MUNIYIELD
INSURED
FUND II, INC.
FUND LOGO
Annual Report
October 31, 1995
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 prospectus, circular or
representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock by issuing Preferred Stock to provide the Common Stock
shareholders with a potentially higher rate of return. Leverage
creates risks for Common Stock shareholders, including the
likelihood of greater volatility of net asset value and market price
of shares of the Common Stock, and the risk that fluctuations in the
short-term dividend rates of the Preferred Stock may affect the
yield to Common Stock shareholders.
<PAGE>
MuniYield Insured
Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield Insured Fund II, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1995, the Common Stock of MuniYield
Insured Fund II, Inc. earned $0.892 per share income dividends,
which included earned and unpaid dividends of $0.075. This
represents a net annualized yield of 5.84%, based on a month-end net
asset value of $15.27 per share. Over the same period, the total
investment return on the Fund's Common Stock was +22.33%, based on a
change in per share net asset value from $13.45 to $15.27, and
assuming reinvestment of $0.895 per share income dividends and
$0.070 per share capital gains distributions.
For the six-month period ended October 31, 1995, the total
investment return on the Fund's Common Stock was +9.26%, based on a
change in per share net asset value from $14.45 to $15.27, and
assuming reinvestment of $0.437 per share income dividends.
For the six-month period ended October 31, 1995, the Fund's Auction
Market Preferred Stock had an average yield of 4.08% for Series A
and 3.82% for Series B.
<PAGE>
The Environment
After losing momentum through the second calendar quarter of 1995,
it now appears that the US economic expansion has resumed. Gross
domestic product growth for the three months ended September 30 was
reported to be 4.2%, higher than generally expected. September
durable goods orders increased a surprisingly strong 3%, and
existing home sales rose to a near-record level. At the same time,
there is evidence that inflationary pressures remain subdued.
Reflecting the trend of renewed economic growth--and continued good
news on the inflation front--the Federal Reserve Board signaled no
near-term shift in monetary policy following its September meeting.
Thus, official interest rates may not be reduced further in the
immediate future.
Another significant development has been the strengthening of the US
dollar relative to the yen and the Deutschemark. Improving interest
rate differentials favoring the US currency, combined with
coordinated central bank intervention and more positive investor
sentiment, have helped to bolster the dollar in foreign exchange
markets. Other factors that appear to be improving the US dollar's
outlook in the near term are a pick-up in capital flows to the
United States and the prospect of increased capital outflows from
Japan. However, it remains to be seen if the US dollar's
strengthening trend can continue without significant improvements in
the US budget and trade deficits.
In the weeks ahead, investor interest will continue to focus on US
economic activity. Clear signs of a moderate, noninflationary
expansion could further benefit the US stock and bond markets. In
addition, should the current Federal budget deficit reduction
efforts now underway in Washington prove successful, the
implications would likely be positive for the US financial markets.
The Municipal Market
Tax-exempt bond yields continued to decline during the six-month
period ended October 31, 1995. As measured by the Bond Buyer Revenue
Bond Index, the yield on uninsured, long-term municipal revenue
bonds fell 30 basis points (0.30%) to end the October period at
approximately 6.00%. While tax-exempt bond yields have declined
dramatically from their highs one year ago, municipal bond yields
have exhibited considerable yield volatility on a weekly basis. In
recent months, tax-exempt bond yields have fluctuated by as much as
20 basis points on a week-to-week basis. US Treasury bond yields
have displayed similar volatility, but the extent of their decline
has been greater. By the end of October, long-term US Treasury bond
yields had declined almost 100 basis points to 6.33%. Proposed
Federal tax restructuring continued to weigh heavily on the tax-
exempt bond market. Thus far in 1995, US Treasury bond yields have
declined approximately 150 basis points. Municipal bond yields have
fallen approximately 95 basis points as the uncertainty surrounding
any changes to the existing Federal income tax structure has
prevented the municipal bond market from rallying as strongly as its
taxable counterpart.
<PAGE>
A general view of a moderately expanding domestic economy, supported
by a very favorable inflationary environment, allowed interest rates
to significantly decline from their recent highs in November 1994.
However, this decline was not a smooth downward curve. Conflicting
economic indicators were released during recent months that have
prevented a clear consensus regarding the near-term direction of
interest rates from being reached. The resultant uncertainty has
promoted more of a saw-toothed pattern as interest rate declines
were repeatedly interrupted by indications of stronger-than-expected
economic growth. As these concerns were overcome by subsequent
weaker economic releases, interest rate declines have resumed. These
periods of volatility are likely to continue for the remainder of
1995, or until proposed Federal budget deficit reduction packages
are resolved and any resultant responses by the Federal Reserve
Board have occurred.
