MUNIVEST
MICHIGAN
INSURED
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
October 31, 1998
<PAGE>
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. How ever, 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 share holders 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.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, interest rates on inverse
floaters will decrease when short-term interest rates increase and increase when
short-term interest rates decrease. Investments in inverse floaters may be
characterized as derivative securities and may subject the Fund to the risks of
reduced or eliminated interest payments and losses of invested principal. In
addition, inverse floaters have the effect of providing investment leverage and,
as a result, the market value of such securities will generally be more volatile
than that of fixed-rate, tax-exempt securities. To the extent the Fund invests
in inverse floaters, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in such securities.
<PAGE>
MuniVest Michigan Insured Fund, Inc., October 31, 1998
DEAR SHAREHOLDER
For the year ended October 31, 1998, the Common Stock of MuniVest Michigan
Insured Fund, Inc. earned $0.749 per share income dividends, which included
earned and unpaid dividends of $0.063. This represents a net annualized yield of
5.18%, based on a month-end per share net asset value of $14.46. Over the same
period, the total investment return on the Fund's Common Stock was +9.56%, based
on a change in per share net asset value from $13.95 to $14.46, and assuming
reinvestment of $0.750 per share income dividends.
For the six-month period ended October 31, 1998, the total investment return on
the Fund's Common Stock was +6.95%, based on a change in per share net asset
value from $13.89 to $14.46, and assuming reinvestment of $0.370 per share
income dividends.
For the six-month period ended October 31, 1998, the Fund's Auction Market
Preferred Stock had an average yield of 3.18%.
The Municipal Market Environment
During the six months ended October 31, 1998, long-term bond yields declined
significantly. The near absence of any inflationary pressures in the United
States continued to support historic low interest rates. Additionally, foreign
economic factors have continued to outweigh US domestic fundamentals, as they
have for much of 1998. The economic crisis that began in Asia over a year ago
has spread both to Russia and South America. However, economic factors in these
countries have begun to negatively impact US growth. For example, employment in
the US manufacturing sector declined in recent months as a result of reduced
demand for export goods. Concern that the modest decline in US economic growth
seen thus far would spread and intensify led the Federal Reserve Board to lower
short-term interest rates in late September, in mid-October and in mid-November.
These actions were taken to offset the drag of foreign economies on future US
growth.
US Treasury bond yields continued to benefit from a strong "flight to quality"
as foreign investors were drawn to the relative safe haven of US Government
securities. Additionally, the sharp equity market correction, which began at the
end of August, triggered a further flight into US Treasury securities. Long-term
US Treasury bond yields fell over 90 basis points (0.90%) to approximately 5% by
the end of September. This is the lowest level since the US Treasury
reintroduced 30-year maturity bond auctions in 1977.
By early October, worldwide investor confidence began to rise, reducing the
demand for the safety and liquidity of US Treasury securities. Investor
confidence was restored by the belief that major world governments, as well as
the International Monetary Fund, would take the necessary action to support weak
domestic economies in Asia and Latin America. Additionally, rapid recovery in US
and world equity markets caused some investors to reallocate funds from US debt
instruments back to various world equity markets. US Treasury securities yields
rose for the remainder of the month to end October at 5.15%. During the
six-month period ended October 31, 1998, long-term Treasury security yields
declined approximately 80 basis points.
During the past 12 months, the tax-exempt bond market has contended with
significant new-issue supply pressures. Over the past year, more than $277
billion in new long-term tax-exempt bonds were underwritten, an increase of
almost 30% compared to the same period a year ago. During the most recent
six-month period, approximately $140 billion in new long-term municipal bonds
were underwritten, representing an increase of more than 15% over the same
six-month period last year. This increased supply, coupled with the high returns
the US equity market generated for much of 1998, was one of the major reasons
municipal bond yields declined less than their taxable counterparts during the
period.
The continued increase in new bond issuance has required ever-lower tax-exempt
bond yields to generate the economic savings necessary for additional municipal
bond financings. Consequently, the pace of new bond issuance has slowed in
recent months. In fact, the trend may be reversing. During the three months
ended October 31, 1998, just over $60 billion in new long-term municipal bonds
were underwritten, a decline of 4% compared to the same quarter a year ago.
