D, 7.50% due 2/01/2019 13,083
AAA Aaa 7,000 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Series B,
5.375% due 6/15/2019 (b) 6,464
BBB+ Baa1 7,595 New York State Dormitory Authority, Revenue Refunding
Bonds (State University Educational Facilities), Series B, 7%
due 5/15/2016 8,054
A A 5,000 New York State Local Government Assistance Corporation,
Refunding, Series B, 5.50% due 4/01/2021 4,624
New York State Urban Development Corporation, Revenue
Refunding Bonds (Correctional Facilities):
BBB Baa1 6,000 5.50% due 1/01/2015 5,440
BBB Baa1 4,000 Series A, 5.50% due 1/01/2016 3,617
<PAGE>
North NR* VMIG1++ 5,000 Person County, North Carolina, Industrial Facilities and
Carolina--0.5% Pollution Control Financing Authority, Solid Waste Disposal
Revenue Bonds (Carolina Power and Light Company), DATES, AMT,
4.30% due 11/01/2016 (a) 5,000
North AAA Aaa 2,500 Grand Forks, North Dakota, Health Care Facilities Revenue
Dakota--0.3% Bonds (United Hospital Obligated Group), 6.25% due
12/01/2024 (d) 2,550
Ohio--3.0% AAA Aaa 3,950 Clermont County, Ohio, Sewer Systems Revenue Bonds, 7.10%
due 12/01/2001 (b)(h) 4,470
AAA Aaa 14,735 Cuyahoga County, Ohio, Hospital Revenue and Improvement
Refunding Bonds (University Hospitals Health Systems), Series A,
6.875% due 1/15/1999 (f)(h) 15,925
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Ohio NR* VMIG1++ $ 6,700 Cuyahoga County, Ohio, Hospital Revenue Improvement Bonds
(concluded) (University Hospital of Cleveland), VRDN, 4.25% due 1/01/2016 (a) $ 6,700
AAA Aaa 2,500 Ohio State Higher Educational Facilities Commission,
Mortgage Revenue Bonds (University of Dayton Project), 6.60%
due 12/01/2017 (c) 2,676
Oklahoma--0.5% AAA Aaa 4,655 Sapulpa, Oklahoma, Municipal Authority, Utility Revenue
Refunding Bonds, 5.75% due 4/01/2023 (c) 4,506
Oregon--0.0% A1+ VMIG1++ 200 Port Saint Helen's, Oregon, PCR (Portland General Electric
Company Project), VRDN, Series B, 4.10% due 6/01/2010 (a) 200
Pennsylvania AAA Aaa 16,000 Montgomery County, Pennsylvania, IDA, PCR, Refunding
- --1.7% (Philadelphia Electric Company), Series B, 6.70%
due 12/01/2021 (d) 17,044
South South Carolina State Public Service Authority Revenue
Carolina--2.8% Bonds:
AAA Aaa 4,850 Refunding, Series B, 5.875% due 1/01/2023 (c) 4,744
AAA Aaa 9,900 (Santee Cooper), Series D, 6.50% due 7/01/2014 (b) 10,550
AAA Aaa 7,000 Spartanburg County, South Carolina, Hospital Facilities
Revenue Refunding Bonds (Spartanburg General Hospital
System), Series A, 6.625% due 4/15/2022 (e) 7,309
NR* NR* 4,200 Spartanburg County, South Carolina, Solid Waste Disposal
Facilities Revenue Bonds (BMW Project), AMT, 7.55% due
11/01/2024 4,522
<PAGE>
Tennessee--1.1% AAA Aaa 3,820 Johnson City, Tennessee, Health and Educational Facilities
Board, Hospital Revenue Refunding and Improvement Bonds
(Johnson City Medical Center), 6.75% due 7/01/2016 (d) 4,070
AAA Aaa 3,000 Metropolitan Government, Nashville and Davidson County, Tennessee,
Water and Sewer Revenue Bonds, RIB, 8.371% due 1/01/2022 (b)(i) 2,970
A+ A1 3,900 Tennessee HDA, Mortgage Finance, AMT, Series A, 6.90%
due 7/01/2025 4,006
Texas--9.2% BBB Baa2 3,700 Alliance Airport Authority, Inc., Texas, Special Facilities
Revenue Bonds (Federal Express Corporation Project), AMT,
6.375% due 4/01/2021 3,636
AAA Aaa 2,800 Austin, Texas, Utility System Revenue Refunding Bonds, 5.50%
due 5/15/2020 (d) 2,640
AAA Aaa 3,200 Bexar, Texas, Metropolitan Water District, Waterworks System
Revenue Refunding Bonds, 6.35% due 5/01/2025 (d) 3,302
Brazos River Authority, Texas, PCR (Texas Utilities Electric
Company Project), AMT (b):
A1 VMIG1++ 13,800 Refunding, VRDN, Series 96A, 4.25% due 3/01/2026 (a) 13,800
AAA Aaa 3,800 Series A, 6.75% due 4/01/2022 3,990
A1+ VMIG1++ 100 Harris County, Texas, Health Facilities Development
Corporation, Special Facilities Revenue Bonds (Texas
