MuniYield California Insured Fund II, Inc.
Semi-Annual
Report
April 30, 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, cir-
cular 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 Pre-
ferred Stock to provide the Common Stock share-
holders with a potentially higher rate of return.
Leverage creates risks for Common Stock share-
holders, 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.
MuniYield California Insured Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield California Insured Fund II, Inc.
TO OUR SHAREHOLDERS
<PAGE>
For the six-month period ended April 30, 1994, the Common Stock
of MuniYield California Insured Fund II, Inc. earned $0.553 per
share income dividends, which includes earned and unpaid divi-
dends of $0.076. This represents a net annualized yield of 7.80%,
based on a month-end per share net asset value of $14.29. Over
the same period, the total investment return on the Fund's Common
Stock was -9.23%, based on a change in per share net asset value
from $16.36 to $14.29, and assuming reinvestment of $0.557 per
share income dividends.
For the six-month period ended April 30, 1994, the Fund's Auction
Market Preferred Stock had an average yield of 2.673% for Series
A and 2.895% for Series B.
The Environment
Inflationary expectations and investor sentiment changed for the
worse during the three-month period ended April 30, 1994. Follow-
ing stronger-than-expected economic results through year-end
1993, the Federal Reserve Board broke with tradition on February
4, 1994 and publicly announced a modest 25 basis point (0.25%)
increase in short-term interest rates. At the March 22 meeting
of the Federal Open Market Committee, the Federal Reserve Board
again raised the Federal Funds rate by 25 basis points, followed
by another 25 basis point increase on April 18.
Rather than view the Federal Reserve Board's first tightening
move as a preemptive strike against inflation, fixed-income
investors focused on Chairman Greenspan's implicit promise of
further tightening should the rate of inflation accelerate, and
bond prices declined sharply. The setback in the bond market
was also reflected in greater stock market volatility. While the
second and third increases in the Federal Funds rate were less
of a surprise, investors remained concerned that interest rates
would trend upward sharply as the central bank aggressively
attempted to contain the inflationary pressures of an improving
economy. At the same time, highly leveraged investors were forced
to liquidate positions in the face of declining stock and bond
prices. Investor confidence was not restored with the announce-
ment of the surprisingly slow 2.6% gross domestic product
growth rate for the first calendar quarter of 1994. Instead,
investors focused on the higher-than-expected (but still
moderate) broad inflation measures and became concerned that
business activity was beginning to stagnate as inflationary
pressures were increasing.
The volatility in the US capital markets was mirrored in inter-
national markets during the period. Political and economic
developments, along with concerns of heightened global infla-
tionary pressures, led to a sell-off in most capital markets,
especially the emerging markets that had appreciated strongly
in 1993.
<PAGE>
The Municipal Market
During the six months ended April 30, 1994, tax-exempt bond
yields exhibited considerable volatility as they rose to their
highest level in the past two years. As measured by the Bond
Buyer Revenue Bond Index, the yield on newly issued municipal
bonds maturing in 30 years rose over 90 basis points to 6.42%
by the end of April. Yields on seasoned municipal revenue bonds
rose by over 100 basis points in sympathy with the equally drama-
tic increase in long-term US Treasury bond yields. By the end of
April, yields on US Treasury securities rose by over 95 basis
points to approximately 7.30%.
Long-term tax-exempt bond yields were essentially unchanged from
the end of October 1993 to the end of January 1994. However, on a
weekly basis, tax-exempt bond yields fluctuated by as much as 15
basis points as investors were unable to reconcile the rapid eco-
nomic growth seen late last year with continued low inflation.
Following the initial interest rate increase by the Federal Re-
serve Board in early February, municipal bond prices began to
erode in concert with taxable bond prices as investors began
to sell securities in anticipation of further interest rate
increases. This fear led investors to withdraw from the tax-
exempt market. From early February to the end of March, total
assets of all tax-exempt bond funds declined by $14 billion to
$247 billion. This decline in investor demand, coupled with fears
that the robust economic recovery seen during the fourth quarter
of 1993 would continue well into 1994, helped push municipal bond
yields higher in February and March. Attracted by tax-exempt
yields in excess of 6.25%, investor demand returned in April,
allowing yields to decline approximately 15 basis points to end
the April period at approximately 6.40%.
