MUNIYIELD
CALIFORNIA
INSURED
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
October 31, 1999
<PAGE>
MuniYield California Insured Fund, Inc.
DEAR SHAREHOLDER
For the year ended October 31, 1999, the Common Stock of MuniYield California
Insured Fund, Inc. earned $0.835 per share income dividends, which included
earned and unpaid dividends of $0.069. This represents a net annualized yield of
6.56%, based on a month-end per share net asset value of $12.73. Over the same
period, the total investment return on the Fund's Common Stock was -11.04%,
based on a change in per share net asset value from $15.75 to $12.73, and
assuming reinvestment of $1.018 per share ordinary income dividends and $0.419
per share capital gains distributions.
For the six-month period ended October 31, 1999, the total investment return on
the Fund's Common Stock was -11.76%, based on a change in per share net asset
value from $14.86 to $12.73, and assuming reinvestment of $0.404 per share
income dividends.
For the six-month period ended October 31, 1999, the Fund's Auction Market
Preferred Stock had an average yield of 2.71% for Series A and 2.82% for Series
B.
The Municipal Market Environment
The combination of steady strong domestic economic growth, improvement in
foreign economies (most notably in Japan) and increasing investor concerns
regarding potential increases in US inflation put upward pressure on bond yields
throughout the six-month period ended October 31, 1999. Continued strong US
employment growth, particularly the decline in the US unemployment rate to 4.2%
in early June, was among the reasons the Federal Reserve Board cited for raising
short-term interest rates in late June and again in late August. US Treasury
bond yields reacted by climbing above 6.375% by late October. However, at
October month-end, economic indicators were released suggesting that, despite
strong economic and employment growth in the third quarter, inflationary
pressures have remained extremely well-contained. This resulted in a significant
rally in the US Treasury bond market, pushing US Treasury bond yields downward
to end the six-month period at approximately 6.15%. During the period, yields on
30-year US Treasury bonds increased over 50 basis points (0.50%).
Long-term tax-exempt bond yields also rose during the six months ended October
31, 1999. Until early May, the municipal bond market was able to withstand much
of the upward pressure on bond yields. However, investor concerns of additional
moves by the Federal Reserve Board to moderate US economic growth and, more
importantly, the loss of the strong technical support that the tax-exempt market
enjoyed in early 1999 helped push municipal bond yields significantly higher for
the remainder of the period. The yields on long-term tax-exempt revenue bonds
rose nearly 90 basis points to 6.18% by October 31, 1999, as measured by the
Bond Buyer Revenue Bond Index.
In recent months, the significant decline in new tax-exempt bond issuance has
remained a positive factor within the municipal bond market, as it had been for
much of the past year. During the last six months, more than $110 billion in
long-term municipal bonds was issued, a decline of nearly 20% compared to the
same period a year ago. During the past three months, $55 billion in municipal
bonds was underwritten, representing a decline of nearly 10% compared to the
corresponding period in 1998. Additionally, in June and July, investors received
more than $40 billion in coupon income and proceeds from bond maturities and
early bond redemptions. These proceeds have generated considerable retail
investor interest, which has helped absorb the recent diminished supply.
Although tax-exempt bond yields are at their highest level in over two years and
have attracted significant retail investor interest, institutional demand has
declined sharply. Long-term municipal mutual funds have seen consistent outflows
in recent months as the yields of individual securities have risen faster than
those of larger, more diverse mutual funds. In addition, the demand from
property/casualty insurance companies has weakened as a result of the losses,
and anticipated losses, incurred as a result of the series of damaging storms
across much of the eastern United States. Additionally, many institutional
investors who were attracted to the municipal bond market in recent years by
historically attractive
1
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
tax-exempt bond yield ratios of over 90% have found other asset classes even
more attractive. Even with a reduced supply position, tax-exempt issuers have
been forced to repeatedly raise municipal bond yields in the attempt to attract
adequate demand.
The recent relative underperformance of the municipal bond market has resulted
in an opportunity for long-term investors to purchase tax-exempt issues whose
yields are nearly identical with taxable US Treasury securities. At October 31,
1999, long-term uninsured municipal revenue bond yields were 100% of comparable
US Treasury securities. In recent months, many taxable asset classes, such as
corporate bonds, mortgage-backed securities and US agency debt, have all
accelerated debt issuance. This acceleration was initiated largely to avoid
issuing securities at year-end and to minimize any associated Year 2000 (Y2K)
problems that may develop. However, this increased issuance has also resulted in
higher yield levels in the various asset classes as lower bond prices became
necessary to attract sufficient investor demand. Going forward, it is believed
that the pace of non-US government debt issuance is likely to slow
significantly. As the supply of this debt declines, we would expect many
institutional investors to return to the municipal bond market and the
attractive yield ratios available.
Looking ahead, it appears to us that long-term tax-exempt bond yields will
remain under pressure, trading in a broad range centered near current levels.
