MUNIYIELD
PENNSYLVANIA
INSURED FUND
FUND LOGO
Annual Report
October 31, 2000
MuniYield Pennsylvania Insured Fund seeks to provide shareholders
with as high a level of current income exempt from Federal and
Pennsylvania income taxes as is consistent with its investment
policies and prudent investment management by investing primarily in
a portfolio of long-term insured municipal obligations the interest
on which, in the opinion of bond counsel to the issuer, is exempt
from Federal and Pennsylvania income taxes.
This report, including the financial information herein, is
transmitted to shareholders of MuniYield Pennsylvania Insured Fund
for their information. It is not a prospectus. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Shares by issuing Preferred Shares to provide the Common
Shareholders with a potentially higher rate of return. Leverage
creates risks for Common Shareholders, including the likelihood of
greater volatility of net asset value and market price of the Common
Shares, and the risk that fluctuations in the short-term dividend
rates of the Preferred Shares may affect the yield to Common
Shareholders. Statements and other information herein are as dated
and are subject to change.
MuniYield Pennsylvania
Insured Fund
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MUNIYIELD PENNSYLVANIA INSURED FUND
The Benefits and
Risks of
Leveraging
MuniYield Pennsylvania Insured Fund utilizes leveraging to seek to
enhance the yield and net asset value of its Common Shares. However,
these objectives cannot be achieved in all interest rate
environments. To leverage, the Fund issues Preferred Shares, which
pay 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 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 Shares. However,
in order to benefit Common 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 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 Share
capitalization of $100 million and the issuance of Preferred Shares
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 Shares 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 on the Common Shares.
In this case, the dividends paid to Preferred Shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common 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 Shares will be reduced or eliminated completely. At the same
time, the market value of the fund's Common Shares (that is, their
price as listed on the New York Stock Exchange) may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common
Shares' net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Shares does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Shares may
also decline.
As a part of its investment strategy, the Fund may invest in certain
securities whose potential income return is inversely related to
changes in a floating interest rate ("inverse floaters"). In
general, income on inverse floaters will decrease when short-term
interest rates increase and increase when short-term interest rates
decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of
reduced or eliminated interest payments and losses of invested
principal. In addition, inverse floaters have the effect of
providing investment leverage and, as a result, the market value of
such securities will generally be more volatile than that of fixed-
rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the
net asset value of the Fund's shares may also be more volatile than
if the Fund did not invest in these securities.
MuniYield Pennsylvania Insured Fund, October 31, 2000
DEAR SHAREHOLDER
For the year ended October 31, 2000, the Common Shares of MuniYield
Pennsylvania Insured Fund earned $0.797 per share income dividends,
which included earned and unpaid dividends of $0.065. This
represents a net annualized yield of 5.63%, based on a month-end net
asset value of $14.16 per share. During the same period, the total
investment return on the Fund's Common Shares was +11.06%, based on
a change in per share net asset value from $13.62 to $14.16, and
assuming reinvestment of $0.801 per share income dividends.
For the six-month period ended October 31, 2000, the total
investment return on the Fund's Common Shares was +8.01%, based on a
change in per share net asset value from $13.54 to $14.16, and
assuming reinvestment of $0.397 per share income dividends.
For the six-month period ended October 31, 2000, the Fund's Auction
Market Preferred Shares had an average yield of 4.05% for Series A
and 4.39% for Series B.
The Municipal Market Environment
During the six months ended October 31, 2000, long-term US Treasury
bond yields generally drifted lower. A number of economic
indicators, particularly employment, new home sales and consumer
spending, have suggested that US economic growth, while still
strong, has moderated from 1999's robust levels. Preliminary
estimates for third-quarter 2000 US gross domestic product growth
were recently released at 2.7%, well below the first-quarter 2000
rate of 4.8% and the second-quarter 2000 rate of 5.6%. This decline
in economic growth suggests to some analysts that the Federal
Reserve Board has finished raising interest rates for its current
interest rate cycle. The Federal Reserve Board increased short-term
interest rates at its May meeting and has since kept monetary policy
steady at its subsequent meetings. Given the potential for stable
short-term interest rates in the coming months, investor emphasis
focused on the continuing US Treasury debt reduction program and
forecasts of sizeable Federal budgetary surpluses going forward.
Many investors have concluded that there will be a significant
future shortage of longer-dated maturity US Treasury securities. By
late August, US Treasury bond yields declined 30 basis points
(0.30%) to 5.66%, their lowest level in more than a year.