However, the municipal bond market's technical position remained
supportive throughout recent quarters. Approximately $82 billion in
long-term municipal securities were issued during the six months
ended October 31, 1995. While this issuance is virtually identical
to underwritings during the October 31, 1994 quarter, tax-exempt
bond issuance over the last 12 months remained approximately 25%
below comparable 1994 levels. The municipal bond market should
maintain this positive technical position well into 1996. Annual
issuance for 1995 is now projected to be approximately $140 billion,
significantly less than last year's already low level of $162
billion. Projected maturities and early redemptions for the
remainder of 1995 and throughout 1996 will lead to a continued
decline in the total outstanding municipal bond supply throughout
1996 and, perhaps, into 1998 should new bond issuance remain at
historically low levels.
Despite the municipal bond market's relative underperformance
compared to the US Treasury market thus far in 1995, the extent of
the tax-exempt bond market's rally was nonetheless quite impressive.
Municipal bond yields have fallen 135 basis points from their highs
reached in November 1994 and municipal bond prices rose accordingly.
Most tax-exempt products recouped almost all of the losses incurred
in 1994 and are well on their way to posting double-digit total
returns for all of 1995. This relative underperformance so far in
1995 provided long-term investors with the rare opportunity to
purchase tax-exempt securities at yield levels near those of taxable
securities.
<PAGE>
Additionally, many of the factors that led to the relative
underperformance of the tax-exempt bond market thus far in 1995,
namely investor concern regarding Federal budget deficit reductions
and proposed changes in the Federal income tax structure, are
nearing resolution. The Federal budget reconciliation process has
already begun, and may be essentially completed by year-end. Recent
public opinion polls suggest that the majority of American taxpayers
prefer the existing Federal income tax system compared to proposed
changes, such as the flat tax or national sales tax. In an upcoming
election year, neither party is likely to advocate a clearly
unpopular position, particularly one that can be expected to
negatively impact the Federal budget deficit reduction program
through reduced tax revenues. As these factors are resolved, we
believe that much of the resistance that the municipal bond market
met this year should dissipate. This should allow municipal bond
yields to significantly decline from current levels in order to
return to more normal historic yield relationships.
Portfolio Strategy
During the 12-month period ended October 31, 1995, there were two
different municipal bond market environments. The Municipal Bond
Buyer Revenue Index went from 6.95% in October 1994 to a high of
7.27% in December 1994 and back to 6.02% in October 1995. During the
first six months of the Fund's fiscal year, we followed a more
cautious investment strategy. We sold a portion of the Fund's
performance-oriented deeply discounted securities and replaced them
with less volatile current and premium coupon securities. Throughout
the last six months of the Fund's fiscal year, our investment
strategy reflected our decidedly more optimistic view toward the
municipal bond market. As a consequence, we kept the Fund
essentially fully invested and cash reserves at a minimum. At the
beginning of August, we concentrated on the acquisition of more
performance-oriented securities of high tax states to better
position the portfolio to take advantage of our view of a falling
interest rate scenario. This partial emphasis toward performance-
oriented securities is still ongoing. This investment approach
resulted in the Fund benefiting from the municipal bond market
rebound that occurred during the last half of the year.
Looking forward, we plan to continue our strategy of concentrating
on maintaining an appealing level of tax-exempt income and total
return by continuing to emphasize the Fund's present coupon and high
credit quality structure. Our use of these strategies resulted in
positive returns and a competitive current yield for our
shareholders during the fiscal year.
<PAGE>
In Conclusion
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
(William R. Bock)
William R. Bock
Portfolio Manager
November 29, 1995
We are pleased to announce that William R. Bock is responsible for
the day-to-day management of MuniYield Insured Fund II, Inc. Mr.
Bock has been employed by Merrill Lynch Asset Management, L.P. (an
affiliate of the Fund's investment adviser) since 1989 as Vice
President and Portfolio Manager. Prior thereto, Mr. Bock was
employed by Bear Stearns and E.F. Hutton in the Tax-Exempt Bond
Division from 1978 to 1989.
<PAGE>
PROXY RESULTS
During the six-month period ended October 31, 1995, MuniYield
Insured Fund II, Inc. Common Stock shareholders voted on the
following proposals. The proposals were approved at a special
shareholders' meeting on May 12, 1995. The description of each
proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Edward H. Meyer 15,882,842 286,309
Jack B. Sunderland 15,888,551 280,600
J. Thomas Touchton 15,889,643 279,508
Arthur Zeikel 15,888,943 280,208
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP as the Fund's independent
auditors for the current fiscal year. 15,749,127 123,735 296,289
</TABLE>
During the six-month period ended October 31, 1995, MuniYield
Insured Fund II, Inc. Preferred Stock shareholders (Series A and B)
voted on the following proposals. The proposals were approved at a
special shareholders' meeting on May 12, 1995. The description of
each proposal and number of shares voted are as follows:
<TABLE>
<CAPTION>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors:
Donald Cecil, M. Colyer Crum, Edward H.
Meyer, Jack B. Sunderland, J. Thomas
Touchton and Arthur Zeikel as follows: Series A 2,034 16
Series B 2,284 2
<PAGE>
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP
as the Fund's independent auditors
for the current fiscal year as follows: Series A 2,045 5 0
Series B 2,284 0 2
</TABLE>
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. 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 of the Common Stock.
