MUNIYIELD
INSURED
FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Annual Report
October 31, 1997
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
Patrick D. Sweeney, 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
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 pur-chase 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 Common 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 #16219 -- 10/97
[RECYCLE LOGO]
Printed on post-consumer recycled paper
MuniYield Insured Fund, Inc. October 31, 1997
TO OUR SHAREHOLDERS
For the year ended October 31, 1997, the Common Stock of MuniYield
Insured Fund, Inc. earned $0.921 per share income dividends, which
included earned and unpaid dividends of $0.075. This represents a net
annualized yield of 5.82%, based on a month-end per share net asset
value of $15.84. Over the same period, the total investment return on
the Fund's Common Stock was +9.89%, based on a change in per share net
asset value from $15.52 to $15.84, and assuming reinvestment of $0.925
per share income dividends and $0.153 per share capital gains
distributions.
For the six-month period ended October 31, 1997, the total investment
return on the Fund's Common Stock was +8.79%, based on a change in per
share net asset value from $15.01 to $15.84, and assuming reinvestment
of $0.461 per share income dividends.
For the six-month period ended October 31, 1997, the Fund's Auction
Market Preferred Stock had an average yield as follows: Series A,
3.85%; Series B, 3.89%; Series C, 3.89%; Series D, 3.81%; and Series
E, 3.55%; Series F, 3.31%; and Series G, 3.65%.
The Municipal Market Environment
Long-term interest rates generally declined during the six-month
period ended October 31, 1997. The general financial environment has
remained one of solid economic growth tempered by few or no
inflationary pressures. While economic growth has been conducive to
declining bond yields, it has remained strong enough to suggest that
the Federal Reserve Board (FRB) might find it necessary to raise
short-term interest rates. This would be intended to slow economic
growth and ensure that any incipient inflationary pressures would be
curtailed. There were investor concerns that the FRB would be forced
to raise interest rates prior to year-end, thus preventing an even
more dramatic decline in interest rates. Long-term tax-exempt revenue
bonds, as measured by the Bond Buyer Revenue Bond Index, declined over
50 basis points (0.50%) to end the six-month period ended October 31,
1997 at 5.60%.
Similarly, long-term US Treasury bond yields generally moved lower
during most of the six-month period ended October 31, 1997. However,
the turmoil in the world's equity markets during the last week in
October has resulted in a significant rally in the Treasury bond
market. The US Treasury bond market was the beneficiary of a flight to
quality mainly by foreign investors whose own domestic markets have
continued to be very volatile. Prior to the initial decline in Asian
equity markets, long-term US Treasury bond yields were essentially
unchanged. By the end of October, US Treasury bond yields declined 80
basis points to 6.15%, their lowest level of 1997.
The tax-exempt bond market's continued underperformance as compared to
its taxable counterpart has been largely in response to its ongoing
weakening technical position. As municipal bond yields have declined,
municipalities have hurriedly rushed to refinance outstanding higher-
couponed debt with new issues financed at present low rates. During
the last six months, over $118 billion in new long-term tax-exempt
issues were underwritten, an increase of over 25% versus the
comparable period a year ago. As interest rates have continued to
decline, these refinancings have intensified municipal bond issuance.
During the past three months, approximately $60 billion in new long-
term municipal securities were underwritten, an increase of over 34%
as compared to the October 31, 1996 quarter.
The recent trend toward larger and larger bond issues has also
continued. However, issues of such magnitude usually must be
attractively priced to ensure adequate investor interest. Obviously,
the yields of other municipal bond issues are impacted by the yield
premiums such large issuers have been required to pay. Much of the
municipal bond market's recent underperformance can be traced to
market pressures that these large bond issuances have exerted.
In our opinion, the recent correction in world equity markets has
enhanced the near-term prospects for continued low, if not declining,
interest rates in the United States. It is likely that the recent
correction will result in slower US domestic growth in the coming
months. This decline is likely to be generated in part by reduced US
export growth. Additionally, some decline in consumer spending also
can be expected in response to reduced consumer confidence. Perhaps
more importantly, it is likely that barring a dramatic and unexpected
resurgence in domestic growth, the FRB may be unwilling to raise
interest rates until the full impact of the equity market's
corrections can be established.
All of these factors suggest that for at least the near term, interest
rates, including tax-exempt bond yields, are unlikely to rise by any
appreciable amount. It is probable that municipal bond yields will
remain under some pressure as a result of continued strong new-issue
supply. However, the recent pace of municipal bond issuance is likely
to be unsustainable. Continued increases in bond issuance will require
lower tax-exempt bond yields to generate the economic savings
necessary for additional municipal bond refinancing. With tax-exempt
bond yields at already attractive yield ratios relative to US Treasury
bonds (approximately 90% at the end of October), any further pressure
on the municipal market may represent an attractive investment
opportunity.
Portfolio Strategy
During the first part of the six-month period ended October 31, 1997,
we basically maintained the strategy we had adopted in the six-month
period ended July 31, 1997. This was because the US economy was
growing at an above-average pace, with no signs that a slowdown was
imminent. The FRB chose not to raise interest rates, which would have
resulted in higher short-term interest rates. This decision was based
on strong economic growth, with no visible signs of inflationary
pressures.
During the last two months of the six-month period, the Fund's
structure allowed it to perform well during periods of market
improvement. In addition, we were able to take advantage of buying
opportunities that occurred as a result of large increases in new-
issue supply that started coming to market in August.
We continued our strategy of purchasing higherquality, current coupon,
income-oriented securities with extended call protection and selling
short-call bonds. Through mid-September when our outlook became
positive toward the market, we believed that risk was biased toward
lower rather than higher interest rates. We adopted a more aggressive
portfolio strategy by reducing the Fund's cash reserve level, selling
prerefunded bonds and increasing the Fund's duration with the purchase
of performance-oriented securities.
Looking ahead, we expect to remain fully invested in the coming months
in order to seek to enhance the Fund's dividend yield and performance.
We believe that the turmoil in the world's equity markets in October
is likely to remove concerns regarding the FRB's raising interest
rates during the remainder of 1997 and early 1998.
