UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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: 10/31/04
Date of reporting period: 11/01/03 - 04/30/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
MuniYield California
Insured Fund, Inc.
Semi-Annual Report
April 30, 2004
[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 April 30, 2004, the percentage of the Fund's
total net assets invested in inverse floaters was 8.61%.
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. APRIL 30, 2004
A Letter From the President
Dear Shareholder
For the six-month and 12-month periods ended April 30, 2004, the Lehman Brothers
Municipal Bond Index posted returns of +1.19% and +2.68%, respectively. Its
taxable counterpart, the Lehman Brothers Aggregate Bond Index, had returns of
+1.25% and +1.82% for the same periods. Amid considerable month-to-month
volatility, tax-exempt bond yields rose over the past year, although not to the
same extent as 10-year U.S. Treasury yields. In all, tax-exempt securities
continued to be an attractive fixed income investment alternative.
As of April month-end, the Federal Reserve Board maintained its accommodative
policy stance, although a better-than-expected employment report for the month
of March prompted speculation that an interest rate increase could come sooner
than many had expected. On April 2, 2004, the good news on the employment front
- -- previously the one dim spot in an otherwise bright economic picture -- helped
prompt the yield on the 10-year Treasury bond to spike nearly 25 basis points
(.25%), from 3.91% to 4.15%. Market watchers continue to monitor the economic
data and Federal Reserve Board language for indications of interest rate
direction. If economic growth maintains its recent pace and employment figures
continue to improve, many believe it is just a matter of time before interest
rates move upward.
Equity markets, in the meantime, gleaned support from the improving economic
environment and provided attractive returns. For the six-month and 12-month
periods ended April 30, 2004, the Standard & Poor's 500 Index returned +6.27%
and +22.88%, respectively. Significant fiscal and monetary stimulus in 2003,
including low interest rates and tax cuts, has opened the door to consumer
spending, capital spending, increases in exports and long-awaited job growth. As
expected, these developments have led the way to improvements in corporate
earnings -- a positive for stock markets.
The events and efforts of the past year leave us with a much stronger economy
today. Of course, markets will always fluctuate, and there are many
uncertainties -- not the least of which are geopolitical in nature -- which can
translate into negative market movements. Keeping this in mind, we encourage you
to revisit your portfolio and your asset allocation strategy to ensure you are
well positioned to take advantage of the opportunities that lie ahead.
Importantly, your financial advisor can help you develop a strategy most
suitable for your circumstances through all types of market and economic cycles.
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. APRIL 30, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
Given the still uncertain interest rate environment, we maintained a
defensive stance throughout the period, seeking to protect the Fund's net asset
value and enhance current yield for our shareholders.
Describe the recent market environment relative to municipal bonds.
For much of the six-month period, a positive economic backdrop helped bond
prices to move higher as yields, which typically move opposite of prices,
declined. In early April, however, a surprisingly strong monthly employment
report triggered fears that the long-accommodative Federal Reserve Board might
raise interest rates sooner than many had expected. As a result, bond yields
rose (prices fell) sharply for the remainder of the period. At the end of April,
long-term U.S. Treasury bond yields had climbed to 5.13%, representing an
increase of approximately 15 basis points (.15%) over the past six months.
Ten-year U.S. Treasury note yields stood at 4.30% as of period-end, an increase
of more than 20 basis points.
Tax-exempt bond yields generally mimicked the movement of their taxable
counterparts, although volatility in the municipal market was more subdued.
Long-term revenue bond yields, as measured by the Bond Buyer Revenue Bond Index,
rose just four basis points over the past six months. For the same period,
yields on AAA-rated issues maturing in 30 years rose approximately 10 basis
points to 4.93% while yields on 10-year, AAA-rated issues increased more than 16
basis points to nearly 4%, according to Municipal Market Data. The more marked
increase in 10-year bond yields may be attributed to the fact that recent
issuance has been concentrated in the 10-year - 20-year range. The resulting
supply imbalance prompted higher intermediate bond yields (and lower prices).
Longer-maturity and lower-rated issues continued to benefit from more favorable
supply/demand factors and, therefore, have seen less price depreciation. For the
six months overall, municipal bond supply declined approximately 5% compared to
the same period a year ago.
Overall, demand for tax-exempt municipal bonds has remained positive. Data from
the Investment Company Institute indicates that, in just the first three months
of 2004, tax-exempt bond funds have seen net new cash flows of almost $640
million.
Describe conditions in the State of California.
In March 2004, California voters approved measures authorizing the issuance of
up to $15 billion in economic recovery bonds to finance accumulated fiscal-year
deficits. At the same time, the State Constitution was amended to provide for
the enactment and maintenance of a balanced state budget; the establishment of
specific reserve requirements; and restrictions on future deficit-related
borrowing. Passage of the propositions mitigated short-term liquidity risks
while providing the Legislature with additional time to formulate future budget
solutions.
Following the approval of these measures, Moody's Investors Service revised the
state's credit outlook from negative to stable while Standard & Poor's (S&P)
revised the outlook from stable to positive. Moody's and S&P affirmed
California's outstanding long-term ratings of Baa1 and BBB, respectively, noting
that further credit improvement is contingent on the state's ability to reduce
its structural imbalances. The positive developments came as a welcomed change
following several months of negative news, highlighted by a $38 billion budget
deficit, a gubernatorial recall election in October 2003 and credit downgrades
from all three major rating agencies.
How did the Fund perform in light of the existing market conditions?
For the six-month period ended April 30, 2004, the Common Stock of MuniYield
California Insured Fund, Inc. had net annualized yields of 5.97% and 6.85%,
based on a period-end per share net asset value of $14.71 and a per share market
price of $12.83, respectively, and $.438 per share income dividends. Over the
same period, the total investment return on the Fund's Common Stock was +.52%,
based on a change in per share net asset value from $15.10 to $14.71, and
assuming reinvestment of $.438 per share ordinary income dividends.
