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: 10/31/03
Date of reporting period: 11/01/02 - 10/31/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
MuniYield California
Insured Fund, Inc.
Annual Report
October 31, 2003
[LOGO] Merrill Lynch Investment Managers
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, net of dividends to Preferred Stock, 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. As of October 31, 2003, the percentage of the Fund's
total net assets invested in inverse floaters was 10.03%.
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.
2 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
A Letter From the President
Dear Shareholder
As 2003 draws to a close, it seems appropriate to reflect on what has been a
meaningful year in many respects. We saw the beginning and the end of all-out
war in Iraq, equity market uncertainty turned to strength and sub par gross
domestic product growth of 1.4% in the first quarter of 2003 grew to an
extraordinary 8.2% in the third quarter. Amid the good news, fixed income
investments, which had become the asset class of choice during the preceding
three-year equity market decline, faced new challenges.
During 2003, municipal bond yields rose and fell in reaction to geopolitical
events, equity market performance, economic activity and employment figures. By
the end of October, long-term municipal revenue bond yields were slightly higher
than they were one year earlier, at 5.24% as measured by the Bond Buyer Revenue
Bond Index. With many state deficits at record levels, municipalities issued
nearly $400 billion in new long-term tax-exempt bonds during the 12-month period
ended October 31, 2003. The availability of bonds, together with attractive
yield ratios relative to U.S. Treasury issues, made municipal bonds a popular
fixed income investment alternative.
Throughout the year, our portfolio managers continued to work diligently to
deliver on our commitment to provide superior performance within reasonable
expectations for risk and return. This included striving to outperform our peers
and the market indexes. With that said, remember that the advice and guidance of
a skilled financial advisor often can mean the difference between successful and
unsuccessful investing. A financial professional can help you choose those
investments that will best serve you as you plan for your financial future.
Finally, I am proud to premiere a new look to our shareholder communications.
Our portfolio manager commentaries have been trimmed and organized in such a way
that you can get the information you need at a glance, in plain language.
Today's markets are confusing enough. We want to help you put it all in
perspective. The report's new size also allows us certain mailing efficiencies.
Any cost savings in production or postage are passed on to the Fund and,
ultimately, to Fund shareholders.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving you in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
In a very volatile period for interest rates, we maintained our focus on
enhancing the credit quality of the portfolio while protecting the Fund from net
asset value volatility.
Describe the market environment relative to municipal bonds during the fiscal
year.
At the end of October, long-term tax-exempt bond yields were 90% - 95% of
comparable U.S. Treasury securities, substantially exceeding their historical
average of 85% - 88%. Considering their tax-free status, this made long-term
municipal bonds an attractive investment alternative during the past 12 months.
Long-term U.S. Treasury bond yields declined throughout most of the first seven
months of the fiscal year, while bond prices -- which move in the opposite
direction of yields -- rose in response to weak equity markets, concerns about a
growing conflict in Iraq and continued sub par U.S. economic growth. The Federal
Reserve Board continued to lower short-term interest rates to stimulate business
and consumer economic activity. Bond yields reversed course in July and August,
rising sharply as economic conditions began to improve and as most analysts
agreed the Federal Reserve Board had finished lowering interest rates. In
mid-August, U.S. Treasury bond yields reached 5.45%, their highest level during
the period, before again moving lower for the remainder of the fiscal year. At
the end of the 12-month period, long-term U.S. Treasury bond yields were 5.13%,
15 basis points (.15%) higher than a year earlier. The relatively modest yield
increase year-over-year masks the considerable month-to-month volatility in
interest rates during the period.
Long-term tax-exempt bond yields also rose from year-ago levels, although to a
lesser extent than U.S. Treasury bonds. Yield movements were less volatile than
those experienced by U.S. Treasury issues, because municipal bond prices
typically are less sensitive to short-term economic and geopolitical pressures.
By the end of October, long-term municipal revenue bond yields stood at 5.24%, a
small increase compared to the previous year. Yields for long-term Aaa-rated
tax-exempt bonds (the highest rated) declined 10 basis points during the past
year. The decline largely reflected investors' growing demand for high-quality
bonds, which provided valuable stability in an uncertain market.
The municipal market's outperformance of the U.S. Treasury market was especially
impressive given the dramatic increase in new bond issuance during the fiscal
year. State and local governments took advantage of historically low interest
rates to finance existing infrastructure needs and refinance outstanding
high-interest-rate debt. During the past 12 months, municipalities issued nearly
$400 billion in new securities, an increase of more than 12% compared to last
year's issuance. More recently, however, new municipal bond issuance slowed as
tax-exempt bond yields rose, making borrowing more expensive. Less than $90
billion in long-term tax-exempt bonds was underwritten during the period's last
three months, a decline of nearly 10% versus the same three months of 2002. This
decline in supply helped support the tax-exempt market's recent performance.
Describe conditions in the state of California during the period.
In July 2003, Standard & Poor's downgraded California's credit rating to BBB,
the lowest of any state in the nation. The credit downgrade stemmed from
uncertainty about California's financial situation, characterized by a deficit
that then exceeded $38 billion. Since that time, the state managed to pass a
budget. Unfortunately for California's finances, the budget included record
amounts of new borrowing and lacked provisions to significantly cut government
spending or increase tax revenues. To close its budget gap, California plans to
issue new general obligation debt, quasi-state-backed bonds secured by a legal
settlement with the tobacco industry, and "fiscal recovery" bonds to refinance
California's high-interest-rate debt. Some of these bond issues, however, are
likely to face legal challenges.
California's political situation was clarified in October, when Arnold
Schwarzenegger won a recall election to succeed Gray Davis as governor. It is,
however, unclear whether this election will lead to significant changes in the
state's fiscal responsibility or in its financial condition.
California general debt obligations offered as much as 75 basis points of
additional yield relative to comparable AAA-rated municipal bonds during the
period, reflecting investors' concern about the state's credit problems. As the
period progressed, that spread narrowed to 35 basis points before widening to 50
basis points late in the period. The more recent wider spreads were prompted by
renewed skepticism following the recall and anticipated new bond supply.
How did the Fund perform during the period in light of the existing market
conditions?
For the year ended October 31, 2003, the Common Stock of MuniYield California
Insured Fund, Inc. had a net annualized
4 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
yield of 5.76%, based on a year-end per share net asset value of $15.10 and
$.870 per share income dividends. Over the same period, the total investment
return on the Fund's Common Stock was +5.29%, based on a change in per share net
asset value from $15.26 to $15.10, and assuming reinvestment of $.867 per share
ordinary income dividends.
For the six-month period ended October 31, 2003, the total investment return on
the Fund's Common Stock was +.44%, based on a change in per share net asset
value from $15.51 to $15.10 and assuming reinvestment of $.438 per share
ordinary income dividends.
For the six-month period ended October 31, 2003, the Fund's Auction Market
Preferred Stock had average yields as follows: .88% for Series A; .74% for
Series B; .68% for Series C; .78% for Series D; and .69% for Series E.
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (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 market value of the Fund's Common Stock can vary significantly from total
investment return based on changes in the Fund's net asset value.
The Fund's total return performance, based on net asset value, trailed that of
its comparable Lipper category of California Insured Municipal Debt Funds, which
had an average return of +5.5% for the same 12-month period. In terms of yield,
we intend to restructure the portfolio to improve our competitive position. We
believe this is best accomplished after interest rates rise, which should allow
us to create a portfolio with a higher-than-average coupon structure. Until
then, we remain focused on protecting the Fund's net asset value by maintaining
a defensive market stance with a low duration asset mix.
What changes were made to the portfolio during the period?
We made few significant changes to the portfolio during the fiscal year. We
continued to adopt a defensive portfolio structure, with approximately 85% of
the Fund invested in insured California bonds on October 31, 2003 --
consistently above the Fund's mandated limit of 80%. We also raised the average
couponing of the Fund's holdings during the period and concentrated assets in
parts of the yield curve that we believe offer the best value for the level of
interest rate risk taken.
As mentioned earlier, we sought to restructure the portfolio to generate higher
average coupon payments from the Fund's holdings, but believe this would be most
advantageous in a higher-interest-rate environment. In the meantime, we focused
on seeking to protect the Fund's net asset value through our defensive approach,
which also included keeping the Fund's duration -- its sensitivity to interest
rates -- relatively low. Another defensive action was to use interest rate swaps
in an effort to cushion the Fund from the negative effects that an interest rate
increase would have on bond prices.
In terms of leverage, the Fund's borrowing costs remained between .75% - 1.25%
during the fiscal year. These attractive funding levels, in combination with a
steep tax-exempt yield curve, generated a significant income benefit to the
Fund's Common Stock shareholders. Further declines in the Fund's borrowing costs
would require significant easing of monetary policy by the Federal Reserve
Board. While such action is not expected, neither is an imminent increase in
short-term interest rates. We expect short-term borrowing costs to remain near
current attractive levels for the coming months. 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 2
of this report to shareholders.)
How would you characterize the portfolio's position at the close of the period?
