UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-6692
Name of Fund: MuniYield Michigan Insured Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
MuniYield Michigan Insured Fund, Inc., 800 Scudders Mill Road,
Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton,
NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 04/30/03
Date of reporting period: 11/01/02 - 04/30/03
Item 1 - Attach shareholder report
(BULL LOGO)
Merrill Lynch Investment Managers
Semi-Annual Report
April 30, 2003
MuniYield
Michigan
Insured
Fund, Inc.
www.mlim.ml.com
MuniYield Michigan Insured Fund, Inc. seeks to provide shareholders
with as high a level of current income exempt from Federal and
Michigan income taxes as is consistent with its investment policies
and prudent investment management by investing primarily in a
portfolio of long-term municipal obligations the interest on which,
in the opinion of bond counsel to the issuer, is exempt from Federal
and Michigan income taxes.
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield Michigan Insured
Fund, Inc. for their information. It is not a prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock and intends to remain leveraged by issuing Preferred
Stock to provide the Common Stock shareholders with a potentially
higher rate of return. Leverage creates risks for Common Stock
shareholders, including the likelihood of greater volatility of net
asset value and market price of 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 Michigan Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MUNIYIELD MICHIGAN INSURED FUND, INC.
The Benefits
And Risks of
Leveraging
MuniYield Michigan 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 on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pickup on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value of the fund's Common Stock (that is, its
price as listed on the New York Stock Exchange) may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Stock does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Stock may
also decline.
As a part of its investment strategy, the Fund may invest in certain
securities whose potential income return is inversely related to
changes in a floating interest rate ("inverse floaters"). In
general, income on inverse floaters will decrease when short-term
interest rates increase and increase when short-term interest rates
decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of
reduced or eliminated interest payments and losses of invested
principal. In addition, inverse floaters have the effect of
providing investment leverage and, as a result, the market value
of such securities will generally be more volatile than that of
fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the
net asset value of the Fund's shares may also be more volatile than
if the Fund did not invest in such securities.
Swap
Agreements
The Fund may also invest in swap agreements, which are over-the-
counter contracts in which one party agrees to make periodic
payments based on the change in market value of a specified bond,
basket of bonds, or index in return for periodic payments based on a
fixed or variable interest rate or the change in market value of a
different bond, basket of bonds or index. Swap agreements may be
used to obtain exposure to a bond or market without owning or taking
physical custody of securities.
MuniYield Michigan Insured Fund, Inc., April 30, 2003
DEAR SHAREHOLDER
For the six months ended April 30, 2003, the Common Stock of
MuniYield Michigan Insured Fund, Inc. had a net annualized yield of
6.06%, based on a period-end per share net asset value of $16.20 and
$.487 per share income dividends. Over the same period, the total
investment return on the Fund's Common Stock was +6.43%, based on a
change in per share net asset value from $15.74 to $16.20, and
assuming reinvestment of $.485 per share ordinary income dividends.
For the six-month period ended April 30, 2003, the Fund's Auction
Market Preferred Stock had an average yield of 1.09% for Series A,
1.00% for Series B and 1.09% for Series C.
For a description of the Fund's total investment return based on a
change in the per share market value (as measured by the trading
price of the Fund's shares on the New York Stock Exchange), and
assuming reinvestment of dividends, please refer to the Financial
Highlights section of the Financial Statements included in this
report. As a closed-end fund, the Fund's shares may trade in the
secondary market at a premium or discount to the Fund's net asset
value. As a result, total investment returns based on changes in the
Fund's market value can vary significantly from total investment
return based on changes in the Fund's net asset value.
The Municipal Market Environment
During the six-month period ended April 30, 2003, amid considerable
weekly and monthly volatility, long-term fixed income interest rates
generally declined. Geopolitical tensions and volatile equity
valuations continued to overshadow economic fundamentals as they
have for most of the last 12 months. Reacting to the strong U.S.
equity rally that began last October, fixed income bond yields
remained under pressure in November 2002, as U.S. equity markets
continued to strengthen. During November, the Standard & Poor's 500
(S&P 500) Index rose an additional 5.50%. Equity prices were
supported by further signs of U.S. economic recovery, especially
improving labor market activity. In late November, third-quarter
2002 U.S. gross domestic product growth was 4%, well above the
second-quarter 2002 rate of 1.30%. Financial conditions were also
strengthened by a larger-than-expected reduction in short-term
interest rates by the Federal Reserve Board in early November. The
Federal Funds target rate was lowered 50 basis points (0.50%) to
1.25%, its lowest level since the 1960s. This action by the Federal
Reserve Board was largely viewed as being taken to bolster the
sputtering U.S. economic recovery. Rebounding U.S. equity markets
and the prospects for a more substantial U.S. economic recovery
pushed long-term U.S. Treasury yield levels to 5.10% by late
November.
However, into early 2003, softer equity prices and renewed investor
concerns about U.S. military action against Iraq and North Korea
again pushed bond prices higher. Reacting to disappointing holiday
sales and corporate managements' attempts to scale back analysts'
expectation of future earnings, the S&P 500 Index declined more than
10% from December 2002 to February 2003. Fearing an eventual
U.S./Iraq military confrontation in 2003, investors again sought the
safety of U.S. Treasury obligations and the prices of fixed income
issues rose. By the end of February 2003, U.S. Treasury bond yields
had declined approximately 40 basis points to 4.67%.
Bond yields continued to fall into early March. Once direct U.S.
military action against Iraq began, bond yields quickly rose. Prior
uncertainty surrounding the Iraqi situation was obviously removed
and early U.S. military successes fostered the hope that the
conflict would be quickly and positively concluded. Concurrently,
the S&P 400 Index rose over 6% as investors, in part, sold fixed
income issues to purchase equities in anticipation of a strong
U.S. economic recovery once the Iraqi conflict was resolved. By
mid-March, U.S. Treasury bond yields again rose to above 5%.
However, as there was growing sentiment that hostilities may not be
resolved in a matter of weeks, U.S. Treasury bond yields again
declined to end the month at 4.81%.
For the six months ended April 30, 2003, long-term U.S. Treasury
bond yields ratcheted back to near 5% by mid-April, as U.S. equity
markets continued to improve and the safe-haven premium U.S.
Treasury issues had commanded prior to the beginning of the Iraqi
conflict continued to be withdrawn. However, with the quick positive
resolution of the Iraqi war, investors quickly resumed their focus
on the fragile U.S. economic recovery. Business activity in the
United States has remained sluggish, especially job creation.
