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 811-6692
Name of Fund: MuniYield California Insured Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, MuniYield
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: 04/30/03
Date of reporting period: 11/01/02 - 04/30/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers
Semi-Annual Report
April 30, 2003
MuniYield
California
Insured
Fund, Inc.
www.mlim.ml.com
MUNIYIELD CALIFORNIA INSURED FUND, INC.
The Benefits and
Risks of Leveraging
MuniYield California Insured Fund, Inc. utilizes leveraging to seek to enhance
the yield and net asset value of its Common Stock. However, these objectives
cannot be achieved in all interest rate environments. To leverage, the Fund
issues Preferred Stock, which pays dividends at prevailing short-term interest
rates, and invests the proceeds in long-term municipal bonds. The interest
earned on these investments is paid to Common Stock shareholders in the form of
dividends, and the value of these portfolio holdings is reflected in the per
share net asset value of the Fund's Common Stock. However, in order to benefit
Common Stock shareholders, the yield curve must be positively sloped; that is,
short-term interest rates must be lower than long-term interest rates. At the
same time, a period of generally declining interest rates will benefit Common
Stock shareholders. If either of these conditions change, then the risks of
leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock capitalization of
$100 million and the issuance of Preferred Stock for an additional $50 million,
creating a total value of $150 million available for investment in long-term
municipal bonds. If prevailing short-term interest rates are approximately 3%
and long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million of Preferred
Stock based on the lower short-term interest rates. At the same time, the fund's
total portfolio of $150 million earns the income based on long-term interest
rates. Of course, increases in short-term interest rates would reduce (and even
eliminate) the dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock shareholders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value of the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's net asset
value will reflect the full decline in the price of the portfolio's investments,
since the value of the fund's Preferred Stock does not fluctuate. In addition to
the decline in net asset value, the market value of the fund's Common Stock may
also decline.
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.
MuniYield California Insured Fund, Inc., April 30, 2003
DEAR SHAREHOLDER
For the six months ended April 30, 2003, the Common Stock of MuniYield
California Insured Fund, Inc. had a net annualized yield of 5.62%, based on a
period-end per share net asset value of $15.51 and $.432 per share income
dividends. Over the same period, the total investment return on the Fund's
Common Stock was +4.83%, based on a change in per share net asset value from
$15.26 to $15.51, and assuming reinvestment of $.429 per share ordinary income
dividends.
For the six-month period ended April 30, 2003, the Fund's Auction Market
Preferred Stock had an average yield of .84% for Series A, .94% for Series B,
..94% for Series C, 1.15% for Series D and .88% for Series E.
For a description of the Fund's total investment return based on a change in the
per share market value (as measured by the trading price of the Fund's shares on
the New York Stock Exchange), and assuming reinvestment of dividends, please
refer to the Financial Highlights section of the Financial Statements included
in this report. As a closed-end fund, the Fund's shares may trade in the
secondary market at a premium or discount to the Fund's net asset value. As a
result, total investment returns based on changes in the Fund's market value can
vary significantly from total investment return based on changes in the Fund's
net asset value.
The Municipal Market Environment
During the six-month period ended April 30, 2003, amid considerable weekly and
monthly volatility, long-term fixed income interest rates generally declined.
Geopolitical tensions and volatile equity valuations continued to overshadow
economic fundamentals as they have for most of the last 12 months. Reacting to
the strong U.S. equity rally that began last October, fixed income bond yields
remained under pressure in November 2002, as U.S. equity markets continued to
strengthen. During November, the Standard & Poor's 500 (S&P 500) Index rose an
additional 5.50%. Equity prices were supported by further signs of U.S. economic
recovery, especially improving labor market activity. In late November,
third-quarter 2002 U.S. gross domestic product growth was 4%, well above the
second-quarter 2002 rate of 1.30%. 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 (0.50%) to 1.25%, its lowest level since the 1960s. This 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.
However, into early 2003, softer equity prices and renewed investor concerns
about U.S. military action against Iraq and North Korea again pushed bond prices
higher. Reacting to disappointing holiday sales and corporate managements'
attempts to scale back analysts' expectation of future earnings, the S&P 500
Index declined more than 10% from December 2002 to February 2003. Fearing an
eventual U.S./Iraq military confrontation in 2003, investors again sought the
safety of U.S. Treasury obligations and the prices of fixed income issues rose.
By the end of February 2003, U.S. Treasury bond yields had declined
approximately 40 basis points to 4.67%.
Bond yields continued to fall into early March. Once direct U.S. military action
against Iraq began, bond yields quickly rose. Prior uncertainty surrounding the
Iraqi situation was obviously removed and early U.S. military successes fostered
the hope that the conflict would be quickly and positively concluded.
Concurrently, the S&P 400 Index rose over 6% as investors, in part, sold fixed
income issues to purchase equities in anticipation of a strong U.S. economic
recovery once the Iraqi conflict was resolved. By mid-March, U.S. Treasury bond
yields again rose to above 5%. However, as there was growing sentiment that
hostilities may not be resolved in a matter of weeks, U.S. Treasury bond yields
again declined to end the month at 4.81%.
For the six months ended April 30, 2003, long-term U.S. Treasury bond yields
ratcheted back to near 5% by mid-April, as U.S. equity markets continued to
improve and the safe-haven premium U.S. Treasury issues had commanded prior to
the beginning of the Iraqi conflict continued to be withdrawn. However, with the
quick positive resolution of the Iraqi war, investors quickly resumed their
focus on the fragile U.S. economic recovery. Business activity in the United
States has remained sluggish, especially job creation. Investors have also been
concerned that the recent SARS outbreak would have a material, negative impact
on world economic conditions, especially in China and Japan. First quarter 2003
U.S. gross domestic product was released in late April initially estimating U.S.
economic activity to be growing at 1.60%, well below many analysts' assessments.
These factors, as well as the possibility that the Federal Reserve Board could
again lower short-term interest rates to encourage more robust U.S. economic
growth, pushed bond prices higher during the last two weeks of the period. By
April 30, 2003, long-term U.S. Treasury bond yields had declined to almost
4.75%. Over the past six months, long-term U.S. bond yields fell more than 20
basis points.
For the six months ended April 30, 2003, long-term tax-exempt bond yields also
fell modestly. Yield volatility was reduced relative to that seen in U.S.
Treasury issues, as municipal bond prices were much less sensitive to worldwide
geopolitical pressures on a daily and weekly basis. Tax-exempt bond yields
generally followed their taxable counterparts higher, responding to a more
positive U.S. fixed income environment and continued slow economic growth. After
rising approximately 10 basis points in November 2002 to 5.30%, municipal bond
yields generally declined through February 2003. At February 28, 2003, long-term
tax-exempt revenue bond yields, as measured by the Bond Buyer Revenue Bond
Index, fell to approximately 5.05%. However, similar to U.S. Treasury bond
yields, once military action began in Iraq, municipal bond yields rose sharply
to nearly 5.20% before declining to approximately 5.10% by the end of April.
