UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-7080
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: 10/31/04
Date of reporting period: 11/01/03 - 04/30/04
Item 1 - Report to Stockholders
(BULL LOGO)
Merrill Lynch Investment Managers
www.mlim.ml.com
MuniYield Michigan
Insured Fund, Inc.
Semi-Annual Report
April 30, 2004
MuniYield Michigan Insured Fund, Inc. seeks to provide shareholders
with as high a level of current income exempt from Federal income
tax 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 income tax and Michigan income taxes.
This report, including the financial information herein, is
transmitted to 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 shares of the Common Stock, and the
risk that fluctuations in the short-term dividend rates of the
Preferred Stock may affect the yield to Common Stock shareholders.
Statements and other information herein are as dated and are subject
to change.
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is
available (1) without charge, upon request, by calling toll-free
1-800-MER-FUND (1-800-637-3863); (2) on www.mutualfunds.ml.com;
and (3) on the Securities and Exchange Commission's website at
http://www.sec.gov.
MuniYield Michigan Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
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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, net of dividends to Preferred Stock, is paid to
Common Stock shareholders in the form of dividends, and the value of
these portfolio holdings is reflected in the per share net asset
value of the Fund's Common Stock. However, in order to benefit
Common Stock shareholders, the yield curve must be positively
sloped; that is, short-term interest rates must be lower than long-
term interest rates. At the same time, a period of generally
declining interest rates will benefit Common Stock shareholders. If
either of these conditions change, then the risks of leveraging will
begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred
Stock for an additional $50 million, creating a total value of
$150 million available for investment in long-term municipal bonds.
If prevailing short-term interest rates are approximately 3% and
long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million
of Preferred Stock based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends 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. As of April 30, 2004,
the percentage of the Fund's total net assets invested in inverse
floaters was 13.89%.
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, 2004
A Letter From the President
Dear Shareholder
For the six-month and 12-month periods ended April 30, 2004, the
Lehman Brothers Municipal Bond Index posted returns of +1.19% and
+2.68%, respectively. Its taxable counterpart, the Lehman Brothers
Aggregate Bond Index, had returns of +1.25% and +1.82% for the same
periods. Amid considerable month-to-month volatility, tax-exempt
bond yields rose over the past year, although not to the same extent
as 10-year U.S. Treasury yields. In all, tax-exempt securities
continued to be an attractive fixed income investment alternative.
As of April month-end, the Federal Reserve Board maintained its
accommodative policy stance, although a better-than-expected
employment report for the month of March prompted speculation that
an interest rate increase could come sooner than many had expected.
On April 2, 2004, the good news on the employment front - previously
the one dim spot in an otherwise bright economic picture - helped
prompt the yield on the 10-year Treasury bond to spike nearly 25
basis points (.25%), from 3.91% to 4.15%. Market watchers continue
to monitor the economic data and Federal Reserve Board language for
indications of interest rate direction. If economic growth maintains
its recent pace and employment figures continue to improve, many
believe it is just a matter of time before interest rates move
upward.
Equity markets, in the meantime, gleaned support from the improving
economic environment and provided attractive returns. For the
six-month and 12-month periods ended April 30, 2004, the Standard &
Poor's 500 Index returned +6.27% and +22.88%, respectively.
Significant fiscal and monetary stimulus in 2003, including low
interest rates and tax cuts, has opened the door to consumer
spending, capital spending, increases in exports and long-awaited
job growth. As expected, these developments have led the way to
improvements in corporate earnings - a positive for stock markets.
The events and efforts of the past year leave us with a much
stronger economy today. Of course, markets will always fluctuate,
and there are many uncertainties - not the least of which are
geopolitical in nature - which can translate into negative market
movements. Keeping this in mind, we encourage you to revisit your
portfolio and your asset allocation strategy to ensure you are well
positioned to take advantage of the opportunities that lie ahead.
Importantly, your financial advisor can help you develop a strategy
most suitable for your circumstances through all types of market and
economic cycles.
We thank you for trusting Merrill Lynch Investment Managers with
your investment assets, and we look forward to serving you in the
months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
A Discussion With Your Fund's Portfolio Manager
Throughout the period, we remained focused on enhancing yield and
preserving net asset value in a volatile interest rate environment.
Describe the recent market environment relative to municipal bonds.
For much of the six-month period, a positive economic backdrop
helped bond prices to move higher as yields, which typically move
opposite of prices, declined. In early April, however, a
surprisingly strong monthly employment report triggered fears that
the long-accommodative Federal Reserve Board might raise interest
rates sooner than many had expected. As a result, bond yields rose
(prices fell) sharply for the remainder of the period. At the end of
April, long-term U.S. Treasury bond yields had climbed to 5.13%,
representing an increase of approximately 15 basis points (.15%)
over the past six months. Ten-year U.S. Treasury note yields stood
at 4.30% as of period-end, an increase of more than 20 basis points.
