MUNIYIELD
CALIFORNIA
INSURED
FUND II, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
October 31, 2000
<PAGE>
MUNIYIELD CALIFORNIA INSURED FUND II, INC.
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. 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 shareholder are
significantly lower than the income earned on the fund's long-term investments,
and therefore the Common Stock shareholders are the beneficiaries of the
incremental yield. However, if short-term interest rates rise, narrowing the
differential between short-term and long-term interest rates, the incremental
yield pickup on the Common Stock will be reduced or eliminated completely. At
the same time, the market value of the fund's Common Stock (that is, its price
as listed on the New York Stock Exchange) may, as a result, decline.
Furthermore, if long-term interest rates rise, the Common Stock's net asset
value will reflect the full decline in the price of the portfolio's investments,
since the value of the fund's Preferred Stock does not fluctuate. In addition to
the decline in net asset value, the market value of the fund's Common Stock may
also decline.
As a part of its investment strategy, the Fund may invest in certain securities
whose potential income return is inversely related to changes in a floating
interest rate ("inverse floaters"). In general, income on inverse floaters will
decrease when short-term interest rates increase and increase when short-term
interest rates decrease. Investments in inverse floaters may be characterized as
derivative securities and may subject the Fund to the risks of reduced or
eliminated interest payments and losses of invested principal. In addition,
inverse floaters have the effect of providing investment leverage and, as a
result, the market value of such securities will generally be more volatile than
that of fixed-rate, tax-exempt securities. To the extent the Fund invests in
inverse floaters, the market value of the Fund's portfolio and the net asset
value of the Fund's shares may also be more volatile than if the Fund did not
invest in these securities.
<PAGE>
MuniYield California Insured Fund II, Inc., October 31, 2000
DEAR SHAREHOLDER
For the year ended October 31, 2000, the Common Stock of MuniYield California
Insured Fund II, Inc. earned $0.805 per share income dividends, which included
earned and unpaid dividends of $0.067. This represents a net annualized yield of
5.65%, based on a month-end per share net asset value of $14.24. Over the same
period, the total investment return on the Fund's Common Stock was +15.28%,
based on a change in per share net asset value from $13.14 to $14.24, and
assuming reinvestment of $0.807 per share income dividends.
For the six-month period ended October 31, 2000, the total investment return on
the Fund's Common Stock was +10.13%, based on a change in per share net asset
value from $13.32 to $14.24, and assuming reinvestment of $0.404 per share
income dividends.
For the six-month period ended October 31, 2000, the Fund's Auction Market
Preferred Stock had an average yield as follows: Series A, 3.36%; Series B,
3.49%; and Series C, 3.57%.
The Municipal Market Environment
During the six months ended October 31, 2000,
long-term US Treasury bond yields generally drifted lower. A number of economic
indicators, particularly employment, new home sales and consumer spending, have
suggested that US economic growth, while still strong, has moderated from 1999's
robust levels. Preliminary estimates for third-quarter 2000 US gross domestic
product growth were recently released at 2.7%, well below the first-quarter 2000
rate of 4.8% and the second-quarter 2000 rate of 5.6%. This decline in economic
growth suggests to some analysts that the Federal Reserve Board has finished
raising interest rates for its current interest rate cycle. The Federal Reserve
Board increased short-term interest rates at its May meeting and has since kept
monetary policy steady at its subsequent meetings. Given the potential for
stable short-term interest rates in the coming months, investor emphasis focused
on the continuing US Treasury debt reduction program and forecasts of sizeable
Federal budgetary surpluses going forward. Many investors have concluded that
there will be a significant future shortage of longer-dated maturity US Treasury
securities. By late August, US Treasury bond yields declined 30 basis points
(0.30%) to 5.66%, their lowest level in more than a year.
However, for the remainder of the period, bond yields were unable to maintain
their earlier gains. Rising oil prices were the major focus behind the decline
in bond prices, as many investors feared that higher oil prices would result in
increased inflationary pressures. Additionally, US corporations issued large
amounts of taxable debt in order to take advantage of the current low interest
rate environment. During the last three months, US corporations issued more than
$100 billion in investment-grade securities, offering yields in the 7.25%-9%
range. Many investors found these taxable issues an attractive and more
plentiful alternative to US Treasury bonds. As the demand for US Treasury issues
weakened, US bond yields rose. Although US Treasury bond yields rose to 5.78% by
the end of October 2000, overall they declined almost 20 basis points during the
last six months.
The six-month period ended October 31, 2000 was one of the few periods in recent
years in which the tax-exempt bond market outperformed its taxable counterpart,
the US Treasury bond market. While municipal bond yields followed the similar
seesaw pattern of Treasury bond yields, tax-exempt bond price volatility was
significantly reduced. Municipal bond yields traded in a relatively narrow range
during much of October 2000. Overall investor demand for municipal bonds
remained strong, allowing tax-exempt bond yields, as measured by the Bond Buyer
Revenue Bond Index, to decline 30 basis points to end the period at 5.75%.
In the past three months, new long-term municipal bond issuance has continued to
decline, albeit at a slower rate than earlier this year. During this period,
more than $53 billion in new long-term municipal bonds was issued, a decline of
3% compared to the same three-month period in 1999. During the last six months,
more than $105 billion in tax-exempt bonds was underwritten, a decline of 8%
compared to the same six-month period in 1999. Just under $200 billion in new
municipal securities was marketed during the past year, a decline of more than
16% compared to the same 12-month period in 1999.
