MUNIYIELD
NEW YORK
INSURED
FUND II, INC.
[FUND LOGO]
STRATEGIC
Performance
Annual Report
October 31, 1997
This report, including the financial information herein, is transmitted
to the shareholders of MuniYield New York Insured Fund II, 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 New York
Insured Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011 #16350 -- 10/97
[RECYCLE LOGO] Printed on post-consumer recycled paper.
MuniYield New York Insured Fund II, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1997, the Common Stock of MuniYield New
York Insured Fund II, Inc. earned $0.841 per share income dividends,
which included earned and unpaid dividends of $0.072. This represents
a net annualized yield of 5.54%, based on a month-end per share net
asset value of $15.18. Over the same period, the total investment
return on the Fund's Common Stock was +10.95%, based on a change in
per share net asset value from $14.53 to $15.18, and assuming
reinvestment of $0.838 per share income dividends.
For the six-month period ended October 31, 1997, the total investment
return on the Fund's Common Stock was +9.18%, based on a change in per
share net asset value from $14.32 to $15.18, and assuming reinvestment
of $0.430 per share income dividends.
The average yields for the Fund's Auction Market Preferred Stock for
the six-month period ended October 31, 1997 were as follows: Series A,
3.52%; Series B, 3.37%; and Series C, 3.22%.
The Municipal Market Environment
Long-term interest rates generally declined during the six-month
period ended October 31, 1997. The general financial environment has
remained one of solid economic growth tempered by few or no
inflationary pressures. While economic growth has been conducive to
declining bond yields, it has remained strong enough to suggest that
the Federal Reserve Board (FRB) might find it necessary to raise
short-term interest rates. This would be intended to slow economic
growth and ensure that any incipient inflationary pressures would be
curtailed. There were investor concerns that the FRB would be forced
to raise interest rates prior to year-end, thus preventing an even
more dramatic decline in interest rates. Long-term tax-exempt revenue
bonds, as measured by the Bond Buyer Revenue Bond Index, declined over
50 basis points (0.50%) to end the six-month period ended October 31,
1997 at 5.60%.
Similarly, long-term US Treasury bond yields generally moved lower
during most of the six-month period ended October 31, 1997. However,
the turmoil in the world's equity markets during the last week in
October has resulted in a significant rally in the Treasury bond
market. The US Treasury bond market was the beneficiary of a flight to
quality mainly by foreign investors whose own domestic markets have
continued to be very volatile. Prior to the initial decline in Asian
equity markets, long-term US Treasury bond yields were essentially
unchanged. By the end of October, US Treasury bond yields declined 80
basis points to 6.15%, their lowest level of 1997.
The tax-exempt bond market's continued underperformance as compared to
its taxable counterpart has been largely in response to its ongoing
weakening technical position. As municipal bond yields have declined,
municipalities have hurriedly rushed to refinance outstanding higher-
couponed debt with new issues financed at present low rates. During
the last six months, over $118 billion in new long-term tax-exempt
issues were underwritten, an increase of over 25% versus the
comparable period a year ago. As interest rates have continued to
decline, these refinancings have intensified municipal bond issuance.
During the past three months, approximately $60 billion in new long-
term municipal securities were underwritten, an increase of over 34%
as compared to the October 31, 1996 quarter.
The recent trend toward larger and larger bond issues has also
continued. However, issues of such magnitude usually must be
attractively priced to ensure adequate investor interest. Obviously,
the yields of other municipal bond issues are impacted by the
yield premiums such large issuers have been required to pay. Much of
the municipal bond market's recent underperformance can be traced to
market pressures that these large bond issuances have exerted.
In our opinion, the recent correction in world equity markets has
enhanced the near-term prospects for continued low, if not declining,
interest rates in the United States. It is likely that the recent
correction will result in slower US domestic growth in the coming
months. This decline is likely to be generated in part by reduced US
export growth. Additionally, some decline in consumer spending also
can be expected in response to reduced consumer confidence. Perhaps
more importantly, it is likely that barring a dramatic and unexpected
resurgence in domestic growth, the FRB may be unwilling to raise
interest rates until the full impact of the equity market's
corrections can be established.
