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 811-07080
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: Robert C. Doll, Jr., Chief
Executive Officer, 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: 10/31/05
Date of reporting period: 11/01/04 - 04/30/05
Item 1 - Report to Stockholders
MuniYield Michigan
Insured Fund, Inc.
Semi-Annual Report
April 30, 2005
(BULL LOGO) Merrill Lynch Investment Managers
www.mlim.ml.com
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
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) at www.mutualfunds.ml.com; and (3) on the Securities and Exchange
Commission's Web site at http://www.sec.gov. Information about how the
Fund voted proxies relating to securities held in the Fund's portfolio
during the most recent 12-month period ended June 30 is available (1) at
www.mutualfunds.ml.com; and (2) on the Securities and Exchange Commission's
Web site 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.
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, 2005, the percentage of the Fund's total net assets invested
in inverse floaters was 10.67%, before the deduction of Preferred Stock.
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. Swap agreements involve
the risk that the party with whom the Fund has entered into the swap will
default on its obligation to pay the Fund and the risk that the Fund will
not be able to meet its obligations to pay the other party to the
agreement.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
A Letter From the President
Dear Shareholder
Financial markets faced a number of crosscurrents over the past several
months, but most major benchmarks managed to post positive returns for the
annual and semi-annual reporting periods ended April 30, 2005:
Total Returns as of April 30, 2005 6-month 12-month
U.S. equities (Standard & Poor's 500 Index) +3.28% + 6.34%
Small-cap U.S. equities (Russell 2000 Index) -0.15% + 4.71%
International equities (MSCI Europe Australasia Far East Index) +8.71% +14.95%
Fixed income (Lehman Brothers Aggregate Bond Index) +0.98% + 5.26%
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) +1.93% + 6.81%
High yield bonds (Credit Suisse First Boston High Yield Index) +0.65% + 6.92%
After expanding at an annualized rate of 4.4% in 2004, U.S. gross domestic
product growth for the first quarter of 2005 came in at an estimated 3.1%
(although that figure was later revised upward to 3.5%). Nevertheless, the
Federal Reserve Board continued increasing interest rates at a measured
pace to combat emergent inflation. The most recent hike came on May 3, and
brought the federal funds rate to 3%. Recently, signs of inflation have
taken the form of rising business costs and increasing consumer prices,
particularly in the areas of gasoline, healthcare, housing and education.
U.S. equities ended 2004 in a strong rally, but stumbled into negative
territory in 2005. The market weakness was largely fueled by the potential
for slowing economic and corporate earnings growth, renewed energy price
concerns and a lack of investor conviction. On the positive side, certain
sectors of the market have been performing well (particularly energy) and
corporate transactions, such as mergers and acquisitions, stock buy-backs
and dividend payouts, have all increased. International equities,
especially in Asia, have benefited from higher economic growth rates.
In the bond market, we witnessed a yield curve flattening trend over the
past several months as short-term yields increased and longer-term interest
rates remained more stable or fell. At the end of April 2005, the two-year
Treasury note yielded 3.66% and the 10-year Treasury note yielded 4.21%, a
difference of 55 basis points (.55%). This compared to a spread of 149
basis points six months earlier and 222 basis points 12 months ago.
Looking ahead, the environment is likely to be a challenging one for
investors. With this in mind, we encourage you to meet with your financial
advisor to review your goals and asset allocation and to rebalance your
portfolio, as necessary, to ensure it remains aligned with your objectives
and risk tolerance. As always, 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,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
President and Director
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
A Discussion With Your Fund's Portfolio Manager
As the period progressed, we sought to take advantage of periods of price
volatility by adding to our position in bonds with greater sensitivity to
changes in interest rates.
Describe the recent market environment relative to municipal bonds.
Amid significant volatility, long-term bond yields moved lower over the past
six months as shorter-term yields increased. Yields on 30-year Treasury
bonds declined 28 basis points (.28%) to 4.51%, while 10-year Treasury note
yields rose 16 basis points to 4.21%. The Federal Reserve Board (the Fed),
in the meantime, continued to raise short-term interest rates at each of
its meetings throughout the period, and most recently increased the federal
funds rate from 2.75% to 3% on May 3. As short-term interest rates
increased while longer-term interest rates fell, the yield curve continued
to flatten.
Tax-exempt bond yields exhibited a similar pattern during the period. Yields
on 30-year revenue bonds, as measured by the Bond Buyer Revenue Bond Index,
fell 14 basis points to 4.83%. According to Municipal Market Data, yields
on AAA-rated issues maturing in 30 years declined 23 basis points to 4.37%
over the six-month period, while AAA-rated bonds maturing in 10 years saw
their yields rise 17 basis points to 3.57%.
During the past six months, more than $186 billion in tax-exempt bonds was
underwritten, an increase of 7.5% versus the same period a year earlier.
Issuance so far in 2005 has been boosted by a 32% increase in refunding
issues as municipalities sought to refinance existing higher-coupon debt.
These refunding issues have been heavily weighted in the 10-year - 20-year
maturity range to lower the overall interest cost of the refunding issue.
This concentration has put pressure on intermediate tax-exempt bond yields
while supporting longer-term bond prices.
Describe conditions in the State of Michigan.
