MUNIYIELD
QUALITY
FUND II, INC.
FUND LOGO
Annual Report
October 31, 1995
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield Quality 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 Quality Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield Quality Fund II, Inc.
TO OUR SHAREHOLDERS
For the year ended October 31, 1995, the Common Stock of MuniYield
Quality Fund II, Inc. earned $0.888 per share income dividends,
which included earned and unpaid dividends of $0.076. This
represents a net annualized yield of 6.07%, based on a month-end net
asset value of $14.64 per share. Over the same period, the total
investment return on the Fund's Common Stock was +20.30%, based on a
change in per share net asset value from $13.20 to $14.64, and
assuming reinvestment of $0.893 per share income dividends and
$0.098 per share capital gains distribution.
For the six-month period ended October 31, 1995, the total
investment return on the Fund's Common Stock was +8.63%, based on a
change in per share net asset value from $13.95 to $14.64, and
assuming reinvestment of $0.429 per share income dividends.
<PAGE>
For the six-month period ended October 31, 1995, the Fund's Auction
Market Preferred Stock had an average yield as follows: Series A,
3.58%; Series B, 3.58%; and Series C, 3.75%.
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.
<PAGE>
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.
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 over-come 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 fiscal year ended October 31, 1995, MuniYield Quality
Fund II, Inc. fully participated in the rebound which occurred in
the municipal markets. The Fund's total return was enhanced by our
purchase of high-quality bonds which performed well in a declining
interest rate environment. Overall, the Fund's performance was
enhanced primarily by our portfolio strategy which centered around
the maintenance of an attractive and competitive yield. As a
consequence, the Fund's cash reserves were kept low, averaging close
to 5% of net assets. The Fund's portfolio structure also figured
prominently in this income-oriented strategy. Issues bearing large
coupons provided not only a generous current return but also a
measure of protection from interest rate volatility. This insulating
quality becomes particularly valuable in the later stages of a
rising market. To the extent these kinds of securities can limit
volatility in the net asset value of the Fund's Common Stock, we
have sought to accumulate them whenever possible.
Leverage continued to benefit Common Stock shareholders as the
municipal yield curve remains positively sloped, allowing the Fund
to generate an incrementally greater yield over what would otherwise
be available with conventional long-term tax-exempt securities.
Moreover, net asset value of the Fund's Common Stock has risen in
value dramatically, recouping much of what was lost in 1994 as well
as demonstrating the volatility inherent in a leveraged portfolio.
However, should the spread between short-term and long-term interest
rates narrow, the benefits of leverage will diminish and the yield
on the Fund's Common Stock will be reduced. (For a complete
explanation of the benefits and risks of leveraging, see page 5 of
this report to shareholders.)
<PAGE>
Looking ahead, we expect interest rates to continue to decline,
although not with the same pace as experienced in the past 12
months. The economy appears to be growing at a moderate rate with
little threat of rising inflation.
In Conclusion
We appreciate your ongoing interest in MuniYield Quality 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
(Robert A. DiMella)
Robert A. DiMella
Portfolio Manager
December 6, 1995
We are pleased to announce that Robert A. DiMella is responsible for
the day-to-day management of MuniYield Quality Fund II, Inc. Mr.
DiMella has been employed by Merrill Lynch Asset Management, L.P.
(an affiliate of the Fund's investment adviser) since 1995 as
Assistant Vice President and was Assistant Portfolio Manager thereof
from 1993 to 1995. Prior thereto, he was Assistant Portfolio Manager
with Prudential Investment Advisors from 1992 to 1993, and was a
Research Assistant with Prudential Investment Corporation from 1989
to 1992.
