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 811-06645
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 - 10/31/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
MuniYield California
Insured Fund, Inc.
Annual Report
October 31, 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 October 31, 2004, the percentage of the Fund's
total net assets invested in inverse floaters was 8.51%, before the deduction of
Preferred Stock.
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. Swap agreements involve the risk that the party
with whom the Fund has entered into the swap will default on its obligation to
pay the Fund and the risk that the Fund will not be able to meet its obligations
to pay the other party to the agreement.
2 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004
A Letter From the President
Dear Shareholder
As we ended the current reporting period, the financial markets were facing a
number of uncertainties. At the top of investors' minds were questions about
economic expansion, corporate earnings, interest rates and inflation, politics,
oil prices and terrorism.
After benefiting from aggressive monetary and fiscal policy stimulus, some fear
the U.S. economy has hit a "soft patch." In fact, economic expansion has slowed
somewhat in recent months, but we believe it is easing into a pace of growth
that is sustainable and healthy. The favorable economic environment has served
to benefit American corporations, which have continued to post strong earnings.
Although the most impressive results were seen earlier in the year, solid
productivity, improved revenue growth and cost discipline all point to a vital
corporate sector.
In terms of inflation and interest rates, the Federal Reserve Board (the Fed)
has signaled its confidence in the economic recovery by increasing the Federal
Funds target rate four times in the past several months, from 1% to 2% as of the
November 10 Federal Open Market Committee meeting. Inflation, for its part, has
remained in check. Investors and economists are focused on how quickly Fed
policy will move from here.
With the presidential election now behind us, any politically provoked market
angst should subside to some extent. The effect of oil prices, however, is more
difficult to predict. At around $50 per barrel, the price of oil is clearly a
concern. However, on an inflation-adjusted basis and considering modern usage
levels, the situation is far from the crisis proportions we saw in the 1980s.
Finally, although terrorism and geopolitical tensions are realities we are
forced to live with today, history has shown us that the financial effects of
any single event tend to be short-lived.
Amid the uncertainty, the Lehman Brothers Municipal Bond Index posted a 12-month
return of +6.03% and a six-month return of +4.79% as of October 31, 2004.
Long-term bond yields were slightly lower at October 31, 2004 than they were a
year earlier. As always, our investment professionals are closely monitoring the
markets, the economy and the overall environment in an effort to make
well-informed decisions for the portfolios they manage. For the individual
investor, the key during uncertain times is to remain focused on the big
picture. Investment success comes not from reacting to short-term volatility,
but from maintaining a long-term perspective and adhering to the disciplines of
asset allocation, diversification and rebalancing. We encourage you to work with
your financial advisor to ensure these time-tested techniques are incorporated
into your investment plan.
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, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
Although long-term bond yields declined over the past 12 months, we
maintained the Fund's defensive positioning in an effort to limit volatility and
safeguard the Fund's net asset value in anticipation of rising long-term
interest rates ahead.
Describe the recent market environment relative to municipal bonds.
Over the past 12 months, amid considerable monthly volatility, long-term U.S.
Treasury bond yields generally moved lower -- despite an increase in short-term
interest rates by the Federal Reserve Board (the Fed). On October 31, 2004, the
30-year Treasury bond yield stood at 4.79%, a decline of 34 basis points (.34%)
from a year earlier. The yield on the 10-year U.S. Treasury note was 4.02%, a 27
basis point drop during the same 12-month period.
While tax-exempt bond yields followed the same pattern as their taxable
counterparts, volatility in the municipal market was more subdued. Yields on
long-term revenue bonds, as measured by the Bond Buyer Revenue Bond Index, fell
27 basis points during the past 12 months. According to Municipal Market Data,
yields on AAA-rated issues maturing in 30 years declined 22 basis points to
4.60%, while yields on 10-year AAA-rated issues dropped 28 basis points to
3.40%.
While more than $360 billion in new long-term tax-exempt bonds was issued in the
past 12 months, this represented a decline of approximately 6% compared to the
previous year. The declining supply amid favorable demand allowed tax-exempt
bond prices to perform in line with the taxable market.
Describe conditions in the State of California.
As the 12-month period began, California was facing political and economic
uncertainty. Concerns over the state's $38 billion deficit led Standard and
Poor's (S&P) to downgrade California's credit rating to BBB, the lowest in the
nation. Conditions improved somewhat as the state passed a new budget and Arnold
Schwarzenegger assumed the governor's office. The new budget, however, included
a significant amount of new general obligation debt -- backed by the state's
precarious revenues -- as well as new "fiscal recovery" bonds to reduce the
deficit.
Toward the end of 2003, credit-rating agencies Fitch and Moody's followed S&P's
lead and downgraded California's credit rating. The downgrade was prompted by
Governor Schwarzenegger's repeal of an unpopular vehicle licensing fee, which
reduced the state's revenues, and a lack of consensus on how to resolve the
state's budget crisis. In June 2004, California completed the issuance of $11
billion worth of economic recovery bonds, alleviating concerns about the state's
cash-flow problems. In turn, Moody's upgraded the state's long-term credit
rating to A3 from Baa1, citing a recovering state economy, increased tax
collections, an improved budget outlook and more liquidity. S&P soon followed,
upgrading its rating from BBB to A, while Fitch raised California's rating to
A-.
As the state's fiscal health improved, credit spreads tightened considerably,
reflecting investors' increased comfort with taking on the risk associated with
owning California's debt. Still, California faces a number of challenges,
including compliance with several stringent financial mandates. These include
Proposition 98, which guarantees public schools a minimum level of funding;
strict property tax limits; and a requirement for a two-thirds supermajority
legislative vote on financial matters, which has often impeded the timely
adoption of a budget. Although California's large population and above-average
per-capita income have resulted in relatively manageable debt levels, the state
has depended on substantial amounts of general obligation debt to resolve recent
budget shortfalls and capital needs.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended October 31, 2004, the Common Stock of MuniYield
California Insured Fund, Inc. had net annualized yields of 5.75% and 6.38%,
based on a year-end per share net asset value of $15.23 and a per share market
price of $13.73, respectively, and $.876 per share income dividends. Over the
same period, the total investment return on the Fund's Common Stock was +7.54%,
based on a change in per share net asset value from $15.10 to $15.23, and
assuming reinvestment of ordinary income dividends.