The demand for municipal bonds came from a number of non-traditional and
conventional sources. Derivative/arbitrage programs and insurance companies
remained the dominant institutional buyers, while individual retail purchases
also remained strong. Traditional, open-end tax-exempt mutual funds have
continued to see significant disintermediation. It was recently reported that
thus far during the 2000 calendar year, long-term municipal bond mutual funds
experienced net cash outflows of more than $15 billion. Fortunately, the
combination of reduced new bond issuance and ongoing demand from non-traditional
sources has been able to more than offset the decline in demand from tax-exempt
mutual funds. This favorable balance has fostered a significant decline in
municipal bond yields in recent months.
Currently, there is no reason to expect that the positive technical position of
the municipal bond market will significantly deteriorate. The steeply positive
yield curve and the relatively high credit quality that the tax-exempt bond
market offers should continue to attract different classes of institutional
buyers. Strong state and local governmental financial conditions also suggest
that issuance should remain manageable into next year.
However, the results of the presidential election may affect the tax-exempt bond
market. Various tax and spending programs proposed by both candidates have
obvious implications for state and local governments as well as corporate and
individual taxpayers. Political history has shown that the enactment of campaign
promises, both Republican and Democratic, has very often been a long, laborious
process. This suggests that over the next few months US economic factors will
most likely have a greater effect on bond yields than political considerations.
Portfolio Strategy
During the six-month period ended October 31, 2000, we managed the Fund with the
intent of sustaining an appealing level of tax-exempt income. At the end of May,
we believed that the municipal market was approaching a high in yields. In our
opinion, investors had fully discounted any further increases in short-term
interest rates, and we believed that any other increases would serve to slow
economic growth and keep inflation manageable.
The months leading to October brought extreme volatility to the municipal
market. Tax-exempt yields dropped about 40 basis points from the end of May to
the end of October although the average yield change from month to month was
about 13 basis points. This volatility occurred because most investors could not
decide if the Federal Reserve Board was ahead or behind the curve in taming
inflation.
As a result of this volatility, we restructured the Fund with higher coupons
that were not available in a lower interest rate environment. The coupons
increased the income of the Fund and produced a generous yield for shareholders.
2 & 3
<PAGE>
MuniYield California Insured Fund II, Inc., October 31, 2000
It also provided us the opportunity to be in a trading range in which we sought
to enhance the Fund's total return.
Going forward, we will seek to take advantage of any backup in interest rates to
invest the Fund's cash to increase the Fund's tax-exempt income and extend
duration. This will position the Fund to take advantage of anticipated lower
interest rates in the future, as the result of an impending economic slowdown
and a potential easing in the Federal Funds rate.
In Conclusion
We appreciate your ongoing interest in MuniYield California Insured Fund II,
Inc., and we look forward to serving your investment needs in the months and
years to come.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Vincent R. Giordano
Vincent R. Giordano
Senior Vice President
/s/ Roberto Roffo
Roberto Roffo
Vice President and Portfolio Manager
November 27, 2000
SCHEDULE OF INVESTMENTS (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
California--96.9% AAA Aaa $ 3,500 ABAG Finance Authority for Nonprofit Corporations, California, COP
(Children's Hospital Medical Center), 6% due 12/01/2029 (a) $ 3,691
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,000 Alameda County, California, Water District Revenue Refunding Bonds,
4.75% due 6/01/2020 (i) 2,735
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,985 Arcadia, California, Unified School District, GO, Series B, 6.50% due
7/01/2015 (c) 2,184
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,675 Bakersfield, California, COP, Refunding (Convention Center Expansion
Project), 5.80% due 4/01/2017 (i) 3,837
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,450 Big Bear Lake, California, Water Revenue Refunding Bonds, 6% due
4/01/2015 (i) 1,625
----------------------------------------------------------------------------------------------------------------
California Community College Financing Authority, Lease Revenue Bonds,
Series A (i):
AAA Aaa 3,215 5.95% due 12/01/2022 3,412
AAA Aaa 1,100 6% due 12/01/2029 1,166
----------------------------------------------------------------------------------------------------------------
NR* Aa2 6,100 California Educational Facilities Authority Revenue Bonds, Trust Receipt,
AMT, Class R, Series 11, 6.918% due 4/01/2028 (a)(k) 6,028
----------------------------------------------------------------------------------------------------------------
California Educational Facilities Authority, Revenue Refunding Bonds:
NR* Aa1 3,000 (Claremont McKenna College), 5% due 11/01/2029 2,804
NR* Aa2 2,750 RIB, Series 147, 6.89% due 10/01/2027 (k) 2,769
----------------------------------------------------------------------------------------------------------------
California HFA, Home Mortgage Revenue Bonds, AMT:
AAA Aaa 1,395 Series E, 6.15% due 8/01/2025 (i) 1,405
AA- Aa2 1,965 Series F-1, 7% due 8/01/2026 (d) 2,007
----------------------------------------------------------------------------------------------------------------
A1+ VMIG1+ 3,000 California HFA, M/F Housing Revenue Bonds, VRDN, AMT, Series A,
4.45% due 2/01/2026 (l) 3,000
----------------------------------------------------------------------------------------------------------------
A+ Aa2 3,750 California HFA, Revenue Bonds, RIB, AMT, Series B-2, 8.351% due
8/01/2023 (d)(k) 3,994
----------------------------------------------------------------------------------------------------------------
California Health Facilities Finance Authority Revenue Bonds
(Kaiser Permanente), RIB (g)(k):
AAA NR* 8,750 Series 26, 6.87% due 6/01/2022 8,866
NR* Aaa 6,625 Series 152, 6.89% due 6/01/2022 6,713
----------------------------------------------------------------------------------------------------------------
</TABLE>
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 below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
GO General Obligation Bonds
HFA Housing Finance Agency
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate Municipal Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
RITR Residual Interest Trust Receipts
S/F Single-Family
VRDN Variable Rate Demand Notes
4 & 5
<PAGE>
MuniYield California Insured Fund II, Inc., October 31, 2000
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
California California Health Facilities Finance Authority, Revenue Refunding Bonds
(continued) (Adventist Hospital), VRDN (i)(l):
A1+ VMIG1+ $ 200 Series A, 4.40% due 9/01/2028 $ 200
A1+ VMIG1+ 450 Series B, 4.40% due 9/01/2028 450
A1+ VMIG1+ 365 Series C, 4.40% due 9/01/2015 365
----------------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority, PCR, Refunding
(Pacific Gas and Electric), VRDN (l):
A1+ NR* 1,000 AMT, Series C, 4.45% due 11/01/2026 1,000
A1+ NR* 2,800 Series C, 4.45% due 11/01/2026 2,800
A1+ NR* 2,500 Series D, 4.40% due 11/01/2026 2,500
A1+ NR* 4,700 Series E, 2.75% due 11/01/2026 4,700
A1+ NR* 800 Series F, 4.40% due 11/01/2026 800
----------------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority, PCR, Refunding
(Southern California Edison Company), VRDN (l):
A1 VMIG1+ 8,700 Series A, 4.55% due 2/28/2008 8,700
A1 P1 4,700 Series C, 4.55% due 2/28/2008 4,700
A1 P1 2,000 Series D, 4.55% due 2/28/2008 2,000
----------------------------------------------------------------------------------------------------------------
California Rural Home Mortgage Finance Authority, S/F Mortgage
Revenue Bonds (Mortgage-Backed Securities Program), AMT:
AAA NR* 4,305 Series A, 6.35% due 12/01/2029 (e)(f) 4,754
AAA NR* 4,905 Series A, 5.40% due 12/01/2030 (f) 4,752
NR* Aaa 1,000 Series A-1, 6.90% due 12/01/2024 (e)(h) 1,078
AAA NR* 3,565 Series B, 6.25% due 12/01/2031 (f) 3,743
----------------------------------------------------------------------------------------------------------------
California State, GO:
AAA Aaa 18,000 6.25% due 10/01/2019 (i) 19,011
AAA Aaa 4,000 4.50% due 12/01/2021 (c) 3,473
AAA Aaa 17,500 4.50% due 12/01/2024 (c) 15,012
----------------------------------------------------------------------------------------------------------------
AAA Aaa 8,675 California State Public Works Board, Lease Revenue Refunding Bonds
(Department of Corrections), Series B, 5.625% due 11/01/2016 (i) 9,023
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,375 California State University and Colleges, Housing System Revenue
Refunding Bonds, 5.90% due 11/01/2021 (c) 2,494
----------------------------------------------------------------------------------------------------------------
California Statewide Communities Development Authority, COP:
NR* VMIG1+ 4,775 (Continuing Care/University Project), VRDN, 4.40% due 11/15/2028 (l) 4,775
AAA Aaa 11,100 (Kaiser Permanente), 5.30% due 12/01/2015 (g) 11,307
----------------------------------------------------------------------------------------------------------------
NR* Aaa 3,520 California Statewide Communities Development Authority, Revenue
Refunding Bonds, RIB, Series 151, 6.89% due 8/01/2011 (a)(k) 4,003
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,200 Calleguas--Las Virgines, California, Public Financing Authority, Installment
Purchase Revenue Refunding Bonds (Las Virgines Municipal Water District),
5% due 11/01/2023 (g) 1,139
----------------------------------------------------------------------------------------------------------------
AAA Aaa 4,600 Ceres, California, Redevelopment Agency, Tax Allocation Bonds (Ceres
Redevelopment Project Area Number 1), 5.75% due 11/01/2030 (i) 4,745
----------------------------------------------------------------------------------------------------------------
Chaffey, California, Unified High School District, GO, Series B (c):
AAA Aaa 2,230 5.50% due 8/01/2012 2,381
AAA Aaa 1,330 5.50% due 8/01/2013 1,410
----------------------------------------------------------------------------------------------------------------
Coalinga, California, Public Financing Authority, Local Obligation Revenue
Refunding Bonds, Senior Lien, Series A (a):
AAA Aaa 495 5.75% due 9/15/2015 543
AAA Aaa 1,270 6% due 9/15/2018 1,404
----------------------------------------------------------------------------------------------------------------
AAA Aaa 10,480 Contra Costa County, California, COP, Refunding (Merrithew Memorial
Hospital Project), 5.375% due 11/01/2017 (i) 10,610
----------------------------------------------------------------------------------------------------------------
El Monte, California, City School District, GO, Refunding, Series A (g):
AAA Aaa 1,000 6.25% due 5/01/2020 1,097
