UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-7080
Name of Fund: MuniYield Michigan Insured Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
MuniYield Michigan Insured Fund, Inc., 800 Scudders Mill Road,
Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton,
NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 10/31/03
Date of reporting period: 11/01/02 - 10/31/03
Item 1 - Attach shareholder report
(BULL LOGO)
Merrill Lynch Investment Managers
www.mlim.ml.com
MuniYield Michigan
Insured Fund, Inc.
Annual Report
October 31, 2003
MuniYield Michigan Insured Fund, Inc. seeks to provide shareholders
with as high a level of current income exempt from Federal income
tax and Michigan income taxes as is consistent with its investment
policies and prudent investment management by investing primarily in
a portfolio of long-term municipal obligations the interest on
which, in the opinion of bond counsel to the issuer, is exempt from
Federal income tax and Michigan income taxes.
This report, including the financial information herein, is
transmitted to shareholders of MuniYield Michigan Insured Fund, Inc.
for their information. It is not a prospectus. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock and intends to remain leveraged by issuing Preferred
Stock to provide the Common Stock shareholders with a potentially
higher rate of return. Leverage creates risks for Common Stock
shareholders, including the likelihood of greater volatility of net
asset value and market price of shares of the Common Stock, and the
risk that fluctuations in the short-term dividend rates of the
Preferred Stock may affect the yield to Common Stock shareholders.
Statements and other information herein are as dated and are subject
to change.
MuniYield Michigan Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield Michigan Insured Fund, Inc.
The Benefits and Risks of Leveraging
MuniYield Michigan Insured Fund, Inc. utilizes leveraging to seek
to enhance the yield and net asset value of its Common Stock.
However, these objectives cannot be achieved in all interest rate
environments. To leverage, the Fund issues Preferred Stock, which
pays dividends at prevailing short-term interest rates, and invests
the proceeds in long-term municipal bonds. The interest earned on
these investments, net of dividends to Preferred Stock, is paid to
Common Stock shareholders in the form of dividends, and the value of
these portfolio holdings is reflected in the per share net asset
value of the Fund's Common Stock. However, in order to benefit
Common Stock shareholders, the yield curve must be positively
sloped; that is, short-term interest rates must be lower than long-
term interest rates. At the same time, a period of generally
declining interest rates will benefit Common Stock shareholders. If
either of these conditions change, then the risks of leveraging will
begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred
Stock for an additional $50 million, creating a total value of
$150 million available for investment in long-term municipal bonds.
If prevailing short-term interest rates are approximately 3% and
long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million
of Preferred Stock based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pickup on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value of the fund's Common Stock (that is, its
price as listed on the New York Stock Exchange) may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Stock does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Stock may
also decline.
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, income 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. As of October 31,
2003, the percentage of the Fund's total net assets invested in
inverse floaters was 14.14%.
Swap Agreements
The Fund may also invest in swap agreements, which are over-the-
counter contracts in which one party agrees to make periodic
payments based on the change in market value of a specified bond,
basket of bonds, or index in return for periodic payments based on a
fixed or variable interest rate or the change in market value of a
different bond, basket of bonds or index. Swap agreements may be
used to obtain exposure to a bond or market without owning or taking
physical custody of securities.
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
A Letter From the President
Dear Shareholder
As 2003 draws to a close, it seems appropriate to reflect on what
has been a meaningful year in many respects. We saw the beginning
and the end of all-out war in Iraq, equity market uncertainty turned
to strength and sub par gross domestic product growth of 1.4% in the
first quarter of 2003 grew to an extraordinary 8.2% in the third
quarter. Amid the good news, fixed income investments, which had
become the asset class of choice during the preceding three-year
equity market decline, faced new challenges.
During 2003, municipal bond yields rose and fell in reaction to
geopolitical events, equity market performance, economic activity
and employment figures. By the end of October, long-term municipal
revenue bond yields were slightly higher than they were one year
earlier, at 5.24% as measured by the Bond Buyer Revenue Bond Index.
With many state deficits at record levels, municipalities issued
nearly $400 billion in new long-term tax-exempt bonds during the
12-month period ended October 31, 2003. The availability of bonds,
together with attractive yield ratios relative to U.S. Treasury
issues, made municipal bonds a popular fixed income investment
alternative.
Throughout the year, our portfolio managers continued to work
diligently to deliver on our commitment to provide superior
performance within reasonable expectations for risk and return. This
included striving to outperform our peers and the market indexes.
With that said, remember that the advice and guidance of a skilled
financial advisor often can mean the difference between successful
and unsuccessful investing. A financial professional can help you
choose those investments that will best serve you as you plan for
your financial future.
Finally, I am proud to premiere a new look to our shareholder
communications. Our portfolio manager commentaries have been trimmed
and organized in such a way that you can get the information you
need at a glance, in plain language. Today's markets are confusing
enough. We want to help you put it all in perspective. The report's
new size also allows us certain mailing efficiencies. Any cost
savings in production or postage are passed on to the Fund and,
ultimately, to Fund shareholders.
We thank you for trusting Merrill Lynch Investment Managers with
your investment assets, and we look forward to serving you in the
months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
A Discussion With Your Fund's Portfolio Manager
The Fund was able to successfully weather bouts of excessive
interest rate volatility during the fiscal year while preserving net
asset value.
Describe the market environment relative to municipal bonds during
the fiscal year.
At the end of October, long-term tax-exempt bond yields were
90% - 95% of comparable U.S. Treasury securities, substantially
exceeding their historical average of 85% - 88%. Considering their
tax-free status, this made long-term municipal bonds an attractive
investment alternative during the past 12 months.
Long-term U.S. Treasury bond yields declined throughout most of the
first seven months of the fiscal year, while bond prices--which move
in the opposite direction of yields--rose in response to weak equity
markets, concerns about a growing conflict in Iraq and continued sub
par U.S. economic growth. The Federal Reserve Board continued to
lower short-term interest rates to stimulate business and consumer
economic activity. Bond yields reversed course in July and August,
rising sharply as economic conditions began to improve and as most
analysts agreed the Federal Reserve Board had finished lowering
interest rates. In mid-August, U.S. Treasury bond yields reached
5.45%, their highest level during the period, before again moving
lower and ending the 12-month period at 5.13%, 15 basis points
(.15%) higher than a year earlier.
Long-term tax-exempt bond yields also rose from year-ago levels,
although to a lesser extent than U.S. Treasury bonds, as municipal
bond prices typically are less sensitive to short-term economic and
geopolitical pressures. By the end of October, long-term municipal
revenue bond yields stood at 5.24%, a small increase compared to the
previous year. Yields for long-term Aaa-rated tax-exempt bonds (the
highest rated) declined 10 basis points during the past year. The
decline largely reflected investors' growing demand for high-quality
bonds, which provided valuable stability in an uncertain market.
How did conditions in the state of Michigan affect the Fund?
Michigan maintains the highest possible credit ratings of Aaa and
AAA from Moody's and Standard & Poor's, although with a negative
outlook, and is rated AA+ by Fitch. The state ranks 28th in debt per
capita and 29th in debt as a percent of personal income nationally.
While debt has increased recently, we find these ratios modest for a
populous state, pointing to Michigan's flexibility in responding to
economic downturns relative to other states.
In line with the national economy, state revenues have consistently
fallen below projections. For fiscal year 2003, which ended on
September 30, 2003, the budget was revised downward on several
occasions. Accordingly, the state is expected to draw down virtually
all of its $145 million Budget Stabilization Fund (BSF) to balance
fiscal year 2003 operations. The BSF was $1 billion in fiscal year
2001. In May 2003, for the first time in six years, Michigan issued
cash flow notes in the amount of $1.2 billion.
The governor and legislature agreed on a fiscal year 2004 budget in
mid-July. The budget closed a $1.7 billion gap largely through broad-
based spending cuts, one-time federal aid of $658 million and
smaller revenue enhancements. No broad-based tax increases were
approved. These sources also allowed the state to budget $75 million
to replenish the BSF, $75 million for a new school reserve fund, and
$60 million in the Medicaid trust fund. Balanced financial
operations in fiscal year 2004 depend largely on an improved
economy.
In managing the Fund, our strategy has been to purchase insured
state general obligation bonds and their equivalents rather than
unenhanced general obligation bonds, as there is no meaningful
increase in yield offered by the uninsured issues. As the state's
economy continues to struggle, we believe credit deterioration will
lead to better relative performance of the insured bonds.
How did the Fund perform during the fiscal year in light of the
existing market conditions?
For the year ended October 31, 2003, the Common Stock of MuniYield
Michigan Insured Fund, Inc. had a net annualized yield of 6.14%,
based on a year-end per share net asset value of $15.94 and $.979
per share income dividends. Over the same period, the total
investment return on the Fund's Common Stock was +8.26%, based on a
change in per share net asset value from $15.74 to $15.94, and
assuming reinvestment of $.977 per share ordinary income dividends.
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
For the six-month period ended October 31, 2003, the total
investment return on the Fund's Common Stock was +1.72%, based on a
change in per share net asset value from $16.20 to $15.94, and
assuming reinvestment of $.492 per share ordinary income dividends.