Investors have also been concerned that the recent SARS outbreak
would have a material, negative impact on world economic conditions,
especially in China and Japan. First quarter 2003 U.S. gross
domestic product was released in late April initially estimating
U.S. economic activity to be growing at 1.60%, well below many
analysts' assessments. These factors, as well as the possibility
that the Federal Reserve Board could again lower short-term interest
rates to encourage more robust U.S. economic growth, pushed bond
prices higher during the last two weeks of the period. By April 30,
2003, long-term U.S. Treasury bond yields had declined to almost
4.75%. Over the past six months, long-term U.S. bond yields fell
more than 20 basis points.
For the six months ended April 30, 2003, long-term tax-exempt bond
yields also fell modestly. Yield volatility was reduced relative to
that seen in U.S. Treasury issues, as municipal bond prices were
much less sensitive to worldwide geopolitical pressures on a daily
and weekly basis. Tax-exempt bond yields generally followed their
taxable counterparts higher, responding to a more positive U.S.
fixed income environment and continued slow economic growth. After
rising approximately 10 basis points in November 2002 to 5.30%,
municipal bond yields generally declined through February 2003. At
February 28, 2003, long-term tax-exempt revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, fell to approximately
5.05%. However, similar to U.S. Treasury bond yields, once military
action began in Iraq, municipal bond yields rose sharply to nearly
5.20% before declining to approximately 5.10% by the end of April.
Over the past six months, long-term tax-exempt bond yields fell
approximately 11 basis points, slightly less than U.S. Treasury
obligations.
A number of factors have combined to generate consistently strong
demand for municipal bonds throughout the six-month period ended
April 30, 2003. Generally weak U.S. equity markets have supported
continued positive demand for tax-exempt products as investors have
sought the relative security of fixed income issues. Also, with tax-
exempt money market rates near 1%, the demand for longer maturity
municipal issues has increased as investors have opted to buy longer
maturity issues rather than remain in cash reserves. Additionally,
investors received approximately $30 billion in January 2003 from
bond maturities, coupon income and proceeds from early redemptions.
However, these positive demand factors were not totally able to
offset the increase in tax-exempt new-issue supply, preventing more
significant declines in tax-exempt bond yields. This modest
underperformance has served to make municipal bonds a particularly
attractive purchase relative to their taxable counterparts.
Throughout most of the yield curve, municipal bonds have been able
to be purchased at yields near or exceeding those of comparable
Treasury issues. Compared to their recent historical averages of
82% - 88% of U.S. Treasury yields, municipal bond yield ratios in
their current 95% - 105% range are likely to prove attractive to
long-term investors.
Declining U.S. equity markets and escalating geopolitical pressures
have resulted in reduced economic activity and consumer confidence.
It is important to note that, despite all the recent negative
factors impeding the growth of U.S. businesses, the U.S. economy
still grew at an approximate 2.50% rate for all of 2002, twice that
of 2001. Similar expansion is expected for early 2003. Lower oil
prices, reduced geopolitical uncertainties, increased Federal
spending for defense, and a likely Federal tax cut are all factors
which should promote stronger economic growth later this year.
However, it is questionable to expect that business and investor
confidence can be so quickly restored as to trigger dramatic,
explosive U.S. economic growth and engender associated, large-scale
interest rate increases. The resumption of solid economic growth is
likely to be a gradual process accompanied by equally graduated
increases in bond yields. Moderate economic growth, especially
within a context of negligible inflationary pressures, should not
greatly endanger the positive fixed income environments tax-exempt
products currently enjoy.
MuniYield Michigan Insured Fund, Inc., April 30, 2003
Specific to Michigan, the state maintains the highest possible
credit ratings of Aaa and AAA from Moody's and Standard & Poor's,
respectively (although with a negative outlook from both), and is
rated AA+ by Fitch. Michigan ranks 33rd in debt per capita and 35th
in debt as a percentage of personal income nationally. These ratios
are quite low for a populous state and indicate flexibility in
responding to economic downturns relative to other states. In line
with the national economy, revenues have consistently fallen below
state projections with even recent projections off by 15% compared
to actual revenues. Accordingly, the state has resorted to drawing
down on its Budget Stabilization Fund, from $1 billion in fiscal
year 2001 to under $100 million to date, as well as revenue
enhancements, such as the sale of state property and expenditure
reductions, including delaying capital projects, in order to balance
its current budget. For the first time in six years, Michigan will
issue cash-flow notes in the amount of more than $1.2 billion during
May 2003. The state's new governor, Jennifer Granholm, faces a
projected $1.6 billion budget shortfall for fiscal year 2004. This
fiscal deficit will likely be addressed by delaying scheduled state
employees' pay raises and a hiring freeze, utilizing the Michigan
Economic Development Corp. for revenue enhancement, further delaying
state capital projects, and repealing business tax cuts.
Portfolio Strategy
Portfolio activity during the six-month period ended April 30, 2003
was limited and largely focused on adding higher-yielding, corporate-
backed issues to the Fund's holdings. The resultant increase in
dividend income allowed the Fund's dividend to be raised once thus
far in 2003. Current general market municipal bond yields have not
proven to be historically attractive long-term investments. Our
strategy has been to purchase insured state general obligation bonds
and their equivalents rather than unenhanced general obligation
bonds since virtually no spread is evidenced. As Michigan's economy
continues to weaken, we believe credit deterioration will lead to
better relative performance of the insured bonds. This was another
reason for our focus on lower-rated issues, which continue to trade
at historically attractive yield spreads. When the U.S. economy
recovers in the future, these higher-yielding issues are expected to
retain more of their market value than higher-rated, general
obligation issues. The overall credit quality of the Fund remained
high. At April 30, 2003, over 85% of the Fund's assets were insured
and rated AAA by at least one of the major rating agencies.
We recently adopted a slightly more defensive market position than
the one held in 2002. It is expected that a number of positive
economic factors, such as those previously mentioned, will result in
stronger U.S. economic activity later this year and into 2004. We
also expect that increased Federal borrowing, both to replenish
recent defense expenditures and offset reduced tax receipts, will
put modest upward pressure on interest rates in the coming months.
Upon signs of a material, sustainable economic recovery, a more
defensive portfolio strategy will be adopted to preserve recent
gains in the Fund's net asset value.