Over the past six months, long-term tax-exempt bond yields fell approximately 11
basis points, slightly less than U.S. Treasury obligations.
A number of factors have combined to generate consistently strong demand for
municipal bonds throughout the six-month period ended April 30, 2003. Generally
weak U.S. equity markets have supported continued positive demand for tax-exempt
products as investors have sought the relative security of fixed income issues.
Also, with tax-exempt money market rates near 1%, the demand for longer maturity
municipal issues has increased as investors have opted to buy longer maturity
issues rather than remain in cash reserves. Additionally, investors received
approximately $30 billion in January 2003 from bond maturities, coupon income
and proceeds from early redemptions. However, these positive demand factors were
not totally able to offset the increase in tax-exempt new-issue supply,
preventing more significant declines in tax-exempt bond yields. This modest
underperformance has served to make municipal bonds a particularly attractive
purchase relative to their taxable counterparts. Throughout most of the yield
curve, municipal bonds have been able to be purchased at yields near or
exceeding those of comparable Treasury issues. Compared to their recent
historical averages of 82% - 88% of U.S. Treasury yields, municipal bond yield
ratios in their current 95% - 105% range are likely to prove attractive to
long-term investors.
Declining U.S. equity markets and escalating geopolitical pressures have
resulted in reduced economic activity and consumer confidence. It is important
to note that, despite all the recent negative factors impeding the growth of
U.S. businesses, the U.S. economy still grew at an approximate 2.50% rate for
all of 2002, twice that of 2001. Similar expansion is expected for early 2003.
Lower oil prices, reduced geopolitical uncertainties, increased Federal spending
for defense, and a likely Federal tax cut are all factors which should promote
stronger economic growth later this year. However, it is questionable to expect
that business and investor confidence can be so quickly restored as to trigger
dramatic, explosive U.S. economic growth and engender associated, large-scale
interest rate increases. The resumption of solid economic growth is likely to be
a gradual process accompanied by equally graduated increases in bond yields.
Moderate economic growth, especially within a context of negligible inflationary
pressures, should not greatly endanger the positive fixed income environments
tax-exempt products currently enjoy.
2 & 3
MuniYield California Insured Fund, Inc., April 30, 2003
Specific to California, the state's financial condition has continued to
deteriorate over the past six months. A weakened national economy and its effect
on the once powerful technology sector led to a significant decline in income
tax revenues, resulting in a large state budget deficit. Prior to the state's
January budget revision, there was an approximate $35 billion budget shortfall
projected during the following 18-month period. One of the efforts to close the
gap was the issuance of tobacco revenue-backed securities. California executed
the largest single sale of municipal bonds backed by revenues from the Master
Settlement Agreement with the four largest tobacco producers. California
intended to come to market with another transaction, effectively attempting to
monetize this future revenue stream, but a weakened demand for these securities
drove up borrowing costs. This second transaction, which would total nearly $3
billion, has been postponed indefinitely. The state has approached cutting
spending, a more politically difficult decision, and the proposed sale of nearly
$3 billion of pension bonds. The governor's office is also working with
investment bankers and caucus leaders as lawmakers consider up to $10 billion in
deficit financing to address the shortfall. However, details will remain unclear
until the state's May budget revision. The major rating services currently have
California general obligation debt rated in the low single-A range.
Portfolio Strategy
The Fund employs leverage to attempt to provide a higher current return of
tax-exempt income to shareholders. Throughout the six months ended April 30,
2003, we maintained a fully invested position, with cash equivalent reserves
averaging less than 5% of total assets. Cash reserves were limited because of
the tight technical position of the California short-term marketplace. Yields on
California municipal cash equivalents consistently averaged close to 1%
throughout most of the period and are currently below 1% for insured issues. Our
strategy was aimed at creating a more defensive market structure within a
leveraged portfolio, which maintains both a fully invested posture and contains
a position of inverse floaters representing 11% of assets. We have raised the
Fund's overall average coupon levels and shortened maturities through purchases
in both the primary and secondary California markets. More recently, we have
been purchasing securities in the two-year and three-year maturity range. These
purchases serve the purpose of maintaining a high level of AAA-insured paper in
the portfolio, while providing a better current yield than the sub-1% rates on
traditional cash reserve instruments such as weekly or daily floaters. We have
employed hedging positions utilizing financial futures to protect the Fund's net
asset value. The Fund's net asset value recently exceeded $15.50, well above the
original issue level of $15.00. Going forward, our strategy will be 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. As
market yields decline through 5%, retail investor demand for California insured
issues has historically declined. The market has far exceeded these levels, and
it is our aim to reduce price 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 parts of the yield curve that we believe
offer the best value for interest rate risk taken. On a relative basis, the Fund
is positioned to perform well should interest rates, at some point, head higher.
On an absolute basis, we believe we should seek to protect the Fund from future
price erosion that would arise should a less favorable economic environment for
the interest rate markets present itself.
The action taken by the Federal Reserve Board in lowering interest rates,
combined with tight market technicals, resulted in a material 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. These declines led to
lower borrowing yields for the Fund and increased yields for the Fund's Common
Stock shareholder. 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 ongoing interest in MuniYield California Insured Fund, Inc.,
and we look forward to assisting you with your financial needs in the months and
years to come.
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
May 30, 2003
PROXY RESULTS
During the six-month period ended April 30, 2003, MuniYield California Insured
Fund, Inc.'s Common Stock shareholders voted on the following proposal. The
proposal was approved at a shareholders' meeting on April 28, 2003. A
description of the proposal and number of shares voted are as follows:
- -------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- -------------------------------------------------------------------------------------------------------------------------
1. To elect the Fund's Directors: Terry K. Glenn 32,896,780 721,112
James H. Bodurtha 32,895,870 722,022
Joe Grills 32,888,449 729,443
Roberta Cooper Ramo 32,898,432 719,460
Robert S. Salomon, Jr. 32,886,749 731,143
Stephen B. Swensrud 32,880,491 737,401
- -------------------------------------------------------------------------------------------------------------------------
During the six-month period ended April 30, 2003, MuniYield California Insured
Fund, Inc.'s Preferred Stock shareholders (Series A, B, C, D & E) voted on the
following proposal. The proposal was approved at a shareholders' meeting on
April 28, 2003. A description of the proposal and number of shares voted are as
follows:
- --------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- --------------------------------------------------------------------------------------------------------------------------
1. To elect the Fund's Board of Directors: Terry K. Glenn, James H. Bodurtha, Joe Grills,
Herbert I. London, Andre F. Perold, Roberta Cooper Ramo, Robert S. Salomon, Jr.