Investors are likely to remain concerned about future action by the Federal
Reserve Board in November. Y2K considerations may prohibit any further Federal
Reserve Board moves through the end of the year and the beginning of 2000. Any
improvement in bond prices will probably be contingent upon weakening in both US
employment growth and consumer spending. The 100 basis point rise in US Treasury
bond yields seen thus far this year may negatively impact US economic growth.
The US housing market will be among the first sectors likely to be affected, as
some declines have already been evidenced in response to higher mortgage rates.
We believe that it is also unrealistic to expect double-digit returns in US
equity markets to continue indefinitely. Much of the US consumer's wealth is
tied to recent stock market appreciation. Any slowing in these incredible growth
rates is likely to reduce consumer spending. We believe that these factors
suggest that the worst of the recent increase in bond yields has passed and
stable, if not slightly improving, bond prices may be expected.
Portfolio Strategy
During the six-month period ended October 31, 1999, we managed the Fund with the
intent of sustaining an attractive level of tax-exempt income for our
shareholders. Our strategy was to remain invested in the highest-yielding bonds
that we could purchase without sacrificing credit quality. Unfortunately, during
the six-month period, tax-exempt interest rates increased about 90 basis points.
While this caused the Fund's net asset value to drop, it gave us the opportunity
to purchase bonds with higher yields, increasing the Fund's income.
Looking ahead, we believe that the back up in interest rates has been excessive
relative to the amount of inflation that is evident in the economy. Therefore,
with interest rates at what we believe to be attractive levels, we will invest
the remainder of the Fund's cash reserves in an effort to increase the
tax-exempt income of the Fund. (For a complete explanation of the benefits and
risks of leverage, see page 4 of this report to shareholders.)
In Conclusion
We appreciate your ongoing interest in MuniYield California Insured Fund, Inc.,
and we look forward to assisting you with your financial needs in the months and
years to come.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Roberto Roffo
Roberto Roffo
Vice President and Portfolio Manager
December 1, 1999
2
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
PROXY RESULTS
During the six-month period ended October 31, 1999, MuniYield California Insured
Fund, Inc.'s Common Stock shareholders voted on the following proposal. Proposal
1 was not approved at a shareholders' meeting on June 23, 1999. A description of
the proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To approve an amendment to the Articles Supplementary of the Fund. 8,420,880 402,603 599,982
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
During the six-month period ended October 31, 1999, MuniYield California Insured
Fund, Inc.'s Preferred Stock shareholders (Series A and B) voted on the
following proposal. Proposal 1 was not approved at a shareholders' meeting on
June 23, 1999. A description of the proposal and number of shares voted are as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. To approve an amendment to the Articles
Supplementary of the Fund as follows:
Series A 409 6 4
Series B 411 1 9
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Arthur Zeikel, Director
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Roberto Roffo, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Transfer Agents
Common Stock:
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MIC
3
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield California Insured Fund, Inc. utilizes leveraging to seek to enhance
the yield and net asset value of its Common Stock. However, these objectives
cannot be achieved in all interest rate environments. To leverage, the Fund
issues Preferred Stock, which pays dividends at prevailing short-term interest
rates and invests the proceeds in long-term municipal bonds. The interest earned
on these investments is paid to Common Stock shareholders in the form of
dividends, and the value of these portfolio holdings is reflected in the per
share net asset value of the Fund's Common Stock. However, in order to benefit
Common Stock shareholders, the yield curve must be positively sloped; that is,
short-term interest rates must be lower than long-term interest rates. At the
same time, a period of generally declining interest rates will benefit Common
Stock shareholders. If either of these conditions change, then the risks of
leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock capitalization of
$100 million and the issuance of Preferred Stock for an additional $50 million,
creating a total value of $150 million available for investment in long-term
municipal bonds. If prevailing short-term interest rates are approximately 3%
and long-term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million of Preferred
Stock based on the lower short-term interest rates. At the same time, the fund's
total portfolio of $150 million earns the income based on long-term interest
rates. Of course, increases in short-term interest rates would reduce (and even
eliminate) the dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock shareholders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value of the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's net asset
value will reflect the full decline in the price of the portfolio's investments,
since the value of the fund's Preferred Stock does not fluctuate. In addition to
the decline in net asset value, the market value of the fund's Common Stock may
also decline.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in these securities.