Throughout the period, the Fund's borrowing costs remained in the
1% - 1.5% range, with interest rates presently near 1%. These
attractive funding levels, in combination with a steep tax-exempt
yield curve, continued to generate significant income benefits to
the Fund's Common Stock shareholders. We do not expect any material
reduction in the Fund's borrowing costs in 2003 as no additional
easings by the Federal Reserve Board are anticipated. We expect the
Fund's short-term borrowing costs to remain at current attractive
levels for the coming months. However, should the spread between
short-term and long-term interest rates narrow, the benefits of
leverage will decline and, as a result, reduce the yield paid on the
Fund's Common Stock. (For a more complete explanation of the risks
and benefits of leveraging, see page 1 of this report to
shareholders.)
In Conclusion
We appreciate your ongoing interest in the MuniYield Michigan
Insured Fund, Inc., and we look forward to assisting you with your
financial needs in the months and years to come.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Kenneth A. Jacob)
Kenneth A. Jacob
Senior Vice President
(John M. Loffredo)
John M. Loffredo
Senior Vice President
(Fred K. Stuebe)
Fred K. Stuebe
Vice President and
Portfolio Manager
May 20, 2003
PROXY RESULTS
During the six-month period ended April 30, 2003, MuniYield Michigan
Insured Fund, Inc.'s Common Stock shareholders voted on the
following proposal. The proposal was approved at a shareholders'
meeting on April 28, 2003. A description of the proposal and number
of shares voted are as follows:
Shares Voted Shares Withheld
For From Voting
1. To elect the Fund's Directors: Terry K. Glenn 17,223,792 477,267
Donald W. Burton 17,219,476 481,583
Fred G. Weiss 17,218,482 482,577
During the six-month period ended April 30, 2003, MuniYield Michigan
Insured Fund, Inc.'s Preferred Stock shareholders (Series A, B & C)
voted on the following proposal. The proposal was approved at a
shareholders' meeting on April 28, 2003. A description of the
proposal and number of shares voted are as follows:
Shares Voted Shares Withheld
For From Voting
1. To elect the Fund's Directors: Terry K. Glenn, Donald W. Burton,
M. Colyer Crum, Laurie Simon Hodrick and Fred G. Weiss 5,129 14
MuniYield Michigan Insured Fund, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Michigan-- AAA Aaa $ 1,000 Allegan, Michigan, Public School District, GO, 5.75% due
137.1% 5/01/2030 (d) $ 1,120
Belding, Michigan, Area Schools, GO, Refunding (c):
AAA Aaa 785 6.05% due 5/01/2006 (e) 893
AAA Aaa 215 6.05% due 5/01/2021 240
AAA Aaa 1,500 Carman-Ainsworth, Michigan, Community School, GO, 5.50% due
5/01/2020 (c) 1,645
AAA Aaa 1,625 Central Michigan University Revenue Bonds, 5.50% due 4/01/2007 (c)(e) 1,848
AAA Aaa 1,000 Central Montcalm, Michigan, Public Schools, GO, 5.90% due 5/01/2019 (b) 1,152
AAA Aaa 1,250 Chelsea, Michigan, School District, GO, 5.875% due 5/01/2005 (c)(e) 1,373
AAA Aaa 1,000 Comstock Park, Michigan, Public Schools, GO, 5.75% due 5/01/2029 (c) 1,119
Delta County, Michigan, Economic Development Corporation,
Environmental Improvement Revenue Refunding Bonds (Mead
Westvaco--Escanaba):
BBB Baa2 1,500 AMT, Series B, 6.45% due 4/15/2023 1,516
BBB Baa2 2,000 Series A, 6.25% due 4/15/2027 2,020
Detroit, Michigan, City School District, GO, Series A:
AAA Aaa 1,000 5.50% due 5/01/2018 (d) 1,112
AAA Aaa 2,300 (School Building and Site Improvement), 5.375% due 5/01/2024 (c) 2,466
Detroit, Michigan, GO (b):
AAA Aaa 1,400 5.50% due 4/01/2018 1,530
AAA Aaa 1,325 5.50% due 4/01/2020 1,433
AAA Aaa 2,705 Series B, 6% due 4/01/2015 3,177
AAA Aaa 1,000 Detroit, Michigan, Sewer Disposal Revenue Bonds, Series A, 5.75%
due 1/01/2010 (c)(e) 1,170
AAA Aaa 2,400 Detroit, Michigan, Sewer Disposal Revenue Refunding Bonds,
Senior Lien, Series A, 5.125% due 7/01/2031 (c) 2,474
Detroit, Michigan, Water Supply System Revenue Bonds:
AAA NR* 4,375 DRIVERS, Series 200, 9.84% due 7/01/2011 (c)(e)(g) 5,966
AAA Aaa 4,875 Senior Lien, Series A, 5.75% due 1/01/2010 (c)(e) 5,703
AAA Aaa 1,250 Senior Lien, Series A, 5.875% due 1/01/2010 (c)(e) 1,472
AAA Aaa 3,455 Senior Lien, Series A, 5% due 7/01/2026 (b) 3,560
AAA Aaa 2,400 Senior Lien, Series A, 5% due 7/01/2034 (b) 2,456
AAA Aaa 2,700 Series B, 5.25% due 7/01/2032 (b) 2,839
AAA Aaa 1,415 Detroit, Michigan, Water Supply System, Revenue Refunding Bonds,
6.25% due 7/01/2012 (c)(h) 1,488
BBB Baa2 3,900 Dickinson County, Michigan, Economic Development Corporation,
Environmental Improvement Revenue Refunding Bonds (International
Paper Company Project), Series A, 5.75% due 6/01/2016 4,049
BBB Baa2 2,500 Dickinson County, Michigan, Economic Development Corporation, PCR,
Refunding (Champion International Corporation Project), 5.85% due
10/01/2018 2,542
NR* Baa3 3,100 Dickinson County, Michigan, Healthcare System, Hospital Revenue
Refunding Bonds, 5.80% due 11/01/2024 3,023
AAA Aaa 1,610 East Grand Rapids, Michigan, Public School District, GO, 5.75%
due 5/01/2009 (d)(e) 1,875
AAA Aaa 2,850 Eastern Michigan University, General Revenue Refunding Bonds,
Series A, 5% due 6/01/2028 (c) 2,928