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,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/WILLIAM R. BOCK
William R. Bock
Vice President and Portfolio Manager
December 4, 1997
<TABLE>
<CAPTION>
PROXY RESULTS
During the six-month period ended October 31, 1997, MuniYield Insured Fund, Inc. Common Stock shareholders voted on the
following proposals. The proposals were approved at a shareholders' meeting on October 9, 1997. The description of each
proposal and number of shares voted are as follows:
Shares Voted Shares Withheld
For From Voting
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors: Joe Grills 59,034,425 1,238,286
Robert S. Salomon Jr. 59,031,950 1,240,762
Stephen B. Swensrud 59,035,408 1,237,304
Arthur Zeikel 59,032,420 1,240,292
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP as the Fund's independent
auditors for the current fiscal year. 59,018,711 265,361 988,639
During the six-month period ended October 31, 1997, MuniYield Insured Fund, Inc. Preferred Stock shareholders (Series A, B,
C, D, E, F and G) voted on the following proposals. The proposals were approved at a shareholders' meeting on October 9, 1997.
The description of each proposal and number of shares voted are as follows:
<CAPTION>
Shares Voted Shares Withheld
For From Voting
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors: Series A 1,431 0
Joe Grills, Walter Mintz, Robert S. Salomon Jr., Series B 1,640 0
Melvin R. Seiden, Stephen B. Swensrud Series C 1,556 0
and Arthur Zeikel as follows: Series D 1,587 2
Series E 3,926 20
Series F 1,424 0
Series G 1,494 0
<CAPTION>
Shares Voted Shares Voted Shares Withheld
For Against From Voting
<S> <C> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP Series A 1,419 12 0
as the Fund's independent auditors for the Series B 1,437 0 203
current fiscal year as follows: Series C 1,556 0 0
Series D 1,587 0 2
Series E 3,936 10 0
Series F 1,390 0 34
Series G 1,494 0 0
</TABLE>
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.
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 on 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.
<TABLE>
<CAPTION>
MuniYield Insured Fund, Inc. October 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C> <C>
Alabama -- 0.5% AAA Aaa $6,000 Huntsville, Alabama, Health Care Authority, Health Care
Facilities Revenue Bonds, Series B, 6.625% due 6/01/2023 (d) $6,693
Alaska -- 1.5% AAA Aaa 21,025 Alaska State Housing Finance Corporation, Refunding,
Series A, 5.875% due 12/01/2024 (d)(f)(i) 21,465
Arizona -- 0.6% A1+ P1 2,600 Maricopa County, Arizona, Pollution Control Corporation,
PCR, Refunding (Arizona Public Service Company), VRDN,
Series B, 3.65% due 5/01/2029 (a) 2,600
NR* NR* 5,000 Mohave County, Arizona, IDA, IDR (North Star Steel
Company Project), AMT, 6.70% due 3/01/2020 5,438
California -- 19.9% Anaheim, California, Public Financing Authority, Lease Revenue
Bonds (Public Improvements Project), Senior Series A (e):
AAA Aaa 5,250 6% due 9/01/2024 5,854
AAA Aaa 7,300 5% due 9/01/2027 6,984
AAA Aaa 1,595 California HFA, Housing Revenue Bonds, AMT, Series E,
7% due 8/01/2026 (d) 1,685
AA- Aa 3,750 California HFA, Revenue Bonds, RIB, AMT,
8.945% due 8/01/2023 (j) 4,186
California State, GO:
A+ A1 5,000 6% due 10/01/2008 5,554
A+ A1 30,500 5% due 10/01/2023 29,093
AAA Aaa 10,000 Refunding, 5.25% due 6/01/2021 (b) 9,853
California State Public Works Board, Lease Revenue Bonds:
A A2 11,755 (California State University), Series C, 5.40% due 10/01/2022 11,627
A Aaa 8,500 (Department of Corrections -- Monterey County -- Soledad II),
Series A, 7% due 11/01/2004 (g) 10,001
A A 2,750 (Various University of California Projects), Series A,
6.375% due 10/01/2019 2,996
AAA Aaa 11,085 California State, Various Purpose Bonds, 5.90% due 3/01/2025 (b) 11,601
AAA Aaa 5,000 Contra Costa, California, Water District, Water Revenue Bonds,
Series D, 6.375% due 10/01/2022 (b) 5,457
Los Angeles, California, Harbor Department Revenue Bonds, AMT:
AAA Aaa 4,000 RITR, Series RI-7, 8.395% due 11/01/2026 (d)(j) 4,875
AAA Aaa 6,330 Series B, 6.625% due 8/01/2019 (b) 6,888
AAA Aaa 8,725 Series B, 6.625% due 8/01/2025 (b) 9,494
AAA Aaa 15,000 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Bonds (Proposition A -- First Tier),
Senior Series A, 6% due 7/01/2026 (d) 15,891
AAA Aaa 5,000 Los Angeles County, California, Transportation Commission,
Sales Tax Revenue Refunding Bonds, Series B,
6.50% due 7/01/2015 (c) 5,435
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) 8,993
AAA Aaa 2,190 Northern California Transmission Revenue Bonds (California-
Oregon Transmission Project), Series A, 6.50% due 5/01/2016 (d) 2,403
AAA Aaa 6,720 Port of Oakland, California, Port Revenue Bonds, AMT, Series G,
5.50% due 11/01/2017 (d) 6,802
BBB- Baa2 2,710 Riverside County, California, Public Financing Authority,
Tax Allocation Revenue Bonds (Redevelopment Projects),
Series A, 5.50% due 10/01/2022 2,670
