UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07080
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: Robert C. Doll, Jr., Chief Executive
Officer, 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: 10/31/06
Date of reporting period: 11/01/05 - 04/30/06
Item 1 - Report to Stockholders
Semi-Annual Report
April 30, 2006
MuniYield Michigan
Insured Fund, Inc.
(BULL LOGO) Merrill Lynch Investment Managers
www.mlim.ml.com
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
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.
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities is available (1)
without charge, upon request, by calling toll-free 1-800-637-3863; (2) at
www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com; and
(2) on the Securities and Exchange Commission's Web site at http://www.sec.gov.
MuniYield Michigan Insured Fund, Inc.
Box 9011
Princeton, NJ 08543-9011
(GO PAPERLESS LOGO)
It's Fast, Convenient, & Timely!
To sign up today, go to www.icsdelivery.com/live.
MuniYield Michigan Insured Fund, Inc.
Announcement to Shareholders
On February 15, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch & Co.,
Inc. ("Merrill Lynch") entered into an agreement to contribute Merrill Lynch's
investment management business, Merrill Lynch Investment Managers, L.P. and
certain affiliates (including Fund Asset Management, L.P. and Merrill Lynch
Investment Managers International Limited), to BlackRock to create a new
independent company that will be one of the world's largest asset management
firms with over $1 trillion in assets under management (based on combined
assets under management as of March 31, 2006). The transaction is expected to
close in the third quarter of 2006, at which time the new company will operate
under the BlackRock name. The Fund's Board of Directors has approved a new
investment advisory agreement with BlackRock Advisors, Inc. or its successor
("BlackRock Advisors") on substantially the same terms and for the same
advisory fee as the current investment advisory agreement with the Investment
Adviser. If the new agreement is approved by the Fund's shareholders,
BlackRock Advisors is expected to become the Fund's investment adviser upon
the closing of the transaction between Merrill Lynch and BlackRock.
Portfolio Information as of April 30, 2006
Percent of
Quality Ratings by Total
S&P/Moody's Investments
AAA/Aaa 87.4%
AA/Aa 3.4
A/A 4.2
BBB/Baa 3.5
BB/Ba 1.1
Other* 0.4
* Includes portfolio holdings in short-term investments.
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.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
A Letter From the President
Dear Shareholder
You may be aware that changes are on the horizon at Merrill Lynch Investment
Managers ("MLIM"). On February 15, 2006, Merrill Lynch announced plans to
combine the firm's investment advisory business, including MLIM, with another
highly regarded investment manager - BlackRock, Inc. ("BlackRock").
We believe this merger of asset management strength will benefit our
investors. MLIM is a leading investment management organization with over
$576 billion in assets under management globally and 2,757 employees in
17 countries. It offers over 100 investment strategies in vehicles ranging
from mutual funds to institutional portfolios. BlackRock is one of the
largest publicly traded investment management firms in the United States
with $463.1 billion in assets under management and 1,839 employees. It
manages assets on behalf of institutional and individual investors worldwide
through a variety of equity, fixed income, liquidity and alternative
investment products.
At the completion of the transaction, which is expected in the third quarter
of this year, the resultant firm will be a top-10 investment manager worldwide
with over $1 trillion in assets under management.* The combined company will
provide a wider selection of high-quality investment solutions across a
range of asset classes and investment styles. MLIM and BlackRock possess
complementary capabilities that together create a well-rounded organization
uniting some of the finest money managers in the industry. At the same time,
the firms share similar values and beliefs - they are focused on delivering
excellence on behalf of clients, and both make investment performance their
single most important mission. In short, the merger only reinforces our
commitment to shareholders.
Most of MLIM's investment products - including mutual funds, separately
managed accounts, annuities and variable insurance funds - eventually will
carry the "BlackRock" name. As a shareholder in one or more MLIM-advised
mutual funds, you will receive a proxy package in the coming weeks in
connection with this transaction. After you receive this information, should
you have any questions or concerns, do not hesitate to contact your financial
advisor.
As always, we thank you for entrusting us with your investment assets, and we
look forward to continuing to serve your investment needs with even greater
strength and scale as the new BlackRock.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
President and Chief Investment Officer
Merrill Lynch Investment Managers
* $1.039 trillion in assets under management as of March 31, 2006.
Data, including assets under management, are as of March 31, 2006.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
A Discussion With Your Fund's Portfolio Manager
The Fund maintained an above-average distribution rate throughout the period,
and our commitment to providing shareholders with attractive income continues
to drive portfolio activity.
Describe the recent market environment relative to municipal bonds.
Long-term bond yields rose sharply during the six-month period ended April 30,
2006, with much of the increase occurring in March and April. Bond prices,
which move opposite of yields, declined. Bond prices were pressured as
investors focused on solid global and U.S. economic growth and renewed
inflationary pressures deriving from rising commodity prices. First quarter
2006 gross domestic product growth was recently estimated at 4.8%, well above
the 1.7% rate recorded in the fourth quarter of 2005.
The Federal Reserve Board (the Fed) increased short-term interest rates at
each of its meetings during the period, bringing the federal funds rate to
4.75% at period-end, and then to 5% on May 10. In response, the yield curve
continued to flatten, with short-term interest rates rising more than longer-
term interest rates. Over the past six months, 30-year U.S. Treasury bond
yields rose 41 basis points (.41%) to 5.17% and 10-year U.S. Treasury note
yields rose 50 basis points to 5.07%, the highest level since May 2002.