Eastern Michigan University Revenue Bonds, Series B (c):
AAA Aaa 1,500 5.60% due 6/01/2025 1,648
AAA Aaa 1,310 5.625% due 6/01/2030 1,443
AAA Aaa 1,025 Eastern Michigan University, Revenue Refunding Bonds, 6% due
6/01/2020 (a) 1,186
NR* Baa2 615 Flint, Michigan, Hospital Building Authority, Revenue Refunding
Bonds (Hurley Medical Center), Series A, 5.375% due 7/01/2020 549
AAA Aaa 1,000 Frankenmuth, Michigan, School District, GO, 5.75% due 5/01/2020 (c) 1,131
AAA Aaa 1,100 Grand Blanc, Michigan, Community Schools, GO, 5.625% due 5/01/2020 (c) 1,216
AAA Aaa 12,500 Grand Ledge, Michigan, Public Schools District, GO, 6.60% due
5/01/2004 (b)(e) 13,430
AAA Aaa 2,090 Grand Rapids, Michigan, Building Authority, GO, 5.375% due
8/01/2017 (a) 2,313
Grand Rapids, Michigan, Building Authority Revenue Bonds, Series A (a):
AAA Aaa 1,100 5.50% due 10/01/2019 1,218
AAA Aaa 1,500 5.50% due 10/01/2020 1,650
AAA NR* 1,070 Grand Valley, Michigan, State University Revenue Bonds, 5.50% due
2/01/2018 (c) 1,206
AAA NR* 8,425 Greater Detroit, Michigan, Resource Recovery Authority Revenue
Bonds, DRIVERS, Series 167, 10.827% due 12/13/2008 (a)(g) 11,393
Hartland, Michigan, Consolidated School District, GO (c)(e):
AAA Aaa 3,250 6% due 5/01/2010 (i) 3,848
AAA Aaa 3,575 6% due 5/01/2010 4,233
AAA Aaa 2,500 6% due 5/01/2010 2,960
AAA Aaa 1,475 Haslett, Michigan, Public School District, Building and Site,
GO, 5.625% due 5/01/2020 1,631
AAA Aaa 1,575 Jenison, Michigan, Public Schools, Building and Site, GO, 5.50%
due 5/01/2019 (c) 1,741
AAA Aaa 3,305 Jonesville, Michigan, Community Schools, GO, 5.75% due 5/01/2029 (c) 3,700
NR* Aaa 6,850 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility
Revenue Refunding Bonds (Bronson Methodist Hospital), 5.50% due
5/15/2028 (b) 7,185
AAA Aaa 4,000 Kent, Michigan, Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Butterworth Hospital), Series A, 7.25% due
1/15/2013 (b) 4,944
Kent, Michigan, Hospital Finance Authority Revenue Bonds
(Spectrum Health), Series A:
AAA NR* 3,000 5.50% due 1/15/2031 (b) 3,175
AA Aa3 1,000 5.50% due 1/15/2031 1,026
AAA Aaa 1,000 Leslie, Michigan, Public Schools, Ingham and Jackson Counties,
GO, Refunding, 6% due 5/01/2005 (a)(e) 1,101
AAA Aaa 5,235 Lincoln Park, Michigan, School District, GO, 7% due
5/01/2006 (c)(e) 6,099
AAA Aaa 4,775 Livonia, Michigan, Public School District, GO (Building and Site),
5.75% due 5/01/2022 (c) 5,368
BBB NR* 2,250 Michigan Higher Education Facilities Authority, Limited Obligation
Revenue Refunding Bonds (Hope College), Series A, 5.90% due 4/01/2032 2,324
Portfolio
Abbreviations
To simplify the listings of MuniYield Michigan Insured Fund, Inc.'s
portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to the
list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
GO General Obligation Bonds
HDA Housing Development Authority
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
MuniYield Michigan Insured Fund, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Michigan Michigan Higher Education Facilities Authority, Revenue
(continued) Refunding Bonds (College for Creative Studies):
NR* Baa2 $ 1,235 5.85% due 12/01/2022 $ 1,233
NR* Baa2 1,145 5.90% due 12/01/2027 1,136
AAA NR* 2,500 Michigan Higher Education Student Loan Authority, Student Loan
Revenue Bonds, AMT, Series XVII-B, 5.40% due 6/01/2018 (a) 2,601
AAA NR* 1,065 Michigan Municipal Bond Authority Revenue Bonds (Local Government
Loan Program), Group A, 5.50% due 11/01/2020 (a) 1,171
Michigan Municipal Bond Authority, Revenue Refunding Bonds
(Local Government Loan Program), Series A:
AAA Aaa 1,035 6.50% due 5/01/2012 (a) 1,060
AAA Aaa 1,870 6.50% due 11/01/2012 (b) 1,915
AAA Aaa 1,000 6% due 12/01/2013 (c) 1,088
AAA Aaa 7,000 6.125% due 12/01/2018 (c) 7,621
AA+ Aaa 7,000 Michigan State Building Authority Revenue Bonds, GO, RIB,
Series 481, 9.353% due 4/15/2009 (b)(g) 9,167
Michigan State Building Authority, Revenue Refunding Bonds:
AAA Aaa 2,500 (Facilities Program), Series I, 5.50% due 10/15/2018 (b) 2,763
NR* Aaa 11,140 RIB, Series 517X, 9.35% due 10/15/2010 (d)(g) 14,524
Michigan State, COP (a):
AAA Aaa 3,000 5.40%** due 6/01/2022 1,185
AAA Aaa 3,000 5.50% due 6/01/2027 3,253
AAA Aaa 3,215 Michigan State, HDA, Rental Housing Revenue Bonds, AMT, Series A,
5.30% due 10/01/2037 (b) 3,276
Michigan State, HDA, Revenue Refunding Bonds (f):
AA+ NR* 170 AMT, Series B, 6.20% due 6/01/2027 178
AA+ NR* 2,690 Series C, 5.90% due 12/01/2015 2,861
AAA Aaa 2,530 Michigan State Hospital Finance Authority, Hospital Revenue Bonds
(Mid-Michigan Obligation Group), Series A, 5.50% due 4/15/2018 (a) 2,785
Michigan State Hospital Finance Authority, Hospital Revenue
Refunding Bonds:
A+ A2 2,200 (Crittenton Hospital), Series A, 5.625% due 3/01/2027 2,268
NR* Ba1 2,000 (Sinai Hospital), 6.625% due 1/01/2016 1,879
A A1 2,000 (Sparrow Obligation Group), 5.625% due 11/15/2031 2,042
BBB- Ba1 2,000 Michigan State Hospital Finance Authority Revenue Bonds (Detroit
Medical Center), Series A, 5.25% due 8/15/2023 1,433
Michigan State Hospital Finance Authority, Revenue Refunding Bonds:
AAA Aaa 12,000 (Ascension Health Credit), Series A, 6.125% due 11/15/2009 (b)(e) 14,478