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniYield California Insured Fund, Inc.'s portfolio
holdings in the Schedule of Investments, we have abbreviated the names of many
of the securities according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate Municipal Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
4
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
====================================================================================================================================
<S> <C> <C> <C> <C>
California--97.2%
AAA NR* $ 3,500 ABAG Finance Authority for Nonprofit Corporations, California, COP (Children's
Hospital Medical Center), 6% due 12/01/2029 (a) $ 3,471
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 ABC, California, Unified School District, GO, Series A, 4.75% due 8/01/2022 (b) 1,679
- ------------------------------------------------------------------------------------------------------------------------------------
Anaheim, California, Public Financing Authority, Lease Revenue Bonds (Public
Improvement Projects), Sub-Series C (e):
AAA Aaa 12,485 5.37%** due 9/01/2034 1,487
AAA Aaa 20,000 5.24%** due 9/01/2035 2,239
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Bay Area Government Association, California, Revenue Refunding Bonds (California
Redevelopment Agency Pool), Series A, 6% due 12/15/2024 (e) 2,007
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Beverly Hills, California, Public Financing Authority, Lease Revenue Refunding Bonds,
INFLOS, 7.87% due 6/01/2015 (g)(h) 2,013
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Big Bear Lake, California, Water Revenue Refunding Bonds, 6% due 4/01/2022 (g) 2,050
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 4,125 Burbank, California, Public Service Department, Electric Revenue Refunding Bonds,
4.75% due 6/01/2023 (e) 3,451
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 5,985 California Educational Facilities Authority Revenue Bonds, RITR, AMT, Series 37,
6.97% due 4/01/2028 (a)(h) 5,235
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Aa2 2,750 California Educational Facilities Authority, Revenue Refunding Bonds, RIB, Series 147,
7.47% due 10/01/2027 (h) 2,386
- ------------------------------------------------------------------------------------------------------------------------------------
California HFA, Home Mortgage Revenue Bonds, AMT:
AA- Aa2 2,440 Series F-1, 7% due 8/01/2026 (c) 2,531
AAA Aaa 5 Series I, 5.75% due 2/01/2029 (g) 5
- ------------------------------------------------------------------------------------------------------------------------------------
AA- Aa3 2,500 California HFA, M/F Housing III Revenue Refunding Bonds, AMT, Series A,
5.375% due 8/01/2028 2,222
- ------------------------------------------------------------------------------------------------------------------------------------
California HFA, Revenue Bonds, RIB, AMT:
NR* Aaa 3,585 Series 150, 7.90% due 2/01/2029 (g) 3,168
A+ Aa2 1,950 Series B-2, 8.879% due 8/01/2023 (c)(h) 2,089
- ------------------------------------------------------------------------------------------------------------------------------------
California Health Facilities Finance Authority Revenue Bonds:
AAA NR* 8,750 (Kaiser Permanente), RITR, Series 26, 7.445% due 6/01/2022 (e)(h) 7,654
NR* Aaa 4,625 RIB, Series 152, 7.47% due 6/01/2022 (e)(h) 4,046
AAA Aaa 10,000 (Sutter Health), Series A, 5.375% due 8/15/2030 (g) 9,036
- ------------------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 900 California Health Facilities Finance Authority, Revenue Refunding Bonds
(Adventist Hospital), VRDN, Series C, 3.55% due 9/01/2015 (g)(i) 900
- ------------------------------------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority, PCR, Refunding (Pacific Gas and
Electric), VRDN (i):
A1+ NR* 1,200 Series C, 3.50% due 11/01/2026 1,200
A1+ NR* 300 Series D, 3.50% due 11/01/2026 300
A1+ VMIG1+ 2,300 Series E, 2.75% due 11/01/2026 2,300
- ------------------------------------------------------------------------------------------------------------------------------------
A1 P1 5,200 California Pollution Control Financing Authority, PCR, Refunding (Southern California
Edison), VRDN, Series C, 3.60% due 2/28/2008 (i) 5,200
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,060 California Rural Home Mortgage Finance Authority, S/F Mortgage Revenue Bonds
(Mortgage-Backed Securities Program), AMT, Series A-1, 6.90% due 12/01/2024 (d)(f) 1,128
- ------------------------------------------------------------------------------------------------------------------------------------
AA Aa2 1,000 California State Department of Water Resources, Water System Revenue Bonds (Central
Valley Project), Series O, 4.75% due 12/01/2017 873
- ------------------------------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 100 California State Economic Development Financing Authority Revenue Bonds (California
Independent Systems Project), VRDN, Series B, 3.50% due 4/01/2008 (i) 100
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
====================================================================================================================================
<S> <C> <C> <C> <C>
California (continued)
AAA Aaa $13,000 California State, GO, 6.25% due 10/01/2019 (g) $ 13,903
- ------------------------------------------------------------------------------------------------------------------------------------