At period-end, Michigan maintained credit ratings of Aa2, AA and AA from
Moody's, Standard & Poor's and Fitch, respectively, each with a stable
outlook. All three agencies downgraded the state during the period, citing
the troubled automotive sector and worse-than-expected revenue collection
estimates. However, Michigan's debt levels are quite low for a populous
state and provide it with valuable financial flexibility in responding to
economic downturns. Another positive is that the state's pension system is
well funded.
Michigan's 2004 fiscal year ended with a surplus exceeding $155 million,
all of which was used, along with money from spending cuts and the Medicaid
trust fund, to close a $375 million budget shortfall for fiscal year 2005.
The state's proposed 2006 budget eliminates a $770 million general fund
deficit mostly through spending cuts with some additional new taxes. The
budget relies very little on the use of one-time revenue sources that will
be unavailable in future years.
Michigan's economy continues to lag the national recovery as well as that
of the other Great Lakes states. Employment in the state fell in 2004,
representing the fourth consecutive annual decline. The manufacturing
sector, led by the auto industry and General Motors Corp. in particular, is
responsible for the job losses, which have caused stagnant state revenue
growth. Without growth from other job sectors, Michigan could face additional
credit-rating downgrades. On the positive side, preliminary February 2005
employment data showed an increase from a year earlier, and the annual rate
of job losses in Michigan has declined each year since 2001.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended April 30, 2005, the Common Stock of
MuniYield Michigan Insured Fund, Inc., had net annualized yields of 6.23%
and 6.52%, based on a period-end per share net asset value of $15.83 and a
per share market price of $15.13, respectively, and $.489 per share income
dividends. Over the same period, the total investment return on the Fund's
Common Stock was +2.41%, based on a change in per share net asset value
from $15.96 to $15.83, and assuming reinvestment of all distributions.
The Fund's total return, based on net asset value, trailed the +2.96%
average return of the Lipper Michigan Municipal Debt Funds category for the
six-month period. (Funds in this Lipper category limit their investment to
securities exempt from taxation in Michigan or a city in Michigan). This
Lipper category includes a number of funds that can purchase lower-rated,
uninsured bonds, which were among the market's best-performing securities
during the past six months. Given the Fund's more conservative investment
parameters, and overall higher credit quality, we were underweight in these
lower-rated issues, which contributed to relative underperformance during
the period. The Fund's defensive positioning during the first part of the
period also detracted somewhat from relative results. As long-term interest
rates continued to decline during this time, the portfolio's relatively
conservative level of interest rate exposure detracted from results.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
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 of 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
returns based on changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
During the past six months, Michigan municipalities issued $6.3 billion in
long-term tax-exempt securities, an increase of 47% compared to the same
six months a year earlier. Despite this increase in supply, overall
activity in the portfolio was limited by the fact that current market
yields are well below those provided by most of the Fund's holdings. The
sale of our existing, higher-yielding bonds would result in a decline in
the Fund's income stream - and, potentially, the eventual reduction of its
dividend. Also, most recent issuance in the state has been heavily weighted
in the 10-year - 20-year maturity range, in keeping with the national supply
pattern. We continued to avoid new purchases in this range because of the
unattractively low yield levels.
Over the course of the period, we increasingly positioned the portfolio to
be less defensive. A combination of factors - including the Fed's continued
program of short-term interest rate increases, moderating economic growth
expectations and declines in leading economic indicators - led us to believe
that the potential for significant interest rate increases later in 2005 and
into 2006 was less than previously anticipated. Accordingly, we sought to
take advantage of periods of price volatility by adding to our position in
bonds with greater sensitivity to changes in interest rates. To generate
funds for these purchases, we sold prerefunded bonds with two-year - five-year
maturity dates, enabling us to lock in the significant market appreciation
these bonds have enjoyed while also moving closer to our desired neutral
portfolio positioning.
For the six-month period ended April 30, 2005, the Fund's Auction Market
Preferred Stock (AMPS) had average yields of 1.65% for Series A, 1.65% for
Series B, 1.67% for Series C and 1.86% for Series D. At this point in the
Fed's monetary tightening cycle, interest rate increases are having a
material impact on the Fund's borrowing costs. The Fed raised the short-
term interest rate target 100 basis points during the six-month period.
Still, the tax-exempt yield curve remained relatively steep and continued
to generate an income benefit to the holders of Common Stock from the
leveraging of Preferred Stock. 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 36.46%
of total net 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 transition toward a more neutral market stance. We
are monitoring economic and market conditions and would need to see
additional evidence of slowing economic activity or financial stress - such
as the recent credit-rating downgrades of General Motors Corp. and Ford
Motor Co. - before enacting a more aggressive market strategy. In the
meantime, we intend to maintain the portfolio's fully invested stance in
order to enhance investment income and allow the Fund to continue to seek
an above-average dividend yield.