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 +8.25% for the 12-month period. (Funds in this Lipper category invest
primarily in municipal debt issues exempt from taxation in the state of
California and insured as to timely payment.) The Fund's relative
underperformance can be partly attributed to its very low duration, or
sensitivity to changes in interest rates. We maintained portfolio duration at a
relatively
4 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004
low level in an effort to reduce volatility and protect the Fund's net asset
value in what we expected to be a rising interest rate environment. However,
long-term rates actually declined during the past 12 months, and we opted not to
trade in and out of securities to take advantage of periods of market
volatility. Instead, we kept the Fund fully invested and with minimal portfolio
turnover.
Also impacting performance was the fact that the Fund employs a lower percentage
of leverage than many of its peers. This had a negative effect on relative
results at those times during the period when interest rates fell. Finally, we
maintained the Fund's focus on high-quality bonds, with an average 90% of the
portfolio invested in AAA-rated insured holdings throughout the period. While
the Fund is permitted to invest up to 20% of its total assets in uninsured
bonds, we kept our uninsured basket below that mark in an effort to limit risk.
This detracted from performance somewhat as credit spreads tightened and
non-investment grade bonds outperformed. Bonds backed by tobacco revenues
enjoyed particularly strong performance, although we had limited exposure given
the high risk associated with these credits.
For the six-month period ended October 31, 2004, the total investment return on
the Fund's Common Stock was +6.99%, based on a change in per share net asset
value from $14.71 to $15.23, and assuming reinvestment of ordinary income
dividends.
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
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 returns based on
changes in the Fund's net asset value.
What changes were made to the portfolio during the year?
In general, we managed the portfolio defensively throughout the past 12 months.
Our goal was to protect the Fund's net asset value should interest rates rise.
Although this scenario has yet to materialize in any sustained fashion, we
believe the Fund is positioned for relative strong performance once long-term
yields begin to follow short-term interest rates higher.
As credit spreads tightened during the year, we took the opportunity to sell
some lower-rated bonds in the portfolio whose income was subject to the
alternative minimum tax (AMT). We were effectively able to reduce the Fund's AMT
exposure while selling these strong-performing bonds at a gain. Overall,
however, we continued to focus on owning a high-quality bond portfolio that
provides current return, rather than generating capital gains through trading
activity.
For the six-month period ended October 31, 2004, the Fund's Auction Market
Preferred Stock (AMPS) had an average yield of 1.10% for Series A; 1.02% for
Series B; .93% for Series C; 1.09% for Series D; and 1% for Series E. These
attractive funding levels, in combination with a positively sloped yield curve,
continued to provide a generous income benefit to the Common Stock shareholder
from the leveraging of Preferred Stock. While the Fed is likely to continue
raising short-term interest rates, the increases are expected to be gradual and
should not have an immediate material impact on the positive advantage leverage
has had on the Fund's Common Stock yield. However, should the spread between
short-term and long-term interest rates narrow, the benefits of leveraging 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 30.58% of total
net 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 maintained the portfolio's relatively short duration. Our focus remains on
protecting the Fund's net asset value in a municipal market environment that we
expect will continue to be quite volatile. The Fed has continued to increase
short-term interest rates at a "measured" pace, with its fourth 25 basis point
rate hike this year on November 10. With the next major move in long-term rates
likely to be upward, the portfolio's defensive structure is expected to mute
price volatility, thereby preserving the returns the Fund has earned for
shareholders.
Walter C. O'Connor, CFA
Vice President and Portfolio Manager
November 10, 2004
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004 5
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (in Thousands)
S&P Moody's Face
Ratings++ Ratings++ Amount Municipal Bonds Value
===================================================================================================================================
California--130.8%
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 7,000 ABAG Finance Authority for Nonprofit Corporations, California,
COP (Children's Hospital Medical Center), 6% due 12/01/2029 (a) $ 7,911
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,350 Alameda, California, GO, 5% due 8/01/2033 (g) 2,419
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,580 Anaheim, California, Public Financing Authority, Electric
System Distribution Facilities Revenue Bonds, Series A, 5%
due 10/01/2031 (e) 3,669
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,400 Anaheim, California, Union High School District, GO (Election
of 2002), 5% due 8/01/2027 (g) 2,486
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,985 Arcadia, California, Unified School District, GO, Series B,
6.50% due 7/01/2015 (b) 2,086
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,675 Bakersfield, California, COP, Refunding (Convention Center
Expansion Project), 5.80% due 4/01/2017 (g) 4,009
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Bay Area Government Association, California, Revenue Refunding
Bonds (California Redevelopment Agency Pool), Series A, 6%
due 12/15/2024 (e) 2,050
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,990 Brentwood, California, Infrastructure Refinancing Authority,
Infrastructure Revenue Refunding Bonds, Series A, 5.20%
due 9/02/2029 (e) 4,168
---------------------------------------------------------------------------------------------------------
California Community College Financing Authority, Lease Revenue
Bonds, Series A (g):
AAA Aaa 3,215 5.95% due 12/01/2022 3,703
AAA Aaa 1,100 6% due 12/01/2029 1,255
---------------------------------------------------------------------------------------------------------
California Educational Facilities Authority Revenue Bonds:
AAA Aaa 28,000 (Pepperdine University), Series A, 5.50% due 8/01/2032 (g) 30,344
NR* A2 5,000 (University of San Diego), Series A, 5.50% due 10/01/2032 5,273
---------------------------------------------------------------------------------------------------------
AAA Aaa 15,625 California Educational Facilities Authority, Student Loan
Revenue Bonds (Caledge Loan Program), AMT, 5.55%
due 4/01/2028 (a) 16,261
---------------------------------------------------------------------------------------------------------
California HFA, Home Mortgage Revenue Bonds, VRDN (j):
A1+ VMIG1+ 800 AMT, Series B, 1.81% due 8/01/2033 (e) 800
A1 VMIG1+ 100 Series F, 1.74% due 2/01/2033 (a) 100
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,750 California Health Facilities Financing Authority Revenue Bonds
(Kaiser Permanente), Series A, 5.50% due 6/01/2022 (e)(k)(l) 3,064
---------------------------------------------------------------------------------------------------------
California Rural Home Mortgage Finance Authority, S/F Mortgage