A rise in tax-exempt bond yields the magnitude of that exper-
ienced over the past six months has not been seen since 1987
when municipal bond rates rose 250 basis points between March
and October of that year. It is very important to note that the
recent municipal bond price declines were largely the result of
consistent and insistent selling pressures over the last two
months. In 1987, the tax-exempt bond market was much more vol-
atile and, at times, chaotic as investors sought to liquidate
positions without concern for fundamental value. For the most
part, the recent price deterioration has been orderly, and the
municipal bond market's liquidity and integrity have not been
challenged or jeopardized.
<PAGE>
To a large extent, the municipal bond market has continued to be
supported by its strong technical position. New-issue volume for
the last six months has been less than $105 billion. This rep-
resents a decline of approximately 20% versus the comparable
period a year ago. This decline was expected and has been dis-
cussed in previous shareholder reports. This reduced issuance
has minimized potential selling pressure in recent months since
institutional investors have been wary of selling appreciable
amounts of securities that they may be unable to replace later
this year at any price level. We expect this decline in issu-
ance to continue since we anticipate recent yield increases to
significantly impact future municipal bond issuance. Just as
higher mortgage rates slow home mortgage refinancings, the recent
rise in bond yields will prevent bond refinancings from becoming
the driving force in bond issuance in 1994 as they were in 1993.
Despite recent price declines, tax-exempt securities remain among
the most attractive investment alternatives available. After the
recent yield increases, longer-term municipal securities yield
approximately 90% of comparable US Treasury yields. Purchasers of
these municipal bonds also accrue substantial after-tax yield
advantages. To investors in the 39% marginal Federal income tax
bracket, the purchase of a municipal bond yielding 6.50% rep-
resents an after-tax equivalent of 10.65%. With prevailing esti-
mates of 1994 inflation at no more than 3%--4%, real after-tax
rates in excess of 6.50% easily compensate longer-term investors
for much of the price volatility recently experienced.
Portfolio Strategy
During the six months ended April 30, 1994, MuniYield California
Insured Fund II, Inc.'s portfolio mix was altered only slightly.
We sold some prerefunded bonds since they were fully valued rela-
tive to their taxable counterparts. Recent volatility in the
fixed-income marketplace has led to a substantial backup in tax-
exempt yields. We used this environment to add to the portion of
the Fund devoted to more performance-oriented holdings.
We expect a constructive technical background for the municipal
market in terms of limited supply and continued retail demand to
lead to a firming of market conditions later in the year. There-
fore, we are maintaining a relatively fully invested posture
with low cash reserves to be in a position to seek to take ad-
vantage of any future positive price action. As a result of
historically tight quality spreads, we have underutilized the
portion of the Fund that is available for non-insured assets.
Currently, 88% of the Fund's net assets are AAA-rated with credit
enhancement.
We appreciate your ongoing interest in MuniYield California Fund
II, Inc., and we look forward to serving your investment needs
and objectives in the months and years to come.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
June 2, 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 Pre-
ferred 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 lever-
aging 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. Further-
more, if long-term interest rates rise, the Common Stock's net
asset value will reflect the full decline in the price of the port-
folio'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 listings 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 at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
HFA Housing Finance Authority
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California--97.1%
<S> <S> <C> <S> <C>
AAA Aaa $ 5,250 Anaheim, California, Electric System, COP, 6.75% due 10/01/2000 (b)(f) $ 5,774
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) 4,638
AAA Aaa 2,000 Brea, California, Redevelopment Agency, Tax Allocation Revenue Refunding Bonds
(Redevelopment Project), 5.50% due 8/01/2017 (d) 1,806
<PAGE>
California Health Facilities Financing Authority Revenue Bonds (d):
AAA Aaa 1,000 (Adventist Health System--West), Series B, 6.25% due 3/01/2021 995
A1+ VMIG1 400 (Catholic Health Care), VRDN, Series B, 3% due 7/01/2016 (a) 400
AAA Aaa 2,000 (Centinela Medical Hospital), 6.25% due 9/01/2015 1,993
AAA Aaa 8,300 Refunding (San Diego Hospital Association), Series A, 6.20% due 8/01/2020 8,162
AAA Aaa 15,750 (San Diego Children's Hospital), 6.50% due 7/01/2020 15,977
California HFA, Home Mortgage Revenue Bonds:
A+ Aa 2,000 RIB, 9.621% due 8/01/2023 (h) 2,015
A+ Aa 5,750 Series B, 6.90% due 8/01/2016 5,787
A1+ VMIG1 400 California Pollution Control Financing Authority, PCR, Refunding (Shell Oil Co.
