MUNIYIELD
QUALITY
FUND II, INC.
FUND LOGO
Semi-Annual Report
April 30, 1995
Officers and Directors
Arthur Zeikel, President and 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
<PAGE>
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
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.
MuniYield Quality Fund II, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
MuniYield Quality Fund II, Inc.
TO OUR SHAREHOLDERS
For the six months ended April 30, 1995, the Common Stock of
MuniYield Quality Fund II, Inc. earned $0.453 per share income
dividends, which included earned and unpaid dividends of $0.071.
This represents a net annualized yield of 6.55%, based on a month-
end net asset value of $13.95 per share. Over the same period, the
total investment return on the Fund's Common Stock was +10.74%,
based on a change in per share net asset value from $13.20 to
$13.95, and assuming reinvestment of $0.464 per share income
dividends and $0.098 per share capital gains distributions.
The average yields of the Fund's Auction Market Preferred Stock for
the six months ended April 30, 1995 were as follows: Series A,
3.94%; Series B, 4.40%; and Series C, 4.19%.
The Environment
During the six months ended April 30, 1995, the perception that the
US economy was overheating and inflationary pressures were
increasing gave way to a more benign economic outlook. With more
signs of slowing growth, investors now appear to be forecasting a
"soft landing" for the US economy. Although gross domestic product
was reported to have increased at a revised 5.1% rate during the
final quarter of 1994, declines in other indicators such as new home
sales and durable goods orders registered thus far in 1995 have led
investors to anticipate that the economy is losing enough momentum
to keep inflation under control and preclude further significant
monetary policy tightening by the Federal Reserve Board. A further
indication of a slowing economy was the reported decline in the
Index of Leading Economic Indicators for March.
As US stock and bond markets have risen on more positive economic
news, the value of the US dollar has reached new lows relative to
the yen and the Deutschemark. Persistent trade deficits and exports
of capital from the United States have kept the US currency in a
decade-long decline relative to the Japanese and German currencies.
Over the longer term, since the United States has the highest
productivity among industrialized nations and among the lowest labor
costs, demand for US dollar-denominated assets may improve. However,
a reduction of the still-widening US trade deficit may be necessary
before the US dollar appreciates substantially relative to the yen
and the Deutschemark.
<PAGE>
The first months of 1995 have been very positive for the stock and
bond markets. Continued signs of a moderating expansion and well-
contained inflationary pressures would provide further assurance
that the peak in interest rates is behind us. On the other hand,
indications of reaccelerating growth and further significant
monetary policy tightening by the Federal Reserve Board would be a
decided negative for the US financial markets.
The Municipal Market
During the six-month period ended April 30, 1995, the tax-exempt
bond market gradually recouped much of the losses sustained during
1994. Signs of a weakening domestic economy and ongoing moderate
inflationary pressures have fostered an environment of declining
interest rates. Since October 31, 1994, A-rated, uninsured municipal
revenue bond yields, as measured by the Bond Buyer Revenue Bond
Index, have declined over 65 basis points (0.65%) to close the six-
month period ended April 30, 1995 at 6.29%. Tax-exempt bond yields
initially continued to climb in late 1994, reaching a high of 7.37%
in late November 1994. Municipal bond yields have since declined
over 100 basis points from their recent highs and are presently
lower than they were a year ago. US Treasury bond yields have
experienced similar declines over the last six months to end the
April period at 7.34%.
Much of the recent improvement in the tax-exempt bond market,
however, has occurred over the last three months. During this most
recent quarter, municipal bond yields have fallen approximately 50
basis points, while US Treasury bond yields declined only 35 basis
points. Tax-exempt bond yields declined more than their taxable
counterparts in recent months, largely in response to the
significant decline in new bond issuance in recent quarters. Over
the last six months, less than $60 billion in new long-term
municipal securities were underwritten, a decline of nearly 45%
versus the comparable period a year earlier. Issuance was
particularly low this past January and February, with monthly volume
of less than $8 billion. These levels are the lowest monthly totals
since the mid-1980s.
