MUNIYIELD
MICHIGAN
INSURED
FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
April 30, 1997
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.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.
MuniYield Michigan
Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #16427 -- 4/97
MuniYield Michigan Insured Fund, Inc.
TO OUR SHAREHOLDERS
For the six-month period ended April 30, 1997, the Common Stock of
MuniYield Michigan Insured Fund, Inc. earned $0.419 per share income
dividends, which included earned and unpaid dividends of $0.068. This
represents a net annualized yield of 5.67%, based on a month-end per
share net asset value of $14.90. Over the same period, the total
investment return on the Fund's Common Stock was +1.33%, based on a
change in per share net asset value from $15.16 to $14.90, and assuming
reinvestment of $0.424 per share income dividends.
For the six-month period ended April 30, 1997, the Fund's Auction Market
Preferred Stock had an average yield of 3.39%.
The Municipal Market Environment
Long-term tax-exempt revenue bonds traded in a relatively narrow range
throughout much of the six months ended April 30, 1997. By mid-January
1997, municipal bond yields had risen to over 6% as investors reacted
negatively to reports of progressively stronger domestic economic
growth. However, a continued lack of any material inflationary pressures
allowed bond yields to decline to their prior levels by late February.
Bond yields rose again as investors became increasingly concerned that
the US domestic economic strength seen thus far in 1997 would continue
and that the increase in short-term interest rates administered by the
Federal Reserve Board (FRB) in late March would be the first in a series
of such moves designed to slow the US economy before any dormant
inflationary pressures were awakened. Long-term tax-exempt bond yields
rose approximately 15 basis points (0.15%) to almost 6.15% by mid-April.
Similarly, long-term US Treasury bond yields rose over 35 basis points
over the same period to 7.16%. However, in late April economic
indicators were released showing that despite considerable economic
growth, any inflationary pressures, particularly those associated with
wage increases, were well-contained and of no immediate concern. Fixed-
income bond prices staged a significant rally during the last week of
April with long-term US Treasury bond yields falling nearly 20 basis
points to end the month at 6.95%. Municipal bond yields, as measured by
the Bond Buyer Revenue Bond Index, declined nearly 15 basis points to
stand at 6.01% by April 30, 1997.
As in recent quarters, the relative stability of long-term tax-exempt
bond yields was supported by low levels of new municipal bond issuance.
Over the past six months, approximately $90 billion in long-term tax-
exempt bonds was underwritten, a decline of more than 6% versus the
corresponding period a year earlier. During the three months ended April
30, 1997, $41 billion in new long-term municipal bonds was issued, also
a 6% decline in issuance as compared to the three months ended April 30,
1996. Overall investor demand has remained strong, particularly from
property and casualty insurance companies and individual retail
investors. In recent years, investor demand has increased whenever tax-
exempt bond yields have approached or exceeded the 6% level as they have
in the past few months.
Additionally, in recent months much of the new bond issuance was
dominated by a number of larger issues. These included $710 million in
New York City water bonds, $600 million in state of California bonds, $1
billion in New York City general obligation bonds, $435 million in Dade
County, Florida water and sewer revenue bonds, $450 million in Puerto
Rico Electric Authority issues, and $930 million in Port Authority of
New York and New Jersey issues. These bonds have typically been issued
in states with relatively high state income taxes and consequently
generally were underwritten at yields that were relatively unattractive
to residents in other states. This has exacerbated the general decline
in overall issuance in recent years, making the decrease in supply even
more dramatic for general market investors.
The present economic situation remains nearly ideal. The domestic
economy continues to grow steadily with little, if any, sign of a
resurgence in inflation. Recent economic growth generated considerable
unexpected tax revenues for the Federal government. Forecasts for the
1997 Federal fiscal deficit were reduced to under $100 billion, a level
not seen since the early 1980s. Such a reduced Federal deficit enhances
the prospect for a balanced Federal budget. All of these factors support
a scenario of steady, or even falling, interest rates in the coming
years. Present annual estimates of future municipal bond issuance remain
centered around $175 billion, indicating that the current relative
scarcity of tax-exempt bonds should continue for at least the remainder
of the year. Should interest rates begin to decline later this year,
either as the result of a balanced Federal budget or continued benign
inflation, investors are unlikely to be able to purchase long-term
municipal bonds at their currently attractive levels.