Project), VRDN, 2.80% due 10/01/2007 (a) 400
NR P1 200 California Pollution Control Financing Authority, Resource Recovery Revenue Bonds
(Honey Lake Power Project), AMT, VRDN, 3% due 9/01/2018 (a) 200
A A2 5,950 California Pollution Control Financing Authority, Solid Waste Disposal, PCR (Keller
Canyon Landfill Co. Project), AMT, 6.875% due 11/01/2027 6,036
AA Aa 5,500 California State Department of Water Resources Revenue Bonds (Central Valley Project),
RIB, 8.713% due 12/01/2021 (h) 4,971
</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>
California State, Public Works Board, Lease Revenue Bonds, Series A (b):
AAA Aaa $ 900 (Secretary of State), 6.40% due 12/01/2007 $ 947
AAA Aaa 2,100 (Various Community College Projects), 6% due 12/01/2012 2,056
AAA Aaa 2,900 (Various University of California Projects), 6.25% due 12/01/2008 2,974
AAA Aaa 6,420 (Various University of California Projects), 6.40% due 12/01/2016 6,464
BBB+ Baa1 1,740 Carson, California, Redevelopment Agency, Tax Allocation Bonds (Redevelopment
Project), Series B, 6% due 10/01/2016 1,566
Central Coast Water Authority, California, Water Project Regional Facilities Revenue
Bonds (b):
AAA Aaa 2,385 6.50% due 10/01/2014 2,432
AAA Aaa 7,500 6.60% due 10/01/2022 7,675
AAA Aaa 2,000 Cucamonga County, California, Water District COP, Refinancing Facilities, 6.50% due
9/01/2022 (c) 2,029
<PAGE>
Eastern Municipal Water District, California, Water and Sewer Revenue Bonds, COP,
Series A (c):
AAA Aaa 1,000 5.375% due 7/01/2013 905
AAA Aaa 8,000 Refunding, 6.30% due 7/01/2020 7,968
AAA Aaa 6,000 El Cajon, California, Redevelopment Agency, Tax Allocation Revenue Bonds (El Cajon
Redevelopment Project), 6.60% due 10/01/2022 (b) 6,150
AAA Aaa 2,000 Eureka, California, Public Financing Authority, Tax Allocation Revenue Refunding
Bonds (Eureka Redevelopment Project), 5% due 11/01/2016 1,679
Fairfield, California, Public Financing Authority Revenue Bonds, Municipal Park
Improvement District No. 1 (c):
AAA Aaa 1,000 6.25% due 7/01/2014 1,001
AAA Aaa 1,340 6.30% due 7/01/2023 1,345
AAA Aaa 1,000 Fairfield-Suisun, California, Sewer District, Sewer Revenue Refunding Bonds, Series A,
6.25% due 5/01/2016 (d) 1,001
A-1 VMIG1 200 Irvine, California, Apartment Development Revenue Bonds (San Rafael Apartments
Project), Series A, AMT, VRDN, 3.05% due 4/01/2022 (a) 200
A-1 NR 400 Irvine Ranch, California, Water District Consolidated Revenue Bonds, DATES, Series B,
2.90% due 10/01/2005 (a) 400
AAA Aaa 2,550 Las Virgenes, California, Municipal Water District, COP (Capital Improvement Project),
6.30% due 11/01/2016 (d) 2,584
AAA Aaa 2,000 Local Government Financing Authority, California, Revenue Refunding Bonds (Roseville),
6.25% due 8/01/1999 (d)(f) 2,130
Los Angeles County, California, COP:
AAA Aaa 10,000 (Correctional Facilities Project), 6.50% due 9/01/2013 (d) 10,153
NR NR 2,000 (Marina Del Rey), Series A, 6.25% due 7/01/2003 2,014
AAA Aaa 4,900 Los Angeles County, California, Transportation Commission, Sales Tax Revenue Bonds,
Series A, 6.75% due 7/01/2001 (c)(f) 5,420
</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 $ 4,250 Marysville, California, Hospital Revenue Bonds (Fremont-Rideout Health Group),
Series A, 6.30% due 1/01/2022 (b) $ 4,253
<PAGE>
AAA Aaa 3,850 Mountain View, California, Capital Improvements Financing Authority Revenue Bonds
(City Hall Community Theatre), 6.50% due 8/01/2016 (d) 3,919
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) 1,014
Northern California Power Agency, Multiple Capital Facilities Revenue Bonds (d):
AAA Aaa 2,500 RIB, 10.105% due 9/02/2025 (h) 2,606
AAA Aaa 2,000 Series A, 6.50% due 8/01/2012 2,046
AAA Aaa 2,670 Ontario, California, Redevelopment Financing Authority Revenue Bonds (Ontario
Redevelopment Project No. 1), 5.80% due 8/01/2023 (d) 2,492
A-1 NR 300 Orange County, California, COP (Office and Courthouse Project), VRDN, 2.90% due
12/01/2015 (a) 300
A-1 VMIG1 1,700 Orange County, California, Improvement Board Act of 1915 Revenue Bonds (Irvine Coast
Assessment District No. 88-1), VRDN, 3.05% due 9/02/2018 (a) 1,700
