UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-8573
MuniHoldings California Insured Fund, Inc.
Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, MuniHoldings
California Insured Fund, Inc., 800 Scudders Mill Road, Plainsboro, NJ
08536. Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 6/30/03
Date of reporting period: 07/01/02 - 12/31/02
Item 1 - Is shareholder report attached? - Y
[LOGO] Merrill Lynch Investment Managers
Semi-Annual Report
December 31, 2002
MuniHoldings
California
Insured
Fund, Inc.
www.mlim.ml.com
MuniHoldings California Insured Fund, Inc.
The Benefits and
Risks of
Leveraging
MuniHoldings California Insured Fund, Inc. utilizes leverage to seek to enhance
the yield and net asset value of its Common Stock. However, these objectives
cannot be achieved in all interest rate environments. To leverage, the Fund
issues Preferred Stock, which pays dividends at prevailing short-term interest
rates, and invests the proceeds in long-term municipal bonds. The interest
earned on these investments is paid to Common Stock shareholders in the form of
dividends, and the value of these portfolio holdings is reflected in the per
share net asset value of the Fund's Common Stock. However, in order to benefit
Common Stock shareholders, the yield curve must be positively sloped; that is,
short-term interest rates must be lower than long-term interest rates. At the
same time, a period of generally declining interest rates will benefit Common
Stock shareholders. If either of these conditions change, then the risks of
leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock capitalization of
$100 million and the issuance of Preferred Stock for an additional $50 million,
creating a total value of $150 million available for investment in long-term
municipal bonds. If prevailing short-term interest rates are approximately 3%
and long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million of Preferred
Stock based on the lower short-term interest rates. At the same time, the fund's
total portfolio of $150 million earns the income based on long-term interest
rates. Of course, increases in short-term interest rates would reduce (and even
eliminate) the dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock shareholders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value of the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's net asset
value will reflect the full decline in the price of the portfolio's investments,
since the value of the fund's Preferred Stock does not fluctuate. In addition to
the decline in net asset value, the market value of the fund's Common Stock may
also decline.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in these securities.
Swap
Agreements
The Fund may also invest in swap agreements, which are over-the-counter
contracts in which one party agrees to make periodic payments based on the
change in market value of a specified bond, basket of bonds, or index in return
for periodic payments based on a fixed or variable interest rate or the change
in market value of a different bond, basket of bonds or index. Swap agreements
may be used to obtain exposure to a bond or market without owning or taking
physical custody of securities.
MuniHoldings California Insured Fund, Inc., December 31, 2002
DEAR SHAREHOLDER
For the six months ended December 31, 2002, the Common Stock of MuniHoldings
California Insured Fund, Inc. earned $.450 per share income dividends, which
included earned and unpaid dividends of $.075. This represents a net annualized
yield of 5.80%, based on a period-end net asset value of $15.40 per share. Over
the same period, the Fund's Common Stock had a total investment return of
+7.22%, based on a change in per share net asset value from $14.82 to $15.40,
and assuming reinvestment of $.450 per share income dividends.
For the six-month period ended December 31, 2002, the Fund's Preferred Stock had
an average yield as follows: Series A, 1.18%; Series B, 1.27%; Series C, 1.10%;
Series D, 1.20%; and Series E, 1.21%.
The Municipal Market Environment
During the six-month period ended December 31, 2002, long-term fixed income
interest rates continued to move lower. As they had earlier in 2002, declining
U.S. equity markets and worldwide political tensions easily overshadowed the
incipient U.S. economic recovery allowing bond yields to fall to recent historic
low levels. In late July, second quarter 2002 gross domestic product activity
was reported at 1.1%, a significant decline from the first quarter rate of 5%.
This rate suggested that continued declines in U.S. equity prices were
negatively affecting not only consumer and business confidence but undermining
much of the economic growth seen earlier this year. Some analysts extrapolated
that recent weakness would continue, if not accelerate. This brought about
forecasts that the Federal Reserve Board would soon be obliged to lower
short-term interest rates both to offset equity market declines and boost
consumer and business spending. The possibility of lower short-term interest
rates helped push longer-term bond yields lower still during July and August.
The dramatic decline in U.S. equity prices in late August and September
triggered a significant fixed income rally as investors sought the safe-haven
status of U.S. Treasury securities. By the end of September, U.S. Treasury bond
yields had fallen to 4.66%.
Bolstered by an unexpected decline in the national unemployment rate to 5.6% in
early October, U.S. equity markets staged a strong rally throughout much of the
month. The Standard & Poor's 500 (S&P 500) Index rose over 8% for the month,
triggered by stronger-than-expected earnings reports from a large number of
companies, such as General Electric Company, International Business Machines
Corporation and Microsoft Corporation. As they have throughout most of the
period, bond prices traded in an inverse relationship to equity prices.
Consequently, as stocks rallied, bond yields rose in October, despite generally
weak economic releases. During October, the U.S. housing sector remained quite
robust, but retail sales and industrial production slowed. Fixed income bond
yields remained under pressure in November as U.S. equity markets continued to
strengthen. During November, the S&P 500 Index rose an additional 5.5%. Equity
prices were supported by signs of further U.S. economic recovery, especially
improving labor market activity. By the end of November, third quarter U.S.
gross domestic product (GDP) growth was revised to 4%. Financial conditions were
also strengthened by a larger-than-expected reduction in short-term interest
rates by the Federal Reserve Board in early November. The Federal Funds target
rate was lowered 50 basis points (.50%) to 1.25%, its lowest level since the
1960s. Recent action by the Federal Reserve Board was largely viewed as being
taken to bolster the sputtering U.S. economic recovery. Rebounding U.S. equity
markets and the prospects for a more substantial U.S. economic recovery pushed
long-term U.S. Treasury yield levels to 5.10% by late November.
In December, softer equity prices and renewed investor concerns about potential
U.S. military action against Iraq again combined to push long-term interest
rates lower. The S&P 500 Index declined more than 5% in December on
disappointing earnings reports and anticipated weak holiday sales. During
December 2002, as both national and international investors sought the
safe-haven sanctuary of U.S. Treasury issues, long-term U.S. Treasury yields
declined over 25 basis points to end the period at 4.75%. During the last six
months, long-term U.S. Treasury bond yields declined 75 basis points.
For the six-month period ended December 31, 2002, tax-exempt bond prices also
generally rose. In recent months, municipal bond yields have declined in
response to the positive fixed income environment engendered by falling equity
valuations. Price advances in tax-exempt issues have not been able to keep pace
with the U.S. Treasury bond price improvement as municipal bonds cannot offer
foreign investors the safe-haven status U.S. Treasury obligations enjoy in
periods of economic and political instability. Additionally, tax-exempt bond
issuance increased dramatically in the last half of 2002 removing some of the
positive technical support the municipal bond market enjoyed earlier this year.
By the end of 2002, long-term municipal bond yields, as measured by the Bond
Buyer Revenue Bond Index, stood at 5.16%, a decline of 25 basis points during
the last six months.
Investor demand for tax-exempt products remained positive throughout the period.
In addition to the approximately $75 billion investors received from June to
August 2002 from bond maturities, coupon income and proceeds from early
redemptions, investors are expected to receive approximately $30 billion from
these sources in January 2003. The Investment Company Institute reported that in
2002 municipal bond funds net cash flows continued to be very positive at nearly
$16 billion, an increase of more than 25% compared to 2001. However, these
positive demand factors have not been able to offset the increase in tax-exempt
new-issue supply that has resulted in the underperformance seen in recent
months. This price underperformance served to make municipal bonds a
particularly attractive purchase relative to their taxable counterparts.