To compound the municipal market's already strong technical posture,
both institutional and individual investors have seen significant
cash inflows in recent months. These assets were derived from
regular coupon payments, bond maturities and the proceeds from early
bond calls and redemptions. It has been estimated that investors
received over $20 billion in principal redemptions and coupon income
in January 1995 alone. With monthly issuance in the $10 billion
range thus far this year, the current supply/demand imbalance has
dominated the municipal market and bond prices have risen
accordingly. The tax-exempt bond market's technical position is
likely to remain very strong throughout most of 1995. Investors are
expected to receive almost $40 billion in principal and coupon
payments on July 1, 1995. Investor proceeds from all sources have
been estimated to exceed $200 billion for all of 1995. Estimates of
total new bond issuance for 1995 have continued to be lowered with
most estimates now in the $125 billion range. Investors should find
it increasingly difficult to replace existing holdings as they
mature and to reinvest coupon income in such an environment.
<PAGE>
The municipal bond market's outperformance thus far this year caused
the tax-exempt market to become temporarily expensive relative to
its taxable counterpart in late April. Investor concerns regarding
the international currency situation and the future impact of
proposed revisions to US taxation policies upon the tax advantage
inherent to municipal bonds have combined to cause tax exempt bond
yields to increase marginally in recent weeks. Municipal bond yields
have risen approximately 15 basis points from their lows in mid-
April 1995. Long-term US Treasury bond yields have remained
essentially stable. Such an underperformance by the tax-exempt bond
market is likely to be limited in duration. The recent increase in
tax exempt bond yields has already begun to attract institutional
investors since some municipal bonds yielding in excess of 85% of US
Treasury bond yields are again available. Also, concerns regarding
the implication for municipal bonds' tax advantage resulting from
various proposed tax law changes (for example, flat-tax, value-added
tax or national sales tax) are all likely to quickly recede as
investors realize that such, if any, changes are unlikely to be
enacted before late 1996 at the earliest. Long-term investors will
also recall 1986 when similar tax proposals were made and tax-exempt
bond yields initially rose and then quickly fell. Investors are
likely to view the current situation as an opportunity to purchase
very attractively priced tax-advantaged products. This should cause
municipal bond yields to quickly return to their more historic
relationship.
Portfolio Strategy
During the six months ended April 30, 1995, MuniYield Quality Fund
II, Inc. fully participated in the fixed-income market rebound that
began in November 1994. Selective purchases of high-quality
performance-oriented securities enhanced the Fund's total return.
However, overall performance was dictated primarily by our portfolio
strategy which centered around maintaining an attractive and
competitive yield. Therefore, cash reserves were kept fairly low,
averaging close to 5% of net assets. Portfolio structure also
figures prominently in this income-oriented strategy. Issues bearing
large coupons provide not only an attractive current return but also
some protection from interest rate volatility. This insulating
quality becomes particularly valuable in the later stages of a
rising market. Given the Fund's potential for greater volatility as
a result of its use of leverage, we purchased these issues whenever
possible to seek to limit risk.
<PAGE>
Leveraging continues to benefit Common Stock shareholders as the
municipal yield curve remains positively sloped. This allows the
Fund to generate an incrementally greater yield over what would
otherwise be available with conventional long-term tax-exempt
securities. 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
the information provided below.)
In terms of net assets, the Fund rose in value dramatically,
recouping much of what was lost in 1994 as well as demonstrating the
volatility inherent in this leveraged product. In terms of market
price, the change is even more notable as these positive returns
were accentuated by a marked narrowing in the discount to net asset
value.
Looking ahead, we have grown somewhat cautious regarding the
market's wholesale acceptance of the successfully engineered soft
landing for the economy. Signs of renewed economic momentum may be
forthcoming and, to the extent that the implications may prove
troublesome for fixed-income markets, a more defensive approach may
be warranted in the months ahead.