AA Aa 3,500 Orange County, California, Local Transportation Authority, Sales Tax Revenue Bonds,
RIB, 9.023% due 2/14/2011 (h) 3,496
Orange County, California, Various Sanitation Districts, COP:
AAA Aaa 10,000 Nos. 1, 3, 5, 7 & 11, Series B, 6.75% due 8/01/2001 (c)(f) 11,006
A1+ VMIG1 200 Nos. 1, 3, 5, 7, 11, 13 & 14, VRDN, 2.95% due 8/01/2015 (a) 200
AAA Aaa 15,000 Pasadena, California, Community Development Commission, M/F Housing Revenue Bonds
(Civic Center), Series A, AMT, 6.45% due 12/01/2021 (e) 14,585
AAA Aaa 5,400 Pittsburgh, California, Redevelopment Agency, Tax Allocation Bonds (Los Medanos
Community Development Project), Series A, 4.625% due 8/01/2021 (b) 4,211
Port Oakland, California, Port Revenue Bonds, AMT, Series E (d):
AAA Aaa 2,000 6.50% due 11/01/2016 2,029
AAA Aaa 7,550 6.40% due 11/01/2022 7,619
Sacramento, California, Municipal Utility District, Electric Revenue Bonds (d):
AAA Aaa 3,680 Series B, 6.25% due 8/15/2011 3,727
AAA Aaa 4,000 Series B, 6.375% due 8/15/2022 4,037
AAA Aaa 4,205 Series Y, 6.75% due 9/01/2001 (f) 4,658
San Francisco, California, City and County Airport Commission, International Airport
Revenue Bonds, Second Series:
AAA Aaa 2,000 Issues 5, AMT, 6.50% due 5/01/2024 (c) 1,964
AAA Aaa 10,000 Refunding, Issues 2, 6.75% due 5/01/2020 (d) 10,353
AAA Aaa 500 San Francisco, California, City and County Redevelopment Financing Authority, Tax
Allocation Revenue Refunding Bonds (San Francisco Redevelopment Project), Series B,
5% due 8/01/2015 (d) 425
</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>
AAA Aaa $ 1,000 San Jose, California, Airport Revenue Refunding Bonds, 5.75% due 3/01/2016 (d) $ 942
San Jose, California, Redevelopment Agency, Tax Allocation Refunding Bonds
(Merged Area Redevelopment Project) (d):
AAA Aaa 2,500 5% due 8/01/2020 2,071
AAA Aaa 4,000 4.75% due 8/01/2024 3,153
AAA Aaa 3,430 Santa Ana, California, Financing Authority Lease Revenue Bonds, Police Ad-
ministration and Holdings Facilities, Series A, 6.25% due 7/01/2024 (d) 3,439
AAA Aaa 3,400 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Revenue Bonds
(Consolidated Redevelopment Project), Series A, 6.40% due 9/01/2022 (d) 3,441
AAA Aaa 3,000 Santa Rosa, California, Water Revenue Bonds (Subregional Wastewater Project), Series A,
6.50% due 9/01/2022 (c) 3,045
AAA Aaa 3,295 Santa Rosa, California, Water Revenue Refunding Bonds, Series B, 6.125% due
9/01/2017 (c) 3,233
AAA NR 4,000 Southern California, HFA, S/F Mortgage Revenue Bonds Program, Series B, AMT, 6.90%
due 10/01/2024 (g) 4,049
AA- Aa 2,000 Southern California, Public Power Authority, Transmission Project Revenue Bonds, RIB,
8.925% due 7/01/2012 (h) 1,912
AAA Aaa 7,815 Sunnyvale, California, Financing Authority Utilities Revenue Bonds (Wastewater Refuse
and Sludge), Series A, 6.30% due 10/01/2017 (d) 7,850
A NR 4,245 Torrance, California, Hospital Revenue Refunding Bonds (Little Company of Mary
Hospital), 6.875% due 7/01/2015 4,336
University of California, Revenue Refunding Bonds (Multiple Purpose Projects):
AAA Aaa 2,485 Series B, 4.75% due 9/01/2021 (d) 1,977
AAA Aaa 4,000 Series C, 5.25% due 9/01/2012 (b) 3,575
AAA Aaa 2,855 Series C, 5% due 9/01/2023 (b) 2,345
AAA Aaa 3,000 West and Central Basin, California, Financing Authority Revenue Bonds, 6.125% due
8/01/2022 (b) 2,942
Total Investments (Cost--$264,120)--97.1% 263,197
Other Assets Less Liabilities--2.9% 7,960
<PAGE> --------
Net Assets--100.0% $271,157
========
<FN>
(a) The interest rate is subject to change periodically
based upon prevailing market rates. The interest
rate shown is the rate in effect at April 30, 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 in-
terest rate shown is the rate in effect at April 30, 1994.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of April 30, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$264,119,806) (Note 1a) $263,197,292
Cash 85,250
Receivables:
Securities sold $ 9,868,273
Interest 4,363,488 14,231,761
------------
Deferred organization expenses (Note 1e) 30,455
Prepaid expenses 194,912
------------
Total assets 277,739,670