Medical Center Project), VRDN, 4.20% due 2/15/2022 (a)(d) 100
AAA Aaa 6,885 Houston, Texas, Airport System Revenue Bonds
(Sub-Lien), AMT, Series A, 6.75% due 7/01/2021 (c) 7,182
AAA Aaa 4,750 Houston, Texas, Hotel Occupancy Tax, Revenue Refunding Bonds
(Senior-Lien), 5.50% due 7/01/2015 (e) 4,512
AAA Aaa 11,795 Matagorda County, Texas, Navigation District No. 1, Revenue
Refunding Bonds (Houston Light and Power), Series A, 6.70%
due 3/01/2027 (b) 12,634
NR* VMIG1++ 1,400 Port of Port Arthur, Texas, Navigation District, PCR, Refunding
(Texaco Inc. Project), VRDN, 4.15% due 10/01/2024 (a) 1,400
AAA Aaa 10,000 San Antonio, Texas, Electric and Gas Revenue Bonds, Series 95,
5.375% due 2/01/2018 (d) 9,326
AAA Aaa 11,000 San Antonio, Texas, Hotel Occupancy Revenue Bonds (Henry B.
Gonzalez Convention Center Project), 5.70% due 8/15/2026 (c) 10,541
AAA Aaa 20,180 Texas State Turnpike Authority, Dallas North Thruway Revenue
Bonds (President George Bush Turnpike), 5.25% due 1/01/2023 (c) 18,326
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Utah--2.3% A1+ VMIG1++ $ 2,140 Emery County, Utah, PCR, Refunding (Pacificorp Projects),
VRDN, 4.10% due 11/01/2024 (a)(b) $ 2,140
AA- Aa 5,250 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, Series D, 5% due 7/01/2023 4,493
AAA Aaa 10,000 Salt Lake City, Utah, Airport Revenue Bonds, AMT,
Series A, 6.125% due 12/01/2022 (c) 9,980
AAA Aaa 7,000 Timpanagos Special Service District, Utah, Sewer Revenue
Bonds, Series A, 6.10% due 6/01/2019 (b) 6,957
Virginia--1.8% AAA Aaa 5,540 Loudon County, Virginia, COP, 6.90% due 3/01/2019 (e) 5,953
AAA Aaa 5,890 Upper Occoquan Sewer Authority, Virginia, Regional Sewer
Revenue Bonds, Series A, 5% due 7/01/2025 (d) 5,148
AAA Aaa 6,500 Virginia State HDA, Commonwealth Mortgage, AMT, Series A,
Sub-Series A-4, 6.45% due 7/01/2028 (d) 6,590
Washington AAA Aaa 1,200 Douglas County, Washington, Public Utility District No. 001,
- --5.4% Revenue Bonds (Electric Distribution System), 6% due
1/01/2015 (d) 1,206
AAA Aaa 9,495 Port Seattle, Washington, Revenue Bonds (Sub-Lien), Series C,
6.625% due 8/01/2017 (d) 10,059
Seattle, Washington, Metropolitan Seattle Municipality
Sewer Revenue Bonds:
AAA Aaa 10,560 Series U, 6.60% due 1/01/2032 (c) 11,158
AAA Aaa 1,750 Series W, 6.25% due 1/01/2022 (d) 1,791
AAA Aaa 5,000 Snohomish County, Washington, Public Utility District No. 001,
Electric Revenue Bonds (Generation System), AMT, Series B,
5.80% due 1/01/2024 (d) 4,724
AAA Aaa 3,500 Tacoma, Washington, Refuse Utility Revenue Bonds, 7% due
12/01/2019 (b) 3,854
AAA Aaa 2,000 University of Washington Alumni Association, Lease Revenue
Bonds (University of Washington Medical Center--Roosevelt II),
6.25% due 8/15/2012 (e) 2,064
A+ A1 8,300 Washington State Health Care Facilities Authority Revenue
Bonds (Children's Hospital and Medical Center), 6% due
10/01/2022 7,809
AAA Aaa 11,175 Washington State Public Power Supply Systems, Revenue Refunding
Bonds (Nuclear Project No. 1), Series A, 6.25% due 7/01/2017 (d) 11,367
West AAA Aaa 4,425 Harrison County, West Virginia, County Commission Solid Waste
Virginia--0.8% Disposal Revenue Bonds (Monongahela Power), AMT, Series C,
6.75% due 8/01/2024 (b) 4,697
AAA Aaa 2,800 West Virginia School Building Authority, Revenue and Capital
Improvement Bonds, Series B, 6.75% due 7/01/2017 (d) 2,981
<PAGE>
Wisconsin--0.8% AA Aa 2,000 Wisconsin, Housing and EDA, Home Ownership Revenue Bonds,
AMT, Series B, 6.75% due 9/01/2025 2,040
Wisconsin State Health and Educational Facilities Authority,
Revenue Refunding Bonds (Wheaton--Franciscan Services) (d):
AAA Aaa 3,955 6.50% due 8/15/2011 4,113
AAA Aaa 2,000 6% due 8/15/2015 1,964
Total Investments (Cost--$941,940)--97.7% 975,884
Other Assets Less Liabilities--2.3% 23,124
--------
Net Assets--100.0% $999,008
========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at April 30, 1996.