For the six-month period ended October 31, 2003, the Fund's Auction
Market Preferred Stock had an average yield of .83% for Series A,
..83% for Series B and .82% for Series C.
For a description of the Fund's total investment return based on a
change in the per share market value of the Fund's Common Stock (as
measured by the trading price of the Fund's shares on the New York
Stock Exchange), and assuming reinvestment of dividends, please
refer to the Financial Highlights section of the Financial
Statements included in this report. As a closed-end fund, the Fund's
shares may trade in the secondary market at a premium or discount to
the Fund's net asset value. As a result, total investment returns
based on changes in the market value of the Fund's Common Stock can
vary significantly from total investment return based on changes in
the Fund's net asset value.
We established a neutral posture with respect to interest rates in
2002 and early 2003, and maintained that stance through the middle
of the year. We believe this positioning helped insulate the Fund
from much of the interest rate volatility experienced during the
past six months. Our strategy of enhancing yield by increasing the
Fund's exposure to lower-rated investment-grade issues also was
beneficial to total return performance, as these issues helped to
increase the Fund's investment income stream. In addition, these
lower-rated issues exhibited less price volatility than many general
market issues in recent months, which also served to enhance
performance.
What changes were made to the portfolio during the period?
In May and June, as market yields declined in response to weak
economic growth and the possibility of additional short-term
interest rate changes by the Federal Reserve Board, we adopted a
slightly more defensive strategy, further reducing the portfolio's
interest rate sensitivity by lowering the Fund's average portfolio
maturity. This defensive positioning resulted in relative
outperformance as interest rates rose dramatically in July and
August. We also continued to add higher-yielding instruments to the
portfolio whenever they were attractively priced, although the
supply of these issues was severely restricted throughout most of
the period.
In terms of leverage, the Fund's borrowing costs remained in the
low 1% range during the period. These attractive funding levels, in
combination with a steep tax-exempt yield curve, generated a
significant income benefit to the Fund's Common Stock shareholders.
Further declines in the Fund's borrowing costs would require
significant easing of monetary policy by the Federal Reserve Board.
While such action is not expected, neither is an increase in short-
term interest rates. We expect short-term borrowing costs to remain
near current attractive levels for the coming months. However,
should the spread between short-term and long-term interest rates
narrow, the benefits of leverage will decline, and as a result,
reduce the yield on the Fund's Common Stock. (For a more complete
explanation of the benefits and risks of leveraging, see page 2 of
this report to shareholders.)
How would you characterize the portfolio's position at the close of
the period?
We ended the period with a modestly defensive posture with respect
to future interest rate movements. We continue to favor more
defensive, higher-coupon issues over the more interest-rate-
sensitive securities. At the close of the period, the Fund had
modest cash reserves of approximately 3%. Overall, the Fund is
structured to perform better in stable-to-rising interest rate
environments. If yields decline to the recent lows seen in June
2003, we would expect to adopt a much stronger defensive strategy.
Fred K. Stuebe
Vice President and Portfolio Manager
November 10, 2003
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Schedule of Investments (In Thousands)
S&P Moody's Face
Ratings++ Ratings++ Amount Municipal Bonds Value
Michigan--134.2%
AAA Aaa $ 1,000 Allegan, Michigan, Public School District, GO, 5.75% due
5/01/2030 (d) $ 1,094
Belding, Michigan, Area Schools, GO, Refunding (c):
AAA Aaa 785 6.05% due 5/01/2006 (e) 878
AAA Aaa 215 6.05% due 5/01/2021 236
AAA Aaa 1,625 Central Michigan University Revenue Bonds, 5.50% due
4/01/2007 (c)(e) 1,830
AAA Aaa 1,000 Central Montcalm, Michigan, Public Schools, GO, 5.90% due
5/01/2019 (b) 1,123
AAA Aaa 1,000 Comstock Park, Michigan, Public Schools, GO, 5.75% due 5/01/2029 (c) 1,085
Delta County, Michigan, Economic Development Corporation,
Environmental Improvement Revenue Refunding Bonds
(Mead Westvaco--Escanaba):
BBB Baa2 1,500 AMT, Series B, 6.45% due 4/15/2023 1,547
BBB Baa2 2,000 Series A, 6.25% due 4/15/2027 2,073
Detroit, Michigan, City School District, GO:
AAA Aaa 2,300 (School Building and Site Improvement), Series A, 5.375%
due 5/01/2024 (c) 2,425
AAA Aaa 3,000 (School Building and Site Improvement), Series B, 5% due
5/01/2019 (c) 3,134
AAA Aaa 1,000 Series A, 5.50% due 5/01/2018 (d) 1,092
AAA Aaa 3,700 Detroit, Michigan, Convention Facility Revenue Refunding Bonds
(Cobo Hall), 5% due 9/30/2011 (b) 4,069
Detroit, Michigan, GO:
AAA Aaa 1,400 5.50% due 4/01/2018 (b) 1,541
AAA Aaa 1,325 5.50% due 4/01/2020 (b) 1,444
AAA Aaa 1,210 Series A, 5% due 4/01/2013 (i) 1,313
AAA Aaa 2,705 Series B, 6% due 4/01/2015 (b) 3,116
AAA Aaa 1,000 Detroit, Michigan, Sewer Disposal Revenue Bonds, Series A, 5.75%
due 1/01/2010 (c)(e) 1,165
AAA Aaa 5,000 Detroit, Michigan, Sewer Disposal Revenue Refunding Bonds, Senior
Lien, Series A, 5% due 7/01/2024 (d) 5,069
Detroit, Michigan, Water Supply System Revenue Bonds:
AAA NR* 4,375 DRIVERS, Series 200, 10.14% due 7/01/2011 (c)(e)(g) 5,888
AAA Aaa 4,875 Senior Lien, Series A, 5.75% due 1/01/2010 (c)(e) 5,674
AAA Aaa 1,250 Senior Lien, Series A, 5.875% due 1/01/2010 (c)(e) 1,464
AAA Aaa 15,200 Series B, 5.25% due 7/01/2032 (b) 15,717
AAA Aaa 1,415 Detroit, Michigan, Water Supply System, Revenue Refunding Bonds,
6.25% due 7/01/2012 (c)(h) 1,458
BBB Baa2 3,900 Dickinson County, Michigan, Economic Development Corporation,
Environmental Improvement Revenue Refunding Bonds (International Paper
Company Project), Series A, 5.75% due 6/01/2016 4,125
BBB Baa2 2,500 Dickinson County, Michigan, Economic Development Corporation, PCR,
Refunding (Champion International Corporation Project), 5.85% due
10/01/2018 2,551
Dickinson County, Michigan, Healthcare System, Hospital Revenue
Refunding Bonds:
NR* Baa3 700 5.80% due 11/01/2024 674
A NR* 2,400 5.80% due 11/01/2024 2,476
AAA Aaa 1,610 East Grand Rapids, Michigan, Public School District, GO, 5.75%
due 5/01/2009 (d)(e) 1,863
Eastern Michigan University Revenue Bonds, Series B (c):
AAA Aaa 1,500 5.60% due 6/01/2025 1,608
AAA Aaa 1,310 5.625% due 6/01/2030 1,411
AAA Aaa 1,025 Eastern Michigan University, Revenue Refunding Bonds, 6% due
6/01/2020 (a) 1,170
Portfolio Abbreviations
To simplify the listings of MuniYield Michigan Insured Fund, Inc.'s
portfolio holdings in the Schedule of Investments, we have
abbreviated the names of many of the securities according to the
list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
GO General Obligation Bonds
