-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WkgPr9q8s2Nya1rL1TVopOvqu4dh/pAN61dxV7Uzlk+TfeDbH/m/7lcQ4Oetq8mt KhbjxZcNWWgN6npRbmF1NQ== 0000900092-02-000084.txt : 20020621 0000900092-02-000084.hdr.sgml : 20020621 20020621152130 ACCESSION NUMBER: 0000900092-02-000084 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020430 FILED AS OF DATE: 20020621 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUNIYIELD MICHIGAN INSURED FUND INC CENTRAL INDEX KEY: 0000890393 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-07080 FILM NUMBER: 02684344 BUSINESS ADDRESS: STREET 1: 800 SCUDDERS MILL RD CITY: PLAINSBORO STATE: NJ ZIP: 08536 BUSINESS PHONE: 6092822800 FORMER COMPANY: FORMER CONFORMED NAME: MUNIYIELD MICHIGAN INSURED FUND INC DATE OF NAME CHANGE: 19920929 FORMER COMPANY: FORMER CONFORMED NAME: MUNIYIELD MICHIGAN INSURED FUND II INC DATE OF NAME CHANGE: 20020620 N-30D 1 ml6865.txt MUNIYIELD MICHIGAN INSURED (BULL LOGO) Merrill Lynch Investment Managers Semi-Annual Report April 30, 2002 MuniYield Michigan Insured Fund, Inc. www.mlim.ml.com MuniYield Michigan Insured Fund, Inc. seeks to provide shareholders with as high a level of current income exempt from Federal 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 and Michigan income taxes. This report, including the financial information herein, is transmitted to the shareholders of MuniYield Michigan Insured Fund, Inc. for their information. It is not a prospectus. 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 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 Printed on post-consumer recycled paper 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 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. 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., April 30, 2002 DEAR SHAREHOLDER During the six months ended April 30, 2002, the Common Stock of MuniYield Michigan Insured Fund, Inc. earned $0.466 per share income dividends, which included earned and unpaid dividends of $0.080. This represents a net annualized yield of 6.09%, based on a month- end per share net asset value of $15.42. Over the same period, the total investment return on the Fund's Common Stock was +0.82%, based on a change in per share net asset value from $15.81 to $15.42, and assuming reinvestment of $0.460 per share income dividends. For the six-month period ended April 30, 2002, the Fund's Auction Market Preferred stock had an average yield of 1.51% for Series A, 1.48% for Series B and 1.48% for Series C. The Municipal Market Environment During the six months ended April 30, 2002, long-term fixed-income bond yields generally rose, while exhibiting considerable monthly volatility. However, throughout the period, tax-exempt bond yield volatility was appreciably lower and the overall increase in municipal bond yields was lower than its taxable counterpart. This relative outperformance by the tax-exempt market largely reflected an improving technical position in recent months. Despite additional decreases in the short-term interest rate target to 1.75% by the Federal Reserve Board, long-term fixed-income markets were unable to hold their October 2001 gains. Rapid, significant US military success in Afghanistan, stronger-than-expected retail sales and recovering US equity markets combined to suggest to many investors that US economic recovery was far more imminent than had been anticipated earlier in the fall of 2001. Bond yields rose during November and December 2001 as investors sold securities both to realize recent profits and in anticipation of an early reversal of the Federal Reserve Board's policy. By the end of December, long- term US Treasury bond yields rose more than 50 basis points (0.50%) to approximately 5.45%. During January and February 2002, economic indicators were mixed, signaling some strength in consumer spending and housing-related industries, but with continued declines in manufacturing employment. Interest rates remained in a narrow but volatile range as weak US equity markets generally supported fixed-income products. By the end of January 2002, the Federal Reserve Board ended its aggressive series of short-term interest rate reductions by maintaining its overnight rate target at 1.75%, a 40-year low. The Federal Reserve Board noted that while US economic activity was beginning to strengthen, earlier weakness could easily resume should consumer spending falter. In recent months, however, the index of leading economic indicators has risen, suggesting that economic activity is likely to expand later this year. In its final revision, fourth quarter 2001 US gross domestic product growth was revised higher to 1.6%, signaling improving economic conditions relative to earlier in 2001. By the end of February 2002, long-term US Treasury bond yields stood at 5.42%. In early March, a number of economic indicators, including surging existing home sales, solid consumer spending and positive nonfarm payroll growth following several months of job losses, suggested US economic