While the municipal yield curve also flattened during the period, a
significant decline in new bond issuance allowed municipal bond prices to
improve slightly or decline much less than their taxable counterparts. As
measured by Municipal Market Data, yields on AAA-rated issues maturing in 30
years fell six basis points to 4.53% while yields on AAA-rated issues maturing
in 10 years rose 16 basis points to 4.08%.
For the most part, the recent outperformance of the tax-exempt market has been
fostered by a dramatic decline in new bond issuance so far in 2006. In 2005,
more than $408 billion in new long-term tax-exempt bonds was underwritten, a
new annual record and an increase of more than 13% compared to 2004. Over the
past six months, $170 billion in long-term municipal bonds was issued, a
decline of 8.6% versus the same period a year earlier.
The tax-exempt market has continued to enjoy strong investor demand. During
the first quarter of 2006, tax-exempt mutual funds received over $9.3 billion,
slightly higher than the $8.9 billion inflow during the same period in 2005.
Recent statistics from AMG Data Services indicate that, thus far in 2006,
average weekly cash flows into long-term municipal bond funds were over $300
million, a significant improvement from the weekly average of $65 million in
December 2005.
Looking ahead, the fundamentals for the tax-exempt bond market appear
favorable, and continued positive cash flows are anticipated. Given their
attractive yields relative to comparable U.S. Treasury bonds, and the
prospects for reduced issuance in 2006, we believe municipal bonds could enjoy
solid results in the coming months.
Describe conditions in the State of Michigan.
The State of Michigan maintained credit ratings of Aa2, AA and AA with stable
outlooks from Moody's, Standard & Poor's and Fitch, respectively. All three
agencies downgraded the state in late 2004 or the first quarter of 2005,
citing the troubled automotive sector and weak revenue estimates. The
performance of the state's economy, which continues to lag the national
recovery as well as that of the Great Lakes region, is the key to future
ratings action. Given the possibilities of more job losses in the automotive
sector and a fiscal crisis in Detroit, at least one of the rating agencies
could downgrade Michigan in 2006 or place a negative outlook on the state's
credit.
The state recorded its fifth consecutive year of increasing unemployment in
2005, although the rate of annual job losses has declined each year since
2001. While the state has successfully managed its budget through conservative
revenue estimates and large spending cuts, the job losses have weighed on
revenue collections and could indicate longer-term economic problems for the
state. As a short-term measure to avoid further spending cuts, the governor
recently vetoed a repeal of the $1 billion business tax. On the upside,
Michigan's debt ratios are quite low for a populous state and indicate
relative flexibility in the ability to respond to economic downturns. The
state's pension system is well funded.
How did the Fund perform during the period?
For the six-month period ended April 30, 2006, the Common Stock of MuniYield
Michigan Insured Fund, Inc. had net annualized yields of 5.90% and 5.94%,
based on a period-end per share net asset value of $15.08 and a per share
market price of $14.97, respectively, and $.441 per share income dividends.
Over the same period, the total investment return on the Fund's Common Stock
was +1.37%, based on a change in per share net asset value from $15.32 to
$15.08, and assuming reinvestment of all distributions.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
The Fund's total return, based on net asset value, lagged the +1.94% average
return of the Lipper Michigan Municipal Debt Funds category for the six-month
period. (Funds in this Lipper category limit their investment to securities
exempt from taxation in Michigan or a city in Michigan.) We maintained an
above-average credit quality profile, consistent with the portfolio's
parameters as an insured fund. This continued to negatively impact total
return performance compared to our more aggressive peers, as lower-rated
issues were among the best performers in the municipal market during the
period. The Fund's performance also was hindered by its considerable exposure
to the intermediate sector of the municipal yield curve, which underperformed
as the curve continued its flattening trend. Nevertheless, we retained many of
these bonds in the portfolio, as they provide a meaningful income benefit and
their sale could result in material taxable gains as well as declines in the
Fund's dividend stream.
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 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 returns
based on changes in the Fund's net asset value.
What changes were made to the portfolio during the period?
Despite the underperformance of the intermediate sector of the yield curve, we
chose not to take any drastic action with respect to our exposure to this
sector. We believe the Fed's interest rate tightening cycle will end by mid-
2006, which may cause the municipal yield curve to steepen somewhat and
potentially lead to strong performance in the intermediate maturity range.
This would allow the Fund's exposure to this portion of the curve to once more
be a positive contributor to overall performance, as well as a source of
significant incremental income.
Portfolio activity in recent months largely involved the execution of bond
swaps that allowed us to add to the Fund's income stream. We have continued to
maintain the Fund's high credit quality. At April 30, 2006, approximately
87.6% of the Fund's assets were rated AAA.
For the six-month period ended April 30, 2006, the Fund's Auction Market
Preferred Stock (AMPS) had average yields of 2.95% for Series A, 2.94% for
Series B, 2.98% for Series C and 2.96% for Series D. The Fed raised the
federal funds rate 100 basis points during the six-month period (and an
additional 25 basis points on May 10), and this continued to affect the Fund's
borrowing costs. We would expect additional increases in the cost of funds to
be more limited as the Fed nears a pause in its monetary tightening campaign.
Despite the interest rate increases during the period, the tax-exempt yield
curve maintained a positive slope, allowing us to borrow at a lower rate than
where we invest. This continued to generate an income benefit to the holders
of Common Stock from the leveraging of Preferred Stock. At the end of the
period, the Fund's leverage amount, due to AMPS, was 37.53% of total net
assets, before the deduction of Preferred Stock. (For a more complete
explanation of the benefits and risks of leveraging, see page 6 of this
report to shareholders.)
How would you characterize the Fund's position at the close of the period?
