MUNIYIELD
CALIFORNIA
INSURED
FUND II, INC.
FUND LOGO
Annual Report
October 31, 1994
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield California 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.
<PAGE>
MuniYield
California Insured
Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield California Insured Fund II, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1994, the Common Stock of MuniYield
California Insured Fund II, Inc. earned $1.031 per share income
dividends, which includes earned and unpaid dividends of $0.079.
This represents a net annualized yield of 7.70%, based on a
month-end net asset value of $13.39 per share. Over the same period,
the total investment return on the Fund's Common Stock was -11.82%,
based on a change in per share net asset value from $16.36 to
$13.39, and assuming reinvestment of $1.031 per share income
dividends.
For the six-month period ended October 31, 1994, the total
investment return on the Fund's Common Stock was -2.85%, based on a
change in per share net asset value from $14.29 to $13.39, and
assuming reinvestment of $0.475 per share income dividends.
The average yields of the Fund's Auction Market Preferred Stock for
the six months ended October 31, 1994 were 3.042% for Series A and
2.962% for Series B.
The Environment
As discussed in our last report to shareholders, the Federal Reserve
Board moved to counteract inflationary pressures by tightening
monetary policy. This trend continued during the May--October
period. Despite the series of preemptive strikes against inflation
by the central bank, concerns of increasing inflationary pressures
continued to prompt volatility in the US capital markets during the
period. In addition, the weakness of the US dollar in foreign
exchange markets prolonged stock and bond market declines.
<PAGE>
Ongoing strength in the manufacturing sector and better-than-
expected economic results continue to fuel speculation that the
Federal Reserve Board will continue to raise short-term interest
rates in the months ahead. However, although consumer spending is
increasing, it is doing so at a lower rate than has been the case in
recent economic recoveries. In the weeks ahead, investors will
continue to assess economic data and inflationary trends in order to
gauge whether further increases in short-term interest rates are
imminent. Continued indications of moderate and sustainable levels
of economic growth would be positive for the US capital markets. At
the same time, greater US dollar stability in foreign exchange
markets would help to dampen expectations of significantly higher
short-term interest rates.
The Municipal Market
The long-term tax-exempt market continued to erode throughout the
three months ended October 31, 1994. As measured by the Bond Buyer
Revenue Bond Index, yields on A-rated municipal revenue bonds
maturing in 30 years rose by almost 50 basis points (0.50%) to 6.95%
during the October 31, 1994 quarter. This represents the highest
level in tax-exempt bond yields in over two years. US Treasury bonds
suffered even greater declines during the quarter as Treasury bond
yields rose approximately 60 basis points to end the quarter at
8.00%.
The tax-exempt bond market reacted negatively throughout the October
quarter to indications that, despite a series of interest rate
increases by the Federal Reserve Board, the strength of the domestic
economy seen in recent quarters has not yet been significantly
reduced. While inflationary pressures have remained well contained,
additional Federal Reserve Board actions have been expected both to
ensure that domestic economic growth is eventually confined to
current levels and to assure nervous financial markets of its
anti-inflationary intentions.
Fortunately, while the demand for tax-exempt bonds has declined
somewhat in recent months, new bond issuance has remained greatly
reduced. During the quarter ended October 31, 1994, only $32 billion
in long-term tax-exempt securities were issued, a decline of over
50% versus the October 31, 1993 quarter. Similarly, for the six
months ended October 31, 1994, only $75 billion in municipal
securities were underwritten, a decline of over 50% versus the
comparable period a year earlier. This reduction in issuance in
recent quarters has allowed the municipal bond market to react to
both the decline in investor demand and the rise in fixed-income
yields in a more orderly fashion than in similar situations in the
past, particularly during 1987.
<PAGE>
Long-term tax-exempt revenue bonds currently yield approximately 7%,
or almost 11.5% on an after-tax equivalent basis, to an investor in
the 39.6% Federal income tax bracket. As inflation has only
marginally increased in the past year, real tax-exempt interest
rates have risen dramatically. The Federal Reserve Board appears
committed to maintaining inflation at or below its current levels.