Throughout most of the yield curve, municipal bonds have been available for
purchase at yields near or exceeding those of comparable U.S. Treasury issues.
Compared to their recent historical averages of 82% - 88% of U.S. Treasury
yields, municipal bond yields ratios at their current 95% -105% range are likely
to prove attractive to long-term investors.
Continued uncertainty regarding the pace of the current U.S. economic recovery
as well as the resolution of the U.N./Iraq confrontation are likely to keep
interest rates near their present levels for the immediate future. Equity market
declines over the past three years have helped push interest rates lower than
economic fundamentals alone would support. When U.S. business conditions improve
and equity markets stabilize, however, any associated interest rate increases
should not be extreme. Inflationary pressures are negligible and any move by the
Federal Reserve Board to raise short-term interest rates is unlikely before late
2003. As equity valuations are likely to only gradually recover, U.S. economic
recovery is also likely to be a moderate process. This suggests that the pace of
any interest rate increases will be gradual. As the municipal bond market's
strong technical position can be expected to remain supportive in the coming
months, future tax-exempt interest rate increases should be more restrained than
their taxable counterparts.
Specific to California, the California budget has been deteriorating because of
a stalled state economy. The budget shortfall, estimated to be nearing $34
billion, was comprised of $10 billion from the remaining fiscal year end and $24
billion for the fiscal year-end 2004. The Governor's office attributes the
deficit to a slowing national economy and a declining stock market that resulted
in lower capital gains tax revenue. The $34 billion shortfall is for the fiscal
year beginning on July 1, 2003 through the end of 2004. Governor Gray Davis
proposed a budget package including $21 billion in spending cuts and $8 billion
in higher taxes on income, retail sales and cigarettes. Standard and Poor's
lowered its credit rating on the state's general obligation debt to A from A+.
Fitch lowered its rating to A from AA, while Moody's Investors Service
maintained its rating of A1. These lowered ratings, and the perception of
increased borrowing needs in the future, caused a widening of yield spreads.
California uninsured paper had traded as tight as 5 basis points-10 basis points
to comparably structured insured bonds last year. Currently, California general
obligations trade at a 50 basis point spread to AAA-rated bonds. On a positive
note, California is still the world's fifth largest economy in terms of domestic
gross product and possesses the economic basis to address these financial
problems. In our opinion, the state's challenge is to overcome the political
obstacles to achieving financial discipline.
Portfolio Strategy
For the six-month period ended December 31, 2002, we maintained
2 & 3
MuniHoldings California Insured Fund, Inc., December 31, 2002
a fully invested position, with cash equivalent reserves averaging less than 5%
of total assets. We minimized cash reserves because of the extremely tight
technical position of the California short-term marketplace, where yields on
cash equivalents were consistently below 1.50% throughout most of the period and
are currently below 1%. Our strategy during the past six months was aimed at
creating a more defensive market structure within a portfolio that is 40%
leveraged. We raised the Fund's overall average coupon levels and shortened
maturities through purchases in both the primary and secondary California
markets. We have become more aggressive in hedging positions, utilizing
financial futures in an effort to further seek to protect the Fund's net asset
value. The Fund's hedge was increased to a 15% position as 10-year Treasury
interest rates reached 4%.
The Fund's net asset value has recently surpassed the original issue level of
$15. Our strategy focused on protecting this price level since historically we
have witnessed a reluctance of municipal prices to move higher once the market
has achieved these levels. Retail investors repeatedly have pulled back from the
California insured municipal marketplace once absolute yields decline through
5%. As of December 2002, the market revisited these levels, and we sought to
reduce net asset volatility in the Fund from this point forward. Steps taken to
date include raising the average level of couponing of the Fund's holdings and
concentrating assets in those parts of the yield curve that we believe offer the
best value for interest rate risk taken. We have purposely underutilized the
portion of the Fund's assets that can be committed to non-insured paper. The use
of leverage allowed the Fund to generate an above-average yield. Consequently,
it has not been necessary to reach for additional yield by compromising credit
quality. At December 31, 2002, 89.5% of the Fund's long-term assets were rated
AAA by at least one of the major bond rating agencies.
The Fund employs leverage to seek to provide a generous current return of
tax-exempt income to shareholders. The additional 50 basis point decline in
short-term interest rates engineered by the Federal Reserve Board at its
November 2002 meeting resulted in a decrease in the Fund's borrowing cost. This
decline, in combination with a steep tax-exempt yield curve, generated a
material income benefit to the Fund's Common Stock shareholder from the
leveraging of the Preferred Stock. However, at this point, no further declines
in short-term interest rates are expected in the coming months, and we
anticipate that the Fund will continue to benefit from these low borrowing
costs. However, should the spread between short-term and long-term interest
rates narrow, the benefits of leverage will decline and, as a result, reduce the
yield on the Fund's Common Stock. (For a more complete explanation of the
benefits and risks of leveraging, see page 1 of this report to shareholders.)
In Conclusion
We appreciate your investment in MuniHoldings California Insured Fund, Inc., and
we look forward to assisting you with your financial needs in the months and
years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Kenneth A. Jacob
Kenneth A. Jacob
Senior Vice President
/s/ John M. Loffredo
John M. Loffredo
Senior Vice President
/s/ Walter C. O'Connor
Walter C. O'Connor
Vice President and Portfolio Manager
January 31, 2003
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
California--150.7% AAA Aaa $ 1,000 ABAG Finance Authority for Nonprofit Corporations, California, COP
(Children's Hospital Medical Center), 6% due 12/01/2029 (a) $ 1,152
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,345 ABC California Unified School District, GO, Series A, 5.625%
due 8/01/2020 (f) 3,740
-----------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 Acalanes, California, Unified High School District, GO, 5.80%
due 8/01/2007 (f)(i) 4,698
-----------------------------------------------------------------------------------------------------------
NR* Aaa 9,300 Alameda County, California, COP, RIB, Series 410, 10.20%
due 9/01/2021 (b)(g) 12,541
-----------------------------------------------------------------------------------------------------------
AAA Aaa 4,535 Bakersfield, California, COP, Refunding (Convention Center Expansion
Project), 5.875% due 4/01/2022 (g) 5,072
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,885 Berkeley, California, GO, Series C, 5.375% due 9/01/2029 (c) 4,095
-----------------------------------------------------------------------------------------------------------
Berkeley, California, Unified School District, GO, Series I (f):
AAA Aaa 1,000 5.75% due 8/01/2019 1,121
AAA Aaa 1,000 5.75% due 8/01/2020 1,118
AAA Aaa 4,520 5.875% due 8/01/2024 4,882
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,925 Cajon Valley, California, Union School District, GO, Series B, 5.50%
due 8/01/2027 (g) 3,162
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,180 California Community College Financing Authority, Lease Revenue Bonds
(Grossmont-Palomar-Shasta), Series A, 5.625% due 4/01/2026 (g) 2,380
-----------------------------------------------------------------------------------------------------------
California Educational Facilities Authority, Revenue Refunding Bonds
(Occidental College) (g):
AAA Aaa 5,815 5.625% due 10/01/2017 6,590
AAA Aaa 5,000 5.70% due 10/01/2027 5,420
