UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07080
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 - 10/31/05
Item 1 - Report to Stockholders
MuniYield Michigan
Insured Fund, Inc.
Annual Report
October 31, 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
(GO PAPERLESS LOGO)
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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 October 31,
2005, the percentage of the Fund's total net assets invested in inverse
floaters was 10.69%, 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. OCTOBER 31, 2005
A Letter From the President
Dear Shareholder
As the financial markets continued to muddle their way through 2005, the
Federal Reserve Board (the Fed) advanced its monetary tightening campaign full
steam ahead. The 12th consecutive interest rate hike since June 2004 came on
November 1, bringing the target federal funds rate to 4%. The central bank is
clearly more focused on inflationary figures than on economic growth, which
has shown some signs of moderating. Despite rising short-term interest rates
and record-high energy prices, the major market indexes managed to post
positive results for the current reporting period:
Total Returns as of October 31, 2005 6-month 12-month
U.S. equities (Standard & Poor's 500 Index) + 5.27% + 8.72%
Small-cap U.S. equities (Russell 2000 Index) +12.25 +12.08
International equities (MSCI Europe Australasia Far East Index) + 8.63 +18.09
Fixed income (Lehman Brothers Aggregate Bond Index) + 0.15 + 1.13
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.59 + 2.54
High yield bonds (Credit Suisse First Boston High Yield Index) + 2.87 + 3.54
The headlines in recent months focused on Hurricanes Katrina and Rita and,
more recently, the nomination of Ben Bernanke to succeed Alan Greenspan as
Chairman of the Fed. While the hurricanes prompted a spike in energy prices
and short-term disruptions to production and spending, the longer-term
economic impact is likely to be tempered. In fact, the fiscal stimulus
associated with reconstruction efforts in the Gulf Coast region could add to
gross domestic product growth in 2006. Notably, the uncontroversial nomination
of Dr. Bernanke was well received by the markets.
The U.S. equity markets remained largely range bound in 2005. Up to this point,
strong corporate earnings reports and relatively low long-term bond yields have
worked in favor of equities. Looking ahead, high energy prices, continued
interest rate hikes, a potential consumer slowdown and/or disappointing
earnings pose the greatest risks to U.S. stocks. Internationally, many markets
have benefited from strong economic statistics, trade surpluses and solid
finances.
The bond market continued to be characterized by a flattening yield curve,
although long-term yields finally began to inch higher toward period end. The
10-year Treasury yield hit 4.57% on October 31, 2005, its highest level in
more than six months. Still, the difference between the two-year and 10-year
Treasury yield was just 17 basis points (.17%) at period end, compared to 149
basis points a year earlier.
Financial markets are likely to face continued crosscurrents in the months
ahead. Nevertheless, opportunities do exist and we encourage you to work with
your financial advisor to diversify your portfolio among a variety of asset
types. This can help to diffuse risk while also tapping into the potential
benefits of a broader range of investment alternatives. As always, we thank
you for trusting Merrill Lynch Investment Managers with your investment
assets.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
President and Director
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
A Discussion With Your Fund's Portfolio Manager
The Fund ended the period in a neutral position in terms of interest rate
risk, as we anticipate that continued moderate economic growth and negligible
inflation will support relatively stable interest rates.
Describe the recent market environment relative to municipal bonds.
Over the past year, long-term bond yields were little changed. Initially, U.S.
Treasury prices rallied strongly, while their yields, which move in the
opposite direction, fell. However, in the final months of the period, bond
yields rose (prices fell) as investors worried that higher energy costs in the
wake of Hurricanes Katrina and Rita would pressure inflation upward. For its
part, the Federal Reserve Board (the Fed) continued to raise short-term
interest rates at each of its meetings, lifting the federal funds target rate
to 4% on November 1, 2005. As short-term interest rates moved higher in
concert with the Fed interest rate hikes and longer-term bond yields remained
steadier, the yield curve continued to flatten.
Over the past 12 months, 30-year Treasury bond yields declined three basis
points to 4.76%, while 10-year Treasury note yields rose 52 basis points
(.52%) to 4.57%. Tax-exempt bond yields exhibited a similar pattern. According
to Municipal Market Data, the yield on AAA-rated issues maturing in 30 years
increased one basis point to 4.59%, while the yield on AAA-rated issues
maturing in 10 years rose 52 basis points to 3.92%.
Historically low nominal tax-exempt bond yields continued to encourage
municipalities to issue new debt and refund outstanding, higher-couponed
issues. During the past year, more than $394 billion in new long-term tax-
exempt bonds was issued, an 8.4% increase over the previous year's total of
$363 billion. During the first nine months of 2005, the volume of refunding
issues increased by more than 55% versus the same period one year ago.
Refunding issues were heavily weighted in the 10-year - 20-year maturity range,
putting pressure on intermediate tax-exempt bond yields while supporting longer-
term bond prices.
The most current statistics from the Investment Company Institute indicate
that, year-to-date through September 2005, net new cash flows into long-term
municipal bond funds exceeded $6.7 billion - a significant improvement from
the $12.9 billion net outflow seen during the same period in 2004. Notably,
high yield tax-exempt bond funds have been the principal target for these new
cash inflows, receiving an average of $115 million per week in recent months.
The need to invest these cash flows has led to strong demand for lower-rated
issues and a consequent narrowing of credit spreads.
Describe conditions in the State of Michigan.
At period-end, Michigan maintained credit ratings of Aa2, AA and AA with a
stable outlook from Moody's, Standard & Poor's and Fitch, respectively. All
three agencies downgraded the state during the period, citing the troubled
automotive sector and weak revenue estimates. Michigan's debt ratios, however,
are quite low for a populous state and indicate relative flexibility in the
ability to respond to economic downturns. The state's pension system is well-
funded.
Whether Michigan's credit rating is further downgraded depends on a recovering
economy, stable employment trends and continued budget balancing. Employment
in the state declined in 2004 for the fourth consecutive year, although the
annual rate of job losses has moderated each year since 2001. The manufacturing
sector - particularly the auto industry, led by General Motors Corp. - has been
responsible for the job losses, which have weighed on revenue collections and
could indicate longer-term economic problems for the state. On the positive
side, preliminary employment data for September 2005 revealed a 6.4%
unemployment rate, a significant improvement over the 7.1% rate a year earlier.
As of September 30, 2005, the end of the state's fiscal year, Michigan showed
a near-zero reserve balance in its major operating funds, reflecting the use
of its past surpluses to close budget shortfalls. Through August 2005,
Michigan's general fund revenues for fiscal year 2005 were almost 1% above
estimates. Governor Granholm recently approved a $41 billion budget for fiscal
year 2006 with no reliance on broad-based tax increases. The budget generally
maintained spending cuts proposed by the governor to eliminate a general fund
deficit of $770 million.
How did the Fund perform during the fiscal year?
For the 12-month period ended October 31, 2005, the Common Stock of MuniYield
Michigan Insured Fund, Inc. had net annualized yields of 6.36% and 6.37%,
based on a year-end per share net asset value of $15.32 and a per share market
price of $15.31, respectively, and $.975 per share income dividends. Over the
same period, the total investment return on the Fund's Common Stock was
+2.24%, based on a change in per share net asset value from $15.96 to $15.32,
and assuming reinvestment of all distributions.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
The Fund's total return, based on net asset value, trailed the +3.18% average
of the Lipper Michigan Municipal Debt Funds category for the 12-month period.
(Funds in this Lipper category limit their investment to securities exempt
from taxation in Michigan or a city in Michigan.) The underperformance can be
attributed in part to the portfolio's relatively defensive interest rate
positioning, which proved to be premature as yields on longer bonds failed to
rise to the extent anticipated. Also detracting from relative results was the
Fund's high degree of credit quality in a market environment in which lower-
rated bonds, particularly BBB-rated hospital and corporate-backed issues, were
generally strong performers. As an insured Fund, we own fewer lower-rated,
higher-yielding securities than most of our competitors. At the end of the
period, more than 85% of the Fund's assets were invested in AAA-rated bonds.
For the six-month period ended October 31, 2005, the total investment return
on the Fund's Common Stock was -.17%, based on a change in per share net asset
value from $15.83 to $15.32, and assuming reinvestment of all distributions.
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?
We added higher-yielding issues to the portfolio whenever we found them to be
attractively priced. However, narrowing credit spreads forced us to limit
these purchases because the additional yield available remained unattractive
compared to historical levels. Recent purchases have focused on more interest
rate-sensitive bonds with maturity dates ranging from 2030 - 2035. We believe
these bonds should perform well given our expectations for relatively stable
interest rates and a historically flat yield curve in the coming months. The
new purchases were largely funded through the sale of prerefunded bonds
maturing in less than five years. Although these sales allowed us to lock in
the securities' significant price appreciation, we did lose their attractive
acquisition yield, as they were issued in earlier, higher interest rate
environments. The resultant loss of portfolio income limited our overall
portfolio activity during the period, as we did not want to sacrifice
significant levels of dividend income to purchase bonds at the current low
market yields.
For the six-month period ended October 31, 2005, the Fund's Auction Market
Preferred Stock (AMPS) had average yields of 2.39% for Series A, 2.20% for
Series B, 2.18% for Series C and 2.39% for Series D. The Fed's interest rate
hikes are clearly having a material impact on the Fund's borrowing costs. The
Fed raised the short-term interest rate target 200 basis points during the
12-month period (and 25 basis points more on November 1). 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 36.76% of total net assets, before the
deduction of Preferred Stock. (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?
The Fund ended the period in a neutral position with respect to interest rate
risk. We expect to maintain this positioning in the near future in
anticipation of continued moderate economic expansion and negligible
inflationary pressures. Higher energy costs, especially for winter heating
fuel, are expected to weigh on consumer spending and confidence and could
promote a relatively stable interest rate environment. If, however, the U.S.
economy strengthens or retail prices rise more than expected, we would likely
position the portfolio more defensively in anticipation of higher interest
rates down the road. Regardless of the economic backdrop, we plan to keep the
portfolio fully invested to enhance shareholder income. Future portfolio
activity is likely to focus on our ongoing efforts to maintain the Fund's
attractive distribution yield.