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pick-up of 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.
<PAGE>
PORTFOLIO ABBREVIATIONS
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
CP Commercial Paper
GO General Obligations
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RAN Revenue Anticipation Notes
RAW Revenue Anticipation Warrants
RIB Residual Interest Bonds
S/F Single-Family
SAVRS Select Auction Variable Rate Securities
UT Unlimited Tax
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--0.7% AAA Aaa $ 2,500 Huntsville, Alabama, Health Care Authority, Health Care
Facilities Revenue Bonds, Series B, 6.625% due 6/01/2023 (d) $ 2,678
Alaska--1.3% AAA Aaa 4,875 Alaska State Housing Finance Corporation, Series A, 5.875%
due 12/01/2024 (d) 4,772
Arizona--1.0% A1+ P1 2,100 Maricopa County, Arizona, PCR, Refunding (Arizona Public
Service Co.), VRDN, Series C, 4% due 5/01/2029 (a) 2,100
NR* NR* 1,500 Mohave County, Arizona, IDA, IDR (North Star Steel Co.
Project), AMT, 6.70% due 3/01/2020 1,604
<PAGE>
California AAA Aaa 3,000 Anaheim, California, Public Financing Authority Revenue
- --14.8% Bonds (Electric Utility-San Juan 4), 2nd Series, 5.75% due
10/01/2022 (c) 2,947
AAA Aaa 1,500 California HFA, Home Mortgage Revenue Bonds, Series F, 6%
due 8/01/2017 (d) 1,493
AAA Aaa 5,000 California State Public Works Board, Lease Revenue Bonds
(Various Universities of California Projects), Series A,
6.40% due 12/01/2016 (b) 5,285
California State, RAW, Series C:
SP-1 MIG1++ 500 5.75% due 4/25/1996 505
AAA Aaa 3,550 5.75% due 4/25/1996 (c) 3,579
AAA Aaa 3,000 California State Various Purpose Bonds, 5.90% due
4/01/2023 (c) 3,004
AAA Aaa 1,575 Cerritos, California, Public Financing Authority Revenue
Bonds (Los Coyotes Redevelopment Project Loan), Series A,
5.75% due 11/01/2022 (b) 1,558
AAA Aaa 2,390 Fresno, California, Health Facilities, Revenue Refunding
Bonds (Holy Cross Health), Series A, 5.625% due
12/01/2018 (d) 2,325
AAA Aaa 3,330 Los Angeles, California, Harbor Department Revenue Bonds,
AMT, Series B, 6.625% due 8/01/2019 (b) 3,549
AAA Aaa 5,000 Los Angeles County, California, COP (Correctional Facilities
Project), 6.50% due 9/01/2013 (d) 5,255
AAA Aaa 5,000 Los Angeles County, California, Metropolitan Transportation
Authority, Sales Tax Revenue Refunding Bonds, Proposition A,
Series A, 5.625% due 7/01/2018 (d) 4,927
AAA Aaa 3,000 Sacramento, California, Municipal Utility District, Electric
Revenue Bonds, Series I, 6% due 1/01/2024 (d) 3,029
</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>
California AAA Aaa $ 2,500 San Francisco, California, City and County Airport
(concluded) Commission, Revenue Bonds (International Airport), UT,
Second Series, Issue 8-B, 6.10% due 5/01/2025 (c) $ 2,545
AAA Aaa 5,000 San Francisco, California, City and County, COP (San Francisco
Courthouse Project), 5.875% due 4/01/2021 (e) 5,002
AAA Aaa 2,000 San Francisco, California, City and County Sewer Revenue
Refunding Bonds, 5.375% due 10/01/2022 (c) 1,911
AAA Aaa 2,000 Santa Clara County, California, Financing Authority, Lease
Revenue Bonds (VMC Facility Replacement Project), Series A,
6.75% due 11/15/2020 (b) 2,180
AAA Aaa 3,295 Santa Rosa, California, Wastewater Revenue Refunding Bonds,
Series B, 6.125% due 9/01/2017 (c) 3,393
AAA Aaa 2,500 Southern California Public Power Authority, Power Project
Revenue Bonds (San Juan Unit 3), Series A, 5% due 1/01/2020 (d) 2,257
<PAGE>
Colorado--2.9% A-1 Aa3 200 Colorado HFA, M/F Revenue Bonds (Central Park Coven &
Greenwood), VRDN, 4% due 5/01/1997 (a) 200