Tax-exempt bond yields generally mimicked the movement of their
taxable counterparts, although volatility in the municipal market
was more subdued. Long-term revenue bond yields, as measured by the
Bond Buyer Revenue Bond Index, rose just four basis points over the
past six months. For the same period, yields on AAA-rated issues
maturing in 30 years rose approximately 10 basis points to 4.93%
while yields on 10-year, AAA-rated issues increased more than 16
basis points to nearly 4%, according to Municipal Market Data. The
more marked increase in 10-year bond yields may be attributed to
the fact that recent issuance has been heavily concentrated in the
10-year - 20-year range. The resulting supply imbalance prompted
higher intermediate bond yields (and lower prices). Longer-maturity
and lower-rated issues continued to benefit from more favorable
supply/demand factors and, therefore, have seen less price
depreciation. For the six-month period as a whole, municipal bond
supply declined approximately 5% compared to the same period a
year ago.
Overall, demand for tax-exempt municipal bonds has remained
positive. Data from the Investment Company Institute indicates that,
in just the first three months of 2004, tax-exempt bond funds have
seen net new cash flows of almost $640 million.
Describe conditions in the State of Michigan.
Michigan maintains credit ratings of Aa1 from Moody's and AA+ from
Standard & Poor's (S&P) and Fitch, all with stable trends. Moody's
and S&P had downgraded the state in the fourth quarter of 2003.
Michigan ranks 33rd in the nation in terms of debt per capita and
35th in debt as a percentage of personal income. These ratios are
quite low for a populous state and point toward Michigan's
flexibility in responding to economic downturns relative to other
states.
The state's pension system is nearly fully funded. However, Michigan
has continued to lose manufacturing jobs, and revenues consistently
have fallen below projections as a result. Officials have resorted
to drawing down the Budget Stabilization Fund (BSF), which declined
from $1 billion in fiscal year 2001 to near zero in fiscal year
2003. A sign of stability came in January 2004, when the fiscal year
2004 revenue projections did not require any revisions from October
2003 estimates. Officials expect the fiscal year 2004 budget to
produce $185 million to replenish the BSF. Despite that good news,
budget balancing remains difficult because of a slow economic
recovery in the state.
How did the Fund perform during the period in light of the existing
market conditions?
For the six-month period ended April 30, 2004, the Common Stock of
MuniYield Michigan Insured Fund, Inc. had net annualized yields of
6.46% and 7.04%, based on a period-end per share net asset value of
$15.53 and a per share market price of $14.25, respectively, and
$.500 per share income dividends. Over the same period, the total
investment return on the Fund's Common Stock was +.69%, based on a
change in per share net asset value from $15.94 to $15.53, and
assuming reinvestment of $.498 per share ordinary income dividends.
For the six-month period ended April 30, 2004, the Fund's Auction
Market Preferred Stock (AMPS) had an average yield of .89% for
Series A, .88% for Series B and .83% for Series C.
The Fund's return, based on net asset value, for the six-month
period lagged the +1.42% return of its comparable Lipper category of
Michigan Municipal Debt Funds. (Funds in this Lipper category limit
their investment to securities exempt from taxation in Michigan or a
city in Michigan.) This Lipper category includes both insured and
uninsured Michigan municipal debt funds.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Recent performance has largely reflected the Fund's defensive
position. By maintaining a conservative duration slightly below that
of our peers, the Fund was better equipped to weather movements in
interest rates. In general, the lower the duration, the less an
investment will fluctuate in value as interest rates move up or
down. This positioning limited asset price appreciation early in the
period when interest rates fell sharply. In addition, lower-rated
issues, such as BBB-rated hospital and corporate-backed revenue
bonds, were among the best-performing assets over the past six
months, as they have been for the past year. As an insured product,
the Fund holds fewer of these issues than do the uninsured funds in
the Lipper category.
For a description of the Fund's total investment return based on a
change in the per share market value of the Fund's Common Stock (as
measured by the trading price of the Fund's shares on the New York
Stock Exchange), and assuming reinvestment of dividends, please
refer to the Financial Highlights section 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 market
value of the Fund's Common Stock can vary significantly from total
investment return based on changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
Portfolio activity was restricted during the period, largely because
of a significant decline in Michigan tax-exempt bond issuance. Over
the past six months, approximately $4.3 billion in new long-term tax-
exempt bonds was issued by Michigan municipalities, a decline of
more than 20% compared to the same period a year ago. In addition,
recent market yields appear relatively unattractive compared to
those of the Fund's existing holdings.
Portfolio transactions largely involved selling insured bonds in the
intermediate maturity range and purchasing longer-maturity insured
issues. The goal was to take advantage of the steep yield curve and
capture the incremental yield available from the longer-maturity
issues. Recent increases in coupon income allowed the Fund to
increase its dividend earlier in 2004.
In terms of leverage, the Fund's borrowing costs remained around 1%
throughout most of the six-month period. These attractive funding
levels, in combination with the steep municipal yield curve,
continued to generate significant income to the Fund's Common Stock
shareholders. The Federal Reserve Board appears poised to begin
raising short-term interest rates, most likely later in 2004. The
increase, however, is expected to be gradual and should not have a
material impact on the positive advantage leverage has had on the
Fund's Common Stock yield. However, should the spread between short-
term and long-term interest rates narrow, the benefits of leveraging
will decline and, as a result, reduce the yield on the Fund's Common
Stock. At the end of the period, the Fund's leverage amount, due to
AMPS, was 33.18% of total assets. (For a more complete explanation
of the benefits and risks of leveraging, see page 2 of this report
to shareholders.)
How would you characterize the Fund's position at the close of the
period?