Revenue Bonds (Mortgage-Backed Securities Program), AMT:
AAA NR* 1,155 Series A, 6.35% due 12/01/2029 (c)(d) 1,159
NR* Aaa 230 Series A-1, 6.90% due 12/01/2024 (c)(f) 242
AAA NR* 760 Series B, 6.25% due 12/01/2031 (d) 773
---------------------------------------------------------------------------------------------------------
California State Department of Veteran Affairs, Home Purpose
Revenue Refunding Bonds:
AAA Aaa 12,680 Series A, 5.35% due 12/01/2027 (a) 13,267
A Aa2 7,500 Series C, 6.15% due 12/01/2027 7,720
---------------------------------------------------------------------------------------------------------
BBB+ A2 7,500 California State Department of Water Resources, Power Supply
Revenue Bonds, Series A, 5.75% due 5/01/2017 8,509
---------------------------------------------------------------------------------------------------------
California State, GO:
AAA Aaa 860 6.25% due 10/01/2019 (g)(h) 876
A A3 5,950 Various Purpose, 5.50% due 11/01/2033 6,382
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, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings++ Ratings++ Amount Municipal Bonds Value
===================================================================================================================================
California (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
California State, GO, Refunding:
AAA Aaa $ 6,000 5% due 2/01/2031 (g) $ 6,155
AAA NR* 9,935 DRIVERS, AMT, Series 239, 9.329% due 12/01/2032 (a)(i) 10,051
AAA Aaa 3,000 Series BX, 5.50% due 12/01/2031 (e) 3,066
---------------------------------------------------------------------------------------------------------
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) 4,896
---------------------------------------------------------------------------------------------------------
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) 18,163
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,375 California State University and Colleges, Housing System
Revenue Refunding Bonds, 5.90% due 11/01/2021 (b) 2,516
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 California State University, Sacramento Foundation, Auxiliary
Organization Revenue Bonds, Series A, 5.50% due 10/01/2037 (g) 1,079
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,100 California Statewide Communities Development Authority, COP
(Kaiser Permanente), 5.30% due 12/01/2015 (e)(l) 4,395
---------------------------------------------------------------------------------------------------------
A A3 3,685 California Statewide Communities Development Authority, Health
Facility Revenue Bonds (Memorial Health Services), Series A, 6%
due 10/01/2023 3,973
---------------------------------------------------------------------------------------------------------
AA- A1 1,000 California Statewide Communities Development Authority Revenue
Bonds (Sutter Health), Series B, 5.50% due 8/15/2028 1,046
---------------------------------------------------------------------------------------------------------
AAA Aaa 8,155 Calleguas-Las Virgenes, California, Public Financing Authority
Revenue Bonds (Calleguas Municipal Water District Project),
Series A, 5% due 7/01/2033 (g) 8,356
---------------------------------------------------------------------------------------------------------
Ceres, California, Redevelopment Agency, Tax Allocation Bonds
(Ceres Redevelopment Project Area Number 1) (g):
AAA Aaa 4,600 5.75% due 11/01/2030 5,135
AAA Aaa 4,000 5% due 11/01/2033 4,109
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Chaffey, California, Union High School District, GO, Series C,
5.375% due 5/01/2023 (e) 6,583
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,540 Coalinga, California, Redevelopment Agency Tax Allocation
Bonds, 5.90% due 9/15/2025 (g) 2,916
---------------------------------------------------------------------------------------------------------
AA NR* 2,750 Commerce, California, Joint Powers Financing Authority Revenue
Bonds (Redevelopment Projects), Series A, 5% due 8/01/2028 (k) 2,788
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Compton, California, Unified School District, GO (Election of
2002), Series B, 5% due 6/01/2029 (g) 2,068
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,135 Contra Costa, California, Water District, Water Revenue
Refunding Bonds, Series L, 5% due 10/01/2032 (e) 4,240
---------------------------------------------------------------------------------------------------------
AAA Aaa 12,180 Contra Costa County, California, COP, Refunding (Merrithew
Memorial Hospital Project), 5.375% due 11/01/2017 (g) 13,410
---------------------------------------------------------------------------------------------------------
AAA Aaa 8,500 Corona, California, COP, (Clearwater Congeneration Project),
5% due 9/01/2028 (g) 8,719
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Coronado, California, Community Development Agency, Tax
Allocation Bonds (Coronado Community Development Project),
5.60% due 9/01/2030 (g) 2,189
---------------------------------------------------------------------------------------------------------
El Monte, California, City School District, GO, Refunding,
Series A (e):
AAA Aaa 1,000 6.25% due 5/01/2020 1,162
AAA Aaa 1,500 6.25% due 5/01/2025 1,732
---------------------------------------------------------------------------------------------------------
El Monte, California, School District, GO, Series B (b):
AAA Aaa 3,025 5.375% due 5/01/2022 3,332
AAA Aaa 2,525 5.375% due 5/01/2027 2,709
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 El Rancho, California, Unified School District, GO (Election
of 2003), Series A, 5% due 8/01/2028 (b) 3,101
---------------------------------------------------------------------------------------------------------
AAA Aaa 10,755 Fremont, California, Unified School District, Alameda County,
GO, Series A, 5.50% due 8/01/2026 (b) 11,779
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,295 Fresno, California, Joint Powers Financing Authority, Lease
Revenue Bonds, Series A, 5.75% due 6/01/2026 (e) 4,840
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,390 Glendale, California, Electric Revenue Bonds, 5%
due 2/01/2032 (g) 4,499
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 La Quinta, California, Financing Authority, Local Agency
Revenue Bonds, Series A, 5.25% due 9/01/2024 (a) 2,705
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 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)
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 3,800 Las Lomitas, California, School District, GO (Election of
2001), 5.50% due 7/01/2022 (e) $ 4,250
---------------------------------------------------------------------------------------------------------
AAA Aaa 10,260 Lodi, California, Unified School District, GO (Election of
2002), 5% due 8/01/2029 (e) 10,582
---------------------------------------------------------------------------------------------------------
NR* Aa3 7,575 Long Beach, California, Harbor Revenue Bonds, RIB, AMT, Series
786-X, 8.70% due 5/15/2024 (i) 8,299
---------------------------------------------------------------------------------------------------------
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) 10,360
---------------------------------------------------------------------------------------------------------
Los Angeles, California, Department of Airports, Airport
Revenue Bonds (b):
AAA Aaa 710 (Los Angeles International Airport), AMT, Series D,
5.625% due 5/15/2005 (h) 731
AAA Aaa 290 (Los Angeles International Airport), AMT, Series D,
5.625% due 5/15/2012 298
AAA Aaa 2,500 (Ontario International Airport), AMT, Series A, 6%