We recently adopted a more positive stance on the municipal market. After
16 consecutive interest rate hikes, the Fed may be nearing a pause in its
monetary tightening campaign. We would expect the end of Fed tightening,
combined with modest economic growth and muted inflationary pressures, to
promote a gradual improvement in tax-exempt bond prices later this year,
underpinning our more constructive outlook. Conversely, we would view
accelerated economic activity and/or rising wage pressures as signals to
return to a more defensive positioning.
Overall, we intend to maintain the Fund's fully invested stance as we seek to
enhance shareholder income. Portfolio activity in the months ahead is likely
to be driven by our efforts to maintain the Fund's attractive distribution
yield.
Fred K. Stuebe
Vice President and Portfolio Manager
May 10, 2006
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
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.
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 April 30,
2006, the percentage of the Fund's total net assets invested in inverse
floaters was 10.66%, before the deduction of Preferred Stock.
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. Swap agreements involve the risk
that the party with whom the Fund has entered into the swap will default on
its obligation to pay the Fund and the risk that the Fund will not be able to
meet its obligations to pay the other party to the agreement.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Schedule of Investments (In Thousands)
Face
Amount Municipal Bonds Value
Michigan--149.0%
Adrian, Michigan, City School District, GO (d):
$ 2,000 5% due 5/01/2029 $ 2,060
1,600 5% due 5/01/2034 1,642
1,000 Allegan, Michigan, Public School District, GO, 5.75%
due 5/01/2010 (d)(e) 1,074
1,000 Ann Arbor, Michigan, Public School District, School
Building and Site, GO, 5% due 5/01/2027 1,032
1,000 Birmingham, Michigan, City School District, School
Building and Site, GO, 5% due 11/01/2033 (d) 1,030
1,000 Central Montcalm, Michigan, Public Schools,
GO, 5.90% due 5/01/2009 (b)(e) 1,061
Delta County, Michigan, Economic Development
Corporation, Environmental Improvement Revenue
Refunding Bonds (Mead Westvaco-Escanaba) (e):
1,500 AMT, Series B, 6.45% due 4/15/2012 1,664
2,000 Series A, 6.25% due 4/15/2012 2,250
Detroit, Michigan, City School District, GO,
Series A (e):
1,000 5.50% due 5/01/2012 (d) 1,086
2,300 (School Building and Site Improvement), 5.375%
due 5/01/2013 (c) 2,496
2,725 Detroit, Michigan, GO, 5.50% due 4/01/2011 (b)(e) 2,933
1,000 Detroit, Michigan, Sewer Disposal Revenue Refunding
Bonds, Senior Lien, Series A, 5% due 7/01/2032 (d) 1,022
Detroit, Michigan, Water Supply System Revenue Bonds:
4,375 DRIVERS, Series 200, 7.363% due 7/01/2011 (c)(e)(i) 5,250
1,250 Senior Lien, Series A, 5.875% due 1/01/2010 (c)(e) 1,351
6,900 Senior Lien, Series A, 5% due 7/01/2034 (b) 7,045
14,790 Series B, 5.25% due 7/01/2032 (b) 15,528
3,970 Series B, 5% due 7/01/2034 (b) 4,059
1,415 Detroit, Michigan, Water Supply System, Revenue
Refunding Bonds, 6.25% due 7/01/2012 (c)(h) 1,527
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 4,143
3,100 Dickinson County, Michigan, Healthcare System,
Hospital Revenue Refunding Bonds, 5.80%
due 11/01/2024 (g) 3,235
1,610 East Grand Rapids, Michigan, Public School District,
GO, 5.75% due 5/01/2009 (d)(e) 1,701
Eastern Michigan University, General Revenue
Refunding Bonds (a):
590 6% due 6/01/2010 (e) 645
435 6% due 6/01/2020 473
Face
Amount Municipal Bonds Value
Michigan (continued)
Eastern Michigan University Revenue Bonds,
Series B (c)(e):
$ 1,500 5.60% due 6/01/2010 $ 1,604
1,310 5.625% due 6/01/2010 1,402
Eaton Rapids, Michigan, Public Schools, School
Building and Site, GO (d):
1,325 5.25% due 5/01/2020 1,410
1,675 5.25% due 5/01/2021 1,781
1,700 5% due 5/01/2026 1,758
3,600 5% due 5/01/2029 3,708
Flint, Michigan, Hospital Building Authority, Revenue
Refunding Bonds (Hurley Medical Center), Series A (g):
615 5.375% due 7/01/2020 626
1,375 6% due 7/01/2020 1,474
2,200 Fowlerville, Michigan, Community Schools, School
District, GO, 5% due 5/01/2030 (c) 2,264
1,000 Frankenmuth, Michigan, School District, GO, 5.75%
due 5/01/2010 (c)(e) 1,074
3,650 Gibraltar, Michigan, School District, School Building
and Site, GO, 5% due 5/01/2028 (c) 3,762
1,100 Grand Blanc, Michigan, Community Schools, GO,
5.625% due 5/01/2020 (c) 1,186
Grand Rapids, Michigan, Building Authority Revenue
Bonds, Series A (a):
1,035 5.50% due 10/01/2012 (e) 1,128
665 5.50% due 10/01/2019 717
900 5.50% due 10/01/2020 970
2,070 Grand Valley, Michigan, State University Revenue
Bonds, 5.50% due 2/01/2018 (c) 2,256
8,425 Greater Detroit, Michigan, Resource Recovery Authority
Revenue Bonds, DRIVERS, Series 167, 8.368%
due 12/13/2008 (a)(i) 9,456
Gulf Lake, Michigan, Community School District, School
