MUNIVEST
MICHIGAN
INSURED
FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Annual Report
October 31, 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 K. Stuebe, Vice President
Gerald M. Richard, Treasurer
Patrick D. Sweeney, Secretary
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
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
NYSE Symbol
MVM
This report, including the financial information herein, is transmitted
to the shareholders of MuniVest 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.
MuniVest Michigan
Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #16638 -- 10/97
[RECYCLE LOGO]
Printed on post-consumer recycled paper
MUNIVEST MICHIGAN INSURED FUND, INC.
The Benefits and
Risks of
Leveraging
MuniVest 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 on
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.
Important Tax
Information
(unaudited)
All of the net investment income distributions paid by MuniVest Michigan
Insured Fund, Inc. during its taxable year ended October 31, 1997
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.
MuniVest Michigan Insured Fund, Inc., October 31, 1997
DEAR SHAREHOLDER
For the year ended October 31, 1997, the Common Stock of MuniVest
Michigan Insured Fund, Inc. earned $0.774 per share income dividends,
which included earned and unpaid dividends of $0.065. This represents a
net annualized yield of 5.55%, based on a month-end per share net asset
value of $13.95. Over the same period, the total investment return on
the Fund's Common Stock was +8.60%, based on a change in per share net
asset value from $13.65 to $13.95, and assuming reinvestment of $0.775
per share income dividends.
For the six-month period ended October 31, 1997, the total investment
return on the Fund's Common Stock was +7.28%, based on a change in per
share net asset value from $13.39 to $13.95, and assuming reinvestment
of $0.382 per share income dividends.
For the six-month period ended October 31, 1997, the Fund's Auction
Market Preferred Stock had an average yield of 3.43%
The Municipal Market Environment
Long-term interest rates generally declined during the six-month period
ended October 31, 1997. The general financial environment has remained
one of solid economic growth tempered by few or no inflationary
pressures. While economic growth has been conducive to declining bond
yields, it has remained strong enough to suggest that the Federal
Reserve Board (FRB) might find it necessary to raise short-term interest
rates. This would be intended to slow economic growth and ensure that
any incipient inflationary pressures would be curtailed. There were
investor concerns that the FRB would be forced to raise interest rates
prior to year-end, thus preventing an even more dramatic decline in
interest rates. Long-term tax-exempt revenue bonds, as measured by the
Bond Buyer Revenue Bond Index, declined over 50 basis points (0.50%) to
end the six-month period ended October 31, 1997 at 5.60%.
Similarly, long-term US Treasury bond yields generally moved lower
during most of the six-month period ended October 31, 1997. However, the
turmoil in the world's equity markets during the last week in October
has resulted in a significant rally in the Treasury bond market. The US
Treasury bond market was the beneficiary of a flight to quality mainly
by foreign investors whose own domestic markets have continued to be
very volatile. Prior to the initial decline in Asian equity markets,
long-term US Treasury bond yields were essentially unchanged. By the end
of October, US Treasury bond yields declined 80 basis points to 6.15%,
their lowest level of 1997.
The tax-exempt bond market's continued underperformance as compared to
its taxable counterpart has been largely in response to its ongoing
weakening technical position. As municipal bond yields have declined,
municipalities have hurriedly rushed to refinance outstanding higher-
couponed debt with new issues financed at present low rates. During the
last six months, over $118 billion in new long-term tax-exempt issues
were underwritten, an increase of over 25% versus the comparable period
a year ago. As interest rates have continued to decline, these
refinancings have intensified municipal bond issuance. During the past
three months, approximately $60 billion in new long-term municipal
securities were underwritten, an increase of over 34% as compared to the
October 31, 1996 quarter. Issuance in Michigan has very closely mirrored
national underwriting trends. During the six months ended October 31,
1997, more than $3.5 billion in long-term municipal bonds were issued by
Michigan municipalities, an increase of 27% versus the comparable period
a year ago. During the three months ended October 31, 1997, $1.8 billion
in Michigan securities were issued, an increase of 35% as compared to
the October 31, 1996 quarter.