All of these factors suggest that for at least the near term, interest
rates, including tax-exempt bond yields, are unlikely to rise by any
appreciable amount. It is probable that municipal bond yields will
remain under some pressure as a result of continued strong new-issue
supply. However, the recent pace of municipal bond issuance is likely
to be unsustainable. Continued increases in bond issuance will require
lower tax-exempt bond yields to generate the economic savings
necessary for additional municipal bond refinancing. With tax-exempt
bond yields at already attractive yield ratios relative to US Treasury
bonds (approximately 90% at the end of October), any further pressure
on the municipal market may represent an attractive investment
opportunity.
Portfolio Strategy
During the 12 months ended October 31, 1997, we managed the Fund with
the intention of seeking to sustain a generous level of tax-exempt
income in addition to providing an attractive total return. We began
the 12-month period optimistic that interest rates would decline in
response to the historically attractive 6.75% yield on the US Treasury
bond and the correspondingly high yields on municipal bonds. This
optimism on interest rates proved correct as interest rates declined
about 60 basis points from October 1996 to October 1997. While the
overall trend in interest rates was down for the year, market
volatility created a narrow trading range in which the Fund was
invested.
Between October 1996 and December 1996, interest rates declined about
35 basis points in response to the belief that inflation was not a
threat. At that time the Fund's aggressive posture, which we adopted
when interest rates were higher, was scaled back to a more defensive
posture because of our belief that interest rates had declined too
rapidly relative to the prevailing economic conditions. This strategy
proved correct as interest rates increased about 80 basis points from
December 1996 to April 1997 on investors' belief that the economy was
expanding at an excessive pace that would cause inflation and
ultimately lead to an FRB tightening. At this point, with interest
rates at 7.15% for long-term US Treasury bonds, we once again adopted
a more aggressive posture because of the excessive backup in municipal
yields and our belief that the FRB would not tighten monetary policy
since inflation did not appear to be a threat. This strategy benefited
Fund performance as interest rates ultimately declined about 100 basis
points from April 1997 to the end of October 1997. This interest rate
decline was the result of various circumstances, such as low inflation
and the volatility created by the Asian stock market and currency
crisis. As a result of our strategy, the Fund had a total return above
the industry average of similar New York insured municipal bond funds.
Given our opinion that interest rates are not in danger of rising
substantially -- and that they probably will trade in a narrow range -
- - we expect to concentrate on seeking to enhance tax-exempt income for
our shareholders while trying to limit any net asset value volatility.
In Conclusion
We appreciate your ongoing interest in MuniYield New York Insured Fund
II, Inc., and we look forward to serving your investment needs in the
months and years to come.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/VINCENT R. GIORDANO
Vincent R. Giordano
Senior Vice President
/S/ROBERTO ROFFO
Roberto Roffo
Vice President and Portfolio Manager
December 4, 1997
<TABLE>
<CAPTION>
PROXY RESULTS
During the six-month period ended October 31, 1997, MuniYield New York Insured Fund II, Inc. Common Stock shareholders
voted on the following proposals. The proposals were approved at a shareholders' meeting on November 20, 1997.
The description of each proposal and number of shares voted are as follows:
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C> <C>
1. To consider and act upon a proposal to approve the
Agreement and Plan of Reorganization between the
Fund and Taurus MuniNew York Holdings, Inc. 10,679,735 457,652 787,479
<CAPTION>
Shares Shares Withheld
Voted For From Voting
<S> <C> <C> <C>
2. To consider and act upon a proposal to elect the
following persons as Directors of the Fund: James H. Bodurtha 19,811,990 693,116
Herbert I. London 19,765,607 739,499
Robert R. Martin 19,758,328 746,778
Arthur Zeikel 19,812,772 692,334
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C> <C>
3. To consider and act upon a proposal to ratify the
selection of Ernst & Young llp as the independent
auditors of the Fund to serve for the current fiscal
year. 19,865,273 129,758 510,075
During the six-month period ended October 31, 1997, MuniYield New York Insured Fund II, Inc. Preferred Stock shareholders
(Series A, Series B and Series C) voted on the following proposals. The proposals were approved at a shareholders' meeting
on November 20, 1997. The description of each proposal and number of shares voted are as follows:
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C> <C> <C>
1. To consider and act upon a proposal to approve the
Agreement and Plan of Reorganization between
the Fund and Taurus MuniNew York Holdings, Inc. Series A 2,715 71 14
as follows: Series B 1,817 3 28
Series C 830 43 107
<CAPTION>
Shares Shares Withheld
Voted For From Voting
<S> <C> <C> <C>
2. To consider and act upon a proposal to elect the
following persons as Directors of the Fund: James
H. Bodurtha, Herbert I. London, Robert R. Martin,
Joseph L. May, Andre F. Perold and Arthur Zeikel Series A 2,029 20
as follows: Series B 1,339 1
Series C 632 10
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
<S> <C> <C> <C> <C>
3. To consider and act upon a proposal to ratify the
selection of Ernst & Young llp as the independent
auditors of the Fund to serve for the current fiscal
year as follows: Series A 2,044 0 5
Series B 1,339 1 0
Series C 640 0 2
</TABLE>
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield New York Insured Fund II, 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.
