MUNIYIELD
CALIFORNIA
INSURED
FUND, INC.
FUND LOGO
Annual Report
October 31, 1996
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. Statements and other information
herein are as dated and are subject to change.
<PAGE>
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, 1996, the Common Stock of MuniYield
California Insured Fund, Inc. earned $0.843 per share income
dividends, which included earned and unpaid dividends of $0.073.
This represents a net annualized yield of 5.78%, based on a month-
end per share net asset value of $14.59. Over the same period, the
total investment return on the Fund's Common Stock was +7.54%, based
on a change in per share net asset value from $14.43 to $14.59, and
assuming reinvestment of $0.839 per share income dividends.
<PAGE>
For the six-month period ended October 31, 1996, the total
investment return on the Fund's Common Stock was +7.24%, based on a
change in per share net asset value from $14.03 to $14.59, and
assuming reinvestment of $0.418 per share income dividends.
For the six-month period ended October 31, 1996, the Fund's Auction
Market Preferred Stock had an average yield of 3.65% for Series A
and 3.20% for Series B.
The Municipal Market Environment
Municipal bond yields generally moved lower during the six-month
period ended October 31, 1996. Long-term tax-exempt revenue bond
yields, as measured by the Bond Buyer Revenue Bond Index, declined
approximately 35 basis points (0.35%) to end the October period at
approximately 5.94%. The municipal bond market exhibited
considerable weekly yield volatility over the last six months with
bond yields vacillating as much as 20 basis points. This ongoing
volatility was in response to fluctuating evidence regarding the
degree to which recent economic growth will result in any
significant increase in inflationary pressures. Much of the evidence
supporting stronger growth centered around the strong employment
growth seen in April and June and bond yields rose in response.
Other, more recent, economic indicators suggested that economic
growth will not be excessive and inflationary pressures will remain
well-contained. This continued benign inflationary environment
supported lower tax-exempt bond yields in recent months. US Treasury
bond yields exhibited similar, albeit greater, volatility during the
period ended October 31, 1996 falling over 20 basis points to end
the period at 6.64%. Over the past six months, tax-exempt bond
yields registered significantly greater declines than shown by the
US Treasury bond market. This relative outperformance by the
municipal bond market was largely the result of the strong technical
support the tax-exempt market enjoyed throughout most of 1996.
Perhaps most significantly, the pace of new bond issuance recently
slowed.
Over the last year, approximately $180 billion in long-term
municipal securities was issued, an increase of over 25% compared to
the same period a year ago. Much of this increase was the result of
issuers seeking to refinance their existing higher-couponed debt as
interest rates declined in 1995 and early 1996. As interest rates
rose, these financings became increasingly economically impractical,
and issuance declined. Over the last six months, approximately $90
billion in long-term tax-exempt securities was underwritten, an
increase of 5% versus the comparable period a year earlier. Only $41
billion in tax-exempt securities was issued in the last three
months, a 3% decline in issuance compared to the October 31, 1995
quarter.
<PAGE>
At the same time, investor demand remained consistently strong. With
nominal new-issue yields generally above 6%, retail investor
interest was steady. Additionally, investors received over $50
billion this June and July in assets derived from coupon income,
bond maturities, and proceeds from early redemptions. Annual new
bond issuance declined in recent years and is expected to remain
below levels seen in the early 1990s. Consequently, as the higher-
couponed bonds issued in the early-to-mid 1980s were redeemed at
their first optional call dates, the total number of outstanding tax-
exempt bonds has declined. This combination of a declining net
supply and significant amounts of assets available for investment
helped maintain investor demand in recent months.
It is unlikely that the municipal bond market will continue to
significantly outperform US Treasury securities in the near future.
The tax-exempt bond market's recent performance led to the yield
ratio between long-term taxable and tax-exempt securities falling
from in excess of 90% to approximately 85%. While historically still
very attractive, some institutional investors, particularly short-
term traders, began to view the tax-exempt bond market's recent
outperformance as an opportunity to sell a relatively expensive
asset. However, to the long-term investor, such a sale would
represent the loss of an attractively priced asset which may not be
easily replaced given the relative scarcity of municipal bonds under
present supply conditions.
