MUNIYIELD
CALIFORNIA
INSURED
FUND, INC.
FUND LOGO
Annual Report
October 31, 1994
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
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield California Insured
Fund, Inc. for their information. It is not a prospectus, circular
or representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock by issuing Preferred Stock to provide the Common Stock
shareholders with a potentially higher rate of return. Leverage
creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price
of shares of the Common Stock, and the risk that fluctuations in the
short-term dividend rates of the Preferred Stock may affect the
yield to Common Stock shareholders.
MuniYield California
Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield California Insured Fund, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1994, the Common Stock of MuniYield
California Insured Fund, Inc. earned $0.906 per share income
dividends, which includes earned and unpaid dividends of $0.075.
This represents a net annualized yield of 7.03%, based on a month-
end net asset value of $12.88 per share. Over the same period, the
total investment return on the Fund's Common Stock was -12.06%,
based on a change in per share net asset value from $15.68 to
$12.88, and assuming reinvestment of $0.909 per share income
dividends.
For the six-month period ended October 31, 1994, the total
investment return on the Fund's Common Stock was -3.34%, based on a
change in per share net asset value from $13.81 to $12.88, and
assuming reinvestment of $0.454 per share income dividends.
The average yields of the Fund's Auction Market Preferred Stock for
the six months ended October 31, 1994 were 3.035% for Series A and
3.178% for Series B.
The Environment
As discussed in our last report to shareholders, the Federal Reserve
Board moved to counteract inflationary pressures by tightening
monetary policy. This trend continued during the May--October
period. Despite the series of preemptive strikes against inflation
by the central bank, concerns of increasing inflationary pressures
continued to prompt volatility in the US capital markets during the
period. In addition, the weakness of the US dollar in foreign
exchange markets prolonged stock and bond market declines.
Ongoing strength in the manufacturing sector and better-than-
expected economic results continue to fuel speculation that the
Federal Reserve Board will continue to raise short-term interest
rates in the months ahead. However, although consumer spending is
increasing, it is doing so at a lower rate than has been the case in
recent economic recoveries. In the weeks ahead, investors will
continue to assess economic data and inflationary trends in order to
gauge whether further increases in short-term interest rates are
imminent. Continued indications of moderate and sustainable levels
of economic growth would be positive for the US capital markets. At
the same time, greater US dollar stability in foreign exchange
markets would help to dampen expectations of significantly higher
short-term interest rates.
The Municipal Market
The long-term tax-exempt market continued to erode throughout the
three months ended October 31, 1994. As measured by the Bond Buyer
Revenue Bond Index, yields on A-rated municipal revenue bonds
maturing in 30 years rose by almost 50 basis points (0.50%) to 6.95%
during the October 31, 1994 quarter. This represents the highest
level in tax-exempt bond yields in over two years. US Treasury bonds
suffered even greater declines during the quarter as Treasury bond
yields rose approximately 60 basis points to end the quarter at
8.00%.
The tax-exempt bond market reacted negatively throughout the October
quarter to indications that, despite a series of interest rate
increases by the Federal Reserve Board, the strength of the domestic
economy seen in recent quarters has not yet been significantly
reduced. While inflationary pressures have remained well contained,
additional Federal Reserve Board actions have been expected both to
ensure that domestic economic growth is eventually confined to
current levels and to assure nervous financial markets of its anti-
inflationary intentions.
Fortunately, while the demand for tax-exempt bonds has declined
somewhat in recent months, new bond issuance has remained greatly
reduced. During the quarter ended October 31, 1994, only $32 billion
in long-term tax-exempt securities were issued, a decline of over
50% versus the October 31, 1993 quarter. Similarly, for the six
months ended October 31, 1994, only $75 billion in municipal
securities were underwritten, a decline of over 50% versus the
comparable period a year earlier. This reduction in issuance in
recent quarters has allowed the municipal bond market to react to
both the decline in investor demand and the rise in fixed-income
yields in a more orderly fashion than in similar situations in the
past, particularly during 1987.
