MUNIYIELD
MICHIGAN
INSURED
FUND, INC.
FUND LOGO
Annual Report
October 31, 1995
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, circular 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 considered 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, 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.
<PAGE>
MuniYield Michigan
Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield Michigan Insured Fund, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1995, the Common Stock of MuniYield
Michigan Insured Fund, Inc. earned $0.859 per share income
dividends, which included earned and unpaid dividends of $0.073.
This represents a net annualized yield of 5.67%, based on a month-
end net asset value of $15.13 per share. Over the same period, the
total investment return on the Fund's Common Stock was +20.20%,
based on a change in per share net asset value from $13.70 to $15.13
and assuming reinvestment of $0.861 per share income dividends and
$0.264 per share capital gains distributions.
For the six-month period ended October 31, 1995, the total
investment return on the Fund's Common Stock was +8.28%, based on a
change in per share net asset value from $14.42 to $15.13, and
assuming reinvestment of $0.424 per share income dividends.
For the six-month period ended October 31, 1995, the Fund's Auction
Market Preferred Stock had an average yield of 3.92%.
The Environment
After losing momentum through the second calendar quarter of 1995,
it now appears that the US economic expansion has resumed. Gross
domestic product growth for the three months ended September 30 was
reported to be 4.2%, higher than generally expected. September
durable goods orders increased a surprisingly strong 3%, and
existing home sales rose to a near-record level. At the same time,
there is evidence that inflationary pressures remain subdued.
Reflecting the trend of renewed economic growth--and continued good
news on the inflation front--the Federal Reserve Board signaled no
near-term shift in monetary policy following its September meeting.
Thus, official interest rates may not be reduced further in the
immediate future.
<PAGE>
Another significant development has been the strengthening of the US
dollar relative to the yen and the Deutschemark. Improving interest
rate differentials favoring the US currency, combined with
coordinated central bank intervention and more positive investor
sentiment, have helped to bolster the dollar in foreign exchange
markets. Other factors that appear to be improving the US dollar's
outlook in the near term are a pick-up in capital flows to the
United States and the prospect of increased capital outflows from
Japan. However, it remains to be seen if the US dollar's
strengthening trend can continue without significant improvements in
the US budget and trade deficits.
In the weeks ahead, investor interest will continue to focus on US
economic activity. Clear signs of a moderate, noninflationary
expansion could further benefit the US stock and bond markets. In
addition, should the current Federal budget deficit reduction
efforts now underway in Washington prove successful, the
implications would likely be positive for the US financial markets.
The Municipal Market
Tax-exempt bond yields continued to decline during the six-month
period ended October 31, 1995. As measured by the Bond Buyer Revenue
Bond Index, the yield on uninsured, long-term municipal revenue
bonds fell 30 basis points (0.30%) to end the October period at
approximately 6%. While tax-exempt bond yields have declined
dramatically from their highs one year ago, municipal bond yields
have exhibited considerable yield volatility on a weekly basis. In
recent months, tax-exempt bond yields have fluctuated by as much as
20 basis points on a week-to-week basis. US Treasury bond yields
have displayed similar volatility, but the extent of their decline
has been greater. By the end of October, long-term US Treasury bond
yields had declined almost 100 basis points to 6.33%. Proposed
Federal tax restructuring continued to weigh heavily on the tax-
exempt bond market. Thus far in 1995, US Treasury bond yields have
declined approximately 150 basis points. Municipal bond yields have
fallen approximately 95 basis points as the uncertainty surrounding
any changes to the existing Federal income tax structure has
prevented the municipal bond market from rallying as strongly as its
taxable counterpart.
A general view of a moderately expanding domestic economy, supported
by a very favorable inflationary environment, allowed interest rates
to significantly decline from their recent highs in November 1994.
However, this decline was not a smooth downward curve. Conflicting
economic indicators were released during recent months that have
prevented a clear consensus regarding the near-term direction of
interest rates from being reached. The resultant uncertainty has
promoted more of a saw-toothed pattern as interest rate declines
were repeatedly interrupted by indications of stronger-than-expected
economic growth. As these concerns were overcome by subsequent
weaker economic releases, interest rate declines have resumed. These
periods of volatility are likely to continue for the remainder of
1995, or until proposed Federal budget deficit reduction packages
are resolved and any resultant responses by the Federal Reserve
Board have occurred.
