MuniYield Michigan Insured Fund, Inc.
Semi-Annual
Report
April 30, 1994
Officers and Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
M. Colyer Crum, Director
Edward H. Meyer, Director
Jack B. Sunderland, Director
J. Thomas Touchton, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
110 Washington Street
New York, New York 10286
Transfer Agents
Common Stock:
The Bank of New York
110 Washington Street
New York, New York 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MIY
<PAGE>
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield Michigan Insured
Fund, Inc. for their information. It is not a prospectus, cir-
cular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in the report.
Past performance results shown in this report should not be con-
sidered a representation of future performance. The Fund has
leveraged its Common Stock by issuing Preferred Stock to provide
the Common Stock shareholders with a potentially higher rate of
return. Leverage creates risks for Common Stock shareholders, in-
cluding 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.
MuniYield Michigan Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield Michigan Insured Fund, Inc.
TO OUR SHAREHOLDERS
For the six-month period ended April 30, 1994, the Common Stock
of MuniYield Michigan Insured Fund, Inc. earned $0.540 per share
income dividends, which includes earned and unpaid dividends of
$0.075. This represents a net annualized yield of 7.41%, based on
a month-end net asset value of $14.70 per share. Over the same
period, the total investment return on the Fund's Common Stock
was -7.97%, based on a change in per share net asset value from
$16.55 to $14.70, and assuming reinvestment of $0.549 per share
income dividends.
The average yield on the Fund's Auction Market Preferred Stock
for the six-month period ended April 30, 1994 was 3.15%.
The Environment
Inflationary expectations and investor sentiment changed for
the worse during the three-month period ended April 30, 1994.
Following stronger-than-expected economic results through year-
end 1993, the Federal Reserve Board broke with tradition on Feb-
ruary 4, 1994 and publicly announced a modest 25 basis point (0.25%)
increase in short-term interest rates. At the March 22 meeting of
the Federal Open Market Committee, the Federal Reserve Board again
raised the Federal Funds rate by 25 basis points, followed by an-
other 25 basis point increase on April 18.
<PAGE>
Rather than view the Federal Reserve Board's first tightening
move as a preemptive strike against inflation, fixed-income in-
vestors focused on Chairman Greenspan's implicit promise of fur-
ther tightening should the rate of inflation accelerate, and bond
prices declined sharply. The setback in the bond market was also
reflected in greater stock market volatility. While the second and
third increases in the Federal Funds rate were less of a surprise,
investors remained concerned that interest rates would trend upward
sharply as the central bank aggressively attempted to contain the in-
flationary pressures of an improving economy. At the same time, high-
ly leveraged investors were forced to liquidate positions in the face
of declining stock and bond prices. Investor confidence was not res-
tored with the announcement of the surprisingly slow 2.6% gross domes-
tic product growth rate for the first calendar quarter of 1994. Instead,
investors focused on the higher-than-expected (but still moderate)
broad inflation measures and became concerned that business activity
was beginning to stagnate as inflationary pressures were increasing.
The volatility in the US capital markets was mirrored in interna-
tional markets during the period. Political and economic developments,
along with concerns of heightened global inflationary pressures, led
to a sell-off in most capital markets, especially the emerging markets
that had appreciated strongly in 1993.
The Municipal Market
During the six months ended April 30, 1994, tax-exempt bond yields
exhibited considerable volatility as they rose to their highest lev-
el in the past two years. As measured by the Bond Buyer Revenue Bond
Index, the yield on newly issued municipal bonds maturing in 30 years
rose over 90 basis points to 6.42% by the end of April. Yields on
seasoned municipal revenue bonds rose by over 100 basis points in
sympathy with the equally dramatic increase in long-term US Treasury
bond yields. By the end of April, yields on US Treasury securities
rose by over 95 basis points to approximately 7.30%.
<PAGE>
Long-term tax-exempt bond yields were essentially unchanged from
the end of October 1993 to the end of January 1994. However, on a
weekly basis, tax-exempt bond yields fluctuated by as much as 15
basis points as investors were unable to reconcile the rapid
economic growth seen late last year with continued low inflation.