The recent trend toward larger and larger bond issues has also
continued. However, issues of such magnitude usually must be
attractively priced to ensure adequate investor interest. Obviously, the
yields of other municipal bond issues are impacted by the yield premiums
such large issuers have been required to pay. Much of the municipal bond
market's recent underperformance can be traced to market pressures that
these large bond issuances have exerted.
In our opinion, the recent correction in world equity markets has
enhanced the near-term prospects for continued low, if not declining,
interest rates in the United States. It is likely that the recent
correction will result in slower US domestic growth in the coming
months. This decline is likely to be generated in part by reduced US
export growth. Additionally, some decline in consumer spending also can
be expected in response to reduced consumer confidence. Perhaps more
importantly, it is likely that barring a dramatic and unexpected
resurgence in domestic growth, the FRB may be unwilling to raise
interest rates until the full impact of the equity market's corrections
can be established.
All of these factors suggest that for at least the near term, interest
rates, including tax-exempt bond yields, are unlikely to rise by any
appreciable amount. It is probable that municipal bond yields will
remain under some pressure as a result of continued strong new-issue
supply. However, the recent pace of municipal bond issuance is likely to
be unsustainable. Continued increases in bond issuance will require
lower tax-exempt bond yields to generate the economic savings necessary
for additional municipal bond refinancing. With tax-exempt bond yields
at already attractive yield ratios relative to US Treasury bonds
(approximately 90% at the end of October), any further pressure on the
municipal market may represent an attractive investment opportunity.
Portfolio Strategy
During the six months ended October 31, 1997, we largely maintained the
defensive posture we had adopted earlier in the year. Our principal
concern was that economic growth would remain strong enough to force the
FRB to raise interest rates prior to year-end. We believed that as long
as the potential for FRB action remained, it was more likely that
interest rates would be raised than lowered. We believed that the Fund's
core position of interest rate-sensitive securities would allow the Fund
to remain competitive should economic growth weaken and interest rates
fall.
However, the turmoil in the world's equity markets during October has
largely removed concerns regarding any additional action by the FRB in
the near term. Additionally, it is likely that economic growth in the
United States will be slower than expected as a result of the recent
stock market correction. Consequently, we adopted a more neutral
position until the full economic impact of the world equity markets'
correction can be determined. Looking ahead, we expect to remain fully
invested going into 1998 in order to seek to enhance yield for Common
Stock shareholders.
Short-term tax-exempt interest rates have continued to trade in a
relatively narrow range, mostly between 3.50% and 3.75%. During the
period ended October 31, 1997, the leverage of the Preferred Stock was
very favorable and significantly augmented the yield paid to the 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 the yield on the Common Stock will be reduced. (For a
complete explanation of the benefits and risks of leveraging, see page 1
of this report to shareholders.)
In Conclusion
We appreciate your ongoing interest in MuniVest 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
December 3, 1997
<TABLE>
<CAPTION>
PROXY RESULTS
During the six-month period ended October 31, 1997, MuniVest Michigan Insured Fund, Inc. Common Stock shareholders voted on the