AAA Aaa 3,000 Sacramento, California, Municipal Utility District, Electric
Revenue Bonds, Series I, 6% due 1/01/2024 (d) 3,170
San Diego, California, Public Facilities Financing Authority,
Sewer Revenue Bonds (c):
AAA Aaa 7,000 5% due 5/15/2025 6,697
AAA Aaa 10,000 Series A, 5.25% due 5/15/2027 9,838
AAA Aaa 5,000 San Diego County, California, COP, Refunding (Central Jail),
5% due 10/01/2025 (b) 4,762
AAA Aaa 12,480 San Francisco, California, Bay Area Rapid Transit District,
Sales Tax Revenue Bonds, 5.50% due 7/01/2020 (c) 12,565
San Francisco, California, City and County Airports Commission,
International Airport Revenue Bonds (International Airport),
Second Series:
AAA Aaa 6,000 AMT, Issue 6, 6.60% due 5/01/2024 (b) 6,583
AAA Aaa 2,500 Issue 8B, 6.10% due 5/01/2025 (c) 2,648
AAA Aaa 9,500 Issue 9B, 5.25% due 5/01/2020 (c) 9,328
AAA Aaa 5,000 San Francisco, California, City and County, COP (San Francisco
Courthouse Project), 5.875% due 4/01/2021 (e) 5,173
AAA Aaa 7,215 San Francisco, California, City and County, Refunding, UT,
Series 1, 5% due 6/15/2016 (c) 7,027
AAA Aaa 10,000 San Francisco, California, City and County Sewer Revenue
Bonds, Series A, 5.95% due 10/01/2025 (c) 10,448
AAA Aaa 7,000 San Joaquin Hills, California, Transportation Corridor Agency,
Toll Road Revenue Refunding Bonds, Series A, 5.25%
due 1/15/2030 (d) 6,871
San Jose, California, Redevelopment Agency Refunding Bonds
(Tax Allocation -- Merged Area Redevelopment Project) (d):
AAA Aaa 6,895 5.60% due 8/01/2019 7,068
AAA Aaa 5,725 5.625% due 8/01/2025 5,871
AAA Aaa 2,000 Santa Clara County, California, Financing Authority, Lease
Revenue Bonds (VMC Facility Replacement Project),
Series A, 6.75% due 11/15/2004 (b)(g) 2,325
Santa Rosa, California, Wastewater Revenue Refunding Bonds (c):
AAA Aaa 3,000 Series A, 5.25% due 9/01/2016 3,028
AAA Aaa 3,295 Series B, 6.125% due 9/01/2017 3,478
AAA Aaa 5,000 University of California Revenue Bonds (Multiple Purpose
Projects), Series D, 6.375% due 9/01/2024 (d) 5,452
Colorado -- 2.0% AAA Aaa 12,500 Colorado Public Highway Authority Revenue Refunding Bonds
(E-470), Senior Series B, 5.48% due 9/01/2025 (d)(k) 2,791
AA Aa2 14,500 Colorado Springs, Colorado, Utilities Revenue Bonds,
Series A, 6.10% due 11/15/2005 (g) 16,050
AAA Aaa 9,800 Denver, Colorado, City and County Airport, Revenue Refunding
Bonds, Series D, 5.50% due 11/15/2025 (d) 9,840
AAA Aaa 105 Douglas County, Colorado, School District No. Re-1 (Douglas and
Elbert Counties Improvement), Series A, 6.50% due 12/15/2016 (d) 117
Connecticut -- 1.2% AAA Aaa 9,695 Connecticut State, HFA (Housing Mortgage Finance Program),
Series B, 6.75% due 11/15/2023 (d) 10,378
Connecticut State Health and Educational Facilities Authority
Revenue Bonds (Nursing Home Program):
AA- A1 5,000 (AHF/Hartford), 7.125% due 11/01/2024 5,698
AA- A1 1,035 (AHF/Windsor Project), 7.125% due 11/01/2024 1,180
Delaware -- 0.3% AAA Aaa 3,525 Delaware Transportation Authority, Transportation System
Revenue Bonds, Senior Series, 7% due 7/01/2004 (c)(g) 4,102
District of AAA Aaa 20,100 Metropolitan Washington, DC, Virginia Airports Authority,
Columbia -- 1.6% General Airport Revenue Bonds, AMT, Series A, 6.625%
due 10/01/2019 (d) 21,878
Florida -- 2.1% A1+ NR* 5,000 Broward County, Florida, HFA, M/F Housing Revenue Refunding
Bonds (Water Edge Project), VRDN, 4.20% due 5/15/2027 (a)(f) 5,000
Dade County, Florida, Water and Sewer System Revenue
Bonds (c):
AAA Aaa 3,000 5.25% due 10/01/2026 2,965
A1+ VMIG1+ 7,100 VRDN, 3.60% due 10/05/2022 (a) 7,100
A1+ VMIG1+ 635 Jacksonville, Florida, PCR, Refunding (Florida Power and Light
Company Project), VRDN, 3.65% due 5/01/2029 (a) 635
A1+ VMIG1+ 3,300 Manatee County, Florida, PCR, Refunding (Florida Power and
Light Company Project), VRDN, 3.65% due 9/01/2024 (a) 3,300
AAA Aaa 9,940 Orange County, Florida, Tourist Development, Tax Revenue
Bonds, Series B, 6.50% due 10/01/2002 (b)(g) 11,103
Georgia -- 1.8% AAA Aaa 4,700 Albany, Georgia, Sewer System Revenue Bonds,
6.70% due 7/01/2002 (d)(g) 5,258
AAA Aaa 10,000 Georgia Municipal Electric Authority, Power Revenue Bonds,
Series EE, 6.40% due 1/01/2023 (b) 10,949
AAA Aaa 6,500 Metropolitan Atlanta, Georgia, Rapid Transit Authority, Sales
Tax Revenue Bonds, Second Indenture, Series A, 6.90%
due 7/01/2004 (d)(g) 7,519
AAA Aaa 2,000 Municipal Electric Authority, Georgia (Project One),
Sub-Series A, 6.50% due 1/01/2004 (b)(g) 2,253
Hawaii -- 1.8% Hawaii State Airports Systems Revenue Bonds, AMT,
Second Series (d):
AAA Aaa 6,000 7% due 7/01/2018 6,531
AAA Aaa 17,145 6.75% due 7/01/2021 18,520
Illinois -- 5.8% AAA Aaa 1,500 Chicago, Illinois, Board of Education (Chicago School of
Reform), UT, 5.75% due 12/01/2020 (b) 1,550
AAA Aaa 9,160 Chicago, Illinois, Midway Airport Revenue Bonds, AMT,
Series A, 6.25% due 1/01/2024 (d) 9,699
AAA Aaa 3,870 Chicago, Illinois, O'Hare International Airport, Special Facilities
Revenue Bonds (International Terminal), AMT, 6.75%