Indeed, most forecasts expect inflation to remain in its present
range of 3%--4% throughout 1995 and, potentially, for the remainder
of the 1990s. Real after-tax equivalent interest rates exceeding 7%
represent historically attractive municipal investments for
long-term investors.
Federal Reserve Board actions taken thus far have yet to fully
impact US domestic growth and expected additional actions should
promote only a modest economic expansion within a benign
inflationary context beginning sometime early in 1995. Within such
an environment, it is unlikely that tax-exempt interest rates will
remain at their current attractive levels. Tax-exempt bond issuance
is unlikely to return to the historic high levels seen in 1992 and
1993, while investor demand should return as markets stabilize. As
we have discussed in earlier reports, the total number of tax-exempt
bonds outstanding is scheduled to decline dramatically in 1994 and
1995 as a result of both regular bond maturities and early
redemptions. Investors seeking tax-advantaged issues are likely to
find it very difficult to obtain currently available tax-exempt
yields as the current supply/demand balance is unlikely to be
maintained in the coming quarters.
Portfolio Strategy
During the quarter ended October 31, 1994, our portfolio strategy
consisted of selling discounted bonds and replacing them with
higher-yielding, current coupon bonds. Furthermore, cash reserves
averaged 5% of net assets for the quarter, and we purchased premium
coupons when available. The net effect of this strategy generated an
increased yield for Common Stock shareholders while restructuring
the Fund in a more defensive strategy. Municipal issuance of
California bonds for this quarter versus the same quarter last year
decreased 33%, which illustrates the difficulty of purchasing bonds
that both meet our portfolio strategy and satisfy the Fund's
diversification requirements. Also, as a result of the tight credit
quality spreads, it was possible to underutilize assets available
for noninsured bonds without significantly affecting the Fund's
yield. Currently 86% of net assets are rated AAA with credit
enhancement by one of the major rating services. Looking forward,
our portfolio strategy will consist of seeking to enhance income for
Common Stock shareholders through the purchase of current coupon and
premium coupon bonds when attractively priced.
<PAGE>
We appreciate your ongoing interest in MuniYield California Insured
Fund II, Inc., and we look forward to serving your investment needs
and objectives in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
December 6, 1994
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield California 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.
<PAGE>
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 pick-up on the
Common Stock will be reduced. 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.
PORTFOLIO ABBREVIATIONS
To simplify the listing of MuniYield California 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 Minimun Tax (subject to)
COP Certificates of Participation
HFA Housing Finance Authority
M/F Multi-Family
RAN Revenue Anticipation Notes
RIB Residual Interest Bonds
RITES Residual Interest Tax-Exempt Securities
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California--99.8%
<S> <S> <C> <S> <C>
AAA Aaa $ 750 Anaheim, California, Electric System, COP, 6.75% due 10/01/2000 (b)(f) $ 810
AAA Aaa 5,000 Anaheim, California, Public Financing Authority Revenue Bonds (Electric
Utilities San Juan 4), Second Series, 5.75% due 10/01/2022 (c) 4,325
AAA Aaa 2,000 Berkeley, California, Unified School District, UT, Series C, 6.50% due
8/01/2019 (b) 1,952
AAA Aaa 2,000 Brea, California, Redevelopment Agency, Tax Allocation Revenue Refunding Bonds
(Redevelopment Project AB), 5.50% due 8/01/2017 (d) 1,695