We ended the period in a slightly defensive posture with respect to
interest rates. We believe this positioning readies the Fund to
perform better in stable to slightly rising interest rate
environments. We would expect to adopt a more defensive stance when
interest rates decline during periods of market volatility.
The Fund was fully invested at period-end in an effort to enhance
investment income flows. With short-term cash equivalents yielding
only near 1%, the performance penalty for holding assets in cash
reserves is far too severe. We continue to favor higher-couponed,
lower-rated issues over more interest rate-sensitive current-
couponed issues.
With economic growth expected to continue its moderate advance, long-
term interest rates are likely to begin reversing their recent
declines. Given consensus inflationary forecasts, any increase in
long-term interest rates is likely to be moderate. With this in
mind, and considering expectations for manageable new-issue volume
in 2004, we believe the municipal market is poised to provide
attractive returns compared to the taxable bond market regardless of
the interest rate environment.
Fred K. Stuebe
Vice President and Portfolio Manager
May 12, 2004
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Schedule of Investments (In Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
Michigan--140.1%
AAA Aaa $ 1,000 Allegan, Michigan, Public School District, GO, 5.75% due
5/01/2030 (d) $ 1,073
Belding, Michigan, Area Schools, GO, Refunding (c):
AAA Aaa 785 6.05% due 5/01/2006 (e) 857
AAA Aaa 215 6.05% due 5/01/2021 231
AAA Aaa 1,000 Central Montcalm, Michigan, Public Schools, GO, 5.90% due
5/01/2019 (b) 1,114
AAA Aaa 1,000 Comstock Park, Michigan, Public Schools, GO, 5.75% due 5/01/2029 (c) 1,072
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 1,554
BBB Baa2 2,000 Series A, 6.25% due 4/15/2027 2,081
Detroit, Michigan, City School District, GO:
AAA Aaa 2,300 (School Building and Site Improvement), Series A, 5.375% due
5/01/2024 (c) 2,404
AAA Aaa 2,100 (School Building and Site Improvement), Series B, 5% due
5/01/2028 (c) 2,100
AAA Aaa 5,155 (School Building and Site Improvement), Series B, 5% due
5/01/2033 (c) 5,116
AAA Aaa 1,000 Series A, 5.50% due 5/01/2018 (d) 1,084
Detroit, Michigan, GO (b):
AAA Aaa 1,400 5.50% due 4/01/2018 1,510
AAA Aaa 1,325 5.50% due 4/01/2020 1,418
AAA Aaa 2,705 Series B, 6% due 4/01/2015 3,054
AAA Aaa 1,000 Detroit, Michigan, Sewer Disposal Revenue Bonds, Series A, 5.75%
due 1/01/2010 (c)(e) 1,139
Detroit, Michigan, Sewer Disposal Revenue Refunding Bonds,
Senior Lien (d):
AAA Aaa 3,000 Series A, 5% due 7/01/2024 3,020
AAA Aaa 4,075 Series A, 5% due 7/01/2032 4,047
AAA Aaa 1,545 Series C, 5.25% due 7/01/2022 1,646
Detroit, Michigan, Water Supply System Revenue Bonds:
AAA NR* 4,375 DRIVERS, Series 200, 10.14% due 7/01/2011 (c)(e)(g) 5,675
AAA Aaa 4,875 Senior Lien, Series A, 5.75% due 1/01/2010 (c)(e) 5,553
AAA Aaa 1,250 Senior Lien, Series A, 5.875% due 1/01/2010 (c)(e) 1,432
AAA Aaa 15,490 Series B, 5.25% due 7/01/2032 (b) 15,822
AAA Aaa 9,490 Series B, 5% due 7/01/2034 (b) 9,406
AAA Aaa 1,415 Detroit, Michigan, Water Supply System Revenue Refunding Bonds,
6.25% due 7/01/2012 (c)(h) 1,426
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 4,154
BBB Baa2 2,500 Dickinson County, Michigan, Economic Development Corporation, PCR,
Refunding (Champion International Corporation Project), 5.85% due
10/01/2018 2,566
A NR* 3,100 Dickinson County, Michigan, Healthcare System, Hospital Revenue
Refunding Bonds, 5.80% due 11/01/2024 (i) 3,193
AAA Aaa 1,610 East Grand Rapids, Michigan, Public School District, GO, 5.75% due
5/01/2009 (d)(e) 1,815
Eastern Michigan University Revenue Bonds, Series B (c):
AAA Aaa 1,500 5.60% due 6/01/2025 1,583
AAA Aaa 1,310 5.625% due 6/01/2030 1,383
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, 2004
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
Michigan (continued)
AAA Aaa $ 1,025 Eastern Michigan University, Revenue Refunding Bonds, 6% due
6/01/2020 (a) $ 1,148
