MUNIYIELD
INSURED
FUND II, INC.
FUND LOGO
Semi-Annual Report
April 30, 1996
<PAGE>
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. Statements and other information
herein are as dated and are subject to change.
MuniYield Insured
Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield Insured Fund II, Inc.
<PAGE>
TO OUR SHAREHOLDERS
For the six-month period ended April 30, 1996, the Common Stock of
MuniYield Insured Fund II, Inc. earned $0.465 per share income
dividends, which included earned and unpaid dividends of $0.069.
This represents a net annualized yield of 6.24%, based on a month-
end per share net asset value of $14.95. Over the same period, the
total investment return on the Fund's Common Stock was +1.27%, based
on a change in per share net asset value from $15.27 to $14.95, and
assuming reinvestment of $0.471 per share income dividends.
The average yields of the Fund's Auction Market Preferred Stock for
the six months ended April 30, 1996 were as follows: Series A, 3.50%
and Series B, 3.75%.
The Environment
Investor perceptions regarding the US economy changed over the
course of the six-month period ended April 30, 1996. As 1995 drew to
a close and 1996 began, it appeared that the US economy was losing
momentum. Lackluster retail sales, increases in initial unemployment
claims (along with weak job and income growth), and evidence of
slowing in the manufacturing sector all suggested that the rate of
economic growth was decelerating, with some forecasters even
suggesting the possibility of an imminent recession.
However, the consensus outlook for the rate of future economic
growth changed dramatically with the report of stronger-than-
expected employment data for February and March. As a result,
investors began to anticipate renewed economic growth. Long-term
interest rates rose, and the Federal Reserve Board left monetary
policy on hold. Adding to investor concerns was the report that the
Knight Ridder-Commodity Research Bureau Index was near an eight-year
high, largely because of an increase in agricultural prices and an
upward spike in the price of crude oil.
Investors are likely to continue to focus on the probable direction
of economic activity and Federal Reserve Board monetary policy in
the weeks ahead. At this time, inflationary pressures do not seem to
be building and the capital spending, housing and consumption
sectors are still relatively weak, which suggest that the economy is
not on the verge of overheating. Nevertheless, it is unlikely that
further indications of stronger economic activity in the weeks ahead
may add to investor concerns that accelerating economic activity
could lead to higher inflation and interest rates.
<PAGE>
The Municipal Market
During the six months ended April 30, 1996, tax-exempt bond yields
rose as investors became increasingly concerned that recent economic
growth would reignite inflationary pressures. Through early February
1996, municipal bond yields continued their earlier declines
supported by continued moderate economic growth and favorable
inflationary expectations. As measured by the Bond Buyer Revenue
Bond Index, yields on uninsured, A-rated municipal revenue bonds
declined an additional 30 basis points (0.30%) to 5.70% by early
February. As signs of emerging economic growth became more numerous,
particularly with the release of the strong March employment
figures, inflation fears increased and bond yields rose in response
for the remainder of the six-month period ended April 30, 1996. At
April 30, 1996, long-term municipal bond yields were approximately
6.30%, an increase of approximately 30 basis points over the last
six months. The rise in US Treasury bond yields was more
substantial. Over the last six months, yields on US Treasury
securities rose approximately 60 basis points to 6.90%. During the
April period, the municipal bond market reversed the trend seen
throughout much of 1995 and significantly outperformed the US
Treasury bond market.
The municipal bond market's recent outperformance was largely the
result of two principal factors. First, and perhaps more important,
much of the earlier concern regarding proposed changes in Federal
income tax codes and their effect on the tax treatment of tax-exempt
bond income has dissipated. As the negative revenue impact of the
various proposals, such as the flat tax, became apparent, the
likelihood of immediate reform quickly diminished. When the Kemp
Commission dealing with Federal income tax reform released its
findings early in 1996, the obvious need for reform was highlighted.