AA Aa 7,500 Colorado Springs, Colorado, Utilities Revenue Bonds, Series A,
6.10% due 11/15/2024 7,692
AAA Aaa 2,500 Garfield Pitkin and Eagle Counties, Colorado, School
District No. 1, UT, 6.60% due 12/15/2014 (d) 2,720
Connecticut A-1 VMIG1++ 300 Connecticut State Economic Recovery Notes, VRDN, Series B,
- --3.4% 3.90% due 6/01/1996 (a) 300
AA- A1 1,035 Connecticut State Health and Educational Facilities Authority
Revenue Bonds (Nursing Home Program-AHF/Windsor Project),
7.125% due 11/01/2024 1,165
AAA Aaa 8,000 Connecticut State HFA, Revenue Bonds (Housing Mortgage
Finance Program), Series B, 6.75% due 11/15/2023 (d) 8,374
A1+ VMIG1++ 100 Connecticut State Special Assessment Unemployment
Compensation, Advanced Fund Revenue Bonds (Connecticut
Unemployment), VRDN, Series B, 3.95% due 11/01/2001(a) 100
AAA Aaa 2,760 Connecticut State Special Tax Obligation Revenue Bonds
(Transportation Infrastructure), Series A, 5.60% due
6/01/2015 (c) 2,753
District of A1+ VMIG1++ 200 District of Columbia, General Fund Recovery Bonds, VRDN, UT,
Columbia--0.1% Series B, 4.30% due 6/01/2003 (a) 200
Florida--1.6% AAA Aaa 6,000 Florida State Department of Transportation (Right of Way),
5.875% due 7/01/2024 (d) 6,059
Georgia--3.9% AAA Aaa 4,700 Albany, Georgia, Sewer System Revenue Bonds, 6.70% due
7/01/2022 (d) 5,112
AAA Aaa 2,000 Chatam County, Georgia, School District Revenue Bonds,
UT, 6.75% due 8/01/2018 (d) 2,209
AAA Aaa 2,590 Marietta, Georgia, Development Authority, Revenue Refunding
Bonds (First Mortgage-Life College), Series A, 6.25% due
9/01/2025 (e) 2,675
A+ A3 2,000 Monroe County, Georgia, Development Authority, PCR,
Refunding (Oglethorpe Power Scherer), Series A, 6.80%
due 1/01/2012 2,242
AAA Aaa 2,000 Municipal Electric Authority, Georgia, Project One,
Sub-Series A, 6.50% due 1/01/2026 (b) 2,127
Hawaii--1.7% AAA Aaa 6,000 Hawaii State Airport System Revenue Bonds, AMT, Second
Series, 7% due 7/01/2018 (d) 6,499
</TABLE>
<PAGE>
<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>
Illinois--10.5% AAA Aaa $ 3,870 Chicago, Illinois, O'Hare International Airport, Special
Facilities Revenue Bonds (International Terminal), AMT, 6.75%
due 1/01/2018 (d) $ 4,080
Chicago, Illinois, Wastewater Transmission Revenue Bonds:
AAA Aaa 10,375 6.35% due 1/01/2022 (c) 10,768
AAA Aaa 6,000 6.375% due 1/01/2024 (d) 6,270
Illinois Health Facilities Authority Revenue Bonds:
A1+ VMIG1++ 200 (Northwest Community Hospital), VRDN, 4% due 7/01/2025 (a) 200
AAA Aaa 3,000 (Servantcor Project), Series A, 6.375% due 8/15/2021 (e) 3,105
AAA Aaa 9,200 Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Bonds (McCormick Expansion
Project), Series A, 6.50% due 6/15/2027 (b) 9,760
AAA Aaa 4,000 Regional Transportation Authority, Illinois, Series A, 7.20%
due 11/01/2020 (b) 4,800
Indiana--1.6% AAA Aaa 2,400 Indiana State Vocational Technical College, Building Facilities
Refunding Bonds (Student Fee), Series D, 6.50% due 7/01/2014 (b) 2,565
A+ NR* 3,000 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Refunding Bonds, Series D, 6.75% due 2/01/2020 3,202
Iowa--1.2% AAA Aaa 4,110 Iowa Financing Authority, S/F Mortgage Revenue Refunding Bonds,
Series F, 6.35% due 7/01/2009 (b) 4,423
Kansas--1.3% AAA Aaa 5,000 Kansas State Turnpike Authority, Revenue Refunding Bonds,
5.25% due 9/01/2017 (b) 4,830
Maryland--0.6% NR* Aa 2,085 Maryland State Community Development Administration, M/F
Housing Revenue Bonds (Department of Housing and Community
Development), Series C, 6.65% due 5/15/2025 2,163