California State, GO, Refunding:
AA- Aa3 3,000 5% due 2/01/2020 2,641
AA- Aa3 6,000 4.75% due 4/01/2029 4,885
AAA Aaa 6,500 5% due 8/01/2029 (g) 5,595
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 7,635 California State Public Works Board, Lease Revenue Refunding Bonds (Department of
Corrections--State Prisons), Series A, 5% due 12/01/2019 (a) 6,865
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,105 California Statewide Communities Development Authority, COP (Kaiser Permanente),
5.30% due 12/01/2015 (e) 2,018
- ------------------------------------------------------------------------------------------------------------------------------------
NR* Aaa 1,000 Central Unified School District, California, COP, Refunding (Refinancing Project),
4.70% due 8/01/2014 (g) 898
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Cerritos, California, Public Financing Authority Revenue Bonds (Los Coyotes
Redevelopment Project Loan), Series A, 6.50% due 11/01/2023 (a) 3,266
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 865 Coalinga, California, Public Financing Authority, Local Obligation Revenue Refunding
Bonds, Senior Lien, Series A, 5.75% due 9/15/2014 (a) 882
- ------------------------------------------------------------------------------------------------------------------------------------
NR* NR* 1,500 Contra Costa County, California, COP, Refunding, RITR, Series 1, 7.045% due
11/01/2017 (g)(h) 1,311
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,060 Fontana, California, Redevelopment Agency, Tax Allocation Refunding Bonds (Southwest
Industrial Park Project), 4.75% due 9/01/2026 (g) 1,700
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,100 Fresno, California, Joint Powers Financing Authority, Lease Revenue Bonds (Exhibit Hall
Expansion Project), 4.75% due 9/01/2028 (a) 1,722
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 King City, California, Joint Unified High School District, GO, Refunding, 5% due
8/01/2020 (b) 1,773
- ------------------------------------------------------------------------------------------------------------------------------------
AAA NR* 9,500 Los Angeles, California, Department of Water and Power, Electric Plant Revenue Bonds,
RIB, Series 144, 7.47% due 6/15/2025 (e)(h) 8,334
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aa3 10,000 Los Angeles, California, Department of Water and Power, Waterworks Revenue
Refunding Bonds, 4.25% due 10/15/2030 (b) 7,428
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 14,730 Los Angeles, California, Harbor Department Revenue Bonds, AMT, Series B,
6.25% due 11/01/2026 (g) 15,024
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 6,600 Los Angeles, California, Parking Revenue Bonds, Series A, 5.25% due 5/01/2029 (a) 5,928
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 8,950 Los Angeles, California, Wastewater System Revenue Bonds, Series A, 5% due 6/01/2028 (b) 7,700
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Los Angeles, California, Wastewater System Revenue Refunding Bonds, Series C,
4% due 6/01/2016 (g) 1,585
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,500 Los Angeles County, California, Metropolitan Transportation Authority, Sales Tax Revenue
Refunding Bonds, Proposition A, First Tier, Senior Series C, 5% due 7/01/2026 (a) 3,033
- ------------------------------------------------------------------------------------------------------------------------------------
Metropolitan Water District of Southern California, GO, Election 1966, Series H:
AAA Aaa 5,000 4.75% due 3/01/2028 4,112
AAA Aaa 2,250 4.75% due 3/01/2037 1,802
- ------------------------------------------------------------------------------------------------------------------------------------
Metropolitan Water District of Southern California, Waterworks Revenue
Refunding Bonds, Series A:
AA Aa2 4,750 5.75% due 7/01/2021 4,726
AA Aa2 5,000 4.75% due 7/01/2022 4,171
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Monterey County, California, COP, Refunding (Natividad Medical Center Improvement),
Series E, 4.75% due 8/01/2025 (g) 4,117
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,900 Oakland, California, Redevelopment Agency, Tax Allocation Refunding Bonds, INFLOS,
8.523% due 9/01/2019 (g)(h) 1,905
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Orchard, California, School District, GO, Series A, 6.50% due 8/01/2019 (b) 2,120
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
====================================================================================================================================
<S> <C> <C> <C> <C>
California (continued)
Palmdale, California, COP (Courthouse and City Hall Project) (a):
AAA NR* $ 2,095 5% due 9/01/2019 $ 1,858
AAA NR* 5,070 4.75% due 9/01/2029 4,122
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 9,000 Port Oakland, California, Port Revenue Bonds, AMT, Series E, 6.50% due 11/01/2016 (g) 9,349
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 10,490 Roseville, California, Special Tax Refunding Bonds (Community Facilities
District 1-Northwest), 4.75% due 9/01/2020 (e) 8,919
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 8,000 Sacramento, California, City Financing Authority, Lease Revenue Refunding Bonds,
Series A, 5.40% due 11/01/2020 (a) 7,588
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 Sacramento, California, Municipal Utility District, Electric Revenue Bonds, Series K,
5.25% due 7/01/2024 (a) 6,861