However, no specific recommendations of a flat tax, value-added tax
or any other reform were made. Consequently, fears of losing the
favored tax treatment of municipal bond income declined even
further. As a percentage of Treasury bond yields, tax-exempt bond
yield ratios quickly declined from 95% to approximately 90%. This
allowed the municipal bond market to maintain much of the gains made
since early 1995.
The second major factor leading to the municipal bond market's
recent improvement was the return of a more favorable technical
environment. Over the past six months, approximately $90 billion in
municipal securities were underwritten, an increase of approximately
45% versus the comparable period a year earlier. However, much of
this increase was biased by recent underwritings dedicated toward
refinancing. Like individual homeowners, municipal issuers sought to
refinance their existing higher-couponed debt as tax-exempt bond
yields declined from their highs in 1995. In recent months such
refinancings were estimated to represent at least 50% of total
issuance. However, the recent rise in tax-exempt interest rates
slowed the pace of such refinancings. Over the last three months
approximately $40 billion in long-term tax-exempt securities were
underwritten, an increase of 35% compared to the same period a year
ago. At current interest rate levels large amounts of refundings are
unlikely and the rate of new bond issuance should continue to
decline.
<PAGE>
Additionally, investors continue to receive significant amounts of
assets derived from coupon income, bond maturities, and proceeds
from early redemptions. In recent months investors received over $30
billion in such assets. These cash flows helped maintain individual
retail investor demand in recent months. Additionally, major
institutional investors, such as certain insurance companies whose
underwriting profits were cyclically high, demonstrated significant
ongoing interest in the tax-exempt bond market, particularly on
higher-quality securities. Individual and institutional investor
demand was strong enough during the six-month period ended April 30,
1996 to absorb the relative increase in bond issuance.
Looking ahead, we believe the municipal bond market is likely to
continue to outperform the US Treasury market. Investor demand
should remain adequate to absorb new bond issuance. It is also
unlikely that the rapid pace of issuance seen thus far in 1996 will
be maintained. The recent rise in yields made further bond
refinancings economically unfeasible. Since these refinancings were
the driving force of recent bond issuance, as the amount of these
refundings decline, overall issuance should decline. This should
allow the current demand/supply balance to be easily maintained in
upcoming months.
Additionally, as a percentage of US Treasury bond yields, long-term
municipal bond yields remain historically attractive. It is likely
that recent interest rate increases will have a negative impact on
economic growth, perhaps as early as late summer 1996. With long-
term mortgage rates above 8%, the domestic housing sector has
already indicated signs of slower growth. If other interest rate
sectors of the economy, such as the automobile industry, begin to
show similar adverse effects, taxable interest rates would be poised
to resume their decline. With long-term tax-exempt revenue bonds
yielding approximately 90% of their taxable counterparts, municipal
bond yields are poised to decline further.
Portfolio Strategy
As we entered the six-month period ended April 30, 1996, we
anticipated that municipal bond yields would decline because of the
continued slowing of the economy and the prospect of additional
easing by the Federal Reserve Board. With this expectation, our
portfolio strategy concentrated on seeking to enhance the Fund's
total return with the acquisition of performance-oriented
securities. However, given the recent strength evident in the
economic data, we became cautious toward the market. Therefore, in
order to be more defensive we added higher-coupon issues and raised
the Fund's cash reserve level.
Looking ahead, we expect the municipal bond market to increase in
volatility within a wide trading range over the next few months. Our
investment strategy will be circumspect. We intend to increase the
cash level as the bond market moves higher and selectively buy
during periods of market weakness, particularly emphasizing high-
quality issues of high-tax states.
<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
Senior Vice President
(William R. Bock)
William R. Bock
Vice President and Portfolio Manager
June 5, 1996
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.
<PAGE>
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred Stock
for an additional $50 million, creating a total value of $150
million available for investment in long-term municipal bonds. If
prevailing short-term interest rates are approximately 3% and long-
term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million
of Preferred Stock based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
In this case, the dividends paid to Preferred Stock 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 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.