A NR* 615 Flint, Michigan, Hospital Building Authority, Revenue Refunding
Bonds (Hurley Medical Center), Series A, 5.375% due 7/01/2020 (i) 617
AAA Aaa 1,000 Frankenmuth, Michigan, School District, GO, 5.75% due 5/01/2020 (c) 1,104
NR* Aa1 3,650 Gibraltar, Michigan, School District, GO (School Building and Site),
5% due 5/01/2028 (c) 3,659
Grand Blanc, Michigan, Community Schools, GO:
AAA Aaa 1,100 5.625% due 5/01/2020 (c) 1,198
AAA Aaa 2,600 (School Building and Site), 5% due 5/01/2028 (d) 2,607
Grand Rapids, Michigan, Building Authority Revenue Bonds,
Series A (a):
AAA Aaa 1,100 5.50% due 10/01/2019 1,191
AAA Aaa 1,500 5.50% due 10/01/2020 1,615
AAA Aaa 2,070 Grand Valley, Michigan, State University Revenue Bonds, 5.50% due
2/01/2018 (c) 2,292
AAA NR* 8,425 Greater Detroit, Michigan, Resource Recovery Authority Revenue Bonds,
DRIVERS, Series 167, 11.11% due 12/13/2008 (a)(g) 10,778
AAA Aaa 9,325 Hartland, Michigan, Consolidated School District, GO, 6% due
5/01/2010 (c)(e) 10,705
AA+ Aa1 1,475 Haslett, Michigan, Public School District, Building and Site, GO,
5.625% due 5/01/2020 1,603
AAA Aaa 1,575 Jenison, Michigan, Public Schools, Building and Site, GO, 5.50% due
5/01/2019 (c) 1,702
AAA Aaa 3,305 Jonesville, Michigan, Community Schools, GO, 5.75% due 5/01/2029 (c) 3,543
NR* Aaa 6,850 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility
Revenue Refunding Bonds (Bronson Methodist Hospital), 5.50% due
5/15/2028 (b) 6,977
AAA Aaa 4,000 Kent, Michigan, Hospital Finance Authority, Hospital Revenue Refunding
Bonds (Butterworth Hospital), Series A, 7.25% due 1/15/2013 (b) 4,806
Kent, Michigan, Hospital Finance Authority Revenue Bonds (Spectrum
Health), Series A:
AA Aa3 1,000 5.50% due 1/15/2031 1,019
AAA Aaa 3,000 5.50% due 1/15/2031 (b) 3,120
AAA Aaa 1,035 Lansing, Michigan, Building Authority, GO, Series A, 5.375% due
6/01/2023 (b) 1,092
AAA Aaa 5,235 Lincoln Park, Michigan, School District, GO, 7% due 5/01/2006 (c)(e) 5,812
AAA Aaa 4,775 Livonia, Michigan, Public School District, GO (Building and Site),
5.75% due 5/01/2010 (c)(e) 5,417
Livonia, Michigan, Public School District, GO, Refunding,
Series A (b):
AAA Aaa 2,850 5% due 5/01/2024 2,877
AAA Aaa 2,840 5% due 5/01/2025 2,860
BBB NR* 2,250 Michigan Higher Education Facilities Authority, Limited Obligation
Revenue Refunding Bonds (Hope College), Series A, 5.90% due 4/01/2032 2,296
Michigan Higher Education Facilities Authority, Revenue Refunding
Bonds (College for Creative Studies):
NR* Baa2 1,235 5.85% due 12/01/2022 1,242
NR* Baa2 1,145 5.90% due 12/01/2027 1,148
AAA Aaa 2,500 Michigan Higher Education Student Loan Authority, Student Loan
Revenue Bonds, AMT, Series XVII-B, 5.40% due 6/01/2018 (a) 2,571
AAA NR* 1,065 Michigan Municipal Bond Authority Revenue Bonds (Local Government
Loan Program), Group A, 5.50% due 11/01/2020 (a) 1,157
Michigan Municipal Bond Authority, Revenue Refunding Bonds (Local
Government Loan Program), Series A:
AAA Aaa 265 6.50% due 11/01/2012 (b) 269
AAA Aaa 1,000 6% due 12/01/2013 (c) 1,045
AAA Aaa 7,000 6.125% due 12/01/2018 (c) 7,314
AA+ Aaa 7,000 Michigan State Building Authority Revenue Bonds, GO, RIB, Series 481,
9.633% due 4/15/2009 (b)(g) 8,662
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
Michigan (continued)
Michigan State Building Authority, Revenue Refunding Bonds:
AAA Aaa $ 2,500 (Facilities Program), Series I, 5.50% due 10/15/2018 (b) $ 2,708
NR* Aaa 11,140 RIB, Series 517X, 9.63% due 10/15/2010 (d)(g) 13,716
Michigan State, COP (a):
AAA Aaa 3,000 5.40%** due 6/01/2022 1,169
AAA Aaa 3,000 5.50% due 6/01/2027 3,120
AAA Aaa 2,665 Michigan State, HDA, Rental Housing Revenue Bonds, AMT, Series A,
5.30% due 10/01/2037 (b) 2,667
AA+ NR* 2,690 Michigan State, HDA, Revenue Refunding Bonds, Series C, 5.90% due
12/01/2015 (f) 2,814
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) 2,685
Michigan State Hospital Finance Authority, Hospital Revenue
Refunding Bonds:
A+ A2 2,200 (Crittenton Hospital), Series A, 5.625% due 3/01/2027 2,240
A A1 2,000 (Sparrow Obligation Group), 5.625% due 11/15/2031 2,025