Massachusetts A+ Aaa 3,000 Massachusetts Bay Transportation Authority, Massachusetts
- --5.0% General Transportation, Series B, 5.375% due 3/01/2020 (b) 2,895
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
AAA Aaa 5,000 (Massachusetts General Hospital), Series F, 6.25% due
7/01/2020 (b) 5,135
AAA Aaa 10,000 (Northeastern University), Series E, 6.55% due 10/01/2022 (d) 10,717
<PAGE>
Michigan--2.2% AAA Aaa 2,750 Caledonia, Michigan, Community Schools, Revenue
Refunding Bonds, UT, 6.625% due 5/01/2014 (b) 2,961
BBB Baa1 1,750 Michigan State, Hospital Financing Authority, Revenue
Refunding Bonds (Pontiac Osteopathic), Series A, 6% due
2/01/2024 1,555
AAA Aaa 3,500 Monroe County, Michigan, PCR (Detroit Edison Company),
AMT, Series I-B, 6.55% due 9/01/2024 (d) 3,686
Minnesota--1.3% A- A 4,500 Minneapolis and St. Paul, Minnesota, Housing and Redevelopment
Authority, Health Care System Revenue Bonds (Group Health Plan
Incorporated Project), 6.90% due 12/01/2022 4,793
Mississippi AAA Aaa 3,930 Mississippi Hospital Equipment and Facilities Authority,
- --1.2% Revenue Refunding Bonds (Baptist Medical Center), 6.50%
due 5/01/2011 (d) 4,298
Missouri--0.9% AAA Aaa 3,000 Kansas City, Missouri, Airport General Revenue Improvement
Bonds, Series B, 6.875% due 9/01/2014 (e) 3,295
Nevada--2.9% AAA Aaa 5,000 Washoe County, Nevada, Gas Facility Revenue Bonds (Sierra
Pacific Power), AMT, 6.55% due 9/01/2020 (d) 5,298
AAA Aaa 5,000 Washoe County, Nevada, Water Facility Revenue Bonds
(Sierra Pacific Power), AMT, 6.65% due 6/01/2017 (d) 5,368
</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>
New Jersey AAA Aaa $ 4,500 New Jersey State Housing and Mortgage Finance Agency
- --2.0% Revenue Bonds (Home Buyer), AMT, Series K, 6.375% due
10/01/2026 (d) $ 4,581
AAA Aaa 3,000 New Jersey State Transportation Trust Fund Authority,
Refunding Bonds (Transportation System), Series A, 5.25%
due 6/15/2014 (d) 2,903
New Mexico AAA Aaa 5,750 Gallup, New Mexico, PCR, Refunding (Plains Electric
- --2.2% Generation), 6.65% due 8/15/2017 (d) 6,203
AAA Aaa 2,250 Las Cruces, New Mexico, Revenue Bonds, AMT, 5.50%
due 12/01/2015 (d) 2,150
<PAGE>
New York--3.0% BBB+ Baa1 3,000 New York City, New York, GO, Series D, 6% due 2/15/2015 2,956
New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds:
AAA Aaa 2,000 Series B, 5.375% due 6/15/2019 (b) 1,926
AAA VMIG1++ 500 VRDN, Series G, 3.90% due 6/15/2024 (a)(c) 500
SP1+ MIG1++ 1,000 New York City, New York, RAN, CP, Series A, 4.50% due
4/11/1996 1,003
A1+ NR* 200 New York State Energy Research and Development Authority,
PCR (Niagara Power Corporation Project), VRDN, AMT,
Series B, 3.95% due 7/01/2027 (a) 200
BBB Baa1 4,145 New York State Urban Development Corporation Revenue Bonds
(State Facilities), 7.50% due 4/01/2020 4,621
Ohio--0.8% AAA Aaa 2,500 North Canton, Ohio, City School District Improvement Bonds,
UT, 6.70% due 12/01/2019 (b) 2,800
Oregon--0.5% AA- Aa 2,000 Oregon State Veterans Welfare, Series 75, 5.875% due
10/01/2018 1,997
Pennsylvania NR* Aa2 4,000 Pennsylvania, HFA, RIB, AMT, 8.111% due 4/01/2025 3,955
- --3.2% AAA Aaa 2,670 Philadelphia, Pennsylvania, Water and Wastewater Revenue
Bonds, 5.60% due 8/01/2018 (d) 2,639
AAA Aaa 5,425 Pittsburgh, Pennsylvania, Water and Sewer Authority,
Water and Sewer Systems Revenue Bonds, Series B, 5.75%
due 9/01/2025 (f) 5,364
South AAA Aaa 10,000 Piedmont, South Carolina, Municipal Power Agency, Electric
Carolina--3.4% Revenue Refunding Bonds, 6.30% due 1/01/2022 (d) 10,336
AAA Aaa 2,000 South Carolina State Public Service Authority Revenue Bonds