However, for the remainder of the period, bond yields were unable to
maintain their earlier gains. Rising oil prices were the major focus
behind the decline in bond prices, as many investors feared that
higher oil prices would result in increased inflationary pressures.
Additionally, US corporations issued large amounts of taxable debt
in order to take advantage of the current low interest rate
environment. During the last three months, US corporations issued
more than $100 billion in investmentgrade securities, offering
yields in the 7.25% - 9% range. Many investors found these taxable
issues an attractive and more plentiful alternative to US Treasury
bonds. As the demand for US Treasury issues weakened, US bond yields
rose. Although US Treasury bond yields rose to 5.78% by the end of
October 2000, overall they declined almost 20 basis points during
the last six months.
The six-month period ended October 31, 2000 was one of the few
periods in recent years in which the tax-exempt bond market
outperformed its taxable counterpart, the US Treasury bond market.
While municipal bond yields followed the similar seesaw pattern of
Treasury bond yields, tax-exempt bond price volatility was
significantly reduced. Municipal bond yields traded in a relatively
narrow range during much of October 2000. Overall investor demand
for municipal bonds remained strong, allowing tax-exempt bond
yields, as measured by the Bond Buyer Revenue Bond Index, to decline
30 basis points to end the period at 5.75%.
In the past three months, new long-term municipal bond issuance has
continued to decline, albeit at a slower rate than earlier this
year. During this period, more than $53 billion in new long-term
municipal bonds was issued, a decline of 3% compared to the same
three-month period in 1999. During the last six months, more than
$105 billion in tax-exempt bonds was underwritten, a decline of 8%
compared to the same six-month period in 1999. Just under $200
billion in new municipal securities was marketed during the past
year, a decline of more than 16% compared to the same 12-month
period in 1999.
The demand for municipal bonds came from a number of non-traditional
and conventional sources. Derivative/arbitrage programs and
insurance companies remained the dominant institutional buyers,
while individual retail purchases also remained strong. Traditional,
open-end tax-exempt mutual funds have continued to see significant
disintermediation. It was recently reported that thus far during the
2000 calendar year, long-term municipal bond mutual funds
experienced net cash outflows of more than $15 billion. Fortunately,
the combination of reduced new bond issuance and ongoing demand from
non-traditional sources has been able to more than offset the
decline in demand from tax-exempt mutual funds. This favorable
balance has fostered a significant decline in municipal bond yields
in recent months.
Currently, there is no reason to expectthat the positive technical
position of the municipal bond market will significantly
deteriorate. The steeply positive yield curve and the relatively
high credit quality that the tax-exempt bond market offers should
continue to attract different classes of institutional buyers.
Strong state and local governmental financial conditions also
suggest that issuance should remain manageable into next year.
However, the results of the presidential election may affect the tax-
exempt bond market. Various tax and spending programs proposed by
both candidates have obvious implications for state and local
governments as well as corporate and individual taxpayers. Political
history has shown that the enactment of campaign promises, both
Republican and Democratic, has very often been a long, laborious
process. This suggests that during the next few months, US economic
factors will most likely have a greater effect on bond yields than
political considerations.
Portfolio Strategy
At the beginning of the six-month period ended October 31, 2000, we
continued to gradually restructure the Fund to have a more neutral
duration in an effort to temper portfolio volatility. In doing so,
our focus was to increase coupon income with the purchase of current
and premium-couponed issues in the 15-year - 20-year maturity range.
We initially maintained this position into the period, but because
of market appreciation, the duration of the Fund was reduced below
what we considered neutral. Also, because of reduced new issuance,
we believed that it would be prudent to return duration to a
slightly higher level. We focused on maintaining and/or increasing
the amount of earned tax-exempt income, in part to offset the
heightened level of short-term interest rates experienced by our
leveraged portfolio. Despite the Fund's increased cost of borrowing,
the leveraging of the portfolio remains an important income-
generating vehicle for the Fund. (For a complete explanation of the
benefits and risks of leveraging, see page 1 of this report to
shareholders.)
Looking ahead, we anticipate that we will maintain our current fully
invested position in an effort to enhance shareholder income. We
believe that any increase in duration will likely generate an
incremental yield to shareholders with a limited associated increase
in price volatility.