-----------------------------------------------------------------------------------------------------------
California HFA, Home Mortgage Revenue Bonds:
AA- Aa2 5,000 Series D, 5.85% due 8/01/2017 (j) 5,356
A1+ VMIG1+ 7,300 VRDN, AMT, Series B, 1.50% due 8/01/2033 (f)(h) 7,300
A1+ VMIG1+ 1,700 VRDN, AMT, Series R, 1.40% due 8/01/2023 (a)(h) 1,700
A1 VMIG1+ 6,800 VRDN, Series F, 1.50% due 2/01/2033 (f)(h) 6,800
-----------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 700 California HFA, M/F Housing Revenue Bonds, VRDN, Series D, 1.45%
due 2/01/2031 (h) 700
-----------------------------------------------------------------------------------------------------------
Portfolio
Abbreviations
To simplify the listings of MuniHoldings 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
DRIVERS Derivative Inverse Tax-Exempt Receipts
GO General Obligation Bonds
HFA Housing Finance Agency
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
4 & 5
MuniHoldings California Insured Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
California NR* Aaa $ 2,148 California HFA, Revenue Bonds, RIB, AMT, Series 412, 10.364%
(continued) due 8/01/2029 (a)(b) $ 2,349
----------------------------------------------------------------------------------------------------------------
California HFA, S/F Mortgage Revenue Bonds, AMT, Class II (g):
AAA Aaa 2,270 Series A-1, 6% due 8/01/2020 2,400
AAA Aaa 4,140 Series C-2, 5.625% due 8/01/2020 (d) 4,341
----------------------------------------------------------------------------------------------------------------
AAA Aaa 9,250 California Health Facilities Finance Authority Revenue Bonds (Kaiser
Permanente), Series A, 5.50% due 6/01/2022 (f) 9,786
----------------------------------------------------------------------------------------------------------------
California Health Facilities Finance Authority, Revenue Refunding Bonds:
AAA Aaa 2,500 (Catholic Healthcare West), Series A, 6% due 7/01/2025 (g) 2,726
AAA Aaa 4,500 (Children's Hospital), 5.375% due 7/01/2020 (g) 4,717
AAA Aaa 3,950 (De Las Companas), Series A, 5.75% due 7/01/2015 (a) 4,364
----------------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority, PCR, Refunding, VRDN (h):
A1+ P1 500 (Exxon Project), 1.20% due 12/01/2012 500
A1+ NR* 2,100 (Pacific Gas and Electric), AMT, Series B, 1.65% due 11/01/2026 2,100
A1+ NR* 5,750 (Pacific Gas and Electric), Series C, 1.65% due 11/01/2026 5,750
----------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 800 California Pollution Control Financing Authority, Solid Waste
Disposal Revenue Bonds (Shell Oil Company--Martinez Project), VRDN,
AMT, Series A, 1.40% due 10/01/2024 (h) 800
----------------------------------------------------------------------------------------------------------------
BBB Baa3 28,355 California Pollution Control Financing Authority, Solid Waste
Disposal Revenue Refunding Bonds (Republic Services Inc. Project),
AMT, Series C, 5.25% due 6/01/2023 28,943
----------------------------------------------------------------------------------------------------------------
California State Department of Veteran Affairs, Home Purpose Revenue
Refunding Bonds:
AAA Aaa 4,095 Series A, 5.35% due 12/01/2027 (a) 4,285
AA- Aa2 5,000 Series C, 6.15% due 12/01/2027 5,212
----------------------------------------------------------------------------------------------------------------
BBB+ A3 6,000 California State Department of Water Resources, Power Supply
Revenue Bonds, Series A, 5.75% due 5/01/2017 6,601
----------------------------------------------------------------------------------------------------------------
AA Aa3 6,400 California State Department of Water Resources Revenue Bonds
(Central Valley Project), 5.25% due 7/01/2022 6,412
----------------------------------------------------------------------------------------------------------------
AAA Aaa 11,000 California State Department of Water Resources, Water Revenue
Refunding Bonds, Series W, 5.25% due 12/01/2022 (f) 11,584
----------------------------------------------------------------------------------------------------------------
AAA Aaa 4,890 California State Department of Water Resources, Water System
Revenue Refunding Bonds (Central Valley Project), Series Q, 5.375%
due 12/01/2027 (g) 5,099
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 California State, GO, 5.50% due 6/01/2025 (c) 2,107
----------------------------------------------------------------------------------------------------------------
California State, GO, Refunding:
A A1 3,175 5.75% due 12/01/2029 3,358
AAA Aaa 4,130 Veterans, AMT, Series B, 5.45% due 12/01/2017 (g) 4,270
AAA Aaa 10,000 Veterans, AMT, Series BZ, 5.35% due 12/01/2021 (g) 10,217
----------------------------------------------------------------------------------------------------------------
AAA Aaa 20,000 California State Public Works Board, Lease Revenue Bonds (Various
University of California Projects), Series C, 5.125% due 9/01/2022 (a) 20,538
----------------------------------------------------------------------------------------------------------------
California State Public Works Board, Lease Revenue Refunding Bonds:
AAA Aaa 5,025 (California State University), Series A, 5.50% due 10/01/2014 (g) 5,674
AAA Aaa 8,750 (Department of Corrections), Series B, 5.625% due 11/01/2019 (g) 9,777
AAA Aaa 2,625 (Various Community College Projects), Series B, 5.625% due 3/01/2019 (a) 2,891
----------------------------------------------------------------------------------------------------------------
AAA NR* 9,500 California Statewide Communities Development Authority, COP,
Refunding (Huntington Memorial Hospital), 5.80% due 7/01/2026 (e) 10,412
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 California Statewide Communities Development Authority, COP (Sutter
Health Obligation Group), 6% due 8/15/2025 (g) 5,559
----------------------------------------------------------------------------------------------------------------
AAA NR* 1,090 California Statewide Communities Development Authority Revenue Bonds
(Los Angeles Orthopedic Hospital Foundation), 5.50% due 6/01/2019 (a) 1,194
----------------------------------------------------------------------------------------------------------------
NR* NR* 100 California Statewide Communities Development Authority, Solid
Waste Facilities Revenue Bonds (Chevron U.S.A. Inc. Project), VRDN,
AMT, 1.40% due 12/15/2024 (h) 100
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,640 Campbell, California, Unified High School District, GO, 5.70%
due 8/01/2025 (f) 1,801
----------------------------------------------------------------------------------------------------------------
Capistrano, California, Unified Public Financing Authority,
Special Tax Revenue Refunding Bonds, First Lien, Series A (a):
AAA Aaa 16,770 5.70% due 9/01/2016 19,091
AAA Aaa 10,640 5.70% due 9/01/2020 11,874
----------------------------------------------------------------------------------------------------------------
AAA Aaa 8,705 Castaic Lake, California, Water Agency Revenue Bonds, COP (Water
System Improvement Project), 5.50% due 8/01/2023 (a) 9,395
----------------------------------------------------------------------------------------------------------------
AAA Aaa 6,810 Chaffey, California, Unified High School District, GO, Series B,
5.375% due 8/01/2022 (c) 7,230
----------------------------------------------------------------------------------------------------------------
AAA Aaa 6,995 Chino, California, Unified School District, COP, Refunding,
6.125% due 9/01/2026 (f) 7,834
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Colton, California, Joint Unified School District, GO, Series A,
5.375% due 8/01/2026 (c) 2,661
----------------------------------------------------------------------------------------------------------------
Contra Costa, California, Water District, Water Revenue Bonds,
Series G (g):
AAA Aaa 4,600 5.75% due 10/01/2004 (i) 5,054
AAA Aaa 5,000 5% due 10/01/2024 5,051
----------------------------------------------------------------------------------------------------------------
Contra Costa County, California, COP, Refunding:
AAA Aaa 4,570 (Capital Projects Program), 5.25% due 2/01/2021 (a) 4,763
AAA Aaa 6,000 DRIVERS, Series 154, 8.918% due 11/01/2017 (b)(g) 7,280
AAA Aaa 2,000 (Merrithew Memorial Hospital Project), 5.50% due 11/01/2022 (g) 2,158
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,395 Covina-Valley, California, Unified School District, GO, Refunding,
Series A, 5.50% due 8/01/2026 (f) 2,576
