MuniYield Insured Fund II, Inc.
Semi-Annual
Report
April 30, 1994
Officers and Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
M. Colyer Crum, Director
Edward H. Meyer, Director
Jack B. Sunderland, Director
J. Thomas Touchton, 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
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
<PAGE>
NYSE Symbol
MTI
This report, including the financial information herein,
is transmitted to the shareholders of MuniYield Insured
Fund II, Inc. for their information. It is not a pros-
pectus, circular or representation intended for use in
the purchase of shares of the Fund or any securities men-
tioned in the report. Past performance results shown in
this report should not be considered a representation of
future performance. The Fund has leveraged its Common
Stock by issuing Preferred Stock to provide the Common
Stock shareholders with a potentially higher rate of re-
turn. 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 Insured Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield Insured Fund II, Inc.
TO OUR SHAREHOLDERS
For the six-month period ended April 30, 1994, the Common Stock
of MuniYield Insured Fund II, Inc. earned $0.731 per share income
dividends, which includes earned and unpaid dividends of $0.076.
This represents a net annualized yield of 10.18%, based on a
month-end per share net asset value of $14.48. Over the same
period, the total investment return on the Fund's Common Stock
was -8.60%, based on a change in per share net asset value from
$16.63 to $14.48, and assuming reinvestment of $0.741 per share
income dividends.
For the six-month period ended April 30, 1994, the Fund's
Preferred Stock had an average yield of 2.446% for Series A and
2.878% for Series B.
<PAGE>
The Environment
Inflationary expectations and investor sentiment changed for
the worse during the three-month period ended April 30, 1994.
Following 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,
1994 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,
1994.
Rather than view the Federal Reserve Board's first tightening
move as a preemptive strike against inflation, fixed-income in-
vestors 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.
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 dramatic
increase in US Treasury bond yields. By the end of April, yields
of US Treasury securities rose by over 95 basis points to
approximately 7.30%.
<PAGE>
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
Reserve 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 in-
creases. 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%.
The magnitude of the rise in tax-exempt bond yields experienced
over the past six months has not been seen since 1987 when muni-
cipal bond rates rose 250 basis points between March and October
of that year. It is very important to note that the recent muni-
cipal 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 volatile and, at times,
chaotic as investors sought to liquidate positions without con-
cern 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.
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
represents a decline of approximately 20% versus the comparable
period a year ago. This decline was expected and has been
discussed 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 issuance
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.
<PAGE>
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%
represents an after-tax equivalent of 10.65%. With prevailing
estimates 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-month period ended April 30, 1994, our strategy
was to continue to structure the Fund's portfolio so that it
would maintain an attractive level of tax-exempt income. Within
this framework we sold prerefunded bonds with approaching call
dates and particular issues that we perceived to be fully valued
in relation to the market as a whole. Subsequently, we had an
opportunity to make additions to the portfolio, notably in the
insured sector of the municipal market. We emphasized the acqui-
sition of current coupon income-oriented issues in specific
high-tax states. Our expectations for long-term municipal in-
terest rates is positive. Given the recent rise in yields and
the alternative investment choices, municipal securities are
offering very attractive yield levels.
We have kept the Fund's cash reserve position at a minimum level
to take advantage of the steep yield spread between short-term
and long-term interest rates, which continues to generate
positive benefits to Common Stock shareholders as a result of the
leveraging of the Preferred Stock. 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. Should the interest rate differential between short-term
and long-term interest rates narrow because of a rise in short-
term interest rates, the incremental yield "pick-up" on the
Common Stock will be reduced. Furthermore, if long-term interest
rates rise, the Common Stock's net asset value will reflect the
full decline in the entire portfolio holdings, since the value of
the Fund's Preferred Stock does not fluctuate. During the six-
month period ended April 30, 1994, long-term interest rates rose,
reflected in the decline in the net asset value of the Fund's
Common Stock. For a complete explanation of leveraging, see the
description given below.