We continued to position the portfolio defensively, keeping its duration shorter
than our Lipper group. Our focus is on maintaining the Fund's net asset value,
as we anticipate continued interest rate volatility. We believe the Fund's
defensive structure should mute some of the price volatility that may result if
long-term market rates continue to rise.
Walter C. O'Connor
Vice President and Portfolio Manager
November 11, 2003
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 5
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (in Thousands)
S&P Moody's Face
Ratings@ Ratings@ Amount Municipal Bonds Value
===================================================================================================================================
California--134.0%
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 7,000 ABAG Finance Authority for Nonprofit Corporations, California,
COP (Children's Hospital Medical Center), 6% due 12/01/2029 (a) $ 7,805
-----------------------------------------------------------------------------------------------------------
AAA Aaa 1,985 Arcadia, California, Unified School District, GO, Series B,
6.50% due 7/01/2015 (b) 2,190
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,675 Bakersfield, California, COP, Refunding (Convention Center
Expansion Project), 5.80% due 4/01/2017 (g) 4,135
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Bay Area Government Association, California, Revenue Refunding
Bonds (California Redevelopment Agency Pool), Series A, 6%
due 12/15/2024 (e) 2,142
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,990 Brentwood, California, Infrastructure Refinancing Authority,
Infrastructure Revenue Refunding Bonds, Series A, 5.20%
due 9/02/2029 (e) 4,102
-----------------------------------------------------------------------------------------------------------
California Community College Financing Authority, Lease Revenue
Bonds, Series A (g):
AAA Aaa 3,215 5.95% due 12/01/2022 3,620
AAA Aaa 1,100 6% due 12/01/2029 1,237
-----------------------------------------------------------------------------------------------------------
California Educational Facilities Authority Revenue Bonds:
AAA NR* 28,000 (Pepperdine University), Series A, 5.50% due 8/01/2032 (g) 29,607
AAA Aaa 3,400 (University of Redlands), 5% due 6/01/2033 (b) 3,418
NR* A2 5,000 (University of San Diego), Series A, 5.50% due 10/01/2032 5,172
-----------------------------------------------------------------------------------------------------------
AAA NR* 24,170 California Educational Facilities Authority, Student Loan
Revenue Bonds (CalEdge Loan Program), AMT, 5.55% due
4/01/2028 (a) 24,935
-----------------------------------------------------------------------------------------------------------
California HFA, Home Mortgage Revenue Bonds, VRDN (j):
A1+ VMIG1+ 5,855 AMT, Series B, 1.20% due 8/01/2033 (e) 5,855
A1+ VMIG1+ 9,210 AMT, Series R, 1.15% due 8/01/2023 (a) 9,210
A1 VMIG1+ 13,200 Series F, 1.15% due 2/01/2033 (a) 13,200
-----------------------------------------------------------------------------------------------------------
NR* Aaa 985 California HFA, Revenue Bonds, RIB, AMT, Series 150, 10.12%
due 2/01/2029 (g)(i) 1,025
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,750 California Health Facilities Finance Authority Revenue Bonds
(Kaiser Permanente), Series A, 5.50% due 6/01/2022 (e) 2,950
-----------------------------------------------------------------------------------------------------------
California Health Facilities Finance Authority Revenue
Refunding Bonds, VRDN (j):
A1+ VMIG1+ 400 (Adventist Hospital), Series A, 1.08% due 9/01/2028 (g) 400
A1+ VMIG1+ 6,800 (Adventist Hospital), Series B, 1.08% due 9/01/2028 (g) 6,800
A1+ VMIG1+ 1,720 (Adventist Hospital), Series B, 1.12% due 9/01/2028 (g) 1,720
A1+ VMIG1+ 1,000 (Sutter/Catholic Healthcare System), Series B, 1.10%
due 7/01/2012 (a) 1,000
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 California Infrastructure and Economic Development Bank,
Insured Revenue Bonds (Rand Corporation), Series A, 5.50%
due 4/01/2032 (a) 3,168
-----------------------------------------------------------------------------------------------------------
BBB+ Baa2 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 20,937
-----------------------------------------------------------------------------------------------------------
California Rural Home Mortgage Finance Authority, S/F Mortgage
Revenue Bonds (Mortgage-Backed Securities Program), AMT:
AAA NR* 2,480 Series A, 6.35% due 12/01/2029 (c)(d) 2,615
NR* Aaa 710 Series A-1, 6.90% due 12/01/2024 (c)(f) 750
AAA NR* 1,865 Series B, 6.25% due 12/01/2031 (d) 1,968
-----------------------------------------------------------------------------------------------------------
California State, Department of Veteran Affairs, Home Purpose
Revenue Refunding Bonds:
AAA Aaa 12,680 Series A, 5.35% due 12/01/2027 (a) 13,051
A Aa2 7,500 Series C, 6.15% due 12/01/2027 7,684
-----------------------------------------------------------------------------------------------------------
BBB+ A3 7,500 California State, Department of Water Resources, Power Supply
Revenue Bonds, Series A, 5.75% due 5/01/2017 8,185
Portfolio Abbreviations
To simplify the listings of MuniYield California Insured Fund, Inc.'s portfolio
holdings in the Schedule of Investments, we have abbreviated the names of many
of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DRIVERS Derivative Inverse Tax-Exempt Receipts
GO General Obligation Bonds
HFA Housing Finance Agency
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
6 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings@ Ratings@ Amount Municipal Bonds Value
===================================================================================================================================
California (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
California State, GO:
AAA Aaa $ 860 6.25% due 10/01/2019 (g) $ 886
BBB A3 3,450 Various Purpose, 5.50% due 11/01/2033 3,500
-----------------------------------------------------------------------------------------------------------
California State, GO, Refunding:
AAA NR* 9,935 DRIVERS, AMT, Series 239, 10% due 12/01/2032 (a)(i) 10,595
AAA Aaa 3,000 Series BX, 5.50% due 12/01/2031 (e) 3,064
-----------------------------------------------------------------------------------------------------------
AAA Aaa 4,530 California State Public Works Board, Lease Revenue Bonds
(Department of Corrections--Tentative Administration), Series A,
5.25% due 3/01/2020 (a) 4,777
-----------------------------------------------------------------------------------------------------------
AAA Aaa 16,675 California State Public Works Board, Lease Revenue Refunding Bonds
(Department of Corrections), Series B, 5.625% due 11/01/2016 (g) 18,764
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,375 California State University and Colleges, Housing System Revenue
Refunding Bonds, 5.90% due 11/01/2021 (b) 2,625
-----------------------------------------------------------------------------------------------------------
AAA Aaa 4,100 California Statewide Communities Development Authority, COP
(Kaiser Permanente), 5.30% due 12/01/2015 (e) 4,436
-----------------------------------------------------------------------------------------------------------
A- A3 3,685 California Statewide Communities Development Authority, Health
Facility Revenue Bonds (Memorial Health Services), Series A, 6%
due 10/01/2023 3,896
-----------------------------------------------------------------------------------------------------------
A+ A1 1,000 California Statewide Communities Development Authority Revenue
Bonds (Sutter Health), Series B, 5.50% due 8/15/2028 1,011
-----------------------------------------------------------------------------------------------------------
AAA Aaa 8,900 Central Unified School District, California, COP, 3.50%
due 1/01/2035 (a) 9,104
-----------------------------------------------------------------------------------------------------------
AAA Aaa 4,600 Ceres, California, Redevelopment Agency, Tax Allocation Bonds
(Ceres Redevelopment Project Area Number 1), 5.75% due
11/01/2030 (g) 5,036
-----------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Chaffey, California, Union High School District, GO, Series C,
5.375% due 5/01/2023 (e) 6,350
-----------------------------------------------------------------------------------------------------------
AAA Aaa 4,590 Clovis, California, Public Financing Authority, Water Revenue
Refunding Bonds, 5% due 3/01/2028 (a) 4,631
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,540 Coalinga, California, Redevelopment Agency Tax Allocation Bonds,
5.90% due 9/15/2025 (g) 2,811
-----------------------------------------------------------------------------------------------------------
AAA Aaa 12,180 Contra Costa County, California, COP, Refunding (Merrithew
Memorial Hospital Project), 5.375% due 11/01/2017 (g) 13,173
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Coronado, California, Community Development Agency, Tax Allocation
Bonds (Coronado Community Development Project), 5.60%
due 9/01/2030 (g) 2,150
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,520 El Camino, California, Community College District, GO (Election
of 2002), Series A, 2.50% due 8/01/2005 (g) 3,601
-----------------------------------------------------------------------------------------------------------
El Monte, California, City School District, GO, Refunding,
Series A (e):
AAA Aaa 1,000 6.25% due 5/01/2020 1,164
AAA Aaa 1,500 6.25% due 5/01/2025 1,713
-----------------------------------------------------------------------------------------------------------
El Monte, California, School District, GO, Series B (b):
AAA Aaa 3,025 5.375% due 5/01/2022 3,225
AAA Aaa 2,525 5.375% due 5/01/2027 2,654
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,040 Fontana, California, Unified School District, GO, Series C, 6.25%
due 5/01/2012 (b) 3,510
-----------------------------------------------------------------------------------------------------------
AAA Aaa 10,755 Fremont, California, Unified School District, Alameda County, GO,
Series A, 5.50% due 8/01/2026 (b) 11,482
-----------------------------------------------------------------------------------------------------------
AAA Aaa 4,295 Fresno, California, Joint Powers Financing Authority, Lease
Revenue Bonds, Series A, 5.75% due 6/01/2026 (e) 4,685
-----------------------------------------------------------------------------------------------------------
BBB Baa2 2,500 Golden State Tobacco Securitization Corporation of California,
Tobacco Settlement Revenue Bonds, Series A-2, 7.90% due 6/01/2042 2,572
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,800 Las Lomitas, California, School District, Election of 2001, GO,
5.50% due 7/01/2022 (e) 4,113
-----------------------------------------------------------------------------------------------------------
NR* Aa3 7,575 Long Beach, California, Harbor Revenue Bonds, RIB, AMT, Series