Fred K. Stuebe
Vice President and Portfolio Manager
May 11, 2005
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
Schedule of Investments (In Thousands)
Face
Amount Municipal Bonds Value
Michigan--152.3%
Adrian, Michigan, City School District, GO (d):
$ 2,000 5% due 5/01/2029 $ 2,099
1,600 5% due 5/01/2034 1,676
1,000 Allegan, Michigan, Public School District, GO, 5.75% due 5/01/2010 (d)(e) 1,097
1,000 Ann Arbor, Michigan, Public School District, School Building and Site, GO, 5% due 5/01/2027 1,049
Belding, Michigan, Area Schools, GO, Refunding (c):
785 6.05% due 5/01/2006 (e) 818
215 6.05% due 5/01/2021 224
1,000 Birmingham, Michigan, City School District, School Building and Site, GO, 5% due 11/01/2033 (d) 1,049
1,000 Central Montcalm, Michigan, Public Schools, GO, 5.90% due 5/01/2009 (b)(e) 1,106
Delta County, Michigan, Economic Development Corporation, Environmental Improvement Revenue
Refunding Bonds (Mead Westvaco--Escanaba):
1,500 AMT, Series B, 6.45% due 4/15/2023 1,700
2,000 Series A, 6.25% due 4/15/2012 (e) 2,244
1,000 Detroit, Michigan, City School District, GO Series A, 5.50% due 5/01/2018 (d) 1,110
Detroit, Michigan, GO (b):
1,400 5.50% due 4/01/2018 1,544
1,325 5.50% due 4/01/2020 1,451
2,705 Series B, 6% due 4/01/2010 (e) 3,082
2,300 Detroit, Michigan School Building and Site Improvement, GO, Series A, 5.375% due 5/01/2024 (c) 2,541
2,100 Detroit, Michigan, Sewer Disposal Revenue Bonds, Senior Lien, VRDN, Series A, 3% due
7/01/2033 (d)(g) 2,100
Detroit, Michigan, Sewer Disposal Revenue Refunding Bonds, Senior Lien (d):
1,000 Series A, 5% due 7/01/2032 1,042
1,545 Series C, 5.25% due 7/01/2022 1,756
Detroit, Michigan, Water Supply System Revenue Bonds:
4,375 DRIVERS, Series 200, 5.75% due 7/01/2011 (c)(e)(j) 5,603
1,250 Senior Lien, Series A, 5.875% due 1/01/2010 (c)(e) 1,410
6,900 Senior Lien, Series A, 5% due 7/01/2034 (b) 7,186
14,790 Series B, 5.25% due 7/01/2032 (b) 15,775
3,970 Series B, 5% due 7/01/2034 (b) 4,135
1,415 Detroit, Michigan, Water Supply System, Revenue Refunding Bonds, 6.25% due 7/01/2012 (c)(h) 1,586
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 4,193
3,100 Dickinson County, Michigan, Healthcare System, Hospital Revenue Refunding Bonds, 5.80% due
11/01/2024 (i) 3,270
1,610 East Grand Rapids, Michigan, Public School District, GO, 5.75% due 5/01/2009 (d)(e) 1,772
2,230 East Lansing, Michigan, School District, GO, Refunding, Series B, 5% due 5/01/2030 (b) 2,350
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
RIB Residual Interest Bonds
VRDN Variable Rate Demand Notes
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
Schedule of Investments (continued) (In Thousands)
Face
Amount Municipal Bonds Value
Michigan (continued)
Eastern Michigan University Revenue Bonds, Series B (c):
$ 1,500 5.60% due 6/01/2025 $ 1,632
1,310 5.625% due 6/01/2030 1,428
Eastern Michigan University, Revenue Refunding Bonds:
1,025 6% due 6/01/2020 (a) 1,153
300 VRDN, 3.05% due 6/01/2027 (c)(g) 300
Eaton Rapids, Michigan, Public Schools, School Building and Site, GO (d):
1,325 5.25% due 5/01/2020 1,450
1,675 5.25% due 5/01/2021 1,825
1,700 5% due 5/01/2026 1,789
3,600 5% due 5/01/2029 3,778
Flint, Michigan, Hospital Building Authority, Revenue Refunding Bonds (Hurley Medical Center),
Series A (i):
615 5.375% due 7/01/2020 635
1,375 6% due 7/01/2020 1,501
2,200 Fowlerville, Michigan, Community Schools, School District, GO, 5% due 5/01/2030 (c) 2,308
1,000 Frankenmuth, Michigan, School District, GO, 5.75% due 5/01/2010 (c)(e) 1,121
3,650 Gibraltar, Michigan, School District, School Building and Site, GO, 5% due 5/01/2028 (c) 3,839
1,100 Grand Blanc, Michigan, Community Schools, GO, 5.625% due 5/01/2020 (c) 1,223
Grand Rapids, Michigan, Building Authority Revenue Bonds, Series A (a):
1,100 5.50% due 10/01/2019 1,227
1,500 5.50% due 10/01/2020 1,659
2,070 Grand Valley, Michigan, State University Revenue Bonds, 5.50% due 2/01/2018 (c) 2,356
8,425 Greater Detroit, Michigan, Resource Recovery Authority Revenue Bonds, DRIVERS, Series 167,
9.185% due 12/13/2008 (a)(j) 10,213
Gulf Lake, Michigan, Community School District, School Building and Site, GO (d):
2,000 5% due 5/01/2028 2,104
3,625 5% due 5/01/2030 3,804
4,775 Harper Woods, Michigan, City School District, School Building and Site, GO, Refunding, 5%
due 5/01/2034 (c) 5,001
9,325 Hartland, Michigan, Consolidated School District, GO, 6% due 5/01/2010 (c)(e) 10,559
3,990 Hudsonville, Michigan, Public Schools, School Building and Site, GO, 5% due 5/01/2029 (d) 4,188
1,575 Jenison, Michigan, Public Schools, Building and Site, GO, 5.50% due 5/01/2019 (c) 1,749