due 5/15/2017 2,641
---------------------------------------------------------------------------------------------------------
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 3,471
AAA Aaa 4,000 5.875% due 2/15/2005 4,089
AAA Aaa 8,000 6% due 2/15/2005 8,180
AAA Aaa 7,140 6.125% due 2/15/2005 7,303
---------------------------------------------------------------------------------------------------------
Los Angeles, California, Harbor Department Revenue Bonds (g)(i):
NR* Aaa 7,365 RIB, AMT, Series 349, 10.40% due 11/01/2026 8,498
NR* Aaa 7,000 Trust Receipts, AMT, Class R, Series 7, 10.373%
due 11/01/2026 8,077
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Los Angeles, California, Unified School District, GO, Series A,
5% due 1/01/2028 (g) 2,070
---------------------------------------------------------------------------------------------------------
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) 3,495
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding Bonds, Proposition C,
Second Tier Senior Series A, 5.25% due 7/01/2030 (b) 2,108
---------------------------------------------------------------------------------------------------------
Los Gatos, California, Joint Union High School District, GO
(Election of 1998), Series C (e):
AAA Aaa 5,830 5.375% due 6/01/2022 6,423
AAA Aaa 1,000 5% due 6/01/2027 1,035
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Los Rios, California, Community College District, GO (Election
of 2002), Series B, 5% due 8/01/2027 (g) 3,117
---------------------------------------------------------------------------------------------------------
AAA Aaa 5,370 Metropolitan Water District of Southern California, Waterworks
Revenue Bonds, Series B-1, 5% due 10/01/2033 (b) 5,518
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,175 Mount Pleasant, California, Elementary School District, GO,
Series B, 6.35% due 12/01/2024 (e) 2,535
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,625 Napa Valley, California, Community College District, GO,
Series A, 5% due 8/01/2027 (g) 4,791
---------------------------------------------------------------------------------------------------------
NR* Aaa 4,245 Nevada County, California, COP, Refunding, 5.25%
due 10/01/2019 (g) 4,646
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 New Haven, California, Unified School District, GO, Refunding,
5.75% due 8/01/2020 (e) 2,308
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Oakland, California, State Building Authority, Lease Revenue
Bonds (Elihu M Harris), Series A, 5.50% due 4/01/2014 (a) 2,213
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,245 Orange County, California, Airport Revenue Refunding Bonds,
AMT, 5.625% due 7/01/2012 (g) 1,359
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,360 Orange County, California, Public Financing Authority, Lease
Revenue Refunding Bonds (Juvenile Justice Center Facility),
5.375% due 6/01/2018 (a) 7,100
---------------------------------------------------------------------------------------------------------
AAA Aaa 16,920 Orange County, California, Recovery COP, Refunding, Series A,
6% due 7/01/2026 (g) 18,274
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,570 Orange County, California, Sanitation District, COP, 5%
due 2/01/2033 (b) 3,646
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,360 Orchard, California, School District, GO, Series A, 6.5%
due 8/01/2005 (b)(h) 4,601
---------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 Oxnard, California, Financing Authority, Wastewater Revenue
Bonds (Redwood Trunk Sewer and Headworks Projects), Series A,
5.25% due 6/01/2034 (b) 10,595
---------------------------------------------------------------------------------------------------------
AAA Aaa 9,645 Oxnard, California, Unified High School District, GO,
Refunding, Series A, 6.20% due 8/01/2030 (g) 11,168
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,275 Palm Springs, California, Financing Authority, Lease Revenue
Refunding Bonds (Convention Center Project), Series A, 5.50%
due 11/01/2035 (g) 1,403
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,205 Palmdale, California, Water District Public Facility
Corporation, COP, 5% due 10/01/2029 (b) 6,396
8 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004
Schedule of Investments (continued) (in Thousands)
S&P Moody's Face
Ratings++ Ratings++ Amount Municipal Bonds Value
===================================================================================================================================
California (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $10,000 Port Oakland, California, RITR, AMT, Class R, Series 5, 9.408%
due 11/01/2012 (b)(i) $ 12,113
---------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 Port Oakland, California, Revenue Bonds, AMT, Series K, 5.75%
due 11/01/2029 (b) 8,118
---------------------------------------------------------------------------------------------------------
AAA Aaa 19,035 Port Oakland, California, Revenue Refunding Bonds, AMT,
Series L, 5.375% due 11/01/2027 (b) 19,975
---------------------------------------------------------------------------------------------------------
Rio Hondo, California, Community College District, GO,
Series A (g):
AAA Aaa 3,000 5% due 8/01/2026 3,132
AAA Aaa 3,500 5.25% due 6/01/2029 3,725
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Riverside, California, COP, 5% due 9/01/2028 (a) 3,091
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Riverside, California, Unified School District, GO (Election
of 2001), Series A, 5.25% due 2/01/2023 (b) 6,486
---------------------------------------------------------------------------------------------------------
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) 5,209
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,065 Saddleback Valley, California, Unified School District, GO, 5%
due 8/01/2029 (e) 3,170
---------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 San Bernardino, California, City Unified School District, GO,
Series A, 5% due 8/01/2028 (e) 5,183
---------------------------------------------------------------------------------------------------------
NR* Aaa 1,200 San Bernardino County, California, S/F Home Mortgage Revenue
Refunding Bonds, AMT, Series A-1, 6.25% due 12/01/2031 (d) 1,203
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,720 San Diego, California, Unified School District, GO (Election of
1998), Series F, 5% due 7/01/2029 (e) 6,949
---------------------------------------------------------------------------------------------------------
San Diego County, California, COP (Salk Institute for Bio
Studies) (g):
AAA Aaa 3,570 5.75% due 7/01/2022 4,082
AAA Aaa 5,200 5.75% due 7/01/2031 5,804
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,090 San Francisco, California, Bay Area Rapid Transit District,
Revenue Refunding Bonds (BART SFO Extension), Series A, 4.875%
due 6/15/2009 (a) 2,095
---------------------------------------------------------------------------------------------------------
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) 8,768
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 5.25% due 5/01/2023 3,222
AAA Aaa 6,455 5.25% due 5/01/2024 6,897
---------------------------------------------------------------------------------------------------------
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 1,103
AAA Aaa 1,000 6.125% due 1/01/2027 1,103
---------------------------------------------------------------------------------------------------------
San Francisco, California, Community College District, GO,
Refunding, Series A (b):
NR* Aaa 1,735 5.375% due 6/15/2019 1,944