786-X, 9.42% due 5/15/2024 (i) 7,955
-----------------------------------------------------------------------------------------------------------
Los Angeles, California, Community Redevelopment Agency, Tax
Allocation Refunding Bonds (Bunker Hill), Series H (e):
AAA Aaa 1,500 6.50% due 12/01/2015 1,536
AAA Aaa 3,500 6.50% due 12/01/2016 3,585
-----------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Los Angeles, California, Convention and Exhibition Center
Authority, Lease Revenue Refunding Bonds, Series A, 2%
due 8/15/2006 (a) 5,073
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 7
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings@ Ratings@ Amount Municipal Bonds Value
===================================================================================================================================
California (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
Los Angeles, California, Department of Airports, Airport Revenue
Bonds, AMT (b):
AAA Aaa $ 710 (Los Angeles International Airport), Series D, 5.625%
due 5/15/2005 (h) $ 761
AAA Aaa 290 (Los Angeles International Airport), Series D, 5.625%
due 5/15/2012 310
AAA Aaa 2,500 (Ontario International Airport), Series A, 6% due 5/15/2017 2,741
-----------------------------------------------------------------------------------------------------------
Los Angeles, California, Department of Water and Power, Electric
Plant Revenue Refunding Bonds (g)(h):
AAA Aaa 3,400 5.50% due 2/15/2005 3,623
AAA Aaa 4,000 5.875% due 2/15/2005 4,282
AAA Aaa 8,000 6% due 2/15/2005 8,576
AAA Aaa 7,140 6.125% due 2/15/2005 7,665
-----------------------------------------------------------------------------------------------------------
Los Angeles, California, Harbor Department Revenue Bonds,
AMT (g)(i):
NR* Aaa 7,365 RIB, Series 349, 11.12% due 11/01/2026 9,121
AAA Aaa 7,000 Trust Receipts, Class R, Series 7, 11.099% due 11/01/2026 8,669
-----------------------------------------------------------------------------------------------------------
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 (g) 3,380
-----------------------------------------------------------------------------------------------------------
AAA Aaa 9,825 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Bonds (Proposition C), Second
Series A, 5% due 7/01/2005 (a)(h) 10,442
-----------------------------------------------------------------------------------------------------------
AAA Aaa 9,330 Los Angeles County, California, Public Works Financing Authority,
Revenue Refunding Bonds (Flood Control District), Series A, 3%
due 3/01/2006 (g) 9,677
-----------------------------------------------------------------------------------------------------------
AAA Aaa 5,830 Los Gatos, California, Joint Union High School District, Election
of 1998, GO, Series C, 5.375% due 6/01/2022 (e) 6,219
-----------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Menlo Park, California, Community Development Agency, Tax
Allocation (Las Pulgas Community Development Project), 5.55%
due 6/01/2030 (a) 1,069
-----------------------------------------------------------------------------------------------------------
AAA NR* 2,985 Milpitas, California, Redevelopment Agency, Tax Allocation
Refunding Bonds (Redevelopment Project Area Number 1), 2.50%
due 9/01/2005 (g) 3,056
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,175 Mount Pleasant, California, Elementary School District, GO,
Series B, 6.35% due 12/01/2024 (e) 2,517
-----------------------------------------------------------------------------------------------------------
AAA Aaa 4,245 Nevada County, California, COP, Refunding, 5.25% due 10/01/2019 (g) 4,519
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 New Haven, California, Unified School District, GO, Refunding,
5.75% due 8/01/2020 (e) 2,220
-----------------------------------------------------------------------------------------------------------
Newhall, California, School District, GO, Series A (e):
AAA Aaa 2,135 6.25% due 5/01/2020 2,486
AAA Aaa 5,715 6.40% due 5/01/2025 6,637
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Oakland, California, State Building Authority, Lease Revenue Bonds
(Elihu M. Harris), Series A, 5.50% due 4/01/2014 (a) 2,234
-----------------------------------------------------------------------------------------------------------
AAA Aaa 1,245 Orange County, California, Airport Revenue Refunding Bonds, AMT,
5.625% due 7/01/2012 (g) 1,379
-----------------------------------------------------------------------------------------------------------
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) 6,953
-----------------------------------------------------------------------------------------------------------
AAA Aaa 16,920 Orange County, California, Recovery COP, Refunding, Series A, 6%
due 7/01/2026 (g) 18,927
-----------------------------------------------------------------------------------------------------------
AAA Aaa 4,360 Orchard, California, School District, GO, Series A, 6.50% due
8/01/2005 (b)(h) 4,844
-----------------------------------------------------------------------------------------------------------
AAA Aaa 9,645 Oxnard, California, Unified High School District, GO, Refunding,
Series A, 6.20% due 8/01/2030 (g) 11,013
-----------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 Pioneers Memorial Hospital District, California, GO, Refunding,
6.50% due 10/01/2024 (a) 8,020
-----------------------------------------------------------------------------------------------------------
AAAr Aaa 10,000 Port Oakland, California, RITR, AMT, Class R, Series 5, 10.164%
due 11/01/2012 (b)(i) 11,756
-----------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 Port Oakland, California, Revenue Bonds, AMT, Series K, 5.75% due
11/01/2029 (b) 7,868
-----------------------------------------------------------------------------------------------------------
AAA Aaa 19,035 Port Oakland, California, Revenue Refunding Bonds, AMT, Series L,
5.375% due 11/01/2027 (b) 19,556
-----------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Riverside, California, Unified School District, Election, GO,
Series A, 5.25% due 2/01/2023 (b) 6,277
-----------------------------------------------------------------------------------------------------------
NR* Aaa 2,250 Riverside County, California, Asset Leasing Corporation, Leasehold
Revenue Refunding Bonds, RIB, Series 148, 10.07% due
6/01/2016 (g)(i) 2,807
8 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings@ Ratings@ Amount Municipal Bonds Value
===================================================================================================================================
California (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
NR* Aaa $ 3,245 San Bernardino County, California, S/F Home Mortgage Revenue
Refunding Bonds, AMT, Series A-1, 6.25% due 12/01/2031 (d) $ 3,372
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,875 San Diego, California, Community College District, GO, Refunding
(Election of 2002), Series A, 2.50% due 5/01/2007 (e) 2,947
-----------------------------------------------------------------------------------------------------------
AAA Aaa 4,865 San Diego, California, Unified School District, GO (Election
1998), Series E, 5% due 7/01/2028 (e) 4,909
-----------------------------------------------------------------------------------------------------------
San Diego County, California, COP:
AAA Aaa 1,000 (North County Regional Center Expansion), 5.25% due
11/15/2019 (a) 1,065
AAA Aaa 3,570 (Salk Institute for Bio Studies), 5.75% due 7/01/2022 (g) 3,920
AAA Aaa 5,200 (Salk Institute for Bio Studies), 5.75% due 7/01/2031 (g) 5,657
-----------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Airport Commission,
International Airport Revenue Bonds, Second Series:
AAA Aaa 3,500 AMT, Issue 5, 6.50% due 5/01/2019 (b) 3,660
AAA Aaa 3,000 AMT, Issue 6, 6.50% due 5/01/2018 (a) 3,137
AAA Aaa 2,000 AMT, Issue 6, 6.60% due 5/01/2020 (a) 2,092
AAA Aaa 8,500 AMT, Issue 11, 6.25% due 5/01/2005 (b)(h) 9,193
AAA Aaa 3,000 Issue 12-B, 5.625% due 5/01/2021 (b) 3,280
AAA Aaa 8,015 Issue 26B, 5% due 5/01/2026 (b) 8,054
-----------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Airports Commission,
International Airport Revenue Refunding Bonds, Second Series
28B (g):
AAA Aaa 3,000 5.25% due 5/01/2023 3,129
AAA Aaa 6,455 5.25% due 5/01/2024 6,701
-----------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Airports Commission,
International Airport, Special Facilities Lease Revenue Bonds
(SFO Fuel Company LLC), AMT, Series A (e):
AAA Aaa 1,000 6.10% due 1/01/2020 1,115
AAA Aaa 1,000 6.125% due 1/01/2027 1,109
-----------------------------------------------------------------------------------------------------------
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 (g) 21,040
-----------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Redevelopment Agency,
Lease Revenue Refunding Bonds (George R. Moscone Convention
Center)(e):
AAA Aaa 2,800 6.75% due 7/01/2015 2,957
AAA Aaa 1,200 6.80% due 7/01/2019 1,267
AAA Aaa 5,110 6.75% due 7/01/2024 5,395
-----------------------------------------------------------------------------------------------------------
San Francisco, California, Community College District, GO,
Refunding, Series A (b):
NR* Aaa 1,735 5.375% due 6/15/2019 1,880
NR* Aaa 1,730 5.375% due 6/15/2020 1,861
NR* Aaa 1,925 5.375% due 6/15/2021 2,056
-----------------------------------------------------------------------------------------------------------
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) 2,174
-----------------------------------------------------------------------------------------------------------
NR* Aaa 3,650 San Jose, California, Redevelopment Agency, Tax Allocation Bonds,
RIB, AMT Series 149, 10.32% due 8/01/2027 (g)(i) 4,139
-----------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Santa Ana, California, Community Redevelopment Agency Tax
Allocation Refunding Bonds (South Main Street Redevelopment
Project), Series B, 2.50% due 9/01/2006 (b) 1,028
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,595 Santa Clara, California, Redevelopment Agency, Tax Allocation
Bonds (Bayshore North Project), Series A, 5.25% due 6/01/2019 (a) 2,760
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Santa Clara County, California, Financing Authority, Lease Revenue
Bonds (VMC Facility Replacement Project), Series A, 7.75% due
11/15/2011 (a) 2,614
-----------------------------------------------------------------------------------------------------------
AAA Aaa 1,100 Santa Clara Valley, California, Water District, Water Utility
System Revenue Bonds, Series A, 5.125% due 6/01/2031 (b) 1,115
-----------------------------------------------------------------------------------------------------------
AAA Aaa 2,150 Santa Clarita, California, Community College District, COP
(College of Canyons Improvement Project), 5.125% due 8/01/2031 (g) 2,190
-----------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Santa Rosa, California, High School District, GO, 5.375% due