Looking forward, no clear consensus for the direction of interest
rates currently exists. Perhaps, the primary focus going forward
will be the extent to which the increase in interest rates seen thus
far in 1996 will negatively impact future economic growth. Should
growth slow in the interest rate-sensitive sectors of the economy,
like housing, auto, and consumer spending, as many economists assert
is likely, then bond yields are likely to decline. Under such a
scenario, the municipal bond market's performance is likely to
closely mirror that of the US Treasury bond market.
Portfolio Strategy
For the 12 months ended October 31, 1996, we managed the Fund with
the intention of sustaining an attractive level of tax-exempt income
while trying to achieve an above-average total return. We entered
the 12-month period optimistic that interest rates would decline.
This opinion was based on the belief that higher interest rates
earlier in the year would cause a drag on the economy. To take
advantage of this scenario, we extended the Fund's duration and
lowered our cash reserve position to a minimal level. From October
1995 to January 1996, the impression that the economy had slowed and
that there was no inflation on the horizon was enough to lower
interest rates by almost 50 basis points. Two rounds of Federal
Reserve Board easings in December 1995 and January 1996 made
investors complacent. This set the stage for a sudden loss of
investor confidence as an undeniably strong employment number in
March blindsided the market and began a period of extreme
volatility, which continued through the end of October. Looking
ahead, we expect this volatility to continue, and our portfolio
strategy is expected to remain neutral until the direction of the
economy becomes clearer.
<PAGE>
In Conclusion
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
Senior Vice President
(Roberto Roffo)
Roberto Roffo
Vice President and Portfolio Manager
November 29, 1996
PROXY RESULTS
<PAGE>
<TABLE>
During the six-month period ended October 31, 1996, MuniYield
California Insured Fund, Inc. Common Stock shareholders voted on the
following proposals. The proposals were approved at a special
shareholders' meeting on September 19, 1996. The description of each
proposal and number of shares voted are as follows:
<CAPTION>
Shares Shares Voted
Voted For Without Authority
<S> <S> <C> <C>
1.To elect the Fund's Board of Directors: James H. Bodurtha 15,712,332 332,855
Herbert I. London 15,708,123 337,064
Robert R. Martin 15,710,704 334,483
Arthur Zeikel 15,704,888 340,299
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C> <C>
2.To ratify the selection of Deloitte & Touche LLP as
the Fund's independent auditors for the current fiscal
year. 15,604,417 56,151 384,618
<CAPTION>
During the six-month period ended October 31, 1996, MuniYield
California Insured Fund, Inc. Preferred Stock shareholders (Series A
and Series B) voted on the following proposals. The proposals were
approved at the annual shareholders' meeting on September 19, 1996.
The description of each proposal and number of shares voted are as
follows:
Shares Shares Voted
Voted For Without Authority
<S> <S> <C> <C>
1.To elect the Fund's Board of Directors:
James H. Bodurtha, Herbert I. London,
Robert R. Martin, Joseph L. May, Andre F.
Perold and Arthur Zeikel as follows: Series A 1,402 65
Series B 1,688 29
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <S> <C> <C> <C>
2.To ratify the selection of Deloitte &
Touche LLP as the Fund's independent
auditors for the currentfiscal year as
follows: Series A 1,386 16 65
Series B 1,688 29 0
</TABLE>
<PAGE>
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. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pickup on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value of the fund's Common Stock (that is, its
price as listed on the New York Stock Exchange) may, as a result,
decline. Furthermore, if long-term interest rates rise, the Common
Stock's net asset value will reflect the full decline in the price
of the portfolio's investments, since the value of the fund's
Preferred Stock does not fluctuate. In addition to the decline in
net asset value, the market value of the fund's Common Stock may
also decline.