<PAGE>
However, the municipal bond market's technical position remained
supportive throughout recent quarters. Approximately $82 billion in
long-term municipal securities were issued during the six months
ended October 31, 1995. While this issuance is virtually identical
to underwritings during the October 31, 1994 quarter, tax-exempt
bond issuance over the last 12 months remained approximately 25%
below comparable 1994 levels. The municipal bond market should
maintain this positive technical position well into 1996. Annual
issuance for 1995 is now projected to be approximately $140 billion,
significantly less than last year's already low level of $162
billion. Projected maturities and early redemptions for the
remainder of 1995 and throughout 1996 will lead to a continued
decline in the total outstanding municipal bond supply throughout
1996 and, perhaps, into 1998 should new bond issuance remain at
historically low levels.
Despite the municipal bond market's relative underperformance
compared to the US Treasury market thus far in 1995, the extent of
the tax-exempt bond market's rally was nonetheless quite impressive.
Municipal bond yields have fallen 135 basis points from their highs
reached in November 1994 and municipal bond prices rose accordingly.
Most tax-exempt products recouped almost all of the losses incurred
in 1994 and are well on their way to posting double-digit total
returns for all of 1995. This relative underperformance so far in
1995 provided long-term investors with the rare opportunity to
purchase tax-exempt securities at yield levels near those of taxable
securities.
Additionally, many of the factors that led to the relative
underperformance of the tax-exempt bond market thus far in 1995,
namely investor concern regarding Federal budget deficit reductions
and proposed changes in the Federal income tax structure, are
nearing resolution. The Federal budget reconciliation process has
already begun, and may be essentially completed by year-end. Recent
public opinion polls suggest that the majority of American taxpayers
prefer the existing Federal income tax system compared to proposed
changes, such as the flat tax or national sales tax. In an upcoming
election year, neither party is likely to advocate a clearly
unpopular position, particularly one that can be expected to
negatively impact the Federal budget deficit reduction program
through reduced tax revenues. As these factors are resolved, we
believe that much of the resistance that the municipal bond market
met this year should dissipate. This should allow municipal bond
yields to significantly decline from current levels in order to
return to more normal historic yield relationships.
<PAGE>
Portfolio Strategy
Over the past 12 months, the Fund's portfolio strategy and
performance can be divided into two periods. From November through
mid-December 1994, we believed that most of the rise in interest
rates seen during the latter half of 1994 was unwarranted.
Consequently, we maintained the Fund's earlier aggressive portfolio
structure, causing the Fund to underperform market averages through
late 1994. Beginning in mid-December 1994 and through October 31,
1995, the Fund's fiscal year-end, our positive outlook toward
interest rates was rewarded as bond yields began a significant
correction. Since their highs in November 1994, tax-exempt bond
yields have fallen over 100 basis points and bond prices have risen
accordingly. During this period, the Fund recouped almost all of the
losses it incurred in 1994.
Given the extent of the municipal bond market's recent rally, we
adopted a more neutral outlook toward interest rates. The Fund's
cash reserves will remain limited in order to enhance the Fund's
current income, but no significant additional purchase of interest
rate-sensitive securities will be made. The Fund's present structure
will allow it to fully participate in any additional market
improvement. Our primary focus will continue to seek to provide as
high a level as possible of tax-exempt income.
Short-term tax-exempt interest rates traded in the 3.25%-4.00% range
throughout most of the last six months. This scenario continued to
generate significant beneficial impact upon the yield paid to the
Fund's Common Stock shareholders. However, should the spread between
short-term and long-term interest rates narrow, the benefits of the
leverage will decline, and, as a result, reduce the yield of the
Fund's Common Stock. (For a complete explanation of the benefits and
risks of leveraging, see page 5 of this report to shareholders.)
In Conclusion
We appreciate your ongoing interest in MuniYield Michigan Insured
Fund, Inc., and we look forward to assisting you with your financial
needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Vincent R. Giordano)
Vincent R. Giordano
Vice President
(Fred K. Stuebe)
Fred K. Stuebe
Portfolio Manager
November 29, 1995
We are pleased to announce that Fred K. Stuebe is responsible for
the day-to-day management of MuniYield Michigan Insured Fund, Inc.