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.
ACES SM Adjustable Convertible Extendable Securities
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
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
RIB Residual Interest Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
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) $ 2,613
Alaska--2.1% AAA Aaa 8,025 Alaska State Housing Finance Corporation, Refunding,
Series A, 5.875% due 12/01/2024 (d)(h)(i) 7,729
Arizona--0.4% NR* NR* 1,500 Mohave County, Arizona, IDA, IDR (North Star Steel Company
Project), AMT, 6.70% due 3/01/2020 1,580
California AAA Aaa 1,500 California HFA, Home Mortgage Revenue Bonds, Series F,
- --12.2% 6% due 8/01/2017 (d) 1,498
AAA Aaa 2,500 California State Department of Water Resources, Water Systems
Revenue Bonds (Central Valley Project), Series O, 4.75% due
12/01/2029 (d) 2,029
AAA Aaa 5,000 California State Public Works Board, Lease Revenue Bonds
(Various University of California Projects), Series A,
6.40% due 12/01/2016 (b) 5,200
AAA Aaa 3,000 California State, Various Purpose, 5.90% due 4/01/2023 (c) 2,952
AAA Aaa 4,275 Los Angeles, California, Convention and Exhibition Center
Authority, Lease Revenue Refunding Bonds, Series A,
5.375% due 8/15/2018 (d) 3,924
AAA Aaa 3,330 Los Angeles, California, Harbor Department Revenue Bonds,
AMT, Series B, 6.625% due 8/01/2019 (b) 3,468
AAA Aaa 5,000 Los Angeles County, California, COP (Correctional
Facilities Project), 6.50% due 9/01/2013 (d) 5,237
AAA Aaa 3,000 Sacramento, California, Municipal Utility District,
Electric Revenue Bonds, Series I, 6% due 1/01/2024 (d) 3,000
AAA Aaa 3,000 San Francisco, California, Bay Area Rapid Transit
District, Sales Tax Revenue Bonds, 5.50% due 7/01/2020 (c) 2,839
AAA Aaa 2,500 San Francisco, California, City and County Airports
Commission, Revenue Bonds (International Airport), UT,
Second Series, Issue 8-B, 6.10% due 5/01/2025 (c) 2,517
AAA Aaa 5,000 San Francisco, California, City and County, COP (San
Francisco Courthouse Project), 5.875% due 4/01/2021 (f) 4,919
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) 2,166
AAA Aaa 3,295 Santa Rosa, California, Wastewater Revenue Refunding
Bonds, Series B, 6.125% due 9/01/2017 (c) 3,321
AAA Aaa 1,850 Southern California Public Power Authority,
Transmission Project Revenue Refunding Bonds,
Sub-Series A, 5% due 7/01/2022 (d) 1,592
</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>
Colorado--2.4% AA Aa $ 5,500 Colorado Springs, Colorado, Utilities Revenue Bonds,
Series A, 6.10% due 11/15/2024 $ 5,531
AAA Aaa 3,500 Denver, Colorado, City and County Airport Revenue Bonds,
Series A, 5.50% due 11/15/2025 (d) 3,277
Connecticut AA- A1 1,035 Connecticut State Health and Educational Facilities
- --2.6% Authority Revenue Bonds (Nursing Home Program--
AHF/Windsor Project), 7.125% due 11/01/2024 1,152
AAA Aaa 8,000 Connecticut State, HFA (Housing Mortgage Finance Program),
Series B, 6.75% due 11/15/2023 (d) 8,288
Florida--1.2% A1+ VMIG1++ 4,000 Hillsborough County, Florida, IDA, PCR, Refunding (Tampa
Electric Company--Gannon), VRDN, 4% due 5/15/2018 (a) 4,000
A2 VMIG1++ 400 Volusia County, Florida, Health Facilities Authority