Fred K. Stuebe
Vice President and Portfolio Manager
November 14, 2005
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Portfolio Information as of October 31, 2005
Percent of
Quality Ratings by Total
S&P/Moody's Investments
AAA/Aaa 87.0%
AA/Aa 3.3
A/A 4.1
BBB/Baa 4.3
BB/Ba 1.1
Other* 0.2
* Includes portfolio holdings in short-term investments.
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.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Schedule of Investments (In Thousands)
Face
Amount Municipal Bonds Value
Michigan--149.1%
Adrian, Michigan, City School District, GO (d):
$ 2,000 5% due 5/01/2029 $ 2,064
1,600 5% due 5/01/2034 1,645
1,000 Allegan, Michigan, Public School District, GO,
5.75% due 5/01/2010 (d)(e) 1,093
1,000 Ann Arbor, Michigan, Public School District,
School Building and Site, GO, 5% due 5/01/2027 1,037
Belding, Michigan, Area Schools, GO, Refunding (c):
785 6.05% due 5/01/2006 (e) 804
215 6.05% due 5/01/2021 220
1,000 Birmingham, Michigan, City School District, School
Building and Site, GO, 5% due 11/01/2033 (d) 1,029
1,000 Central Montcalm, Michigan, Public Schools, GO,
5.90% due 5/01/2009 (b)(e) 1,081
Delta County, Michigan, Economic Development
Corporation, Environmental Improvement Revenue
Refunding Bonds (Mead Westvaco--Escanaba) (e):
1,500 AMT, Series B, 6.45% due 4/15/2012 1,685
2,000 Series A, 6.25% due 4/15/2012 2,283
Detroit, Michigan, City School District, GO, Series A (e):
1,000 5.50% due 5/01/2012 (d) 1,100
2,300 (School Building and Site Improvement), 5.375%
due 5/01/2013 (c) 2,524
Detroit, Michigan, GO (b):
1,400 5.50% due 4/01/2018 1,515
1,325 5.50% due 4/01/2020 1,428
Detroit, Michigan, Sewer Disposal Revenue Refunding
Bonds, Series A:
3,150 Second Lien, 5% due 7/01/2030 (b) 3,255
1,000 Senior Lien, 5% due 7/01/2032 (d) 1,026
Detroit, Michigan, Water Supply System
Revenue Bonds:
4,375 DRIVERS, Series 200, 8.487%
due 7/01/2011 (c)(e)(i) 5,379
1,250 Senior Lien, Series A, 5.875%
due 1/01/2010 (c)(e) 1,375
6,900 Senior Lien, Series A, 5% due 7/01/2034 (b) 7,076
14,790 Series B, 5.25% due 7/01/2032 (b) 15,551
3,970 Series B, 5% due 7/01/2034 (b) 4,071
1,415 Detroit, Michigan, Water Supply System Revenue
Refunding Bonds, 6.25% due 7/01/2012 (c)(h) 1,555
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 4,107
Face
Amount Municipal Bonds Value
Michigan (continued)
$ 3,100 Dickinson County, Michigan, Healthcare System,
Hospital Revenue Refunding Bonds, 5.80%
due 11/01/2024 (g) $ 3,243
1,610 East Grand Rapids, Michigan, Public School District,
GO, 5.75% due 5/01/2009 (d)(e) 1,734
Eastern Michigan University Revenue Bonds,
Series B (c):
1,500 5.60% due 6/01/2025 1,610
1,310 5.625% due 6/01/2030 1,408
1,025 Eastern Michigan University, Revenue Refunding
Bonds, 6% due 6/01/2020 (a) 1,131
Eaton Rapids, Michigan, Public Schools, School
Building and Site, GO (d):
1,325 5.25% due 5/01/2020 1,422
1,675 5.25% due 5/01/2021 1,795
1,700 5% due 5/01/2026 1,764
3,600 5% due 5/01/2029 3,716
Flint, Michigan, Hospital Building Authority, Revenue
Refunding Bonds (Hurley Medical Center), Series A (g):
615 5.375% due 7/01/2020 629
1,375 6% due 7/01/2020 1,488
2,200 Fowlerville, Michigan, Community Schools, School
District, GO, 5% due 5/01/2030 (c) 2,266
1,000 Frankenmuth, Michigan, School District, GO, 5.75%
due 5/01/2010 (c)(e) 1,093
3,650 Gibraltar, Michigan, School District, School Building
and Site, GO, 5% due 5/01/2028 (c) 3,773
1,100 Grand Blanc, Michigan, Community Schools, GO,
5.625% due 5/01/2020 (c) 1,205
Grand Rapids, Michigan, Building Authority Revenue
Bonds, Series A (a):
1,035 5.50% due 10/01/2012 (e) 1,142
665 5.50% due 10/01/2019 728
900 5.50% due 10/01/2020 983
2,070 Grand Valley, Michigan, State University Revenue
Bonds, 5.50% due 2/01/2018 (c) 2,290
8,425 Greater Detroit, Michigan, Resource Recovery Authority
Revenue Bonds, DRIVERS, Series 167, 9.486%
due 12/13/2008 (a)(i) 9,793
Gulf Lake, Michigan, Community School District,
School Building and Site, GO (d):
2,000 5% due 5/01/2028 2,067
3,625 5% due 5/01/2030 3,734
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
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Schedule of Investments (continued) (In Thousands)
Face
Amount Municipal Bonds Value
Michigan (continued)
$ 4,775 Harper Woods, Michigan, City School District,
School Building and Site, GO, Refunding, 5%
due 5/01/2034 (c) $ 4,908
9,325 Hartland, Michigan, Consolidated School District, GO,
6% due 5/01/2010 (c)(e) 10,269
3,990 Hudsonville, Michigan, Public Schools, School Building
and Site, GO, 5% due 5/01/2029 (d) 4,118
1,575 Jenison, Michigan, Public Schools, Building and Site,
GO, 5.50% due 5/01/2019 (c) 1,717
6,850 Kalamazoo, Michigan, Hospital Finance Authority,
Hospital Facility Revenue Refunding Bonds (Bronson
Methodist Hospital), 5.50% due 5/15/2008 (b)(e) 7,274
4,000 Kent, Michigan, Hospital Finance Authority Revenue
Bonds (Spectrum Health), Series A, 5.50%
due 7/15/2011 (b)(e) 4,395
4,000 Kent, Michigan, Hospital Finance Authority, Hospital
Revenue Refunding Bonds (Butterworth Hospital),
Series A, 7.25% due 1/15/2013 (b) 4,599
1,510 Lansing, Michigan, Building Authority, GO, Series A,
5.375% due 6/01/2023 (b) 1,635
1,875 Michigan Higher Education Facilities Authority, Limited
Obligation Revenue Bonds (Hillsdale College Project),
5% due 3/01/2035 1,889
2,250 Michigan Higher Education Facilities Authority, Limited
Obligation Revenue Refunding Bonds (Hope College),
Series A, 5.90% due 4/01/2032 2,348
Michigan Higher Education Facilities Authority, Revenue
Refunding Bonds (College for Creative Studies):
1,235 5.85% due 12/01/2022 1,265
1,145 5.90% due 12/01/2027 1,170
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
1,065 Michigan Municipal Bond Authority Revenue Bonds
(Local Government Loan Program), Group A, 5.50%
due 11/01/2020 (a) 1,147
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) 1,022
7,000 6.125% due 12/01/2018 (c) 7,155
Michigan State Building Authority, Revenue
Refunding Bonds:
2,500 (Facilities Program), Series I, 5.50%
due 10/15/2018 (b) 2,723
3,000 (Facilities Program), Series II, 5%
due 10/15/2029 (b) 3,091
11,140 RIB, Series 517X, 8.04% due 10/15/2010 (d)(i) 13,205
Face
Amount Municipal Bonds Value
Michigan (continued)
Michigan State, COP (a):
$ 3,000 5.50% due 6/01/2010 (e) $ 3,197
3,000 5.40%** due 6/01/2022 (h) 1,362
1,605 Michigan State, HDA, Rental Housing Revenue
Bonds, AMT, Series A, 5.30% due 10/01/2037 (b) 1,618
2,690 Michigan State, HDA, Revenue Refunding Bonds,
Series C, 5.90% due 12/01/2015 (f) 2,777
2,530 Michigan State Hospital Finance Authority, Hospital
Revenue Bonds (Mid-Michigan Obligation Group),
Series A, 5.50% due 4/15/2018 (a) 2,694
Michigan State Hospital Finance Authority, Hospital
Revenue Refunding Bonds:
2,200 (Crittenton Hospital), Series A, 5.625%
due 3/01/2027 2,303
2,000 (Sparrow Obligation Group), 5.625%