HDA Housing Development Authority
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
Ratings++ Ratings++ Amount Municipal Bonds Value
Michigan (continued)
NR* Baa3 $ 615 Flint, Michigan, Hospital Building Authority, Revenue Refunding
Bonds (Hurley Medical Center), Series A, 5.375% due 7/01/2020 $ 537
AAA Aaa 1,000 Frankenmuth, Michigan, School District, GO, 5.75% due 5/01/2020 (c) 1,117
AAA Aaa 1,100 Grand Blanc, Michigan, Community Schools, GO, 5.625% due
5/01/2020 (c) 1,215
Grand Rapids, Michigan, Building Authority Revenue Bonds,
Series A (a):
AAA Aaa 1,100 5.50% due 10/01/2019 1,199
AAA Aaa 1,500 5.50% due 10/01/2020 1,630
AAA NR* 2,070 Grand Valley, Michigan, State University Revenue Bonds, 5.50%
due 2/01/2018 (c) 2,341
AAA NR* 8,425 Greater Detroit, Michigan, Resource Recovery Authority Revenue
Bonds, DRIVERS, Series 167, 11.139% due 12/13/2008 (a)(g) 11,244
AAA Aaa 9,325 Hartland, Michigan, Consolidated School District, GO 6% due
5/01/2010 (c)(e) 10,986
AAA Aaa 1,475 Haslett, Michigan, Public School District, Building and Site, GO,
5.625% due 5/01/2020 1,629
AAA Aaa 1,575 Jenison, Michigan, Public Schools, Building and Site, GO, 5.50%
due 5/01/2019 (c) 1,713
AAA Aaa 3,305 Jonesville, Michigan, Community Schools, GO, 5.75% due 5/01/2029 (c) 3,585
NR* Aaa 6,850 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility
Revenue Refunding Bonds (Bronson Methodist Hospital), 5.50% due
5/15/2028 (b) 7,191
AAA Aaa 4,000 Kent, Michigan, Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Butterworth Hospital), Series A, 7.25% due
1/15/2013 (b) 4,916
Kent, Michigan, Hospital Finance Authority Revenue Bonds
(Spectrum Health), Series A (b):
AAA NR* 3,000 5.50% due 1/15/2031 3,154
AA Aa3 1,000 5.50% due 1/15/2031 1,017
AAA Aaa 1,035 Lansing, Michigan, Building Authority, GO, Series A, 5.375%
due 6/01/2023 (b) 1,096
AAA Aaa 1,250 Lansing, Michigan, Community College, College Building and Site,
GO, Refunding, 5% due 5/01/2019 (b) 1,306
AAA Aaa 1,000 Leslie, Michigan, Public Schools, Ingham and Jackson Counties, GO,
Refunding, 6% due 5/01/2005 (a)(e) 1,081
AAA Aaa 5,235 Lincoln Park, Michigan, School District, GO, 7% due 5/01/2006 (c)(e) 5,978
AAA Aaa 4,775 Livonia, Michigan, Public School District, GO (Building and Site),
5.75% due 5/01/2022 (c) 5,265
BBB- NR* 3,000 Macomb County, Michigan, Hospital Finance Authority, Hospital
Revenue Bonds (Mount Clemens General Hospital), Series B, 5.875%
due 11/15/2034 2,843
BBB NR* 2,250 Michigan Higher Education Facilities Authority, Limited Obligation
Revenue Refunding Bonds (Hope College), Series A, 5.90% due 4/01/2032 2,294
Michigan Higher Education Facilities Authority, Revenue Refunding
Bonds (College for Creative Studies):
NR* Baa2 1,235 5.85% due 12/01/2022 1,243
NR* Baa2 1,145 5.90% due 12/01/2027 1,150
AAA NR* 2,500 Michigan Higher Education Student Loan Authority, Student Loan
Revenue Bonds, AMT, Series XVII-B, 5.40% due 6/01/2018 (a) 2,581
AAA NR* 1,065 Michigan Municipal Bond Authority Revenue Bonds (Local Government
Loan Program), Group A, 5.50% due 11/01/2020 (a) 1,163
Michigan Municipal Bond Authority, Revenue Refunding Bonds (Local
Government Loan Program), Series A:
AAA Aaa 1,035 6.50% due 5/01/2012 (a) 1,050
AAA Aaa 1,870 6.50% due 11/01/2012 (b) 1,897
AAA Aaa 1,000 6% due 12/01/2013 (c) 1,070
AAA Aaa 7,000 6.125% due 12/01/2018 (c) 7,487
AA+ Aaa 7,000 Michigan State Building Authority Revenue Bonds, GO, RIB,
Series 481, 9.663% due 4/15/2009 (b)(g) 9,033
Michigan State Building Authority, Revenue Refunding Bonds:
AAA Aaa 2,500 (Facilities Program), Series I, 5.50% due 10/15/2018 (b) 2,753
NR* Aaa 11,140 RIB, Series 517X, 9.66% due 10/15/2010 (d)(g) 14,371
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
Ratings++ Ratings++ Amount Municipal Bonds Value
Michigan (continued)
Michigan State COP (a):
AAA Aaa $ 3,000 5.40%** due 6/01/2022 $ 1,168
AAA Aaa 3,000 5.50% due 6/01/2027 3,168
AAA Aaa 2,665 Michigan State, HDA, Rental Housing Revenue Bonds, AMT,
Series A, 5.30% due 10/01/2037 (b) 2,674
AA+ NR* 2,690 Michigan State, HDA, Revenue Refunding Bonds, Series C, 5.90%
due 12/01/2015 (f) 2,828
AAA Aaa 2,530 Michigan State Hospital Finance Authority, Hospital Revenue Bonds
(Mid-Michigan Obligation Group), Series A, 5.50% due 4/15/2018 (a) 2,727
Michigan State Hospital Finance Authority, Hospital Revenue
Refunding Bonds:
A+ A2 2,200 (Crittenton Hospital), Series A, 5.625% due 3/01/2027 2,236
NR* Ba3 2,000 (Sinai Hospital), 6.625% due 1/01/2016 1,536
A A1 2,000 (Sparrow Obligation Group), 5.625% due 11/15/2031 2,016
B Ba3 2,000 Michigan State Hospital Finance Authority Revenue Bonds
(Detroit Medical Center), Series A, 5.25% due 8/15/2023 1,200
Michigan State Hospital Finance Authority, Revenue Refunding Bonds:
AAA Aaa 2,715 (Ascension Health Credit), Series A, 5.75% due 11/15/2009 (b)(e) 3,195
AAA Aaa 12,000 (Ascension Health Credit), Series A, 6.125% due 11/15/2009 (b)(e) 14,371
AAA Aaa 2,500 (Ascension Health Credit), Series A, 6.25% due 11/15/2009 (b)(e) 3,011
AAA Aaa 4,805 (Mercy Health Services), Series T, 6.50% due 8/15/2013 (b) 5,522
AAA Aaa 2,000 (Mercy Health Services), Series X, 6% due 8/15/2014 (b) 2,272
AAA Aaa 2,200 (Mercy Health Services), Series X, 5.75% due 8/15/2019 (b) 2,422
AAA Aaa 4,930 (Mercy Mount Clemens), Series A, 6% due 5/15/2014 (b) 5,589
AAA Aaa 3,000 (Saint John Hospital), Series A, 6.0% due 5/15/2013 (a)(h) 3,070
AA- Aa3 1,500 (Trinity Health Credit), Series C, 5.375% due 12/01/2030 1,521
AAA Aaa 6,400 (Trinity Health), Series A, 6% due 12/01/2027 (a) 6,978
Michigan State Strategic Fund, Limited Obligation Revenue Bonds, AMT:
BBB Baa1 5,000 (Ford Motor Company Project), Series A, 6.55% due 10/01/2022 5,056
BBB Baa3 3,000 (WMX Technologies Inc. Project), 6% due 12/01/2013 3,063
Michigan State Strategic Fund, Limited Obligation Revenue Refunding
Bonds:
AAA Aaa 7,250 (Detroit Edison Company), AMT, Series A, 5.55% due 9/01/2029 (b) 7,510
AAA Aaa 6,000 (Detroit Edison Company Fund - Pollution), Series AA, 6.95%
due 5/01/2011 (c) 7,381
A- A3 2,175 (Dow Chemical Company Project), AMT, 5.50% due 12/01/2028 2,267
NR* Aaa 5,750 RIB, Series 382, 11.41% due 9/01/2025 (b)(g) 6,877
BBB Baa1 2,500 Michigan State Strategic Fund, PCR, Refunding (General Motors Corp.),
6.20% due 9/01/2020 2,568
AAA Aaa 1,000 Michigan State Trunk Line Revenue Refunding Bonds, 5.25% due
10/01/2021 (d) 1,056
AAA Aaa 15,000 Monroe County, Michigan, Economic Development Corp., Limited
Obligation Revenue Refunding Bonds (Detroit Edison Co. Project),
Series AA, 6.95% due 9/01/2022 (c) 19,239
AAA Aaa 9,000 Monroe County, Michigan, PCR (Detroit Edison Company Project),
AMT, Series CC, 6.55% due 6/01/2024 (b) 9,220
AAA Aaa 1,000 Montrose Township, Michigan, School District, GO, 6.20% due
5/01/2017 (b) 1,198
NR* Aaa 1,830 Muskegon Heights, Michigan, Water System Revenue Bonds, Series A,
5.625% due 11/01/2025 (b) 1,969
Northview, Michigan, Public School District, GO, Refunding (b):
AAA NR* 2,265 5.80% due 5/01/2006 (e) 2,520
AAA Aaa 235 5.80% due 5/01/2021 257
AAA Aaa 1,100 Norway Vulcan, Michigan, Area Schools, GO, 5.90% due 5/01/2025 (c) 1,221
AAA Aaa 2,425 Oxford, Michigan, Area Community School District, GO, 5.50% due