Long-term tax-exempt revenue bonds currently yield approximately 7%,
or almost 11.5% on an after-tax equivalent basis, to an investor in
the 39.6% Federal income tax bracket. As inflation has only
marginally increased in the past year, real tax-exempt interest
rates have risen dramatically. The Federal Reserve Board appears
committed to maintaining inflation at or below its current levels.
Indeed, most forecasts expect inflation to remain in its present
range of 3%--4% throughout 1995 and, potentially, for the remainder
of the 1990s. Real after-tax equivalent interest rates exceeding 7%
represent historically attractive municipal investments for long-
term investors.
Federal Reserve Board actions taken thus far have yet to fully
impact US domestic growth and expected additional actions should
promote only a modest economic expansion within a benign
inflationary context beginning sometime early in 1995. Within such
an environment, it is unlikely that tax-exempt interest rates will
remain at their current attractive levels. Tax-exempt bond issuance
is unlikely to return to the historic high levels seen in 1992 and
1993, while investor demand should return as markets stabilize. As
we have discussed in earlier reports, the total number of tax-exempt
bonds outstanding is scheduled to decline dramatically in 1994 and
1995 as a result of both regular bond maturities and early
redemptions. Investors seeking tax-advantaged issues are likely to
find it very difficult to obtain currently available tax-exempt
yields as the current supply/demand balance is unlikely to be
maintained in the coming quarters.
Portfolio Strategy
During the quarter ended October 31, 1994, our portfolio strategy
consisted of selling discounted bonds and replacing them with higher-
yielding, current coupon bonds. Furthermore, cash reserves averaged
5% of net assets for the quarter, and we purchased premium coupons
when available. The net effect of this strategy generated an
increased yield for shareholders while restructuring the Fund to
exhibit a more defensive posture. Municipal issuance of California
bonds for this quarter versus the same quarter last year decreased
33%, which illustrates the difficulty of purchasing bonds that both
meet our portfolio strategy and satisfy the Fund's diversification
requirements. Also, as a result of the tight credit quality spreads,
it was possible to underutilize the assets available for non-insured
bonds without significantly affecting the Fund's yield. Currently
86% of net assets are rated AAA with credit enhancement by one of
the major rating services. Looking forward, our portfolio strategy
will consist of enhancing income for Common Stock shareholders
through the purchase of current coupon and premium coupon bonds when
attractively priced.
We appreciate your ongoing interest in MuniYield California Insured
Fund, Inc., and we look forward to serving your investment 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
December 6, 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 Preferred Stock, which
pays dividends at prevailing short-term interest rates, and invests
the proceeds in long-term municipal bonds. The interest earned on
these investments is paid to Common Stock shareholders in the form
of dividends, and the value of these portfolio holdings is reflected
in the per share net asset value of the Fund's Common Stock.
However, in order to benefit Common Stock shareholders, the yield
curve must be positively sloped; that is, short-term interest rates
must be lower than long-term interest rates. At the same time, a
period of generally declining interest rates will benefit Common
Stock shareholders. If either of these conditions change, then the
risks of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred Stock
for an additional $50 million, creating a total value of $150
million available for investment in long-term municipal bonds. If
prevailing short-term interest rates are approximately 3% and long-
term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million
of Preferred Stock based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates.
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 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 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.