For the six-month period ended April 30, 2004, the Fund's Auction Market
Preferred Stock (AMPS) had average yields as follows: .87% for Series A; .89%
for Series B; .86% for Series C; .90% for Series D; and .90% for Series E.
The Fund's total return, based on net asset value, trailed its comparable Lipper
category of California Insured Municipal Debt Funds, which had an average return
of +1.34% for the six-month period. (Funds in this Lipper category invest
primarily in municipal debt issues exempt from taxation in the state of
California and that are insured as to timely payment.) We have been managing the
Fund conservatively, maintaining a shorter duration than many of our peers in
order to protect
4 MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004
the Fund's net asset value and insulate the portfolio from any spikes in
interest rates. During the past six months, the municipal bond market rallied
(yields fell as prices rose) more strongly than anticipated, and our strategy
temporarily resulted in underperformance relative to our peers. We continue to
believe the Fund is positioned to perform well when interest rates eventually
rise, a phenomenon we began to see as the period closed.
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
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.
What changes were made to the portfolio during the period?
We anticipate an eventual rise in interest rates and have positioned the Fund
accordingly. We continued to focus on limiting price volatility in the portfolio
and protecting the Fund's net asset value from the negative price effect
associated with a rise in interest rates. To this end, we kept the Fund's
duration below average during the past six months. In general, lower-duration
investments are less sensitive to interest rate moves and will, therefore,
outperform in a stable-to-rising interest rate environment.
The Fund's cash reserves comprised slightly more than 3% of net assets
throughout the period. With short-term cash equivalents yielding only near 1%,
we are reluctant to increase our cash allocation, as we feel it would result in
too severe a performance penalty.
Finally, we employed a small hedge on 5% of the portfolio's net assets.
Specifically, we purchased some long-term bonds with maturities of 25 years - 30
years in an effort to increase the current yield offered to shareholders. At the
same time, we employed a futures hedge -- that is, we were short 10-year
Treasury futures -- in case interest rates did trend higher. Taken together,
these moves allowed us to increase the Fund's yield distribution while also
providing some capital appreciation from the short-term Treasury securities as
interest rates moved higher late in the period. Overall, our goal is to maintain
below-average exposure to investments and strategies that may expose the Fund to
net asset value volatility. A more aggressive stance awaits a higher interest
rate environment.
During the period, the Fund's borrowing costs generally remained in the .75% -
1.25% range. 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. At this point, the Federal Reserve Board appears
poised to begin raising short-term interest rates, most likely later in 2004.
The increase, however, is expected to be gradual and should not have a material
impact on the positive advantage leverage has had on the Fund's Common Stock
yield. 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. At the end of the period,
the Fund's leverage amount, due to AMPS, was 31.28% of total assets. (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 Fund's position at the close of the period?
We ended the period defensively positioned with a shorter-than-average portfolio
duration. We believe the Fund is well positioned to deliver better relative
performance in an eventual rising interest rate environment. In fact, by the end
of the period, interest rates had started to move up, and the Fund's relative
results benefited accordingly.
Our investment focus is on high current yield, avoiding securities that we
believe will expose the Fund to extreme price movements when interest rates
eventually rise. While we are keeping an eye toward adopting a more aggressive
stance, we believe such a move is further down the road, perhaps after the
Federal Reserve Board has begun tightening monetary policy. As interest rates
rise, we also intend to address the Fund's call structure. If the market falls
far enough, in our estimation, it may be time to extend the average call
protection in the Fund, effectively making it a more aggressive portfolio.
Walter C. O'Connor
Vice President and Portfolio Manager
May 7, 2004
MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004 5
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
===================================================================================================================================
California--132.6%
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 7,000 ABAG Finance Authority for Nonprofit Corporations, California,
COP (Children's Hospital Medical Center), 6% due 12/01/2029 (a) $ 7,682
--------------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 Alhambra, California, City Elementary School District, GO
(Election of 1999), Series B, 5.10%** due 9/01/2031 (b) 2,175
--------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Antelope Valley, California, Health Care District Revenue
Refunding Bonds, Series A, 5.20% due 1/01/2017 (e) 2,098
--------------------------------------------------------------------------------------------------------------
AAA Aaa 1,985 Arcadia, California, Unified School District, GO, Series B,
6.50% due 7/01/2015 (b) 2,129
--------------------------------------------------------------------------------------------------------------
AAA Aaa 3,675 Bakersfield, California, COP, Refunding (Convention Center
Expansion Project), 5.80% due 4/01/2017 (g) 4,010
--------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Bay Area Government Association, California, Revenue Refunding
Bonds (California Redevelopment Agency Pool), Series A, 6%
due 12/15/2024 (e) 2,089
--------------------------------------------------------------------------------------------------------------
AAA Aaa 3,990 Brentwood, California, Infrastructure Refinancing Authority,
Infrastructure Revenue Refunding Bonds, Series A, 5.20%
due 9/02/2029 (e) 4,046
--------------------------------------------------------------------------------------------------------------
California Community College Financing Authority, Lease Revenue
Bonds, Series A (g):
AAA Aaa 3,215 5.95% due 12/01/2022 3,590
AAA Aaa 1,100 6% due 12/01/2029 1,214
--------------------------------------------------------------------------------------------------------------
California Educational Facilities Authority Revenue Bonds,
Series A:
AAA NR* 28,000 (Pepperdine University), 5.50% due 8/01/2032 (g) 28,980
NR* A2 5,000 (University of San Diego), 5.50% due 10/01/2032 5,134
--------------------------------------------------------------------------------------------------------------
AAA NR* 17,595 California Educational Facilities Authority, Student Loan
Revenue Bonds (Caledge Loan Program), AMT, 5.55%
due 4/01/2028 (a) 18,159
--------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 4,500 California HFA, Home Mortgage Revenue Bonds, VRDN, AMT,