<PAGE>
We appreciate your ongoing interest in MuniYield Insured Fund II,
Inc., and we look forward to assisting you with your financial
needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
June 6, 1994
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield Insured Fund II, Inc. utilizes leveraging to seek to
enhance the yield and net asset value of its Common Stock. How-
ever, 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 in-
vests the proceeds in long-term municipal bonds. The interest
earned on these investments is paid to Common Stock shareholders
in the form of dividends, and the value of these portfolio
holdings is reflected in the per share net asset value of the
Fund's Common Stock. However, in order to benefit Common Stock
shareholders, the yield curve must be positively sloped; that is,
short-term interest rates must be lower than long-term interest
rates. At the same time, a period of generally declining interest
rates will benefit Common Stock shareholders. If either of these
conditions change, then the risks of leveraging will begin to
outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred
Stock for an additional $50 million, creating a total value of
$150 million available for investment in long-term municipal
bonds. If prevailing short-term interest rates are approximately
3% and long-term interest rates are approximately 6%, the yield
curve has a strongly positive slope. The fund pays dividends on
the $50 million of Preferred Stock based on the lower short-term
interest rates. At the same time, the fund's total portfolio of
$150 million earns the income based on long-term interest rates.
<PAGE>
In this case, the dividends paid to Preferred Stock shareholders
are significantly lower than the income earned on the fund's
long-term investments, and therefore the Common Stock shareholders
are the beneficiaries of the incremental yield. However, if short-
term interest rates rise, narrowing the differential between short-
term and long-term interest rates, the incremental yield pick-up
on the Common Stock will be reduced. At the same time, the market
value of the fund's Common Stock (that is, its price as listed on
the New York Stock Exchange) may, as a result, decline. Furthermore,
if long-term interest rates rise, the Common Stock's net asset value
will reflect the full decline in the price of the portfolio's in-
vestments, since the value of the fund's Preferred Stock does not
fluctuate. In addition to the decline in net asset value, the mar-
ket value of the fund's Common Stock may also decline.
PER SHARE INFORMATION
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Net Unrealized Dividends/Distributions
Investment Realized Gains Net Investment Income Capital Gains
For the Period Income Gains (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
October 30, 1992++ to January 31, 1993 $.25 $.01 $ .68 $.13 $.04 -- --
February 1, 1993 to April 31, 1993 .30 .07 .63 .25 .04 -- --
May 1, 1993 to July 31, 1993 .30 .15 .14 .25 .05 -- --
August 1, 1993 to October 31, 1993 .30 .07 .78 .25 .05 -- --
November 1, 1993 to January 31, 1994 .30 .19 (.12) .25 .01 $.25 $.05
February 1, 1994 to April 30, 1994 .28 .18 2.13 .24 .05 -- --
<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 $14.78 $14.75 $15.125 $14.125 8,336
February 1, 1993 to April 31, 1993 16.00 14.75 15.875 14.625 17,791
May 1, 1993 to July 31, 1993 16.01 15.39 15.75 15.00 1,237
