MuniYield California Insured Fund, Inc.
Semi-Annual
Report
April 30, 1994
This report, including the financial information herein, is trans-
mitted to the shareholders of MuniYield California Insured Fund,
Inc. for their information. It is not a prospectus, circular or rep-
resentation intended for use in the purchase of shares of the Fund
or any securities mentioned in the report. Past performance results
shown in this report should not be considered a representation of
future performance. The Fund has leveraged its Common Stock by issu-
ing 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 vol-
atility 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.
MuniYield California Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield California Insured Fund, Inc.
TO OUR SHAREHOLDERS
For the six-month period ended April 30, 1994, the Common Stock
of MuniYield California Insured Fund, Inc. earned $0.449 per
share income dividends, which includes earned and unpaid divi-
dends of $0.072. This represents a net annualized yield of 6.55%,
based on a month-end per share net asset value of $13.81. Over
the same period, the total investment return on the Fund's Com-
mon Stock was -9.02%, based on a change in per share net asset
value from $15.68 to $13.81, and assuming reinvestment of $0.454
per share income dividends.
For the six-month period ended April 30, 1994, the Fund's Auction
Market Preferred Stock had an average yield of 3.178% for Series
A and 2.68% for Series B.
The Environment
Inflationary expectations and investor sentiment changed for
the worse during the three-month period ended April 30, 1994.
Following stronger-than-expected economic results through year-
end 1993, the Federal Reserve Board broke with tradition on
February 4, 1994 and publicly announced a modest 25 basis point
(0.25%) increase in short-term interest rates. At the March 22
meeting of the Federal Open Market Committee, the Federal Reserve
Board again raised the Federal Funds rate by 25 basis points,
followed by another 25 basis point increase on April 18.
Rather than view the Federal Reserve Board's first tightening
move as a preemptive strike against inflation, fixed-income
investors focused on Chairman Greenspan's implicit promise of
further tightening should the rate of inflation accelerate, and
bond prices declined sharply. The setback in the bond market was
also reflected in greater stock market volatility. While the
second and third increases in the Federal Funds rate were less
of a surprise, investors remained concerned that interest rates
would trend upward sharply as the central bank aggressively
attempted to contain the inflationary pressures of an improving
economy. At the same time, highly leveraged investors were forced
to liquidate positions in the face of declining stock and bond
prices. Investor confidence was not restored with the announce-
ment of the surprisingly slow 2.6% gross domestic product
growth rate for the first calendar quarter of 1994. Instead,
investors focused on the higher-than-expected (but still
moderate) broad inflation measures and became concerned that
business activity was beginning to stagnate as inflationary
pressures were increasing.
The volatility in the US capital markets was mirrored in in-
ternational markets during the period. Political and economic
developments, along with concerns of heightened global infla-
tionary pressures, led to a sell-off in most capital markets,
especially the emerging markets that had appreciated strongly
in 1993.
The Municipal Market
During the six months ended April 30, 1994, tax-exempt bond
yields exhibited considerable volatility as they rose to their
highest level in the past two years. As measured by the Bond
Buyer Revenue Bond Index, the yield on newly issued municipal
bonds maturing in 30 years rose over 90 basis points to 6.42% by
the end of April. Yields on seasoned municipal revenue bonds rose
by over 100 basis points in sympathy with the equally dramatic
increase in long-term US Treasury bond yields. By the end of
April, yields on US Treasury securities rose by over 95 basis
points to approximately 7.30%.
Long-term tax-exempt bond yields were essentially unchanged from
the end of October 1993 to the end of January 1994. However, on a
weekly basis, tax-exempt bond yields fluctuated by as much as 15
basis points as investors were unable to reconcile the rapid
economic growth seen late last year with continued low inflation.
Following the initial interest rate increase by the Federal
Reserve Board in early February, municipal bond prices began to
erode in concert with taxable bond prices as investors began to
sell securities in anticipation of further interest rate in-
creases. This fear led investors to withdraw from the tax-exempt
market. From early February to the end of March, total assets of
all tax-exempt bond funds declined by $14 billion to $247 billion.