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 below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Authority
INFLOS Inverse Floating Rate Municipal Bonds
RIB Residual Municipal Bonds
RITES Residual Interest Tax-Exempt Securities
S/F Single-Family
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--99.7%
<S> <S> <C> <S> <C>
Alameda County, California, GO, UT, Refunding Bonds (Unified School
District), Series A (b):
AAA Aaa $ 3,190 6.10% due 7/01/2013 $ 3,007
AAA Aaa 3,760 6.10% due 7/01/2014 3,538
AAA Aaa 1,960 Berkeley, California, Unified School District, GO, UT, Series C, 6.50% due
8/01/2019 (b) 1,913
AAA Aaa 2,000 Beverly Hills, California, Public Financing Authority, Lease Revenue Bonds,
Series A, INFLOS, 8.22% due 6/01/2015 (d)(e) 1,500
AAA Aaa 5,915 Brea, California, Public Financing Authority, Water Revenue Bonds, Series B,
6.25% due 7/01/2021 (c) 5,558
Brea, California, Redevelopment Agency, Tax Allocation Revenue Refunding Bonds
(Redevelopment Project AB) (d):
AAA Aaa 1,000 6.125% due 8/01/2013 946
AAA Aaa 6,000 5.50% due 8/01/2017 5,084
AAA Aaa 1,750 5.75% due 8/01/2023 1,511
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 2,838
AAA Aaa 10,500 (Centinela Medical Hospital), 6.25% due 9/01/2015 10,040
AAA Aaa 3,000 Refunding (San Diego Hospital), Series A, 6.20% due 8/01/2012 2,866
AAA Aaa 5,000 Refunding (San Diego Hospital), Series A, 6.20% due 8/01/2020 4,671
AAA Aaa 1,000 (San Diego Hospital), Series B, 6.125% due 8/01/2022 923
AAA Aaa 2,500 (Scripps Memorial Hospital), Series A, 6.25% due 10/01/2013 2,398
AAA Aaa 2,750 (Scripps Memorial Hospital), Series A, 6.375% due 10/01/2022 2,624
California HFA, Home Mortgage Revenue Bonds, AMT:
AA- Aa 265 Series B, 8% due 8/01/2029 272
AA- Aa 2,000 Series E-1, 6.70% due 8/01/2025 1,900
AA- Aa 4,260 Series F-1, 7% due 8/01/2026 4,206
AA- Aa 6,045 Series G, 7.05% due 8/01/2027 6,006
AA- Aa 2,000 California HFA, Revenue Bonds, RIB, AMT, 9.111% due 8/01/2023 (e) 1,735
NR* Aaa 1,060 California Rural Home Mortgage Finance Authority, S/F Mortgage Revenue Bonds
(Mortgage-Backed Securities Program), AMT, Series A-1, 6.90% due 12/01/2024 (g) 1,039
NR* Baa 3,160 California State Public Capital Improvements Financing Authority Revenue Bonds
(Joint Powers Agency Pooled Projects), Series E, 8.25% due 3/01/1998 3,416
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (concluded)
<S> <S> <C> <S> <C>
California State Public Works Board, Lease Revenue Bonds, Series A:
A- A $ 9,785 (Various California State University Projects), 6.70% due 10/01/2017 $ 9,473
AAA Aaa 2,000 (Various Community College Projects), 6% due 12/01/2012 (b) 1,876
AAA Aaa 1,955 (Various Universities of California Projects), 6.40% due 12/01/2016 (b) 1,903
California Statewide Community Development Authority Revenue Bonds, COP:
AAA Aaa 2,000 (Good Samaritan Health System), 6.50% due 5/01/2024 1,939
AA Aa 4,000 (Saint Joseph Health System), 6.50% due 7/01/2015 3,880
AAA Aaa 3,000 Contra Costa, California, Water Authority, Water Treatment Revenue Refunding Bonds,
Series A, 5.75% due 10/01/2020 (c) 2,605
AAA Aaa 5,720 Contra Costa, California, Water District, Water Revenue Bonds, Series D, 6.375%
due 10/01/2022 (b) 5,472
AAA Aaa 2,000 Coronado, California, Community Development Agency, Tax Allocation Revenue Bonds
(Coronado Community Development Project), 6.30% due 9/01/2022 (d) 1,890
AAA Aaa 5,000 Cucamonga County, California, Water District COP, Facilities Refinancing Bonds,
6.50% due 9/01/2022 (c) 4,874
AAA Aaa 7,000 East Bay, California, Municipal Utility District, Wastewater Treatment System
Revenue Bonds, 6.375% due 6/01/2021 (b) 6,685
AAA Aaa 5,000 El Camino, California, Hospital District Revenue Refunding Bonds, Series A,
