MUNIYIELD
NEW YORK
INSURED
FUND II, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
October 31, 1998
<PAGE>
MuniYield New York Insured Fund II, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1998, the Common Stock of MuniYield New York
Insured Fund II, Inc. earned $0.843 per share income dividends, which included
earned and unpaid dividends of $0.069. This represents a net annualized yield of
5.33%, based on a month-end per share net asset value of $15.82. Over the same
period, the total investment return on the Fund's Common Stock was +10.24%,
based on a change in per share net asset value from $15.18 to $15.82, and
assuming reinvestment of $0.846 per share income dividends.
For the six-month period ended October 31, 1998, the total investment return on
the Fund's Common Stock was +7.69%, based on a change in per share net asset
value from $15.10 to $15.82, and assuming reinvestment of $0.417 per share
income dividends.
For the six-month period ended October 31, 1998, the Fund's Auction Market
Preferred Stock had an average yield as follows: Series A, 3.22%; Series B,
3.17%; Series C, 3.09%; and Series D, 3.55%.
The Municipal Market Environment
During the six months ended October 31, 1998, long-term bond yields declined
significantly. The near absence of any inflationary pressures in the United
States continued to support historic low interest rates. Additionally, foreign
economic factors have continued to outweigh US domestic fundamentals, as they
have for much of 1998. The economic crisis that began in Asia over a year ago
has spread both to Russia and South America. However, economic factors in these
countries have begun to negatively impact US growth. For example, employment in
the US manufacturing sector declined in recent months as a result of reduced
demand for export goods. Concern that the modest decline in US economic growth
seen thus far would spread and intensify led the Federal Reserve Board to lower
short-term interest rates in late September, in mid-October and in mid-November.
These actions were taken to offset the drag of foreign economies on future US
growth.
US Treasury bond yields continued to benefit from a strong "flight to quality"
as foreign investors were drawn to the relative safe haven of US Government
securities. Additionally, the sharp equity market correction, which began at the
end of August, triggered a further flight into US Treasury securities. Long-term
US Treasury bond yields fell over 90 basis points (0.90%) to approximately 5% by
the end of September. This is the lowest level since the US Treasury
reintroduced 30-year maturity bond auctions in 1977.
By early October, worldwide investor confidence began to rise, reducing the
demand for the safety and liquidity of US Treasury securities. Investor
confidence was restored by the belief that major world governments, as well as
the International Monetary Fund, would take the necessary action to support weak
domestic economies in Asia and Latin America. Additionally, rapid recovery in US
and world equity markets caused some investors to reallocate funds from US debt
instruments back to various world equity markets. US Treasury security yields
rose for the remainder of the month to end October at 5.15%. During the
six-month period ended October 31, 1998, long-term Treasury security yields
declined approximately 80 basis points.
During the past 12 months, the tax-exempt bond market has contended with
significant new-issue supply pressures. Over the past year, more than $277
billion in new long-term tax-exempt bonds were underwritten, an increase of
almost 30% compared to the same period a year ago. During the most recent
six-month period, approximately $140 billion in new long-term municipal bonds
were underwritten, representing an increase of more than 15% over the same
six-month period last year. This increased supply, coupled with the high returns
the US equity market generated for much of 1998, was one of the major reasons
municipal bond yields declined less than their taxable counterparts during the
period.
The continued increase in new bond issuance has required ever-lower tax-exempt
bond yields to generate the economic savings necessary for additional municipal
bond financings. Consequently, the pace of new bond issuance has slowed in
recent months. In fact, the trend may be reversing. During the three months
ended October 31, 1998, just over $60 billion in new long-term municipal bonds
were underwritten, a decline of 4% compared to the same quarter a year ago.
During the month of October, there were less than $20 billion in new municipal
bond securities issued, a decline of over
1
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
10% compared to October 1997. We will monitor this trend closely in the coming
months to determine if the supply pressures exerted thus far in 1998 are abating
and fostering a more balanced supply/ demand environment.
Throughout the six-month period ended October 31, 1998, municipal bond yields
followed a pattern that was similar to US Treasury securities, although the
yield declines were more muted. As measured by the unmanaged Bond Buyer Revenue
Bond Index, long-term, uninsured tax-exempt revenue bond yields declined over 40
basis points to 5.09% by the end of September, their lowest level since the
early 1970s. Municipal bond yields rose during October to end the period at
5.24%. Over the past six months, long-term tax-exempt bond yields declined
almost 30 basis points.
Although municipal bond yields declined during the six-month period, recent
supply pressures and the absence of the safe haven status enjoyed by US
securities caused municipal bond yields to rise relative to US Treasury bond
yields. At October 31, 1998, long-term tax-exempt bond yield spreads were
attractive relative to US Treasury securities of comparable maturities (over
100%), well in excess of their historic range of 85%-88%. Tax-exempt bond yield
ratios have rarely exceeded 90% in the 1980s and 1990s. Historically, yield
spreads have been wider than these levels when there have been potential changes
in Federal tax codes that would have adversely affected the tax-favored status
of municipal bonds.