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniYield New
York Insured Fund II, Inc. during its taxable year ended October 31,
1997 qualify as tax-exempt interest dividends for Federal income tax
purposes. Additionally, there were no capital gains distributed by the
Fund during the year.
Please retain this information for your records.
<TABLE>
<CAPTION>
MuniYield New York Insured Fund II, Inc. October 31, 1997
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
New York -- 102.0%
<S> <C> <C> <C> <C>
AAA Aaa $4,095 Albany County, New York, Airport Authority, Airport Revenue Bonds, RITR, AMT,
Series RI-97-7, 7.92% due 12/15/2023 (f)(h) $4,576
Metropolitan Transportation Authority, New York, Commuter Facilities Revenue Bonds:
AAA Aaa 2,650 RITR, Series 20, 8.52% due 7/01/2017 (c)(h) 3,207
AAA Aaa 8,650 Refunding, Series B, 6.25% due 7/01/2002 (c)(g) 9,532
AAA Aaa 2,070 Series A, 6.375% due 7/01/2004 (c)(g) 2,335
AAA Aaa 3,025 Series B, 5.125% due 7/01/2024 (d) 2,954
AAA Aaa 10,100 Series E, 5% due 7/01/2021 (d) 9,720
AAA Aaa 25,735 Metropolitan Transportation Authority, New York, Dedicated Tax Fund, Series A, 5.25%
due 4/01/2026 (c) 25,323
Metropolitan Transportation Authority, New York, Transportation Facilities Revenue Bonds:
AAA Aaa 2,400 Series A, 6.10% due 7/01/2021 (f) 2,573
AAA Aaa 5,650 Series J, 6.375% due 7/01/2002 (b)(g) 6,256
AAA Aaa 5,000 Series J, 6.50% due 7/01/2002 (b)(g) 5,562
AAA Aaa 5,000 Series O, 6.375% due 7/01/2004 (c)(g) 5,640
AAA Aaa 1,005 Mount Sinai, New York, Union Free School District, Refunding, GO, UT, 6.20% due
2/15/2019 (d) 1,138
A1+ NR* 2,300 Municipal Assistance Corporation, New York City, New York, VRDN, Sub-Series K-1, 3.65%
due 7/01/2008 (a) 2,300
Nassau County, New York, GO, UT, Series P (b)(g):
AAA Aaa 3,250 6.50% due 11/01/2004 3,742
AAA Aaa 3,685 6.50% due 11/01/2004 4,243
NR* Aaa 4,035 Nassau County, New York, General Improvement Bonds, Series X, UT, 5.10% due
11/01/2015 (d) 3,979
BBB+ Baa1 10,000 New York City, New York, GO, Refunding Bonds, Series D, 5.25% due 8/01/2021 9,467
New York City, New York, GO, UT, Series B:
BBB+ Baa1 5,000 (Fiscal 92), 7.50% due 2/01/2006 5,613
AAA Aaa 2,000 (Fiscal 92), 7% due 2/01/2017 (d) 2,217
AAA Aaa 2,000 (Fiscal 92), 7% due 2/01/2018 (d) 2,217
A1+ VMIG1+ 500 VRDN, Sub-Series B-4, 3.75% due 8/15/2023 (a)(c) 500
A1+ Aa2 12,200 New York City, New York, Health and Hospital Corporation, Health System Revenue Bonds,
VRDN, Series A, 3.60% due 2/15/2026 (a) 12,200
AAA Aaa 12,500 New York City, New York, IDA, Civic Facility Revenue Bonds (USTA National Tennis Center
Project), 6.375% due 11/15/2014 (f) 13,772
A A 5,265 New York City, New York, IDA, Special Facility Revenue Bonds, RITR, AMT,
Series RI-5, 7.895% due 1/01/2024 (h) 5,765
New York City, New York, Municipal Water Finance Authority, Water and Sewer System
Revenue Bonds:
A- A2 5,000 RIB, 7.625% due 6/15/2025 (h) 5,506
A- A2 11,000 RITR, Series 21, 7.22% due 6/15/2029 (h) 11,605
AAA Aaa 6,000 Refunding, Series A, 5.125% due 6/15/2022 (d) 5,864
AAA Aaa 1,760 Series A, 7% due 6/15/2001 (b)(g) 1,943