<PAGE>
<TABLE>
PROXY RESULTS
<CAPTION>
During the six-month period ended October 31, 1995, MuniYield
Quality Fund II, Inc. Common Stock shareholders voted on the
following proposals. The proposals were approved at a special
shareholders' meeting on September 8, 1995. The description of each
proposal and number of shares voted are as follows:
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Herbert I. London 20,822,810 887,468
Robert R. Martin 20,806,644 903,634
Andre F. Perold 20,821,132 889,146
Arthur Zeikel 20,804,088 906,190
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's independent
auditors for the current fiscal year. 20,927,845 405,021 377,412
<CAPTION>
During the six-month period ended October 31, 1995, MuniYield
Quality Fund II, Inc. Preferred Stock shareholders (Series A, B, C)
voted on the following proposals. The proposals were approved at a
special shareholders' meeting on September 8, 1995. The description
of each proposal and number of shares voted are as follows:
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors:
James H. Bodurtha, Herbert I. London,
Robert R. Martin, Joseph L. May,
Andre F. Perold and Arthur Zeikel
as follows: Series A 1,390 0
Series B 1,878 0
Series C 1,794 31
<PAGE>
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP
as the Fund's independent auditors for the
current fiscal year as follows: Series A 1,372 18 0
Series B 1,746 1 131
Series C 1,825 0 0
</TABLE>
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield Quality Fund II, Inc. utilizes leveraging to seek to
enhance the yield and net asset value of its Common Stock. However,
these objectives cannot be achieved in all interest rate
environments. To leverage, the Fund issues Preferred Stock, which
pays dividends at prevailing short-term interest rates, and invests
the proceeds in long-term municipal bonds. The interest earned on
these investments is paid to Common Stock shareholders in the form
of dividends, and the value of these portfolio holdings is reflected
in the per share net asset value of the Fund's Common Stock.
However, in order to benefit Common Stock shareholders, the yield
curve must be positively sloped; that is, short-term interest rates
must be lower than long-term interest rates. At the same time, a
period of generally declining interest rates will benefit Common
Stock shareholders. If either of these conditions change, then the
risks of leveraging will begin to outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock
capitalization of $100 million and the issuance of Preferred Stock
for an additional $50 million, creating a total value of $150
million available for investment in long-term municipal bonds. If
prevailing short-term interest rates are approximately 3% and long-
term interest rates are approximately 6%, the yield curve has a
strongly positive slope. The fund pays dividends on the $50 million
of Preferred Stock based on the lower short-term interest rates. At
the same time, the fund's total portfolio of $150 million earns the
income based on long-term interest rates. Of course, increases in
short-term interest rates would reduce (and even eliminate) the
dividends on the Common Stock.
<PAGE>
In this case, the dividends paid to Preferred Stock shareholders are
significantly lower than the income earned on the fund's long-term
investments, and therefore the Common Stock shareholders are the
beneficiaries of the incremental yield. However, if short-term
interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental yield pick-up on the
Common Stock will be reduced or eliminated completely. At the same
time, the market value on 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 Quality 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)
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
PCR Pollution Control Revenue Bonds
S/F Single-Family
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--1.6% NR* Aaa $ 7,390 Alabama, HFA, S/F Revenue Bonds (Collateral Home