6.25% due 8/15/2017 (b) 4,727
AAA Aaa 3,000 Escondido, California, Joint Powers Financing Authority, Lease Revenue Bonds
(Escondido Civic Center Project), Series B, 6.125% due 9/01/2011 (b) 2,874
AAA Aaa 1,000 Fairfield-Suisun, California, Sewer District, Sewer Revenue Refunding Bonds,
Series A, 6.25% due 5/01/2016 (d) 950
AAA Aaa 1,250 Fresno, California, Sewer Revenue Bonds, Series A-1, 6.25% due 9/01/2014 (b) 1,211
BBB Baa 4,890 Inglewood, California, Public Financing Authority Revenue Bonds (Inglewood
and Industrial Park Project), Series B, 7% due 5/01/2022 4,768
AAA Aaa 2,780 Los Angeles, California, Community Redevelopment Agency, Tax Allocation
Bonds (Hollywood Redevelopment Project), Series B, 6.10% due 7/01/2022 (d) 2,558
AAA Aaa 10,500 Los Angeles, California, Department of Water and Power, Waterworks Revenue
Bonds (Second Issue), 6.40% due 11/01/2031 (d) 10,016
Los Angeles, California, Wastewater System Revenue Bonds:
AAA Aaa 5,000 Refunding, Series A, 6% due 12/01/2018 (c) 4,578
AAA Aaa 3,000 Series B, 5.70% due 6/01/2023 (d) 2,573
AAA Aaa 1,000 Los Angeles County, California, COP (Correctional Facilities Project), 6.50%
due 9/01/2013 (d) 987
Los Angeles County, California, Metropolitan Transportation Authority, Sales
Tax Revenue Refunding Bonds, Series A (d):
AAA Aaa 5,000 (Proposition A), 5.625% due 7/01/2018 4,292
A1+ VMIG1 1,700 (Proposition C--Second Senior), VRDN, 3.25% due 7/01/2020 (a) 1,700
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 983
AAA Aaa 9,000 6% due 7/01/2022 8,169
AAA Aaa 5,140 Mt. Diablo, California, Unified School District, Community Facilities--Special
District Tax Bonds, 6.30% due 8/01/2022 (b) 4,857
</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>
Northern California Public Power Agency, Revenue Refunding Bonds (Hydroelectric
Project Number 1), Series A (d):
AAA Aaa $ 3,000 6.25% due 7/01/2012 $ 2,891
AAA Aaa 2,000 5.50% due 7/01/2016 1,701
AAA Aaa 1,900 Oakland, California, Redevelopment Agency Refunding Bonds, INFLOS, 8.321% due
9/01/2019 (d)(e) 1,522
AAA Aaa 4,885 Ontario, California, Redevelopment Financing Authority Revenue Bonds (Center City--
Cimarron Project Number 1), 6.25% due 8/01/2015 (d) 4,666
Orange County, California, Local Transportation Authority, Sales Tax Revenue
Bonds, RIB (e):
AA Aa 4,000 8.161% due 2/14/2011 3,760
AAA Aaa 8,000 Second Series, 8.111% due 2/14/2011 (c) 7,290
A1+ VMIG1 8,000 Orange County, California, Various Sanitation Districts Nos. 1, 2, 3, 6, 7, &
11, COP, VRDN, Series C, 3.45% due 8/01/2017 (a)(c) 8,000
AAA Aaa 1,000 Palm Springs, California, Financing Authority Lease Revenue Bonds (Convention
Center Project), Series A, 6.75% due 11/01/2021 (d) 1,003
Port Oakland, California, Port Revenue Bonds, AMT, Series E (d):
AAA Aaa 11,000 6.50% due 11/01/2016 10,578
AAA Aaa 11,495 6.40% due 11/01/2022 10,841
Rancho, California, Water District Financing Authority Revenue Bonds:
AAA Aaa 2,000 Refunding, 6.25% due 8/01/2012 (c) 1,927
AAA Aaa 2,000 RITES, 9.25% due 9/11/2001 (a)(b)(f) 2,240
NR* A 2,500 Rancho Mirage, California, Joint Powers Financing Authority, COP (Eisenhower
Memorial Hospital), 7% due 3/01/2022 2,434
AAA Aaa 2,495 Rio Linda, California, Unified School District GO, UT, Series A, 6.25% due
8/01/2015 (b) 2,386
Sacramento, California, Municipal Utility District, Electric Revenue Bonds (d):
AAA Aaa 1,505 Refunding, Series A, 5.75% due 8/15/2013 1,356
AAA Aaa 1,000 Refunding, Series G, 6.50% due 9/01/2013 988
AAA Aaa 10,500 Series B, 6.375% due 8/15/2022 10,020
San Francisco, California, City and County International Airports Commission,
Airport Revenue Refunding Bonds, Second Series (d):
AAA Aaa 10,315 AMT, Issue 3, 6.20% due 5/01/2020 9,535