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Cucamonga, California, County Water District COP, 5.25%
due 9/01/2025 (c) 2,089
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,750 Culver City, California, Redevelopment Finance Authority, Revenue
Refunding Bonds, Tax Allocation, Series A, 5.60% due 11/01/2025 (f) 4,075
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,870 Davis, California, Joint Unified School District, Community
Facilities District, Special Tax Refunding Bonds, Number 1, 5.50%
due 8/15/2021 (g) 1,999
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,655 East Side Union High School District, California, Santa Clara
County, GO, Series E, 5% due 9/01/2023 (c) 5,737
----------------------------------------------------------------------------------------------------------------
AAA Aaa 7,000 El Dorado County, California, Public Agency Financing Authority,
Revenue Refunding Bonds, 5.50% due 2/15/2021 (c) 7,462
----------------------------------------------------------------------------------------------------------------
Escondido, California, COP, Refunding:
AAA Aaa 1,000 Series A, 5.75% due 9/01/2024 (c) 1,116
AAA Aaa 5,000 (Wastewater Project), 5.70% due 9/01/2026 (a) 5,404
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Fontana, California, Redevelopment Agency, Tax Allocation Refunding
Bonds (Southwest Industrial Park Project), 5% due 9/01/2022 (g) 5,116
----------------------------------------------------------------------------------------------------------------
AAA Aaa 4,455 Fresno, California, Airport Revenue Bonds, AMT, Series B, 5.50%
due 7/01/2020 (f) 4,725
----------------------------------------------------------------------------------------------------------------
6 & 7
MuniHoldings California Insured Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
===================================================================================================================================
California AAA Aaa $ 4,040 Garden Grove, California, COP (Financing Project), Series A, 5.50%
(continued) due 3/01/2026 (a) $ 4,333
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,200 Glendale, California, Unified School District, GO, Series B, 5.125%
due 9/01/2023 (f) 5,343
----------------------------------------------------------------------------------------------------------------
Hacienda La Puente, California, Unified School District, GO,
Series A (g):
AAA Aaa 1,700 5.50% due 8/01/2020 1,880
AAA Aaa 1,500 5.25% due 8/01/2025 1,563
----------------------------------------------------------------------------------------------------------------
AAA NR* 4,565 Hemet, California, Unified School District, GO, Series A, 5.375%
due 8/01/2026 (g) 4,818
----------------------------------------------------------------------------------------------------------------
AAA Aaa 9,205 Industry, California, Urban Development Agency Tax Allocation
Refunding Bonds (Civic Recreation Industrial), Series 1, 5.50%
due 5/01/2020 (g) 10,118
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,700 Inglewood, California, Unified School District, GO, Series A, 5.60%
due 10/01/2024 (c) 1,861
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,300 Irvine, California, Unified School District, Special Tax (Community
Facilities District Number 86-1), 5.375% due 11/01/2020 (a) 2,502
----------------------------------------------------------------------------------------------------------------
AAA Aaa 4,665 Irvine, California, Unified School District, Special Tax Refunding
Bonds (Community Facilities District Number 86-1), 5.80%
due 11/01/2020 (a) 5,312
----------------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 La Quinta, California, Redevelopment Agency, Housing Tax Allocation
Bonds (Redevelopment Project Areas Number 1 & 2), 6% due 9/01/2025 (g) 8,350
----------------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 Long Beach, California, Bond Finance Authority, Lease Revenue Bonds
(Rainbow Harbor Refinancing Project), Series A, 5.25%
due 5/01/2024 (a) 4,162
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,740 Long Beach, California, Harbor Revenue Bonds, AMT, 5.375% due
5/15/2020 (g) 3,852
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,590 Long Beach, California, Water Revenue Refunding Bonds, Series A, 5%
due 5/01/2024 (g) 3,668
----------------------------------------------------------------------------------------------------------------
AAA Aaa 10,650 Los Altos, California, School District GO, Series A, 5%
due 8/01/2023 (f) 10,802
----------------------------------------------------------------------------------------------------------------
AAA Aaa 12,265 Los Angeles, California, Community College District, GO, Series A,
5.50% due 8/01/2020 (g) 13,348
----------------------------------------------------------------------------------------------------------------
AAA Aaa 11,000 Los Angeles, California, Convention and Exhibition Center Authority,
Lease Revenue Refunding Bonds, DRIVERS, Series 162, 5.375%
due 8/15/2018 (b)(g) 11,868
----------------------------------------------------------------------------------------------------------------
AAA Aaa 10,730 Los Angeles, California, Department of Water and Power, Electric
Plant Revenue Bonds, 5.5% due 6/15/2004 (f)(i) 11,509
----------------------------------------------------------------------------------------------------------------
Los Angeles, California, Department of Water and Power, Electric
Plant Revenue Refunding Bonds:
AA- Aa3 490 5.875% due 2/15/2020 510
NR* Aa3 1,030 RIB, Series 370, 10.20% due 2/15/2024 (b) 1,232
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,930 Los Angeles, California, M/F Housing Revenue Refunding Bonds,
Senior Series G, 5.65% due 1/01/2014 (f) 4,057
----------------------------------------------------------------------------------------------------------------
Los Angeles, California, Unified School District, GO (c):
AAA Aaa 5,415 Series B, 5% due 7/01/2023 5,534
AAA Aaa 1,710 Series D, 5.375% due 7/01/2025 1,807
----------------------------------------------------------------------------------------------------------------
AAA Aaa 7,370 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Bonds, Proposition C, Second Senior
Series B, 5.25% due 7/01/2023 (a) 7,543
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,750 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding Bonds, Proposition C, Second
Senior Series A, 5.25% due 7/01/2030 (c) 2,851
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Menlo Park, California, Community Development Agency, Tax Allocation
(Las Pulgas Community Development Project), 5.50% due 6/01/2025 (a) 5,344
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,500 Mojave, California, Water Agency, GO, Refunding (Improvement
District--Morongo Basin), 5.80% due 9/01/2022 (c) 3,877
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Montebello, California, Community Redevelopment Agency, Housing
Tax Allocation Bonds, Series A, 5.45% due 9/01/2019 (f) 2,146
----------------------------------------------------------------------------------------------------------------
Morgan Hill, California, Unified School District, GO (c):
AAA NR* 2,315 5.75% due 8/01/2019 2,609
AAA Aaa 2,840 5.25% due 8/01/2020 3,045
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,730 Mount San Antonio, California, Community College District, GO,
Series A, 5.375% due 5/01/2022 (c) 3,997
----------------------------------------------------------------------------------------------------------------
AAA Aaa 16,000 Norco, California, Redevelopment Agency, Tax Allocation Bonds,
Refunding (Norco Redevelopment Project--Area Number 1), 5.75%
due 3/01/2026 (g) 17,391
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,140 North City West, California, School Facilities Financing Authority,
Special Tax Refunding Bonds, Series B, 6% due 9/01/2019 (f) 2,443
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Northern California Power Agency, Public Power Revenue Refunding
Bonds (Hydroelectric Project Number One), Series A, 5.125%
due 7/01/2023 (g) 3,091
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,745 Northridge, California, Water District Revenue Refunding Bonds, COP
(1993 Project and 2001 Project), 5.25% due 2/01/2021 (a) 2,907
----------------------------------------------------------------------------------------------------------------
AAA Aaa 9,995 Oakland, California, Alameda County Unified School District, GO,
Refunding, Series C, 5.50% due 8/01/2019 (c) 10,787