and Stephen B. Swensrud 8,718 233
- --------------------------------------------------------------------------------------------------------------------------
4 & 5
MuniYield California Insured Fund, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
California--132.3% AAA Aaa $ 7,000 ABAG Finance Authority for Nonprofit Corporations, California, COP
(Children's Hospital Medical Center), 6% due 12/01/2029 (a) $ 8,080
-------------------------------------------------------------------------------------------------------------
AAA Aaa 1,985 Arcadia, California, Unified School District, GO, Series B, 6.50%
due 7/01/2015 (c) 2,214
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,675 Bakersfield, California, COP, Refunding (Convention Center Expansion
Project), 5.80% due 4/01/2017 (i) 4,145
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Bay Area Government Association, California, Revenue Refunding Bonds
(California Redevelopment Agency Pool), Series A, 6% due
12/15/2024 (g) 2,172
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Beverly Hills, California, Public Financing Authority, Lease Revenue
Refunding Bonds, INFLOS, 9.792% due 6/01/2003 (i)(j)(k) 2,096
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,990 Brentwood, California, Infrastructure Refinancing Authority,
Infrastructure Revenue Refunding Bonds, Series A, 5.20% due
9/02/2029 (g) 4,169
-------------------------------------------------------------------------------------------------------------
California Community College Financing Authority, Lease Revenue
Bonds, Series A (i):
AAA Aaa 3,215 5.95% due 12/01/2022 3,699
AAA Aaa 1,100 6% due 12/01/2029 1,270
-------------------------------------------------------------------------------------------------------------
California Educational Facilities Authority Revenue Bonds, Series A:
AAA NR* 28,000 (Pepperdine University), 5.50% due 8/01/2032 (i) 30,502
NR* A2 5,000 (University of San Diego), 5.50% due 10/01/2032 5,313
-------------------------------------------------------------------------------------------------------------
AAA NR* 24,170 California Educational Facilities Authority, Student Loan Revenue
Bonds (CalEdge Loan Program), AMT, 5.55% due 4/01/2028 (a) 25,173
-------------------------------------------------------------------------------------------------------------
AAA Aaa 40 California HFA, Home Mortgage Revenue Bonds, AMT, Series E, 6.15%
due 8/01/2025 (i) 40
-------------------------------------------------------------------------------------------------------------
California HFA, Home Mortgage Revenue Bonds, VRDN (l):
A1+ VMIG1+ 10,300 AMT, Series B, 1.35% due 8/01/2033 (g) 10,300
A1+ VMIG1+ 3,100 AMT, Series R, 1.45% due 8/01/2023 (a) 3,100
A1 VMIG1+ 2,000 Series F, 1.30% due 2/01/2033 (g) 2,000
-------------------------------------------------------------------------------------------------------------
NR* Aaa 2,420 California HFA, Revenue Bonds, RIB, AMT, Series 150, 9.921% due
2/01/2029 (i)(k) 2,615
-------------------------------------------------------------------------------------------------------------
California Health Facilities Authority, Revenue Refunding Bonds
(Adventist Hospital), VRDN (i)(l):
A1+ VMIG1+ 2,100 Series A, 1.30% due 9/01/2028 2,100
A1+ VMIG1+ 1,500 Series B, 1.30% due 9/01/2028 1,500
A1+ VMIG1+ 1,200 Series C, 1.30% due 9/01/2015 1,200
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,750 California Health Facilities Finance Authority Revenue Bonds (Kaiser
Permanente), Series A, 5.50% due 6/01/2022 (g) 2,936
-------------------------------------------------------------------------------------------------------------
AAA Aaa 780 California Pollution Control Financing Authority, PCR, Refunding
(Southern California Edison Company), Series A, 5.45% due
9/01/2029 (i) 819
-------------------------------------------------------------------------------------------------------------
BBB Baa3 21,000 California Pollution Control Financing Authority, Solid Waste
Disposal Revenue Refunding Bonds (Republic Services Inc. Project),
AMT, Series C, 5.25% due 6/01/2023 21,560
-------------------------------------------------------------------------------------------------------------
California Rural Home Mortgage Finance Authority, S/F Mortgage
Revenue Bonds (Mortgage-Backed Securities Program), AMT:
AAA NR* 4,850 Series A, 6.35% due 12/01/2029 (e)(f) 5,585
NR* Aaa 1,070 Series A-1, 6.90% due 12/01/2024 (e)(h) 1,198
AAA NR* 2,605 Series B, 6.25% due 12/01/2031 (f) 2,837
-------------------------------------------------------------------------------------------------------------
California State Department of Veteran Affairs, Home Purpose Revenue
Refunding Bonds:
AAA Aaa 12,680 Series A, 5.35% due 12/01/2027 (a) 13,255
AA- Aa2 7,500 Series C, 6.15% due 12/01/2027 7,792
-------------------------------------------------------------------------------------------------------------
California State, Department of Water Resources, Power Supply
Revenue Bonds, Series A:
BBB+ A3 7,500 5.75% due 5/01/2017 8,338
AAA Aaa 7,000 5.375% due 5/01/2018 (a) 7,731
-------------------------------------------------------------------------------------------------------------
California State, GO:
AAA Aaa 860 6.25% due 10/01/2019 (i) 885
A A2 2,500 5.25% due 4/01/2032 2,538
-------------------------------------------------------------------------------------------------------------
California State, GO, Refunding:
A A2 6,000 5% due 2/01/2023 6,050
A A2 5,600 5.25% due 2/01/2029 5,690
AAA NR* 11,090 DRIVERS, AMT, Series 239, 9.77% due 12/01/2032 (a)(k) 12,790
-------------------------------------------------------------------------------------------------------------
California State Public Works Board, Lease Revenue Bonds:
AAA Aaa 4,530 (Department of Corrections--Tentative Administration), Series A,
5.25% due 3/01/2020 (a) 4,864
A- A3 3,415 (Department of Mental Health--Patton), Series B, 5.25% due
4/01/2023 3,478
-------------------------------------------------------------------------------------------------------------
AAA Aaa 16,675 California State Public Works Board, Lease Revenue Refunding Bonds
(Department of Corrections), Series B, 5.625% due 11/01/2016 (i) 18,875
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,375 California State University and Colleges, Housing System Revenue
Refunding Bonds, 5.90% due 11/01/2021 (c) 2,643
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,100 California Statewide Communities Development Authority, COP (Kaiser
Permanente), 5.30% due 12/01/2015 (g) 4,512
-------------------------------------------------------------------------------------------------------------
A- A3 3,685 California Statewide Communities Development Authority, Health
Facility Revenue Bonds (Memorial Health Services), Series A, 6% due
10/01/2023 3,926
-------------------------------------------------------------------------------------------------------------
A+ A1 1,000 California Statewide Communities Development Authority Revenue
Bonds (Sutter Health), Series B, 5.50% due 8/15/2028 1,026
-------------------------------------------------------------------------------------------------------------
AAA Aaa 8,900 Central Unified School District, California, COP, 3.50% due
1/01/2035 (a) 9,168
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,600 Ceres, California, Redevelopment Agency, Tax Allocation Bonds
(Ceres Redevelopment Project Area Number 1), 5.75% due 11/01/2030 (i) 5,142