NR* Aaa 1,730 5.375% due 6/15/2020 1,925
NR* Aaa 1,925 5.375% due 6/15/2021 2,130
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,135 San Jose, California, Airport Revenue Bonds, Series D, 5%
due 3/01/2028 (g) 4,266
---------------------------------------------------------------------------------------------------------
NR* Aaa 3,650 San Jose, California, Redevelopment Agency, Tax Allocation
Bonds, RIB, AMT, Series 149, 9.60% due 8/01/2027 (g)(i) 4,280
---------------------------------------------------------------------------------------------------------
AAA Aaa 4,250 San Juan, California, Unified School District, GO (Election of
2002), 5% due 8/01/2028 (g) 4,393
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,700 San Mateo County, California, Community College District, COP,
5% due 10/01/2029 (g) 1,752
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,595 Santa Clara, California, Redevelopment Agency, Tax Allocation
Bonds (Bayshore North Project), Series A, 5.25%
due 6/01/2019 (a) 2,866
---------------------------------------------------------------------------------------------------------
AAA Aaa 5,500 Santa Clara, California, Subordinated Electric Revenue Bonds,
Series A, 5% due 7/01/2028 (g) 5,683
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,100 Santa Clara Valley, California, Water District, Water Utility
System Revenue, Series A, 5.125% due 6/01/2031 (b) 1,143
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 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 (concluded)
- -----------------------------------------------------------------------------------------------------------------------------------
AAA Aaa $ 5,300 Santa Paula, California, Public Financing Authority, Water
Revenue Refunding Bonds, 5% due 2/01/2033 (a) $ 5,442
---------------------------------------------------------------------------------------------------------
Santa Rosa, California, High School District, GO:
AAA Aaa 3,000 5.375% due 8/01/2026 (e) 3,240
AAA Aaa 2,500 (Election of 2002), 5% due 8/01/2028 (g) 2,584
---------------------------------------------------------------------------------------------------------
South Tahoe, California, Joint Powers Finance Authority,
Revenue Refunding Bonds (South Tahoe Redevelopment Project
Area No. 1), Series A (e):
AAA NR* 1,645 5% due 10/01/2029 1,696
AAA NR* 5,830 5% due 10/01/2034 5,967
---------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Southern California Public Power Authority, Power Project
Revenue Bonds (Magnolia Power Project), Series A-1, 5%
due 7/01/2033 (a) 5,131
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,055 Stockton, California, Public Financing Revenue Refunding Bonds,
Series A, 5.875% due 9/02/2016 (e) 1,095
---------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 Tehachapi, California, COP, Refunding (Installment Sale), 5.75%
due 11/01/2016 (e) 1,736
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 Tracy, California, Community Development Agency, Tax Allocation
Refunding Bonds, Series A, 5% due 3/01/2034 (a) 6,123
---------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Turlock, California, Public Finance Authority, Sewer Revenue
Bonds, Series A, 5% due 9/15/2033 (b) 3,082
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,800 University of California, Hospital Revenue Refunding Bonds
(UCLA Medical Center), Series A, 5% due 5/15/2034 (a) 2,858
---------------------------------------------------------------------------------------------------------
University of California Revenue Bonds:
AAA Aaa 8,720 (Multiple Purpose Projects), Series Q, 5%
due 9/01/2024 (e) 9,127
AAA Aaa 6,110 (Multiple Purpose Projects), Series Q, 5%
due 9/01/2033 (e) 6,250
AAA Aaa 4,790 Series O, 5.125% due 9/01/2031 (b) 4,964
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,130 Vacaville, California, Unified School District, GO (Election
of 2001), 5.25% due 8/01/2028 (e) 6,473
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,550 Vista, California, Unified School District, GO, Series B, 5%
due 8/01/2028 (b) 2,636
---------------------------------------------------------------------------------------------------------
AAA Aaa 2,185 Walnut, California, Public Financing Authority, Tax Allocation
Revenue Bonds (Walnut Improvement Project), 5.375%
due 9/01/2021 (a) 2,403
---------------------------------------------------------------------------------------------------------
AAA Aaa 6,690 West Contra Costa, California, Unified School District, GO,
Series B, 5% due 8/01/2032 (e) 6,857
===================================================================================================================================
Puerto Rico--8.9%
- -----------------------------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth, Public Improvement, GO (g):
AAA Aaa 4,335 5.75% due 7/01/2017 4,957
AAA Aaa 4,075 5.75% due 7/01/2018 4,660
AAA Aaa 1,090 5.75% due 7/01/2019 1,246
---------------------------------------------------------------------------------------------------------
A- A3 1,000 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series NN, 5.125% due 7/01/2029 1,038
---------------------------------------------------------------------------------------------------------
NR* Aaa 10,000 Puerto Rico Municipal Finance Agency, GO, RIB, Series 225,
9.44% due 8/01/2012 (e)(i) 12,803
---------------------------------------------------------------------------------------------------------
BBB+ Baa2 20,000 Puerto Rico Public Finance Corporation, Commonwealth
Appropriation Revenue Bonds, Series E, 5.75% due 2/01/2007 (h) 21,611
---------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$690,484)--139.7% 730,794
=========================================================================================================
10 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004
Schedule of Investments (concluded) (in Thousands)
Shares
Held Short-Term Securities Value
=========================================================================================================
33 CMA California Municipal Money Fund+++ $ 33
---------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$33)--0.0% 33
=========================================================================================================
Total Investments (Cost--$690,517**)--139.7% 730,827
Other Assets Less Liabilities--4.3% 22,424
Preferred Stock, at Redemption Value--(44.0%) (230,045)
---------
Net Assets Applicable to Common Stock--100.0% $ 523,206
=========
(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, 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 October 31,
2004.
(k) Radian Insured.
(l) Escrowed to maturity.
* Not Rated.
** The cost and unrealized appreciation/depreciation of investments as of
October 31, 2004, as computed for federal income tax purposes were as
follows:
(in Thousands)
--------------------------------------------------------------------------
Aggregate cost ........................................... $690,494
========
Gross unrealized appreciation ............................ $ 40,572
Gross unrealized depreciation ............................ (239)
--------
Net unrealized appreciation .............................. $ 40,333
========
+ Highest short-term rating by Moody's Investors Service, Inc.
++ Ratings of issues shown are unaudited.
+++ 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) were as follows:
(in Thousands)
--------------------------------------------------------------------------
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
CMA California Municipal Money Fund 17 $18
--------------------------------------------------------------------------
See Notes to Financial Statements.