Mr. Stuebe has been employed by Merrill Lynch Asset Management, L.P.
(an affiliate of the Fund's investment adviser) since 1989 as Vice
President and Portfolio Manager in the Tax-Exempt Bond Department.
Prior thereto, he was employed by Old Republic Insurance Company
since 1984 as Vice President-Tax-Exempt Investments.
<TABLE>
PROXY RESULTS
<CAPTION>
During the six-month period ended October 31, 1995, MuniYield
Michigan Insured Fund, Inc. Common Stock shareholders voted on the
following proposals. The proposals were approved at a special
shareholders' meeting on May 12, 1995. The description of each
proposal and number of shares voted are as follows:
<PAGE>
Shares Shares Voted
Voted For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Edward H. Meyer 6,830,769 166,466
Jack B. Sunderland 6,834,688 162,547
J. Thomas Touchton 6,835,526 161,709
Arthur Zeikel 6,830,807 166,428
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP as the
Fund's independent auditors for the current fiscal year. 6,818,866 29,954 148,415
<CAPTION>
During the six-month period ended October 31, 1995, MuniYield
Michigan Insured Fund, Inc. Preferred Stock shareholders voted on
the following proposals. The proposals were approved at a special
shareholders' meeting on May 12, 1995. The description of each
proposal and number of shares voted are as follows:
Shares Shares Voted
Voted For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Donald Cecil 2,000 0
M. Colyer Crum 2,000 0
Edward H. Meyer 2,000 0
Jack B. Sunderland 2,000 0
J. Thomas Touchton 2,000 0
Arthur Zeikel 2,000 0
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP as the
Fund's independent auditors for the current fiscal year. 2,000 0 0
<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. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pick-up 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.
<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 many of the securities according to the
list at right.
AMT Alternative Minimum Tax (subject to)
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
PCR Pollution Control Revenue Bonds
UT Unlimited Tax
VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Michigan--100.5%
<S> <S> <C> <S> <C>
AAA Aaa $1,000 Bay City, Michigan, Electric Utility Revenue Bonds, 6.60% due 1/01/2012 (b) $ 1,074
AAA Aaa 5,000 Bay City, Michigan, School District Revenue Bonds, UT, 6.50% due 5/01/2008 (b) 5,379
AAA Aaa 1,750 Brighton, Michigan, Area School District, Revenue Refunding Bonds, UT,
Series II, 6% due 5/01/2020 (b) 1,777
AAA Aaa 1,250 Chelsea, Michigan, School District Revenue Bonds, UT, 5.875% due 5/01/2025 (c) 1,258
AAA Aaa 3,785 Chippewa Valley, Michigan, School Refunding Bonds, UT, 5.125% due 5/01/2015 (c) 3,565
AAA Aaa 2,000 City of Muskegon, Michigan, Public Schools District, GO, 5.25% due 5/01/2016 (c) 1,904
AAA Aaa 1,525 Dearborn, Michigan, Economic Development Corporation, Hospital Revenue Bonds
(Oakwood Obligation Group), Series A, 5.30% due 11/15/2006 (c) 1,554
AAA Aaa 2,000 Dearborn, Michigan, Sewage Disposal Revenue Bonds, Series A, 5.125% due
4/01/2016 (d) 1,881
NR* P1 500 Delta County, Michigan, Economic Development Corp., Environmental Improvement
Revenue Bonds (Mead Escambia Paper), DATES, Series E, 4.10% due 12/01/2023 (a) 500
Detroit, Michigan, Sewage Disposal Revenue Bonds (c):
AAA Aaa 7,200 6.625% due 7/01/2021 7,724
AAA Aaa 1,000 Refunding, Series A, 5.10% due 7/01/2004 1,019
AAA Aaa 5,000 Detroit, Michigan, Water Supply System, Revenue Refunding Bonds, 6.25% due
7/01/2012 (c) 5,259
AAA Aaa 1,000 Eastern Michigan University, GO, Revenue Refunding Bonds, 6.375% due 6/01/2014 (b) 1,051
AAA Aaa 1,500 Eaton Rapids, Michigan, Public Schools Building and Site Revenue Bonds, UT, 5.50%
due 5/01/2020 (d) 1,467
AAA Aaa 1,750 Ferndale, Michigan, School District, Revenue Refunding Bonds, UT, 5.375% due
5/01/2016 (c) 1,684
AAA Aaa 4,500 Grand Ledge, Michigan, Public Schools District Revenue Bonds, UT, 6.60% due
5/01/2004 (f) 5,158
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Michigan (continued)