(b)AMBAC Insured.
(c)FGIC Insured.
(d)MBIA Insured.
(e)FSA Insured.
(f)BIG Insured.
(g)Escrowed to maturity.
(h)Prerefunded.
(i)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at April 30, 1996.
(j)FNMA Collateralized.
(k)GNMA Collateralized.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<PAGE>
<TABLE>
Statement of Assets, Liabilities and Capital as of April 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$941,940,039) (Note 1a) $ 975,884,449
Cash 66,458
Receivables:
Interest $ 17,962,980
Securities sold 6,616,570 24,579,550
--------------
Deferred organization expenses (Note 1e) 8,873
Prepaid expenses and other assets 58,767
--------------
Total assets 1,000,598,097
--------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 1,036,870
Investment adviser (Note 2) 438,695 1,475,565
--------------
Accrued expenses and other liabilities 114,956
--------------
Total liabilities 1,590,521
--------------
Net Assets: Net assets $ 999,007,576
==============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (12,800 shares
of AMPS* issued and outstanding at $25,000 per share
liquidation preference) $ 320,000,000
Common Stock, par value $.10 per share (45,187,339 shares
issued and outstanding) $ 4,518,734
Paid-in capital in excess of par 630,233,103
Undistributed investment income--net 8,124,513
Undistributed realized capital gains on investments--net 2,186,816
Unrealized appreciation on investments--net 33,944,410
--------------
Total--Equivalent to $15.03 net asset value per Common Stock
(market price--$13.75) 679,007,576
--------------
Total capital $ 999,007,576
==============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended April 30, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 29,890,556
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 2,550,693
Commission fees (Note 4) 396,667
Transfer agent fees 63,880
Professional fees 48,237
Accounting services (Note 2) 45,036
Directors' fees and expenses 39,361
Printing and shareholder reports 33,904
Custodian fees 28,739
Listing fees 22,773
Pricing fees 12,296
Amortization of organization expenses (Note 1e) 3,128
Other 33,541
--------------
Total expenses 3,278,255
--------------
Investment income--net 26,612,301
--------------
Realized & Realized gain on investments--net 10,345,853
Unrealized Gain Change in unrealized appreciation on investments--net (25,710,160)
(Loss) on --------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 11,247,994
(Notes 1b, ==============
1d & 3):
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 26,612,301 $ 54,442,202
Realized gain (loss) on investments--net 10,345,853 (1,207,134)
Change in unrealized appreciation/depreciation on
investments--net (25,710,160) 76,204,182
-------------- --------------
Net increase in net assets resulting from operations 11,247,994 129,439,250
-------------- --------------
<PAGE>
Dividends & Investment income--net:
Distributions to Common Stock (20,873,432) (41,768,871)
Shareholders Preferred Stock (4,828,152) (12,703,005)
(Note 1f): Realized gain on investments--net:
Common Stock (3,872,510) (158,132)
Preferred Stock (1,178,380) (26,101)
In excess of realized gain on investments--net:
Common Stock -- (1,631,693)
Preferred Stock -- (269,320)
-------------- --------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (30,752,474) (56,557,122)
-------------- --------------
Net Assets: Total increase (decrease) in net assets (19,504,480) 72,882,128
Beginning of period 1,018,512,056 945,629,928
-------------- --------------
End of period* $ 999,007,576 $1,018,512,056
============== ==============
<FN>
*Undistributed investment income--net $ 8,124,513 $ 7,213,796
============== ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
For the For the Period
The following per share data and ratios have been derived Six Months March 27,
from information provided in the financial statements. Ended 1992++ to
April 30, For the Year Ended October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.46 $ 13.85 $ 16.76 $ 14.27 $ 14.18
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .59 1.20 1.20 1.21 .66
Realized and unrealized gain (loss) on
investments--net (.33) 1.66 (2.66) 2.59 .16
-------- -------- -------- -------- --------
Total from investment operations .26 2.86 (1.46) 3.80 .82
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.46) (.92) (.98) (1.00) (.48)
Realized gain on investments--net (.09) (.00)+++ (.26) (.10) --
In excess of realized gains on
investments--net -- (.04) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders (.55) (.96) (1.24) (1.10) (.48)
-------- -------- -------- -------- --------
Capital charge resulting from issuance of
Common Stock -- -- -- -- (.01)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:++++
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.11) (.28) (.17) (.19) (.10)
Realized gain on investments--net (.03) (.00)+++ (.04) (.02) --
In excess of realized gains on
investments--net -- (.01) -- -- --
Capital charge resulting from issuance
of Preferred Stock -- -- -- -- (.14)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.14) (.29) (.21) (.21) (.24)