8/01/2026 (e) 3,146
-----------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Southeast Resource Recovery Facilities Authority, California,
Lease Revenue Refunding Bonds, Series A, 4% due 12/01/2005 (a) 1,056
-----------------------------------------------------------------------------------------------------------
AAA NR* 1,055 Stockton, California, Public Financing Revenue Refunding Bonds,
Series A, 5.875% due 9/02/2016 (e) 1,110
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 9
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (concluded) (in Thousands)
S&P Moody's Face
Ratings@ Ratings@ Amount Municipal Bonds Value
===================================================================================================================================
California (concluded)
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 1,500 Tehachapi, California, COP, Refunding (Installment Sale), 5.75%
due 11/01/2016 (e) $ 1,704
---------------------------------------------------------------------------------------------------------
AAA Aaa 7,155 Turlock, California, Public Financing Authority, Sewer Revenue
Bonds, Series A, 5% due 9/15/2033 (b) 7,193
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,790 University of California Revenue Bonds, Series O, 5.125% due
9/01/2031 (b) 4,873
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,130 Vacaville, California, Unified School District, GO (Election of
2001), 5.25% due 8/01/2028 (e) 6,362
---------------------------------------------------------------------------------------------------------
Ventura County, California, Public Financing Authority II,
COP (e):
AAA Aaa 1,225 2.50% due 8/15/2005 1,253
AAA Aaa 1,135 2.50% due 8/15/2006 1,166
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,185 Walnut, California, Public Financing Authority, Tax Allocation
Revenue Bonds (Walnut Improvement Project), 5.375% due
9/01/2021 (a) 2,325
---------------------------------------------------------------------------------------------------------
AAA NR* 7,190 West Contra Costa, California, Unified School District, GO,
Series B, 5% due 8/01/2032 (e) 7,229
===================================================================================================================================
Puerto Rico--7.8%
- -----------------------------------------------------------------------------------------------------------------------------------
AAAr Aaa 4,750 Puerto Rico Commonwealth, GO, Refunding, RITR, Class R, Series 3,
10.097% due 7/01/2016 (g)(i) 6,232
---------------------------------------------------------------------------------------------------------
NR* Aaa 10,000 Puerto Rico Municipal Finance Agency, GO, RIB, Series 225, 10.17%
due 8/01/2012 (e)(i) 12,780
---------------------------------------------------------------------------------------------------------
BBB+ Baa3 20,000 Puerto Rico Public Finance Corporation, Commonwealth
Appropriation Revenue Bonds, Series E, 5.75% due 8/01/2030 21,307
---------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$700, 817)--141.8% 735,714
===================================================================================================================================
Shares
Held Short-Term Securities
===================================================================================================================================
16 CMA California Municipal Money Fund++ 16
---------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$16)--0.0% 16
===================================================================================================================================
Total Investments (Cost--$700,833)--141.8% 735,730
Unrealized Appreciation on Forward Interest Swaps**--0.1% 756
Other Assets Less Liabilities--2.4% 12,332
Preferred Stock, at Redemption Value--(44.3%) (230,032)
---------
Net Assets Applicable to Common Stock--100.0% $ 518,786
=========
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FHLMC Collateralized.
(d) FNMA/GNMA Collateralized.
(e) FSA Insured.
(f) GNMA Collateralized.
(g) MBIA Insured.
(h) Prerefunded.
(i) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at October 31, 2003.
(j) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at October 31,
2003.
* Not Rated.
** Forward interest rate swaps entered into as of October 31, 2003 were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
--------------------------------------------------------------------------
Receive a variable rate equal to 7-day
Bond Market Association rate at
quarterly reset date and pay a fixed
rate equal to 4.129%. $37,000 $ 756
Broker, Morgan Stanley Capital Services, Inc.
Expires January 2, 2024
--------------------------------------------------------------------------
+ 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 16 $17
--------------------------------------------------------------------------
@ Ratings of issues shown are unaudited.
See Notes to Financial Statements.
10 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
Statement of Net Assets
As of October 31, 2003
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments, at value (identified cost--$700,833,363) ....................... $ 735,730,333
Cash ........................................................................ 182,272
Unrealized appreciation on forward interest rate swaps ...................... 756,132
Receivables:
Interest ................................................................. $ 13,469,894
Securities sold .......................................................... 6,935,112 20,405,006
-------------
Prepaid expenses and other assets ........................................... 66,726
-------------
Total assets ................................................................ 757,140,469
-------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Payables:
Securities purchased ..................................................... 7,597,837
Investment adviser ....................................................... 357,501
Dividends to Common Stock shareholders ................................... 298,205
Other affiliates ......................................................... 5,397 8,258,940
-------------
Accrued expenses ............................................................ 63,967
-------------
Total liabilities ........................................................... 8,322,907
-------------
===================================================================================================================================
Preferred Stock
- -----------------------------------------------------------------------------------------------------------------------------------
Preferred Stock, at redemption value, par value $.10 per share (1,800
Series A Shares, 1,800 Series B Shares and 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) .............. 230,031,752
-------------
===================================================================================================================================
Net Assets Applicable to Common Stock
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock ....................................... $ 518,785,810
=============
===================================================================================================================================
Analysis of Net Assets Applicable to Common Stock
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.10 per share (34,361,200 shares issued and
outstanding) .............................................................. $ 3,436,120
Paid-in capital in excess of par ............................................ 494,852,784
Undistributed investment income--net ........................................ $ 6,480,413
Accumulated realized capital losses on investments--net ..................... (21,636,609)
Unrealized appreciation on investments--net ................................. 35,653,102
-------------
Total accumulated earnings--net ............................................. 20,496,906
-------------
Total--Equivalent to $15.10 net asset value per share of Common Stock
(market price--$13.82) .................................................... $ 518,785,810
=============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 11
[LOGO] Merrill Lynch Investment Managers
Statement of Operations
For the Year Ended October 31, 2003
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Interest .................................................................... $ 37,666,984
Dividends from affiliates ................................................... 17,390
-------------
Total income ................................................................ 37,684,374
-------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees .................................................... $ 3,794,973
Commission fees ............................................................. 584,936
Accounting services ......................................................... 232,642
Transfer agent fees ......................................................... 87,445
Professional fees ........................................................... 66,828
Custodian fees .............................................................. 40,337
Directors' fees and expenses ................................................ 37,237
Printing and shareholder reports ............................................ 34,767
Listing fees ................................................................ 31,485
Pricing fees ................................................................ 27,838
Other ....................................................................... 41,310
-------------
Total expenses before reimbursement ......................................... 4,979,798
Reimbursement of expenses ................................................... (9,948)
-------------
Total expenses after reimbursement .......................................... 4,969,850
-------------
Investment income--net ...................................................... 32,714,524
-------------
===================================================================================================================================
Realized & Unrealized Loss on Investments--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized loss on investments--net ........................................... (598,996)
Change in unrealized appreciation on investments--net ....................... (6,051,332)
-------------
Total realized and unrealized loss on investments--net ...................... (6,650,328)
-------------
===================================================================================================================================
Dividends to Preferred Stock Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ...................................................... (1,972,130)
-------------
Net Increase in Net Assets Resulting from Operations ........................ $ 24,092,066
=============
See Notes to Financial Statements.