due 11/15/2031 (b) 2,073
Michigan State Hospital Finance Authority, Revenue
Refunding Bonds:
9,475 5% due 11/15/2036 9,677
2,715 (Ascension Health Credit), Series A, 5.75%
due 11/15/2009 (b)(e) 2,961
12,000 (Ascension Health Credit), Series A, 6.125%
due 11/15/2009 (b)(e) 13,245
2,500 (Ascension Health Credit), Series A, 6.25%
due 11/15/2009 (b)(e) 2,774
4,805 (Mercy Health Services), Series T, 6.50%
due 8/15/2007 (b)(e) 5,123
2,000 (Mercy Health Services), Series X, 6%
due 8/15/2009 (b)(e) 2,202
2,200 (Mercy Health Services), Series X, 5.75%
due 8/15/2019 (b) 2,371
4,930 (Mercy-Mount Clemens), Series A, 6%
due 5/15/2014 (b) 5,349
3,000 (Saint John Hospital), Series A, 6%
due 5/15/2013 (a)(h) 3,164
6,400 (Trinity Health), Series A, 6% due 12/01/2027 (a) 7,077
1,000 (Trinity Health Credit), Series C, 5.375%
due 12/01/2023 1,045
5,255 (Trinity Health Credit), Series C, 5.375%
due 12/01/2030 5,482
3,100 (Trinity Health Credit), Series D, 5%
due 8/15/2034 3,151
5,000 Michigan State Strategic Fund, Limited Obligation
Revenue Bonds (Ford Motor Company Project), AMT,
Series A, 6.55% due 10/01/2022 4,831
Michigan State Strategic Fund, Limited Obligation,
Revenue Refunding Bonds:
7,250 (Detroit Edison Company), AMT, Series A, 5.55%
due 9/01/2029 (b) 7,583
6,000 (Detroit Edison Company Fund--Pollution),
Series AA, 6.95% due 5/01/2011 (c) 6,918
3,300 (Detroit Edison Pollution Control), Series C, 5.45%
due 9/01/2029 3,407
2,175 (Dow Chemical Company Project), AMT, 5.50%
due 12/01/2028 2,307
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Schedule of Investments (continued) (In Thousands)
Face
Amount Municipal Bonds Value
Michigan (continued)
$ 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) $ 19,288
1,000 Montrose Township, Michigan, School District, GO,
6.20% due 5/01/2017 (b) 1,174
1,830 Muskegon Heights, Michigan, Water System Revenue
Bonds, Series A, 5.625% due 11/01/2025 (b) 1,978
235 Northview, Michigan, Public School District, GO,
Refunding, 5.80% due 5/01/2021 (b) 240
1,100 Norway Vulcan, Michigan, Area Schools, GO, 5.90%
due 5/01/2009 (c)(e) 1,191
5,320 Orchard View, Michigan, Schools, School Building and
Site, GO, 5% due 5/01/2029 (b) 5,483
4,835 Ostego, Michigan, Public Schools District, School
Building and Site, GO, 5% due 5/01/2034 (d) 4,970
2,425 Oxford, Michigan, Area Community School District, GO,
5.50% due 11/01/2011 (d)(e) 2,663
1,370 Pennfield, Michigan, School District, School Building
and Site, GO, 5% due 5/01/2029 (c) 1,414
1,000 Plainwell, Michigan, Community Schools, School
District, School Building and Site, GO, 5.50%
due 11/01/2012 (d)(e) 1,105
3,905 Plymouth-Canton, Michigan, Community School
District, GO, 5% due 5/01/2029 (c) 4,031
700 Pontiac, Michigan, Tax Increment Finance Authority,
Revenue Refunding Bonds (Development Area
Number 2), 5.625% due 6/01/2022 (g) 737
1,425 Reed, Michigan, City Public Schools, School Building
and Site, GO, 5% due 5/01/2026 (d) 1,479
2,500 Saginaw, Michigan, Hospital Finance Authority,
Revenue Refunding Bonds (Covenant Medical
Center), Series E, 5.625% due 7/01/2013 (b) 2,686
Saginaw Valley State University, Michigan, General
Revenue Refunding Bonds (c):
2,100 5% due 7/01/2024 2,184
1,445 5% due 7/01/2034 1,486
8,900 Saint Clair County, Michigan, Economic Revenue
Refunding Bonds (Detroit Edison Company), RIB,
Series 282, 9.79% due 8/01/2024 (a)(i) 10,550
1,300 Southfield, Michigan, Library Building Authority, GO,
5.50% due 5/01/2010 (b)(e) 1,408
Southfield, Michigan, Public Schools, School Building
and Site, GO, Series A (d):
2,900 5.25% due 5/01/2027 3,084
3,500 5% due 5/01/2029 3,612
Face
Amount Municipal Bonds Value
Michigan (concluded)
$ 1,325 Sparta, Michigan, Area Schools, School Building and
Site, GO, 5% due 5/01/2030 (c) $ 1,365
2,700 Sturgis, Michigan, Public School District, GO,
Refunding, 5% due 5/01/2030 (c) 2,789
1,100 Waverly, Michigan, Community School, GO, 5.50%
due 5/01/2010 (c)(e) 1,191
10,660 Wayne Charter County, Michigan, Airport Revenue
Bonds (Detroit Metropolitan Wayne County), AMT,
Series A, 5.375% due 12/01/2015 (b) 11,185
1,750 Wayne Charter County, Michigan, Detroit
Metropolitan Airport, GO, Airport Hotel, Series A,
5% due 12/01/2030 (b) 1,795
Wayne County, Michigan, Airport Authority Revenue
Bonds (b):
11,260 (Detroit Metropolitan Wayne County Airport),
AMT, 5% due 12/01/2034 11,401
6,910 DRIVERS, AMT, Series 1081-Z, 7.458%
due 6/01/2013 (i) 7,521
West Bloomfield, Michigan, School District,
GO Refunding (c):
1,710 5.50% due 5/01/2017 1,864
1,225 5.50% due 5/01/2018 1,335
2,405 West Branch-Rose City, Michigan, Area School District,
GO, 5.50% due 5/01/2009 (c)(e) 2,571
6,075 Western Michigan University Revenue Bonds, 5%
due 11/15/2035 (c) 6,261
1,600 Zeeland, Michigan, Public Schools, School Building and
Site, GO, 5% due 5/01/2029 (b) 1,651
Puerto Rico--8.0%
6,000 Puerto Rico Commonwealth Highway and
Transportation Authority, Transportation Revenue
Refunding Bonds, Series K, 5% due 7/01/2040 6,018
Puerto Rico Commonwealth Infrastructure Financing
Authority, Special Tax and Capital Appreciation
Revenue Bonds, Series A:
4,600 4.68%** due 7/01/2031 (c) 1,297
11,700 4.657%** due 7/01/2036 (a) 2,560
Puerto Rico Electric Power Authority, Power Revenue
Bonds:
3,425 Series RR, 5% due 7/01/2035 (c) 3,555
1,270 Trust Receipts, Class R, Series 16 HH, 8.451%
due 7/01/2013 (d)(i) 1,531
3,790 Puerto Rico Municipal Finance Agency Revenue Bonds,
Series A, 5% due 8/01/2027 (d) 3,924
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Schedule of Investments (concluded) (In Thousands)
Face
Amount Municipal Bonds Value
Puerto Rico (concluded)
$ 1,000 Puerto Rico Public Finance Corporation,
Commonwealth Appropriation Revenue Bonds,
Series E, 5.70% due 2/01/2010 (e) $ 1,087
2,150 University of Puerto Rico, University Revenue Refunding
Bonds, Series O, 5.375% due 6/01/2030 (b) 2,173
Total Municipal Bonds
(Cost--$414,762)--157.1% 437,096
Shares
Held Short-Term Securities Value
1,021 CMA Michigan Municipal Money Fund (j) $ 1,021
Total Short-Term Securities
(Cost--$1,021)--0.4% 1,021
Total Investments
(Cost--$415,783*)--157.5% 438,117
Other Assets Less Liabilities--1.8% 5,169
Preferred Stock, at Redemption Value--(59.3%) (165,036)
----------
Net Assets Applicable to Common Stock--100.0% $ 278,250
==========
* The cost and unrealized appreciation (depreciation) of investments as
of October 31, 2005, as computed for federal income tax purposes, were
as follows:
Aggregate cost $ 415,588
---------------
Gross unrealized appreciation $ 24,100
Gross unrealized depreciation (1,571)
---------------
Net unrealized appreciation $ 22,529
===============
** Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
(a) AMBAC Insured.
(b) MBIA Insured.
(c) FGIC Insured.
(d) FSA Insured.
(e) Prerefunded.
(f) FHA Insured.
(g) ACA Insured.
(h) Escrowed to maturity.