This decline in investor demand, coupled with fears that the ro-
bust economic recovery seen during the fourth quarter of 1993
would continue well into 1994, helped push municipal bond yields
higher in February and March. Attracted by tax-exempt yields in
excess of 6.25%, investor demand returned in April, allowing
yields to decline approximately 15 basis points to end the April
period at approximately 6.40%.
A rise in tax-exempt bond yields the magnitude of that exper-
ienced over the past six months has not been seen since 1987
when municipal bond rates rose 250 basis points between March
and October of that year. It is very important to note that the
recent municipal bond price declines were largely the result
of consistent and insistent selling pressures over the last two
months. In 1987, the tax-exempt bond market was much more vol-
atile and, at times, chaotic as investors sought to liquidate
positions without concern for fundamental value. For the most
part, the recent price deterioration has been orderly, and the
municipal bond market's liquidity and integrity have not been
challenged or jeopardized.
To a large extent, the municipal bond market has continued to
be supported by its strong technical position. New-issue volume
for the last six months has been less than $105 billion. This
represents a decline of approximately 20% versus the comparable
period a year ago. This decline was expected and has been dis-
cussed in previous shareholder reports. This reduced issuance
has minimized potential selling pressure in recent months since
institutional investors have been wary of selling appreciable
amounts of securities that they may be unable to replace later
this year at any price level. We expect this decline in issuance
to continue since we anticipate recent yield increases to sig-
nificantly impact future municipal bond issuance. Just as higher
mortgage rates slow home mortgage refinancings, the recent rise
in bond yields will prevent bond refinancings from becoming
the driving force in bond issuance in 1994 as they were in 1993.
Despite recent price declines, tax-exempt securities remain among
the most attractive investment alternatives available. After the
recent yield increases, longer-term municipal securities yield
approximately 90% of comparable US Treasury yields. Purchasers of
these municipal bonds also accrue substantial after-tax yield
advantages. To investors in the 39% marginal Federal income tax
bracket, the purchase of a municipal bond yielding 6.50% rep-
resents an after-tax equivalent of 10.65%. With prevailing
estimates of 1994 inflation at no more than 3%--4%, real after-
tax rates in excess of 6.50% easily compensate longer-term in-
vestors for much of the price volatility recently experienced.
Portfolio Strategy
During the six months ended April 30, 1994, MuniYield California
Insured Fund, Inc.'s portfolio mix was altered only slightly. We
sold some prerefunded bonds since they were fully valued relative
to their taxable counterparts. Recent volatility in the fixed-
income marketplace has led to a substantial back up in tax-exempt
yields. We used this environment to add to the portion of the
Fund devoted to more performance-oriented holdings.
We expect a constructive technical background for the municipal
market in terms of limited supply and continued retail demand to
lead to a firming of market conditions later in the year. There-
fore, we are maintaining a relatively fully invested posture
with low cash reserves to be in a position to seek to take ad-
vantage of any future positive price action. As a result of
historically tight quality spreads, we have underutilized the
portion of the Fund that is available for noninsured assets.
Currently, 89% of the Fund's net assets are AAA-rated with credit
enhancement.
We appreciate your ongoing interest in MuniYield California
Insured Fund, Inc., and we look forward to serving your in-
vestment needs and objectives in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
May 31, 1994
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield California 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 Pre-
ferred 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 lev-
eraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock cap-
italization 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 share-
holders are the beneficiaries of the incremental yield. However,
if short-term interest rates rise, narrowing the differential be-
tween short-term and long-term interest rates, the incremental
yield pick-up on the Common Stock will be reduced. 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 Com-
mon 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 Com-
mon Stock may also decline.