12 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
Statements of Changes in Net Assets
For the Year Ended
October 31,
-------------------------------
Increase (Decrease) in Net Assets: 2003 2002
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ...................................................... $ 32,714,524 $ 29,318,898
Realized gain (loss) on investments--net .................................... (598,996) 1,662,413
Change in unrealized appreciation on investments--net ....................... (6,051,332) (2,673,126)
Dividends and distributions to Preferred Stock shareholders ................. (1,972,130) (2,578,760)
-------------------------------
Net increase in net assets resulting from operations ........................ 24,092,066 25,729,425
-------------------------------
===================================================================================================================================
Dividends & Distributions to Common Stock Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ...................................................... (29,791,160) (23,314,427)
Realized gain on investments--net ........................................... -- (112,798)
-------------------------------
Net decrease in net assets resulting from dividends and distributions to
Common Stock shareholders ................................................. (29,791,160) (23,427,225)
-------------------------------
===================================================================================================================================
Common Stock Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from issuance of Common Stock resulting from reorganization ........ -- 238,629,327
-------------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to Common Stock .......... (5,699,094) 240,931,527
Beginning of year ........................................................... 524,484,904 283,553,377
-------------------------------
End of year* ................................................................ $ 518,785,810 $ 524,484,904
===============================
* Undistributed investment income--net ................................... $ 6,480,413 $ 5,529,179
===============================
See Notes to Financial Statements.
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 13
[LOGO] Merrill Lynch Investment Managers
Financial Highlights
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended October 31,
-------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001+ 2000+ 1999+
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ........................... $ 15.26 $ 15.44 $ 14.24 $ 13.14 $ 16.25
-------------------------------------------------------
Investment income--net ....................................... .95@@ .95 1.00 1.02 1.03
Realized and unrealized gain (loss) on investments--net ...... (.18) (.22) 1.21 1.14 (2.37)
Dividends and distributions to Preferred Stock shareholders:
Investment income--net .................................... (.06) (.09) (.20) (.25) (.15)
Realized gain on investments--net ......................... -- --@ -- -- (.06)
In excess of realized gain on investments--net ............ -- -- --@ -- (.05)
-------------------------------------------------------
Total from investment operations ............................. .71 .64 2.01 1.91 (1.60)
-------------------------------------------------------
Less dividends and distributions to Common Stock shareholders:
Investment income--net .................................... (.87) (.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 (.87) (.82) (.81) (.81) (1.51)
-------------------------------------------------------
Net asset value, end of year ................................. $ 15.10 $ 15.26 $ 15.44 $ 14.24 $ 13.14
=======================================================
Market price per share, end of year .......................... $ 13.82 $ 13.68 $ 14.46 $ 13.625 $12.6875
=======================================================
==================================================================================================================================
Total Investment Return*
- ----------------------------------------------------------------------------------------------------------------------------------
Based on market price per share .............................. 7.50% .20% 12.33% 14.23% (12.83%)
=======================================================
Based on net asset value per share ........................... 5.29% 4.68% 14.76% 15.28% (10.76%)
=======================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement and excluding
reorganization expenses** .................................. .94% .96% 1.06% 1.04% 1.02%
=======================================================
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** ............................... 6.20% 6.38% 6.74% 7.43% 6.86%
=======================================================
Amount of dividends to Preferred Stock shareholders .......... .37% .56% 1.36% 1.81% .98%
=======================================================
Investment income--net, to Common Stock shareholders ......... 5.83% 5.82% 5.38% 5.62% 5.88%
=======================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Common and Preferred Stock**
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement and excluding
reorganization expenses .................................... .65% .67% .72% .68% .69%
=======================================================
Total expenses, excluding reorganization expenses ............ .66% .67% .72% .68% .69%
=======================================================
Total expenses ............................................... .66% .70% .72% .68% .69%
=======================================================
Total investment income--net ................................. 4.31% 4.42% 4.57% 4.88% 4.65%
=======================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders .................... .85% 1.25% 2.86% 3.46% 2.08%
=======================================================
14 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
Financial Highlights (concluded)
The following per share data and ratios have been derived
from information provided in the financial statements. For the Year Ended October 31,
----------------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001+ 2000+ 1999+
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of year (in thousands) $518,786 $524,485 $283,553 $261,474 $240,973
====================================================
Preferred Stock outstanding, end of year (in thousands) ......... $230,000 $230,000 $130,000 $130,000 $130,000
====================================================
Portfolio turnover .............................................. 52.17% 77.13% 59.36% 78.52% 86.51%
====================================================
==================================================================================================================================
Leverage
- ----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ....................................... $ 3,256 $ 3,280 $ 3,181 $ 3,011 $ 2,854
====================================================
==================================================================================================================================
Dividends Per Share on Preferred Stock Outstanding++
- ----------------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ................................ $ 216 $ 359 $ 758 $ 879 $ 493
====================================================
Series B--Investment income--net ................................ $ 212 $ 324 $ 700 $ 838 $ 555
====================================================
Series C--Investment income--net ................................ $ 204 $ 320 $ 683 $ 884 $ 503
====================================================
Series D--Investment income--net ................................ $ 242 $ 203 -- -- --
====================================================
Series E--Investment income--net ................................ $ 196 $ 201 -- -- --
====================================================
* 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.
@@ Based on average shares outstanding.
See Notes to Financial Statements.
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 15
[LOGO] Merrill Lynch Investment Managers
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 amended, 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. 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 last available bid price in the
over-the-counter market or on the basis of yield equivalents as obtained by the
Fund's pricing service from one or more 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). Swap agreements are valued by quoted fair values
received daily by the Fund from the counterparty. Short-term securities with a
remaining maturity 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 movements and movements in the securities
markets. 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).
16 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
Notes to Financial Statements (continued)
Written and purchased options are non-income producing investments.
o Forward interest rate swaps -- The Fund may enter into forward interest
rate swaps. In a forward interest rate swap, the Fund and the counterparty
agree to make periodic net payments on a specified notional contract
amount, commencing on a specified future effective date, unless terminated
earlier. 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 year ended October 31,
2003, FAM reimbursed the Fund in the amount of $9,948.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") received $650 in
commissions on the execution of portfolio security transactions for the Fund for
the year ended October 31, 2003.
For the year ended October 31, 2003, the Fund reimbursed FAM $17,831 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
year ended October 31, 2003 were $389,731,959 and $368,489,107, respectively.
Net realized gains (losses) for the year ended October 31, 2003 and net
unrealized gains as of October 31, 2003 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains
- --------------------------------------------------------------------------------
Long-term investments ................... $ 3,839,881 $34,896,970
Financial futures contracts ............. (5,112,277) --
Forward interest rate swaps ............. 673,400 756,132
-------------------------------
Total ................................... $ (598,996) $35,653,102
===============================
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 17
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued)
As of October 31, 2003, net unrealized appreciation for Federal income tax
purposes aggregated $34,889,695, of which $35,624,150 related to appreciated
securities and $734,455 related to depreciated securities. The aggregate cost of
investments at October 31, 2003 for Federal income tax purposes was
$700,840,638.
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 year ended October 31, 2003 remained
constant and for the year ended October 31, 2002 increased by 16,002,080 as a
result of issuance of Common Stock from a 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 October 31, 2003 were as follows:
Series A, .73%; Series B, .76%; Series C, .75%; Series D, .74%; and Series E,
..80%.
Shares issued and outstanding during the year ended October 31, 2003, remained
constant and during the year ended October 31, 2002, increased by 4,000 as a
result of issuance of Preferred Stock from a 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 year ended October 31, 2003 Merrill Lynch, Pierce, Fenner &
Smith Incorporated, an affiliate of FAM, earned $152,364 as commissions.
5. Distributions to Shareholders:
The Fund paid a tax-exempt income dividend to holders of Common Stock in the
amount of $.073000 per share on November 26, 2003 to shareholders of record on
November 14, 2003.
18 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
Notes to Financial Statements (concluded)
The tax character of distributions paid during the fiscal years ended October
31, 2003 and October 31, 2002 was as follows:
- --------------------------------------------------------------------------------
10/31/2003 10/31/2002
- --------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income .................... $31,763,290 $25,864,643
Ordinary income ...................... -- 141,342
-------------------------------
Total distributions .................... $31,763,290 $26,005,985
===============================
As of October 31, 2003, the components of accumulated earnings on a tax basis
were as follows:
- -----------------------------------------------------------------------------
Undistributed tax-exempt income--net .................... $ 6,462,631
Undistributed long-term capital gains--net .............. --
------------
Total undistributed earnings--net ....................... 6,462,631
Capital loss carryforward ............................... (12,682,535)*
Unrealized gains--net ................................... 26,716,810**
------------
Total accumulated earnings--net ......................... $ 20,496,906
============
* On October 31, 2003, the Fund had a net capital loss carryforward of
$12,682,535, of which $2,049,123 expires in 2007, $5,722,654 expires in
2008, $9,668 expires in 2009 and $4,901,090 expires in 2011. This amount
will be available to offset like amounts of any future taxable gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales, the
tax deferral of losses on straddles and the difference between book and
tax amortization methods for premiums and discounts on fixed income
securities.
