MUNIYIELD
MICHIGAN
INSURED
FUND, INC.
FUND LOGO
Annual Report
October 31, 1996
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. Statements and other information
herein are as dated and are subject to change.
<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, 1996, the Common Stock of MuniYield
Michigan Insured Fund, Inc. earned $0.866 per share income
dividends, which included earned and unpaid dividends of $0.073.
This represents a net annualized yield of 5.71%, based on a month-
end net asset value of $15.16 per share. Over the same period, the
total investment return on the Fund's Common Stock was +6.45%, based
on a change in per share net asset value from $15.13 to $15.16, and
assuming reinvestment of $0.866 per share income dividends.
For the six-month period ended October 31, 1996, the total
investment return on the Fund's Common Stock was +5.71%, based on a
change in per share net asset value from $14.78 to $15.16, and
assuming reinvestment of $0.432 per share income dividends.
For the six-month period ended October 31, 1996, the Fund's Auction
Market Preferred Stock had an average yield of 3.42%.
<PAGE>
The Municipal Market Environment
Municipal bond yields generally moved lower during the six months
ended October 31, 1996. Long-term tax-exempt revenue bond yields, as
measured by the Bond Buyer Revenue Bond Index, declined
approximately 35 basis points (0.35%) to close the six-month period
ended October 31, 1996 at approximately 5.94%. The municipal bond
market exhibited considerable weekly yield volatility over the six
months ended October 31, 1996 with bond yields vacillating as much
as 20 basis points. This ongoing volatility was in response to
fluctuating evidence regarding the degree to which recent economic
growth would result in any significant increase in inflationary
pressures. Much of the evidence supporting stronger growth centered
around the strong employment growth seen in April and June with bond
yields rising in response. Other more recent economic indicators
have suggested that economic growth will not be excessive and
inflationary pressures will remain well-contained. This continued
benign inflationary environment has supported lower tax-exempt bond
yields in recent months. US Treasury bond yields have exhibited
similar, albeit greater, volatility during the six-month period
ended October 31, 1996, falling more than 20 basis points to end the
period at 6.64%. Over the past six months, tax-exempt bond yields
registered significantly greater declines than those shown by the US
Treasury bond. This relative outperformance by the municipal bond
market was largely the result of the strong technical support the
tax-exempt market has enjoyed throughout most of 1996. Perhaps most
significantly, the pace of new bond issuance has recently slowed.
Over the last year, approximately $180 billion in long-term
municipal securities was issued, an increase of over 25% versus the
same period a year ago. Much of this increase was the result of
issuers seeking to refinance their existing higher-couponed debt as
interest rates declined in 1995 and early 1996. As interest rates
rose, these financings became increasingly economically impractical
and issuance declined. Over the last six months, approximately $90
billion in long-term tax-exempt securities was underwritten, an
increase of 5% versus the comparable period a year earlier. Only $41
billion in tax-exempt securities was issued in the last three
months, a 3% decline in issuance versus the October 31, 1995
quarter.
At the same time, investor demand remained consistently strong. With
nominal new-issue yields generally above 6%, retail investor
interest was steady. Additionally, investors received over $50
billion this June and July in assets derived from coupon income,
bond maturities, and proceeds from early redemptions. Annual new
bond issuance has declined in recent years and is expected to remain
below levels seen in the early 1990s. Consequently, as the higher-
couponed bonds issued in the early-to-mid 1980s were redeemed at
their first optional call date, the total number of outstanding tax-
exempt bonds has declined. This combination of a declining net
supply and significant amounts of assets helped maintain investor
demand in recent months.
<PAGE>
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance has led to the yield
ratio between long-term taxable and tax-exempt securities falling
from in excess of 90% to approximately 85%. While still historically
very attractive, some institutional investors, particularly short-
term traders, began to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor, such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
Looking ahead, no clear consensus for the direction of interest
rates currently exists. Perhaps, the primary focus going forward
will be the extent to which the increase in interest rates seen thus
far in 1996 will negatively impact future economic growth. Should
growth slow in the interest rate-sensitive sectors of the economy,
like housing, auto, and consumer spending, as many economists assert
is likely, then bond yields are likely to decline. Under such a
scenario, the municipal bond market's performance is likely to
closely mirror that of the US Treasury bond market.