5/01/2018 (d) 2,670
AAA Aaa 1,000 Plainwell, Michigan, Community Schools, School District, Building
and Site, GO, 5.50% due 5/01/2020 (d) 1,087
A NR* 700 Pontiac, Michigan, Tax Increment Finance Authority, Tax Increment
Revenue Refunding Bonds (Development Area 2), 5.625% due 6/01/2022 722
AAA Aaa 1,870 Redford, Michigan, Unified School District, GO, 5.90% due
5/01/2006 (c)(e) 2,085
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Schedule of Investments (continued) (In Thousands)
S&P Moody's Face
Ratings++ Ratings++ Amount Municipal Bonds Value
Michigan (concluded)
AAA Aaa $ 1,000 Reeths-Puffer Schools, Michigan, GO, Refunding, 6% due
5/01/2005 (c)(e) $ 1,081
AAA Aaa 1,800 Rochester, Michigan, Community School District, GO, Series II,
5.50% due 5/01/2015 (c) 2,006
AAA Aaa 2,500 Saginaw, Michigan, Hospital Finance Authority, Revenue Refunding
Bonds (Covenant Medical Center), Series E, 5.625% due 7/01/2013 (b) 2,781
NR* Aaa 8,900 Saint Clair County, Michigan, Economic Revenue Refunding Bonds
(Detroit Edison Company), RIB, Series 282, 11.42% due
8/01/2024 (a)(g) 11,620
AAA Aaa 1,300 Southfield, Michigan, Library Building Authority, GO, 5.50% due
5/01/2018 (b) 1,432
Sturgis, Michigan, Public School District, GO (School Building
and Site):
AAA Aaa 1,900 5.50% due 5/01/2021 2,056
AAA Aaa 2,545 5.625% due 5/01/2030 2,742
AAA Aaa 1,000 Three Rivers, Michigan, Community Schools GO, 6% due 5/01/2006 (b)(e) 1,118
AAA Aaa 1,100 Waverly, Michigan, Community School, GO, 5.50% due 5/01/2021 (c) 1,190
AAA Aaa 10,660 Wayne Charter County, Michigan, Airport Revenue Bonds (Detroit
Metropolitan Wayne County), AMT, Series A, 5.375% due 12/01/2015 (b) 11,378
AAA Aaa 2,170 Wayne County, Michigan, COP, 5.625% due 5/01/2011 (a) 2,425
West Bloomfield, Michigan, School District, GO Refunding (c):
AAA Aaa 1,710 5.50% due 5/01/2017 1,879
AAA Aaa 1,225 5.50% due 5/01/2018 1,338
AAA Aaa 2,405 West Branch-Rose City, Michigan, Area School District, GO, 5.50%
due 5/01/2024 (c) 2,545
Guam--0.5%
AAA Aaa 1,190 A.B. Won Guam International Airport Authority, General Revenue
Refunding Bonds, Series B, 5% due 10/01/2012 (b) 1,309
Puerto Rico--7.4%
BBB Baa2 2,000 Children's Trust Fund, Puerto Rico, Tobacco Settlement Revenue
Bonds, 5.625% due 5/15/2043 1,760
BBB Baa2 2,300 Children's Trust Fund, Puerto Rico, Tobacco Settlement Revenue
Refunding Bonds, 5.50% due 5/15/2039 2,014
AAA Aaa 4,000 Puerto Rico Commonwealth, Public Improvement, GO, Refunding,
Series C, 5% due 7/01/2021 (d) 4,416
Puerto Rico Electric Power Authority, Power Revenue Bonds:
AAA Aaa 3,500 Series LL, 5.50% due 7/01/2017 (b) 4,013
AAA Aaa 1,270 Trust Receipts, Class R, Series 16 HH, 10.094% due
7/01/2013 (d)(g) 1,701
Puerto Rico Public Finance Corporation, Commonwealth Appropriation
Revenue Bonds:
AAA Aaa 1,000 Series A, 5.375% due 8/01/2024 (b) 1,068
BBB+ Baa3 1,000 Series E, 5.70% due 8/01/2025 1,050
BBB+ Baa3 2,900 Series E, 5.75% due 8/01/2030 3,090
AAA Aaa 2,150 University of Puerto Rico, University Revenue Refunding Bonds,
Series O, 5.375% due 6/01/2030 (b) 2,261
Total Municipal Bonds (Cost--$379,090)--142.1% 411,191
Shares
Held Short-Term Securities
10,836 CMA Michigan Municipal Money Fund (j) 10,836
Total Short-Term Securities (Cost--$10,836)--3.7% 10,836
Total Investments (Cost--$389,926)--145.8% 422,027
Unrealized Depreciation on Forward Interest Rate Swaps--Net***--0.0% (167)
Other Assets Less Liabilities--2.6% 7,512
Preferred Stock, at Redemption Value--(48.4%) (140,008)
---------
Net Assets Applicable to Common Stock--100.0% $ 289,364
=========
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Schedule of Investments (concluded)
(a)AMBAC Insured.
(b)MBIA Insured.
(c)FGIC Insured.
(d)FSA Insured.
(e)Prerefunded.
(f)FHA Insured.
(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, 2003.
(h)Escrowed to maturity.
(i)XL Capital Insured.
(j)Investments in companies considered to be an affiliate of the
Fund (such companies are defined as "Affiliated Companies" in
Section 2(a)(3) of the Investment Company Act of 1940) are as
follows:
(in Thousands)
Net Dividend
Affiliate Activity Income
CMA Michigan Municipal
Money Fund 10,836 $41
++Ratings of issues shown are unaudited.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
***Forward interest rate swaps entered into as of October 31, 2003
were as follows:
(in Thousands)
Unrealized
Notional Appreciation/
Affiliate Amount Depreciation
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and
pay a fixed rate of 3.741%
Broker, J.P. Morgan Chase Bank
Expires December 2013 $10,700 $ (23)
Receive a variable rate equal to
3-Month LIBOR at quarterly reset
date and pay a fixed rate equal
to 5.025%
Broker, Morgan Stanley Capital
Services Inc.
Expires January 2014 $11,000 (209)
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and
pay a fixed rate of 3.832%
Broker, J.P. Morgan Chase Bank
Expires February 2014 $11,000 (55)
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and
pay a fixed rate of 4.14%
Broker, Morgan Stanley Capital
Services Inc.
Expires December 2023 $10,800 201
Receive a variable rate equal to
7-Day Bond Market Association
Municipal Swap Index Rate and
pay a fixed rate of 4.3295%
Broker, J.P. Morgan Chase Bank
Expires January 2024 $11,000 (81)
--------
Total $ (167)
========
See Notes to Financial Statements.
Quality Profile (unaudited)
The quality ratings of securities in the Fund as of October 31, 2003
were as follows:
Percent of
Total
S&P Rating/Moody's Rating Investments
AAA/Aaa 84.3%
AA/Aa 1.3
A/A 2.3
BBB/Baa 8.9
BB/Ba 0.6
NR (Not Rated) 2.6
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Statement of Net Assets
As of October 31, 2003
Assets
Investments, at value (identified cost--$389,926,428) $ 422,026,606
Cash 23,123
Receivables:
Interest $ 7,917,829
Dividends from affiliates 119 7,917,948
---------------
Prepaid expenses 4,359
---------------
Total assets 429,972,036
---------------
Liabilities
Unrealized depreciation on forward interest rate swaps--net 167,158
Payables:
Investment adviser 199,442
Dividends to Common Stock shareholders 189,457
Other affiliates 3,060 391,959
---------------
Accrued expenses 40,577
---------------
Total liabilities 599,694
---------------
Preferred Stock
Preferred Stock, par value $.05 per share (2,000 Series A Shares,
2,000 Series B Shares and 1,600 Series C Shares of AMPS* issued and
outstanding at $25,000 per share liquidation preference) 140,008,060
---------------
Net Assets Applicable to Common Stock
Net assets applicable to Common Stock $ 289,364,282
===============
Analysis of Net Assets Applicable to Common Stock
Common Stock, par value $.10 per share (18,155,932 shares issued
and outstanding) $ 1,815,593
Paid-in capital in excess of par 268,391,966
Undistributed investment income--net $ 4,585,110
Accumulated realized capital losses on investments--net (17,361,407)
Unrealized appreciation on investments--net 31,933,020
---------------
Total accumulated earnings--net 19,156,723
---------------
Total--Equivalent to $15.94 net asset value per share of Common Stock
(market price--$14.69) $ 289,364,282
===============
*Auction Market Preferred Stock.