Following the intitial interest rate increase by the Federal
Reserve Board in early February, municipal bond prices began to
erode in concert with taxable bond prices as investors began to
sell securities in anticipation of further interest rate increas-
es. This fear led investors to withdraw from the tax-exempt market.
From early February to the end of March, total assets of all tax-
exempt bond funds declined by $14 billion to $247 billion. This
decline in investor demand, coupled with fears that the robust eco-
nomic recovery seen during the fourth quarter of 1993 would con-
tinue well into 1994, helped push municipal bond yields higher in
February and March. Attracted by tax-exempt yields in excess of
6.25%, investor demand returned in April, allowing yields to de-
cline approximately 15 basis points to end the April period at
approximately 6.40%.
The magnitude of the rise in tax-exempt bond yields experienced
during the past six months has not been seen since 1987 when
municipal bond rates rose 250 basis points between March and
October of that year. It is very important to note that the
recent municipal bond price declines were largely the result of
consistent and insistent selling pressures over the last two
months. In 1987, the tax-exempt bond market was much more vola-
tile and, at times, chaotic as investors sought to liquidate
positions without concern for fundamental value. For the most
part, the recent price deterioration has been orderly, and the
municipal bond market's liquidity and integrity have not been
challenged or jeopardized.
To a large extent, the municipal bond market has continued to be
supported by its strong technical position. New-issue volume for
the last six months has been less than $105 billion. This rep-
resents a decline of approximately 20% versus the comparable
period a year ago. This decline was expected and has been dis-
cussed in previous shareholder reports. This reduced issuance
has minimized potential selling pressure in recent months since
institutional investors have been wary of selling appreciable
amounts of securities that they may be unable to replace later
this year at any price level. We expect this decline in issuance
to continue since we anticipate recent yield increases to sig-
nificantly impact future municipal bond issuance. Just as higher
mortgage rates slow home mortgage refinancings, the recent rise
in bond yields will prevent bond refinancings from becoming the
driving force in bond issuance in 1994 as they were in 1993.
<PAGE>
Despite recent price declines, tax-exempt securities remain among
the most attractive investment alternatives available. After the
recent yield increases, longer-term municipal securities yield
approximately 90% of comparable US Treasury yields. Purchasers of
these municipal bonds also accrue substantial after-tax yield ad-
vantages. To investors in the 39% marginal Federal income tax
bracket, the purchase of a municipal bond yielding 6.50% repre-
sents an after-tax equivalent of 10.65%. With prevailing esti-
mates of 1994 inflation at no more than 3%--4%, real after-tax
rates in excess of 6.50% easily compensate longer-term investors
for much of the price volatility recently experienced.
Portfolio Strategy
We remain constructive on the municipal bond market and continue
to believe that tax-exempt bond yields will decline by late 1994
and into 1995. However, we expect the volatility the tax-exempt
bond market has exhibited in recent months to continue into mid-
year. This volatility led the Fund to become more defensive dur-
ing March and April. This defensive posture will be maintained
until either the Federal Reserve Board concludes its current round
of interest rate increases or until there are consistent indica-
tions that recent yield increases have had a negative impact on
economic growth. It is likely that until either of these two con-
ditions are met, the financial markets' current uncertainty will
continue and interest rates will remain volatile.
During the April period, we increased the Fund's cash reserve
position to approximately 10% of net assets. This defensive
position has two principal benefits. First, additional capital
depreciation in response to rising interest rates will be limited
to some degree. Second, this increased liquidity will enable the
Fund to more quickly respond to those attractive market oppor-
tunities recent periods of volatility have presented. These
episodes of market uncertainty have allowed the Fund to add
attractively priced higher-coupon, noncallable issues to its
holdings. These issues should enhance the Fund's current yield in
the coming years. Also, while we reduced the Fund's position in
more performance-oriented issues, the Fund remains well-position-
ed to take advantage of expected interest rate declines later this
year.