----------------------------------------------------------------------------------------------------------------
Oakland, California, Alameda County Unified School District, GO,
Series F (g):
AAA Aaa 5,245 5.625% due 8/01/2021 5,673
AAA Aaa 6,000 5.50% due 8/01/2024 6,402
----------------------------------------------------------------------------------------------------------------
Oakland, California, GO:
AAA Aaa 2,500 Measure 1, 5.85% due 12/15/2022 (c) 2,790
AAA Aaa 1,300 Measure K, Series C, 5.80% due 12/15/2018 (g) 1,483
----------------------------------------------------------------------------------------------------------------
AAA Aaa 7,105 Oakland, California, Joint Powers Financing Authority, Lease
Revenue Bonds (Oakland Administration Buildings), 5.75%
due 8/01/2021 (a) 7,805
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Oakland, California, State Building Authority, Lease Revenue Bonds
(Elihu M. Harris), Series A, 5% due 4/01/2023 (a) 2,553
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,705 Oakland, California, Unified School District, GO (Alameda County),
Series F, 5.625% due 8/01/2020 (g) 4,127
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,750 Palm Desert, California, Financing Authority, Tax Allocation
Revenue Refunding Bonds (Project Area Number 1), 5.45%
due 4/01/2018 (g) 6,345
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Palm Springs, California, COP, Refunding (Multiple Capital
Facilities Project), 5.75% due 4/01/2017 (a) 1,133
----------------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 Pittsburg, California, Public Financing Authority, Water Revenue Bonds,
5.50% due 6/01/2027 (g) 4,283
----------------------------------------------------------------------------------------------------------------
Pleasanton, California, Unified School District, GO:
AAA Aaa 2,700 Series D, 5.375% due 8/01/2023 (g) 2,824
AAA Aaa 9,100 Series E, 5.50% due 8/01/2025 (c) 9,746
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Port Oakland, California, Port Revenue Bonds, AMT, Series G, 5.375%
due 11/01/2025 (g) 2,061
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Port Oakland, California, Port Revenue Refunding Bonds, Series I,
5.40% due 11/01/2017 (g) 5,550
----------------------------------------------------------------------------------------------------------------
Port Oakland, California, Revenue Bonds, AMT, Series K (c):
AAA Aaa 3,500 5.75% due 11/01/2014 3,910
AAA Aaa 17,120 5.75% due 11/01/2029 18,333
----------------------------------------------------------------------------------------------------------------
8 & 9
MuniHoldings California Insured Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
California AAA Aaa $25,355 Port Oakland, California, Revenue Refunding Bonds, AMT, Series L,
(concluded) 5.375% due 11/01/2027 (c) $ 26,268
-----------------------------------------------------------------------------------------------------------
Richmond, California, Joint Powers Financing Authority, Tax
Allocation Revenue Bonds, Series A (g):
AAA Aaa 1,980 5.50% due 9/01/2016 2,244
AAA Aaa 2,090 5.50% due 9/01/2017 2,343
AAA Aaa 2,205 5.50% due 9/01/2018 2,464
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Roseville, California, Electric System Revenue Bonds, COP, 5.50%
due 8/01/2009 (f)(i) 3,236
-----------------------------------------------------------------------------------------------------------
AAA Aaa 10,825 Sacramento, California, Municipal Utility District, Electric
Revenue Refunding Bonds, Series L, 5.125% due 7/01/2022 (g) 11,147
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,500 Sacramento, California, Power Authority Revenue Bonds
(Cogeneration Project), 5.875% due 7/01/2015 (g) 3,996
-----------------------------------------------------------------------------------------------------------
AAA Aaa 5,440 San Bernardino, California, Joint Powers Financing Authority,
Lease Revenue Bonds (Department of Transportation Lease), Series A,
5.50% due 12/01/2020 (g) 5,960
-----------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 San Bernardino, California, Joint Powers Financing Authority, Tax
Allocation Revenue Refunding Bonds, Series A, 5.75%
due 10/01/2025 (f) 5,420
-----------------------------------------------------------------------------------------------------------
AAA NR* 1,480 San Bernardino County, California, COP, Refunding (Medical Center
Financing Project), 5.50% due 8/01/2019 (g) 1,583
-----------------------------------------------------------------------------------------------------------
AAA Aaa 5,055 San Diego, California, Public Facilities Financing Authority, Sewer
Revenue Bonds, Series A, 5.25% due 5/15/2027 (c) 5,242
-----------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 San Diego County, California, COP (North County Regional Center
Expansion), 5.25% due 11/15/2019 (a) 4,212
-----------------------------------------------------------------------------------------------------------
AAA Aaa 6,795 San Francisco, California, Bay Area Rapid Transit District, Sales
Tax Revenue Bonds, 5.50% due 7/01/2026 (c) 7,170
-----------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Airport Commission,
International Airport Revenue Bonds, AMT, Second Series:
AAA Aaa 5,830 Issue 10-A, 5.50% due 5/01/2013 (g) 6,307
AAA Aaa 5,750 Issue 12-A, 5.80% due 5/01/2021 (c) 6,159
AAA Aaa 6,430 Issue 24-A, 5.50% due 5/01/2024 (f) 6,722
-----------------------------------------------------------------------------------------------------------
AAA Aaa 8,900 San Francisco, California, State Building Authority, Lease Revenue
Bonds (San Francisco Civic Center Complex), Series A, 5.25%
due 12/01/2021 (a) 9,281
-----------------------------------------------------------------------------------------------------------
AAA Aaa 18,100 San Jose, California, Redevelopment Agency, Tax Allocation Refunding
Bonds, DRIVERS, Series 158, 9.038% due 8/01/2014 (b)(g) 20,162
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 San Jose-Santa Clara, California, Water Financing Authority, Sewer
Revenue Bonds, Series A, 5.375% due 11/15/2020 (c) 2,117
-----------------------------------------------------------------------------------------------------------
San Juan, California, Unified School District, GO (c):
AAA Aaa 3,955 5.625% due 8/01/2018 4,458
AAA Aaa 3,830 5.625% due 8/01/2019 4,277
-----------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 San Mateo-Foster City, California, School District, GO, 5.30%
due 8/01/2029 (c) 5,240
-----------------------------------------------------------------------------------------------------------
AAA Aaa 14,000 Santa Clara, California, Redevelopment Agency, Tax Allocation
Bonds (Bayshore North Project), Series A, 5.50% due 6/01/2023 (a) 15,064
-----------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Santa Clara, California Unified School District, GO, 5.50%
due 7/01/2020 (c) 1,105
-----------------------------------------------------------------------------------------------------------
AAA Aaa 6,205 Santa Clara County, California, East Side Union High School
District, GO, Series E, 5% due 9/01/2022 (c) 6,310
-----------------------------------------------------------------------------------------------------------
AAA Aaa 9,750 Santa Clara County, California, Financing Authority, Lease Revenue
Refunding Bonds, Series A, 5% due 11/15/2022 (a) 9,983
-----------------------------------------------------------------------------------------------------------
AAA Aaa 9,000 Santa Fe Springs, California, Community Development, Commission Tax
Allocation Refunding Bonds (Consolidated Redevelopment Project),
Series A, 5% due 9/01/2022 (g) 9,199
-----------------------------------------------------------------------------------------------------------
AAA Aaa 5,110 Santa Monica, California, Redevelopment Agency, Tax Allocation Bonds
(Earthquake Recovery Redevelopment Project), 6% due 7/01/2029 (a) 5,745
-----------------------------------------------------------------------------------------------------------
AAA Aaa 6,500 South Placer, California, Wastewater Authority, Wastewater Revenue
Bonds, Series A, 5.25% due 11/01/2027 (c) 6,757
-----------------------------------------------------------------------------------------------------------
AAA Aaa 12,800 Southern California Public Power Authority, Revenue Refunding Bonds
(Power Project), DRIVERS, Series 157, 9.042% due 7/01/2017 (b)(c) 13,781
-----------------------------------------------------------------------------------------------------------