Building and Site, GO (d):
2,000 5% due 5/01/2028 2,061
3,625 5% due 5/01/2030 3,731
4,775 Harper Woods, Michigan, City School District, School
Building and Site, GO, Refunding, 5% due 5/01/2034 (c) 4,902
9,325 Hartland, Michigan, Consolidated School District, GO,
6% due 5/01/2010 (c)(e) 10,094
3,990 Hudsonville, Michigan, Public Schools, School Building
and Site, GO, 5% due 5/01/2029 (d) 4,109
1,575 Jenison, Michigan, Public Schools, Building and Site,
GO, 5.50% due 5/01/2019 (c) 1,691
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
RIB Residual Interest Bonds
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Schedule of Investments (continued) (In Thousands)
Face
Amount Municipal Bonds Value
Michigan (continued)
$ 650 Kalamazoo, Michigan, Hospital Finance Authority,
Hospital Facility Revenue Refunding Bonds (Bronson
Methodist Hospital), 5.50% due 5/15/2008 (b)(e) $ 678
Kent, Michigan, Hospital Finance Authority Revenue
Bonds (Spectrum Health), Series A (e):
3,000 5.50% due 7/15/2011 (b) 3,259
1,000 5.50% due 7/15/2011 1,086
4,000 Kent, Michigan, Hospital Finance Authority, Hospital
Revenue Refunding Bonds (Butterworth Hospital),
Series A, 7.25% due 1/15/2013 (b) 4,495
1,510 Lansing, Michigan, Building Authority, GO, Series A,
5.375% due 6/01/2023 (b) 1,613
1,875 Michigan Higher Education Facilities Authority, Limited
Obligation Revenue Bonds (Hillsdale College Project),
5% due 3/01/2035 1,892
2,250 Michigan Higher Education Facilities Authority, Limited
Obligation Revenue Refunding Bonds (Hope College),
Series A, 5.90% due 4/01/2032 2,343
Michigan Higher Education Facilities Authority, Revenue
Refunding Bonds (College for Creative Studies):
1,235 5.85% due 12/01/2022 1,301
1,145 5.90% due 12/01/2027 1,200
2,500 Michigan Higher Education Student Loan Authority,
Student Loan Revenue Bonds, AMT, Series XVII-B,
5.40% due 6/01/2018 (a) 2,559
1,065 Michigan Municipal Bond Authority Revenue Bonds
(Local Government Loan Program), Group A, 5.50%
due 11/01/2020 (a) 1,130
Michigan Municipal Bond Authority, Revenue
Refunding Bonds (Local Government Loan Program),
Series A:
150 6.50% due 11/01/2012 (b) 150
1,000 6% due 12/01/2013 (c) 1,012
7,000 6.125% due 12/01/2018 (c) 7,083
Michigan State Building Authority, Revenue
Refunding Bonds:
2,500 (Facilities Program), Series I, 5.50%
due 10/15/2018 (b) 2,676
3,500 (Facilities Program), Series II, 5%
due 10/15/2029 (b) 3,599
2,500 (Facilities Program), Series II, 5%
due 10/15/2033 (a) 2,582
11,140 RIB, Series 517X, 6.93% due 10/15/2010 (d)(i) 12,865
Michigan State COP (a):
3,000 5.50% due 6/01/2010 (e) 3,196
3,000 5.40% due 6/01/2022 (k) 1,396
2,530 Michigan State Hospital Finance Authority, Hospital
Revenue Bonds (Mid-Michigan Obligation Group),
Series A, 5.50% due 4/15/2018 (a) 2,675
Michigan State Hospital Finance Authority, Hospital
Revenue Refunding Bonds:
2,200 (Crittenton Hospital), Series A, 5.625%
due 3/01/2027 2,315
2,000 (Sparrow Obligation Group), 5.625%
due 11/15/2031 (b) 2,069
Face
Amount Municipal Bonds Value
Michigan (continued)
Michigan State Hospital Finance Authority, Revenue
Refunding Bonds:
$10,465 5% due 11/15/2036 (b) $ 10,717
2,715 (Ascension Health Credit), Series A, 5.75%
due 11/15/2009 (b)(e) 2,913
12,000 (Ascension Health Credit), Series A, 6.125%
due 11/15/2009 (b)(e) 13,020
2,500 (Ascension Health Credit), Series A, 6.25%
due 11/15/2009 (b)(e) 2,723
2,200 (Mercy Health Services), Series X, 5.75%
due 8/15/2009 (b)(e) 2,352
2,000 (Mercy Health Services), Series X, 6%
due 8/15/2009 (b)(e) 2,162
4,930 (Mercy-Mount Clemens), Series A, 6%
due 5/15/2014 (b) 5,260
3,000 (Saint John Hospital), Series A, 6%
due 5/15/2013 (a)(h) 3,154
6,400 (Trinity Health), Series A, 6% due 12/01/2027 (a) 6,974
1,000 (Trinity Health Credit), Series C, 5.375%
due 12/01/2023 1,042
5,255 (Trinity Health Credit), Series C, 5.375%
due 12/01/2030 5,475
3,100 (Trinity Health Credit), Series D, 5% due 8/15/2034 3,151
5,000 Michigan State Strategic Fund, Limited Obligation
Revenue Bonds (Ford Motor Company Project), AMT,
Series A, 6.55% due 10/01/2022 4,827
Michigan State Strategic Fund, Limited Obligation
Revenue Refunding Bonds:
10,250 (Detroit Edison Company), AMT, Series A, 5.55%
due 9/01/2029 (b) 10,730
6,000 (Detroit Edison Company Fund--Pollution),
Series AA, 6.95% due 5/01/2011 (c) 6,808
3,300 (Detroit Edison Pollution Control), Series C, 5.45%
due 9/01/2029 3,374
2,175 (Dow Chemical Company Project), AMT, 5.50%
due 12/01/2028 2,305
1,170 Michigan State, HDA, Rental Housing Revenue Bonds,
AMT, Series A, 5.30% due 10/01/2037 (b) 1,178
2,690 Michigan State, HDA, Revenue Refunding Bonds,
Series C, 5.90% due 12/01/2015 (f) 2,749
4,395 Michigan State Trunk Line Fund Revenue Bonds, 5%
due 9/01/2014 (e) 4,676
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) 19,162