<PAGE>
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 Agency
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate Municipal Bonds
PCR Pollution Control Revenue
RIB Residual Interest 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--98.9%
<S> <S> <C> <S> <C>
AAA Aaa $ 1,960 Berkeley, California, Unified School District, UT, Series C, 6.50% due
8/01/2019 (b) $ 2,131
AAA Aaa 2,000 Beverly Hills, California, Public Financing Authority, Lease Revenue Bonds,
INFLOS, Series A, 7.52% due 6/01/2015 (d)(e) 1,846
AAA Aaa 2,000 Big Bear Lake, California, Water Revenue Refunding Bonds, 6% due 4/01/2022 (d) 2,144
California Health Facilities Financing Authority Revenue Bonds:
AAA Aaa 2,850 (Adventist Health System Hospital), Series B, 6.50% due 3/01/2011 (d) 3,063
AAA Aaa 4,500 (Centinela Medical Hospital), 6.25% due 9/01/2002 (d)(f) 4,991
AAA Aaa 1,415 (Kaiser Permanente), Series A, 7% due 10/01/2018 (b) 1,533
AAA Aaa 2,750 (Scripps Memorial Hospital), Series A, 6.375% due 10/01/2022 (d) 2,926
<PAGE>
California HFA, Home Mortgage Revenue Bonds, AMT:
AA- Aa 230 Series B, 8% due 8/01/2029 241
AA- Aa 4,220 Series F-1, 7% due 8/01/2026 4,483
AA- Aa 6,000 Series G, 7.05% due 8/01/2027 6,267
AA- Aa 1,950 California HFA, Revenue Bonds, RIB, AMT, 8.856% due 8/01/2023 (e) 2,063
California Pollution Control Financing Authority, PCR, AMT:
A1+ NR* 2,700 Refunding (Pacific Gas and Electric Co.), VRDN, Series C, 3.60% due
2/01/2016 (a) 2,700
A1 NR* 2,700 Refunding (Pacific Gas and Electric Co.), VRDN, Series G, 3.55% due
11/01/2026 (a) 2,700
AAA Aaa 1,500 (Southern California Edison Co.), Series B, 6.40% due 12/01/2024 (d) 1,591
NR* P1 2,500 California Pollution Control Financing Authority, Resource Recovery Revenue
Bonds (Delano Project), VRDN, AMT, Series 1991, 3.55% due 8/01/2019 (a) 2,500
A A2 3,000 California Pollution Control Financing Authority, Solid Waste Disposal Revenue
Bonds (Keller Canyon Landfill Company Project), AMT, 6.875% due 11/01/2027 3,197
NR* Baa 1,720 California Public Capital Improvements Financing Authority Revenue Bonds
(Joint Powers Agency--Pooled Projects), Series E, 8.25% due 3/01/1998 1,796
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)(h) 1,138
California State, GO (c):
AAA Aaa 6,000 5.375% due 6/01/2026 5,764
AAA Aaa 4,840 UT, 6.90% due 11/01/2004(f) 5,631
AAA Aaa 2,615 UT, 7% due 11/01/2004(f) 3,060
AAA Aaa 1,700 UT, 6.80% due 11/01/2009 1,902
AAA Aaa 160 UT, 6.90% due 11/01/2011 180
AAA Aaa 85 UT, 7% due 11/01/2014 97
</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:
AAA Aaa $ 3,810 (Department of Corrections--California State Prison), Series B, 5.375% due
12/01/2019 (d) $ 3,628
AAA Aaa 5,110 Refunding (Department of Corrections--California State Prisons), Series A,
5% due 12/01/2019 (b) 4,759
A A 1,785 (Various California State University Projects), Series A, 6.70% due
10/01/2002 (f) 2,016
A A 3,000 (Various Community College Projects), Series B, 7% due 3/01/2004 (f) 3,464
AAA Aaa 5,955 (Various University of California Projects), Series A, 6.40% due
12/01/2016 (b) 6,378
<PAGE>
California Statewide Community Development Authority Revenue Bonds, COP:
AAA Aaa 2,000 (Good Samaritan Health System), 6.50% due 5/01/2004 (f)(j) 2,248
AA Aa 1,750 (Saint Joseph Health System Group), 6.50% due 7/01/2015 1,858