In Conclusion
We thank you for your support of the MuniYield Pennsylvania Insured
Fund, and we look forward to serving your investment needs in the
months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Trustee
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(William R. Bock)
William R. Bock
Vice President and Portfolio Manager
November 28, 2000
MuniYield Pennsylvania Insured Fund, October 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
Pennsylvania--98.2% NR* Aaa $ 2,500 Allegheny County, Pennsylvania, COP, 5% due
12/01/2019 (a) $ 2,324
Allegheny County, Pennsylvania, Hospital Development
Authority Revenue Bonds:
AAA Aaa 2,000 (Allegheny General Hospital Project), Series A,
6.25% due 9/01/2020 (g) 2,183
NR* VMIG1++ 1,330 (Presbyterian University Hospital), ACES, Series
B-3, 4.40% due 3/01/2018 (j) 1,330
NR* A2 3,000 (South Hills Health System), Series A, 6.50% due
5/01/2014 3,039
BBB Baa1 3,100 Allegheny County, Pennsylvania, IDA, Environmental
Improvement Revenue Refunding Bonds (USX Project),
6% due 1/15/2014 3,004
AAA Aaa 6,000 Allegheny County, Pennsylvania, Port Authority, Special
Transportation Revenue Bonds, 6% due 3/01/2024 (g) 6,238
Allegheny County, Pennsylvania, Sanitation Authority,
Sewer Revenue Bonds (g):
AAA Aaa 3,660 5.75% due 12/01/2018 3,779
AAA Aaa 10,000 5.375% due 12/01/2024 9,717
AAA Aaa 8,000 5.50% due 12/01/2024 7,905
AAA Aaa 2,550 Berks County, Pennsylvania, GO, Refunding, 5.85%
due 11/15/2018 (c) 2,596
AAA Aaa 1,500 Boyertown, Pennsylvania, School District, GO,
Refunding, 6.10% due 9/01/2002 (a)(h) 1,544
AAA Aaa 1,000 Bucks County, Pennsylvania, IDA, Revenue Refunding
Bonds (Grand View Hospital), Series A, 5.25% due 7/01/2021 (a) 945
NR* Aaa 4,500 Bucks County, Pennsylvania, Water and Sewer Authority,
Revenue Refunding Bonds (Neshaminy Interceptor Sewer System),
5.60% due 6/01/2024 (a) 4,503
AAA Aaa 2,000 Delaware County, Pennsylvania, IDA, PCR, Refunding
(Philadelphia Electric Company Project), Series A,
7.375% due 4/01/2021 (a) 2,059
AAA Aaa 4,000 Gettysburg, Pennsylvania, Municipal Authority, College
Revenue Refunding Bonds, 5% due 8/15/2023 (g) 3,670
AAA Aaa 3,280 Johnstown, Pennsylvania, GO, Refunding, 6.45% due
10/01/2019 (c) 3,469
AAA Aaa 7,000 Lehigh County, Pennsylvania, General Purpose Authority
Revenue Bonds (Saint Luke's Hospital--Bethlehem),
6.25% due 7/01/2022 (a) 7,139
AAA Aaa 10,750 Lehigh County, Pennsylvania, IDA, PCR, Refunding
(Pennsylvania Power and Light Company Project),
Series A, 6.40% due 11/01/2021 (g) 11,247
AAA Aaa 4,570 Lower Providence Township, Pennsylvania, Sewer Authority,
Sewer Revenue Refunding Bonds, 5.25% due 5/01/2022 (g) 4,371
A A3 1,500 Luzerne County, Pennsylvania, IDA, Exempt Facilities
Revenue Bonds (Pennsylvania Gas and Water Company Project),
AMT, Series B, 7.125% due 12/01/2022 1,583
Luzerne County, Pennsylvania, IDA, Exempt Facilities
Revenue Refunding Bonds (Pennsylvania Gas and Water
Company Project), AMT, Series A:
A A3 2,500 7.20% due 10/01/2017 2,635
AAA Aaa 5,000 7% due 12/01/2017 (a) 5,385
AAA Aaa 1,000 Northeastern Pennsylvania, Hospital and Education
Authority, College Revenue Bonds (Luzerne County Community