Revenue Bonds (Pooled Hospital Loan Program), ACES,
4.15% due 11/01/2015 (a)(c) 400
Georgia--2.6% AAA Aaa 4,700 Albany, Georgia, Sewer System Revenue Bonds, 6.70% due
7/01/2022 (d) 5,056
A+ A3 2,000 Monroe County, Georgia, Development Authority, PCR,
Refunding (Oglethorpe Power Scherer), Series A, 6.80%
due 1/01/2012 2,150
AAA Aaa 2,000 Municipal Electric Authority of Georgia, Project One,
Sub-Series A, 6.50% due 1/01/2026 (b) 2,093
<PAGE>
Hawaii--1.8% AAA Aaa 6,000 Hawaii State Airports System Revenue Bonds, AMT, Second
Series, 7% due 7/01/2018 (d) 6,482
Illinois--12.0% AAA Aaa 3,000 Chicago, Illinois (Central Public Library), Series B,
6.85% due 7/01/2002 (b)(e) 3,362
AAA Aaa 3,870 Chicago, Illinois, O'Hare International Airport, Special
Facilities Revenue Bonds (International Terminal), AMT,
6.75% due 1/01/2018 (d) 4,027
Chicago, Illinois, Wastewater Transmission Revenue Bonds:
AAA Aaa 10,375 6.35% due 1/01/2003 (c)(e) 11,384
AAA Aaa 6,000 6.375% due 1/01/2024 (d) 6,165
Illinois Health Facilities Authority Revenue Bonds:
A1+ VMIG1++ 200 (Northwest Community Hospital), VRDN, 4.45% due
7/01/2025 (a) 200
AAA Aaa 3,000 (Servantcor Project), Series A, 6.375% due 8/15/2021 (f) 3,055
AAA Aaa 9,200 Metropolitan Pier and Exposition Authority, Illinois,
Dedicated State Tax Revenue Bonds (McCormick Place Expansion
Project), Series A, 6.50% due 6/15/2027 (b) 9,552
AAA Aaa 4,000 Regional Transportation Authority, Illinois, Series A, 7.20%
due 11/01/2020 (b) 4,658
A1+ VMIG1++ 1,500 Southwestern Illinois Development Authority, Solid Waste
Disposal Revenue Bonds (Shell Oil Co.--Wood River Project),
VRDN, AMT, 4.25% due 4/01/2022 (a) 1,500
Indiana--1.6% AAA Aaa 2,400 Indiana State Vocational Technical College, Building Facilities
Fee, Refunding (Student Fee), Series D, 6.50% due 7/01/2014 (b) 2,511
A+ NR* 3,000 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Refunding, Series O, 6.75% due 2/01/2020 3,180
Iowa--1.2% AAA Aaa 4,020 Iowa Financing Authority, S/F Mortgage Refunding Bonds
Series F, 6.35% due 7/01/2009 (b) 4,201
Kansas--1.3% AAA Aaa 5,000 Kansas State Turnpike Authority, Revenue Refunding Bonds,
5.25% due 9/01/2017 (b) 4,625
</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>
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 $ 2,142
Massachusetts AAA Aaa 3,000 Massachusetts Bay Transportation Authority, Massachusetts
- --6.5% General Transportation, Series B, 5.375% due 3/01/2020 (b) 2,778
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
AAA Aaa 5,000 (Massachusettes General Hospital), Series F, 6.25% due
7/01/2020 (b) 5,073
AAA Aaa 10,000 (Northeastern University), Series E, 6.55% due 10/01/2022 (d) 10,575
Massachusetts State Water Resource Authority, Series B (d):
AAA Aaa 3,000 4.75% due 12/01/2021 2,489
AAA Aaa 3,000 5% due 12/01/2025 2,602
<PAGE>
Michigan--2.2% AAA Aaa 2,750 Caledonia, Michigan, Community Schools, Refunding, UT, 6.625%
due 5/01/2014 (b) 2,955
BBB Baa1 1,750 Michigan State, Hospital Finance Authority, Revenue Refunding
Bonds (Pontiac Osteopathic), Series A, 6% due 2/01/2024 1,550
AAA Aaa 3,500 Monroe County, Michigan, PCR (Detroit Edison Company Project),
AMT, Series I-B, 6.55% due 9/01/2024 (d) 3,613