3,305 Jonesville, Michigan, Community Schools, GO, 5.75% due 5/01/2009 (c)(e) 3,637
6,850 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility Revenue Refunding Bonds
(Bronson Methodist Hospital), 5.50% due 5/15/2028 (b) 7,283
4,000 Kent, Michigan, Hospital Finance Authority, Hospital Revenue Refunding Bonds (Butterworth
Hospital), Series A, 7.25% due 1/15/2013 (b) 4,714
Kent, Michigan, Hospital Finance Authority Revenue Bonds (Spectrum Health), Series A (b):
1,000 5.50% due 1/15/2031 1,062
3,000 5.50% due 1/15/2031 3,226
1,510 Lansing, Michigan, Building Authority, GO, Series A, 5.375% due 6/01/2023 (b) 1,670
2,425 Mayville, Michigan, Community Schools, School Building and Site, GO, 5% due 5/01/2034 (c) 2,545
2,500 Mendon, Michigan, Community Schools, School Building and Site, GO, 5% due 5/01/2034 (c) 2,618
1,875 Michigan Higher Education Facilities Authority, Limited Obligation Revenue Bonds (Hillsdale
College Project), 5% due 3/01/2035 1,926
2,250 Michigan Higher Education Facilities Authority, Limited Obligation Revenue Refunding Bonds
(Hope College), Series A, 5.90% due 4/01/2032 2,389
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
Schedule of Investments (continued) (In Thousands)
Face
Amount Municipal Bonds Value
Michigan (continued)
Michigan Higher Education Facilities Authority, Revenue Refunding Bonds (College for
Creative Studies):
$ 1,235 5.85% due 12/01/2022 $ 1,277
1,145 5.90% due 12/01/2027 1,178
2,500 Michigan Higher Education Student Loan Authority, Student Loan Revenue Bonds, AMT,
Series XVII-B, 5.40% due 6/01/2018 (a) 2,596
1,065 Michigan Municipal Bond Authority Revenue Bonds (Local Government Loan Program), Group A,
5.50% due 11/01/2020 (a) 1,166
Michigan Municipal Bond Authority, Revenue Refunding Bonds (Local Government Loan Program),
Series A:
150 6.50% due 11/01/2012 (b) 150
1,000 6% due 12/01/2013 (c) 1,023
7,000 6.125% due 12/01/2018 (c) 7,158
Michigan State Building Authority, Revenue Refunding Bonds:
2,500 (Facilities Program), Series I, 5.50% due 10/15/2018 (b) 2,774
3,000 (Facilities Program), Series II, 5% due 10/15/2029 (b) 3,144
11,140 RIB, Series 517X, 7.74% due 10/15/2010 (d)(j) 13,768
Michigan State, COP (a):
3,000 5.40%** due 6/01/2022 1,348
3,000 5.50% due 6/01/2027 3,237
1,605 Michigan State, HDA, Rental Housing Revenue Bonds, AMT, Series A, 5.30% due 10/01/2037 (b) 1,642
2,690 Michigan State, HDA, Revenue Refunding Bonds, Series C, 5.90% due 12/01/2015 (f) 2,807
2,530 Michigan State Hospital Finance Authority, Hospital Revenue Bonds (Mid-Michigan Obligation
Group), Series A, 5.50% due 4/15/2018 (a) 2,755
Michigan State Hospital Finance Authority, Hospital Revenue Refunding Bonds:
2,200 (Crittenton Hospital), Series A, 5.625% due 3/01/2027 2,347
2,000 (Sparrow Obligation Group), 5.625% due 11/15/2031 2,111
Michigan State Hospital Finance Authority, Revenue Refunding Bonds:
8,875 5% due 11/15/2036 (b) 9,240
2,715 (Ascension Health Credit), Series A, 5.75% due 11/15/2009 (b)(e) 3,033
12,000 (Ascension Health Credit), Series A, 6.125% due 11/15/2009 (b)(e) 13,594
2,500 (Ascension Health Credit), Series A, 6.25% due 11/15/2009 (b)(e) 2,845
4,805 (Mercy Health Services), Series T, 6.50% due 8/15/2013 (b) 5,191
2,000 (Mercy Health Services), Series X, 6% due 8/15/2014 (b) 2,220
2,200 (Mercy Health Services), Series X, 5.75% due 8/15/2019 (b) 2,410
4,930 (Mercy Mount Clemens), Series A, 6% due 5/15/2014 (b) 5,451
3,000 (Saint John Hospital), Series A, 6% due 5/15/2013 (a)(h) 3,223
6,400 (Trinity Health), Series A, 6% due 12/01/2027 (a) 7,189
1,000 (Trinity Health Credit), Series C, 5.375% due 12/01/2023 1,059
5,255 (Trinity Health Credit), Series C, 5.375% due 12/01/2030 5,520
5,000 Michigan State Strategic Fund, Limited Obligation Revenue Bonds (Ford Motor Company Project),
AMT, Series A, 6.55% due 10/01/2022 5,026
Michigan State Strategic Fund, Limited Obligation, Revenue Refunding Bonds:
7,250 (Detroit Edison Company), AMT, Series A, 5.55% due 9/01/2029 (b) 7,682
6,000 (Detroit Edison Company Fund--Pollution), Series AA, 6.95% due 5/01/2011 (c) 7,125
3,300 (Detroit Edison Pollution Control), Series C, 5.45% due 9/01/2029 3,462
2,175 (Dow Chemical Company Project), AMT, 5.50% due 12/01/2028 2,349
5,750 RIB, Series 382, 9.49% due 9/01/2025 (b)(j) 6,107
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
Schedule of Investments (continued) (In Thousands)
Face
Amount Municipal Bonds Value
Michigan (concluded)
$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) $ 19,919
1,000 Montrose Township, Michigan, School District, GO, 6.20% due 5/01/2017 (b) 1,208