<PAGE>
Short-term tax-exempt interest rates continue to trade in the
2.25%--3.00% range, despite the increases in short-term taxable
rates by the Federal Reserve Board in recent months. The demand
for municipal cash equivalents has been very strong for much of
the past year and is expected to remain strong. The leverage of
the Preferred Stock continues to have a positive impact on the
yield spread to the Common Stock shareholder. 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. Should the interest rate differential between
short-term and long-term interest rates narrow because of a rise
in short-term interest rates, the incremental yield "pick up" on
the Common Stock will be reduced. Furthermore, if long-term
interest rates rise, the Common Stock's net asset value will
reflect the full decline in the entire portfolio holdings, since
the value of the Fund's Preferred Stock does not fluctuate.
During the six-month period ended April 30, 1994, long-term
interest rates rose, reflected in the decline in the net asset
value of the Fund's Common Stock. For a complete explanation of
leveraging, see the description below.
We appreciate your ongoing interest in MuniYield Michigan Insured
Fund, Inc., and we look forward to assisting you with your finan-
cial needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
May 31, 1994
<PAGE>
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield Michigan Insured Fund, Inc. utilizes leveraging to seek
to enhance the yield and net asset value of its Common Stock.
However, these objectives cannot be achieved in all interest rate
environments. To leverage, the Fund issues Preferred Stock, which
pays dividends at prevailing short-term interest rates, and
invests the proceeds in long-term municipal bonds. The interest
earned on these investments is paid to Common Stock shareholders
in the form of dividends, and the value of these portfolio
holdings is reflected in the per share net asset value of the
Fund's Common Stock. However, in order to benefit Common Stock
shareholders, the yield curve must be positively sloped; that is,
short-term interest rates must be lower than long-term interest
rates. At the same time, a period of generally declining interest
rates will benefit Common Stock shareholders. If either of these
conditions change, then the risks of leveraging will begin to
outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred
Stock for an additional $50 million, creating a total value of
$150 million available for investment in long-term municipal
bonds. If prevailing short-term interest rates are approximately
3% and long-term interest rates are approximately 6%, the yield
curve has a strongly positive slope. The fund pays dividends on
the $50 million of Preferred Stock based on the lower short-term
interest rates. At the same time, the fund's total portfolio of
$150 million earns the income based on long-term interest rates.
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 pick-up
on the Common Stock will be reduced. 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 in-
vestments, 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.
<PAGE>
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 some of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
PCR Pollution Control Revenue Bonds
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Michigan--97.1%
<S> <S> <C> <S> <C>
AAA Aaa $ 1,000 Bay City, Michigan, Electric Utility Revenue Bonds, 6.60% due 1/01/2012 (b) $ 1,030
AAA Aaa 5,000 Bay City, Michigan, School District, Revenue Bonds, UT, 6.50% due 5/01/2008 (b) 5,199
AAA Aaa 3,355 Brighton, Michigan, Area School District Refunding Bonds, UT, Series II, 6% due
5/01/2020 (b) 3,244
AAA Aaa 1,000 Chippewa Valley, Michigan, Schools Revenue Bonds (School Building and Site), UT,
6.375% due 5/01/2001 (c)(f) 1,076
AAA Aaa 4,700 Detroit, Michigan, Sewage Disposal Revenue Bonds, 6.625% due 7/01/2021 (c) 4,808
Detroit, Michigan, Water and Supply Systems Revenue Refunding Bonds (c):