-------------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Chaffey, California, Union High School District, GO, Series C,
5.375% due 5/01/2023 (g) 6,509
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,540 Coalinga, California, Redevelopment Agency Tax Allocation Bonds,
5.90% due 9/15/2025 (i) 2,879
-------------------------------------------------------------------------------------------------------------
AAA Aaa 12,180 Contra Costa County, California, COP, Refunding (Merrithew Memorial
Hospital Project), 5.375% due 11/01/2017 (i) 13,416
-------------------------------------------------------------------------------------------------------------
Portfolio
Abbreviations
To simplify the listings of MuniYield California Insured Fund, Inc.'s portfolio
holdings in the Schedule of Investments, we have abbreviated the names of many
of the securities according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
GO General Obligation Bonds
HFA Housing Finance Agency
INFLOS Inverse Floating Rate Municipal Bonds
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
6 & 7
MuniYield California Insured Fund, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
California AAA Aaa $ 2,000 Coronado, California, Community Development Agency, Tax Allocation
(continued) Bonds (Coronado Community Development Project), 5.60% due
9/01/2030 (i) $ 2,199
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,520 El Camino, California, Community College District, GO (Election of
2002), Series A, 2.50% due 8/01/2005 (i) 3,613
-------------------------------------------------------------------------------------------------------------
El Monte, California, City School District, GO, Refunding,
Series A (g):
AAA Aaa 1,000 6.25% due 5/01/2020 1,191
AAA Aaa 1,500 6.25% due 5/01/2025 1,769
-------------------------------------------------------------------------------------------------------------
El Monte, California, School District, GO, Series B (c):
AAA Aaa 3,025 5.375% due 5/01/2022 3,293
AAA Aaa 2,525 5.375% due 5/01/2027 2,706
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,040 Fontana, California, Unified School District, GO, Series C, 6.25%
due 5/01/2012 (c) 3,543
-------------------------------------------------------------------------------------------------------------
AAA Aaa 10,755 Fremont, California, Unified School District, Alameda County, GO,
Series A, 5.50% due 8/01/2026 (c) 11,675
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,295 Fresno, California, Joint Powers Financing Authority, Lease Revenue
Bonds, Series A, 5.75% due 6/01/2026 (g) 4,683
-------------------------------------------------------------------------------------------------------------
A- A3 4,000 Golden State Tobacco Securitization Corporation, California, Tobacco
Settlement Revenue Bonds, Series 2003-A-1, 6.75% due 6/01/2039 3,538
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,800 Las Lomitas, California, School District, Election of 2001, GO,
5.50% due 7/01/2022 (g) 4,183
-------------------------------------------------------------------------------------------------------------
NR* NR* 7,575 Long Beach, California, Harbor Revenue Bonds, RIB, AMT, Series
786-X, 9.11% due 5/15/2024 (k) 8,216
-------------------------------------------------------------------------------------------------------------
Los Angeles, California, Community Redevelopment Agency, Tax
Allocation Refunding Bonds (Bunker Hill), Series H (g):
AAA Aaa 1,500 6.50% due 12/01/2015 1,574
AAA Aaa 3,500 6.50% due 12/01/2016 3,672
-------------------------------------------------------------------------------------------------------------
Los Angeles, California, Department of Airports, Airport Revenue
Bonds, AMT (c):
AAA Aaa 1,000 (Los Angeles International Airport), Series D, 5.625% due 5/15/2012 1,070
AAA Aaa 2,500 (Ontario International Airport), Series A, 6% due 5/15/2017 2,779
-------------------------------------------------------------------------------------------------------------
Los Angeles, California, Department of Water and Power, Electric
Plant Revenue Refunding Bonds (i):
AAA Aaa 2,490 5.50% due 2/15/2005 (j) 2,700
AAA Aaa 2,940 5.875% due 2/15/2005 (j) 3,208
AAA Aaa 2,225 6% due 2/15/2005 (j) 2,433
AAA Aaa 3,710 6% due 2/15/2005 (j) 4,056
AAA Aaa 5,300 6.125% due 2/15/2005 (j) 5,806
AAA Aaa 910 5.50% due 2/15/2014 976
AAA Aaa 775 6% due 2/15/2016 837
AAA Aaa 1,840 6.125% due 2/15/2018 1,993
AAA Aaa 1,060 5.875% due 2/15/2020 1,141
AAA Aaa 1,290 6% due 2/15/2030 1,393
-------------------------------------------------------------------------------------------------------------
Los Angeles, California, Harbor Department Revenue Bonds, AMT (i)(k):
NR* Aaa 7,365 RIB, Series 349, 10.81% due 11/01/2026 9,379
AAA Aaa 7,000 Trust Receipts, Class R, Series 7, 10.801% due 11/01/2026 8,914
-------------------------------------------------------------------------------------------------------------
AAA Aaa 26,000 Los Angeles, California, Wastewater System Revenue Bonds, Series B,
5.70% due 6/12/2003 (i)(j) 26,622
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,165 Los Angeles, California, Water and Power Revenue Refunding Bonds
(Power System), Series A-A-2, 5.375% due 7/01/2021 (i) 3,415
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,320 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding, Property A, 1st Tier,
Series C, 5% due 7/01/2023 (a) 4,472
-------------------------------------------------------------------------------------------------------------
Los Angeles County, California, Public Works Financing Authority,
Revenue Refunding Bonds (Flood Control District), Series A (i):
AAA Aaa 1,000 2.50% due 3/01/2005 1,022
AAA Aaa 9,330 3% due 3/01/2006 9,692
-------------------------------------------------------------------------------------------------------------
AAA Aaa 5,830 Los Gatos, California, Joint Union High School District, Election of
1998, GO, Series C, 5.375% due 6/01/2022 (g) 6,350
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,175 Mount Pleasant, California, Elementary School District, GO,
Series B, 6.35% due 12/01/2024 (g) 2,602
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,245 Nevada County, California, COP, Refunding, 5.25% due 10/01/2019 (i) 4,574
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 New Haven, California, Unified School District, GO, Refunding, 5.75%
due 8/01/2020 (g) 2,257
-------------------------------------------------------------------------------------------------------------
Newhall, California, School District, GO, Series A (g):
AAA Aaa 2,135 6.25% due 5/01/2020 2,542
AAA Aaa 5,715 6.40% due 5/01/2025 6,853
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Oakland, California, State Building Authority, Lease Revenue Bonds
(Elihu M. Harris), Series A, 5.50% due 4/01/2014 (a) 2,259
-------------------------------------------------------------------------------------------------------------
AAA Aaa 1,245 Orange County, California, Airport Revenue Refunding Bonds, AMT,
5.625% due 7/01/2012 (i) 1,378
-------------------------------------------------------------------------------------------------------------
AAA Aaa 6,360 Orange County, California, Public Financing Authority, Lease Revenue
Refunding Bonds (Juvenile Justice Center Facility), 5.375% due
6/01/2018 (a) 7,070
-------------------------------------------------------------------------------------------------------------
AAA Aaa 16,920 Orange County, California, Recovery COP, Refunding, Series A, 6%