AAA Aaa 7,500 Issue 2, 6.75% due 5/01/2020 7,522
</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 $ 1,575 San Jose, California, Airport Revenue Refunding Bonds, 5.75% due 3/01/2016 (d) $ 1,385
AAA Aaa 6,945 Santa Ana, California, Financing Authority, Lease Revenue Bonds (Police
Administration and Holding Facility), Series A, 6.25% due 7/01/2024 (d) 6,595
Santa Clara, California, Electric Revenue Bonds, Series A (d):
AAA Aaa 3,000 6.25% due 7/01/2013 2,891
AAA Aaa 8,500 6.25% due 7/01/2019 8,002
AAA Aaa 1,350 6.50% due 7/01/2021 1,315
AAA Aaa 1,350 Santa Clara County, California, COP, Refunding Bonds (Capital Project I), 6.25%
due 10/01/2016 (b) 1,282
AAA Aaa 8,875 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Revenue Bonds
(Construction Redevelopment Project), Series A, 6.40% due 9/01/2022 (d) 8,573
AAA Aaa 2,185 Santa Rosa, California, High School District GO, UT, 6.375% due 5/01/2016 (d) 2,114
AAA Aaa 4,300 Santa Rosa, California, Water Revenue Bonds (Sub-Regional Wastewater Project),
Series A, 6.50% due 9/01/2016 (b) 4,226
NR* Baa1 1,100 Tulare County, California, COP (Financing Project), Series B, 6.875% due 11/15/2012 1,083
University of California, Revenue Bonds (Multiple Purpose Projects) (d):
AAA Aaa 5,250 Refunding, Series A, 6.875% due 9/01/2002 (f) 5,720
AAA Aaa 4,000 Series D, 6.375% due 9/01/2024 3,823
AAA Aaa 8,250 West Sacramento, California, Redevelopment Agency, Tax Allocation Bonds
(West Sacramento Redevelopment Project), 6.25% due 9/01/2021 (d) 7,751
Total Investments (Cost--$328,448)--99.7% 309,251
Other Assets Less Liabilities--0.3% 1,004
--------
Net Assets--100.0% $310,255
========
<FN>
*Not Rated.
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 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 October 31, 1994.
(f)Prerefunded.
(g)FNMA/GNMA Collateralized.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$328,448,394) (Note 1a) $309,250,750
Cash 82,191
Interest receivable 5,920,650
Deferred organization expenses (Note 1e) 18,439
Prepaid expenses and other assets 55,091
------------
Total assets 315,327,121
------------
Liabilities: Payables:
Securities purchased $ 4,286,506
Dividends to shareholders (Note 1g) 542,949
Investment adviser (Note 2) 134,150 4,963,605
------------
Accrued expenses and other liabilities 108,995
------------
Total liabilities 5,072,600
------------
Net Assets: Net assets $310,254,521
============
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 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 1,861,407
Accumulated realized capital losses--net (Note 5) (1,715,502)
Unrealized depreciation on investments--net (19,197,644)
------------
Total--Equivalent to $12.88 net asset value per share of Common
Stock (market price--$11.25) 210,254,521
------------
Total capital $310,254,521
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1994
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 20,308,939
Income
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,681,939
Commission fees (Note 4) 308,098
Professional fees 63,620
Transfer agent fees 58,554
Printing and shareholder reports 48,667
Accounting services (Note 2) 29,011
Listing fees 25,448
Directors' fees and expenses 22,980
Custodian fees 19,558
Pricing fees 10,912
Amortization of organization expenses (Note 1e) 6,924
Other 30,336
------------
Total expenses 2,306,047
------------
Investment income--net 18,002,892
------------
Realized & Realized loss on investments--net (1,662,888)
Unrealized Change in unrealized appreciation/depreciation on
Loss on investments--net (44,359,302)
Investments-- ------------
Net (Notes Net Decrease in Net Assets Resulting from Operations $(28,019,298)
1d & 3): ============
See Notes to Financial Statements.