Series B, 1.11% due 8/01/2033 (e)(j) 4,500
--------------------------------------------------------------------------------------------------------------
California Health Facilities Financing Authority Revenue Bonds:
AAA Aaa 2,750 (Kaiser Permanente), Series A, 5.50% due 6/01/2022 (e)(m) 2,899
AAA Aaa 2,915 (Lucile Salter Packard Children's Hospital), Series C,
5% due 8/15/2020 (a) 2,980
--------------------------------------------------------------------------------------------------------------
California Health Facilities Financing Authority, Revenue
Refunding Bonds, VRDN (j):
A1+ VMIG1+ 900 (Adventist Hospital), Series A, 1.03% due 9/01/2028 (g) 900
A1+ VMIG1+ 1,475 (Sutter/Catholic Healthcare System), Series B, 1.07%
due 7/01/2012 (a) 1,475
--------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 California Infrastructure and Economic Development Bank, Insured
Revenue Bonds (Rand Corporation), Series A, 5.50%
due 4/01/2032 (a) 3,118
--------------------------------------------------------------------------------------------------------------
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 20,878
--------------------------------------------------------------------------------------------------------------
California Rural Home Mortgage Finance Authority, S/F Mortgage
Revenue Bonds (Mortgage-Backed Securities Program), AMT:
AAA NR* 1,705 Series A, 6.35% due 12/01/2029 (c)(d) 1,751
NR* Aaa 425 Series A-1, 6.90% due 12/01/2024 (c)(f) 447
AAA NR* 1,000 Series B, 6.25% due 12/01/2031 (d) 1,036
--------------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 California State Department of Transportation Revenue Bonds
(Federal Highway Grant Anticipation Bonds), Series A, 4%
due 2/01/2010 (g) 7,807
--------------------------------------------------------------------------------------------------------------
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. APRIL 30, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
===================================================================================================================================
California (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
California State Department of Veteran Affairs, Home Purpose
Revenue Refunding Bonds:
AAA Aaa $12,680 Series A, 5.35% due 12/01/2027 (a) $ 13,002
A Aa2 7,500 Series C, 6.15% due 12/01/2027 7,815
-------------------------------------------------------------------------------------------------------------
California State Department of Water Resources, Power Supply
Revenue Bonds:
BBB+ A3 7,500 Series A, 5.75% due 5/01/2017 8,124
A1+ VMIG1+ 3,600 VRDN, Series C-2, 1.08% due 5/01/2022 (a)(j) 3,600
-------------------------------------------------------------------------------------------------------------
California State, GO:
AAA Aaa 860 6.25% due 10/01/2019 (g) 876
BBB Baa1 3,500 5.10% due 2/01/2034 3,375
-------------------------------------------------------------------------------------------------------------
California State, GO, Refunding:
AAA NR* 9,935 DRIVERS, AMT, Series 239, 10.024% due 12/01/2032 (a)(i) 10,440
AAA Aaa 3,000 Series BX, 5.50% due 12/01/2031 (e) 3,053
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,530 California State Public Works Board, Lease Revenue Bonds
(Department of Corrections--Ten Administrative Segregation Housing
Units), Series A, 5.25% due 3/01/2020 (a) 4,722
-------------------------------------------------------------------------------------------------------------
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) 18,241
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,375 California State University and Colleges, Housing System Revenue
Refunding Bonds, 5.90% due 11/01/2021 (b) 2,546
-------------------------------------------------------------------------------------------------------------
BBB Baa1 5,950 California State, Various Purpose, GO, 5.50% due 11/01/2033 6,078
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,100 California Statewide Communities Development Authority, COP
(Kaiser Permanente), 5.30% due 12/01/2015 (e)(m) 4,443
-------------------------------------------------------------------------------------------------------------
A A3 3,685 California Statewide Communities Development Authority, Health
Facility Revenue Bonds (Memorial Health Services), Series A,
6% due 10/01/2023 3,901
-------------------------------------------------------------------------------------------------------------
AA- A1 1,000 California Statewide Communities Development Authority Revenue
Bonds (Sutter Health), Series B, 5.50% due 8/15/2028 1,019
-------------------------------------------------------------------------------------------------------------
NR* Aaa 4,000 Campbell, California, Unified High School District, GO (Election
of 1999), 5% due 8/01/2032 (b) 3,986
-------------------------------------------------------------------------------------------------------------
Ceres, California, Redevelopment Agency, Tax Allocation Bonds
(Ceres Redevelopment Project Area Number 1) (g):
AAA Aaa 4,600 5.75% due 11/01/2030 4,927
AAA Aaa 4,000 5% due 11/01/2033 3,957
-------------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Chaffey, California, Union High School District, GO, Series C,
5.375% due 5/01/2023 (e) 6,344
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,800 Chino Valley, California, Unifed School District, GO, Series A,
5% due 8/01/2026 (e) 3,816
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,540 Coalinga, California, Redevelopment Agency Tax Allocation Bonds,
5.90% due 9/15/2025 (g) 2,783
-------------------------------------------------------------------------------------------------------------
AA NR* 2,750 Commerce, California, Joint Powers Financing Authority Revenue
Bonds (Redevelopment Projects), Series A, 5% due 8/01/2028 (k) 2,649
-------------------------------------------------------------------------------------------------------------
AAA Aaa 12,180 Contra Costa County, California, COP, Refunding (Merrithew
Memorial Hospital Project), 5.375% due 11/01/2017 (g) 12,970
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Coronado, California, Community Development Agency, Tax
Allocation Bonds (Coronado Community Development Project),
5.60% due 9/01/2030 (g) 2,099
MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004 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)
- -----------------------------------------------------------------------------------------------------------------------------------
El Monte, California, City School District, GO, Refunding,
Series A (e):
AAA Aaa $ 1,000 6.25% due 5/01/2020 $ 1,134
AAA Aaa 1,500 6.25% due 5/01/2025 1,697
-------------------------------------------------------------------------------------------------------------
El Monte, California, School District, GO, Series B (b):
AAA Aaa 3,025 5.375% due 5/01/2022 3,215
AAA Aaa 2,525 5.375% due 5/01/2027 2,630
-------------------------------------------------------------------------------------------------------------
AAA Aaa 10,755 Fremont, California, Unified School District, Alameda County, GO,
Series A, 5.50% due 8/01/2026 (b) 11,220
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,295 Fresno, California, Joint Powers Financing Authority, Lease
Revenue Bonds, Series A, 5.75% due 6/01/2026 (e) 4,603
-------------------------------------------------------------------------------------------------------------