<S> <S> <C> <S> <C>
Grand Rapids, Michigan, Water Supply System, Revenue Refunding Bonds (c):
AAA Aaa $3,000 6.25% due 1/01/2011 $ 3,153
AAA Aaa 3,490 6.50% due 1/01/2015 3,681
AAA Aaa 5,000 Grand Traverse County, Michigan, Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Munson Healthcare), Series A, 6.25% due 7/01/2022 (b) 5,137
AAA Aaa 1,000 Grandville, Michigan, Public Schools District, Revenue Refunding Bonds, UT, 6.60%
due 5/01/2015 (c) 1,087
AAA Aaa 2,500 Greenville, Michigan, Public Schools Building, GO, UT, 5.75% due 5/01/2024 (d) 2,493
AAA Aaa 1,300 Gull Lake, Michigan, Community School District, GO, UT, 6.80% due 5/01/2001 (c)(f) 1,468
AAA Aaa 2,000 Kent, Michigan, Hospital Finance Authority, Michigan Hospital Facility, Revenue
Refunding Bonds (Butterworth Hospital), Series A, 7.25% due 1/15/2013 (d) 2,351
AAA Aaa 4,000 Lakeshore, Michigan, Public Schools District (Berrien County), UT, 5.70% due
5/01/2022 (d) 3,973
AAA Aaa 1,000 Leslie, Michigan, Public Schools Building and Site Revenue Refunding Bonds
(Ingham and Jackson Counties), UT, 6% due 5/01/2015 (b) 1,023
AAA VMIG1++ 400 Michigan Higher Education Student Loan Authority Revenue Bonds, VRDN, AMT,
Series XII-F, 4.05% due 10/01/2020 (a)(b) 400
Michigan Municipal Bond Authority Revenue Bonds, Series A:
AAA Aaa 5,000 (Local Government Loan Program), 6.125% due 12/01/2018 (c) 5,168
AAA Aaa 1,035 Refunding (Local Government Loan Program), 6.50% due 5/01/2012 (b) 1,112
AAA Aaa 1,870 Refunding (Local Government Loan Program), 6.50% due 11/01/2012 (d) 2,008
AA Aa 2,950 (State Revolving Fund), 6.55% due 10/01/2013 3,172
AA Aa 2,000 (State Revolving Fund), 6.60% due 10/01/2018 2,122
Michigan State Building Authority, Revenue Refunding Bonds, Series I:
AAA Aaa 3,000 5.20% due 10/01/2010 (b) 2,922
AA- A1 1,500 6.75% due 10/01/2011 1,630
AAA Aaa 3,000 6.25% due 10/01/2020 (d) 3,108
<PAGE>
AAA Aaa 1,100 Michigan State Hospital Finance Authority, Revenue Refunding Bonds (Sisters
of Mercy Health Corp.), Series M, 6.25% due 2/15/2022 (e) 1,129
Michigan State Strategic Fund, Limited Obligation Revenue Bonds:
A+ A1 7,250 (Ford Motor Co. Project), AMT, Series A, 6.55% due 10/01/2022 7,476
AAA Aaa 2,500 Refunding (Detroit Edison Co. Project), Series CC, 6.95% due 9/01/2021 (c) 2,720
A+ A1 2,500 (Waste Management Inc. Project), AMT, 6.625% due 12/01/2012 2,603
NR* P1 1,400 Michigan State Strategic Fund, PCR, Refunding (Consumers Power Project), VRDN,
Series A, 3.50% due 4/15/2018 (a) 1,400
NR* VMIG1++ 700 Michigan State Strategic Fund, Solid Waste Disposal Revenue Bonds (Grayling
Generating Project), VRDN, AMT, 4.05% due 1/01/2014 (a) 700
AAA Aaa 7,500 Monroe County, Michigan, Economic Development Corporation, Limited Obligation
Revenue Refunding Bonds (Detroit Edison Co. Project), Series AA, 6.95% due
9/01/2022 (c) 8,826
Monroe County, Michigan, PCR (Detroit Edison Co. Project), AMT:
AAA Aaa 2,500 (Monroe and Fermi Plants), Series 1, 7.65% due 9/01/2020 (c) 2,822
AAA Aaa 4,500 Series CC, 6.55% due 6/01/2024 (d) 4,708
AAA Aaa 1,500 Series I, 7.30% due 9/01/2019 (b) 1,672
AAA Aaa 1,500 Series I-B, 6.55% due 9/01/2024 (d) 1,580
AAA Aaa 5,000 Plymouth-Canton, Michigan, Community School District, Revenue Refunding Bonds,
UT, 5.50% due 5/01/2017 (b) 4,913
</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>
AAA Aaa $5,925 Riverview, Michigan, Community School District, Building Revenue Bonds, UT,
6.70% due 5/01/2002 (c)(f) $ 6,701
Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds:
AA- Aa 3,000 Refunding (Beaumont Properties, Inc.), Series E, 6.625% due 1/01/2019 3,135
AA Aa 1,000 (William Beaumont Hospital), Series D, 6.75% due 1/01/2020 1,054
AAA Aaa 7,000 Saint Clair County, Michigan, Economic Development Corp., PCR, Refunding
(Detroit Edison), Series AA, 6.40% due 8/01/2024 (b) 7,491
<PAGE> University of Michigan, University Hospital Revenue Bonds, VRDN, Series A (a):
NR* VMIG1++ 1,800 4% due 12/01/2027 1,800
NR* VMIG1++ 500 Refunding, 4% due 12/01/2019 500
AAA Aaa 2,760 Western Michigan School District, Revenue Refunding Bonds, UT, 5.50% due