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004 11
[LOGO] Merrill Lynch Investment Managers
Statement of Net Assets
As of October 31, 2004
============================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified
cost--$690,484,485) $ 730,794,232
Investments in affiliated securities, at value (identified
cost--$32,584) 32,584
Cash ............................................................. 42,568
Receivables:
Interest ...................................................... $ 13,039,276
Securities sold ............................................... 10,055,889 23,095,165
-------------
Prepaid expenses and other assets ................................ 12,055
-------------
Total assets ..................................................... 753,976,604
-------------
============================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payables:
Investment adviser ............................................ 358,293
Dividends to Common Stock shareholders ........................ 280,568
Other affiliates .............................................. 5,198 644,059
-------------
Accrued expenses ................................................. 82,256
-------------
Total liabilities ................................................ 726,315
-------------
============================================================================================================================
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*
authorized, issued and outstanding at $25,000 per share
liquidation preference) ......................................... 230,044,712
-------------
============================================================================================================================
Net Assets Applicable to Common Stock
- ----------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock ............................ $ 523,205,577
=============
============================================================================================================================
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 ................................. 494,824,623
Undistributed investment income--net ............................. $ 6,609,556
Accumulated realized capital losses--net ......................... (21,974,469)
Unrealized appreciation--net ..................................... 40,309,747
-------------
Total accumulated earnings--net .................................. 24,944,834
-------------
Total--Equivalent to $15.23 net asset value per share of Common
Stock (market price--$13.73) .................................... $ 523,205,577
=============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
12 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004
Statement of Operations
For the Year Ended October 31, 2004
============================================================================================================================
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Interest ......................................................... $ 37,352,926
Dividends from affiliates ........................................ 18,372
-------------
Total income ..................................................... 37,371,298
-------------
============================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ......................................... $ 3,717,972
Commission fees .................................................. 582,512
Accounting services .............................................. 229,282
Transfer agent fees .............................................. 92,032
Professional fees ................................................ 55,129
Printing and shareholder reports ................................. 45,377
Custodian fees ................................................... 40,105
Listing fees ..................................................... 26,588
Directors' fees and expenses ..................................... 25,343
Pricing fees ..................................................... 21,535
Other ............................................................ 90,389
-------------
Total expenses before reimbursement .............................. 4,926,264
Reimbursement of expenses ........................................ (11,573)
-------------
Total expenses after reimbursement ............................... 4,914,691
-------------
Investment income--net ........................................... 32,456,607
-------------
============================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- ----------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net .............................................. 67,429
Futures contracts and forward interest rate swaps--net ........ (461,318) (393,889)
-------------
Change in unrealized appreciation on:
Investments--net .............................................. 5,412,777
Forward interest rate swaps--net .............................. (756,132) 4,656,645
-------------------------------
Total realized and unrealized gain--net .......................... 4,262,756
-------------
============================================================================================================================
Dividends to Preferred Stock Shareholders
- ----------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... (2,199,184)
-------------
Net Increase in Net Assets Resulting from Operations ............. $ 34,520,179
=============
See Notes to Financial Statements.
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004 13
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets
For the Year Ended
October 31,
-------------------------------
Increase (Decrease) in Net Assets: 2004 2003
============================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... $ 32,456,607 $ 32,714,524
Realized loss--net ............................................... (393,889) (598,996)
Change in unrealized appreciation--net ........................... 4,656,645 (6,051,332)
Dividends to Preferred Stock shareholders ........................ (2,199,184) (1,972,130)
-------------------------------
Net increase in net assets resulting from operations ............. 34,520,179 24,092,066
-------------------------------
============================================================================================================================
Dividends to Common Stock Shareholders
- ----------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... (30,100,412) (29,791,160)
-------------------------------
Net decrease in net assets resulting from dividends to Common
Stock shareholders .............................................. (30,100,412) (29,791,160)
-------------------------------
============================================================================================================================
Net Assets Applicable to Common Stock
- ----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to Common Stock 4,419,767 (5,699,094)
Beginning of year ................................................ 518,785,810 524,484,904
-------------------------------
End of year* ..................................................... $ 523,205,577 $ 518,785,810
===============================
* Undistributed investment income--net ........................ $ 6,609,556 $ 6,480,413
===============================
See Notes to Financial Statements.
14 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004
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: 2004 2003 2002 2001 2000
================================================================================================================================
Per Share Operating Performance
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ........ $ 15.10 $ 15.26 $ 15.44 $ 14.24 $ 13.14
-----------------------------------------------------------
Investment income--net .................... .94@@ .95@@ .95 1.00 1.02
Realized and unrealized gain
(loss)--net .............................. .13 (.18) (.22) 1.21 1.14
Dividends and distributions to
Preferred Stock shareholders:
Investment income--net ................. (.06) (.06) (.09) (.20) (.25)
Realized gain--net ..................... -- -- --@ -- --
In excess of realized gain--net ........ -- -- -- --@ --
-----------------------------------------------------------
Total from investment operations .......... 1.01 .71 .64 2.01 1.91
-----------------------------------------------------------
Less dividends and distributions
to Common Stock shareholders:
Investment income--net ................. (.88) (.87) (.81) (.81) (.81)
Realized gain--net ..................... -- -- (.01) -- --
In excess of realized gain--net ........ -- -- -- --@ --
-----------------------------------------------------------
Total dividends and distributions
to Common Stock shareholders ............. (.88) (.87) (.82) (.81) (.81)
-----------------------------------------------------------
Net asset value, end of year .............. $ 15.23 $ 15.10 $ 15.26 $ 15.44 $ 14.24
===========================================================
Market price per share, end of year ....... $ 13.73 $ 13.82 $ 13.68 $ 14.46 $13.625
===========================================================
================================================================================================================================
Total Investment Return*
- --------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ........ 7.54% 5.29% 4.68% 14.76% 15.28%
===========================================================
Based on market price per share ........... 5.93% 7.50% .20% 12.33% 14.23%
===========================================================
================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
- --------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of
reimbursement and excluding
reorganization expenses** ................. .95% .94% .96% 1.06% 1.04%
===========================================================
Total expenses, excluding
reorganization expenses** ................ .95% .94% .96% 1.06% 1.04%
===========================================================
Total expenses** .......................... .95% .94% 1.00% 1.06% 1.04%
===========================================================
Total investment income--net** ............ 6.29% 6.20% 6.38% 6.74% 7.43%
===========================================================
Amount of dividends to Preferred
Stock shareholders ....................... .43% .37% .56% 1.36% 1.81%
===========================================================
Investment income--net, to Common
Stock shareholders ....................... 5.86% 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 ................... .66% .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 .............. 4.36% 4.31% 4.42% 4.57% 4.88%
===========================================================
================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
- --------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock
shareholders ............................. .96% .85% 1.25% 2.86% 3.46%
===========================================================
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004 15
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (concluded)
For the Year Ended October 31,
The following per share data and ratios have been derived --------------------------------------------------------
from information provided in the financial statements. 2004 2003 2002 2001 2000
====================================================================================================================
Supplemental Data
- --------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
Stock, end of year (in thousands) $523,206 $518,786 $524,485 $283,553 $261,474
========================================================
Preferred Stock outstanding, end
of year (in thousands) .......... $230,000 $230,000 $230,000 $130,000 $130,000
========================================================
Portfolio turnover ............... 68.05% 52.17% 77.13% 59.36% 78.52%
========================================================
====================================================================================================================
Leverage
- --------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ........ $ 3,275 $ 3,256 $ 3,280 $ 3,181 $ 3,011
========================================================
====================================================================================================================
Dividends Per Share on Preferred Stock Outstanding
- --------------------------------------------------------------------------------------------------------------------
Series A--Investment income--net . $ 246 $ 216 $ 359 $ 758 $ 879
========================================================
Series B--Investment income--net . $ 238 $ 212 $ 324 $ 700 $ 838
========================================================
Series C--Investment income--net . $ 224 $ 204 $ 320 $ 683 $ 884
========================================================
Series D+--Investment income--net $ 249 $ 242 $ 203 -- --
========================================================
Series E+--Investment income--net $ 236 $ 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.