August 1, 1993 to October 31, 1993 16.95 15.80 16.50 15.25 2,677
November 1, 1993 to January 31, 1994 16.61 16.03 16.75 15.375 998
February 1, 1994 to April 30, 1994 16.38 13.87 16.125 12.75 1,791
<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>
PORTFOLIO ABBREVIATIONS
<PAGE>
To simplify the listings of MuniYield 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
EDA Economic Development Authority
GO General Obligation Bonds
HFA Housing Finance Authority
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
RIB Residual Interest Bonds
S/F Single-Family
TAN Tax Anticipation Notes
TRAN Tax Revenue Anticipation Notes
VRDN Variable Rate Demand Notes
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama--0.5% AAA Aaa $ 2,000 East Alabama Health Care Authority, Health Care
Facilities, Revenue Refunding Bonds, TAN, 5.25%
due 9/01/2014 (d) $ 1,761
Arizona--0.6% AAA Aaa 2,165 Chandler, Arizona, Water and Sewer, Revenue Refunding
Bonds, 6.25% due 7/01/2013 (c) 2,183
<PAGE>
California--13.9% AAA Aaa 1,500 California State, GO (Variable Purpose), 6% due 10/01/2021
(d) 1,445
AAA Aaa 5,000 California State Public Works Board, Lease Revenue Bonds
(Department of Corrections--California State Prison),
Series B, 5.375% due 12/01/2019 (d) 4,398
California State Public Works Board, Lease Revenue Bonds
(Various Universities of California Projects):
A A1 2,000 Refunding, Series A, 5.50% due 6/01/2021 1,728
AAA Aaa 7,250 Series A, 6.40% due 12/01/2016 (b) 7,299
A A1 5,000 Series B, 5.50% due 6/01/2019 (d) 4,357
SP-1 MIG1++ 5,000 California State, RAN, Series B, 3.50% due 7/26/1994 5,006
SP-1+ MIG1++ 2,100 Los Angeles, California, University School District, TRAN,
3.25% due 7/15/1994 2,101
AAA Aaa 2,250 Los Angeles, California, Wastewater System Revenue Re-
funding Bonds, Series A, 5.70% due 6/01/2020 (d) 2,078
AAA Aaa 5,000 Los Angeles County, California, COP (Correctional Facil-
ities Project), 6.50% due 9/01/2013 (d) 5,076
AAA Aaa 8,000 Los Angeles County, California, Transportation Commission,
Sales Tax Revenue Bonds, Proposition C, Second Senior,
Series A, 6% due 7/01/2023 (d) 7,691
AAA Aaa 1,750 Moulton Niguel Water District, California, COP, 4.80% due
9/01/2017 (b) 1,426
AAA Aaa 1,250 Sacramento, California, Municipal Utility District,
Electric Revenue Refunding Bonds, Series D, 5.25% due
11/15/2020 (d) 1,077
AAA Aaa 1,440 Southern California Public Power Authority, Power Project
Revenue Bonds (San Juan Unit 3), Series A, 5.25% due
1/01/2014 (d) 1,274
AAA Aaa 2,000 Southern California Public Power Authority, Revenue Re-
funding Bonds (Transmission Project), Subseries A, 5.25%
due 7/01/2020 (d) 1,725
NR Aa 2,300 University of California, COP, Refunding (UCLA Center
Chiller/Cogen Project), 5.60% due 11/01/2020 2,053
AAA Aaa 1,000 University of California, Revenue Refunding Bonds (Housing
System), Series A, 5% due 11/01/2013 (d) 862
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Connecticut--2.3% AAA Aaa $ 8,000 Connecticut State HFA, Revenue Bonds (Housing Mortgage
Finance Program), Series B, 6.75% due 11/15/2023 (d) $ 8,126
Delaware--1.2% AAA Aaa 2,500 Delaware River and Bay Authority, Delaware, Revenue
Refunding Bonds, 4.75% due l/01/2024 (d) 2,008
AAA Aaa 2,500 Delaware State EDA, Gas Facility Revenue Bonds (Delmarva
Power and Light), Series A, AMT, 6.05% due 6/01/2032 (d) 2,393
<PAGE>
Florida--3.4% AAA Aaa 1,500 Brevard County, Florida, School Board, COP, Refunding,