1,830 Muskegon Heights, Michigan, Water System Revenue Bonds, Series A, 5.625% due 11/01/2025 (b) 2,007
235 Northview, Michigan, Public School District, GO, Refunding, 5.80% due 5/01/2021 (b) 244
1,100 Norway Vulcan, Michigan, Area Schools, GO, 5.90% due 5/01/2009 (c)(e) 1,218
5,320 Orchard View, Michigan, Schools, School Building and Site, GO, 5% due 5/01/2029 (b) 5,571
4,835 Ostego, Michigan, Public Schools District, School Building and Site, GO, 5% due 5/01/2034 (d) 5,063
2,425 Oxford, Michigan, Area Community School District, GO, 5.50% due 5/01/2018 (d) 2,693
1,370 Pennfield, Michigan, School District, School Building and Site, GO, 5% due 5/01/2029 (c) 1,438
1,000 Plainwell, Michigan, Community Schools, School District, School Building and Site, GO, 5.50%
due 5/01/2020 (d) 1,107
3,905 Plymouth-Canton, Michigan, Community School District, GO, 5% due 5/01/2029 (c) 4,098
700 Pontiac, Michigan, Tax Increment Finance Authority, Revenue Refunding Bonds (Development
Area Number 2), 5.625% due 6/01/2022 (i) 744
1,425 Reed, Michigan, City Public Schools, School Building and Site, GO, 5% due 5/01/2026 (d) 1,500
2,500 Saginaw, Michigan, Hospital Finance Authority, Revenue Refunding Bonds (Covenant Medical Center),
Series E, 5.625% due 7/01/2013 (b) 2,732
Saginaw Valley State University, Michigan, General Revenue Refunding Bonds (c):
2,100 5% due 7/01/2024 2,227
1,445 5% due 7/01/2034 1,514
8,900 Saint Clair County, Michigan, Economic Revenue Refunding Bonds (Detroit Edison Company), RIB,
Series 282, 9.49% due 8/01/2024 (a)(j) 10,980
1,300 Southfield, Michigan, Library Building Authority, GO, 5.50% due 5/01/2010 (b)(e) 1,442
Southfield, Michigan, Public Schools, School Building and Site, GO, Series B (d):
2,900 5.25% due 5/01/2027 3,131
3,500 5% due 5/01/2029 3,673
1,325 Sparta, Michigan, Area Schools, School Building and Site, GO, 5% due 5/01/2030 (c) 1,390
2,700 Sturgis, Michigan, Public School District, GO, Refunding, 5% due 5/01/2030 (c) 2,845
1,775 Tecumseh, Michigan, Public Schools, GO, Refunding, 5.125% due 5/01/2030 (c) 1,892
100 University of Michigan, University Hospital Revenue Refunding Bonds, VRDN, Series A, 2.98%
due 12/01/2019 (g) 100
1,100 Waverly, Michigan, Community School, GO, 5.50% due 5/01/2010 (c)(e) 1,196
10,660 Wayne Charter County, Michigan, Airport Revenue Bonds (Detroit Metropolitan Wayne County),
AMT, Series A, 5.375% due 12/01/2015 (b) 11,336
1,750 Wayne Charter County, Michigan, Detroit Metropolitan Airport, GO, Airport Hotel, Series A,
5% due 12/01/2030 (b) 1,820
Wayne County, Michigan, Airport Authority Revenue Bonds (Detroit Metropolitan Wayne County
Airport), AMT (b):
7,525 5.25% due 12/01/2025 8,002
6,300 5.25% due 12/01/2026 6,672
West Bloomfield, Michigan, School District, GO Refunding (c):
1,710 5.50% due 5/01/2017 1,901
1,225 5.50% due 5/01/2018 1,360
2,405 West Branch-Rose City, Michigan, Area School District, GO, 5.50% due 5/01/2009 (c)(e) 2,624
6,075 Western Michigan University Revenue Bonds, 5% due 11/15/2035 (c) 6,363
1,600 Zeeland, Michigan, Public Schools, School Building and Site, GO, 5% due 5/01/2029 (b) 1,679
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
Schedule of Investments (concluded) (In Thousands)
Face
Amount Municipal Bonds Value
Puerto Rico--3.1%
$ 1,270 Puerto Rico Electric Power Authority, Power Revenue Bonds, Trust Receipts, Class R,
Series 16 HH, 8.193% due 7/01/2013 (d)(j) $ 1,593
3,790 Puerto Rico Municipal Finance Agency Revenue Bonds, Series A, 5% due 8/01/2027 (d) 3,987
1,000 Puerto Rico Public Finance Corporation, Commonwealth Appropriation Revenue Bonds, Series E,
5.70% due 2/01/2010 (e) 1,113
2,150 University of Puerto Rico, University Revenue Refunding Bonds, Series O, 5.375% due 6/01/2030 (b) 2,175
Total Investments (Cost--$414,741*)--155.4% 446,644
Other Assets Less Liabilities--2.0% 5,865
Preferred Stock, at Redemption Value--(57.4%) (165,024)
---------
Net Assets Applicable to Common Stock--100.0% $ 287,485
=========
* The cost and unrealized appreciation (depreciation) of investments as
of April 30, 2005, as computed for federal income tax purposes, were
as follows:
(in Thousands)
Aggregate cost $ 414,544
==============
Gross unrealized appreciation $ 32,353
Gross unrealized depreciation (253)
--------------
Net unrealized appreciation $ 32,100
==============
** 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) Security may have a maturity of more than one year at the time of
issuance, but has variable rate and demand features which qualify
it as a short-term security. The rate disclosed is that currently in effect.