(i) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
(j) Investments in companies considered to be an affiliate of the Fund,
for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
were as follows:
Net Dividend
Affiliate Activity Income
CMA Michigan Municipal
Money Fund (6,169) $36
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Statement of Net Assets
As of October 31, 2005
Assets
Investments in unaffiliated securities, at value (identified cost--$414,761,450) $ 437,095,496
Investments in affiliated securities, at value (identified cost--$1,021,124) 1,021,124
Cash 17,723
Receivables:
Interest $ 8,712,205
Dividends from affiliates 56 8,712,261
---------------
Prepaid expenses 11,391
---------------
Total assets 446,857,995
---------------
Liabilities
Payables:
Securities purchased 3,169,378
Investment adviser 175,475
Dividends to Common Stock shareholders 159,376
Other affiliates 5,863 3,510,092
---------------
Accrued expenses 61,597
---------------
Total liabilities 3,571,689
---------------
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) and $.10 per share
(1,000 Series D Shares) of AMPS* authorized, issued and outstanding at $25,000
per share liquidation preference 165,035,970
---------------
Net Assets Applicable to Common Stock
Net assets applicable to Common Stock $ 278,250,336
===============
Analysis of Net Assets Applicable to Common Stock
Common Stock, par value $.10 per share (18,166,106 shares issued and outstanding) $ 1,816,611
Paid-in capital in excess of par 268,176,952
Undistributed investment income--net $ 2,873,508
Accumulated realized capital losses--net (16,950,781)
Unrealized appreciation--net 22,334,046
---------------
Total accumulated earnings--net 8,256,773
---------------
Total--Equivalent to $15.32 net asset value per share of Common Stock
(market price--$15.31) $ 278,250,336
===============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Statement of Operations
For the Year Ended October 31, 2005
Investment Income
Interest $ 22,705,390
Dividends from affiliates 35,823
---------------
Total income 22,741,213
---------------
Expenses
Investment advisory fees $ 2,251,164
Commission fees 413,672
Accounting services 156,457
Transfer agent fees 94,526
Professional fees 59,513
Printing and shareholder reports 33,961
Directors' fees and expenses 26,715
Custodian fees 25,300
Pricing fees 22,745
Listing fees 19,117
Other 49,139
---------------
Total expenses before reimbursement 3,152,309
Reimbursement of expenses (11,989)
---------------
Total expenses after reimbursement 3,140,320
---------------
Investment income--net 19,600,893
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain on:
Investments--net 4,090,086
Futures contracts and forward interest rate swaps--net 13,456 4,103,542
---------------
Change in unrealized appreciation/depreciation on:
Investments--net (14,204,954)
Forward interest rate swaps--net 273,060 (13,931,894)
--------------- ---------------
Total realized and unrealized loss--net (9,828,352)
---------------
Dividends to Preferred Stock Shareholders
Investment income--net (3,245,894)
---------------
Net Increase in Net Assets Resulting from Operations $ 6,526,647
===============
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Statements of Changes in Net Assets
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 2005 2004
Operations
Investment income--net $ 19,600,893 $ 19,227,681
Realized gain (loss)--net 4,103,542 (3,710,496)
Change in unrealized appreciation/depreciation--net (13,931,894) 4,332,920
Dividends to Preferred Stock shareholders (3,245,894) (1,327,132)
--------------- ---------------
Net increase in net assets resulting from operations 6,526,647 18,522,973
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (17,757,326) (18,192,244)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (17,757,326) (18,192,244)
--------------- ---------------
Capital Stock Transactions
Value of shares issued to Common Stock shareholders in reinvestment of dividends 159,122 --
Offering and underwriting costs resulting from the issuance of Preferred Stock (373,118) --
--------------- ---------------
Net decrease in net assets derived from Capital Stock transactions (213,996) --
--------------- ---------------
Net Assets Applicable to Common Stock
Total increase (decrease) in net assets applicable to Common Stock (11,444,675) 330,729
Beginning of year 289,695,011 289,364,282
--------------- ---------------
End of year* $ 278,250,336 $ 289,695,011
=============== ===============
* Undistributed investment income--net $ 2,873,508 $ 4,275,835
=============== ===============
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Financial Highlights
The following per share data and ratios have been derived 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 year $ 15.96 $ 15.94 $ 15.74 $ 15.81 $ 14.48
---------- ---------- ---------- ---------- ----------
Investment income--net 1.08+++ 1.06+++ 1.10+++ 1.10+++ 1.08
Realized and unrealized gain (loss)--net (.54) .03 .15 (.12) 1.30
Dividends to Preferred Stock shareholders from
investment income--net (.18) (.07) (.07) (.11) (.24)
---------- ---------- ---------- ---------- ----------
Total from investment operations .36 1.02 1.18 .87 2.14
---------- ---------- ---------- ---------- ----------
Less dividends to Common Stock shareholders from
investment income--net (.98) (1.00) (.98) (.94) (.81)
Capital charge resulting from issuance of Common Stock -- -- -- -- --++
---------- ---------- ---------- ---------- ----------
Total dividends to Common Stock shareholders (.98) (1.00) (.98) (.94) (.81)
---------- ---------- ---------- ---------- ----------
Offering and underwriting costs resulting from the
issuance of Preferred Stock (.02) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 15.32 $ 15.96 $ 15.94 $ 15.74 $ 15.81
========== ========== ========== ========== ==========
Market price per share, end of year $ 15.31 $ 15.37 $ 14.69 $ 13.95 $ 14.22
========== ========== ========== ========== ==========
Total Investment Return*
Based on net asset value per share 2.24% 7.04% 8.26% 6.33% 15.89%
========== ========== ========== ========== ==========
Based on market price per share 6.10% 11.85% 12.57% 4.77% 26.44%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Common Stock
Total expenses, net of reimbursement** 1.10% 1.00% 1.01% 1.04% 1.05%
========== ========== ========== ========== ==========
Total expenses** 1.10% 1.02% 1.03% 1.04% 1.05%
========== ========== ========== ========== ==========
Total investment income--net** 6.84% 6.69% 6.83% 7.10% 7.10%
========== ========== ========== ========== ==========
Amount of dividends to Preferred Stock shareholders 1.13% .46% .45% .70% 1.59%
========== ========== ========== ========== ==========
Investment income--net, to Common Stock shareholders 5.71% 6.23% 6.38% 6.40% 5.51%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Preferred Stock
Dividends to Preferred Stock shareholders 1.98% .95% .94% 1.40% 3.14%
========== ========== ========== ========== ==========
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Financial Highlights (concluded)
The following per share data and ratios have been derived 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 year
(in thousands) $ 278,250 $ 289,695 $ 289,364 $ 285,802 $ 286,982
========== ========== ========== ========== ==========
Preferred Stock outstanding, end of year
(in thousands) $ 165,000 $ 140,000 $ 140,000 $ 140,000 $ 140,000
========== ========== ========== ========== ==========
Portfolio turnover 30.16% 36.63% 33.39% 32.68% 68.17%
========== ========== ========== ========== ==========
Leverage
Asset coverage per $1,000 $ 2,686 $ 3,069 $ 3,067 $ 3,041 $ 3,050
========== ========== ========== ========== ==========
Dividends Per Share on Preferred Stock Outstanding
Series A--Investment income--net $ 505 $ 250 $ 240 $ 354 $ 792
========== ========== ========== ========== ==========
Series B--Investment income--net $ 480 $ 232 $ 230 $ 362 $ 783
========== ========== ========== ========== ==========
Series C--Investment income--net $ 482 $ 226 $ 240 $ 333 $ 782
========== ========== ========== ========== ==========
Series D++++--Investment income--net $ 505 -- -- -- --
========== ========== ========== ========== ==========
* 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 isssued on November 22, 2004.
+++ Based on average shares outstanding.
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 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. 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 shares are 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 ("OTC") 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. OCTOBER 31, 2005
Notes to Financial Statements (continued)
(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 year ended October 31, 2005, FAM reimbursed the
Fund in the amount of $11,989.
For the year ended October 31, 2005, the Fund reimbursed FAM $11,288 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
year ended October 31, 2005 were $167,626,938 and $132,375,996, 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.
Common Stock
Shares issued and outstanding during the year ended October 31, 2005 increased
by 10,174 from the reinvestment of dividends. Shares issued and outstanding
during the year ended October 31, 2004 remained constant.
Preferred Stock
Auction Market Preferred Stock are shares of Preferred Stock of the Fund, with
a par value of $.05 per share on Series A Shares, Series B Shares and Series C
Shares, and $.10 per share on Series D Shares. In addition, there is 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 October 31, 2005 were as follows: Series A, 2.50%; Series B, 2.65%; Series
C, 2.55%; and Series D, 2.50%.
Shares issued and outstanding during the year ended October 31, 2005 increased
by 1,000 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 year ended, October 31, 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 year ended October 31, 2005, MLPF&S earned $234,699 as
commissions.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Notes to Financial Statements (concluded)
5. Distributions to Shareholders:
The Fund paid a tax-exempt income dividend to holders of Common Stock in the
amount of $.081000 per share on November 29, 2005 to shareholders of record on
November 15, 2005.
The tax character of distributions paid during the fiscal years ended October
31, 2005 and October 31, 2004 was as follows:
10/31/2005 10/31/2004
Distributions paid from:
Tax-exempt income $ 21,003,220 $ 19,519,376
--------------- ---------------
Total distributions $ 21,003,220 $ 19,519,376
=============== ===============
As of October 31, 2005, the components of accumulated earnings on a tax basis
were as follows:
Undistributed tax-exempt income--net $ 2,653,188
Undistributed long-term capital gains--net --
---------------
Total undistributed earnings--net 2,653,188
Capital loss carryforward (13,574,845)*
Unrealized gains--net 19,178,430**
---------------
Total accumulated earnings--net $ 8,256,773
===============
* On October 31, 2005, the Fund had a net capital loss carryforward
of $13,574,845, of which $1,006,344 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.
** The difference between book-basis and tax-basis net unrealized
gains is attributable to the tax deferral of losses on wash sales,
the tax deferral of losses on straddles and the difference between
book and tax amortization methods for premiums and discounts
on fixed income securities.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
of MuniYield Michigan Insured Fund, Inc.:
We have audited the accompanying statement of net assets of MuniYield Michigan
Insured Fund, Inc., including the schedule of investments, as of October 31,
2005, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of October 31, 2005, by correspondence
with the custodian and brokers. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
MuniYield Michigan Insured Fund, Inc. at October 31, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each
of the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
(Ernst & Young LLP)
Philadelphia, Pennsylvania
December 9, 2005
Important Tax Information (unaudited)
All of the net investment income distributions paid by MuniYield Michigan
Insured Fund, Inc. during the taxable year ended October 31, 2005 qualify as
tax-exempt interest dividends for federal income tax purposes.
Fund Certification (unaudited)
In May 2005, the Fund filed its Chief Executive Officer Certification for the
prior year with the New York Stock Exchange pursuant to Section 303A.12(a) of
the New York Stock Exchange Corporate Governance Listing Standards.
The Fund's Chief Executive Officer and Chief Financial Officer Certifications
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 were filed with the
Fund's Form N-CSR and are available on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Disclosure of Investment Advisory Agreement
Activities of and Composition of the Board of Directors
All but one member of the Board of Directors is an independent director whose
only affiliation with Fund Asset Management, L.P. (the "Investment Adviser")
or other Merrill Lynch affiliates is as a director of the Fund and a director
or trustee of certain other funds advised by the Investment Adviser or its
affiliates. The Chairman of the Board is also an independent director. New
director nominees are chosen as nominees by a Nominating Committee comprised
of independent directors. All independent directors also are members of the
Board's Audit Committee and the independent directors meet in executive
session at each in-person Board meeting. The Board and the Audit Committee
meet in person for at least two days each quarter and conduct other in-person
and telephone meetings throughout the year, some of which are formal board
meetings, and some of which are informational meetings. The independent
counsel to the independent directors attends all in-person Board and Audit
Committee meetings and other meetings at the independent directors' request.