------------
Liabilities: Payables:
Securities purchased 5,652,703
Dividends to shareholders (Note 1g) 583,384
Investment adviser (Note 2) 107,391 6,343,478
------------
Accrued expenses 239,094
------------
Total liabilities 6,582,572
------------
Net Assets: Net assets $271,157,098
============
<PAGE>
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 share 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 1,541,623
Undistributed realized capital gains--net 2,795,535
Unrealized depreciation on investments--net (922,514)
------------
Total--Equivalent to $14.29 net asset value per share of Common Stock
(market price--$13.125) 181,157,098
------------
Total capital $271,157,098
============
<FN>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
April 30, 1994
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 8,357,356
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 716,457
Commission fees (Note 4) 144,461
Professional fees 39,971
Transfer agent fees 24,320
Printing and shareholder reports 13,247
Accounting services (Note 2) 13,161
Listing fees 11,731
Directors' fees and expenses 11,531
Custodian fees 7,582
Pricing fees 4,664
Amortization of organization expenses (Note 1e) 3,805
Other 11,645
------------
Total expenses 1,002,575
------------
Investment income--net 7,354,781
------------
<PAGE>
Realized & Realized gain on investments--net 2,795,531
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net (27,949,486)
(Loss) on ------------
Investments--Net Net Decrease in Net Assets Resulting from Operations $(17,799,174)
(Notes 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: April 30, 1994 Oct. 31, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 7,354,781 $ 14,141,995
Realized gain on investments--net 2,795,531 1,653,210
Change in unrealized appreciation/depreciation on investments--net (27,949,486) 27,026,972
------------ ------------
Net increase (decrease) in net assets resulting from operations (17,799,174) 42,822,177
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (5,704,687) (10,592,119)
Shareholders Preferred Stock (1,088,964) (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 (8,446,857) (13,161,502)
------------ ------------
Capital Stock Proceeds from issuance of Preferred Stock -- 90,000,000
Transactions Offering and underwriting costs from the issuance of Common Stock -- (1,739,184)
(Notes 1e & 4): Value of shares issued to Common Stock shareholders in reinvestment of
dividends and distributions (1,000) 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 (26,247,031) 118,849,476
Beginning of period 297,404,129 178,554,653
------------ ------------
End of period* $271,157,098 $297,404,129
============ ============
<PAGE>
<FN>
* Undistributed investment income--net $ 1,541,623 $ 980,493
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
For the Six Period
The following per share data and ratios have been derived Months For the October 30,
from information provided in the financial statements. Ended Year Ended 1992++ to
April 30, 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 .58 1.12 --
Realized and unrealized gain (loss) on investments--net (1.98) 2.27 --
---------- ---------- ----------
Total from investment operations (1.40) 3.39 --
---------- ---------- ----------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net (.45) (.84) --
Realized gain on investments--net (.11) -- --
---------- ---------- ----------
Total dividends to Common Stock shareholders (.56) (.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 (.09) (.20) --
Realized gain on investments--net (.02) -- --
Capital charge resulting from issuance of Preferred Stock -- (.14) --
---------- ---------- ----------
Total effect of Preferred Stock activity (.11) (.34) --
---------- ---------- ----------
Net asset value, end of period $ 14.29 $ 16.36 $ 14.15
========== ========== ==========
Market price per share, end of period $ 13.125 $ 15.375 $ 15.00
========== ========== ==========
<PAGE>
Total Investment Based on market price per share (11.29%)+++ 8.24% 0.00%+++