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Statement of Operations
For the Year Ended October 31, 2003
Investment Income
Interest $ 22,836,837
Dividends from affiliates 41,132
---------------
Total income 22,877,969
---------------
Expenses
Investment advisory fees $ 2,162,735
Commission fees 355,108
Accounting services 146,206
Professional fees 71,985
Transfer agent fees 71,497
Printing and shareholder reports 33,817
Listing fees 28,965
Custodian fees 26,564
Directors' fees and expenses 24,335
Pricing fees 20,106
Other 48,273
---------------
Total expenses before reimbursement 2,989,591
Reimbursement of expenses (42,312)
---------------
Total expenses after reimbursement 2,947,279
---------------
Investment income--net 19,930,690
---------------
Realized & Unrealized Gain on Investments--Net
Realized gain on investments--net 1,528,951
Change in unrealized appreciation on investments--net 1,157,612
---------------
Total realized and unrealized gain on investments--net 2,686,563
---------------
Dividends to Preferred Stock Shareholders
Investment income--net (1,325,488)
---------------
Net Increase in Net Assets Resulting from Operations $ 21,291,765
===============
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Statements of Changes in Net Assets
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 2003 2002
Operations
Investment income--net $ 19,930,690 $ 20,056,086
Realized gain (loss) on investments--net 1,528,951 (1,708,542)
Change in unrealized appreciation/depreciation on investments--net 1,157,612 (555,321)
Dividends to Preferred Stock shareholders (1,325,488) (1,965,080)
--------------- ---------------
Net increase in net assets resulting from operations 21,291,765 15,827,143
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (17,729,268) (17,007,569)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock
shareholders (17,729,268) (17,007,569)
--------------- ---------------
Net Assets Applicable to Common Stock
Total increase (decrease) in net assets applicable to Common Stock 3,562,497 (1,180,426)
Beginning of year 285,801,785 286,982,211
--------------- ---------------
End of year* $ 289,364,282 $ 285,801,785
=============== ===============
*Undistributed investment income--net $ 4,585,110 $ 3,709,176
=============== ===============
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Financial Highlights
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: 2003 2002 2001++++++ 2000++++++ 1999++++++
Per Share Operating Performance
Net asset value, beginning of year $ 15.74 $ 15.81 $ 14.48 $ 13.91 $ 15.93
---------- ---------- ---------- ---------- ----------
Investment income--net 1.10+++ 1.10+++ 1.08 .99 1.04
Realized and unrealized gain (loss)
on investments--net .15 (.12) 1.30 .67 (1.79)
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.07) (.11) (.24) (.30) (.18)
In excess of realized gain on
investments--net -- -- -- -- (.03)
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.18 .87 2.14 1.36 (.96)
---------- ---------- ---------- ---------- ----------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.98) (.94) (.81) (.79) (.85)
In excess of realized gain on
investments--net -- -- -- -- (.21)
---------- ---------- ---------- ---------- ----------
Capital charge resulting from issuance of
Common Stock -- -- --++ -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions to
Common Stock shareholders (.98) (.94) (.81) (.79) (1.06)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 15.94 $ 15.74 $ 15.81 $ 14.48 $ 13.91
========== ========== ========== ========== ==========
Market price per share, end of year $ 14.69 $ 13.95 $ 14.22 $ 11.9375 $ 12.1875
========== ========== ========== ========== ==========
Total Investment Return*
Based on market price per share 12.57% 4.77% 26.44% 4.62% (17.47%)
========== ========== ========== ========== ==========
Based on net asset value per share 8.26% 6.33% 15.89% 11.19% (6.13%)
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Common Stock
Total expenses, net of reimbursement and
excluding reorganization expenses** 1.01% 1.04% 1.05% 1.10% 1.09%
========== ========== ========== ========== ==========
Total expenses, excluding reorganization
expenses** 1.03% 1.04% 1.05% 1.33% 1.09%
========== ========== ========== ========== ==========
Total expenses** 1.03% 1.04% 1.05% 1.33% 1.09%
========== ========== ========== ========== ==========
Total investment income--net** 6.83% 7.10% 7.10% 7.49% 6.85%
========== ========== ========== ========== ==========
Amount of dividends to Preferred Stock
shareholders .45% .70% 1.59% 2.18% 1.18%
========== ========== ========== ========== ==========
Investment income--net, to Common Stock
shareholders 6.38% 6.40% 5.51% 5.31% 5.67%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Common & Preferred Stock**
Total expenses, net of reimbursement and
excluding reorganization expenses .68% .70% .70% .72% .76%
========== ========== ========== ========== ==========
Total expenses, excluding reorganization
expenses .69% .70% .70% .86% .76%
========== ========== ========== ========== ==========
Total expenses .69% .70% .70% .86% .76%
========== ========== ========== ========== ==========
Total investment income--net 4.61% 4.75% 4.71% 4.87% 4.75%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Preferred Stock
Dividends to Preferred Stock shareholders .94% 1.40% 3.14% 4.06% 2.66%
========== ========== ========== ========== ==========
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Financial Highlights (concluded)
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: 2003 2002 2001++++++ 2000++++++ 1999++++++
Supplemental Data
Net assets applicable to Common Stock,
end of year (in thousands) $ 289,364 $ 285,802 $ 286,982 $ 262,864 $ 103,364
========== ========== ========== ========== ==========
Preferred Stock outstanding, end of year
(in thousands) $ 140,000 $ 140,000 $ 140,000 $ 140,000 $ 50,000
========== ========== ========== ========== ==========
Portfolio turnover 33.39% 32.68% 68.17% 51.41% 42.71%
========== ========== ========== ========== ==========
Leverage
Asset coverage per $1,000 $ 3,067 $ 3,041 $ 3,050 $ 2,878 $ 3,067
========== ========== ========== ========== ==========
Dividends Per Share on Preferred Stock Outstanding++++
Series A--Investment income--net $ 240 $ 354 $ 792 $ 1,023 $ 663
========== ========== ========== ========== ==========
Series B--Investment income--net $ 230 $ 362 $ 783 $ 653 --
========== ========== ========== ========== ==========
Series C--Investment income--net $ 240 $ 333 $ 782 $ 678 --
========== ========== ========== ========== ==========
*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 charges.
**Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Amount is less than $(.01) per share.
++++The fund's Preferred Stock was issued on November 19, 1992
(Series A) and March 6, 2000 (Series B and Series C).
++++++Certain prior year amounts have been reclassified to conform
to current year presentation.
+++Based on average shares outstanding.
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Notes to Financial Statements
1. Significant Accounting Policies:
MuniYield Michigan Insured Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as amended, as a non-
diversified, closed-end management investment company. The Fund's
financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. The Fund
determines and makes available for publication the net asset value
of its Common Stock on a weekly basis. The Fund's Common Stock is
listed on the New York Stock Exchange under the symbol MIY. The
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the last available
bid price in the over-the-counter market or on the basis of yield
equivalents as obtained by the Fund's pricing service from one or
more 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). Swap
agreements are valued by quoted fair values received daily by the
Fund from the counterparty. Short-term investments with a remaining
maturity 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 instruments--The Fund may engage in various
portfolio investment strategies both to increase the return of the
Fund and to hedge, or protect, its exposure to interest rate
movements and movements in the securities markets. Losses may arise
due to changes in the value of the contract or if the counterparty
does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts.
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.
* 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.
* Forward interest rate swaps--The Fund may enter into forward
interest rate swaps. In a forward interest rate swap, the Fund and
the counterparty agree to make periodic net payments on a specified
notional contract amount, commencing on a specified future effective
date, unless terminated earlier. When the agreement is closed, the
Fund records a realized gain or loss in an amount equal to the value
of the agreement.
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Notes to Financial Statements (continued)
(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). Realized gains and losses on security
transactions are determined on the identified cost basis. Interest
income is recognized on the accrual basis. Dividend income is
recorded on the ex-dividend dates. The Fund amortizes all premiums
and discounts on debt securities.
(e) 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 .50% of
the Fund's average weekly net assets, including proceeds from the
issuance of Preferred Stock. For the year ended October 31, 2003,
FAM reimbursed the Fund in the amount of $42,312.
For the year ended October 31, 2003, the Fund reimbursed MLIM $9,356
for certain accounting services.
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, 2003 were $138,657,939 and
$142,094,253, respectively.
Net realized gains (losses) for the year ended October 31, 2003 and
net unrealized gains (losses) as of October 31, 2003 were as
follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 3,329,338 $ 32,100,178
Forward interest rate swaps 1,024,632 (167,158)
Financial futures contracts (2,825,019) --
-------------- --------------
Total $ 1,528,951 $ 31,933,020
============== ==============
As of October 31, 2003, net unrealized appreciation for Federal
income tax purposes aggregated $32,251,418, of which $33,883,629
related to appreciated securities and $1,632,211 related to
depreciated securities. The aggregate cost of investments at
October 31, 2003 for Federal income tax purposes was $389,775,188.
4. Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of 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 stock
without approval of holders of Common Stock.
Preferred Stock
Auction Market Preferred Shares ("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, plus accrued and unpaid
dividends that entitle their holders to receive cash dividends at an
annual rate that may vary for the successive dividend periods. The
yields in effect at October 31, 2003 were as follows: Series A,
..90%, Series B, .84% and Series C, .80%.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from .25% to .375%,
calculated on the proceeds of each auction. For the year ended
October 31, 2003, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, an affiliate of FAM, earned $177,702 as commissions.
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Notes to Financial Statements (concluded)
5. Distributions to Shareholders:
The Fund paid a tax-exempt income dividend to holders of Common
Stock in the amount of $.082000 per share on November 26, 2003 to
shareholders of record on November 14, 2003.
The tax character of distributions paid during the fiscal years
ended October 31, 2003 and October 31, 2002 was as follows:
10/31/2003 10/31/2002
Distributions paid from:
Tax-exempt income $ 19,054,756 $ 18,972,649
-------------- --------------
Total distributions $ 19,054,756 $ 18,972,649
============== ==============
As of October 31, 2003, the components of accumulated earnings on a
tax basis were as follows:
Undistributed tax-exempt income--net $ 4,433,872
Undistributed long-term capital gains--net --
--------------
Total undistributed earnings--net 4,433,872
Capital loss carryforward (13,269,487)*
Unrealized gains--net 27,992,338**
--------------
Total accumulated earnings--net $ 19,156,723
==============
*On October 31, 2003, the Fund had a net capital loss carryforward
of $13,269,487, of which $679,274 expires in 2006, $3,974,932
expires in 2007, $7,490,629 expires in 2008 and $1,124,652 expires
in 2010. This amount will be available to offset like amounts of any
future taxable gains.
**The difference between book-basis and tax-basis net unrealized
gains is attributable primarily to the tax deferral of losses on
straddles as well as the difference between book and tax
amortization methods for premiums and discounts on fixed income
securities.