During the month of October, there were less than $20 billion in new municipal
bond securities issued, a decline of over 10% compared to October 1997. We will
monitor this trend closely in the coming months to determine if the supply
pressures exerted thus far in 1998 are abating and fostering a more balanced
supply/ demand environment.
Throughout the six-month period ended October 31, 1998, municipal bond yields
followed a pattern that was similar to US Treasury securities, although the
yield declines were more muted. As measured by the unmanaged Bond Buyer Revenue
Bond Index, long-term, uninsured tax-exempt revenue bond yields declined over 40
basis points to 5.09% by the end of September, their lowest level since the
early 1970s. Municipal bond yields rose during October to end the period at
5.24%. Over the past six months, long-term tax-exempt bond yields declined
almost 30 basis points.
Although municipal bond yields declined during the six-month period, recent
supply pressures and the absence of the safe haven status enjoyed by US
securities caused municipal bond yields to rise relative to US Treasury bond
yields. At October 31, 1998, long-term tax-exempt bond yield spreads were
attractive relative to US Treasury securities of comparable maturities (over
100%), well in excess of their historic range of 85%-88%. Tax-exempt bond yield
ratios have rarely exceeded 90% in the 1980s and 1990s. Historically, yield
spreads have been wider than these levels when there have been potential changes
in Federal tax codes that would have adversely affected the tax-favored status
of municipal bonds.
Currently, municipal bond investors find themselves in a unique investment
environment. Previous opportunities to purchase tax-exempt bonds with yields
exceeding that of comparable US Treasury issues have been limited to relatively
brief episodes and then further limited to a few municipal credits undergoing
specific financial pressures. At present, almost the entire municipal bond
universe, across nearly all maturity and credit sectors, can be purchased at
yields greater than their taxable counterparts. However, the current opportunity
may quickly disappear should tax-exempt bond supply pressures diminish or the
safe-haven status of US Treasury securities become less desirable. Under these
conditions, municipal bond ratios should quickly revert to more normal historic
percentages, certainly well below their presently attractive levels.
Portfolio Strategy
During the six-month period ended October 31, 1998, we maintained the Fund's
constructive investment strategy toward the municipal bond market that was
adopted at the beginning of the period. We continued to believe that the
combination of negligible inflation and a slowing domestic economy would result
in a low interest rate environment. We expect that this environment is likely to
continue well into 1999. Consequently, we anticipate little change to the Fund's
existing structure and composition. Furthermore, we intend to maintain a fully
invested position in order to seek to enhance the Fund's dividend income.
Throughout the six months ended October 31, 1998, short-term tax-exempt bond
interest rates traded in a relatively narrow range centered around 3.50%. Recent
Federal Reserve Board actions to lower short-term taxable interest rates in
September, October, and again in November have begun to be reflected in the
tax-exempt market as well. Interest rates paid to the Fund's Preferred Stock
shareholders have declined in recent weeks, which resulted in higher dividends
to the Fund's Common Stock shareholders. We anticipate that this situation is
likely to continue in the coming months, particularly if the Federal Reserve
Board lowers taxable short-term interest rates further. 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 1
of this report to shareholders.)
Looking ahead, we will closely monitor two areas of the Fund's current portfolio
composition. First, despite an already existing high-credit quality structure
(over 60% of the Fund is rated AA or higher by at least one of the major rating
agencies), we will continue to emphasize higher-rated issues. The yield spread
between higher-quality and lower-rated tax-exempt issues has remained
historically narrow, and we are able to continue to purchase better quality
issues with little yield sacrifice. Also, while none of our current holdings can
be called within two years, we will continue to manage the Fund's callable
securities in order to limit the impact that the loss of higher nominal
coupon-bearing issues would have on the Fund's income stream. We purchased
higher-coupon issues at interest rate levels that are significantly higher than
presently available. Since interest levels have declined, the market value of
these securities has increased dramatically. As these issues approach their
earliest call dates, we will monitor opportunities to sell these bonds,
capturing the existing market appreciation. As a result, the above-original
purchase price proceeds will provide for us the opportunity to purchase
additional securities with greater call protection and pose little disruption to
the Fund's existing dividend income stream.