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniYield California 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
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
HFA Housing Finance Authority
INFLOS Inverse Floating Rate Municipal Bonds
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
RAW Revenue Anticipation Warrants
RIB Residual Interest Bonds
RITES Residual Interest Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California--99.6%
<S> <S> <C> <S> <C>
Alameda County, California, GO, UT, Refunding (Unified School District),
Series A (b):
AAA Aaa $ 3,190 6.10% due 7/01/2013 $ 3,161
AAA Aaa 3,760 6.10% due 7/01/2014 3,704
AAA Aaa 2,000 Beverly Hills, California, Public Financing Authority, Lease Revenue Bonds,
Series A, INFLOS, 8.22% due 6/01/2015 (d)(e) 1,720
AAA Aaa 5,915 Brea, California, Public Financing Authority, Water Revenue Bonds,
Series B, 6.25% due 7/01/2021 (c) 5,891
Brea, California, Redevelopment Agency, Tax Allocation Revenue Refunding
Bonds (Redevelopment Project) (d):
AAA Aaa 1,000 6.125% due 8/01/2013 993
AAA Aaa 6,000 5.50% due 8/01/2017 5,418
AAA Aaa 1,750 5.75% due 8/01/2023 1,622
California Health Facilities Financing Authority, Hospital Revenue Bonds (d):
AAA Aaa 2,850 (Adventist Health System Hospital), Series B, 6.50% due 3/01/2011 2,917
AAA Aaa 10,500 (Centinela Hospital), 6.25% due 9/01/20l5 10,462
AAA Aaa 3,000 Refunding (San Diego Hospital), Series A, 6.20% due 8/01/20l2 3,006
AAA Aaa 5,000 Refunding (San Diego Hospital), Series A, 6.20% due 8/01/2020 4,917
AAA Aaa 1,000 (San Diego Hospital), Series B, 6.125% due 8/01/2022 978
AAA Aaa 2,500 (Scripps Memorial Hospital), Series A, 6.25% due 10/01/2013 2,514
AAA Aaa 2,750 (Scripps Memorial Hospital), Series A, 6.375% due 10/01/2022 2,776
California Health Facilities Financing Authority, Revenue Refunding Bonds,
VRDN (a):
A1+ VMIG1 1,000 (Memorial Health Services), 3.20% due 10/01/2024 1,000
A1+ VMIG1 100 (Saint Joseph Health System), Series A, 2.85% due 7/01/2013 100
A1+ VMIG1 200 (Sutter Health), Series B, 2.90% due 3/01/2020 200
California HFA, Home Mortgage Revenue Bonds, AMT:
A+ Aa 425 Series B, 8% due 8/01/2029 438
A+ Aa 6,170 Series G, 7.05% due 8/01/2027 6,303
A+ Aa 2,000 California HFA, Revenue Bonds, RIB, AMT, 9.621% due 8/01/2023 (e) 2,015
A1+ VMIG1 2,200 California Pollution Control Financing Authority, PCR, Refunding (Shell Oil Company
Project), Series B, VRDN, 2.80% due 10/01/2011 (a) 2,200
NR Baa 3,160 California State Public Capital Improvements Financing Authority Revenue Bonds
(Joint Powers Agency), Series E, 8.25% due 3/01/1998 3,375
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (continued)
<S> <S> <C> <S> <C>
California State Public Works Board, Lease Revenue Bonds, Series A:
A A1 $ 9,785 (Various California State University Projects), 6.70% due 10/01/2017 $ 9,909
AAA Aaa 2,000 (Various Community College Projects), 6% due 12/01/2012 (b) 1,958
AAA Aaa 1,955 (Various University of California Projects), 6.40% due 12/01/2016 (b) 1,968
SP-1 MIG1++ 1,500 California State, RAW, Series B, 3.50% due 7/26/1994 1,502
AAA Aaa 1,600 California Statewide Community Development Authority, Revenue Refunding Insured
Bonds (Children's Hospital), COP, 6% due 6/01/2007 (d) 1,623
AAA Aaa 3,000 Contra Costa, California, Water Authority, Water Treatment Revenue Refunding Bonds,
Series A, 5.75% due 10/01/2020 (c) 2,792
Contra Costa, California, Water District, Water Revenue Bonds:
AAA Aaa 5,720 Series D, 6.375% due 10/01/2022 (b) 5,787
AAA Aaa 2,000 Series F, Refunding, 5% due 10/01/2020 (c) 1,656
AAA Aaa 7,000 East Bay, California, Municipal Utility District, Wastewater Treatment System
Revenue Bonds, 6.375% due 6/01/2021 (b) 7,052
AAA Aaa 5,000 El Camino, California, Hospital District Revenue Refunding Bonds, Series A, 6.25%
due 8/15/2017 (b) 4,969
AAA Aaa 4,900 Escondido, California, Joint Powers Financing Authority, Lease Revenue Bonds
(Escondido Civic Center Project), Series B, 6.125% due 9/01/2011 (b) 4,897
AAA Aaa 1,000 Fairfield-Suisun, California, Sewer District, Sewer Revenue Refunding Bonds, Series A,
6.25% due 5/01/2016 (d) 1,001
AAA Aaa 1,250 Fresno, California, Sewer Revenue Bonds, Series A-1, 6.25% due 9/01/2014 (b) 1,263
BBB Baa 4,945 Inglewood, California, Public Financing Authority Revenue Bonds (Inglewood and
Industrial Park Project), Series B, 7% due 5/01/2022 4,933
Irvine Ranch, California, Water District Consolidated Revenue Bonds, DATES (a):
A-1 NR 700 Series B, 2.90% due 10/01/2005 700
A-1 NR 200 Series C, 2.90% due 10/01/2010 200
A1+ VMIG1 200 Irvine Ranch, California, Water District Revenue Bonds, COP (Capital Improvement
Project), VRDN, 2.95% due 8/01/2016 (a) 200
Los Angeles, California, Community Redevelopment Agency, Tax Allocation Bonds
(Hollywood Redevelopment Project), Series B (d):
AAA Aaa 4,000 6% due 7/01/2017 3,864
AAA Aaa 2,780 6.10% due 7/01/2022 2,707
AAA Aaa 10,500 Los Angeles, California, Department of Water and Power, Waterworks Revenue Bonds
(Second Issue), 6.40% due 11/01/2031 (d) 10,805
Los Angeles, California, Wastewater System Revenue Bonds:
AAA Aaa 9,500 Refunding, Series A, 6% due 12/01/2018 (c) 9,168
AAA Aaa 1,725 Series B, 6% due 6/01/2022 (b) 1,661
NR NR 2,000 Los Angeles County, California, COP (Marina del Rey), Series A, 6.25% due 7/01/2003 2,014
AAA Aaa 11,900 Los Angeles County, California, Metropolitan Transportation Authority, Sales Tax
Revenue Refunding Bonds (Proposition A), Series A, 5.625% due 7/01/2018 (d) 10,881
AAA Aaa 3,340 Los Angeles County, California, Transportation Commission, Sales Tax Revenue Bonds
(Proposition C), Second Series A, 6.50% due 7/01/2002 (d)(f) 3,649
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (continued)
<S> <S> <C> <S> <C>
M-S-R Public Power Agency, California, Revenue Bonds (San Juan Project),
Series E (d):
AAA Aaa $ 1,000 6.50% due 7/01/2017 $ 1,014
AAA Aaa 8,500 6% due 7/01/2022 8,176
AAA Aaa 5,140 Mt. Diablo, California, Unified School District, Community Facilities--Special
District Tax Bonds, 6.30% due 8/01/2022 (b) 5,143
Northern California Public Power Agency, Revenue Refunding Bonds (Hydroelectric
Project Number 1), Series A (d):
AAA Aaa 1,000 6.25% due 7/01/2012 1,006
AAA Aaa 2,000 5.50% due 7/01/2016 1,814
AAA Aaa 1,250 Northern California Transmission Revenue Bonds (California-Oregon Transmission
Project), Series A, RIB, 7.774% due 4/29/2024 (d)(e) 984
AAA Aaa 2,000 Oakland, California, Redevelopment Agency Refunding Bonds, INFLOS, 9.081% due
9/01/2019 (d)(e) 1,828
AAA Aaa 4,885 Ontario, California, Redevelopment Financing Authority Revenue Bonds (Center City--
Cimarron Project 1), 6.25% due 8/01/2015 (d) 4,891
Orange County, California, Local Transportation Authority, Sales Tax Revenue
Bonds, RIB (e):
AA Aa 4,000 9.023% due 2/14/2011 3,995
AAA Aaa 8,000 Second Series, 9.023% due 2/14/2011 (c) 7,980
Port Oakland, California, Port Revenue Bonds, AMT, Series E (d):