(Santee Cooper), Series D, 6.50% due 7/01/2014 (b) 2,141
Tennessee--1.4% Metropolitan Government, Nashville and Davidson County,
Tennessee, Water and Sewer Revenue Bonds (b):
AAA Aaa 2,000 RIB, 8.054% due 1/01/2022 (g) 2,058
AAA Aaa 2,000 SAVRS, 4.04% due 1/01/2022 (a) 2,000
A+ A1 1,000 Tennessee, HDA, Mortgage Finance, AMT, Series A, 6.90% due
7/01/2025 1,039
Texas--13.5% AAA Aaa 2,000 Austin, Texas, Airport System Revenue Bonds (Prior Lien),
AMT, Series A, 6.125% due 11/15/2025 (d) 2,023
AAA Aaa 11,500 Brazos River Authority, Texas, PCR, Refunding (Collateral--
Texas Utilities Electric Company Project), AMT, 6.50% due
12/01/2027 (b) 12,212
Brazos River Authority, Texas, PCR (Texas Utilities Electric
Co.), VRDN, AMT (a):
A1+ VMIG1++ 2,400 Refunding, Series C, 4.05% due 6/01/2030 2,400
NR* Ba2 2,200 Series A, 4.05% due 4/01/2030 2,200
AAA Aaa 7,000 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light & Power), Series A, 6.70% due 3/01/2017 (b) 7,645
AAA Aaa 4,500 Harris County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Hermann Hospital
Project), 6.375% due 10/01/2024 (d) 4,695
</TABLE>
<PAGE>
<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>
Texas Houston, Texas, Water and Sewer System Revenue Bonds,
(concluded) Junior Lien, Series A (d):
AAA Aaa $ 5,565 6.375% due 12/01/2022 $ 5,820
AAA Aaa 3,200 Refunding, 6.20% due 12/01/2020 3,314
AAA Aaa 1,500 Sabine River Authority, Texas, PCR, Refunding (Texas
Utilities Electric Company Project), 6.55% due 10/01/2022 (c) 1,597
San Antonio, Texas, Electric and Gas Revenue Bonds,
Series 95 (d):
AAA Aaa 3,000 5.375% due 2/01/2017 2,898
AAA Aaa 1,500 5.375% due 2/01/2018 1,448
NR* VMIG1++ 3,900 Southwest Texas, Higher Education Authority Incorporated,
Revenue Refunding Bonds (Southern Methodist University),
VRDN, 3.90% due 7/01/2015 (a) 3,900
Virginia--1.7% Virginia State, HDA, Commonwealth Mortgage:
AAA Aaa 2,500 AMT, Series A, Sub-Series A-4, 6.45% due 7/01/2028 (d) 2,550
AA+ Aa1 3,500 Series J, Sub-Series J-2, 6.75% due 7/01/2017 3,647
Washington--8.6% Seattle, Washington, Municipal Light and Power Revenue
Bonds, Series A (d):
AAA Aaa 1,185 5.625% due 9/01/2017 1,173
AAA Aaa 1,480 5.625% due 9/01/2018 1,464
Seattle, Washington, Municipality Metropolitan, Sewer
Revenue Bonds:
AAA Aaa 1,500 Refunding, Series X, 5.50% due 1/01/2016 (c) 1,468
AAA Aaa 1,465 Series W, 6.25% due 1/01/2021 (d) 1,507
AAA Aaa 11,000 Spokane County, Washington, Lease Revenue Refunding
Bonds (Multi-Purpose Arena Project), AMT, Series A, 6.60%
due 1/01/2014 (b) 11,631
AAA Aaa 2,500 Tacoma, Washington, Refuse Utility Revenue Bonds,
7% due 12/01/2019 (b) 2,792
AAA Aaa 2,500 Washington State, Health Care Facilities Authority Revenue
Bonds (Virginia Mason Obligation Group, Seattle), 6.30%
due 2/15/2017 (d) 2,563
Washington State Public Power Supply Systems, Revenue
Refunding Bonds (d):
AAA Aaa 4,000 (Nuclear Project No. 1), Series A, 6.25% due 7/01/2017 4,110
AAA Aaa 1,500 (Nuclear Project No. 3), Series C, 7.50% due 7/01/2008 1,792
AA Aa 3,600 Washington State, UT, Series 93-A, 5.75% due 10/01/2017 3,564
Wisconsin AAA Aaa 4,500 Wisconsin State Health and Educational Facilities Authority
- --1.1% Revenue Bonds (Waukesha Memorial Hospital), Series A, 5.25%
due 8/15/2019 (b) 4,139
Total Investments (Cost--$356,835)--101.5% 376,416
Liabilities in Excess of Other Assets--(1.5%) (5,726)
--------
Net Assets--100.0% $370,690
========
<PAGE>
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at October 31, 1995.
(b)AMBAC Insured.
(c)FGIC Insured.
(d)MBIA Insured.
(e)CGIC Insured.
(f)FSA Insured.