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 2, 1998
2 & 3
<PAGE>
MuniVest Michigan Insured Fund, Inc., October 31, 1998
PROXY RESULTS
During the six-month period ended October 31, 1998, MuniVest Michigan Insured
Fund, Inc. Common Stock shareholders voted on the following proposals. The
proposals were approved at a shareholders' meeting on September 14, 1998. The
description of each proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors: Edward H. Meyer 7,112,433 130,632
Jack B. Sunderland 7,112,433 130,632
J. Thomas Touchton 7,112,433 130,632
Fred G. Weiss 7,112,433 130,632
Arthur Zeikel 7,112,433 130,632
</TABLE>
<TABLE>
<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. 7,160,208 32,243 60,289
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
During the six-month period ended October 31, 1998, MuniVest Michigan Insured
Fund, Inc. Preferred Stock shareholders voted on the following proposals. The
proposals were approved at a shareholders' meeting on September 14, 1998. The
description of each proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors: Donald Cecil 1,931 3
M. Colyer Crum 1,931 3
Edward H. Meyer 1,931 3
Jack B. Sunderland 1,931 3
J. Thomas Touchton 1,931 3
Fred G. Weiss 1,931 3
Arthur Zeikel 1,931 3
</TABLE>
<TABLE>
<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. 1,620 48 267
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Michigan--93.6% Belding, Michigan, Area Schools, UT (c):
AAA Aaa $ 785 6.05% due 5/01/2006 (f) $ 892
AAA Aaa 215 6.05% due 5/01/2021 240
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Caledonia, Michigan, Community Schools, Refunding, UT, 6.625% due
5/01/2014 (b) 1,102
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,625 Central Michigan University Revenue Bonds, 5.50% due 4/01/2007 (c)(f) 1,798
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Coldwater, Michigan, Community Schools, UT, 6.30% due 5/01/2004 (e)(f) 1,134
--------------------------------------------------------------------------------------------------------------
Delta County, Michigan, Economic Development Corporation, Environmental
Improvement Revenue Bonds (a):
NR* P1 200 (Mead Escanaba Paper), DATES, Series F, 3.70% due 12/01/2013 200
NR* P1 900 Refunding (Mead Escambia Paper), VRDN, Series C, 3.70% due 12/01/2023 900
--------------------------------------------------------------------------------------------------------------
Detroit, Michigan, Sewage Disposal Revenue Bonds:
AAA Aaa 4,100 6.625% due 7/01/2001 (c)(f) 4,488
AAA Aaa 5,500 Series A, 5% due 7/01/2027 (e) 5,417
--------------------------------------------------------------------------------------------------------------
Detroit, Michigan, Water Supply System Revenue Bonds, Series A (e):
AAA Aaa 3,200 5% due 7/01/2021 3,157
AAA Aaa 3,150 5% due 7/01/2027 3,098
--------------------------------------------------------------------------------------------------------------
AAA Aaa 5,250 Eastern Michigan University, General Revenue Bonds, 5.50% due
6/01/2027 (c) 5,540
--------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Ferris State University, Michigan, General Revenue Refunding Bonds, 5%
due 10/01/2023 (b) 1,972
--------------------------------------------------------------------------------------------------------------
Grand Ledge, Michigan, Public Schools District, UT (e):
AAA Aaa 8,000 6.60% due 5/01/2004 (f) 9,186
AAA Aaa 1,000 6.45% due 5/01/2014 1,125
AAA Aaa 1,000 Refunding, 5.375% due 5/01/2024 1,030
--------------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 Grand Rapids, Michigan, Sanitary Sewer System, Revenue Refunding and
Improvement Bonds, Series A, 4.75% due 1/01/2028 (c) 3,806
--------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 1,100 Grand Rapids, Michigan, Water Supply System, Revenue Refunding Bonds,
VRDN, 2.90% due 1/01/2020 (a)(c) 1,100
--------------------------------------------------------------------------------------------------------------
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) 5,730
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,570 Grandville, Michigan, Public Schools District, Refunding, UT, 6.60% due
5/01/2005 (c)(f) 1,816
--------------------------------------------------------------------------------------------------------------
</TABLE>
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)
DATES Daily Adjustable Tax-Exempt Securities
HDA Housing Development Authority
PCR Pollution Control Revenue Bonds
RITR Residual Interest Trust Receipts
UT Unlimited Tax
VRDN Variable Rate Demand Notes
4 & 5
<PAGE>
MuniVest Michigan Insured Fund, Inc., October 31, 1998
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
STATE Ratings Ratings Amount Issue (Note 1a)
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Michigan AAA Aaa $2,250 Greenville, Michigan, Public Schools Building, UT, 5.75% due 5/01/2004
(concluded) (e)(f) $ 2,471
--------------------------------------------------------------------------------------------------------------
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 1,529
AAA Aaa 1,000 5.875% due 5/15/2026 1,076
AAA Aaa 1,180 Series A, 6.375% due 5/15/2003 (f) 1,325
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Kent County, Michigan, Airport Facility Revenue Bonds (Kent County
International Airport), AMT, 5% due 1/01/2028 (e) 967
--------------------------------------------------------------------------------------------------------------
AAA Aaa 2,660 Kent, Michigan, Hospital Finance Authority, Health Care Revenue Bonds