Currently, municipal bond investors find themselves in a unique investment
environment. Previous opportunities to purchase tax-exempt bonds with yields
exceeding that of comparable US Treasury issues have been limited to relatively
brief episodes and then further limited to a few municipal credits undergoing
specific financial pressures. At present, almost the entire municipal bond
universe, across nearly all maturity and credit sectors, can be purchased at
yields greater than their taxable counterparts. However, the current opportunity
may quickly disappear should tax-exempt bond supply pressures diminish or the
safe-haven status of US Treasury securities become less desirable. Under these
conditions, municipal bond ratios should quickly revert to more normal historic
percentages, certainly well below their presently attractive levels.
Portfolio Strategy
For the six-month period ended October 31, 1998, we managed the Fund with the
intention of seeking to sustain an appealing level of tax-exempt income in
addition to providing an attractive total return. Throughout the period, we
maintained a fully invested position using any dips in the market to restructure
the Fund more aggressively, while using market rallies to sell more aggressively
structured bonds. Although the overall trend in interest rates declined during
the period, market volatility created a trading range. Interest rates fluctuated
rapidly during the period, reflecting changes in both the outlook for inflation
and the Federal Reserve Board's monetary policy. Overall, the Fund was
well-positioned to benefit from a decline in interest rates because we believed
that inflation was not an obstacle.
Looking ahead, we believe that interest rates will fluctuate until a sustained
slowdown in the US economy drives interest rates lower. Consequently, we will
focus on extending the Fund's duration on any market back-ups in order to seek
to enhance the Fund's total return.
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 10, 1998
2
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MuniYield New York Insured Fund II, Inc. October 31, 1998
PROXY RESULTS
During the six-month period ended October 31, 1998, MuniYield New York Insured
Fund II, Inc. Common Stock shareholders voted on the following proposals. The
proposals were approved at a shareholders' meeting on September 24, 1998. The
description of each proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors: James H. Bodurtha 24,516,031 781,539
Herbert I. London 24,516,045 781,525
Robert R. Martin 24,516,031 781,539
Arthur Zeikel 24,516,045 781,525
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP as the Fund's
independent auditors for the current fiscal year. 24,436,741 243,443 617,386
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
During the six-month period ended October 31, 1998, MuniYield New York Insured
Fund II, Inc. Preferred Stock shareholders voted on the following proposals. The
proposals were approved at a shareholders' meeting on September 24, 1998. The
description of each proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors:
James H. Bodurtha, Joseph L. May and Andre F. Perold: Series A 2,646 9
Herbert I. London, Robert R. Martin and Arthur Zeikel: Series A 2,638 17
James H. Bodurtha, Herbert I. London, Robert R. Martin,
Joseph L. May, Andre F. Perold and Arthur Zeikel as follows: Series B 1,070 0
Series C 452 0
Series D 668 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP as the Fund's
independent auditors for the current fiscal year as follows:
Series A 2,642 9 4
Series B 1,055 15 0
Series C 452 0 0
Series D 668 0 0
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
3
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
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.
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, interest rates 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 such securities.
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
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RITR Residual Interest Trust Receipts
UT Unlimited Tax
VRDN Variable Rate Demand Notes
4
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- ----------------------------------------------------------------------------------------------------------------------------------
New York--98.6%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA Aaa $ 4,095 Albany County, New York, Airport Authority, Airport Revenue Bonds, RITR, AMT,
Series RI-97-7, 8.17% due 12/15/2023 (c)(f) $ 4,837
==================================================================================================================================
NR* Aaa 3,000 Allegany County, New York, IDA, Civic Facilities Revenue Refunding Bonds (Alfred
University), 5% due 8/01/2028 (d) 2,954
==================================================================================================================================
A A2 3,000 Allegany County, New York, IDA, Solid Waste Disposal Facility Revenue Bonds (Atlantic
Richfield Company), AMT, 6.625% due 9/01/2016 3,267
==================================================================================================================================
A A2 1,275 Battery Park City Authority, New York, Revenue Refunding Bonds, Junior--Series A, 5.80%
due 11/01/2022 1,364
==================================================================================================================================
AAA Aaa 4,300 Buffalo, New York, Sewer Authority Revenue Bonds, Series F, 6% due 7/01/2013 (b) 4,957
==================================================================================================================================
Huntington, New York, Refunding, GO, UT (a):
NR* Aaa 715 5.50% due 4/15/2010 789
NR* Aaa 485 5.50% due 4/15/2011 534
NR* Aaa 460 5.50% due 4/15/2012 507
NR* Aaa 455 5.50% due 4/15/2013 500
NR* Aaa 450 5.50% due 4/15/2014 492
NR* Aaa 450 5.50% due 4/15/2015 489
==================================================================================================================================
AAA Aaa 10,800 Long Island Power Authority, New York, Electric Systems Revenue Refunding Bonds,
Series A, 5.50% due 12/01/2029 (d) 11,312
==================================================================================================================================
AAA Aaa 9,570 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue Bonds,