Mortgage Program), Series B-1, 6.65% due 10/01/2025 $ 7,746
Alaska--0.6% A- A 2,580 Alaska Industrial Development and Export Authority
Revolving Fund, AMT, Series A, 6.375% due 4/01/2008 2,729
Arkansas--0.9% AAA NR* 4,000 Arkansas State Development Financing Authority, S/F
Mortgage Revenue Refunding Bonds (Mortgage Backed
Securities Program), AMT, Series B, 6.70% due 7/01/2027 (d) 4,144
<PAGE>
California AAA Aaa 10,000 Los Angeles, California, Convention and Exhibition Center
- --5.9% Authority, Lease Revenue Refunding Bonds, Series A,
5.125% due 8/15/2021 (c) 9,202
A A1 3,000 Los Angeles, California, Wastewater System Revenue
Refunding Bonds, Series C, 7.10% due 6/01/2018 3,312
AAA Aaa 5,000 Riverside, California, Redevelopment Agency Refunding
Bonds (Tax Allocation--Merged Redevelopment Project),
Series A, 5.625% due 8/01/2023 (c) 4,886
AAA Aaa 10,000 University of California Revenue Bonds (Multiple
Purpose Projects), Series D, 6.375% due 9/01/2019 (c) 10,477
Colorado BBB+ Baa1 1,350 Colorado Health Facilities Authority Revenue Bonds (Hospital
- --3.9% P/SL Healthcare System Project), Series A, 6.875% due 2/15/2023 1,520
Denver, Colorado, City and County Airport Revenue Bonds:
BBB Baa 4,020 AMT, Series B, 7.50% due 11/15/2025 4,198
BBB Baa 9,500 AMT, Series C, 6.75% due 11/15/2022 9,589
BBB Baa 3,000 Series A, 7.25% due 11/15/2025 3,232
Connecticut Connecticut State Learning Regional Educational Service
- --1.9% Center Revenue Bonds (Office/Education Center Facilities):
NR* NR* 2,150 7.50% due 2/01/2005 2,223
NR* NR* 1,100 7.75% due 2/01/2015 1,145
AA- A1 5,000 Connecticut State Special Tax Obligation Revenue Bonds
(Transportation Infrastructure), Series B, 6.50% due 10/01/2012 5,540
District of AA- A 4,460 District of Columbia Revenue Bonds (Howard University),
Columbia--1.0% Series A, 7.25% due 10/01/2020 4,784
Florida--3.8% AAA Aaa 10,000 Florida State Turnpike Authority, Turnpike Revenue Bonds
(Department of Transportation), Series A, 5.50% due
7/01/2021 (g) 9,797
AAA Aaa 5,000 Orlando and Orange County, Florida, Expressway Authority
Revenue Bonds, Junior-Lien, 6.50% due 7/01/2011 (g) 5,639
NR* Baa 2,500 Palm Bay, Florida, Lease Revenue Refunding Bonds
(Florida Education and Research Foundation Project),
Series A, 7% due 9/01/2024 2,628
</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>
Georgia--4.9% AAA Aaa $ 2,500 Georgia Municipal Electric Authority, Power Revenue
Bonds, Series EE, 6.65% due 1/01/2021 (b) $ 2,584
AAA Aaa 10,000 Georgia Municipal Electric Authority, Special Obligation
Revenue Bonds, Fifth Crossover Series (Project No. 1),
6.40% due 1/01/2013 (b)(f) 10,874
AA+ Aa 3,000 Georgia State HFA, Revenue Bonds, S/F, Mortgage, AMT,
Sub-Series A-2, 6.55% due 12/01/2027 3,045
AAA Aaa 6,200 Putnam County, Georgia, Development Authority, PCR (Georgia
Power Company, Plant Branch), 7.25% due 7/01/2021 (g) 6,449
<PAGE>
Idaho--1.1% Idaho Student Loan Revenue Bonds (Student Loan Marketing
Association, Inc.), AMT:
NR* NR* 3,245 Series B, 6.60% due 10/01/2006 3,369
NR* Aa 2,005 Sub-Series 1, 6.80% due 10/01/2006 2,081
Illinois--3.1% AAA Aaa 3,030 Illinois Development Finance Authority, PCR, Refunding (Commerce
Edison Company Project), Series D, 6.75% due 3/01/2015 (b) 3,303
A+ A1 3,645 Illinois Educational Facilities Authority, Revenue Refunding Bonds
(Loyola University--Chicago), Series A, 7.125% due 7/01/2021 3,946
NR* Baa1 1,000 Illinois Health Facilities Authority Revenue Bonds (Mercy
Center for Health Care Services), 6.65% due 10/01/2022 1,011
NR* Aaa 6,000 Illinois Student Assistance Commission, Student Loan
Revenue Bonds, AMT, Senior Series BB, 6.75% due 3/01/2015 6,335
Indiana--4.2% A NR* 2,675 Indiana Bond Bank Revenue Bonds (State Revolving Fund
Program), Series A, 6.75% due 2/01/2017 2,862
NR* Aa 2,200 Indiana Health Facility Finance Authority, Hospital Revenue
Refunding Bonds (Methodist Hospital Incorporated),
6.75% due 9/15/2009 2,324