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 10/15/2022 4,779
Mississippi NR* Aa2 2,700 Jackson County, Mississippi, Industrial Sewer Facilities
- --3.5% Revenue Bonds (Chevron USA, Inc. Project), VRDN, 4.25%
due 12/15/2024 (a) 2,700
NR* P1 6,300 Jackson County, Mississippi, Port Facility Revenue Refunding
Bonds (Chevron USA, Inc. Project), VRDN, 4% due 6/01/2023 (a) 6,300
AAA Aaa 3,930 Mississippi Hospital Equipment and Facilities Authority,
Revenue Refunding Bonds (Mississippi Baptist Medical Center),
6.50% due 5/01/2011 (d) 4,158
Missouri--0.9% AAA Aaa 3,000 Kansas City, Missouri, Airport Revenue General Improvement
Bonds, Series B, 6.875% due 9/01/2014 (f) 3,225
Nevada--2.8% AAA Aaa 5,000 Washoe County, Nevada, Gas Facilities Revenue Bonds
(Sierra Pacific Power), AMT, 6.55% due 9/01/2020 (d) 5,135
AAA Aaa 5,000 Washoe County, Nevada, Water Facility Revenue Bonds
(Sierra Pacific Power), AMT, 6.65% due 6/01/2017 (d) 5,196
New Jersey AAA Aaa 4,500 New Jersey State Housing and Mortgage Finance Agency Revenue
- --1.7% Bonds (Home Buyer), AMT, Series K, 6.375% due 10/01/2026 (d) 4,521
AAA Aaa 2,000 New Jersey State Transportation Trust Fund Authority, Refunding
(Transportation System), Series A, 5.50% due 6/15/2013 (d) 1,952
New Mexico AAA Aaa 5,750 Gallup, New Mexico, PCR, Refunding (Plains Electric Generation),
- --1.8% 6.65% due 8/15/2017 (d) 6,118
A1+ P1 500 Hurley, New Mexico, PCR (Kennecott Santa Fe), VRDN, 4.10%
due 12/01/2015 (a) 500
New York--2.0% AAA Aaa 2,000 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Series B, 5.375%
due 6/15/2019 (b) 1,847
A A 2,000 New York State Local Government Assistance Corporation,
Refunding, Series B, 5.50% due 4/01/2021 1,850
BBB Baa1 4,000 New York State Urban Development Corporation, Revenue
Refunding Bonds (Correctional Facilities), 5.50% due 1/01/2015 3,627
</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>
North Carolina A1+ NR* $ 200 Raleigh--Durham, North Carolina, Airport Authority, Special
- --0.1% Facility Revenue Refunding Bonds (American Airlines), VRDN,
Series B, 4.10% due 11/01/2015 (a) $ 200
Ohio--1.2% AAA Aaa 1,450 Clermont County, Ohio, Sewer Systems Revenue Bonds,
7.10% due 12/01/2001 (b)(e) 1,641
AAA Aaa 2,500 North Canton, Ohio, City School District Improvement Bonds,
UT, 6.70% due 12/01/2019 (b) 2,715
Oklahoma--0.5% AAA Aaa 2,000 Sapulpa, Oklahoma, Municipal Authority, Utility Revenue
Refunding Bonds, 5.75% due 4/01/2023 (c) 1,936
Pennsylvania AA Aa 4,000 Pennsylvania, HFA, RIB, AMT, 8.414% due 4/01/2025 (g) 3,745
- --1.0%
South Carolina AAA Aaa 10,000 Piedmont Municipal Power Agency, South Carolina, Electric
- --4.1% Revenue Refunding Bonds, 6.30% due 1/01/2022 (d) 10,274
AAA Aaa 2,715 Richland--Lexington, South Carolina, Airport District Revenue
Bonds (Columbia Metropolitan Airport), AMT, Series A, 5.70%
due 1/01/2026 (b) 2,567
AAA Aaa 2,000 South Carolina State Public Service Authority Revenue Bonds
(Santee Cooper), Series D, 6.50% due 7/01/2014 (b) 2,131
Tennessee--0.8% AAA Aaa 2,000 Metropolitan Government, Nashville and Davidson County,
Tennessee, Water and Sewer Revenue Bonds, RIB, 8.371%
due 1/01/2022 (b)(g) 1,980