due 1/01/2018 (d) 4,197
AAA Aaa 12,000 Chicago, Illinois, Public Building Commission, Building
Revenue Bonds, Series A, 6.50% due 1/01/2018 (d)(h) 12,660
AAA Aaa 6,000 Chicago, Illinois, Wastewater Transmission Revenue Bonds,
6.375% due 1/01/2024 (d) 6,530
AAA Aaa 10,000 Chicago, Illinois, Water Revenue Refunding Bonds, 5.25%
due 11/01/2027 (c) 9,749
AAA Aaa 15,000 Cook County, Illinois, GO, UT, Series A, 6.60% due
11/15/2002 (d)(g) 16,819
Illinois Health Facilities Authority Revenue Bonds:
NR* VMIG1+ 2,700 (Resurrection Health Care System), VRDN, 3.75%
due 5/01/2011 (a) 2,700
AAA Aaa 8,545 (Rockford Memorial Hospital), Series B, 6.75%
due 8/15/2018 (b) 9,292
AAA Aaa 3,000 (Servantcor Project), Series A, 6.375% due 8/15/2021 (e)
Metropolitan Pier and Exposition Authority, Illinois, 3,240
Dedicated State Tax Revenue Bonds (McCormick Place
Expansion Project), Series A (b):
AAA Aaa 5,000 6.50% due 6/15/2003 (g) 5,609
AAA Aaa 175 6.50% due 6/15/2027 193
Indiana -- 1.9 % AAA Aaa 3,150 Hammond, Indiana, Multi-School Building Corporation,
Refunding (First Mortgage), 5.75% due 1/15/2017 (d) 3,258
AAA Aaa 2,400 Indiana State Vocational Technical College Building Facilities Fee,
Refunding Bonds (Student Fee), Series D, 6.50% due 7/01/2014 (b) 2,667
AAA Aaa 10,000 Indianapolis, Indiana, Economic Development Revenue Bonds
(Archdiocese of Indianapolis Education Facilities Project),
5.50% due 7/01/2026 (d) 10,055
AAA Aaa 5,000 Indianapolis, Indiana, Gas Utility Revenue Bonds, Series A,
6.20% due 6/01/2023 (c) 5,369
A+ NR* 3,000 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Refunding, Series D, 6.75% due 2/01/2020 3,314
AAA Aaa 2,000 Monroe County, Indiana, Hospital Authority, Hospital Revenue
Bonds (Bloomington Hospital Project), 6.70% due 5/01/2002 (d)(g) 2,215
Iowa -- 0.2% AAA Aaa 2,100 Iowa Financing Authority, S/F Mortgage, Refunding,
Series F, 6.35% due 7/01/2009 (b) 2,211
Kansas -- 1.9% AAA Aaa 20,250 Burlington, Kansas, PCR, Refunding (Kansas Gas and Electric
Company Project), 7% due 6/01/2031 (d) 22,118
AAA Aaa 5,000 Kansas State Turnpike Authority, Turnpike Revenue Refunding
Bonds, 5.25% due 9/01/2017 (b) 5,000
Maryland -- 0.3% NR* Aa 1,985 Maryland State Community Development Administration,
Department of Housing and Community Development,
S/F Program, AMT, Second Series, 6.55% due 4/01/2026 2,098
NR* Aa 2,085 Maryland State Community Development Administration,
M/F Housing Revenue Bonds (Department of Housing and
Community Development), Series C, 6.65% due 5/15/2025 2,219
Massachusetts -- 4.1% Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
AAA Aaa 5,000 (Massachusettes General Hospital), Series F, 6.25%
due 7/01/2020 (b) 5,342
AAA Aaa 7,130 (New England Medical Center Hospitals), Series F,
6.625% due 7/01/2025 (c) 7,807
AAA Aaa 10,000 (Northeastern University), Series E, 6.55% due 10/01/2022 (d) 11,023
NR* Aaa 36,000 Massachusetts State Turnpike Authority, Metropolitan Highway
System Revenue Bonds, Series A, 5% due 1/01/2037 (d) 33,884
Michigan -- 3.4% AAA Aaa 2,750 Caledonia, Michigan, Community Schools, Refunding, UT,
6.625% due 5/01/2014 (b) 3,022
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) 23,856
Monroe County, Michigan, PCR (Detroit Edison Company),
AMT (d):
AAA Aaa 5,000 Series CC, 6.55% due 6/01/2024 5,439
AAA Aaa 8,500 Series I-B, 6.55% due 9/01/2024 9,268
AAA Aaa 6,300 Western Michigan University, General Revenue Bonds,
6.125% due 11/15/2002 (c)(g) 6,930
Minnesota -- 0.8% A- A 4,500 Minneapolis and St. Paul, Minnesota, Housing and
Redevelopment Authority, Health Care System Revenue Bonds
(Group Health Plan Inc. Project), 6.90% due 10/15/2022 4,945
Minnesota State, HFA, S/F Mortgage, AMT:
AA+ Aa2 3,645 Series H, 6.50% due 1/01/2026 3,814
AA+ Aa2 2,835 Series L, 6.70% due 7/01/2020 3,004
Mississippi -- 0.3% AAA Aaa 3,930 Mississippi Hospital Equipment and Facilities Authority,
Revenue Refunding Bonds (Mississippi Baptist Medical
Center), 6.50% due 5/01/2011 (d) 4,354
Missouri -- 0.9% AAA Aaa 7,000 Kansas City, Missouri, Airport Revenue Bonds, General
Improvement, Series B, 6.875% due 9/01/2004 (e)(g) 8,060
AAA Aaa 3,775 Missouri State Health and Educational Facilities Authority,
Health Facilities Revenue Refunding Bonds (SSM Health
Care), Series AA, 6.25% due 6/01/2016 (d) 4,012
Nebraska -- 0.3% AAA Aaa 5,000 Nebraska Public Power District Revenue Bonds (Power Supply
System), Series A, 5.25% due 1/01/2022 (d) 4,926
Nevada -- 6.4% AAA Aaa 15,000 Clark County, Nevada, GO, School District, 6% due 6/15/2014 (c) 15,933
AAA Aaa 9,250 Humboldt County, Nevada, PCR, Refunding (Sierra Pacific
Power Company Project), 6.55% due 10/01/2013 (b) 10,108
AAA Aaa 33,755 Nevada State GO, Nos. 49 and 50, 5.50% due 11/01/2025 (c) 33,945
AAA Aaa 2,400 Reno, Nevada, Hospital Revenue Bonds (Saint Mary's Regional
Medical Center), Series A, 6.70% due 7/01/2021 (d) 2,605
Washoe County, Nevada, Gas Facilities Revenue Bonds