Report of Independent Auditors
To the Shareholders and Board of Directors
of MuniYield Michigan Insured Fund, Inc.:
We have audited the accompanying statement of net assets of
MuniYield Michigan Insured Fund, Inc., including the schedule of
investments, as of October 31, 2003, and the related statement of
operations for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended, and
financial highlights for each of the years indicated therein. These
financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements and financial highlights. Our procedures
included confirmation of securities owned as of October 31, 2003, by
correspondence with the custodian and others. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of MuniYield Michigan Insured Fund, Inc. at
October 31, 2003, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the
years indicated, in conformity with accounting principles generally
accepted in the United States.
(Ernst & Young LLP)
MetroPark, New Jersey
December 16, 2003
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Dividend Policy
The Fund's dividend policy is to distribute all or a portion of its
net investment income to its shareholders on a monthly basis. In
order to provide shareholders with a more stable level of dividend
distributions, 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 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 Net Assets, which comprises part of the Financial
Information included in this report.
Important Tax Information (unaudited)
All of the net investment income distributions paid by MuniYield
Michigan Insured Fund, Inc. during its taxable year ended October
31, 2003 qualify as tax-exempt interest dividends for Federal income
tax purposes.
Please retain this information for your records.
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Automatic Dividend Reinvestment Plan
The following description of the Fund's Automatic Dividend
Reinvestment Plan (the "Plan") is sent to you annually as required
by Federal securities laws.
Pursuant to the Fund's Plan, unless a holder of Common Stock
otherwise elects, all dividend and capital gains distributions will
be automatically reinvested by The Bank of New York (the "Plan
Agent"), as agent for shareholders in administering the Plan, in
additional shares of Common Stock of the Fund. Holders of Common
Stock who elect not to participate in the Plan will receive all
distributions in cash paid by check mailed directly to the
shareholder of record (or, if the shares are held in street or other
nominee name then to such nominee) by The Bank of New York, as
dividend paying agent. Such participants may elect not to
participate in the Plan and to receive all distributions of
dividends and capital gains in cash by sending written instructions
to The Bank of New York, as dividend paying agent, at the address
set forth below. Participation in the Plan is completely voluntary
and may be terminated or resumed at any time without penalty by
written notice if received by the Plan Agent not less than ten days
prior to any dividend record date; otherwise such termination will
be effective with respect to any subsequently declared dividend or
distribution.
Whenever the Fund declares an income dividend or capital gains
distribution (collectively referred to as "dividends") payable
either in shares or in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the
equivalent in shares of Common Stock. The shares will be acquired by
the Plan Agent for the participant's account, depending upon the
circumstances described below, either (i) through receipt of
additional unissued but authorized shares of Common Stock from the
Fund ("newly issued shares") or (ii) by purchase of outstanding
shares of Common Stock on the open market ("open-market purchases")
on the New York Stock Exchange or elsewhere. If on the payment
date for the dividend, the net asset value per share of the Common
Stock is equal to or less than the market price per share of the
Common Stock plus estimated brokerage commissions (such conditions
being referred to herein as "market premium"), the Plan Agent will
invest the dividend amount in newly issued shares on behalf of the
participant. The number of newly issued shares of Common Stock to be
credited to the participant's account will be determined by dividing
the dollar amount of the dividend by the net asset value per share
on the date the shares are issued, provided that the maximum
discount from the then current market price per share on the date of
issuance may not exceed 5%. If on the dividend payment date the
net asset value per share is greater than the market value (such
condition being referred to herein as "market discount"), the Plan
Agent will invest the dividend amount in shares acquired on behalf
of the participant in open-market purchases.
In the event of a market discount on the dividend payment date, the
Plan Agent will have until the last business day before the next
date on which the shares trade on an "ex-dividend" basis or in no
event more than 30 days after the dividend payment date (the "last
purchase date") to invest the dividend amount in shares acquired in
open-market purchases. It is contemplated that the Fund will pay
monthly income dividends. Therefore, the period during which open-
market purchases can be made will exist only from the payment date
on the dividend through the date before the next "ex-dividend" date,
which typically will be approximately ten days. If, before the Plan
Agent has completed its open-market purchases, the market price of
a share of Common Stock exceeds the net asset value per share,
the average per share purchase price paid by the Plan Agent may
exceed the net asset value of the Fund's shares, resulting in the
acquisitions of fewer shares than if the dividend had been paid in
newly issued shares on the dividend payment date. Because of the
foregoing difficulty with respect to open-market purchases, the Plan
provides that if the Plan Agent is unable to invest the full
dividend amount in open-market purchases during the purchase period
or if the market discount shifts to a market premium during the
purchase period, the Plan Agent will cease making open-market
purchases and will invest the uninvested portion of the dividend
amount in newly issued shares at the close of business on the last
purchase date determined by dividing the uninvested portion of the
dividend by the net asset value per share.
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Automatic Dividend Reinvestment Plan (concluded)
The Plan Agent maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the account,
including information needed by shareholders for tax records. Shares
in the account of each Plan participant will be held by the Plan
Agent in non-certificated form in the name of the participant, and
each shareholder's proxy will include those shares purchased or
received pursuant to the Plan. The Plan Agent will forward all proxy
solicitation materials to participants and vote proxies for shares
held pursuant to the Plan in accordance with the instructions of the
participants.
In the case of shareholders such as banks, brokers or nominees which
hold shares of others who are the beneficial owners, the Plan Agent
will administer the Plan on the basis of the number of shares
certified from time to time by the record shareholders as
representing the total amount registered in the record shareholder's
name and held for the account of beneficial owners who are to
participate in the Plan.
There will be no brokerage charges with respect to shares issued
directly by the Fund as a result of dividends or capital gains
distributions payable either in shares or in cash. However, each
participant will pay a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open-market purchases in
connection with the reinvestment of dividends.
The automatic reinvestment of dividends and distributions will not
relieve participants of any Federal, state or local income tax that
may be payable (or required to be withheld) on such dividends.
Shareholders participating in the Plan may receive benefits not
available to shareholders not participating in the Plan. If the
market price plus commissions of the Fund's shares is above the net
asset value, participants in the Plan will receive shares of the
Fund at less than they could otherwise purchase them and will have
shares with a cash value greater than the value of any cash
distribution they would have received on their shares. If the market
price plus commissions is below the net asset value, participants
will receive distributions in shares with a net asset value greater
than the value of any cash distribution they would have received on
their shares. However, there may be insufficient shares available in
the market to make distributions in shares at prices below the net
asset value. Also, since the Fund does not redeem shares, the price
on resale may be more or less than the net asset value.
The value of shares acquired pursuant to the Plan will generally be
excluded from gross income to the extent that the cash amount
reinvested would be excluded from gross income. If, when the Fund's
shares are trading at a premium over net asset value, the Fund
issues shares pursuant to the Plan that have a greater fair market
value than the amount of cash reinvested, it is possible that all or
a portion of such discount (which may not exceed 5% of the fair
market value of the Fund's shares) could be viewed as a taxable
distribution. If the discount is viewed as a taxable distribution,
it is also possible that the taxable character of this discount
would be allocable to all the shareholders, including shareholders
who do not participate in the Plan. Thus, shareholders who do not
participate in the Plan might be required to report as ordinary
income a portion of their distributions equal to their allocable
share of the discount.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the
Plan. There is no direct service charge to participants in the Plan;
however, the Fund reserves the right to amend the Plan to include a
service charge payable by the participants.
All correspondence concerning the Plan should be directed to
the Plan Agent at The Bank of New York, Church Street Station,
P.O. Box 11258, New York , NY 10286-1258, Telephone: 800-432-8224.
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Officers and Directors (unaudited)
Number of
Portfolios in Other Public
Position(s) Length Fund Complex Directorships
Held Of Time Overseen by Held by
Name, Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Director Director
Interested Director
Terry K. Glenn* President 1999 to President and Chairman of Merrill Lynch 124 Funds None
P.O. Box 9011 and present Investment Managers, L.P. ("MLIM")/Fund 163 Portfolios
Princeton, Director and Asset Management, L.P. ("FAM")--Advised
NJ 08543-9011 1993 to Funds since 1999; Chairman (Americas
Age: 63 present Region) of MLIM from 2000 to 2002;
Executive Vice President of MLIM and
FAM (which terms as used herein include
their corporate predecessors) from 1983
to 2002; President of FAM Distributors,
Inc. ("FAMD") from 1986 to 2002 and
Director thereof from 1991 to 2002;
Executive Vice President and Director of
Princeton Services, Inc. ("Princeton
Services") from 1993 to 2002; President
of Princeton Administrators, L.P. from
1989 to 2002; Director of Financial Data
Services, Inc. since 1985.
*Mr. Glenn is a director, trustee or member of an advisory board of
certain other investment companies for which MLIM or FAM acts as
investment adviser. Mr. Glenn is an "interested person," as
described in the Investment Company Act, of the Fund based on his
former positions with MLIM, FAM, FAMD, Princeton Services and
Princeton Administrators, L.P. The Director's term is unlimited.
Directors serve until their resignation, removal or death, or until
December 31 of the year in which they turn 72. As Fund President,
Mr. Glenn serves at the pleasure of the Board of Directors.