AAA Aaa 4,000 Indiana State Toll Finance Authority, Toll Road Revenue
Refunding Bonds, 6.875% due 7/01/2012 (g) 4,191
Indianapolis, Indiana, Local Public Improvement Bond Bank:
A+ NR* 4,800 Refunding, Series D, 6.75% due 2/01/2020 5,122
NR* A1 5,000 Series C, 6.70% due 1/01/2017 5,266
Kentucky--0.6% NR* NR* 3,000 Perry County, Kentucky, Solid Waste Disposal Revenue
Bonds (TJ International Project), AMT, 7% due 6/01/2024 3,072
Louisiana NR* Baa2 5,000 Lake Charles, Louisiana, Harbor and Terminal District,
- --1.2% Port Facilities Revenue Refunding Bonds (Trunkline
Long Company Project), 7.75% due 8/15/2022 5,636
Massachusetts AAA Aaa 8,000 Massachusetts Bay Transportation Authority, General
- --6.8% Transportation System Revenue Refunding Bonds, Series A,
5.50% due 3/01/2022 (c) 7,782
BBB+ A 2,000 Massachusetts Municipal Wholesale Electric Company,
Revenue Refunding Bonds (Power Supply System), Series A,
6.75% due 7/01/2011 2,142
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
NR* Aa 2,500 Refunding (Daughters of Charity), Series D,
6.10% due 7/01/2014 2,553
A- NR* 3,500 Refunding (Melrose--Wakefield Hospital), Series B,
6.375% due 7/01/2016 3,522
NR* Ba 2,640 Refunding (New England Memorial Hospital), Series B,
6% due 7/01/2008 2,222
NR* Ba 4,590 Refunding (New England Memorial Hospital), Series B,
6.125% due 7/01/2013 3,813
BBB Baa1 5,000 (Sisters Providence Health System), Series A, 6.625%
due 11/15/2022 4,774
AAA Aaa 5,000 Massachusetts State, HFA (Residential Development),
Series A, 6.875% due 11/15/2011 (i) 5,296
</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>
Mississippi A A2 $ 6,000 Lowndes County, Mississippi, Solid Waste Disposal, PCR,
- --1.4% Refunding (Weyerhaeuser Company Project), Series A
6.80% due 4/01/2022 $ 6,709
New Jersey AAA Aaa 5,000 Cape May County, New Jersey, PCR, Industrial Finance
- --1.2% Authority, Revenue Refunding Bonds (Atlantic City
Electric Company Project), Series B, 7% due 11/01/2029 (c) 5,619
New Mexico A+ A1 4,600 Albuquerque, New Mexico, Airport Revenue Refunding
- --2.1% Bonds, 6.50% due 7/01/2019 4,658
A A2 5,000 Lordsburg, New Mexico, PCR, Refunding (Phelps Dodge
Corporation Project), 6.50% due 4/01/2013 5,196
New York--6.0% BBB+ Baa1 5,150 New York City, New York, GO, UT, Series H, 7% due 2/01/2021 5,429
New York City, New York, IDA, Civic Facilities Revenue
Bonds (New York Blood Center Incorporated Project):
BBB NR* 2,000 7.20% due 5/01/2012 2,122
BBB NR* 3,250 7.25% due 5/01/2022 3,418
AAA Aaa 4,035 New York City, New York, Municipal Water Finance
Authority, Water and Sewer System Revenue Bonds,
Series B, 5.375% due 6/15/2019 (b) 3,886
A Aa 7,500 New York State Environmental Facilities Corporation, PCR
(State Water Revolving Fund), Series E, 6.50% due 6/15/2014 8,002
A A 5,000 New York State Local Government Assistance Corporation
Revenue Bonds, Series A, 6.875% due 4/01/2019 5,452
North A A2 13,000 Martin County, North Carolina, Industrial Facilities and
Carolina--2.9% Pollution Control Financing Authority, Solid Waste Disposal
Revenue Bonds (Weyerhaeuser Company), AMT,
6.80% due 5/01/2024 13,791
<PAGE>
Ohio--1.4% AA- Aa3 6,500 Ohio State Air Quality Development Authority, Revenue
Refunding Bonds (Dayton Power and Light Project),
Series B, 6.40% due 8/15/2027 6,747
Oklahoma--1.1% AA- A1 5,000 Muskogee, Oklahoma, Industrial Collateralized Trust, PCR
(Oklahoma Gas and Electric Co. Project), Series A,
7% due 3/01/2017 5,228
Oregon--3.6% AAA Aaa 2,520 Josephine County, Oregon, School District No. 007, UT,
5.75% due 6/01/2007 (g) 2,675
A+ Aa 2,000 Lane County, Oregon, Area Education District (Lane
Community College), UT, 5.50% due 6/01/2006 2,108
AAA Aaa 1,150 Lincoln County, Oregon, School District, UT, 6% due
6/15/2008 (g) 1,245
Marion County, Oregon, School District No. 103C (Woodburn) (g):
AAA Aaa 3,500 Series A, 5.65% due 11/01/2015 3,503
AAA Aaa 2,000 Series B, 5.15%** due 11/01/2006 1,149
AAA Aaa 2,000 Series B, 5.25%** due 11/01/2007 1,080