College), 6.625% due 2/15/2005 (a)(h) 1,078
AAA Aaa 2,000 Northeastern Pennsylvania, Hospital and Education
Authority, Health Care Revenue Bonds (Wyoming Valley
Health Care), Series A, 5.25% due 1/01/2026 (a) 1,860
AAA AAA 4,000 Norwin, Pennsylvania, School District, GO, 6% due
4/01/2024 (c) 4,166
BBB Baa2 6,500 Pennsylvania Economic Development Financing Authority,
Wastewater Treatment Revenue Bonds (Sun Company
Inc.--R & M Project), AMT, Series A, 7.60%
due 12/01/2024 6,801
AA+ Aa2 2,000 Pennsylvania HFA, Revenue Bonds, RIB, AMT,
7.553% due 4/01/2025 (i) 2,023
AAA Aaa 4,000 Pennsylvania HFA, Revenue Refunding Bonds
(Rental Housing), 6.50% due 7/01/2023 (e) 4,138
Pennsylvania HFA, S/F Mortgage Revenue Bonds, AMT:
AA+ Aa2 2,630 Series 34B, 7% due 4/01/2024 (d) 2,723
AA+ Aa2 8,000 Series 70A, 5.80% due 10/01/2021 7,959
Pennsylvania HFA, S/F Mortgage Revenue
Refunding Bonds, AMT:
AA+ Aa2 2,500 Series 39B, 6.875% due 10/01/2024 2,616
AA+ Aa2 2,965 Series 41B, 6.65% due 4/01/2025 3,043
AA+ Aa2 2,720 Series 60A, 5.85% due 10/01/2027 2,627
AAA Aaa 6,900 Pennsylvania Intergovernmental Co-Op Authority,
Special Tax Revenue Refunding Bonds (Philadelphia
Funding Program), 5% due 6/15/2021 (c) 6,375
Pennsylvania State, GO:
AAA Aaa 11,000 Second Series, 5.75% due 10/01/2019 (g) 11,314
AAA Aaa 4,000 Third Series, 5% due 12/01/2018 (c) 3,768
Pennsylvania State, GO, Refunding, First Series:
AA Aa2 7,605 6% due 1/15/2011 8,308
AAA Aaa 5,770 6% due 1/15/2017 (g) 6,131
AAA Aaa 6,000 Pennsylvania State Higher Education Assistance
Agency, Student Loan Revenue Bonds, AMT, Series C,
7.15% due 9/01/2021 (a) 6,463
AAA Aaa 1,690 Pennsylvania State Higher Educational Facilities
Authority, College and University Revenue Bonds (Marywood
University Project), 5.50% due 6/01/2018 (g) 1,691
AAA Aaa 1,255 Pennsylvania State Higher Educational Facilities Authority,
College and University Revenue Refunding Bonds (Duquesne
University), Series A, 6.75% due 4/01/2020 (g) 1,265
Pennsylvania State Higher Educational Facilities
Authority, Revenue Refunding Bonds:
A1+ NR* 200 (Carnegie Mellon University), VRDN, Series A,
4.60% due 11/01/2025 (j) 200
A1+ NR* 300 (Carnegie Mellon University), VRDN, Series B,
4.60% due 11/01/2027 (j) 300
A1+ NR* 200 (Carnegie Mellon University), VRDN, Series D,
4.60% due 11/01/2030 (j) 200
AA NR* 1,400 (Philadelphia University), 6% due 6/01/2029 1,410
AAA Aaa 2,000 (Temple University), First Series, 5% due 4/01/2019 (g) 1,869
AAA Aaa 4,000 Pennsylvania State Turnpike Commission, Oil Franchise
Tax Revenue Refunding Bonds, Senior Series A,
5% due 12/01/2023 (a) 3,672
AAA Aaa 6,300 Philadelphia, Pennsylvania, Authority for
Industrial Development, Airport Revenue
Bonds (Philadelphia Airport System Project),
AMT, Series A, 5.125% due 7/01/2028 (c) 5,670
AAA Aaa 9,125 Philadelphia, Pennsylvania, Authority for Industrial
Development, Lease Revenue Bonds (City of Philadelphia
Project), Series A, 5.375% due 2/15/2027 (g) 8,769
</TABLE>
Portfolio
Abbreviations
To simplify the listings of MuniYield Pennsylvania Insured Fund's
portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to the
list at right.