(Butterworth Health Systems), Series A, 5.625% due 1/15/2006 (e)(f) 2,956
--------------------------------------------------------------------------------------------------------------
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) 2,492
--------------------------------------------------------------------------------------------------------------
AAA Aaa 3,235 Lincoln Park, Michigan, School District, UT, 7% due 5/01/2006 (c)(f) 3,871
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,900 Lowell, Michigan, Area Schools, Refunding, UT, 4.91%** due 5/01/2016 (c) 803
--------------------------------------------------------------------------------------------------------------
A1 VMIG1+ 500 Michigan Higher Education Student Loan Authority Revenue Bonds, VRDN,
AMT, Series XII-D, 3.15% due 10/01/2015 (a)(b) 500
--------------------------------------------------------------------------------------------------------------
AA+ Aa1 1,250 Michigan Municipal Bond Authority Revenue Bonds (Drinking Water Revolving
Fund), 4.75% due 10/01/2020 1,197
--------------------------------------------------------------------------------------------------------------
Michigan Municipal Bond Authority Revenue Bonds (Local Government Loan
Program), Series A (c):
AAA Aaa 1,000 6% due 12/01/2013 1,108
AAA Aaa 2,000 6.125% due 12/01/2018 2,236
--------------------------------------------------------------------------------------------------------------
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) 1,547
--------------------------------------------------------------------------------------------------------------
AAA Aaa 3,990 Michigan State, HDA, Rental Housing Revenue Refunding Bonds, Series A,
6.50% due 4/01/2023 (d) 4,246
--------------------------------------------------------------------------------------------------------------
A- A3 1,000 Michigan State Hospital Finance Authority Revenue Bonds (Detroit Medical
Center), Series A, 5.25% due 8/15/2028 974
--------------------------------------------------------------------------------------------------------------
Michigan State Hospital Finance Authority, Revenue Refunding Bonds:
AAA Aaa 2,930 (Detroit Medical Group), Series A, 5.25% due 8/15/2027 (b) 2,956
AAA Aaa 2,305 (Mercy Health Services), Series T, 6.50% due 8/15/2013 (e) 2,647
AAA Aaa 3,000 (Saint John Hospital), Series A, 6% due 5/15/2013 (b) 3,258
AAA Aaa 1,460 (Sparrow Obligation Group), 6.50% due 11/15/2011 (e) 1,588
--------------------------------------------------------------------------------------------------------------
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) 5,470
--------------------------------------------------------------------------------------------------------------
NR* P1 3,600 Michigan State Strategic Fund, PCR, Refunding (Consumers Power Project),
VRDN, Series A, 3.70% due 4/15/2018 (a) 3,600
--------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Michigan State Trunk Line General Refunding, Series A, 4.75% due
11/01/2020 (e) 4,815
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Michigan State University, Revenue Bonds, Series A, 5.125% due
2/15/2016 (b) 1,017
--------------------------------------------------------------------------------------------------------------
AAA Aaa 6,500 Monroe County, Michigan, Economic Development Corporation, Limited
Obligation Revenue Refunding Bonds (Detroit Edison Co. Project),
Series AA, 6.95% due 9/01/2022 (c) 8,307
--------------------------------------------------------------------------------------------------------------
AAA Aaa 4,500 Monroe County, Michigan, PCR (Detroit Edison Co. Project), AMT, Series
CC, 6.55% due 6/01/2024 (e) 4,983
--------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Montrose, Michigan, School District, UT, 5.60% due 5/01/2026 (e) 2,112
--------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Northern Michigan University, Revenue Bonds, 5% due 12/01/2025 (e) 1,971
--------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Northview, Michigan, Public School District, Refunding, UT, 5.80% due
5/01/2006 (e)(f) 2,801
--------------------------------------------------------------------------------------------------------------
AAA Aaa 2,600 Novi, Michigan, Community School District, UT, 6.125% due 5/01/2003
(c)(f) 2,892
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Oakland University, Michigan, General Revenue Bonds, 5.75% due
5/15/2026 (e) 1,079
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Reeths-Puffer, Michigan, School District, Refunding, UT, 6% due 5/01/2005
(c)(f) 1,123
--------------------------------------------------------------------------------------------------------------
AAA Aaa 2,400 Three Rivers, Michigan, Community Schools (Building and Site), UT, 6% due
5/01/2006 (e)(f) 2,720
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Waterford, Michigan, School District, UT, 6.25% due 6/01/2004 (c)(f) 1,687
--------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Wayne Charter County, Michigan, Airport Revenue Bonds (Detroit
Metropolitan--Wayne County), AMT, Series A, 5.375% due 12/01/2017 (e) 5,159
--------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Western Michigan University, Revenue Refunding Bonds, Series B, 6.50% due
7/15/2021 (b) 2,169
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,300 Ypsilanti, Michigan, School District, Refunding, UT, 5.75% due
5/01/2020 (c) 1,395