California Health Facilities Financing Authority Revenue Bonds (d):
AAA Aaa 1,000 (Adventist Health System--West), Series B, 6.25% due 3/01/2021 940
AAA Aaa 2,000 (Centinela Medical Hospital), 6.25% due 9/01/2015 1,912
AAA Aaa 8,300 Refunding (San Diego Hospital Association), Series A, 6.20% due 8/01/2020 7,755
AAA Aaa 15,750 (San Diego Children's Hospital), 6.50% due 7/01/2020 15,308
California HFA, Home Mortgage Revenue Bonds:
AA- Aa 2,000 AMT, Series E--1, 6.70% due 8/01/2025 1,900
AA- Aa 3,900 AMT, Series F--1, 7% due 8/01/2026 3,850
AA- Aa 5,750 Series B, 6.90% due 8/01/2016 5,777
AA- Aa 2,000 California HFA, Revenue Bonds, RIB, AMT, 9.111% due 8/01/2023 (h) 1,735
A A2 5,950 California Pollution Control Financing Authority, Solid Waste Disposal Revenue
Bonds (Keller Canyon Landfill Co. Project), AMT, 6.875% due 11/01/2027 5,615
NR* Aaa 1,000 California Rural Home Mortgage Finance Authority, S/F Mortgage Revenue Bonds
(Mortgage--Backed Securities Program), AMT, Series A1, 6.90% due 12/01/2024 (g) 980
AA Aa 5,500 California State Department of Water Resources Revenue Bonds (Central Valley
Project), RITES, 8.488% due 12/01/2021 (h) 4,386
California State Public Works Board, Lease Revenue Bonds, Series A:
AAA Aaa 11,500 (Department of Corrections--Monterey County), 6.40% due 11/01/2010 (d) 11,385
AAA Aaa 900 (Secretary of State), 6.40% due 12/01/2007 (b) 921
AAA Aaa 2,100 (Various Community College Projects), 6% due 12/01/2012 (b) 1,970
AAA Aaa 11,420 (Various Universities of California Projects), 6.40% due 12/01/2016 (b) 11,117
<PAGE>
SP-1 MIG1++ 3,000 California State, RAN, Series A, 3.758% due 12/21/1994 (a) 3,000
California Statewide Community Development Authority Revenue Bonds, COP:
AAA Aaa 1,000 (Good Samaritan Health System), 6.50% due 5/01/2024 969
AA Aa 3,000 (Saint Joseph Health System Group), 6.50% due 7/01/2015 2,910
Central Coast Water Authority, California, Water Project Regional Facilities
Revenue Bonds (b):
AAA Aaa 2,385 6.50% due 10/01/2014 2,359
AAA Aaa 7,500 6.60% due 10/01/2022 7,415
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (continued)
<S> <S> <C> <S> <C>
AAA Aaa $ 2,000 Cucamonga County, California, Water District COP, Refinancing Facilities, 6.50%
due 9/01/2022 (c) $ 1,950
AAA Aaa 400 East Bay, California, Municipal Utility District, Wastewater Treatment System
Revenue Bonds, 6.375% due 6/01/2021 (b) 382
Eastern Municipal Water District, California, Water and Sewer Revenue Refunding
Bonds, COP, Series A (c):
AAA Aaa l,000 6.50% due 7/01/2009 1,006
AAA Aaa 8,000 6.30% due 7/01/2020 7,572
AAA Aaa 6,000 El Cajon, California, Redevelopment Agency, Tax Allocation Revenue Bonds (El
Cajon Redevelopment Project), 6.60% due 10/01/2022 (b) 5,932
Fairfield, California, Public Financing Authority Revenue Bonds, Municipal Park
Improvement District No. 1 (c):
AAA Aaa 1,000 6.25% due 7/01/2014 955
AAA Aaa 1,340 6.30% due 7/01/2023 1,265
AAA Aaa 1,000 Fairfield-Suisun, California, Sewer District, Sewer Revenue Refunding Bonds,
Series A, 6.25% due 5/01/2016 (d) 950
AAA Aaa 2,925 Las Virgenes, California, Municipal Water District, COP (Capital Improvement
Project), 6.30% due 11/01/2016 (d) 2,804
AAA Aaa 11,000 Los Angeles County, California, COP (Correctional Facilities Project), 6.50% due
9/01/2013 (d) 10,852
<PAGE>
A1+ VMIG1 1,100 Los Angeles County, California, Metropolitan Transportation Authority, Sales
Tax Revenue Refunding Bonds (Proposition C--Second Senior), VRDN, Series A,
3.25% due 7/01/2020 (a)(d) 1,100
AAA Aaa 4,250 Marysville, California, Hospital Revenue Bonds (Fremont--Rideout Health Group),
Series A, 6.30% due 1/01/2022 (b) 4,018
AAA Aaa 3,850 Mountain View, California, Capital Improvements Financing Authority Revenue
Bonds (City Hall Community Theatre), 6.50% due 8/01/2016 (d) 3,792
AAA Aaa 1,000 M-S-R Public Power Agency, California, Revenue Bonds (San Juan Project), Series
E, 6.50% due 7/01/2017 (d) 982