+ The Fund's Preferred Stock was issued on February 4, 2002 for Series D and
E.
@ Amount is less than $(.01) per share.
@@ Based on average shares outstanding.
See Notes to Financial Statements.
16 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 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 U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. The Fund determines and makes available for publication the net
asset value of its Common Stock on a daily 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 values as obtained by a pricing
service. Pricing services use valuation matrixes that incorporate both
dealer-supplied valuations and valuation models. The procedures of the pricing
service and its valuations are reviewed by the officers of the Fund under the
general direction of the Board of Directors. Such valuations and procedures will
be reviewed periodically by the Board of Directors of the Fund. 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's pricing service. Short-term investments with a remaining maturity of
60 days or less are valued at amortized cost, which approximates market value,
under which method the investment is valued at cost and any premium or discount
is amortized on a straight line basis to maturity. Investments in open-end
investment companies are valued at their net asset value each business day.
Securities and other 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.
(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. OCTOBER 31, 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.
(f) Reclassifications -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $56,028 has been reclassified between undistributed net investment income
and accumulated net realized capital losses on investments and $28,160 has been
reclassified between paid-in capital in excess of par and undistributed net
investment income as a result of permanent differences attributable to the
amortization methods for premiums and discounts on fixed income securities and
nondeductible expenses. These reclassifications have no effect on net assets or
net asset values per share.
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. The Investment Adviser has agreed
to reimburse its management fee by the amount of management fees the Fund pays
to FAM indirectly through its investment in CMA California Municipal Money Fund.
For the year ended October 31, 2004, FAM reimbursed the Fund in the amount of
$11,573.
For the year ended October 31, 2004, the Fund reimbursed FAM $14,472 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, 2004 were $518,780,271 and $490,076,953, respectively.
18 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004
Notes to Financial Statements (concluded)
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 October 31, 2004 were as follows:
Series A, .90%; Series B, 1.58%; Series C, 1.10%; Series D, 1.40%; and Series E,
1.10%.
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, 2004, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, an affiliate of FAM, earned $167,420 as commissions.
5. Distributions to Shareholders:
The Fund paid a tax-exempt income dividend to holders of Common Shares in the
amount of $.073000 per share on November 29, 2004 to shareholders of record on
November 12, 2004.
The tax character of distributions paid during the fiscal years ended October
31, 2004 and October 31, 2003 was as follows:
- --------------------------------------------------------------------------------
10/31/2004 10/31/2003
- --------------------------------------------------------------------------------
Distributions paid from:
Tax-exempt income .................... $32,299,596 $31,763,290
===============================
Total distributions .................... $32,299,596 $31,763,290
===============================
As of October 31, 2004, the components of accumulated earnings on a tax basis
were as follows:
- -----------------------------------------------------------------------------
Undistributed tax-exempt income--net .................... $ 6,585,997
Undistributed long-term capital gains--net .............. --
------------
Total undistributed earnings--net ....................... 6,585,997
Capital loss carryforward ............................... (15,358,482)*
Unrealized gains--net ................................... 33,717,319**
------------
Total accumulated earnings--net ......................... $ 24,944,834
============
* On October 31, 2004, the Fund had a net capital loss carryforward of
$15,358,482, of which $2,049,122 expires in 2007, $5,722,655 expires in
2008, $9,668 expires in 2009, $4,901,089 expires in 2011 and $2,675,948
expires in 2012. 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 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, 2004 19
[LOGO] Merrill Lynch Investment Managers
Report of Independent Registered Public Accounting Firm
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,
2004, 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 the standards of the Public Company
Accounting Oversight Board (United States). 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, 2004, by correspondence with the custodian.
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, 2004, 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 U.S. generally
accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 14, 2004
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, 2004 qualify as
tax-exempt interest dividends for federal income tax purposes.
Please retain this information for your records.
20 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004
Quality Profile (unaudited)
The quality ratings of securities in the Fund as of October 31, 2004 were as
follows:
- --------------------------------------------------------------------------------
Percent of
Total
S&P Rating/Moody's Rating Investments
- --------------------------------------------------------------------------------
AAA/Aaa ........................................................... 90.8%
AA/Aa ............................................................. 2.7
A/A ............................................................... 3.4
BBB/Baa ........................................................... 3.0
Other+ ............................................................ 0.1
- --------------------------------------------------------------------------------
+ Includes portfolio holdings in short-term investments.
Dividend Policy (unaudited)
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.
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004 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
22 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004
shareholders 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, 2004 23
[LOGO] Merrill Lynch Investment Managers
Officers and Directors (unaudited)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Interested Director
- ------------------------------------------------------------------------------------------------------------------------------------
Terry K. P.O. Box 9011 President 1999 to President of the Merrill Lynch Investment Managers, 124 Funds None
Glenn* Princeton, NJ and present L.P. ("MLIM")/Fund Asset Management, L.P. 157 Portfolios
08543-9011 Director ("FAM")-advised funds since 1999; Chairman
Age: 64 (Americas Region) of MLIM from 2000 to 2002;
Executive Vice President of MLIM and FAM (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 MLIM
or FAM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of
the Fund based on his present and former positions with MLIM, FAM, 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 38 Funds None
Bodurtha Princeton, NJ present 1996 and Executive Vice President thereof from 55 Portfolios
08543-9095 1996 to 2003; Chairman of the Board, Berkshire
Age: 60 Holding 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 38 Funds Kimco
Princeton, NJ present Employee Benefit Assets of the Association of 55 Portfolios Realty
08543-9095 Financial Professionals ("CIEBA") since 1986; Corporation
Age: 69 Member of CIEBA's Executive Committee since
1988 and its Chairman from 1991 to 1992;
Assistant Treasurer of International Business
Machines Corporation ("IBM") and Chief
Investment Officer of IBM Retirement Funds
from 1986 to 1993; Member of the Investment
Advisory Committee 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 University Management Company
from 1992 to 2004, Vice Chairman thereof from 1998
to 2004 and Director Emeritus thereof since 2004;
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 its Vice
Chairman 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.