1,000 Montrose Township, Michigan, School District, GO,
6.20% due 5/01/2017 (b) 1,159
1,830 Muskegon Heights, Michigan, Water System Revenue
Bonds, Series A, 5.625% due 11/01/2010 (b)(e) 1,970
235 Northview, Michigan, Public School District, GO,
Refunding, 5.80% due 5/01/2021 (b) 240
1,100 Norway Vulcan, Michigan, Area Schools, GO, 5.90%
due 5/01/2009 (c)(e) 1,169
1,000 Oak Park, Michigan, Street Improvement, GO, 5%
due 5/01/2030 (b) 1,035
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Schedule of Investments (continued) (In Thousands)
Face
Amount Municipal Bonds Value
Michigan (continued)
$ 5,320 Orchard View, Michigan, Schools, School Building and
Site, GO, 5% due 5/01/2029 (b) $ 5,471
4,835 Ostego, Michigan, Public Schools District, School
Building and Site, GO, 5% due 5/01/2034 (d) 4,970
2,425 Oxford, Michigan, Area Community School District,
GO, 5.50% due 11/01/2011 (d)(e) 2,628
1,370 Pennfield, Michigan, School District, School Building
and Site, GO, 5% due 5/01/2029 (c) 1,411
1,000 Plainwell, Michigan, Community Schools, School
District, School Building and Site, GO, 5.50%
due 11/01/2012 (d)(e) 1,092
3,905 Plymouth-Canton, Michigan, Community School District,
GO, 5% due 5/01/2029 (c) 4,022
700 Pontiac, Michigan, Tax Increment Finance Authority,
Revenue Refunding Bonds (Development Area
Number 2), 5.625% due 6/01/2022 (g) 734
1,425 Reed, Michigan, City Public Schools, School Building
and Site, GO, 5% due 5/01/2014 (d)(e) 1,515
2,500 Saginaw, Michigan, Hospital Finance Authority,
Revenue Refunding Bonds (Covenant Medical Center),
Series E, 5.625% due 7/01/2013 (b) 2,640
Saginaw Valley State University, Michigan, General
Revenue Refunding Bonds (c):
2,100 5% due 7/01/2024 2,178
1,445 5% due 7/01/2034 1,484
8,900 Saint Clair County, Michigan, Economic Revenue
Refunding Bonds (Detroit Edison Company), RIB,
Series 282, 8.68% due 8/01/2024 (a)(i) 10,182
1,300 Southfield, Michigan, Library Building Authority, GO,
5.50% due 5/01/2010 (b)(e) 1,384
Southfield, Michigan, Public Schools, School Building
and Site, GO, Series A (d):
2,900 5.25% due 5/01/2027 3,067
3,500 5% due 5/01/2029 3,605
1,325 Sparta, Michigan, Area Schools, School Building and
Site, GO, 5% due 5/01/2030 (c) 1,364
2,700 Sturgis, Michigan, Public School District, GO, Refunding,
5% due 5/01/2030 (c) 2,787
1,100 Waverly, Michigan, Community School, GO, 5.50%
due 5/01/2010 (c)(e) 1,171
10,660 Wayne Charter County, Michigan, Airport Revenue
Bonds (Detroit Metropolitan Wayne County), AMT,
Series A, 5.375% due 12/01/2015 (b) 11,055
1,750 Wayne Charter County, Michigan, Detroit Metropolitan
Airport, GO, Airport Hotel, Series A, 5%
due 12/01/2030 (b) 1,795
Wayne County, Michigan, Airport Authority Revenue
Bonds (b):
12,260 (Detroit Metropolitan Wayne County Airport), AMT,
5% due 12/01/2034 12,437
6,910 DRIVERS, AMT, Series 1081-Z, 6.349%
due 6/01/2013 (i) 7,607
Face
Amount Municipal Bonds Value
Michigan (concluded)
West Bloomfield, Michigan, School District, GO
Refunding (c):
$ 1,710 5.50% due 5/01/2017 $ 1,836
1,225 5.50% due 5/01/2018 1,315
2,405 West Branch-Rose City, Michigan, Area School District,
GO, 5.50% due 5/01/2009 (c)(e) 2,524
6,075 Western Michigan University Revenue Bonds, 5%
due 11/15/2035 (c) 6,248
1,600 Zeeland, Michigan, Public Schools, School Building
and Site, GO, 5% due 5/01/2029 (b) 1,648
Puerto Rico--7.6%
6,000 Puerto Rico Commonwealth Highway and
Transportation Authority, Transportation
Revenue Refunding Bonds, Series K, 5%
due 7/01/2040 5,990
11,700 Puerto Rico Commonwealth Infrastructure
Financing Authority, Special Tax and Capital
Appreciation Revenue Bonds, Series A, 4.657%
due 7/01/2036 (a)(k) 2,604
Puerto Rico Electric Power Authority, Power
Revenue Bonds:
1,925 Series RR, 5% due 7/01/2035 (c) 1,995
1,270 Trust Receipts, Class R, Series 16 HH,
7.405% due 7/01/2013 (d)(i) 1,487
2,700 Puerto Rico Electric Power Authority, Power
Revenue Refunding Bonds, Series SS, 5%
due 7/01/2030 (d) 2,804
2,790 Puerto Rico Municipal Finance Agency Revenue
Bonds, Series A, 5% due 8/01/2027 (d) 2,886
1,000 Puerto Rico Public Finance Corporation,
Commonwealth Appropriation Revenue Bonds,
Series E, 5.70% due 2/01/2010 (e) 1,068
2,150 University of Puerto Rico, University Revenue
Refunding Bonds, Series O, 5.375%
due 6/01/2030 (b) 2,182
Total Municipal Bonds
(Cost--$411,832)--156.6% 430,156
Shares
Held Short-Term Securities
1,591 CMA Michigan Municipal Money Fund 3.10% (j)(l) 1,591
Total Short-Term Securities
(Cost--$1,591)--0.6% 1,591
Total Investments (Cost--$413,423*)--157.2% 431,747
Other Assets Less Liabilities--2.9% 7,977
Preferred Stock, at Redemption Value--(60.1%) (165,090)
----------
Net Assets Applicable to Common Stock--100.0% $ 274,634
==========
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Schedule of Investments (concluded) (In Thousands)
* The cost and unrealized appreciation (depreciation) of investments