Investment Advisory Agreement--Matters Considered by the Board
Every year, the Board considers approval of the Fund's investment advisory
agreement (the "Investment Advisory Agreement"). The Board assesses the
nature, scope and quality of the services provided to the Fund by the
personnel of the Investment Adviser and its affiliates, including
administrative services, shareholder services, oversight of fund accounting,
marketing services and assistance in meeting legal and regulatory
requirements. The Board also receives and assesses information regarding the
services provided to the Fund by certain unaffiliated service providers.
At various times throughout the year, the Board also considers a range of
information in connection with its oversight of the services provided by the
Investment Adviser and its affiliates. Among the matters considered are: (a)
fees (in addition to management fees) paid to the Investment Adviser and its
affiliates by the Fund; (b) Fund operating expenses paid to third parties;
(c) the resources devoted to and compliance reports relating to the Fund's
investment objective, policies and restrictions, and its compliance with its
Code of Ethics and the Investment Adviser's compliance policies and
procedures; and (d) the nature, cost and character of non-investment
management services provided by the Investment Adviser and its affiliates.
The Board believes that the Investment Adviser is one of the most experienced
global asset management firms and considers the overall services provided by
the Investment Adviser to be generally of high quality. The Board also
believes that the Investment Adviser is financially sound and well managed and
notes that the Investment Adviser is affiliated with one of America's largest
financial firms. The Board works closely with the Investment Adviser in over-
seeing the Investment Adviser's efforts to achieve good performance. As part
of this effort, the Board discusses portfolio manager effectiveness and, when
performance is not satisfactory, discusses with the Investment Adviser taking
steps such as changing investment personnel.
Annual Consideration of Approval by the Board of Directors
In the period prior to the Board meeting to consider renewal of the Investment
Advisory Agreement, the Board requests and receives materials specifically
relating to the Fund's Investment Advisory Agreement. These materials include
(a) information compiled by Lipper Inc. ("Lipper") on the fees and expenses
and the investment performance of the Fund as compared to a comparable group
of funds as classified by Lipper; (b) information comparing the Fund's market
price with its net asset value per share; (c) a discussion by the Fund's
portfolio management team of investment strategies used by the Fund during its
most recent fiscal year; (d) information on the profitability to the Investment
Adviser and its affiliates of the Investment Advisory Agreement and other
relationships with the Fund; and (e) information provided by the Investment
Adviser concerning investment advisory fees charged to other clients, such as
offshore funds under similar investment mandates and generally to institutional
clients. The Board also considers other matters it deems important to the
approval process such as services related to the valuation and pricing of
Fund portfolio holdings, allocation of Fund brokerage fees, the Fund's
portfolio turnover statistics, and direct and indirect benefits to the
Investment Adviser and its affiliates from their relationship with the Fund.
Certain Specific Renewal Data
In connection with the most recent renewal of the Fund's Investment Advisory
Agreement in May 2005, the independent directors' and Board's review included
the following:
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Services Provided by the Investment Adviser--The Board reviewed the nature,
extent and quality of services provided by the Investment Adviser, including
the investment advisory services and the resulting performance of the Fund.
The Board focused primarily on the Investment Adviser's investment advisory
services and the Fund's investment performance, having concluded that the
other services provided to the Fund by the Investment Adviser were
satisfactory. The Board compared Fund performance - both including and
excluding the effects of the Fund's fees and expenses - to the performance
of a comparable group of funds, and the performance of a relevant index or
combination of indexes. While the Board reviews performance data at least
quarterly, consistent with the Investment Adviser's investment goals, the
Board attaches more importance to performance over relatively long periods of
time, typically three to five years. The Fund's performance after fees and
expenses ranked in the fifth quintile for each of the one- and three-year
periods, and ranked fourth out of five funds for the five-year period, ended
August 31, 2003. The Board noted that the universe of comparable funds was
very small. Considering these factors, the Board concluded that the Fund's
performance supported the continuation of the Investment Advisory Agreement.
The Investment Adviser's Personnel and Investment Process--The Board reviews
at least annually the Fund's investment objectives and strategies. The Board
discusses with senior management of the Investment Adviser responsible for
investment operations and the senior management of the Investment Adviser's
municipal investing group the strategies being used to achieve the stated
objectives. Among other things, the Board considers the size, education and
experience of the Investment Adviser's investment staff, its use of
technology, and the Investment Adviser's approach to training and retaining
portfolio managers and other research, advisory and management personnel.
The Board also reviews the Investment Adviser's compensation policies and
practices with respect to the Fund's portfolio managers. The Board also
considered the experience of the Fund's portfolio manager and noted that
Mr. Stuebe has more than fifteen years of experience in portfolio management.
The Investment Adviser and its investment staff have extensive experience in
analyzing and managing the types of investments used by the Fund. The Board
concluded that the Fund benefits from that expertise.
Management Fees and Other Expenses--The Board reviews the Fund's contractual
management fee rate and actual management fee rate as a percentage of total
assets at common asset levels - the actual rate includes advisory and
administrative service fees and the effects of any fee waivers - compared to
the other funds in its Lipper category. It also compares the Fund's total
expenses to those of other comparable funds. The Board considered the services
provided to and the fees charged by the Investment Adviser to other types of
clients such as off-shore funds, with similar investment mandates and noted
that the fees charged by the Investment Adviser in those cases typically
exceeded those being charged to the Fund. The Board also noted that, as a
general matter, fees charged to institutional clients were lower than the fees
charged to the Fund, but believed that less extensive services were being
provided to such clients. The Fund's contractual management fee rate was equal
to the median of management fees charged by comparable funds as determined by
Lipper, while the Fund's total expenses were lower than, and its actual
management fee rate was slightly higher than, the median fees and expenses
charged by comparable funds. The Board has concluded that the Fund's
management fee and fee rate and overall expense ratio are reasonable compared
to those of other comparable funds.
Profitability--The Board considers the cost of the services provided to
the Fund by the Investment Adviser, and the Investment Adviser's and its
affiliates' profits relating to the management and distribution of the Fund
and the MLIM/FAM-advised funds. As part of its analysis, the Board reviewed
the Investment Adviser's methodology in allocating its costs to the management
of the Fund and concluded that there was a reasonable basis for the
allocation. The Board believes the Investment Adviser's profits are reasonable
in relation to the nature and quality of services provided. The Board also
considered the federal court decisions discussing an investment adviser's
profitability and profitability levels considered to be reasonable in those
decisions.
Economies of Scale--The Board considered the extent to which economies of
scale might be realized as the assets of the Fund increase and whether there
should be changes in the management fee rate or structure in order to enable
the Fund to participate in these economies of scale. The Board considered
economies of scale to the extent applicable to the Fund's closed-end structure
and determined that the Fund currently appropriately benefits from any
economies of scale and no changes were currently necessary.
Conclusion
After the independent directors deliberated in executive session, the entire
Board, including all of the independent directors, approved the renewal of the
existing Investment Advisory Agreement, concluding that the advisory fee was
reasonable in relation to the services provided and that a contract renewal
was in the best interests of the shareholders.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Automatic Dividend Reinvestment Plan
How the Plan Works--The Fund offers a Dividend Reinvestment Plan (the "Plan")
under which income and capital gains dividends paid by the Fund are
automatically reinvested in additional shares of Common Stock of the Fund.
The Plan is administered on behalf of the shareholders by The Bank of New York
(the "Plan Agent"). Under the Plan, whenever the Fund declares a dividend,
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund. The Plan Agent will acquire the shares for the participant's
account either (i) through receipt of additional unissued but authorized
shares of the Fund ("newly issued shares") or (ii) by purchase of outstanding
shares of Common Stock on the open market on the New York Stock Exchange or
elsewhere. If, on the dividend payment date, the Fund's net asset value per
share is equal to or less than the market price per share plus estimated
brokerage commissions (a condition often referred to as a "market premium"),
the Plan Agent will invest the dividend amount in newly issued shares. If the
Fund's net asset value per share is greater than the market price per share (a
condition often referred to as a "market discount"), the Plan Agent will
invest the dividend amount by purchasing on the open market additional shares.
If the Plan Agent is unable to invest the full dividend amount in open market
purchases, or if the market discount shifts to a market premium during the
purchase period, the Plan Agent will invest any uninvested portion in newly
issued shares. The shares acquired are credited to each shareholder's account.
The amount credited is determined by dividing the dollar amount of the
dividend by either (i) when the shares are newly issued, the net asset value
per share on the date the shares are issued or (ii) when shares are purchased
in the open market, the average purchase price per share.
Participation in the Plan--Participation in the Plan is automatic, that is, a
shareholder is automatically enrolled in the Plan when he or she purchases
shares of Common Stock of the Fund unless the shareholder specifically elects
not to participate in the Plan. Shareholders who elect not to participate will
receive all dividend distributions in cash. Shareholders who do not wish to
participate in the Plan, must advise the Plan Agent in writing (at the address
set forth below) that they elect not to participate in the Plan. Participation
in the Plan is completely voluntary and may be terminated or resumed at any
time without penalty by writing to the Plan Agent.
Benefits of the Plan--The Plan provides an easy, convenient way for
shareholders to make additional, regular investments in the Fund. The Plan
promotes a long-term strategy of investing at a lower cost. All shares acquired
pursuant to the Plan receive voting rights. In addition, if the market price
plus commissions of the Fund's shares is above the net asset value,
participants in the Plan will receive shares of the Fund for less than they
could otherwise purchase them and with a cash value greater than the value of
any cash distribution they would have received. However, there may not be
enough shares available in the market to make distributions in shares at prices
below the net asset value. Also, since the Fund does not redeem shares, the
price on resale may be more or less than the net asset value.
Plan Fees--There are no enrollment fees or brokerage fees for participating in
the Plan. The Plan Agent's service fees for handling the reinvestment of
distributions are paid for by the Fund. However, brokerage commissions may be
incurred when the Fund purchases shares on the open market and shareholders
will pay a pro rata share of any such commissions.