AAA Aaa 13,250 Tracy, California, Area Public Facilities Financing Agency, Special
Tax Refunding Bonds (Community Facilities District Number 87-1),
Series H, 5.875% due 10/01/2019 (g) 15,021
-----------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 University of California, COP, Series A, 5.25% due 11/01/2024 (a) 6,199
-----------------------------------------------------------------------------------------------------------
AAA Aaa 9,875 University of California, Hospital Revenue Bonds (University of
California Medical Center), 5.75% due 7/01/2015 (a) 11,031
-----------------------------------------------------------------------------------------------------------
University of California Revenue Bonds (c):
AAA NR* 1,410 Series K, 5.25% due 9/01/2024 1,463
AAA Aaa 9,790 Series O, 5.125% due 9/01/2031 10,026
-----------------------------------------------------------------------------------------------------------
AAA Aaa 16,000 University of California, Revenue Refunding Bonds (Multiple Purpose
Projects), Series E, 5.125% due 9/01/2020 (g) 17,124
-----------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 Vista, California, Unified School District, GO, Series A, 5.25%
due 8/01/2025 (f) 10,459
====================================================================================================================================
Puerto Rico--7.1% Puerto Rico Commonwealth, GO (g):
AAA Aaa 4,515 5.375% due 7/01/2021 4,883
AAA Aaa 5,825 Public Improvement, 5.75% due 7/01/2026 (i) 6,783
-----------------------------------------------------------------------------------------------------------
A Baa1 7,670 Puerto Rico Commonwealth Highway and Transportation Authority,
Transportation Revenue Bonds, Series B, 6% due 7/01/2026 8,454
-----------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority, Power Revenue Bonds:
AAA Aaa 11,015 Series HH, 5.30% due 7/01/2020 (f) 11,920
AAA Aaa 4,530 Series II, 5.375% due 7/01/2019 (g) 5,015
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Puerto Rico, Public Finance Corporation, Commonwealth Appropriation
Revenue Bonds, Series A, 5.375% due 8/01/2024 3,198
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,470 University of Puerto Rico, University Revenue Refunding Bonds,
Series O, 5.75% due 6/01/2018 (g) 3,925
====================================================================================================================================
Total Municipal Bonds (Cost--$916,661)--157.8% 987,315
====================================================================================================================================
10 & 11
MuniHoldings California Insured Fund, Inc., December 31, 2002
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
Shares
Held Common Stock Value
===================================================================================================================================
12,600 CMA California Municipal Money Fund*** $ 12,600
===================================================================================================================================
Total Common Stock (Cost--$12,600)--2.0% 12,600
===================================================================================================================================
Total Investments (Cost--$929,261)--159.8% 999,915
Variation Margin on Financial Futures Contracts**--0.0% 263
Other Assets Less Liabilities--2.5% 15,824
Preferred Stock, at Redemption Value--(62.3%) (390,065)
---------
Net Assets Applicable to Common Stock--100.0% $ 625,937
=========
===================================================================================================================================
(a) AMBAC Insured.
(b) 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 December 31, 2002.
(c) FGIC Insured.
(d) FHA Insured.
(e) Connie Lee Insured.
(f) FSA Insured.
(g) MBIA Insured.
(h) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at December
31, 2002.
(i) Prerefunded.
(j) All or a portion of security held as collateral in connection with open
financial futures contracts.
+ Highest short-term rating by Moody's Investors Service, Inc.
* Not Rated.
** Financial futures contracts sold as of December 31, 2002 were as follows:
(in Thousands)
--------------------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
--------------------------------------------------------------------------
1,200 U.S. Treasury Bonds March 2003 $138,056
--------------------------------------------------------------------------
Total Financial Futures Contracts Sold
(Total Contract Price--$135,168) $138,056
========
--------------------------------------------------------------------------
*** Investments in companies considered to be an affiliate of the Fund (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) are as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Share Net Dividend
Affiliate Activity Cost Income
--------------------------------------------------------------------------
CMA California
Municipal Money Fund 12,600 $12,600 $7
--------------------------------------------------------------------------
See Notes to Financial Statements.
STATEMENT OF NET ASSETS
As of December 31, 2002
====================================================================================================================================
Assets: Investments, at value (identified cost--$929,261,346) ....................... $ 999,915,381
Cash ........................................................................ 103,021
Receivables:
Interest .................................................................. $ 16,497,692
Variation margin .......................................................... 262,500
Dividends ................................................................. 345 16,760,537
-------------
Prepaid expenses ............................................................ 32,430
--------------
Total assets ................................................................ 1,016,811,369
--------------
====================================================================================================================================
Liabilities: Payables:
Investment adviser ........................................................ 432,650
Dividends to Common Stock shareholders .................................... 316,927 749,577
-------------
Accrued expenses ............................................................ 59,799
--------------
Total liabilities ........................................................... 809,376
--------------
====================================================================================================================================
Preferred Stock: Preferred Stock, at redemption value, par value $.10 per share (1,920 Class A
shares, 3,880 Class B shares, 3,200 Class C shares, 2,960 Class D shares and
3,640 Class E shares of AMPS* issued and outstanding at $25,000 per share
liquidation preference) ..................................................... 390,065,044
--------------
====================================================================================================================================
Net Assets Net assets applicable to Common Stock ....................................... $ 625,936,949
Applicable to ==============
Common Stock::
====================================================================================================================================
Analysis of Net Assets Common Stock, par value $.10 per share (40,657,301 shares issued and
Applicable to outstanding) ................................................................ $ 4,065,730
Common Stock: Paid-in capital in excess of par ............................................ 599,718,612
Undistributed investment income--net ........................................ $ 7,077,573
Accumulated realized capital losses on investments--net ..................... (52,691,501)
Unrealized appreciation on investments--net ................................. 67,766,535
-------------
Total accumulated earnings--net ............................................. 22,152,607
--------------
Total--Equivalent to $15.40 net asset value per share of Common Stock
(market price--$14.01) ...................................................... $ 625,936,949
==============
====================================================================================================================================
* Auction Market Preferred Stock.
See Notes to Financial Statements.