Portfolio Strategy
During the six-month period ended April 30, 1997, we generally
maintained the neutral strategy we had adopted in late 1996. However, in
recent months we positioned the Fund slightly more defensively given the
FRB's apparent intention to raise short-term interest rates further to
insure that economic growth slows and any potential inflationary
pressures are halted. We expect growth to slow eventually and interest
rates to fall in response.
Under ordinary circumstances, the FRB's actions impact the economy only
after a considerable period of time, usually measured in quarters, not
months. The action by the FRB was taken in late March, so typically we
would expect the economy to begin to slow by the beginning of the fourth
quarter of 1997, at the earliest. However, prospects for material
progress on reducing the Federal budget deficit may significantly alter
historic patterns of FRB actions and its consequences. Should
significant Federal budget reduction legislation be enacted quickly,
interest rates could fall sooner. Under such a scenario, we are prepared
to quickly adopt a more aggressive approach to the tax-exempt bond
market in order to more fully participate in a bond market rally.
However, until such legislation is in place, we expect tax-exempt bond
yields to trade in a relatively narrow range, with perhaps a slight
upward bias in yields. We will continue to purchase higher-couponed,
defensively oriented securities whenever they become available. We may
raise cash reserves to further protect the Fund's principal, but
probably not higher than 5% of net assets for any significant period of
time. The scarcity of attractively priced municipal issues is expected
to continue making reinvestment difficult.
Short-term tax-exempt interest rates also continued to trade in a
relatively narrow range, mostly between 3.50% and 3.75%. However, in
recent weeks short-term interest rates have risen to above 4%, largely
in response to seasonal corporate and individual tax pressures.
Historically, such pressures are short-lived and interest rates usually
begin to decline by mid-May. However, throughout the six-month period,
the leverage of the Preferred Stock was very favorable and has
significantly augmented the yield paid to Common Stock shareholders.
However, should the spread between short-term and long-term tax-exempt
interest rates narrow, the benefits of the leverage will decline and, as
a result, reduce the yield on the Fund's Common Stock. (For a complete
explanation of the benefits and risks of leveraging, see page 3 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,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/FRED K. STUEBE
Fred K. Stuebe
Vice President and Portfolio Manager
June 3, 1997
MuniYield Michigan Insured Fund, Inc. April 30, 1997
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 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>
<CAPTION>
MuniYield Michigan Insured Fund, Inc. April 30, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C>
Michigan -- 100.0%
AAA Aaa $1,000 Bay City, Michigan, Electric Utility Revenue Bonds, 6.60% due 1/01/2001 (b)(f) $1,080
AAA Aaa 5,000 Bay City, Michigan, School District, UT, 6.50% due 5/01/2008 (b) 5,318
AAA Aaa 1,250 Chelsea, Michigan, School District, UT, 5.875% due 5/01/2025 (c) 1,250
Delta County, Michigan, Economic Development Corp., Environmental Improvement
Revenue Bonds, DATES (Mead Escanaba Paper) (a):
NR* P1 1,000 Series E, 4.40% due 12/01/2023 1,000
NR* P1 2,600 Series F, 4.40% due 12/01/2013 2,600
AA+ P1 900 Delta County, Michigan, Economic Development Corp., Environmental Improvement
Revenue Refunding Bonds (Mead Escambia Paper), VRDN, Series D, 4.40% due
12/01/2023 (a) 900
AAA Aaa 1,600 Detroit, Michigan, City School District, UT, 7.10% due 5/01/2001 (d)(f) 1,762
AAA Aaa 7,200 Detroit, Michigan, Sewage Disposal Revenue Bonds, 6.625% due 7/01/2001 (c)(f) 7,823
AAA Aaa 5,000 Detroit, Michigan, Water Supply System, Revenue Refunding Bonds, 6.25% due