AAA Aaa 1,350 Series A-1994, 7% due 6/15/2015 (b) 1,477
A1+ VMIG1+ 1,600 VRDN, Series C, 3.75% due 6/15/2023 (a)(b) 1,600
New York State Dormitory Authority Revenue Bonds:
AAA Aaa 11,165 (City University), Third Generation Reserves, Series 2, 6.875% due 7/01/2004 (c)(g) 12,955
AAA Aaa 3,000 (City University System), Third Resolution, Series 1, 6.25% due 7/01/2016 (d) 3,271
AAA Aaa 3,640 (City University System), Third Resolution, Series 1, 6.25% due 7/01/2020 (d) 3,952
AAA Aaa 6,290 (City University System), Third Resolution, Series 1, 6.30% due 7/01/2024 (d) 7,025
AAA Aaa 1,375 Consolidated City University System), Second Generation, Series A, 5.75% due
7/01/2018 (f) 1,475
AAA Aaa 3,700 (Consolidated City University System), Series 1, 5.125% due 7/01/2027 (c) 3,603
A1+ VMIG1+ 100 (Cornell University), VRDN, Series B, 3.60% due 7/01/2025 (a) 100
AAA Aaa 15,500 (Mental Health Services Facilities Improvement), Series B, 5.125% due 8/15/2021 (c) 15,155
AAA Aaa 6,000 (Mount Sinai School of Medicine), Series A, 5.15% due 7/01/2024 (c) 5,880
AAA Aaa 1,750 Refunding (Mount Sinai School of Medicine), 6.75% due 7/01/2009 (c) 1,917
A- A3 10,000 Refunding (State University Educational Facilities), 5.125% due 5/15/2027 9,511
AAA Aaa 4,500 Refunding (State University Educational Facilities), Series A, 5.875% due 5/15/2011 (b) 4,921
A- A3 2,000 Refunding (State University Educational Facilities), Series B, 7% due 5/15/2016 2,159
AAA Aaa 1,050 (Saint John's University), 6.875% due 7/01/2011 (d) 1,155
AAA Aaa 2,000 (State University Educational Facilities), Series B, 5.75% due 5/15/2024 (b) 2,048
New York State Energy Research and Development Authority, Facilities Revenue Bonds
(Consolidated Edison Company Inc.), AMT, Series A:
AAA Aaa 6,950 6.75% due 1/15/2027 (c) 7,437
AAA Aaa 3,785 6.75% due 1/15/2027 (d) 4,039
AAA Aaa 3,200 New York State Energy Research and Development Authority, Facilities Revenue Bonds,
RITR, Series 19, 8.22% due 8/15/2020 (h) 3,640
New York State Energy Research and Development Authority, Gas Facilities Revenue
Bonds (Brooklyn Union Gas Company), AMT (c):
AAA Aaa 12,000 Series A, 6.75% due 2/01/2024 13,113
AAA Aaa 5,000 Series B, 6.75% due 2/01/2024 5,465
AAA Aaa 3,600 New York State Energy Research and Development Authority, PCR, Refunding (Rochester
Gas and Electric Project), AMT, Series B, 6.50% due 5/15/2032 (c) 3,890
A- Aa 5,000 New York State Environmental Facilities Corporation, PCR, RITR, Series RI-1, 7.445% due
6/15/2014 (h) 5,600
AAA Aaa 11,265 New York State Environmental Facilities Corporation, Special Obligation Revenue
Refunding Bonds (Riverbank State Park), 5.125% due 4/01/2022 (d) 11,011
NR* VMIG1+ 16,200 New York State, HFA, Revenue Bonds (East 84th Street), VRDN, AMT, Series A, 3.65% due
11/01/2028 (a) 16,200
New York State Local Government Assistance Corporation:
AAA Aaa 6,575 RITR, Series 22, 8.02% due 4/01/2024 (d)(h) 7,364
A+ Aaa 1,000 Series A, 6.875% due 4/01/2002 (g) 1,123
A1+ VMIG1+ 3,200 VRDN, Series D, 3.65% due 4/01/2025 (a) 3,200
New York State Medical Care Facilities Finance Agency Revenue Bonds:
AAA Aaa 2,790 (Health Center Project -- Second Mortgage), Series A, 6.375% due 11/15/2019 (d) 3,052
AAA Aaa 3,000 (Mental Health), Series E, 6.50% due 8/15/2015 (f) 3,326
AAA Aaa 4,330 (Mental Health), Series F, 6.50% due 8/15/2012 (f) 4,751
AAA Aaa 1,500 (Mental Health Services Facilities), Series A, 6% due 2/15/2025 (c) 1,577
AAA Aaa 12,850 (New York Hospital Mortgage), Series A, 6.80% due 8/15/2024 (d)(e) 14,477
AAA Aaa 12,250 (New York Hospital Mortgage), Series A, 6.50% due 8/15/2029 (d)(e) 13,570
AAA Aaa 5,200 Refunding (Hospital and Nursing Home), Series C, 6.375% due 8/15/2029 (c) 5,655
AAA Aaa 4,515 Refunding (Mental Health Services), Series F, 5.25% due 2/15/2021 (f) 4,402
AAA Aaa 1,000 New York State Mortgage Agency, Homeowner Mortgage Revenue Bonds, Series 43,
6.45% due 10/01/2017 (c) 1,078
NR* Aaa 3,000 New York State Mortgage Agency Revenue Bonds, RITR, AMT, Series 24, 7.47% due
10/01/2028 (h) 3,079
New York State Thruway Authority, Highway and Bridge Trust Fund, Series B:
AAA Aaa 6,760 5% due 4/01/2017 (f) 6,547
AAA Aaa 11,000 UT, 6.25% due 4/01/2012 (b) 12,066
New York State Urban Development Corporation, Revenue Bonds (Correctional Capital
Facilities):
AAA Aaa 2,295 Refunding, Series A, 5.25% due 1/01/2014 (f) 2,335
AAA Aaa 7,000 Series 6, 5.375% due 1/01/2025 (d) 6,985
AAA Aaa 1,000 Niagara Falls, New York, Water Treatment Plant, UT, AMT, 7.25% due 11/01/2010 (c) 1,206
North Hempstead, New York, GO, UT, Refunding, Series B (b):
AAA Aaa 1,745 6.40% due 4/01/2013 2,001
AAA Aaa 555 6.40% due 4/01/2017 640
Port Authority of New York and New Jersey, Consolidated Revenue Bonds:
AAA Aaa 2,000 71st Series, 6.50% due 1/15/2026 (b) 2,141
AAA Aaa 3,000 72nd Series, 7.40% due 10/01/2002 (d)(g) 3,445
AA- A1 8,000 72nd Series, 7.35% due 10/01/2002 (g) 9,151
AAA Aaa 4,000 Port Authority of New York and New Jersey, RITR, FR3-108th Series, AMT, 7.635% due
1/15/2017 (f)(h) 4,395
A1+ VMIG1+ 4,500 Port Authority of New York and New Jersey, Special Obligation Revenue Refunding Bonds
(Versatile Structure Obligation), VRDN, Series 3, 3.65% due 6/01/2020 (a) 4,500
Syracuse, New York, COP (Syracuse Hancock International Airport), AMT (b):
AAA Aaa 3,650 6.625% due 1/01/2012 3,944
AAA Aaa 3,120 6.50% due 1/01/2017 3,357
A1+ VMIG1+ 3,200 Syracuse, New York, IDA, Civic Facility Revenue Bonds (Multi-Modal Syracuse University
Project), VRDN, 3.60% due 3/01/2023 (a) 3,200
AAA Aaa 2,000 Triborough Bridge and Tunnel Authority, New York, General Purpose Revenue Refunding
Bonds, Series Y, 6.125% due 1/01/2021 (I) 2,247
Triborough Bridge and Tunnel Authority, New York, Special Obligation Refunding Bonds:
AAA Aaa 5,075 6.25% due 1/01/2012 (d) 5,466
AAA Aaa 6,975 Series A, 6.625% due 1/01/2017 (c) 7,548
AAA Aaa 1,000 Series B, 6.875% due 1/01/2015 (b) 1,089
AAA Aaa 2,000 Series B, 6.875% due 1/01/2015 (c) 2,179
AAA Aaa 5,150 Series B, 6.875% due 1/01/2015 (d) 5,611
--------
Total Investments (Cost -- $445,588) -- 102.0% 475,055
Liabilities in Excess of Other Assets -- (2.0%) (9,303)
--------
Net Assets -- 100.0% $465,752
========
(a) 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, 1997.