This rate changes periodically based upon prevailing market rates.
(h) Escrowed to maturity.
(i) ACA Insured.
(j) The rate disclosed is that currently in effect. The rate changes
periodically and inversely based upon prevailing market rates.
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) were as follows:
(in Thousands)
Net Dividend
Affiliate Activity Income
CMA Michigan Municipal
Money Fund (7,190) $8
Forward interest rate swaps outstanding as of April 30, 2005
were as follows:
(in Thousands)
Notional Unrealized
Amount Depreciation
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and
pay a fixed rate of 3.702%
Broker, JPMorgan Chase Bank
Expires July 2015 $21,500 $ (139)
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
Statement of Net Assets
As of April 30, 2005
Assets
Investments in unaffiliated securities, at value (identified cost--$414,741,479) $ 446,643,689
Cash 81,478
Receivables:
Interest $ 8,199,462
Securities sold 4,742,970 12,942,432
---------------
Prepaid expenses 18,824
---------------
Total assets 459,686,423
---------------
Liabilities
Unrealized depreciation on forward interest rate swaps 139,277
Payables:
Securities purchased 6,535,794
Investment adviser 172,612
Dividends to Common Stock shareholders 170,091
Offering costs 98,685
Other affiliates 4,969 6,982,151
---------------
Accrued expenses 55,137
---------------
Total liabilities 7,176,565
---------------
Preferred Stock
Preferred Stock, at redemption value, par value $.05 per share
(2,000 Series A Shares, 2,000 Series B Shares, 1,600 Series C Shares and
1,000 Series D Shares of AMPS* authorized, issued and outstanding at
$25,000 per share liquidation preference) 165,024,360
---------------
Net Assets Applicable to Common Stock
Net assets applicable to Common Stock $ 287,485,498
===============
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 268,001,548
Undistributed investment income--net $ 3,864,976
Accumulated realized capital losses--net (17,959,552)
Unrealized appreciation--net 31,762,933
---------------
Total accumulated earnings--net 17,668,357
---------------
Total--Equivalent to $15.83 net asset value per share of Common Stock
(market price--$15.13) $ 287,485,498
===============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
Statement of Operations
For the Six Months Ended April 30, 2005
Investment Income
Interest $ 11,416,917
Dividends from affiliates 7,779
---------------
Total income 11,424,696
---------------
Expenses
Investment advisory fees $ 1,119,617
Commission fees 203,375
Accounting services 77,077
Transfer agent fees 38,303
Professional fees 28,145
Printing and shareholder reports 16,754
Directors' fees and expenses 12,978
Custodian fees 12,697
Listing fees 10,433
Pricing fees 9,069
Other 20,648
---------------
Total expenses before reimbursement 1,549,096
Reimbursement of expenses (4,151)
---------------
Total expenses after reimbursement 1,544,945
---------------
Investment income--net 9,879,751
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain on:
Investments--net 3,035,008
Futures contracts and forward interest rate swaps--net 59,763 3,094,771
---------------
Change in unrealized appreciation/depreciation on:
Investments--net (4,636,790)
Forward interest rate swaps--net 133,783 (4,503,007)
--------------- ---------------
Total realized and unrealized loss--net (1,408,236)
---------------
Dividends to Preferred Stock Shareholders
Investment income--net (1,357,892)
---------------
Net Increase in Net Assets Resulting from Operations $ 7,113,623
===============
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2005 2004
Operations
Investment income--net $ 9,879,751 $ 19,227,681
Realized gain (loss)--net 3,094,771 (3,710,496)
Change in unrealized appreciation/depreciation--net (4,503,007) 4,332,920
Dividends to Preferred Stock shareholders (1,357,892) (1,327,132)
--------------- ---------------
Net increase in net assets resulting from operations 7,113,623 18,522,973
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (8,932,718) (18,192,244)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (8,932,718) (18,192,244)
--------------- ---------------
Capital Stock Transactions
Offering and underwriting costs resulting from the issuance of Preferred Stock (390,418) --
--------------- ---------------
Net decrease in net assets derived from Capital Stock transactions (390,418) --
--------------- ---------------
Net Assets Applicable to Common Stock
Total increase (decrease) in net assets applicable to Common Stock (2,209,513) 330,729
Beginning of period 289,695,011 289,364,282
--------------- ---------------
End of period* $ 287,485,498 $ 289,695,011
=============== ===============
* Undistributed investment income--net $ 3,864,976 $ 4,275,835
=============== ===============
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
Financial Highlights
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. 2005 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of period $ 15.96 $ 15.94 $ 15.74 $ 15.81 $ 14.48