A+ A1 1,000 Tennessee, Housing Development Agency, Mortgage Finance,
AMT, Series A, 6.90% due 7/01/2025 1,027
<PAGE>
Texas--14.0% BBB Baa2 1,550 Alliance Airport Authority, Inc., Texas, Special Facilities
Revenue Bonds (Federal Express Corporation Project), AMT,
6.375% due 4/01/2021 1,523
AAA Aaa 11,500 Brazos River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Company Project), AMT, 6.50% due 12/01/2027 (b) 11,803
AAA Aaa 7,000 Brazos River Authority, Texas, Revenue Refunding Bonds
(Houston Light & Power), Series A, 6.70% due 3/01/2017 (b) 7,505
AAA Aaa 4,500 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Hermann Hospital Project), 6.375%
due 10/01/2024 (d) 4,647
A1+ Aaa 1,100 Harris County, Texas, Industrial Development Corporation,
PCR (Exxon Project), DATES, 1984--Series A, 4.15% due 3/01/2024 (a) 1,100
AAA Aaa 5,565 Houston, Texas, Water and Sewer System Revenue Bonds,
Junior Lien, Series A, 6.375% due 12/01/2022 (d) 5,752
AAA Aaa 1,500 Sabine River Authority, Texas, PCR, Refunding (Texas Utilities
Electric Company Project), 6.55% due 10/01/2022 (c) 1,592
AAA Aaa 1,500 San Antonio, Texas, Electric and Gas Revenue Bonds,
Series 95, 5.375% due 2/01/2018 (d) 1,399
AAA Aaa 4,000 San Antonio, Texas, Hotel Occupancy Revenue Bonds (Henry B.
Gonzalez Convention Center Project), 5.70% due 8/15/2026 (c) 3,833
AAA Aaa 13,000 Texas State Turnpike Authority, Dallas North Thruway Revenue
Bonds (President George Bush Turnpike), 5.25% due 1/01/2023 (c) 11,806
</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>
Utah--1.6% A1+ VMIG1++ $ 900 Emery County, Utah, PCR, Refunding (Pacificorp Projects),
VRDN, 4.10% due 11/01/2024 (a)(b) $ 900
AA- Aa 2,425 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, Series D, 5% due 7/01/2023 2,076
AAA Aaa 3,000 Timpanogos Special Service District, Utah, Sewer Revenue
Bonds, Series A, 6.10% due 6/01/2019 (b) 2,981
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) 2,534
AA+ Aa1 3,500 Series J, Sub-Series J-2, 6.75% due 7/01/2017 3,599
Washington AAA Aaa 1,465 Seattle, Washington, Municipality, Metropolitan Seattle, Sewer
- --5.2% Revenue Bonds, Series W, 6.25% due 1/01/2021 (d) 1,499
AAA Aaa 7,875 Spokane, Washington, Lease Revenue Refunding Bonds (Multi-
Purpose Arena Project), AMT, Series A, 6.60% due 1/01/2014 (b) 8,103
AAA Aaa 2,500 Tacoma, Washington, Refuse Utility Revenue Bonds, 7%
due 12/01/2019 (b) 2,753
AAA Aaa 2,500 Washington State, Health Care Facilities Authority Revenue
Bonds (Virginia Mason Obligation Group, Seattle), 6.30%
due 2/15/2017 (d) 2,544
AAA Aaa 4,000 Washington State Public Power Supply Systems, Revenue
Refunding Bonds (Nuclear Project No. 1), Series A, 6.25% due
7/01/2017 (d) 4,069
<PAGE>
Wisconsin--2.0% Wisconsin State Health and Educational Facilities Authority
Revenue Bonds:
AAA Aaa 3,500 (Aurora Medical Group Inc. Project), 5.60% due 11/15/2016 (f) 3,308
AAA Aaa 4,500 Refunding (Waukesha Memorial Hospital), Series A, 5.25% due
8/15/2019 (b) 4,048
Total Investments (Cost--$345,880)--97.6% 356,708
Other Assets Less Liabilities--2.4% 8,851
--------
Net Assets--100.0% $365,559
========
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at April 30, 1996.