Series A, 6.50% due 7/01/2012 (b) 1,538
Florida State Municipal Power Agency Revenue Bonds:
AAA Aaa 2,000 (Power Supply Project), 5.10% due 10/01/2025 1,661
AAA Aaa 3,850 Refunding (Saint Lucie Project), 5.25% due 10/01/2021 (c) 3,352
AAA Aaa 3,350 Orlando and Orange County Expressway Authority, Florida,
Revenue Refunding Bonds (Florida Expressway), Junior Lien,
Series A, 5.25% due 7/01/2019 (c) 2,931
AAA Aaa 3,000 West Palm Beach, Florida, Utility System Revenue Bonds,
Series B, 5.40% due 10/01/2023 (c) 2,662
Georgia--3.4% AAA Aaa 4,700 Albany, Georgia, Sewer System Revenue Bonds, 6.70% due
7/01/2022 (d) 4,864
AAA Aaa 5,000 Atlanta, Georgia, COP (Atlanta Pretrial Detention Center),
6.25% due 12/01/2017 (d) 4,981
AA- A3 2,000 Monroe County, Georgia, Development Authority, PCR,
Refunding (Oglethorpe Power Scherer), Series A, 6.80% due
l/01/2012 2,067
Hawaii--2.4% AAA Aaa 6,000 Hawaii State Airport System Revenue Bonds, Second Series,
AMT, 7% due 7/01/2018 (d) 6,431
AAA Aaa 2,625 Hawaii State, Department of Budget and Finance, Special
Purpose Mortgage Revenue Bonds (Hawaiian Electric Company
and Subsidiary Project), AMT, 5.45% due 11/01/2023 (d) 2,296
Illinois--8.1% Chicago, Illinois, O'Hare International Airport, Special
Facilities Revenue Bonds (International Terminal), AMT (d):
AAA Aaa 2,000 6.75% due l/01/2012 2,072
AAA Aaa 3,870 6.75% due 1/01/2018 3,955
AAA Aaa 10,375 Chicago, Illinois, Wastewater Transmission Revenue Bonds,
6.35% due 1/01/2022 (c) 10,320
A- NR 1,300 Illinois Health Facilities Authority Revenue Bonds
(Northern Illinois Medical Center Project), 5.875% due
9/01/2013 1,192
Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Bonds, Series A:
A+ A 1,505 6.50% due 6/15/2022 1,497
AAA Aaa 10,000 6.50% due 6/15/2027 (b) 10,070
Indiana--2.6% AAA Aaa 3,800 Ball State University, Indiana, University Revenue Bonds
(Student Fee), Series G, 6.125% due 7/01/2014 3,661
AAA Aaa 1,390 Indiana Municipal Power Agency, Power Supply System,
Revenue Refunding Bonds, Series B, 6% due 1/01/2012 (d) 1,369
A+ NR 4,650 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Refunding Bonds, Series D, 6.75% due 2/01/2020 4,627
Iowa--1.3% AAA Aaa 4,715 Iowa Financing Authority, S/F, Mortgage Revenue Refunding
Bonds, Series F, 6.35% due 7/01/2009 (b) 4,696
<PAGE>
Louisiana--0.6% NR Aa 2,000 Louisiana Public Facilities Authority, Student Loan Revenue
Bonds, Senior Series A-2, AMT, 6.75% due 9/01/2006 2,042
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Massachusetts--4.7% Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
NR VMIG1 $ 1,500 (Capital Asset Program), Series E, VRDN, 3% due 1/01/2035
(a) $ 1,500
AAA Aaa 5,000 (Massachusetts General Hospital), Series F, 6.25% due
7/01/2020 (b) 4,961
AAA Aaa 10,000 (Northeastern University), Series E, 6.55% due 10/01/2022
(d) 10,196
Michigan--2.2% AAA Aaa 2,750 Caledonia, Michigan, Community Schools, Revenue Refunding
Bonds, UT, 6.625% due 5/01/2014 (b) 2,828
BBB Baa1 1,750 Michigan State, Hospital Financing Authority, Revenue Re-
funding Bonds (Pontiac Osteopathic), Series A, 6% due
2/01/2024 1,515
AAA Aaa 3,500 Monroe County, Michigan, PCR (Detroit Edison Company--Coll
Project), Series I-B, AMT, 6.55% due 9/01/2024 (d) 3,556
Minnesota--1.3% A- A 4,500 Minneapolis and St. Paul, Minnesota, Housing and Redevel-
opment Authority, Health Care System Revenue Bonds (Group
Health Plan Incorporated Project), 6.90% due 10/15/2022 4,622