NR* Baa3 2,500 Golden State Tobacco Securitization Corporation of California,
Tobacco Settlement Revenue Bonds, Series A-2, 7.90%
due 6/01/2042 2,658
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,800 Las Lomitas, California, School District, Election of 2001, GO,
5.50% due 7/01/2022 (e) 4,048
-------------------------------------------------------------------------------------------------------------
NR* NR* 7,575 Long Beach, California, Harbor Revenue Bonds, RIB, AMT,
Series 786-X, 9.38% due 5/15/2024 (i) 7,935
-------------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 Los Angeles, California, Community Redevelopment Agency,
Community Redevelopment Financing Authority Revenue Bonds (Bunker
Hill Project), Series A, 5% due 12/01/2027 (e) 9,972
-------------------------------------------------------------------------------------------------------------
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) 747
AAA Aaa 290 (Los Angeles International Airport), Series D, 5.625%
due 5/15/2012 (h) 303
AAA Aaa 2,500 (Ontario International Airport), Series A, 6% due 5/15/2017 2,670
-------------------------------------------------------------------------------------------------------------
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 3,547
AAA Aaa 4,000 5.875% due 2/15/2005 4,185
AAA Aaa 8,000 6% due 2/15/2005 8,378
AAA Aaa 7,140 6.125% due 2/15/2005 7,484
-------------------------------------------------------------------------------------------------------------
Los Angeles, California, Harbor Department Revenue Bonds (g)(i):
NR* Aaa 7,365 RIB, AMT, Series 349, 11.08% due 11/01/2026 8,647
NR* Aaa 7,000 Trust Receipts, AMT, Class R, Series 7, 11.06% due 11/01/2026 8,218
8 MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
===================================================================================================================================
California (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $15,510 Los Angeles, California, Wastewater System Revenue Refunding
Bonds, Sub-Series A, 5% due 6/01/2026 (g) $ 15,577
-------------------------------------------------------------------------------------------------------------
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) 3,340
-------------------------------------------------------------------------------------------------------------
AAA Aaa 15,000 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding Bonds (Proposition A),
First Tier, Senior Series B, 5% due 7/01/2019 (g) 15,444
-------------------------------------------------------------------------------------------------------------
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) 6,198
-------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Menlo Park, California, Community Development Agency, Tax
Allocation (Las Pulgas Community Development Project), 5.55%
due 6/01/2030 (a) 1,042
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,175 Mount Pleasant, California, Elementary School District, GO,
Series B, 6.35% due 12/01/2024 (e) 2,504
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,245 Nevada County, California, COP, Refunding, 5.25% due 10/01/2019 (g) 4,465
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 New Haven, California, Unified School District, GO, Refunding,
5.75% due 8/01/2020 (e) 2,205
-------------------------------------------------------------------------------------------------------------
AAA Aaa 5,715 Newhall, California, School District, GO, Series A, 6.40%
due 5/01/2010 (e)(h) 6,766
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Oakland, California, State Building Authority, Lease Revenue
Bonds (Elihu M Harris), Series A, 5.50% due 4/01/2014 (a) 2,190
-------------------------------------------------------------------------------------------------------------
AAA Aaa 1,245 Orange County, California, Airport Revenue Refunding Bonds, AMT,
5.625% due 7/01/2012 (g) 1,336
-------------------------------------------------------------------------------------------------------------
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) 6,830
-------------------------------------------------------------------------------------------------------------
AAA Aaa 16,920 Orange County, California, Recovery COP, Refunding, Series A,
6% due 7/01/2026 (g) 18,338
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,360 Orchard, California, School District, GO, Series A, 6.50%
due 8/01/2005 (b)(h) 4,721
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,005 Oxnard, California, Financing Authority, Water Revenue Bonds,
5% due 6/01/2028 (l) 3,983
-------------------------------------------------------------------------------------------------------------
AAA Aaa 9,645 Oxnard, California, Unified High School District, GO, Refunding,
Series A, 6.20% due 8/01/2030 (g) 10,857
-------------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 Pioneers Memorial Hospital District, California, GO, Refunding,
6.50% due 10/01/2024 (a) 7,805
-------------------------------------------------------------------------------------------------------------
AAAr Aaa 10,000 Port Oakland, California, RITR, AMT, Class R, Series 5, 10.13%
due 11/01/2012 (b)(i) 11,646
-------------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 Port Oakland, California, Revenue Bonds, AMT, Series K, 5.75%
due 11/01/2029 (b) 7,776
-------------------------------------------------------------------------------------------------------------
AAA Aaa 19,035 Port Oakland, California, Revenue Refunding Bonds, AMT, Series L,
5.375% due 11/01/2027 (b) 19,441
-------------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Riverside, California, Unified School District, Election, GO,
Series A, 5.25% due 2/01/2023 (b) 6,238
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,500 Riverside County, California, Asset Leasing Corporation,
Leasehold Revenue Refunding Bonds (Riverside County Hospital
Project), Series B, 5.70% due 6/01/2016 (g) 4,939
-------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Rocklin, California, Unified School District, Community Facilities
District No. 1 Special Tax Bonds, 5% due 9/01/2025 (g) 1,006
-------------------------------------------------------------------------------------------------------------
NR* Aaa 2,090 San Bernardino County, California, S/F Home Mortgage Revenue
Refunding Bonds, AMT, Series A-1, 6.25% due 12/01/2031 (d) 2,133
-------------------------------------------------------------------------------------------------------------
San Diego County, California, COP:
AAA Aaa 1,000 (North County Regional Center Expansion), 5.25%
due 11/15/2019 (a) 1,056
AAA Aaa 3,570 (Salk Institute for Bio Studies), 5.75% due 7/01/2022 (g) 3,882
AAA Aaa 5,200 (Salk Institute for Bio Studies), 5.75% due 7/01/2031 (g) 5,574
-------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 San Francisco, California, Bay Area Rapid Transit District,
Revenue Refunding Bonds (BART SFO Extension), Series A,
4.875% due 6/15/2009 (a) 5,020
MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004 9
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
===================================================================================================================================
California (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Airport Commission,