activity was continuing to strengthen. Also, in Congressional testimony, Federal Reserve Board Chairman Alan Greenspan was cautiously optimistic regarding future US economic growth noting, while any increase in activity was likely to be moderate, "an economic expansion (was) well underway." These factors combined to push US equity prices higher and bond prices sharply lower in expectation of a reversal of the Federal Reserve Board actions taken during the past 15 months. By the end of March 2002, long-term US Treasury bond yields stood at 5.80%, their highest level in more than 18 months. During April 2002, bond yields reversed to move lower as US economic conditions, especially employment trends, weakened and US equity markets solidly declined. Also, first quarter 2002 US gross domestic product growth was initially estimated to have grown 0.6%. This decline in US economic activity from the fourth quarter of 2001 suggested that earlier US economic strength was weakening and the Federal Reserve Board would be unlikely to raise interest rates for much of 2002. US Treasury issue prices were also boosted by erupting Middle East politics that led many international investors to seek the safe haven of US Treasury securities. By April 30, 2002, long- term US Treasury bond yields declined to 5.59%. During the past six months, US Treasury bond yields rose more than 70 basis points. The municipal bond market displayed a similar pattern to its taxable counterpart during the six-month period ended April 2002. The tax- exempt bond market was also unable to maintain the gains made in late September and October 2001. In addition to a modestly stronger financial environment, increased tax-exempt new bond issuance in late 2001 also put upward pressure on municipal bond yields. By year- end 2001, long-term tax-exempt revenue bond yields as measured by the Bond Buyer Revenue Bond Index stood at 5.60%, an increase of approximately 25 basis points during the last two months of 2001. In early 2002, tax-exempt bond yields traded in a relatively narrow range as an increasingly positive technical position supported existing municipal bond prices. However, in March, increased economic activity and associated concerns regarding near-term Federal Reserve Board actions also pushed tax-exempt bond prices lower. By late March, long-term municipal revenue bond yields rose to 5.67%, their highest level in more than a year. Similar to US Treasury issues, tax-exempt bond yields declined throughout April as economic conditions weakened. The municipal bond market's improvement was bolstered by a continued improvement in the market's technical environments. Investor demand strengthened, in part aided by declining equity prices, as issuance levels declined. At April 30, 2002, long-term tax-exempt bond yields stood at 5.52%, an increase of approximately 30 basis points during the last six months. Interest rates are likely to remain near current levels as US economic conditions are expected to remain relatively weak. However, going forward, business activity appears likely to accelerate, perhaps significantly. Immediately after the September 11 attacks, the Federal Government announced a $45 billion package to aid New York City, Washington DC and the airline industry, with additional fiscal aid packages expected. The military response to these attacks will continue to require sizable increases in Defense Department spending. Eventually, this governmental spending should result in increased US economic activity, particularly in the construction and defense industries. This governmental stimulus, in conjunction with the actions already taken by the Federal Reserve Board, can be expected to generate significant increases in US gross domestic product growth some time in mid-to-late 2002. As inflationary pressures are expected to remain well contained going forward, increased economic activity need not result in significant increases in long-term bond yields. Also, throughout much of 2001, the municipal bond market exhibited far less volatility than its taxable counterparts. Since the strong technical position that has supported the tax-exempt bond market's performance for much of 2001 can be expected to continue, any potential increases in municipal bond yields can also be expected to be limited. Portfolio Strategy For the six-month period ended April 30, 2002, the economic environment remained very favorable for fixed-income investments, and we believe that the majority of recent interest rate declines has already occurred. The Federal Reserve Board's actions taken in 2001, combined with recent and potential additional Federal fiscal stimulus, should eventually restore US economic activity. Consequently, we maintained the neutral position we adopted last year. While this position prevented us from taking advantage of potential short-term trading opportunities, it allowed us to avoid widely fluctuating asset valuations associated with market volatility. However, the Fund's fully