Missouri--0.6% AAA Aaa 2,000 Missouri State Health and Educational Facility Authority,
Health Facilities Revenue Bonds (Heartland Health Systems
Project), 6.35% due 11/15/2017 (b) 2,018
Nebraska--0.7% NR Aa 2,700 Nebraska Higher Education Loan Program Incorporated Revenue
Bonds, Senior Sub-Lien, Series A-5, AMT, 6.65% due
6/01/2008 2,676
Nevada--3.5% AAA Aaa 2,770 Henderson, Nevada, Health Care Facilities, Revenue Re-
funding Bonds (Catholic Healthcare), Series A, 5% due
7/01/2020 (b) 2,286
AAA Aaa 5,000 Washoe County, Nevada, Gas Facility Revenue Bonds (Sierra
Pacific Power), AMT, 6.55% due 9/01/2020 (d) 5,045
AAA Aaa 5,000 Washoe County, Nevada, Water Facility Revenue Bonds (Sierra
Pacific Power), AMT, 6.65% due 6/01/2017 (d) 5,111
New Jersey--1.0% AAA Aaa 3,650 New Jersey EDA, Water Facilities, Revenue Refunding Bonds
(Hackensack Water Company Project), Series A, 5.80% due
3/01/2024 (d) 3,452
<PAGE>
New Mexico--2.1% AAA Aaa 7,250 Gallup, New Mexico, PCR, Refunding (Plains Electric Gener-
ation), 6.65% due 8/15/2017 (d) 7,478
New York--7.9% A- Baa1 7,500 New York City, New York, GO, Series C, Subseries C-l , 7%
due 8/01/2018 7,848
New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Series B:
AAA Aaa 2,575 5.375% due 6/15/2019 (b) 2,282
AAA Aaa 475 5.375% due 6/15/2019 (d) 421
BBB- Baa1 5,725 New York State Dormitory Authority Revenue Bonds (Upstate
Community Colleges), Series A, 5.70% due 7/01/2021 5,097
BB+ Baa 1,000 New York State Energy Research and Development Authority,
Electric Facilities Revenue Bonds (Long Island Lighting),
Series A, AMT, 7.15% due 6/01/2020 1,015
A A 1,500 New York State Local Government Assistance Corporation
Revenue Bonds, Series D, 5% due 4/01/2023 1,223
New York State Medical Care Facilities Finance Agency
Revenue Bonds (Mental Health Services Facility):
BBB+ Baa1 3,500 Refunding, Series F, 5.375% due 2/15/2014 3,075
BBB+ Baa1 5,685 Refunding, Series F, 5.25% due 2/15/2019 4,784
BBB+ Baa1 3,000 Series A, 5.25% due 8/15/2023 2,481
Ohio--1.2% AAA Aaa 5,000 Ohio Municipal Electric Generation Agency, COP (Joint
Venture 5), 5.375% due 2/15/2024 (b) 4,424
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Oklahoma--0.6% AAA Aaa $ 2,500 Oklahoma State Municipal Power Authority, Power Supply
System, Revenue Refunding Bonds, Series A, 4.75% due
1/01/2022 (c) $ 2,040
Oregon--0.4% AAA Aaa 1,500 Oregon State Department of Transportation Revenue Bonds
(Regulation Light Rail Fund--Westside Project), 6.25% due
6/01/2009 (d) 1,533
Pennsylvania--3.0% Allegheny County, Pennsylvania, Hospital Development
Authority Revenue Bonds (Health Center Presbyterian
University), Series A (d):
AAA Aaa 5,000 6.25% due 11/01/2023 4,927
A1+ VMIG1 100 VRDN, 3.20% due 3/01/2020 (a) 100
AAA Aaa 1,000 Beaver County, Pennsylvania, Hospital Authority, Revenue
Refunding Bonds (Medical Center Beaver County, Incorpor-
ated), 6.625% due 7/01/2010 (b) 1,039
AA Aa 4,000 Pennsylvania HFA, RIB, AMT, 8.769% due 4/01/2025 (g) 3,525
BBB+ Baa1 1,150 Philadelphia, Pennsylvania, Hospitals and Higher Education
Facilities Authority, Hospital Revenue Refunding Bonds
(Temple University Hospital), Series A, 6.625% due
11/15/2023 1,103
<PAGE>
South Carolina--4.2% Piedmont, South Carolina, Municipal Power Agency, Electric
Revenue Refunding Bonds (d):
AAA Aaa 3,500 6.30% due 1/01/2014 3,476
AAA Aaa 10,000 6.30% due 1/01/2022 9,857