In Conclusion
We appreciate your ongoing interest in MuniYield Quality Fund II,
Inc., and we look forward to serving your investment needs and
objectives in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
<PAGE>
June 5, 1995
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)
CARS Complementary Auction Rate Securities
CP Commercial Paper
DATES Daily Adjustable Tax-Exempt Securities
EDA Economic Development Authority
GO General Obligation Bonds
HDA Housing Development Authority
HFA Housing Finance Agency
IDA Industrial Development Authority
IDB Industrial Development Board
M/F Multi-Family
PCR Pollution Control Revenue Bonds
S/F Single-Family
TRAN Tax Revenue Anticipation Notes
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--1.7% NR* Aaa $ 7,625 Alabama, HFA, S/F, Revenue Bonds (Collateral Home Mortgage
Program), Series B-1, 6.65% due 10/01/2025 $ 7,833
Alaska--1.3% A- A 2,580 Alaska Industrial Development and Export Authority,
Revolving Fund, AMT, Series A, 6.375% due 4/01/2008 2,642
NR* NR* 3,500 Valdez, Alaska, Marine Term Revenue Refunding Bonds
(Amerada Hess Pipeline Corporation), 6.10% due 2/01/2024 3,147
<PAGE>
Arizona--0.7% NR* VMIG1++ 3,000 Maricopa County, Arizona, IDA, Hospital Facility Revenue
Bonds (Samaritan Health Service Hospital), VRDN, Series B-2,
4.90% due 12/01/2008 (a)(c) 3,000
A1+ P1 200 Pinal County, Arizona, IDA, PCR (Magma Copper/Newmont
Mining Corporation), DATES, 5% due 12/01/2009 (a) 200
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) 4,043
California-- A A1 3,000 Los Angeles, California, Wastewater System Revenue Refunding
3.6% Bonds, Series C, 7.10% due 6/01/2018 3,181
AAA Aaa 13,000 University of California Revenue Bonds (Multiple Purpose
Projects), Series D, 6.375% due 9/01/2019 (c) 13,167
Colorado--3.9% BBB+ Baa1 1,350 Colorado Health Facilities Authority Revenue Bonds (Hospital
P/SL Healthcare SystemProject), Series A, 6.875% due 2/15/2023 1,299
Denver, Colorado, City and County Airport Revenue Bonds:
BB Baa 4,020 AMT, Series B, 7.50% due 11/15/2025 4,077
BB Baa 9,500 AMT, Series C, 6.75% due 11/15/2022 9,256
BB Baa 3,000 Series A, 7.25% due 11/15/2025 3,081
Connecticut Connecticut State Learning Regional Educational Service
- --0.8% Center Revenue Bonds (Office/Education Center Facilities):
NR* NR* 2,150 7.50% due 2/01/2005 2,163
NR* NR* 1,100 7.75% due 2/01/2015 1,108
District of AA- A1 4,460 District of Columbia Revenue Bonds (Howard University),
Columbia--1.0% Series A, 7.25% due 10/01/2020 4,586
</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>
Florida--2.8% BBB Baa1 $ 2,500 Escambia County, Florida, PCR (Champion International
Corporation Project), AMT, 6.90% due 8/01/2022 $ 2,545
A1 VMIG1++ 1,700 Martin County, Florida, PCR, Refunding (Florida Power &
Light Company Project), VRDN, 5.25% due 9/01/2024 (a) 1,700
A+ A1 5,500 Orange County, Florida, Sales Tax Revenue Bonds, Series B,
5.375% due 1/01/2024 4,922
NR* Baa 2,500 Palm Bay, Florida, Lease Revenue Refunding Bonds (Florida
Education & Research Foundation Project), Series A,
7% due 9/01/2024 2,472
A1 VMIG1++ 1,000 Pinellas County, Florida, Health Facilities Authority,
Revenue Refunding Bonds (Pooled Hospital Loan Program),
DATES, 5% due 12/01/2015 (a) 1,000
<PAGE>
Georgia--3.8% A1 VMIG1++ 1,000 Burke County, Georgia, Development Authority, PCR