Michigan State Hospital Finance Authority, Revenue Refunding Bonds:
AAA Aaa 2,715 (Ascension Health Credit), Series A, 5.75% due 11/15/2009 (b)(e) 3,102
AAA Aaa 12,000 (Ascension Health Credit), Series A, 6.125% due 11/15/2009 (b)(e) 13,940
AAA Aaa 2,500 (Ascension Health Credit), Series A, 6.25% due 11/15/2009 (b)(e) 2,920
AAA Aaa 4,805 (Mercy Health Services), Series T, 6.50% due 8/15/2013 (b) 5,379
AAA Aaa 2,000 (Mercy Health Services), Series X, 6% due 8/15/2014 (b) 2,226
AAA Aaa 2,200 (Mercy Health Services), Series X, 5.75% due 8/15/2019 (b) 2,382
AAA Aaa 4,930 (Mercy Mount Clemens), Series A, 6% due 5/15/2014 (b) 5,476
AAA Aaa 3,000 (Saint John Hospital), Series A, 6.0% due 5/15/2013 (a)(h) 3,070
AA- Aa3 1,000 (Trinity Health Credit), Series C, 5.375% due 12/01/2023 1,022
AA- Aa3 2,255 (Trinity Health Credit), Series C, 5.375% due 12/01/2030 2,287
AAA Aaa 6,400 (Trinity Health), Series A, 6% due 12/01/2027 (a) 6,962
Michigan State Strategic Fund, Limited Obligation Revenue Bonds:
BBB- Baa1 5,000 (Ford Motor Company Project), AMT, Series A, 6.55% due 10/01/2022 5,036
BBB+ NR* 3,000 (Republic Services Inc.), AMT, 4.25% due 8/01/2031 2,832
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) 7,458
AAA Aaa 6,000 (Detroit Edison Company Fund--Pollution), Series AA, 6.95% due
5/01/2011 (c) 7,181
A- A3 2,175 (Dow Chemical Company Project), AMT, 5.50% due 12/01/2028 2,311
NR* Aaa 5,750 RIB, Series 382, 11.38% due 9/01/2025 (b)(g) 6,598
BBB Baa1 2,500 Michigan State Strategic Fund, PCR, Refunding (General Motors Corp.),
6.20% due 9/01/2020 2,557
AAA Aaa 1,000 Michigan State Trunk Line Revenue Refunding Bonds, 5.25% due
10/01/2021 (d) 1,047
Michigan Technological University, General Revenue Bonds,
Series A (b):
AAA Aaa 1,850 5% due 10/01/2029 1,853
AAA Aaa 1,650 5% due 10/01/2034 1,642
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) 18,974
AAA Aaa 9,000 Monroe County, Michigan, PCR (Detroit Edison Company Project), AMT,
Series CC, 6.55% due 6/01/2024 (b) 9,128
AAA Aaa 1,000 Montrose Township, Michigan, School District, GO, 6.20% due
5/01/2017 (b) 1,173
NR* Aaa 1,830 Muskegon Heights, Michigan, Water System Revenue Bonds, Series A,
5.625% due 11/01/2025 (b) 1,937
AAA Aaa 235 Northview, Michigan, Public School District, GO, Refunding, 5.80%
due 5/01/2021 (b) 251
AAA Aaa 1,100 Norway Vulcan, Michigan, Area Schools, GO, 5.90% due 5/01/2025 (c) 1,210
AA+ Aaa 2,425 Oxford, Michigan, Area Community School District, GO, 5.50% due
5/01/2018 (d) 2,628
AAA Aaa 1,000 Plainwell, Michigan, Community Schools, School District, Building
and Site, GO, 5.50% due 5/01/2020 (d) 1,075
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
Michigan (concluded)
A NR* $ 700 Pontiac, Michigan, Tax Increment Finance Authority, Tax
Increment Revenue Refunding Bonds (Development Area 2), 5.625%
due 6/01/2022 (i) $ 718
AA+ Aa1 1,800 Rochester, Michigan, Community School District, GO, Series II,
5.50% due 5/01/2015 (c) 1,960
AAA Aaa 2,500 Saginaw, Michigan, Hospital Finance Authority, Revenue Refunding
Bonds (Covenant Medical Center), Series E, 5.625% due 7/01/2013 (b) 2,711
NR* Aaa 8,900 Saint Clair County, Michigan, Economic Revenue Refunding Bonds
(Detroit Edison Company), RIB, Series 282, 11.42% due 8/01/2024 (a)(g) 11,453
AAA Aaa 1,300 Southfield, Michigan, Library Building Authority, GO, 5.50% due
5/01/2018 (b) 1,410
Sturgis, Michigan, Public School District, GO (School Building
and Site):
AA+ Aa1 1,900 5.50% due 5/01/2021 2,049
AA+ Aa1 2,545 5.625% due 5/01/2030 2,680
AAA Aaa 1,000 Three Rivers, Michigan, Community Schools, GO, 6% due 5/01/2006 (b)(e) 1,091
AAA Aaa 1,100 Waverly, Michigan, Community School, GO, 5.50% due 5/01/2021 (c) 1,186
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) 11,198
AAA Aaa 1,750 Wayne Charter County, Michigan, Detroit Metropolitan Airport, GO,
Airport Hotel, Series A, 5% due 12/01/2030 (b) 1,750
AAA Aaa 2,070 Wayne County, Michigan, COP, 5.625% due 5/01/2011 (a) 2,257
West Bloomfield, Michigan, School District, GO, Refunding (c):
AAA Aaa 1,710 5.50% due 5/01/2017 1,858
AAA Aaa 1,225 5.50% due 5/01/2018 1,327