ACES SM Adjustable Convertible
Extendible Securities
AMT Alternative Minimum Tax
(subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
IDA Industrial Development Authority
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
MuniYield Pennsylvania Insured Fund, October 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
<S> <S> <S> <C> <S> <C>
Pennsylvania AAA NR* $ 3,000 Philadelphia, Pennsylvania, Hospitals and Higher Education
(concluded) Facilities Authority, Hospital Revenue Refunding Bonds
(Presbyterian Medical Center), 6.65% due 12/01/2019 (b) $ 3,414
Philadelphia, Pennsylvania, Parking Authority, Airport
Parking Revenue Bonds (f):
AAA Aaa 2,000 5.625% due 9/01/2015 2,068
AAA Aaa 6,250 5.25% due 9/01/2022 5,991
AAA Aaa 5,500 Philadelphia, Pennsylvania, Parking Authority, Parking
Revenue Refunding Bonds, 5% due 2/01/2027 (a) 4,978
AAA Aaa 7,000 Philadelphia, Pennsylvania, School District, GO,
Series B, 5.375% due 4/01/2027 (a) 6,763
AAA Aaa 1,050 Pittsburgh and Allegheny Counties, Pennsylvania,
Public Auditorium Revenue Bonds (Regional Asset
District Sales Tax), 5% due 2/01/2024 (a) 965
AAA Aaa 3,070 Pittsburgh, Pennsylvania, GO, Series A, 5.65% due
9/01/2017 (c) 3,138
Pittsburgh, Pennsylvania, Public Parking Authority,
Parking Revenue Bonds (a):
AAA Aaa 1,460 5.80% due 12/01/2017 1,509
AAA Aaa 1,525 5.85% due 12/01/2018 1,574
A1+ NR* 450 Schuylkill County, Pennsylvania, IDA, Resource
Recovery Revenue Refunding Bonds (Northeastern Power
Company), VRDN, Series A, 4.55% due 12/01/2022 (j) 450
A- NR* 2,520 Scranton-Lackawanna, Pennsylvania, Health and Welfare
Authority, Revenue Refunding Bonds (University of
Scranton Project), Series B, 6.50% due 3/01/2015 2,615
Southeastern Pennsylvania Transportation Authority,
Special Revenue Bonds (c):
AAA Aaa 4,500 5.375% due 3/01/2017 4,501
AAA Aaa 2,525 5.375% due 3/01/2022 2,467
AA+ Aaa 3,985 Swarthmore Borough Authority, Pennsylvania, College
Revenue Refunding Bonds, 6% due 9/15/2020 4,064
AAA Aaa 3,500 Washington County, Pennsylvania, Capital Funding
Authority Revenue Bonds (Capital Projects and
Equipment Program), 6.15% due 12/01/2029 (a) 3,796
Puerto Rico--0.4% A Baa1 1,000 Puerto Rico Commonwealth Highway and Transportation
Authority, Transportation Revenue Bonds, Series B,
6% due 7/01/2026 1,029
Total Investments (Cost--$238,895)--98.6% 246,426
Other Assets Less Liabilities--1.4% 3,426
--------
Net Assets--100.0% $249,852
========
(a)AMBAC Insured.
(b)Escrowed to maturity.
(c)FGIC Insured.
(d)FHA Insured.
(e)FNMA Collateralized.
(f)FSA Insured.
(g)MBIA Insured.
(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 October 31, 2000.
(j)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, 2000.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
Quality Profile
(unaudited)
The quality ratings of securities in the Fund as of October 31, 2000
were as follows:
Percent of
S&P Rating/Moody's Rating Net Assets
AAA/Aaa 77.0%
AA/Aa 12.3
A/A 4.4
BBB/Baa 3.9
Other++ 1.0
++Temporary investments in short-term municipal securities.
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of October 31, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$238,894,565) $246,426,215
Cash 22,961
Interest receivable 3,765,795
Prepaid expenses and other assets 41,228
------------
Total assets 250,256,199
------------
Liabilities: Payables:
Dividends to shareholders $ 180,914
Investment adviser 101,731 282,645
------------
Accrued expenses 121,449
------------
Total liabilities 404,094
------------
Net Assets: Net assets $249,852,105
============
Capital: Capital Shares (unlimited number of shares authorized):
Preferred Shares, par value $.05 per share (3,520 shares
of AMPS* issued and outstanding at $25,000
per share liquidation preference) $ 88,000,000
Common Shares, par value $.10 per share (11,434,032
shares issued and outstanding) $ 1,143,403
Paid-in capital in excess of par 170,030,716
Undistributed investment income--net 1,261,361
Accumulated realized capital losses on investments--net (16,774,770)
Accumulated distributions in excess of realized capital
gains on investments--net (1,340,255)
Unrealized appreciation on investments--net 7,531,650
------------
Total--Equivalent to $14.16 net asset value per
Common Share (market price--$11.75) 161,852,105
------------
Total capital $249,852,105
============
*Auction Market Preferred Shares.
See Notes to Financial Statements.