invested position allowed us to participate in recent market appreciation and enhanced shareholder income that otherwise might have been jeopardized by market-timing strategies. The Fund's fully invested position also proved beneficial as Michigan's new-issue volume declined in recent months. For the three months ended April 30, 2002, Michigan municipalities issued approximately $1.1 billion, a decline of nearly 30% compared to the same three-month period a year earlier. Recent Michigan underwriting has been in marked contrast with national supply trends, which were stable during the last three months. Finally, the Fund's fully invested position was advantageous, as short-term municipal bond interest rates have recently declined to approximately 1.25% - 1.50%. We are likely to maintain the Fund's present neutral position in the coming months as no significant economic recovery is expected until some time later in 2002. Should business activity improve throughout 2002, we will adopt a more defensive position, anticipating an increase in long- term interest rates. MuniYield Michigan Insured Fund, Inc., April 30, 2002 The 475 basis point decline in short-term interest rates engineered by the Federal Reserve Board in 2001 has resulted in a material decrease in the Fund's borrowing cost into the 1% - 1.25% range. This decline, in combination with a steep tax-exempt yield curve, has generated a material income benefit to the Fund's Common Stock shareholders from the leveraging of the Preferred Stock. While modest increases in short-term interest rates are expected later this year, these increases are unlikely to result in higher borrowng costs for the Fund. However, should the spread between short-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 leverage, see page 1 of this report to shareholders.) In Conclusion We appreciate your ongoing interest in MuniYield Michigan Insured Fund, Inc., and we look forward to assisting you with your financial needs in the months and years ahead. Sincerely, (Terry K. Glenn) Terry K. Glenn President and Director (Kenneth A. Jacob) Kenneth A. Jacob Senior Vice President (John M. Loffredo) John M. Loffredo Senior Vice President (Fred K. Stuebe) Fred K. Stuebe Vice President and Portfolio Manager May 29, 2002 PROXY RESULTS
During the six-month period ended April 30, 2002, MuniYield Michigan Insured Fund, Inc.'s Common Stock shareholders voted on the following proposal. The proposal was approved at a shareholders' meeting on April 25, 2002. A description of the proposal and number of shares voted are as follows: Shares Voted Shares Withheld For From Voting 1. To elect the Fund's Directors: Terry K. Glenn 17,324,606 415,790 J. Thomas Touchton 17,328,311 412,085 Fred G. Weiss 17,324,472 415,924 During the six-month period ended April 30, 2002, MuniYield Michigan Insured Fund, Inc.'s Preferred Stock shareholders (Series A, B and C) voted on the following proposal. The proposal was approved at a shareholders' meeting on April 25, 2002. A description of the proposal and number of shares voted are as follows: Shares Voted Shares Withheld For From Voting 1. To elect the Fund's Board of Directors: Terry K. Glenn, M. Colyer Crum, Laurie Simon Hodrick, J. Thomas Touchton and Fred G. Weiss 5,064 0
MuniYield Michigan Insured Fund, Inc., April 30, 2002 MANAGED 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 consistent yield to the current trading price of Common Stock of the Fund, the Fund may at times pay out less than the entire amount of net investment income earned in any particular month and may at times in any 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. QUALITY PROFILE The quality ratings of securities in the Fund as of April 30, 2002 were as follows: Percent of S&P Rating/Moody's Rating Total Assets AAA/Aaa 84.4% AA/Aa 4.2 A/A 3.0 BBB/Baa 4.3 Other++ 0.8 ++Temporary investments in short-term municipal securities. SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face STATE Ratings Ratings Amount Issue Value Indiana--0.4% AAA Aaa $ 1,100 Wayne County, Indiana, Jail Holding Corporation, First Mortgage Revenue Bonds, 5.50% due 7/15/2022 $ 1,135 Michigan-- AAA Aaa 1,000 Allegan, Michigan, Public School District, GO, 5.75% 141.0% due 5/01/2030 (d) 1,044 Belding, Michigan, Area Schools, GO, Refunding (c): AAA Aaa 785 6.05% due 5/01/2006 (e) 877 AAA Aaa 215 6.05% due 5/01/2021 230 AAA Aaa 3,230 Byron Center, Michigan, Public Schools, GO, Refunding, 5.97% due 5/01/2005 (b)(e) 3,546 AAA Aaa 1,000 Caledonia, Michigan, Community Schools, GO, Refunding, 6.625% due 5/01/2014 (a) 1,041 AAA Aaa 1,625 Central Michigan University Revenue Bonds, 5.50% due 4/01/2007 (c)(e) 1,792 AAA Aaa 1,000 Central Montcalm, Michigan, Public Schools, GO, 5.90% due 5/01/2019 (b) 1,066 AAA Aaa 1,250 Chelsea, Michigan, School District, GO, 5.875% due 5/01/2005 (c)(e) 1,368 AAA Aaa 1,000 Coldwater, Michigan, Community Schools, GO, 6.30% due 5/01/2004 (b)(e) 1,094 AAA Aaa 1,000 Comstock Park, Michigan, Public Schools, GO, 5.75% due 5/01/2029 (c) 1,041 Detroit, Michigan, City School District, GO, Series A: AAA Aaa 2,455 6.50% due 5/01/2009 (a) 2,841 AAA Aaa 1,500 6.50% due 5/01/2011 (a) 1,759 AAA Aaa 1,000 5.50% due 5/01/2018 (d) 1,050 AAA Aaa 2,705 Detroit, Michigan, GO, Series B, 6% due 4/01/2015 (b) 2,996 AAA Aaa 1,000 Detroit, Michigan, Sewer Disposal Revenue Bonds, Series A, 5.75% due 1/01/2010 (c)(e) 1,123 Detroit, Michigan, Water Supply System Revenue Bonds (c): AAA NR* 3,375 DRIVERS, Series 200, 9.51% due 7/01/2028 (g) 3,747 AAA Aaa 4,875 Senior Lien, Series A, 5.75% due 1/01/2010 (e) 5,463 AAA Aaa 1,250 Senior Lien, Series A, 5.875% due 1/01/2010 (e) 1,411 AAA Aaa 5,000 Detroit, Michigan, Water Supply System Revenue Refunding Bonds, 6.25% due 7/01/2012 (c)(e)(h) 5,301 AAA Aaa 1,610 East Grand Rapids, Michigan, Public School District, GO, 5.75% due 5/01/2009 (d)(e) 1,798 AAA Aaa 1,500 East Lansing, Michigan, School District, GO (School Building and Site), 5.50% due 5/01/2020 1,549 Eastern Michigan University, General Revenue Refunding Bonds: AAA Aaa 1,000 6.375% due 6/06/2002 (a)(e) 1,014 AAA Aaa 1,790 Series A, 5.80% due 6/01/2012 (c) 2,010
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 VRDN Variable Rate Demand Notes MuniYield Michigan Insured Fund, Inc., April 30, 2002 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face STATE Ratings Ratings Amount Issue Value Michigan Eastern Michigan University Revenue Bonds, Series B (c): (continued) AAA Aaa $ 1,500 5.60% due 6/01/2025 $ 1,547 AAA Aaa 1,310 5.625% due 6/01/2030 1,348 Eastern Michigan University, Revenue Refunding Bonds: AAA Aaa 1,025 6% due 6/01/2020 (a) 1,112 A1+ NR* 1,100 VRDN, 1.70% due 6/01/2027 (c)(i) 1,100 AAA Aaa 1,000 Frankenmuth, Michigan, School District, GO, 5.75% due 5/01/2020 (c) 1,059 AAA Aaa 1,100 Grand Blanc, Michigan, Community Schools, GO, 5.625% due 5/01/2020 (c) 1,154 Grand Ledge, Michigan, Public Schools District, GO (b)(e): AAA Aaa 1,000 6.45% due 5/01/2004 1,097 AAA Aaa 12,500 6.60% due 5/01/2004 13,743 AAA Aaa 2,090 Grand Rapids, Michigan, Building Authority, GO, 5.375% due 8/01/2017 (a) 2,168 AAA Aaa 3,110 Grand Traverse County, Michigan, Hospital Revenue Refunding Bonds (Munson Healthcare), Series A, 6.25% due 7/01/2022 (a) 3,188 AAA Aaa 2,570 Grandville, Michigan, Public Schools District, GO, Refunding, 6.60% due 5/01/2005 (c)(e) 2,868 AAA NR* 8,425 Greater Detroit, Michigan, Resource Recovery Authority Revenue Bonds, DRIVERS, Series 167, 10.498% due 12/13/2008 (a)(g) 10,715 AAA Aaa 2,250 Greenville, Michigan, Public Schools, GO, 5.75% due 5/01/2004 (b)(e) 2,415 AAA Aaa 1,500 Greenville, Michigan, Public Schools, GO, Refunding, 5% due 5/01/2024 (d) 1,461 Hartland, Michigan, Consolidated School District, GO (c)(e): AAA Aaa 5,750 6% due 5/01/2010 6,535 AAA Aaa 3,575 6% due 5/01/2010 (j) 4,063 AAA Aaa 1,475 Haslett, Michigan, Public School District, Building and Site, GO, 5.625% due 5/01/2020 1,547 AAA Aaa 3,305 Jonesville, Michigan, Community Schools, GO, 5.75% due 5/01/2029 (c) 3,436 AAA Aaa 1,180 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility Revenue Refunding and Improvement Bonds (Bronson Methodist Hospital), Series A, 6.375% due 5/15/2009 (b) 1,257 NR* Aaa 6,850 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility Revenue Refunding Bonds (Bronson Methodist Hospital), 5.50% due 5/15/2028 (b) 6,897 AAA Aaa 4,660 Kent, Michigan, Hospital Finance Authority, Health Care Revenue Bonds (Butterworth Health Systems), Series A, 5.625% due 1/15/2006 (b)(e) 5,136 AAA Aaa 4,000 Kent, Michigan, Hospital Finance Authority, Hospital Revenue Refunding Bonds (Butterworth Hospital), Series A, 7.25% due 1/15/2013 (b) 4,805 Kent, Michigan, Hospital Finance Authority Revenue Bonds (Spectrum Health), Series A: AAA NR* 3,000 5.50% due 1/15/2031 (b) 3,018 AA Aa3 1,000 5.50% due 1/15/2031 986 AAA Aaa 1,000 Leslie, Michigan, Public Schools, Ingham and Jackson Counties, GO, Refunding, 6% due 5/01/2005 (a)(e) 1,099 AAA Aaa 5,235 Lincoln Park, Michigan, School District, GO, 7% due 5/01/2006 (c)(e) 6,036 AAA Aaa 4,775 Livonia, Michigan, Public School District, GO (Building and Site), 5.75% due 5/01/2022 (c) 5,031 Lowell, Michigan, Area Schools, GO, Refunding (c): AAA Aaa 1,500 6% due 5/01/2007 1,671 AAA Aaa 1,900 4.91%** due 5/01/2016 925 BBB NR* 2,250 Michigan Higher Education Facilities Authority, Limited Obligation Revenue Refunding Bonds (Hope College), Series A, 5.90% due 4/01/2032 2,245 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) 2,505 AAA NR* 1,065 Michigan Municipal Bond Authority Revenue Bonds (Local Government Loan Program), Group A, 5.50% due 11/01/2020 (a) 1,102 Michigan Municipal Bond Authority, Revenue Refunding Bonds (Local Government Loan Program), Series A: AAA Aaa 1,035 6.50% due 5/01/2012 (a) 1,078 AAA Aaa 1,870 6.50% due 11/01/2012 (b) 1,948 AAA Aaa 1,000 6% due 12/01/2013 (c) 1,081 AAA Aaa 7,000 6.125% due 12/01/2018 (c) 7,598 AA+ Aaa 7,000 Michigan State Building Authority Revenue Bonds, GO, RIB, Series 481, 9.01% due 4/15/2009 (b)(g) 8,415 Michigan