Series A, 6.375% due 7/01/2004 (d)(e) 10,884
==================================================================================================================================
AAA Aaa 5,000 Metropolitan Transportation Authority, New York, Commuter Facilities Revenue Refunding
Bonds, Series B, 4.75% due 7/01/2026 (b) 4,792
==================================================================================================================================
Metropolitan Transportation Authority, New York, Dedicated Tax Fund Revenue Bonds,
Series A (b):
AAA Aaa 5,250 5% due 4/01/2023 5,191
AAA Aaa 7,100 4.75% due 4/01/2028 6,796
==================================================================================================================================
Metropolitan Transportation Authority, New York, Transit Facilities Revenue Bonds:
AAA Aaa 2,000 Series A, 6.10% due 7/01/2006 (c)(e) 2,302
AAA Aaa 2,500 Series C-1, 5.50% due 7/01/2022 (b) 2,645
==================================================================================================================================
Metropolitan Transportation Authority, New York, Transit Facilities Revenue Refunding
Bonds, Series A (d):
AAA Aaa 3,555 4.75% due 7/01/2021 3,421
AAA Aaa 5,325 4.75% due 7/01/2024 5,111
==================================================================================================================================
BBB+ Baa1 3,000 Metropolitan Transportation Authority, New York, Transit Facilities, Service Contract,
Revenue Refunding Bonds, Series 5, 7% due 7/01/2012 3,281
==================================================================================================================================
Metropolitan Transportation Authority, New York, Transportation Facilities
Revenue Bonds (e):
AAA Aaa 2,400 Series A, 6.10% due 7/01/2006 (c) 2,762
AAA Aaa 30,690 Series O, 6.375% due 7/01/2004 (d) 34,905
==================================================================================================================================
AAA Aaa 1,005 Mount Sinai, New York, Union Free School District, Refunding, GO, UT, 6.20%
due 2/15/2019 (a) 1,180
==================================================================================================================================
Nassau County, New York, GO, UT, Series P (b)(e):
AAA Aaa 3,250 6.50% due 11/01/2004 3,778
AAA Aaa 3,685 6.50% due 11/01/2004 4,283
==================================================================================================================================
AAA Aaa 3,000 New York City, New York, Cultural Resources Trust, Revenue Refunding Bonds (Museum of
Modern Art), Series A, 5.50% due 1/01/2021 (a) 3,175
==================================================================================================================================
</TABLE>
5
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- ----------------------------------------------------------------------------------------------------------------------------------
New York (continued)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York City, New York, GO, UT:
A- A3 $ 3,625 7.50% due 2/01/2006 $ 4,055
AAA Aaa 2,000 Series B, Fiscal 92, 7% due 2/01/2017 (a) 2,208
AAA Aaa 2,000 Series B, Fiscal 92, 7% due 2/01/2018 (a) 2,208
==================================================================================================================================
New York City, New York, IDA, Civic Facility Revenue Bonds:
NR* Aaa 885 (Anti-Defamation League Foundation), Series A, 5.50% due 6/01/2022 (d) 938
AAA Aaa 12,500 (USTA National Tennis Center Project), 6.375% due 11/15/2014 (c) 14,060
==================================================================================================================================
A A 7,485 New York City, New York, IDA, Special Facility Revenue Bonds, RITR,
AMT, Series RI-5, 8.195% due 1/01/2024 (f) 8,516
==================================================================================================================================
New York City, New York, Municipal Water Finance Authority, Water and Sewer System
Revenue Bonds:
A- A2 13,000 RITR, Series 21, 7.62% due 6/15/2029 (f) 15,049
A A1 1,290 Series A, 6.75% due 6/15/2017 1,390
AAA Aaa 7,500 Series A, 4.75% due 6/15/2031 (b) 7,142
AAA Aaa 2,000 Series A-1994, 7% due 6/15/2015 (b) 2,173
AAA Aaa 1,500 Series F, 5.50% due 6/15/2023 (d) 1,574
==================================================================================================================================
New York City, New York, Municipal Water Finance Authority, Water and Sewer System
Revenue Refunding Bonds:
AAA Aaa 5,000 Series A, 6% due 6/15/2005 (d)(e) 5,631
AAA Aaa 5,000 Series D, 4.75% due 6/15/2025 (b) 4,795
A1+ VMIG1+ 1,500 VRDN, Series A, 3.70% due 6/15/2025 (b)(g) 1,500
==================================================================================================================================
New York City, New York, Transitional Finance Authority Revenue Bonds, Future Tax
Secured, Series B (b):
AAA Aaa 7,500 4.75% due 11/15/2023 7,203
AAA Aaa 10,000 4.50% due 11/15/2027 9,224
==================================================================================================================================
A1+ VMIG1+ 300 New York, New York, GO, UT, VRDN, Series B, 3.60% due 10/01/2022 (b)(g) 300
==================================================================================================================================
A- A3 3,400 New York, New York, Refunding, GO, UT, Series J, 5% due 8/01/2023 3,324
==================================================================================================================================
New York State Dormitory Authority Revenue Bonds:
AAA Aaa 11,165 (City University System), Third Generation Reserves, Series 2, 6.875% due 7/01/2004 (d)(e) 13,022
AAA Aaa 3,000 (City University System), Third Resolution, Series 1, 6.25% due 7/01/2004 (a)(e) 3,405
AAA Aaa 3,640 (City University System), Third Resolution, Series 1, 6.25% due 7/01/2004 (a)(e) 4,132
AAA Aaa 6,290 (City University System), Third Resolution, Series 1, 6.30% due 7/01/2024 (a) 7,049
AAA Aaa 1,375 (Consolidated City University System), Second Generation, Series A, 5.75% due 7/01/2018 (c) 1,532
A- A3 2,340 (Mental Health Services Facilities Improvement), 6% due 8/15/2016 2,637