</TABLE>
MuniYield Pennsylvania Insured Fund, October 31, 2000
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended October 31, 2000
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 12,351,908
Income:
Expenses: Investment advisory fees $ 1,057,508
Reorganization expenses 388,067
Commission fees 193,123
Transfer agent fees 113,086
Professional fees 75,886
Accounting services 46,772
Printing and shareholder reports 41,597
Trustees' fees and expenses 33,032
Custodian fees 13,161
Listing fees 10,251
Pricing fees 6,150
Other 17,482
------------
Total expenses 1,996,115
------------
Investment income--net 10,355,793
------------
Realized & Realized loss on investments--net (7,084,167)
Unrealized Change in unrealized appreciation/depreciation on investments--net 16,283,097
Gain (Loss) on ------------
Investments--Net: Net Increase in Net Assets Resulting from Operations $ 19,554,723
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the
Year Ended
October 31,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 10,355,793 $ 6,162,649
Realized loss on investments--net (7,084,167) (247,464)
Change in unrealized appreciation/depreciation on
investments--net 16,283,097 (10,834,889)
------------ ------------
Net increase (decrease) in net assets resulting
from operations 19,554,723 (4,919,704)
------------ ------------
Dividends & Investment income--net:
Distributions to Common Shares (7,590,869) (5,107,217)
Shareholders: Preferred Shares (3,022,040) (1,089,472)
Realized gain on investments--net:
Common Shares -- (1,443,729)
Preferred Shares -- (184,564)
In excess of realized gain on investments--net:
Common Shares -- (1,188,339)
Preferred Shares -- (151,916)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (10,612,909) (9,165,237)
------------ ------------
Capital Share Proceeds from issuance of Common Shares resulting
Transactions: from reorganization 72,664,657 --
Proceeds from issuance of Preferred Shares resulting
from reorganization 48,000,000 --
Value of shares issued to Common Shareholders in
reinvestment of dividends and distributions -- 1,563,742
------------ ------------
Net increase in net assets derived from capital
share transactions 120,664,657 1,563,742
------------ ------------
Net Assets: Total increase (decrease) in net assets 129,606,471 (12,521,199)
Beginning of year 120,245,634 132,766,833
------------ ------------
End of year* $249,852,105 $120,245,634
============ ============
*Undistributed investment income--net $ 1,261,361 $ 1,126,658
============ ============
See Notes to Financial Statements.
</TABLE>
MuniYield Pennsylvania Insured Fund, October 31, 2000
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
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: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 13.62 $ 16.01 $ 15.86 $ 15.32 $ 15.36
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .99 1.05 1.12 1.13 1.15
Realized and unrealized gain (loss)
on investments--net .65 (1.87) .46 .66 (.03)
--------- --------- --------- --------- ---------
Total from investment operations 1.64 (.82) 1.58 1.79 1.12
--------- --------- --------- --------- ---------
Less dividends and distributions
to Common Shareholders:
Investment income--net (.80) (.87) (.88) (.89) (.91)
Realized gain on investments--net -- (.25) (.27) (.09) --
In excess of realized gain on
investments--net -- (.20) -- -- --
--------- --------- --------- --------- ---------
Total dividends and distributions
to Common Shareholders (.80) (1.32) (1.15) (.98) (.91)
--------- --------- --------- --------- ---------
Effect of Preferred Share activity:
Dividends and distributions to
Preferred Shareholders:
Investment income--net (.30) (.19) (.18) (.24) (.25)
Realized gain on investments--net -- (.03) (.10) (.03) --
In excess of realized gain on
investments--net -- (.03) -- -- --
--------- --------- --------- --------- ---------
Total effect of Preferred Share activity (.30) (.25) (.28) (.27) (.25)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 14.16 $ 13.62 $ 16.01 $ 15.86 $ 15.32
========= ========= ========= ========= =========
Market price per share, end of year $ 11.75 $ 12.25 $ 16.50 $ 14.8125 $ 14.125
========= ========= ========= ========= =========
Total Investment Based on market price per share 2.46% (18.98%) 19.82% 12.15% 9.48%
Return:* ========= ========= ========= ========= =========
Based on net asset value
per share 11.06% (7.16%) 8.58% 10.71% 6.30%
========= ========= ========= ========= =========
Ratios Based on Total expenses, excluding
Average Net reorganization expenses** 1.18% 1.15% 1.11% 1.14% 1.13%
Assets of ========= ========= ========= ========= =========
Common Shares: Total expenses** 1.46% 1.15% 1.11% 1.14% 1.13%
========= ========= ========= ========= =========
Total investment
income--net** 7.58% 7.00% 7.01% 7.30% 7.43%
========= ========= ========= ========= =========
Amount of dividends to
Preferred Shareholders 2.21% 1.24% 1.15% 1.52% 1.62%
========= ========= ========= ========= =========
Investment income--net, to
Common Shareholders 5.37% 5.76% 5.86% 5.78% 5.81%
========= ========= ========= ========= =========
Ratios Based on Total expenses, excluding reorganization
Total Average Net expenses .76% .79% .77% .79% .78%
Assets:**++ ========= ========= ========= ========= =========