AAA Aaa 5,000 6.25% due 7/01/2012 5,022
AAA Aaa 2,000 4.75% due 7/01/2019 1,611
Grand Rapids, Michigan, Water Supply Systems Revenue Refunding Bonds (c):
AAA Aaa 3,000 6.25% due 1/01/2011 3,040
AAA Aaa 1,245 6.50% due 1/01/2015 1,267
AAA Aaa 1,250 5.75% due 1/01/2018 1,167
A1+ VMIG1 8,000 VRDN, 2.95% due 1/01/2020 (a) 8,000
AAA Aaa 17,600 Grand Traverse County, Michigan, Hospital Finance Authority, Revenue Refunding Bonds
(Munson Healthcare), Series A, 6.25% due 7/01/2022 (b) 17,391
AAA Aaa 1,500 Kalamazoo, Michigan, Hospital Finance Authority, Revenue Refunding Bonds, Series A,
6.25% due 6/01/2014 (c) 1,512
AAA Aaa 1,550 Kellogsville, Michigan, Public School District Revenue Bonds, UT, 5.75% due
5/01/2018 (c) 1,447
<PAGE>
AAA Aaa 1,000 Livonia, Michigan, Public School District Revenue Bonds, Series II, UT,
6.30% due 5/01/2002 (c)(f) 1,072
AAA VMIG1 1,300 Michigan Higher Education Student Loan Authority, Revenue Refunding Bonds,
Series XII-F, AMT, VRDN, 3.15% due 10/01/2020 (a)(b) 1,300
Michigan Municipal Bond Authority Revenue Bonds (Local Government Loan):
AAA Aaa 4,000 Series A, 6.125% due 12/01/2018 3,937
A NR 1,100 Series B, 5.80% due 11/01/2013 1,030
Michigan Municipal Bond Authority Revenue Bonds, Series A:
AAA Aaa 1,035 Refunding, 6.50% due 5/01/2012 (b) 1,062
AAA Aaa 1,870 Refunding, 6.50% due 11/01/2012 (d) 1,919
AA Aa 2,950 (Revolving Fund), 6.55% due 10/01/2013 2,989
AA Aa 2,000 (Revolving Fund), 6.60% due 10/01/2018 2,028
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Michigan (concluded)
<S> <S> <C> <S> <C>
Michigan State Building Authority, Revenue Refunding Bonds, Series I:
AA- A $ 1,500 6.75% due 10/01/2011 $ 1,562
AAA Aaa 3,500 6.25% due 10/01/2020 (d) 3,477
Michigan State Hospital Finance Authority, Revenue Refunding Bonds:
AAA Aaa 1,000 (Henry Ford Health Systems), 6% due 9/01/2011 (b) 985
AAA Aaa 2,000 (Henry Ford Health Systems), 6% due 9/01/2012 (b) 1,969
AAA Aaa 1,515 (Henry Ford Health Systems), 5.75% due 9/01/2017 (e) 1,412
AAA Aaa 1,100 (Sisters of Mercy Health Corp.), Series M, 6.25% due 2/15/2022 (e) 1,091
AAA Aaa 2,000 Michigan State Housing Development Authority, Rental Housing Revenue Refunding Bonds,
Series A, 5.90% due 4/01/2023 (b) l,830
Michigan State Strategic Fund, Limited Obligation Revenue Bonds:
NR P1 1,100 (Dow Chemical Company Project), VRDN, AMT, 3.30% due 12/01/2014 (a) 1,100
A A2 9,750 (Ford Motor Company Project), Series A, AMT, 6.55% due 10/01/2022 9,786
AAA Aaa 1,500 Refunding (Detroit Edison Co.), Series BB, 6.05% due 10/01/2023 (d) 1,456
AA- A1 5,000 (Waste Management Inc. Project), AMT, 6.625% due 12/01/2012 5,028
A P1 1,600 Midland County, Michigan, Economic Development Corporation, Limited Obligation Revenue
Refunding Bonds (Dow Chemical Company Project), VRDN, Series B, 3.15% due
2/01/2015 (a) 1,600
<PAGE>
Monroe County, Michigan, Economic Development Corporation, Limited Obligation
Revenue Refunding Bonds (Detroit Edison Co.):
AAA Aaa 5,500 Series AA, 6.95% due 9/01/2022 (c) 6,062
NR P1 600 Series CC, VRDN, 3% due 10/01/2024 (a) 600
Monroe County, Michigan, PCR (Detroit Edison Co., Project), AMT (d):
AAA Aaa 4,500 Series CC, 6.55% due 6/01/2024 4,571
AAA Aaa 1,500 Series I-B, 6.55% due 9/01/2024 1,524
AAA Aaa 1,250 Mount Clemens, Michigan, Community School District Revenue Bonds, UT,
6.60% due 5/01/2002 (d)(f) 1,361
AAA Aaa 5,925 Riverview, Michigan, Community School District Building Revenue Bonds, UT,
6.70% due 5/01/2002 (c) 6,488
Royal Oak, Michigan, Hospital Finance Authority, Hospital Revenue Bonds:
AA- Aa 3,000 (Beaumont Properties Inc.), Series E, 6.625% due 1/01/2019 3,039
AA Aa l,000 (William Beaumont Hospital), Series D, 6.75% due 1/01/2020 1,020
AAA Aaa 7,375 West Ottawa, Michigan, Public School District, Revenue Refunding Bonds, UT,
6% due 5/01/2020 (c) 7,139
Western Michigan University, General Revenue Bonds (c):
AAA Aaa 13,500 6.125% due 11/15/2022 13,223
AAA Aaa 1,000 Refunding, Series A, 5% due 7/15/2021 834