Independent Directors*
Donald W. Burton Director 2002 to Manager of The Burton Partnership, 23 Funds ITC DeltaCom,
P.O. Box 9095 present Limited Partnership since 1979; Managing 37 Portfolios Inc.; ITC Holding
Princeton, General Partner of the South Atlantic Company, Inc.;
NJ 08543-9095 Venture Funds, Limited Partnerships and Knology, Inc.;
Age: 59 Chairman of South Atlantic Private Equity MainBancorp
Fund IV, Limited Partnership since 1983; N.A.; PriCare,
Member of the Investment Advisory Council Inc.; Symbion,
of the Florida State Board of Administration Inc.
since 2001.
M. Colyer Crum Director 1992 to James R. Williston Professor of Investment 24 Funds Cambridge
P.O. Box 9095 present Management Emeritus, Harvard Business 38 Portfolios Bancorp
Princeton, School since 1996; Chairman and Director,
NJ 08543-9095 Phaeton International, Ltd. since 1985;
Age: 71 Director, Cambridge Bancorp since 1969.
Laurie Simon Hodrick Director 1999 to Professor of Finance and Economics, Graduate 23 Funds None
P.O. Box 9095 present School of Business, Columbia University 37 Portfolios
Princeton, since 1998; Associate Professor of Finance
NJ 08543-9095 and Economics, Graduate School of Business,
Age: 41 Columbia University from 1996 to 1998.
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Officers and Directors (unaudited)(concluded)
Number of
Portfolios in Other Public
Position(s) Length Fund Complex Directorships
Held Of Time Overseen by Held by
Name, Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Director Director
Independent Directors (concluded)*
Fred G. Weiss Director 1998 to Managing Director of FGW Associates since 23 Funds Watson
P.O. Box 9095 present 1997; Vice President, Planning, Investment 37 Portfolios Pharmaceuticals,
Princeton, and Development of Warner Lambert Co. from Inc.
NJ 08543-9095 1979 to 1997; Director, BTG International,
Age: 62 PLC since 2001; Director, Watson
Pharmaceuticals, Inc. since 2000.
David H. Walsh Director 2003 to Consultant with Putnam Investments since 23 Funds None
P.O. Box 9095 present 1993 and employed in various capacities 37 Portfolios
Princeton, therewith from 1971 to 1992; Director,
NJ 08543-9095 the National Audubon Society since 1980;
Age: 62 Director, the American Museum of Fly
Fishing since 1998.
*The Director's term is unlimited. Directors serve until their
resignation, removal or death, or until December 31 of the year in
which they turn 72.
Position(s) Length
Held Of Time
Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years
Fund Officers
Donald C. Burke Vice 1993 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since
P.O. Box 9011 President present 1999; Senior Vice President and Treasurer of Princeton Services since 1999;
Princeton, and and Vice President of FAMD since 1999; Director of MLIM Taxation since 1990.
NJ 08543-9011 Treasurer 1999 to
Age: 43 present
Kenneth A. Jacob Senior 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
P.O. Box 9011 Vice present Management) of MLIM from 1997 to 2000.
Princeton, President
NJ 08543-9011
Age: 52
John M. Loffredo Senior 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
P.O. Box 9011 Vice present Management) of MLIM from 1998 to 2000.
Princeton, President
NJ 08543-9011
Age: 39
Fred K. Steube Vice 1995 to Director (Municipal Tax-Exempt Fund Management) of MLIM since 2000; Vice
P.O. Box 9011 President present President of MLIM from 1994 to 2000.
Princeton,
NJ 08543-9011
Age: 53
Brian D. Stewart Secretary 2002 to Vice President (Legal Advisory) of MLIM since 2002; Attorney with Reed Smith
P.O. Box 9011 present from 2001 to 2002; Attorney with Saul Ewing from 1999 to 2001.
Princeton,
NJ 08543-9011
Age: 34
*Officers of the Fund serve at the pleasure of the Board of
Directors.
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MIY
MUNIYIELD MICHIGAN INSURED FUND, INC., OCTOBER 31, 2003
Item 2 - Did registrant adopt a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party? If not, why not? Briefly describe
any amendments or waivers that occurred during the period. State
here if code of ethics/amendments/waivers are on website and give
website address-. State here if fund will send code of ethics to
shareholders without charge upon request--
The registrant has adopted a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer and
principal accounting officer, or persons performing similar
functions. A copy of the code of ethics is available without charge
upon request by calling toll-free 1-800-MER-FUND (1-800-637-3863).
Item 3 - Did the registrant's board of directors determine that the
registrant either: (i) has at least one audit committee financial
expert serving on its audit committee; or (ii) does not have an
audit committee financial expert serving on its audit committee? If
yes, disclose name of financial expert and whether he/she is
"independent," (fund may, but is not required, to disclose name/
independence of more than one financial expert) If no, explain why
not. -
The registrant's board of directors has determined that (i) the
registrant has the following audit committee financial experts
serving on its audit committee and (ii) each audit committee
financial expert is independent: (1) Donald W. Burton, (2) M. Colyer
Crum, (3) Laurie Simon Hodrick, (4) David H. Walsh and (5) Fred G.
Weiss.
The registrant's board of directors has determined that Laurie Simon
Hodrick and M. Colyer Crum qualify as financial experts pursuant to
Item 3(c)(4) of Form N-CSR.
Ms. Hodrick has a thorough understanding of generally accepted
accounting principals, financial statements, and internal controls
and procedures for financial reporting. Ms. Hodrick earned a Ph.D.
in economics and has taught courses in finance for over 15 years.
Her M.B.A.-level course centers around the evaluation and analysis
of firms' corporate financial statements. She has also taught in
financial analysts' training programs. Ms. Hodrick has also worked
with several prominent corporations in connection with the analysis
of financial forecasts and projections and analysis of the financial
statements of those companies, serving on the Financial Advisory
Council of one of these major corporations. She has also served as
the Treasurer and Finance Chair of a 501(c)(3) organization. Ms.
Hodrick has published a number of articles in leading economic and
financial journals and is the associate editor of two leading
finance journals.
M. Colyer Crum also possesses a thorough understanding of generally
accepted accounting principals, financial statements, and internal
controls and procedures for financial reporting through a
combination of education and experience. Professor Crum was a
professor of investment management at the Harvard Business School
for 25 years. The courses taught by Professor Crum place a heavy
emphasis on the analysis of underlying company financial statements
with respect to stock selection and the analysis of credit risk in
making loans. Professor Crum has also served on a number of boards
of directors and has served on the audit committees, and in some
cases chaired the audit committee, for several major corporations
and financial institutions. For two such organizations, Professor
Crum has performed extensive investment analysis of financial
statements in connection with investment management decisions. From
these experiences, he has gained significant experience with the
establishment of reserves and accounting policies, differences
between U.S. GAAP and Canadian GAAP and executive compensation
issues.
Item 4 - Disclose annually only (not answered until December 15,
2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements
for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of
the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance
of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising the fees disclosed
under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the
fees disclosed under this category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the
last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs
(a) through (c) of this Item. Registrants shall describe the nature
of the services comprising the fees disclosed under this category.
N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation
S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule
10A-3 under the Exchange Act, state whether or not the registrant
has a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act regarding an exemption from the listing
standards for audit committees. N/A
(Listed issuers must be in compliance with the new listing rules by
the earlier of their first annual shareholders meeting after January
2004, or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in
their portfolio, describe the policies and procedures that it uses
to determine how to vote proxies relating to those portfolio
securities.
Proxy Voting Policies and Procedures
Each Fund's Board of Directors/Trustees has delegated to Merrill
Lynch Investment Managers, L.P. and/or Fund Asset Management, L.P.
(the "Investment Adviser") authority to vote all proxies relating to
the Fund's portfolio securities. The Investment Adviser has adopted
policies and procedures ("Proxy Voting Procedures") with respect to
the voting of proxies related to the portfolio securities held in
the account of one or more of its clients, including a Fund.
Pursuant to these Proxy Voting Procedures, the Investment Adviser's
primary objective when voting proxies is to make proxy voting
decisions solely in the best interests of each Fund and its
shareholders, and to act in a manner that the Investment Adviser
believes is most likely to enhance the economic value of the
securities held by the Fund. The Proxy Voting Procedures are
designed to ensure that that the Investment Adviser considers the
interests of its clients, including the Funds, and not the interests
of the Investment Adviser, when voting proxies and that real (or
perceived) material conflicts that may arise between the Investment
Adviser's interest and those of the Investment Adviser's clients are
properly addressed and resolved.
In order to implement the Proxy Voting Procedures, the Investment
Adviser has formed a Proxy Voting Committee (the "Committee"). The
Committee is comprised of the Investment Adviser's Chief Investment
Officer (the "CIO"), one or more other senior investment
professionals appointed by the CIO, portfolio managers and
investment analysts appointed by the CIO and any other personnel the
CIO deems appropriate. The Committee will also include two non-
voting representatives from the Investment Adviser's Legal
department appointed by the Investment Adviser's General Counsel.