following proposals. The proposals were approved at a shareholders' meeting on September 11, 1997. The description of each
proposal and number of shares voted are as follows:
Shares Voted Shares Withheld
For From Voting
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors: Edward H. Meyer 7,051,654 148,169
Jack B. Sunderland 7,052,130 147,693
J. Thomas Touchton 7,056,607 143,216
Arthur Zeikel 7,052,530 147,293
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's independent
auditors for the current fiscal year. 7,019,816 47,785 132,222
During the six-month period ended October 31, 1997, MuniVest Michigan Insured Fund, Inc. Preferred Stock shareholders voted on
the following proposals. The proposals were approved at a shareholders' meeting on September 11, 1997. The description of each
proposal and number of shares voted are as follows:
<CAPTION>
Shares Voted Shares Withheld
For From Voting
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors: Donald Cecil 1,979 0
M. Colyer Crum 1,979 0
Edward H. Meyer 1,979 0
Jack B. Sunderland 1,979 0
J. Thomas Touchton 1,979 0
Arthur Zeikel 1,979 0
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's independent
auditors for the current fiscal year. 1,582 6 391
</TABLE>
<TABLE>
<CAPTION>
MuniVest Michigan Insured Fund, Inc., October 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C> <C>
Michigan -- 98.1% AAA Aaa $1,000 Belding, Michigan, Area Schools, Refunding, UT, 6.05% due 5/01/2021 (c) $1,063
AAA Aaa 1,000 Caledonia, Michigan, Community Schools, Refunding, UT, 6.625% due
5/01/2014 (b) 1,099
AAA Aaa 1,625 Central Michigan University Revenue Bonds, 5.50% due 10/01/2026 (c) 1,635
Coldwater, Michigan, Community Schools (e):
AAA Aaa 2,310 Refunding, 5.125% due 5/01/2023 2,248
AAA Aaa 1,000 UT, 6.30% due 5/01/2004 (f) 1,120
AAA Aaa 2,000 Detroit, Michigan, Distributable State Aid, 7.20% due 5/01/1999 (b)(f) 2,132
Detroit, Michigan, Sewage Disposal Revenue Bonds:
AAA Aaa 6,750 6.625% due 7/01/2001 (c)(f) 7,421
AAA Aaa 3,000 Series A, 5% due 7/01/2027 (e) 2,862
Detroit, Michigan, Water Supply System Revenue Bonds, Series A (e):
AAA Aaa 3,200 5% due 7/01/2021 3,063
AAA Aaa 1,250 5% due 7/01/2027 1,192
BBB Baa1 4,750 Dickinson County, Michigan, Economic Development Corp.,
Solid Waste Disposal, Revenue Refunding Bonds (Champion International),
6.55% due 3/01/2007 5,042
AAA Aaa 5,250 Eastern Michigan University Revenue Bonds, 5.50% due 6/01/2027 (c) 5,284
Grand Ledge, Michigan, Public Schools District, UT (e):
AAA Aaa 8,000 6.60% due 5/01/2004 (f) 9,096
AAA Aaa 1,000 6.45% due 5/01/2014 1,105
AAA Aaa 7,000 Grand Rapids, Michigan, Water Supply System, Revenue Refunding Bonds,
6.50% due 1/01/2015 (c) 7,532
AAA Aaa 5,250 Grand Traverse County, Michigan, Hospital Finance Authority,
Hospital Revenue Refunding Bonds (Munson Healthcare), Series A,
6.25% due 7/01/2022 (b) 5,571
AAA Aaa 1,570 Grandville, Michigan, Public Schools District, Refunding, UT,
6.60% due 5/01/2005 (c)(f) 1,792
AAA Aaa 2,250 Greenville, Michigan, Public Schools Building, UT, 5.75% due
5/01/2019 (e) 2,314
Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility,
Revenue Refunding and Improvement Bonds (Bronson Methodist) (e):
AAA Aaa 1,435 5.75% due 5/15/2016 1,482
AAA Aaa 1,000 5.875% due 5/15/2026 1,035
AAA Aaa 1,180 Series A, 6.375% due 5/15/2017 1,275
AAA Aaa 2,660 Kent, Michigan, Hospital Finance Authority, Health Care Revenue Bonds
(Butterworth Health Systems), Series A, 5.625% due 1/15/2026 (e) 2,688
AAA Aaa 2,000 Kent, Michigan, Hospital Finance Authority, Hospital Facility,
Revenue Refunding Bonds (Butterworth Hospital), Series A, 7.25%
due 1/15/2013 (e) 2,451
AAA Aaa 3,235 Lincoln Park, Michigan, School District, UT, 7% due 5/01/2006 (c)(f) 3,818