7/01/2012 (c) 5,256
Eastern Michigan University, GO, Revenue Bonds:
AAA Aaa 3,750 5.50% due 6/01/2027 (c) 3,585
AAA Aaa 1,000 Refunding, 6.375% due 6/01/2014 (b) 1,048
AAA Aaa 4,500 Grand Ledge, Michigan, Public Schools District, UT, 6.60% due 5/01/2004 (d)(f) 4,996
Grand Rapids, Michigan, Water Supply System, Revenue Refunding Bonds (c):
AAA Aaa 3,000 6.25% due 1/01/2011 3,130
AAA Aaa 3,490 6.50% due 1/01/2015 3,714
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) 5,160
AAA Aaa 1,000 Grandville, Michigan, Public Schools District, Refunding, UT, 6.60% due
5/01/2015 (c) 1,080
AAA Aaa 2,500 Greenville, Michigan, Public Schools Building, GO, UT, 5.75% due 5/01/2024 (d) 2,456
AAA Aaa 1,100 Gull Lake, Michigan, Community School District, GO, UT, 6.80% due 5/01/2001
(c)(f) 1,200
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) 1,483
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) 1,919
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) 2,313
AAA Aaa 4,000 Lakeshore, Michigan, Public Schools District (Berrien County), UT, 5.70% due
5/01/2022 (d) 3,932
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) 1,026
AAA Aaa 2,000 Lincoln Park, Michigan, School District, UT, 7% due 5/01/2020 (c) 2,225
Michigan Higher Education Student Loan Authority Revenue Bonds, VRDN, AMT
(a)(b):
A1 VMIG1+ 100 Series XII-D, 4.60% due 10/01/2015 100
AAA VMIG1+ 400 Series XII-F, 4.60% 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) 5,122
AAA Aaa 1,035 Refunding (Local Government Loan Program), 6.50% due 5/01/2012 (b) 1,115
AAA Aaa 1,870 Refunding (Local Government Loan Program), 6.50% due 11/01/2012 (d) 2,015
AA Aa 2,950 (State Revolving Fund), 6.55% due 10/01/2002 (f) 3,227
AA Aa 2,000 (State Revolving Fund), 6.60% due 10/01/2002 (f) 2,193
AAA Aaa 3,045 Michigan State Building Authority, Facilties Program Revenue Bonds, Series I, 6%
due 10/01/2004 (b) 3,226
AAA Aaa 3,000 Michigan State Building Authority, Revenue Refunding Bonds, Series I, 6.25%
due 10/01/2020 (d) 3,096
Michigan State Hospital Finance Authority Revenue Bonds (Mercy Health Services):
AAA Aaa 2,500 Refunding, Series T, 6.50% due 8/15/2013 (d) 2,700
AAA Aaa 4,000 Series Q, 5.375% due 8/15/2026 (b) 3,735
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) 1,134
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 7,537
AAA Aaa 2,500 Refunding (Detroit Edison Co. Project), Series CC, 6.95% due 9/01/2021 (c) 2,698
A A1 2,500 (Waste Management Inc. Project), AMT, 6.625% due 12/01/2012 2,666
NR* P1 3,700 Michigan State Strategic Fund, PCR, Refunding (Consumers Power Project), VRDN,
Series A, 4.30% due 4/15/2018 (a) 3,700
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) 8,770
Monroe County, Michigan, PCR (Detroit Edison Co. Project), AMT:
AAA Aaa 2,500 Project 1, 7.65% due 9/01/2020 (c) 2,724
AAA Aaa 4,500 Series CC, 6.55% due 6/01/2024 (d) 4,712
AAA Aaa 1,500 Series I-B, 6.55% due 9/01/2024 (d) 1,572
AAA Aaa 1,000 Oakland University, Michigan, General Revenue Bonds, 5.75% due 5/15/2026 (d) 989
AAA Aaa 1,870 Redford, Michigan, Unified School District No. 001, UT, 5.90% due 5/01/2014 (c) 1,905
AAA Aaa 5,925 Riverview, Michigan, Community School District Building, UT, 6.70% due
5/01/2002 (c)(f) 6,477
Royal Oak, Michigan, Hospital Finance Authority, Hospital Revenue Bonds:
AA - Aa3 2,620 Refunding (Beaumont Properties, Inc.), Series E, 6.625% due 1/01/2019 2,784
AA Aaa 1,000 (William Beaumont Hospital), Series D, 6.75% due 1/01/2001 (f) 1,084
A1+ VMIG1+ 300 (William Beaumont Hospital), VRDN, Series J, 4.40% due 1/01/2003 (a) 300
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) 7,391
A1+ VMIG1+ 1,000 University of Michigan, University Hospital Revenue Bonds, VRDN, Series A,
4.50% due 12/01/2027 (a) 1,000
AAA Aaa 3,470 Western Michigan University, General Revenue Bonds, 6.125% due 11/15/2022 (c) 3,527
AAA Aaa 5,500 Wyandotte, Michigan, Electric Revenue Refunding Bonds, 6.25% due 10/01/2017 (d) 5,704
Total Investments (Cost -- $152,006) -- 100.0% 159,859
Other Assets Less Liabilities -- 0.0% 10