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,000 Sacramento, California, Municipal Utility District, Electric Revenue Refunding Bonds,
Series G, 6.50% due 9/01/2013 (g) 1,104
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,325 San Bernardino, California, City Unified School District, GO, Refunding, Series A,
5.75% due 8/01/2019 (b) 3,286
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 San Diego, California, IDR, Refunding (San Diego Gas and Electric Company), Series C,
5.90% due 9/01/2018 (e) 2,005
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,600 San Diego, California, Public Facilities Financing Authority, Sewer Revenue Bonds,
Series A, 5% due 5/15/2029 (b) 2,239
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 10,000 San Francisco, California, Bay Area Rapid Transit District, Sales Tax Revenue
Refunding Bonds, 5% due 7/01/2028 (a) 8,626
- ------------------------------------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Airport Commission, International
Airport Revenue Bonds, Second Series:
AAA Aaa 2,500 AMT, Issue 22, 4.75% due 5/01/2023 (a) 2,044
AAA Aaa 4,660 Issue 21, 4.50% due 5/01/2023 (g) 3,750
AAA Aaa 3,000 Issue 21, 4.50% due 5/01/2026 (g) 2,376
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 San Francisco, California, City and County Airport Commission, International Airport
Revenue Refunding Bonds, Second Series, Issue 20, 4.50% due 5/01/2026 (g) 2,376
- ------------------------------------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Redevelopment Agency, Lease Revenue Refunding
Bonds (George R. Moscone Convention Center) (e):
AAA Aaa 1,200 6.80% due 7/01/2019 1,306
AAA Aaa 2,060 6.75% due 7/01/2024 2,233
- ------------------------------------------------------------------------------------------------------------------------------------
San Jose, California, Redevelopment Agency, Tax Allocation Bonds:
AAA Aaa 4,560 (Merged Area Redevelopment Project), 4.75% due 8/01/2029 (a) 3,730
NR* Aaa 3,650 RIB, AMT, Series 149, 8.10% due 8/01/2027 (g) 3,407
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 San Mateo County, California, Transit District, Sales Tax Revenue Refunding Bonds,
Series A, 8% due 6/01/2020 (g) 5,055
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 6,945 Santa Ana, California, Financing Authority, Lease Revenue Bonds (Police Administration
and Holding Facility), Series A, 6.25% due 7/01/2024 (g) 7,342
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,540 Santa Clara County, California, Financing Authority, Lease Revenue Bonds (VMC Facility
Replacement Project), Series A, 7.75% due 11/15/2011 (a) 4,326
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,850 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Refunding Bonds,
Series A, 6.40% due 9/01/2022 (g) 1,900
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 2,185 Santa Rosa, California, High School District, GO, 6.375% due 5/01/2016 (g) 2,280
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 1,800 Simi Valley, California, Unified School District, COP, Refunding (Capital Improvements
Projects), 5.25% due 8/01/2022 (a) 1,654
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
====================================================================================================================================
<S> <C> <C> <C> <C>
California (concluded)
Tustin, California, Unified School District, Special Tax Refunding Bonds
(Community Facilities District No. 88-1) (e):
AAA Aaa $ 3,250 4.375% due 9/01/2019 $ 2,626
AAA Aaa 5,735 4.50% due 9/01/2024 4,581
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 4,000 Walnut Valley, California, Unified School District, GO, Refunding, Series A,
7.20% due 2/01/2016 (g) 4,552
- ------------------------------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 West Sacramento, California, Redevelopment Agency, Tax Allocation Refunding Bonds
(West Sacramento Redevelopment Project), 4.75% due 9/01/2027 (g) 2,467
<CAPTION>
====================================================================================================================================
<S> <C> <C> <C> <C>
Puerto Rico--1.1%
AAA Aaa 3,750 Puerto Rico Public Buildings Authority Revenue Bonds, Guaranteed Government
Facilities, Series B, 5% due 7/01/2027 (a) 3,260
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$323,213)--98.3% 305,436
Other Assets Less Liabilities--1.7% 5,296
--------
Net Assets--100.0% $310,732
========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FHA Insured.
(d) FHLMC Collateralized.
(e) FSA Insured.
(f) GNMA Collateralized.
(g) MBIA Insured.
(h) 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, 1999.
(i) 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,
1999.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is the effective
yield at the time of purchase by the Fund.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
QUALITY PROFILE
The quality ratings of securities in the Fund as of October 31, 1999 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa ............................................................ 86.1%
AA/Aa .............................................................. 8.6
NR (Not Rated) ..................................................... 0.4
Other+ ............................................................. 3.2
- --------------------------------------------------------------------------------
+ Temporary investments in short-term municipal securities.