Tax Implications--The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income tax that
may be payable (or required to be withheld) on such dividends. Therefore,
income and capital gains may still be realized even though shareholders do not
receive cash. The value of shares acquired pursuant to the Plan will generally
be excluded from gross income to the extent that the cash amount reinvested
would be excluded from gross income. If, when the Fund's shares are trading at
a market premium, the Fund issues shares pursuant to the Plan that have a
greater fair market value than the amount of cash reinvested, it is possible
that all or a portion of the discount from the market value (which may not
exceed 5% of the fair market value of the Fund's shares) could be viewed as a
taxable distribution. If the discount is viewed as a taxable distribution, it
is also possible that the taxable character of this discount would be
allocable to all the shareholders, including shareholders who do not
participate in the Plan. Thus, shareholders who do not participate in the Plan
might be required to report as ordinary income a portion of their
distributions equal to their allocable share of the discount.
Contact Information--All correspondence concerning the Plan, including any
questions about the Plan, should be directed to the Plan Agent at The Bank of
New York, Church Street Station, P.O. Box 11258, New York, NY 10286-1258,
Telephone: 800-432-8224.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Officers and Directors
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
Interested Director
Robert C. Doll, Jr.* President 2005 to President of the MLIM/FAM-advised funds since 131 Funds None
P.O. Box 9011 and present 2005; President of MLIM and FAM since 2001; 177 Portfolios
Princeton, Director Co-Head (Americas Region) thereof from 2000
NJ 08543-9011 to 2001 and Senior Vice President from 1999
Age: 51 to 2001; President and Director of Princeton
Services, Inc. ("Princeton Services") since
2001; President of Princeton Administrators, L.P.
("Princeton Administrators") since 2001; Chief
Investment Officer of OppenheimerFunds, Inc. in
1999 and Executive Vice President thereof from
1991 to 1999.
* Mr. Doll is a director, trustee or member of an advisory board of certain other
investment companies for which MLIM or FAM acts as investment adviser. Mr. Doll is
an "interested person," as described in the Investment Company Act, of the Fund
based on his current positions with MLIM, FAM, Princeton Services and Princeton
Administrators. Directors serve until their resignation, removal or death, or
until December 31 of the year in which they turn 72. As Fund President, Mr. Doll
serves at the pleasure of the Board of Directors.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Officers and Directors (continued)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
Independent Directors*
Donald W. Burton Director 2002 to General Partner of The Burton Partnership, 23 Funds Knology, Inc.
P.O. Box 9095 present Limited Partnership (an investment partnership) 42 Portfolios (telecommuni-
Princeton, since 1979; Managing General Partner of The cations); and
NJ 08543-9095 South Atlantic Venture Funds since 1983; Symbion, Inc.
Age: 61 Member of the Investment Advisory Council (healthcare)
of the Florida State Board of Administration
since 2001.
Laurie Simon Hodrick Director 1999 to Professor of Finance and Economics, Graduate 23 Funds None
P.O. Box 9095 present School of Business, Columbia University 42 Portfolios
Princeton, since 1998.
NJ 08543-9095
Age: 43
John Francis O'Brien Director 2005 to President and Chief Executive Officer of 23 Funds ABIOMED
P.O. Box 9095 present Allmerica Financial Corporation (financial 42 Portfolios (medical device
Princeton, services holding company) from 1995 to 2002 manufacturer),
NJ 08543-9095 and Director from 1995 to 2003; President of Cabot
Age: 62 Allmerica Investment Management Co., Inc. Corporation
(investment adviser) from 1989 to 2002, Director (chemicals),
from 1989 to 2002 and Chairman of the Board from LKQ Corporation
1989 to 1990; President, Chief Executive Officer (auto parts
and Director of First Allmerica Financial Life manufacturing),
Insurance Company from 1989 to 2002 and Director and TJX Companies,
of various other Allmerica Financial companies Inc. (retailer)
until 2002; Director since 1989 and Member of
the Governance Nominating Committee since 2004;
Member of the Compensation Committee of ABIOMED
since 1989 and Member of the Audit Committee of
ABIOMED from 1990 to 2004; Director and
member of the Governance and Nomination
Committee of Cabot Corporation and Member
of the Audit Committee since 1990; Director
and Member of the Audit Committee and
Compensation Committee of LKQ Corporation
since 2003; Lead Director of TJX Companies,
Inc. since 1999; Trustee of the Woods Hole
Oceanographic Institute since 2003.
David H. Walsh Director 2003 to Consultant with Putnam Investments from 1993 23 Funds None
P.O. Box 9095 present to 2003, and employed in various capacities 42 Portfolios
Princeton, therewith from 1973 to 1992; Director, The
NJ 08543-9095 National Audubon Society since 1998; Director,
Age: 64 The American Museum of Fly Fishing since 1997.
Fred G. Weiss** Director 1998 to Managing Director of FGW Associates since 23 Funds Watson
P.O. Box 9095 present 1997; Vice President, Planning, Investment and 42 Portfolios Pharmaceuticals,
Princeton, Development of Warner Lambert Co. from 1979 Inc.
NJ 08543-9095 to 1997; Director of the Michael J. Fox (pharmaceutical
Age: 64 Foundation for Parkinson's Research since company)
2000; Director of BTG International PLC (a
global technology commercialization company)
since 2001.
* Directors serve until their resignation, removal or death, or until December 31
of the year in which they turn 72.
** Chairman of the Board and the Audit Committee.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
Officers and Directors (concluded)
Position(s) Length of
Held with Time
Name, Address & Age Fund Served Principal Occupation(s) During Past 5 Years
Fund Officers*
Donald C. Burke Vice 1993 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999;
P.O. Box 9011 President present Senior Vice President and Treasurer of Princeton Services since 1999 and Director
Princeton, and and since 2004; Vice President of FAM Distributors, Inc. ("FAMD") since 1999; Vice
NJ 08543-9011 Treasurer 1999 to President of MLIM and FAM from 1990 to 1997; Director of Taxation of MLIM from
Age: 45 present 1990 to 2001; Vice President, Treasurer and Secretary of the IQ Funds since 2004.
Kenneth A. Jacob Senior 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
P.O. Box 9011 Vice present Management) of MLIMfrom 1997 to 2000.
Princeton, President
NJ 08543-9011
Age: 54
John M. Loffredo Senior 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
P.O. Box 9011 Vice present Management) of MLIM from 1997 to 2000.
Princeton, President
NJ 08543-9011
Age: 41
Fred K. Steube Vice 1995 to Director (Municipal Tax-Exempt Fund Management) of MLIM since 2000;
P.O. Box 9011 President present Vice President of MLIM from 1994 to 2000.
Princeton,
NJ 08543-9011
Age: 55
Jeffrey Hiller Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President
P.O. Box 9011 Compliance present and Chief Compliance Officer of MLIM (Americas Region) since 2004; Chief
Princeton, Officer Compliance Officer of the IQ Funds since 2004; Global Director of Compliance at
NJ 08543-9011 Morgan Stanley Investment Management from 2002 to 2004; Managing Director
Age: 54 and Global Director of Compliance at Citigroup Asset Management from 2000 to
2002; Chief Compliance Officer at Soros Fund Management in 2000; Chief Compliance
Officer at Prudential Financial from 1995 to 2000; Senior Counsel in the
Commission's Division of Enforcement in Washington, D.C. from 1990 to 1995.
Alice A. Pellegrino Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from 1999 to
P.O. Box 9011 present 2002; Attorney associated with MLIM since 1997; Secretary of MLIM, FAM, FAMD
Princeton, and Princeton Services since 2004.
NJ 08543-9011
Age: 45
* Officers of the Fund serve at the pleasure of the Board of Directors.
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
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
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.
MUNIYIELD MICHIGAN INSURED FUND, INC. OCTOBER 31, 2005
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. OCTOBER 31, 2005
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as
of the end of the period covered by this report, that applies to
the registrant's principal executive officer, principal financial
officer and principal accounting officer, or persons performing
similar functions. A copy of the code of ethics is available
without charge upon request by calling toll-free 1-800-MER-FUND
(1-800-637-3863).
Item 3 - Audit Committee Financial Expert - The registrant's board of
directors has determined that (i) the registrant has the following
audit committee financial experts serving on its audit committee
and (ii) each audit committee financial expert is independent: (1)
Donald W. Burton, (2) M. Colyer Crum (retired as of December 31,
2004), (3) Laurie Simon Hodrick, (4) John F. O'Brien (as of
November 22, 2004), (5) David H. Walsh and (6) Fred G. Weiss.
The registrant's board of directors has determined that Laurie
Simon Hodrick and M. Colyer Crum qualify as financial experts
pursuant to Item 3(c)(4) of Form N-CSR.
Ms. Hodrick has a thorough understanding of generally accepted
accounting principals, financial statements, and internal controls
and procedures for financial reporting. Ms. Hodrick earned a Ph.D.
in economics and has taught courses in finance for over 15 years.
Her M.B.A.-level course centers around the evaluation and analysis
of firms' corporate financial statements. She has also taught in
financial analysts' training programs. Ms. Hodrick has also worked
with several prominent corporations in connection with the analysis
of financial forecasts and projections and analysis of the
financial statements of those companies, serving on the Financial
Advisory Council of one of these major corporations. She has also
served as the Treasurer and Finance Chair of a 501(c)(3)
organization. Ms. Hodrick has published a number of articles in
leading economic and financial journals and is the associate editor
of two leading finance journals.
M. Colyer Crum also possesses a thorough understanding of generally
accepted accounting principals, financial statements, and internal
controls and procedures for financial reporting through a
combination of education and experience. Professor Crum was a
professor of investment management at the Harvard Business School
for 25 years. The courses taught by Professor Crum place a heavy
emphasis on the analysis of underlying company financial statements
with respect to stock selection and the analysis of credit risk in
making loans. Professor Crum has also served on a number of boards
of directors and has served on the audit committees, and in some
cases chaired the audit committee, for several major corporations
and financial institutions. For two such organizations, Professor
Crum has performed extensive investment analysis of financial
statements in connection with investment management decisions.