Portfolio Strategy
During the six months ended October 31, 1996, we continued to
maintain the neutral strategy we had adopted earlier this year. We
preferred income-oriented issues over more interest rate-sensitive
securities whenever possible. However, attractively priced, higher-
couponed, tax-exempt bonds continued to be scarce, making such
purchases difficult despite ongoing yield volatility. Consequently,
we chose to remain essentially fully invested during the six-month
period ended October 31, 1996. Until the near-term direction of tax-
exempt interest rates becomes clearer, we expect to maintain the
Fund's current strategy. Over the last 12 months, this strat-egy
greatly benefited the Fund's total return.
Short-term tax-exempt interest rates traded in a narrow range,
centering around 3.50% for most of the six-month period ended
October 31, 1996. Concerns over interest rate tightening by the
Federal Reserve Board have had little, if any, impact on short-term
municipal interest rates. Consequently, the leverage of the Common
Stock has continued to have a material beneficial impact on the
yield paid to the Common Stock shareholders. However, should the
spread between short-term and long-term interest rates narrow, the
benefits of the leverage will decline, and the yield on the Common
Stock will be reduced. (For a complete explanation of the benefits
and risks of leveraging, see page 4 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.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Fred K. Stuebe)
Fred K. Stuebe
Vice President and Portfolio Manager
November 29, 1996
<TABLE>
PROXY RESULTS
<CAPTION>
During the six-month period ended October 31, 1996, MuniYield
Michigan Insured Fund, Inc. Common Stock shareholders voted on the
following proposals. The proposals were approved at a special
shareholders' meeting on September 9, 1996. 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: Edward H. Meyer 7,001,968 117,121
Jack B. Sunderland 6,944,085 175,004
J. Thomas Touchton 6,944,098 174,991
Arthur Zeikel 6,942,581 176,508
<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. 6,967,673 38,973 112,443
<PAGE>
<CAPTION>
During the six-month period ended October 31, 1996, MuniYield
Michigan Insured Fund, Inc. Preferred Stock shareholders voted on
the following proposals. The proposals were approved at a special
shareholders' meeting on September 6, 1996. 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 1,949 0
M. Colyer Crum 1,949 0
Edward H. Meyer 1,949 0
Jack B. Sunderland 1,949 0
J. Thomas Touchton 1,949 0
Arthur Zeikel 1,949 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. 1,940 0 9
</TABLE>
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.
<PAGE>
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.
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>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
Michigan--98.9%
<S> <S> <C> <S> <C>
AAA Aaa $ 1,000 Bay City, Michigan, Electric Utility Revenue Bonds, 6.60% due 1/01/2012 (b) $ 1,080
AAA Aaa 5,000 Bay City, Michigan, School District, UT, 6.50% due 5/01/2008 (b) 5,352
AAA Aaa 2,125 Cedar Springs, Michigan, Public School District, UT, 5.875% due 5/01/2019 (d) 2,142
AAA Aaa 1,250 Chelsea, Michigan, School District, UT, 5.875% due 5/01/2025 (c) 1,259
<PAGE>
AAA Aaa 3,785 Chippewa Valley, Michigan, School Refunding Bonds, UT, 5.125% due 5/01/2015 (c) 3,550
AAA Aaa 2,000 Dearborn, Michigan, Sewage Disposal System Revenue Bonds, Series A, 5.125% due
4/01/2016 (d) 1,879
Delta County, Michigan, Economic Development Corp., Environmental Improvement
Revenue Bonds (Mead Escambia Paper) (a):
NR* P1 300 DATES, Series F, 3.60% due 12/01/2013 300
AA+ P1 900 Refunding, VRDN, Series D, 3.60% due 12/01/2023 900
AAA Aaa 1,600 Detroit, Michigan, City School District, UT, 7.10% due 5/01/2001 (d)(f) 1,796
AAA Aaa 7,200 Detroit, Michigan, Sewage Disposal Revenue Bonds, 6.625% due 7/01/2001 (c)(f) 7,965
Detroit, Michigan, Water Supply System Revenue Refunding Bonds (c):
AAA Aaa 2,500 5% due 7/01/2023 2,261
AAA Aaa 5,000 AMT, 6.25% due 7/01/2012 5,251
AAA Aaa 1,000 Eastern Michigan University, GO, Revenue Refunding Bonds, 6.375% due 6/01/2014 (b) 1,057
AAA Aaa 4,500 Grand Ledge, Michigan, Public Schools District, UT, 6.60% due 5/01/2004 (d)(f) 5,079