8
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of October 31, 1999
<TABLE>
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$323,212,655) (Note 1a) ......... $305,436,476
Cash .................................................................... 302,082
Receivables:
Interest .............................................................. $ 5,762,137
Securities sold ....................................................... 3,151,551 8,913,688
------------
Prepaid expenses and other assets ....................................... 11,549
------------
Total assets ............................................................ 314,663,795
------------
- --------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased .................................................. 3,474,041
Dividends to shareholders (Note 1e) ................................... 240,141
Investment adviser (Note 2) ........................................... 151,042 3,865,224
------------
Accrued expenses and other liabilities .................................. 66,245
------------
Total liabilities ....................................................... 3,931,469
------------
- --------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets .............................................................. $310,732,326
============
- --------------------------------------------------------------------------------------------------------------------------
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 per share (4,000 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) ... $100,000,000
Common Stock, par value $.10 per share (16,549,484 shares issued
and outstanding) ...................................................... $ 1,654,948
Paid-in capital in excess of par ........................................ 231,014,108
Undistributed investment income--net .................................... 2,171,455
Accumulated distributions in excess of realized capital
gains--net (Note 1e) .................................................... (6,332,006)
Unrealized depreciation on investments--net ............................. (17,776,179)
------------
Total--Equivalent to $12.73 net asset value per share of Common Stock
(market price--$12.625) ................................................. 210,732,326
------------
Total capital ........................................................... $310,732,326
============
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
9
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Year Ended
October 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 18,487,278
(Note 1d):
- -----------------------------------------------------------------------------------------------------------------------------
Expenses: Investment advisory fees (Note 2) ................................... $ 1,693,704
Commission fees (Note 4) ............................................ 253,200
Transfer agent fees ................................................. 85,582
Professional fees ................................................... 75,108
Accounting services (Note 2) ........................................ 56,168
Printing and shareholder reports .................................... 32,837
Listing fees ........................................................ 24,260
Directors' fees and expenses ........................................ 23,276
Custodian fees ...................................................... 19,126
Pricing fees ........................................................ 12,769
Other ............................................................... 57,654
------------
Total expenses ...................................................... 2,333,684
------------
Investment income--net .............................................. 16,153,594
------------
- -----------------------------------------------------------------------------------------------------------------------------
Realized & Realized loss on investments--net ................................... (1,867,682)
Unrealized Loss on Change in unrealized appreciation/depreciation on investments--net .. (36,831,141)
Investments--Net ------------
(Notes 1b, 1d & 3): Net Decrease in Net Assets Resulting from Operations ................ $(22,545,229)
============
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended October 31,
-----------------------------
Increase (Decrease) in Net Assets: 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations: Investment income--net .............................................. $ 16,153,594 $ 16,593,253
Realized gain (loss) on investments--net ............................ (1,867,682) 12,791,120
Change in unrealized appreciation/depreciation on investments--net .. (36,831,141) (3,704,775)
Net increase (decrease) in net assets resulting from operations ..... (22,545,229) 25,679,598
- -----------------------------------------------------------------------------------------------------------------------------
Dividends & Investment income--net:
Distributions to Common Stock ...................................................... (13,865,703) (13,400,404)
Shareholders Preferred Stock ................................................... (1,931,760) (3,034,380)
(Note 1e): Realized gain on investments--net:
Common Stock ...................................................... (4,367,697) --
Preferred Stock ................................................... (768,544) (465,980)
In excess of realized gain on investments--net:
Common Stock ...................................................... (5,382,533) --
Preferred Stock ................................................... (947,115) --
Net decrease in net assets resulting from dividends and
distributions to shareholders ....................................... (27,263,352) (16,900,764)
- -----------------------------------------------------------------------------------------------------------------------------
Capital Stock Trans- Value of shares issued to Common Stock shareholders in
actions (Note 4): reinvestment of dividends and distributions ......................... 3,385,881 --
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets: Total increase (decrease) in net assets ............................. (46,422,700) 8,778,834
Beginning of year ................................................... 357,155,026 348,376,192
End of year* ........................................................ $310,732,326 $357,155,026
- -----------------------------------------------------------------------------------------------------------------------------
*Undistributed investment income--net (Note 1f) ...................... $ 2,171,455 $ 1,789,881
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
FINANCIAL INFORMATION (concluded)
Financial Highlights
<TABLE>
<CAPTION>
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: 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year .................. $ 15.75 $ 15.21 $ 14.59 $ 14.43 $ 12.88
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .............................. .98 1.02 1.05 1.04 1.09
Realized and unrealized gain (loss) on
investments--net .................................... (2.34) .56 .63 .17 1.53
-------- -------- -------- -------- --------
Total from investment operations .................... (1.36) 1.58 1.68 1.21 2.62