=================================================================================================================================
Puerto Rico--2.4% AAA Aaa 3,485 Puerto Rico, RITR, Series 14, 7.02% due 7/01/2027 (e)(g) 3,759
=================================================================================================================================
Total Investments (Cost--$139,237)--96.0% 150,537
Other Assets Less Liabilities--4.0% 6,297
--------
Net Assets--100.0% $156,834
========
=================================================================================================================================
</TABLE>
(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, 1998.
(b) AMBAC Insured.
(c) FGIC Insured.
(d) FSA Insured.
(e) MBIA Insured.
(f) Prerefunded.
(g) The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at October 31, 1998.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
Quality Profile
The quality ratings of securities in the Fund as of October 31, 1998 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa.......................................................... 90.6%
AA/Aa............................................................ 0.8%
A/A.............................................................. 0.6%
Other+........................................................... 4.0%
- --------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
6 & 7
<PAGE>
MuniVest Michigan Insured Fund, Inc., October 31, 1998
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of October 31, 1998
==============================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$139,237,164) (Note 1a) ......... $ 150,536,826
Cash .................................................................... 86,221
Receivables:
Securities sold ....................................................... $ 7,651,456
Interest .............................................................. 2,880,044 10,531,500
-------------
Prepaid expenses and other assets ....................................... 10,760
-------------
Total assets ............................................................ 161,165,307
-------------
==============================================================================================================================
Liabilities: Payables:
Securities purchased .................................................. 4,157,017
Investment adviser (Note 2) ........................................... 69,079
Dividends to shareholders (Note 1f) ................................... 30,680 4,256,776
-------------
Accrued expenses and other liabilities .................................. 74,236
-------------
Total liabilities ....................................................... 4,331,012
-------------
==============================================================================================================================
Net Assets: Net assets .............................................................. $ 156,834,295
=============
==============================================================================================================================
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 (7,387,697 shares issued and
outstanding) .......................................................... $ 738,770
Paid-in capital in excess of par ........................................ 102,828,343
Undistributed investment income--net .................................... 500,273
Accumulated realized capital losses on investments--net (Note 5) ........ (8,532,753)
Unrealized appreciation on investments--net ............................. 11,299,662
-------------
Total--Equivalent to $14.46 net asset value per share of Common Stock
(market price--$14.625) ................................................ 106,834,295
-------------
Total capital ........................................................... $ 156,834,295
=============
==============================================================================================================================
</TABLE>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended October 31, 1998
==============================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned ................ $ 8,346,255
Income (Note 1d):
==============================================================================================================================
Expenses: Investment advisory fees (Note 2) ....................................... $ 772,663
Commission fees (Note 4) ................................................ 126,780
Professional fees ....................................................... 88,810
Accounting services (Note 2) ............................................ 60,483
Directors' fees and expenses ............................................ 26,085
Transfer agent fees ..................................................... 23,931
Printing and shareholder reports ........................................ 16,077
Listing fees ............................................................ 13,468
Custodian fees .......................................................... 11,887
Pricing fees ............................................................ 7,576
Amortization of organization expenses (Note 1e) ......................... 1,784
Other ................................................................... 16,624
-------------
Total expenses .......................................................... 1,166,168
-------------
Investment income--net .................................................. 7,180,087