---------- ---------- ---------- ---------- ----------
Investment income--net .54+++ 1.06+++ 1.10+++ 1.10+++ 1.08
Realized and unrealized gain (loss)--net (.09) .03 .15 (.12) 1.30
Dividends to Preferred Stock shareholders from
investment income--net (.07) (.07) (.07) (.11) (.24)
---------- ---------- ---------- ---------- ----------
Total from investment operations .38 1.02 1.18 .87 2.14
---------- ---------- ---------- ---------- ----------
Less dividends to Common Stock shareholders from
investment income--net (.49) (1.00) (.98) (.94) (.81)
Capital charge resulting from issuance of Common Stock -- -- -- -- --++
---------- ---------- ---------- ---------- ----------
Total dividends to Common Stock shareholders (.49) (1.00) (.98) (.94) (.81)
---------- ---------- ---------- ---------- ----------
Offering and underwriting costs resulting from the
issuance of Preferred Stock (.02) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 15.83 $ 15.96 $ 15.94 $ 15.74 $ 15.81
========== ========== ========== ========== ==========
Market price per share, end of period $ 15.13 $ 15.37 $ 14.69 $ 13.95 $ 14.22
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 2.41%+++++ 7.04% 8.26% 6.33% 15.89%
========== ========== ========== ========== ==========
Based on market price per share 1.64%+++++ 11.85% 12.57% 4.77% 26.44%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Common Stock
Total expenses, net of reimbursement*** 1.08%* 1.00% 1.01% 1.04% 1.05%
========== ========== ========== ========== ==========
Total expenses*** 1.08%* 1.02% 1.03% 1.04% 1.05%
========== ========== ========== ========== ==========
Total investment income--net*** 6.91%* 6.69% 6.83% 7.10% 7.10%
========== ========== ========== ========== ==========
Amount of dividends to Preferred Stock shareholders .95%* .46% .45% .70% 1.59%
========== ========== ========== ========== ==========
Investment income--net, to Common Stock shareholders 5.96%* 6.23% 6.38% 6.40% 5.51%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Preferred Stock
Dividends to Preferred Stock shareholders 1.68%* .95% .94% 1.40% 3.14%
========== ========== ========== ========== ==========
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
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. 2005 2004 2003 2002 2001
Supplemental Data
Net assets applicable to Common Stock, end of
period (in thousands) $ 287,485 $ 289,695 $ 289,364 $ 285,802 $ 286,982
========== ========== ========== ========== ==========
Preferred Stock outstanding, end of period
(in thousands) $ 165,000 $ 140,000 $ 140,000 $ 140,000 $ 140,000
========== ========== ========== ========== ==========
Portfolio turnover 19.06% 36.63% 33.39% 32.68% 68.17%
========== ========== ========== ========== ==========
Leverage
Asset coverage per $1,000 $ 2,742 $ 3,069 $ 3,067 $ 3,041 $ 3,050
========== ========== ========== ========== ==========
Dividends Per Share on Preferred Stock Outstanding
Series A--Investment income--net $ 205 $ 250 $ 240 $ 354 $ 792
========== ========== ========== ========== ==========
Series B--Investment income--net $ 205 $ 232 $ 230 $ 362 $ 783
========== ========== ========== ========== ==========
Series C--Investment income--net $ 208 $ 226 $ 240 $ 333 $ 782
========== ========== ========== ========== ==========
Series D++++--Investment income--net $ 205 -- -- -- --
========== ========== ========== ========== ==========
* 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.
++++ Series D was issued on November 22, 2004.
+++ Based on average shares outstanding.
+++++ Aggregate total investment return.
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
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 U.S. generally accepted accounting principles,
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 present a fair statement of the interim period. 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 daily 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 ("OTC") markets and are valued at the last available bid
price in the OTC market or on the basis of values as obtained by a pricing
service. Pricing services use valuation matrixes that incorporate both
dealer-supplied valuations and valuation models. The procedures of the
pricing service and its valuations are reviewed by the officers of the Fund
under the general direction of the Board of Directors. Such valuations and
procedures are reviewed periodically by the Board of Directors of the Fund.
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 OTC 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's pricing service. Short-term
investments with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates market value, under which method the
investment is valued at cost and any premium or discount is amortized on a
straight line basis to maturity. Investments in open-end investment
companies are valued at their net asset value each business day. Securities
and other 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.