AAA Aaa 2,000 South Carolina State Public Service Authority Revenue Bonds
(Santee Cooper), Series D, 6.50% due 7/01/2014 (b) 2,031
South Dakota--0.7% AAA Aaa 2,300 Rapid City, South Dakota, Sales Tax Revenue Refunding
Bonds, Series B, 6% due 6/01/2012 (c) 2,312
Tennessee--1.1% AAA Aaa 1,000 Clarksville, Tennessee, Water, Sewer and Gas Revenue Re-
funding and Improvement Bonds, Series B, 6.25% due 2/01/2018
(d) 999
AAA Aaa 2,905 Knox County, Tennessee, Health Educational and Housing
Facilities Board, Hospital Facilities Revenue Refunding
Bonds (Fort Sanders Alliance), Series C, 6.25% due 1/01/2013
(d) 2,940
Texas--9.2% Brazos River Authority, Texas, Revenue Refunding Bonds (b):
AAA Aaa 7,000 (Coll Houston Light & Power), Series A, 6.70% due
3/01/2017 7,202
AAA Aaa 11,500 PCR (Coll Texas Utilities Company Project), AMT, 6.50% due
12/01/2027 11,543
AAA Aaa 6,105 Brownsville, Texas, Utilities System Revenue Bonds, 6.50%
due 9/01/2017 (b) 6,175
AAA Aaa l,000 Harris County, Texas, Revenue Refunding Bonds (Toll Road
Senior Lien), Series A, 6.50% due 8/15/2017 (b) 1,081
AAA Aaa 5,565 Houston, Texas, Water and Sewer System Revenue Bonds,
Junior Lien, Series A, 6.375% due 12/01/2022 (d) 5,609
AAA Aaa 1,500 Sabine River Authority, Texas, PCR, Refunding (Coll Texas
Utilities Electric Company Project), 6.55% due 10/01/2022
(c) 1,521
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Virginia--2.1% AAA Aaa $ 6,750 Prince William County, Virginia, Service Authority, Water
and Sewer System Revenue Bonds, 6.50% due 7/01/2001 (c)(e) $ 7,341
<PAGE>
Washington--9.0% AA Aa 3,000 Seattle, Washington, Water System Revenue Refunding Bonds,
5.50% due 6/01/2014 2,741
AAA Aaa 11,000 Spokane County, Washington, Lease Revenue Refunding
Financing Bonds (Multi-Purpose Arena Project), Series A,
AMT, 6.60% due 1/01/2014 (b) 11,203
AAA Aaa 2,500 Washington State, Health Care Facilities Authority Revenue
Bonds (Virginia Mason Obligation Group, Seattle), 6.30%
due 2/15/2017 (d) 2,444
Washington State Public Power Supply System, Revenue
Refunding Bonds (Nuclear Project Number 1) (d):
AAA Aaa 4,000 Series A, 6.25% due 7/01/2017 3,947
AAA Aaa 3,485 Series B, 5.60% due 7/01/2015 3,183
Washington State Public Power Supply System, Revenue
Refunding Bonds (Nuclear Project Number 2), Series A:
AA Aa 2,500 5.375% due 7/01/2010 2,244
AA Aa 2,500 5.375% due 7/01/2011 2,223
AAA Aaa 4,150 Yakima--Tieton, Washington, Irrigation District, Revenue
Refunding Bonds, 6.125% due 6/01/2013 (f) 4,111
Wisconsin--2.5% Wisconsin State Health and Educational Facilities Authority
Revenue Bonds:
AAA Aaa 4,000 (Aurora Health Care Obligated Group), 5.25% due
8/15/2023 (d) 3,371
AAA Aaa 6,000 Refunding (Meriter Hospital Incorporated), Series A, 6%
due 12/01/2022 (c) 5,649
Wyoming--0.1% A1+ Aaa 300 Lincoln County, Wyoming, PCR (Exxon Project), Series C,
AMT, VRDN, 2.80% due 7/01/2017 (a) 300
Total Investments (Cost--$352,451)--98.4% 352,015
Other Assets Less Liabilities--1.6% 5,754
--------
Net Assets--100.0% $357,769
========
<FN>
(a) The interest rate is subject to change periodically based
upon the prevailing market rate. The interest rates shown are
the rates in effect at April 30, 1994.
(b) AMBAC Insured.
(c) FGIC Insured.
(d) MBIA Insured.
(e) Prerefunded.
(f) FSA Insured.
(g) The interest rate is subject to change periodically and
inversely based upon the prevailing market rate. The interest
rates shown are the rates in effect at April 30, 1994.
+ Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
<PAGE>
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 $352,450,950) (Note 1a) $352,014,576
Cash 72,201
Receivables:
Interest $ 6,942,022
Securities sold 2,187,619 9,129,641
------------
Deferred organization expenses (Note 1e) 32,978
Prepaid expenses and other assets 136,151
------------
Total assets 361,385,547
------------
Liabilities: Payables:
Securities purchased 2,803,007
Dividends to shareholders (Note 1g) 671,523
Investment adviser (Note 2) 141,737 3,616,267
------------ ------------
Total liabilities 3,616,267
------------
Net Assets: Net assets $357,769,280
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (2,400 shares of AMPS*
issued and outstanding at $50,000 per share liquidation preference) $120,000,000
Common Stock, par value $.10 per share (16,420,827 shares issued and
outstanding) $ 1,642,083
Paid-in capital in excess of par 228,565,325
Undistributed investment income--net 1,983,059
Undistributed realized capital gains--net 6,015,187
Unrealized depreciation on investments--net (436,374)
------------
Total--Equivalent to $14.48 net asset value per share of Common Stock
(market price--$13.375) 237,769,280
------------
Total capital $357,769,280
============
<FN>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Six Months Ended April 30, 1994
<CAPTION>
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 10,803,427
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 942,194
Commission fees (Note 4) 158,466
Professional fees 37,576
Transfer agent fees 26,228
Accounting services (Note 2) 18,705
Listing fees 15,357
Printing and shareholder reports 13,475
Directors' fees and expenses 11,174
Custodian fees 9,829
Pricing fees 5,694
Amortization of organization expenses (Note 1e) 3,402
Other 15,665
------------
Total expenses 1,257,765
------------
Investment income--net 9,545,662
------------
Realized & Realized gain on investments--net 6,015,193
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net (36,959,687)
(Loss) on ------------
Investments--Net Net Decrease in Net Assets Resulting from Operations $(21,398,832)
(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 $ 9,545,662 $ 18,825,793
Realized gain on investments--net 6,015,193 4,951,515
Change in unrealized appreciation/depreciation on investments--net (36,959,687) 36,523,313
------------ ------------
Net increase (decrease) in net assets resulting from operations (21,398,832) 60,300,621
------------ ------------
<PAGE>
Dividends & Investment income--net:
Distributions to Common Stock (7,974,869) (14,394,871)
Shareholders Preferred Stock (1,063,896) (2,954,760)
(Note 1g): Realized gain on investments--net:
Common Stock (4,174,365) --
Preferred Stock (777,156) --
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (13,990,286) (17,349,631)
------------ ------------
Common & Proceeds from issuance of Preferred Stock -- 120,000,000
Preferred Stock Value of shares issued to Common Stock shareholders in reinvestment
Transactions of dividends 519,444 1,373,218
(Notes 1e & 4): Offering and underwriting costs resulting from the issuance of
Preferred Stock -- (2,352,020)
------------ ------------
Net increase in net assets derived from Common and Preferred Stock
transactions 519,444 119,021,198
------------ ------------
Net Assets: Total increase (decrease) in net assets (34,869,674) 161,972,188
Beginning of period 392,638,954 230,666,766
------------ ------------
End of period* $357,769,280 $392,638,954
============ ============
<FN>
* Undistributed investment income--net $ 1,983,059 $ 1,476,162
============ ============
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 $ 16.63 $ 14.15 $ 14.18
Operating ---------- ---------- ----------
Performance: Investment income--net .58 1.15 --
Realized and unrealized gain (loss) on
investments--net (1.88) 2.53 --
---------- ---------- ----------
Total from investment operations (1.30) 3.68 --
---------- ---------- ----------
<PAGE>
Less dividends and distributions to Common Stock
shareholders:
Investment income--net (.49) (.88) --
Realized gain on investments--net (.25) -- --
---------- ---------- ----------
Total dividends and distributions to Common Stock
shareholders (.74) (.88) --
---------- ---------- ----------
Capital charge resulting from issuance of Common Stock -- -- (.03)
---------- ---------- ----------
Effect of Preferred Stock activity++++:
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net (.06) (.18) --
Realized gain on investments--net (.05) -- --
Capital charge resulting from issuance of Common
Stock -- (.14) --
---------- ---------- ----------
Total effect of Preferred Stock activity (.11) (.32) --
---------- ---------- ----------
Net asset value, end of period $ 14.48 $ 16.63 $ 14.15
========== ========== ==========
Market price per share, end of period $ 13.375 $ 15.875 $ 15.00
========== ========== ==========
Total Investment Based on market price per share (11.56%)+++ 11.95% 0.00%+++
Return:** ========== ========== ==========
Based on net asset value per share (8.60%)+++ 24.32% (0.21%)+++
========== ========== ==========
Ratios to Average Expenses, net of reimbursement .66%* .54% --%
Net Assets:*** ========== ========== ==========
Expenses .66%* .65% --%
========== ========== ==========
Investment income--net 5.05%* 5.25% --%
========== ========== ==========
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $ 237,769 $ 272,639 $ 230,667
========== ========== ==========
Preferred Stock outstanding, end of period
(in thousands) $ 120,000 $ 120,000 $ --
========== ========== ==========
Portfolio turnover 24.81% 38.69% --%
========== ========== ==========
Dividends Per Share Series A--Investment income--net $ 372 $ 1,183 $ --
On Preferred Stock Series B--Investment income--net 515 1,279 --
Outstanding:
<PAGE>
<FN>
++ Commencement of Operations.