AAA Aaa 2,405 West Branch-Rose City, Michigan, Area School District, GO, 5.50%
due 5/01/2024 (c) 2,534
Puerto Rico--4.4%
Children's Trust Fund Project of Puerto Rico, Tobacco Settlement
Revenue Refunding Bonds:
BBB Baa3 2,300 5.50% due 5/15/2039 2,129
BBB Baa3 1,400 5.625% due 5/15/2043 1,311
AAA Aaa 1,270 Puerto Rico Electric Power Authority, Power Revenue Bonds, Trust
Receipts, Class R, Series 16 HH, 10.07% due 7/01/2013 (d)(g) 1,640
Puerto Rico Public Finance Corporation, Commonwealth Appropriation
Revenue Bonds:
AAA Aaa 1,000 Series A, 5.375% due 8/01/2024 (b) 1,053
BBB+ Baa3 1,000 Series E, 5.70% due 8/01/2025 1,048
BBB+ Baa3 2,900 Series E, 5.75% due 8/01/2030 3,058
AAA Aaa 2,150 University of Puerto Rico, University Revenue Refunding Bonds,
Series O, 5.375% due 6/01/2030 (b) 2,225
Total Municipal Bonds (Cost--$382,291)--144.5% 407,421
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Schedule of Investments (concluded) (In Thousands)
Shares
Held Short-Term Securities Value
15,355 CMA Michigan Municipal Money Fund (j) $ 15,355
Total Short-Term Securities (Cost--$15,355)--5.4% 15,355
Total Investments (Cost--$397,646)--149.9% 422,776
Liabilities in Excess of Other Assets--(0.3%) (790)
Preferred Stock, at Redemption Value--(49.6%) (140,010)
---------
Net Assets Applicable to Common Stock--100.0% $ 281,976
=========
*Not Rated.
**Represents a zero coupon bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
(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, 2004.
(h)Escrowed to maturity.
(i)ACA Insured.
(j)Investments in companies considered to be an affiliate of the
Fund (such companies are defined as "Affiliated Companies" in
Section 2(a)(3) of the Investment Company Act of 1940) are as
follows:
(in Thousands)
Net Dividend
Affiliate Activity Income
CMA Michigan Municipal
Money Fund 4,519 $22
Forward interest rate swaps entered into as of April 30, 2004 were
as follows:
(in Thousands)
Notional Unrealized
Affiliate Amount Depreciation
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and
pay a fixed rate equal to 3.926%
Broker, J.P. Morgan Chase Bank
Expires August 2014 $21,500 $ (19)
See Notes to Financial Statements.
Quality Profile
The quality ratings of securities in the Fund as of April 30, 2004
were as follows:
Percent of
Total
S&P Rating/Moody's Rating Investments
AAA/Aaa 81.4%
AA/Aa 4.5
A/A 2.6
BBB/Baa 7.8
NR (Not Rated) 3.7
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Statement of Net Assets
As of April 30, 2004
Assets
Investments in unaffiliated securities, at value
(identified cost--$382,291,020) $ 407,421,360
Investments in affiliated securities, at value (identified cost--$15,354,873) 15,354,873
Cash 25,177
Receivables:
Interest $ 7,603,301
Securities sold 100,000
Dividends from affiliates 214 7,703,515
---------------
Prepaid expenses 4,360
---------------
Total assets 430,509,285
---------------
Liabilities
Unrealized depreciation on forward interest rate swaps 18,727
Payables:
Securities purchased 8,085,526
Investment adviser 198,810
Dividends to Common Stock shareholders 181,321
Other affiliates 2,976 8,468,633
---------------
Accrued expenses and other liabilities 35,728
---------------
Total liabilities 8,523,088
---------------
Preferred Stock
Preferred Stock, at redemption value, 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) 140,009,780
---------------
Net Assets Applicable to Common Stock
Net assets applicable to Common Stock $ 281,976,417
===============
Analysis of Net Assets Applicable to Common Stock
Common Stock, par value $.10 per share (18,155,932 shares issued and
outstanding) $ 1,815,593
Paid-in capital in excess of par 268,391,966
Undistributed investment income--net $ 4,570,847
Accumulated realized capital losses on investments--net (17,913,602)
Unrealized appreciation on investments--net 25,111,613
---------------
Total accumulated earnings--net 11,768,858
---------------
Total--Equivalent to $15.53 net asset value per share of Common Stock
(market price--$14.25) $ 281,976,417
===============
*Auction Market Preferred Stock.