AAA Aaa 11,000 6.50% due 11/01/2016 11,159
AAA Aaa 8,495 6.40% due 11/01/2022 8,572
Rancho, California, Water District Financing Authority Revenue Bonds:
AAA Aaa 2,000 6.25% due 8/01/2012 (c) 2,011
AAA Aaa 2,000 RITES, 9.974% due 9/11/2001 (a)(b)(f) 2,360
AAA Aaa 4,600 Rancho Cucamonga, California, Redevelopment Agency, Tax Allocation Refunding
Bonds (Rancho Redevelopment Project), 5.50% due 9/01/2023 (d) 4,110
NR A 2,500 Rancho Mirage, California, Joint Powers Financing Authority, COP (Eisenhower
Memorial Hospital), 7% due 3/01/2022 2,535
AAA Aaa 2,495 Rio Linda, California, Unified School District GO, UT, Series A, 6.25% due
8/01/2015 (b) 2,486
Sacramento, California, Municipal Utility District, Electric Revenue Bonds (d):
AAA Aaa 1,505 Refunding, Series A, 5.75% due 8/15/2013 1,424
AAA Aaa 10,500 Series B, 6.375% due 8/15/2022 10,597
AAA Aaa 3,000 Series Y, 6.75% due 9/01/2001 (f) 3,323
San Francisco, California, City and County International Airports Commission,
Airport Revenue Refunding Bonds (d):
AAA Aaa 10,315 AMT, Second Series 3, 6.20% due 5/01/2020 10,119
AAA Aaa 7,500 Second Series 2, 6.75% due 5/01/2020 7,765
AAA Aaa 2,500 San Francisco, California, City and County Sewer Revenue Refunding Bonds, 6% due
10/01/2011 (b) 2,471
AAA Aaa 1,300 San Jose, California, Airport Revenue Refunding Bonds, 5.75% due 3/01/2016 (d) 1,224
AAA Aaa 2,500 San Jose, California, Redevelopment Agency, Tax Allocation Revenue Refunding Bonds
(Merged Area Redevelopment Project), 5% due 8/01/2020 (d) 2,071
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (concluded)
<S> <S> <C> <S> <C>
AAA Aaa $ 6,945 Santa Ana, California, Financing Authority, Lease Revenue Bonds (Police Admin-
istration and Holding Facility), Series A, 6.25% due 7/01/2024 (d) $ 6,963
Santa Clara, California, Electric Revenue Bonds, Series A (d):
AAA Aaa 3,000 6.25% due 7/01/2013 3,016
AAA Aaa 8,500 6.25% due 7/01/2019 8,414
AAA Aaa 1,350 Santa Clara County, California, COP, Refunding (Capital Project I), 6.25%
due 10/01/2016 (b) 1,353
AAA Aaa 5,000 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Bonds (Con-
solidated Redevelopment Project), Series A, 6.40% due 9/01/2022 (d) 5,060
AAA Aaa 2,185 Santa Rosa, California, High School District GO, UT, 6.375% due 5/01/2016 (d) 2,217
AAA Aaa 4,300 Santa Rosa, California, Water Revenue Bonds (Sub-Regional Wastewater Project),
Series A, 6.50% due 9/01/2016 (b) 4,371
AAA Aaa 2,500 Southern California Public Power Authority, Power Project Revenue Bonds (San Juan
Unit 3), Series A, 5% due 1/01/2020 (d) 2,081
AAA VMIG1 200 Southern California Public Power Authority, Subordinated Revenue Refunding Bonds
(Transmission Project), VRDN, 3.35% due 7/01/2019 (a)(b) 200
AAA Aaa 3,500 Southern California Rapid Transit District, COP (Workers Compensation), 6% due
7/01/2010 (d) 3,492
NR Baa1 1,100 Tulare County, California, COP (Financing Project), Series B, 6.875% due 11/15/2012 1,093
AAA Aaa 5,250 University of California, Revenue Refunding Bonds (Multi-Purpose Projects),
Series A, 6.875% due 9/01/2002 (d)(f) 5,873
AAA Aaa 8,250 West Sacramento, California, Redevelopment Agency, Tax Allocation Bonds (West
Sacramento Redevelopment Project), 6.25% due 9/01/2021 (d) 8,164
Total Investments (Cost--$329,405)--99.6% 324,224
Other Assets Less Liabilities--0.4% 1,345
--------
Net Assets--100.0% $325,569
========
<FN>
(a) 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, 1994.