AAA Aa2 1,500 (Ascension Health Credit), Series A, 6.125% due 11/15/2009 (e) 1,810
AAA Aaa 2,500 (Ascension Health Credit), Series A, 6.25% due 11/15/2009 (b)(e) 3,035
AAA Aaa 2,715 (Ascension Health Credit), Series A, 5.75% due 11/15/2009 (b)(e) 3,215
AAA Aaa 4,805 (Mercy Health Services), Series T, 6.50% due 8/15/2013 (b) 5,522
AAA Aaa 2,000 (Mercy Health Services), Series X, 6% due 8/15/2014 (b) 2,275
AAA Aaa 2,200 (Mercy Health Services), Series X, 5.75% due 8/15/2019 (b) 2,408
AAA Aaa 4,930 (Mercy Mount Clemens), Series A, 6% due 5/15/2014 (b) 5,595
AAA Aaa 3,000 (Saint John Hospital), Series A, 6% due 5/15/2013 (a)(h) 3,070
AA- Aa3 3,750 (Trinity Health Credit), Series C, 5.375% due 12/01/2030 3,836
AAA Aaa 6,400 (Trinity Health), Series A, 6% due 12/01/2027 (a) 7,163
Michigan State Strategic Fund, Limited Obligation Revenue Bonds, AMT:
BBB Baa1 5,000 (Ford Motor Company Project), Series A, 6.55% due 10/01/2022 5,071
BBB Baa3 3,000 (WMX Technologies Inc. Project), 6% due 12/01/2013 3,046
Michigan State Strategic Fund, Limited Obligation Revenue Refunding
Bonds:
AAA Aaa 7,250 (Detroit Edison Company), AMT, Series A, 5.55% due 9/01/2029 (b) 7,586
AAA Aaa 6,000 (Detroit Edison Company Fund--Pollution), Series AA, 6.95% due
5/01/2011 (c) 7,451
A- A3 2,175 (Dow Chemical Company Project), AMT, 5.50% due 12/01/2028 2,190
NR* Aaa 5,750 RIB, Series 382, 11.10% due 9/01/2025 (b)(g) 7,133
BBB A3 2,500 Michigan State Strategic Fund, PCR, Refunding (General Motors Corp.),
6.20% due 9/01/2020 2,594
AAA Aaa 1,000 Michigan State Trunk Line Revenue Refunding Bonds, 5.25% due
10/01/2021 (d) 1,070
AAA Aaa 15,000 Monroe County, Michigan, Economic Development Corp., Limited
Obligation Revenue Refunding Bonds (Detroit Edison Co. Project),
Series AA, 6.95% due 9/01/2022 (c) 19,814
Monroe County, Michigan, PCR (Detroit Edison Company Project), AMT (b):
AAA Aaa 9,000 Series CC, 6.55% due 6/01/2024 9,213
AAA Aaa 1,500 Series I-B, 6.55% due 9/01/2024 1,552
AAA Aaa 1,000 Montrose Township, Michigan, School District, GO, 6.20% due
5/01/2017 (b) 1,232
NR* Aaa 1,830 Muskegon Heights, Michigan, Water System Revenue Bonds, Series A,
5.625% due 11/01/2025 (b) 2,018
Northview, Michigan, Public School District, GO, Refunding (b):
AAA NR* 2,265 5.80% due 5/01/2006 (e) 2,560
AAA Aaa 235 5.80% due 5/01/2021 260
AAA Aaa 1,100 Norway Vulcan, Michigan, Area Schools, GO, 5.90% due 5/01/2025 (c) 1,252
AAA Aaa 2,425 Oxford, Michigan, Area Community School District, GO, 5.50% due
5/01/2018 (d) 2,681
AAA Aaa 1,000 Plainwell, Michigan, Community Schools, School District, Building
and Site, GO, 5.50% due 5/01/2020 (d) 1,101
A NR* 700 Pontiac, Michigan, Tax Increment Finance Authority, Tax Increment
Revenue Refunding Bonds (Development Area 2), 5.625% due 6/01/2022 733
AAA Aaa 1,870 Redford, Michigan, Unified School District, GO, 5.90% due
5/01/2006 (c)(e) 2,119
AAA Aaa 1,000 Reeths-Puffer Schools, Michigan, GO, Refunding, 6% due
5/01/2005 (c)(e) 1,101
AAA Aaa 1,800 Rochester, Michigan, Community School District, GO, Series II,
5.50% due 5/01/2015 (c) 2,028
AAA Aaa 2,500 Saginaw, Michigan, Hospital Finance Authority, Revenue Refunding
Bonds (Covenant Medical Center), Series E, 5.625% due 7/01/2013 (b) 2,762
NR* Aaa 8,900 Saint Clair County, Michigan, Economic Revenue Refunding Bonds
(Detroit Edison Company), RIB, Series 282, 10.87% due 8/01/2024 (a)(g) 12,220
AAA Aaa 1,300 Southfield, Michigan, Library Building Authority, GO, 5.50%
due 5/01/2018 (b) 1,447
AAA Aaa 2,090 Southgate, Michigan, Community School District, GO, Refunding,
4% due 5/01/2012 (b) 2,162
Sturgis, Michigan, Public School District, GO (School Building
and Site):
AAA Aaa 1,900 5.50% due 5/01/2021 2,086
AAA Aaa 2,545 5.625% due 5/01/2030 2,803
MuniYield Michigan Insured Fund, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
Michigan AAA Aaa $ 1,000 Three Rivers, Michigan, Community Schools GO, 6% due 5/01/2006 (b)(e) $ 1,136
(concluded)
AAA Aaa 1,100 Waverly, Michigan, Community School, GO, 5.50% due 5/01/2021 (c) 1,208
AAA Aaa 10,660 Wayne Charter County, Michigan, Airport Revenue Bonds (Detroit
Metropolitan Wayne County), AMT, Series A, 5.375% due 12/01/2015 (b) 11,348
AAA Aaa 2,170 Wayne County, Michigan, COP, 5.625% due 5/01/2011 (a) 2,428
West Bloomfield, Michigan, School District, GO Refunding (c):
AAA Aaa 1,710 5.50% due 5/01/2017 1,912
AAA Aaa 1,225 5.50% due 5/01/2018 1,361
AAA Aaa 2,405 West Branch-Rose City, Michigan, Area School District, GO, 5.50%
due 5/01/2024 (c) 2,609
AAA Aaa 2,485 West Ottawa, Michigan, Public School District, GO, Refunding,
Series B, 5.375% due 5/01/2017 (c) 2,763
AAA Aaa 1,300 Ypsilanti, Michigan, School District, GO, Refunding, 5.75% due
5/01/2007 (c)(e) 1,482
Puerto Rico-- A- A3 2,000 Children's Trust Fund, Puerto Rico, Tobacco Settlement Revenue
5.1% Bonds, 5.625% due 5/15/2043 1,621
A- A3 2,300 Children's Trust Fund, Puerto Rico, Tobacco Settlement Revenue
Refunding Bonds, 5.50% due 5/15/2039 1,836
AAA Aaa 1,270 Puerto Rico Electric Power Authority, Power Revenue Bonds, Trust
Receipts, Class R, Series 16 HH, 9.81% due 7/01/2013 (d)(g) 1,738
AAA Aaa 2,000 Puerto Rico Municipal Finance Agency Revenue Bonds, Series A, 5.25%