AAA Aaa 4,350 (Mental Health Services Facilities Improvement), Series F, 4.50% due 8/15/2028 (a) 4,008
AAA Aaa 6,000 (Mount Sinai School of Medicine), Series A, 5.15% due 7/01/2024 (d) 6,244
AAA Aaa 1,105 (New School of Social Research), 5.75% due 7/01/2026 (d) 1,202
AAA Aaa 2,000 (New York University), Series A, 5.75% due 7/01/2027 (d) 2,267
NR* Aaa 8,125 RITR, Series 1, 7.885% due 7/01/2027 (f) 10,293
AAA Aaa 3,500 (Saint Barnabas Hospital), 5.45% due 8/01/2035 (a)(h) 3,617
AAA Aaa 1,050 (Saint John's University), 6.875% due 7/01/2011 (a) 1,149
AAA Aaa 12,000 (Sloan Kettering Cancer Memorial), 5.50% due 7/01/2023 (d) 13,078
BBB+ Baa1 1,000 (State University Athletic Facilities), 7.25% due 7/01/2021 1,089
AAA Aaa 12,230 (State University Educational Facilities), Series B, 6.25% due 5/15/2004 (d)(e) 13,854
AAA Aaa 2,000 (State University Educational Facilities), Series B, 5.75% due 5/15/2004 (b)(e) 2,184
==================================================================================================================================
</TABLE>
6
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- ----------------------------------------------------------------------------------------------------------------------------------
New York (continued)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York State Dormitory Authority Revenue Refunding Bonds:
AAA Aaa $10,000 (Mental Health Services Facilities Improvement), Series D, 4.75% due 2/15/2025 (d) $ 9,593
AAA Aaa 1,500 (New York & Presbyterian Hospital), Series A, 4.75% due 8/01/2027 (a) 1,432
AAA Aaa 4,000 (North Shore University Hospital), 5.25% due 11/01/2019 (d) 4,097
AAA Aaa 5,000 (Rockefeller University), 4.75% due 7/01/2037 4,770
AAA Aaa 4,500 (State University Educational Facilities), Series A, 5.875% due 5/15/2011 (b) 5,139
A- A3 1,500 (State University Educational Facilities), Series A, 5.50% due 5/15/2019 1,608
A- A3 2,000 (State University Educational Facilities), Series A, 5.25% due 5/15/2021 2,081
AAA Aaa 13,660 (State University Educational Facilities), Series A, 4.75% due 5/15/2025 (d) 13,103
==================================================================================================================================
New York State Energy Research and Development Authority, Facilities Revenue Bonds
(Consolidated Edison Company Inc.), AMT, Series A:
AAA Aaa 2,000 6.75% due 1/15/2027 (d) 2,128
AAA Aaa 3,785 6.75% due 1/15/2027 (a) 4,030
==================================================================================================================================
AAA Aaa 4,200 New York State Energy Research and Development Authority, Facilities Revenue Bonds,
RITR, Series 19, 8.47% due 8/15/2020 (f) 5,142
==================================================================================================================================
New York State Energy Research and Development Authority, Gas Facilities Revenue Bonds:
AAA Aaa 12,000 (Brooklyn Union Gas Company), AMT, Series A, 6.75% due 2/01/2024 (d) 13,181
AAA Aaa 6,255 (Brooklyn Union Gas Company), AMT, Series B, 6.75% due 2/01/2024 (d) 6,873
AAA Aaa 14,355 RITR, Series 9, 7.27% due 1/01/2021 (d)(f) 15,893
==================================================================================================================================
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 (d) 3,926
==================================================================================================================================
A1+ NR* 4,900 New York State Energy Research and Development Authority,
Various PCR (Niagara Power Corporation Project), VRDN, AMT, Series B, 3.75%
due 7/01/2027 (g) 4,900
==================================================================================================================================
A- Aa 5,000 New York State Environmental Facilities Corporation, PCR, RITR, Series RI-1, 7.895%
due 6/15/2014 (f) 5,930
==================================================================================================================================
AAA Aaa 1,040 New York State HFA, M/F Housing Revenue Bonds, AMT, Series A, 7.75% due 11/01/2020 (a) 1,112
==================================================================================================================================
AAA Aaa 6,575 New York State Local Government Assistance Corporation, RITR, Series 22, 8.27%
due 4/01/2024 (a)(f) 8,015
==================================================================================================================================
New York State Medical Care Facilities, Finance Agency Revenue Bonds:
AAA Aaa 5,535 (Brookdale Hospital Medical Center), Series A, 6.85% due 2/15/2005 (e) 6,493
AAA Aaa 2,790 (Health Center Project--Second Mortgage), Series A, 6.375% due 11/15/2019 (a) 3,200
AAA Aaa 3,000 (Mental Health), Series E, 6.50% due 8/15/2015 (c) 3,398
AAA Aaa 1,500 (Mental Health Services Facilities), Series A, 6% due 2/15/2025 (d) 1,662
AAA Aaa 12,250 (New York Hospital Mortgage), Series A, 6.50% due 2/15/2005 (a)(e)(h) 14,136
AAA Aaa 12,850 (New York Hospital Mortgage), Series A, 6.80% due 2/15/2005 (a)(e)(h) 15,040
AAA Aaa 3,700 Series F, 6.50% due 8/15/2002 (c)(e) 4,126
==================================================================================================================================
AAA Aaa 5,200 New York State Medical Care Facilities, Finance Agency Revenue Refunding Bonds
(Hospital and Nursing Home), Series C, 6.375% due 8/15/2029 (d) 5,710
==================================================================================================================================
New York State Mortgage Agency, Homeowner Mortgage Revenue Bonds:
NR* Aa2 3,270 AMT, Series 44, 7.50% due 4/01/2026 3,579
AAA Aaa 1,000 Series 43, 6.45% due 10/01/2017 (d) 1,088
==================================================================================================================================
NR* Aaa 4,000 New York State Mortgage Agency Revenue Bonds, RITR, AMT, Series 24, 7.72%
due 10/01/2028 (f) 4,474
==================================================================================================================================
</TABLE>
7
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- ----------------------------------------------------------------------------------------------------------------------------------