International Airport Revenue Bonds, Second Series (b):
AAA Aaa $ 8,500 AMT, Issue 11, 6.25% due 5/01/2005 (h) $ 8,985
AAA Aaa 3,000 Issue 12-B, 5.625% due 5/01/2021 3,187
-------------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Airports Commission,
International Airport Revenue Refunding Bonds, Second
Series 28B (g):
AAA Aaa 3,000 AMT, 5.25% due 5/01/2023 3,097
AAA Aaa 6,455 5.25% due 5/01/2024 6,637
-------------------------------------------------------------------------------------------------------------
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 1,097
AAA Aaa 1,000 6.125% due 1/01/2027 1,079
-------------------------------------------------------------------------------------------------------------
AAA Aaa 17,160 San Francisco, California, City and County Public Utilities
Commission, Clean Water Revenue Refunding Bonds, Series A, 3%
due 10/01/2007 (g) 17,615
-------------------------------------------------------------------------------------------------------------
AAA Aaa 8,335 San Francisco, California, City and County Public Utilities
Commission, Water Revenue Refunding Bonds, Series A, 5%
due 11/01/2032 (g) 8,301
-------------------------------------------------------------------------------------------------------------
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 2,879
AAA Aaa 1,200 6.80% due 7/01/2019 1,234
AAA Aaa 5,110 6.75% due 7/01/2024 5,255
-------------------------------------------------------------------------------------------------------------
San Francisco, California, Community College District, GO,
Refunding, Series A (b):
NR* Aaa 1,735 5.375% due 6/15/2019 1,853
NR* Aaa 1,730 5.375% due 6/15/2020 1,853
NR* Aaa 1,925 5.375% due 6/15/2021 2,048
-------------------------------------------------------------------------------------------------------------
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) 2,137
-------------------------------------------------------------------------------------------------------------
San Jose, California, Redevelopment Agency, Tax Allocation Bonds:
A Aaa 2,140 (Merged Area Redevelopment Project), 5.25% due 8/01/2029 2,143
NR* Aaa 3,650 RIB, AMT, Series 149, 10.28% due 8/01/2027 (g)(i) 4,016
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,135 San Mateo, California, Union High School District, GO, Series C,
5.05%** due 9/01/2026 (b) 915
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,595 Santa Clara, California, Redevelopment Agency, Tax Allocation
Bonds (Bayshore North Project), Series A, 5.25% due 6/01/2019 (a) 2,736
-------------------------------------------------------------------------------------------------------------
AAA Aaa 1,100 Santa Clara Valley, California, Water District, Water Utility
System Revenue, Series A, 5.125% due 6/01/2031 (b) 1,107
-------------------------------------------------------------------------------------------------------------
AAA Aaa 2,150 Santa Clarita, California, Community College District, COP (College
of Canyons Improvement Project), 5.125% due 8/01/2031 (g) 2,162
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Santa Rosa, California, High School District, GO, 5.375%
due 8/01/2026 (e) 3,122
-------------------------------------------------------------------------------------------------------------
AAA NR* 1,055 Stockton, California, Public Financing Revenue Refunding Bonds,
Series A, 5.875% due 9/02/2016 (e) 1,114
-------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Tehachapi, California, COP, Refunding (Installment Sale), 5.75%
due 11/01/2016 (e) 1,679
-------------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Tracy, California, Community Development Agency Tax Allocation
Series A, 5% due 3/01/2034 (a) 5,932
-------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Turlock, California, Public Finance Authority, Sewer Revenue Bonds,
Series A, 5% due 9/15/2033 (b) 2,986
-------------------------------------------------------------------------------------------------------------
AAA Aaa 4,790 University of California Revenue Bonds, Series O, 5.125%
due 9/01/2031 (b) 4,827
-------------------------------------------------------------------------------------------------------------
AAA Aaa 6,130 Vacaville, California, Unified School District, GO (Election
of 2001), 5.25% due 8/01/2028 (e) 6,288
-------------------------------------------------------------------------------------------------------------
Walnut, California, Energy Center Authority Revenue Bonds,
Series A (a):
AAA Aaa 5,000 5% due 1/01/2029 4,979
AAA Aaa 9,200 5% due 1/01/2034 9,115
10 MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004
Schedule of Investments (concluded) (in Thousands)
S&P Moody's Face
Ratings Ratings Amount Municipal Bonds Value
===================================================================================================================================
California (concluded)
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 2,185 Walnut, California, Public Financing Authority, Tax Allocation
Revenue Bonds (Walnut Improvement Project), 5.375%
due 9/01/2021 (a) $ 2,307
-------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 West Basin, California, Municipal Water District Revenue Refunding
Bonds, COP, Series A, 5% due 8/01/2030 (g) 1,493
-------------------------------------------------------------------------------------------------------------
AAA NR* 6,690 West Contra Costa, California, Unified School District, GO,
Series B, 5% due 8/01/2032 (e) 6,667
===================================================================================================================================
Puerto Rico--8.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth, Public Improvement, GO (g):
AAA Aaa 4,335 5.75% due 7/01/2017 4,934
AAA Aaa 4,075 5.75% due 7/01/2018 4,638
AAA Aaa 1,090 5.75% due 7/01/2019 1,241
-------------------------------------------------------------------------------------------------------------
NR* Aaa 10,000 Puerto Rico Municipal Finance Agency, GO, RIB, Series 225,
10.11% due 8/01/2012 (e)(i) 12,432
-------------------------------------------------------------------------------------------------------------
BBB+ Baa3 20,000 Puerto Rico Public Finance Corporation, Commonwealth Appropriation
Revenue Bonds, Series E, 5.75% due 8/01/2030 21,090
-------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$693,015)--141.4% 714,646
=============================================================================================================
===================================================================================================================================
Shares
Held Short-Term Securities
===================================================================================================================================
22 CMA California Municipal Money Fund++ 22
-------------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$22)--0.0% 22
===================================================================================================================================
Total Investments (Cost--$693,037)--141.4% 714,668
Other Assets Less Liabilities--4.1% 20,652
Preferred Stock, at Redemption Value--(45.5%) (230,009)
--------
Net Assets Applicable to Common Stock--100.0% $505,311
========
(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 April 30, 2004.