AAA Aaa 1,500 6.25% due 5/01/2025 1,634
----------------------------------------------------------------------------------------------------------------
Fontana, California, Redevelopment Agency, Tax Allocation Refunding Bonds
(Southwest Industrial Park Project) (i):
AAA Aaa 4,120 4.75% due 9/01/2026 3,670
AAA Aaa 5,795 5.20% due 9/01/2030 5,590
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,545 Imperial Irrigation District, California, Electric Revenue Refunding Bonds,
5% due 11/01/2018 (i) 2,469
----------------------------------------------------------------------------------------------------------------
Los Angeles, California, Community Redevelopment Agency, Tax Allocation
Refunding Bonds:
AAA Aaa 1,500 (Bunker Hill), Series H, 6.50% due 12/01/2015 (g) 1,617
AAA Aaa 3,500 (Bunker Hill), Series H, 6.50% due 12/01/2016 (g) 3,773
AAA Aaa 2,395 (Hollywood Redevelopment Project), Series C, 5.50% due 7/01/2016 (i) 2,535
----------------------------------------------------------------------------------------------------------------
Los Angeles, California, Department of Airports, Airport Revenue Bonds,
AMT (c):
AAA Aaa 1,000 (Los Angeles International Airport), Series D, 5.50% due 5/15/2007 1,046
AAA Aaa 1,000 (Los Angeles International Airport), Series D, 5.625% due 5/15/2012 1,035
AAA Aaa 2,500 (Ontario International Airport), Series A, 6% due 5/15/2017 2,603
----------------------------------------------------------------------------------------------------------------
Los Angeles, California, Department of Water and Power, Electric Plant
Revenue Refunding Bonds (i):
AAA Aaa 3,400 5.50% due 2/15/2014 3,494
AAA Aaa 3,000 6% due 2/15/2016 3,159
AAA Aaa 2,000 5.875% due 2/15/2020 2,060
AAA Aaa 2,500 6% due 2/15/2030 2,582
----------------------------------------------------------------------------------------------------------------
NR* Aaa 7,000 Los Angeles, California, Harbor Department Revenue Bonds, Trust Receipts,
AMT, Class R, Series 7, 8.34% due 11/01/2026 (i)(k) 7,808
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,930 Los Angeles, California, Wastewater System Revenue Refunding Bonds, Series C,
4% due 6/01/2016 (i) 2,515
----------------------------------------------------------------------------------------------------------------
Los Angeles County, California, Metropolitan Transportation Authority,
Sales Tax Revenue Refunding Bonds:
AAA Aaa 4,425 Proposition A, First Tier, Senior Series C, 5% due 7/01/2026 (a) 4,169
AAA Aaa 5,000 Proposition C, Second Series, Series A, 4.75% due 7/01/2026 (g) 4,456
----------------------------------------------------------------------------------------------------------------
AA Aa2 500 Los Gatos--Saratoga, California, Joint Union High School District, GO,
Series A, 4.375% due 10/01/2023 420
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 M-S-R Public Power Agency, California, Revenue Refunding Bonds (San Juan
Project), Series D, 6.75% due 7/01/2020 (b)(i) 1,774
----------------------------------------------------------------------------------------------------------------
</TABLE>
6 & 7
<PAGE>
MuniYield California Insured Fund II, Inc., October 31, 2000
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<TABLE>
<CAPTION>
S&P Moody's Face
STATE Ratings Ratings Amount Issue Value
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
California AAA Aaa $ 2,200 Madera, California, Redevelopment Agency, Tax Allocation Bonds
(concluded) (Tax Allocation Redevelopment Project), 4.75% due 9/01/2028 (g) $ 1,938
----------------------------------------------------------------------------------------------------------------
AAA NR* 1,500 Madera County, California, COP, Refunding (Valley Children's Hospital
Project), 4.75% due 3/15/2018 (i) 1,384
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,000 Metropolitan Water District of Southern California, Waterworks
Revenue Bonds, Series A, 5% due 7/01/2030 1,871
----------------------------------------------------------------------------------------------------------------
A1+ NR* 7,500 Metropolitan Water District of Southern California, Waterworks Revenue
Refunding Bonds, VRDN, Series B-1, 4.40% due 7/01/2035 (l) 7,500
----------------------------------------------------------------------------------------------------------------
AAA Aaa 4,960 Modesto, California, Public Financing Authority, Lease Revenue Refunding
Bonds (Capital Improvements and Refinancing Project), 4.75% due
9/01/2024 (a) 4,439
----------------------------------------------------------------------------------------------------------------
AAA NR* 2,000 Natomas, California, Unified School District, GO, Refunding, 5.25% due
9/01/2016 (c) 2,026
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,715 Newhall, California, School District, GO, Series A, 6.40% due 5/01/2025 (g) 6,317
----------------------------------------------------------------------------------------------------------------
AAA Aaa 965 Oakland, California, Redevelopment Agency Tax Allocation Refunding Bonds,
INFLOS, 7.459% due 9/01/2019 (i)(k) 1,014
----------------------------------------------------------------------------------------------------------------
Oakland, California, State Building Authority, Lease Revenue Bonds
(Elihu M. Harris), Series A (a):
AAA Aaa 1,000 5.50% due 4/01/2011 1,062
AAA Aaa 2,000 5.50% due 4/01/2014 2,092
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,360 Orchard, California, School District, GO, Series A, 6.50% due
8/01/2005 (c)(j) 2,638
----------------------------------------------------------------------------------------------------------------
A+ A1 2,000 Pasadena, California, COP, Refunding (Old Pasadena Parking Facility