State Building Authority, Revenue Refunding Bonds: AAA Aaa 4,335 (Facilities Program), Series I, 6% due 10/01/2005 (a) 4,755 NR* Aa1 9,890 RIB, Series 517X, 9.01% due 10/15/2010 (g) 11,912 Michigan State COP (a): AAA Aaa 3,000 5.40%** due 6/01/2022 984 AAA Aaa 3,000 5.50% due 6/01/2027 3,051 AAA Aaa 1,500 Michigan State, COP, Refunding (New Center Development Inc.), 5.25% due 9/01/2009 (b) 1,622 AAA Aaa 5,000 Michigan State, HDA, Rental Housing Revenue Bonds, AMT, Series A, 5.30% due 10/01/2037 (b) 4,740 AAA Aaa 3,560 Michigan State, HDA, Rental Housing Revenue Refunding Bonds, Series A, 6.50% due 4/01/2023 (d) 3,656 Michigan State, HDA Revenue Refunding Bonds (f): AA+ NR* 525 AMT, Series B, 6.20% due 6/01/2027 542 AA+ NR* 2,690 Series C, 5.90% due 12/01/2015 2,822 BBB- Baa3 2,000 Michigan State Hospital Finance Authority Revenue Bonds (Detroit Medical Center),Series A, 5.25% due 8/15/2023 1,627 Michigan State Hospital Finance Authority, Revenue Refunding Bonds: AAA Aaa 2,500 (Ascension Health Credit), Series A, 6.25% due 11/15/2014 (b) 2,713 AAA Aaa 2,715 (Ascension Health Credit), Series A, 5.75% due 11/15/2017 (b) 2,819 AAA Aaa 12,000 (Ascension Health Credit), Series A, 6.125% due 11/15/2023 (b) 12,597 AA Aa2 1,500 (Ascension Health Credit), Series A, 6.125% due 11/15/2026 1,569 AAA Aaa 4,930 (Mercy Mount Clemens), Series A, 6% due 5/15/2014 (b) 5,352 AAA Aaa 4,805 (Mercy Health Services), Series T, 6.50% due 8/15/2013 (b) 5,409 AAA Aaa 2,000 (Mercy Health Services), Series X, 6% due 8/15/2014 (b) 2,176 AAA Aaa 2,200 (Mercy Health Services), Series X, 5.75% due 8/15/2019 (b) 2,293 AAA Aaa 3,000 (Saint John Hospital), Series A, 6% due 5/15/2013 (a)(h) 3,169 AAA Aaa 6,400 (Trinity Health), Series A, 6% due 12/01/2027 (a) 6,753 AAA Aaa 2,155 Michigan State House of Representatives, COP, 5.50% due 8/15/2009 (a) 2,365 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 5,105 BBB Ba1 3,000 (WMX Technologies Inc. Project), 6% due 12/01/2013 2,980 BBB Ba1 2,500 (Waste Management Inc. Project), 6.625% due 12/01/2012 2,553
MuniYield Michigan Insured Fund, Inc., April 30, 2002 SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face STATE Ratings Ratings Amount Issue Value Michigan Michigan State Strategic Fund, Limited Obligation Revenue (concluded) Refunding Bonds: AAA Aaa $ 7,250 (Detroit Edison Company), AMT, Series A, 5.55% due 9/01/2029 (b) $ 7,328 AAA Aaa 6,000 (Detroit Edison Company Fund--Pollution), Series AA, 6.95% due 5/01/2011 (c) 7,214 BBB+ Baa1 3,460 (Ford Motor Co. Project), Series A, 7.10% due 2/01/2006 3,823 NR* Aaa 5,750 RIB, Series 382, 10.76% due 9/01/2025 (b)(g) 6,820 BBB+ A3 2,500 Michigan State Strategic Fund, PCR, Refunding (General Motors Corp.), 6.20% due 9/01/2020 2,562 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) 18,538 Monroe County, Michigan, PCR (Detroit Edison Company Project), AMT (b): AAA Aaa 9,000 Series CC, 6.55% due 6/01/2024 9,495 AAA Aaa 1,500 Series I-B, 6.55% due 9/01/2024 1,594 NR* Aaa 1,830 Muskegon Heights, Michigan, Water System Revenue Bonds, Series A, 5.625% due 11/01/2025 (b) 1,894 Northview, Michigan, Public School District, GO, Refunding (b): AAA NR* 2,265 5.80% due 5/01/2006 (e) 2,510 AAA Aaa 235 5.80% due 5/01/2021 245 AAA Aaa 1,100 Norway Vulcan, Michigan, Area Schools, GO, 5.90% due 5/01/2025 (c) 1,162 AAA Aaa 2,600 Novi, Michigan, Community School District, GO, 6.125% due 5/01/2003 (c)(e) 2,760 AAA Aaa 2,425 Oxford, Michigan, Area Community School District, GO, 5.50% due 5/01/2018 (d) 2,542 A NR* 700 Pontiac, Michigan, Tax Increment Finance Authority, Revenue Refunding Bonds (Tax Increment--Development Area Number 2), 5.625% due 6/01/2022 694 AAA Aaa 1,870 Redford, Michigan, Unified School District, GO, 5.90% due 5/01/2006 (c)(e) 2,079 AAA Aaa 1,000 Reeths-Puffer Schools, Michigan, GO, Refunding, 6% due 5/01/2005 (c)(e) 1,099 AAA Aaa 1,800 Rochester, Michigan, Community School District, GO, Series II, 5.50% due 5/01/2015 (c) 1,928 AAA Aaa 7,500 Romulus, Michigan, Community Schools, GO, 6% due 5/01/2009 (c)(e) 8,491 AAA Aaa 2,500 Saginaw, Michigan, Hospital Finance Authority, Revenue Refunding Bonds (Covenant Medical Center), Series E, 5.625% due 7/01/2013 (b) 2,674 NR* Aaa 7,400 Saint Clair County, Michigan, Economic Revenue Refunding Bonds (Detroit Edison Company), RIB, Series 282, 10.76% due 8/01/2024 (a)(g) 9,110 AAA Aaa 1,300 Southfield, Michigan, Library Building Authority, GO, 5.50% due 5/01/2018 (b) 1,355 Sturgis, Michigan, Public School District, GO (School Building and Site): AAA Aaa 1,900 5.50% due 5/01/2021 1,958 AAA Aaa 2,545 5.625% due 5/01/2030 2,618 AAA Aaa 1,000 Three Rivers, Michigan, Community Schools GO, 6% due 5/01/2006 (b)(e) 1,116 A1+ VMIG1++ 2,100 University of Michigan, University Hospital Revenue Refunding Bonds, VRDN, Series A, 1.75% due 12/01/2019 (i) 2,100 AAA Aaa 1,500 Waterford, Michigan, School District, GO, 6.25% due 6/01/2004 (c)(e) 1,629 AAA Aaa 1,100 Waverly, Michigan, Community School, GO, 5.50% due 5/01/2021 (c) 1,134 