(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 prevailing market rates. The interest rate shown is the
rate in effect at April 30, 1996.
(h)FNMA Collateralized.
(i)GNMA Collateralized.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets, Liabilities and Capital as of April 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$345,880,407) (Note 1a) $356,707,883
Cash 35,089
Receivables:
Interest $ 6,465,987
Securities sold 2,833,518 9,299,505
------------
Deferred organization expenses (Note 1e) 14,956
Prepaid expenses and other assets 21,049
------------
Total assets 366,078,482
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 313,913
Investment adviser (Note 2) 160,519 474,432
------------
Accrued expenses and other liabilities 45,493
------------
Total liabilities 519,925
------------
Net Assets: Net assets $365,558,557
============
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 2,732,385
Undistributed realized capital gains on investments--net 1,791,288
Unrealized appreciation on investments--net 10,827,476
------------
Total--Equivalent to $14.95 net asset value per share of
Common Stock (market price--$13.375) 245,558,557
------------
Total capital $365,558,557
============
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended April 30, 1996
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 10,884,460
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 931,800
Commission fees (Note 4) 142,379
Professional fees 40,583
Accounting services (Note 2) 31,862
Transfer agent fees 31,121
Printing and shareholder reports 17,347
Listing fees 12,069
Directors' fees and expenses 11,264
Custodian fees 10,942
Pricing fees 6,211
Amortization of organization expenses (Note 1e) 3,701
Other 14,354
------------
Total expenses 1,253,633
------------
Investment income--net 9,630,827
------------
Realized & Realized gain on investments 3,900,331
Unrealized Gain Change in unrealized appreciation on investments--net (8,752,688)
(Loss) on ------------
Investments Net Increase in Net Assets Resulting from Operations $ 4,778,470
- --Net (Notes 1b, ============
1d & 3):
</TABLE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 9,630,827 $ 19,481,221
Realized gain (loss) on investments--net 3,900,331 (816,424)
Change in unrealized appreciation/depreciation on investments--net (8,752,688) 31,718,726
------------ ------------
Net increase in net assets resulting from operations 4,778,470 50,383,523
------------ ------------
<PAGE>
Dividends & Investment income--net:
Distributions to Common Stock (7,271,208) (14,703,701)
Shareholders Preferred Stock (2,031,024) (4,452,300)
(Note 1f): Realized gain on investments--net:
Common Stock (468,617) (581,683)
Preferred Stock (138,816) (104,543)
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 (9,909,665) (20,521,459)
------------ ------------
Net Assets: Total increase (decrease) in net assets (5,131,195) 29,862,064
Beginning of period 370,689,752 340,827,688
------------ ------------
End of period* $365,558,557 $370,689,752
============ ============
<FN>
*Undistributed investment income--net $ 2,732,385 $ 2,403,790
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
For the For the Period
The following per share data and ratios have been derived Six Months Oct. 30,
from information provided in the financial statements. Ended 1992++ to
April 30, For the Year Ended October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 15.27 $ 13.45 $ 16.63 $ 14.15 $ 14.18
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .58 1.19 1.18 1.15 --
Realized and unrealized gain (loss) on
investments--net (.30) 1.88 (2.92) 2.53 --
-------- -------- -------- -------- --------
Total from investment operations .28 3.07 (1.74) 3.68 --
-------- -------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.44) (.90) (.96) (.88) --
Realized gain on investments--net (.03) (.04) (.25) -- --
In excess of realized gain on
investments--net -- -- (.03) -- --
-------- -------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.47) (.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 (.12) (.27) (.18) (.18) --
Realized gain on investments--net (.01) (.01) (.05) -- --
In excess of realized gain on invest-
ments--net -- (.00)+++ -- -- --