-------------
==============================================================================================================================
Realized & Realized gain on investments--net ....................................... 2,267,650
Unrealized Gain on Change in unrealized appreciation on investments--net ................... 1,560,039
Investments--Net -------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations .................... $ 11,007,776
=============
==============================================================================================================================
</TABLE>
See Notes to Financial Statements.
8 & 9
<PAGE>
MuniVest Michigan Insured Fund, Inc., October 31, 1998
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------
Increase (Decrease) in Net Assets: 1998 1997
==============================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ................................................. $ 7,180,087 $ 7,429,850
Realized gain (loss) on investments--net ............................... 2,267,650 (380,050)
Change in unrealized appreciation on investments--net .................. 1,560,039 2,564,434
------------- -------------
Net increase in net assets resulting from operations ................... 11,007,776 9,614,234
------------- -------------
==============================================================================================================================
Dividends to Investment income--net:
Shareholders Common Stock ......................................................... (5,538,150) (5,721,912)
(Note 1f): Preferred Stock ...................................................... (1,671,160) (1,669,740)
------------- -------------
Net decrease in net assets resulting from dividends to shareholders .... (7,209,310) (7,391,652)
------------- -------------
==============================================================================================================================
Capital Stock Value of shares issued to Common Stock shareholders in reinvestment
Transactions of dividends ........................................................... 111,746 --
(Note 4): ------------- -------------
==============================================================================================================================
Net Assets:
Total increase in net assets ........................................... 3,910,212 2,222,582
Beginning of year ...................................................... 152,924,083 150,701,501
------------- -------------
End of year* ........................................................... $ 156,834,295 $ 152,924,083
============= =============
==============================================================================================================================
*Undistributed investment income--net ................................... $ 500,273 $ 529,496
============= =============
==============================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended October 31,
---------------------------------------------------
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ...................... $ 13.95 $ 13.65 $ 13.65 $ 11.83 $ 14.89
Operating -------- -------- -------- -------- -------
Performance: Investment income--net .................................. .98 1.01 1.01 1.01 1.01
Realized and unrealized gain (loss) on investments--net.. .51 .30 --++ 1.82 (3.06)
-------- -------- -------- -------- -------
Total from investment operations ........................ 1.49 1.31 1.01 2.83 (2.05)
-------- -------- -------- -------- -------
Less dividends to Common Stock shareholders:
Investment income--net ................................. (.75) (.78) (.77) (.76) (.84)
-------- -------- -------- -------- -------
Effect of Preferred Stock activity:
Dividends to Preferred Stock shareholders:
Investment income--net ............................... (.23) (.23) (.24) (.25) (.17)
-------- -------- -------- -------- -------
Total effect of Preferred Stock activity ................ (.23) (.23) (.24) (.25) (.17)
-------- -------- -------- -------- -------
Net asset value, end of year ............................ $ 14.46 $ 13.95 $ 13.65 $ 13.65 $ 11.83
======== ======== ======== ======== =======
Market price per share, end of year ..................... $ 14.625 $ 13.313 $ 12.375 $ 12.25 $ 10.25
======== ======== ======== ======== =======
==================================================================================================================================
Total Investment Based on market price per share ......................... 16.12% 14.32% 7.40% 27.59% (27.71%)
Return:* ======== ======== ======== ======== =======
Based on net asset value per share ...................... 9.56% 8.60% 6.32% 23.18% (15.25%)
======== ======== ======== ======== =======
==================================================================================================================================
Ratios to Average Expenses ................................................ .76% .75% .77% .77% .76%
Net Assets:** ======== ======== ======== ======== =======
Investment income--net .................................. 4.65% 4.89% 4.91% 5.21% 4.98%
======== ======== ======== ======== =======
==================================================================================================================================
Supplemental Net assets, net of Preferred Stock, end of year
Data: (in thousands) .......................................... $106,834 $102,924 $100,702 $100,729 $87,313