12 & 13
MuniHoldings California Insured Fund, Inc., December 31, 2002
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 2002
======================================================================================================================
Investment Income: Interest ...................................................... $ 25,881,469
Dividends ..................................................... 7,487
------------
Total income .................................................. 25,888,956
------------
======================================================================================================================
Expenses: Investment advisory fees ...................................... $ 2,803,666
Commission fees ............................................... 448,017
Accounting services ........................................... 143,607
Transfer agent fees ........................................... 64,761
Professional fees ............................................. 46,157
Custodian fees ................................................ 28,923
Printing and shareholder reports .............................. 26,291
Directors' fees and expenses .................................. 25,907
Pricing fees .................................................. 16,958
Listing fees .................................................. 16,139
Other ......................................................... 26,675
-----------
Total expenses before reimbursement ........................... 3,647,101
Reimbursement of expenses ..................................... (200,678)
-----------
Total expenses after reimbursement ............................ 3,446,423
------------
Investment income--net ........................................ 22,442,533
------------
======================================================================================================================
Realized & Unreal- Realized loss on investments--net ............................. (2,118,967)
ized Gain (Loss) on Change in unrealized appreciation on investments--net ......... 23,701,937
Investments--Net: ------------
Total realized and unrealized gain on investments--net ........ 21,582,970
------------
======================================================================================================================
Dividends to Investment income--net ........................................ (2,364,175)
Preferred Stock ------------
Shareholders: Net Increase in Net Assets Resulting from Operations .......... $ 41,661,328
============
======================================================================================================================
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
December 31, June 30,
Increase (Decrease) in Net Assets: 2002 2002
===============================================================================================================================
Operations: Investment income--net .............................................. $ 22,442,533 $ 44,545,117
Realized loss on investments--net ................................... (2,118,967) (841,711)
Change in unrealized appreciation on investments--net ............... 23,701,937 13,620,597
Dividends and distributions to Preferred Stock shareholders ......... (2,364,175) (6,179,443)
------------- -------------
Net increase in net assets resulting from operations ................ 41,661,328 51,144,560
------------- -------------
===============================================================================================================================
Dividends & Investment income--net .............................................. (18,295,785) (36,317,459)
Distributions to Realized gain on investments--net ................................... -- (179,258)
Common Stock ------------- -------------
Shareholders: Net decrease in net assets resulting from dividends and distributions
to Common Stock shareholders ........................................ (18,295,785) (36,496,717)
------------- -------------
===============================================================================================================================
Net Assets Total increase in net assets applicable to Common Stock ............. 23,365,543 14,647,843
Applicable to Beginning of period ................................................. 602,571,406 587,923,563
Common Stock: ------------- -------------
End of period* ...................................................... $ 625,936,949 $ 602,571,406
============= =============
===============================================================================================================================
*Undistributed investment income--net ................................ $ 7,077,573 $ 5,295,000
============= =============
===============================================================================================================================
See Notes to Financial Statements.
14 & 15
MuniHoldings California Insured Fund, Inc., December 31, 2002
FINANCIAL HIGHLIGHTS
The following per share data and ratios have been
derived from information provided in the financial For the Six
statements. Months Ended For the Year Ended June 30,
December 31, -----------------------------------------
Increase (Decrease) in Net Asset Value: 2002 2002 2001 2000 1999
==================================================================================================================================
Per Share Net asset value, beginning of period ................. $ 14.82 $ 14.46 $ 13.31 $ 14.38 $ 14.96
Operating -------- -------- -------- -------- --------
Performance:+ Investment income--net ............................... .55@@ 1.10@@ 1.10@@ 1.11 1.13
Realized and unrealized gain (loss) on
investments--net ..................................... .54 .30 1.17 (1.03) (.57)
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net ............................. (.06) (.15) (.33) (.34) (.30)
Realized gain on investments--net .................. -- --@@@ -- -- (.01)
-------- -------- -------- -------- --------
Total from investment operations ..................... 1.03 1.25 1.94 (.26) .25
-------- -------- -------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net ............................. (.45) (.89) (.79) (.81) (.80)
Realized gain on investments--net .................. -- --@@@ -- -- (.03)
-------- -------- -------- -------- --------
Total dividends and distributions to Common Stock
shareholders ......................................... (.45) (.89) (.79) (.81) (.83)
-------- -------- -------- -------- --------
Net asset value, end of period ....................... $ 15.40 $ 14.82 $ 14.46 $ 13.31 $ 14.38
======== ======== ======== ======== ========
Market price per share, end of period ................ $ 14.01 $ 14.19 $ 13.18 $12.3125 $ 13.00
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on market price per share ...................... 1.87%@ 14.61% 13.67% 1.06% (8.34%)
Return:** ======== ======== ======== ======== ========
Based on net asset value per share ................... 7.22%@ 9.10% 15.36% (1.23%) 1.66%
======== ======== ======== ======== ========
==================================================================================================================================
Ratios Based on Total expenses, net of reimbursement and excluding
Average Net Assets reorganization expenses*** ........................... 1.10%* 1.14% 1.13% 1.20% 1.09%
Of Common Stock: ======== ======== ======== ======== ========
Total expenses, excluding reorganization expenses*** . 1.17%* 1.20% 1.22% 1.31% 1.23%
======== ======== ======== ======== ========
Total expenses*** .................................... 1.17%* 1.22% 1.29% 1.50% 1.23%
======== ======== ======== ======== ========
Total investment income--net*** ...................... 7.19%* 7.41% 7.71% 8.50% 7.42%
======== ======== ======== ======== ========
Amount of dividends to Preferred Stock shareholders .. .76%* 1.02% 2.22% 2.66% 1.93%
======== ======== ======== ======== ========
Investment income--net, to Common Stock shareholders . 6.43%* 6.39% 5.49% 5.84% 5.49%
======== ======== ======== ======== ========
==================================================================================================================================
Ratios Based on Total expenses, net of reimbursement and excluding
Average Net Assets reorganization expenses .............................. .68%* .69% .67% .69% .67%
Of Common and ======== ======== ======== ======== ========
Preferred Stock:*** Total expenses, excluding reorganization expenses .... .72%* .73% .73% .75% .75%
======== ======== ======== ======== ========
Total expenses ....................................... .72%* .74% .77% .86% .75%
======== ======== ======== ======== ========
Total investment income--net ......................... 4.40%* 4.50% 4.60% 4.85% 4.53%
======== ======== ======== ======== ========
==================================================================================================================================
Ratios Based on Dividends to Preferred Stock shareholders ............ 1.20%* 1.57% 3.28% 3.54% 3.02%
Average Net Assets ======== ======== ======== ======== ========
Of Preferred Stock:
==================================================================================================================================
Supplemental Data: Net assets, applicable to Common Stock, end of period
(in thousands) ....................................... $625,937 $602,571 $587,924 $468,360 $141,073
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) ....................................... $390,000 $390,000 $390,000 $341,000 $ 96,000
======== ======== ======== ======== ========
Portfolio turnover ................................... 9.55% 41.35% 63.37% 105.22% 82.36%
======== ======== ======== ======== ========
==================================================================================================================================
Leverage: Asset coverage per $1,000 ............................ $ 2,605 $ 2,545 $ 2,507 $ 2,373 $ 2,470
======== ======== ======== ======== ========
==================================================================================================================================
Dividends Per Series A--Investment income--net ..................... $ 149 $ 362 $ 793 $ 915 $ 775
Share on Preferred ======== ======== ======== ======== ========
Stock Outstanding:++ Series B--Investment income--net ..................... $ 161 $ 400 $ 533 $ 830 $ 735
======== ======== ======== ======== ========
Series C--Investment income--net ..................... $ 139 $ 375 $ 812 $ 284 --
======== ======== ======== ======== ========
Series D--Investment income--net ..................... $ 152 $ 400 $ 853 $ 288 --
======== ======== ======== ======== ========
Series E--Investment income--net ..................... $ 153 $ 408 $ 813 $ 314 --
======== ======== ======== ======== ========
==================================================================================================================================
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges. The Fund's Investment Adviser waived a portion of its management
fee. Without such waiver, the Fund's performance would have been lower.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Certain prior year amounts have been reclassified to conform to current
year presentation.
++ The Fund's Preferred Stock was issued on March 19, 1998 for Series A and
Series B; and on March 6, 2000 for Series C, Series D and Series E.
@ Aggregate total investment return.
@@ Based on average shares outstanding.
@@@ Amount is less than $.01 per share.
See Notes to Financial Statements.