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 19
[LOGO] Merrill Lynch Investment Managers
Independent Auditors' Report
To the Shareholders and Board of Directors of
MuniYield California Insured Fund, Inc.:
We have audited the accompanying statement of net assets, including the schedule
of investments, of MuniYield California Insured Fund, Inc. as of October 31,
2003, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2003, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
MuniYield California Insured Fund, Inc. as of October 31, 2003, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and its financial highlights for each
of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
December 17, 2003
20 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
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 stable level of dividend distributions, 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.
Quality Profile (unaudited)
The quality ratings of securities in the Fund as of October 31, 2003 were as
follows:
- --------------------------------------------------------------------------------
Percent of
Total
S&P Rating/Moody's Rating Investments
- --------------------------------------------------------------------------------
AAA/Aaa ................................................ 83.6%
AA/Aa .................................................. 2.1
A/A .................................................... 3.0
BBB/Ba ................................................. 6.1
Other+ ................................................. 5.2
- --------------------------------------------------------------------------------
+ Temporary investments in short-term variable rate municipal securities.
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 21
[LOGO] Merrill Lynch Investment Managers
Automatic Dividend Reinvestment Plan
The following description of the Fund's Automatic Dividend Reinvestment Plan
(the "Plan") is sent to you annually as required by Federal securities laws.
Pursuant to the Fund's Plan, unless a holder of Common Stock otherwise elects,
all dividend and capital gains distributions will be automatically reinvested by
EquiServe (the "Plan Agent"), as agent for shareholders in administering the
Plan, in additional shares of Common Stock of the Fund. Holders of Common Stock
who elect not to participate in the Plan will receive all distributions in cash
paid by check mailed directly to the shareholder of record (or, if the shares
are held in street or other nominee name then to such nominee) by EquiServe, as
dividend paying agent. Such participants may elect not to participate in the
Plan and to receive all distributions of dividends and capital gains in cash by
sending written instructions to EquiServe, as dividend paying agent, at the
address set forth below. Participation in the Plan is completely voluntary and
may be terminated or resumed at any time without penalty by written notice if
received by the Plan Agent not less than ten days prior to any dividend record
date; otherwise such termination will be effective with respect to any
subsequently declared dividend or distribution.
Whenever the Fund declares an income dividend or capital gains distribution
(collectively referred to as "dividends") payable either in shares or in cash,
non-participants in the Plan will receive cash and participants in the Plan will
receive the equivalent in shares of Common Stock. The shares will be acquired by
the Plan Agent for the participant's account, depending upon the circumstances
described below, either (i) through receipt of additional unissued but
authorized shares of Common Stock from the Fund ("newly issued shares") or (ii)
by purchase of outstanding shares of Common Stock on the open market
("open-market purchases") on the New York Stock Exchange or elsewhere. If on the
payment date for the dividend, the net asset value per share of the Common Stock
is equal to or less than the market price per share of the Common Stock plus
estimated brokerage commissions (such conditions being referred to herein as
"market premium"), the Plan Agent will invest the dividend amount in newly
issued shares on behalf of the participant. The number of newly issued shares of
Common Stock to be credited to the participant's account will be determined by
dividing the dollar amount of the dividend by the net asset value per share on
the date the shares are issued, provided that the maximum discount from the then
current market price per share on the date of issuance may not exceed 5%. If on
the dividend payment date the net asset value per share is greater than the
market value (such condition being referred to herein as "market discount"), the
Plan Agent will invest the dividend amount in shares acquired on behalf of the
participant in open-market purchases.
In the event of a market discount on the dividend payment date, the Plan Agent
will have until the last business day before the next date on which the shares
trade on an "ex-dividend" basis or in no event more than 30 days after the
dividend payment date (the "last purchase date") to invest the dividend amount
in shares acquired in open-market purchases. It is contemplated that the Fund
will pay monthly income dividends. Therefore, the period during which
open-market purchases can be made will exist only from the payment date on the
dividend through the date before the next "ex-dividend" date, which typically
will be approximately ten days. If, before the Plan Agent has completed its
open-market purchases, the market price of a share of Common Stock exceeds the
net asset value per share, the average per share purchase price paid by the Plan
Agent may exceed the net asset value of the Fund's shares, resulting in the
acquisitions of fewer shares than if the dividend had been paid in newly issued
shares on the dividend payment date. Because of the foregoing difficulty with
respect to open-market purchases, the Plan provides that if the Plan Agent is
unable to invest the full dividend amount in open-market purchases during the
purchase period or if the market discount shifts to a market premium during the
purchase period, the Plan Agent will cease making open-market purchases and will
invest the uninvested portion of the dividend amount in newly issued shares at
the close of business on the last purchase date determined by dividing the
uninvested portion of the dividend by the net asset value per share.
The Plan Agent maintains all shareholders' accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Plan Agent in non-certificated form in the name
of the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan. The Plan Agent will forward all
proxy solicitation materials to participants and vote proxies for shares held
pursuant to the Plan in accordance with the instructions of the participants.
In the case of shareholders such as banks, brokers or nominees which hold shares
of others who are the beneficial owners, the Plan Agent will administer the Plan
on the basis of the number of shares certified from time to time by the record
shareholders
22 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
Automatic Dividend Reinvestment Plan (concluded)
as representing the total amount registered in the record shareholder's name and
held for the account of beneficial owners who are to participate in the Plan.
There will be no brokerage charges with respect to shares issued directly by the
Fund as a result of dividends or capital gains distributions payable either in
shares or in cash. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open-market
purchases in connection with the reinvestment of dividends.
The automatic reinvestment of dividends and distributions will not relieve
participants of any Federal, state or local income tax that may be payable (or
required to be withheld) on such dividends.
Shareholders participating in the Plan may receive benefits not available to
shareholders not participating in the Plan. If the market price plus commissions
of the Fund's shares is above the net asset value, participants in the Plan will
receive shares of the Fund at less than they could otherwise purchase them and
will have shares with a cash value greater than the value of any cash
distribution they would have received on their shares. If the market price plus
commissions is below the net asset value, participants will receive
distributions in shares with a net asset value greater than the value of any
cash distribution they would have received on their shares. However, there may
be insufficient shares available in the market to make distributions in shares
at prices below the net asset value. Also, since the Fund does not redeem
shares, the price on resale may be more or less than the net asset value.
The value of shares acquired pursuant to the Plan will generally be excluded
from gross income to the extent that the cash amount reinvested would be
excluded from gross income. If, when the Fund's shares are trading at a premium
over net asset value, the Fund issues shares pursuant to the Plan that have a
greater fair market value than the amount of cash reinvested, it is possible
that all or a portion of such discount (which may not exceed 5% of the fair
market value of the Fund's shares) could be viewed as a taxable distribution. If
the discount is viewed as a taxable distribution, it is also possible that the
taxable character of this discount would be allocable to all the shareholders,
including shareholders who do not participate in the Plan. Thus, shareholders
who do not participate in the Plan might be required to report as ordinary
income a portion of their distributions equal to their allocable share of the
discount.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants in the Plan; however, the Fund reserves the right
to amend the Plan to include a service charge payable by the participants.
All correspondence concerning the Plan should be directed to the Plan Agent at
EquiServe, P.O. Box 43010, Providence, RI 02940-3010, Telephone: 800-426-5523.
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 23
[LOGO] Merrill Lynch Investment Managers
Officers and Directors (unaudited)
Number of
Portfolios in Other Public
Position(s) Length Fund Complex Directorships
Held of Time Overseen by Held by
Name Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Interested Director
- ------------------------------------------------------------------------------------------------------------------------------------
Terry K. P.O. Box 9011 President 1999 to President and Chairman of Merrill Lynch Investment 124 Funds None
Glenn* Princeton, NJ and present Managers, L.P. ("MLIM")/Fund Asset Management, 163 Portfolios
08543-9011 Director and L.P. ("FAM")--Advised Funds since 1999; Chairman
Age: 63 1992 to (Americas Region) of MLIM from 2000 to 2002;
present Executive Vice President of FAM and MLIM (which
terms as used herein include their corporate
predecessors) from 1983 to 2002; President of
FAM Distributors, Inc. ("FAMD") from 1986 to 2002
and Director thereof from 1991 to 2002; Executive
Vice President and Director of Princeton Services,
Inc. ("Princeton Services") from 1993 to 2002;
President of Princeton Administrators, L.P. from
1989 to 2002; Director of Financial Data Services,
Inc. since 1985.