5/01/2020 (d) 2,698
AAA Aaa 3,470 Western Michigan University, General Revenue Bonds, 6.125% due 11/15/2022 (c) 3,575
AAA Aaa 1,000 Western Michigan University, Revenue Refunding Bonds, Series A, 5.50% due
7/15/2016 (c) 983
AAA Aaa 5,500 Wyandotte, Michigan, Electric Revenue Refunding Bonds, 6.25% due 10/01/2017 (d) 5,736
Total Investments (Cost--$153,091)--100.5% 162,484
Liabilities in Excess of Other Assets--(0.5%) (884)
--------
Net Assets--100.0% $161,600
========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1995.
(b)AMBAC Insured.
(c)FGIC Insured.
(d)MBIA Insured.
(e)FSA Insured.
(f)Prerefunded.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Ernst & Young LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$153,091,134) (Note 1a) $162,483,964
Cash 58,645
Interest receivable 2,949,383
Deferred organization expenses (Note 1e) 15,471
Prepaid expenses and other assets 7,429
------------
Total assets 165,514,892
------------
<PAGE>
Liabilities: Payables:
Securities purchased $ 3,581,084
Dividends to shareholders (Note 1f) 221,311
Investment adviser (Note 2) 70,395 3,872,790
------------
Accrued expenses and other liabilities 41,864
------------
Total liabilities 3,914,654
------------
Net Assets: Net assets $161,600,238
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (2,000 shares of AMPS*
issued and outstanding at $25,000 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 954,171
Accumulated realized capital losses on investments--net
(Note 5) (2,255,617)
Unrealized appreciation on investments--net 9,392,830
------------
Total--Equivalent to $15.13 net asset value per share of
Common Stock (market price--$13.50) 111,600,238
------------
Total capital $161,600,238
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended October 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 9,483,700
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 780,360
Commission fees (Note 4) 132,007
Professional fees 81,183
Accounting services (Note 2) 42,294
Transfer agent fees 39,412
Printing and shareholder reports 38,204
Directors' fees and expenses 22,945
Listing fees 16,420
Custodian fees 11,033
Amortization of organization expenses (Note 1e) 7,735
Pricing fees 7,153
Other 7,651
------------
Total expenses 1,186,397
------------
Investment income--net 8,297,303
------------
Realized & Realized loss on investments--net (2,255,586)
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net 14,921,938
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 20,963,655
(Notes 1b, 1d ============
& 3):
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended Oct. 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 8,297,303 $ 8,305,690
Realized gain (loss) on investments--net (2,255,586) 2,392,886
Change in unrealized appreciation/depreciation on
investments--net 14,921,938 (22,741,883)
------------ ------------
Net increase (decrease) in net assets resulting from operations 20,963,655 (12,043,307)
------------ ------------
<PAGE>
Dividends & Investment income--net:
Distributions to Common Stock (6,346,344) (6,701,446)
Shareholders Preferred Stock (1,671,220) (1,540,930)
(Note 1f): Realized gain on investments--net:
Common Stock (1,948,948) (604,972)
Preferred Stock (443,960) (122,510)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (10,410,472) (8,969,858)
------------ ------------
Capital Stock Offering costs resulting from the issuance of Common Stock -- (9,200)
Transactions ------------ ------------
(Notes 1e & 4): Net decrease in net assets derived from capital stock
transactions -- (9,200)
------------ ------------
Net Assets: Total increase (decrease) in net assets 10,553,183 (21,022,365)
Beginning of year 151,047,055 172,069,420
------------ ------------
End of year* $161,600,238 $151,047,055
============ ============
<FN>
*Undistributed investment income--net $ 954,171 $ 674,432
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlgihts
<CAPTION>
For the
Period
The following per share data and ratios have been derived Oct. 30,