(b) FGIC Insured.
(c) MBIA Insured.
(d) AMBAC Insured.
(e) FHA Insured.
(f) FSA Insured.
(g) Prerefunded.
(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, 1997.
(I) CAPMAC Insured.
* Not Rated.
+ Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Ernst & Young LLP.
Portfolio Abbreviations
To simplify the listings of MuniYield New York Insured Fund II, 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
IDA Industrial Development Authority
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
PCR Pollution Control Revenue Bonds
UT Unlimited Tax
VRDN Variable Rate Demand Notes
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of October 31, 1997
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $445,588,291) (Note 1a) $475,055,395
Cash 135,156
Interest receivable 6,448,975
Prepaid expenses and other assets 63,721
------------
Total assets 481,703,247
------------
Liabilities: Payables:
Securities purchased $15,038,516
Dividends to shareholders (Note 1f) 471,354
Investment adviser (Note 2) 208,708 15,718,578
------------
Accrued expenses and other liabilities 232,994
------------
Total liabilities 15,951,572
------------
Net Assets: Net assets $465,751,675
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 per share (5,760 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) $144,000,000
Common Stock, par value $.10 per share (21,195,037 shares issued
and outstanding) $2,119,504
Paid-in capital in excess of par 305,998,600
Undistributed investment income -- net 1,657,552
Accumulated realized capital losses on investments -- net (Note 5) (17,491,085)
Unrealized appreciation on investments -- net 29,467,104
------------
Total -- Equivalent to $15.18 net asset value per share of Common Stock
(market price -- $14.25) 321,751,675
------------
Total capital $465,751,675
============
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended
October 31, 1997
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned $23,077,867
(Note 1d):
Expenses: Investment advisory fees (Note 2) $2,026,005
Commission fees (Note 4) 330,189
Transfer agent fees 98,313
Professional fees 66,111
Printing and shareholder reports 46,185
Accounting services (Note 2) 33,307
Listing fees 26,740
Custodian fees 23,139
Directors' fees and expenses 22,865
Pricing fees 17,058
Amortization of organization expenses (Note 1e) 4,575
Other 36,913
------------
Total expenses 2,731,400
------------
Investment income -- net 20,346,467
------------
Realized & Realized gain on investments -- net 5,879,051
Unrealized Gain on Change in unrealized appreciation on investments -- net 9,153,298
Investments -- Net ------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $35,378,816
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <C> <C> <C>
Operations: Investment income -- net $20,346,467 $11,589,728
Realized gain (loss) on investments -- net 5,879,051 (1,623,682)
Change in unrealized appreciation on investments -- net 9,153,298 479,529
-------------- --------------
Net increase in net assets resulting from operations 35,378,816 10,445,575
-------------- --------------
Dividends to Investment income -- net:
Shareholders Common Stock (15,161,332) (9,071,415)
(Note 1f): Preferred Stock (4,351,319) (2,557,268)
-------------- --------------
Net decrease in net assets resulting from dividends to shareholders (19,512,651) (11,628,683)
-------------- --------------
Capital Stock Proceeds from issuance of Common Stock resulting from reorganization 144,780,654 --
Transactions Offering costs from issuance of Common Stock resulting from
(Notes 1e & 4): reorganization (366,791) --
Proceeds from issuance of Preferred Stock resulting from reorganization 74,000,000 --
-------------- --------------
Net increase in net assets derived from capital stock transactions 218,413,863 --
-------------- --------------
Net Assets: Total increase (decrease) in net assets 234,280,028 (1,183,108)
Beginning of year 231,471,647 232,654,755
-------------- --------------
End of year* $465,751,675 $231,471,647
============== ==============
* Undistributed investment income -- net $1,657,552 $823,736
============== ==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
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,
1997 1996 1995 1994 1993
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $14.53 $14.63 $13.13 $15.89 $13.43
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net 1.08 1.04 1.07 1.07 1.11
Realized and unrealized gain (loss) on
investments -- net .66 (.09) 1.50 (2.76) 2.46
--------- --------- --------- --------- ---------
Total from investment operations 1.74 .95 2.57 (1.69) 3.57
--------- --------- --------- --------- ---------
Less dividends and distributions to Common
Stock shareholders:
Investment income -- net (.84) (.82) (.84) (.87) (.91)
Realized gain on investments -- net -- -- -- (.01) --
--------- --------- --------- --------- ---------
Total dividends and distributions to Common
Stock shareholders (.84) (.82) (.84) (.88) (.91)