The Committee's membership shall be limited to full-time employees
of the Investment Adviser. No person with any investment banking,
trading, retail brokerage or research responsibilities for the
Investment Adviser's affiliates may serve as a member of the
Committee or participate in its decision making (except to the
extent such person is asked by the Committee to present information
to the Committee, on the same basis as other interested
knowledgeable parties not affiliated with the Investment Adviser
might be asked to do so). The Committee determines how to vote the
proxies of all clients, including a Fund, that have delegated proxy
voting authority to the Investment Adviser and seeks to ensure that
all votes are consistent with the best interests of those clients
and are free from unwarranted and inappropriate influences. The
Committee establishes general proxy voting policies for the
Investment Adviser and is responsible for determining how those
policies are applied to specific proxy votes, in light of each
issuer's unique structure, management, strategic options and, in
certain circumstances, probable economic and other anticipated
consequences of alternate actions. In so doing, the Committee may
determine to vote a particular proxy in a manner contrary to its
generally stated policies. In addition, the Committee will be
responsible for ensuring that all reporting and recordkeeping
requirements related to proxy voting are fulfilled.
The Committee may determine that the subject matter of a recurring
proxy issue is not suitable for general voting policies and requires
a case-by-case determination. In such cases, the Committee may
elect not to adopt a specific voting policy applicable to that
issue. The Investment Adviser believes that certain proxy voting
issues require investment analysis - such as approval of mergers and
other significant corporate transactions - akin to investment
decisions, and are, therefore, not suitable for general guidelines.
The Committee may elect to adopt a common position for the
Investment Adviser on certain proxy votes that are akin to
investment decisions, or determine to permit the portfolio manager
to make individual decisions on how best to maximize economic value
for a Fund (similar to normal buy/sell investment decisions made by
such portfolio managers). While it is expected that the Investment
Adviser will generally seek to vote proxies over which the
Investment Adviser exercises voting authority in a uniform manner
for all the Investment Adviser's clients, the Committee, in
conjunction with a Fund's portfolio manager, may determine that the
Fund's specific circumstances require that its proxies be voted
differently.
To assist the Investment Adviser in voting proxies, the Committee
has retained Institutional Shareholder Services ("ISS"). ISS is an
independent adviser that specializes in providing a variety of
fiduciary-level proxy-related services to institutional investment
managers, plan sponsors, custodians, consultants, and other
institutional investors. The services provided to the Investment
Adviser by ISS include in-depth research, voting recommendations
(although the Investment Adviser is not obligated to follow such
recommendations), vote execution, and recordkeeping. ISS will also
assist the Fund in fulfilling its reporting and recordkeeping
obligations under the Investment Company Act.
The Investment Adviser's Proxy Voting Procedures also address
special circumstances that can arise in connection with proxy
voting. For instance, under the Proxy Voting Procedures, the
Investment Adviser generally will not seek to vote proxies related
to portfolio securities that are on loan, although it may do so
under certain circumstances. In addition, the Investment Adviser
will vote proxies related to securities of foreign issuers only on a
best efforts basis and may elect not to vote at all in certain
countries where the Committee determines that the costs associated
with voting generally outweigh the benefits. The Committee may at
any time override these general policies if it determines that such
action is in the best interests of a Fund.
From time to time, the Investment Adviser may be required to vote
proxies in respect of an issuer where an affiliate of the Investment
Adviser (each, an "Affiliate"), or a money management or other
client of the Investment Adviser (each, a "Client") is involved.
The Proxy Voting Procedures and the Investment Adviser's adherence
to those procedures are designed to address such conflicts of
interest. The Committee intends to strictly adhere to the Proxy
Voting Procedures in all proxy matters, including matters involving
Affiliates and Clients. If, however, an issue representing a non-
routine matter that is material to an Affiliate or a widely known
Client is involved such that the Committee does not reasonably
believe it is able to follow its guidelines (or if the particular
proxy matter is not addressed by the guidelines) and vote
impartially, the Committee may, in its discretion for the purposes
of ensuring that an independent determination is reached, retain an
independent fiduciary to advise the Committee on how to vote or to
cast votes on behalf of the Investment Adviser's clients.
In the event that the Committee determines not to retain an
independent fiduciary, or it does not follow the advice of such an
independent fiduciary, the powers of the Committee shall pass to a
subcommittee, appointed by the CIO (with advice from the Secretary
of the Committee), consisting solely of Committee members selected
by the CIO. The CIO shall appoint to the subcommittee, where
appropriate, only persons whose job responsibilities do not include
contact with the Client and whose job evaluations would not be
affected by the Investment Adviser's relationship with the Client
(or failure to retain such relationship). The subcommittee shall
determine whether and how to vote all proxies on behalf of the
Investment Adviser's clients or, if the proxy matter is, in their
judgment, akin to an investment decision, to defer to the applicable
portfolio managers, provided that, if the subcommittee determines to
alter the Investment Adviser's normal voting guidelines or, on
matters where the Investment Adviser's policy is case-by-case, does
not follow the voting recommendation of any proxy voting service or
other independent fiduciary that may be retained to provide research
or advice to the Investment Adviser on that matter, no proxies
relating to the Client may be voted unless the Secretary, or in the
Secretary's absence, the Assistant Secretary of the Committee
concurs that the subcommittee's determination is consistent with the
Investment Adviser's fiduciary duties
In addition to the general principles outlined above, the Investment
Adviser has adopted voting guidelines with respect to certain
recurring proxy issues that are not expected to involve unusual
circumstances. These policies are guidelines only, and the
Investment Adviser may elect to vote differently from the
recommendation set forth in a voting guideline if the Committee
determines that it is in a Fund's best interest to do so. In
addition, the guidelines may be reviewed at any time upon the
request of a Committee member and may be amended or deleted upon the
vote of a majority of Committee members present at a Committee
meeting at which there is a quorum.
The Investment Adviser has adopted specific voting guidelines with
respect to the following proxy issues:
* Proposals related to the composition of the Board of Directors of
issuers other than investment companies. As a general matter, the
Committee believes that a company's Board of Directors (rather than
shareholders) is most likely to have access to important, nonpublic
information regarding a company's business and prospects, and is
therefore best-positioned to set corporate policy and oversee
management. The Committee, therefore, believes that the foundation
of good corporate governance is the election of qualified,
independent corporate directors who are likely to diligently
represent the interests of shareholders and oversee management of
the corporation in a manner that will seek to maximize shareholder
value over time. In individual cases, the Committee may look at a
nominee's history of representing shareholder interests as a
director of other companies or other factors, to the extent the
Committee deems relevant.
* Proposals related to the selection of an issuer's independent
auditors. As a general matter, the Committee believes that
corporate auditors have a responsibility to represent the interests
of shareholders and provide an independent view on the propriety of
financial reporting decisions of corporate management. While the
Committee will generally defer to a corporation's choice of auditor,
in individual cases, the Committee may look at an auditors' history
of representing shareholder interests as auditor of other companies,
to the extent the Committee deems relevant.
* Proposals related to management compensation and employee
benefits. As a general matter, the Committee favors disclosure of
an issuer's compensation and benefit policies and opposes excessive
compensation, but believes that compensation matters are normally
best determined by an issuer's board of directors, rather than
shareholders. Proposals to "micro-manage" an issuer's compensation
practices or to set arbitrary restrictions on compensation or
benefits will, therefore, generally not be supported.
* Proposals related to requests, principally from management, for
approval of amendments that would alter an issuer's capital
structure. As a general matter, the Committee will support requests
that enhance the rights of common shareholders and oppose requests
that appear to be unreasonably dilutive.
* Proposals related to requests for approval of amendments to an
issuer's charter or by-laws. As a general matter, the Committee
opposes poison pill provisions.
* Routine proposals related to requests regarding the formalities of
corporate meetings.
* Proposals related to proxy issues associated solely with holdings
of investment company shares. As with other types of companies, the
Committee believes that a fund's Board of Directors (rather than its
shareholders) is best-positioned to set fund policy and oversee
management. However, the Committee opposes granting Boards of
Directors authority over certain matters, such as changes to a
fund's investment objective, that the Investment Company Act
envisions will be approved directly by shareholders.
* Proposals related to limiting corporate conduct in some manner
that relates to the shareholder's environmental or social concerns.
The Committee generally believes that annual shareholder meetings
are inappropriate forums for discussion of larger social issues, and
opposes shareholder resolutions "micromanaging" corporate conduct or
requesting release of information that would not help a shareholder
evaluate an investment in the corporation as an economic matter.
While the Committee is generally supportive of proposals to require
corporate disclosure of matters that seem relevant and material to
the economic interests of shareholders, the Committee is generally
not supportive of proposals to require disclosure of corporate
matters for other purposes.
Item 8--Reserved
Item 9(a) - The registrant's certifying officers have reasonably
designed such disclosure controls and procedures to ensure material
information relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
Item 9(b)--There were no significant changes in the registrant's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of
ethics or amendments/waivers is on website or offered to
shareholders upon request without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the
Sarbanes-Oxley Act. Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MuniYield Michigan Insured Fund, Inc.
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
MuniYield Michigan Insured Fund, Inc.
Date: December 22, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Terry K. Glenn________
Terry K. Glenn,
President of
MuniYield Michigan Insured Fund, Inc.
Date: December 22, 2003
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
MuniYield Michigan Insured Fund, Inc.
Date: December 22, 2003
Attached hereto as a furnished exhibit are the certifications
pursuant to Section 906 of the Sarbanes-Oxley Act.