-------- -------- -------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net ............................ (.84) (.82) (.86) (.84) (.84)
Realized gain on investments--net ................. (.27) -- -- -- --
In excess of realized gain on investments--net .... (.33) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders ......................... (1.44) (.82) (.86) (.84) (.84)
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net .......................... (.12) (.19) (.20) (.21) (.23)
Realized gain on investments--net ............... (.04) (.03) -- -- --
In excess of realized gain on investments--net .. (.06) -- -- -- --
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity ............ (.22) (.22) (.20) (.21) (.23)
-------- -------- -------- -------- --------
Net asset value, end of year ........................ $ 12.73 $ 15.75 $ 15.21 $ 14.59 $ 14.43
======== ======== ======== ======== ========
Market price per share, end of year ................. $ 12.625 $ 15.50 $ 15.125 $ 13.75 $ 12.625
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investment Based on market price per share ..................... (10.35%) 8.13% 16.74% 15.84% 20.01%
Return:* ======== ======== ======== ======== ========
Based on net asset value per share .................. (11.04%) 9.26% 10.64% 7.54% 19.81%
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios Based on Total expenses** .................................... .97% .92% .93% .95% 1.02%
Average Net Assets ======== ======== ======== ======== ========
Of Common Stock: Total investment income--net** ...................... 6.73% 6.61% 7.02% 7.15% 7.99%
======== ======== ======== ======== ========
Amount of dividends to Preferred Stock shareholders.. .80% 1.21% 1.36% 1.43% 1.71%
======== ======== ======== ======== ========
Investment income--net, to Common Stock
shareholders ........................................ 5.93% 5.40% 5.66% 5.72% 6.28%
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios Based on Total expenses ...................................... .69% .66% .66% .67% .70%
Total Average ======== ======== ======== ======== ========
Net Assets:**+ Total investment income--net ........................ 4.76% 4.72% 5.01% 5.06% 5.45%
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios Based on Dividends to Preferred Stock shareholders ........... 1.94% 3.03% 3.33% 3.42% 3.76%
Average Net Assets ======== ======== ======== ======== ========
Of Preferred Stock:
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, net of Preferred Stock, end of year
Data: (in thousands) ...................................... $210,732 $257,155 $248,376 $238,203 $235,603
======== ======== ======== ======== ========
Preferred Stock outstanding, end of year
(in thousands) ...................................... $100,000 $100,000 $100,000 $100,000 $100,000
======== ======== ======== ======== ========
Portfolio turnover .................................. 84.58% 106.63% 71.36% 79.39% 83.26%
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
Leverage: Asset coverage per $1,000 ........................... $ 3,107 $ 3,572 $ 3,484 $ 3,382 $ 3,356
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends Per Share Series A--Investment income--net .................... $ 469 $ 796 $ 858 $ 882 $ 912
On Preferred Stock ======== ======== ======== ======== ========
Outstanding: Series B--Investment income--net .................... $ 497 $ 721 $ 807 $ 826 $ 967
======== ======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
+ Includes Common and Preferred Stock average net assets.
See Notes to Financial Statements.
11
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield California Insured Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The Fund's financial statements are prepared in accordance
with generally accepted accounting principles, which may require the use of
management accruals and estimates. The Fund determines and makes available for
publication the net asset value of its Common Stock on a weekly basis. The
Fund's Common Stock is listed on the New York Stock Exchange under the symbol
MIC. The following is a summary of significant accounting policies followed by
the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various portfolio
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the debt 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 for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
o Options--The Fund is authorized to write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the premium received
by the Fund is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked to market to reflect the current market
value of the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from (or added to)
the proceeds of the security sold. When an option expires (or the Fund enters
into a closing transaction), the Fund realizes a gain or loss on the option to
the extent of the premiums received or paid (or gain or loss to the extent the
cost of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Discounts and market
premiums are amortized into interest income. Realized gains and losses on
security
12
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
transactions are determined on the identified cost basis.
(e) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates. Distributions in excess of realized capital gains are due
primarily to differing tax treatments for futures transactions.
(f) Reclassification--Generally accepted accounting principles require that
certain components of net assets be adjusted to reflect permanent differences
between financial and tax reporting. Accordingly, current year's permanent
book/tax differences have been reclassified as follows: $23,073 between paid-in
capital in excess of par and undistributed net investment income; $12 between
paid-in capital in excess of par and accumulated distributions in excess of net
realized capital gains; and $2,370 between accumulated distributions in excess
of net realized capital gains and undistributed net investment income. These
reclassifications have no effect on net assets or net asset value 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.
Accounting services are provided to the Fund by FAM at cost.
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, 1999 were $275,114,747 and $285,410,417, respectively.
Net realized gains (losses) for the year ended October 31, 1999 and net
unrealized losses as of October 31, 1999 were as follows:
- -------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Losses
- -------------------------------------------------------------------------------
Long-term investments ........................... $(2,796,522) $(17,776,179)
Financial futures contracts ..................... 928,840 --
----------- ------------
Total ........................................... $(1,867,682) $(17,776,179)
=========== ============
- -------------------------------------------------------------------------------
As of October 31, 1999, net unrealized depreciation for Federal income tax
purposes aggregated $17,776,179, of which $2,760,062 related to appreciated
securities and $20,536,241 related to depreciated securities. The aggregate cost
as of October 31, 1999 for Federal income tax purposes was $323,212,655.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital 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 capital stock without approval of holders of
Common Stock.