AAA Aaa 3,000 Cerritos, California, Public Financing Authority, Revenue Refunding Bonds
(Los Coyotes Redevelopment Project Loan), Series A, 6.50% due 11/01/2023 (b) 3,429
AAA Aaa 7,000 Compton, California, Community Redevelpment Agency, Tax Allocation Refunding
Bonds (Compton Redevelopment Project), Series A, 6.50% due 8/01/2013 (i) 7,603
AAA Aaa 5,720 Contra Costa, California, Water District, Water Revenue Bonds, Series D, 6.375%
due 10/01/2022 (b) 6,098
AAA Aaa 5,000 Cucamonga County, California, Water District Facilities Refinancing Bonds, COP,
6.50% due 9/01/2022 (c) 5,410
AAA Aaa 7,000 East Bay, California, Municipal Utility District, Wastewater Treatment System
Revenue Bonds, 6.375% due 12/01/2001 (b)(f) 7,766
AAA Aaa 5,000 El Camino, California, Hospital District Revenue Refunding Bonds, Series A,
6.25% due 8/15/2017 (b) 5,209
AAA Aaa 3,500 Elk Grove, California, Unified School District Number 1, Community Facilities,
Special District Tax Bonds, 7% due 12/01/2003 (b)(f) 4,067
AAA Aaa 1,000 Fairfield-Suisun, California, Sewer District, Sewer Revenue Refunding Bonds,
Series A, 6.25% due 5/01/2016 (d) 1,048
AAA Aaa 1,250 Fresno, California, Sewer Revenue Bonds, Series A-1, 6.25% due 9/01/2014 (b) 1,372
BBB Baa 4,765 Inglewood, California, Public Financing Authority Revenue Bonds (Manchester-
Prairie-N. Inglewood Industrial Park Project), Series B, 7% due 5/01/2022 5,064
AAA Aaa 2,725 Los Angeles, California, Department of Water and Power, Electric Plant Revenue
Refunding Bonds, Second Issue, 5.25% due 11/15/2026 (c) 2,531
AAA Aaa 1,000 Los Angeles, California, Harbor Department Revenue Bonds, AMT, Series B,
6.625% due 8/01/2025 (d) 1,071
A A 1,400 Los Angeles, California, State Building Authority, Lease Revenue Refunding Bonds
(California State Department of General Services), Series A, 5.625% due 5/01/2011 1,438
AAA Aaa 1,000 Los Angeles County, California, COP (Correctional Facilities Project), 6.50% due
9/01/2000 (d)(f) 1,097
<PAGE>
Los Angeles County, California, Public Works Financing Authority, Lease Revenue
Bonds (Multiple Capital Facilities Project-IV) (d):
AAA Aaa 10,000 4.75% due 12/01/2013 8,991
AAA Aaa 1,730 Refunding, Series B, 5.25% due 9/01/2013 1,664
AAA Aaa 7,260 Los Angeles County, California, Transportation Commission, Sales Tax Revenue
Bonds, Series A, 6.75% due 7/01/2001 (c)(f) 8,117
</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>
AAA Aaa $ 6,475 M-S-R Public Power Agency, California, Revenue Bonds (San Juan Project),
Series E, 6.50% due 7/01/2017 (d) $ 6,988
AA Aa 4,750 Metropolitan Water District, Southern California, Waterworks Revenue Refunding
Bonds, Series A, 5.75% due 7/01/2021 4,902
AAA Aaa 3,000 Mount Diablo, California, Unified School District, Community Facilities-Special
District Number 1 Tax Bonds, 6.30% due 8/01/2022 (b) 3,181
AAA Aaa 3,000 Northern California Public Power Agency, Revenue Refunding Bonds (Hydroelectric
Project No. 1), Series A, 6.25% due 7/01/2012 (d) 3,168
AAA Aaa 1,900 Oakland, California, Redevelopment Agency, Refunding Bonds, INFLOS, 8.169% due
9/01/2019 (d)(e) 1,912
AAA Aaa 16,000 Orange County, California, Local Transportation Authority, Sales Tax Revenue
Bonds, Second Series, 6.10% due 2/14/2011 (c) 16,602
AAA Aaa 2,000 Orchard, California, School District, GO, UT, Series A, 6.50% due 8/01/2019 (c) 2,174