24 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004
Officers and Directors (unaudited) (continued)
Number of
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Independent Directors* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Herbert I. P.O. Box 9095 Director 1992 to John M. Olin Professor of Humanities, New York 38 Funds None
London Princeton, NJ present University since 1993 and Professor thereof since 55 Portfolios
08543-9095 1980; President, Hudson Institute since 1997
Age: 65 and Trustee thereof since 1980; Dean, Gallatin
Division of New York University from 1976 to 1993;
Distinguished Fellow, Herman Kahn Chair, Hudson
Institute from 1984 to 1985; Director, Damon Corp.
from 1991 to 1995; Overseer, Center for Naval
Analyses from 1983 to 1993.
- ------------------------------------------------------------------------------------------------------------------------------------
Roberta P.O. Box 9095 Director 1999 to Shareholder, Modrall, Sperling, Roehl, Harris & 38 Funds None
Cooper Princeton, NJ present Sisk, P.A. since 1993; President, American Bar 55 Portfolios
Ramo 08543-9095 Association from 1995 to 1996 and Member of
Age: 62 the Board of Governors thereof from 1994 to 1997;
Shareholder, Poole, Kelly & Ramo, Attorneys at Law,
P.C. from 1977 to 1993; Director of ECMC Group
(service provider to students, schools and lenders)
since 2001; Director, United New Mexico Bank
(now Wells Fargo) from 1983 to 1988; Director,
First National Bank of New Mexico (now Wells
Fargo) from 1975 to 1976; Vice President, American
Law Institute since 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert S. P.O. Box 9095 Director 2002 to Principal of STI Management (investment adviser) 38 Funds None
Salomon, Princeton, NJ present since 1994; Chairman and CEO of Salomon 55 Portfolios
Jr. 08543-9095 Brothers Asset Management from 1992 to 1995;
Age: 67 Chairman of Salomon Brothers equity mutual funds
from 1992 to 1995; regular columnist with Forbes
Magazine from 1992 to 2002; Director of Stock
Research and U.S. Equity Strategist at Salomon
Brothers from 1975 to 1991; Trustee, Common fund
from 1980 to 2001.
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen B. P.O. Box 9095 Director 2002 to Chairman of Fernwood Advisors, Inc. (investment 39 Funds None
Swensrud Princeton, NJ present adviser) since 1996; Principal, Fernwood Associates 56 Portfolios
08543-9095 (financial consultants) since 1975; Chairman of
Age: 71 R.P.P. Corporation (manufacturing company)
since 1978; Director of International Mobile
Communications, Incorporated (telecommunications)
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.
MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004 25
[LOGO] Merrill Lynch Investment Managers
Officers and Directors (unaudited) (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1993 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999 and Director
08543-9011 and and since 2004; Vice President of FAMD since 1999; Vice President of MLIM and FAM from
Age: 44 Treasurer 1999 to 1990 to 1997; Director of MLIM Taxation since 1990.
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: 53
- ------------------------------------------------------------------------------------------------------------------------------------
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: 40
- ------------------------------------------------------------------------------------------------------------------------------------
Walter C. 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 1999.
08543-9011
Age: 43
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President and
Hiller Princeton, NJ Compliance present Chief Compliance Officer of MLIM since 2004; Global Director of Compliance at
08543-9011 Officer Morgan Stanley Investment Management from 2002 to 2004; Managing Director and
Age: 53 Global Director of Compliance at Citigroup Asset Management from 2000 to 2002;
Chief Compliance Officer at Soros Fund Management in 2000; Chief Compliance Officer
at Prudential Financial from 1995 to 2000.
- ------------------------------------------------------------------------------------------------------------------------------------
Alice A. P.O. Box 9011 Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from 1999 to
Pellegrino Princeton, NJ present 2002; Attorney associated with MLIM since 1997.
08543-9011
Age: 44
------------------------------------------------------------------------------------------------------------------------
* 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
101 Barclay Street -- 7 West
New York, NY 10286
NYSE Symbol
MCA
------------------------------------------------------------------------------
Andre F. Perold resigned as a Director of the Fund effective October 22, 2004.
------------------------------------------------------------------------------
26 MUNIYIELD CALIFORNIA INSURED FUND, INC. OCTOBER 31, 2004
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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 Web
site 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, 2004 27
[LOGO] Merrill Lynch Investment Managers
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)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
MuniYield California Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
#16388 -- 10/04
Item 2 - Code of Ethics - 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 - Audit Committee Financial Expert - 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 F. Perold (resigned as of October 1, 2004), (3) Robert S.
Salomon, Jr., and (4) Stephen B. Swensrud.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending October 31, 2004 - $28,000
Fiscal Year Ending October 31, 2003 - $26,000
(b) Audit-Related Fees - Fiscal Year Ending October 31, 2004 - $3,000
Fiscal Year Ending October 31, 2003 - $5,600
The nature of the services include assurance and related services
reasonably related to the performance of the audit of financial
statements not included in Audit Fees.
(c) Tax Fees - Fiscal Year Ending October 31, 2004 - $5,610
Fiscal Year Ending October 31, 2003 - $4,800
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending October 31, 2004 - $0
Fiscal Year Ending October 31, 2003 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval"). However, such
services will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any proposed
services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject
to general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending October 31, 2004 - $13,270,096
Fiscal Year Ending October 31, 2003 - $18,737,552
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's 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.
Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals are
members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act (15 U.S.C. 78c(a)(58)(A)):
James H. Bodurtha
Joe Grills
Herbert I. London
Andre F. Perold (resigned as of October 1, 2004)
Roberta Cooper Ramo
Robert S. Solomon, Jr.
Stephen B. Swensrud
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - 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 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 - 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 second 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 - See Item 2
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: December 13, 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: December 13, 2004
By: /s/ Donald C. Burke
Donald C. Burke,
Chief Financial Officer of
MuniYield California Insured Fund, Inc.
Date: December 13, 2004