--------- --------- --------- --------- ---------
Capital charge resulting from issuance of Common
Stock (.02) -- -- -- --
--------- --------- --------- --------- ---------
Effect of Preferred Stock activity:++
Dividends and distributions to Preferred
Stock shareholders:
Investment income -- net (.23) (.23) (.23) (.19) (.20)
Realized gain on investments -- net -- -- -- --+ --
--------- --------- --------- --------- ---------
Total effect of Preferred Stock activity (.23) (.23) (.23) (.19) (.20)
--------- --------- --------- --------- ---------
Net asset value, end of year $15.18 $14.53 $14.63 $13.13 $15.89
========= ========= ========= ========= =========
Market price per share, end of year $14.25 $13.375 $13.25 $11.00 $15.25
========= ========= ========= ========= =========
Total Investment Based on market price per share 13.15% 7.28% 28.61% (22.96%) 17.90%
Return:* ========= ========= ========= ========= =========
Based on net asset value per share 10.95% 5.55% 18.96% (11.75%) 25.77%
========= ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement .68% .71% .74% .74% .62%
Net Assets:** ========= ========= ========= ========= =========
Expenses .68% .71% .74% .74% .70%
========= ========= ========= ========= =========
Investment income -- net 5.04% 5.00% 5.27% 5.09% 5.25%
========= ========= ========= ========= =========
Supplemental Net assets, net of Preferred Stock, end of year
Data: (in thousands) $321,752 $161,472 $162,655 $145,977 $176,595
========= ========= ========= ========= =========
Preferred Stock outstanding, end of year
(in thousands) $144,000 $70,000 $70,000 $70,000 $70,000
========= ========= ========= ========= =========
Portfolio turnover 121.49% 118.28% 110.76% 36.79% 3.33%
========= ========= ========= ========= =========
Leverage: Asset coverage per $1,000 $3,234 $3,307 $3,324 $3,085 $3,523
========= ========= ========= ========= =========
Dividends Per Series A -- Investment income -- net $865 $913 $910 $759 $809
Share On ========= ========= ========= ========= =========
Preferred Stock Series B -- Investment income -- net $643 -- -- -- --
Outstanding:+++ ========= ========= ========= ========= =========
Series C -- Investment income -- net $667 -- -- -- --
========= ========= ========= ========= =========
* 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 loads.
** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Amount is less than $.01 per share.
++ The Fund's Preferred Stock was issued on September 16, 1992 (Series A) and January 27, 1997 (Series B and Series C).
+++ Dividends per share have been adjusted to reflect a two-for-one stock split that occurred on December 1, 1994.
See Notes to Financial Statements.
</TABLE>
MuniYield New York Insured Fund II, Inc. October 31, 1997
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield New York Insured Fund II, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a non-diversified, closed-
end management investment company. 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 MYT. 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, which are traded on exchanges, are valued at their last sale
price as of the close of such exchanges or, lacking any sales, at the
last available bid price. Securities with remaining maturities of
sixty days or less are valued at amortized cost, which approximates
market value. Securities for which market quotations are not readily
available are valued at their 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.
(bullet) Financial futures contracts -- The Fund may purchase or sell
interest rate 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.
(bullet) 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 transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and offering costs -- Deferred
organization expenses are amortized on a straight-line basis over a
five-year period. Direct expenses relating to the issuance of Common
Stock resulting from the reorganization were charged to capital.
(f) Dividends and distributions -- Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
(g) 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 of $112,952
have been reclassified between accumulated net realized capital losses
and paid-in capital in excess of par. 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 0.50% of
the Fund's average weekly net assets.
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
and securities acquired through the reorganization, for the year ended
October 31, 1997 were $459,844,226 and $493,985,978, respectively.
Net realized and unrealized gains (losses) as of October 31, 1997 were
as follows:
Realized
Gains Unrealized
(Losses) Gains
Long-term investments $6,824,351 $29,467,104
Financial futures contracts (945,300) --
----------- -----------
Total $5,879,051 $29,467,104
----------- -----------
As of October 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $29,390,917, of which $29,391,926 related to
appreciated securities and $1,009 related to depreciated securities.