Total expenses .94% .79% .77% .79% .78%
========= ========= ========= ========= =========
Total investment income--net 4.89% 4.82% 4.90% 5.07% 5.14%
========= ========= ========= ========= =========
Ratios Based on Dividends to Preferred Shareholders 4.01% 2.73% 2.62% 3.41% 3.60%
Average Net ========= ========= ========= ========= =========
Assets of
Preferred Shares:
Supplemental Net assets, net of Preferred Shares,
Data: end of year (in thousands) $ 161,852 $ 80,246 $ 92,767 $ 91,071 $ 88,001
========= ========= ========= ========= =========
Preferred Shares outstanding,
end of year (in thousands) $ 88,000 $ 40,000 $ 40,000 $ 40,000 $ 40,000
========= ========= ========= ========= =========
Portfolio turnover 37.77% 53.28% 60.52% 70.14% 75.83%
========= ========= ========= ========= =========
Leverage: Asset coverage per $1,000 $ 2,839 $ 3,006 $ 3,319 $ 3,277 $ 3,200
========= ========= ========= ========= =========
Dividends Per Series A--Investment income--net $ 986 $ 681 $ 655 $ 853 $ 901
Share On ========= ========= ========= ========= =========
Preferred Shares Series B--Investment income--net $ 753 -- -- -- --
Outstanding:++++ ========= ========= ========= ========= =========
*Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales charges.
**Do not reflect the effect of dividends to Preferred Shareholders.
++Includes Common and Preferred Share average net assets.
++++The Fund's Preferred Shares were issued on November 30, 1992
(Series A) and February 7, 2000 (Series B).
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield Pennsylvania Insured Fund (the "Fund") (formerly MuniYield
Pennsylvania Fund) is registered under the Investment Company Act of
1940 as a non-diversified, closed-end management investment company.
The Fund's financial statements are prepared in conformity with
accounting principles generally accepted in the United States of
America, which may require the use of management accruals and
estimates. The Fund determines and makes available for publication
the net asset value of its Common Shares on a weekly basis. The
Fund's Common Shares are listed on the New York Stock Exchange under
the symbol MPA. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of
options traded in the over-the-counter market, valuation is the last
asked price (options written) or the last bid price (options
purchased). Securities with remaining maturities of sixty days or
less are valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at their fair value as determined in good faith
by or under the direction of the Board of Trustees 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 Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. Losses may arise due to
changes in the value of the contract or if the counterparty does not
perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
MuniYield Pennsylvania Insured Fund, October 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
* 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) 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 futures transactions.
(f) Reclassification--Accounting principles generally accepted in
the United States of America require that certain components of net
assets be adjusted to reflect permanent differences between
financial and tax reporting. Accordingly, the current year's
permanent book/ tax differences of $8,619 have been reclassified
between accumulated net realized capital losses and paid-in capital
in excess of par, $3,752 has been reclassified between accumulated
net realized capital losses and undistributed net investment income
and $388,067 has been reclassified between paid-in capital in excess
of par and undistributed net investment income. These
reclassifications have no effect on net assets or net asset value
per share.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of .50% of
the Fund's average weekly net assets, including proceeds from the
issuance of Preferred Shares.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 2000 were $87,678,804 and
$73,806,145, respectively.
Net realized losses for the year ended October 31, 2000 and net
unrealized gains as of October 31, 2000 were as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (6,361,987) $ 7,531,650
Financial futures contracts (722,180) --
------------- ------------
Total $ (7,084,167) $ 7,531,650
============= ============
As of October 31, 2000, net unrealized appreciation for Federal
income tax purposes aggregated $7,478,023, of which $8,606,408
related to appreciated securities and $1,128,385 related to
depreciated securities. The aggregate cost of investments at October
31, 2000 for Federal income tax purposes was $238,948,192.
4. Capital Share Transactions:
The Fund is authorized to issue an unlimited number of shares of
beneficial interest, including Preferred Shares, par value $.10 per
share, all of which were initially classified as Common Shares. The
Board of Trustees is authorized, however, to reclassify any unissued
shares of beneficial interest without approval of the holders of
Common Shares.
Common Shares
Shares issued and outstanding during the year ended October 31, 2000
increased by 5,542,626 as a result of issuance of Common Shares from
reorganization and during the year ended October 31, 1999 increased
by 98,662 as a result of dividend reinvestment.