++++ The Fund's Preferred Stock was issued on November 30, 1992.
* 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.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield Insured Fund II, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a non-diversified, closed-
end management investment company. The Fund determines and makes
available for publication the net asset value of its Common Stock
on a weekly basis. The Fund's Common Stock is listed on the New
York Stock Exchange under the symbol MTI. 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 market and are valued at the
most recent bid price or yield equivalent as obtained by the
Fund's pricing service from dealers that make markets in such
securities. Financial futures contracts, which are traded on
exchanges, are valued at their closing prices as of the close of
such exchanges. Options, which are traded on exchanges, are
valued at their last sale price as of the close of such exchanges
or, lacking any sales, at the last available bid price.
Securities with remaining maturities of sixty days or less are
valued at amortized cost, which approximates market value.
Securities for which market quotations are not readily available
are valued at their fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund.
<PAGE>
(b) Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures
contracts are contracts for delayed delivery of securities at a
specific future date and at a specific price or yield. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on
which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as variation margin and are
recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income
tax provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are
entered into (the trade dates). Interest income is recognized on
the accrual basis. Discounts and market premiums are amortized
into interest income. Realized gains and losses on security
transactions are determined on the identified cost basis.
(e) Deferred organization and offering expenses--Deferred organ-
ization expenses are amortized on a straight-line basis over
a five-year period. Direct expenses relating to the public offer-
ing of the Common and Preferred Stock were charged to capital at
the time of issuance.
(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.
<PAGE>
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
securities, for the six months ended April 30, 1994 were
$88,306,865 and $95,937,769, respectively.
Net realized and unrealized gains (losses) as of April 30, 1994
were as follows:
Realized Unrealized
Gains Losses
Long-term investments $4,735,116 $ (376,173)
Short-term investments 9,837 (60,201)
Financial futures contracts 1,270,240 --
---------- ----------
Total $6,015,193 $ (436,374)
========== ==========
As of April 30, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $436,374, of which $5,911,670
related to appreciated securities and $6,348,044 related to
depreciated securities. The aggregate cost of investments at
April 30, 1994 for Federal income tax purposes was $352,450,950.
<PAGE>
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital
stock, including Preferred Stock, par value $.10 per share, all
of which were initially classified as Common Stock. The Board of
Directors is authorized, however, to reclassify any unissued
shares of capital stock without approval of the holders of Common
Stock.
Common Stock
For the six months ended April 30, 1994, shares issued and
outstanding increased by 30,267 to 16,420,827 as a result of
dividend reinvestment. At April 30, 1994, total paid-in capital
amounted to $230,207,408.
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, 2.65% and Series B, 3.075%.
In connection with the offering of AMPS, the Board of Directors
reclassified 2,400 shares of unissued capital stock as AMPS. For
the six months ended April 30, 1994, there were 2,400 AMPS shares
authorized, issued and outstanding with a liquidation preference
of $50,000 per share, plus accumulated and unpaid dividends of
$507,378.
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 $137,149 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 $.076257 per share payable on May 27, 1994 to
shareholders of record as of May 17, 1994.