FINANCIAL INFORMATION (continued)
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 18,002,892 $ 17,880,652
Realized gain (loss) on investments--net (1,662,888) 323,694
Change in unrealized appreciation/depreciation on investments--net (44,359,302) 39,303,533
------------ ------------
Net increase (decrease) in net assets resulting from operations (28,019,298) 57,507,879
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (14,563,738) (15,079,874)
Shareholders Preferred Stock (2,943,730) (2,766,040)
(Note 1g): Realized gain on investments--net:
Common Stock (276,122) (254,904)
Preferred Stock (47,570) (34,450)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (17,831,160) (18,135,268)
------------ ------------
Common 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 Common Stock transactions -- 4,956,613
------------ ------------
Net Assets: Total increase (decrease) in net assets (45,850,458) 44,329,224
Beginning of year 356,104,979 311,775,755
------------ ------------
End of year* $310,254,521 $356,104,979
============ ============
*Undistributed investment income--net $ 1,861,407 $ 1,365,983
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived June 26,
from information provided in the financial statements. For the Year Ended 1992++ to
October 31, October 31,
Increase (Decrease) in Net Asset Value: 1994 1993 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 1.10 1.10 .28
Realized and unrealized gain (loss) on investments--net (2.81) 2.45 (.87)
--------- --------- --------
Total from investment operations (1.71) 3.55 (.59)
--------- --------- --------
Less dividends and distributions to Common Stock shareholders:
Investment income--net (.89) (.93) (.18)
Realized gain on investments--net (.02) (.02) --
--------- --------- --------
Total dividends and distributions (.91) (.95) (.18)
--------- --------- --------
Capital charge resulting from issuance of Common Stock -- -- (.02)
--------- --------- --------
Effect of Preferred Stock activity:++++
Dividends and distributions to Preferred Stock shareholders:
Investment income--net (.18) (.17) (.02)
Capital charge resulting from issuance of Preferred Stock -- -- (.12)
--------- --------- --------
Total effect of Preferred Stock activity (.18) (.17) (.14)
--------- --------- --------
Net asset value, end of period $ 12.88 $ 15.68 $ 13.25
========= ========= ========
Market price per share, end of period $ 11.25 $ 15.00 $ 14.875
========= ========= ========
Total Based on market price per share (19.71%) 7.48% 0.44%+++
Investment ========= ========= ========
Return:** Based on net asset value per share (12.06%) 26.13% (5.36%)+++
========= ========= ========
Ratios to Expenses, net of reimbursement .68% .63% .13%*
Average ========= ========= ========
Net Assets:*** Expenses .68% .64% .63%*
========= ========= ========
Investment income--net 5.34% 5.27% 5.33%*
========= ========= ========
Supplemental Net assets, net of Preferred Stock, end of period (in thousands) $ 210,255 $ 256,105 $211,776
Data: ========= ========= ========
Preferred Stock outstanding, end of period (in thousands) $ 100,000 $ 100,000 $100,000
========= ========= ========
Portfolio turnover 38.06% 15.17% 32.97%
========= ========= ========
Dividends Per Series A--Investment income--net $ 1,368 $ 1,287 $ 187
Share On Series B--Investment income--net 1,575 1,479 202
Preferred Stock
Outstanding:
<FN>
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value,
may result in substantially different returns. Total investment
returns exclude the effects of sales loads.