New York (continued)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA Aaa $ 2,050 New York State Power Authority, Revenue Refunding and General Purpose Bonds, Series CC,
5% due 1/01/2003 (d)(e) $ 2,180
==================================================================================================================================
AAA Aaa 3,400 New York State Thruway Authority, General Revenue Bonds, Series C, 6% due 1/01/2005 (b)(e) 3,830
==================================================================================================================================
AAA Aaa 11,000 New York State Thruway Authority, Highway and Bridge Trust Fund, Series B, 6.25%
due 4/01/2004 (b)(e) 12,436
==================================================================================================================================
New York State Thruway Authority, Service Contract Revenue Bonds (Local Highway and
Bridge), Series A-2 (d):
AAA Aaa 7,000 5.375% due 4/01/2016 7,325
AAA Aaa 5,000 5% due 4/01/2018 4,994
==================================================================================================================================
AAA Aaa 2,295 New York State Urban Development Corporation, Revenue Refunding Bonds (Correctional
Capital Facilities), Series A, 5.25% due 1/01/2014 (c) 2,438
==================================================================================================================================
AAA Aaa 4,725 Niagara Falls, New York, Bridge Commission Toll Revenue Bonds, 6.125% due 10/01/2002 (b)(e) 5,222
==================================================================================================================================
AAA Aaa 1,000 Niagara Falls, New York, Water Treatment Plant, UT, AMT, 7.25% due 11/01/2010 (d) 1,251
==================================================================================================================================
AAA Aaa 1,260 North Country, New York, Development Authority, Solid Waste Management System,
Revenue Refunding Bonds, 6% due 5/15/2015 (c) 1,434
==================================================================================================================================
North Hempstead, New York, GO, UT, Refunding, Series B (b):
AAA Aaa 1,745 6.40% due 4/01/2013 2,086
AAA Aaa 555 6.40% due 4/01/2017 662
==================================================================================================================================
AAA Aaa 1,665 Oneida County, New York, IDA Revenue Bonds, Civic Facility (Mohawk Valley Network Inc.),
Series A, 5.20% due 2/01/2013 (c) 1,719
==================================================================================================================================
AAA Aaa 1,080 Oneida County, New York, Refunding, GO, UT, 5.50% due 3/15/2009 (b) 1,187
==================================================================================================================================
Port Authority of New York and New Jersey, Consolidated Revenue Bonds:
AA- A1 3,000 71st Series, 6.50% due 1/15/2026 3,205
AAA Aaa 2,000 71st Series, 6.50% due 1/15/2026 (b) 2,136
AAA Aaa 3,200 104th Series, 4.75% due 1/15/2026 (a) 3,086
AAA Aaa 6,300 116th Series, 4.50% due 10/01/2018 5,974
AAA Aaa 10,000 116th Series, 4.25% due 10/01/2026 (b) 8,905
==================================================================================================================================
AAA Aaa 4,000 Port Authority of New York and New Jersey, RITR, AMT, 108th Series, 7.885%
due 1/15/2017 (c)(f) 4,693
==================================================================================================================================
Port Authority of New York and New Jersey, Special Obligation Revenue Refunding Bonds
(Versatile Structure Obligation), VRDN (g):
A1 VMIG1+ 2,000 AMT, Series 1R, 3.85% due 8/01/2028 2,000
A1+ VMIG1+ 1,100 Series 2, 3.70% due 5/01/2019 1,100
==================================================================================================================================
AAA Aaa 2,500 St. Lawrence County, New York, Industrial Development Civic Facility Revenue Bonds
(St. Lawrence University Project), Series A, 5.375% due 7/01/2018 (d) 2,593
==================================================================================================================================
Syracuse, New York, COP (Syracuse Hancock International Airport), AMT (b):
AAA Aaa 3,650 6.625% due 1/01/2012 3,989
AAA Aaa 3,120 6.50% due 1/01/2017 3,391
==================================================================================================================================
BBB+ Baa1 4,000 Triborough Bridge and Tunnel Authority, New York (Convention Center Project), Series E,
7.25% due 1/01/2010 4,813
==================================================================================================================================
Triborough Bridge and Tunnel Authority, New York, General Purpose Revenue Refunding Bonds:
A+ Aa3 1,000 Series B, 5% due 1/01/2020 1,009
AAA Aaa 2,000 Series Y, 6.125% due 1/01/2021 (i) 2,338
==================================================================================================================================
</TABLE>
8
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
- ----------------------------------------------------------------------------------------------------------------------------------
New York (concluded)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Triborough Bridge and Tunnel Authority, New York, Special Obligation Revenue
Refunding Bonds:
AAA Aaa $ 1,030 6.25% due 1/01/2012 (a) $ 1,111
AAA Aaa 2,265 Series A, 5.125% due 1/01/2011 (d) 2,401
AAA Aaa 2,000 Series B, 6.875% due 1/01/2015 (a) 2,160
==================================================================================================================================
Total Investments (Cost--$548,168)--98.6% 586,087
Other Assets Less Liabilities--1.4% 8,571
--------
Net Assets--100.0% $594,658
========
==================================================================================================================================
</TABLE>
(a) AMBAC Insured.
(b) FGIC Insured.
(c) FSA Insured.
(d) MBIA Insured.
(e) Prerefunded.
(f) 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, 1998.
(g) 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,
1998.
(h) FHA Insured.
(i) CAPMAC Insured.
+ Highest short-term rating by Moody's Investors Service, Inc.