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Statement of Operations
For the Six Months Ended April 30, 2004
Investment Income
Interest $ 11,071,875
Dividends from affiliates 21,596
---------------
Total income 11,093,471
---------------
Expenses
Investment advisory fees $ 1,078,884
Commission fees 178,617
Accounting services 74,117
Transfer agent fees 38,013
Professional fees 32,210
Printing and shareholder reports 17,969
Directors' fees and expenses 13,114
Custodian fees 11,771
Listing fees 10,665
Pricing fees 8,851
Other 21,340
---------------
Total expenses before reimbursement 1,485,551
Reimbursement of expenses (28,379)
---------------
Total expenses after reimbursement 1,457,172
---------------
Investment income--net 9,636,299
---------------
Realized & Unrealized Loss on Investments--Net
Realized loss on investments--net (552,195)
Change in unrealized appreciation/depreciation on investments--net (6,821,407)
---------------
Total realized and unrealized loss on investments--net (7,373,602)
---------------
Dividends to Preferred Stock Shareholders
Investment income--net (608,908)
---------------
Net Increase in Net Assets Resulting from Operations $ 1,653,789
===============
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2004 2003
Operations
Investment income--net $ 9,636,299 $ 19,930,690
Realized gain (loss) on investments--net (552,195) 1,528,951
Change in unrealized appreciation/depreciation on investments--net (6,821,407) 1,157,612
Dividends to Preferred Stock shareholders (608,908) (1,325,488)
--------------- ---------------
Net increase in net assets resulting from operations 1,653,789 21,291,765
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (9,041,654) (17,729,268)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock
shareholders (9,041,654) (17,729,268)
--------------- ---------------
Net Assets Applicable to Common Stock
Total increase (decrease) in net assets applicable to Common Stock (7,387,865) 3,562,497
Beginning of period 289,364,282 285,801,785
--------------- ---------------
End of period* $ 281,976,417 $ 289,364,282
=============== ===============
*Undistributed investment income--net $ 4,570,847 $ 4,585,110
=============== ===============
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Financial Highlights
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
April 30, For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001++++++ 2000++++++
Per Share Operating Performance
Net asset value, beginning of period $ 15.94 $ 15.74 $ 15.81 $ 14.48 $ 13.91
---------- ---------- ---------- ---------- ----------
Investment income--net .53+++ 1.10+++ 1.10+++ 1.08 .99
Realized and unrealized gain (loss) on
investments--net (.41) .15 (.12) 1.30 .67
Dividends to Preferred Stock shareholders
from investment income--net (.03) (.07) (.11) (.24) (.30)
---------- ---------- ---------- ---------- ----------
Total from investment operations .09 1.18 .87 2.14 1.36
---------- ---------- ---------- ---------- ----------
Less dividends to Common Stock shareholders
from investment income--net (.50) (.98) (.94) (.81) (.79)
Capital charge resulting from issuance of
Common Stock -- -- -- --++ --
---------- ---------- ---------- ---------- ----------
Total dividends to Common Stock shareholders (.50) (.98) (.94) (.81) (.79)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 15.53 $ 15.94 $ 15.74 $ 15.81 $ 14.48
========== ========== ========== ========== ==========
Market price per share, end of period $ 14.25 $ 14.69 $ 13.95 $ 14.22 $ 11.9375
========== ========== ========== ========== ==========
Total Investment Return**
Based on market price per share .25%+++++ 12.57% 4.77% 26.44% 4.62%
========== ========== ========== ========== ==========
Based on net asset value per share .69%+++++ 8.26% 6.33% 15.89% 11.19%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Common Stock
Total expenses, net of reimbursement and
excluding reorganization expenses*** 1.00%* 1.01% 1.04% 1.05% 1.10%
========== ========== ========== ========== ==========
Total expenses, excluding reorganization
expenses*** 1.01%* 1.03% 1.04% 1.05% 1.10%
========== ========== ========== ========== ==========
Total expenses*** 1.01%* 1.03% 1.04% 1.05% 1.33%
========== ========== ========== ========== ==========
Total investment income--net*** 6.58%* 6.83% 7.10% 7.10% 7.49%
========== ========== ========== ========== ==========
Amount of dividends to Preferred Stock
shareholders .41%* .45% .70% 1.59% 2.18%
========== ========== ========== ========== ==========
Investment income--net, to Common Stock
shareholders 6.17%* 6.38% 6.40% 5.51% 5.31%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Common & Preferred Stock***
Total expenses, net of reimbursement and
excluding reorganization expenses .67%* .68% .70% .70% .72%
========== ========== ========== ========== ==========
Total expenses, excluding reorganization
expenses .69%* .69% .70% .70% .72%
========== ========== ========== ========== ==========
Total expenses .69%* .69% .70% .70% .86%
========== ========== ========== ========== ==========
Total investment income--net 4.46%* 4.61% 4.75% 4.71% 4.87%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Preferred Stock
Dividends to Preferred Stock shareholders .87%* .94% 1.40% 3.14% 4.06%
========== ========== ========== ========== ==========
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Financial Highlights (concluded)
For the Six
Months Ended
The following per share data and ratios have been derived April 30, For the Year Ended October 31,
from information provided in the financial statements. 2004 2003 2002 2001++++++ 2000++++++
Supplemental Data
Net assets applicable to Common Stock, end
of period (in thousands) $ 281,976 $ 289,364 $ 285,802 $ 286,982 $ 262,864
========== ========== ========== ========== ==========
Preferred Stock outstanding, end of period
(in thousands) $ 140,000 $ 140,000 $ 140,000 $ 140,000 $ 140,000
========== ========== ========== ========== ==========
Portfolio turnover 16.57% 33.39% 32.68% 68.17% 51.41%
========== ========== ========== ========== ==========
Leverage
Asset coverage per $1,000 $ 3,014 $ 3,067 $ 3,041 $ 3,050 $ 2,878
========== ========== ========== ========== ==========
Dividends Per Share on Preferred Stock Outstanding++++
Series A--Investment income--net $ 111 $ 240 $ 354 $ 792 $ 1,023
========== ========== ========== ========== ==========
Series B--Investment income--net $ 110 $ 230 $ 362 $ 783 $ 653
========== ========== ========== ========== ==========
Series C--Investment income--net $ 104 $ 240 $ 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, 2004
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 amended, 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. Actual
results may differ from these 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 last available
bid price in the over-the-counter market or on the basis of yield
equivalents as obtained by the Fund's pricing service from one or
more dealers that make markets in the 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). Swap
agreements are valued by quoted fair values received daily by the
Fund from the counterparty. Short-term investments with a remaining
maturity 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
movements and movements in the securities markets. Losses may arise
due to changes in the value of the contract or if the counterparty
does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts.