***Do not reflect the effect of dividends to Preferred Stock
shareholders.
++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 registered
under the Investment Company Act of 1940 as a non-diversified,
closed-end management investment company. The Fund determines and
makes available for publication the net asset value of its Common
Stock on a weekly basis. The Fund's Common Stock is listed on the
New York Stock Exchange under the symbol MIC. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts, 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 valued at their last sale price
as of the close of such exchanges or, lacking any sales, at the last
available bid price. Securities with remaining maturities of sixty
days or less are valued at amortized cost, which approximates market
value. 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
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Non-income producing investments--Written and purchased options
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. ("PSI"), an indirect wholly-owned
subsidiary of ML & Co. The limited partners are ML & Co. and Fund
Asset Management, Inc. ("FAMI"), 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, FAMI, PSI, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1994 were $127,602,009 and
$123,621,835, respectively.
Net realized and unrealized gains (losses) as of October 31, 1994
were as follows:
Realized Unrealized
Gains (Losses) Losses
Long-term investments $(1,438,603) $(19,197,644)
Short-term investments (740,416) --
Financial futures contracts 516,131 --
----------- ------------
Total $(1,662,888) $(19,197,644)
=========== ============
As of October 31, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $19,197,644, of which $373,343
related to appreciated securities and $19,570,987 related to
depreciated securities. The aggregate cost of investments at October
31, 1994 for Federal income tax purposes was $328,448,394.
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 year ended October 31, 1994, shares issued and outstanding
remained constant at 16,328,873. At October 31, 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 October 31, 1994 were as
follows: Series A, 3.27%; and Series B, 3.178%.
For the year ended October 31, 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 $74,857.
Effective December 1, 1994, as a result of a two-for-one stock
split, there will be 4,000 AMPS shares with a liquidation preference
of $25,000 per share.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the year ended
October 31, 1994, MLPF&S, an affiliate of FAMI, earned $66,942 as
commissions.
5. Capital Loss Carryforward:
At October 31, 1994, the Fund had a capital loss carryforward of
approximately $1,715,000, all of which expires in 2002. This amount
will be available to offset like amounts of any future taxable
gains.
6. Subsequent Event:
On November 8, 1994, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.074845 per share, payable on November 29, 1994, to shareholders
of record as of November 18, 1994.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
MuniYield California Insured Fund, Inc.:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniYield
California Insured Fund, Inc. as of October 31, 1994, the related
statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and
the financial highlights for each of the years in the two-year
period then ended and the period June 26, 1992 (commencement of
operations) to October 31, 1992. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at October
31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniYield California Insured Fund, Inc. as of October 31, 1994, the
results of its operations, the changes in its net assets and the
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 8, 1994
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid monthly by
MuniYield California Insured Fund, Inc. during its taxable year
ended October 31, 1994 qualify as tax-exempt interest dividends for
Federal income tax purposes.
Additionally, the following table summarizes the per share capital
gains distributions declared by the Fund during the year:
<TABLE>
Payable Short-Term Long-Term
Date Capital Gains Capital Gains
<S> <C> <C> <C>
Common Stock Shareholders 12/30/93 $ 0.016910 --
Preferred Stock Shareholders: Series A 12/01/93 $22.10 --
Series B 12/01/93 $25.47 --
Please retain this information for your records.
</TABLE>
PER SHARE INFORMATION (unaudited)
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Net Realized Unrealized Dividends/Distributions
Investment Gains Gains Net Investment Income Capital Gains
For the Quarter Income (Losses) (Losses) Common Preferred Common
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) .21 .04 --
May 1, 1994 to July 31, 1994 .27 -- .26 .23 .05 --
August 1, 1994 to October 31, 1994 .28 (.08) (1.11) .23 .05 --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
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 14.73 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
May 1, 1994 to July 31, 1994 14.37 13.41 13.75 12.75 1,289
August 1, 1994 to October 31, 1994 14.09 12.87 13.375 11.25 1,950
<FN>
*Calculations are based upon shares of Common Stock outstanding at the end of each quarter.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