Grand Rapids, Michigan, Water Supply System, Revenue Refunding Bonds (c):
AAA Aaa 3,000 6.25% due 1/01/2011 3,156
AAA Aaa 3,490 6.50% due 1/01/2015 3,747
A1+ VMIG1++ 1,600 VRDN, 3.40% due 1/01/2020 (a) 1,600
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) 5,209
</TABLE>
<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>
AAA Aaa $ 1,000 Grandville, Michigan, Public Schools District, Refunding, UT, 6.60% due
5/01/2015 (c) $ 1,099
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) 1,444
AAA Aaa 1,500 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility Revenue
Refunding and Improvement Bonds (Bronson Methodist), 5.75% due 5/15/2016 (d) 1,501
AAA Aaa 2,000 Kent, Michigan, Hospital Finance Authority, Health Care Revenue Bonds (Butterworth
Health Systems), Series A, 5.625% due 1/15/2026 (d) 1,962
<PAGE>
AAA Aaa 2,000 Kent, Michigan, Hospital Finance Authority, Hospital Facility Revenue Refunding
Bonds (Butterworth Hospital), Series A, 7.25% due 1/15/2013 (d) 2,354
AAA Aaa 4,000 Lakeshore, Michigan, Public Schools District (Berrien County), UT, 5.70% due
5/01/2022 (d) 3,963
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
Lincoln Park, Michigan, School District, UT (c):
AAA Aaa 2,000 7% due 5/01/2020 2,281
AAA Aaa 1,000 5.90% due 5/01/2026 1,011
Michigan Higher Education Student Loan Authority Revenue Bonds, VRDN, AMT (a)(b):
A1 VMIG1++ 100 Series XII-D, 3.60% due 10/01/2015 100
AAA VMIG1++ 400 Series XII-F, 3.60% due 10/01/2020 400
Michigan Municipal Bond Authority Revenue Bonds, Series A:
AAA Aaa 5,000 (Local Government Loan Program), 6.125% due 12/01/2018 (c) 5,153
AAA Aaa 1,035 Refunding (Local Government Loan Program), 6.50% due 5/01/2012 (b) 1,128
AAA Aaa 1,870 Refunding (Local Government Loan Program), 6.50% due 11/01/2012 (d) 2,038
AA Aa 2,950 (State Revolving Fund), 6.55% due 10/01/2002 (f) 3,290
AA Aa 2,000 (State Revolving Fund), 6.60% due 10/01/2002 (f) 2,235
AAA Aaa 3,045 Michigan State Building Authority, Facilities Program Revenue Bonds, Series I,
6% due 10/01/2004 (b) 3,279
Michigan State Building Authority, Revenue Refunding Bonds, Series I:
AA- A1 1,500 6.75% due 10/01/2011 1,605
AAA Aaa 3,000 6.25% due 10/01/2020 (d) 3,130
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) 1,144
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 7,599
AAA Aaa 2,500 Refunding (Detroit Edison Co. Project), Series CC, 6.95% due 9/01/2021 (c) 2,735
A+ A1 2,500 (Waste Management Inc. Project), AMT, 6.625% due 12/01/2012 2,697
</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 $ 7,500 Monroe County, Michigan, Economic Development Corp., Limited Obligation Revenue
Refunding Bonds (Detroit Edison Co. Project), Series AA, 6.95% due 9/01/2022 (c) $ 9,013
<PAGE>
Monroe County, Michigan, PCR (Detroit Edison Co. Project), AMT:
AAA Aaa 2,500 Project 1, 7.65% due 9/01/2020 (c) 2,763
AAA Aaa 4,500 Series CC, 6.55% due 6/01/2024 (d) 4,820
AAA Aaa 1,500 Series I, 7.30% due 9/01/2019 (b) 1,646
AAA Aaa 1,500 Series I-B, 6.55% due 9/01/2024 (d) 1,614
AAA Aaa 1,870 Redford, Michigan, Unified School District No. 001, UT, 5.90% due 5/01/2014 (c) 1,914
AAA Aaa 5,925 Riverview, Michigan, Community School District Building, UT, 6.70% due
5/01/2002 (c)(f) 6,603
Royal Oak, Michigan, Hospital Finance Authority Revenue Bonds:
AAA Aaa 380 Refunding (Beaumont Properties, Inc.), Series E, 6.625% due 1/01/2002 (f) 421
AA- Aa 2,620 Refunding (Beaumont Properties, Inc.), Series E, 6.625% due 1/01/2019 2,792
AA Aaa 1,000 (William Beaumont Hospital), Series D, 6.75% due 1/01/2001 (f) 1,102
AAA Aaa 7,000 Saint Clair County, Michigan, Economic Development Corp., PCR, Refunding (Detroit
Edison Co. Project), Series AA, 6.40% due 8/01/2024 (b) 7,637
A1+ VMIG1++ 200 University of Michigan, University Hospital, Revenue Refunding Bonds, VRDN,
Series A, 3.60% due 12/01/2019 (a) 200
AAA Aaa 3,470 Western Michigan University, General Revenue Bonds, 6.125% due 11/15/2022 (c) 3,550
AAA Aaa 5,500 Wyandotte, Michigan, Electric Revenue Refunding Bonds, 6.25% due 10/01/2017 (d) 5,783
AAA Aaa 1,000 Ypsilanti, Michigan, School District, Refunding, 5.375% due 5/01/2026 936
Total Investments (Cost--$149,728)--98.9% 160,041
Other Assets Less Liabilities--1.1% 1,793
--------
Net Assets--100.0% $161,834