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) 10,913 AAA Aaa 2,400 Wayne County, Michigan, COP, 5.625% due 5/01/2011 (a) 2,588 West Bloomfield, Michigan, School District, GO Refunding (c): AAA Aaa 1,710 5.50% due 5/01/2017 1,807 AAA Aaa 1,225 5.50% due 5/01/2018 1,287 AAA Aaa 2,405 West Branch-Rose City, Michigan, Area School District, GO, 5.50% due 5/01/2024 (c) 2,461 AAA Aaa 5,500 Wyandotte, Michigan, Electric Revenue Refunding Bonds, 6.25% due 10/01/2017 (b) 5,699 AAA Aaa 1,300 Ypsilanti, Michigan, School District, GO, Refunding, 5.75% due 5/01/2007 (c)(e) 1,439 Puerto A Baa1 2,500 Puerto Rico Commonwealth, Highway and Transportation Authority, Rico--5.1% Transportation Revenue Bonds, Series D, 5.75% due 7/01/2041 2,635 AAA Aaa 1,270 Puerto Rico Electric Power Authority, Power Revenue Bonds, Trust Receipts, Class R, Series 16 HH, 9.542% due 7/01/2013 (d)(g) 1,616 A Baa1 2,500 Puerto Rico Public Buildings Authority, Government Facilities Revenue Refunding Bonds, Series C, 5.75% due 7/01/2022 2,674 Puerto Rico Public Finance Corporation, Commonwealth Appropriation Revenue Bonds: AAA Aaa 1,000 Series A, 5.375% due 8/01/2024 (b) 1,031 A- Baa3 2,900 Series E, 5.75% due 8/01/2030 3,016 A- Baa3 1,000 Puerto Rico Public Finance Corporation Revenue Bonds, Commonwealth Appropriation, Series E, 5.70% due 8/01/2025 1,036 AAA Aaa 2,150 University of Puerto Rico, University Revenue Refunding Bonds, Series O, 5.375% due 6/01/2030 (b) 2,171 Total Investments (Cost--$386,715)--146.5% 410,094 Variation Margin on Financial Futures Contracts***--0.0% (46) Other Assets Less Liabilities--3.5% 9,967 Preferred Stock, at Redemption Value--(50.0%) (140,027) ---------- Net Assets Applicable to Common Stock--100.0% $ 279,988 ========== (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 April 30, 2002. (h)Escrowed to maturity. (i)The interest rate is subject to change periodically based upon prevailing market rates. The interest rate shown is the rate in effect at April 30, 2002. (j)All or a portion of security held as collateral in connection with open financial futures contracts. *Not Rated. **Represents a zero coupon bond; the interest rate shown is the effective yield at the time of purchase by the Fund. ***Financial futures contracts sold as of April 30, 2002 were as follows: Number of Expiration Contracts Issue Date Value 420 US Treasury Notes June 2002 $ 44,336,250 ------------ Total Financial Futures Contracts Sold (Total Contract Price--$44,447,812) $ 44,336,250 ============ ++Highest short-term rating by Moody's Investors Service, Inc. See Notes to Financial Statements.
MuniYield Michigan Insured Fund, Inc., April 30, 2002 STATEMENT OF NET ASSETS As of April 30, 2002 Assets: Investments, at value (identified cost--$386,714,731) $410,093,619 Receivables: Interest $ 8,388,921 Securities sold 6,013,875 14,402,796 ------------ Prepaid expenses and other assets 8,078 ------------ Total assets 424,504,493 ------------ Liabilities: Payables: Securities purchased 3,357,708 Custodian bank 614,559 Dividends to shareholders 217,531 Investment adviser 171,609 Variation margin 45,938 4,407,345 ------------ Accrued expenses and other liabilities 81,996 ------------ Total liabilities 4,489,341 ------------ Preferred Preferred Stock, par value $.05 per share (5,600 shares of AMPS* Stock: issued and outstanding at $25,000 per share liquidation preference) 140,027,132 ------------ Net Assets Net assets applicable to Common Stock $279,988,020 Applicable To ============ Common Stock: Analysis of Common Stock, par value $.10 per share (18,155,932 shares issued Net Assets and outstanding) $ 1,815,593 Applicable to Paid-in capital in excess of par 271,454,773 Common Stock: Undistributed investment income--net 3,019,414 Accumulated realized capital losses on investments--net (19,792,210) Unrealized appreciation on investments--net 23,490,450 ------------ Total--Equivalent to $15.42 net asset value per share of Common Stock (market price--$13.75) $279,988,020 ============ *Auction Market Preferred Stock. See Notes to Financial Statements.
STATEMENT OF OPERATIONS For the Six Months Ended April 30, 2002 Investment Interest $ 11,353,891 Income: Expenses: Investment advisory fees $ 1,040,555 Commission fees 177,801 Accounting services 75,683 Professional fees 42,554 Transfer agent fees 29,186 Listing fees 17,421 Directors' fees and expenses 13,353 Custodian fees 12,605 Printing and shareholder reports 11,933 Pricing fees 10,425 Other 17,352 ------------ Total expenses 1,448,868 ------------ Investment income--net 9,905,023 ------------ Realized & Realized gain on investments--net 400,387 Unrealized Change in unrealized appreciation on investments--net (7,917,035) Gain (Loss) on ------------ Investments Total realized and unrealized loss on investments--net (7,516,648) - --Net: ------------ Dividends to Investment income--net (1,035,376) Preferred ------------ Stock Net Increase in Net Assets Resulting from Operations $ 1,352,999 Shareholders: ============ See Notes to Financial Statements.