(Georgia Power Company-Plant Vogtle Project), VRDN,
5% due 7/01/2024 (a) 1,000
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)(g) 10,543
AA+ Aa 6,000 Georgia State HFA, Revenue Bonds, S/F, Mortgage, AMT,
Sub-Series A-2, 6.55% due 12/01/2027 5,952
Idaho--1.1% Idaho Student Loan Revenue Bonds (Student Loan Marketing
Association, Inc.), AMT:
NR* Aaa 3,245 Series B, 6.60% due 10/01/2006 3,237
NR* Aa 2,005 Sub-Series 1, 6.80% due 10/01/2006 2,000
Illinois--7.0% BBB- Baa 2,760 Chicago, Illinois, Revenue Refunding Bonds (Skyway Toll
Bridge), 6.75% due 1/01/2017 2,729
AAA Aaa 4,000 Chicago, Illinois, Wastewater Transmission Revenue Bonds,
6.375% due 1/01/2024 (c) 4,018
A+ A1 3,645 Illinois Educational Facilities Authority, Revenue Refunding
Bonds (Loyola University--Chicago), Series A, 7.125% due
7/01/2021 3,827
NR* A 1,000 Illinois Health Facilities Authority Revenue Bonds (Mercy
Center for Health Care Services), 6.65% due 10/01/2022 980
A+ A1 7,500 Illinois HDA, M/F Program Bonds, Series 5, 6.75% due 9/01/2023 7,517
A+ A1 7,500 Illinois State Toll Highway Authority, Toll HighwayPriority
Revenue Bonds, Series A, 6.375% due 1/01/2015 7,499
NR* Aaa 6,000 Illinois Student Assistance Commission, Student Loan Revenue
Bonds, AMT, Senior Series BB, 6.75% due 3/01/2015 6,111
Indiana--2.7% A NR* 2,675 Indiana Bond Bank Revenue Bonds (State Revolving Fund
Program), Series A, 6.75% due 2/01/2017 2,769
NR* A 2,200 Indiana Health Facility Finance Authority, Hospital Revenue
Refunding Bonds (Methodist Hospital Incorporated),
6.75% due 9/15/2009 2,272
BBB Baa2 5,000 Indianapolis, Indiana, Airport Authority, Special Facilities
Revenue Bonds (Federal Express Corporation Project), AMT,
7.10% due 1/15/2017 5,104
NR* A1 2,200 Indianapolis, Indiana, Local Public Improvement Bond Bank,
Series C, 6.70% due 1/01/2017 2,245
Iowa--0.8% A1+ NR* 300 Iowa Finance Authority, Solid Waste Disposal Revenue Bonds
(Cedar River Paper Company Project), VRDN, Series A,
5.25% due 6/01/2024 (a) 300
BBB+ NR* 3,675 Ottumwa, Iowa, Hospital Facilities Revenue Refunding and
Improvement Bonds (Ottumwa Regional Health),
6% due 10/01/2018 3,194
</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>
Kentucky--1.4% AAA VMIG1++ $ 3,800 Daviess County, Kentucky, Solid Waste Disposal Facility
Revenue Bonds (Scott Paper Co. Project), VRDN, AMT, Series
A, 5.05% due 5/01/2024 (a) $ 3,800
NR* NR* 3,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds
(TJ International Project), AMT, 7% due 6/01/2024 2,934
Louisiana--1.2% NR* Baa3 5,000 Lake Charles, Louisiana, Harbor and Terminal District, Port
Facilities Revenue Refunding Bonds (Trunkline Long Company
Project), 7.75% due 8/15/2022 5,381
Maryland--2.1% NR* A 10,000 Northeast, Maryland, Waste Disposal Authority, Solid Waste
Revenue Bonds (Montgomery County Resource Recreation
Project), AMT, Series A, 6.30% due 7/01/2016 9,714
Massachusetts BBB+ A 2,000 Massachusetts Municipal Wholesale Electric Company, Revenue
- --7.7% Refunding Bonds (Power Supply System), Series A,
6.75% due 7/01/2011 2,065
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
NR* Baa 2,000 (Anna Jaques Hospital), Series B, 6.875% due 10/01/2012 1,950
AAA Aaa 5,150 (Central Massachusetts Medical Center), CARS, Series B,
8.64% due 6/23/2022 (b)(e) 5,530