A1 VMIG1+ 500 Michigan Higher Education Student Loan Authority Revenue Bonds,
VRDN, AMT, Series XII-D, 3.70% due 10/01/2015 (a)(b) 500
Michigan Municipal Bond Authority Revenue Bonds (Local Government
Loan Program), Series A (c):
AAA Aaa 1,000 6% due 12/01/2013 1,067
AAA Aaa 2,000 6.125% due 12/01/2018 2,143
AAA Aaa 1,425 Michigan Municipal Bond Authority Revenue Bonds (Local Government Loan
Program -- Marquette Building), Series D, 6.75% due 5/01/2021 (b) 1,553
AAA Aaa 5,000 Michigan State, HDA, Rental Housing, Revenue Refunding Bonds,
Series A, 6.50% due 4/01/2023 (d) 5,252
Michigan State Hospital Finance Authority Revenue Bonds (b):
AAA Aaa 4,000 (Mercy Health Services), Series Q, 5.375% due 8/15/2026 3,951
AAA Aaa 1,225 (Mercy Health Services), Series R, 5.375% due 8/15/2026 1,210
AAA Aaa 1,360 (Saint John Hospital and Medical Center), Series A, 5.25% due 5/15/2026 1,321
Michigan State Hospital Finance Authority, Revenue Refunding Bonds:
AAA Aaa 2,305 (Mercy Health Services), Series T, 6.50% due 8/15/2013 (e) 2,550
AAA Aaa 3,000 (Saint John Hospital), Series A, 6% due 5/15/2013 (b) 3,163
AAA Aaa 1,460 (Sparrow Obligation Group), 6.50% due 11/15/2011 (e) 1,586
AAA Aaa 5,000 Michigan State Strategic Fund, Limited Obligation, Revenue
Refunding Bonds (Detroit Edison Co. Project), Series CC, 6.95%
due 9/01/2021 (c) 5,476
NR* P1 200 Michigan State Strategic Fund, PCR, Refunding (Consumers Power Project),
VRDN, Series A, 3.65% due 4/15/2018 (a) 200
AAA Aaa 6,500 Monroe County, Michigan, Economic Development Corp., Limited Obligation,
Revenue Refunding Bonds (Detroit Edison Co. Project), Series AA,
6.95% due 9/01/2022 (c) 8,003
AAA Aaa 4,500 Monroe County, Michigan, PCR (Detroit Edison Co. Project), AMT,
Series CC, 6.55% due 6/01/2024 (e) 4,895
AAA Aaa 2,500 Monroe County, Michigan, PCR (Detroit Edison Co. Project --
Monroe and Fermi Plants), AMT, Series 1, 7.65% due 9/01/2020 (c) 2,739
AAA Aaa 2,000 Montrose, Michigan, School District, UT, 5.60% due 5/01/2026 (e) 2,035
AAA Aaa 2,000 Northern Michigan University, Revenue Refunding Bonds, 5.125%
due 12/01/2020 (e) 1,948
AAA Aaa 2,500 Northview, Michigan, Public School District, Refunding, UT, 5.80%
due 5/01/2021 (e) 2,585
AAA Aaa 2,600 Novi, Michigan, Community School District, UT, 6.125% due 5/01/2013 (c) 2,771
AAA Aaa 1,000 Oakland University, Michigan, General Revenue Bonds, 5.75%
due 5/15/2026 (e) 1,030
AAA Aaa 1,000 Reeths-Puffer, Michigan, School District, Refunding, UT, 6%
due 5/01/2025 (c) 1,053
Royal Oak, Michigan, Hospital Finance Authority, Hospital Revenue Bonds
(William Beaumont Hospital):
AA Aaa 2,750 Series D, 6.75% due 1/01/2001 (f) 3,003
A1+ VMIG1+ 100 VRDN, Series J, 3.70% due 1/01/2003 (a) 100
AAA Aaa 2,400 Three Rivers, Michigan, Community Schools (Building and Site), UT,
6% due 5/01/2023 (e) 2,539
AAA Aaa 1,990 Tri-County, Michigan, Area School District, Refunding, UT, 5.25%
due 5/01/2020 (c) 1,936
A1+ VMIG1+ 2,800 University of Michigan, University Hospital Revenue Bonds, VRDN,
Series A, 3.65% due 12/01/2027 (a) 2,800
AAA Aaa 1,500 Waterford, Michigan, School District Revenue Bonds, UT, 6.25%
due 6/01/2004 (c)(f) 1,667
AAA Aaa 1,450 Wayne Charter County, Michigan, Airport Revenue Bonds
(Detroit Metropolitan Airport), Sub-Lien, Series A, 6.50%
due 12/01/2001 (e)(f) 1,600
AAA Aaa 1,625 Western Michigan University, General Revenue Refunding Bonds,
5.125% due 11/15/2022 (c) 1,579
AAA Aaa 2,000 Western Michigan University, Revenue Refunding Bonds, Series B,
6.50% due 7/15/2021 (b) 2,170
AAA Aaa 1,300 Ypsilanti, Michigan, School District, Refunding, UT,
5.75% due 5/01/2020 (c) 1,338
--------
Total Investments (Cost -- $140,343) -- 98.1% 150,083
Other Assets Less Liabilities -- 1.9% 2,841
--------
Net Assets -- 100.0% $152,924
========
(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, 1997.