as of April 30, 2006, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 413,266
===============
Gross unrealized appreciation $ 19,734
Gross unrealized depreciation (1,253)
---------------
Net unrealized appreciation $ 18,481
===============
(a) AMBAC Insured.
(b) MBIA Insured.
(c) FGIC Insured.
(d) FSA Insured.
(e) Prerefunded.
(f) FHA Insured.
(g) ACA Insured.
(h) Escrowed to maturity.
(i) The rate disclosed is that currently in effect. This rate changes
periodically and inversely based upon prevailing market rates.
(j) Investments in companies considered to be an affiliate of the Fund,
for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
were as follows:
Net Dividend
Affiliate Activity Income
CMA Michigan Municipal
Money Fund $ 570 $62
(k) Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase.
(l) Represents the current yield as of April 30, 2006.
o Forward interest rate swaps outstanding as of April 30, 2006
were as follows:
Notional Unrealized
Amount Depreciation
Pay a fixed rate of 4.416% and receive
a floating rate based on 1-week Bond
Market Association rate
Broker, JPMorgan Chase Bank
Expires July 2026 $ 11,000 $ (67)
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Statement of Net Assets
As of April 30, 2006
Assets
Investments in unaffiliated securities, at value (identified cost--$411,832,610) $ 430,156,305
Investments in affiliated securities, at value (identified cost--$1,590,566) 1,590,566
Cash 86,480
Receivables:
Interest $ 8,215,634
Securities sold 1,010,000 9,225,634
---------------
Prepaid expenses 11,391
---------------
Total assets 441,070,376
---------------
Liabilities
Unrealized depreciation on forward interest rate swaps 67,452
Payables:
Securities purchased 1,037,773
Investment adviser 166,885
Other affiliates 5,393
Dividends to Common Stock shareholders 15 1,210,066
---------------
Accrued expenses and other liabilities 68,682
---------------
Total liabilities 1,346,200
---------------
Preferred Stock
Preferred Stock, at redemption value, par value $.05 per share
(2,000 Series A Shares, 2,000 Series B Shares, 1,600 Series C Shares)
and $.10 per share (1,000 Series D Shares) of AMPS* authorized, issued
and outstanding at $25,000 per share liquidation preference 165,089,822
---------------
Net Assets Applicable to Common Stock
Net assets applicable to Common Stock $ 274,634,354
===============
Analysis of Net Assets Applicable to Common Stock
Common Stock, par value $.10 per share (18,206,301 shares issued and outstanding) $ 1,820,630
Paid-in capital in excess of par 268,787,335
Undistributed investment income--net $ 1,764,292
Accumulated realized capital losses--net (15,994,146)
Unrealized appreciation--net 18,256,243
---------------
Total accumulated earnings--net 4,026,389
---------------
Total--Equivalent to $15.08 net asset value per share of Common Stock
(market price--$14.97) $ 274,634,354
===============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Statement of Operations
For the Six Months Ended April 30, 2006
Investment Income
Interest $ 10,970,179
Dividends from affiliates 62,496
---------------
Total income 11,032,675
---------------
Expenses
Investment advisory fees $ 1,099,704
Commission fees 212,343
Accounting services 75,521
Transfer agent fees 41,874
Professional fees 32,317
Printing and shareholder reports 18,404
Directors' fees and expenses 13,528
Custodian fees 12,617
Pricing fees 9,755
Listing fees 8,333
Other 27,234
---------------
Total expenses before reimbursement 1,551,630
Reimbursement of expenses (12,634)
---------------
Total expenses after reimbursement 1,538,996
---------------
Investment income--net 9,493,679
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net 1,130,626
Forward interest rate swaps--net (173,991) 956,635
---------------
Change in unrealized appreciation/depreciation on:
Investments--net (4,010,351)
Forward interest rate swaps--net (67,452) (4,077,803)
--------------- ---------------
Total realized and unrealized loss--net (3,121,168)
---------------
Dividends to Preferred Stock Shareholders
Investment income--net (2,418,504)
---------------
Net Increase in Net Assets Resulting from Operations $ 3,954,007
===============
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2006 2005
Operations
Investment income--net $ 9,493,679 $ 19,600,893
Realized gain--net 956,635 4,103,542
Change in unrealized appreciation/depreciation--net (4,077,803) (13,931,894)
Dividends to Preferred Stock shareholders (2,418,504) (3,245,894)
--------------- ---------------
Net increase in net assets resulting from operations 3,954,007 6,526,647
--------------- ---------------
Dividends to Common Stock Shareholders
Investment income--net (8,184,391) (17,757,326)
--------------- ---------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (8,184,391) (17,757,326)