AAA Aaa 1,000 Palm Springs, California, Financing Authority, Lease Revenue Bonds (Convention
Center Project), Series A, 6.75% due 11/01/2021 (d) 1,100
AAA Aaa 16,955 Port Oakland, California, Port Revenue Bonds, AMT, Series E, 6.50% due
11/01/2016 (d) 18,164
AAA Aaa 2,000 Rancho, California, Water District Financing Authority Revenue Bonds, RITES,
9.024% due 9/01/2001 (b)(e)(f) 2,393
AAA Aaa 1,910 Rancho Cucamonga, California, Redevelopment Agency Tax Allocation Bonds (Rancho
Redevelopment Project), 7.125% due 9/01/2019 (d) 2,079
<PAGE>
NR* A 4,900 Rancho Mirage, California, Joint Powers Financing Authority, COP (Eisenhower
Memorial Hospital), 7% due 3/01/2022 5,292
AAA Aaa 8,000 Sacramento, California, City Financing Authority, Lease Revenue Refunding Bonds,
Series A, 5.40% due 11/01/2020 (b) 7,863
Sacramento, California, Municipal Utility District, Electric Revenue Bonds (d):
AAA Aaa 1,000 Refunding, Series G, 6.50% due 9/01/2013 1,122
AAA Aaa 8,500 Series B, 6.375% due 8/15/2022 9,043
AAA Aaa 12,500 San Diego, California, IDR (San Diego Gas and Electric Co.), Series A, 6.10%
due 9/01/2018 (d) 12,883
AAA Aaa 17,000 San Diego, California, Public Facilities Financing Authority, Sewer Revenue
Bonds, 5% due 5/15/2025 (c) 15,465
AAA Aaa 7,500 San Francisco, California, City and County International Airports Commission,
Revenue Refunding Bonds, Second Series, Issue 2, 6.75% due 5/01/2020 (d) 8,299
San Francisco, California, City and County Redevelopment Agency, Lease Revenue
Bonds (George R. Moscone Convention Center) (i):
AAA Aaa 1,200 6.80% due 7/01/2019 1,332
AAA Aaa 2,060 6.75% due 7/01/2024 2,292
AAA Aaa 2,000 San Francisco, California, City and County Sewer Revenue Refunding Bonds,
6% due 10/01/2011 (b) 2,083
AAA Aaa 4,000 San Mateo County, California, Transportation District, Sales Tax Revenue
Refunding Bonds, Series A, 8% due 6/01/2020 (d) 5,325
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) 7,702
</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>
Santa Clara, California, Electric Revenue Bonds, Series A (d):
AAA Aaa $ 6,000 6.25% due 7/01/2019 $ 6,275
AAA Aaa 1,350 6.50% due 7/01/2021 1,457
AAA Aaa 1,350 Santa Clara County, California, COP, Refunding Bonds (Capital Project I),
6.25% due 10/01/2016 (b) 1,409
<PAGE>
Santa Clara County, California, Financing Authority, Lease Revenue Bonds
(VMC Facility Replacement Project), Series A (b):
AAA Aaa 3,540 7.75% due 11/15/2011 4,426
AAA Aaa 2,700 6.75% due 11/15/2020 3,002
AAA Aaa 5,000 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Bonds
(Consolidated Redevelopment Project), Series A, 6.40% due 9/01/2022 (d) 5,344
AAA Aaa 2,185 Santa Rosa, California, High School District GO, UT, 6.375% due 5/01/2016 (d) 2,336
AAA Aaa 4,300 Santa Rosa, California, Wastewater Revenue Bonds (Sub-Regional Wastewater
Project), Series A, 6.50% due 9/01/2000 (b)(f) 4,717
AAA Aaa 1,500 Stockton, California, COP, Revenue Bonds (Wastewater Treatment Plant Expansion),
Series A, 6.80% due 9/01/2024 (c) 1,681
AAA Aaa 2,000 University of California Revenue Bonds (Multiple Purpose Projects), Series D,
6.375% due 9/01/2024 (d) 2,136
Total Investments (Cost--$318,128)--98.9% 334,417
Other Assets Less Liabilities--1.1% 3,786
--------
Net Assets--100.0% $338,203
========
<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 October 31, 1996.
(b)AMBAC Insured.