(b) AMBAC Insured.
(c) FGIC Insured.
(d) FSA Insured.
(e) MBIA Insured.
(f) Prerefunded.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issuses shown have not been audited by Deloitte & Touche LLP.
Portfolio Abbreviations
To simplify the listings of MuniVest Michigan Insured Fund, Inc.'s
portfolio holdings in the Schedule of Investments, we have abbreviated
the names of some of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
HDA Housing Development Authority
PCR Pollution Control Revenue Bonds
UT Unlimited Tax
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
As of October 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $140,343,403) (Note 1a) $150,083,026
Cash 87,368
Interest receivable 3,050,256
Deferred organization expenses (Note 1e) 1,784
Prepaid expenses and other assets 8,242
------------
Total assets 153,230,676
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) $163,039
Investment adviser (Note 2) 68,831 231,870
------------
Accrued expenses and other liabilities 74,723
------------
Total liabilities 306,593
------------
Net Assets: Net assets $152,924,083
============
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 (7,379,969 shares issued and
outstanding) $737,997
Paid-in capital in excess of par 102,717,370
Undistributed investment income -- net 529,496
Accumulated realized capital losses on investments -- net (Note 5) (10,800,403)
Unrealized appreciation on investments -- net 9,739,623
------------
Total -- Equivalent to $13.95 net asset value per share of
Common Stock (market price -- $13.313) 102,924,083
------------
Total capital $152,924,083
============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1997
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned $8,562,772
Income (Note 1d):
Expenses: Investment advisory fees (Note 2) $760,018
Commission fees (Note 4) 126,760
Professional fees 72,786
Accounting services (Note 2) 39,452
Transfer agent fees 34,038
Printing and shareholder reports 28,191
Directors' fees and expenses 22,322
Listing fees 17,184
Custodian fees 10,473
Pricing fees 6,416
Amortization of organization expenses (Note 1e) 3,608
Other 11,674
----------
Total expenses 1,132,922
----------
Investment income -- net 7,429,850
----------
Realized & Unrealized Realized loss on investments -- net (380,050)
Gain (Loss) on Change in unrealized appreciation on investments -- net 2,564,434
Investments -- Net ----------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $9,614,234
==========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended October 31,
-------------------------------
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>
Operations: Investment income -- net $7,429,850 $7,416,066
Realized loss on investments -- net (380,050) (1,201,355)
Change in unrealized appreciation on investments -- net 2,564,434 1,183,894
------------ ------------
Net increase in net assets resulting from operations 9,614,234 7,398,605
------------ ------------
Dividends to Investment income -- net:
Shareholders Common Stock (5,721,912) (5,654,230)
(Note 1f): Preferred Stock (1,669,740) (1,771,460)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (7,391,652) (7,425,690)
------------ ------------
Net Assets: Total increase (decrease) in net assets 2,222,582 (27,085)
Beginning of year 150,701,501 150,728,586
------------ ------------
End of year* $152,924,083 $150,701,501
============ ============
* Undistributed investment income -- net $529,496 $491,298
============ ============
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. April 30,
For the Year Ended October 31, 1993+ to
----------------------------------------- Oct. 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 $13.65 $13.65 $11.83 $14.89 $14.18
Operating -------- -------- -------- -------- --------
Performance: Investment income -- net 1.01 1.01 1.01 1.01 .47
Realized and unrealized gain (loss) on
investments -- net .30 --+++++ 1.82 (3.06) .80
-------- -------- -------- -------- --------
Total from investment operations 1.31 1.01 2.83 (2.05) 1.27
-------- -------- -------- -------- --------
Less dividends to Common Stock shareholders:
Investment income -- net (.78) (.77) (.76) (.84) (.33)
-------- -------- -------- -------- --------
Capital charge resulting from issuance of
Common Stock -- -- -- -- (.03)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:++
Dividends to Preferred Stock shareholders:
Investment income -- net (.23) (.24) (.25) (.17) (.07)
Capital charge resulting from issuance of
Preferred Stock -- -- -- -- (.13)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.23) (.24) (.25) (.17) (.20)