--------------- ---------------
Capital Stock Transactions
Value of shares issued to Common Stock shareholders in reinvestment of dividends 614,402 159,122
Offering and underwriting costs resulting from the issuance of Preferred Stock -- (373,118)
--------------- ---------------
Net increase (decrease) in net assets derived from Capital Stock transactions 614,402 (213,996)
--------------- ---------------
Net Assets Applicable to Common Stock
Total decrease in net assets applicable to Common Stock (3,615,982) (11,444,675)
Beginning of period 278,250,336 289,695,011
--------------- ---------------
End of period* $ 274,634,354 $ 278,250,336
=============== ===============
* Undistributed investment income--net $ 1,764,292 $ 2,873,508
=============== ===============
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Financial Highlights
For the Six
Months Ended
The following per share data and ratios have been derived April 30, For the Year Ended October 31,
from information provided in the financial statements. 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 15.32 $ 15.96 $ 15.94 $ 15.74 $ 15.81
---------- ---------- ---------- ---------- ----------
Investment income--net** .52 1.08 1.06 1.10 1.10
Realized and unrealized gain (loss)--net (.18) (.54) .03 .15 (.12)
Dividends to Preferred Stock shareholders from
investment income--net (.13) (.18) (.07) (.07) (.11)
---------- ---------- ---------- ---------- ----------
Total from investment operations .21 .36 1.02 1.18 .87
---------- ---------- ---------- ---------- ----------
Less dividends to Common Stock shareholders from
investment income--net (.45) (.98) (1.00) (.98) (.94)
---------- ---------- ---------- ---------- ----------
Offering and underwriting costs resulting from the
issuance of Preferred Stock -- (.02) -- -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 15.08 $ 15.32 $ 15.96 $ 15.94 $ 15.74
========== ========== ========== ========== ==========
Market price per share, end of period $ 14.97 $ 15.31 $ 15.37 $ 14.69 $ 13.95
========== ========== ========== ========== ==========
Total Investment Return+++
Based on net asset value per share 1.37%+++++ 2.24% 7.04% 8.26% 6.33%
========== ========== ========== ========== ==========
Based on market price per share .69%+++++ 6.10% 11.85% 12.57% 4.77%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Common Stock
Total expenses, net of reimbursement*** 1.11%* 1.10% 1.00% 1.01% 1.04%
========== ========== ========== ========== ==========
Total expenses*** 1.12%* 1.10% 1.02% 1.03% 1.04%
========== ========== ========== ========== ==========
Total investment income--net*** 6.87%* 6.84% 6.69% 6.83% 7.10%
========== ========== ========== ========== ==========
Amount of dividends to Preferred Stock shareholders 1.75%* 1.13% .46% .45% .70%
========== ========== ========== ========== ==========
Investment income--net, to Common Stock shareholders 5.12%* 5.71% 6.23% 6.38% 6.40%
========== ========== ========== ========== ==========
Ratios Based on Average Net Assets of Preferred Stock
Dividends to Preferred Stock shareholders 2.96%* 1.98% .95% .94% 1.40%
========== ========== ========== ========== ==========
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Financial Highlights (concluded)
For the Six
Months Ended
The following per share data and ratios have been derived April 30, For the Year Ended October 31,
from information provided in the financial statements. 2006 2005 2004 2003 2002
Supplemental Data
Net assets applicable to Common Stock, end of period
(in thousands) $ 274,634 $ 278,250 $ 289,695 $ 289,364 $ 285,802
========== ========== ========== ========== ==========
Preferred Stock outstanding, end of period (in thousands) $ 165,000 $ 165,000 $ 140,000 $ 140,000 $ 140,000
========== ========== ========== ========== ==========
Portfolio turnover 5.35% 30.16% 36.63% 33.39% 32.68%
========== ========== ========== ========== ==========
Leverage
Asset coverage per $1,000 $ 2,664 $ 2,686 $ 3,069 $ 3,067 $ 3,041
========== ========== ========== ========== ==========
Dividends Per Share on Preferred Stock Outstanding
Series A--Investment income--net $ 366 $ 505 $ 250 $ 240 $ 354
========== ========== ========== ========== ==========
Series B--Investment income--net $ 364 $ 480 $ 232 $ 230 $ 362
========== ========== ========== ========== ==========
Series C--Investment income--net $ 369 $ 482 $ 226 $ 240 $ 333
========== ========== ========== ========== ==========
Series D++--Investment income--net $ 367 $ 505 -- -- --
========== ========== ========== ========== ==========
* Annualized.
** Based on average shares outstanding.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
++ Series D was issued on November 22, 2004.
+++ 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.
+++++ Aggregate total investment return.