(j) The interest rate is subject to change periodically based upon prevailing
market rates. The interest rate shown is the rate in effect at April 30,
2004.
(k) Radian Insured.
(l) XL Capital Insured.
(m) Escrowed to maturity.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown reflects the
effective yield at the time of purchase by the Fund.
+ 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 6 $7
--------------------------------------------------------------------------
See Notes to Financial Statements.
MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004 11
[LOGO] Merrill Lynch Investment Managers
Statement of Net Assets
As of April 30, 2004
=====================================================================================================================
Assets
- ---------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified
cost--$693,015,278) ......................................... $ 714,646,100
Investments in affiliated securities, at value (identified
cost--$21,852) .............................................. 21,852
Cash .......................................................... 15,052
Receivables:
Securities sold ............................................ $ 38,746,530
Interest ................................................... 13,281,375 52,027,905
-------------
Prepaid expenses .............................................. 22,903
-------------
Total assets .................................................. 766,733,812
-------------
=====================================================================================================================
Liabilities
- ---------------------------------------------------------------------------------------------------------------------
Payables:
Securities purchased ....................................... 30,736,288
Investment adviser ......................................... 355,559
Dividends to Common Stock shareholders ..................... 300,537
Other affiliates ........................................... 5,183 31,397,567
-------------
Accrued expenses .............................................. 16,676
-------------
Total liabilities ............................................. 31,414,243
-------------
=====================================================================================================================
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) ........................... 230,008,802
-------------
=====================================================================================================================
Net Assets Applicable to Common Stock
- ---------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock ......................... $ 505,310,767
=============
=====================================================================================================================
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 .......................... $ 6,243,778
Accumulated realized capital losses on investments--net ....... (20,852,737)
Unrealized appreciation on investments--net ................... 21,630,822
-------------
Total accumulated earnings--net ............................... 7,021,863
-------------
Total--Equivalent to $14.71 net asset value per share of
Common Stock (market price--$12.83) ......................... $ 505,310,767
=============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
12 MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004
Statement of Operations
For the Six Months Ended April 30, 2004
=====================================================================================================================
Investment Income
- ---------------------------------------------------------------------------------------------------------------------
Interest ...................................................... $ 18,286,437
Dividends from affiliates ..................................... 6,769
-------------
Total income .................................................. 18,293,206
-------------
=====================================================================================================================
Expenses
- ---------------------------------------------------------------------------------------------------------------------
Investment advisory fees ...................................... $ 1,879,300
Commission fees ............................................... 289,095
Accounting services ........................................... 115,637
Transfer agent fees ........................................... 45,966
Professional fees ............................................. 31,187
Printing and shareholder reports .............................. 23,804
Custodian fees ................................................ 19,534
Listing fees .................................................. 13,478
Directors' fees and expenses .................................. 12,718
Pricing fees .................................................. 10,376
Other ......................................................... 26,403
-------------
Total expenses before reimbursement ........................... 2,467,498
Reimbursement of expenses ..................................... (5,574)
-------------
Total expenses after reimbursement ............................ 2,461,924
-------------
Investment income--net ........................................ 15,831,282
-------------
=====================================================================================================================
Realized & Unrealized Gain (Loss) on Investments--Net
- ---------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net ............................. 783,872
Change in unrealized appreciation on investments--net ......... (14,022,280)
-------------
Total realized and unrealized loss on investments--net ........ (13,238,408)
-------------
=====================================================================================================================
Dividends to Preferred Stock Shareholders
- ---------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................ (1,017,712)
-------------
Net Increase in Net Assets Resulting from Operations .......... $ 1,575,162
=============
See Notes to Financial Statements.
MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004 13
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 2004 2003
=====================================================================================================================
Operations
- ---------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................ $ 15,831,282 $ 32,714,524
Realized gain (loss) on investments--net ...................... 783,872 (598,996)
Change in unrealized appreciation on investments--net ......... (14,022,280) (6,051,332)
Dividends to Preferred Stock shareholders ..................... (1,017,712) (1,972,130)
-------------------------------
Net increase in net assets resulting from operations .......... 1,575,162 24,092,066
-------------------------------
=====================================================================================================================
Dividends to Common Stock Shareholders
- ---------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................ (15,050,205) (29,791,160)
-------------------------------
Net decrease in net assets resulting from dividends to
Common Stock shareholders ................................... (15,050,205) (29,791,160)
-------------------------------
=====================================================================================================================
Net Assets Applicable to Common Stock
- ---------------------------------------------------------------------------------------------------------------------
Total decrease in net assets applicable to Common Stock ....... (13,475,043) (5,699,094)
Beginning of period ........................................... 518,785,810 524,484,904
-------------------------------
End of period* ................................................ $ 505,310,767 $ 518,785,810
===============================
* Undistributed investment income--net ..................... $ 6,243,778 $ 6,480,413
===============================
See Notes to Financial Statements.
14 MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004
Financial Highlights
The following per share data and ratios have been derived For the Six For the Year Ended
from information provided in the financial statements. Months Ended October 31,
April 30, ----------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001+ 2000+
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........... $ 15.10 $ 15.26 $ 15.44 $ 14.24 $ 13.14
------------------------------------------------------------
Investment income--net ......................... .46@@@ .95@@@ .95 1.00 1.02
Realized and unrealized gain (loss) on
investments--net ............................. (.38) (.18) (.22) 1.21 1.14
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net ...................... (.03) (.06) (.09) (.20) (.25)
Realized gain on investments--net ........... -- -- --@ -- --
In excess of realized gain on
investments--net .......................... -- -- -- --@ --
------------------------------------------------------------
Total from investment operations ............... .05 .71 .64 2.01 1.91
------------------------------------------------------------
Less dividends and distributions to
Common Stock shareholders:
Investment income--net ...................... (.44) (.87) (.81) (.81) (.81)
Realized gain on investments--net ........... -- -- (.01) -- --
In excess of realized gain on
investments--net .......................... -- -- -- --@ --
------------------------------------------------------------
Total dividends and distributions to
Common Stock shareholders .................... (.44) (.87) (.82) (.81) (.81)
------------------------------------------------------------
Net asset value, end of period ................. $ 14.71 $ 15.10 $ 15.26 $ 15.44 $ 14.24
============================================================
Market price per share, end of period .......... $ 12.83 $ 13.82 $ 13.68 $ 14.46 $13.625
============================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on market price per share ................ (4.21%)@@ 7.50% .20% 12.33% 14.23%
============================================================
Based on net asset value per share ............. .52%@@ 5.29% 4.68% 14.76% 15.28%
============================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement
and excluding reorganization expenses*** ..... .94%* .94% .96% 1.06% 1.04%
============================================================
Total expenses, excluding reorganization
expenses*** .................................. .94%* .94% .96% 1.06% 1.04%
============================================================
Total expenses*** .............................. .94%* .94% 1.00% 1.06% 1.04%
============================================================
Total investment income--net*** ................ 6.05%* 6.20% 6.38% 6.74% 7.43%
============================================================
Amount of dividends to Preferred Stock
shareholders ................................. .39%* .37% .56% 1.36% 1.81%
============================================================
Investment income--net, to Common Stock
shareholders ................................. 5.66%* 5.83% 5.82% 5.38% 5.62%
============================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Common and Preferred Stock***
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of reimbursement
and excluding reorganization expenses ........ .65%* .65% .67% .72% .68%
============================================================
Total expenses, excluding reorganization
expenses ..................................... .66%* .66% .67% .72% .68%
============================================================
Total expenses ................................. .66%* .66% .70% .72% .68%
============================================================
Total investment income--net ................... 4.20%* 4.31% 4.42% 4.57% 4.88%
============================================================
==================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders ...... .89%* .85% 1.25% 2.86% 3.46%
============================================================
MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004 15
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (concluded)
For the Six For the Year Ended
Months Ended October 31,
The following per share data and ratios have been derived April 30, -----------------------------------------------
from information provided in the financial statements. 2004 2003 2002 2001+ 2000+
=========================================================================================================================
Supplemental Data
- -------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock,
end of period (in thousands) ....... $505,311 $518,786 $524,485 $283,553 $261,474
============================================================
Preferred Stock outstanding, end of
period (in thousands) .............. $230,000 $230,000 $230,000 $130,000 $130,000
============================================================
Portfolio turnover ................... 30.04% 52.17% 77.13% 59.36% 78.52%
============================================================
=========================================================================================================================
Leverage
- -------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ............ $ 3,197 $ 3,256 $ 3,280 $ 3,181 $ 3,011
============================================================
=========================================================================================================================
Dividends Per Share on Preferred Stock Outstanding++
- -------------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net ..... $ 109 $ 216 $ 359 $ 758 $ 879
============================================================
Series B--Investment income--net ..... $ 111 $ 212 $ 324 $ 700 $ 838
============================================================
Series C--Investment income--net ..... $ 108 $ 204 $ 320 $ 683 $ 884
============================================================
Series D--Investment income--net ..... $ 113 $ 242 $ 203 -- --
============================================================
Series E--Investment income--net ..... $ 112 $ 196 $ 201 -- --
============================================================
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Certain prior year amounts have been reclassified to conform to current
year presentation.
++ The Fund's Preferred Stock was issued on November 30, 1992 (Series A and
B), January 27, 1997 (Series C) and February 4, 2002 (Series D and E).
@ Amount is less than $(.01) per share.
@@ Aggregate total investment return.
@@@ Based on average shares outstanding.
See Notes to Financial Statements.
16 MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004
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. Actual
results may differ from these estimates. These unaudited financial statements
reflect all adjustments, which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All such
adjustments are of a normal, recurring nature. The Fund determines and makes
available for publication the net asset value of its Common Stock on a weekly
basis. The Fund's Common Stock is listed on the New York Stock Exchange under
the symbol MCA. The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments -- Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the 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 may write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the premium
received by the Fund is reflected as an asset and an equivalent liability.