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.03 $ 15.46 $ 13.85 $ 16.76 $ 14.27
======== ======== ======== ======== ========
Market price per share, end of period $ 13.75 $ 13.625 $ 11.625 $ 15.875 $ 14.875
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on market price per share 4.88%+++++ 26.09% (20.23%) 14.51% 2.46%+++++
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 1.03%+++++ 20.09% (9.98%) 26.01% 3.97%+++++
======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .64%* .65% .66% .65% .47%*
Net Assets:*** ======== ======== ======== ======== ========
Expenses .64%* .65% .66% .65% .66%*
======== ======== ======== ======== ========
Investment income--net 5.20%* 5.55% 5.35% 5.35% 5.69%*
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock,
Data: end of period (in thousands) $679,008 $698,512 $625,630 $757,138 $638,150
======== ======== ======== ======== ========
Preferred Stock outstanding, end of
period (in thousands) $320,000 $320,000 $320,000 $320,000 $320,000
======== ======== ======== ======== ========
Portfolio turnover 46.42% 59.71% 45.71% 39.93% 21.89%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,122 $ 3,183 2,955 $ 3,366 $ 2,994
======== ======== ======== ======== ========
Dividends Per Series A--Investment income--net $ 360 $ 1,043 $ 1,184 $ 1,150 $ 688
Share on ======== ======== ======== ======== ========
Preferred Stock Series B--Investment income--net $ 363 $ 1,043 $ 1,090 $ 1,253 $ 656
Outstanding:++++++ ======== ======== ======== ======== ========
Series C--Investment income--net $ 368 $ 1,042 $ 1,278 $ 1,175 $ 659
======== ======== ======== ======== ========
Series D--Investment income--net $ 362 $ 950 $ 1,144 $ 1,426 $ 767
======== ======== ======== ======== ========
Series E--Investment income--net $ 408 $ 933 $ 1,282 $ 1,492 $ 766
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
***Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Commencement of Operations.
++++The Fund's Preferred Stock was issued on May 22, 1992.
++++++Dividends per share have been adjusted to reflect a two-for-
one stock split that occurred on December 1, 1994.
+++Amount less than $.01 per share.
+++++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield Insured Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
The Fund determines and makes available for publication the net
asset value of its Common Stock on a weekly basis. The Fund's Common
Stock is listed on the New York Stock Exchange under the symbol MYI.
The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options, which are traded on exchanges, are valued
at their last sale price as of the close of such exchanges or,
lacking any sales, at the last available bid price. Securities with
remaining maturities of sixty days or less are valued at amortized
cost, which approximates market value. Securities for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Directors of the Fund, including valuations furnished by a pricing
service retained by the Fund, which may utilize a matrix system for
valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general
supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
<PAGE>
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
* Options--The Fund is authorized to 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.
(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). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
<PAGE>
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates. Distributions in excess of
realized capital gains are due primarily to differing tax treatments
for future transactions and post-October losses.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1996 were $454,588,870 and
$491,596,635, respectively.
Net realized and unrealized gains as of April 30, 1996 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $ 5,146,283 $33,944,410
Short-term investments 3,007 --
Financial futures contracts 5,196,563 --
----------- -----------
Total $10,345,853 $33,944,410
=========== ===========
As of April 30, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $33,944,410, of which $37,489,277 related to
appreciated securities and $3,544,867 related to depreciated
securities. The aggregate cost of April 30, 1996 for Federal income
tax purposes was $941,940,039.
<PAGE>
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital 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
stock without approval of the holders of Common Stock.
Common Stock
For the six months ended April 30, 1996, shares issued and
outstanding remained constant at 45,187,339. At April 30, 1996,
total paid-in capital amounted to $634,751,837.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at April 30, 1996 were as
follows: Series A, 3.65%; Series B, 3.62%; Series C, 3.63%; Series
D, 3.47%; and Series E, 3.85%.
As of April 30, 1996, there were 12,800 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the six months ended
April 30, 1996, MLPF&S, an affiliate of FAM, earned $228,545 as
commissions.
5. Subsequent Event:
On May 10, 1996, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$0.073902 per share, payable on May 30, 1996, to shareholders of
record as of May 21, 1996.