========
<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, 1996.
(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>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$149,727,474) (Note 1a) $160,040,962
Cash 45,171
Interest receivable 2,994,739
Deferred organization expenses (Note 1e) 7,735
Prepaid expenses and other assets 4,440
------------
Total assets 163,093,047
------------
Liabilities: Payables:
Securities purchased $ 936,280
Dividends to shareholders (Note 1f) 175,830
Investment adviser (Note 2) 68,355 1,180,465
------------
Accrued expenses and other liabilities 79,024
------------
Total liabilities 1,259,489
------------
Net Assets: Net assets $161,833,558
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 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 935,456
Accumulated realized capital losses on investments--net (Note 5) (2,924,240)
Unrealized appreciation on investments--net 10,313,488
------------
Total--Equivalent to $15.16 net asset value per share of
Common Stock (market price--$14.25) 111,833,558
------------
Total capital $161,833,558
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 9,341,174
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 807,275
Commission fees (Note 4) 129,320
Professional fees 77,989
Accounting services (Note 2) 48,626
Transfer agent fees 41,648
Printing and shareholder reports 24,736
Directors' fees and expenses 22,711
Listing fees 16,795
Custodian fees 9,898
Amortization of organization expenses (Note 1e) 7,736
Pricing fees 6,480
Other 19,027
------------
Total expenses 1,212,241
------------
Investment income--net 8,128,933
------------
Realized & Realized loss on investments--net (668,623)
Unrealized Change in unrealized appreciation on investments--net 920,658
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 8,380,968
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended Oct. 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 8,128,933 $ 8,297,303
Realized loss on investments--net (668,623) (2,255,586)
Change in unrealized appreciation/depreciation on
investments--net 920,658 14,921,938
------------ ------------
Net increase in net assets resulting from operations 8,380,968 20,963,655
------------ ------------
<PAGE>
Dividends & Investment income--net:
Distributions to Common Stock (6,383,408) (6,346,344)
Shareholders Preferred Stock (1,764,240) (1,671,220)
(Note 1f): Realized gain on investments--net:
Common Stock -- (1,948,948)
Preferred Stock -- (443,960)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (8,147,648) (10,410,472)
------------ ------------
Net Assets: Total increase in net assets 233,320 10,553,183
Beginning of year 161,600,238 151,047,055
------------ ------------
End of year* $161,833,558 $161,600,238
============ ============
<FN>
*Undistributed investment income--net $ 935,456 $ 954,171
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. For the Year Ended Oct. 30, 1992++
October 31, to Oct. 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.13 $ 13.70 $ 16.55 $ 14.14 $ 14.18
Operating -------- -------- -------- -------- --------
Performance: Investment income--net 1.11 1.13 1.13 1.13 --
Realized and unrealized gain (loss) on
investments--net .03 1.71 (2.76) 2.47 --
-------- -------- -------- -------- --------
Total from investment operations 1.14 2.84 (1.63) 3.60 --
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.87) (.86) (.91) (.86) --
Realized gain on investments--net -- (.26) (.08) -- --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.87) (1.12) (.99) (.86) --
-------- -------- -------- -------- --------
<PAGE> Capital charge resulting from issuance of
Common Stock -- -- -- -- (.04)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:++++
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.24) (.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 (.24) (.29) (.23) (.33) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 15.16 $ 15.13 $ 13.70 $ 16.55 $ 14.14
======== ======== ======== ======== ========
Market price per share, end of period $ 14.25 $ 13.50 $ 11.875 $ 16.625 $ 15.00
======== ======== ======== ======== ========
Total Investment Based on market price per share 12.14% 23.73% (23.52%) 17.03% .00%+++