due 7/01/2026 (b)(i) 19,193
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,360 Orchard, California, School District, GO, Series A, 6.50% due
8/01/2005 (c)(j) 4,944
-------------------------------------------------------------------------------------------------------------
AAA Aaa 9,645 Oxnard, California, Unified High School District, GO, Refunding,
Series A, 6.20% due 8/01/2030 (i) 11,258
-------------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 Pioneers Memorial Hospital District, California, GO, Refunding,
6.50% due 10/01/2024 (a) 8,211
-------------------------------------------------------------------------------------------------------------
AAAr Aaa 10,000 Port Oakland, California, RITR, AMT, Class R, Series 5, 9.836% due
11/01/2012 (c)(k) 12,187
-------------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 Port Oakland, California, Revenue Bonds, AMT, Series K, 5.75% due
11/01/2029 (c) 8,193
-------------------------------------------------------------------------------------------------------------
AAA Aaa 19,035 Port Oakland, California, Revenue Refunding Bonds, AMT, Series L,
5.375% due 11/01/2027 (c) 19,755
-------------------------------------------------------------------------------------------------------------
Poway, California, Redevelopment Agency, Tax Allocation Refunding
Bonds (Paguay Redevelopment Project) (a):
AAA Aaa 1,000 5.375% due 12/15/2018 1,109
AAA Aaa 1,050 5.375% due 12/15/2019 1,157
-------------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Riverside, California, Unified School District, Election, GO,
Series A, 5.25% due 2/01/2023 (c) 6,425
-------------------------------------------------------------------------------------------------------------
NR* Aaa 2,250 Riverside County, California, Asset Leasing Corporation, Leasehold
Revenue Refunding Bonds, RIB, Series 148, 9.76% due 6/01/2016 (i)(k) 2,925
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,450 Sacramento, California, Municipal Utility District, Electric Revenue
Refunding Bonds, 5.30% due 11/15/2005 (g) 2,554
-------------------------------------------------------------------------------------------------------------
NR* Aaa 4,835 San Bernardino County, California, S/F Home Mortgage Revenue
Refunding Bonds, AMT, Series A-1, 6.25% due 12/01/2031 (f) 5,104
-------------------------------------------------------------------------------------------------------------
San Diego County, California, COP (Salk Institute for Bio
Studies) (i):
AAA Aaa 3,570 5.75% due 7/01/2022 4,011
AAA Aaa 5,200 5.75% due 7/01/2031 5,794
-------------------------------------------------------------------------------------------------------------
8 & 9
MuniYield California Insured Fund, Inc., April 30, 2003
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
California San Francisco, California, City and County Airports Commission,
(concluded) International Airport Revenue Bonds, Second Series:
AAA Aaa $ 3,500 AMT, Issue 5, 6.50% due 5/01/2019 (c) $ 3,716
AAA Aaa 3,000 AMT, Issue 6, 6.50% due 5/01/2018 (a) 3,185
AAA Aaa 2,000 AMT, Issue 6, 6.60% due 5/01/2020 (a) 2,125
AAA Aaa 8,500 AMT, Issue 11, 6.25% due 5/01/2005 (c)(j) 9,376
AAA Aaa 3,000 Issue 12-B, 5.625% due 5/01/2021 (c) 3,319
AAA Aaa 8,015 Issue 26B, 5% due 5/01/2026 (c) 8,237
------------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Airports Commission,
International Airport Revenue Refunding Bonds, Second Series 28B (i):
AAA Aaa 3,000 AMT, 5.25% due 5/01/2023 3,192
AAA Aaa 6,455 5.25% due 5/01/2024 6,825
------------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Airports Commission,
International Airport, Special Facilities Lease Revenue Bonds (SFO
Fuel Company LLC), AMT, Series A (g):
AAA Aaa 1,000 6.10% due 1/01/2020 1,132
AAA Aaa 1,000 6.125% due 1/01/2027 1,138
------------------------------------------------------------------------------------------------------------
AAA Aaa 20,160 San Francisco, California, City and County Public Utilities
Commission, Clean Water Revenue Refunding Bonds, Series A, 3% due
10/01/2007 (i) 20,948
------------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Redevelopment Agency,
Lease Revenue Refunding Bonds (George R. Moscone Convention
Center) (g):
AAA Aaa 2,800 6.75% due 7/01/2015 3,015
AAA Aaa 1,200 6.80% due 7/01/2019 1,293
AAA Aaa 5,110 6.75% due 7/01/2024 5,503
------------------------------------------------------------------------------------------------------------
San Francisco, California, Community College District, GO,
Refunding, Series A (c):
NR* Aaa 1,735 5.375% due 6/15/2019 1,899
NR* Aaa 1,730 5.375% due 6/15/2020 1,883
NR* Aaa 1,925 5.375% due 6/15/2021 2,085
------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 San Francisco, California, State Building Authority, Lease Revenue
Bonds (San Francisco Civic Center Complex), Series A, 5.25% due
12/01/2016 (a) 2,203
------------------------------------------------------------------------------------------------------------
NR* Aaa 3,650 San Jose, California, Redevelopment Agency, Tax Allocation Bonds,
RIB, AMT, Series 149, 10.01% due 8/01/2027 (i)(k) 4,417
------------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 San Mateo County, California, Transit District, Sales Tax Revenue
Refunding Bonds, Series A, 8% due 6/01/2020 (i) 5,778
------------------------------------------------------------------------------------------------------------
AAA Aaa 2,595 Santa Clara, California, Redevelopment Agency, Tax Allocation Bonds
(Bayshore North Project), Series A, 5.25% due 6/01/2019 (a) 2,810
------------------------------------------------------------------------------------------------------------
AAA Aaa 6,040 Santa Clara County, California, Financing Authority, Lease Revenue
Bonds (VMC Facility Replacement Project), Series A, 7.75% due
11/15/2011 (a) 8,000
------------------------------------------------------------------------------------------------------------
AAA Aaa 1,100 Santa Clara Valley, California, Water District, Water Utility System
Revenue, Series A, 5.125% due 6/01/2031 (c) 1,132
------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Santa Rosa, California, High School District, GO, 5.375% due
8/01/2026 (g) 3,204
------------------------------------------------------------------------------------------------------------
AAA Aaa 1,800 South Gate, California, Public Financing Authority, Tax Allocation
Revenue Bonds (South Gate Redevelopment Project Number 1), 5.125%
due 9/01/2024 (d) 1,878
------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 South Placer, California, Wastewater Authority, Wastewater Revenue
Bonds, Series A, 5.25% due 11/01/2027 (c) 2,103
------------------------------------------------------------------------------------------------------------
AAA NR* 1,055 Stockton, California, Public Financing Revenue Refunding Bonds,
Series A, 5.875% due 9/02/2016 (g) 1,219
------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Tehachapi, California, COP, Refunding (Installment Sale), 5.75% due
11/01/2016 (g) 1,728
------------------------------------------------------------------------------------------------------------
AAA Aaa 4,790 University of California Revenue Bonds, Series O, 5.125% due
9/01/2031 (c) 4,964
------------------------------------------------------------------------------------------------------------
AAA Aaa 2,185 Walnut, California, Public Financing Authority, Tax Allocation