Northern California Power Agency, Multiple Capital Facilities Revenue Bonds (d):
AAA Aaa 2,500 RIB, 9.355% due 9/02/2025 (h) 2,363
AAA Aaa 2,000 Series A, 6.50% due 8/01/2012 1,979
AAA Aaa 3,500 Northern California Power Agency, Public Power Revenue Refunding Bonds
(Hydroelectric Project No. 1), Series A, 5.50% due 7/01/2023 (d) 2,914
AAA Aaa 2,670 Ontario, California, Redevelopment Financing Authority Revenue Bonds (Ontario
Redevelopment Project No. 1), 5.80% due 8/01/2023 (d) 2,322
Orange County, California, COP, Various Sanitation Districts, VRDN (a):
A1+ VMIG1 2,800 Nos. 1, 2, 3, 6, 7 & 11, Series C, 3.45% due 8/01/2017 (c) 2,800
A1+ VMIG1 2,300 Refunding, Nos. 1--7 & 11, 3.45% due 8/01/2016 (b) 2,300
AA Aa 3,500 Orange County, California, Local Transportation Authority, Sales Tax Revenue
Bonds, RIB, 8.161% due 2/14/2011 (h) 3,290
AAA Aaa 15,000 Pasadena, California, Community Development Commission, M/F Housing Revenue
Bonds (Civic Center), AMT, Series A, 6.45% due 12/01/2021 (e) 14,124
Port Oakland, California, Port Revenue Bonds, AMT, Series E (d):
AAA Aaa 2,000 6.50% due 11/01/2016 1,923
AAA Aaa 10,370 6.40% due 11/01/2022 9,780
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (concluded)
<S> <S> <C> <S> <C>
Sacramento, California, Municipal Utility District, Electric Revenue
Bonds (d):
AAA Aaa $ 1,000 Refunding, Series G, 6.50% due 9/01/2013 $ 988
AAA Aaa 3,680 Series B, 6.25% due 8/15/2011 3,572
AAA Aaa 4,000 Series B, 6.375% due 8/15/2022 3,817
AAA Aaa 2,000 Series E, 5.75% due 5/15/2022 1,740
AAA Aaa 4,205 Series Y, 6.75% due 9/01/2001 (f) 4,546
San Francisco, California, City and County Airport Commission, International
Airport Revenue Bonds, Second Series:
AAA Aaa 2,000 Issue 5, AMT, 6.50% due 5/01/2024 (c) 1,900
AAA Aaa 3,000 Issue 6, AMT, 6.50% due 5/01/2018 (b) 2,892
AAA Aaa 10,000 Refunding, Issue 2, 6.75% due 5/01/2020 (d) 10,030
AAA Aaa 1,000 San Jose, California, Airport Revenue Refunding Bonds, 5.75% due
3/01/2016 (d) 879
AAA Aaa 3,000 San Pablo, California, Redevelopment Agency, Subordinate Tax Allocation
Bonds (Merged Project Area), 5.25% due 12/01/2023 (c) 2,382
AAA Aaa 3,430 Santa Ana, California, Financing Authority, Lease Revenue Bonds (Police
Administration and Holding Facility), Series A, 6.25% due 7/01/2024 (d) 3,257
AAA Aaa 3,400 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Bonds
(Consolidated Redevelopment Project), Series A, 6.40% due 9/01/2022 (d) 3,284
AAA Aaa 3,000 Santa Rosa, California, Wastewater Revenue Bonds (Subregional Wastewater Project),
Series A, 6.50% due 9/01/2022 (c) 2,924
AAA Aaa 3,295 Santa Rosa, California, Wastewater Revenue Refunding Bonds, Series B, 6.125%
due 9/01/2017 (c) 3,086
AAA NR* 3,335 Southern California, HFA, S/F Mortgage Revenue Bonds Program, AMT, Series B,
6.90% due 10/01/2024 (g) 3,252
AA- Aa 2,000 Southern California Public Power Authority Revenue Bonds (Transmission Project),
RIB, 8.012% due 7/01/2012 (h) 1,680
BBB+ NR* 1,300 Stanislaus, California, Waste-to-Energy Financing Agency, Solid Waste Facility
Revenue Refunding Bonds, COP (Ogden Martin System, Inc., Project), 7.625% due
1/01/2010 1,327
AAA Aaa 7,815 Sunnyvale, California, Financing Authority Utilities Revenue Bonds (Wastewater
Refuse and Sludge), Series A, 6.30% due 10/01/2017 (d) 7,433
<PAGE>
A NR* 4,175 Torrance, California, Hospital Revenue Refunding Bonds (Little Company of Mary
Hospital), 6.875% due 7/01/2015 4,021
University of California Revenue Bonds (Multiple Purpose Projects):
AAA Aaa 4,000 Refunding, Series C, 5.25% due 9/01/2012 (b) 3,357
AAA Aaa 1,920 Series D, 6.375% due 9/01/2019 (d) 1,840
AAA Aaa 3,000 West and Central Basin, California, Financing Authority Revenue Bonds, 6.125%
due 8/01/2022 (b) 2,769
Total Investments (Cost--$270,107)--99.8% 259,317
Other Assets Less Liabilities--0.2% 440
--------
Net Assets--100.0% $259,757
========
<FN>
*Not Rated.