Capital charge resulting from issuance of
Preferred Stock -- -- -- (.14) --
-------- -------- -------- -------- --------
Total effect of Preferred Stock activity (.13) (.28) (.23) (.32) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 14.95 $ 15.27 $ 13.45 $ 16.63 $ 14.15
======== ======== ======== ======== ========
Market price per share, end of period $ 13.375 $ 13.125 $ 11.375 $ 15.875 $ 15.00
======== ======== ======== ======== ========
Total Based on market price per share 5.41%+++++ 24.33% (21.92%) 11.95% .00%+++++
Investment ======== ======== ======== ======== ========
Return:** Based on net asset value per share 1.27%+++++ 22.33% (11.87%) 24.32% (.21%)+++++
======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement .67%* .69% .69% .54% --
Average ======== ======== ======== ======== ========
Net Assets:*** Expenses .67%* .69% .69% .65% --
======== ======== ======== ======== ========
Investment income--net 5.15%* 5.47% 5.24% 5.25% --
======== ======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of
Data: period (in thousands) $245,559 $250,690 $220,828 $272,639 $230,667
======== ======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $120,000 $120,000 $120,000 $120,000 --
======== ======== ======== ======== ========
Portfolio turnover 39.74% 64.18% 47.85% 38.69% --
======== ======== ======== ======== ========
<PAGE>
Leverage: Asset coverage per $1,000 $ 3,046 $ 3,089 $ 2,840 $ 3,272 --
======== ======== ======== ======== ========
Dividends Series A--Investment income--net $ 406 $ 953 $ 590 $ 592 --
Per Share ======== ======== ======== ======== ========
On Preferred Series B--Investment income--net $ 440 $ 902 $ 640 $ 640 --
Stock ======== ======== ======== ======== ========
Outstanding:++++++
<FN>
*Annualized.
**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 that occurred on December 1, 1994.
+++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. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
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 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.
<PAGE>
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired, or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
NOTES TO FINANCIAL STATEMENTS (concluded)
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(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.
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.
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.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1996 were $142,111,759 and
$155,364,418, respectively.
Net realized and unrealized gains (losses) as of April 30, 1996 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $1,880,281 $10,827,476
Short-term investments (556) --
Financial futures contracts 2,020,606 --
---------- -----------
Total $3,900,331 $10,827,476
========== ===========
As of April 30, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $10,827,476, of which $12,437,976 related to
appreciated securities and $1,610,500 related to depreciated
securities. The aggregate cost of investments at April 30, 1996 for
Federal income tax purposes was $345,880,407.
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 six months ended April 30, 1996, shares issued and
outstanding remained constant at 16,420,827. At April 30, 1996,
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, 1996 were 3.65%
for Series A and 3.75% for Series B.
<PAGE>
As of April 30, 1996, there were 4,800 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share.
The Fund pays commissions to certain broker-dealers at the end of
each auction at an annual rate ranging from 0.25% to 0.375%,
calculated on the proceeds of each auction. For the six months ended
April 30, 1996, MLPF&S, an affiliate of FAM, earned $82,924 as
commissions.
5. Subsequent Event:
On May 10, 1996, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$0.069054 per share, payable on May 30, 1996 to shareholders of
record as of May 21, 1996.
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
Vincent R. Giordano, Senior Vice President
William R. Bock, Vice President
Donald C. Burke, 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
<PAGE>
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MTI