The aggregate cost of investments at October 31, 1997 for Federal
income tax purposes was $445,664,478.
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 the holders of Common Stock.
Common Stock
Shares issued and outstanding during the year ended October 31, 1997
increased by 10,080,205 pursuant to a plan of reorganization and
during the year ended October 31, 1996 remained constant.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock
of the Fund 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, 1997 were as follows: Series A, 3.48%;
Series B, 3.57%; and Series C, 3.25%.
In addition, AMPS shares increased by 2,960 pursuant to a plan of
reorganization. As a result, as of October 31, 1997, there were 5,760
AMPS shares authorized, issued and outstanding with a liquidation
preference of $25,000 per share.
The Fund pays commissions to certain brokerdealers at the end of each
auction at an annual rate ranging from 0.25% to 0.375%, calculated on
the proceeds of each auction. For the year ended October 31, 1997,
Merrill Lynch, Pierce, Fenner & Smith Inc., an affiliate of FAM,
earned $156,861 as commissions.
5. Capital Loss Carryforward:
At October 31, 1997, the Fund had a net capital loss carryforward of
approximately $12,333,000, of which $833,000 expires in 2002,
$10,359,000 expires in 2003 and $1,141,000 expires in 2004. This
amount will be available to offset like amounts of any future taxable
gains.
6. Acquisition of MuniYield New York Insured Fund III, Inc. and
MuniVest New York Insured Fund, Inc.:
On January 27, 1997, MuniYield New York Insured Fund II, Inc. acquired
all of the net assets of MuniYield New York Insured Fund III, Inc. and
MuniVest New York Insured, Inc. pursuant to a plan of reorganization.
The acquisition was accomplished by a tax-free exchange of 3,688,900
Common Stock shares and 1,000 AMPS shares of MuniYield New York
Insured Fund III, Inc., and 7,204,432 Common Stock shares and 1,960
AMPS shares of MuniVest New York Insured Fund, Inc. for 10,080,205
Common Stock shares and 2,960 AMPS shares of MuniYield New York
Insured Fund II, Inc. MuniYield New York Insured Fund III, Inc.'s net
assets on that date of $77,037,487, including $2,948,846 of unrealized
appreciation and $2,421,657 of accumulated net realized capital
losses, and MuniVest New York Insured Fund, Inc.'s net assets on that
date of $141,743,167, including $5,555,384 of unrealized appreciation
and $13,770,042 of accumulated net realized capital losses, were
combined with those of MuniYield New York Insured Fund II, Inc. The
aggregate net assets of MuniYield New York Insured Fund II, Inc.
immediately after the acquisition amounted to $448,419,691.
7. Reorganization Plan:
On November 20, 1997, the shareholders approved a plan of
reorganization whereby the Fund would acquire substantially all of the
assets and liabilities of Taurus MuniNew York Holdings, Inc. in
exchange for newly issued shares of the Fund. Taurus MuniNew York
Holdings, Inc. is a registered, non-diversified, closed-end management
investment company. Both entities have a similar investment objective
and are managed by FAM.
8. Subsequent Event:
On November 6, 1997, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount of
$.071746 per share, payable on November 26, 1997 to shareholders of
record as of November 17, 1997.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors, MuniYield New York Insured
Fund II, Inc.
We have audited the accompanying statement of assets, liabilities and
capital of MuniYield New York Insured Fund II, Inc., including the
schedule of investments, as of October 31, 1997, and the related
statements of operations and changes in net assets and financial
highlights for the year 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 audit. The statement
of changes in net assets for the year ended October 31, 1996 and
financial highlights for each of the four years in the period then
ended of MuniYield New York Insured Fund II, Inc., were audited by
other auditors whose report dated December 3, 1996, expressed an
unqualified opinion on such financial statement and financial
highlights.
We conducted our audit 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 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 and financial highlights.
Our procedures included confirmation of securities owned as of October
31, 1997 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 audit provides a
reasonable basis for our opinion.
In our opinion, the 1997 financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of MuniYield New York Insured Fund II, Inc. at
October 31, 1997, and the results of its operations, the changes in
its net assets and financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
/S/ERNST & YOUNG LLP
Princeton, New Jersey
December 3, 1997
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Roberto Roffo, Vice President
Gerald M. Richard, Treasurer
Philip M. Mandel, 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:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
NYSE Symbol
MYT