Project), 6.25% due 1/01/2018 2,242
----------------------------------------------------------------------------------------------------------------
AAA Aaa 7,500 Pioneers Memorial Hospital District, California, GO, Refunding,
6.50% due 10/01/2024 (a) 8,150
----------------------------------------------------------------------------------------------------------------
AAAr Aaa 5,000 Port Oakland, California, RITR, AMT, Class R, Series 5, 7.375% due
11/01/2012 (c)(k) 5,543
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,755 Poway, California, Unified School District, Special Tax Refunding Bonds
(Community Facilities District No. 1), 4.75% due 10/01/2023 (i) 3,368
----------------------------------------------------------------------------------------------------------------
NR* Aaa 2,250 Riverside County, California, Asset Leasing Corporation, Leasehold Revenue
Refunding Bonds, RIB, Series 148, 7.29% due 6/01/2016 (i)(k) 2,517
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 Roseville, California, Special Tax Refunding Bonds (Community Facilities
District 1-Northwest), 4.75% due 9/01/2020 (g) 4,556
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,000 San Diego, California, IDR, Refunding (San Diego Gas & Electric Company),
Series C, 5.90% due 9/01/2018 (g) 5,161
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 San Diego, California, Public Facilities Financing Authority, Sewer
Revenue Bonds, Series B, 5% due 5/15/2029 (c) 1,405
----------------------------------------------------------------------------------------------------------------
AAA Aaa 5,200 San Diego County, California, COP (Salk Institute for Bio Studies),
5.75% due 7/01/2031 (i) 5,358
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,500 San Diego County, California, Water Authority, COP, Series A, 4.75%
due 5/01/2028 (c) 1,328
----------------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Airport Commission,
International Airport Revenue Bonds, Second Series:
AAA Aaa 3,500 AMT, Issue 5, 6.50% due 5/01/2019 (c) 3,739
AAA Aaa 3,000 AMT, Issue 6, 6.50% due 5/01/2018 (a) 3,205
AAA Aaa 2,000 AMT, Issue 6, 6.60% due 5/01/2020 (a) 2,134
AAA Aaa 2,265 AMT, Issue 22, 4.70% due 5/01/2014 (a) 2,155
AAA Aaa 2,500 AMT, Issue 22, 4.75% due 5/01/2023 (a) 2,201
AAA Aaa 3,000 Issue 12-B, 5.625% due 5/01/2021 (c) 3,048
AAA Aaa 4,660 Issue 21, 4.50% due 5/01/2023 (i) 4,014
----------------------------------------------------------------------------------------------------------------
AAA Aaa 6,000 San Francisco, California, City and County Airport Commission, International
Airport Revenue Refunding Bonds, Second Series, Issue 20, 4.50% due
5/01/2026 (i) 5,117
----------------------------------------------------------------------------------------------------------------
San Francisco, California, City and County Redevelopment Agency, Lease Revenue
Refunding Bonds (George R. Moscone Convention Center) (g):
AAA Aaa 2,800 6.75% due 7/01/2015 3,066
AAA Aaa 3,050 6.75% due 7/01/2024 3,333
----------------------------------------------------------------------------------------------------------------
AAA Aaa 3,170 San Francisco State University, California, Revenue Bonds (Student Union),
Series B, 4.20% due 11/01/2023 (i) 2,606
----------------------------------------------------------------------------------------------------------------
AAA Aaa 4,560 San Jose, California, Redevelopment Agency, Tax Allocation Bonds (Merged
Area Redevelopment Project), 4.75% due 8/01/2029 (a) 4,027
----------------------------------------------------------------------------------------------------------------
San Mateo County, California, Joint Powers Authority, Lease Revenue
Refunding Bonds (Capital Projects Program):
AAA Aaa 2,450 5.125% due 7/01/2018 (i) 2,449
AAA Aaa 4,250 Series A, 4.75% due 7/15/2023 (g) 3,814
----------------------------------------------------------------------------------------------------------------
AAA Aaa 1,600 San Mateo County, California, Transportation District, Sales Tax Revenue
Refunding Bonds, Series A, 5.25% due 6/01/2019 (i) 1,609
----------------------------------------------------------------------------------------------------------------
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 (i) 3,866
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,595 Santa Clara, California, Redevelopment Agency, Tax Allocation Bonds
(Bayshore North Project), Series A, 5.25% due 6/01/2019 (a) 2,589
----------------------------------------------------------------------------------------------------------------
AAA Aaa 2,500 Santa Clara County, California, Financing Authority, Lease Revenue Bonds
(VMC Facility Replacement Project), Series A, 7.75% due 11/15/2011 (a) 3,196
----------------------------------------------------------------------------------------------------------------
Walnut, California, Public Financing Authority, Tax Allocation Revenue
Refunding Bonds (i):
AAA NR* 580 6.50% due 9/01/2002 (j) 616
AAA Aaa 920 6.50% due 9/01/2022 968
====================================================================================================================================
Puerto Rico--1.5% NR* Aaa 5,000 Puerto Rico Municipal Finance Agency, GO, RIB, Series 225, 7.39% due
8/01/2012 (g)(k) 5,819
====================================================================================================================================
Total Investments (Cost--$375,042)--98.4% 385,094
Other Assets Less Liabilities--1.6% 6,380
--------
Net Assets--100.0% $391,474
========
====================================================================================================================================
</TABLE>
(a) AMBAC Insured.