AAA Aaa 5,500 Wyandotte, Michigan, Electric Revenue Refunding Bonds, 6.25% due 10/01/2017 (d) 5,500
Total Investments (Cost--$151,689)--97.1% 153,808
Other Assets Less Liabilities--2.9% 4,612
--------
Net Assets--100.0% $158,420
========
<FN>
(a) The interest rate is subject to change periodically
based upon prevailing market rates. The interest
rates shown are the rates in effect at April 30, 1994.
(b) AMBAC Insured.
(c) FGIC Insured.
(d) MBIA Insured.
(e) FSA Insured.
(f) Prerefunded.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of April 30, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$151,689,336) (Note 1a) $153,808,400
Cash 25,483
Receivables:
Interest $ 2,800,268
Securities sold 2,137,016 4,937,284
------------
Deferred organization expenses (Note 1e) 30,942
Prepaid expenses and other assets 76,426
------------
Total assets 158,878,535
------------
Liabilities: Payables:
Dividends to shareholders (Note 1g) 395,451
Investment adviser (Note 2) 62,906 458,357
------------ ------------
Total liabilities 458,357
------------
Net Assets: Net assets $158,420,178
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (1,000 shares of AMPS*
issued and outstanding at $50,000 per share liquidation preference) $ 50,000,000
Common Stock, par value $.10 per share (7,374,470 shares issued
and outstanding) $ 737,447
Paid-in capital in excess of par 102,771,407
Undistributed investment income--net 637,000
Undistributed realized capital gains--net 2,155,260
Unrealized appreciation on investments--net 2,119,064
------------
Total--Equivalent to $14.70 net asset value per share of Common Stock
(market price--$14.25) 108,420,178
------------
Total capital $158,420,178
============
<FN>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended April 30, 1994
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 4,828,491
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 416,272
Commission fees (Note 4) 87,460
Professional fees 33,924
Accounting services (Note 2) 22,430
Printing and shareholder reports 15,438
Directors' fees and expenses 10,798
Transfer agent fees 10,346
Listing fees 9,324
Custodian fees 4,632
Amortization of organization expenses (Note 1e) 3,645
Pricing fees 2,579
Other 7,653
------------
Total expenses 624,501
------------
Investment income--net 4,203,990
------------
Realized & Unreal- Realized gain on investments--net 2,155,268
ized Gain (Loss) on Change in unrealized appreciation on investments--net (15,093,711)
Investments--Net ------------
(Notes 1d & 3): Net Decrease in Net Assets Resulting from Operations $ (8,734,453)
============
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: April 30, 1994 Oct. 31, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 4,203,990 $ 8,252,117
Realized gain on investments--net 2,155,268 727,474
Change in unrealized appreciation on investments--net (15,093,711) 17,212,775
------------ ------------
Net increase (decrease) in net assets resulting from operations (8,734,453) 26,192,366
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (3,445,168) (6,251,359)
Shareholders Preferred Stock (732,940) (1,389,640)
(Note 1g): Realized gain on investments--net:
Common Stock (604,972) --
Preferred Stock (122,510) --
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (4,905,590) (7,640,999)
------------ ------------
Common & Preferred Net proceeds from issuance of Common Stock -- --
Stock Transactions Proceeds from issuance of Preferred Stock -- 50,000,000
(Notes 1e & 4): Value of shares issued to Common Stock shareholders in reinvestment
of dividends -- 2,798,535
Offering and underwriting costs resulting from the issuance of
Preferred Stock (9,199) (1,016,699)
------------ ------------
Net increase (decrease) in net assets derived from capital stock
transactions (9,199) 51,781,836
------------ ------------
Net Assets: Total increase (decrease) in net assets (13,649,242) 70,333,203
Beginning of period 172,069,420 101,736,217
------------ ------------
End of period* $158,420,178 $172,069,420
============ ============