Return:* ======== ======== ======== ======== ========
Based on net asset value per share 6.45% 20.20% (11.36%) 23.59% (.28%)+++
======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .75% .78% .78% .61% --
Net Assets:** ======== ======== ======== ======== ========
Expenses .75% .78% .78% .70% --
======== ======== ======== ======== ========
Investment income--net 5.03% 5.44% 5.07% 5.24% --
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of
Data: period (in thousands) $111,834 $111,600 $101,047 $122,069 $101,736
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $ 50,000 $ 50,000 $ 50,000 $ 50,000 --
======== ======== ======== ======== ========
Portfolio turnover 21.82% 41.11% 21.76% 12.73% .00%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,237 $ 3,232 $ 3,021 $ 3,441 --
======== ======== ======== ======== ========
Dividends Per Investment income--net $ 882 $ 836 $ 771 $ 695 --
Share On ======== ======== ======== ======== ========
Preferred Stock
Outstanding:++++++
<FN>
++Aggregate total investment return.
*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 Operartions.
++++The Fund's Preferred Stock was issued on November 19, 1992.
++++++Dividens per share have been adjusted to reflect a two-for-one
stock split that occurred on December 1, 1994.
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--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(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.
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.
<PAGE>
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, 1996 were $33,728,980 and
$35,309,437, respectively.
Net realized and unrealized gains (losses) as of October 31, 1996
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 88,478 $10,313,488
Financial futures contracts (757,101) --
----------- -----------
Total $ (668,623) $10,313,488
----------- ===========
As of October 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $10,313,488, of which $10,323,740
related to appreciated securities and $10,252 related to depreciated
securities. The aggregate cost of investments at October 31, 1996
for Federal income tax purposes was $149,727,474.
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, 1996, shares issued and outstanding
remained constant at 7,374,470. At October 31, 1996, 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
dividends at an annual rate that may vary for the successive
dividend periods. The yield in effect at October 31, 1996 was 3.45%.
<PAGE>
As of October 31, 1996, there were 2,000 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share.
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, 1996, MLPF&S, an affiliate of FAM, earned $99,151 as
commissions.
5. Capital Loss Carryforward:
At October 31, 1996, the Fund had a net capital loss carryforward of
approximately $144,000, of which $125,000 expires in 2003 and
$19,000 expires in 2004. This amount will be available to offset
like amounts of any future taxable gains.
6. Subsequent Event:
On November 8, 1996, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.073012 per share, payable on November 27, 1996 to shareholders
of record as of November 18, 1996.
<AUDIT-REPORT>
REPORT OF INDEPENDENT AUDITORS
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, 1996, 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.
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
misstatement. 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, 1996 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.
<PAGE>
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, 1996, 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 4, 1996
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniYield
Michigan Insured Fund, Inc. during its taxable year ended October
31, 1996 qualify as tax-exempt interest dividends for Federal income
tax purposes. Additionally, there were no capital gains distributed
by the Fund during the year.
Please retain this information for your records.
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
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Fred K. Stuebe, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
<PAGE>
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
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MIY