NR* Aa 2,500 Refunding (Daughters of Charity), Series D,
6.10% due 7/01/2014 2,453
A- NR* 3,500 Refunding (Melrose--Wakefield Hospital), Series B,
6.375% due 7/01/2016 3,360
NR* Ba 2,640 Refunding (New England Memorial Hospital), Series B,
6% due 7/01/2008 2,190
NR* Ba 4,590 Refunding (New England Memorial Hospital), Series B,
6.125% due 7/01/2013 3,772
BBB Baa1 5,000 (Sisters Providence Health System), Series A,
6.625% due 11/15/2022 4,629
AAA Aaa 5,000 Massachusetts State, HFA (Residential Development), Series A,
6.875% due 11/15/2011 (d) 5,213
AAA Aaa 5,000 Massachusetts State Water Resources Authority, Refunding,
Series C, 5.25% due 12/01/2020 (c) 4,438
Michigan-- A- A 3,250 Michigan State Hospital Finance Authority, Revenue Refunding
0.7% Bonds (Detroit Medical Center Obligation Group), Series A,
6.25% due 8/15/2013 3,163
<PAGE>
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 6,386
Missouri--0.4% NR* VMIG1++ 2,000 Missouri Higher Education Loan Authority, Student Loan
Revenue Bonds, VRDN, AMT, Series A, 4.75% due 6/01/2017 (a) 2,000
New Jersey AAA Aaa 5,000 Cape May County, New Jersey, PCR, Industrial Finance Authority,
- --2.3% Revenue Refunding Bonds (Atlantic City Electric Company
Project), Series B, 7% due 11/01/2029 (c) 5,515
A+ Aa 5,000 New Jersey Sports and Exposition Authority Revenue Bonds
(State Contract), Series A, 6% due 3/01/2021 4,941
New Mexico NR * VMIG1++ 1,800 Hurley, New Mexico, PCR (Kennecott Santa Fe), VRDN,
- --1.5% 5% due 12/01/2015 (a) 1,800
A A3 5,000 Lordsburg, New Mexico, PCR, Refunding (Phelps Dodge
Corporation Project), 6.50% due 4/01/2013 5,062
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
New York--9.8% New York City, New York, GO, UT:
A- Baa1 $ 5,150 Series H, 7% due 2/01/2021 $ 5,237
A1+ VMIG1++ 300 Sub-Series B-5, VRDN, 5.75% due 8/01/2021 (a)(c) 300
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 2,074
BBB NR* 3,250 7.25% due 5/01/2022 3,336
AAA VMIG1++ 10,400 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, VRDN, Series G,
4.80% due 6/15/2024 (a)(h) 10,400
A Aa 7,500 New York State Environmental Facilities Corporation, PCR
(State Water Revolving Fund), Series E, 6.50% due 6/15/2014 7,821
New York State Local Government Assistance Corporation
Revenue Bonds:
A A 6,250 Refunding, Series B, 5.50% due 4/01/2021 5,637
A A 5,000 Refunding, Series C, 5% due 4/01/2021 4,180
A A 5,000 Series A, 6.875% due 4/01/2019 5,331
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 13,354
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 6,576
<PAGE>
Oklahoma--1.1% AA- A1 5,000 Muskogee, Oklahoma, Industrial Collateralized Trust, PCR
(Oklahoma Gas & Electric Co. Project), Series A, 7% due
3/01/2017 5,203
Oregon--0.2% A1 VMIG1++ 200 Medford, Oregon, Hospital Facilities Authority Revenue Bonds
(Gross--Rogue Valley Health Services), VRDN, 4.60% due
10/16/2016 (a) 200
SP1+ NR* 1,000 Oregon State Health, Housing, Educational and Cultural
Facilities Authority Revenue Bonds (Guide Dogs for the Blind),
VRDN, Series A, 4.60% due 7/01/2025 (a) 1,000
Pennsylvania AAA Aaa 5,000 Pennsylvania HFA, Revenue Refunding Bonds (Rental Housing),
- --2.9% 6.50% due 7/01/2023 (d) 5,041
AA Aa 5,000 Pennsylvania HFA, S/F, Mortgage Revenue Bonds, Series 34A,
6.85% due 4/01/2016 5,178
A- Baa1 3,150 Philadelphia, Pennsylvania, Hospitals and Higher Education