(Sierra Pacific Power Company), AMT:
AAA Aaa 15,000 6.65% due 12/01/2017 (b) 16,336
AAA Aaa 5,000 6.55% due 9/01/2020 (d) 5,433
AAA Aaa 5,000 Washoe County, Nevada, Water Facilities Revenue Bonds (Sierra
Pacific Power Company), AMT, 6.65% due 6/01/2017 (d) 5,456
New Hampshire -- 0.6% AAA Aaa 7,660 New Hampshire Higher Educational and Health Facilities
Authority Revenue Bonds (Elliot Hospital of Manchester),
6.25% due 10/01/2021 (b) 8,137
New Jersey -- 0.7% AAA Aaa 9,195 New Jersey State Housing and Mortgage Finance Agency Revenue
Bonds (Home Buyer), AMT, Series K, 6.375% due 10/01/2026 (d) 9,640
New Mexico -- 1.3% AAA Aaa 10,000 Farmington, New Mexico, PCR, Refunding (Southern California
Edison Company), Series A, 5.875% due 6/01/2023 (d) 10,374
AAA Aaa 5,750 Gallup, New Mexico, PCR, Refunding (Plains Electric
Generation), 6.65% due 8/15/2017 (d) 6,312
NR* A 1,635 New Mexico Educational Assistance Foundation, Student
Loan Revenue Bonds, AMT, First Sub-Series A-2, 6.65%
due 11/01/2025 1,753
New York -- 9.6% AAA Aaa 3,500 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, RITR, Series 9, 8.22% due 7/01/2026 (j) 4,051
BBB+ Baa1 10,980 Metropolitan Transportation Authority, New York, Transit
Facilities Service Contract, Refunding, Series 5, 7%
due 7/01/2012 11,967
AAA Aaa 6,180 New York City, New York, Educational Construction Fund
Revenue Bonds, Junior Sub-Lien, 5.50% due 4/01/2026 (b) 6,224
New York City, New York, GO, UT:
BBB+ Baa1 5,000 Refunding, Series I, 5.875% due 3/15/2012 5,174
BBB+ Baa1 5,820 Series C, 5.375% due 11/15/2027 5,565
BBB+ Baa1 170 Series C, Sub-Series C-1, 7.50% due 8/01/2019 192
BBB+ Baa1 950 Series D, 7.50% due 2/01/2019 1,063
BBB+ Baa1 11,250 Series I, 6% due 4/15/2009 11,967
New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds:
AAA Aaa 18,830 RITR, Series RI 97-6, 7.495% due 6/15/2026 (d)(j) 19,936
A- A2 8,500 Series B, 5.75% due 6/15/2026 8,717
AAA Aaa 5,000 New York City, New York, Trust Cultural Resource Revenue
Bonds (American Museum of Natural History), Series A,
5.65% due 4/01/2027 (d) 5,127
New York State Dormitory Authority, Revenue Refunding Bonds:
AAA Aaa 7,000 (Pace University), 5.70% due 7/01/2022 (d) 7,216
A- A3 8,000 (State University Educational Facilities), 5.125%
due 5/15/2027 7,609
A- A3 7,595 (State University Educational Facilities), Series B,
7% due 5/15/2016 8,200
AAA Aaa 22,000 New York State Energy Research and Development Authority,
Gas Facilities Revenue Refunding Bonds (Brooklyn Union
Gas Company), Series A, 5.50% due 1/01/2021 (d) 22,152
BBB+ Baa1 10,000 New York State Thruway Authority, Service Contract Revenue
Bonds (Local Highway and Bridge), 5.75% due 4/01/2016 10,276
North Dakota -- 0.5% AAA Aaa 2,500 Grand Forks, North Dakota, Health Care Facilities Revenue Bonds
(United Hospital Obligated Group), 6.25% due 12/01/2024 (d) 2,695
AAA Aaa 3,725 Grand Forks, North Dakota, Health Care System Revenue Bonds
(Altru Health System Obligated Group), 5.60% due 8/15/2017 (d) 3,770
Ohio -- 0.4% AAA Aaa 2,500 North Canton, Ohio, School District Improvement Bonds, UT,
6.70% due 12/01/2019 (b) 2,836
AAA Aaa 2,500 Ohio State Higher Educational Facilities Commission,
Mortgage Revenue Bonds (University of Dayton Project),
6.60% due 12/01/2017 (c) 2,796
Oregon -- 0.9% AAA Aaa 5,000 Port of Portland, Oregon, International Airport Revenue Bonds
(Portland International Airport), AMT, Series 11, 5.625%
due 7/01/2026 (c) 5,054
AAA Aaa 7,500 Portland Oregon, Sewer System Revenue Refunding Bonds,
Series A, 5% due 6/01/2015 (c) 7,362
Pennsylvania -- 2.6% AAA Aaa 4,000 Allegheny County, Pennsylvania, Airport Revenue Refunding
Bonds (Pittsburgh International Airport), AMT, Series A,
5.25% due 1/01/2016 (d) 3,935
AAA Aaa 5,000 Allegheny County, Pennsylvania, Hospital Development
Authority, Health Center Revenue Bonds (University of
Pittsburgh Medical Center), Series B, 5.125% due 7/01/2022 (d) 4,813
A1+ P1 400 Beaver County, Pennsylvania, IDA, PCR, Refunding
(Duquesne Light Company -- Manfield), VRDN, Series B,
3.55% due 8/01/2009 (a) 400
AAA Aaa 16,000 Montgomery County, Pennsylvania, IDA, PCR, Refunding
(Philadelphia Electric Company), Series B, 6.70%
due 12/01/2021 (d) 17,478
AA Aa 4,000 Pennsylvania HFA, RIB, AMT, 8.009% due 4/01/2025 (j) 4,225
AAA Aaa 5,900 Philadelphia, Pennsylvania, Water and Wastewater Revenue
Bonds, Series A, 5% due 8/01/2022 (b) 5,641
South Carolina -- 2.9% AAA Aaa 10,000 Piedmont, South Carolina, Municipal Power Agency, Electric
Revenue Refunding Bonds, 6.30% due 1/01/2022 (d) 10,811
South Carolina State Public Service Authority Revenue Bonds:
AAA Aaa 4,850 Refunding, Series B, 5.875% due 1/01/2023 (c) 5,047
AAA Aaa 11,900 (Santee Cooper), Series D, 6.50% due 7/01/2002 (b)(g) 13,212
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) 7,644
NR* NR* 4,200 Spartanburg County, South Carolina, Solid Waste Disposal
Facilities Revenue Bonds (BMW Project), AMT,
7.55% due 11/01/2024 4,740