AAA Aaa 2,000 Series B, 5.35%** due 11/01/2008 1,013
AAA Aaa 2,500 Series B, 5.45%** due 11/01/2009 1,189
AAA Aaa 2,500 Series B, 5.55%** due 11/01/2010 1,116
AAA Aaa 2,000 Series B, 5.65%** due 11/01/2011 833
A1+ VMIG1++ 1,000 Port Saint Helens, Oregon, PCR (Portland General Electric
Company Project), VRDN, Series B, 3.95% due 6/01/2010 (a) 1,000
</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>
Pennsylvania A1+ VMIG1++ $ 2,300 Allegheny County, Pennsylvania, Hospital Development
- --3.2% Authority Revenue Bonds (Presbyterian Health Center),
VRDN, Series D, 3.85% due 3/01/2020 (a) (c) $ 2,300
A1 NR* 2,300 Emmaus, Pennsylvania, General Authority Revenue Bonds,
VRDN, Sub-Series D-12, 4% due 3/01/2024 (a) 2,300
AAA Aaa 5,000 Pennsylvania HFA, Revenue Refunding Bonds (Rental
Housing), 6.50% due 7/01/2023 (i) 5,163
AA Aa 5,000 Pennsylvania HFA, S/F Mortgage Revenue Bonds, Series 34-A,
6.85% due 4/01/2016 5,277
Rhode A- Baa1 5,000 Rhode Island Depositors Economic Protection Corporation,
Island--1.0% Special Obligation Refunding Bonds, Series A, 5.75% due 8/01/2021 4,792
<PAGE>
South A1+ A2 5,765 Berkeley County, South Carolina, PCR (South Carolina
Carolina--5.4% Electric and Gas Company), 6.50% due 10/01/2014 6,108
A A1 4,150 Fairfield County, South Carolina, PCR (South Carolina
Electric and Gas Company), 6.50% due 9/01/2014 4,379
A- A1 7,000 Richland County, South Carolina, PCR, Refunding (Union
Camp Corporation Project), Series C, 6.55% due 11/01/2020 7,299
BBB Baa1 5,000 South Carolina Jobs, EDA, Economic Development Revenue
Bonds (Saint Francis Hospital--Franciscan Sisters),
7% due 7/01/2015 5,123
NR* NR* 2,500 Spartanburg County, South Carolina, Solid Waste Disposal
Facilities Revenue Bonds (BMW Project), AMT,
7.55% due 11/01/2024 2,730
South AA+ Aa1 10,320 South Dakota, HDA, Homeownership Mortgage, Series B,
Dakota--2.3% 7.10% due 5/01/2017 10,896
Tennessee BBB Baa1 5,000 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds
- --1.1% (Recycling Facilities-Calhoun Newsprint), AMT, 7.40%
due 12/01/2022 5,398
Texas--10.2% NR* Aaa 3,435 Coppell, Texas, Independent School District Revenue
Refunding Bonds, UT, 6.50% due 8/15/2026 3,626
Gulf Coast, Texas, Waste Disposal Authority Revenue Bonds:
BBB Baa1 4,200 (Champion International Corporation), AMT,
7.375% due 10/01/2025 4,485
AAA Aaa 1,600 Refunding (Coll-Houston Light and Power Company),
Series A, 6.375% due 4/01/2012 (c) 1,694
A- A 4,000 Harris County, Texas, Health Facilities Development Corporation,
Hospital Revenue Bonds (Memorial Hospital Systems Project),
Series A, 6.625% due 6/01/2024 4,143
AAA Aaa 10,490 Harris County, Texas, Toll Road Revenue Refunding Bonds,
Senior Lien, 5.375% due 8/15/2020 (g) 10,066
AAA Aaa 9,250 Lower Colorado River Authority, Texas, Revenue Refunding
Bonds, Junior Lien, Fourth-Supply, 5.625% due 1/01/2017 (h) 9,086
BBB NR* 1,600 Midland County, Texas, Hospital District Revenue Bonds
(Midland Memorial Hospital), 7.50% due 6/01/2016 1,706
BBB Baa 3,885 Tarrant County, Texas, Health Facilities Development
Corporation, Hospital Revenue Refunding and Improvement
Bonds (Fort Worth Osteopathic), 7% due 5/15/2028 3,920
AA Aa 8,200 Texas State, Refunding (Veterans Land), UT, 7.40%
due 12/01/2020 9,292
</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>
Utah--3.8% AA Aa $ 10,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospital Incorporated), 6.25% due 2/15/2023 $ 10,209
Salt Lake County, Utah, PCR, Refunding (Service Station
Holdings Project), VRDN (a):
NR* P1 200 3.95% due 2/01/2008 200
NR* P1 2,400 Series B, 4% due 8/01/2007 2,400
AAA Aaa 5,000 Utah State Board of Regents, Student Loan Revenue Bonds,
AMT, Series H, 6.70% due 11/01/2015 (b) 5,164
Virginia--3.8% Virginia State HDA, Commonwealth Mortgage:
AA+ Aa1 7,640 Series B, Sub-Series B-3, 6.35% due 1/01/2017 7,736
AA+ Aa1 5,085 Series C, Sub-Series C-9, 6.45% due 1/01/2015 5,181
AA+ Aa1 5,025 Series J, Sub-Series J-2, 6.65% due 7/01/2014 5,229