--------
Net Assets -- 100.0% $159,869
========
(a) The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate
in effect at April 30, 1997.
(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.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of April 30, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $152,006,256) (Note 1a) $159,858,646
Cash 85,507
Interest receivable 2,887,320
Deferred organization expenses (Note 1e) 7,735
Prepaid expenses and other assets 4,440
------------
Total assets 162,843,648
------------
Liabilities: Payables:
Securities purchased $2,698,826
Dividends to shareholders (Note 1f) 167,299
Investment adviser (Note 2) 65,263 2,931,388
-----------
Accrued expenses and other liabilities 43,044
------------
Total liabilities 2,974,432
------------
Net Assets: Net assets $159,869,216
============
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 1,005,809
Accumulated realized capital losses on investments -- net (Note 5) (2,497,837)
Unrealized appreciation on investments -- net 7,852,390
-----------
Total -- Equivalent to $14.90 net asset value per share of Common Stock
(market price -- $13.625) 109,869,216
------------
Total capital $159,869,216
============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended
April 30, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $4,637,183
(Note 1d):
Expenses: Investment advisory fees (Note 2) $400,750
Commission fees (Note 4) 62,858
Professional fees 41,390
Accounting services (Note 2) 27,759
Transfer agent fees 18,913
Directors' fees and expenses 11,177
Printing and shareholder reports 9,979
Listing fees 8,012
Custodian fees 5,245
Amortization of organization expenses (Note 1e) 3,833
Pricing fees 3,265
Other 7,863
---------
Total expenses 601,044
-----------
Investment income -- net 4,036,139
-----------
Realized & Realized gain on investments -- net 426,403
Unrealized Change in unrealized appreciation on investments -- net (2,461,098)
Gain (Loss) on -----------
Investments -- Net Net Increase in Net Assets Resulting from Operations $2,001,444
(Notes 1b, 1d & 3): ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: April 30, 1997 Oct. 31, 1996
<S> <C> <C> <C>
Operations: Investment income -- net $4,036,139 $8,128,933
Realized gain (loss) on investments -- net 426,403 (668,623)
Change in unrealized appreciation/depreciation on investments -- net (2,461,098) 920,658
------------ ------------
Net increase in net assets resulting from operations 2,001,444 8,380,968
------------ ------------
Dividends to Investment income -- net:
Shareholders Common Stock (3,126,466) (6,383,408)
(Note 1f): Preferred Stock (839,320) (1,764,240)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (3,965,786) (8,147,648)
------------ ------------
Net Assets: Total increase (decrease) in net assets (1,964,342) 233,320
Beginning of period 161,833,558 161,600,238
------------ ------------
End of period* $159,869,216 $161,833,558
============ ============
* Undistributed investment income -- net $1,005,809 $935,456
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended For the Year Ended
April 30, October 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $15.16 $15.13 $13.70 $16.55 $14.14
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .54 1.11 1.13 1.13 1.13
Realized and unrealized gain (loss) on
investments -- net (.27) .03 1.71 (2.76) 2.47
--------- --------- --------- --------- ---------
Total from investment operations .27 1.14 2.84 (1.63) 3.60
--------- --------- --------- --------- ---------
Less dividends and distributions to Common
Stock shareholders:
Investment income -- net (.42) (.87) (.86) (.91) (.86)
Realized gain on investments -- net -- -- (.26) (.08) --
--------- --------- --------- --------- ---------
Total dividends and distributions to Common
Stock shareholders (.42) (.87) (1.12) (.99) (.86)
--------- --------- --------- --------- ---------
Effect of Preferred Stock activity:
Dividends and distributions to Preferred
Stock shareholders:
Investment income -- net (.11) (.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 (.11) (.24) (.29) (.23) (.33)
--------- --------- --------- --------- ---------
Net asset value, end of period $14.90 $15.16 $15.13 $13.70 $16.55
========= ========= ========= ========= =========
Market price per share, end of period $13.625 $14.25 $13.50 $11.875 $16.625
========= ========= ========= ========= =========
Total Investment Based on market price per share (1.42%)++++ 12.14% 23.73% (23.52%) 17.03%
Return:** ========= ========= ========= ========= =========
Based on net asset value per share 1.33%++++ 6.45% 20.20% (11.36%) 23.59%
========= ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement .75%* .75% .78% .78% .61%
Net Assets:*** ========= ========= ========= ========= =========
Expenses .75%* .75% .78% .78% .70%
========= ========= ========= ========= =========
Investment income -- net 5.03%* 5.03% 5.44% 5.07% 5.24%
========= ========= ========= ========= =========
Supplemental Net assets, net of Preferred Stock, end of
Data: period (in thousands) $109,869 $111,834 $111,600 $101,047 $122,069
========= ========= ========= ========= =========
Preferred Stock outstanding, end of period
(in thousands) $50,000 $50,000 $50,000 $50,000 $50,000
========= ========= ========= ========= =========
Portfolio turnover 7.14% 21.82% 41.11% 21.76% 12.73%
========= ========= ========= ========= =========
Leverage: Asset coverage per $1,000 $3,197 $3,237 $3,232 $3,021 $3,441
========= ========= ========= ========= =========
Dividends Per Share Investment income -- net $420 $882 $836 $771 $695
On Preferred Stock ========= ========= ========= ========= =========
Outstanding:+
* 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
+ Dividends per share have been adjusted to reflect a two-for-one stock split that occurred on December
1, 1994.
++++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
MuniYield Michigan Insured Fund, Inc. April 30, 1997
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. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature. The
Fund determines and makes available for publication the net asset value
of its Common Stock on a 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.
[bullet] 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.
[bullet] 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 for 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 straightline 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.
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, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the six months ended April 30, 1997 were $11,064,075 and $15,652,538,
respectively.
Net realized and unrealized gains as of April 30, 1997 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $426,403 $7,852,390
-------- ----------
Total $426,403 $7,852,390
======== ==========
As of April 30, 1997, net unrealized appreciation for Federal income tax
purposes aggregated $7,852,390, of which $7,988,742 related to
appreciated securities and $136,352 related to depreciated securities.
The aggregate cost of investments at April 30, 1997 for Federal income
tax purposes was $152,006,256.
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 six months ended April 30, 1997, shares issued and outstanding
remained constant at 7,374,470. At April 30, 1997, 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 April 30, 1997 was 4.05%.
As of April 30, 1997, 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 six months ended April 30, 1997,
Merrill Lynch, Pierce, Fenner & Smith Inc., an affiliate of FAM, earned
$46,848 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 May 9, 1997, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of $.068300
per share, payable on May 29, 1997 to shareholders of record as of May
19, 1997.
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 F. Stuebe, Vice President
Gerald M. Richard, Treasurer
Patrick D. Sweeney, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MIY