Futures contracts are contracts for delayed delivery of securities
at a specific future date and at a specific price or yield. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund
agrees to receive from or pay to the broker an amount of cash equal
to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Fund
as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
* Options--The Fund may write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written. When a security is purchased or sold through an exercise of
an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired, or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Notes to Financial Statements (continued)
Written and purchased options are non-income producing investments.
* Forward interest rate swaps--The Fund may enter into forward
interest rate swaps. In a forward interest rate swap, the Fund and
the counterparty agree to make periodic net payments on a specified
notional contract amount, commencing on a specified future effective
date, unless terminated earlier. When the agreement is closed, the
Fund records a realized gain or loss in an amount equal to the value
of the agreement.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Realized gains and losses on security
transactions are determined on the identified cost basis. 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,
2004, FAM reimbursed the Fund in the amount of $28,379.
For the six months ended April 30, 2004, the Fund reimbursed MLIM
$4,442 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, 2004 were $72,416,452 and
$69,036,674, respectively.
Net realized gains (losses) for the six months ended April 30, 2004
and net unrealized appreciation/depreciation as of April 30, 2004
were as follows:
Unrealized
Realized Appreciation/
Gains (Losses) Depreciation
Long-term investments $ 580,346 $ 25,130,340
Forward interest rate swaps (1,132,541) --
Financial futures contracts -- (18,727)
-------------- --------------
Total $ (552,195) $ 25,111,613
============== ==============
As of April 30, 2004, net unrealized appreciation for Federal income
tax purposes aggregated $25,288,350, of which $27,056,713 related to
appreciated securities and $1,768,363 related to depreciated
securities. The aggregate cost of investments at April 30, 2004 for
Federal income tax purposes was $397,487,883.
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.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Notes to Financial Statements (concluded)
Preferred Stock
Auction Market Preferred Stock 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, 2004 were as follows: Series A, 1.02%, Series
B, 1.02% and Series C, .75%.
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, 2004, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
an affiliate of FAM, earned $90,677 as commissions.
5. Capital Loss Carryforward:
On October 31, 2003, the Fund had a net capital loss carryforward of
$13,269,487, of which $679,274 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 $.084000 per share on May 27, 2004 to
shareholders of record on May 14, 2004.
Proxy Results
During the six-month period ended April 30, 2004, MuniYield Michigan
Insured Fund, Inc.'s Common Stock shareholders voted on the
following proposal. The proposal was approved at a shareholders'
meeting on April 27, 2004. 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: Donald W. Burton 17,016,533 635,326
David H. Walsh 17,022,560 629,299
Fred G. Weiss 17,025,159 626,700
During the six-month period ended April 30, 2004, MuniYield Michigan
Insured Fund, Inc.'s Preferred Stock shareholders (Series A - C)
voted on the following proposal. The proposal was approved at a
shareholders' meeting on April 27, 2004. 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 Board of Directors: Donald W. Burton,
M. Colyer Crum, Laurie Simon Hodrick, David H. Walsh and
Fred G. Weiss 4,895 2
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Officers and Directors
Terry K. Glenn, President and Director
Donald W. Burton, Director
M. Colyer Crum, Director
Laurie Simon Hodrick, Director
David H. Walsh, 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
Phillip S. Gillespie, Secretary
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
101 Barclay Street - 7 West
New York, NY 10286
NYSE Symbol
MIY
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 stable level of dividend
distributions, the Fund may at times pay out less than the entire
amount of net investment income earned in any particular month and
may at times in any 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.
Electronic Delivery
The Fund offers electronic delivery of communications to its
shareholders. In order to receive this service, you must
register your account and provide us with e-mail information.
To sign up for this service, simply access this website
http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification
number (PIN). You will need this PIN should you wish to update your
e-mail address, choose to discontinue this service and/or make any
other changes to the service. This service is not available for
certain retirement accounts at this time.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2004
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this
semi-annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to
this semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to
this semi-annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies - Not Applicable to this
semi-annual report
Item 8 - Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not
Applicable
Item 10 - Controls and Procedures
10(a) - The registrant's certifying officers have reasonably
designed such disclosure controls and procedures to ensure material
information relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
10(b) - There were no changes in the registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year
of the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
Item 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - Not Applicable to this semi-annual
report
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MuniYield Michigan Insured Fund, Inc.
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
MuniYield Michigan Insured Fund, Inc.
Date: June 18, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Terry K. Glenn________
Terry K. Glenn,
President of
MuniYield Michigan Insured Fund, Inc.
Date: June 18, 2004
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
MuniYield Michigan Insured Fund, Inc.
Date: June 18, 2004