16 & 17
MuniHoldings California Insured Fund, Inc., December 31, 2002
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniHoldings 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's financial statements are prepared in conformity
with accounting principles generally accepted in the United States of America,
which may require the use of management accruals and estimates. These unaudited
financial statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal, recurring nature. The Fund
determines and makes available for publication the net asset value of its Common
Stock on a weekly basis. The Fund's Common Stock is listed on the New York Stock
Exchange under the symbol MUC. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Directors.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. Losses may arise due to changes in the value of the contract or if
the counterparty does not perform under the contract.
o Financial futures contracts -- The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options -- The Fund is authorized to write covered call options and purchase
put options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the current
market value of the option written. When a security is purchased or sold through
an exercise of an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from (or added to)
the proceeds of the security sold. When an option expires (or the Fund enters
into a closing transaction), the Fund realizes a gain or loss on the option to
the extent of the premiums received or paid (or gain or loss to the extent the
cost of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
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 .55% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Stock. For the six months ended December
31, 2002, FAM earned fees of $2,803,666, of which $200,678 was waived.
For the six months ended December 31, 2002, the Fund reimbursed FAM $11,173 for
certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended December 31, 2002 were $90,864,836 and $91,086,639, respectively.
Net realized gains (losses) for the six months ended December 31, 2002 and net
unrealized gains (losses) as of December 31, 2002 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
- --------------------------------------------------------------------------------
Long-term investments .................. $ 4,083,683 $ 70,654,035
Financial futures contracts ............ (6,202,650) (2,887,500)
------------ ------------
Total .................................. $ (2,118,967) $ 67,766,535
============ ============
- --------------------------------------------------------------------------------
As of December 31, 2002, net unrealized appreciation for Federal income tax
purposes aggregated $70,605,407, of which $70,700,422 related to appreciated
securities and $95,015 related to depreciated securities. The aggregate cost of
investments at December 31, 2002 for Federal income tax purposes was
$929,309,974.
4. Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of 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 stock without approval of holders of Common Stock.
Common Stock
Shares issued and outstanding during six months ended December 31, 2002 and for
the year ended June 30, 2002 remained constant.
Preferred Stock
AMPS are shares of Preferred Stock of the Fund, with a par value of $.10 per
share and a liquidation preference of
18 & 19
MuniHoldings California Insured Fund, Inc., December 31, 2002
NOTES TO FINANCIAL STATEMENTS (concluded)
$25,000 per share that entitle their holders to receive cash dividends at an
annual rate that may vary for the successive dividend periods. The yields in
effect at December 31, 2002 were: Series A, 1.475%; Series B, .909%; Series C,
1.10%; Series D, 1.49%; and Series E, 1.549%.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the six months ended December 31, 2002, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S") earned $196,569 as commissions.
5. Distributions to Shareholders:
On January 7, 2003, a tax-exempt income dividend of $.075000 was declared. The
dividend was paid on January 30, 2003, to shareholders of record on January 16,
2003.
6. Capital Loss Carryforward:
On June 30, 2002, the Fund had a net capital loss carryforward of $45,571,244,
of which $911,162 expires in 2006; $11,978,510 expires in 2007; $7,894,678
expires in 2008 and $24,786,894 expires in 2009. This amount will be available
to offset like amounts of any future taxable gains.
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholders on a monthly basis. However, in order to
provide shareholders with a more consistent yield to the current trading price
of shares of Common Stock of the Fund, the Fund may at times pay out less than
the entire amount of net investment income earned in any particular month and
may at times in any particular month pay out such accumulated but undistributed
income in addition to net investment income earned in that month. As a result,
the dividends paid by the Fund for any particular month may be more or less than
the amount of net investment income earned by the Fund during such month. The
Fund's current accumulated but undistributed net investment income, if any, is
disclosed in the Statement of Net Assets, which comprises part of the financial
information included in this report.
20 & 21
MuniHoldings California Insured Fund, Inc., December 31, 2002
QUALITY PROFILE
The quality ratings of securities in the Fund as of December 31, 2002 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Total Investments
- --------------------------------------------------------------------------------
AAA/Aaa .................................................. 89.5%
AA/Aa .................................................... 1.9
A/A ...................................................... 1.8
BBB/Baa .................................................. 2.9
NR (Not rated) ........................................... 1.3
Other+ ................................................... 2.6
- --------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Joe Grills, Director
Herbert I. London, Director
Andre F. Perold, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Walter C. O'Connor, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, NY 10286
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MUC
- --------------------------------------------------------------------------------
Effective January 1, 2003, Melvin R. Seiden, Director of Merrill Lynch
MuniHoldings California Insured Fund, Inc., retired. The Fund's Board of
Directors wishes Mr. Seiden well in his retirement.
- --------------------------------------------------------------------------------
22 & 23
[LOGO] Merrill Lynch Investment Managers
[GRAPHICS OMITTED]
MuniHoldings California Insured Fund, Inc. seeks to provide shareholders with
current income exempt from Federal and California income taxes. The Fund seeks
to achieve this objective by investing primarily in a portfolio of long-term
investment-grade municipal obligations the interest on which, in the opinion of
bond counsel to the issuer, is exempt from Federal and California income taxes.
This report, including the financial information herein, is transmitted to
shareholders of MuniHoldings California Insured Fund, Inc. for their
information. It is not a prospectus. Past performance results shown in this
report should not be considered a representation of future performance. The Fund
has leveraged its Common Stock and intends to remain leveraged by issuing
Preferred Stock to provide the Common Stock shareholders with a potentially
higher rate of return. Leverage creates risks for Common Stock shareholders,
including the likelihood of greater volatility of net asset value and market
price of shares of the Common Stock, and the risk that fluctuations in the
short-term dividend rates of the Preferred Stock may affect the yield to Common
Stock shareholders. Statements and other information herein are as dated and are
subject to change.
MuniHoldings California Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
[RECYCLED LOGO] Printed on post-consumer recycled paper #HOLDCA--12/02
- --------------------------------------------------------------------------------
Item 2 - Did registrant adopt a code of ethics, as of the end of the period
covered by this report, that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (not answered until July 15, 2003 and only
annually for funds)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert) If no, explain why not. -N/A (not answered until July
15, 2003 and only annually for funds)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last two
fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's
annual financial statements or services that are
normally provided by the accountant in connection with
statutory and regulatory filings or engagements for
those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and related
services by the principal accountant that are
reasonably related to the performance of the
audit of the registrant's financial statements
and are not reported under paragraph (a) of this
Item. Registrants shall describe the nature of
the services comprising the fees disclosed under
this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services provided
by the principal accountant, other than the services
reported in paragraphs (a) through (c) of this Item.
Registrants shall describe the nature of the
services comprising the fees disclosed under this
category. N/A.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of paragraphs
(b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended on
the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Items 5-6 - Reserved
Item 7 - For closed-end funds that contain voting securities in their portfolio,
describe the policies and procedures that it uses to determine how to
vote proxies relating to those portfolio securities. N/A.
Item 8 -- Reserved
Item 9(a) - Disclose the conclusions of the registrant's principal executive
officer or officers and principal financial officer or officers, or
persons performing similar functions, about the effectiveness of the
registrant's disclosure controls and procedures (as defined in Rule
30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on their
evaluation of these controls and procedures as of a date within 90
days of the filing date of the report that includes the disclosure
required by this paragraph. N/A.
Item 9(b) -- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for
CEO/CFO). Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MuniHoldings California Insured Fund, Inc.
By: /s/ Terry K. Glenn
------------------------------
Terry K. Glenn,
President of
MuniHoldings California Insured Fund, Inc.
Date: February 18, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Terry K. Glenn
------------------------------
Terry K. Glenn,
President of
MuniHoldings California Insured Fund, Inc.
Date: February 18, 2003
By: /s/ Donald C. Burke
------------------------------
Donald C. Burke
Chief Financial Officer of
MuniHoldings California Insured Fund, Inc.
Date: February 18, 2003