(b) Escrowed to maturity.
(c) FGIC Insured.
(d) FHA Insured.
(e) FHLMC Collateralized.
(f) FNMA/GNMA Collateralized.
(g) FSA Insured.
(h) GNMA Collateralized.
(i) MBIA Insured.
(j) Prerefunded.
(k) 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, 2000.
(l) 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, 2000.
* Not Rated.
+ 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.
8 & 9
<PAGE>
MuniYield California Insured Fund II, Inc., October 31, 2000
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
As of October 31, 2000
====================================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$375,042,441) ............................ $385,093,929
Cash ............................................................................. 45,220
Receivables: .....................................................................
Interest ...................................................................... $ 6,713,074
Securities sold ............................................................... 115,000 6,828,074
------------
Prepaid expenses and other assets ................................................ 40,972
------------
Total assets ..................................................................... 392,008,195
------------
====================================================================================================================================
Liabilities: Payables:
Dividends to shareholders ..................................................... 224,231
Investment adviser ............................................................ 159,648 383,879
------------
Accrued expenses ................................................................. 150,269
------------
Total liabilities ................................................................ 534,148
------------
====================================================================================================================================
Net Assets: Net assets ....................................................................... $391,474,047
============
====================================================================================================================================
Capital: Capital Stock (200,000,000 shares authorized):
Preferred Stock, par value $.10 per share (5,200 shares of AMPS*
issued and outstanding at $25,000 per share liquidation preference) ........... $130,000,000
Common Stock, par value $.10 per share (18,359,120 shares
issued and outstanding) ....................................................... $ 1,835,912
Paid-in capital in excess of par ................................................. 263,746,850
Undistributed investment income--net ............................................. 1,944,568
Accumulated realized capital losses on investments--net .......................... (9,635,039)
Accumulated distributions in excess of realized capital gains on
investments--net ................................................................. (6,469,732)
Unrealized appreciation on investments--net ...................................... 10,051,488
------------
Total--Equivalent to $14.24 net asset value per share of Common
Stock (market price--$13.625) .................................................... 261,474,047
------------
Total capital .................................................................... $391,474,047
============
====================================================================================================================================
</TABLE>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended October 31, 2000
====================================================================================================================================
<S> <C> <C> <C>
Investment Interest and amortization of premium and discount earned ......................... $ 21,076,391
Income:
====================================================================================================================================
Expenses: Investment advisory fees ......................................................... $ 1,891,880
Commission fees .................................................................. 331,526
Professional fees ................................................................ 79,266
Accounting services .............................................................. 78,583
Transfer agent fees .............................................................. 60,152
Directors' fees and expenses ..................................................... 30,130
Listing fees ..................................................................... 28,303
Printing and shareholder reports ................................................. 26,752
Custodian fees ................................................................... 20,604
Pricing fees ..................................................................... 15,401
Other ............................................................................ 33,221
-----------
Total expenses ................................................................... 2,595,818
------------
Investment income--net ........................................................... 18,480,573
------------
====================================================================================================================================
Realized & Realized loss on investments--net ................................................ (9,635,039)
Unrealized Change in unrealized appreciation/depreciation on investments--net ............... 30,763,983
Gain (Loss) on ------------
Investments--Net: Net Increase in Net Assets Resulting from Operations ............................. $ 39,609,517
============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
MuniYield California Insured Fund II, Inc., October 31, 2000
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended October 31,
------------------------------
Increase (Decrease) in Net Assets: 2000 1999
===================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ........................................................ $18,480,573 $ 18,738,440
Realized loss on investments--net ............................................. (9,635,039) (1,192,946)
Change in unrealized appreciation/depreciation on investments--net ............ 30,763,983 (42,458,713)
----------- ------------
Net increase (decrease) in net assets resulting from operations ............... 39,609,517 (24,913,219)
----------- ------------
===================================================================================================================================
Dividends & Investment income--net:
Distributions to Common Stock ............................................................... (14,801,729) (15,883,092)
Shareholders: Preferred Stock ............................................................ (4,504,460) (2,691,092)
Realized gain on investments--net:
Common Stock ............................................................... -- (6,023,067)
Preferred Stock ............................................................ -- (1,039,332)
In excess of realized gain on investments--net:
Common Stock ............................................................... -- (5,515,839)
Preferred Stock ............................................................ -- (951,806)
----------- ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ............................................................... (19,306,189) (32,104,228)
----------- ------------
===================================================================================================================================
Capital Stock Value of shares issued to Common Stock shareholders in reinvestment
Transactions: of dividends and distributions ................................................ 198,010 4,321,286
----------- ------------
===================================================================================================================================
Net Assets: Total increase (decrease) in net assets ....................................... 20,501,338 (52,696,161)
Beginning of year ............................................................. 370,972,709 423,668,870