MuniYield Michigan Insured Fund, Inc., April 30, 2002 STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the Months Ended Year Ended April 30, October 31, Increase (Decrease) in Net Assets: 2002 2001++ Operations: Investment income--net $ 9,905,023 $ 19,641,438 Realized gain on investments--net 400,387 1,578,519 Change in unrealized appreciation/depreciation on investments--net (7,917,035) 22,042,066 Dividends to Preferred Stock shareholders (1,035,376) (4,401,028) ------------ ------------ Net increase in net assets resulting from operations 1,352,999 38,860,995 ------------ ------------ Dividends to Investment income--net (8,347,190) (14,726,730) Common Stock ------------ ------------ Shareholders: Net decrease in net assets resulting from dividends to Common Stock shareholders (8,347,190) (14,726,730) ------------ ------------ Capital Stock Offering costs resulting from the issuance of Common Stock -- (15,881) Transactions: ------------ ------------ Net decrease in net assets derived from capital stock transactions -- (15,881) ------------ ------------ Net Assets Total increase (decrease) in net assets applicable to Common Stock (6,994,191) 24,118,384 Applicable To Beginning of period 286,982,211 262,863,827 Common Stock: ------------ ------------ End of period* $279,988,020 $286,982,211 ============ ============ *Undistributed investment income--net $ 3,019,414 $ 2,496,957 ============ ============ ++Certain prior year amounts have been reclassified to conform to current year presentation. See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
The following per share data and ratios For the have been derived from information Six Months provided in the financial statements. Ended April 30, For the Year Ended October 31, Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998 Per Share Net asset value, beginning of period $ 15.81 $ 14.48 $ 13.91 $ 15.93 $ 15.51 Operating --------- --------- --------- --------- --------- Performance:++++++ Investment income--net .55 1.08 .99 1.04 1.07 Realized and unrealized gain (loss) on investments--net (.42) 1.30 .67 (1.79) .46 Dividends and distributions to Preferred Stock shareholders: Investment income--net (.06) (.24) (.30) (.18) (.21) In excess of realized gain on investments--net -- -- -- (.03) (.03) --------- --------- --------- --------- --------- Total from investment operations .07 2.14 1.36 (.96) 1.29 --------- --------- --------- --------- --------- Less dividends and distributions to Common Stock shareholders: Investment income--net (.46) (.81) (.79) (.85) (.83) In excess of realized gain on investments--net -- -- -- (.21) (.04) --------- --------- --------- --------- --------- Capital charge resulting from issuance of Common Stock -- --++ -- -- -- --------- --------- --------- --------- --------- Total dividends and distributions to Common Stock shareholders (.46) (.81) (.79) (1.06) (.87) --------- --------- --------- --------- --------- Net asset value, end of period $ 15.42 $ 15.81 $ 14.48 $ 13.91 $ 15.93 ========= ========= ========= ========= ========= Market price per share, end of period $ 13.75 $ 14.22 $ 11.9375 $ 12.1875 $ 15.875 ========= ========= ========= ========= ========= Total Investment Based on market price per share (.05%)+++ 26.44% 4.62% (17.47%) 16.03% Return:** ========= ========= ========= ========= ========= Based on net asset value per share .82%+++ 15.89% 11.19% (6.13%) 8.85% ========= ========= ========= ========= ========= Ratios Based on Total expenses, excluding Average Net reorganization expenses*** 1.04%* 1.05% 1.10% 1.09% 1.06% Assets of ========= ========= ========= ========= ========= Common Stock: Total expenses*** 1.04%* 1.05% 1.33% 1.09% 1.06% ========= ========= ========= ========= ========= Total investment income--net*** 7.14%* 7.10% 7.49% 6.85% 6.90% ========= ========= ========= ========= ========= Amount of dividends to Preferred Stock shareholders .75%* 1.59% 2.18% 1.18% 1.36% ========= ========= ========= ========= ========= Investment income--net, to Common Stock shareholders 6.39%* 5.51% 5.31% 5.67% 5.54% ========= ========= ========= ========= ========= Ratios Based on Total expenses, excluding Average Net reorganization expenses .70%* .70% .72% .76% .74% Assets Of ========= ========= ========= ========= ========= Common & Total expenses .70%* .70% .86% .76% .74% Preferred ========= ========= ========= ========= ========= Stock:*** Total investment income--net 4.76%* 4.71% 4.87% 4.75% 4.79% ========= ========= ========= ========= ========= Ratios Based on Dividends to Preferred Stock 1.49%* 3.14% 4.06% 2.66% 3.13% Average Net shareholders ========= ========= ========= ========= ========= Assets Of Preferred Stock: Supplemental Net assets, net of Preferred Stock, Data: end of period (in thousands) $ 279,988 $ 286,982 $262,864 $103,364 $ 117,511 ========= ========= ========= ========= ========= Preferred Stock outstanding, end of period (in thousands) $ 140,000 $ 140,000 $140,000 $ 50,000 $ 50,000 ========= ========= ========= ========= ========= Portfolio turnover 11.41% 68.17% 51.41% 42.71% 41.65% ========= ========= ========= ========= ========= Leverage: Asset coverage per $1,000 $ 3,000 $ 3,050 $ 2,878 $ 3,067 $ 3,350 ========= ========= ========= ========= ========= Dividends Per Series A--Investment income--net $ 187 $ 792 $ 1,023 $ 663 $ 782 Share On ========= ========= ========= ========= ========= Preferred Stock Series B--Investment income--net $ 184 $ 783 $ 653 -- -- Outstanding:++++ ========= ========= ========= ========= ========= Series C--Investment income--net $ 184 $ 782 $ 678 -- -- ========= ========= ========= ========= ========= *Annualized. **Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Total investment returns exclude the effects of sales 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. +++Aggregate total investment return. See Notes to Financial Statements.