from information provided in the financial statements. For the Year Ended 1992++ to
October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.70 $ 16.55 $ 14.14 $ 14.18
Operating -------- -------- -------- --------
Performance: Investment income--net 1.13 1.13 1.13 --
Realized and unrealized gain (loss) on
investments--net 1.71 (2.76) 2.47 --
-------- -------- -------- --------
Total from investment operations 2.84 (1.63) 3.60 --
-------- -------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net (.86) (.91) (.86) --
Realized gain on investments--net (.26) (.08) -- --
-------- -------- -------- --------
Total dividends and distributions to Common Stock
shareholders (1.12) (.99) (.86) --
-------- -------- -------- --------
Capital charge resulting from issuance of
Common Stock -- -- -- (.04)
-------- -------- -------- --------
Effect of Preferred Stock activity:++++
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net (.23) (.21) (.19) --
Realized gain on investments--net (.06) (.02) -- --
Capital charge resulting from issuance of
Preferred Stock -- -- (.14) --
-------- -------- -------- --------
Total effect of Preferred Stock activity (.29) (.23) (.33) --
-------- -------- -------- --------
Net asset value, end of period $ 15.13 $ 13.70 $ 16.55 $ 14.14
======== ======== ======== ========
Market price per share, end of period $ 13.50 $ 11.875 $ 16.625 $ 15.00
======== ======== ======== ========
Total Investment Based on market price per share 23.73% (23.52%) 17.03% .00%+++
Return:** ======== ======== ======== ========
Based on net asset value per share 20.20% (11.36%) 23.59% (.28%)+++
======== ======== ======== ========
<PAGE>
Ratios to Expenses, net of reimbursement .78% .78% .61% --%*
Average ======== ======== ======== ========
Net Assets:*** Expenses .78% .78% .70% --%*
======== ======== ======== ========
Investment income--net 5.44% 5.07% 5.24% --%*
======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $111,600 $101,047 $122,069 $101,736
======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $ 50,000 $ 50,000 $ 50,000 $ --
======== ======== ======== ========
Portfolio turnover 41.11% 21.76% 12.73% .00%
======== ======== ======== ========
Dividends Per Investment income--net $ 836 $ 771 $ 695 $ --
Share 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, may 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.
++++++Dividends per share have been adjusted to reflect a two-for-
one stock split.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
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 primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts and options thereon, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options, 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. Securities with
remaining maturities of sixty days or less are valued at amortized
cost, which approximates market value. Securities for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Directors of the Fund, including valuations furnished by a pricing
service retained by the Fund, which may utilize a matrix system for
valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general
supervision of the Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt 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
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.
<PAGE>
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired, or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(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). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and offering expenses--Deferred
organization expenses are amortized on a straight-line basis over a
five-year period. Direct expenses relating to the public offering of
the Common and Preferred Stock were charged to capital at the time
of issuance.
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
<PAGE>
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, PSI, Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1995 were $65,024,339 and
$60,439,777, respectively.