Preferred Shares
Auction Market Preferred Shares ("AMPS") are Preferred Shares of the
Fund, with a par value of $.05 per share and a liquidation
preference of $25,000 per share, 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,
2000 were 4.13% for Series A and 4.13% for Series B.
Shares issued and outstanding during the year ended October 31, 2000
increased by 1,920 as a result of issuance of Preferred Shares from
reorganization and during the year ended October 31, 1999 remained
constant.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from .25% to .375%,
calculated on the proceeds of each auction. For the year ended
October 31, 2000, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, an affiliate of FAM, earned $114,381 as commissions.
5. Capital Loss Carryforward:
At October 31, 2000, the Fund had a net capital loss carryforward of
approximately $16,882,000, of which $1,807,000 expires in 2001,
$3,117,000 expires in 2002, $954,000 expires in 2003, $1,637,000
expires in 2006, $1,782,000 expires in 2007 and $7,585,000 expires
in 2008. This amount will be available to offset like amounts of any
future taxable gains.
6. Acquisition of Other FAM-Managed Investment Companies:
On February 7, 2000, the Fund acquired all of the net assets of
MuniHoldings Pennsylvania Insured Fund and MuniVest Pennsylvania
Insured Fund pursuant to a plan of reorganization. The acquisition
was accomplished by a tax-free exchange of the following capital
shares:
Common Shares AMPS
Exchanged Exchanged
MuniHoldings Pennsylvania
Insured Fund 2,170,570 820
MuniVest Pennsylvania Insured
Fund 4,042,798 1,100
In exchange for these shares, the Fund issued 5,542,626 Common
Shares and 1,920 AMPS Shares. As of that date, net assets of the
acquired funds, including unrealized depreciation and accumulated
net realized capital losses, were as follows:
Accumulated
Net Unrealized Net Realized
Assets Depreciation Capital Losses
MuniHoldings
Pennsylvania
Insured Fund $46,498,855 $(4,568,915) $(1,583,563)
MuniVest
Pennsylvania
Insured Fund $74,165,802 $(1,690,594) $(8,094,669)
The aggregate net assets of the Fund immediately after the
acquisition amounted to $237,900,779.
7. Subsequent Event:
On November 8, 2000, the Fund's Board of Trustees declared an
ordinary income dividend to holders of Common Shares in the amount
of $.065389 per share, payable on November 29, 2000 to shareholders
of record as of November 20, 2000.
MuniYield Pennsylvania Insured Fund, October 31, 2000
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders, MuniYield Pennsylvania
Insured Fund:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniYield
Pennsylvania Insured Fund (the "Fund")(formerly MuniYield
Pennsylvania Fund) as of October 31, 2000, the related statement of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights.
Our procedures included confirmation of securities owned at October
31, 2000 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniYield Pennsylvania Insured Fund as of October 31, 2000, the
results of its operations, the changes in its net assets and the
financial highlights for the respective stated periods in conformity
with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
Princeton, New Jersey
December 1, 2000
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniYield
Pennsylvania Insured Fund during its taxable year ended October 31,
2000 qualify as tax-exempt interest dividends for Federal income tax
purposes. Additionally, there were no capital gains distributions
paid by the Fund during the year.
Please retain this information for your records.
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute all or a portion of its
net investment income to its shareholders on a monthly basis. In
order to provide shareholders with a more consistent yield to the
current trading price of shares of Common Shares of the Fund, the
Fund may at times pay out less than the entire amount of net
investment income earned in any particular month and may at times in
any month pay out such accumulated but undistributed income in
addition to net investment income earned in that month. As a result,
the dividends paid by the Fund for any particular month may be more
or less than the amount of net investment income earned by the Fund
during such month. The Fund's current accumulated but undistributed
net investment income, if any, is disclosed in the Statement of
Assets, Liabilities and Capital, which comprises part of the
Financial Information included in this report.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
M. Colyer Crum, Trustee
Laurie Simon Hodrick, Trustee
Jack B. Sunderland, Trustee
Stephen B. Swensrud, Trustee
J. Thomas Touchton, Trustee
Fred G. Weiss, Trustee
Arthur Zeikel, Trustee
Vincent R. Giordano, Senior Vice President
William R. Bock, Vice President
Kenneth A. Jacob, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Custodian
State Street Bank and Trust Company
225 Franklin StreetBoston, MA 02110
Transfer Agents
Common Shares:
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Preferred Shares:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MPA