MuniYield Michigan Insured Fund, Inc., April 30, 2002 NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies: MuniYield Michigan Insured Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a non-diversified, closed-end management investment company. The Fund'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. These unaudited financial statements reflect all adjustments, which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. All such adjustments are of a normal, recurring nature. The Fund determines and makes available for publication the net asset value of its Common Stock on a weekly basis. The Fund's Common Stock is listed on the New York Stock Exchange under the symbol MIY. The following is a summary of significant accounting policies followed by the Fund. (a) Valuation of investments--Municipal bonds are traded primarily in the over-the-counter markets and are valued at the most recent bid price or yield equivalent as obtained by the Fund's pricing service from dealers that make markets in such securities. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their closing prices as of the close of such exchanges. Options 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-counter-market, valuation is the last asked price (options written) or the last bid price (options purchased). Securities with remaining maturities of sixty days or less are valued at amortized cost, which approximates market value. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of Directors of the Fund, including valuations furnished by a pricing service retained by the Fund, which may utilize a matrix system for valuations. The procedures of the pricing service and its valuations are reviewed by the officers of the Fund under the general supervision of the Board of Directors. (b) Derivative financial instruments--The Fund may engage in various portfolio investment strategies to increase or decrease the level of risk to which the Fund is exposed more quickly and efficiently than transactions in other types of instruments. 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 for the purpose of hedging the market risk on existing securities or the intended purchase of securities. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. * Options--The Fund is authorized to write covered call options and purchase put options. When the Fund writes an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired, or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. (c) Income taxes--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax provision is required. (d) Security transactions and investment income--Security transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Interest income is recognized on the accrual basis. (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. (f) Custodian bank--The Fund recorded an amount payable to the Custodian Bank reflecting an overnight overdraft which resulted from management estimates of available cash. 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 six months ended April 30, 2002, the Fund reimbursed FAM, $8,353 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 six months ended April 30, 2002 were $46,792,073 and $47,029,349, respectively. Net realized gains (losses) for the six months ended April 30, 2002 and net unrealized gains as of April 30, 2002 were as follows: Realized Unrealized Gains (Losses) Gains Long-term investments $ 938,347 $ 23,378,888 Financial futures contracts (537,960) 111,562 ------------- ------------- Total $ 400,387 $ 23,490,450 ============= ============= As of April 30, 2002, net unrealized appreciation for Federal income tax purposes aggregated $23,378,888, of which $23,776,482 related to appreciated securities and $397,594 related to depreciated securities. The aggregate cost of investments at April 30, 2002 for Federal income tax purposes was $386,714,731. 4. Capital Stock Transactions: The Fund is authorized to issue 200,000,000 shares of capital stock, including Preferred Stock, par value $.10 per share, all of which were initially classified as Common Stock. The Board of Directors is authorized, however, to reclassify any unissued shares of capital stock without approval of holders of Common Stock. Common Stock Shares issued and outstanding during the six months ended April 30, 2002 and for the year ended October 31, 2001 remained constant. Preferred Stock Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the Fund, with a par value of $.05 per share and a liquidation preference of $25,000 per share, that entitle their holders to receive cash dividends at an annual rate that may vary for the successive dividend periods. The yields in effect at April 30, 2002 were as follows: Series A, 1.55%, Series B, 1.65% and Series C, 1.60%. Shares issued and outstanding during the six months ended April 30, 2002 and for the year ended October 31, 2001 remained constant. 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 six months ended April 30, 2002, Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of FAM, earned $211,287 as commissions. 5. Capital Loss Carryforward: At October 31, 2001, the Fund had a net capital loss carryforward of approximately $16,733,000, of which $3,063,000 expires in 2002; $746,000 expires in 2003; $1,459,000 expires in 2006; $3,975,000 expires in 2007 and $7,490,000 expires in 2008. This amount will be available to offset like amounts of any future taxable gains. Expired capital loss carryforward in the amount of $473,462 has been reclassified to paid-in capital in excess of par. 6. Subsequent Event: On May 8, 2002, the Fund's Board of Directors declared an ordinary income dividend to Common Stock shareholders in the amount of $.079500 per share, payable on May 30, 2002 to shareholders of record as of May 20, 2002. MuniYield Michigan Insured Fund, Inc., April 30, 2002 OFFICERS AND DIRECTORS Terry K. Glenn, President and Director Donald W. Burton, Director M. Colyer Crum, Director Laurie Simon Hodrick, Director Stephen B. Swensrud, Director J. Thomas Touchton, Director Fred G. Weiss, Director Kenneth A. Jacob, Senior Vice President John M. Loffredo, Senior Vice President Fred K. Stuebe, Vice President Donald C. Burke, Vice President and Treasurer Stephen M. Benham, Secretary Vincent R. Giordano, Senior Vice President of MuniYield Michigan Insured Fund, Inc., has recently retired. The Fund's Board of Directors wishes Mr. Giordano well in his retirement. Custodian The Bank of New York 90 Washington Street New York, NY 10286 Transfer Agents Common Stock: The Bank of New York 101 Barclay Street New York, NY 10286 Preferred Stock: The Bank of New York 100 Church Street New York, NY 10286 NYSE Symbol MIY -----END PRIVACY-ENHANCED MESSAGE-----