------------------------------------------------------------------------------------------------------------------------
* Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which FAM or
MLIM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of
the Fund based on his former positions with FAM, MLIM, FAMD, Princeton Services and Princeton Administrators, L.P. The
Director's term is unlimited. Directors serve until their resignation, removal or death, or until December 31 of the
year in which they turn 72. As Fund President, Mr. Glenn serves at the pleasure of the Board of Directors.
====================================================================================================================================
Independent Directors*
- ------------------------------------------------------------------------------------------------------------------------------------
James H. P.O. Box 9095 Director 1995 to Director, The China Business Group, Inc. since 1996 40 Funds None
Bodurtha Princeton, NJ present and Executive Vice President thereof from 1996 to 59 Portfolios
08543-9095 2003; Chairman of the Board, Berkshire Holding
Age: 59 Corporation since 1980; Partner, Squire, Sanders &
Dempsey from 1980 to 1993.
- ------------------------------------------------------------------------------------------------------------------------------------
Joe Grills P.O. Box 9095 Director 2002 to Member of the Committee of Investment of 40 Funds Kimco Realty
Princeton, NJ present Employee Benefit Assets of the Association of 59 Portfolios Corporation
08543-9095 Financial Professionals ("CIEBA") since 1986 and
Age: 68 its Chairman from 1991 to 1992; Member of the
Investment Advisory Committees of the State of
New York Common Retirement Fund since 1989;
Member of the Investment Advisory Committee of
the Howard Hughes Medical Institute from 1997 to
2000; Director, Duke Management Company since
1992 and Vice Chairman thereof since 1998;
Director, LaSalle Street Fund from 1995 to 2001;
Director, Kimco Realty Corporation since 1997;
Member of the Investment Advisory Committee of
the Virginia Retirement System since 1998 and Vice
Chairman thereof since 2002; Director, Montpelier
Foundation since 1998 and Vice Chairman thereof
since 2000; Member of the Investment Committee
of the Woodberry Forest School since 2000; Member
of the Investment Committee of the National Trust
for Historic Preservation since 2000.
- ------------------------------------------------------------------------------------------------------------------------------------
Herbert I. P.O. Box 9095 Director 1992 to John M. Olin Professor of Humanities, New York 40 Funds None
London Princeton, NJ present University since 1993 and Professor thereof since 59 Portfolios
08543-9095 1980; President of Hudson Institute since 1997 and
Age: 64 Trustee thereof since 1980.
- ------------------------------------------------------------------------------------------------------------------------------------
24 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
Officers and Directors (unaudited) (concluded)
Number of
Portfolios in Other Public
Position(s) Length Fund Complex Directorships
Held of Time Overseen by Held by
Name Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Independent Directors* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Andre F. P.O. Box 9095 Director 1992 to George Gund Professor of Finance and Banking, 40 Funds None
Perold Princeton, NJ present Harvard Business School since 2000 and a member 59 Portfolios
08543-9095 of the faculty since 1979; Director and Chairman
Age: 51 of the Board, UNX, Inc. since 2003; Director, Sanlam
Limited and Sanlam Life since 2001; Director, Genbel
Securities and Gensec Bank since 1999; Director,
Stockback.com from 2002 to 2002; Director,
Bulldogresearch.com from 2000 to 2001; Director,
Sanlam Investment Management from 1999 to
2001; Director, Quantec Limited from 1991 to 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Roberta P.O. Box 9095 Director 1999 to Shareholder, Modrall, Sperling, Roehl, Harris & 40 Funds None
Cooper Princeton, NJ present Sisk, P.A. since 1993; Director of Cooper's, Inc. 59 Portfolios
Ramo 08543-9095 since 1999 and Chairman of the Board since 2000;
Age: 61 Director of ECMC, Inc. since 2001.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert S. P.O. Box 9095 Director 2002 to Principal of STI Management since 1994; Trustee 40 Funds None
Salomon, Princeton, NJ present of Commonfund from 1980 to 2001; Director of 59 Portfolios
Jr. 08543-9095 Rye Country Day School since 2001.
Age: 66
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen B. P.O. Box 9095 Director 2002 to Chairman, Fernwood Advisors (investment adviser) 41 Funds None
Swensrud Princeton, NJ present since 1996; Principal of Fernwood Associates 60 Portfolios
08543-9095 (financial consultant) since 1975; Chairman of RPP
Age: 70 Corporation since 1978; Director, International
Mobile Communications, Inc. since 1998.
------------------------------------------------------------------------------------------------------------------------
* The Director's term is unlimited. Directors serve until their resignation, removal or death, or until December 31 of
the year in which they turn 72.
- ------------------------------------------------------------------------------------------------------------------------------------
Position(s) Length
Held of Time
Name Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1993 to First Vice President of FAM and MLIM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999; Vice
08543-9011 and and President of FAMD since 1999; Director of MLIM Taxation since 1990.
Age: 43 Treasurer 1999 to
present
- ------------------------------------------------------------------------------------------------------------------------------------
Kenneth A. P.O. Box 9011 Senior Vice 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
Jacob Princeton, NJ President present Management) of MLIM from 1997 to 2000.
08543-9011
Age: 52
- ------------------------------------------------------------------------------------------------------------------------------------
John M. P.O. Box 9011 Senior Vice 2002 to Managing Director of MLIM since 2000; Director (Municipal Tax-Exempt Fund
Loffredo Princeton, NJ President present Management) of MLIM from 1998 to 2000.
08543-9011
Age: 39
- ------------------------------------------------------------------------------------------------------------------------------------
Walter P.O. Box 9011 Vice 2002 to Managing Director of MLIM since 2003; Director (Municipal Tax-Exempt Fund
O'Connor Princeton, NJ President present Management) of MLIM from 2000 to 2003; Vice President of MLIM from 1994 to 2000.
08543-9011
Age: 42
- ------------------------------------------------------------------------------------------------------------------------------------
Brian D. P.O. Box 9011 Secretary 2003 to Vice President (Legal Advisory) of MLIM since 2002; Attorney with Reed Smith from
Stewart Princeton, NJ present 2001 to 2002; Attorney with Saul Ewing from 1999 to 2001.
08543-9011
Age: 34
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and
Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agents
Common Stock:
EquiServe
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
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 25
[LOGO] Merrill Lynch Investment Managers
Important Tax Information (unaudited)
All of the net investment income distributions paid by MuniYield California
Insured Fund, Inc. during its taxable year ended October 31, 2003 qualify as
tax-exempt interest dividends for Federal income tax purposes.
Please retain this information for your records.
26 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003
Electronic Delivery
The Fund is now offering electronic delivery of communications to its
shareholders. In order to receive this service, you must register your account
and provide us with e-mail information. To sign up for this service, simply
access this website http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification number
(PIN). You will need this PIN should you wish to update your e-mail address,
choose to discontinue this service and/or make any other changes to the service.
This service is not available for certain retirement accounts at this time.
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2003 27
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
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
#16388 -- 10/03
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--
The registrant has adopted 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 and principal
accounting officer, or persons performing similar functions. A copy of
the code of ethics is available without charge upon request by calling
toll-free 1-800-MER-FUND (1-800-637-3863).
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. -
The registrant's board of directors has determined that (i) the
registrant has the following audit committee financial experts serving
on its audit committee and (ii) each audit committee financial expert
is independent: (1) Joe Grills, (2) Andre Perold, (3) Robert S.
Salomon, Jr., and (4) Stephen B. Swensrud.
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. N/A
(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.
Proxy Voting Policies and Procedures
Each Fund's Board of Directors/Trustees has delegated to Merrill Lynch
Investment Managers, L.P. and/or Fund Asset Management, L.P. (the
"Investment Adviser") authority to vote all proxies relating to the
Fund's portfolio securities. The Investment Adviser has adopted
policies and procedures ("Proxy Voting Procedures") with respect to the
voting of proxies related to the portfolio securities held in the
account of one or more of its clients, including a Fund. Pursuant to
these Proxy Voting Procedures, the Investment Adviser's primary
objective when voting proxies is to make proxy voting decisions solely
in the best interests of each Fund and its shareholders, and to act in
a manner that the Investment Adviser believes is most likely to enhance
the economic value of the securities held by the Fund. The Proxy Voting
Procedures are designed to ensure that the Investment Adviser considers
the interests of its clients, including the Funds, and not the
interests of the Investment Adviser, when voting proxies and that real
(or perceived) material conflicts that may arise between the Investment
Adviser's interest and those of the Investment Adviser's clients are
properly addressed and resolved.
In order to implement the Proxy Voting Procedures, the Investment
Adviser has formed a Proxy Voting Committee (the "Committee"). The
Committee is comprised of the Investment Adviser's Chief Investment
Officer (the "CIO"), one or more other senior investment professionals
appointed by the CIO, portfolio managers and investment analysts
appointed by the CIO and any other personnel the CIO deems appropriate.