Facilities Authority, Hospital Revenue Refunding Bonds (Temple
University Hospital), Series A, 6.625% due 11/15/2023 3,073
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 4,542
South A- A2 5,175 Berkeley County, South Carolina, PCR (South Carolina Electric
Carolina--5.3% and Gas Company), 6.50% due 10/01/2014 5,249
A A1 4,150 Fairfield County, South Carolina, PCR (South Carolina Electric
and Gas Company), 6.50% due 9/01/2014 4,246
A- A1 7,000 Richland County, South Carolina, PCR, Refunding (Union Camp
Corporation Project), Series C, 6.55% due 11/01/2020 7,054
BBB- Baa 5,000 South Carolina Jobs, EDA, Economic Development Revenue Bonds
(Saint Francis Hospital--Franciscan Sisters), 7% due 7/01/2015 4,909
NR* NR* 2,500 Spartanburg County, South Carolina, Solid Waste Disposal
Facilities Revenue Bonds (BMW Project), AMT,
7.55% due 11/01/2024 2,640
</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>
South AA+ Aa1 $10,460 South Dakota, HDA, Homeownership Mortgage, Series B,
Dakota--2.4% 7.10% due 5/01/2017 $ 10,853
Tennessee--1.1% BBB- Baa1 5,000 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds
(Recycling Facilities--Calhoun Newsprint), AMT,
7.40% due 12/01/2022 5,152
<PAGE>
Texas--6.1% BBB Baa1 4,200 Gulf Coast, Texas, Waste Disposal Authority Revenue Bonds
(Champion International Corporation), AMT, 7.375% due
10/01/2025 4,400
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 3,982
BBB NR* 1,600 Midland County, Texas, Hospital District Revenue Bonds
(Midland Memorial Hospital), 7.50% due 6/01/2016 1,654
BBB Baa 3,000 Tarrant County, Texas, Health Facilities Development
Corporation, Hospital Revenue Refunding and Improvement
Bonds (Fort Worth Osteopathic), 7% due 5/15/2028 2,895
SP1+ MIG1++ 6,000 Texas State, CP, TRAN, UT, 5% due 8/31/1995 6,015
AA Aa 8,200 Texas State, Refunding (Veterans Land), UT, 7.40% due
12/01/2020 8,799
Utah--2.8% AA Aa 8,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospital Incorporated), 6.25% due 2/15/2023 7,814
AAA Aaa 5,000 Utah State Board of Regents, Student Loan Revenue Bonds,
AMT, Series H, 6.70% due 11/01/2015 (b) 5,091
Virginia--3.9% Virginia State HDA, Commonwealth Mortgage:
AA+ Aa1 7,840 Series B, Sub-Series B-3, 6.35% due 1/01/2017 7,839
AA+ Aa1 5,085 Series C, Sub-Series C-9, 6.45% due 1/01/2015 5,108
AA+ Aa1 5,025 Series J, Sub-Series J-2, 6.65% due 7/01/2014 5,147
Washington AA Aaa 6,250 Lewis County, Washington, Public Utility District No. 1
- --4.9% Revenue Bonds (Cowlitz Falls Hydroelectric Project),
7% due 10/01/2001 (f) 6,998
AA Aa 15,250 Washington State Public Power Supply System, Revenue Refunding
Bonds (Nuclear Project No. 1), Series A, 6.50% due 7/01/2015 15,353
West Virginia NR* A1 2,500 West Virginia Hospital Financing Authority, Hospital Revenue
- --0.6% Bonds (Charleston Medical Center Incorporated), Series A,
6.50% due 9/01/2023 2,480
Wisconsin--1.6% NR* A 5,300 Wisconsin Health and Educational Facilities Authority Revenue
Bonds (Mercy Hospital of Janesville Incorporated),
6.50% due 8/15/2011 5,321
SP1+ MIG1++ 2,000 Wisconsin State, Operating Notes, 4.50% due 6/15/1995 2,000
Total Investments (Cost--$448,172)--98.8% 452,497
Other Assets Less Liabilities--1.2% 5,456
--------
Net Assets--100.0% $457,953
========
<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 April 30, 1995.