Common Stock
Shares issued and outstanding during the year ended October 31, 1999 increased
by 220,611 as a result of dividend reinvestment and during the year ended
October 31, 1998 remained constant.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the
Fund, with a par value of $.05 per share and a liquidation preference of $25,000
per share, that entitle their holders to receive cash dividends at an annual
rate that may vary for the successive dividend periods. The yields in effect at
October 31, 1999 were as follows: Series A, 2.88% and Series B, 2.39%.
Shares issued and outstanding during the years ended October 31, 1999 and
October 31, 1998 remained constant.
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, 1999, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, an affiliate of FAM, earned $71,742 as commissions.
13
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
5. Capital Loss Carryforward:
At October 31, 1999, the Fund had a net capital loss carryforward of
approximately $4,373,000, all of which expires in 2007. This amount will be
available to offset like amounts of any future taxable gains.
6. Subsequent Event:
On November 8, 1999, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.069000 per share,
payable on November 29, 1999 to shareholders of record as of November 22, 1999.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders, MuniYield California Insured Fund,
Inc.:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of MuniYield California Insured Fund,
Inc. as of October 31, 1999, the related statements of operations for the year
then ended and changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years in the
five-year period then ended. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the 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 at October
31, 1999 by correspondence with the custodian and brokers. 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MuniYield California
Insured Fund, Inc. as of October 31, 1999, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 3, 1999
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute substantially all of its net
investment income to its shareholders on a monthly basis. However, in order to
provide shareholders with a more consistent yield to the current trading price
of shares of Common Stock of the Fund, the Fund may at times pay out less than
the entire amount of net investment income earned in any particular month and
may at times in any 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 Assets, Liabilities and Capital, which comprises
part of the Financial Information included in this report.
14
<PAGE>
MuniYield California Insured Fund, Inc. October 31, 1999
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, 1999 qualify as
tax-exempt interest dividends for Federal income tax purposes. Additionally, the
following table summarizes the taxable capital gains distributions paid by the
Fund during the year:
- --------------------------------------------------------------------------------
Payable Ordinary Long-Term
Date Income Capital Gains*
- --------------------------------------------------------------------------------
Common Stock Shareholders 12/30/98 $.177942 $.418609
- --------------------------------------------------------------------------------
Preferred Stock Shareholders: Series A 11/13/98 $43.19 $70.12
12/11/98 $37.49 $62.43
1/08/99 $36.76 $63.10
2/05/99 $35.45 $64.00
3/05/99 $17.79 $39.96
------------------------------------------------
Series B 11/06/98 -- $26.70
11/13/98 $11.63 $14.33
11/20/98 $11.03 $13.67
11/27/98 $ 8.94 $11.16
12/04/98 $ 9.29 $11.64
12/11/98 $ 9.62 $12.15
12/18/98 $11.97 $15.22
12/28/98 $14.88 $19.07
1/04/99 $15.44 $20.12
1/08/99 $ 9.75 $12.94
1/15/99 $10.66 $14.35
1/22/99 $10.55 $14.45
1/29/99 $ 9.04 $12.69
2/05/99 $ 6.81 $ 9.89
2/12/99 $ 8.38 $12.56
2/19/99 $ 6.70 $11.91
- --------------------------------------------------------------------------------
* All of these distributions are subject to the 20% tax rate.
Please retain this information for your records.
YEAR 2000 ISSUES
Many computer systems were designed using only two digits to designate years.
These systems may not be able to distinguish the Year 2000 from the Year 1900
(commonly known as the "Year 2000 Problem"). The Fund could be adversely
affected if the computer systems used by the Fund's management or other Fund
service providers do not properly address this problem before January 1, 2000.
The Fund's management expects to have addressed this problem before then, and
does not anticipate that the services it provides will be adversely affected.
The Fund's other service providers have told the Fund's management that they
also expect to resolve the Year 2000 Problem, and the Fund's management will
continue to monitor the situation as the Year 2000 approaches. However, if the
problem has not been fully addressed, the Fund could be negatively affected. The
Year 2000 Problem could also have a negative impact on the securities in which
the Fund invests, and this could hurt the Fund's investment returns.
15
<PAGE>
This report, including the financial information herein, is transmitted to the
shareholders of MuniYield California Insured Fund, Inc. for their information.
It is not a prospectus, circular or representation intended for use in the
purchase of shares of the Fund or any securities mentioned in the report. Past
performance results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its Common Stock by
issuing Preferred Stock to provide the Common Stock shareholders with a
potentially higher rate of return. Leverage creates risks for Common Stock
shareholders, including the likelihood of greater volatility of net asset value
and market price of shares of the Common Stock, and the risk that fluctuations
in the short-term dividend rates of the Preferred Stock may affect the yield to
Common Stock shareholders. Statements and other information herein are as dated
and are subject to change.
MuniYield California
Insured Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #16338--10/99
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