The amount of the liability is subsequently marked to market to reflect
the current market value of the option written. When a security is
purchased or sold through an exercise of an option, the related premium
paid (or received) is added to (or deducted from) the basis of the
security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent
of the premiums received or paid (or gain or loss to the extent the cost
of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Forward interest rate swaps -- The Fund 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.
MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004 17
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued)
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Stock. For the six months ended April
30, 2004, FAM reimbursed the Fund in the amount of $5,574.
For the six months ended April 30, 2004, the Fund reimbursed FAM $7,620 for
certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 2004 were $238,984,701 and $217,881,657, respectively.
Net realized gains (losses) for the six months ended April 30, 2004 and net
unrealized appreciation as of April 30, 2004 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Appreciation
- --------------------------------------------------------------------------------
Long-term investments ................... $ (18,717) $21,630,822
Financial futures contracts ............. 1,147,188 --
Forward interest rate swaps ............. (344,599) --
-------------------------------
Total ................................... $ 783,872 $21,630,822
===============================
As of April 30, 2004, net unrealized appreciation for Federal income tax
purposes aggregated $21,637,770, of which $25,352,558 related to appreciated
securities and $3,714,788 related to depreciated securities. The aggregate cost
of investments at April 30, 2004 for Federal income tax purposes was
$693,030,182.
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.
Preferred Stock
Auction Market Preferred Stock are redeemable shares of Preferred Stock of the
Fund, with a par value of $.10 per share and a liquidation preference of $25,000
per share plus accrued and unpaid dividends, that entitle their holders to
receive cash dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at April 30, 2004 were as follows: Series
A, .90%; Series B, 1.03%; Series C, .97%; Series D, 1.028%; and Series E, 1.00%.
18 MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004
Notes to Financial Statements (concluded)
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the six months ended April 30, 2004, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, an affiliate of FAM, earned $85,506 as commissions.
6. Capital Loss Carryforward:
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.
7. Subsequent Event:
The Fund paid a tax-exempt income dividend to holders of Common Stock in the
amount of $0.073000 per share on May 27, 2004 to shareholders of record on May
14, 2004.
MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004 19
[LOGO] Merrill Lynch Investment Managers
Quality Profile
The quality ratings of securities in the Fund as of April 30, 2004 were as
follows:
- --------------------------------------------------------------------------------
Percent of
Total
S&P Rating/Moody's Rating Investments
- --------------------------------------------------------------------------------
AAA/Aaa ..................................................... 85.9%
AA/Aa ....................................................... 0.3
A/A ......................................................... 3.6
BBB/Ba ...................................................... 7.6
NR (Not Rated) .............................................. 1.1
Other+ ...................................................... 1.5
- --------------------------------------------------------------------------------
+ Temporary investments in short-term variable rate municipal securities.
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.
20 MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004
Proxy Results
During the six-month period ended April 30, 2004, MuniYield California Insured
Fund, Inc.'s Common Stock shareholders voted on the following proposal. The
proposal was approved at a shareholders' meeting on April 27, 2004. A
description of the proposal and number of shares voted are as follows:
- ---------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- ---------------------------------------------------------------------------------------------------------------
1. To elect the Fund's Directors: James H. Bodurtha 32,729,062 533,524
Joe Grills 32,711,309 551,277
Roberta Cooper Ramo 32,728,901 533,685
Robert S. Salomon, Jr. 32,719,262 543,324
Stephen B. Swensrud 32,697,901 564,685
- ---------------------------------------------------------------------------------------------------------------
During the six-month period ended April 30, 2004, MuniYield California Insured
Fund, Inc.'s Preferred Stock shareholders (Series A - E) voted on the following
proposal. The proposal was approved at a shareholders' meeting on April 27,
2004. A description of the proposal and number of shares voted are as follows:
- ---------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- ---------------------------------------------------------------------------------------------------------------
1. To elect the Fund's Board of Directors:
James H. Bodurtha, Joe Grills, Herbert I. London, Andre F. Perold,
Roberta Cooper Ramo, Robert S. Salomon, Jr. and Stephen B. Swensrud 7,896 343
- ---------------------------------------------------------------------------------------------------------------
MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004 21
[LOGO] Merrill Lynch Investment Managers
Officers and Directors
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Joe Grills, Director
Herbert I. London, Director
Andre F. Perold, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Stephen B. Swensrud, Director
Kenneth A. Jacob, Senior Vice President
John M. Loffredo, Senior Vice President
Walter C. O'Connor, Vice President
Donald C. Burke, Vice President and Treasurer
Phillip S. Gillespie, Secretary
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
101 Barclay Street -- 7 West
New York, NY 10286
NYSE Symbol
MCA
22 MUNIYIELD CALIFORNIA INSURED FUND, INC. APRIL 30, 2004
Electronic Delivery
The Fund offers 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. APRIL 30, 2004 23
[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.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
website at http://www.sec.gov.
MuniYield California Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
#16388 -- 4/04
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this
semi-annual report
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-annual
report
Item 8 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 10 - Controls and Procedures
10(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.
10(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the last fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MuniYield California Insured Fund, Inc.
By: /s/ Terry K. Glenn
---------------------------------------
Terry K. Glenn,
President of
MuniYield California Insured Fund, Inc.
Date: June 18, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By: /s/ Terry K. Glenn
---------------------------------------
Terry K. Glenn,
President of
MuniYield California Insured Fund, Inc.
Date: June 18, 2004
By: /s/ Donald C. Burke
---------------------------------------
Donald C. Burke,
Chief Financial Officer of
MuniYield California Insured Fund, Inc.
Date: June 18, 2004