Revenue Bonds (Walnut Improvement Project), 5.375% due 9/01/2021 (a) 2,379
===================================================================================================================================
Puerto Rico--7.8% AAAr Aaa 4,750 Puerto Rico Commonwealth, GO, Refunding, RITR, Class R, Series 3,
9.813% due 7/01/2016 (i)(k) 6,364
------------------------------------------------------------------------------------------------------------
NR* Aaa 10,000 Puerto Rico Municipal Finance Agency, GO, RIB, Series 225, 9.86% due
8/01/2012 (g)(k) 13,136
------------------------------------------------------------------------------------------------------------
BBB+ Baa3 20,000 Puerto Rico Public Finance Corporation, Commonwealth Appropriation
Revenue Bonds, Series E, 5.75% due 8/01/2030 21,932
===================================================================================================================================
Total Municipal Bonds (Cost--$697,026)--140.1% 746,716
===================================================================================================================================
Shares
Held Short-Term Securities
===================================================================================================================================
13 CMA California Municipal Money Fund++ 13
===================================================================================================================================
Total Short-Term Securities (Cost--$13)--0.0% 13
===================================================================================================================================
Total Investments (Cost--$697,039)--140.1% 746,729
Variation Margin on Financial Futures Contracts**--0.0% (238)
Other Assets Less Liabilities--3.1% 16,467
Preferred Stock, at Redemption Value--(43.2%) (230,015)
---------
Net Assets Applicable to Common Stock--100.0% $ 532,943
=========
===================================================================================================================================
(a) AMBAC Insured.
(b) All or a portion of security held as collateral in connection with open
financial futures contracts.
(c) FGIC Insured.
(d) XL Capital Insured.
(e) FHLMC Collateralized.
(f) FNMA/GNMA Collateralized.
(g) FSA Insured.
(h) GNMA Collateralized.
(i) MBIA Insured.
(j) Prerefunded.
(k) 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 April 30, 2003.
(l) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at April 30,
2003.
* Not Rated.
** Financial futures contracts sold as of April 30, 2003 were as follows:
(in Thousands)
--------------------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
--------------------------------------------------------------------------
400 U.S. Treasury Notes June 2003 $46,050
--------------------------------------------------------------------------
Total Financial Futures Contracts Sold
(Total Contract Price--$46,222) $46,050
=======
--------------------------------------------------------------------------
+ Highest short-term rating by Moody's Investors Service, Inc.
++ 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 Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
CMA California Municipal
Money Fund 13 $15
--------------------------------------------------------------------------
See Notes to Financial Statements.
10 & 11
MuniYield California Insured Fund, Inc., April 30, 2003
QUALITY PROFILE
The quality ratings of securities in the Fund as of April 30, 2003 were as
follows:
- --------------------------------------------------------------------------------
Percent
of Total
S&P Rating/Moody's Rating Investments
- --------------------------------------------------------------------------------
AAA/Aaa ................................................. 84.0%
AA/Aa ................................................... 1.0
A/A ..................................................... 5.4
BBB/Baa ................................................. 5.8
NR (Not Rated) .......................................... 1.1
Other+ .................................................. 2.7
- --------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
STATEMENT OF NET ASSETS
As of April 30, 2003
===============================================================================================================================
Assets: Investments, at value (identified cost--$697,038,761) ............... $ 746,728,530
Cash ................................................................ 169,413
Receivables:
Interest .......................................................... $ 14,518,274
Securities sold ................................................... 2,454,429 16,972,703
-------------
Prepaid expenses and other assets ................................... 67,352
-------------
Total assets ........................................................ 763,937,998
-------------
===============================================================================================================================
Liabilities: Payables:
Investment adviser ................................................ 321,441
Dividends to shareholders ......................................... 288,984
Variation margin .................................................. 237,500
Securities purchased .............................................. 100,266
Other affiliates .................................................. 5,821 954,012
-------------
Accrued expenses .................................................... 25,651
-------------
Total liabilities ................................................... 979,663
-------------
===============================================================================================================================
Preferred Stock: Preferred Stock, at redemption value, par value $.10 per share
(1,800 Series A shares, 1,800 Series B shares, 1,600 Series C
shares, 2,000 Series D shares and 2,000 Series E shares of
AMPS* issued and outstanding at $25,000 per share liquidation
preference) ......................................................... 230,015,344
-------------
===============================================================================================================================
Net Assets Applicable Net assets applicable to Common Stock ............................... $ 532,942,991
To Common Stock: =============
===============================================================================================================================
Analysis of Net Common Stock, par value $.10 per share (34,361,200 shares
Assets Applicable issued and outstanding) ............................................. $ 3,436,120
To Common Stock: Paid-in capital in excess of par .................................... 494,852,782
Undistributed investment income--net ................................ $ 6,121,936
Accumulated realized capital losses on investments--net ............. (21,329,491)
Unrealized appreciation on investments--net ......................... 49,861,644
-------------
Total accumulated earnings--net ..................................... 34,654,089
-------------
Total--Equivalent to $15.51 net asset value per share of Common
Stock (market price--$14.03) ........................................ $ 532,942,991
=============
===============================================================================================================================
* Auction Market Preferred Stock.