(c)FGIC Insured.
(d)MBIA Insured.
(e)The interest rate is subject to change periodically and inversely
based upon prevailing market rates. The interest rate shown is the
rate in effect at October 31, 1996.
(f)Prerefunded.
(g)GNMA Collateralized.
(h)FHLMC Insured.
(i)FSA Insured.
(j)CAPMAC Insured.
*Not Rated.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<PAGE>
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$318,127,844) (Note 1a) $334,416,748
Cash 82,099
Receivables:
Interest $ 6,205,513
Securities sold 3,722,645 9,928,158
------------
Deferred organization expenses (Note 1e) 4,571
Prepaid expenses and other assets 12,161
------------
Total assets 344,443,737
------------
Liabilities: Payables:
Securities purchased 5,687,015
Dividends to shareholders (Note 1f) 302,850
Investment adviser (Note 2) 142,612 6,132,477
------------
Accrued expenses and other liabilities 108,500
------------
Total liabilities 6,240,977
------------
Net Assets: Net assets $338,202,760
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 per share (4,000 shares
of AMPS* issued and outstanding at $25,000 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 1,840,343
Accumulated realized capital losses on investments--net (Note 5) (9,232,747)
Unrealized appreciation on investments--net 16,288,904
------------
Total--Equivalent to $14.59 net asset value per share of
Common Stock (market price--$13.75) 238,202,760
------------
Total capital $338,202,760
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 19,295,323
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,679,529
Commission fees (Note 4) 253,220
Professional fees 79,737
Accounting services (Note 2) 74,053
Transfer agent fees 61,244
Printing and shareholder reports 25,502
Listing fees 24,510
Directors' fees and expenses 22,841
Pricing fees 14,126
Custodian fees 13,111
Amortization of organization expenses (Note 1e) 6,943
Other 11,704
------------
Total expenses 2,266,520
------------
Investment income--net 17,028,803
------------
Realized & Realized gain on investments--net 709,173
Unrealized Change in unrealized appreciation on investments--net 1,986,386
Gain on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 19,724,362
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 17,028,803 $ 17,521,984
Realized gain (loss) on investments--net 709,173 (8,226,418)
Change in unrealized appreciation on investments--net 1,986,386 33,500,162
------------ ------------
Net increase in net assets resulting from operations 19,724,362 42,795,728
------------ ------------
<PAGE>
Dividends to Investment income--net:
Shareholders Common Stock (13,706,880) (13,688,151)
(Note 1f): Preferred Stock (3,417,420) (3,759,400)
------------ ------------
Net decrease in net assets resulting from dividends to
shareholders (17,124,300) (17,447,551)
------------ ------------
Net Assets: Total increase in net assets 2,600,062 25,348,177
Beginning of year 335,602,698 310,254,521
------------ ------------
End of year* $338,202,760 $335,602,698
============ ============
<FN>
*Undistributed investment income--net $ 1,840,343 $ 1,935,840
============ ============
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, Oct. 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 14.43 $ 12.88 $ 15.68 $ 13.25 $ 14.18
Operating -------- -------- -------- -------- --------
Performance: Investment income--net 1.04 1.09 1.10 1.10 .28
Realized and unrealized gain (loss) on
investments--net .17 1.53 (2.81) 2.45 (.87)
-------- -------- -------- -------- --------
Total from investment operations 1.21 2.62 (1.71) 3.55 (.59)
-------- -------- -------- -------- --------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net (.84) (.84) (.89) (.93) (.18)
Realized gain on investments--net -- -- (.02) (.02) --
-------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders (.84) (.84) (.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 (.21) (.23) (.18) (.17) (.02)
Realized gain on investments--net -- -- (.00)+++++ (.00)+++++ --
Capital charge resulting from
issuance of Preferred Stock -- -- -- -- (.12)
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.21) (.23) (.18) (.17) (.14)
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.59 $ 14.43 $ 12.88 $ 15.68 $ 13.25
======== ======== ======== ======== ========
Market price per share, end of period $ 13.75 $ 12.625 $ 11.25 $ 15.00 $ 14.875
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on market price per share 15.84% 20.01% (19.71%) 7.48% .44%+++
Return:** ======== ======== ======== ======== ========
Based on net asset value per share 7.54% 19.81% (12.06%) 26.13% (5.36%)+++
======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .67% .70% .68% .63% .13%*
Net Assets:*** ======== ======== ======== ======== ========
Expenses .67% .70% .68% .64% .63%*
======== ======== ======== ======== ========
Investment income--net 5.06% 5.45% 5.34% 5.27% 5.33%*
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end