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rates shown are the rates in
effect at October 31, 1994.
(b)AMBAC Insured.
(c)FGIC Insured.
(d)MBIA Insured.
(e)FSA Insured.
(f)Prerefunded.
(g)GNMA/FNMA Collateralized.
(h)The interest rate is subject to change periodically and
inversely based upon the prevailing market rate. The interest rates
shown are the rates in effect at October 31, 1994.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$270,107,274) (Note 1a) $259,317,396
Cash 53,217
Receivables:
Securities sold $ 19,336,816
Interest 4,796,646 24,133,462
------------
Deferred organization expenses (Note 1e) 22,820
Prepaid expenses and other assets 19,470
------------
Total assets 283,546,365
------------
Liabilities: Payables:
Securities purchased 23,228,211
Dividends to shareholders (Note 1g) 356,124
Investment adviser (Note 2) 112,245 23,696,580
------------
Accrued expenses and other liabilities 92,531
------------
Total liabilities 23,789,111
------------
Net Assets: Net assets $259,757,254
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (1,800 shares of AMPS*
issued and outstanding at $50,000 per liquidation preference) $ 90,000,000
Common Stock, par value $.10 per share (12,678,633 shares issued
and outstanding) $ 1,267,863
Paid-in capital in excess of par 176,474,591
Undistributed investment income--net 1,737,697
Undistributed realized capital gains--net 1,066,981
Unrealized depreciation on investments--net (10,789,878)
------------
Total--Equivalent to $13.39 net asset value per share of Common
Stock (market price--$11.875) 169,757,254
------------
Total capital $259,757,254
============
<PAGE>
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1994
<S> <S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 16,843,233
Income
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,402,877
Commission fees (Note 4) 290,914
Professional fees 70,004
Transfer agent fees 56,760
Printing and shareholder reports 34,555
Accounting services (Note 2) 25,625
Listing fees 24,319
Directors' fees and expenses 22,980
Custodian fees 15,372
Pricing fees 8,672
Amortization of organization expenses (Note 1e) 7,635
Other 22,431
------------
Total expenses 1,982,144
Investment income--net 14,861,089
<PAGE>
Realized & Realized gain on investments--net 1,066,977
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net (37,816,850)
(Loss) on ------------
Investments-- Net Decrease in Net Assets Resulting from Operations $(21,888,784)
Net (Notes ============
1d & 3):
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
October 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 14,861,089 $ 14,141,995
Realized gain on investments--net 1,066,977 1,653,210
Change in unrealized appreciation/depreciation on investments--net (37,816,850) 27,026,972
------------ ------------
Net increase (decrease) in net assets resulting from operations (21,888,784) 42,822,177
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (11,722,512) (10,592,119)
Shareholders Preferred Stock (2,381,373) (2,569,383)
(Note 1g): Realized gain on investments--net:
Common Stock (1,352,849) --
Preferred Stock (300,357) --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (15,757,091) (13,161,502)
------------ ------------
Capital Stock Proceeds from issuance of Preferred Stock -- 90,000,000
Transactions Offering and underwriting costs from issuance of Preferred Stock (1,000) (1,739,184)
(Notes 1e & 4): Value of shares issued to Common Stock shareholders in reinvestment
of dividends and distributions -- 927,985
------------ ------------
Net increase (decrease) in net assets derived from capital stock
transactions (1,000) 89,188,801
------------ ------------
Net Assets: Total increase (decrease) in net assets (37,646,875) 118,849,476
Beginning of year 297,404,129 178,554,653
------------ ------------
End of year* $259,757,254 $297,404,129
============ ============
<FN>
*Undistributed investment income--net $ 1,737,697 $ 980,493
============ ============
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived For the Oct. 30,
from information provided in the financial statements. Year Ended 1992++ to
October 31, October 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.36 $ 14.15 $ 14.18
Operating ------------ ------------ ------------