See Notes to Financial Statements.
12 & 13
MuniYield California Insured Fund, Inc., April 30, 2003
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 2003
===============================================================================================================================
Investment Interest ............................................................ $ 18,850,812
Income: Dividends ........................................................... 14,722
-------------
Total income ........................................................ 18,865,534
-------------
===============================================================================================================================
Expenses: Investment advisory fees ............................................ $ 1,875,486
Commission fees ..................................................... 290,987
Accounting services ................................................. 113,357
Transfer agent fees ................................................. 41,273
Professional fees ................................................... 33,648
Custodian fees ...................................................... 20,018
Directors' fees and expenses ........................................ 16,641
Printing and shareholder reports .................................... 16,249
Listing fees ........................................................ 15,306
Pricing fees ........................................................ 13,334
Other ............................................................... 17,656
-------------
Total expenses before reimbursement ................................. 2,453,955
Reimbursement of expenses ........................................... (7,585)
-------------
Total expenses after reimbursement .................................. 2,446,370
-------------
Investment income--net .............................................. 16,419,164
-------------
===============================================================================================================================
Realized & Unrealized Realized loss on investments--net ................................... (291,880)
Gain (Loss) on Change in unrealized appreciation/depreciation on investments--net .. 8,157,210
Investments--Net: -------------
Total realized and unrealized gain on investments--net .............. 7,865,330
-------------
===============================================================================================================================
Dividends to Preferred Investment income--net .............................................. (1,085,452)
Stock Shareholders: -------------
Net Increase in Net Assets Resulting from Operations ................ $ 23,199,042
=============
===============================================================================================================================
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2003 2002
==============================================================================================================================
Operations: Investment income--net ............................................. $ 16,419,164 $ 29,318,898
Realized gain (loss) on investments--net ........................... (291,880) 1,662,413
Change in unrealized appreciation/depreciation on investments--net . 8,157,210 (2,673,126)
Dividends and distributions to Preferred Stock shareholders ........ (1,085,452) (2,578,760)
------------- -------------
Net increase in net assets resulting from operations ............... 23,199,042 25,729,425
------------- -------------
==============================================================================================================================
Dividends & Investment income--net ............................................. (14,740,955) (23,314,427)
Distributions to Realized gain on investments--net .................................. -- (112,798)
Common Stock ------------- -------------
Shareholders: Net decrease in net assets resulting from dividends and
distributions to Common Stock shareholders ......................... (14,740,955) (23,427,225)
------------- -------------
==============================================================================================================================
Common Stock Proceeds from issuance of Common Stock resulting from reorganization -- 238,629,327
Transactions: ------------- -------------
==============================================================================================================================
Net Assets Total increase in net assets applicable to Common Stock ............ 8,458,087 240,931,527
Applicable to Beginning of period ................................................ 524,484,904 283,553,377
Common Stock: ------------- -------------
End of period* ..................................................... $ 532,942,991 $ 524,484,904
============= =============
==============================================================================================================================
*Undistributed investment income--net ............................... $ 6,121,936 $ 5,529,179
============= =============
==============================================================================================================================
See Notes to Financial Statements.
14 & 15
MuniYield California Insured Fund, Inc., April 30, 2003
FINANCIAL HIGHLIGHTS
The following per share data and ratios have
been derived from information provided in the For the Six
financial statements. Months Ended For the Year Ended October 31,
April 30, ------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
==================================================================================================================================
Per Share Net asset value, beginning of period ............ $ 15.26 $ 15.44 $ 14.24 $ 13.14 $ 16.25
Operating -------- -------- -------- -------- --------
Performance:+ Investment income--net .......................... .48@@@ .95 1.00 1.02 1.03
Realized and unrealized gain (loss) on
investments--net ................................ .23 (.22) 1.21 1.14 (2.37)
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net ......................... (.03) (.09) (.20) (.25) (.15)
Realized gain on investments--net .............. -- --@ -- -- (.06)
In excess of realized gain on investments--net . -- -- --@ -- (.05)
-------- -------- -------- -------- --------
Total from investment operations ................ .68 .64 2.01 1.91 (1.60)
-------- -------- -------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net ......................... (.43) (.81) (.81) (.81) (.87)
Realized gain on investments--net .............. -- (.01) -- -- (.33)
In excess of realized gain on investments--net . -- -- --@ -- (.31)
-------- -------- -------- -------- --------
Total dividends and distributions to Common Stock
shareholders .................................... (.43) (.82) (.81) (.81) (1.51)
-------- -------- -------- -------- --------
Net asset value, end of period .................. $ 15.51 $ 15.26 $ 15.44 $ 14.24 $ 13.14
======== ======== ======== ======== ========
Market price per share, end of period ........... $ 14.03 $ 13.68 $ 14.46 $ 13.625 $12.6875
======== ======== ======== ======== ========
==================================================================================================================================
Total Investment Based on market price per share ................. 5.78%@@ .20% 12.33% 14.23% (12.83%)
Return:** ======== ======== ======== ======== ========
Based on net asset value per share .............. 4.83%@@ 4.68% 14.76% 15.28% (10.76%)
======== ======== ======== ======== ========
==================================================================================================================================
Ratios Based on Total expenses, net of reimbursement and
Average Net Assets excluding reorganization expenses*** ............ .94%* .96% 1.06% 1.04% 1.02%
Of Common Stock: ======== ======== ======== ======== ========
Total expenses, excluding reorganization
expenses*** ..................................... .94%* .96% 1.06% 1.04% 1.02%
======== ======== ======== ======== ========
Total expenses*** ............................... .94%* 1.00% 1.06% 1.04% 1.02%
======== ======== ======== ======== ========
Total investment income--net*** ................. 6.30%* 6.38% 6.74% 7.43% 6.86%
======== ======== ======== ======== ========
Amount of dividends to Preferred Stock
shareholders .................................... .42%* .56% 1.36% 1.81% .98%
======== ======== ======== ======== ========
Investment income--net, to Common Stock
shareholders .................................... 5.88%* 5.82% 5.38% 5.62% 5.88%
======== ======== ======== ======== ========
==================================================================================================================================
Ratios Based on Total expenses, net of reimbursement and
Average Net Assets excluding reorganization expenses ............... .65%* .67% .72% .68% .69%
Of Common and ======== ======== ======== ======== ========
Preferred Stock:*** Total expenses, excluding reorganization expenses .65%* .67% .72% .68% .69%
======== ======== ======== ======== ========
Total expenses .................................. .65%* .70% .72% .68% .69%
======== ======== ======== ======== ========
Total investment income--net .................... 4.38%* 4.42% 4.57% 4.88% 4.65%
======== ======== ======== ======== ========
==================================================================================================================================
Ratios Based on Dividends to Preferred Stock shareholders ....... .95%* 1.25% 2.86% 3.46% 2.08%
Average Net Assets ======== ======== ======== ======== ========
Of Preferred Stock:
==================================================================================================================================
Supplemental Net assets applicable to Common Stock, end of
Data: period (in thousands) ........................... $532,943 $524,485 $283,553 $261,474 $240,973
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) .................................. $230,000 $230,000 $130,000 $130,000 $130,000
======== ======== ======== ======== ========
Portfolio turnover .............................. 21.08% 77.13% 59.36% 78.52% 86.51%
======== ======== ======== ======== ========
==================================================================================================================================
Leverage: Asset coverage per $1,000 ....................... $ 3,317 $ 3,280 $ 3,181 $ 3,011 $ 2,854
======== ======== ======== ======== ========
==================================================================================================================================
Dividends Per Share Series A--Investment income--net ................ $ 104 $ 359 $ 758 $ 879 $ 493
On Preferred Stock ======== ======== ======== ======== ========
Outstanding:++ Series B--Investment income--net ................ $ 117 $ 324 $ 700 $ 838 $ 555
======== ======== ======== ======== ========
Series C--Investment income--net ................ $ 117 $ 320 $ 683 $ 884 $ 503
======== ======== ======== ======== ========
Series D--Investment income--net ................ $ 143 $ 203 -- -- --
======== ======== ======== ======== ========
Series E--Investment income--net ................ $ 108 $ 201 -- -- --
======== ======== ======== ======== ========
==================================================================================================================================
* 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.