(b) AMBAC Insured.
(c) FGIC Insured.
(d) MBIA Insured.
(e) The interest rate is subject to change periodically and inversely
to the prevailing market rate. The interest rate shown is the
rate in effect at April 30, 1994.
(f) Prerefunded.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets, Liabilities and Capital as of April 30, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$329,404,833) (Note 1a) $324,223,681
Cash 29,607
Receivables:
Securities sold $ 9,203,023
Interest 5,993,371 15,196,394
------------
Deferred organization expenses (Note 1e) 25,363
Prepaid expenses 293,803
------------
Total assets 339,768,848
------------
Liabilities: Payables:
Securities purchased 13,361,584
Dividends to shareholders (Note 1g) 445,857
Investment adviser (Note 2) 129,862 13,937,303
------------
Accrued expenses 262,463
------------
Total liabilities 14,199,766
------------
Net Assets: Net assets $325,569,082
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (2,000 shares of
AMPS* issued and outstanding at $50,000 per share liquidation
preference) $100,000,000
Common Stock, par value $.10 per share (16,328,873 shares
issued and outstanding) $ 1,632,887
Paid-in capital in excess of par 227,673,373
Undistributed investment income--net 1,790,665
Accumulated realized capital losses--net (346,691)
Unrealized depreciation on investments--net (5,181,152)
------------
Total--Equivalent to $13.81 net asset value per share of
Common Stock (market price--$12.75) 225,569,082
------------
Total capital $325,569,082
============
<FN>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
April 30, 1994
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 10,087,634
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 859,837
Commission fees (Note 4) 147,522
Professional fees 41,432
Transfer agent fees 28,569
Printing and shareholder reports 19,768
Accounting services (Note 2) 18,118
Listing fees 12,520
Directors' fees and expenses 10,964
Custodian fees 9,932
Pricing fees 5,708
Amortization of organization expenses (Note 1e) 3,423
Other 15,984
------------
Total expenses 1,173,777
------------
Investment income--net 8,913,857
------------
Realized & Realized loss on investments--net (294,077)
Unrealized Loss on Change in unrealized appreciation/depreciation on
Investments--Net investments--net (30,342,811)
(Notes 1d & 3): ------------
Net Decrease in Net Assets Resulting from Operations $(21,723,031)
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 8,913,857 $ 17,880,652
Realized gain (loss) on investments--net (294,077) 323,694
Change in unrealized appreciation/depreciation on investments--net (30,342,811) 39,303,533
------------ ------------
Net increase (decrease) in net assets resulting from operations (21,723,031) 57,507,879
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (7,144,665) (15,079,874)
Shareholders Preferred Stock (1,344,510) (2,766,040)
(Note 1g): Realized gain on investments--net:
Common Stock (276,121) (254,904)
Preferred Stock (47,570) (34,450)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (8,812,866) (18,135,268)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders in
Transactions reinvestment of dividends and distributions -- 4,956,613
(Note 4):
------------ ------------
Net increase in net assets derived from capital stock transactions -- 4,956,613
------------ ------------
Net Assets: Total increase (decrease) in net assets (30,535,897) 44,329,224
Beginning of period 356,104,979 311,775,755
------------ ------------
End of period* $325,569,082 $356,104,979
============ ============
<FN>
*Undistributed investment income--net $ 1,790,665 $ 1,365,983
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
The following per share data and ratios have been derived For the Six For the Year Period
from information provided in the financial statements. Months Ended Ended June 26,
April 30, Oct. 31, 1992+ to
Increase (Decrease) in Net Asset Value: 1994 1993 Oct. 31, 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.68 $ 13.25 $ 14.18
Operating --------- --------- ---------
Performance: Investment income--net .55 1.10 .28
Realized and unrealized gain (loss) on investments--net (1.88) 2.45 (.87)
--------- --------- ---------
Total from investment operations (1.33) 3.55 (.59)
--------- --------- ---------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net (.44) (.93) (.18)
Realized gain on investments--net (.02) (.02) --
--------- --------- ---------