From these experiences, he has gained significant experience with
the establishment of reserves and accounting policies, differences
between U.S. GAAP and Canadian GAAP and executive compensation
issues.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending October 31, 2005 - $32,000
Fiscal Year Ending October 31, 2004 - $31,500
(b) Audit-Related Fees -
Fiscal Year Ending October 31, 2005 - $3,500
Fiscal Year Ending October 31, 2004 - $3,000
The nature of the services include assurance and related services
reasonably related to the performance of the audit of financial
statements not included in Audit Fees.
(c) Tax Fees - Fiscal Year Ending October 31, 2005 - $5,700
Fiscal Year Ending October 31, 2004 - $5,200
The nature of the services include tax compliance, tax advice and
tax planning.
(d) All Other Fees - Fiscal Year Ending October 31, 2005 - $0
Fiscal Year Ending October 31, 2004 - $0
(e)(1) The registrant's audit committee (the "Committee") has
adopted policies and procedures with regard to the pre-approval of
services. Audit, audit-related and tax compliance services
provided to the registrant on an annual basis require specific pre-
approval by the Committee. The Committee also must approve other
non-audit services provided to the registrant and those non-audit
services provided to the registrant's affiliated service providers
that relate directly to the operations and the financial reporting
of the registrant. Certain of these non-audit services that the
Committee believes are a) consistent with the SEC's auditor
independence rules and b) routine and recurring services that will
not impair the independence of the independent accountants may be
approved by the Committee without consideration on a specific case-
by-case basis ("general pre-approval"). However, such services
will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any
proposed services exceeding the pre-approved cost levels will
require specific pre-approval by the Committee, as will any other
services not subject to general pre-approval (e.g., unanticipated
but permissible services). The Committee is informed of each
service approved subject to general pre-approval at the next
regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending October 31, 2005 - $9,200
Fiscal Year Ending October 31, 2004 - $8,200
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling,
controlled by, or under common control with the investment adviser
that provides ongoing services to the registrant that were not pre-
approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal
accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $0, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals
are members of the registrant's separately-designated standing
audit committee established in accordance with Section 3(a)(58)(A)
of the Exchange Act (15 U.S.C. 78c(a)(58)(A)):
Donald W. Burton
M. Colyer Crum (retired as of December 31, 2004)
Laurie Simon Hodrick
John F. O'Brien (as of November 22, 2004)
David H. Walsh
Fred G. Weiss
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies -
Proxy Voting Policies and Procedures
Each Fund's Board of Directors/Trustees has delegated to Merrill
Lynch Investment Managers, L.P. and/or Fund Asset Management, L.P.
(the "Investment Adviser") authority to vote all proxies relating
to the Fund's portfolio securities. The Investment Adviser has
adopted policies and procedures ("Proxy Voting Procedures") with
respect to the voting of proxies related to the portfolio
securities held in the account of one or more of its clients,
including a Fund. Pursuant to these Proxy Voting Procedures, the
Investment Adviser's primary objective when voting proxies is to
make proxy voting decisions solely in the best interests of each
Fund and its shareholders, and to act in a manner that the
Investment Adviser believes is most likely to enhance the economic
value of the securities held by the Fund. The Proxy Voting
Procedures are designed to ensure that the Investment Adviser
considers the interests of its clients, including the Funds, and
not the interests of the Investment Adviser, when voting proxies
and that real (or perceived) material conflicts that may arise
between the Investment Adviser's interest and those of the
Investment Adviser's clients are properly addressed and resolved.
In order to implement the Proxy Voting Procedures, the Investment
Adviser has formed a Proxy Voting Committee (the "Committee"). The
Committee is comprised of the Investment Adviser's Chief Investment
Officer (the "CIO"), one or more other senior investment
professionals appointed by the CIO, portfolio managers and
investment analysts appointed by the CIO and any other personnel
the CIO deems appropriate. The Committee will also include two non-
voting representatives from the Investment Adviser's Legal
department appointed by the Investment Adviser's General Counsel.
The Committee's membership shall be limited to full-time employees
of the Investment Adviser. No person with any investment banking,
trading, retail brokerage or research responsibilities for the
Investment Adviser's affiliates may serve as a member of the
Committee or participate in its decision making (except to the
extent such person is asked by the Committee to present information
to the Committee, on the same basis as other interested
knowledgeable parties not affiliated with the Investment Adviser
might be asked to do so). The Committee determines how to vote the
proxies of all clients, including a Fund, that have delegated proxy
voting authority to the Investment Adviser and seeks to ensure that
all votes are consistent with the best interests of those clients
and are free from unwarranted and inappropriate influences. The
Committee establishes general proxy voting policies for the
Investment Adviser and is responsible for determining how those
policies are applied to specific proxy votes, in light of each
issuer's unique structure, management, strategic options and, in
certain circumstances, probable economic and other anticipated
consequences of alternate actions. In so doing, the Committee may
determine to vote a particular proxy in a manner contrary to its
generally stated policies. In addition, the Committee will be
responsible for ensuring that all reporting and recordkeeping
requirements related to proxy voting are fulfilled.
The Committee may determine that the subject matter of a recurring
proxy issue is not suitable for general voting policies and
requires a case-by-case determination. In such cases, the
Committee may elect not to adopt a specific voting policy
applicable to that issue. The Investment Adviser believes that
certain proxy voting issues require investment analysis - such as
approval of mergers and other significant corporate transactions -
akin to investment decisions, and are, therefore, not suitable for
general guidelines. The Committee may elect to adopt a common
position for the Investment Adviser on certain proxy votes that are
akin to investment decisions, or determine to permit the portfolio
manager to make individual decisions on how best to maximize
economic value for a Fund (similar to normal buy/sell investment
decisions made by such portfolio managers). While it is expected
that the Investment Adviser will generally seek to vote proxies
over which the Investment Adviser exercises voting authority in a
uniform manner for all the Investment Adviser's clients, the
Committee, in conjunction with a Fund's portfolio manager, may
determine that the Fund's specific circumstances require that its
proxies be voted differently.
To assist the Investment Adviser in voting proxies, the Committee
has retained Institutional Shareholder Services ("ISS"). ISS is an
independent adviser that specializes in providing a variety of
fiduciary-level proxy-related services to institutional investment
managers, plan sponsors, custodians, consultants, and other
institutional investors. The services provided to the Investment
Adviser by ISS include in-depth research, voting recommendations
(although the Investment Adviser is not obligated to follow such
recommendations), vote execution, and recordkeeping. ISS will also
assist the Fund in fulfilling its reporting and recordkeeping
obligations under the Investment Company Act.
The Investment Adviser's Proxy Voting Procedures also address
special circumstances that can arise in connection with proxy
voting. For instance, under the Proxy Voting Procedures, the
Investment Adviser generally will not seek to vote proxies related
to portfolio securities that are on loan, although it may do so
under certain circumstances. In addition, the Investment Adviser
will vote proxies related to securities of foreign issuers only on
a best efforts basis and may elect not to vote at all in certain
countries where the Committee determines that the costs associated
with voting generally outweigh the benefits. The Committee may at
any time override these general policies if it determines that such
action is in the best interests of a Fund.
From time to time, the Investment Adviser may be required to vote proxies in
respect of an issuer where an affiliate of the Investment Adviser (each, an
"Affiliate"), or a money management or other client of the Investment Adviser
(each, a "Client") is involved. The Proxy Voting Procedures and the Investment
Adviser's adherence to those procedures are designed to address such conflicts
of interest. The Committee intends to strictly adhere to the Proxy Voting
Procedures in all proxy matters, including matters involving Affiliates and
Clients. If, however, an issue representing a non-routine matter that is
material to an Affiliate or a widely known Client is involved such that the
Committee does not reasonably believe it is able to follow its guidelines (or
if the particular proxy matter is not addressed by the guidelines) and vote
impartially, the Committee may, in its discretion for the purposes of ensuring
that an independent determination is reached, retain an independent fiduciary
to advise the Committee on how to vote or to cast votes on behalf of the
Investment Adviser's clients.
In the event that the Committee determines not to retain an
independent fiduciary, or it does not follow the advice of such an
independent fiduciary, the powers of the Committee shall pass to a
subcommittee, appointed by the CIO (with advice from the Secretary
of the Committee), consisting solely of Committee members selected
by the CIO. The CIO shall appoint to the subcommittee, where
appropriate, only persons whose job responsibilities do not include
contact with the Client and whose job evaluations would not be
affected by the Investment Adviser's relationship with the Client
(or failure to retain such relationship). The subcommittee shall
determine whether and how to vote all proxies on behalf of the
Investment Adviser's clients or, if the proxy matter is, in their
judgment, akin to an investment decision, to defer to the
applicable portfolio managers, provided that, if the subcommittee
determines to alter the Investment Adviser's normal voting
guidelines or, on matters where the Investment Adviser's policy is
case-by-case, does not follow the voting recommendation of any
proxy voting service or other independent fiduciary that may be
retained to provide research or advice to the Investment Adviser on
that matter, no proxies relating to the Client may be voted unless
the Secretary, or in the Secretary's absence, the Assistant
Secretary of the Committee concurs that the subcommittee's
determination is consistent with the Investment Adviser's fiduciary
duties
In addition to the general principles outlined above, the
Investment Adviser has adopted voting guidelines with respect to
certain recurring proxy issues that are not expected to involve
unusual circumstances. These policies are guidelines only, and the
Investment Adviser may elect to vote differently from the
recommendation set forth in a voting guideline if the Committee
determines that it is in a Fund's best interest to do so. In
addition, the guidelines may be reviewed at any time upon the
request of a Committee member and may be amended or deleted upon
the vote of a majority of Committee members present at a Committee
meeting at which there is a quorum.