*** 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 November 30, 1992 (Series A and
B), January 27, 1997 (Series C) and February 4, 2002 (Series D and E).
@ Amount is less than $(.01) per share.
@@ Aggregate total investment return.
@@@ Based on average shares outstanding.
See Notes to Financial Statements.
16 & 17
MuniYield California Insured Fund, Inc., April 30, 2003
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield California Insured Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The Fund'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 MCA. 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 both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movement and movements in the securities
market. 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. 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.
o Forward interest rate swaps -- The Fund is authorized to enter into forward
interest rate swaps. In a forward interest rate swap, the Fund and the
counterparty agree to pay or receive interest on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. The value of the agreement is determined by quoted fair values received
daily by the Fund from the counterparty. When the agreement is closed, the Fund
records a realized gain or loss in an amount equal to the value of the
agreement.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The fund amortizes all
premiums and discounts on debt securities.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Stock. For the six months ended April
30, 2003, FAM reimbursed the Fund in the amount of $7,585.
For the six months ended April 30, 2003, the Fund reimbursed FAM $8,344 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 April 30, 2003 were $183,106,188 and $148,542,338, respectively.
Net realized gains (losses) for the six months ended April 30, 2003 and net
unrealized gains as of April 30, 2003 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains
- --------------------------------------------------------------------------------
Long-term investments ................... $ 3,631,753 $49,689,769
Financial futures contracts ............. (3,923,633) 171,875
----------- -----------
Total ................................... $ (291,880) $49,861,644
=========== ===========
- --------------------------------------------------------------------------------
As of April 30, 2003, net unrealized appreciation for Federal income tax
purposes aggregated $49,679,666, of which $50,077,349 related to appreciated
securities and $397,683 related to depreciated securities. The aggregate cost of
investments at April 30, 2003 for Federal income tax purposes was $697,048,864.
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 the six months ended April 30, 2003
remained constant and for the year ended
18 & 19
MuniYield California Insured Fund, Inc., April 30, 2003
NOTES TO FINANCIAL STATEMENTS (concluded)
October 31, 2002 increased by 16,002,080 as a result of issuance of Common Stock
from reorganization.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are redeemable shares of Preferred Stock
of the Fund, with a par value of $.10 per share and a liquidation preference of
$25,000 per share plus accrued and unpaid dividends, that entitle their holders
to receive cash dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at April 30, 2003 were as follows: Series
A, .95%; Series B, .95%; Series C, 1.00%; Series D, 1.13%; and Series E, .80%.
Shares issued and outstanding during the six months ended April 30, 2003,
remained constant and during the year ended October 31, 2002, increased by 4,000
as a result of issuance of Preferred Stock from reorganization.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the six months ended April 30, 2003, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, an affiliate of FAM, earned $78,650 as commissions.
5. Capital Loss Carryforward:
On October 31, 2002, the Fund had a net capital loss carryforward of $7,781,444,
of which $2,049,122 expires in 2007, $5,722,654 expires in 2008 and $9,668
expires in 2009. This amount will be available to offset like amounts of any
future taxable gains.
6. Subsequent Event:
The Fund paid a tax-exempt income dividend to holders of Common Stock in the
amount of $.073000 per share on May 29, 2003 to shareholders of record on May
16, 2003.
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. 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 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
MuniYield California Insured Fund, Inc., April 30, 2003
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
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
Brian D. Stewart, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agents
Common Stock:
EquiServe Trust Company, I.A.
P.O. Box 43010
Providence, RI 02940-3010
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MCA
- --------------------------------------------------------------------------------
Melvin R. Seiden, Director of MuniYield California Insured Fund, Inc., has
recently retired. The Fund's Board of Directors wishes Mr. Seiden well in his
retirement.
- --------------------------------------------------------------------------------
22
[LOGO] Merrill Lynch Investment Managers
[GRAPHICS OMITTED]
MuniYield California Insured Fund, Inc. seeks to provide shareholders with as
high a level of current income exempt from Federal and California income taxes
as is consistent with its investment policies and prudent investment management
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 MuniYield 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.
MuniYield California Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
[RECYCLED LOGO] Printed on post-consumer recycled paper #16388--4/03
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.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-3 under the
Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d) under
the Exchange Act regarding an exemption from the listing standards for
audit committees.
(Listed issuers must be in compliance with the new listing rules by the
earlier of their first annual shareholders meeting after January 2004,
or October 31, 2004 (annual requirement))
Item 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 (not answered
until July 1, 2003)
Item 8 -- Reserved
Item 9(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
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 pursuant to Section 302 of the Sarbanes-Oxley Act.
Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MuniYield California Insured Fund, Inc.
By: /s/ Terry K. Glenn
------------------------------
Terry K. Glenn,
President of
MuniYield California Insured Fund, Inc.
Date: June 23, 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
MuniYield California Insured Fund, Inc.
Date: June 23, 2003
By: /s/ Donald C. Burke
------------------------------
Donald C. Burke,
Chief Financial Officer of
MuniYield California Insured Fund, Inc.
Date: June 23, 2003
Attached hereto as an exhibit are the certifications pursuant to
Section 906 of the Sarbanes-Oxley Act.