See Notes to Financial Statements.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
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 U.S. generally accepted accounting principles, which may
require the use of management accruals and estimates. Actual results may
differ from these estimates. These unaudited financial statements reflect all
adjustments, which are, in the opinion of management, necessary to present a
fair statement of the results for the interim period. 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 daily basis. The
Fund's Common Stock shares are 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 ("OTC") markets and are valued at the last available bid price in
the OTC market or on the basis of values as obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer-supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the general
direction of the Board of Directors. Such valuations and procedures are
reviewed periodically by the Board of Directors of the Fund. 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 OTC 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's
pricing service. Short-term investments with a remaining maturity of 60 days
or less are valued at amortized cost, which approximates market value, under
which method the investment is valued at cost and any premium or discount is
amortized on a straight line basis to maturity. Investments in open-end
investment companies are valued at their net asset value each business day.
Securities and other 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.
(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 may 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.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Notes to Financial Statements (continued)
* 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.
(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. 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.
(f) Offering costs--Direct expenses relating to the public offering of the
Fund's Preferred Stock were charged to capital at the time of issuance of the
shares.
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. The Investment
Adviser has agreed to reimburse its management fee by the amount of management
fees the Fund pays to FAM indirectly through its investment in CMA Michigan
Municipal Money Fund. For the six months ended April 30, 2006, FAM reimbursed
the Fund in the amount of $12,634.
For the six months ended April 30, 2006, the Fund reimbursed FAM $4,717 for
certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including FAM, to the
investment management business of BlackRock, Inc. The transaction is expected
to close in the third quarter of 2006.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
six months ended April 30, 2006 were $23,188,839 and $26,676,618,
respectively.
4. 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 the
holders of Common Stock.
Common Stock
Shares issued and outstanding during the six months ended April 30, 2006
increased by 40,195 as a result of dividend reinvestment. Shares issued and
outstanding during the year ended October 31, 2005 increased by 10,174 as a
result of dividend reinvestment.
Preferred Stock
Auction Market Preferred Stock are shares of Preferred Stock of the Fund, with
a par value of $.05 per share on Series A Shares, Series B Shares and Series C
Shares, and $.10 per share on Series D Shares. In addition, there is 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 April 30, 2006 were as follows: Series A, 3.60%; Series B, 3.65%; Series C,
3.60%; and Series D, 3.50%.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Notes to Financial Statements (concluded)
Shares issued and outstanding during the six months ended April 30, 2006
remained constant. Shares issued and outstanding during the year ended October
31, 2005 increased by 1,000 from the issuance of an additional series of
Preferred Stock.
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, 2006, Merrill Lynch, Pierce,
Fenner & Smith Incorporated earned $104,645 as commissions.
5. Capital Loss Carryforward:
On October 31, 2005, the Fund had a net capital loss carryforward of
$13,574,845, of which $1,006,344 expires in 2007, $7,490,629 expires in 2008,
$1,124,652 expires in 2010 and $3,953,220 expires in 2012. This amount will be
available to offset like amounts of any future taxable gains.
6. Subsequent Event:
The Fund paid a tax-exempt income dividend to holders of Common Stock in the
amount of $.072000 per share on May 30, 2006 to shareholders of record on May
15, 2006.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Proxy Results
During the six-month period ended April 30, 2006, MuniYield Michigan Insured
Fund, Inc.'s Common Stock shareholders voted on the following proposal. The
proposal was approved at a shareholders' meeting on April 27, 2006. 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: Robert C. Doll, Jr. 16,833,306 364,990
Donald W. Burton 16,826,994 371,302
John F. O'Brien 16,835,315 362,981
David H. Walsh 16,834,035 364,261
During the six-month period ended April 30, 2005, MuniYield Michigan Insured
Fund, Inc.'s Preferred Stock shareholders (Series A - D) voted on the
following proposals. Proposal 1 was approved at a shareholders' meeting on
April 28, 2005. With respect to Proposal 2, the proposal was adjourned until
May 27, 2005. A description of the proposals and number
of shares voted were as follows:
Shares Voted Shares Withheld
For From Voting
1. To elect the Fund's Board of Directors: Robert C. Doll, Jr.,
Donald W. Burton, Laurie Simon Hodrick, John F. O'Brien,
David H. Walsh and Fred G. Weiss 6,142 8
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Officers and Directors
Robert C. Doll, Jr., President and Director
Donald W. Burton, Director
Laurie Simon Hodrick, Director
John Francis O'Brien, Director
David H. Walsh, Director
Fred G. Weiss, Director
Donald C. Burke, Vice President and Treasurer
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Fred K. Stuebe, Vice President
Jeffrey Hiller, Chief Compliance Officer
Alice A. Pellegrino, Secretary
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 - 11 East
New York, NY 10286
Preferred Stock:
The Bank of New York
101 Barclay Street - 7 West
New York, NY 10286
NYSE Symbol
MIY
Laurie Simon Hodrick resigned as a Director of MuniYield Michigan Insured
Fund, Inc. effective May 1, 2006.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions. When you
visit this site, you will obtain a personal identification number (PIN). You
will need this PIN should you wish to update your e-mail address, choose to
discontinue this service and/or make any other changes to the service. This
service is not available for certain retirement accounts at this time.
MUNIYIELD MICHIGAN INSURED FUND, INC. APRIL 30, 2006
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-
annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this semi-
annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-
annual report
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable to this semi-annual report
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(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.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the last fiscal half-
year of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - 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/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniYield Michigan Insured Fund, Inc.
Date: June 22, 2006
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/ Robert C. Doll, Jr.
---------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
MuniYield Michigan Insured Fund, Inc.
Date: June 22, 2006
By: /s/ Donald C. Burke
---------------------------
Donald C. Burke,
Chief Financial Officer of
MuniYield Michigan Insured Fund, Inc.
Date: June 22, 2006