-------- -------- -------- -------- --------
Net asset value, end of period $13.95 $13.65 $13.65 $11.83 $14.89
======== ======== ======== ======== ========
Market price per share, end of period $13.313 $12.375 $12.25 $10.25 $15.125
======== ======== ======== ======== ========
Total Based on market price per share 14.32% 7.40% 27.59% (27.71%) 3.10%++++
Investment ======== ======== ======== ======== ========
Return:** Based on net asset value per share 8.60% 6.32% 23.18% (15.25%) 7.37%++++
======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .75% .77% .77% .76% .56%*
Average ======== ======== ======== ======== ========
Net Assets:*** Expenses .75% .77% .77% .76% .78%*
======== ======== ======== ======== ========
Investment income -- net 4.89% 4.91% 5.21% 4.98% 4.67%*
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end
Data: of period (in thousands) $102,924 $100,702 $100,729 $87,313 $108,647
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $50,000 $50,000 $50,000 $50,000 $50,000
======== ======== ======== ======== ========
Portfolio turnover 22.43% 47.10% 53.85% 49.03% 15.34%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $3,058 $3,014 $3,015 $2,746 $3,173
======== ======== ======== ======== ========
Dividends Per
Share On Investment income -- net $835 $886 $939 $615 $255
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.
+ Commencement of operations.
++ The Fund's Preferred Stock were issued on June 1, 1993.
+++ Dividends per share have been adjusted to reflect a two-for-one
stock split that occurred on December 1, 1994.
++++ Aggregate total investment return.
+++++ Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
MuniVest Michigan Insured Fund, Inc., October 31, 1997
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniVest 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 MVM. 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 (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.
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 year ended October 31, 1997 were $32,153,762 and $33,243,879,
respectively.
Net realized and unrealized gains (losses) as of October 31, 1997 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $408,194 $9,739,623
Financial futures contracts (788,244) --
---------- ----------
Total $(380,050) $9,739,623
========== ==========
As of October 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $9,739,623, all of which related to appreciated
securities. The aggregate cost of investments at October 31, 1997 for
Federal income tax purposes was $140,343,403.
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
Shares issued and outstanding during the years ended October 31, 1997
and October 31, 1996 remained constant.
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, 1997 was 3.52%.
As of October 31, 1997, there were 2,000 AMPS 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, 1997,
Merrill Lynch, Pierce, Fenner & Smith Inc., an affiliate of FAM, earned
$95,935 as commissions.
5. Capital Loss Carryforward:
At October 31, 1997, the Fund had a net capital loss carryforward of
approximately $8,142,000, of which $4,333,000 expires in 2002;
$3,063,000 expires in 2003 and $746,000 expires in 2004. This amount
will be available to offset like amounts of any future taxable gains.
6. Subsequent Event:
On November 6, 1997, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of $.065307
per share, payable on November 26, 1997 to shareholders of record as of
November 17, 1997.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
MuniVest Michigan Insured Fund, Inc.:
We have audited the accompanying statement of assets, liabilities and
capital, including the schedule of investments, of MuniVest Michigan
Insured Fund, Inc. as of October 31, 1997, the related statements of
operations for the year then ended and changes in net assets for each of
the years in the two-year period then ended, and the financial
highlights for each of the years in the four-year period then ended and
the period April 30, 1993 (commencement of operations) to October 31,
1993. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and the 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
the 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 at October 31, 1997 by correspondence
with the custodian. 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, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniVest Michigan Insured Fund, Inc. as of October 31, 1997, the results
of its operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 3, 1997