(g)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, 1995.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Ernst & Young LLP.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of October 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$356,835,346)
(Note 1a) $ 376,415,510
Cash 31,687
Receivables:
Securities sold $ 6,785,789
Interest 6,356,052 13,141,841
-------------
Deferred organization expenses (Note 1e) 14,956
Prepaid expenses and other assets 20,204
-------------
Total assets 389,624,198
-------------
<PAGE>
Liabilities: Payables:
Securities purchased 18,392,702
Dividends to shareholders (Note 1f) 330,156
Investment adviser (Note 2) 161,755 18,884,613
-------------
Accrued expenses and other liabilities 49,833
-------------
Total liabilities 18,934,446
-------------
Net Assets: Net assets $ 370,689,752
=============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (4,800
shares of AMPS* issued and outstanding at $25,000 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 2,403,790
Accumulated realized capital losses on investments--net (822,378)
Accumulated distributions in excess of realized capital
gains--net (679,232)
Unrealized appreciation on investments--net 19,580,164
-------------
Total--Equivalent to $15.27 net asset value per share of
Common Stock (market price--$13.125) 250,689,752
-------------
Total capital $ 370,689,752
=============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Year Ended
October 31, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 21,936,133
(Note 1d):
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 1,783,002
Commission fees (Note 4) 338,387
Professional fees 78,292
Transfer agent fees 69,994
Accounting services (Note 2) 54,216
Printing and shareholder reports 26,741
Listing fees 24,991
Directors' fees and expenses 22,606
Custodian fees 20,468
Pricing fees 12,644
Amortization of organization expenses (Note 1e) 7,478
Other 16,093
-------------
Total expenses 2,454,912
-------------
Investment income--net 19,481,221
-------------
Realized & Realized loss on investments--net (816,424)
Unrealized Gain Change in unrealized appreciation/depreciation on
(Loss) on investments--net 31,718,726
Investments--Net -------------
(Notes 1b, Net Increase in Net Assets Resulting from Operations $ 50,383,523
1d & 3): =============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 19,481,221 $ 19,372,697
Realized gain (loss) on investments--net (816,424) 686,231
Change in unrealized appreciation/depreciation on
investments--net 31,718,726 (48,661,875)
------------- -------------
Net increase (decrease) in net assets resulting from operations 50,383,523 (28,602,947)
------------- -------------
<PAGE>
Dividends & Investment income--net:
Distributions to Common Stock (14,703,701) (15,824,435)
Shareholders Preferred Stock (4,452,300) (2,951,808)
(Note 1f): Realized gain on investments--net:
Common Stock (581,683) (4,174,364)
Preferred Stock (104,543) (777,156)
In excess of realized gain on investments--net:
Common Stock (575,755) --
Preferred Stock (103,477) --
------------- -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (20,521,459) (23,727,763)
------------- -------------
Capital Stock Value of shares issued to Common Stock Shareholders in
Transactions reinvestment of dividends and distributions -- 491,846
(Notes 1e & 4): Offering costs resulting from the issuance of Preferred Stock -- 27,598
------------- -------------
Net increase in net assets derived from capital stock
transactions -- 519,444
------------- -------------
Net Assets: Total increase (decrease) in net assets 29,862,064 (51,811,266)
Beginning of year 340,827,688 392,638,954
------------- -------------
End of year* $ 370,689,752 $ 340,827,688
============= =============
<FN>
*Undistributed investment income--net (Note 1g) $ 2,403,790 $ 2,072,616
============= =============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived Oct. 30,
from information provided in the financial statements. For the Year Ended 1992++ to
October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.45 $ 16.63 $ 14.15 $ 14.18
Operating -------- -------- -------- --------
Performance: Investment income--net 1.19 1.18 1.15 --
Realized and unrealized gain (loss) on investments
--net 1.88 (2.92) 2.53 --
-------- -------- -------- --------
Total from investment operations 3.07 (1.74) 3.68 --
-------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.90) (.96) (.88) --
Realized gain on investments--net (.04) (.25) -- --
In excess of realized gain on investments--net (.03) -- -- --
-------- -------- -------- --------
Total dividends and distributions to Common Stock
shareholders (.97) (1.21) (.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 (.27) (.18) (.18) --
Realized gain on investments--net (.01) (.05) -- --
In excess of realized gain on investments--net --+++ -- -- --
Capital charge resulting from issuance of
Preferred Stock -- -- (.14) --
-------- -------- -------- --------
Total effect of Preferred Stock activity (.28) (.23) (.32) --
-------- -------- -------- --------
Net asset value, end of period $ 15.27 $ 13.45 $ 16.63 $ 14.15
======== ======== ======== ========
Market price per share, end of period $ 13.125 $ 11.375 $ 15.875 $ 15.00
======== ======== ======== ========
Total Investment Based on market price per share 24.33% (21.92%) 11.95% .00%+++++
Return:* ======== ======== ======== ========
Based on net asset value per share 22.33% (11.87%) 24.32% (.21%)+++++
======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .69% .69% .54% --
Net Assets:** ======== ======== ======== ========
Expenses .69% .69% .65% --
======== ======== ======== ========
Investment income--net 5.47% 5.24% 5.25% --
======== ======== ======== ========
<PAGE>
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $250,690 $220,828 $272,639 $230,667
======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $120,000 $120,000 $120,000 --
======== ======== ======== ========
Portfolio turnover 64.18% 47.85% 38.69% --
======== ======== ======== ========
Dividends Per Series A--Investment income--net $ 953 $ 590 $ 592 --
Share on Series B--Investment income--net 902 640 640 --
Preferred Stock
Outstanding:++++++
<FN>
*Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales loads.
**Do not reflect the effect of dividends to Preferred Stock
shareholders.
++Commencement of Operations.
++++The Fund's Preferred Stock was issued on November 30, 1992.
++++++Dividends per share have been adjusted to reflect a two-for-
one stock split.
+++Amount less than $.01 per share.
+++++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.
<PAGE>
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Financial
futures contracts and options thereon, 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 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 strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* 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.
* 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).
<PAGE>
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) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
Direct expenses relating to the public offering of the Common and
Preferred Stock were charged to capital at the time of issuance.