Tennessee -- 1.4% 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) 4,167
AAA Aaa 5,000 Metropolitan Government, Nashville and Davidson County,
Tennessee, UT, Series A, 5.125% due 11/15/2027 (c) 4,847
AAA Aaa 5,000 Metropolitan Government, Nashville and Davidson County,
Tennessee, Water and Sewer Revenue Bonds, RIB,
8.276% due 1/01/2022 (b)(j) 5,531
A+ A1 4,900 Tennessee HDA, Mortgage Finance, AMT, Series A,
6.90% due 7/01/2025 5,215
Texas -- 6.0% AAA Aaa 3,200 Bexar, Texas, Metropolitan Water District, Waterworks System
Revenue Refunding Bonds, 6.35% due 5/01/2025 (d) 3,495
Brazos River Authority, Texas, PCR (Texas Utilities Electric
Company Project), AMT (b):
AAA Aaa 11,500 Refunding, 6.50% due 12/01/2027 12,471
AAA Aaa 3,800 Series A, 6.75% due 4/01/2022 4,134
AAA Aaa 7,000 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light and Power), Series A, 6.70% due 3/01/2017 (b) 7,651
Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds:
A1+ NR* 200 (Methodist Hospital), VRDN, 3.70% due 12/01/2025 (a) 200
AAA Aaa 2,150 RITR, Series 12, 8.67% due 10/01/2024 (d)(j) 2,494
A1+ NR* 2,900 Refunding (Methodist Hospital), VRDN, 4% due 12/01/2026 (a) 2,900
AAA Aaa 6,885 Houston, Texas, Airport System Revenue Bonds (Sub-Lien), AMT,
Series A, 6.75% due 7/01/2021 (c) 7,437
AAA Aaa 4,465 Houston, Texas, Water and Sewer System Revenue Bonds
(Junior-Lien), Series A, 6.375% due 12/01/2022 (d) 4,887
AAA Aaa 11,795 Matagorda County, Texas, Navigation District No. 1, Revenue
Refunding Bonds (Houston Light and Power Company),
Series A, 6.70% due 3/01/2027 (b) 12,892
AAA Aaa 1,500 Sabine River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Company Project), 6.55% due 10/01/2022 (c) 1,643
SP1+ MIG1+ 24,500 Texas State, TRAN, Series A, 4.75% due 8/31/1998 24,690
Utah -- 0.3% AAA Aaa 4,000 Salt Lake City, Utah, Airport Revenue Bonds, AMT, Series A,
6.125% due 12/01/2022 (c) 4,161
Virginia -- 1.8% AAA Aaa 5,540 Loudon County, Virginia, COP, 6.90% due 3/01/2019 (e) 6,225
Virginia State, HDA, Commonwealth Mortgage Revenue Bonds:
AAA Aaa 9,000 AMT, Series A, Sub-Series A-4, 6.45% due 7/01/2028 (d) 9,557
AA+ Aa1 6,000 AMT, Series B, Sub-Series B-1, 6.375% due 7/01/2026 6,344
AA+ Aa1 3,500 Series J, Sub-Series J-2, 6.75% due 7/01/2017 3,759
Washington -- 8.7% AAA Aaa 6,595 Chelan County, Washington, Public Utility Dist No. 001,
Consolidated Revenue Refunding Bonds (Chelan Hydro),
AMT, Series B, 6.35% due 7/01/2026 (d) 7,155
Port Seattle, Washington, Revenue Bonds:
AAA Aaa 10,000 Series A, 5.50% due 10/01/2017 (c) 10,189
AAA Aaa 9,495 (Sub-Lien), Series C, 6.625% due 8/01/2017 (d) 10,472
Seattle, Washington, Metropolitan Seattle Municipality
Sewer Revenue Bonds, Series W (d):
AAA Aaa 1,465 6.25% due 1/01/2021 1,571
AAA Aaa 1,750 6.25% due 1/01/2022 1,877
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) 5,094
AAA Aaa 7,875 Spokane County, Washington, Lease Revenue Refunding
Financing Bonds (Multi-Purpose Arena Project), AMT,
Series A, 6.60% due 1/01/2014 (b) 8,505
AAA Aaa 6,000 Tacoma, Washington, Refuse Utility Revenue Bonds,
7% due 12/01/2004 (b)(g) 7,020
AAA Aaa 8,705 Tacoma, Washington, Solid Waste Utilities, Revenue Refunding
Bonds, Series B, 5.50% due 12/01/2019 (b) 8,781
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) 2,171
AAA Aaa 14,860 Washington State, GO, Series C, 5% due 1/01/2022 (c) 14,255
Washington State Health Care Facilities Authority Revenue Bonds:
A+ A1 8,300 (Children's Hospital and Medical Center), 6% due 10/01/2022 8,419
AAA Aaa 2,500 (Virginia Mason Obligation Group of Seattle),
6.30% due 2/15/2017 (d) 2,688
Washington State Public Power Supply Systems, Revenue
Refunding Bonds:
AAA Aaa 15,175 (Nuclear Project No. 1), Series A, 6.25% due 7/01/2017 (d) 16,281
AAA Aaa 14,000 (Nuclear Project No. 1), Series B, 5.125% due 7/01/2017 (b) 13,552
AAA Aaa 4,800 (Nuclear Project No. 3), Series A, 5.25% due 7/01/2016 (e) 4,705
West Virginia -- 1.0% AAA Aaa 4,425 Harrison County, West Virginia, County Commission, Solid Waste
Disposal Revenue Bonds (Monongahela Power), AMT,
Series C, 6.75% due 8/01/2024 (b) 4,919
AAA Aaa 10,000 West Virginia, School Building Authority, Revenue Refunding
Bonds (Capital Improvement), Series B, 5.25% due 7/01/2021 (e) 9,840
Wisconsin -- 2.0% AA Aa 2,000 Wisconsin, Housing and EDA, Home Ownership Revenue Bonds,
AMT, Series B, 6.75% due 9/01/2025 2,117
Wisconsin Public Power Inc., Power Supply System Revenue
Bonds, Series A (d):
AAA Aaa 5,000 6% due 7/01/2015 5,320
AAA Aaa 13,685 5.75% due 7/01/2023 14,124
Wisconsin State Health and Educational Facilities Authority,
Revenue Refunding Bonds (Wheaton-Franciscan Services) (d):
AAA Aaa 3,955 6.50% due 8/15/2011 4,281
AAA Aaa 2,000 6% due 8/15/2015 2,069
Total Investments (Cost -- $1,320,322) -- 100.3% 1,416,517
Liabilities in Excess of Other Assets -- (0.3%) (4,903)
-----------
Net Assets -- 100.0% $1,411,614
===========
(a) 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, 1997.