The Investment Adviser has adopted specific voting guidelines with
respect to the following proxy issues:
* Proposals related to the composition of the Board of Directors of issuers
other than investment companies. As a general matter, the Committee
believes that a company's Board of Directors (rather than shareholders) is
most likely to have access to important, nonpublic information regarding a
company's business and prospects, and is therefore best-positioned to set
corporate policy and oversee management. The Committee, therefore,
believes that the foundation of good corporate governance is the election
of qualified, independent corporate directors who are likely to diligently
represent the interests of shareholders and oversee management of the
corporation in a manner that will seek to maximize shareholder value over
time. In individual cases, the Committee may look at a nominee's history
of representing shareholder interests as a director of other companies or
other factors, to the extent the Committee deems relevant.
* Proposals related to the selection of an issuer's independent auditors. As
a general matter, the Committee believes that corporate auditors have a
responsibility to represent the interests of shareholders and provide an
independent view on the propriety of financial reporting decisions of
corporate management. While the Committee will generally defer to a
corporation's choice of auditor, in individual cases, the Committee may
look at an auditors' history of representing shareholder interests as
auditor of other companies, to the extent the Committee deems relevant.
* Proposals related to management compensation and employee benefits. As a
general matter, the Committee favors disclosure of an issuer's compensation
and benefit policies and opposes excessive compensation, but believes that
compensation matters are normally best determined by an issuer's board of
directors, rather than shareholders. Proposals to "micro-manage" an
issuer's compensation practices or to set arbitrary restrictions on
compensation or benefits will, therefore, generally not be supported.
* Proposals related to requests, principally from management, for approval of
amendments that would alter an issuer's capital structure. As a general
matter, the Committee will support requests that enhance the rights of
common shareholders and oppose requests that appear to be unreasonably
dilutive.
* Proposals related to requests for approval of amendments to an issuer's
charter or by-laws. As a general matter, the Committee opposes poison pill
provisions.
* Routine proposals related to requests regarding the formalities of
corporate meetings.
* Proposals related to proxy issues associated solely with holdings of
investment company shares. As with other types of companies, the Committee
believes that a fund's Board of Directors (rather than its shareholders) is
best-positioned to set fund policy and oversee management. However, the
Committee opposes granting Boards of Directors authority over certain
matters, such as changes to a fund's investment objective, that the
Investment Company Act envisions will be approved directly by shareholders.
* Proposals related to limiting corporate conduct in some manner that relates
to the shareholder's environmental or social concerns. The Committee
generally believes that annual shareholder meetings are inappropriate
forums for discussion of larger social issues, and opposes shareholder
resolutions "micromanaging" corporate conduct or requesting release of
information that would not help a shareholder evaluate an investment in the
corporation as an economic matter. While the Committee is generally
supportive of proposals to require corporate disclosure of matters that
seem relevant and material to the economic interests of shareholders, the
Committee is generally not supportive of proposals to require disclosure of
corporate matters for other purposes.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
as of October 31, 2005.
(a)(1) Mr. Fred K . Stuebe is primarily responsible for the
day-to-day management of the registrant's portfolio
("Portfolio Manager"). Mr. Stuebe has been a Director
(Municipal Tax-Exempt Fund Management) of MLIM since 2000
and has 25 years of experience investing in Municipal
Bonds. He was a Vice President of MLIM from 1994 to 2000.
He has been the portfolio manager of the Fund since 1992
and a Vice President of the Fund since 1995.
(a)(2) As of October 31, 2005:
(iii) Number of Other Accounts and
(ii) Number of Other Accounts Managed Assets for Which Advisory Fee is
and Assets by Account Type Performance-Based
Other Other
(i) Name of Registered Other Pooled Registered Other Pooled
Portfolio Investment Investment Other Investment Investment Other
Manager Companies Vehicles Accounts Companies Vehicles Accounts
Fred K.
Stuebe 3 0 0 0 0 0
$ 1,695,004,238 $ 0 $ 0 $ 0 $ 0 $ 0
(iv) Potential Material Conflicts of Interest
Real, potential or apparent conflicts of interest may arise when a
portfolio manager has day-to-day portfolio management responsibilities with
respect to more than one fund or account, including the following:
Certain investments may be appropriate for the Fund and also for
other clients advised by the Investment. Adviser and its affiliates, including
other client accounts managed by the Fund's portfolio management team.
Investment decisions for the Fund and other clients are made with a view to
achieving their respective investment objectives and after consideration of
such factors as their current holdings, availability of cash for investment and
the size of their investments generally. Frequently, a particular security may
be bought or sold for only one client or in different amounts and at different
times for more than one but less than all clients. Likewise, because clients of
the Investment Adviser and its affiliates may have differing investment
strategies, a particular security may be bought for one or more clients when
one or more other clients are selling the security. The investment results for
the Fund may differ from the results achieved by other clients of the
Investment Adviser and its affiliates and results among clients may differ. In
addition, purchases or sales of the same security may be made for two or more
clients on the same day. In such event, such transactions will be allocated
among the clients in a manner believed by the Investment Adviser and its
affiliates to be equitable to each. The Investment Adviser will not determine
allocations based on whether it receives a performance based fee from the
client. In some cases, the allocation procedure could have an adverse effect on
the price or amount of the securities purchased or sold by the Fund. Purchase
and sale orders for the Fund may be combined with those of other clients of the
Investment Adviser and its affiliates in the interest of achieving the most
favorable net results to the Fund.
To the extent that the Fund's portfolio management team has
responsibilities for managing accounts in addition to the Fund, a portfolio
manager will need to divide his time and attention among relevant accounts.
In some cases, a real, potential or apparent conflict may also arise
where (i) the Investment Adviser may have an incentive, such as a performance
based fee, in managing one account and not with respect to other accounts it
manages or (ii) where a member of the Fund's portfolio management team owns an
interest in one fund or account he or she manages and not another.
(a)(3) As of October 31, 2005:
Portfolio Manager Compensation
The Portfolio Manager Compensation Program of MLIM and its
affiliates, including the Investment Adviser, is critical to MLIM's ability to
attract and retain the most talented asset management professionals. This
program ensures that compensation is aligned with maximizing investment returns
and it provides a competitive pay opportunity for competitive performance.
Compensation Program
The elements of total compensation for MLIM and its affiliates
portfolio managers are a fixed base salary, annual performance-based cash and
stock compensation (cash and stock bonus) and other benefits. MLIM has balanced
these components of pay to provide portfolio managers with a powerful incentive
to achieve consistently superior investment performance. By design, portfolio
manager compensation levels fluctuate - both up and down - with the relative
investment performance of the portfolios that they manage.
Base Salary
Under the MLIM approach, like that of many asset management firms,
base salaries represent a relatively small portion of a portfolio manager's
total compensation. This approach serves to enhance the motivational value of
the performance-based (and therefore variable) compensation elements of the
compensation program.
Performance-Based Compensation
MLIM believes that the best interests of investors are served by
recruiting and retaining exceptional asset management talent and managing their
compensation within a consistent and disciplined framework that emphasizes pay
for performance in the context of an intensely competitive market for talent.
To that end, MLIM and its affiliates portfolio manager incentive compensation
is based on a formulaic compensation program. MLIM's formulaic portfolio
manager compensation program includes: investment performance relative to a
subset of general closed-end, Michigan municipal debt funds over 1-, 3- and
5-year performance periods and a measure of operational efficiency. Portfolio
managers are compensated based on the pre-tax performance of the products they
manage. If a portfolio manager's tenure is less than 5 years, performance
periods will reflect time in position. Portfolio managers are compensated based
on products they manage. A discretionary element of portfolio manager
compensation may include consideration of: financial results, expense control,
profit margins, strategic planning and implementation, quality of client
service, market share, corporate reputation, capital allocation, compliance and
risk control, leadership, workforce diversity, supervision, technology and
innovation. MLIM and its affiliates also consider the extent to which
individuals exemplify and foster ML & Co.'s principles of client focus, respect
for the individual, teamwork, responsible citizenship and integrity. All
factors are considered collectively by MLIM management.
Cash Bonus
Performance-based compensation is distributed to portfolio managers
in a combination of cash and stock. Typically, the cash bonus, when combined
with base salary, represents more than 60% of total compensation for portfolio
managers.
Stock Bonus
A portion of the dollar value of the total annual performance-based
bonus is paid in restricted shares of ML & Co. stock. Paying a portion of
annual bonuses in stock puts compensation earned by a portfolio manager for a
given year "at risk" based on the company's ability to sustain and improve its
performance over future periods. The ultimate value of stock bonuses is
dependent on future ML & Co. stock price performance. As such, the stock bonus
aligns each portfolio manager's financial interests with those of the ML & Co.
shareholders and encourages a balance between short-term goals and long-term
strategic objectives. Management strongly believes that providing a significant
portion of competitive performance-based compensation in stock is in the best
interests of investors and shareholders. This approach ensures that portfolio
managers participate as shareholders in both the "downside risk" and "upside
opportunity" of the company's performance. Portfolio managers therefore have a
direct incentive to protect ML & Co.'s reputation for integrity.
Other Compensation Programs
Portfolio managers who meet relative investment performance and
financial management objectives during a performance year are eligible to
participate in a deferred cash program. Awards under this program are in the
form of deferred cash that may be benchmarked to a menu of MLIM mutual funds
(including their own fund) during a five-year vesting period. The deferred cash
program aligns the interests of participating portfolio managers with the
investment results of MLIM products and promotes continuity of successful
portfolio management teams.
Other Benefits
Portfolio managers are also eligible to participate in broad-based
plans offered generally to employees of ML & Co. and its affiliates, including
broad-based retirement, 401(k), health, and other employee benefit plans.
(a)(4) Beneficial Ownership of Securities. As of October 31,
2005, Mr. Stuebe does not beneficially own any stock issued
by the Fund.
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 second 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 - See Item 2
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: December 16, 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: December 16, 2005
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
MuniYield Michigan Insured Fund, Inc.
Date: December 16, 2005