======== ======== ======== ======== =======
Preferred Stock outstanding, end of year (in thousands).. $ 50,000 $ 50,000 $ 50,000 $ 50,000 $50,000
======== ======== ======== ======== =======
Portfolio turnover ...................................... 48.30% 22.43% 47.10% 53.85% 49.03%
======== ======== ======== ======== =======
==================================================================================================================================
Leverage: Asset coverage per $1,000 ............................... $ 3,137 $ 3,058 $ 3,014 $ 3,015 $ 2,746
======== ======== ======== ======== =======
==================================================================================================================================
Dividends Per Share Investment income--net .................................. $ 836 $ 835 $ 886 $ 939 $ 615
On Preferred Stock ======== ======== ======== ======== =======
Outstanding:+
==================================================================================================================================
</TABLE>
* 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.
++ Amount is less than $.01 per share.
See Notes to Financial Statements.
10 & 11
<PAGE>
MuniVest Michigan Insured Fund, Inc., October 31, 1998
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 written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets 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 instrument--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.
o Financial futures contracts--The Fund may purchase or sell financial 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.
o 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 period not exceeding five years.
(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, including
proceeds from the issuance of Preferred Stock.
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, 1998 were $70,555,990 and $76,480,221, respectively.
Net realized gains for the year ended October 31, 1998 and net unrealized gains
as of October 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ............................. $2,267,650 $11,299,662
---------- -----------
Total ............................................. $2,267,650 $11,299,662
========== ===========
- --------------------------------------------------------------------------------
As of October 31, 1998, net unrealized appreciation for Federal income tax
purposes aggregated $11,296,251, of which $11,386,466 related to appreciated
securities and $90,215 related to depreciated securities. The aggregate cost of
investments at October 31, 1998 for Federal income tax purposes was
$139,240,575.
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 year ended October 31, 1998 increased
by 7,728 as a result of dividend reinvestment and during the year ended October
31, 1997 remained constant.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the
Fund, with a par value of $.05 per share and a liquidation preference of $25,000
per share, 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, 1998 was 3.20%.
Shares issued and outstanding during the years ended October 31, 1998 and
October 31, 1997 remained constant.
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, 1998, Merrill Lynch, Pierce, Fenner
& Smith Inc., an affiliate of FAM, earned $93,074 as commissions.
5. Capital Loss Carryforward:
At October 31, 1998, the Fund had a net capital loss carry forward of
approximately $5,871,000, of which $2,062,000 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 5, 1998, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.063456 per share,
payable on November 27, 1998 to shareholders of record as of November 20, 1998.
12 & 13
<PAGE>
MuniVest Michigan Insured Fund, Inc., October 31, 1998
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, 1998, 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 five-year
period then ended. 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, 1998 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, 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, 1998, 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 7, 1998
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, 1998 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.
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute substantially all of its net
investment income to its shareholders on a monthly basis. However, in order to
provide shareholders with a more consistent yield to the current trading price
of shares of Common Stock of the Fund, the Fund may at times pay out less than
the entire amount of net investment income earned in any particular month and
may at times in any particular month pay out such accumulated but undistributed
income in addition to net investment income earned in that month. As a result,
the dividends paid by the Fund for any particular month may be more or less than
the amount of net investment income earned by the Fund during such month. The
Fund's current accumulated but undistributed net investment income, if any, is
disclosed in the Statement of Assets, Liabilities and Capital, which comprises
part of the financial information included in this report.
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
Fred G. Weiss, 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
14 & 15
<PAGE>
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--10/98
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