Total dividends and distributions to Common Stock share-
holders (.46) (.95) (.18)
--------- --------- ---------
Capital charge resulting from issuance of Common Stock -- -- (.02)
--------- --------- ---------
Effect of Preferred Stock activity:++++
Dividends to Preferred Stock shareholders:
Investment income--net (.08) (.17) (.02)
Capital charge resulting from issuance of Preferred Stock -- -- (.12)
--------- --------- ---------
Total effect of Preferred Stock activity (.08) (.17) (.14)
--------- --------- ---------
Net asset value, end of period $ 13.81 $ 15.68 $ 13.25
========= ========= =========
Market price per share, end of period $ 12.75 $ 15.00 $ 14.875
========= ========= =========
Total Investment Based on market price per share (12.20%)+++ 7.48% 0.44%+++
Return:** ========= ========= =========
Based on net asset value per share (9.02%)+++ 26.13% (5.36%)+++
========= ========= =========
Ratios to Average Expenses, net of reimbursement .68%* .63% .13%*
Net Assets:*** ========= ========= =========
Expenses .68%* .64% .63%*
========= ========= =========
Investment income--net 5.17%* 5.27% 5.33%*
========= ========= =========
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $ 225,569 $ 256,105 $ 211,776
========= ========= =========
Preferred Stock outstanding, end of period (in thousands) $ 100,000 $ 100,000 $ 100,000
========= ========= =========
Portfolio turnover 23.20% 15.17% 32.97%
========= ========= =========
Dividends Per Share Series A--Investment income--net $ 573 $ 1,287 $ 187
On Preferred Stock Series B--Investment income--net 772 1,479 202
Outstanding:
<FN>
* Annualized.
** Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, result
in substantially different returns. Total investment returns ex-
clude the effects of sales loads.
*** Do not reflect the effect of dividends to Preferred Stock share-
holders.
++ Commencement of Operations.
++++ The Fund's Preferred Stock was issued on September 16, 1992.
+++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield California Insured Fund, Inc. (the "Fund") is reg-
istered under the Investment Company Act of 1940 as a non-
diversified, closed-end management investment company. The Fund
determines and makes available for publication the net asset
value of its Common Stock on a weekly basis. The Fund's Common
Stock is listed on the New York Stock Exchange under the symbol
MIC. The following is a summary of significant accounting pol-
icies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded pri-
marily 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, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options, which are traded on exchanges, are val-
ued at their last sale price as of the close of such exchanges
or, lacking any sales, at the last available bid price. Secur-
ities with remaining maturities of sixty days or less are
valued at amortized cost. Securities for which market quotations
are not readily available are valued at their fair value as
determined in good faith by or under the direction of the Board
of Directors of the Fund.
(b) Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures
contracts are contracts for delayed delivery of securities at a
specific future date and at a specific price or yield. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on
which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as variation margin and are
recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the re-
quirements 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 trans-
actions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the
accrual basis. Discounts and market premiums are amortized into
interest income. Realized gains and losses on security trans-
actions are determined on the identified cost basis.
(e) Deferred organization and offering expenses--Deferred or-
ganization expenses are amortized on a straight-line basis over
a five-year period beginning with the commencement of operations
of the Fund.
(f) Non-income producing investments--Written and purchased op-
tions are non-income producing investments.
(g) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). Effective January 1, 1994,
the investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc., an indirect wholly-owned subsidiary of
ML & Co. The limited partners are ML & Co. and Merrill Lynch
Investment Management, Inc. ("MLIM"), which is also an indirect
wholly-owned subsidiary of ML & Co.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund.