NOTES TO FINANCIAL STATEMENTS (concluded)
(f) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital gains
are recorded on the ex-dividend dates. Distributions in excess of
realized capital gains are due primarily to differing tax treatments
for futures transactions and post-October losses.
(g) Reclassification--Generally accepted accounting principles
require that certain components of net assets be reclassified to
reflect permanent differences between financial reporting and tax
purposes. Accordingly, current year's permanent book/tax differences
of $5,954 have been reclassified from accumulated net realized
capital losses to undistributed net investment income. These
reclassifications have no effect on net assets or net asset value
per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets.
<PAGE>
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, Merrill Lynch, Pierce, Fenner & Smith Inc.
("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1995 were $226,613,801 and
$214,964,056, respectively.
Net realized and unrealized gains (losses) as of October 31, 1995
were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 2,656,679 $19,582,086
Short-term investments (4,684) (1,922)
Financial futures contracts (3,468,419) --
----------- -----------
Total $ (816,424) $19,580,164
=========== ===========
As of October 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $19,580,164, of which $19,753,121
related to appreciated securities and $172,957 related to
depreciated securities. The aggregate cost of investments at October
31, 1995 for Federal income tax purposes was $356,835,346.
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
For the year ended October 31, 1995, shares issued and outstanding
remained constant at 16,420,827. At October 31, 1995, 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, 1995 were 3.75%
for Series A and 3.75% for Series B.
<PAGE>
A two-for-one stock split occurred on December 1, 1994. As a result,
as of October 31, 1995, there were 4,800 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share, plus accumulated and unpaid dividends of $147,634.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the year ended
October 31, 1995, MLPF&S, an affiliate of FAM, earned $174,972 as
commissions.
5. Subsequent Event:
On November 13, 1995, the Fund's Board of Directors declared an
ordinary income dividend to Common Stock shareholders in the amount
of $0.075475 per share, payable on November 29, 1995 to shareholders
of record as of November 24, 1995.
<AUDIT-REPORT>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors,
MuniYield Insured Fund II, Inc.
We have audited the accompanying statement of assets, liabilities
and capital of MuniYield Insured Fund II, Inc., including the
schedule of investments, as of October 31, 1995, and the related
statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then
ended and financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and 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 as of
October 31, 1995 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
<PAGE>
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of MuniYield Insured Fund II, Inc. at October 31,
1995, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period
then ended and financial highlights for each of the indicated
periods, in conformity with generally accepted accounting
principles.
(Ernst & Young LLP)
ERNST & YOUNG LLP
Princeton, New Jersey
December 1, 1995
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (UNAUDITED)
All of the net investment income distributions paid monthly by
MuniYield Insured Fund II, Inc. during its
taxable year ended October 31, 1995 qualify as tax-exempt interest
dividends for Federal income tax purposes. Additionally, the
following table summarizes the per share capital gains distributions
paid by the Fund during the year.
<TABLE>
<CAPTION>
Payable Long-Term
Date Capital Gains
<S> <S> <C> <C>
Common Stock Shareholders 12/29/94 $ 0.070486
Preferred Stock Shareholders: Series A 11/29/94 $83.18
Series B 12/01/94 $90.17
Please retain this information for your records.
</TABLE>
PER SHARE INFORMATION (UNAUDITED)
<PAGE>
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Dividends/Distributions
Net Realized Unrealized
Investment Gains Gains Net Investment Income Capital Gains
For the Quarter Income (Losses) (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
November 1, 1993 to January 31, 1994 $.30 $ .18 $ (.12) $.25 $.01 $.25 $.05
February 1, 1994 to April 30, 1994 .28 .18 (2.13) .24 .05 -- --
May 1, 1994 to July 31, 1994 .29 (.10) .33 .23 .05 -- --
August 1, 1994 to October 31, 1994 .31 (.22) (1.04) .24 .07 -- --
November 1, 1994 to January 31, 1995 .30 (.11) .75 .24 .05 .07 .01
February 1, 1995 to April 30, 1995 .29 (.05) .48 .22 .07 -- --
May 1, 1995 to July 31, 1995 .30 .08 .23 .22 .07 -- --
August 1, 1995 to October 31, 1995 .30 .02 .48 .22 .08 -- --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
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
May 1, 1994 to July 31, 1994 15.14 14.07 13.75 13.00 1,541
August 1, 1994 to October 31, 1994 14.74 13.45 13.375 11.375 2,080
November 1, 1994 to January 31, 1995 14.03 12.41 12.625 10.50 3,354
February 1, 1995 to April 30, 1995 14.82 14.05 13.25 12.875 1,247
May 1, 1995 to July 31, 1995 15.41 14.45 13.375 12.50 1,610
August 1, 1995 to October 31, 1995 15.35 14.48 13.375 12.625 1,539
<FN>
*Calculations are based upon shares of Common Stock outstanding at
the end of each quarter.
**As reported in the consolidated transaction reporting system.
***In thousands.
</TABLE>
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
<PAGE>
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Transfer Agents
Common Stock:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MTI