due 8/01/2019 (d) 2,184
Puerto Rico Public Finance Corporation, Commonwealth Appropriation
Revenue Bonds:
AAA Aaa 1,000 Series A, 5.375% due 8/01/2024 (b) 1,076
BBB+ Baa3 2,900 Series E, 5.75% due 8/01/2030 3,180
BBB+ Baa3 1,000 Puerto Rico Public Finance Corporation Revenue Bonds, Commonwealth
Appropriation, Series E, 5.70% due 8/01/2025 1,055
AAA Aaa 2,150 University of Puerto Rico, University Revenue Refunding Bonds,
Series O, 5.375% due 6/01/2030 (b) 2,316
Total Municipal Bonds (Cost--$379,697)--142.2% 418,291
Shares
Held Short-Term Securities
6,110 CMA Michigan Municipal Money Fund (j) 6,110
Total Short-Term Securities (Cost--$6,110)--2.1% 6,110
Total Investments (Cost--$385,807)--144.3% 424,401
Variation Margin on Financial Futures Contracts***--(0.1%) (178)
Unrealized Depreciation on Forward Interest Rate Swaps****--(0.1%) (300)
Other Assets Less Liabilities--3.5% 10,284
Preferred Stock, at Redemption Value--(47.6%) (140,009)
---------
Net Assets Applicable to Common Stock--100.0% $ 294,198
=========
(a) AMBAC Insured.
(b) MBIA Insured.
(c) FGIC Insured.
(d) FSA Insured.
(e) Prerefunded.
(f) FHA Insured.
(g) The interest rate is subject to change periodically and
inversely based upon prevailing market rates. The interest rate
shown is the rate in effect at April 30, 2003.
(h) Escrowed to maturity.
(i) All or a portion of security held as collateral in connection
with open financial futures contracts.
(j) Investments in companies considered to be an affiliate of the
Fund (such companies are defined as "Affliliated Companies" in
Section 2(a)(3) of the Investment Company Act of 1940 are as
follows:
(in Thousands)
Net Dividend
Affiliate Activity Income
CMA Michigan Municipal
Money Fund 6,110 $21
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
***Financial futures contracts sold as of April 30, 2003 were as
follows:
(in Thousands)
Number of Expiration
Contracts Issue Date Value
300 U.S. Treasury Notes June 2003 $ 34,538
-----------
Total Financial Futures Contracts Sold
(Total Contract Price--$34,784) $ 34,538
===========
****Forward interest rate swaps entered into as of April 30, 2003
were as follows:
(in Thousands)
Notional Unrealized
Amount Depreciation
Receive a variable rate equal to
7-Day Bond Market Association
rate at quarterly reset date and
pay a fixed rate equal to 3.704% $13,000 $(300)
Broker, JP Morgan Chase
Expires, June 25, 2013
See Notes to Financial Statements.
MuniYield Michigan Insured Fund, Inc., April 30, 2003
STATEMENT OF NET ASSETS
As of April 30, 2003
Assets: Investments, at value (identified cost--$385,806,651) $ 424,401,218
Cash 72,561
Receivables:
Interest $ 8,042,473
Securities sold 2,563,487
Dividends 129 10,606,089
-------------
Prepaid expenses 20,881
-------------
Total assets 435,100,749
-------------
Liabilities: Unrealized depreciation on forward interest rate swaps 300,300
Payables:
Dividends to Common Stock shareholders 200,389
Variation margin 178,125
Investment adviser 177,764
Other affiliates 3,304 559,582
-------------
Accrued expenses and other liabilities 33,588
-------------
Total liabilities 893,470
-------------
Preferred Stock: Preferred Stock, par value $.05 per share (2,000 Series A shares,
2,000 Series B shares and 1,600 Series C shares of AMPS* issued and
outstanding at $25,000 per share liquidation preference) 140,009,200
-------------
Net Assets Net assets applicable to Common Stock $ 294,198,079
Applicable To
Common Stock:
Analysis of Common Stock, par value $.10 per share (18,155,932 shares issued
Net Assets and outstanding) $ 1,815,593
Applicable to Paid-in capital in excess of par 268,391,966
Common Stock: Undistributed investment income--net $ 4,101,688
Accumulated realized capital losses on investments--net (18,651,529)
Unrealized appreciation on investments--net 38,540,361
-------------
Total accumulated earnings--net 23,990,520
-------------
Total--Equivalent to $16.20 net asset value per share of Common
Stock (market price--$14.85) $ 294,198,079
=============
*Auction Market Preferred Stock.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 2003
Investment Interest $ 11,355,345
Income: Dividends 21,005
-------------
Total income 11,376,350
-------------
Expenses: Investment advisory fees $ 1,063,267
Commission fees 175,850
Accounting services 72,897
Professional fees 36,889
Transfer agent fees 31,209
Printing and shareholder reports 18,972
Listing fees 14,337
Custodian fees 13,288
Directors' fees and expenses 11,053
Pricing fees 10,233
Other 22,106
-------------
Total expenses before reimbursement 1,470,101
Reimbursement of expenses (18,204)
-------------
Total expenses after reimbursement 1,451,897
-------------
Investment income--net 9,924,453
-------------
Realized & Realized gain on investments--net 238,829
Unrealized Change in unrealized appreciation on investments--net 7,764,953
Gain on -------------
Investments--Net: Total realized and unrealized gain on investments--net 8,003,782
-------------
Dividends to Investment income--net (735,392)
Preferred Stock -------------
Shareholders: Net Increase in Net Assets Resulting from Operations $ 17,192,843
=============
See Notes to Financial Statements.