<FN>
* Undistributed investment income--net $ 637,000 $ 611,118
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived For the Six For the Oct. 30,
from information provided in the financial statements. Months Ended Year Ended 1992++ to
April 30, October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.55 $ 14.14 $ 14.18
Operating ---------- ---------- ----------
Performance: Investment income--net .57 1.13 --
Realized and unrealized gain (loss) on investments--net (1.75) 2.47 --
---------- ---------- ----------
Total from investment operations (1.18) 3.60 --
---------- ---------- ----------
Less dividends and distributions to Common Stock share-
holders:
Investment income--net (.47) (.86) --
Realized gain on investments--net (.08) -- --
---------- ---------- ----------
Total dividends and distributions to Common Stock shareholders (.55) (.86) --
---------- ---------- ----------
Capital charge resulting from issuance of Common Stock -- -- (.04)
---------- ---------- ----------
Effect of Preferred Stock activity++++:
Dividends and distributions to Preferred Stock:
Investment income--net (.10) (.19) --
Realized gain on investments--net (.02) -- --
Capital charge resulting from issuance of Preferred Stock -- (.14) --
---------- ---------- ----------
Total effect of Preferred Stock activity (.12) (.33) --
---------- ---------- ----------
Net asset value, end of period $ 14.70 $ 16.55 $ 14.14
========== ========== ==========
Market price per share, end of period $ 14.25 $ 16.625 $ 15.00
========== ========== ==========
Total Investment Based on market price per share (11.19%)+++ 17.03% 0.00%+++
Return:** ========== ========== ==========
Based on net asset value per share (7.97%)+++ 23.59% (0.28%)+++
========== ========== ==========
Ratios to Average Expenses, net of reimbursement .75%* .61% --%*
Net Assets:*** ========== ========== ==========
Expenses .75%* .70% --%*
========== ========== ==========
Investment income--net 5.03%* 5.24% --%*
========== ========== ==========
<PAGE>
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $ 108,420 $ 122,069 $ 101,736
========== ========== ==========
Preferred Stock outstanding, end of period (in thousands) $ 50,000 $ 50,000 $ --
========== ========== ==========
Portfolio turnover 9.95% 12.73% 0%
========== ========== ==========
Dividends Per Share Investment income--net $ 733 $ 1,390 $ --
On Preferred Stock
Outstanding:
<FN>
* Annualized.
** Total investment returns based on market value, which can
be significantly greater or lesser than the net asset value,
result in substantially different returns. Total investment
returns exclude the effects of sales loads.
*** Do not reflect the effect of dividends to Preferred Stock
shareholders.
++ Commencement of Operations.
++++ The Fund's Preferred Stock was issued on November 19, 1992.
+++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield Michigan Insured Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a non-diversified,
closed-end management investment company. The Fund determines and
makes available for publication the net asset value of its Common
Stock on a weekly basis. The Fund's Common Stock is listed on the
New York Stock Exchange under the symbol MIY. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded pri-
marily in the over-the-counter markets and are valued at the
most recent bid price or yield equivalent as obtained by the
Fund's pricing service from dealers that make markets in such
securities. Financial futures contracts, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options, which are traded on exchanges, are
valued at their last sale price as of the close of such exchanges
or, lacking any sales, at the last available bid price. Secur-
ities with remaining maturities of sixty days or less are valued
at amortized cost. Securities for which market quotations are
not readily available are valued at their fair value as deter-
mined in good faith by or under the direction of the Board
of Directors of the Fund.