----------- ------------
End of year* .................................................................. $391,474,047 $370,972,709
============ ============
===================================================================================================================================
*Undistributed investment income--net .......................................... $ 1,944,568 $ 2,770,184
============ ============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
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: 2000 1999 1998 1997 1996
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year .................... $ 13.14 $ 16.25 $ 15.70 $ 15.04 $ 14.92
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ................................ 1.02 1.03 1.08 1.10 1.10
Realized and unrealized gain (loss) on investments--net 1.14 (2.37) .63 .68 .13
-------- -------- -------- -------- --------
Total from investment operations ...................... 2.16 (1.34) 1.71 1.78 1.23
-------- -------- -------- -------- --------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net .............................. (.81) (.87) (.86) (.88) (.87)
Realized gain on investments--net ................... -- (.33) (.05) --@ --
In excess of realized gain on investments--net ...... -- (.31) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions to Common Stock
shareholders .......................................... (.81) (1.51) (.91) (.88) (.87)
-------- -------- -------- -------- --------
Capital charge resulting from issuance of Common Stock -- -- -- (.01) --
-------- -------- -------- -------- --------
Effect of Preferred Stock activity:
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net ............................ (.25) (.15) (.20) (.23) (.24)
Realized gain on investments--net ................. -- (.06) (.05) --@ --
In excess of realized gain on investments--net .... -- (.05) -- -- --
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity .............. (.25) (.26) (.25) (.23) (.24)
-------- -------- -------- -------- --------
Net asset value, end of year .......................... $ 14.24 $ 13.14 $ 16.25 $ 15.70 $ 15.04
======== ======== ======== ======== ========
Market price per share, end of year ................... $ 13.625 $12.6875 $16.0625 $15.0625 $ 14.125
======== ======== ======== ======== ========
===================================================================================================================================
Total Based on market price per share ....................... 14.23% (12.83%) 13.04% 13.20% 14.52%
Investment ======== ======== ======== ======== ========
Return:* Based on net asset value per share .................... 15.28% (10.76%) 9.72% 10.82% 7.26%
======== ======== ======== ======== ========
===================================================================================================================================
Ratios Based Total expenses** ...................................... 1.04% 1.02% .96% 1.00% 1.02%
on Average Net ======== ======== ======== ======== ========
Assets Of Total investment income--net** ........................ 7.43% 6.86% 6.84% 7.35% 7.35%
Common Stock: ======== ======== ======== ======== ========
Amount of dividends to Preferred Stock shareholders ... 1.81% .98% 1.27% 1.52% 1.62%
======== ======== ======== ======== ========
Investment income--net, to Common Stock shareholders .. 5.62% 5.88% 5.57% 5.83% 5.73%
======== ======== ======== ======== ========
===================================================================================================================================
Ratios Based
on Total Total expenses ........................................ .68% .69% .66% .68% .69%
Average Net ======== ======== ======== ======== ========
Assets:**+ Total investment income--net .......................... 4.88% 4.65% 4.72% 4.97% 4.99%
======== ======== ======== ======== ========
===================================================================================================================================
Ratios Based Dividends to Preferred Stock shareholders ............. 3.46% 2.08% 2.80% 3.20% 3.43%
on Average Net ======== ======== ======== ======== ========
Assets Of
Preferred Stock:
===================================================================================================================================
Supplemental Net assets, net of Preferred Stock, end of year
Data: (in thousands) ........................................ $261,474 $240,973 $293,669 $283,661 $190,653
======== ======== ======== ======== ========
Preferred Stock outstanding, end of year (in thousands) $130,000 $130,000 $130,000 $130,000 $ 90,000
======== ======== ======== ======== ========
Portfolio turnover .................................... 78.52% 86.51% 103.93% 85.35% 119.52%
======== ======== ======== ======== ========
===================================================================================================================================
Leverage: Asset coverage per $1,000 ............................. $ 3,011 $ 2,854 $ 3,259 $ 3,182 $ 3,118
======== ======== ======== ======== ========
===================================================================================================================================
Dividends Per Series A--Investment income--net ...................... $ 879 $ 493 $ 734 $ 809 $ 870
Share On ======== ======== ======== ======== ========
Preferred
Stock Series B--Investment income--net ...................... $ 838 $ 555 $ 672 $ 821 $ 844
Outstanding:++ ======== ======== ======== ======== ========
Series C--Investment income--net ...................... $ 884 $ 503 $ 697 $ 574 --
======== ======== ======== ======== ========
===================================================================================================================================
</TABLE>
* Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may
result in substantially different returns. Total investment
returns exclude the effects of sales charges.
** Do not reflect the effect of dividends to Preferred Stock
shareholders.
+ Includes Common and Preferred Stock average net assets.
++ The Fund's Preferred Stock was issued on November 30, 1992
(Series A and B) and January 27, 1997 (Series C).
@ Amount is less than $.01 per share.
See Notes to Financial Statements.
12 & 13
<PAGE>
MuniYield California Insured Fund II, Inc., October 31, 2000
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's financial statements are prepared in conformity
with accounting principles generally accepted in the United States of America,
which may require the use of management accruals and estimates. The Fund
determines and makes available for publication the net asset value of its Common
Stock on a weekly basis. The Fund's Common Stock is listed on the New York Stock
Exchange under the symbol MCA. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily in the
over-the-counter markets and are valued at the most recent bid price or yield
equivalent as obtained by the Fund's pricing service from dealers that make
markets in such securities. Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Options written or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price (options
written) or the last bid price (options purchased). Securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund, including valuations
furnished by a pricing service retained by the Fund, which may utilize a matrix
system for valuations. The procedures of the pricing service and its valuations
are reviewed by the officers of the Fund under the general supervision of the
Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various portfolio
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. 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) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates. Distributions in excess of realized capital gains are due to
primarily differing tax treatments for future transactions.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee at
an annual rate of .50% of the Fund's average weekly net assets, including
proceeds from the issuance of Preferred Stock.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 2000 were $272,567,958 and $299,719,070, respectively.