Performance: Investment income--net 1.17 1.12 --
Realized and unrealized gain (loss) on investments--net (2.90) 2.27 --
------------ ------------ ------------
Total from investment operations (1.73) 3.39 --
------------ ------------ ------------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net (.92) (.84) --
Realized gain on investments--net (.11) -- --
------------ ------------ ------------
Total dividends and distributions (1.03) (.84) --
------------ ------------ ------------
Capital charge resulting from issuance of Common Stock -- -- (.03)
------------ ------------ ------------
Effect of Preferred Stock activity:++++
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net (.19) (.20) --
Realized gain on investments--net (.02) -- --
Capital charge resulting from issuance of Preferred Stock -- (.14) --
------------ ------------ ------------
Total effect of Preferred Stock activity (.21) (.34) --
------------ ------------ ------------
Net asset value, end of period $ 13.39 $ 16.36 $ 14.15
============ ============ ============
Market price per share, end of period $ 11.875 $ 15.375 $ 15.00
============ ============ ============
<PAGE>
Total Investment Based on market price per share (16.78%) 8.24% .00+++
Return:* ============ ============ ============
Based on net asset value per share (11.82%) 22.09% (.21%)+++
============ ============ ============
Ratios to Expenses, net of reimbursement .70% .56% --
Average ============ ============ ============
Net Assets:** Expenses .70% .68% --
============ ============ ============
Investment income--net 5.28% 5.17% --
============ ============ ============
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $ 169,757 $ 207,404 $ 178,555
============ ============ ============
Preferred Stock outstanding, end of period (in thousands) $ 90,000 $ 90,000 $ --
============ ============ ============
Portfolio turnover 41.67% 15.85% .00%
============ ============ ============
Dividends Per Series A--Investment income--net $ 1,272 $ 1,485 $ --
Share On Series B--Investment income--net 1,374 1,370 --
Preferred Stock
Outstanding:
*Total investment returns based on market value, which can be significantly greater or
lesser than the net asset value, 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.
++Commencement of Operations.
++++The Fund's Preferred Stock was issued on November 30, 1992.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield California 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 MCA. The
following is a summary of significant accounting policies followed
by the Fund.
<PAGE>
(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, 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.
(b)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.
(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 expenses--Deferred
organization expenses are amortized on a straight-line basis over a
five-year period. Direct expenses relating to the public offering of
the Common and Preferred Stock were charged to capital at the time
of issuance.
<PAGE>
(f)Non-income producing investments--Written and purchased options
are non-income producing investments.
(g)Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement
and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). Effective January 1, 1994, the
investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of ML & Co. The limited partners are ML & Co. and Fund
Asset Management, Inc. ("FAMI"), which is also indirect wholly-owned
subsidiary of ML & Co.
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, FAMI, PSI, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1994 were $117,422,776 and
$110,847,337, respectively.
Net realized and unrealized gains (losses) as of October 31, 1994
were as follows:
Realized Unrealized
Gains Losses
Long-term investments $ 638,352 $(10,789,151)
Short-term investments -- (727)
Financial futures contracts 428,625 --
------------ ------------
Total $ 1,066,977 $(10,789,878)
============ ============
<PAGE>
As of October 31, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $10,789,878, of which $463,981
related to appreciated securities and $11,253,859 related to
depreciated securities. The aggregate cost of investments at October
31, 1994 for Federal income tax purposes was $270,107,274.