<PAGE>
(b) Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures
contracts are contracts for delayed delivery of securities at a
specific future date and at a specific price or yield. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on
which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as variation margin and are
recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the re-
quirements 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 trans-
actions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the ac-
crual basis. Discounts and market premiums are amortized into in-
terest income. Realized gains and losses on security transactions
are determined on the identified cost basis.
(e) Deferred organization and offering expenses--Deferred or-
ganization expenses are amortized on a straight-line basis over
a five-year period. Direct expenses relating to the public offer-
ing of the Common and Preferred Stock were charged to capital
at the time of issuance of the stocks.
(f) Non-income producing investments--Written and purchased
options are non-income producing investments.
(g) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
<PAGE>
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). Effective January 1, 1994,
the investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc., an indirect wholly-owned subsidiary of
ML & Co. The limited partners are ML & Co. and Merrill Lynch
Investment Management, Inc. ("MLIM"), which is also an indirect
wholly-owned subsidiary of ML & Co.
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 0.50% of the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, MLIM, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term secur-
ities, for the six months ended April 30, 1994 were $15,771,561
and $28,685,299, respectively.
Net realized and unrealized gains as of April 30, 1994 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $ 2,155,268 $ 2,119,064
----------- -----------
Total $ 2,155,268 $ 2,119,064
=========== ===========
As of April 30, 1994, net unrealized appreciation for Federal
income tax purposes aggregated $2,119,064, of which $2,947,454
related to appreciated securities and $828,390 related to depre-
ciated securities. The aggregate cost of investments at April 30,
1994 for Federal income tax purposes was $151,689,336.
<PAGE>
4. Capital 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
For the six months ended April 30, 1994, shares issued and out-
standing remained constant at 7,374,470. At April 30, 1994, total
paid-in capital amounted to $103,508,854.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash di-
vidends at an annual rate that may vary for the successive divi-
dend periods. The yield in effect at April 30, 1994 is 3.25%.
For the six months ended April 30, 1994, there were 1,000 AMPS
shares authorized, issued and outstanding with a liquidation
preference of $50,000 per share, plus accumulated and unpaid
dividends of $61,844.
The Fund pays commissions to certain broker-dealers at the end of
each auction at the annual rate of one-quarter of 1% calculated
on the proceeds of each auction. For the six months ended April
30, 1994, MLPF&S, an affiliate of MLIM, earned $123,957 as
commissions.
5. Subsequent Event:
On May 6, 1994, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the
amount of $0.067088 per share, payable on May 27, 1994 to
shareholders of record as of May 17, 1994.
PER SHARE INFORMATION
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Net Unrealized Dividends/Distributions
Investment Realized Gains Net Investment Income Capital Gains
For the Period Income Gains (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
October 30, 1992++ to January 31, 1993 $.26 $.03 $ .75 $.14 $.05 -- --
February 1, 1993 to April 30, 1993 .29 .02 .61 .23 .05 -- --
May 1, 1993 to July 31, 1993 .29 .01 .31 .24 .05 -- --
August 1, 1993 to October 31, 1993 .29 .05 .69 .25 .04 -- --
November 1, 1993 to January 31, 1994 .34 -- .18 .24 .05 $.08 $.02
February 1, 1994 to April 30, 1994 .23 .29 (2.22) .23 .05 -- --
<PAGE>
<CAPTION>
Net Asset Value Market Price**
For the Period High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
October 30, 1992++ to January 31, 1993 $14.85 $14.14 $15.625 $15.00 237
February 1, 1993 to April 30, 1993 15.90 14.84 16.25 15.25 557
May 1, 1993 to July 31, 1993 16.00 15.42 16.375 15.25 474
August 1, 1993 to October 31, 1993 16.83 15.82 17.00 15.75 517
November 1, 1993 to January 31, 1994 16.65 15.99 16.75 15.125 537
February 1, 1994 to April 30, 1994 16.60 14.15 16.50 13.75 566
<FN>
++ Commencement of Operations.
* Calculations are based upon shares of Common Stock outstanding
at the end of each period.
** As reported in the consolidated transaction reporting system.
*** In thousands.
</TABLE>