The Committee will also include two non-voting representatives from the
Investment Adviser's Legal department appointed by the Investment
Adviser's General Counsel. The Committee's membership shall be limited
to full-time employees of the Investment Adviser. No person with any
investment banking, trading, retail brokerage or research
responsibilities for the Investment Adviser's affiliates may serve as a
member of the Committee or participate in its decision making (except
to the extent such person is asked by the Committee to present
information to the Committee, on the same basis as other interested
knowledgeable parties not affiliated with the Investment Adviser might
be asked to do so). The Committee determines how to vote the proxies of
all clients, including a Fund, that have delegated proxy voting
authority to the Investment Adviser and seeks to ensure that all votes
are consistent with the best interests of those clients and are free
from unwarranted and inappropriate influences. The Committee
establishes general proxy voting policies for the Investment Adviser
and is responsible for determining how those policies are applied to
specific proxy votes, in light of each issuer's unique structure,
management, strategic options and, in certain circumstances, probable
economic and other anticipated consequences of alternate actions. In so
doing, the Committee may determine to vote a particular proxy in a
manner contrary to its generally stated policies. In addition, the
Committee will be responsible for ensuring that all reporting and
recordkeeping requirements related to proxy voting are fulfilled.
The Committee may determine that the subject matter of a recurring
proxy issue is not suitable for general voting policies and requires a
case-by-case determination. In such cases, the Committee may elect not
to adopt a specific voting policy applicable to that issue. The
Investment Adviser believes that certain proxy voting issues require
investment analysis - such as approval of mergers and other significant
corporate transactions - akin to investment decisions, and are,
therefore, not suitable for general guidelines. The Committee may elect
to adopt a common position for the Investment Adviser on certain proxy
votes that are akin to investment decisions, or determine to permit the
portfolio manager to make individual decisions on how best to maximize
economic value for a Fund (similar to normal buy/sell investment
decisions made by such portfolio managers). While it is expected that
the Investment Adviser will generally seek to vote proxies over which
the Investment Adviser exercises voting authority in a uniform manner
for all the Investment Adviser's clients, the Committee, in conjunction
with a Fund's portfolio manager, may determine that the Fund's specific
circumstances require that its proxies be voted differently.
To assist the Investment Adviser in voting proxies, the Committee has
retained Institutional Shareholder Services ("ISS"). ISS is an
independent adviser that specializes in providing a variety of
fiduciary-level proxy-related services to institutional investment
managers, plan sponsors, custodians, consultants, and other
institutional investors. The services provided to the Investment
Adviser by ISS include in-depth research, voting recommendations
(although the Investment Adviser is not obligated to follow such
recommendations), vote execution, and recordkeeping. ISS will also
assist the Fund in fulfilling its reporting and recordkeeping
obligations under the Investment Company Act.
The Investment Adviser's Proxy Voting Procedures also address special
circumstances that can arise in connection with proxy voting. For
instance, under the Proxy Voting Procedures, the Investment Adviser
generally will not seek to vote proxies related to portfolio securities
that are on loan, although it may do so under certain circumstances. In
addition, the Investment Adviser will vote proxies related to
securities of foreign issuers only on a best efforts basis and may
elect not to vote at all in certain countries where the Committee
determines that the costs associated with voting generally outweigh the
benefits. The Committee may at any time override these general policies
if it determines that such action is in the best interests of a Fund.
From time to time, the Investment Adviser may be required to vote proxies in
respect of an issuer where an affiliate of the Investment Adviser (each, an
"Affiliate"), or a money management or other client of the Investment Adviser
(each, a "Client") is involved. The Proxy Voting Procedures and the Investment
Adviser's adherence to those procedures are designed to address such conflicts
of interest. The Committee intends to strictly adhere to the Proxy Voting
Procedures in all proxy matters, including matters involving Affiliates and
Clients. If, however, an issue representing a non-routine matter that is
material to an Affiliate or a widely known Client is involved such that the
Committee does not reasonably believe it is able to follow its guidelines (or if
the particular proxy matter is not addressed by the guidelines) and vote
impartially, the Committee may, in its discretion for the purposes of ensuring
that an independent determination is reached, retain an independent fiduciary to
advise the Committee on how to vote or to cast votes on behalf of the Investment
Adviser's clients.
In the event that the Committee determines not to retain an independent
fiduciary, or it does not follow the advice of such an independent
fiduciary, the powers of the Committee shall pass to a subcommittee,
appointed by the CIO (with advice from the Secretary of the Committee),
consisting solely of Committee members selected by the CIO. The CIO
shall appoint to the subcommittee, where appropriate, only persons
whose job responsibilities do not include contact with the Client and
whose job evaluations would not be affected by the Investment Adviser's
relationship with the Client (or failure to retain such relationship).
The subcommittee shall determine whether and how to vote all proxies on
behalf of the Investment Adviser's clients or, if the proxy matter is,
in their judgment, akin to an investment decision, to defer to the
applicable portfolio managers, provided that, if the subcommittee
determines to alter the Investment Adviser's normal voting guidelines
or, on matters where the Investment Adviser's policy is case-by-case,
does not follow the voting recommendation of any proxy voting service
or other independent fiduciary that may be retained to provide research
or advice to the Investment Adviser on that matter, no proxies relating
to the Client may be voted unless the Secretary, or in the Secretary's
absence, the Assistant Secretary of the Committee concurs that the
subcommittee's determination is consistent with the Investment
Adviser's fiduciary duties
In addition to the general principles outlined above, the Investment
Adviser has adopted voting guidelines with respect to certain recurring
proxy issues that are not expected to involve unusual circumstances.
These policies are guidelines only, and the Investment Adviser may
elect to vote differently from the recommendation set forth in a voting
guideline if the Committee determines that it is in a Fund's best
interest to do so. In addition, the guidelines may be reviewed at any
time upon the request of a Committee member and may be amended or
deleted upon the vote of a majority of Committee members present at a
Committee meeting at which there is a quorum.
The Investment Adviser has adopted specific voting guidelines with
respect to the following proxy issues:
o Proposals related to the composition of the Board of Directors of issuers
other than investment companies. As a general matter, the Committee
believes that a company's Board of Directors (rather than shareholders) is
most likely to have access to important, nonpublic information regarding a
company's business and prospects, and is therefore best-positioned to set
corporate policy and oversee management. The Committee, therefore,
believes that the foundation of good corporate governance is the election
of qualified, independent corporate directors who are likely to diligently
represent the interests of shareholders and oversee management of the
corporation in a manner that will seek to maximize shareholder value over
time. In individual cases, the Committee may look at a nominee's history
of representing shareholder interests as a director of other companies or
other factors, to the extent the Committee deems relevant.
o Proposals related to the selection of an issuer's independent auditors. As
a general matter, the Committee believes that corporate auditors have a
responsibility to represent the interests of shareholders and provide an
independent view on the propriety of financial reporting decisions of
corporate management. While the Committee will generally defer to a
corporation's choice of auditor, in individual cases, the Committee may
look at an auditors' history of representing shareholder interests as
auditor of other companies, to the extent the Committee deems relevant.
o Proposals related to management compensation and employee benefits. As a
general matter, the Committee favors disclosure of an issuer's
compensation and benefit policies and opposes excessive compensation, but
believes that compensation matters are normally best determined by an
issuer's board of directors, rather than shareholders. Proposals to
"micro-manage" an issuer's compensation practices or to set arbitrary
restrictions on compensation or benefits will, therefore, generally not be
supported.
o Proposals related to requests, principally from management, for approval
of amendments that would alter an issuer's capital structure. As a general
matter, the Committee will support requests that enhance the rights of
common shareholders and oppose requests that appear to be unreasonably
dilutive.
o Proposals related to requests for approval of amendments to an issuer's
charter or by-laws. As a general matter, the Committee opposes poison pill
provisions.
o Routine proposals related to requests regarding the formalities of
corporate meetings.
o Proposals related to proxy issues associated solely with holdings of
investment company shares. As with other types of companies, the Committee
believes that a fund's Board of Directors (rather than its shareholders)
is best-positioned to set fund policy and oversee management. However, the
Committee opposes granting Boards of Directors authority over certain
matters, such as changes to a fund's investment objective, that the
Investment Company Act envisions will be approved directly by
shareholders.
o Proposals related to limiting corporate conduct in some manner that
relates to the shareholder's environmental or social concerns. The
Committee generally believes that annual shareholder meetings are
inappropriate forums for discussion of larger social issues, and opposes
shareholder resolutions "micromanaging" corporate conduct or requesting
release of information that would not help a shareholder evaluate an
investment in the corporation as an economic matter. While the Committee
is generally supportive of proposals to require corporate disclosure of
matters that seem relevant and material to the economic interests of
shareholders, the Committee is generally not supportive of proposals to
require disclosure of corporate matters for other purposes.
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: December 22, 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: December 22, 2003
By: /s/ Donald C. Burke
------------------------------
Donald C. Burke,
Chief Financial Officer of
MuniYield California Insured Fund, Inc.
Date: December 22, 2003
Attached hereto as a furnished exhibit are the certifications pursuant
to Section 906 of the Sarbanes-Oxley Act.