Washington AA Aaa 6,250 Lewis County, Washington, Public Utility District No. 1
- --3.7% Revenue Bonds (Cowlitz Falls Hydroelectric Project),
7% due 10/01/2001 (e) 7,167
AA Aa 10,000 Washington State Public Power Supply System, Revenue
Refunding Bonds (Nuclear Project No. 1), Series A,
6.50% due 7/01/2015 10,225
West Virginia NR* A1 1,500 West Virginia Hospital Financing Authority, Hospital
- --0.3% Revenue Bonds (Charleston Medical Center
Incorporated), Series A, 6.50% due 9/01/2023 1,535
Wisconsin--1.2% NR* A 5,300 Wisconsin Health and Educational Facilities Authority
Revenue Bonds (Mercy Hospital of Janesville Incorporated),
6.50% due 8/15/2011 5,453
Puerto Rico Puerto Rico Commonwealth, UT:
- --2.3% AAA Aaa 5,250 7% due 7/01/2010 (b) 6,183
A Baa1 4,250 6.45% due 7/01/2017 4,488
Total Investments (Cost--$452,891)--99.5% 470,486
Other Assets Less Liabilities--0.5% 2,547
--------
Net Assets--100.0% $473,033
========
<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)MBIA Insured.
(d)FNMA/GNMA Collateralized.
(e)Prerefunded.
(f)Escrowed to Maturity.
(g)FGIC Insured.
(h)FSA Insured.
(i)FNMA Collateralized.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
++Highest short-term ratings by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche 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--$452,890,705) (Note 1a) $470,485,815
Cash 10,018,853
Receivables:
Interest $ 8,590,088
Securities sold 4,617,854 13,207,942
------------
Deferred organization expenses (Note 1e) 10,374
Prepaid expenses and other assets 8,820
------------
Total assets 493,731,804
------------
Liabilities: Payables:
Securities purchased 19,954,613
Dividends to shareholders (Note 1f) 430,393
Investment adviser (Note 2) 206,632 20,591,638
------------
Accrued expenses and other liabilities 107,147
------------
Total liabilities 20,698,785
------------
Net Assets: Net assets $473,033,019
============
<PAGE>
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (6,000 shares of AMPS*
issued and outstanding at $25,000 per share liquidation
preference) $150,000,000
Common Stock, par value $.10 per share (22,070,885 shares issued
and outstanding) $ 2,207,089
Paid-in capital in excess of par 307,412,636
Undistributed investment income--net 3,539,409
Accumulated realized capital losses on investments--net (Note 5) (7,686,664)
Accumulated distributions in excess of realized capital gains--net (34,561)
Unrealized appreciation on investments--net 17,595,110
------------
Total--Equivalent to $14.64 net asset value per Common Stock
(market price--$12.625) 323,033,019
------------
Total capital $473,033,019
============
<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 $ 28,745,330
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 2,280,771
Commission fees (Note 4) 395,296
Transfer agent fees 79,184
Professional fees 75,510
Accounting services (Note 2) 72,455
Printing and shareholder reports 51,386
Listing fees 38,313
Custodian fees 26,173
Directors' fees and expenses 23,679
Pricing fees 14,861
Amortization of organization expenses (Note 1e) 5,643
Other 29,341
------------
Total expenses 3,092,612
------------
Investment income--net 25,652,718
------------
<PAGE>
Realized & Realized loss on investments--net (7,685,092)
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net 41,461,941
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 59,429,567
(Notes 1b, ============
1d & 3):
</TABLE>
<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 $ 25,652,718 $ 26,174,204
Realized gain (loss) on investments--net (7,685,092) 2,464,397
Change in unrealized appreciation/depreciation on investments--net 41,461,941 (61,640,797)
------------ ------------
Net increase (decrease) in net assets resulting from operations 59,429,567 (33,002,196)
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (19,712,391) (21,297,432)
Shareholders Preferred Stock (5,523,140) (3,453,990)
(Note 1f): Realized gain on investments--net:
Common Stock (2,139,194) (8,271,594)