(b)AMBAC Insured.
(c)MBIA Insured.
(d)FNMA Insured.
(e)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, 1995.
(f)Prerefunded.
(g)Escrow to maturity.
(h)FGIC Insured.
*Not Rated.
++Highest short-term ratings 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, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$448,171,849) (Note 1a) $452,496,698
Cash 86,702
Interest receivable 8,055,950
Deferred organization expenses (Note 1e) 16,017
Prepaid expenses and other assets 57,699
------------
Total assets 460,713,066
------------
Liabilities: Payables:
Securities purchased $ 1,628,479
Dividends to shareholders (Note 1f) 837,258
Investment adviser (Note 2) 177,728 2,643,465
------------
Accrued expenses and other liabilities 116,395
------------
Total liabilities 2,759,860
------------
Net Assets: Net assets $457,953,206
============
<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 307,417,515
Undistributed investment income--net 2,958,773
Accumulated realized capital losses on investments--net (8,955,020)
Unrealized appreciation on investments--net 4,324,849
------------
Total--Equivalent to $13.95 net asset value per share of Common
Stock (market price--$12.25) 307,953,206
------------
Total capital $457,953,206
============
<FN>
*Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six
Months Ended
April 30, 1995
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 14,324,892
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,093,046
Commission fees (Note 4) 194,930
Transfer agent fees 38,324
Professional fees 35,901
Accounting services (Note 2) 32,185
Printing and shareholder reports 28,309
Listing fees 18,899
Custodian fees 13,569
Directors' fees and expenses 11,388
Pricing fees 7,350
Amortization of organization expenses (Note 1e) 2,786
Other 20,192
------------
Total expenses 1,496,879
------------
Investment income--net 12,828,013
------------
<PAGE>
Realized & Realized loss on investments--net (8,920,459)
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net 28,191,680
(Loss) on ------------
Investments Net Increase in Net Assets Resulting from Operations $ 32,099,234
- --Net (Notes ============
1b, 1d & 3):
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: April 30, 1995 Oct. 31, 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 12,828,013 $ 26,174,204
Realized gain (loss) on investments--net (8,920,459) 2,464,397
Change in unrealized appreciation/depreciation on investments
--net 28,191,680 (61,640,797)
------------ ------------
Net increase (decrease) in net assets resulting from operations 32,099,234 (33,002,196)
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (10,242,591) (21,297,432)
Shareholders Preferred Stock (2,742,420) (3,453,990)
(Note 1f): Realized gain on investments--net:
Common Stock (2,169,193) (8,271,594)
Preferred Stock (329,750) (1,657,090)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (15,483,954) (34,680,106)
------------ ------------
<PAGE>
Net Assets: Total increase (decrease) in net assets 16,615,280 (67,682,302)
Beginning of period 441,337,926 509,020,228
------------ ------------
End of period* $457,953,206 $441,337,926
============ ============
<FN>
*Undistributed investment income--net $ 2,958,773 $ 3,115,771
============ ============
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 Aug. 28,
from information provided in the financial statements. Ended For the Year Ended 1992++ to
April 30, 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 .57 1.18 1.21 .15
Realized and unrealized gain (loss) on invest-
ments--net .87 (2.68) 2.75 (.59)
-------- -------- -------- --------
Total from investment operations 1.44 (1.50) 3.96 (.44)
-------- -------- -------- --------
Less dividends and distributions to Common
Stock shareholders:
Investment income--net (.46) (.96) (1.07) --
Realized gain on investments--net (.10) (.37) -- --
-------- -------- -------- --------
Total dividends and distributions to Common Stock
shareholders (.56) (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 (.12) (.16) (.20) (.01)
Realized gain on investments--net (.01) (.08) -- --
Capital charge resulting from issuance of
Preferred Stock -- -- -- (.13)
-------- -------- -------- --------
Total effect of Preferred Stock activity (.13) (.24) (.20) (.14)
-------- -------- -------- --------
Net asset value, end of period $ 13.95 $ 13.20 $ 16.27 $ 13.58
======== ======== ======== ========