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
For the year ended October 31, 1994, shares issued and outstanding
remained constant at 12,678,633. At October 31, 1994, total paid-in
capital amounted to $177,742,454.
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, 1994 were as
follows: Series A, 3.247% and Series B, 3.15%.
For the year ended October 31, 1994, there were 1,800 AMPS shares
authorized, issued and outstanding with a liquidation preference of
$50,000 per share, plus accumulated and unpaid dividends of
$225,391. Effective December 1, 1994, as a result of a two-for-one
stock split, there will be 3,600 AMPS shares with a liquidation
preference of $25,000 per share.
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, 1994, MLPF&S, an affiliate of FAMI, earned $106,316 as
commissions.
5. Subsequent Event:
On November 8, 1994, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $.078986 per share, payable on November 29, 1994 to shareholders
of record as of November 18, 1994.
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
MuniYield California Insured Fund II, Inc.:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniYield
California Insured Fund II, Inc. as of October 31, 1994, the related
statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and
the financial highlights for the period October 30, 1992
(commencement of operations) to October 31, 1992. These financial
statements and the financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion
on these financial statements and the financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at October
31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniYield California Insured Fund II, Inc. as of October 31, 1994,
the results of its operations, the changes in its net assets, and
the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 9, 1994
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
<PAGE>
All of the net investment income distributions paid monthly by
MuniYield California Insured Fund II, Inc. during its taxable year
ended October 31, 1994 qualify as tax-exempt interest dividends for
Federal income tax purposes. Additionally, the following table
summarizes the per share capital gains distributions paid by the
Fund during the year.
<TABLE>
Payable Short-Term Long-Term
Date Capital Gains Capital Gains
<S> <S> <C> <C> <C>
Common Stock Shareholders 12/30/93 $ 0.106703 --
Preferred Stock Shareholders: Series A 12/01/93 $173.30 --
Series B 12/01/93 $160.43 --
Please retain this information for your records.
</TABLE>
PER SHARE INFORMATION (unaudited)
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Net Realized Unrealized Dividends/Distributions
Investment Gains Gains Net Investment Income Capital Gains
For the Period Income (Losses) (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
October 30, 1992++ to January 31, 1993 $.26 $ .04 $ .64 $.14 $.04 -- --
February 1, 1993 to April 30, 1993 .29 -- .59 .23 .06 -- --
May 1, 1993 to July 31, 1993 .28 .07 .18 .24 .05 -- --
August 1, 1993 to October 31, 1993 .29 .02 .73 .23 .05 -- --
November 1, 1993 to January 31, 1994 .30 .11 .01 .23 .05 $.11 $.02
February 1, 1994 to April 30, 1994 .28 .11 (2.21) .22 .04 -- --
May 1, 1994 to July 31, 1994 .29 (.07) .34 .23 .05 -- --
August 1, 1994 to October 31, 1994 .30 (.07) (1.12) .24 .05 -- --
<PAGE>
<CAPTION>
Net Asset Value Market Price**
For the Period High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
October 30, 1992++ to January 31, 1993 $14.77 $14.15 $15.125 $14.50 602
February 1, 1993 to April 30, 1993 15.94 14.76 15.75 14.625 1,247
May 1, 1993 to July 31, 1993 15.80 15.26 15.375 14.75 960
August 1, 1993 to October 31, 1993 16.67 15.62 16.00 15.00 1,374
November 1, 1993 to January 31, 1994 16.38 15.78 15.375 14.375 1,568
February 1, 1994 to April 30, 1994 16.33 13.64 15.125 12.875 1,553
May 1, 1994 to July 31, 1994 14.89 13.95 13.675 13.25 1,207
August 1, 1994 to October 31, 1994 14.61 13.37 13.50 11.75 1,504
<FN>
++Commencement of Operations.
*Calculations are based upon shares of Common Stock outstanding
at the end of each period.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Kenneth S. Axelson, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Robert E. Putney III, Assistant Secretary
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Transfer Agents
Common Stock:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
California, California 10004
NYSE Symbol
MCA
<PAGE>