* Not Rated.
Ratings of issues shown have not been audited by Ernst & Young LLP.
See Notes to Financial Statements.
QUALITY PROFILE
The quality ratings of securities in the Fund as of October 31, 1998 were as
follows:
- --------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
- --------------------------------------------------------------------------------
AAA/Aaa ............................................................ 85.8%
AA/Aa .............................................................. 2.3
A/A ................................................................ 7.3
BBB/Baa ............................................................ 1.5
Other* ............................................................. 1.7
- --------------------------------------------------------------------------------
* Temporary investments in short-term municipal securities.
9
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of October 31, 1998
<TABLE>
======================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$548,168,254) (Note 1a) ......... $586,087,459
Cash .................................................................... 34,400
Receivables:
Interest .............................................................. $ 10,249,453
Securities sold ....................................................... 9,184,466 19,433,919
------------
Prepaid expenses and other assets ....................................... 19,427
------------
Total assets ............................................................ 605,575,205
------------
======================================================================================================================
Liabilities: Payables:
Securities purchased .................................................. 10,000,265
Dividends to shareholders (Note 1f) ................................... 480,741
Investment adviser (Note 2) ........................................... 262,440 10,743,446
------------
Accrued expenses and other liabilities .................................. 173,974
------------
Total liabilities ....................................................... 10,917,420
------------
======================================================================================================================
Net Assets: Net assets .............................................................. $594,657,785
============
======================================================================================================================
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.05 per share (6,960 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) ... $174,000,000
Common Stock, par value $.10 per share (26,592,191 shares issued
and outstanding) ...................................................... $ 2,659,219
Paid-in capital in excess of par ........................................ 380,433,873
Undistributed investment income--net .................................... 2,000,229
Accumulated realized capital losses on investments--net ................. (2,354,741)
Unrealized appreciation on investments--net ............................. 37,919,205
------------
Total--Equivalent to $15.82 net asset value per share of Common Stock
(market price--$15.4375) ................................................ 420,657,785
------------
Total capital ........................................................... $594,657,785
============
======================================================================================================================
</TABLE>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
10
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For the Year Ended
October 31, 1998
===============================================================================================================
<S> <C> <C> <C>
Investment Income Interest and amortization of premium and discount earned ... $ 30,186,750
(Note 1d):
===============================================================================================================
Expenses: Investment advisory fees (Note 2) .......................... $ 2,775,072
Commission fees (Note 4) ................................... 416,534
Professional fees .......................................... 105,251
Transfer agent fees ........................................ 73,492
Accounting services (Note 2) ............................... 51,834
Custodian fees ............................................. 32,293
Listing fees ............................................... 24,390
Directors' fees and expenses ............................... 23,221
Pricing fees ............................................... 19,696
Other ...................................................... 11,830
-----------
Total expenses ............................................. 3,533,613
------------
Investment income--net ..................................... 26,653,137
------------
===============================================================================================================
Realized & Realized gain on investments--net .......................... 15,690,747
Unrealized Gain Change in unrealized appreciation on investments--net ...... (667,130)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations ....... $ 41,676,754
(Notes 1b, 1d & 3): ============
===============================================================================================================
</TABLE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------
Increase (Decrease) in Net Assets: 1998 1997
==============================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net .................................................. $ 26,653,137 $ 20,346,467
Realized gain on investments--net ....................................... 15,690,747 5,879,051
Change in unrealized appreciation on investments--net ................... (667,130) 9,153,298
------------- -------------
Net increase in net assets resulting from operations .................... 41,676,754 35,378,816
------------- -------------
==============================================================================================================================
Dividends & Investment income--net:
Distributions to Common Stock .......................................................... (20,787,847) (15,161,332)
Shareholders Preferred Stock ....................................................... (5,533,891) (4,351,319)