Net realized and unrealized gains (losses) as of October 31, 1995
were as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (125,297) $ 9,392,830
Financial futures contracts (2,130,289) --
----------- ------------
Total $(2,255,586) $ 9,392,830
=========== ============
As of October 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $9,392,830, of which $9,396,811
related to appreciated securities and $3,981 related to depreciated
securities. The aggregate cost of investments at October 31, 1995
for Federal income tax purposes was $153,091,134.
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 holders of Common Stock.
Common Stock
For the year ended October 31, 1995, shares issued and outstanding
remained constant at 7,374,470. At October 31, 1995, total paid-in
capital amounted to $103,508,854.
<PAGE>
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods. The yield in effect at October 31, 1995 was 3.82%.
A two-for-one stock split occurred on December 1, 1994. As a result,
as of October 31, 1995, there were 2,000 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share, plus accumulated and unpaid dividends of $281,840.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the year ended
October 31, 1995, MLPF&S, an affiliate of FAM, earned $107,432 as
commissions.
5. Capital Loss Carryforward:
At October 31, 1995, the Fund had a net capital loss carryforward of
approximately $125,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On November 13, 1995, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $0.073114 per share, payable on November 29, 1995 to shareholders
of record as of November 24, 1995.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors,
MuniYield Michigan Insured Fund, Inc.
We have audited the accompanying statement of assets, liabilities
and capital of MuniYield Michigan Insured Fund, Inc., including the
schedule of investments, as of October 31, 1995, 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 periods indicated
therein. 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.
<PAGE>
We conducted our audits in accordance with generally accepted
auditing standards. 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 mis-
statement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. 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, 1995, 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 financial highlights for each of the
indicated periods, in conformity with generally accepted accounting
principles.
(Ernst & Young LLP)
Princeton, New Jersey
December 1, 1995
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (UNAUDITED)
All of the net investment income distributions paid monthly by
MuniYield Michigan Insured Fund, Inc. during its taxable year ended
October 31, 1995 qualify as tax-exempt interest dividends for
Federal income tax purposes. Additionally, the following table
summarizes the per share capital gains distributions paid by the
Fund during the year:
<PAGE>
<TABLE>
<CAPTION>
Payable Short-Term Long-Term
Date Capital Gains Capital Gains
<S> <C> <C> <C>
Common Stock Shareholders 12/09/94 -- $ 0.264283
Preferred Stock Shareholders 11/30/94 -- $206.20
12/07/94 -- $ 29.08
12/14/94 -- $ 24.62
12/21/94 -- $ 29.08
12/28/94 -- $ 35.87
1/04/95 -- $ 0.23
Please retain this information for your records.
</TABLE>
PER SHARE INFORMATION (UNAUDITED)
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Dividends/Distributions
Net Realized Unrealized
Investment Gains Gains Net Investment Income Capital Gains
For the Quarter Income (Losses) (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
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 -- --
May 1, 1994 to July 31, 1994 .28 -- .31 .22 .05 -- --
August 1, 1994 to October 31, 1994 .28 .03 (1.35) .22 .06 -- --
November 1, 1994 to January 31, 1995 .29 (.26) .96 .22 .03 .26 .06
February 1, 1995 to April 30, 1995 .27 (.03) .34 .22 .06 -- --
May 1, 1995 to July 31, 1995 .29 .01 .20 .21 .07 -- --
August 1, 1995 to October 31, 1995 .28 (.02) .51 .21 .07 -- --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
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
May 1, 1994 to July 31, 1994 15.28 14.35 15.00 14.25 323
August 1, 1994 to October 31, 1994 15.02 13.69 14.375 11.875 843
November 1, 1994 to January 31, 1995 14.10 12.68 13.375 10.625 1,479
February 1, 1995 to April 30, 1995 14.78 14.13 13.75 12.875 402
May 1, 1995 to July 31, 1995 15.31 14.41 14.125 12.875 497
August 1, 1995 to October 31, 1995 15.18 14.41 13.625 13.00 440
<PAGE>
<FN>
*Calculations are based upon shares of Common Stock outstanding at
the end of each quarter.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
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
90 Washington Street
New York, New York 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, New York 10286
<PAGE>
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MIY