MuniYield Michigan Insured Fund, Inc., April 30, 2003
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2003 2002
Operations: Investment income--net $ 9,924,453 $ 20,056,086
Realized gain (loss) on investments--net 238,829 (1,708,542)
Change in unrealized appreciation/depreciation on investments--net 7,764,953 (555,321)
Dividends to Preferred Stock shareholders (735,392) (1,965,080)
------------- -------------
Net increase in net assets resulting from operations 17,192,843 15,827,143
------------- -------------
Dividends to Investment income--net (8,796,549) (17,007,569)
Common Stock ------------- -------------
Shareholders: Net decrease in net assets resulting from dividends to
Common Stock shareholders (8,796,549) (17,007,569)
------------- -------------
Net Assets Total increase (decrease) in net assets applicable to Common Stock 8,396,294 (1,180,426)
Applicable To Beginning of period 285,801,785 286,982,211
Common Stock: ------------- -------------
End of period* $ 294,198,079 $ 285,801,785
============= =============
*Undistributed investment income--net $ 4,101,688 $ 3,709,176
============= =============
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
The following per share data and ratios For the
have been derived from information Six Months
provided in the financial statements. Ended
April 30, For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
Per Share Net asset value, beginning of period $ 15.74 $ 15.81 $ 14.48 $ 13.91 $ 15.93
Operating --------- --------- --------- --------- ---------
Performance:++++++ Investment income--net .55+++ 1.10+++ 1.08 .99 1.04
Realized and unrealized gain (loss) on
investments--net .43 (.12) 1.30 .67 (1.79)
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.04) (.11) (.24) (.30) (.18)
In excess of realized gain on
investments--net -- -- -- -- (.03)
--------- --------- --------- --------- ---------
Total from investment operations .94 .87 2.14 1.36 (.96)
--------- --------- --------- --------- ---------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.48) (.94) (.81) (.79) (.85)
In excess of realized gain on
investments--net -- -- -- -- (.21)
--------- --------- --------- --------- ---------
Capital charge resulting from issuance
of Common Stock -- -- --++ -- --
--------- --------- --------- --------- ---------
Total dividends and distributions to
Common Stock shareholders (.48) (.94) (.81) (.79) (1.06)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 16.20 $ 15.74 $ 15.81 $ 14.48 $ 13.91
========= ========= ========= ========= =========
Market price per share, end of period $ 14.85 $ 13.95 $ 14.22 $ 11.9375 $ 12.1875
========= ========= ========= ========= =========
Total Investment Based on market price per share 10.08%+++++ 4.77% 26.44% 4.62% (17.47%)
Return:** ========= ========= ========= ========= =========
Based on net asset value per share 6.43%+++++ 6.33% 15.89% 11.19% (6.13%)
========= ========= ========= ========= =========
Ratios Based on Total expenses, net of reimbursement
Average Net and excluding reorganization expenses*** 1.02%* 1.04% 1.05% 1.10% 1.09%
Assets of ========= ========= ========= ========= =========
Common Stock: Total expenses, excluding reorganization
expenses*** 1.03%* 1.04% 1.05% 1.10% 1.09%
========= ========= ========= ========= =========
Total expenses*** 1.03%* 1.04% 1.05% 1.33% 1.09%
========= ========= ========= ========= =========
Total investment income--net*** 6.94%* 7.10% 7.10% 7.49% 6.85%
========= ========= ========= ========= =========
Amount of dividends to Preferred
Stock shareholders .51%* .70% 1.59% 2.18% 1.18%
========= ========= ========= ========= =========
Investment income--net, to Common
Stock shareholders 6.43%* 6.40% 5.51% 5.31% 5.67%
========= ========= ========= ========= =========
Ratios Based on Total expenses, net of reimbursement
Average Net and reorganization expenses .68%* .70% .70% .72% .76%
Assets Of ========= ========= ========= ========= =========
Common & Total expenses, excluding
Preferred reorganization expenses .69%* .70% .70% .72% .76%
Stock:*** ========= ========= ========= ========= =========
Total expenses .69%* .70% .70% .86% .76%
========= ========= ========= ========= =========
Total investment income--net 4.67%* 4.75% 4.71% 4.87% 4.75%
========= ========= ========= ========= =========
Ratios Based on Dividends to Preferred Stock shareholders 1.06%* 1.40% 3.14% 4.06% 2.66%
Average Net ========= ========= ========= ========= =========
Assets Of
Preferred Stock:
Supplemental Net assets applicable to Common Stock,
Data: end of period (in thousands) $ 294,198 $ 285,802 $ 286,982 $ 262,864 $ 103,364
========= ========= ========= ========= =========
Preferred Stock outstanding, end of
period (in thousands) $ 140,000 $ 140,000 $ 140,000 $ 140,000 $ 50,000
========= ========= ========= ========= =========
Portfolio turnover 10.68% 32.68% 68.17% 51.41% 42.71%
========= ========= ========= ========= =========
Leverage: Asset coverage per $1,000 $ 3,101 $ 3,041 $ 3,050 $ 2,878 $ 3,067
========= ========= ========= ========= =========
Dividends Per Series A--Investment income--net $ 135 $ 354 $ 792 $ 1,023 $ 663
Share On ========= ========= ========= ========= =========
Preferred Stock Series B--Investment income--net $ 124 $ 362 $ 783 $ 653 --
Outstanding:++++ ========= ========= ========= ========= =========
Series C--Investment income--net $ 136 $ 333 $ 782 $ 678 --
========= ========= ========= ========= =========
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales charges.
***Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Amount is less than $.01 per share.
++++The Fund's Preferred Stock was issued on November 19, 1992
(Series A) and March 6, 2000 (Series B and Series C).
++++++Certain prior year amounts have been reclassified to conform
to current year presentation.
+++Based on average shares outstanding.
+++++Aggregate total investment return.
See Notes to Financial Statements.
MuniYield Michigan Insured Fund, Inc., April 30, 2003
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield Michigan 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'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. These
unaudited financial statements reflect all adjustments, which are,
in the opinion of management, necessary to a fair statement of the
results for the interim period presented. All such adjustments are
of a normal, recurring nature. The Fund determines and makes
available for publication the net asset value of its Common Stock on
a weekly basis. The Fund's Common Stock is listed on the New York
Stock Exchange under the symbol MIY. 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-counter-market, valuation is the last
asked price (options written) or the last bid price (options
purchased). Securities with remaining maturities of sixty days or
less are valued at amortized cost, which approximates market value.
Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund, including
valuations furnished by a pricing service retained by the Fund,
which may utilize a matrix system for valuations. The procedures of
the pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio investment strategies both to increase the return of the
Fund and to hedge, or protect, its exposure to interest rate
movement and movements in the securities market. Losses may arise
due to changes in the value of the contract or if the counterparty
does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts.
Futures contracts are contracts for delayed delivery of securities
at a specific future date and at a specific price or yield. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund
agrees to receive from or pay to the broker an amount of cash equal
to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Fund
as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
* Options--The Fund 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.
* Forward interest rate swaps--The Fund is authorized to enter into
forward interest rate swaps. In a forward interest rate swap, the
Fund and the counterparty agree to pay or receive interest on a
specified notional contract amount, commencing on a specified future
effective date, unless terminated earlier. The value of the
agreement is determined by quoted fair values received daily by the
Fund from the counterparty. When the agreement is closed, the Fund
records a realized gain or loss in an amount equal to the value of
the agreement.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Realized gains and losses on security
transactions are determined on the identified cost basis. Interest
income is recognized on the accrual basis. Dividend income is
recorded on the ex-dividend dates. The Fund amortizes all premiums
and discounts on debt securities.
(e) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect, wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of .50% of
the Fund's average weekly net assets, including proceeds from the
issuance of Preferred Stock. For the six months ended April 30,
2003, FAM reimbursed the Fund in the amount of $18,204.
For the six months ended April 30, 2003, the Fund reimbursed MLIM
$4,885 for certain accounting services.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 2003 were $44,235,401 and
$46,474,805, respectively.
Net realized gains (losses) for the six months ended April 30, 2003
and net unrealized gains (losses) as of April 30, 2003 were as
follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 2,078,917 $ 38,594,567
Forward interest rate swaps -- (300,300)
Financial futures contracts (1,840,088) 246,094
------------ ------------
Total $ 238,829 $ 38,540,361
============ ============
As of April 30, 2003, net unrealized appreciation for Federal income
tax purposes aggregated $38,721,804, of which $39,720,381 related to
appreciated securities and $998,577 related to depreciated
securities. The aggregate cost of investments at April 30, 2003 for
Federal income tax purposes was $385,679,414.
4. Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of stock
without approval of holders of Common Stock.
Common Stock
Shares issued and outstanding during the six months ended April 30,
2003 and for the year ended October 31, 2002 remained constant.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund, with a par value of $.05 per share and a
liquidation preference of $25,000 per share plus accrued and unpaid
dividends, that entitle their holders to receive cash dividends at
an annual rate that may vary for the successive dividend periods.
The yields in effect at April 30, 2003 were as follows: Series A,
1.25%, Series B, 1.15% and Series C, 1.20%.
Shares issued and outstanding during the six months ended April 30,
2003 and for the year ended October 31, 2002 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 six months ended
April 30, 2003, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
an affiliate of FAM, earned $90,108 as commissions.
5. Capital Loss Carryforward:
On October 31, 2002, the Fund had a net capital loss carryforward of
$14,795,324, of which $746,473 expires in 2003; $1,458,638 expires
in 2006; $3,974,932 expires in 2007; $7,490,629 expires in 2008 and
$1,124,652 expires in 2010. This amount will be available to offset
like amounts of any future taxable gains.
6. Subsequent Event:
The Fund paid a tax-exempt income dividend to holders of Common
Stock in the amount of $.082000 per share on May 29, 2003 to
shareholders of record on May 16, 2003.
MuniYield Michigan Insured Fund, Inc., April 30, 2003
QUALITY PROFILE
The quality ratings of securities in the Fund as of April 30, 2003
were as follows:
Percent of
S&P Rating/Moody's Rating Total Investments
AAA/Aaa 85.6%
AA/Aa 1.9
A/A 3.1
BBB/Baa 7.6
BB/Ba 0.4
NR (Not Rated) 1.4
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 Common Stock 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 Net
Assets, which comprises part of the Financial Information included
in this report.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Donald W. Burton, Director
M. Colyer Crum, Director
Laurie Simon Hodrick, Director
Fred G. Weiss, Director
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Fred K. Stuebe, Vice President
Donald C. Burke, Vice President and Treasurer
Brian D. Stewart, Secretary
J. Thomas Touchton, Director of MuniYield Michigan Insured Fund,
Inc., has recently retired. The Fund's Board of Directors wishes
Mr. Touchton well in his retirement.
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MIY
Item 2 - Did registrant adopt a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party? If not, why not? Briefly describe
any amendments or waivers that occurred during the period. State
here if code of ethics/amendments/waivers are on website and give
website address-. State here if fund will send code of ethics to
shareholders without charge upon request--N/A (not answered until
July 15, 2003 and only annually for funds)
Item 3 - Did the registrant's board of directors determine that the
registrant either: (i) has at least one audit committee financial
expert serving on its audit committee; or (ii) does not have an
audit committee financial expert serving on its audit committee? If
yes, disclose name of financial expert and whether he/she is
"independent," (fund may, but is not required, to disclose
name/independence of more than one financial expert) If no, explain
why not. -N/A (not answered until July 15, 2003 and only annually
for funds)
Item 4 - Disclose annually only (not answered until December 15,
2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements
for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of
the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance
of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising the fees disclosed
under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the
fees disclosed under this category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the
last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs
(a) through (c) of this Item. Registrants shall describe the nature
of the services comprising the fees disclosed under this category.
N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation
S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-
3 under the Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act regarding an exemption from the listing
standards for audit committees.
(Listed issuers must be in compliance with the new listing rules by
the earlier of their first annual shareholders meeting after January
2004, or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in
their portfolio, describe the policies and procedures that it uses
to determine how to vote proxies relating to those portfolio
securities. N/A (not answered until July 1, 2003)
Item 8--Reserved
Item 9(a) - The registrant's certifying officers have reasonably
designed such disclosure controls and procedures to ensure material
information relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
Item 9(b)--There were no significant changes in the registrant's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of
ethics or amendments/waivers is on website or offered to
shareholders upon request without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the
Sarbanes-Oxley Act. Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MuniYield Michigan Insured Fund, Inc.
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
MuniYield Michigan Insured Fund, Inc.
Date: June 23, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Terry K. Glenn________
Terry K. Glenn,
President of
MuniYield Michigan Insured Fund, Inc.
Date: June 23, 2003
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
MuniYield Michigan Insured Fund, Inc.
Date: June 23, 2003
Attached hereto as an exhibit are the certifications pursuant to
Section 906 of the Sarbanes-Oxley Act.