Data: of period (in thousands) $238,203 $235,603 $210,255 $256,105 $211,776
======== ======== ======== ======== ========
Preferred Stock outstanding, end of
period (in thousands) $100,000 $100,000 $100,000 $100,000 $100,000
======== ======== ======== ======== ========
Portfolio turnover 79.39% 83.26% 38.06% 15.17% 32.97%
======== ======== ======== ======== ========
Leverage: Asset coverage per $1,000 $ 3,382 $ 3,356 $ 3,103 $ 3,561 $ 3,118
======== ======== ======== ======== ========
Dividends Per Share Series A--Investment income--net $ 882 $ 912 $ 684 $ 644 $ 94
On Preferred Stock ======== ======== ======== ======== ========
Outstanding:++++++ Series B--Investment income--net $ 826 $ 967 $ 788 $ 740 $ 101
======== ======== ======== ======== ========
<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.
++++++Dividends per share have been adjusted to reflect a two-for-
one stock split that occurred on December 1, 1994.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
<PAGE>
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 and options thereon, 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 and assets for
which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the
Board of Directors of the Fund, including valuations furnished by a
pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its
valuations are reviewed by the officers of the Fund under the
general supervision of the Board of Directors.
(b) Derivative financial instruments -- The Fund may engage in
various portfolio strategies to seek to increase its return by
hedging its portfolio against adverse movements in the debt markets.
Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
<PAGE>
* 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.
* Options -- The Fund is authorized to write covered call options
and purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income -- Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). 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.
<PAGE>
(e) Deferred organization expenses -- Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
NOTES TO FINANCIAL STATEMENTS (concluded)
(f) Dividends and distributions -- Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 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, 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, 1996 were $253,846,273 and
$253,842,216, respectively.
Net realized and unrealized gains (losses) as of October 31, 1996
were as follows:
Realized
Gains Unrealized
(Losses) Gains
Long-term investments $ 379,927 $16,288,904
Short-term investments (14,145) --
Financial futures contracts 343,391 --
---------- -----------
Total $ 709,173 $16,288,904
========== ===========
<PAGE>
As of October 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $15,157,658, of which $16,059,841
related to appreciated securities and $902,183 related to
depreciated securities. The aggregate cost as of October 31, 1996
for Federal income tax purposes was $319,259,090.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of holders of Common Stock.
Common Stock
For the year October 31, 1996, shares issued and outstanding
remained constant at 16,328,873. At October 31, 1996, 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, 1996 were as
follows: Series A, 3.20% and Series B, 2.75%.
As of October 31, 1996, there were 4,000 AMPS shares authorized,
issued and outstanding 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 Octo-
ber 31, 1996, MLPF&S, an affiliate of FAM, earned $153,121 as
commissions.
5. Capital Loss Carryforward:
At October 31, 1996, the Fund had a net capital loss carryforward of
approximately $4,405,000, of which $18,000 expires in 2002 and
$4,387,000 expires in 2003. This amount will be available to offset
like amounts of any future taxable gains.
6. Subsequent Event:
On November 8, 1996, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.072511 per share, payable on November 27, 1996 to shareholders
of record as of November 18, 1996.
<PAGE>
<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, 1996, 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 four-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, 1996 by correspondence with the custodian and broker. 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, 1996, 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
November 29, 1996
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
<PAGE>
All of the net investment income distributions paid by MuniYield
California Insured Fund, Inc. during its taxable year ended October
31, 1996 qualify as tax-exempt interest dividends for Federal income
tax purposes. Additionally, there were no capital gains distributed
by the Fund during the year.
Please retain this information for your records.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Walter C. O'Connor, Vice President
Roberto Roffo, 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
<PAGE>