(Note 1f): Realized gain on investments--net:
Common Stock .......................................................... (66,383) --
Preferred Stock ....................................................... (18,055) --
------------- -------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ......................................................... (26,406,176) (19,512,651)
------------- -------------
==============================================================================================================================
Capital Stock Proceeds from issuance of Common Stock resulting from reorganization .... 83,897,738 144,780,654
Transactions Offering costs from issuance of Common Stock resulting from reorganization (262,206) (366,791)
(Notes 1e & 4): Proceeds from issuance of Preferred Stock resulting from reorganization . 30,000,000 74,000,000
------------- -------------
Net increase in net assets derived from capital stock transactions ...... 113,635,532 218,413,863
------------- -------------
==============================================================================================================================
Net Assets: Total increase in net assets ............................................ 128,906,110 234,280,028
Beginning of year ....................................................... 465,751,675 231,471,647
------------- -------------
End of year* ............................................................ $ 594,657,785 $ 465,751,675
============= =============
==============================================================================================================================
*Undistributed investment income--net (Note 1g) .......................... $ 2,000,229 $ 1,657,552
============= =============
==============================================================================================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
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: 1998 1997 1996 1995 1994
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ................. $ 15.18 $ 14.53 $ 14.63 $ 13.13 $ 15.89
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ............................. 1.05 1.08 1.04 1.07 1.07
Realized and unrealized gain (loss) on
investments--net ................................... .66 .66 (.09) 1.50 (2.76)
-------- -------- -------- -------- --------
Total from investment operations ................... 1.71 1.74 .95 2.57 (1.69)
-------- -------- -------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net ........................... (.84) (.84) (.82) (.84) (.87)
Realized gain on investments--net ................ --+ -- -- -- (.01)
-------- -------- -------- -------- --------
Total dividends and distributions to
Common Stock shareholders .......................... (.84) (.84) (.82) (.84) (.88)
-------- -------- -------- -------- --------
Capital charge resulting from issuance of
Common Stock ....................................... (.01) (.02) -- -- --
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:++
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net ......................... (.22) (.23) (.23) (.23) (.19)
Realized gain on investments--net .............. --+ -- -- -- --+
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity ........... (.22) (.23) (.23) (.23) (.19)
-------- -------- -------- -------- --------
Net asset value, end of year ....................... $ 15.82 $ 15.18 $ 14.53 $ 14.63 $ 13.13
======== ======== ======== ======== ========
Market price per share, end of year ................ $15.4375 $ 14.25 $ 13.375 $ 13.25 $ 11.00
======== ======== ======== ======== ========
=================================================================================================================================
Total Investment Based on market price per share .................... 14.60% 13.15% 7.28% 28.61% (22.96%)
Return:* ======== ======== ======== ======== ========
Based on net asset value per share ................. 10.24% 10.95% 5.55% 18.96% (11.75%)
======== ======== ======== ======== ========
=================================================================================================================================
Ratios to Average Expenses ........................................... .64% .68% .71% .74% .74%
Net Assets:** ======== ======== ======== ======== ========
Investment income--net ............................. 4.81% 5.04% 5.00% 5.27% 5.09%
======== ======== ======== ======== ========
=================================================================================================================================
Supplemental Net assets, net of Preferred Stock, end of year
Data: (in thousands) ..................................... $420,658 $321,752 $161,472 $162,655 $145,977
======== ======== ======== ======== ========
Preferred Stock outstanding, end of year
(in thousands) ..................................... $174,000 $144,000 $ 70,000 $ 70,000 $ 70,000
======== ======== ======== ======== ========
Portfolio turnover ................................. 136.43% 121.49% 118.28% 110.76% 36.79%
======== ======== ======== ======== ========
=================================================================================================================================
Leverage: Asset coverage per $1,000 .......................... $ 3,418 $ 3,234 $ 3,307 $ 3,324 $ 3,085
======== ======== ======== ======== ========
=================================================================================================================================
Dividends Per Share Series A--Investment income--net ................... $ 849 $ 865 $ 913 $ 910 $ 759
On Preferred Stock ======== ======== ======== ======== ========
Outstanding:+++ Series B--Investment income--net ................... $ 825 $ 643 -- -- --
======== ======== ======== ======== ========
Series C--Investment income--net ................... $ 785 $ 667 -- -- --
======== ======== ======== ======== ========
Series D--Investment income--net ................... $ 628 -- -- -- --
======== ======== ======== ======== ========
=================================================================================================================================
</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 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), January 27, 1997 (Series B and Series C) and
February 9, 1998 (Series D).