Preferred Stock (325,188) (1,657,090)
In excess of realized gain on investments--net:
Common Stock (29,999) --
Preferred Stock (4,562) --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (27,734,474) (34,680,106)
------------ ------------
Net Assets: Total increase (decrease) in net assets 31,695,093 (67,682,302)
Beginning of year 441,337,926 509,020,228
------------ ------------
End of year* $473,033,019 $441,337,926
============ ============
<FN>
*Undistributed investment income--net (Note 1g) $ 3,539,409 $ 3,115,771
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATON (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived Aug. 28,
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 $ 13.20 $ 16.27 $ 13.58 $ 14.18
Operating -------- -------- -------- --------
Performance: Investment income--net 1.16 1.18 1.21 .15
Realized and unrealized gain (loss) on investments--net 1.53 (2.68) 2.75 (.59)
-------- -------- -------- --------
Total from investment operations 2.69 (1.50) 3.96 (.44)
-------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.89) (.96) (1.07) --
Realized gain on investments--net (.10) (.37) -- --
In excess of realized gain on investments--net --+++++ -- -- --
-------- -------- -------- --------
Total dividends and distributions to Common
Stock shareholders (.99) (1.33) (1.07) --
-------- -------- -------- --------
Capital charge resulting from issuance of
Common Stock -- -- -- (.02)
-------- -------- -------- --------
Effect of Preferred Stock activity:++++
Dividends and distributions to Preferred
Stock shareholders:
Investment income--net (.25) (.16) (.20) (.01)
Realized gain on investments--net (.01) (.08) -- --
In excess of realized gain on invest-
ments--net --+++++ -- -- --
Capital charge resulting from issuance of
Preferred Stock -- -- -- (.13)
-------- -------- -------- --------
Total effect of Preferred Stock activity (.26) (.24) (.20) (.14)
-------- -------- -------- --------
Net asset value, end of period $ 14.64 $ 13.20 $ 16.27 $ 13.58
======== ======== ======== ========
Market price per share, end of period $ 12.625 $ 11.125 $ 15.50 $ 14.25
======== ======== ======== ========
<PAGE>
Total Investment Based on market price per share 23.09% (20.98%) 16.82% (5.00%)+++
Return:** ======== ======== ======== ========
Based on net asset value per share 20.30% (10.68%) 28.67% (4.23%)+++
======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement .68% .69% .57% --%*
Net Assets:*** ======== ======== ======== ========
Expenses .68% .69% .61% .60%*
======== ======== ======== ========
Investment income--net 5.63% 5.46% 5.49% 6.18%*
======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $323,033 $291,338 $359,020 $297,414
======== ======== ======== ========
Preferred Stock outstanding, end of period
(in thousands) $150,000 $150,000 $150,000 $150,000
======== ======== ======== ========
Portfolio turnover 79.27% 47.42% 81.12% 5.07%
======== ======== ======== ========
Dividends Per Series A--Investment income--net $ 885 $ 564 $ 760 $ 29
Share on Series B--Investment income--net 942 564 811 30
Preferred Stock Series C--Investment income--net 934 600 640 24
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 October 19, 1992.
++++++Dividends per share have been adjusted to reflect a two-
for-one stock split.
+++Aggregate total investment return.
+++++Amount less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield Quality 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 MQT. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primarily
in the over-the-counter markets and are valued at the most recent
bid price or yield equivalent as obtained by the Fund's pricing
service from dealers that make markets in such securities. Finan-
cial 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
their 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.
<PAGE>
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) 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.