For such services, the Fund pays a monthly fee at an annual rate
of 0.50% of the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, MLIM, Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term
securities, for the six months ended April 30, 1994 were
$84,104,879 and $76,817,641, respectively.
Net realized and unrealized gains (losses) as of April 30, 1994
were as follows:
Realized
Gains Unrealized
(Losses) Losses
Long-term investments $ 158,089 $(5,181,152)
Short-term investments (452,166) --
---------- -----------
Total $ (294,077) $(5,181,152)
========== ===========
As of April 30, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $5,181,152, of which $1,387,935
related to appreciated securities and $6,569,087 related to
depreciated securities. The aggregate cost of investments at
April 30, 1994 for Federal income tax purposes was $329,404,833.
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 the holders of Common
Stock.
Common Stock
For the six months ended April 30, 1994, shares issued and out-
standing remained constant at 16,328,873. At April 30, 1994,
total paid-in capital amounted to $229,306,260.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at April 30, 1994 were
as follows: Series A, 3.178% and Series B, 3.00%.
In connection with the offering of AMPS, the Board of Directors
reclassified 2,000 shares of unissued capital stock as AMPS.
For the six months ended April 30, 1994, there were 2,000 AMPS
shares authorized, issued and outstanding with a liquidation
preference of $50,000 per share, plus accumulated and unpaid
dividends of $106,551.
The Fund pays commissions to certain broker-dealers at the end of
each auction at the annual rate of one-quarter of 1% calculated
on the proceeds of each auction. For the six months ended April
30, 1994, MLPF&S, an affiliate of MLIM, earned $17,370 as com-
missions.
5. Subsequent Event:
On May 6, 1994, the Fund's Board of Directors declared an or-
dinary income dividend to Common Stock shareholders in the
amount of $.072397 per share, payable on May 27, 1994 to share-
holders of record as of May 17, 1994.
PER SHARE INFORMATION
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Net Realized Unrealized Dividends/Distributions
Investment Gains Gains Net Investment Income Capital Gains
For the Period Income (Losses) (Losses) Common Preferred Common
<S> <C> <C> <C> <C> <C> <C>
June 26, 1992++ to July 31, 1992 $.04 $ .01 $ .20 -- -- --
August 1, 1992 to October 31, 1992 .24 -- (1.08) $.18 $.02 --
November 1, 1992 to January 31, 1993 .28 (.01) 1.01 .24 .04 $.02
February 1, 1993 to April 30, 1993 .28 .01 .57 .23 .05 --
May 1, 1993 to July 31, 1993 .27 .02 .19 .23 .04 --
August 1, 1993 to October 31, 1993 .27 -- .66 .23 .04 --
November 1, 1993 to January 31, 1994 .28 .06 .05 .22 .04 .02
February 1, 1994 to April 30, 1994 .27 (.08) (1.91) .22 .04 --
<CAPTION>
Net Asset Value Market Price**
For the Period High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
June 26, 1992++ to July 31, 1992 $14.46 $14.16 $15.50 $15.00 162
August 1, 1992 to October 31, 1992 14.40 13.04 15.50 14.375 630
November 1, 1992 to January 31, 1993 14.23 13.27 15.25 14.25 952
February 1, 1993 to April 30, 1993 15.38 14.23 15.625 14.375 876
May 1, 1993 to July 31, 1993 15.25 14.11 15.25 14.75 910
August 1, 1993 to October 31, 1993 15.99 15.03 15.75 14.875 1,422
November 1, 1993 to January 31, 1994 15.79 15.08 15.25 14.00 1,655
February 1, 1994 to April 30, 1994 15.73 13.05 14.75 12.50 1,663
<FN>
++ Commencement of Operations.
* Calculations are based upon shares of Common Stock outstanding
at the end of each period.
** As reported in the consolidated transaction reporting system.
*** In thousands.
</TABLE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Kenneth S. Axelson, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Transfer Agents
Common Stock:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MIC