Market price per share, end of period $ 12.25 $ 11.125 $ 15.50 $ 14.25
======== ======== ======== ========
Total Based on market price per share 15.38%+++ (20.98%) 16.82% (5.00%)+++
Investment ======== ======== ======== ========
Return:** Based on net asset value per share 10.74%+++ (10.68%) 28.67% (4.23%)+++
======== ======== ======== ========
<PAGE>
Ratios to Expenses, net of reimbursement .69%* .69% .57% --%*
Average ======== ======== ======== ========
Net Assets:*** Expenses .69%* .69% .61% .60%*
======== ======== ======== ========
Investment income--net 5.88%* 5.46% 5.49% 6.18%*
======== ======== ======== ========
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $307,953 $291,338 $359,020 $297,414
======== ======== ======== ========
Preferred Stock outstanding, end of period (in
thousands) $150,000 $150,000 $150,000 $150,000
======== ======== ======== ========
Portfolio turnover 23.64% 47.42% 81.12% 5.07%
======== ======== ======== ========
Dividends Per Series A--Investment income--net $ 429 $ 564 $ 760 $ 29
Share on Series B--Investment income--net 486 564 811 30
Preferred Stock Series C--Investment income--net 456 600 640 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.
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. 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 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. 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 their fair value
as determined in good faith by or under the direction of the Board
of Directors of the Fund.
(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.
NOTES TO FINANCIAL STATEMENTS (concluded)
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.
<PAGE>
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 six months ended April 30, 1995 were $97,775,645 and
$124,233,284, respectively.
Net realized and unrealized gains (losses) as of April 30, 1995 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $(3,927,001) $3,937,495
Short-term investments 638 387,354
Financial futures contracts (4,994,096) --
----------- ----------
Total $(8,920,459) $4,324,849
=========== ==========
As of April 30, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $4,324,849, of which $8,605,689 related to
appreciated securities and $4,280,840 related to depreciated
securities. The aggregate cost of investments at April 30, 1995
for Federal income tax purposes was $448,171,849.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock,
including Preferred Stock, par value $.10 per share, all of which
were initially classified as Common Stock. The Board of Directors is
authorized, however, to reclassify any unissued shares of capital
stock without approval of the holders of Common Stock.
Common Stock
For the six months ended April 30, 1995, shares issued and
outstanding remained constant at 22,070,885. At April 30, 1995,
total paid-in capital amounted to $309,624,604.
<PAGE>
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at April 30, 1995 were as
follows: Series A, 4.08%; Series B, 4.15%; and Series C, 4.15%.
A two-for-one stock split occurred on December 1, 1994. As a result,
at April 30, 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 $180,400.
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, 1995, MLPF&S, an affiliate of FAM, earned $105,229 as
commissions.
5. Subsequent Event:
On May 9, 1995, the Fund's Board of Directors declared an ordinary
income dividend to Common Stock shareholders in the amount of
$0.070504 per share, payable on May 30, 1995 to shareholders of
record as of May 19, 1995.
PER SHARE INFORMATION
<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>
May 1, 1993 to July 31, 1993 $.30 $ .07 $ .20 $.25 $.05 -- --
August 1, 1993 to October 31, 1993 .30 .12 .66 .25 .05 -- --
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 -- --
<PAGE>
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
May 1, 1993 to July 31, 1993 $15.68 $15.07 $15.375 $14.50 1,722
August 1, 1993 to October 31, 1993 16.51 15.49 15.75 15.00 2,734
November 1, 1993 to January 31, 1994 16.29 15.70 15.75 14.375 2,309
February 1, 1994 to April 30, 1994 16.05 13.58 15.625 12.375 2,063
May 1, 1994 to July 31, 1994 14.75 13.78 13.25 12.50 2,172
August 1, 1994 to October 31, 1994 14.42 13.20 13.25 11.125 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
<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>