+++ 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.
12
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
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 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 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.
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 transactions are determined on the identified cost basis.
(e) Offering costs--Direct expenses relating to the issuance of Common Stock
resulting from 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 $11,278 have been reclassified between accumulated net
realized capital
13
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
losses 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 0.50% 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 and
securities acquired through the reorganization, for the year ended October 31,
1998 were $731,759,870 and $717,353,053, respectively.
Net realized gains (losses) for the year ended October 31, 1998 and net
unrealized gains as of October 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments .......................... $16,304,054 $37,919,205
Financial futures contracts .................... (613,307) --
----------- -----------
Total .......................................... $15,690,747 $37,919,205
=========== ===========
- --------------------------------------------------------------------------------
As of October 31, 1998, net unrealized appreciation for Federal income tax
purposes aggregated $37,822,133, of which $38,434,217 related to appreciated
securities and $612,084 related to depreciated securities. The aggregate cost of
investments at October 31, 1998 for Federal income tax purposes was
$548,265,326.
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 years ended October 31, 1998 and
October 31, 1997 increased by 5,397,154 and 10,080,205, respectively, pursuant
to a plan of reorganization.
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, 1998 were as follows: Series A, 3.25%; Series B, 3.30%; Series C,
3.45%; and Series D, 3.35%.
Shares issued and outstanding during the years ended October 31, 1998 and
October 31, 1997 increased by 1,200 and 2,960, respectively, pursuant to a plan
of reorganization.
The Fund pays commissions to certain broker-dealers 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, 1998, Merrill Lynch, Pierce, Fenner
& Smith Inc., an affiliate of FAM, earned $191,084 as commissions.
5. Acquisition of Taurus MuniNew York Holdings, Inc.:
On February 9, 1998, the Fund acquired all of the net assets of Taurus MuniNew
York Holdings, Inc. pursuant to a plan of reorganization. The acquisition was
accomplished by a tax-free exchange of 6,782,117 Common Stock shares and 1,200
AMPS shares of Taurus MuniNew York Holdings, Inc. for 5,397,154 Common Stock
shares and 1,200 AMPS shares of the Fund. Taurus MuniNew York Holdings, Inc.'s
net assets on that date of $113,898,593, including $9,119,231 of unrealized
appreciation and $458,687 of accumulated net realized capital losses, were
combined with those of the Fund. The aggregate net assets of the Fund
immediately after the acquisition amounted to $587,371,200.
6. Subsequent Event:
On November 5, 1998, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.069006 per share,
payable on November 27, 1998 to shareholders of record as of November 20, 1998.
14
<PAGE>
MuniYield New York Insured Fund II, Inc. October 31, 1998
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, 1998, and the related statement of operations for the year
then ended and the statements of changes in net assets and financial highlights
for each of the two years in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for each of
the three years in the period ended October 31, 1996 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 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, 1998 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, the financial statements and financial highlights referred to
above and audited by us present fairly, in all material respects, the financial
position of MuniYield New York Insured Fund II, Inc. at October 31, 1998, the
results of its operations for the year then ended, and the changes in its net
assets and financial highlights for each of the two years in the period then
ended, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Princeton, New Jersey
December 1, 1998
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, 1998 qualify as
tax-exempt interest dividends for Federal income tax purposes. Additionally, the
following table summarizes the taxable ordinary income distributions paid by the
Fund during the year:
- --------------------------------------------------------------------------------
Payable Ordinary
Date Income
- --------------------------------------------------------------------------------
Common Stock Shareholders 12/30/97 $ .003132
- --------------------------------------------------------------------------------
Preferred Stock Shareholders: Series A 11/24/97 $3.59
Series B 11/26/97 $2.67
Series C 12/04/97 $2.77
- --------------------------------------------------------------------------------
Please retain this information for your records.
15
<PAGE>
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
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--10/98
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