(b) AMBAC Insured.
(c) FGIC Insured.
(d) MBIA Insured.
(e) FSA Insured.
(f) FNMA Collateralized.
(g) Prerefunded.
(h) Escrowed to maturity.
(i) GNMA Collateralized.
(j) 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, 1997.
(k) Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Ernst & Young LLP.
PORTFOLIO ABBREVIATIONS
To simplfy 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
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
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
TRAN Tax Revenue Anticipation Notes
UT Unlimited Tax
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of October 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $1,320,321,682) (Note 1a) $1,416,517,151
Cash 101,950
Receivables:
Interest $24,430,125
Securities sold 4,722,689 29,152,814
--------------
Prepaid expenses and other assets 73,373
--------------
Total assets 1,445,845,288
--------------
Liabilities: Payables:
Securities purchased 32,317,913
Dividends to shareholders (Note 1f) 1,060,817
Investment adviser (Note 2) 634,187 34,012,917
--------------
Accrued expenses and other liabilities 218,370
--------------
Total liabilities 34,231,287
--------------
Net Assets: Net assets $1,411,614,001
==============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 per share (17,600 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) $440,000,000
Common Stock, par value $.10 per share (61,351,136 shares issued
and outstanding) $6,135,114
Paid-in capital in excess of par 858,201,728
Undistributed investment income -- net 10,420,273
Undistributed realized capital gains on investments -- net 661,417
Unrealized appreciation on investments -- net 96,195,469
--------------
Total -- Equivalent to $15.84 net asset value per share
of Common Stock (market price -- $14.8125) 971,614,001
--------------
Total capital $1,411,614,001
==============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended
October 31, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $75,804,754
(Note 1d):
Expenses: Investment advisory fees (Note 2) $6,533,126
Commission fees (Note 4) 1,051,511
Transfer agent fees 151,797
Accounting services (Note 2) 135,264
Professional fees 97,161
Directors' fees and expenses 75,201
Custodian fees 71,095
Printing and shareholder reports 59,355
Listing fees 37,417
Pricing fees 24,386
Amortization of organization expenses (Note 1e) 2,542
Other 56,076
------------
Total expenses 8,294,931
------------
Investment income -- net 67,509,823
------------
Realized & Realized gain on investments -- net 12,466,054
Unrealized Change in unrealized appreciation on investments -- net 21,056,912
Gain on ------------
Investments -- Net Net Increase in Net Assets Resulting from Operations $101,032,789
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>
Operations: Investment income -- net $67,509,823 $53,184,275
Realized gain on investments -- net 12,466,054 7,245,480
Change in unrealized appreciation on investments -- net 21,056,912 (391,582)
------------- -------------
Net increase in net assets resulting from operations 101,032,789 60,038,173
------------- -------------
Dividends & Investment income -- net:
Distributions to Common Stock (51,886,380) (41,238,191)
Shareholders Preferred Stock (13,590,316) (10,788,626)
(Note 1f): Realized gain on investments -- net:
Common Stock (6,926,993) (3,872,510)
Preferred Stock (1,762,542) (1,178,380)
------------- -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (74,166,231) (57,077,707)
------------- -------------
Capital Stock Proceeds from issuance of Common Stock resulting from
Transactions reorganization 243,897,323 --
(Notes 1e & 4): Offering costs from issuance of Common Stock resulting from
reorganization (622,402) --
Proceeds from issuance of Preferred Stock resulting from
reorganization 120,000,000 --
------------- -------------
Net increase in net assets derived from capital stock transactions 363,274,921 --
------------- -------------
Net Assets: Total increase in net assets 390,141,479 2,960,466
Beginning of year 1,021,472,522 1,018,512,056
------------- -------------
End of year* $1,411,614,001 $1,021,472,522
============= =============
* Undistributed investment income -- net (Note 1g) $10,420,273 $8,382,551
============= =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
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: 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $15.52 $15.46 $13.85 $16.76 $14.27
Operating ------- ------- ------- ------- -------
Performance: Investment income -- net 1.15 1.18 1.20 1.20 1.21
Realized and unrealized gain (loss) on
investments -- net .54 .15 1.66 (2.66) 2.59
------- ------- ------- ------- -------
Total from investment operations 1.69 1.33 2.86 (1.46) 3.80
------- ------- ------- ------- -------
Less dividends and distributions to Common
Stock shareholders:
Investment income -- net. (.92) (.91) (.92) (.98) (1.00)
Realized gain on investments -- net (.15) (.09) -- + (.26) (.10)
In excess of realized gains on investments -- net -- -- (.04) -- --
------- ------- ------- ------- -------
Total dividends and distributions to Common
Stock shareholders (1.07) (1.00) (.96) (1.24) (1.10)
------- ------- ------- ------- -------
Capital charge resulting from issuance of
Common Stock (.01) -- -- -- --
------- ------- ------- ------- -------
Effect of Preferred Stock activity:++
Dividends and distributions to Preferred
Stock shareholders:
Investment income -- net (.25) (.24) (.28) (.17) (.19)
Realized gain on investments -- net (.04) (.03) -- + (.04) (.02)
In excess of realized gains on investments -- net -- -- (.01) -- --
------- ------- ------- ------- -------
Total effect of Preferred Stock activity (.29) (.27) (.29) (.21) (.21)
------- ------- ------- ------- -------
Net asset value, end of year $15.84 $15.52 $15.46 $13.85 $16.76
======= ======= ======= ======= =======
Market price per share, end of year $14.8125 $14.00 $13.6250 $11.625 $15.875
======= ======= ======= ======= =======
Total Investment Based on market price per share. 13.92% 10.30% 26.09% (20.23%) 14.51%
Return:* ======= ======= ======= ======= =======
Based on net asset value per share 9.89% 7.76% 20.09% (9.98%) 26.01%
======= ======= ======= ======= =======
Ratios to Average Expenses .63% .64% .65% .66% .65%
Net Assets:** ======= ======= ======= ======= =======
Investment income -- net. 5.17% 5.22% 5.55% 5.35% 5.35%
======= ======= ======= ======= =======
Supplemental Net assets, net of Preferred Stock, end of year
Data: (in thousands) $971,614 $701,473 $698,512 $625,630 $757,138