(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).
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.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
Notes to Financial Statements (concluded)
(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.
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.
(f) Offering costs--Direct expenses relating to the public offering of the
Fund's Preferred Stock were charged to capital at the time of issuance of
the shares.
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. The
Investment Adviser has agreed to reimburse its management fee by the amount
of management fees the Fund pays to FAM indirectly through its investment in
CMA Michigan Municipal Money Fund. For the six months ended April 30, 2005,
FAM reimbursed the Fund in the amount of $4,151.
For the six months ended April 30, 2005, the Fund reimbursed FAM $4,783 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, 2005 were $116,233,658 and $83,004,000,
respectively.
4. Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which were
initially classified as Common Stock. The Board of Directors is authorized,
however, to reclassify any unissued shares of capital stock without
approval of the holders of Common Stock.
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, 2005 were as follows:
Series A, 2.55%; Series B, 2.39%; Series C, 2.50%; and Series D, 2.39%.
Shares issued and outstanding for the six months ended April 30, 2005
increased by 1,000 shares from the issuance of an additional series of
Preferred Stock. Shares issued and outstanding during the year ended
October 31, 2004 remained constant.
For the six months ended April 30, 2005, Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S"), an affiliate of FAM, received underwriting
fees of $250,000 in connection with the issuance of the Fund's Preferred
Stock.
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, 2005, MLPF&S
earned $117,353 as commissions.
5. Capital Loss Carryforward:
On October 31, 2004, the Fund had a net capital loss carryforward of
$17,222,707, of which $679,274 expires in 2006, $3,974,932 expires in 2007,
$7,490,629 expires in 2008, $1,124,652 expires in 2010 and $3,953,220
expires in 2012. 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 $.081000 per share on May 27, 2005 to shareholders of record
on May 13, 2005.
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
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.
Proxy Results
During the six-month period ended April 30, 2005, MuniYield Michigan
Insured Fund, Inc.'s Common Stock shareholders voted on the following
proposals. Proposal 1 was approved at a shareholders' meeting on April 28,
2005. With respect to Proposal 2, the proposal was adjourned until May 27,
2005, at which time it passed. A description of the proposals and number of
shares voted were as follows:
Shares Voted Shares Withheld
For From Voting
1. To elect the Fund's Directors: Robert C. Doll, Jr. 9,964,850 199,658
Donald W. Burton 9,965,542 198,966
John F. O'Brien 9,963,713 200,795
David H. Walsh 9,963,943 200,565
Shares Voted Shares Voted Shares Voted
For Against Abstain
2. To approve an amendment to fundamental investment restrictions. 8,116,661 358,683 228,075
During the six-month period ended April 30, 2005, MuniYield Michigan
Insured Fund, Inc.'s Preferred Stock shareholders (Series A - D) voted on
the following proposals. Proposal 1 was approved at a shareholders' meeting
on April 28, 2005. With respect to Proposal 2, the proposal was adjourned
until May 27, 2005, at which time it passed. A description of the proposals
and number of shares voted were as follows:
Shares Voted Shares Withheld
For From Voting
1. To elect the Fund's Board of Directors: Robert C. Doll, Jr., Donald W. Burton,
Laurie Simon Hodrick, John F. O'Brien, David H. Walsh and Fred G. Weiss 4,121 170
Shares Voted Shares Voted Shares Voted
For Against Abstain
2. To approve an amendment to fundamental investment restrictions. 6,162 380 57
Portfolio Information as of April 30, 2005
Percent of
Quality Ratings by Total
S&P/Moody's Investments
AAA/Aaa 89.3%
AA/Aa 2.6
A/A 4.1
BBB/Baa 4.0
MUNIYIELD MICHIGAN INSURED FUND, INC., APRIL 30, 2005
Officers and Directors
Robert C. Doll, Jr., President and Director
Donald W. Burton, Director
Laurie Simon Hodrick, Director
John Francis O'Brien, 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
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, 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 - 11 East
New York, NY 10286
Preferred Stock:
The Bank of New York
101 Barclay Street - 7 West
New York, NY 10286
NYSE Symbol
MIY
Effective January 1, 2005, Terry K. Glenn, President and Director and
M. Colyer Crum, Director of MuniYield Michigan Insured Fund, Inc. retired.
The Fund's Board of Directors wishes Mr. Glenn and Professor Crum well in
their retirements.
Effective January 1, 2005, Robert C. Doll, Jr. became President and
Director of the Fund.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters
of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the
SEC's Web site at http://www.sec.gov. The Fund's Forms N-Q may also be
reviewed and copied at the SEC's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained
by calling 1-800-SEC-0330.
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 Web site at 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, 2005
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 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable to this semi-annual report
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not
Applicable
Item 11 - Controls and Procedures
11(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.
11(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 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(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/ Robert C. Doll, Jr.
-------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniYield Michigan Insured Fund, Inc.
Date: June 20, 2005
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/ Robert C. Doll, Jr.
-------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniYield Michigan Insured Fund, Inc.
Date: June 20, 2005
By: /s/ Donald C. Burke
-------------------------------
Donald C. Burke,
Chief Financial Officer of
MuniYield Michigan Insured Fund, Inc.
Date: June 20, 2005