(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 $1,572 and $4,879 have been reclassified from accumulated net
realized capital losses and paid-in capital in excess of par,
respectively, to undistributed net investment income. These
reclassifications have no effect on net assets or net asset value
per share.
<PAGE>
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). 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.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1995 were $345,341,259 and
$337,438,989, respectively.
Net realized and unrealized gains (losses) as of October 31, 1995
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $(1,624,481) $17,595,110
Short-term investments 525,559 --
Financial futures contracts (6,586,170) --
----------- -----------
Total $(7,685,092) $17,595,110
=========== ===========
As of October 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $17,595,110, of which $18,936,974
related to appreciated securities and $1,341,864 related to
depreciated securities. The aggregate cost of investments at October
31, 1995 for Federal income tax purposes was $452,890,705.
<PAGE>
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of the holders of Common Stock.
Common Stock
For the year ended October 31, 1995, shares issued and outstanding
remained constant at 22,070,885. At October 31, 1995, total paid-in
capital amounted to $309,619,725.
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 October 31, 1995 were as
follows: Series A, 3.78%; Series B, 3.78%; and Series C, 3.78%.
A two-for-one stock split occurred on December 1, 1994. As a result,
as of October 31, 1995, there were 6,000 AMPS shares authorized,
issued and outstanding with a liquidation preference of $25,000 per
share, plus accumulated and unpaid dividends of $390,366.
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 $216,254 as
commissions.
5. Capital Loss Carryforward:
At October 31, 1995, the Fund had a capital loss carryforward of
approximately $2,439,000, all of which expires in 2003. This amount
will be available to offset like amounts on any future taxable
gains.
6. 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 $0.076438 per share, payable on November 29, 1995 to shareholders
of record as of November 24, 1995.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
MuniYield Quality Fund II, Inc.:
<PAGE>
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of MuniYield
Quality Fund II, Inc. as of October 31, 1995, the related statements
of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the three-year period
then ended and the period August 28, 1992 (commencement of
operations) to October 31, 1992. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at October
31, 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.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
MuniYield Quality Fund II, Inc. as of October 31, 1995, the results
of its operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 6, 1995
</AUDIT-REPORT>
<TABLE>
IMPORTANT TAX INFORMATION (unaudited)
<CAPTION>
All of the net investment income distributions paid monthly by
MuniYield Quality 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:
<PAGE>
Payable Short-Term Long-Term
Date Capital Gains Capital Gains
<S> <S> <C> <C> <C>
Common Stock Shareholders 12/29/94 -- $ .098283
Preferred Stock Shareholders: Series A 12/01/94 -- $107.55
Series B 12/12/94 -- $ 53.81
Series C 11/28/94 -- $ 54.58
12/05/94 -- $ 27.29
12/12/94 -- $ 2.71
Please retain this information for your records.
</TABLE>
PER SHARE INFORMATION (unaudited)
<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 $ .49 $ .19 $.24 $.01 $.37 $.07
February 1, 1994 to April 30, 1994 .28 (.35) (2.06) .24 .05 -- --
May 1, 1994 to July 31, 1994 .29 .01 .25 .24 .05 -- .01
August 1, 1994 to October 31, 1994 .31 (.04) (1.17) .24 .05 -- --
November 1, 1994 to January 31, 1995 .30 (.18) .60 .24 .04 .10 .01
February 1, 1995 to April 30, 1995 .27 (.22) .67 .22 .08 -- --
May 1, 1995 to July 31, 1995 .30 (.04) .28 .21 .07 -- --
August 1, 1995 to October 31, 1995 .29 .10 .32 .22 .06 -- --
<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 $16.29 $15.70 $15.625 $14.25 2,309
February 1, 1994 to April 30, 1994 16.05 13.58 15.50 12.50 2,063
May 1, 1994 to July 31, 1994 14.75 13.78 13.25 12.375 2,172
August 1, 1994 to October 31, 1994 14.42 13.20 13.25 11.00 4,298
November 1, 1994 to January 31, 1995 13.53 12.15 12.375 10.125 6,116
February 1, 1995 to April 30, 1995 14.25 13.56 12.75 12.00 2,541
May 1, 1995 to July 31, 1995 14.64 13.93 12.625 12.00 2,592
August 1, 1995 to October 31, 1995 14.71 14.01 12.625 12.00 2,136
<PAGE>
<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
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, New York 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MQT