Net realized losses for the year ended October 31, 2000 and net unrealized gains
as of October 31, 2000 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Losses Gains
--------------------------------------------------------------------------------
Long-term investments ................. $(9,256,921) $10,051,488
Financial futures contracts ........... (378,118) --
----------- -----------
Total ................................. $(9,635,039) $10,051,488
=========== ===========
--------------------------------------------------------------------------------
As of October 31, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $10,051,488, of which $12,532,297 related to appreciated
securities and $2,480,809 related to depreciated securities. The aggregate cost
of investments at October 31, 2000 for Federal income tax purposes was
$375,042,441.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, including
Preferred Stock, par value $.10 per share, all of which were initially
classified as Common Stock. The Board of Directors is authorized, however, to
reclassify any unissued shares of capital stock without approval of holders of
Common Stock.
Common Stock
Shares issued and outstanding during the years ended October 31, 2000 and
October 31, 1999 increased by 14,174 and 277,909, respectively, as a result of
dividend reinvestment.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred Stock of the
Fund, with a par value of $.10 per share and a liquidation preference of $25,000
per
14 & 15
<PAGE>
MuniYield California Insured Fund II, Inc., October 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
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, 2000 were as follows: Series A, 4.10%; Series B, 3.85%; and Series
C, 3.30%.
Shares issued and outstanding during the years ended October 31, 2000 and
October 31, 1999 remained constant.
The Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the year ended October 31, 2000, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, an affiliate of FAM, earned $112,715 as commissions.
5. Capital Loss Carryforward:
At October 31, 2000, the Fund had a net capital loss carry forward of
approximately $14,862,000, of which $4,997,000 expires in 2007 and $9,865,000
expires in 2008. This amount will be available to offset like amounts of any
future taxable gains.
6. Subsequent Event:
On November 8, 2000, the Fund's Board of Directors declared an ordinary income
dividend to Common Stock shareholders in the amount of $.067300 per share,
payable on November 29, 2000 to shareholders of record as of November 20, 2000.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
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, 2000, the related statements of operations for the year
then ended and changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years in the
five-year period then ended. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 2000 by correspondence with the custodian. 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, 2000, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods in conformity with accounting principles generally accepted in
the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
November 29, 2000
IMPORTANT TAX INFORMATION (unaudited)
All of the net investment income distributions paid by MuniYield California
Insured Fund II, Inc. during its taxable year ended October 31, 2000 qualify as
tax-exempt interest dividends for Federal income tax purposes. Additionally,
there were no capital gains distributions paid by the Fund during the year.
Please retain this information for your records.
QUALITY PROFILE (unaudited)
The quality ratings of securities in the Fund as of October 31, 2000 were as
follows:
--------------------------------------------------------------------------------
Percent of
S&P Rating/Moody's Rating Net Assets
--------------------------------------------------------------------------------
AAA/Aaa ............................................. 82.1%
AA/Aa ............................................... 4.6
A/A ................................................. 0.6
Other* .............................................. 11.1
--------------------------------------------------------------------------------
* Temporary investments in short-term municipal securities.
16 & 17
<PAGE>
MuniYield California Insured Fund II, Inc., October 31, 2000
MANAGED DIVIDEND POLICY
The Fund's dividend policy is to distribute all or a portion of its net
investment income to its shareholder on a monthly basis. 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.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Joseph L. May, Director
Andre F. Perold, Director
Roberta Cooper Ramo, Director
Arthur Zeikel, Director
Vincent R. Giordano, Senior Vice President
Kenneth A. Jacob, Vice President
Roberto Roffo, Vice President
Donald C. Burke, Vice President and Treasurer
Alice A. Pellegrino, Secretary
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Transfer Agents
Common Stock:
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Preferred Stock:
The Bank of New York
100 Church Street
New York, NY 10286
NYSE Symbol
MCA
18 & 19
<PAGE>
MuniYield California Insured Fund II, Inc. seeks to provide shareholders with as
high a level of current income exempt from Federal and California income taxes
as is consistent with its investment policies and prudent investment management
by investing primarily in a portfolio of long-term municipal obligations the
interest on which, in the opinion of bond counsel to the issuer, is exempt from
Federal and California income taxes.
This report, including the financial information herein, is transmitted to
shareholders of MuniYield California Insured Fund II, Inc. for their
information. It is not a prospectus. Past performance results shown in this
report should not be considered a representation of future performance. The Fund
has leveraged its Common Stock by issuing Preferred Stock to provide the Common
Stock shareholders with a potentially higher rate of return. Leverage creates
risks for Common Stock shareholders, including the likelihood of greater
volatility of net asset value and market price of shares of the Common Stock,
and the risk that fluctuations in the short-term dividend rates of the Preferred
Stock may affect the yield to Common Stock shareholders. Statements and other
information herein are as dated and are subject to change.
MuniYield California
Insured Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011 #16388--10/00
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