======= ======= ======= ======= =======
Preferred Stock outstanding, end of year
(in thousands) $440,000 $320,000 $320,000 $320,000 $320,000
======= ======= ======= ======= =======
Portfolio turnover 98.91% 100.49% 59.71% 45.71% 39.93%
======= ======= ======= ======= =======
Leverage: Asset coverage per $1,000 $3,208 $3,192 $3,183 $2,955 $3,366
======= ======= ======= ======= =======
Dividends Per Share Series A -- Investment income -- net $808 $832 $1,043 $1,184 $1,150
On Preferred Stock ======= ======= ======= ======= =======
Outstanding:+++ Series B -- Investment income -- net $813 $835 $1,043 $1,090 $1,253
======= ======= ======= ======= =======
Series C -- Investment income -- net $812 $841 $1,042 $1,278 $1,175
======= ======= ======= ======= =======
Series D -- Investment income -- net $789 $865 $950 $1,144 $1,426
======= ======= ======= ======= =======
Series E -- Investment income -- net $797 $842 $933 $1,282 $1,492
======= ======= ======= ======= =======
Series F -- Investment income -- net $706 -- -- -- --
======= ======= ======= ======= =======
Series G -- Investment income -- net $675 -- -- -- --
======= ======= ======= ======= =======
* 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.
See Notes to Financial Statements.
** Do not reflect the effect of dividends to Preferred
Stock shareholders.
+ Amount is less than $.01 per share.
++ The Fund's Preferred Stock was issued on May 22, 1992
(Series A, B, C, D and E) and January 27, 1997
(Series F and G).
+++ Dividends per share have been adjusted to reflect a two-
for-one stock split that occurred on December 1, 1994.
</TABLE>
MuniYield Insured Fund, Inc. October 31, 1997
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. 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.
[bullet] 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.
[bullet] 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.
(e) Deferred organization expenses and offering costs -- Deferred
organization expenses are amortized on a straight-line basis over a
five-year period. Direct expenses relating to the issuance of Common
Stock resulting from the reorganization were charged to capital.
(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.
(g) Reclassification -- Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of $4,595
have been reclassified between undistributed net realized capital
gains and undistributed net investment income. These reclassifications
have no effect on net assets or net asset value per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned subsidiary
of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited
partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities
and securities acquired through the reorganization, for the year ended
October 31, 1997 were $1,226,673,866 and $1,248,103,643, respectively.
Net realized and unrealized gains (losses) as of October 31, 1997 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $14,214,790 $96,179,579
Short-term investments 1,061 15,890
Options purchased (1,749,797) --
------------- -------------
Total $12,466,054 $96,195,469
============= =============
As of October 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $96,195,469, of which $96,211,758 related to
appreciated securities and $16,289 related to depreciated securities.
The aggregate cost of investments at October 31, 1997 for Federal
income tax purposes was $1,320,321,682.
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
Shares issued and outstanding during the year ended October 31, 1997
increased by 16,163,797 pursuant to a plan of reorganization and
during the year ended October 31, 1996 remained constant.
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 October 31, 1997 were as follows: Series A, 3.64%;
Series B, 3.60%; Series C, 3.60%; Series D, 3.48%; Series E, 3.52%;
Series F, 3.59%; and Series G, 3.49%.
In addition, AMPS shares increased by 4,800 pursuant to a plan of
reorganization. As a result, as of October 31, 1997, there were 17,600
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 year ended October 31, 1997,
Merrill Lynch, Pierce, Fenner & Smith Inc., an affiliate of FAM,
earned $448,259 as commissions.
5. Acquisition of MuniYield Insured Fund II, Inc.:
On January 27, 1997, MuniYield Insured Fund, Inc. acquired all of the
net assets of MuniYield Insured Fund II, Inc. pursuant to a plan of
reorganization. The acquisition was accomplished by a tax-free
exchange of 16,163,797 Common Stock shares and 4,800 AMPS shares of
MuniYield Insured Fund, Inc. for 16,420,827 Common Stock shares and
4,800 AMPS shares outstanding of MuniYield Insured Fund II, Inc.
MuniYield Insured Fund II, Inc.'s net assets on that date of
$363,897,323, including $15,875,569 of unrealized appreciation and
$2,185,654 of accumulated net realized capital losses, were combined
with those of MuniYield Insured Fund, Inc. The aggregate net assets of
MuniYield Insured Fund, Inc. immediately after the acquisition
amounted to $1,365,945,620.
6. Subsequent Event:
On November 6, 1997, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount of
$.074635 per share, payable on November 26, 1997, to shareholders of
record as of November 17, 1997.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors,
MuniYield Insured Fund, Inc.
We have audited the accompanying statement of assets, liabilities and
capital of MuniYield Insured Fund, Inc., including the schedule of
investments, as of October 31, 1997, and the related statements of
operations and changes in net assets and financial highlights for the
year then ended. 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 audit. The statement of changes in net assets
for the year ended October 31, 1996 and financial highlights for each
of the four years in the period then ended of MuniYield Insured Fund,
Inc., were audited by other auditors whose report dated December 6,
1996, expressed an unqualified opinion on such financial statement and
financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. 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, 1997 by correspondence with the custodian and brokers. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the 1997 financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of MuniYield Insured Fund, Inc. at October 31,
1997, and the results of its operations, the changes in its net assets
and financial highlights for the year then ended, in conformity with
generally accepted accounting principles.
/S/Ernst & Young LLP
Princeton, New Jersey
December 3, 1997