Return:** ========== ========== ==========
Based on net asset value per share (9.23%)+++ 22.09% (0.21%)+++
========== ========== ==========
Ratios to Expenses, net of reimbursement .70%* .56% --%
Average Net ========== ========== ==========
Assets:*** Expenses .70%* .68% --%
========== ========== ==========
Investment income--net 5.11%* 5.17% --%
========== ========== ==========
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $ 181,157 $ 207,404 $ 178,555
========== ========== ==========
Preferred Stock outstanding, end of period (in thousands) $ 90,000 $ 90,000 $ --
========== ========== ==========
Portfolio turnover 18.32% 15.85% 0%
========== ========== ==========
Dividends Per Series A--Investment income--net $ 574 $ 1,485 $ --
Share on Preferred Series B--Investment income--net 636 1,370 --
Stock Outstanding:
<FN>
* Annualized.
** 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.
+++ Aggregate total investment return.
++ Commencement of Operations.
++++ The Fund's Preferred Stock was issued on November 30, 1992.
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 val-
ue 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 pri-
marily 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 ex-
changes 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. Sec-
urities 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 trans-
actions 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 trans-
actions are determined on the identified cost basis.
<PAGE>
(e) Deferred organization and offering expenses--Deferred organ-
ization expenses are amortized on a straight-line basis over
a five-year period beginning with the commencement of operations
of the Fund. Direct expenses relating to the public offering of
the Common and Preferred Stock were charged to capital at the
time of issuance of the stocks.
(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., an indirect wholly-owned subsidiary of
ML & Co. The limited partners are ML & Co. and Merrill Lynch
Investment Management, Inc. ("MLIM"), which is also an 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, MLIM, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term sec-
urities, for the six months ended April 30, 1994 were $53,955,041
and $50,243,278, respectively.
Net realized and unrealized gains (losses) as of April 30, 1994
were as follows:
<PAGE>
Realized Unrealized
Gains Losses
Long-term investments $ 2,795,531 $ (922,514)
----------- -----------
Total $ 2,795,531 $ (922,514)
=========== ===========
As of April 30, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $922,514, of which $4,170,296
related to appreciated securities and $5,092,810 related to de-
preciated securities. The aggregate cost of investments at April
30, 1994 for Federal income tax purposes was $264,119,806.
4. Capital Share 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 six months ended April 30, 1994, shares issued and out-
standing remained constant at 12,678,633. At April 30, 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 April 30, 1994 were as
follows: Series A, 2.410% and Series B, 2.895%.
For the six months ended April 30, 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 $148,380.
The Fund pays commissions to certain broker-dealers at the end of
each auction at the annual rate of one-quarter of 1% calculated
on the proceeds of each auction. For the six months ended April
30, 1994, MLPF&S, an affiliate of MLIM, earned $30,793 as
commissions.
5. Subsequent Event:
On May 6, 1994, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the
amount of $0.075658 per share, payable on May 27, 1994 to
shareholders of record as of May 17, 1994.
<PAGE>
PER SHARE INFORMATION
<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 August 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 -- --
<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 August 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
<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
<PAGE>
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
New York, New York 10004
NYSE Symbol
MCA
